tv Bloomberg Daybreak Europe Bloomberg October 13, 2021 1:00am-2:00am EDT
splash its targeted numbers to -- >> we see the inflationary pressures. we have heard that narrative from any policymaker as it is transitory. manus: inflation risks, with numbers coming today. more from the standard chartered ceo this hour. jp morning reports -- jp morgan reports with lenders looking in the morning. transitory is such a dirty word. there lies the point. this man is looking for the data, inflation expectations are high. he does not expect it, he has a punch upcoming. good morning. dani: good morning.
both alluded to taking the punch bowl away from markets. my absolute favorite part of what he said yesterday was his commitment. i think we have this video, when he said it was a dirty word. he would put a dollar in the jar every time he said that word. i think what we are missing are more props on this show. we need a tip jar, our dirty word should be stag-flation. manus: i think you are right. i think for every guest there should be the jar. for data, he really leaned in. inflation expectations, here it is. one-three year inflation expectations. the risk of non-anchoring, even
though they are higher, over $30 billion, the second-highest allocation ever. there is still a desire to hold paper, perhaps at the short end of duration. dani: it is incredible. we have seen some yield curves flattening over the past day or so. there is really and that they are. politician what your to your is doing. at the moment, 79. we are seeing some come into the equity markets. there are your s&p futures there. we are seeing the dollar pullback. you are looking in a stronger euro this morning.
this morning, one spot, 15, 73. pulling back slightly. we had that warning this morning that there is risk of higher prices. manus: so that warning from them. let's jump back to one of our top stories. the asian supplies. apple. they are to slash their targets. let's get with debbie would now. what is behind this? >> like many other companies, you have companies such as apple now being hit with a chip shortage as well. this is because u.s.-based chip makers are strong enough to
deliver the components for apple to make the new iphone 13. recently, apple was planning to make about 90 million for this year, but now it is poised to slightly cut production by as much as 10 million. a little more less now. dani: does this mean that apple needs to reevaluate and look for different suppliers? >> it will probably be hard to do that. we are looking at boundaries. what japan makes for others. we are looking at very limited capacity at the moment. anybody, from apple to gm are fighting for the same capacity. apple has more bargaining power
as the biggest corporate buyer of conductors. the situation is getting worse. apple is struggling a little bit. it is hard to bite right now. dani: thank you. thank you for bringing us this bloomberg's group. debbie wu. the world is filling to invest in enough energy as the climate change. joining us now is bloomberg's energy reporter, dan. how big of a warning is this for us? >> this is a huge warning on two fronts. one thing they are saying, we are not investing enough in green energy, clean energy to drive the energy transition.
if we keep going at the current pace, we are way off track to be able to keep global temperatures in a sustainable range. on the other hand, we are not investing enough in fossil fuels to prevent the pricing spikes. they are just saying that the energy world has it all wrong when it comes to investments right now. manus: pretty big headlines coming in from the iea. this transition is going to be hard. thank you very much. we will keep and i -- and eye -- and eye on things. >> we have been seeing these case applies coming out.
[indiscernible] a number of jobs rising. when you look at apple supply, you can see the tie up. there is a little bit positive as we saw the export surge. a record, despite that slow down, the energy crisis is still seen strong export data. let's look at the board in terms of pbi, the key want to watch. we will likely see a surge in inflation on the factory floor. this is also for commodity prices. bloomberg economics is suggesting we will be at a 10.5% jump after a 9% jump in august. the cpi is expected to rise. dani: thank you so much.
the cpi numbers are coming up. let's get everyone set up for the key things to watch in these markets today. we have u.s. bank earnings season kicking off. we will have further discussion about this in 30 minutes. that kicks off with jp morgan. manus: yes. some of the data points. 1:30 yen, we will keep an eye on that. 7:00 p.m. u.k. time, this is the heart of bostick. he has moved up his timeline on hikes. dani: how many times will they say that dirty word, transitory? i am ready for the daybreak tips jar, the dirty word tips jar. i am going to make it.
you can hear the narrative that it is transitory. inflationary pressures are transitory, but i also see structural wage pressures building up. they will not easily be resolved. i think the inflation trend is transitory, that will be a little bit dismissive. the early stages of pulling back the monetary system. in terms of fiscal stimulus, the wind may come out of the sale for the economy a bit. the momentum is good. in china, we talk about growth, down to 5%, may be down for a while. u.s. has tremendous resilience. i'm not desperately concerned about the economy but i think it is a little bit harder. >> pressure for the markets?
