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tv   Bloomberg Markets European Open  Bloomberg  October 14, 2021 2:00am-4:00am EDT

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>> good morning. welcome to bloomberg markets, the european open. i'm anna edwards. mark cudmore joints me here in london to take you through all the market action this hour. the cash trade is just less than an hour away. christ pressures. china sees the highest factory inflation after u.s. cpi prints
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above 5% once again. earnings season ramps up. banks report today. midnight dismissals. the lira slides to another record low after president erdogan fired three central bankers overnight. welcome to the program. this is the european market open. it is just on 7:00 a.m. in london. mark, i wonder what the markets are saying to you. good morning. mark: good morning. it has been a quietly positive session in asia. we can't move beyond the inflation debate at the moment. we had inflation data out of china. it is not feeding through to the consumer. we are getting a lot of nuance. basically every single different kind of divergent interpretation is getting its airtime at the moment and people are swinging
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back about which type they are in. look at what is happening in the commodity prices. anna: stagflation light is something we will also feature. interesting, a bloomberg analysis, the number of times supply chains are mentioned on the call. let's get back to the start of the european trade or think about the start of the european trade. european equity market futures are pointing to the upside. this in the back of some gains made on both sides of the atlantic. it is interesting that we are managing to make these gains in risk assets despite the fact that we have inflation once again about 5%. we have chinese factory inflation at a 26-year high. all of those things and we still managed to make gains on these risk assets every it see where
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we are an of the gmm. mark: you are absolutely right. look at that equities column. generally, we are seeing strength across the board. it is nothing to wild. we are in a higher volatility regime, so gains of 1% or so, just that back-and-forth flow day today, not necessarily the start of a new trend, but it is positive in equity markets. look at that commodities column, copper surging yet again. it has really tightened the supply side. fundamentals are moving much more positive. it looks like it is again going to be back in focus. look at the bonds column. it is quite mixed. the general theme we are getting is a little bit of flattening in the curve. people are getting much more scared about inflation, which mean central banks are reacting. all around the world, we are seeing a little bit of tightening. whether it is chile overnight.
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whether it is the fact that we think the fred -- the fed will bring forth their action. we get that natural flattening of the curve in the market. finally, have a look at that affects column. look at the turkish lira falling again today. anna: that is why yields below where it was yesterday despite the high inflation print, that is why that makes sense. thank you for explaining that to me. let's get a detailed look on the asian markets and more on that inflation reading out of china. juliette saly joins us in singapore. good morning. juliette: good morning. it is really this divergence you were talking about. the consumer still not spending. our business is going to pass on higher costs to the consumer? these calls for a triple are cut starting to get a ladder chorus, suggesting you could see a
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50-basis point cut to the rrr. we have been seeing a bit of fluctuation coming through in the chinese market today. elsewhere, it is this growth story really lifting asia today. we had tsmc a beat with its quarterly profit, so the demand for chips still very much robust. also mentioned the monetary authority decision here in singapore, a surprise tightening. that is strengthening the singapore dollar. we are seeing a lot of trades coming through in the emerging market currencies. anna: thanks very much. juliette saly in singapore. let's get into a conversation about the things moving the market. from what you just described to me about how the rate hikes are being brought forward, that is why you get lower yields at this 10-year horizon. mark: it reflects the idea that
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central banks need to react now, but they are worried that whether the economy can cope and whether that means we get flattening longer-term. it is the idea we get a couple of rate hikes early and that means pressure to the economy. anna: did you see stuff and detail that made you think this is temporary? did you see any clues as to whether this is transitory or not? some people said, this is more than transitory, this is a little bit more sustained. mark: i thought it was a rotation in what segments are contributing to this. some of the reopening themes we have seen because of basic facts , -- basically facts -- base effects. doesn't mean we might be getting a longer shock?
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it is definitely not transitory. anna: i liked the trimmed mean from the cleveland fed. let's get to the chinese inflation story. once again, we have inflation concerns there. they are pretty good at not passing goes on to consumers all the time. no surprise that we get this increase because of what has been happening to energy prices in china. mark: it is crazy what has been happening in energy prices there. there is a great article by our colleague overnight talking about the amount of energy used in china and that this will be bad for businesses around the world. china works as the factory of the world. it is the start of the supply chain issues. if industry can't operate because of energy problems, that will feed through even more supply chain issues. we are not getting through the supply chain issues. anna: you talked over the gmm about where we are seeing
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strengths coming through in the commodities. why is it good for copper and good for some of the metals, but not good for iron ore? i was reading about how the energy crunch is either weighing on or will weigh on iron ore prices. mark: it is the different process of where they are on the chain. the iron ore it's a little bit earlier in the chain for producing steel prices. coppers closer to the end good. if you are not getting that energy, you don't need that iron ore to produce into kind of steel or copper. anna: quick word on the turkish lira. that stood out. done by 0.8% now. mark: this is the story that never ends. you've got to remember that stroke turkey is seeing inflation month after month. it has a crazy inflation story. it is a major energy importer. people are worried that in a
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world where you keep seeing central banks surprised hawkish lay. you see turkey look at it pave the way when it has one of the worst inflation problems. anna: you can get up-to-date analysis and insight from mark and the rest of the markets live team on the terminal. coming up, bank of america kicks off a busy morning for banks. we will talk about the earnings season. plus, more of our exclusive conversation with the santander head. this is bloomberg. ♪
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anna: welcome back to the european market open. we still have 50 minutes to go until the start of european cash equity trading. let's stick with the top story.
