tv Bloomberg Markets Americas Bloomberg October 12, 2021 10:00am-11:00am EDT
>> from the financial centers of the world, this is "bloomberg markets," with alix steel and guy johnson. ♪ guy: tuesday the 12th. 3:00 p.m. in london, 10:00, new york, 30 minutes into the trading day in the united states. welcome everybody to "bloomberg markets." today busier than yesterday, but not as busy as tomorrow. alix: it was interesting that we did get futures get hit overnight as we did not have a lot of trading, and now all of a sudden, we are trying to claw our way to positive territory. the s&p pretty much flat on the day, but tech and consumer discretionary were trying to make a run for it. the question becomes what do bank earnings that kick off tomorrow, plus cpi, how does that affect all of this?
volatility is most definitely in play. the dollar at one point had a nice spike. oil holding onto that $80 handle as the power crisis continue. but it does feel like a wait and see until tomorrow, would we get the cpi and the earnings with jp morgan. guy: i think it is going to be interesting. we are getting data out of the u.s. economy right now, backdated to august. it is the job openings and labor turnover survey, jolt, being delivered to the screen. it is a bit of a mixed one. what we had in july was a record, and july has been revised higher, so job openings in july have been revised up from 10.9 million to north of 11. but the august number is a little softer than maybe the market was looking for. the market was looking for 10.9, maybe even going towards 11, but we have gone a little softer than that, 10.4.
so the july number is stronger, the august number a little bit softer. what you have to take a step back here and look at what is happening, and that is that this data is still incredibly strong. you've still got huge amounts of help-wanted signs plastered across america, in terms of companies leading to higher -- companies needing to hire, and we will see this in the earnings. alix: 51% of these small businesses had positions they were unable to fill, so just take that into account. that is how much the demand is for labor. guy: it is absolutely incredible, and it is going to be interesting to see. the imf suggests the inflation story will fade midway through next year. we will see whether that happens because it doesn't feel like it at the moment. mike mckee, walk us through the numbers. what can we learn? michael: looking at small
business companies around the country, they are getting depressed by the fact that they can't find workers. we saw a big drop in small business confidence. it fell to its lowest since march in the month of september, and that is because, as you guys were just talking about, they can't find workers. their six-month outlook isn't any better. things really looking down for these guys because they are having trouble finding people to fill the demand for labor, which means they are starting to raise prices. you look at the number of companies raising prices, raising salaries at a record level, and as you can see, the number of people with job openings is at a record level. we are just below a record level in terms of how many expect to raise wages. you still see pressures building from the small business community in terms of not finding workers, but having to raise prices to do that. it is something we are going to
be looking forward to hearing about from members of the federal reserve this week. where do they think we are, and as a weak jobs report change their views, or does a strong jolt report keep them where they are? and we get the minutes tomorrow of the last meeting to get set up for where we go at the next. alix: looking at that, 12 fed speakers this week, plus cpi tomorrow. what are we looking for? michael: we are looking for a declining rate of increase. we are still seeing inflation rise, and we should see big increases in the headline numbers because of energy. the fed looks past that. they will be looking to see what is happening with the core index , and the great thing about the cpi is it breaks down all of the categories of inflation, so we will see where inflation pressures are being generated, and if they are in the so-called transitory category. alix: mike, thanks a lot. we are going to hear more about
what is on the minds of small businesses with the nfib director of research at one a talk p.m. -- at one a clock p.m. in new york, six clock p.m. london -- at 1:00 p.m. in new york, six clock p.m. london -- 6:00 p.m. london. with us now is annmarie hordern. the house comes back. what happens? annmarie: the house either be here physically in person, but many of them are going to be voting by proxy, which was ushered in with the pandemic. they are going to raise the limit that we do not have a default, but as you mentioned, it is just for a few weeks. we are going to be dealing with this in a bigger showdown come december. senator mitch mcconnell allowed the democrats in the senate to have an easy vote on this, but had written a letter to the president saying that will not happen again. right now in washington, when it comes to the debt ceiling, but also when it comes to avoiding
