tv Bloomberg Markets European Close Bloomberg October 20, 2021 11:00am-12:00pm EDT
johnson and alix steel. ♪ guy: wednesday the 20th. what do you need to know out of europe this hour? u.k. inflation staying above 3% and now expected to climb to 4% or higher. we will discuss that in a moment. jens weidmann quitting the bundesbank. the surprise move for personal reasons comes after he was passed over for president. angela merkel saying within the last few minutes that it will be up to her successor to pick his were placement. covid cases continue to climb across europe. the u.k. secretary will hold a conference, expect it to urge the elderly to get boosters. his government is still ruling out lockdowns for now.
let's talk about where we are with the market. equity markets bid in europe, up 0.2%. we are just continuing to push higher. the stoxx 600 got up into the mid-for 70's not long ago. crude is negative, but very much off the floor that inventoried that we broken the last half-hour, certainly pushing crude prices back up again. brent crude, $85 on the nose. alix: in the u.s., we are seeing a sixth straight day of gains for the s&p. haven't seen that since about mid july, up by 0.4%. you have a earnings dissecting the haves and have-nots versus the same time, there is no alternative. john authers added something onto that. resistance is futile. no matter what your sentiment is, surely people are buying stocks. magna international ended up warning in their core about margin and sales forecast, lowering estimates for 2021, citing all of the disruptions in the odyssey i change, yet that
stock is up by 2%. novavax, one of the worst performers, off by a whopping 10%. their vaccine manufacturing may not be up to snuff, so that is going to wind up hurting that stock. bitcoin talking about record highs. the bitcoin etf over 4%. tons of liquidity buying coming in for that etf as well. i love that idea, there is no alternative. resistance is futile. go buy stocks. guy: that seems to be quite represented on wall street you saw it in the bank of america fund managers survey yesterday. concerned about slowing growth and the idea that there is still this wall of money out there, as a result of which, what is the option? there is no alternative. let's get back to that news regarding the bundesbank. bundesbank resident jens weidmann to step down. the current german chancellor angela merkel says his successor will be chosen by the next coalition.
here was the latest, bloomberg's central bank reporter carolyn . what impact is this going to have on policy? do we have an idea of who the successor is likely to be? reporter: weidmann's resignation is a pivotal moment because officials are getting ready to decide how they will reinvent their bond buying program for the postcrisis era, so weidmann will be participating, but the big question is who will succeed him , and what views will they bring with them on the inflation spike we are seeing in the euro area. that question over his successor will ultimately be a political one.
weidmann was appointed as a very close ally of chancellor angela merkel, and in the history of the bundesbank's existence, it has never actually been led by a woman, so maybe now is the time. guy: some pretty college -- some pretty solid candidates as well to fill those shoes. staying with monetary policy, u.k. consumer prices accelerating well beyond the target for a second month. the data we got for september, global disruption and supply chains driving prices higher. we've got energy a factor into the mix as well. it was a little bit of a debt, but now expected to accelerate further from here. let's talk about what the applications are for policy. lizzie burton joining me now on set. this is further evidence that may be the bank takes action.
what do we take from this data about that decision? >> this is going to buttress market expeditions of a rate hike to 0.25% which is already wet it's expected. this is the last inflation reading before the november meeting. you saw inflation in september coming in below economist forecasts, but still above the mac of england's 2% target, so every month that this continues, it makes the narrative that this is only transitory look shakier and shakier, and it will weigh on household incomes because the government is cutting benefits and raising taxes at the same time. for the budget next week, the chancellor is unlikely to want to unleash the spending caps when he's already going to be aware of the inflationary pressures that more government spending will add to encourage the bank of england to hike rates more aggressively. so if they do that, that is only
going to add to the cost of servicing the government's debt burden. alix: it definitely feels like a rock and a hard place with that one, spending and the inflation backdrop. lizzie, things a lot -- thanks a lot. by the white house -- while the white house is out wanting a vaccine plan for younger children, new reserves shows vaccinating older people can have a significant impact on hospitalizations. he to break it down is rasmus beck hansen -- rasmus bech h ansen, air affinity -- airfinity's ceo. rasmus: the numbers you have of sachsen it in the older population versus the younger populace and is quite striking. if you have --
alix: in terms of the case count in europe, what are you noticing? rasmus: we are seeing increasing rises in germany which is quite worrying. we have seen very high levels, consistent high levels in the u.k. for quite a while. we are not seeing a big increase, but we are also not seeing the decline that one would've hoped for, so when you look at europe and the u.k. in particular, the clouds are really gathering. i think he numbers to look at is really what is the percentage of the population you vaccinated the elderly, the high risk versus the younger. if you look at all vaccination rates, the numbers aren't very different. but if you look specifically at how many of the highest risk are vaccinated, there's quite a big difference. it actually explains a lot of
the hospitalization differences we are seeing. you need 800 vaccinations to prevent one hospitalization. you need 25 vaccinations to prevent hospitalization if you are below 18 vaccinating, so the risk profile is very different. guy: the u.k. just reporting data for the day. for demand thousand 100 cases more. the u.k. now has more covert cases in france, germany, italy, and spain combined. is the u.k. just further forward in the process? we started vaccinating earlier therefore maybe we are starting to see some of that immunity fading? we are going to be hearing from the health secretary a little later on. would be better at this point to focus on, as you say, vaccinating the elderly, getting that booster shot in? is that where the risks should now be? rasmus: yeah, 100%.