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u.s. consumer prices rose by more than forecast in september, resuming a faster pace of growth and underscoring the inflationary pressures in the economy. fed officials agreed tapering will start in mid november or december according to minutes from their september meeting. joining us now is our guest. good morning. when you put together what we learned from the minutes, when you put that with the inflation data we got out of the united states yesterday, do you take anything new away? have we learned anything about where we are in the inflation picture, the inflation story in the u.s.? >> what was interesting was the big jump in the medium cpi. so that the outliers don't cause them to be looking at numbers that are very distorted. we have seen some big pickups and measures there.
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some were trimmed or median cpi sort of been more constrained, so we very much look at those central measures and that is where we saw probably the biggest surprise. it was more in line with the idea that the sequential numbers will fall back. that is what the market is expecting. mark: we have not seen an inflationary environment like this for more than 30 years. how worried are you in that context that we all might just be getting it wrong. my professional markets career started 20 years ago, so i did not get to trade this environment. while you may be able to look at it through the academic lens, are you nervous we all might be getting it wrong? >> you need something more structural for that to bring to bear. in the short-term and the more
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cyclical side, it is that combination of the price pressure on the consumer side coupled with the really tight labor market and it is the really tight labor market that is probably more of the surprise. the expectation is we see participation in the labor force come back up. it is the combination of the price inflation and the shortage of labor. i don't think we are facing a circumstance we haven't seen. the globalization of the labor force and the increased use of technology have been in play. there are lots of ways in which you could argue covid is a district -- and that a much faster pace than people realized. i agree on a cyclical point. we worry about because everybody is worried about the inflation
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pressures, i would say. everyone is saying medium-term with upside risk and that is why we worry a little bit, there is a lot of consensus on that view. anna: but you stopped short of saying we are heading into deflation. some people say we are not looking at -- stagflation, sorry -- some people say we are not looking at stagflation because we have economies that are growing. you say we are not heading for it because we have a lot of quite healthy household balance sheets and western economies. >> absolutely. we could be looking at u.s. gdp growth over 4% next year. over half the street is still expecting above trend growth for the global economy and the u.s.. that is not really stagflation. stagflation needs to be below trend growth coupled with higher inflation.
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for the u.s. in particular, savings have gone up to 11% to gdp and that is very -- with this buildup in wealth, it is often really the rich people and they don't really spend it unless they are planning to go to space. this has gone right across the social demographic. you have these very strong balance sheets, even on the housing side where you have seen big gains in wealth and the potential for equity release. you have extremely strong balance sheets and that makes that growth disappointment a lot less likely. nominal gdp did not disappoint. it is only real gdp because of that unexpected jump in inflation. there is an awful lot of firepower on consumer balance sheets. mark: i'm completely with you that stagflation does not seem appropriate, but i'm curious about that idea that you say no one seems to be thinking anymore that this is a transitory short-term thing. while we are all talking about the idea of stagflation, asset
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prices do not reflect market that is overly concerned by it. look at where yields are, look at where equities are, look at where asset prices are, look at where things like crypto are. i would say that we are talking about this a lot because we are scared, but essentially the market is pricing that this is absolutely transitory. >> i would say the market is closer to where you were outlining before i joined. it is no longer seen as short-term transitory. it is seen as a bit cyclical. i would say that is more where the market is with the risks being perceived that it could be more structural. i think a few months ago everyone was saying this is super transitory, about 12 months of high print and in august, participation goes back to normal. and it is very short-term. people in that sticky, but not structural campus what i mean by that consensus view. i think it comes down to do you believe in central banks?
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if we do can more inflationary pressure, you get what we have seen in the 10-year. people expect the fed to act and expect them to be able to control inflation. i think we all need to recognize that over the last decade, we really struggled to understand inflationary forces and how the dynamics work. i believe we need to be careful about being too confident in any one scenario, but we already have inflation expectations in the u.s. at the highest level since 2014. i would say quite a lot of's priced -- a lot's priced and i would say we still have those forces in the background. anna: john, thank you. qe asking is a structural change that could drive up inflation. maybe we will return to that theme shortly. john stays with us on the program. let's get the bloomberg first word news update with juliet. juliette: the eu and the u.k.
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are braced for a new round of negotiations in london over the coming days over trade barriers in northern ireland after brussels unveiled a set of proposed adjustments to the trade protocols that would cut customs checks in the territory by half and cut sanitary inspections on many retail goods by 80%. the british say the -- existing arrangements are unworkable. police in norway are considering if an incident that saw five people killed and two people injured in a bow and error attack -- arrow attack was an act of terror. police say officers around the country will be temporarily armed as a result of the incident. the turkish lira has dropped to a record low against the dollar after president erdogan fired three members of the central bank in a midnight decree. bloomberg understands it rids the committee of members who disagreed with his calls to continue cutting interest rates
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despite high inflation. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna: thanks very much. coming up on the program, we will get to the earnings story. earnings season ramps up. what have we learned already about big u.s. banks and the earnings season more generally? we will get john's take. this is bloomberg. ♪
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anna: welcome back to the european market open. futures point to the upside in europe, as they do in the united states. earnings season is in full swing and investors will hear two words over and over again.
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executives that s&p 500 companies mentioned supply chains more than 3000 times on investor calls so far. the new milestone is likely to be set once the third quarter earnings season concludes. john, you have upset me because i don't think you are all that excited about the earnings season and i think maybe we will learn a lot about supply chain concerns and inflationary pressures. your expectations seem lower. john: a little bit less than usual, a little bit more like a normal earnings season. the last feel, you have had a exciting earnings seasons, but because all of it normalized toward the back end of last year, we start to look more like a normal earnings season. another supply chain point, it is absolutely a key one. it is interesting that even when a company so essential as apple, the impact on the share price was quite muted in the spill over to the sector was nothing at all. i think the supply chain worries
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have been well flagged. i think companies have gone up in the results and that has not been as bad as people were worried about. i don't think there is any surprise so far. mark: john, you have upset anna, but you have made me quite happy. people aren't looking at earnings yet. at the moment, we got inflation and yield curve and not about earnings. i'm curious on the bank earnings , as you have mentioned in your note, it is really a consensus trade, but is it a consensus that can keep on working? if not, what is the catalyst that could change that trend. john: i have to be honest, i really dislike it when consensus trades work. if you do get a series of news that keeps playing an of the same theme, it keeps going.