another government shutdown, these are just band-aids. everything is leading up to early december, when there is going to be another big showdown on this. guy: great stuff, as ever. let's talk about what is happening with the earnings story, the industrial supply company fastenal out with earnings today. really indicative stuff going on here. at the go doolittle is digging into the numbers. abigail: it was a solid report offer all -- report overall, beating on both the top and bottom line, but one of the big questions for this earnings season, what is the cost of rising material costs on margins? it turns out the price pressure for the most part is immaterial for the company. the biggest point of pain, employees, 70% of costs rising for employees. if we take a look at the overall margin picture, yes, we are looking at a bit of a decline,
but if you take a look at the first quarter and second quarter of 2020, where margins were 9.7% and then 9%, you can see steadily rising pretty strong, and still well above 12.5% and above those prior levels, suggesting that the management of this company, fastenal, the country's largest fastener company, glue, adhesives and the like, that they are managing this pressure right now in a pretty strong way. alix: abigail, thanks a lot. that is a really good indicator for the overall industrials. coming up, you've got the imf trimming its view on growth, warning of a dangerous virgins. we will break down what this means with g to go up and off -- with gita gopinath -- dangerous divergence. we will break down what that means with gita gopinath, imf chief economist. this is bloomberg. ♪ this is bloomberg. ♪
alix: it is time for the bloomberg business flash. general motors says south korea's lg has agreed to pay for costs linked to the recall of chevy bolt vehicles. lg was the battery supplier. gm says the reimbursement will offset up to $2 billion in charges. shares in energy fell as much us one-to-one percent in london. most of the gas wells bloomberg visited were found to need repair. the bloomberg story does not reflect the positive environmental, social, and economic and if it's stemming from the investment. classes ms. klein is repairing
to spin off its consumer unit. bloomberg has learned a number of private equity firms are interested in what could be a $54 billion deal. among them, kkr, blackstone, park how -- blackstone, and carlyle group. that is your business flash. i believe the glaxo thing just shows that is a huge number for private equity, and it is how much money is still on the table in pe. guy: there's two things to sing here -- to say here. one of which commuted that brilliantly. alix: cold read. thank you. guy: that's probably the biggest take away from of this. the second thing is that yes, there is still loads of dry powder. there's still plenty of deals out there. private equity has got lots of dry powder that it needs to be thinking about using and figuring out exact a what the right deal for that is. maybe glaxo fits the bill.
dave wilson has more on this story. dave: with this whole business about the consumer unit, glaxo has been looking to spin it off anyway, so you knew some kind of a deal was coming. it is just a question of how it would look, and i tell you, when you see seven private equity firms in our reporting lining up to show interest in the glaxo consumer business, it definitely gets your attention. it is understandable. if you look at the consumer unit in the context of glaxo, it has accounted for a greater percentage of revenue over the last couple of years. it is running about 30%, more or less the level it was at last year in terms of its contribution to the broader company. you are talking about a business that has a whole lot of names that people know. you look at the segments, you see sensodyne, the toothpaste,
and their oral killer unit. you see i bill, the pain reliever. you see tom's, and case you have a little heartburn. syndrome for vitamins, theraflu -- centrum for vitamins, theraflu. it breaks out evenly among those segments, so they certainly have some well-established businesses which, put it altogether, you can kind of understand why the buyout firms would be interested. it is a relatively steady potential source of cash. alix: but it is not just that, right? david: no, it is not. glaxo has this relationship with the german company curevac that has been working on covid-19 vaccines, and the story out of curevac today is that they decided to drop their first generation vaccines in terms of what you would call second-generation shots.