bill: i think the markets are sensitive right now. i do think we will have a correction. the underlying earnings, they are ok. even if we have global growth into the 3% zone for a while, the underlying use of pressure that comes from the pandemic is supportive. francine: the energy pressures put -- prices put pressure on markets. bill: that is part of the inflationary dislocation which economists and others will debate if it is transitory or not. for sure, if you have rent well above 100, consistently, the world has become less dependent
on fossil fuels, thankfully. dani: standard chartered ceo bill winters there speaking to francine lacqua. we will bring you more that conversation later. let's dig more into the inflation conversation. joining us today is william hobbs, chief investment officer at barclays. it is great to have you here. this is a nice change from at-home zoom. on this inflation debate, we're looking at yields at a 19th month high. we have the feds debating this issue, how is the market looking at it? is it here for a little longer? william: that is a good question. the interesting thing is that they are incremental
central-bank indicators, talking about outside risks, inflation, transitory is trying to be emphasized. from our perspective, will be have to watch is how the current inflation has been longer than everyone expected. the collective consciousness, it is not easy to measure it. wage data is noisy at the moment. and makes a story difficult to judge. we still look at it as a hump, not a new trend. they are right to add some compensation at the longer and. -- longer end. manus: good morning. great to have you back. part of the narrative over the past few days is shorter in duration. do you see that, to actively
look at the inflationary hump, where do i want to be? short-term, inflation tips, how do you want to prepare the portfolio for a little bit of something in 2022? william: good question. for the long-term strategic prospects, one of the big things that we have had the advantage for our clients is much less exposure. that was at the beginning of the year. also, a larger chunk of commodities which we added to the risk margin. that, alongside the stocks has put us in a pretty good place so far. we will have to see how it involves. the difficulty for investors,
generally, is how much inflation risk premium, term premium is the right amount for the world we are entering into. the next decade could look unlike the decade behind it. the big supply story, the abundant supply that you characterize, all of these things for bit in inflation like growth and may be coming to an end. we may be looking at a scarce supply story. it suggests a different outlook and very different capital markets. dani: what do you do with 60-40, the death has been called, on correctly so. some are saying, this is it when we see bonds and equity selloff period what do you do, is it still a viable strategy? william: the graveyard
strategists have been calling in and for this. you would say that 40% of the portfolio, government bonds are offering more return risks, that makes it difficult. we do think, in a world where you finish with one of the three great bond markets, your now you are looking at high margins, low interest rates. what do you do with that? you need to be a little more creative with allocations. you need to look at sources as well. the broad cap of 60-40 has been a beast. a call for exposure for many investors. our investors are -- our expectation is that is good going forward. manus: it is some toxic shock.
inflation stock could give you a punch up in your stock. i was listening to what you said, that is not a shock that is a fact. you had a sprinkle of commodity across the board. how does that look? coal is at a record high, oil is $80. how do you do it? william: the main way. we were not cherry picking individual commodities, we're looking at broad exposure to the diversified. we are looking to pick up the risk premiums associated with it. that should be rewarded. that gets passed down to investors. that is a strategic argument. as a ghost, from a tactical
perspective -- as it goes, from a tactical perspective, it goes from messy to renewable energy. it will be more fickle, more inter-missive. we will use a lot of fossil fuels to get to the promised land. that world has been underinvested in. that goes back to that slightly different economic, macro framework. you're looking at a different regulatory backdrop, global tax regime. that suggests that not just you need to think about having value stocks in your portfolio, but it also suggests wariness about the winners. dani: definitely a big shift ahead. thank you so much.
the season. how did the chip shortages manifest in the portfolio? william: pricing power. what you're seeing in terms of input costs, within the u.k., we have seen some sense that there has been pricing power shed. an average selling prices at 40 year highs which suggests that within the manufacturing sector, it will be very interesting to watch. analyst so far are looking conservative. there is some attrition forecast. the review some scope, will there seems to be in an earnings season. it is surmountable with the
markets in this earnings season with the focus on the supply chain crunch. dani: i wonder if you go in and stepped in and invite some of these names that are getting be not by supply chain, apple, nike, you step in and you buy them, assuming that they do have a pricing power and that next year, some of the speeds away. william: i think this goes back into the quality growth story. it is like that nifty 50. some of them whether the crisis very well. i think they have courted lester there can only go down from here, particularly if many of these companies, if you see higher interest rates, that
should tarnish the appearance of some of these incredible companies. the wrigley torrey backdrop already looks different. you do not just want to allocate to one area of the market, has to be diversified across the. if you look further back, that is not the case. manus:. briefly, you're out of cash, would you say that you are very bullish, moderately, or tentatively bullish? william: tentatively bullish, probably. we have added a sentiment indicator suggesting that stocks are guilty until proven innocent, at the moment.
the growth outlook, all the criticisms are taken into account. dani: so good to have you. you will have to be back with us. william hobbs there of barclays. coming up, so many people are overweight now, and asking themselves, "why can't i lose weight?" for most, the reason is insulin resistance, and they don't even know they have it.