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it can be extremely frustrating when that news breaks. to me, that is i think what you need. i think you need continual new news. had an investor survey that said 80% of investors are looking to be shorter interest rates. that is quite an extreme position. banks tend to do well when interest rates rise and so does that short yield position. jp morgan's results were very good, but they were not an outperform or. from that perspective, it shows just how expectations already are. i definitely think that part of it would be there. a lot of pressure, we left a week or so ago because we were worried that when we opened the newspaper or we looked at broker views or other investors, everybody seems to be talking about inflation and the interest rate short. what could turn it one bad inflation number anything along those lines or an increase in
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participation in the labor market. anna: we will look for that for the participation. you have been cutting conviction across a number of trades. explain how that works. john: from our perspective, it is a real pickup and fundamental macro uncertainty. actually our own perspective. three months ago, we felt the outcome as we came through the pandemic was relatively set. you get really strong growth and normalization. the macro narrative was all about -- was less about outcome. there is a lot more confidence in what the outcome looks like as we come out now. that is because of the multiple shocks. we talked about supply-side shocks, labor shocks, disappointing gdp. from that perspective with all of that going on, that has increased uncertainty, it does not look fully priced in markets, such as bringing down
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the total number of trades and the total size of risk-taking until we get a bit more clarity about what all that uncertainty means. anna: john, thanks so much for joining us. great to get your perspective. coming up, a big day for u.s. bank earnings. much of the focus will be on loan growth after the jp morgan disappointed on that front. it did not disappoint on the m&a side. this is bloomberg. ♪
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you get 500 strands free. call right now. (upbeat music) anna: welcome back to the
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european market open. a half-hour until the start of equities trading in europe. futures point to the upside. we have been surprised by the inflation data out of the united states and china, and oil prices continue to move to the upside. you have been thing about data surprises? mark: i'm feeling inspiration from our colleague, who writes
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the morning notes, but this is the idea of citibank's economic surprise -- the way this works, if it is above zero -- that is the zero line -- essentially when it is above zero, data is coming in above expectations. when it becomes below zero, it comes in below expectations. it is not whether growth is positive or negative. obviously if we have a certain expectation, 5% growth somewhere, and it comes in at 4.5%, it is disappointing. what is important is we have moved into positive territory last june and exited positive teritory in august, 14 months of data beating our optimism. one of the most incredible years were equity returns up until
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august. we saw 14 months of data completely nailing the fastest recovery we have ever known -- and now suddenly we were overoptimistic and it is starting to disappoint. i do not see this turning around soon. i think this index will keep falling. anna: i was going to ask if it was plateauing. you could take away from looking at that chart that maybe we had too high expectations have moderated those. maybe data will surprise us to the upside. mark: i think we are chasing too slowly. a lot of times we adapt to expectations too slowly. i think the dynamic we are seeing, fresh news on the supply chain front, fresh news on
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commodities, fresh news on inflation and yields -- this is going to be more negative surprises in the months ahead. anna: let's get a bloomberg business flash. juliette: sources telling us amazon is shopping to use boeing planes and cargo plans, more evidence they have plans to move products from china. it is bigger than the current fleet, and would see the e-commerce giant give up rivalry with ups and fedex. cathie wood is joining wall street players hoping regulators will greenlight an etf tracking bitcoin futures. they will invest on commodity exchanges. nine bitcoin applications were being considered by regulators at the beginning of this month. finance ministers from the
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biggest economies have endorsed a global tax overhaul. 136 governments reached a deal on a minimum rate to be set at 15% for corporations. plans for digital taxes after the u.s. said they were discriminatory. the g20 leaders are set to approve the accord later this month. anna: thank, juliette saly in singapore. let's get to the earning sector in banking sector, bank of america kicks off a busy day. all eyes will be on the loners growth after mixed numbers yesterday. the m&a unit posted its best quarter yet but shares fell. what were the high points from j.p. morgan's results yesterday? it seems to be the same high point it was delivering earlier in the year. >> jp morgan will report on the
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third quarter. they posted their best quarter, a record for m&a overall. advisory almost tripled. equity underwriting jumped 41%. they are looking ahead [indiscernible] this bodes very well for their global fears. mark: as the story of loan growth, something real focus for investors, are we seeing it as a continued good story? candice: this is an area that is
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important particularly looking ahead. we have seen executives point to early indications that small businesses and consumers -- [indiscernible] jp morgan showed there are some ways to go. loan growth was 6% higher than a year ago, but thanks to the wealth management arms. consumer and commercial loan growth -- that is where a lot of investors are focused. [indiscernible] it is expected to be sometime before they return to pre-covid levels. anna: that will be inching to see what those loan story does.
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[indiscernible] santander's chairman says she believes inflation pressures are linked to the pandemic, and are transitory. speaking to francine lacqua, she urged caution. >> there is a lot of talk linked to the issue in financial markets, it is temporary, and i believe it is in the sense that covid is a one off and created a spike. u.s.-china are already ahead of where they were pre-covid. europe will be there in q1. energy is a factor, but hopefully it is part of the broader picture of how we green the economy at a cost we can afford and is fair, and where the cost is borne by everybody in a fair way.