perhaps a combined covid and flu vaccine. it is something certainly that glaxo would want to be a part of , and the challenge from curevac's perspective is how long it would have taken, eight months for europe to sign off on the first generation. so they decided to drop it at this point and move on. alix: dave, thanks a lot. really appreciate it. we will get to gita gopinath in just a second from the imf, the chief economist. this is bloomberg. ♪
recovery is losing a little bit of momentum. interestingly enough, it is becoming dangerously divided. their words, not mine. global growth slowing a little bit this year off of what was expected, but it is still really high. basically, going from 6% to 5.9%. but they are still protecting at the imf that we are getting a significant post-pandemic bounce back, just moderating a little bit. we all know why. supply chain constraints, what is happening in the energy story all factoring into the mix. but it is this idea that we get this "dangerous divergence" in terms of the growth data. what you are seeing is a clear division in terms of vaccinated and nonvaccinated, and terms of exposure to inflation and what we are going to see on inflation, that it is going to pick up and then moderate, according to the imf. a lot of people saying that at the moment. will it come true? this idea is something we are going to need to dwell on
because we think here that it feels like the vaccine story is kind of in the rearview mirror area for many, it is not. alix: for us, the headlines are all supply chain issues. let's get some more insight now in a bloomberg first interview. gita gopinath, imf chief economist, joins us now. can you talk me through the number one thesis behind that, and what is the downside risk to your outlook? gita: always a pleasure to join you. when you look at the projections and look at the advanced economy group, next year we predict advanced economies to be back to pre-pandemic. but if you look at any emerging and developing economies, we are looking at very significant scarring. even 10% relative to where they would have been. this is the divergence we are
extremely worried about, and it has two factors. one is highly inequitable access to vaccinations, especially with low income countries, and the fact that policy support has been much larger in advanced economies as compared to many emerging and developing economies. guy: in terms of what is happening in the developed markets, the fear at the moment is that we are going into either a inflationary ward -- inflationary world or a stagflationary world. what gives you confidence that inflation is going to fade as we work our way through next year? gita: firstly, when you look at the facts in terms of how countries have bounced back to pre-pandemic levels, this is not a bad recovery. this is a strong recovery that we have seen. right now, we still have a global economy projected to grow 5.9%. in terms of inflation, our view is that for most countries by the middle of next year, you're
coming back to more typical pre-pandemic levels of inflation. there are upside risks, and some of the country's risks are bigger. i would say the u.s. is one such country. but as of now, if you look at month on month core inflation, it has moderated over the last few months. we will see what happens when the data comes in tomorrow. in terms of the pressures, we have seen supply-side pressures. we have seen commodity prices go up, energy prices go up. all of that is expected to revert to the middle of next year. so again, there are these transitory forces, and as long as we see inflation expectations remaining anchored and no wage price spikes, we expect to see return to normalcy by next year. alix: but would have to happen for you to think that those inflation expectations weren't anchored?
the five-year five-year forward break even the highest level in the u.s. in four years. in the u.k., breakevens are over 4%. the path of least resistance feels like it is becoming a stickier environment for inflation. gita: firstly, we do want inflation except patients to be at a particular level consistent with inflation mandates of countries. so after inflation x came down quite a bit last year, we should be moving back up to the levels we would like them to be. we would like to see broad-based inflation again at the kind of levels we are used to seeing. the question is, if that spirals out of control and you are ending up with very high inflation numbers above the comfort range of central bankers , there we are not seeing that yet. we are looking very closely at development's and labor markets, whether we are seeing broad-based wage inflation. we are seeing what is happening with shelter inflation, whether there's a pass-through from housing prices shelter inflation.
what is happening to long-term inflation its patients. i think these three sets of indicators are what will give us some signs of where we are headed. guy: so is your suggestion to global sintra banks, to advanced country central banks, that they should look through any inflation they are seeing at the moment? because i listen to the central bank just over the road from me here, the bank of england. it sounds like that is not going to be the case. they are going to react to it. is that the right way to deal with this? is it too early to be tightening monetary policy? gita: central bankers should care not just about what is happening to inflation, but also what is happening to the economic recovery. there are countries like the u.s. where we have seen a very strong economic recovery. there's not that much more distance to cover. so you have to ask yourself the question about is now the right time to withdraw support.
tapering asset purchases seems like a reasonable thing to do in the near term. in terms of rapidly tightening monetary policy, i would say you have time to wait and see how these -- what we see on the inflation front. give it some more time to see it develop a little more closely. i think our headline message is also to be extremely vigilant and to be ready to move quickly if you have to. alix: if the path of least resistance forces central banks to still move, does the imf have an idea of what the impact will be? taper tantrum and the bond market, a tantrum in the equity markets? what is the best guess? gita: our best guess which is what is in our model forecast, is that this would be relatively well contained, so there will be some tightening in financial conditions, but nothing to throw off the recovery. this is why we expect will economies to continue to grow next year at a rate of 4.9%.