we are seeing a number of factors in the u.k. we have seen the rise of the delta plus variant. it is likely that other european countries will see similar pattern, but i think there's also quite a lot of unique factors for the u.k. i also think public adherence to masks in public transport is less then it is in many european countries. but i think it is important to say i don't think the u.k. is yet in lockdown territory. i think a key number to look at here is really hospitalizations. we have around 900 to 1000 hospitalizations. it has been pretty stable. it is still some way to go, but there's no doubt those are high
numbers. if you move into the winter season, you might have slew cases and other infectious diseases, and a lockdown could be the only way out for the government. but that is not get the case. alix: for your models, or he better off doing that were purely focusing on the elderly? rasmus: i don't think is a binary. you can do both. but if you were to choose, there's still almost 15% of the highest risk in the u.s. that haven't been vaccinated at all. that should be the primary focus. of course, vaccine mandates might not be as effective for those because many of them are pensioners, so you have to find new innovative methods. we are seeing immunity of around
10% month on month. getting that moving really fast is critical. we don't have full availability on the booster numbers, but from what we hear, u.k. is struggling with the booster programs, and u.s. has struggled to some extent. that could also explain the divergence we are seeing on the country level. so the elderly, definitely in high-risk groups, those would be the focus if you want to avoid the risk of lockdown going into the winter. guy: why do you think their message is different? while using there is such slow uptake? does the message around boosters need to be different than the message about the first and second vaccinations that were delivered? why do you thicket as we are seeing the apathy in terms of getting these shots done for the elderly? rasmus: that is a great
question. i think part of it is this is a logistical challenge. the first vaccination program was somewhat easier. you just had everyone get in, get vaccinated quickly. now we need more targeted measures. you need to know exactly when a person not the first and second vaccine, and count six months or whatever did the dosing were jean -- what ever the dosing regime is. so we do quite a strong digital set up, quite a strong communication effort, and then i think there might also be some covid tiredness in the population. we have heard so much about it, been through so many things. that might set in in both the u.k. and the u.s. guy: as i say, we will hear from the health secretary at 5:00 p.m. local time, noon in the u.s. getting an update on what is happening here, rasmus bech
deflation. if you had to err on one side of another, you would err on allowing a certain amount of inflation today nice. >> you are seeing signs of inflation, whether it is transitory or something more long-term. you have to begin to stop the quantitative easing. that is going to be a challenge. alix: that was void blankfein and jes staley on inflation concerns. joining us now is sylvain broyer, s&p global ratings chief of emea. if you have inflation heating up for a second month, the expert patient at the bily is that -- at the boe is that they will hike. is that a policy mistake? sylvain: it looks like the bank of england -- if you look at the
current market pricing in the current guidance by the bank of england on starting investment and selling assets, the reason that normalization is shrinking the balance sheet of the bank of england might come as soon as march this year, so it is very healthy, even more healthy than the fed. for inflation, that is caused mostly by energy, and not by core inflation, not by wages. guy: we are starting to see significant labor shortages. labor costs are beginning to rise it was always second-round effects that the bank of england was worried about you if what you say is true, why do you think they are doing what they are doing? because the governor has been very clear he is worried about second-round effects. i'm assuming that he sees evidence for that.
sylvain: we need to have a clear view of what is going on in terms of wages and generally on the labor market. you have compositional effect, base effect that probably distort to the upside. we will see a slowdown in wage growth in the u.s. and europe over the next quarter. it is too early to say for policy steps. alix: i'm interested to get your take on wages because i feel like every single article i read is that you have companies whether you're going to be a huge investment bank or whether you are in amazon or walmart raising wages.
