tv Bloomberg Markets European Open Bloomberg October 13, 2021 2:00am-4:00am EDT
production target. shares fall on that scoop. the fed calls transitory a dirty word as the inflation surge lasts longer than policy maker expected. sales beat expectations but growth slows as the world's biggest luxury company. we discussed that luxury sector. welcome to the european market open everybody. it has gone 7:00 here in london. an hour away from the start of trade. i wonder what the markets are saying to you. mark: good morning. relatively quiet session. we are anticipating u.s. i later today. that's the big turning point to the week. everyone is only talking about inflation this year. at the moment, a foe for -- focus on stagflation. we've just had some data break the top of the hour. a bunch of u.k. data, overall quite mixed. gdp numbers came in below expectations.
3% expected. some of the high-frequency stuff was positive. we got beats on the industrial production and manufacturing production. slight positive from u.k. data over all. we also got german inflation data coming out at the top of the hour. i was looking for some excitement there. i'm afraid it came in line and so we wait for the u.s. data. anna: we look elsewhere for the excitement. let's check out the futures. just under an hour until the start of the cash trading station -- session. euro stoxx futures pretty flat. let's scroll and i will show you what the u.s. data has in store. yesterday, losses across u.s. markets and european markets. we are in limbo on certain elements to our investment allow -- landscape app of them -- landscape at the moment.
1.6% on u.s. 10 year yields, oil price around $80 a barrel. we have taken 24 hours to consolidate those positions. this is the futures picture as we wait for the u.s. cpi data and earnings news to come thick and fast. that will be fascinating. what is the gmm saying to you? it's a fairly quiet session. mark: it is. there are big macro coming out. i have two things to draw attention to. equity markets are generally doing well today. asia has been slightly more resilient recently. china has been holding on despite the negative stories there. it had its weakness earlier. there's also a little bit of dollar softness today which is interesting. currencies elsewhere generally gaining, including some of the g10 ones. i think this might just be position trimming ahead of cpi rather than trading in new themes.
otherwise, it's a completely mixed picture on commodities which is fun for once. other days, it has gone crazy. anna: we need a day or two to just think straight. let's get back to our top stories. apple is expecting to/this year's production target for its latest iphone model by up to 10 million units. major chipmakers warning that demand will continue to a spec that outpace supply throughout next year. there's no quick fix and site. peter elstrom joins us now with the latest. take us through the story before us and now will -- what we now understand is happening at apple. what is behind the production cuts? peter: apple has a very carefully orchestrated introduction of products that come out over the year. the iphone comes out in the fall and typically consumer scramble to buy them up. and apple is ready for that. they line up their production process through the months ahead of that and make sure they have enough. this year, they are running into
the same problem that other people have. they can't get enough of these key components. we mention broadcom and texas instruments in particular have been having a hard time producing and as chips to meet demand. apple is the biggest company, the most valuable company out there. for many of these companies, it's the most important comfortable. -- customer. they will have a harder time with all these automakers and other technology companies that are out there trying to get enough chips to be able to put their products out the door. mark: good afternoon. what does this tell us about the broader chip shortage that has affected automakers and tech companies? peter: yeah. that has been a chronic problem for about a year now. there aren't enough chips to go around. we've tracked the average waiting time to get chips, now nine months in a row, up to 22 weeks at this point. that's the average for certain chips, particularly broadcom.
automakers now expect to lose out on sales of about $210 billion just this year because they can't get enough components. what you are seeing is that the crunch is even worse than we expected. it will probably spill over next euros well. anna: thanks very much for joining us. that's through the latest apple headlines. let's linger on this subject for a moment. for little while, we've been asking, is there any respite insight for the supply chain issues for chip shortages? they're just doesn't seem to be any. you don't get a sense from the companies we hear from that things are becoming particularly easier. mark: definitely not. this persisted longer than we expected. this feeds into the idea that inflation is lasting longer than we expected. that doesn't make it permanent.
they can still be considered transitory. on the supply chain issues, i wonder whether we are reaching peak supply chain panic. jonathan ferro suggested this yesterday. the idea that everyone is now focusing on this, everyone is worried about what's happening around christmas. we are close to that point. when apple is disrupting production supply chains, everyone has priced it in. anna: it will depend on your margins. we've been tracking shipping costs going higher across the atlantic and pacific for many months now through the pandemic and recovery. company saying shipping costs are increasing but we can absorb them. maybe companies with the margins will be ok but there will be some that won't be in that luxury situation. mark: absolutely. this will drive some businesses to the wall. longer-term, that might be a healthy thing. it's a very disruptive thing in the short term. i'm not surprised that they can afford those margins squeezing a little bit. anna: you've seen the prices of
some of those hand for -- handbags. the dollar falling, a little bit weaker. what does that say as we head toward cpi? mark: i'm lows to read too much into it. the dollar has strengthened a lot across the board. this is just about position trimming and consolidating. you could be tempted to go, is the market positioning for weaker cpi today, but i don't think that's the case. anna: what about ever grand? we haven't mentioned it enough over the last few days. i was tracking story after story talking about whether there will be fallout for global markets. standard chartered doesn't think so. whether there will be fallout, it is there already to some degree. what is your latest thinking on this? mark: at the moment, it's not proved more systemic. markets have gone on. a tough couple weeks but it's not crazy. we've climbed that wall. we are seeing a little bit of
spread in terms of credit markets in asia weakening a little bit but not in a dramatic way. it is still a situation to watch. will it cause a big systemic crash? i don't think so. anna: get up-to-date analysis from mark and the team on your terminal. coming up, standard chartered ceo talks about the need for more transparency in the carbon offset space. next month, we get views on markets. we get views on what's coming up on the environmental agenda. plus, lvmh earnings slowed. we will get the latest on the luxury sector from paris. this is bloomberg. ♪
