tv Bloomberg Markets European Close Bloomberg November 11, 2021 3:00am-4:00am EST
statement. we will speak to the cfo of rwe. elon musk cashes in. the world's richest man unloads 500 billion dollars of stock in tesla. francine: let's take a look at the futures. i'm sure we heard about inflation, central banks keep telling us that inflation is here, it is transitory. when you look at some of the prints, not to worry about it. the futures are pretty much unchanged. interesting to see how the day develops. tom: increasingly, you have the divergence between what central banks are saying to put the term of transitory to bed given that very strong print that we have. the spanish ibex is down 0.2%.
the ftse 100 is flat. we had the gdp print for the month. quarter on quarter, just slightly weaker. how that plays into the decision-making will be in focus. we can change it on to see what the cross assets are looking like. cash treasuries are not trading today because of a holiday, but when you have a look at the futures, italy gaining or down 0.2%. down about a 10th of a percent in terms of the pressure. we expect to see yields higher when the treasury trading starts in resumes. the dollar index should be in focus. how that plays out particularly in emerging markets, strength for the u.s. dollar. in terms of u.s. wti, gains of
0.2%. investors and some strategists say there is still plenty of cash. we will get the view from the barclays chief strategist in the next few minutes. currently futures in the u.s. .2 gains of around seven points. let's get to the bloomberg business flash with laura wright. >> elon musk has offloaded $5 billion worth of tesla stock days after holding a twitter poll on his stake in the company. the carmakers ceo has disposed more than 4 million shares, his first sale and more than five years. the regulatory filings. riviere and -- rivian shares soared before giving up some of the gain. the ev makers market value briefly topped $100 billion, putting it on par with general motors and making it worth more than ford as the biggest listing
in the world so far this year. >> we spent years and years putting this together and what is exciting as seeing a diverse group of people with diverse backgrounds and interests really coming together to create these products and standing there today, it is quite emotional seeing so many passionate faces. it was so powerful. >> that is the bloomberg business flash. tom: ok, laura wright in london, thank you very much indeed. francine: i had my espresso. this is what happens on thursday morning with u.s. consumer prices rising at the fastest rate since 1990. here are some key market players and how they have been reacting on bloomberg tv. >> a wide range of expectations for core cpi and headline cpi. what we got was incredibly strong. >> inflation is going to be getting worse before it gets better.
>> we think the inflation pressures have gotten broader and broader. thinking about trying to call that turn is extremely difficult. >> the next 3-6 months, we will see continued pressure. >> supply chain and airports are probably the biggest place we are seeing cost pressure, and fuel prices. >> we are in the perfect environment for sustained inflation. >> is it going to change the fed's course in terms of taper? >> we still think it is priced in too much tightening by the fed. >> powell is not meant to do something about it. >> joining us not to talk inflation is the berkeley set of european equity strategy. thank you for coming on and coming into studio. if you look at that inflation print, we certainly think this is not as transitory as it could have been. what does that mean for equities? >> equity markets are probably
the best hedge against inflation. in the last couple of weeks, there was a lot of tension in the bond market. it is somewhat dependent on central banks. it has not begun to absorb the bond volatility. in the last couple of weeks, we had very strong earnings, very strong earnings to manage and struggle disinflation pressure. this is what we found out [indiscernible] tom: does anything in this inflationary data that we have seen suggest that the defense of those margins is going to be challenged in the months ahead for these corporate's? >> we are seeing more and more businesses talking about higher cost, not getting better. this is something adding pressure on margins.
again, one of the key takeaways from the reporting season for us is confidence from businesses. we do think inflation is very dependent on what will happen with covid. if the covid situation in east asia improves, we could see some easing, which will at some point price some support to margin. francine: the question and we have been talking about it quite a lot is that is quite difficult to say how much of it is covid and how much of it is supply chain and how much of it is also part of the transition of the economy. are we not going to have a taper tantrum? >> so far, we have had very careful communication by central banks. they have been spending a lot of time. clearly it will for central
banks to find tune -- find tune -- fine tune. it will force central banks to adapt communications. the market keeps speculating or worrying about the policy mistakes. they will have to be very diligent. unless they have good reason to believe inflation is transitory. but for now, we have seen central banks sticking to the plan, which is to err on the side of caution and not react to short-term inflation prices. tom: what do you think is the impact on the consumer? is there a concern? do you need to start repositioning away from companies in sectors that are dependent on that very strong consumer demand that may now be under pressure as a result of the very high prices? >> i would say that it is very
well oriented. we have a very strong labor market. we have very high asset prices. we are very expansionary budget. we feel good about the private sector and the customer in particular to be in a position to have stopped some inflation. [indiscernible] are you going to see at some point wage inflation picking up? it could be a red flag. we don't find much to be done for that yet, but that is something we are monitoring carefully. tom: that seems to be a consensus view. certainly, people are watching that very closely. emmanuel is going to stay with us. we will be back and get some calls on where you want to be exposed in this high inflationary environment.