the problem would be in policy accidents or miscommunication at then end up with sharp increases in risk premia, sharp increases in borrowing costs, that rely on external finance. that would trigger a much more severe downturn. guy: what impact is china's increasing regulatory crackdown likely to have in terms of its economic growth? what impact is common prosperity likely to have in terms of economic growth? i see you have downgraded your forecast for that part of the world, but i am curious as to whether or not you think this regulatory environment continues , whether or not this is something you are projecting forward and will have a longer lasting effect. gita: regulations, putting in place regulations rein in asset bubbles or excessively easy financial conditions is
something that has been going on in china since last year. it is why we have also downgraded our forecast. we dated in july and we have done it some more now. we have seen developments in the property sector, a very important part of the economy for china. we have seen developments at evergrande. as of now, our view is that the chinese government has the tools to be able to contain the fallout from particular property developers and prevent it from becoming a widespread phenomenon. while we do see growth slowing in china, we are not projecting in our baseline a sharp slowdown which will then have repercussions for the rest of the world. that is what the baseline is. these are very uncertain times, and there are financial risks. alix: before we let you go, i wouldn't to get your help in addressing the business scandal that has erected in the imf and kristalina georgieva. do you feel like your research
is going to have a credit ability problem, and what do you feel like you need to do to backstop it? gita: as you saw, the board came out with a strong statement expressing full confidence in the managing director. the issue about the data had nothing to do with the imf. it was about the world bank doing business reports. we place an incredible amount of importance on data integrity at the imf. we have many checks and balances, multiple departments, multiple economies reviewing our data forecasts, so i feel good about where we are. guy: you have been put under no pressure to make the data fit the narrative that is being delivered for the rep? that hasn't -- delivered further up? there's no evidence of that happening at the imf? gita: absolutely not. i have personally never face that pressure. guy: thank you very much for your time today. we look forward to the next installment of your economic outlook is a great deal of interest. gita gopinath, imf chief
economist, greatly appreciated. it is this belief in transitory inflation that i think it's fascinating at the moment. the market is increasingly of the view that that narrative needs to be questioned. we have seen that any data. you certainly see it in the rates market as well. yet the imf, many central banks continue to voice the idea that it is going to be transitory, that we will get back down to more normal areas. but as the labor market story develops, the energy market story develops, the iconic growth story develops, it feels look it needs to be put under pressure under the microscope. alix: i think part of the problem is that we don't know. they are trying to buy some time and maybe make a mistake so they can get some more firepower as to when it is actually really needed, and if they don't actually know the answer to that question, and if transitory means 18 months, that is a different kind of story. what are the aftermath effects
of something like that? there are potential signs that may be some of the court issues may be easing just a touch. what does just a touch mean? does that really have a big impact? guy: i am curious to see what happens for the holidays, whether the demand story will fade a little bit. but your point about raising rates for reasons other than inflation i thing is really interesting. i was having a conversation about this earlier on today with somebody, talking about the idea that maybe the bank of england is looking to raise rates as you suggest, not to do with the short-term inflationary issue, but actually to get ready for the next downturn. that they want to have some ammunition back in the locker that they can use when that point comes. the bank of england is a reasonably conservative central bank. alix: but i have to wonder is a 15 basis point move, does that really count as ammunition?
guy: maybe you get up to the kind of terminal rate of around 1%. we are at 10% now, so there's a long way to go, but there is potential to get to there. alix: then we are at peak monetary policy. where do you go from here? that is a bigger issue than. guy: i thing hugo gradually, but if morgan stanley is right that this is an accelerated cycle, there is a downturn coming at some point. alix: let's get to that whole perspective. you have many individuals calling for more stagflation, that call getting louder. there are some naess heirs -- some naysayers, but a lot of them feel like that is in the cards. they spoke about it over the last one to four hours -- the last one to four hours. -- the last 24 hours. >> in my view, it is not just going to be a one quarter
phenomenon, but persisting for several quarters. >> i think in the near term, it is real if you define stagflation as deceleration in growth from the extremely rapid pace we had a couple of quarters ago and much higher inflation than we have had in several decades. alix: on the flipside, rbc's tom porcelli talking about the fact that stagflation is purely a distraction. our next guest sees one sector leading the economy into direct inflationary and possibly stagflationary pressure. here to break it down with us is karen karniol-tambour, bridgewater associates co. cio for sustainability -- associates co-cio for sustainability. what do you see? i thing you might be on mute. there we go. [laughter] karen: it is temping to think anyone sector is the whole story. the broader thing going on his demand is clearly outpacing supply and the massive inflation that central banks have provided
are going to create these very significant inflationary pressures everywhere. and anyone sector, it can be temping to say it is unique circumstances, but it is broad. that said, i think the one sector worth calling out as energy sector because policy intentions here are much clearer , meaning all around the world, plus emitters have said we would like to see an energy transition. they have made different goals and different pledges in that direction, and the particular tools they have chosen, you can do it and all kinds of ways, are mostly either to price carbon or through directly imaging supply, saying we are not going to finance more coal. those are, by definition, inflationary or stagflationary. you need to create those incentives in order to persuade people to shift away from carbon intensive things.