>> do i see persistent inflation? yes. you know, i believe it's more than transitory related to supply chain issues and commodity prices. >> hopefully it will straighten out over the next six months. history says it should. they find other places to spend. >> people are confident that they are transitory, that they will be solved. whether it is nine months, i don't know. i don't think it would be longer than that. i am confident that we will get past this. anna: some big names from the finance world weighing in on the global supply chain issues. we've been talking about those this morning in the context of the latest news around apple. joining us now is gareth witcomb. very nice to speak to you this morning. give us your thoughts on where
the supply chain issues have from here. we've been discussing how they don't have any brighter signs on the horizon, any voices popping up to say this will get better in a few months or so. when you look at the fundamentals that are putting us in this position, i thought things were supposed to improve. we've got big structural changes going around around ev vehicles. what are the big things that are driving this and aren't going to change or provide any relief soon? gareth: if we look at it as a big picture perspective, we've had unprecedented stimulus from central banks and authorities generally. as we've been in this coronavirus crisis. that has meant that demand has been incredibly strong. we've had this usually disruptive event around coronavirus which has led to supply chain's being hugely disruptive. we are surprised at how long
that has lasted. certainly i agree with mark. apple is one of the biggest companies in the world, talking about their inability to source chips, that's a major concern. i do wonder whether we are at the peak level of supply chain issues. i hope so. some of the pmi data will be looked at. it's very tentative suggestions, maybe some of those supply issues are getting better. it will be with us for a while yet. that's for sure. remember, it is being driven by very strong demand in the global economy which is a good thing. mark: if we are approaching peak supply chain issues, it will be with us for some time but we might start getting fewer and fewer supply chain issues. how do you express that to markets? what is the trait to go, we've
been talking about these issues all year, it's time to focus on the positive demand story. how do you express that to the market? gareth: we still remain positive. we don't think this is a worry for people who want to invest in equities. the u.s. consumer is in an excellent place. they've been wary -- very well supported. growth is above trends in 2022. in the u.s., we still think that real gdp will have a forehand in 2022. that's a very strong level of growth. we've pushed out our growth expectations for 2021 into 2022 and 2023. they are still there. the support is going to be able to navigate through this.
we still think that growth and eps will be strong and that will support risk assets. anna: growth and eps will be strong. how about capital expenditure? you cite this is one of the reasons why you're able to feel optimistic about risk assets, the fact that companies are still willing to invest. what are you seeing in those trends around x miniature? gareth: it's a really good question. one of the things that we are observing has been this willingness of companies to invest in the cycle. not just in the u.s. or europe. it looks really strong to us. we think that is something that is perhaps not being talked about in the market at the moment. understandably. there's the supply chain issues and things going on around china. those are the things that people are fretting about as well as inflation. underlying the positive use,
really strong story from. it's different from what we saw in the last recovery. anna: thanks very much. stay with us. gareth witcomb. he stays with us on this program. let's get a first word news update from juliette saly. juliette: the warning from the international energy agency. they say that investment in green energy like solar and wind is lacking what's needed to meet climate targets. fossil fuel spending is also insufficient to meet current growth in demand. the house has approved a short-term increase to the u.s. government debt limit, sending the legislation to president biden days before the treasury was set to run out of borrowing authority. it delays another partisan confrontation for less than two
months. the u.k. says the northern ireland protocol is harming the region and has to change. the brexit minister called for the current agreement to be replaced. he left room for compromise, saying the u.k. is prepared for negotiations with the eu without triggering a larger trade war. the chief brexit negotiator will lay out a counterproposal today. the u.s. federal judges have upheld new york covid requirements in three separate decisions. the issue winds its way through the court system. the rulings rejected claims against mandatory jabs launched on the racial, medical, and religious grounds. greg abbott has outlawed vaccine mandates in the second largest u.s. state, setting the stage for a showdown with the federal government. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. anna: thanks very much.
♪ >> we would like to see broad-based inflation again at the levels they used to be. if that spirals out of control with high inflation numbers, above the comfort range of people in general, but we are not seeing that yet. >> manifesting themselves in all kinds of cost pressures, and bottlenecks. shortages and the like which make for a more persistent, more
persistent and stubborn inflation outlook. anna: chief economist of the imf and world bank giving their views on inflation. jp morgan asset management manager is still with us. your thoughts on inflation? it doesn't sound as if you are overly concerned about stagflation or inflation becoming really entrenched. how do you see the inflation narrative in the u.s. developing next? gareth: on the subject of stagflation, there's two ingredients there. one will be slower growth, as i was saying earlier. we are pretty optimistic on growth. the 2022 growth number in the u.s. is floating around 4%. that's a very strong growth number. certainly inflation has the ability to reduce growth in the economy if prices continue to be
relatively out of range. given where i started, i would be very cautious about calling for stagflation here. specifically on inflation itself. we are still in the transitory camp. i think inflation has been a little bit more persistent than we initially thought. we see inflation in the u.s. and elsewhere coming back to trend in 2022. mark: you are optimistic on growth. you think that the inflation is supply-side driven. maybe that demand side inflation will take over and we might get a proper inflation spiral. what are you watching out for to change your mind and go, we have the transitory inflation idea wrong, we are at risk of a genuine inflation spiral? what are you watching to change your mind on that? gareth: i think the composition of the report will be one of the key things to look out for. so far, i think it's been a
reasonable assertion that the higher inflation could tap into the reopening trade to create the issues that people talk about. used car prices and so on. we saw a change in the composition of inflation. that has certainly been a concern for us. you are right that inflation has proved, we are hanging onto the transitory view, there is a risk around that. inflation becomes a little bit more entrenched. i think that's one of the reasons why we are seeing central banks now -- i would not describe it as heading rates, taking their foot off of the a solar rater a little bit. -- accelerator a little bit. anna: in terms of the taper, what do we take from the inflation data? has that ship sailed? gareth: yeah. that's pretty much baked in.