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francine: what worries you about what we are living through economically? ana: first let me say the positive. we are in a better place than a year ago. 6% global growth this year, 4% next year. that is pretty good. governments especially in the developed world were in a timely way making sure businesses survived. those are very positive signals. the other is a huge amount of savings. in 2020, savings increased by $100 billion. on the risk side, what happened to the excess government debt? what happens when businesses and people are taking off life support? do they go back to being in the
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regular situation, able to cope? is inflation temporary? those are issues we need to tackle. francine: does that mean we could hear zombie companies question mark what should leaders be focused on? ana: one of the things we have to manage, and we were doing that, how do we approach customer behavior that is radically different? 50-year-olds and anybody above that age had a hard time banking mobile. during covid a lot of people had to do it because they did not want to go out of their homes. how do we bring people along the digital transformation? had to ensure everybody has a chance in the new economy? those are the big issues. for us it is climate change in financial intrusion, those are the big areas we are focused on
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is a company. each company has to choose where they want most of an impact. anna: that was sent and their chairman ana botin speaking to francine lacqua. 20 minutes from what looks as a positive equity session. we will focus on turkey. the turkish lira down 0.9% as president erdogan makes late-night changes to the lineup in turkey. more on that next. this is bloomberg. ♪
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anna: welcome back to the european market open. 18 minutes into the start of cash equity trading.
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european futures pointing to the upside. a big day from fed speakers. we will hear from the atlanta fed president, who kicks it off. he takes part in a virtual panel on inclusive group hosted by the aspen institute at 10:00 a.m. u.k. time. interesting to get their thoughts in the wake of the above 5% print on inflation. former treasury secretary larry summers slammed policymakers for paying too much attention to social issues, and not enough to the biggest risk to inflation since the 1970's. >> we have a generation of central bankers who are defining themselves by their wokeness. as by how socially concerned they are. they are defining themselves by how concerned they are about the
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environment. they are defining themselves by how concerned they are about financial access and business ethics. and they have grown up and had the whole experience shaked by a period when inflation was below target. it is very hard to lose old habits. anna: the views of larry summers. i was thinking, didn't we hear about other views on jerome powell, who was criticized for not being concerned enough around the climate. it seems like the left of center policies in the u.s. are divided on what they think of the fed. mark: it seems that larry summers' comments were more targeted at gelling yellen --
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janet yellen, and there is that mindset. it is not a different fed, but we have seen less of this. i do agree that we seem complacent about the inflation risk and are concerned about keeping asset prices and growth up, and not the inflation bogeyman. anna: is that because everybody is woke in central banking, or we have not seen inflation for a long time, and structural factors may take us into a deflationary environment? mark: it is a great question, but i will go for the latter, it is about they are underestimating the inflation. anna: for the moment we will get a bloomberg first word news update. juliette: germany's olaf scholz says the government will drive
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forward expansion and renewables and energy restructuring. he expressed confidence he will form a government by christmas. he also weighed in on europe's energy crisis. >> there are a lot of prices that increase for oil and gas, which is due to the economic recovery worldwide. so far, in the next year we will have normalization of price inflation again. juliette: the eu and u.k. are braced for a new round of negotiations in london over the coming days over the trade barriers in northern ireland after brussels unveiled a set of proposal adjustments to the trade protocols that would slash customs checks by half. the british say the existing arrangements are unworkable. police in or we are considering evidence that saw five people
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killed and two injured in a bow and arrow attack. the assailant is expected of -- is suspected of working alone. police say officers around the country will be temporarily armed as a result of the incident. the world health organization has proposed a new team to lead an investigation into the origins of the covid-19 pandemic . the 26 proposed numbers of the group were selected from 700 applications, and have expertise in a range of areas from epidemiology to buy a security. a controversial mission earlier this year found the coronavirus probably spread from bats to humans via another animal. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: the turkish lira has dropped to another record low, after president erdogan fired some of his central bankers in a
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midnight decree. we were going to try to get to our colleague on this subject, having a few technical issues. we will not go to her, and we will turn instead to another subject. we had interesting comments at the bank of england last night, saying the crypto market is double the size of the subprime debt market in the united states on the eve of the great financial crisis. this was designed to get attention, not every but he will agree with this comparison. mark: the lira went to cryptocurrency in your mindset, i do not know if that is a loaded question -- even though the crypto market -- it is less of a systemic risk. the financial system is immensely bigger. we know from central bank
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expansion, the expansion of equity markets, we are weighed egger. crypto markets are ways smaller. there are fewer layer's. cryptocurrency is an isolated market. if you you lose money, other risk assets, but it is not integrated and where people live in the banking system anna:. that was the point he was making, it is increasingly integrated. you have wealth managers sang we do not -- wealth managers saying we will help you get into that market. it is that process and thinking that is making it more integrated. mark: we might go there but subprime was everything. the credit bubble in 2000 was focused around mortgage backed bonds, so essentially in the anglo-saxon world, the obsession
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with owning property was strong. it was essentially government policy to encourage people to buy houses. then everyone in the financial system was punting in the same assets. anna: i knew you would be animated on the subject. coming up, stocks to watch including the banking sector. weakness in the turkish currency. we will talk about that, next. this is bloomberg. ♪
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anna: welcome back to the european market open. eight minutes until the start of cash trading markets pointing to the upside. let's get our stocks to watch from our equities team.
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let's start with the banking sector, a week turkish lira. >> good morning. this is not our first rodeo when it comes to volatility regarding turkeys currency and it central bank. when this sparked a couple of years ago, there were reactions from bnp paribas, i would not expect a big reaction today, but you may see those stocks underperform. mark: we have had tsmc results this morning. what is the story? >> you have not missed an enormous amount, it is broadly in line with what was expected. demand is incredibly high, they are struggling to keep up. there were reports around apple and iphone production yesterday.