are they not outpacing inflation? why does not not count for more substantial wage inflation? sylvain: if you look at the official statistics, wages in the euro zone are just growing at the pace of 1.7% a year, so it is lower than the target of the ecb. what you see right now is more a normalization of prices. we will probably have 4% inflation at the end of the year. but if you measure the increasing consumer prices over one year -- if you measure over two years, that is more
normalization than something else, and my mind. guy: how big d using the gap is going to be between the major central banks and a couple of years? the u.k. looks like it is going to be hiking rates. i hear plenty of talk in the united states that we could get up to the neutral rate, circuit 2%, and then have to go further in order to push back on the inflation narrative. as you say, the ecb feels like it is in a very different place. this could be relatively short. you think we could find ourselves in a situation where the bank of england raises rates aggressively, but the ecb does nothing? what are the implications of that? sylvain: sorry, i didn't get the full question. guy: what is the policy divergence going to be if the fed and the bank of england go in one direction, and the ecb doesn't find itself in a position where it gets to the
point where it can raise rates this cycle? sylvain: yes, we might have a huge gap in the years to come, especially coming from the side of the easy be. on the continent, the choice is quite clear. fiscal policy is about inflation pressure. [indiscernible] -- sizable effect on lowering inflation next year, and the ecb will look through, so probably the ecb will remain on hold in terms of rates. guy: one final quick question. what are the locations of jens weidmann leaving?
will we see a more dovish ecb as a result of that? sylvain: the ecb has already changed a lot since he joined the ecb board. the ecb has become much more pragmatic than before. we see that it reacted almost immediately to the pendant situation. i think the changes that the ecb are ongoing, and it is not about only one effort. it is about the situation in europe. guy: we are going to leave it there. thank you very much, indeed. sylvain broyer of s&p global ratings, greatly appreciated. this is bloomberg. ♪
♪ >> time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. it is bank president jens weidmann stepping down from his post at the end of the year -- bundesbank president jens weidmann stepping down from his post at the end of the year. the 53-year-old has been germany's central bank chief for more than a decade and is considered one of the more hawkish members of the european central bank governing council. activision blizzard has reported lee fired 20 employees in a bid to clean up its culture. the company has faced accusations of gender-based discrimination and harassment. in august, hundreds of staff protested after management dismissed a lawsuit scribing a so-called frat boy culture. "the financial times" says the game maker will expand its ethics and compliance team. about 50 staff working in
trading operations in london have been asked to relocate. the bank is also working on a plan that will offer administrative and headquarters staff the option to work from home approximately two days a week. that is the bloomberg business flash. guy: thanks very much, indeed. great story coming out of the bloomberg right now. paypal said to be looking at a possible purchase of pinterest. the approach has been made about that possible acquisition. they have discussed the price. we are talking circa $70 a share. i think on the math, that is about a 25%, 26% premium. they are making it very clear that deliberations are ongoing and may not lead to a deal. breaking news on the bloomberg terminal. the clothes is next. -- the close is next. this is bloomberg. ♪
level. we are keeping the stock summary now as we work our way through the earning narrative. we are trying to figure out what it means. the inflation story seems to be part of a narrative, but what we are also seeing his pricing power. that is critical in what seems to be keeping the narrative on an upward directory. the ftse is up 5.1%. the dax is up by .1% -- the ftse is up by .1%. the dax is up by .1% pure luxury stocks are storming back. that may be a knee-jerk reaction. this is an earning story here. list take a look at the session and how it has developed and what we are seeing. as you can see, really tight rates -- range. we picked up a little toward the end of the session. we are up around .3% around the close.
in terms of sector stories, what you need to do is dig into the details. nestle is a huge component of what we are seeing. you are seeing food and beverage are performing today. nestle really driving food and beverage. energy is tracking higher. energy has come off the floor that is still largely negative. technology, autos, that is where weakness lies in europe. it is about earnings. let's talk about what is happening with a paint company, a coating company. it is struggling to source key things and needs to produce paint. prices are likely to rise sharply. this is the color blue, apparently. that pigment seems to be in short supply now.
if you're looking to paint your house blue, i would get on with it. asml, the chip company. feels quite conservative, what they have laid out in terms of guidance, but their machines are likely to remain in high demand. there is a shortage issue here. nestle is also battling high input costs. what it is able to do is pass those on. they are seeing the best growth they have seen in 10 years and they are able to price for it. the consumer or supermarket says you have to take these price hikes and that is interesting. alix: i want to know how long that lasts for. nestle's ceo spoke exclusively with bloomberg. >> you will not be able to repeat the enormous profits we saw in 2020 and the first few quarters of this year, but we are also not seeing elements of a hangover. what you are seeing is continue growth -- continued growth.