that was a disappointment headline. a little stronger. if you think about the three-month average, we think that's enough for the fed to begin to taper. they signaled that they want the tapering to be finished by the middle of next year. we have felt that the playbook was 2014, where you saw the tapering. we expected a longer time for tapering to take place. middle of 2022 is really what we're seeing. mark: i know you don't think the treasury provides any value here because you believe we have more inflation to come. ultimately, at some point, you have to believe that provides some sort of value. what is the level where you
think that treasuries provide value again? is there another part of the bond curve that you are interested in playing? gareth: yeah. it's just a question of the choices that we have. if you are investing and taking capital and investing it, you are guaranteed to provide them with a negative real return. i think you may as well pack up and go home. we have other choices we like. equities, other parts of the credit market are much more interesting for multi-asset investors. specifically on treasuries, we did think that we want to see real yields start to move a little bit higher. they are deeply negative. in the taper tantrum, real yields were positive.
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anna: half an hour until the start of cash equity trading. futures looking uninspired. uninspired through the asia trading day unless you are looking at the weather in hong kong. u.s. futures flat to negative as we wait for cpi data due from the united states later today. let's look at where we are in the larger picture fight against covid. there is.
a chart that caught your eye. . >> this is partially driven by my experience of arriving in the u.k.. we move beyond covid. it is quite amazing. singapore, still closely controlled all social activities. i have been in the pub regularly and it does not feel like there's any covid at all, but it looks like -- i wanted to draw optimistic attention to covid. based on longer-term trends around mortality figures, and i do not take for granted we are still talking about a lot of people unfortunately still passing away from the disease. we are in an improving trend and it justifies perhaps the u.k. approach. let me explain this chart. this is a global covid fatalities. the pink line is the better line to watch. that is the seven-day smooth moving average. a very noisy trend. this green line here was the peak of the seven-day moving
average in april last year. finally after 11 months, for the first time since early november last year, we have that below that on the seven day moving average. the worst period was the last 11 months. there is a strong reason to believe this will trend lower. vaccination rates are improving. we are getting medication to treat people who are sick. hospitals are not as overloaded. and there is a chance that last year we are under diagnosing fidelity's from covid -- fatalities from covid. we are in a better situation than we were last year. we are at the same level but exiting. this is exceptionally positive news for markets. in a couple months time we will no longer talk about the pandemic ever again i am sure. anna: indeed. really interesting. glad you are managing to get out and about in london. good to get the positive and we
hope the data reflects the reality in terms of the number of deaths we are seeing. let's get a bloomberg business flash. >> apple is set to slash production of the iphone 13 due to the chip supply crunch. the company expected to produce 90 million handsets. component shortages from broadcom and texas instruments force them to cut. the average lead time for chips rose to more than 21 weeks. sap has raised full-year revenue on accelerating cloud sales around plans that europe's biggest software company has cloud revenue that will grow 15% to 19% from a year earlier. tesla notched up another rise in domestic shipments even as general auto sales declined.
total china shipments for the month were up 27% once exports were included. that is a 50% jump in august. elon musk said tesla's shanghai factory is now out producing the fremont california plant. that is your bloomberg business flash. anna: inflation concerns are gripping policymakers and investors across the globe. standard chartered ceo phil winters says inflation may be transitory, but structural wage pressures will not be easily resolved. >> the biggest one we hear about his stagflation. we have heard the narrative from pre-much any policymaker you speak to, this is transitory. the inflationary pressures are transitory, but i also see structural pressures building up on the back of a reasonably strong economy. i think the inflation trend -- to say it is truly transitory
would be a little bit dismissive. unfortunately economic growth as we withdraw the stimulus plug, whether it is the early stages of pulling back from monetary stimulus and the inevitable contraction in terms of fiscal stimulus, both of which need to happen, thankfully the momentum is quite good. in china we are talking about growth dropping down to 5%, maybe a bit below for a while, but coming back up. 5% in the world second-biggest economy is pretty good. the u.s. will also recover. i am not desperately concerned, but i think it is going to be harder. >> that means what direction for the market? volatility? >> the markets are interest-rate sensitive right now. to the extent the market prices in short-term rates going up, i think we will have a correction at that point. the underlying earnings still look ok. even if we have doubled ruth
below -- global growth down below potential for a while, the underlying release of pressure that comes from the pandemic receding is supportive for the global economy. >> the energy prices put a lot of pressure on margins. >> this is sort of part of the disinflationary -- sorry, the inflationary dislocation, which economists and others will debate at length. it feels a little bit stickier than complete dismissal. you have brent well above 100 consistently. inc. fully the world has also become less dependent on fossil fuels -- thankfully the world has also become less dependent on fossil fuels. >> china, there is a regulatory crackdown. how do you look at it? >> the way i look at china is the leadership has a social agenda they have been transparent about for some time. that agenda amongst other things
is to promote youth engagement. when you look at the specific actions the leadership has taken around video gaming, around the tutoring industry, these were not random attacks. these were not attacks on random industries. these were saying we want our youth employed and engaged. are the tactics the tactics that would be used in different parts of the world? of course not. might they be effective? they might be. the big tech companies simply became quite powerful and were beginning to at least raise some concerns around the ability to attract monopolistic trends. >> what does it mean for banks? >> not much. the opportunity for us to fill voids that might have been filled by big tech companies in the past is now reopened to us. competitive environment is good.