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i do not expect moves in chip stocks, tsmc is one of the most important companies in the global supply chain. they expect tightness in supply to remain throughout 2022. anna: let's go to the global appetite industry. >> an upbeat report today, heavy investment in building up the data business. when the pandemic hit, it drove arise in e-commerce. they benefited enormously from that, now paying dividends. we are expecting a good reaction . anna: thank you very much. quietly in the background we
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keep returning to oil prices, up again 0.9% on print threatening to go above $84 a barrel. this is a forever theme. mark: this is massive and under the radar. there is so much to focus on. the oil is one of the big problems, the energy crisis, and it is the driver of inflation. later today we will be talking about oil. mark: thank you to mark for spending the last hour with us. tom mackenzie joins me for the next hour. slightly higher oil prices again this morning. energy and oil companies listed in london and beyond.
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futures pointing to the upside. u.s. futures also pointing to the upside a day after the cpi print above 5%. we have the strength of the chinese picture, a 26 year high in china, what upward pressure will that put on global inflation? we will be back with the market open, next. this is bloomberg. ♪
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it's moving day. and while her friends are doing the heavy lifting, jess is busy moving her xfinity internet and tv services. it only takes about a minute. wait, a minute? but what have you been doing for the last two hours? ...delegating? oh, good one. move your xfinity services without breaking a sweat. xfinity makes moving easy. go online to transfer your services in about a minute. get started today. anna: welcome back to the
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european market open. one minute to the start of cash equity trading. i'm anna edwards in london with tom mackenzie. tom: china sees the highest factory inflation after 26 years, as the u.s. cpi goes above 5%. bank of america, morgan stanley and citigroup report today. the lira slides to another
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record low after president erdogan fires three central bankers overnight. anna: let's look at the futures picture, positive, pointing to the upside. u.s. futures pointing to the upside. it is almost we have forgotten around concerns of inflation. we got that 26 year high-end factory inflation out of china. it looks like we are set for a positive start. tom: larry summers is very concerned about inflation, but the market is looking through the data out of the u.s. and china, suggesting inflation remains sticky at the moment. the markets in europe up 0.3%. wti is above $81. rises as well for brent. yesterday we saw technology
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rally in the u.s., a strong session in europe as well. the u.s. 10 year yield comfortably below the 1.6 level. the yield story giving comfort now for technology. the earnings picture in focus, jp morgan m&a deal strong. the cac quarante, gains 0.8%. spain as well gaining, 0.8%. the italian ftse is in similar territory. let's look at the sectors. technology was leading yesterday. financials were at the bottom. currently, energy gaining, as oil prices rise. utilities gaining 0.3% in the u.k. concerns that utility companies will have higher prices.
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the banking sector is gaining 0.9%. wells fargo reporting later today. technology getting again in the first few minutes. more than 1%. anna: european equity markets opening to the upside. traders are considering further signs of global inflationary pressures as u.s. cpi rose. china factory prices grew the fastest in almost 26 years in september. let's speak to valentijn van nieuwenhuijzen, cio, nn investment partners. doesn't make sense we are seeing moves higher in risk assets despite these inflationary concerns? valentijn: good morning. if you look at the daily move, it may be a bit surprising. we have seen the big surprises
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in april and may on the inflation front. markets digested them well. what you are seeing is the risk aversion from the last four weeks has shaken out markets a little bit. at the core, supply bottlenecks and inflationary pressures will prove to be temporary. it is still embedded in the market. as long as that not fundamentally changing, i think you will see more volatility, and after a shakeout, you will see days like today and yesterday were you get a rebound. there is a lot of cash needs to move somewhere. you see equities moving up, and it is waiting for the moment when markets change their opinion about inflation. we are not there yet. tom: we heard in terms of the fed minutes, cementing this view
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the taper will start in november or december, and that takes investors onto the rate hike cycle by december of next year. how do you position around that? valentijn: again, critic liam important, if you look at tapering cycles, rate hike cycles, it is running up to the moment that is often most challenging for markets. anticipating future interest rates, hikes or tightening of policy is when markets are shaky. once it starts, actually, it is often clearing a little of uncertainty from the markets, and that might be a period if the economic economy does well, markets get more on the front foot again. for the next couple of months, it will be more volatile with up and down days, and more of a correction as everybody seems to
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be anticipating. once we get into tapering and rate hikes, markets will calm down and see that the underlying economy is doing well. anna: a lot has been written and set about stagflation. you talk about stagflation-lite. is it difficult to see stagflation when you have economies growing so quickly, from those that were well telegraphed from deep lows? is that why it is difficult to call it stagflation? valentijn: exactly. let's take a step back. many economies are still operating below the level they were doing before covid or just around that level. the potential room to grow is still there. balance sheets are there on the
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household side and the side. a lot of capex is driven to the energy sector. all in all, medium-term there is room to grow for the economy. stagflation from the 1970's is when there was no growth and high inflation. we are seeing a growth worry but anticipating solid growth going forward, and higher input prices which we still remain will prove to be temporary, but will scare markets for the next 9-12 months. tom: some growth worries emanating from china. credit impulse is starting to slow. all the questions around real estate. we heard that investors are underestimating the slowdown in china. valentijn: i think there is an
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important point, the distinction between the short term panic related to illiquidity and bond issuance, and specificity around specific names. it is clearly less of a support for chinese growth in the property sector. that has been a key driver behind the strength of growth in china, and that is an important medium-term takeaway. construction on the property sector will not be leading that growth for the next 3-5 years. anna: thank you very much, valentijn van nieuwenhuijzen, cio, nn investment partners. more with him shortly. coming up, views from our guests , next.
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this is bloomberg. ♪
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anna: welcome back to the european market open. 10 minutes into the european trading session. we are higher across european equity markets. that's look at stocks on the move. let's start with the mining sector.