let's check in on some of the individual stocks on the move at the open. we touched on this with anna before the break. the luxury goods maker burberry coming out with results that missed estimates in the first half, but they did say they are seeing strong growth still in china. absolutely crucial market for this company. look at that. shares down more than 8%. 162 points. pressure on burberry. not convinced by that line. they did restart their share buyback and they have maintained their guidance. benefiting from the higher prices, but they did struggle in terms of deliveries, particularly to the auto sector. they also warned on the outlook for china given the pressure on the real estate sector. investors rewarding that company , gaining around 2%. daimler, the news that they are selling their stake in renault.
francine: welcome back to the open. we are about 12 minutes into the european trading day and we are not seeing that many losses after the selloff we saw because of the cpi data. if you look at what is happening in europe, overall, they are holding strong after some of the equities and china gained amid speculation that officials will seek to ease the cash crunch. that is a positive. there is a lot of worry about the inflation print. it does not seem to be filtering through to european stocks. in to some of the equities we are watching. we talked a lot about the bigger picture, about the support we got through some of the earnings overall. if you look at the luxury sector
and burberry is case in point. how much are they suffering from what is going on in china and doesn't make a difference whether you are more exposed to the u.s. longer-term or will everyone eventually have to be exposed to china? >> china has been a big source of concern for markets. the spreads are tight. there is an impact on the broader market. some stocks have been hurt. we had the summer selloff and luxury goods. the resiliency of the consumer. we had a very nice rebound. numbers are kind of mixed, but the consumer still being the key story in china, we do think that what the government is trying to do is transition to make growth more sustainable and balanced.
we have seen some talk about credit growth stabilizing, gains coming back or easing and something which could somewhat support sentiment on the health of the market, which is a key driver of the consumer. we feel pretty good into next year. we are still in the commodity driven part of the chinese market. we will not over stimulate the economy and we will not grow the economy and a capital-intensive way anymore. tom: in terms of what we are looking at here in europe, the focus particularly on the cyclical sector amid an economic recovery, some are questioning how long that is going to be sustained for. what is your preference for getting exposure to what is still a recovery, even if it is maturing where we are in the cycle? >> growth is slowing, but should
stay above trend. we like banks, we like financials, we like energy, we like luxury goods, we like auto. some of the transportation stocks. tom: it is not fully priced in for the sectors at this point? >> something is priced in. but we think there is something left with earnings beating estimates. we don't find the valuations overly as much. francine: thank you so much as always for speaking with us. let's get straight to the bloomberg business flash with laura wright. laura: siemens says it expects profit margins to increase across its three main divisions next year as the industrial giant reaps the benefit of a multiyear streaming program. the group reported net income of 6.7 billion euros for the full year, beating estimates for 5.7
billion euros. but the company warned on pressures from component shortages and higher raw materials prices in the coming months. the eu is set to prolong a temporary waiver across its banks and money managers to continue to conduct trades in the u.k. officials have decided the waiver was just too short. they will give details of the extension early next year. general electric is offering to buy back up to $23 billion of bonds in one of the largest corporate debt buybacks ever. it is targeting a series of bonds. the company is on track to cut $75 billion of debt, boosting cash flow and profit margins as part of a massive restructure program. that is the bloomberg business flash. tom: thank you very much indeed. joining us now is ben from our markets live team. talk to us about the treasury selloff we saw yesterday. do you expect it to be sustained?
how should we layer the inflation data on top of it? >> i don't think we should expect it to be sustained because there were too many factors weighing in on the treasury selloff yesterday. we heard the inflation print which was above expectations, but we also had an auction that did not go very well. it was the ugliest in a decade. if you saw the selloff, it was all over the place. so, i don't think it is a sustainable thing. if you look at the stock market reaction, we fell on the s&p, but it was less than 1%. when the markets come back tomorrow and we take a fresh look, i think we are not going to see a sustained selloff at the long end. the front-end is a different story. i think we are going to get some curve flattening into next year as the fed starts to raise rates. francine: we had an interview
with jeremy grantham and he said the markets are so attached to what the fed is saying, the leaf has been so unshakable that it will be difficult to have any repricing. is this dangerous? >> i'm not sure i agree entirely. if you look at the money market pricing, the markets are pricing more than one rate hike for next year. that is different to the fed dot plot. i don't think the markets are kind of taking the fed at face value. i think that as we get into next year, i think that the markets are likely to be much more aggressive in pricing rate hikes and therefore i think the fed is behind the curve. i think that they will have a lot of catch up to do and that has its implications for the front-end. tom: is the boe also behind the curve as we look to next month's decision as we take into account the data that we got today? >> i don't know if they are behind the curve, but they certainly surprised last week.