guy: i was reading a support suggest that maybe u.k. u.k. could be in a position because carbon prices have been so high for so long that there is the option to maybe take some of this pressure off, particularly when it comes to energy inflation. karen: i think the most 10 thing approach for governments is to go down fiscal and monetary together. use stimulus policies to transition away from carbon rather than more stagflationary ones. so instead of taxing carbon, you can give lots of incentives, make it really cheap or spend federal budgets on refurbishing things, on new technologies. that is a way that is inflationary, but more broad to the whole economy. it is not a specific, not as regressive. that seems like the most tempting thing rather than backtrack on the whole idea of transitioning the energy economy. alix:alix: what part of that needs to be rethought now in the middle of the energy crisis? karen: there's short-term and medium long term. in the short-term, governments
are going to do all of short-term levers they need, and in the u.k. in europe, where it is most acute, they are already looking to take government money very directing to try to support whoever is squeezed by this, as well as bring supply online anyway you can. the more important question is these are long-term goals, multi-decade goals the governments have in place. will they set up for the longer-term, figuring out how you get enough supply of the renewable energy you want, how you get enough incentives without going down a more stagflationary path? guy: in terms of the near-term demand distraction that could come as a result of all of this, there's talk of turning factories off, of sort of hitting consumers. in terms of balancing what is happening in the long-term with the short-term, how do we do that? how do we avoid near-term demand destruction to achieve these long-term goals? karen: in the near term, there
will be some demand destruction that happens as a result of this , not only an energy. everywhere. you can't get enough ships to ship your things. you can't get enough workers to run the service economy. you can't get enough truck drivers, and of semiconductors, all of these issues are going to lead in part to higher prices and lower growth because you literally won't be able to have the growth that people want to have. in large part, policy makers want to see that come. they want to have repaired balance sheets, strong income, strong demand coming out of covid, and i think they are willing to accept somewhat higher inflation, and i think that is what they are getting. alix: so how do you hedge for it? i feel like nothing is really working right now unless you are may be long energy stocks. karen: as an investor, i would say that almost every portfolio i look at, but really has very little of is things you think you're going to be inflation hedges. in today's world, you can easily look and say you can't just have
one inflation hedge because inflation can show up in a lot of different places. if you only end up having one commodity, one energy stock you have all of this idiosyncratic risk. any one commodity could be more or less squeezed, so you really need a collection. one of the easiest switches investors can make is to switch some of their nominal bond holdings. you are going to get paid whatever cpi is. in most countries in the world, that is not priced to be all that high for that long. the upside risk seems like one that investors don't have a lot of hedges against. guy: they are quite expensive right now, tips. do you still think there is value there? karen: i think what you should do is divide the pricing in some sense, the pricing that is embedded in both treasuries and the tips, which is what you would call the real yield, versus inflation. if you have the treasury, the treasury is too extensive to
begin with. if you are holding a treasury, you have this issue of whether or not rates are going to be raised faster than they have already been priced in. if you are already holding a treasury, you might as well, instead of only taking the risk that they will raise rates faster than expected, get paid on cpi. the part that you're going to get paid for in terms of cpi is not priced to be all that high relative to what might end up being. you don't need a lot of outperformance in terms of inflation to get paid on that. alix: at the same time, we are still looking at an environment that feels very tina to me. maybe retail is going and and buying towards an individual stock, but overall, it still feels like if the stagflation narrative or if inflation slows down central banks, it is still he tina scenario. is that true? is the search for yield going to continue to be that strong? karen: i agree with you.
broadly, we shifted away from an extremely favorable environment for risky assets to something that is more neutral. it was just an amazing time to hold risky assets, and now that is no longer the case. you are no longer going to get a flooding of liquidy by central banks. there's obviously accelerating constraints on policymakers in the form of rising inflation pressures. they are going to have to pull back to some degree. so the environment we were in, it was a great time to be in risky assets, but a lot more digital today. guy: in terms of what we should think about going forward, do you think central banks are going to protect the equity market and the way they have done? they provided huge amount of liquidity on the upside, but if we get a down move, do you think central banks will behavior as a result of that? where is the fed put? karen: i think central banks aren't going to come of it where they are today is that in order
to slow the economy to the degree they might need to come of the effect on asset prices could be quite significant, so they find them selves in a pretty tough spot where the rations are so long for so low that pullback liquidity has a disparate portion it affect on a lot of these risky assets, so they might have to trade that off when they want to slow the economy. it is going to be very hard to slow the economy because they were so successful at the mix of policies they had. you send people checks, and they get them in their house, now they have great balance sheets great incomes and they are sitting on savings. so you have this very self-sustaining, self reinforcing recovery. so the fed eventually, but wants to tighten, might have to live with tougher consequent is on asset prices than in the past. guy: karen, always a pleasure. we greatly appreciate it. karen karniol-tambour of bridgewater associates, thank you very much, indeed.