we have a fabulous business in china. it is our fastest growing market. it is big and it is profitable. we will continue to invest in china. i believe the country is going the right direction. these are hard times to navigate through. anna: bill winters. we will bring you more of the conversation later, focusing on climate. mark, interesting to get his reflections on transitory. to say the inflation picture is truly transitory would be dismissive. you wonder how helpful the world transitory is. it is used so much by different people. there are probably more definitions of transitory then there are four stagflation. -- then there are for stagflation. mark: raphael bostick calls it a dirty word. there is a jar and we ought to put money in every time he said
the word transitory. i think it is unhelpful at the time. the fed have backed themselves into a corner by talking about it. they have to move on from transitory well saying it will not be persistent. how do we manage this? anna: our colleague writing on your blog this morning, if he had a penny for it every time some but he said transitory, he would have enough money to buy a greek island and have some change left over. coming up, we will talk about luxury earnings. back to the earnings picture. lvmh sales growth eases after the lockdown boom. organic revenue beats expectations in the key fashion and leather unit. ♪ ♪
anna: rings pointing a little bit weaker. the dax flat. here's juliette saly. collects the house has approved a short-term increase in the u.s. government debt limit, sending the legislation to president biden just days before the treasury was set to run out of borrowing authority. the vote only delay is another part of the conversation on debt and spending in less than two months time. the u.k. says the northern ireland protocol is harming the region at has to change. frost did leave room for compromise, saying the u.k. is prepared for negotiations with the eu without triggering a larger trade war. the eu brexit negotiator will lay out a counterproposal today. u.s. federal judges have upheld
covid vaccine requirements in three separate decisions. the rulings rejected mandates for mandatory jabs on religious grounds. texas governor greg abbott has outlawed vaccine mandates in the second largest u.s. state setting the stage for a showdown with the federal government. global news 24 hours a day on air and that bloombergquint take powered by more than 2700 -- and that bloomberg quicktake powered by more than 2700 journalists and analysts and 120 countries. this is bloomberg. anna: lvmh's fashion and leather goods unit. the company says it is confident growth will continue. joining us from paris is angelina rask array. lvmh is the first company to report for the period. tell us about the trends for the
third quarter. >> yes. the second quarter was exceptionally strong. the same period a year ago was extremely tough. the third-quarter growth was going to slow down, and it did. overall the luxury group beats on its luxury goods and leather unit. sales grew from 2019, a comparison luxury goods are taking since that was a normal year. that shows the resilience of this unit with represents the path of louis vuitton. of lvmh, sorry. mark: do you think lvmh reassured on the china front? >> yes, there were concerns about the appetite of the chinese consumer. virus restrictions, a
resurgence, but also because in august the regime announced the goal to reach -- to narrow the gap between the rich and the poor and redistribute wealth. when announced, the stated policies sent shutters through luxury stocks with fears of imminent crackdown and more taxes. during the call, the cfo of lvmh explained he did not think this policy would be detrimental, and quite the opposite, he thinks it could be positive since the upper and middle classes in china concentrate the bulk of its customer base. anna: thank you very much. bloomberg's luxury reporter. let's focus on another market. the iea has warned the world is failing to invest in enough energy to avoid sharp increases in fossil fuel prices as oil holds above $80 a barrel after a
four day advance. we are joined by bloomberg's chief energy correspondent. good to speak to you. is the iea saying countries need to invest in more green energy sources, or they need to invest in more fossil fuel's, or both? >> the iea on the flagship report is describing a rather bleak outlook for global energy. on the one hand it is saying clearly the world is not investing nearly enough on green energy like solar and wind, to avoid catastrophic climate change. we need to triple that investment to get to the 1.5 degrees scenario the scientists say is needed. the agency is also saying what they see in terms of oil and gas demand, the world is also not investing enough to make sure we don't face tight supply and higher prices. it is bad news on both fronts.
mark: is the iea really an entirely unbiased commentator on this issue? they are the energy organization for people who basically invest in fossil fuels. is it fair to say they are entirely neutral? i am not undermining the quality or the fact-based elements, but there may not be -- there may be bias on what they put focus on. >> i disagree on that premise. the iea is an independent body. the last five years, if anything has been -- they have put a lot more emphasis on investing in green energy rather than oil. mark: so if we basically say we are early in this oil price cycle, how early are we in this boom phase in oil? i look back to 2008.