alix: joining me now is an analyst with a buy rating on nestle. question on the margin part, how many price increases do you think nestle is going to be able to do passing costs onto consumers? >> i think we are seeing just the beginning of the price increase with nestle. expect further in the fourth quarter of next year. the logistics cost is a pain for the industry. guy: in terms of real strength, pet food remains strong. coffee remains strong as well. when we think about nestle, it is almost heads we win, tails we lose. if we go into lockdown, they are
also going out and eating more, as a result of which nestle benefits as well. how do you think nestle is going to never get the winter? >> it was very interesting today to see the strong growth in retail increasing but you have retail continuing to be strong. strong, differentiated products. you are mentioning pet care, coffee, and plant-based with an extended product range. alix: when are we going to reach the peak of what nestle can actually do? they can use current operating margins and funds, any extra
cross inflation they might see. when do we run out of juice for nestle? what is the top? >> next year i think. very upbeat when it comes to volume growth and price in for next year. i think you see some attractive increased adoption worldwide. you have elevated growth right now and plant-based. guy: we will leave it there. greatly appreciated. let's talk about the other stocks i mentioned a few moments ago, the chip lithography company that makes the kids you used to make chips. joining us now is the head of research.
let's talk about where we are. i read through the numbers this morning. i looked at what they said. it sounds like they are being cautious at the moment. i am wondering whether you think that caution is justified. you have a 900 price target on this business. what is it going to take to get us to 900, and how much of this caution do you think is justified? >> i am not sure. they have been so cautious. i think they are saying what they see and currently they have supply chain constraints that prevent them from reaching their expectations for the year. when you're talking about only 300 million euro of revenue compared to their initial expectations, those revenues will be achieved in 2022, so nothing of the long term story we are seeing has changed today.
it is just they are highlighting there is a problem in the supply chain. alix: it is one of the top-performing stocks this year. they also say the current ship crunch is going to last into 2022. what are the chances that gets pushed back? what is the impact on the stock? >> there will be some problems in 2022, but that does not change the need of their tools, especially the tools that are used to make very small transistors. everyone wants it.
they will probably succeed to deliver what they have promised to the market. those tools are worth $160 million, so they can make a calculation and that will drive growth next year. guy: how much pricing power -- these pieces of the kit are expensive. you say millions of millions for each machine. how much pricing power do you think they have? chips are in high demand. there is a shortage. what does pricing look like going forward? stephane: the prices of asml are not really depending on the situation. it is a moment where chip price are going up or not. what matters is really the positivity of the machines and what you can make with their machines. without them, it is going to be very hard to have an iphone 14
or 15, and that is probably what makes the value of their tools. they can increase the price of their tools because they deliver something that nobody can really deliver. they have that kind of pricing power. guy: we will leave there. thank you very much. we are wrapping up the european session here positive, but only just. earnings are the key driver today, particularly with stocks like nestle, asml fascinating as well. we are creeping ever higher. the cac around -- checked around -- cac 40 today coming back. we saw numbers last night. they were not good.
allie -- alix is interested in the fact that gucci means good. let's get back to that breaking news for you. reportedly paypal is looking at a bid to buy pinterest. it would be potentially a deal that would be a 26% premium, a potential price of around $70 a share that would value pinterest around $39 billion. this is bloomberg. ♪
would value pinterest at roughly $39 billion, paypal down, pinterest up, twitter down, all reacting on that news. you really have seen shopping online has been a huge help to paypal. for me, that is how i pay for 70% of my things. guy: the story on this is we are at $62 45 cents. we are not going up to 70 to -- $70. you have a 12% pick up in the stock. it is still not convinced it is going to happen. there are a lot of caveats in this story. there is no guarantee this ultimately moves forward as a deal. we are obviously quite early in this process, so it'll be interesting to see how the market prices this one going forward.
at the moment, they seem to be looking at the prices on the around this.ttle bit of caution alix: we have seen paypal increasing its bid for different companies. i forgot it bought a european small platform in 2018. it really wants to challenge square. pinterest has been trying to increase user engagement. you had daily active users fall off in the second quarter, monthly active users i should say. guy: the challenge of pinterest has always been how do you monetize it and commercialize all those hits. that continues to be one of the challenges. you do wonder whether this is going to be something that solves this problem. stocks up by around 12%. we will see ultimately whether this deal does go anywhere, but the market is higher but still
greeting the deal with caution. alix: we will get more perspective to update you cannot paypal up by almost 4% on that news. you feel like getting more of a book end for paypal would be something the market might want to see. they have that whole by now, pay later thing, which i do not understand. maybe i am too old. guy: many in the banking industry would agree with you. is interesting that the bigger companies -- there is going to be huge resistance to the large companies doing any more acquisitions and the regulatory pushback is going to get greater and greater. you wonder if you take a step down into the next league in terms of the size and scale of companies we are talking about whether there is greater opportunity there to ultimately do deals rather than allowing
larger companies to be able to make these as well. alix: you also might make the argument that pinterest has gotten cheap enough to do it now . you are not necessarily buying at the top. the news that bloomberg broke is that paypal is looking at buying pinterest at around $70 a share, valuing pinterest at about 39 billion dollars according to some sources. the market kind of taking it on the chin here. up to -- not hitting about $70 for that price. that is the news we are looking at here. pinterest went public in 2019, so it would not have been public for that long. ed hammond is here.