the u.k. brexit minner is speaking in lisbon, delivering what is excited to be a fairly downing indictment -- fairly damning indictment of the northern island protocol. this is of huge concern in washington, d.c. the president has made his use of this very clear. but lord frost says the protocol isn't working and has lost consent. alix: apparently the eu-u.k. are headed into a crucial few weeks for brexit. i thought that was a year ago and then a year ago and then a year ago. the cable rate, i should point out, right around the lows of the session. rbc sees 1.30% with some risk to this as we move forward. guy: it is certainly a factor the market is increasingly concerned about, but there is a possibility, and we are about to celebrate the one-year
anniversary of the brexit deal being done. i say celebrate. but we basically go from a deal being done to a trade war within that very short period, particularly if lord frost moves the u.k. in the direction of tearing up the northern ireland protocol and triggering article 16. it is going to be an interesting few weeks. alix: i also wonder if france is going to use its power, literally, leverage over the u.k.. that comes into play on the sidelines. anyway. guy: we will talk about that with the abbasid or a little later on, the ambassador to the united six from france joining the show in a few minutes. this is bloomberg. ♪ >> -- this agreement shows why these arrangements are so hard to make work in practice. it is about the system at which the court is the apex. the court is the apex.
you are looking live at the principal room. this is bloomberg. ♪ let's check in on the bloomberg first word news. i'm laura wright. glaxosmithkline is preparing to spin off its consumer unit. bloomberg has learned a number of private equity firms are interested in what could be a $54 billion deal. among them, kkr, blackstone, and carlyle group. the glaxo units also attract some of the world's biggest pharmaceutical and consumer goods companies. in the u.k., a parliament tree report found that boris johnson's government made serious mistakes in the early handling of the coronavirus pandemic erie lawmakers say that imposing a full lockdown more quickly would have saved lives. the european union drew record demand for its debut green bonds.
there was more than one under $56 billion in orders today for a sale of almost $40 billion of securities. the money will be used by you nations for energy efficiency, clean energy, and climate change at a patient's. -- clement change expectations. -- climate change expectations. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm laura wright. this is bloomberg. alix: so the green bond story i think is really fascinating. it shows how strong the demand is. what i will he to know going forward is how much you actually pay up for it, is that sustainable? just how willing are people to pay up for some thing that is greener, whether it is stuff like toothpaste or whether it is a green bond? guy: if you've got green toothpaste, that is all you. alix: it is toothpaste greenly, guy. guy: i will take whatever colors i am going for, but green may be a stretch too far.
maybe it is minty. a lot of people have increasingly got mandates that require this. there's a huge amount of demand. i think one analyst called today's auction a riot. basically, everybody is clamoring for this stuff. the expectation judging by what we have seen thus far is that we are going to see potentially the greenium rising. it may go from two or three basis points out 245, maybe six basis points. this is a supercheap way for governments to borrow, which will encourage them to go down this way as well. the green challenge is one that is going to be huge for the aviation sector. i'm not sure it is entirely relevant, but boeing's third-quarter delivery numbers are about to come out. we've already had airbus numbers this morning as well. airbus is targeting 600 liveries this year. i think it is about 176 short at
this point. so we are going to have to see some big delivery months. but the supply chain potentially having an impact. i spoke to the management of airbus, and they talked really clearly about what is happening in the supply chain. the cowen senior analyst has a buy target. thank you for your time. clearly, boeing is having to go through a much more accelerated delivery schedule at the moment, as we move away from what has happened with the max, as we move away from the ongoing issues with the 787. walk me through what you are expecting boeing to be able to deliver this year because this is cash flow crucial. >> i think they are public and to be light on both the 737 and the 87. they haven't delivered any 87's for months. i think they indicated they would start delivering again in late october.