2007, it was feeding inflation figures. 2008, we were well above $100 a barrel. do you think those prices are on the horizon if we don't do something quickly? i don't know what the solution is. can that be averted? >> any oil price above the triple digit hurts demand significantly because it hurts the economy unless the economy is firing on all cylinders. we are still fighting with the pandemic remains. i don't think we are there yet. clearly it in terms of investment in oil, the last few years investment has dropped significantly in part because of low prices, in part because of pressure from shareholders to cut investment, focus on dividends and climate change. certainly if the demand continues growing at the pace it is growing, we don't see any sign of change. supply and demand outlook looks very tight for the next couple
of years. the potential for high prices is there. anna: looking at the shorter-term gas story, the has been a focus for many people in europe over recent months and increasingly other parts of the world as well. more positive news on this front yesterday the prices had come off their recent highs, but they are still really elevated i suppose. gas storage -- i was looking at charts that suggested the mild weather we have had has allowed for increases in gas storage. are there better signs on the gas front? >> we have seen more gas flowing into europe. we have seen an increase in storage in the last few weeks, which is badly needed. we are still not out of the woods. the winter that is about to start here -- lower then in the past couple weeks. prices have come off a bit from last week. we have near record highs and
the main worry is that europe does not have much control of what is going to happen. it is going to depend on how cold it gets over the winter. certainly, we are not out of the woods yet. we still have november, december, january, and february to go through. anna: thanks for joining us. coming up on the program, we will get back to stocks to watch. there are plenty. we talked about the luxury sector. s.a.p. also in focus. europe's biggest software company raises its full-year forecast on accelerating cloud sales. ♪
a mixed picture on futures. let's get to individual stocks. very good morning to you. should we start with just eat take away? >> this is one of those stocks that did really well during the pandemic. we are watching to see if the momentum can be continued. just eat take away, shares are down 30%. they have had to invest heavily to keep apace with the competition. will this be enough for investors? they are used to high growth rates from these companies. one thing to keep an eye on will be its capital market next week. that will be the next catalyst. mark: cloud sales are going well for s.a.p.. >> this is the german software giant sap. it has raised its full-year revenue outlook. this is really great.
the story is it wants to transition older products onto cloud subscriptions. that seems to be going well. shares are up after last year's shocker. might be enough to give it a boost this morning. anna: thanks very much. we will keep an eye on those. i will put into the mix centrica as well. all the way through the energy supply chain. a couple things. given what we have seen in the gas market recently, the fact they say their performance is in line with views is positive, and they are well hedged for the coming winter and beyond. that is perhaps a positive. but they canceled their capital markets day in november. we are sort of in a limbo on treasuries and oil prices and stocks as we head toward that inflation data later. mark: the european session will
be calm enough. inflation figures, we are expecting 5.3 percent headline number zero on year. i think the fact if you get month after month you are seeing the mainstream papers going -- 5% inflation, they are going i want wage hikes. anna: that is a sticker shock. mark: you see it wants, you ignore it. but when you are getting it month after month, it is in the subconscious. i want a 10% pay rise. anna: mainstream media in the u.k. interviewing economists about stagflation. that does not happen every day. for the main story to be are we heading toward stagflation -- maybe that is the u.k. dimension , muscle memory from the 70's. it is in the popular narrative, isn't it? mark: definitely. on the way back to the airport,
i will check whether the taxi driver believes whether we will have stagflation. anna: you let us know, that will be a good one. thanks to mark. we will be taking you through the market open. futures pointing not anywhere in particular, waiting for the u.s. inflation number. we will look out for that. we will be back with the market open next. this is bloomberg. ♪
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u.s. cpi today. growth slows at the world's biggest luxury company. anna: we are heading into another trading day with fairly flat expectations for futures market. the macro story would be inflation numbers out of the united states they do wrong. in europe we have had corporate earnings. bank earnings coming from the united states later today. we will start to look in earnest at the earnings picture. as we wait for the inflation narrative to get the latest input, what do we see? tom: the ftse 100 down 0.8%. we had the gdp numbers, 0.4% month by month for the month of august. the estimate was 0.5%. growth continues to expand in the u.k. there are question marks as to
whether it starts to slow as markets price in a rate hike. down 0.4% on the ftse 100. in spain, similar. the cac quarante down 0.1%. u.s. cpi out later today. will that change the narrative? will you hear more fed officials question the transitory nature of inflation? let's look at the sectors to see how things are shaping up. the energy sector is down 0.2%. similar for utilities. not a lot of movement in energy prices today. oil remains just above $80 per barrel. banks currently trading lower by close to 0.2%. we have bank earnings later which will kick off the earnings season. technology currently down 0.3%.
anna: european equity markets opening on the back foot a little as we wait for that inflation number. stagflation is a hot topic on investors minds, with one of the causes being the crimp engine supply chains. -- crimp in supply chains. >> do i see persistence in inflation? yes. i believe is more than transitory related to supply chain issues and commodity prices. >> hopefully it will straighten out over the next six months. supply chains hold people back. >> people are confident they are transitory, that they will be solved, and whether it is three months or nine months, i do not know. i do not think it will be longer than that. i'm confident we will get past this. anna: joining us now is james
athey, investment director, aberdeen asset management, . give us your sense of where the u.s. inflation story peaks. where do you have a better handle? can we say with any certainty about the inflation story in the u.s.? james: i have long been of the opinion inflation is not a concept we understand well at all. i do not think any of the macro theories are that robust. that makes it difficult to model and what we experienced in recent months or at the moment is a combination of gigantic forces colliding, which raises the difficulty of making those forecasts more than a few days, weeks or months difficult indeed. to me, people are thinking about
levels and not changes. inflation is a rate of change, we see percentage changes reported. there is a difference between saying prices will not return to their prior level, and saying inflation will continue. where we see supply chain, it is not sufficient for them not to be resolved. they would have to continue getting worse and drive prices to increase rather than prices remaining elevated. broadly speaking, and it comes to transitory, i need to see past the first year-over-year comparison. i need to believe things are getting worse in terms of disruption to global supply chain, and wages will keep up with the headline price
pressures. so far i do not see evidence we will tick all of those boxes. therefore i think it is inflation shock. it is going to be bigger and more persistent than we expected. tom: that seems to align what we are hearing from the fed boss in atlanta. take a listen at what he had to say. >> it is becoming increasingly clear that the feature of this episode that is animated price pressures, mainly the widespread supply chain disruptions, will not be brief. data from multiple sources point two these lasting longer than most additionally thought. by this definition, the forces are not transitory. tom: we also heard from the vice chair of the fed saying the conditions have been met for the taper in november. we look past the taper, can we
price in an earlier rate hike cycle? james: essentially yes, that is what investors are looking at. the fed narrative has evolved toward the views of the more hawkish members of the committee. the problem the fed has and any of us have, there is a path dependency, and they need to buy themselves the option of hiking soon within the framework that they created. they have made it clear rate hikes will not happen until they finish with the balance sheet unwind. that has not been the case at the bank of england. it has forced itself to get on with the taper more quickly. it needs to get ahead of expectations mainly.