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base metals near an all-time high on the lme. all parts of the inflation narrative, a year-long rally in metals. and in supply issues and the energy tightness, and that is adding up to higher prices for some of the things. what about advertising? tom: doing well, shares gaining close to 2.5%. they are saying revenue is back above pre-pandemic levels. they also raise the forecasts. they see organic revenue increasing in the third quarter, and that beats forecasts. some questions in terms -- anna: a copenhagen listed
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medical company on the move to the downside by 2.9%. we have seen a recall of products. they have had to recall and halt sales of new implants due to performance issues in a small subset of implants, and they do not have any safety events. let's get back to our guest, valentijn van nieuwenhuijzen, cio, nn investment partners. i wonder how you are trading these markets at this point. the materials space, how do you see that playing out with higher metals prices? valentijn: i think overall playing the markets right now, we are in a bit of a period where we are not taking the most aggressive positions until we
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get to tapering. it will stay volatile. if you want certain sectors within the equity space such as materials, also financials, they are attractive. it is not only because of the spikes we see in gas and oil but from a medium-term perspective on industrial metals. and upside we see for growth in this sector for the role they are playing. some of these commodities and the companies are related to producing them remain attractive. it is one of our favorite sectors. tom: can you unpack your views on financials? we have wells fargo and citi later today. there was pressure on consumer and corporate loans.
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is that a concern for you? valentijn: not materially. there is going to be one of the most adjusting earnings seasons we have had in a long time because it will be more dispersed, and whether it is on the financial side or other sectors, how companies deal with these fascinating durations in a global economy. we are not concern but more importantly there is the tailwind we anticipate for financials broadly. bonds are not our favorite place to be. and we expect further support for the sector coming from higher interest rates. anna: i'm interested in your play on carbon. tell us about your strategy. is there a specific outcome your
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banking on? valentijn: i would say it is a bigger play. it is an important stepping stone on a bigger journey in terms of transforming our economic model to a more sustainable future. the powers that interact around this only seemed to be growing, and not only in europe but globally more and more. that transition from a european leadership is probably important to get it to a more global scale. we do feel carbon will be one of the most interesting in the medium-term perspective on the back of this necessary in focus transformation we have to undergo in the global economy. the scarcity can be used or increased scarcity is one of the policy tools european policymakers have. we play it through the european
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cap and trade market were we feel on the back of the regulation coming into play in europe there will be persistent upward pressure on the carbon price. tom: what underpins your positive view on copper, particularly what we see on china's growth trajectory? valentijn: as i said earlier, i think copper, aluminum do play an important role in the manufacturing sector. also the role that this sector plays plays an energy transformation. if you talk about china, i mentioned i'm concerned about the contribution from construction. if you think about solid manufacturing, china will continue to get strong support,
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and maybe even become more important than it already has been. we saw strong export demand, i do not see that going away. i see that even stronger than in the past, a central pillar for chinese growth going forward. i expect these metals to be well supported. anna: thank you very much. tom: valentijn van nieuwenhuijzen, cio, nn investment partners. let's get the bloomberg business flash. >> tsmc will build a fabrication special plant for chips and plans to begin production in late 2024. they reported quarterly profits beating expectations as demand for chips stayed robust in the face of worsening supply chain problems. the taiwanese company set aside $100 billion for output over the next three years. the finance minister from the
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biggest economies have endorsed global tax overhaul. 136 governments had reached a deal on a minimum rate of 15% for corporations. digital taxes plans have been scrapped after the u.s. said they were discriminatory. the stage is set for g20 leaders to approve it at an accord later this month. amazon is shopping for cargo planes, more evidence of their ambitions to move products. the models are bigger than their current fleet, and was see the e-commerce giant in a rivalry with ups and fedex. cathie wood is joining the slate of wall street players hoping u.s. regulators will track bitcoin futures. they plan to invest -- according to intelligence, nine bitcoin future etf applications were
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considered by regulators at the beginning of this month. that is your bloomberg business flash. tom: thank you very much. we have some lines on the terminal from the chinese premier, saying he is confident china will meet its full year targets. others have said they are likely to meet it despite challenges around real estate and the energy crunch. he is pointing out the supply chain challenges remain acute. anna: and speaking confidently they will ensure electricity demand is met.
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we will return to that story. coming up, truth or trade war, the eu and u.k. brace for new negotiations over northern ireland. that story is next. this is bloomberg. ♪
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tom: welcome back to the open,
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22 minutes into the european trading day. the stoxx 600 gaining 0.6%. similar picture for the cac quarante and in germany as well. top of the list for sectors, higher energy prices, technology gaining 1.6%. let's switch focus to brexit. the european union and the u.k. are braced for a new round of negotiations over trade barriers and northern ireland, after a british challenge and fresh concessions from the bloc, glimmers of progress. how serious is the eu proposal to the u.k.? >> it is interesting, the eu tried to tailor its proposal to address practical issues that people in northern ireland and businesses had been identifying.