having said that, i think they will be one of the first major central banks to start raising rates. whether it is february or december, we don't know yet and we will see what the data leads the boe to do. i think that the money markets are pricing 100 basis points of tightening by the end of next year, which i think is a bit too aggressive. i don't think the boe is going to be raising rates in the next year at all by 100 basis points. francine: thank you so much. coming up, elon musk sells more tesla shares. the world's richest man has collected -- continues to selloff stocks? that is the million-dollar question. this is bloomberg. ♪
tom: welcome back. we are 23 minutes into the european trading day. you are flat across the benchmark europe stocks. the ftse 100. you are seeing very modest losses on the dax in germany. basic resources at the top of the list. travel and leisure at the bottom. one corporate we are focused on and a warning about china is
burberry, dropping more than 8%. .4%, the fashion goods maker based in the u.k., suggesting that the covid restrictions that china has put in place really did have an impact on sales, which missed estimates. longer-term, they still see resilience in china, but nonetheless, investors taking this pretty badly. francine: it is interesting. some things we should be watching out for. investors were frustrated by the chief executives focus on cost cutting and trying to get that under control. this also comes as the chief executive is leaving in a couple of weeks and will be replaced by new ones. we could see turbulent at burberry. elon musk has sold more shares on top of the previous shares he liquidated. it feels like you cover elon
musk 99% of the time right now. it is amazing to watch. it is a fun story. he tweeted and then he sold quite a lot of stock for the first time in five years. >> that's right and some of this was preplanned. i think a lot of people are zeroing in on that and saying he took this poll and was a just a stunned? i think he is maybe just -- the only person who knows the answer to that. he could have called off the plan, but this was a big chunk of shares that were sold. there also may still be more to come because we have not reached the threshold where he sold enough to get to that roughly 10% figure. i do think one of the other things that is interesting is that this is not just a matter of the controversy over billionaires and the unrealized gains that they have gotten from the value of their stock
holdings going up, this is also about options he got a few years back. a little asterisk to that twitter paul or maybe two of them from the weekend. tom: those were baked in. do we have any clarity about more option sales or stake sales coming from elon musk? do we have any sense that is going to happen? >> i believe it is about 4.5 million shares that we know at this point and we would have to get to about 17 million to get to the 10% figure that he floated in the poll. this may go on for a few days before all is said and done. francine: you have to come back to talk about rivian. it was an amazing day for them. >> maybe one of the most valuable automakers in the world now despite just a handful of sales at this point. francine: we want to hear more about that. our overall car -- he spearheads
francine: welcome back to the open, 30 minutes into the european trading day. the hottest u.s. epa print and 30 years on risk appetite as more voices warned that inflation is not transitory. climate talks heat up, china and the u.s. work together to cool down the planet. we will speak to the cfo of rwe shortly. elon musk catches in the world's richest man, and sells a billion dollars in stocks and tesla.
tom: burberry taking a hit on concerns what is happening in china. you can look through the inflationary concerns, and eps around 14% for european stocks next year. back to fundamentals, that will continue to propel equities higher into next year, that is the line from barclays. the euro stocks 600 is flat, but gains of 0.3% on the ftse 100 despite pressure on burberry as a result of the china concerns. the cac quarante is gaining 11 points, 0.2%. the dax is flat. on a sector by sector basis, iron ore has jumped again on the back of reporting suggesting possibly officials in china will
ease conditions around the real estate sector. also optimism that for at least for now ever grand has avoided a default. iron ore gaining almost 2%. at the bottom losses for travel and leisure down 1%. retail down 1%. that is a sector by sector breakdown 30 minutes into the trading session. the data out of the u.k. on a monthly basis was more positive than the estimate gdp of 0.6%, even on a quarterly basis, a bit of a miss. francine: china and the u.s., seem to work together, in a statement yesterday. it injects momentum in the last days of global negotiations at cop 26. we are joined on the phone from glasgow. china did not sign up to the pledge. >> that is right.