that is the big concern, expectations because of the magnitude of price rises we are seeing. in that respect it is somewhat irrelevant. if people have adjusted their behavior in the interim, that could override macro decisions, so the fed needs to buy it self the option to go sooner than needed. markets are bringing for the earliest rate hike. anna: do you adjust your portfolio around higher inflation from here, or not? you are short u.s. and u.k. inflation. tell us the trades around this. james: it is difficult because inflation has an impact on markets, but it leads to central bank action as well, and those
effects are not the same. what the market was assuming in the first quarter was we would get a lot of inflation but the fed will not react at all. i think the fed has shown it is not willing or able to completely ignore these price pressures. we are nowhere near and as happy of an environment for equities when you consider this is all coming in a growth slowdown period. i am less concerned from a portfolio scenario. the way i see it, more upside inflation prints in the near term, the greater the probability the fed will be increasingly hawkish. tom: james athey, investment director, aberdeen asset management stays with us.
weakness as we wait inflation data from the united states later today. let's look at stocks on the move. getting a few trading updates from european corporate's. sap up 2.7 percent, doing well after they boosted guidance. they raise the full year 2021 outlook. the clouds side of the business is on the side of this, higher cloud spending. this is having an impact on other software companies with some moving to the upside. once european tech. -- watch european tech. tom: sd micro is lower, the french this did chip and supply company, a major supplier to apple. this is on the back of the news that apple is cutting production because of supply chain constraints. anna: i'm thinking about the
pandemic, and the food livery industry that benefited during that. the take away, the company coming through with numbers for the third quarter. they maintained the 2021 guidance and topped estimates. it seems to some analysts that they have taken a gloomy view. some say the slowdown is larger than expected, and the market is responding negatively. the u.k. treasury and the bank of england are working to reduce the stimulus long before the fallout before the coronavirus crisis comes to an end. it could risk what is likely to be a difficult winter for britain. they are facing labor shortages and a cost-of-living crunch for its poorest citizens. james athey, investment director, aberdeen asset management is still with us. what are you expecting the bank
of england will do? on the context that people do not think they will do what you think. do you think the bank of england will follow through on the hawkish commentary? james: it is most certainly in the context. i think it does not mean they will necessarily hike. the idea that you talk hawkish lease of the market does the work for you, so when you get more information further down the line, you are not compelled to hike. you run ahead of that as condition shift in the interim. that is good way of dealing with a transitory inflation shock. i do not think that means the bank will not do anything. i think they are shifting toward the hawkish end of the spectrum. certainly the data is suggesting
a broad enough price pressure in some wage pressures that the bank may think getting a little of the emergency stay this away. thinking about monetary policy rather than changes is sometimes instructive. growth is slowing and we think inflation is transitory but ultimately monetary policy is as extreme as it was at the height of the coronavirus pandemic when economies were shot and gdp was falling. taking away some of that emergency stimulus where inflation is believed to be transitory, i cannot see how that is particularly egregious. tom: some have come on the showing discussed the possibility of a boe policy mistake by raising rates too
quickly. you are suggesting they could be behind the curve? james: yes, i think they all are to the extent of the rapid recovery that we have seen is slowing. they did not use any rapid recovery to chip away at the stimulus. there is a lot of stimulus we need to deal with, and what we are seeing is demand is recovering faster than supply. that is an open and shut case for these central banks intellectual framework. it is an open and shut case to for the need to take away some of that stimulus. i think they are behind the curve. it should not really be used. anna: where do you think the currency trades through all of this? interest markets have gotten
used to the idea of hawkish and us and moved to price that in. the pound has not followed suit. short positioning on the pound on expectations that something knocks the strong growth recovery off course. what you make of the recent move in sterling? james: i have been a pound bull. we took our sterling off in the last few days because we had concerns the market was viewing things through this lens. i looked at the kiwi dollar and that is showing how the market is doing this. there were other dynamics that dominate what the dollar is doing. it is hugely important and to some degree can offset idiosyncrasies. the kiwi dollar has been
weakening. possibly because of similar reasons to sterling. it is going it alone on a hawkish path that has not tended to end well. we were sterling bulls, it is cheap long. we are concerned brexit considerations and a policy error will weigh on sterling. tom: we have those political pressures around northern ireland back in focus. longer-term bullish on sterling. james athey, investment director, aberdeen asset management, thank you very much. let's get the bloomberg flash. laura: sap raised its full year revenue forecast on accelerating cloud sales.
sap says 2021's cloud revenue will grow up to 19% from a year earlier. lvmh beat estimates but growth slowed from the previous period. luxury items surged after the coronavirus lockdown. tesla's china made cars notched another rise in shipments to more than 52,000 units for september, even as general auto sales declined. total shipments were up 27%. that follows a nearly 50% jump in august. ceo elon musk said tesla's shanghai factory is out producing the three-month california plant. anna: thank you.