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addressing the movement of medicines, customs checks, food inspections. the eu feels moved quite a long way. the proposal is not what they call an ultimatum or take it or leave it, but the beginning of a conversation over how we implement this. they feel it moved far. it is not clear it will be far enough given that the proposal does not address a few of what are the key demands. anna: what stands in the way of a deal? is it the role of the ecj? kevin: that seems to be the outstanding one, that is the one the eu did not address in the proposal yesterday. it does not mean there is no way out of it, but that is the big
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sticking point. the eu says you cannot have access to the, market if you do not reign supreme over it. u.k. does not think this should be subject only to an eu court. there may be a solution out of this, creating some in a rim body that would handle most of the disputes, some joint mechanism. you can imagine creative solutions. there were a few things they could draw on that exist, but we are not there yet. tom: why is this all happening now? kevin: from the brussels side, that is almost entirely what is happening. keep in mind northern ireland
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protocol, that was part of the big brexit negotiation that was concluded in 2019. no one loved the deal but it was a deal they finally agreed on. this does feel from the eu side like a set an attempt to renegotiate. from the u.k. side, there are legitimate issues that the deal was creating real problems for northern ireland. i think the deeper philosophical things are driven a bit more by domestic politics, then the government in england eager to distract from other issues. anna: thank you very much for
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the update. coming up, a big day for u.s. bank earnings with focus on loan growth after jp morgan disappointed investors. what used to households have of loans when they have large deposits at the aggregate level in their bank accounts. what do banks do with those deposits? this is bloomberg. ♪
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anna: welcome back to the european market open, 30 minutes into the trading day. price pressures, china sees the highest factory inflation and 26 years after u.s. cpi prints above 5% once again. bank of america, morgan stanley and citigroup report today. midnight dismissals, the s lies to a record low after president
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erdogan fired three central bankers overnight. the european equity market dismissing concerns approaching things with a different mindset. over recent weeks since the middle of august we have been bothered by the inflation and supply chain narrative. tom: looking to the cpi print in the u.s. a 5%. there is a gap between the producer prices, factory prices in china, and cpi. so far, not a lot of inflation has been passed on to consumers. that gives the pboc a bit of room. the energy constraints of coal price records in china are challenging, but they think china will meet its targets for the rest of the year. the stoxx 600 gaining 0.5% after modest gains yesterday. the s&p 500 snapping three days
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of losses. technology coming back strongly on the back of yields. currently around 1.55 for u.s. 10 year. the dax gaining 0.5%. olaf scholz says he will be chancellor by the end of the year. cac quarante, up 0.4%. in the u.k., the ftse 100 is getting 0.5%. brexit is back in terms of a dispute between brussels and the u.k. house prices edging up slightly. they have been on a strong run in the u.k. and in the u.s. let's look at the sectors. a sick resources getting a boost on the back of higher prices in terms of oil, brent, wti above $80. brent closing in on $84 a
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barrel. technology had a strong day yesterday. slightly softer yields in terms of u.s. treasuries. at the bottom of the list, health care and utilities, which is flat. anna: let's get back to the u.s. bank earnings season, bank of america kicks off a busy day today. all eyes will be on them after jp morgan had mixed numbers yesterday. the m&a unit posted its best quarter yet, but shares fell. what were the high points from j.p. morgan yesterday? the investment banking side holding up well. >> definitely. jp morgan will report on the
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third-quarter numbers, and it is a good time for the dealmakers. it is shipping up to be a record for m&a overall. the advisory almost tripling. also a surge in equities trading. dispose well for j.p. morgan, and particularly morgan stanley. on the other side, we could see citi showing weaker trading results for fixed income. tom: what did we hear about loan growth or lack of loan growth at jp morgan and what it tells us about demand from consumers and corporate's? >> that is an important focus for investors, and we have seen executives saying that consumers
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are beginning to take on debt again. there is a real turnaround that is some ways away. overall, loan growth came in higher, but it is the asset and wealth management arm. when it comes to consumer and commercial loan growth, those remain. credit card balances should begin to grow. it is expected it will take time before they return to pre-covid levels. those are the numbers some are focusing on. and there is a lot of ground to be made up. tom: thank you very much. switching to santander, the chairman saying no one should be
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left behind as banks strive to transition to a climate finally future. she spoke exclusively to francine lacqua. ana: most of us are not zero in her own operations, and how do we help customers transition to green? we need a common language. we call it taxonomy. what is green? we need to ensure stress tests are aligned across countries and regions. we need governments to have policies where you do not have unintended consequences, and others financing what some are not financing. we need that clarity of court nation across the world. francine: if you look at anxiousness in the banks now, how much more will be done in the next two months? ana: i think covid has helped us because we depend on each other.
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it is the same for climate change. some people say you are not seeing it, you see extreme weather a lot of the times we are in a dangerous path. it has to happen now working together. it is very much with us in the private sector, banks, governments, regulators. there is a real push for coordination, and having clarity. what is green? how do you measure it? what do we do about it? francine: that you changed some labels that were not labeled as green, will we ca something similar from asia and others? ana: in glasgow we have more alignment on the global standards, and we need to speak the same language otherwise it will not be done the right way. my biggest concern is not
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leaving customers behind. we see that with the energy price increase. going green will have a cost but it is a huge opportunity for business and investment. doing it in a way to bring along vulnerable customers, economies that are not starting in the same place as ours -- in brazil and mexico people need a home. how do we get this done in a fair way across different countries and sectors? anna: that was the banco santander chairman giving her thoughts on climate change. we have oil prices elevated, interesting to see lines from the saudis and uae energy nesters not have any impact on the prices now. the saudis talking about a
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challenging year for opec-plus. they are not in any hurry to increase production. they say that increase is smaller than gas and coal. the uae energy minister says he is not worried that we will have overheated oil markets. let's get a bloomberg first word news update. angel: olaf scholz sata the government -- said the government will drive forward in renewables and energy investments. on a trip to washington, he expressed confidence he will form a government by christmas. he also weighed in on europe's energy crisis. >> prices are increase for oil and gas, which is due to the economic recovery we have seen worldwide. so far, in the next year we will
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have normalization of price inflation again. >> police in norway are considering an incident that saw five people killed and two injured as an attack of terror. police say officers around the country will be temporarily armed as a result of the incident. the turkish lira has dropped to a record low against the dollar after president erdogan fired three members of the central bank in a midnight decree. they were members who disagreed with erdogan wanting interest rates cut despite higher inflation. the world health organization proposed a new team to invest the origins of the covid-19 pandemic.