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to/there iphone production target. -- to slash their iphone production target. >> it is transitory. dani: inflationary risks are on the brain. more of our exclusive interview with standard chartered ceo the winters. jp morgan reports that they are looking for the lender to set the tone. manus, good morning to you. it is time to break out the sword guards. transitory is a dirty word. we have already committed the crime of saint transitory to me times. our last guest, william hobbs says it is right to start scaling back on some of these longer-term assets. manus: absolutely. if we dig into the story, we
will likely have a jar full, maybe two. as far as inflation expectations, if you look at fed, it is the highest since 2013. that is what is causing bostick to move with transitory is a dirty word. he brought forward his view on that and went rate hikes should start, not until next year. think there is a lot in that piece. dani: can i just make one point, when it comes to stagflation being our second dirty word, we should get that word out of the debate, all that matters is that u.s. growth mixture will be above potential. that is enough to make the fed mood -- move. two tip jars, i will have them
stagnation as well as transitory. manus: 1940's stagflation or 1970's stagflation. that is a late evening conversation. let's look at the markets. europe is a little bit higher in rate differentials. you have got this squeeze in the entity -- energy market. coal is at a record high. there is concern about the commodities. dani: beautiful. manus: that is what you call reinvention. dani: today, jp morgan will set the global bar for trading and investment banking. they will kick off big bank earnings. a difficult area and the banking
sector, likely to be one of the key areas of focus. joining us today is filippo alloatti, head of financials at hermes. let's start on the loan growth picture. it is the time that we are finally going to see loan growth get back into first gear? filippo: good morning. it would be about time. historically, whenever they sustain growth, long growth. we are reading about supply chain bottlenecks. especially corporate, they are cautious when it comes to investing. that is the question that we need to solve. especially on the corporate side.
that is verified. there is a huge support of the american administration. manus: we were looking at this, at that inflection point, it is kind of moving from reverse to first gear. we are kicking off the earnings season. we have long growth but also the reserve releases. reserve provisioning was a big feature of 2020, we began to see releases coming through, how much more will that be a part of this earnings season? filippo: i think it will be important. just give you a civil example, -- a simple example, 70% is
being raised by the top 20 banks. that is the main difference versus europe where 45%. should see it potentially in q4. i think the narrative needs to find -- either long growth or a more conducive interest rate. dani: what about mna, will this react as the banking sectors outperform in the u.s. and europe last quarter, does this become the new engine of growth for banking as we see that interest income under pressure and the long growth under pressure as well? filippo: it would really help. in q2, there were two main mna's, and without these, it would have been stable.
as it was, all expectations were in the term yields. it is more focused on competition and one of the first measures of the executive order [indiscernible] composition effects on the mna. i think we would see more on the acquisition between that term and number 20. i would not expect large mna's around the world. it is about more capital return. manus: to europe, you have some big calls.
we were looking at this, this is about ford earnings, heidi vallow you -- how do you value them, they are -- 40% disk client to the index. is it too early? how do you look at european banks on a valuation base? filippo: i think, to some extent, some good franchises are very true. i would say, and tesla, also in the u.k.. the topics, they may be
lighting. -- lagging. i would expect it more obviously in america because they are behind. capital returns also increase. last week there was some news that there was a payout rate -- of the earnings. this is it across the banks, because they can. they're still a bit to do in terms of lagging. dani: of course, we have the ecb allowing banks to start to return that capital, payout dividends. given that there is some unevenness to when banks are signed to return to shareholders , how do you want to play that, and are there certain regions, what are the names of banks that
you want to capture that shareholder payout returned to them what you want to avoid? filippo: as we look at the provision for profitability. there are some good franchises. across the credit cycle, those banks remain profitable. it is a key feature because i see the ecb more and more are focusing on the profitability of the banks. i'm asking a difficult question to the manager, what is the purpose of your organization? maybe they should be looking at mergers with other domestic companies. libby should look at your business model -- maybe you should look at your business model. we make discounts before the fed
moves. in europe, the market is still discounting rate hike. it is wrong to assume that they will be negative and lower forever. manus: just before i let you go. i'll be in zurich and a couple weeks with the ceo, or you think about banking and allocation, you have iv, weekly, have you got a proclivity for where you wanted to be as far as exposure? filippo: yes. it is a nice franchise to have, the problem, if you look at valuation, it is expensive. i think all the benefits are in the trend, especially europe and to some extent america. they're trying to buy this fear income.