22 minutes into a trading day that is fairly negative. the cac quarante and ftse 100 under pressure. apple is the latest victim of the global chip shortage, expecting to slash the production targets for the iphone model. the major chipmaker is warning that demand will outpace supply through next year. there is no quick fix insight. let's get the details from debbie wu. what is leading apple to face a chip shortage situation at this point? debbie: the protracted chip shortage situation is heating up to a notable degree. what is happening is two of the major american chip suppliers, texas instruments and qualcomm are dropping a component for apple's latest flagship iphone.
what we are expecting is consumers will see a delay in the shipment of their headset when they take orders without. the average waiting time for consumers to get the new iphone headset is a month. you place the orders you get your iphones in mid-november. tom: what are the longer-term implications for apple as a result of these shortages? debby: right now we are seeing this as a supply issue. while apple is likely to cut its production, demand is likely to get pushed to next year. in the short term we may see some impact, but [indiscernible]
anna: that is the demand side. what does this mean for the apple supply chain? what can they do about this? debby: like you said earlier, there is no quick fix. it does take a year or two for chip plants to expand capacity. some of the major chipmakers are saying they would expand and outpace supply until next year, and the chip crunch could last until 2023. apples chip supplier will hold its earnings call tomorrow. all eyes will be on how long they think this will last.
tom: debby wu joining us with that scoop. because of supply chain constraints, have you upgraded to the iphone 13? anna: my focus is elsewhere. i wonder whether that will materialize before christmas. a likely cut an apple iphone 13 targets could hurt revenue but analysts are remaining bullish on the stock. demand remains robust. tom: we are doing our bit to support apple. demand is incredibly strong. they need to get up product -- they need to get the product in people's pockets. coming up, green bond boom, a record demand for the debut sale on securities.
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sales beat expectations but growth slows at the world's biggest luxury company. one of the macro things to watch out for, inflationary is one thing to watch out for. as we go into the next earning seasons, or they have to say on inflation, market pricing power, supply chain disruption, all of that we will be watching. tom: earlier, they were saying this will be one of the most interesting earning seasons. precisely because we will get a gauge on the impacts of the supply chains. we hear from apple that they are shutting protection early -- production early. stoxx 600, carrying some of the heavier losses. down 50 points. the dax is performing slightly better.
partly because of the stronger picture from the software company boosting the dax. in terms of the cac, that is lower. slowing picture of growth and sales. the ftse 100 is also down. gdp coming out for the month of august, 0.4%, slightly below the forecast. let's switch it and have a look at sectors. real estate at the top of the pile. technology is now gaining, despite the longer-term concerns about the discount values as a result of the deals. they're edging in stateside. calls from investors looking at cyclicals, banks, rather than technology. technology has gained, basic resources are down. oil, around $80 a barrel. brent is a little higher.
it has been softer in the last few hours. that is the shape of play as we look ahead to the cpi data out of the u.s. and china as well on thursday. anna: the inflation focus continues as we work our way towards the conference. the european union drew record demand for its debut green bonds. the demand and the size, eclipsed the u.k.'s deal last month. investors may have to wait until 2022 to get more. let us talk about this and other developments. henrik johnsson joins us. nice to have you. let me ask you about the green issuance that we have seen in markets yesterday. what do you expect, do you
expect to see more green sales? dear expect the pricing benefits attached to this kind of debt to stay at these levels or move from here? what are your expectations? henrik: great question. we have seen over 100% growth year-over-year in green bonds. i think that will continue. at some point, there will not be any green bonds if it continues to grow at this rate. i think we will reach some sort of equilibrium where regulation is going to start questioning how much green there is and enforce the compliance with various metrics. in the short term, continue to grow, but i think there will be regulation coming in that will put a damper on it. tom: how closely are you watching just how much these
bonds do align with the needs in esg space to what extent they are following the letter of the law? henrik: it depends on what kind of green bond. summer bonds do not have a lot of different kpis that have to be followed because they have a lot of ability to create green and esg products. i think it is more interesting on the corporate side were investors are going to be scrutinizing exactly what are in the terms and conditions of the green bonds. i think corporate's are going to have to really deliver on the goals that they are stating. to your question about the greenium, that has been a positive thing in green bonds. previously, we had to pay up to issue green bonds. now, investors are saving money
by issuing green which is one of the reasons we have seen it grow. anna: you suggested that regulation is coming, and that will weigh on issuance, where do you see that regulation coming from, over what time frame? do you have anything more specific? henrik: i think it will be multifaceted. investors are going to be scrutinized themselves in terms of their portfolio. what do they own that is green? there are different shades of green bonds. starting with the -- economy and regulation around europe, companies will have to be more specific as to exactly what they are doing to fulfill their goa ls. i think the eu and europe will be in that kind of regulation, mainly to avoid greenwashing,
which is a topic right now. tom: how much concern is there amongst borrowers around what we are seeing when it comes to private market and supply chain constraints, about the expectations of higher rates from some of the central banks, how does that play into the primary market? henrik: a bit like you were saying in the introduction. we will have the most interesting quarter for many quarters, the one we just started. a lot of the megatrends that were previously driving demand, central bank supports, sovereign issuance, a lot of those are reversing. green bonds will continue to be a real bright spot in the market. i do think that for the rest of the issuance -- that is across equity, high yields, investment grade -- it will be more
difficult. there has been a real shift were investors have a lot more pricing power, issuers are going to have to pay up in order to pay debt. given all the uncertainty out there, new earnings season, supply chain issues, the goal for the central bank is liquidity. anna: can you tell us about the deal pipeline? i don't know if that is being improved. we have seen a lot of private equity interest in doing the deals, is that so there, is that still showing up? how is that impacting the deal pipeline? henrik: a real bright spot in the investing landscape. m&a will continue to be very strong. that is driven by increased competence amongst corporate's and loss of drive power that sponsors have. deals are getting larger and