my sources are telling me it might be a bit after that. secondly, on the 737, the deliveries in august and september both were a little bit disappointing. not entirely clear why. one of the issues is china, but those are certainly a bit disappointing. alix: is your base case study yet she goes? as income of the supply issues don't get worse, covid doesn't get worse? those are factors that will impact all of the supply chain lines. how do you factor that into those numbers for boeing? reporter: when i -- cai: when i upgraded boeing, the idea was that they could do a little over $20 in cash flow in 2024. obviously if covid gets worse, that is probably unrealistic, but it does look like the numbers for covid are coming down. it doesn't assume a major glitch
in the supply chain. supply chain has gone at a much higher rate than we are currently forecasting when you get up to 2024. so that should be doable, but the real issue is that boeing has to start delivering 737's and start delivering 87's, and china needs to come back into the mix. guy: just to stay on the supply chain issue for a moment, i was speaking to guillaume faury at airbus a couple of weeks ago, and he was talking lee for the first time about his concerns about what is happening within his supply chain. the supply chain is not his. he does share it with boeing, and many companies that will be providing services for both companies are being affected at the moment. in terms of the near-term problems that both of these companies could be facing, how severe could it get? i am not just talking about materials, but the ability to hire engineers, technicians.
where do the problems lie right now? cai: there's a little difference between airbus and boeing because airbus wants to go up to $70 per month -- to 70 per month , so boeing is going up to rates they have already achieved. they basically kept around most of their employees. they are bearing the cost of that now, but i think they have the manpower to get it done. you know, you never can totally tell about the supply chain. that is sort of a factor across industries. and you only need one supplier to be late. but boeing has experience managing it. i think their targets are realistic, while i will say i have been skeptical of 31 a month that they have been talking about for early next year, simply because it looks like they have not been delivering enough planes now. they still have approximately
370 completed maxes in their inventory. so getting to 31 per month, which is what they have said they hope to do early next year, i don't think that is going to happen. alix: walk me through the end user demand. i wonder how it works when you have issues with ramping up capacity. southwest is a perfect example. they don't have the staff to meet the kind of demand they are seeing. how does that filter back through boeing? cai: the way it filters back is they will call boeing up and say deliver them a bit later. clearly, all of these issues, if the customers don't have the folks to fly the planes, that is an issue. if you have supply chain constraints, that is an issue. it is basically one large cycle. alix: thanks a lot , cai.
we really appreciate you jumping on with us today. southwest will comply with the federal vaccine order, so the federal order supersedes any state mandate. texas tried to get out of the vaccine mandate, and it turns out they can't. they will comply with that federal vaccine order overstate bans. guy: this is interesting because it in some ways goes to what is happening with the texas story which is where southwest is based, and what is happening with the banks. the banks basically are finding themselves in the crosshairs as the state decides that banks that have taken a different approach when it comes to gun control, etc., maybe they don't get to play in the muni bond market the way they would, and some of these banks are walking away. it is interesting to see ultimately where texas sits in
alix: time now for the bloomberg business flash. in china, tesla overcame a broad slump in overall car sales. shipments to the local market rose for a second month in a row. more than 52,000 tesla's were sold. meanwhile, china's overall auto sales fell 17% in september. a travel rebound in the u.k. is picking up pace. easyjet saying it will boost capacity to about 70% of 2019 levels this quarter. the lifting of travel
restrictions has led to a surge in bookings in places like egypt and turkey. 3m ceo jane fraser's lieutenants are eligible for as much as $5 million in bonuses. mike mayo says citi did not sell off the targets. that is your business flash. you've got to love mike mayo. caviar, hot, 5 million butler bonuses -- $5 million bonuses. they are all the same. guy: mike is going to join the team a little bit later on. looking forward to that. that's going to be an interesting conversation. mike mayo coming up, 2:30 p.m. in new york. this is bloomberg. the close is next. ♪
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>> the countdown is on in europe. this is "bloomberg markets: european close," with guy johnson and alix steel. ♪ guy: tuesday the 12th, 30 minutes of the close. -- 30 minutes to the close. the eu debut green bond issuance producing record demand. 135 billion euros worth of orders. will rising energy prices knock the sustainability target off course? we will talk about that throughout this hour. u.k. brexit minister lord frost has been speaking within the last few minutes, indicating that he things do northern ireland protocol is broken. he thinks that we now need --