say the target [indiscernible] i have 25 ford earnings, you are out a lot of wage, there are a lot of teams allowed. it is people that leave two years after. you're kind of back in first place. dani: thank you so much for joining us here on the people of jp morgan's earnings. that is filippo alloatti, head of financials at hermes. coming up, more on the interview with the standard chartered ceo who talks about the carbon oxide space as we look ahead. more of that exclusive interview . this is bloomberg. ♪
manus: it is "daybreak europe." the day that banks are completely disengaged from fossil fuel is the day there is no more fossil fuels. face of you of the standard chartered ceo, bill winters. he spoke exclusively with francine lacqua. bill: one of the criteria is that you do no harm. if you do harm to the community, it disqualifies the contract under principal.
that is the defensive approach. what we want to do is create a market and we are doing that right now. this is the carbon center. there are also attributes that are valuable to you. water resources, not do no harm, but do some good. you may want to pay extra. we talk to the people who are big, some of them happen to be oil companies or large airlines. they are investing in projects to protect rain forest but also have secondary as well. local summits, protect biodiversity, natural carbon, biodiversity. there will be more for that. we want to make sure we also capture that in the transparent market to help that circle where there is a sense that you are doing something good but by being transparent, you are getting scaled and you can do
more. francine: are we transparent enough? filippo: --bill: right now, no. it is over-the-counter, underexposed. we're trying to get everyone to come forward, put it out on a platform. together with partners in singapore, we created something. our first function of high integrity projects are coming out right now. we wanted to create around this and be transparent. we will publish it. hopefully, that will bring more people into the market. francine: when do you think will be the date when banks say, i am not financing fossil fuel anymore? bill: it depends on what you mean by not financing fossil fuel. i think the day that banks are
completely disengaged is when there are no more fossil fuels. if you look at the national agency or park initiative, in 2050, we will still be producing oil and gas. francine: nothing more? bill: maybe. technology, which is scalable, economic, taking care of the environment. whether with storage or developing hydrogen technology. out of the fossil fuel industry? i do not know. when we say we are hydrogen confident, consistent with net zero. dani: standard chartered ceo
speaking with our francine lacqua. more interviews will come up. we will also speak with santander. let's go to first word news with juliette saly. >> hello. the house has approved a short increase in the u.s. government's debt limits, days before the treasury was set to run out. the u.k. said that protocol is harming the region and has to change. they call for the current agreement to be replaced. looking for a compromise saying that the u.k. is prepared for negotiation with that ea you without triggering trade wars. there is a counterproposal today. u.s. federal judges about cobit
requirements in three separate discussions. the decisions are -- playing through the court system. meanwhile, the texas governor has out load hat -- has outlawed vaccine mandates, setting the stage for a showdown with the federal government. raising forecast on cloud cells, planning around the biggest company. cloud revenue will grow. global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much. coming up, no sign of a slowdown. beijing's crackdown on china's
dani: welcome back to "bloomberg daybreak: europe." let's get look at some of the keep markets that you need to watch out for. u.s. bank earnings season is kicking off. jp morgan is set to release numbers. it is all about loan growth. manus: it is. we are watching echo from reverse into -- watching it go from reverse into first gear. data points, for wells fargo, we
will get those numbers. we are one print way from the bond market. we will get minutes from the federal reserve meeting. where will the two-year taper go to? the sales expectations for the third quarter are out. organic revenue has rose in the period earlier. let's get news from our reporter who is tracking the story. the numbers are in. what do they tell us about consumption? >> the number of missions, it is 4% from the goal. higher than estimated, compared to the previous, it has doubled
from a year earlier when doors were mostly shut during the first wave of covid. the slow down is because of comparisons. it is nowhere near the nine-month impact goals. the company says they are confident. they are one of the first groups report the quarter. they are suggesting there is momentum in staying on track. dani: in terms of the slowing pace, one of the concerns that was constantly brought out before the earnings china, slowing growth in china, covid policy meant that it could be a concern for these luxury companies. to beget any clues to how that turned out -- did we get any clues to how that turned out? >> there was a concern, not only
the virus surgeons, resurgence, and other one was the government plans in regulation. the company is brushing off these concerns. they do not expect the new policy to be detrimental to the upper, middle class in china. they are not worried. in terms of what we are seeing from china, the government can continue operating. the is a positive sign. manus: thank you so much. that was the latest, they say