this will become one of the top three achievements of cop. before the paris agreement in 2015, the u.s.-china deal open the way for that landmark agreement. the key thing is they will talk about the 20 20's, a crucial decade, because if we do not manage to step up action this decade, it will be too late. things to note, not only did china not sign up, but kerry did not manage to convince them to bring forward their date for peak emissions. that was something the u.s. is pushing for china to bring forward, its 2030 peak date. it is injecting momentum into
the overall discussion. china was not the only obstacle. we will see how that plays out with other countries. boris johnson urging country to not stand in the way of the historic deal. we have to see how broad of a deal it is. next week we have the biden-xi summit, and it might pave the way for an improvement in relations. tom: still more work to be done for cop 26, but that surprise announcement from beijing in washington. companies are wrestling with cop 26 and energy prices. profits for rwe rising in the first nine months of the year, and germany's biggest power producer ramped up generation at its coal plant. they saw gains in energy markets
with earnings at his trading division jumping 53%. we are joined now by michael muller, cfo, rwe. thank you for joining us to go through these results and get your views on the energy transition. these are the numbers for the trading unit benefiting from additional coal production, and the burning of coal. does that continue, and how do you square it with your commitments around climate? michael: we first need to discuss how fundamentally energy markets are working. that is important to understand going forward. the energy demand needs to be met by supply, and we currently see because of high gas prices, coal generation comes back into the money. that indicates the only way to decarbonize our world is to extend the buildout of
renewables. at the moment we have more renewables, coal production will fall out of production. the direction discussed in glasgow is the right one. how do you speed up targets and the buildout of renewables? that is the only way to get the decarbonization running. francine: at the same time we have to accelerate our efforts. this is what a lot of protesters say. winter is coming, it is difficult energy wise. will rwe continue to fire up coal? michael: in the short-term, it is always supply and demand. look at germany last year when gas prices were low. this year even though prices are higher than last year, we have more. it is not that we want to produce it, it is energy balance. francine: as you see it going
into the winter, will you burn more coal? michael: naturally in winter energy demand will increase, and that will lead to additional generation. yes, clearly, there will be more generation. tom: there is the demand factor, that is essential. that remains solid as we negotiate and navigate these turmoils around that demand for energy. there is the optionality as a corporate leader, and at this point in time as cop 26 continues, rwe is digging up coal mines in germany. why are you continuing that? so you can invest that in renewables? michael: you have to look at our strategy. our strategy is clearly focused on the buildout of renewables.
if you look at the current year, we made great progress. we took online assets and invested $2.5 billion in renewables. that brings us clearly in line with our target of more than 30 gigawatts of renewable generation by 2022. the company is set to grow, and we give more flavor to that topic in our capital markets on monday. we are in line with that strategy and fully committed to grow renewables to contribute to the energy transition. francine: you are getting so much pressure from shareholders to be more green, and you are doing huge efforts on renewables. could you pull away earlier than planned? michael: the discussion with our investors is in the end it is
important that you speed up the transition. you should measure us on the speed of transition and if we are really delivering against our commitment. if you look at rwe, we were the first to decommission our hard-core fire plants in the u.k. and converted them in the netherlands. we are reducing the number, so we are clearly on that pathway. at the same time you have to consider we want to make that transformation in a socially responsible manner. we have to look into the regions, the energy supply and security, and look at our people to restructure them in a socially responsible manner. what investors discuss with us is that the maximum speed we are taking, that is indeed the fact. tom: you are continuing to
invest in gas. you see the russians increasing supplies? michael: what we have seen this year is the russians produced more gas than last year. it is only the direction where the gas has gone. as in germany and europe, we had a cold winter, so gas storage was depleted. the russians built their own storage in the country and exported more gas into turkey and asia. in the balance, russia is producing more gas but it is not coming to europe. francine: overall do you expect gas demand to evolve in europe? how much will we need? michael: in the end it is always a question of weather. our energy system will be more dependent on weather.
if it is a cold winter, the demand will strongly increase. it may well be winter becomes warm and we get a lot of wind, then the balance will be there. tom: that demand, watching the weather patterns. there is data that suggests it will be bitterly cold in november. you would expect demand for gas to continue to be elevated. michael muller, cfo, rwe, thank you here in coming up we will stick with energy. ceo, xlinks, simon morrish joins us. that interview is next. this is bloomberg.
the winter season pressures. what is the problem? first, demand has surged as britain emerged from the pandemic. there is a natural gas shortage across europe pushing up power prices, and making matters worse, the u.k. does not have as much gas in storage from russia, the top exporter, as it usually holds this time of year. finally, one of two electricity cables was damaged and will not be back to full strength until october, 2023. some u.k. utilities are forced to use coal burning plants despite the need for more green energy. u.k. power prices hit records in september, and while because have come down, they are far higher than the average over the past five years. consumer electricity bills could jump 30%. there could be black outs. u.k. economy could be facing dark times ahead.