i do not know if he is good, working on that. ed hammond broke the story for us. can i bring ed in? can you hear me? he probably cannot hear you. what did you learn from it? ed: i can tell you about the story because we just put it out there. paypal expressed interest in acquiring pinterest. they are thinking around $70 a share, which would be a premium based on what they are trading today but it depends on where they are doing in recent years. the logic of this is an interesting one. and put the tweet out sing this is happening, responses were question marks. i'm not an expert in this space, but i do know there is a decent amount of e-commerce at pinterest and paypal is sort of
this gigantic payments business now looking to expand wherever it can. guy: i was talking a moment to go about the fact that large tech deals are likely to come under scrutiny. would this? ed: it probably would come under scrutiny. i do not think of paypal as big tech and the way we think of facebook or google. regulators will look at something of this size, but they are not necessarily going to come down on it the way they might a company that has huge social influence. pinterest does have eyeballs on it in the same way any other social media site does, but it is much smaller. alix: i finally realized how to make a board a year ago. i felt proud of myself. will there be any other bidders? ed: we have not heard anything about other bidders. this is a company that is
historically quite cheap right now, so maybe other bidders do emerge. it would not be the first time. if you look back, there were rumors about microsoft looking at this this year. we did not confirm those. we have nothing to substantiate that. guy: thanks very much, breaking the paypal-pinterest store in the last few minutes. next, tesla reporting after the bell. as you can see, not quite there yet. we will talk about this next. this is bloomberg. ♪
i think it will end up in that group. electric vehicles are taking a massive share from traditional, gas powered vehicles. this finally is responding to that reality. guy: cathie wood speaking yesterday. tesla gearing up to release quarterly results today. here with the preview is our auto reporter. that has a punchy target to get to $3000. what does tesla have that is going to continue the momentum it has now? what are we going to hear later? >> tesla is on a tear now. they announced third quarter sales a few weeks ago and it was a huge upside surprise, a quarter million vehicles in the third quarter worldwide. that was up from a year ago. more than anyone expected. they have two factories coming
online, one in texas, another in berlin. they should be able to build 1.5 million vehicles by the end of this year. they are on a growth search. the company will sell 20 million vehicles by the end of the decade, which would be twice what toyota sells now. alix: in terms of numbers today, it is my understanding the elon musk will not be on the call. are there any fireworks we can expect or will this being -- be a pretty boring hour or so? keith: tesla is never boring. i do not think we can count elon out. he may not be on, but he has a lot to crow about. in terms of outrageous numbers, morgan stanley just predicted elon musk will become world's first truly -- the world's first billionaire because of tesla and spacex. i think it is always possible
that he will show up. the number to beat is $1.67 a share. very high expectations. guy: tesla feels like it is valued as a tech stock. auto companies are catching up. how does that relate to chip work? if they catch up, is it a zero-sum game for tesla? >> their valuation now is all the world's leading automakers combined. tesla is a tech stock in many ways. they are weathering the chip crisis better than legacy automakers because they write their own software and have been rewriting software so they can maximize ship usage. that helps them, so they are a tech company.
alix: we have a lot coming up in the next 24 hours. president biden delivering remarks on infrastructure, a u.k. health secretary coming at the top of the hour. we will take that on radio for you. guy: fascinated to hear what the health secretary has to say. it has been a long day. tomorrow, we were expected to start trading. we have american airlines, southwest. we will speak to mike jackson from southwest and autonation, looking forward to all of that. this is bloomberg. ♪
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westin. david: from bloomberg's headquarters in new york to our tv and radio audiences worldwide, welcome to balance of power. joining us is abigail doolittle. stocks are liking what they are seeing so far today. is it going to be a record? people talk about it. having a: people do talk about it. it would turn heads -- abigail: people do talk about it. it would turn heads. one analyst at morgan stanley is calling for correction for the s&p 500. we have moved in the other direction. that seems to have to do with yields going higher and mainly positive earnings reports. we are looking at a