that will continue. finance will be a little bit harder given the bonds. that puts a certain amount of limits on what can be done. overall, m&a will keep growing as the world is adjusting to post-covid realities. tom: we are seeing more competition in debt markets, is a positive longer-term, adding the competition for issuers and bonds? how does that change? henrik: taking a step back. we have come from the best ever time to an issue of debt. that has lasted for a year and a half. when i'm talking about volatility, bear in mind that is from a strong base. i think this kind of correction is healthy. there will have to be a bit more
discipline and i think an increase in yields is not a bad thing for the economy. we have to exit at some point, the extreme stimulus we have all operated under. there will continue to be a strong pipeline, investors have more power. don't get me wrong, this is still a great time to be doing deals. from a historical perspective, the rates available in the market and the sizes are so fantastic. tom: henrik johnsson, cohead of deutsche bank. thank you very much for your insights. let's get the bloomberg first word news. here is laura wright. laura: investing have to escape climate change in avoid sharp increases in fossil fuel, the warning of the international energy agency. they say that investing in green
energy is what is needed to meet climate targets. at the same time, fossil fuel spending is more than efficient to be the demand. china's export search to a new record in september. strong demand in advance for the holiday shopping season outweighing the shortages across the country. exports grew 20% from earlier, beating economists expectations. the house has approved a short-term increase in the u.s. debt limit, sending the conversation to president biden days before the treasury says that will run out. they are delaying a conversation on debt and spending for two months time. the u.k. says protocol is harming the region and has to change. they call for the current agreement to be replaced. frost did leave room for
compromising the u.k. is prepared for conversations without triggering a trade war. 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. i am laura wright. this is bloomberg. tom: thank you. coming up, bill winters talks about the need for more transparency in the carbon offset space as we look ahead to the conference next month. more from our exclusive interview with him. this is bloomberg. ♪
are taking a gloomy trajectory saying that growth is larger than expected. that is a view shared by others that stock is under pressure. tom: let's switch focus to one of our big interviews. the chief executive at standard chartered says -- fossil fuel. it is in part because doing so would undermine transition efforts in the emerging markets. he spoke exclusively to flint -- francine lacqua. bill: when other the criteria is that we do no harm. if you're doing harm to communities, indigenous people, biodiversity, it will not qualify. that is a defensive approach. the offense of approach is to say, what we want to do is create a market that is what we're are doing.
there are also attributes that are important to you. climate, water resources, not just do no harm, but do good. people who are good in the climate investment, if you look you were happened to oil companies or large airlines, it is bad. if you're investing directly in projects to protect rain forests, but also local as well, employment, bow diversity, natural carbon, protect biodiversity. it is important to them in their business model. doing something good, but also about being transparent. francine: are we transparent enough? bill: right now, no.
it is over-the-counter. we are trying to bring everybody to put the trains out onto the platform. we have created something called climate impact x, we have our first auction of high integrity carbon projects coming up right now. 12 projects, all neutral base. we wanted to create some way surround us. we want to be transparent. we will publish the price. a fleet that will bring more people into the markets. francine: when do you think will be the date when banks say i am not financing fossil fuel anymore? bill: that depends on what you mean by saint not financing fossil fuel. -- by say gaining not financing -- by saying not financing
fossil fuel. in 2050, we will still be producing oil and gas. this is embedded in the science, technology which is scalable and economic to take the carbon out of the environment. whether it is carbon capture or storage, developing greener technology. take -- once we sit up and say, we are highly confident that we are on a science-based target consistent with the paris agreement. anna: that was standard chartered co speaking with francine lacqua. coming up later today, we speak with -- later tonight.
we talk about climate, and await fossil fuel extraction, we have interesting lines coming out of russia. tom: in russia saying that domestically they have enough gas. they will stop injecting additional gas into domestic storage on november 1. that is the line from them on the dependency of europe on russian gas. we note, we are looking to have additional pipelines. how much energy will be getting from russia, the fact that they will say they will stop injecting domestic. anna: i think we will hear from president putin later on. his words, what he has to say
about sending natural gas to europe. there is a redline across europe, sticking with the energy theme. a mining business, in response to the energy crisis they will curtail production further at three operations. this is due to significant increases in recent weeks. we see the ongoing impact of the energy crisis here in europe. coming up, european stocks -- early losses, now fairly flat. we will get back to the market conversation. we will talk to our live team, next. this is bloomberg. ♪ oomberg. ♪
anna: 54 minutes into our trading day. european markets are fairly flat. inflows in the third quarter, lift assets to another record period let's look at some of the events we are watching out for. 12:00 p.m., jp morgan releases its numbers. that is closely followed by u.s. banking and inflation story.
blue origin, with the star trek actor william shatner. then, g20 meeting is happening in washington. tom: joining us now is our bloomberg live macro strategist. how are you thinking about the inflation input here within the market context for central banks in the comments? >> bostick is known for that, i would not expect anything different. it is important to understand how the economy is doing right now. we have seen a comeback globally. just a reminder, we are that
much closer to november with that fed tapering timeline that is coming closer. the market believes that tapering is here now we will start talking about rates very soon. anna: something gave sterling abuse earlier, or is that just dollar weakness? >> i can see dollar dominating the british pound. in the u.k., there are a lot of issues here impacting it. if we want to take a step back, it is a story of shortages globally. whether the u.k. economy, could see that with output decreasing, also, you have apple as well and the shortage of chip shortages impacting their output. it keeps coming and going as we toggle between inflation and supply chain constraints. tom: bloomberg's reporter there