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they were selected from 700 applications, and have expertise in a range of areas from epidemiology to bio security. a joint mission earlier this year found the coronavirus probably spread from bats to humans via another animal. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you very much, coming up we look at the age old debate of value versus growth with a veteran of the investment industry. that is next. this is bloomberg. ♪
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>> i'm going to be cautious because bubbles can last longer and go further than anyone can imagine. i would say if you are thinking of buying tech, if you are thinking of buying these growth names, ask yourself what is my
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exit strategy? if you do not have an exit strategy, do not go in, because you will write it up and all the way back down. we do not know where that turned is. dani: does it seem that fundamentals matter at all? >> to the market, no. it was famously said in the 1940's the stock market in the short run is a voting machine. in the long run it is a weighing machine. the weight of future growth prospects is light relative to the price. if tesla saw its profits grow by 50% per year in the next 10 year, that would mean profits from 10 years now are 55 times larger than they are today. if that happened in your discount that back today, you get a fair value of about 400. do i think it will grow 50% per
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year? no. amazon grew 27% per year. the projection of 50% growth means five times as much growth over the next 10 years. i do not seek tesla growing faster in the coming decade than amazon did in the last cake, and you would have to assume five times that growth to justify half the price. manus: when you think about tech valuations, you say high valuation shares are an endangered -- the investor, how much of a repricing in growth for tech are you seriously expecting? what is the trigger to that? rob: i love the catalyst question because but whatever it is is the prize most of the market otherwise it would not be
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a catalyst. there are many possibilities. i love to frame things in the context of a simple question -- what is going on today that will matter in five years? current supply shocks? no. soaring debt and deficit? yes. demography? yes. these are point in the direction of value doing fine and tech reverting to fair value. i love the question what matters five years from now because it can help us clear the noise of the way. tom: that was rob arnott talking to dani burger and manus cranny, saying you are facing significant risks if you are in investment technology and you do
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not have an exit strategy. anna: accessible commentary on how expensive he thinks technology shares are at the moment. if he thinks it is a bubble, he recognizes that bubbles can last longer than you could rationalize. the catalyst question from manus is interesting, if you see a change coming, you have to understand a work out, what will bring that change about. you might think something is expensive, but what will make the rest of the market to realize that? tom: that is key, even if the fundamentals and data suggest companies are overvalued, the sentiment remains positive longer-term. the stoxx can continue to rally. in terms of the balance sheets, the strengths of the company balance sheets and the technology will be underpinning future growth. anna: let's talk to dani burger.
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interesting to get his thoughts. if he is bearish on tech, did you talk about things he did not like? dani: he really likes value, and anyone who follows rob arnott, they know he liked value for a long time. he has written hundreds of research papers. this time the opportunity value presents is cheaper compared to the growth stocks than in the dot com bubble. he thought he would never see that opportunity again, but he says we are here again. now is a unique time. the window will not last long, so if you are looking for something with greater returns in the future, he says by value, especially u.k. value. tom: we love a public debate. what is he taking issue with when it comes to cathie wood's
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strategy? dani: he loves a debate. he says the issue with what cathie wood is doing, you can have a fantastic company, but if it is expensive enough, it is a bad stock, and that is what he sees with tesla. he says fundamentals are not attached to reality when it comes to the stock price, and you cannot say just because it is a disruptor it is worth sky high valuations. he takes issue with other things that cathie wood and momentum investors like. bitcoin -- he says he does not invest in things he does not understand, but bitcoin does not act as a source of money would. it is not a reliable store of value. it is very expensive. he says there is a good chance it is a bubble, and it will disappoint long-term holders, but he says he would not bet the farm on that because of the
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volatility in the crypto space. anna: a good chance regulators are coming for crypto at some point. dani burger bringing the highlights of that interesting interview. tom: coming, u.s. futures as investors look for inflationary pressures from u.s. and china. we will get the latest with our mliv strategist, ven ram. this is bloomberg. ♪
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anna: welcome back to the european market open. 53 minutes into a positive trading equity markets, moving to the upside. joining us now is ven ram. we see stocks heading higher, and pushing up valuations. the u.s. stock market is now worth more than the combined economic output of five of the world's biggest economies, underscoring how lofty valuations have become. ven: that is absolutely right, tina is the big explanation for this. 47.5 trillion of u.s. stocks,
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that is 210% of the u.s. gdp output. that means we will not close the valuation gap anytime soon regardless of how the economy fares. if you look at the long-term trend growth in the u.s., 3.2%, that will take more than 30 years to close that gap. the market is already suggesting the output. it is a long haul. with rates lower for longer, although the fed is on the cusp of tapering, i think valuations will surge for a long time, and the world we live in at the moment. tom: tell us about the death of the 60/40 strategy. given the idiosyncrasies of today's markets, are we there yet? ven: absolutely.
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people have called the death of the 60/40 strategy for years. in 2019 bank of america had the saying, this is the end of the strategy, people should move on. if you look at the 60/40 strategy, that has run up 25% since that call was issued. the death of the 60/40 strategy is exaggerated, and it is not likely to happen soon. the fed, even though they will taper soon, we are still in an accommodative mode. they will still be buying bonds at a smaller pace. that means we will not get a process of normalization anything close to where we were before the great financial crisis anytime soon. anna: we will not talk about the death of that strategy yet, according to ven ram.
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thank you very much for joining us. that is it for the european market open. oil pushing up to $84 a barrel. tom: the saudi oil minister suggesting they are in no rush to ramp-up supplies at this point. "surveillance: early edition" is up next. this is bloomberg. ♪
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>> i'm very concerned. the chairman of the federal reserve has not taken the real risks associated to climate change. >> going green will have a huge cost but is also an opportunity. >>


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