francine: a look at the energy crunch facing the united kingdom from bloomberg's anna edwards. our next guest looking to tackle the power crunch. we are joined by simon morrish, ceo, xlinks. thank you for joining us. this is building a cable to get solar and wind power from morocco to the u.k. it is an exciting project, it depends if morocco is on board. simon: discussions with the moroccan government are positive. they are a great partner in this. we have all the land secured and export license done. morocco has enormous ambitions to be a green electricity supporter to northern europe, and they are a powerhouse. from the moroccan and we are in
an incredibly good position. tom: what about the u.k. end? how are your conversations with the british government going? simon: we have further to go on the british end. we have positive engagement from the treasury. what we are asking them for is a contract -- this is for firm baseload power. what we are generating in morocco with battery storage in comparison to what was given for nuclear power. that is what we are asking the u.k. government. this is a free option for them. this is well below their own analysis in terms of what the market price will be. francine: if they do not give you the support, will you do it
anyway? simon: we fundamentally believe this is absolutely necessary. while the u.k. is pushing out its wind ambitions -- and offshore wind is an incredible resource, and kospi coming down -- one of the problems it has is when the wind does not blow for several weeks, you have a big issue. we saw that in april, so you need to have some form of baseload power to provide the u.k. with nuclear, many nuclear power plants are coming off line in the next 10 years, many gas plants are coming off-line. we do not have other solutions. tom: in terms of -- and that sounds like you would not go ahead without government support -- where are you in terms of discussions around the contracts ?
are you close to getting them to agree? simon: i hope and expect we have positive responses out of the government in the next 12 months. this is not slowing us down at this moment because there is a huge amount to do. one of the key constraints is the cable. if you think about the length of cable we need, the electricity industry is moving more from ac to dc, a more efficient way to transmit power. the most recent link between the u.k. and norway, which went live the first of october, that has been a huge boost u.k. power and reducing prices. effectively we need to build cable factories for this. francine: a lot of believers, a
lot of supporters say this is a great idea. some say it will be difficult to push it through. simon: i do not believe so. we are going ahead on the cable. three european producers have between 4-6 year order backlogs. woman sex predicts demand for this cable will grow nine fold -- goldman sachs predicts demand for this cable will grow nine fold. they are looking to transmit power long-distance. i am very confident this will all be going ahead. what are your other solutions? francine: water. can you not use water? simon: tidal? francine: hydrogen. simon: hydrogen is an important part of the decarbonization, but it does not solve the
electricity supply because so expensive. if you think about what you do with hydrogen, you are compressing it, storing it, transporting it, and then back to a fuel-cell. the efficiency is less than 40%. xlinks products are so much more efficient, half the cost of hydrogen. tom: we wish you luck. that is simon morrish, ceo, xlinks. coming up, we focus on the u.k. after a busy day, what are the implications for the bank of england next month? this is bloomberg. ♪
tom: welcome back to the open, 54 minutes into the european trading day. flat across the benchmark but some upside for the u.k. the dax down 0.1%. futures in the u.s. pointing up 0.2% after the selloff yesterday. basic resources gaining. travel and leisure down more than 1%. this focus on the u.k. and the economy going more than expected after a surge in services and construction. let's bring in lizzy burden.
lizzy: the numbers came in above expectations, but a shade below for the third quarter. the quarterly numbers are the ones the bank of england cares about. it represents a slowing of momentum after that rapid rebound over the summer. it was the risk of choking off the economic recovery that put the bank of england off of hiking rates at its november decision last week. these are not far off of the predicted numbers, but expectations are the bank will hike rates soon. francine: manufacturing not as strong as it could have been, and cars are missing chips. lizzy: that comes back to the supply issues. you had the pandemic that meant workers could not go in because they were notified of coming in
contact with the positive case of coronavirus. that held up the recovery over the summer. tom: are there political costs for boris johnson? lizzy: you have a political moment because the cost of living crisis pushed up by inflation, but the allegations that keep coming out, they divided the ruling conservative party. this is after last week the government made a u-turn to overhaul parliamentary standards when it tried to save a former minister from suspension. unlike the cost of living crisis, you cannot blame this on the pandemic. it is an open goal for the opposition. francine: thank you very much. that is it for the market open. "surveillance: early edition" is up next. tom: so far, europe flat, but no
>> inflation is high. this is a transitory period. >> faith in the fed is so complete that when they say it is temporary, we believe it. >> the biggest challenge is the help of the supply chain. announcer: this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg surveillance: early edition." i'm francine lacqua in london. the hottest uscp i print in 30 years ways on r