tv Bloomberg Markets European Open Bloomberg November 24, 2021 3:00am-4:00am EST
fall. turkey's currency shatters all kinds of records as president erdogan defends his push for low rates. francine: take a look at the futures. a little bit mixed. the focus is00 central banks could do because of inflation. we're expecting u.s. data that could move the needle and then we have the fed minutes. we have of m&a and then oil as well. tom: it is indeed. looking ahead to that data, consumer good of course, durable good, mortgage applications and the minutes from the fomc and the fed and direction as to what happens with the taper. three rate hikes being priced in be the markets. iron ore is up again. in the basic resources sector. france is flat.
let's look and see how things are playing out. that coordination in terms of the u.s. aligning with the u.s. aligning. that disappointment from some that there is not more released into the markets. future, losses .1%. tech was lower but some of the cyclical financials higher stateside. raising some of the fancy you saw on the yield yesterday down by three basis points. the new zealand dollar is in focus. a quarter point increase in rates in line with a survey by bloomberg. many had anticipated a bigger rey rate increase. looking at 2% by the end of 2022. fran?
francine: the focus, some of the sectors is on some of the inflationary countries. we look at banks. if there is an interest rate hike, that would be beneficiary for them. there are not huge gains but if you look at what we heard from oil, president biden saying it should be redistributed in terms over the retail gasoline prices. the 10 centers this benefiting because of the release should be passed onto the consumer. autos and retail leading the loss. not huge moves. in the range of falling or gaining 0.3 or 0.4. >> kathy woods says the money manager is -- amid concerns about beijing's crackdown on some of the country's high
profile tycoons. the arc founder said china remains -- there are concerns over the erosion for entrepreneurs. astrazeneca is opening labs for its koad product at a new u.k. r & d site this year as they determine the vaccine's effectiveness. its shots could be the reason they are fairg better with hospitalizations than europe. and they discuss the vaccines. >> likely this would be a -- it is more or less pandemic. it would be like to flu and come back on a regular basis and people have to be vaccinated. the question is do you need to be vaccinated every year or two years? we don't know that.
>> considering boosting. 12.2 billion for the bid was too low. telefonica italia said it received a bid from 401 (k) r. 401 (k) r is said to be debating whether 70 to 80 cents a share would seal the deal. margins being hit by a spike in organized robberies. slowing sales and promotional discounts are weighing on the company's bottom line. tom: let's bring in our markets reporter. the u.s., the fed minutes. where are the markets going to be in terms of trying to get a
direction to the next response from the fed? >> i think a lot traders are going to be watching to see if there are any clues on how fast fed plans to taper asset purchases. a lot of that is how they see inflation now. are they more worried after the recent numbers? thank it is not as transitory as they first thought. this is coming at an interesting time. you had this big surge in real yields. i think people are waiting to see if the fed is going to change their mind on that front. francine: there is a couple of moves including what we saw in new zealand. >> exactly. that's why marcus had been reacting so strongly. it is not just about the fed now. it is about the tightening trajectory that a lot of global central banks are embarking on. we saw that big flung neck the
last two sessions in the u.s. tom: is there a sense whether that continues? the main stocks, the software companies, taking a hit. maybe this is a healthy -- >> when bond yields rise, usually -- it is exactly lie you can sate, especially detective like you said. you can see investors losing patience for those profits to materialize. it seems like with treasury yields it is down a little bit today. maybe the nasdaq catching a brooter but in terms -- breather. francine: we're looking at the price of oil. talking about extensively yesterday. it is a little bit disappointing in terms of the amount released. it is widely expected. what does that do and will that be passed onto the consumer?
>> the surge in oil has put pressure on consumers lately. we saw oil go further yesterday after that headline. seems like people are waiting to see what the reaction from opec is and i think that will be a big factor in the u.s. inflationary picture going forward. tom: looking at brent $82 a barrel. wpi at 70. in terms of dollar strength. we have seen such a strong run-up over the last three weeks and months for the greenback. obviously that can be tide to whatever happens regarding taper and expectations around rate hikes. do we expect more sustained upside for the greenback? >> exactly. people are looking at the relative pace of tightening all across the world. for a long time people were expected u.s. to go a little bit faster. it seems like that is still the picture lately.
especially maybe people are expecting that to go forward. francine: we're hearing 401 (k) r said they are considering raising the silicon italia bid. are we going to see more m&a in general because of these evaluations especially in europe? >> exactly. i think that is a really interesting question because we have seen a lot of deal activities lately. another big one people are looking at. francine: we have breaking news out of germany. tom: we have been watching for this. the coalition deal to become the next german chancellor. they will present a coalition deal today. that is going to happen today. significance in terms of moving forward on bringing these parties together for that
coalition. maria talking about the channels of course. notably covid. francine: yesterday we would a wreakdown. we'll see if scholz, the new chancellor of germany con if i weres that. we delve in germany and what the moves and yields could mean for stocks. with a global exit strategist at citi. this is bloomberg. bloomberg. ♪
francine: welcome back to the open. 12 minutes into the trading day. european stocks 0.3%. the cue will depend on what we get from the fed. it is all about monetary policy. we understand germany's social democrats are in agreement to form the next government with sholz as the head. it will be presented later today. we're expecting a news conference at 3:00 p.m. berlin time. let's get to our reporter on the ground. is this pretty much expected, the kind of coalition we thought we would have? any surprises? how do they deal with covid?
>> this is a big question. the fact that scholz has been able to bring three different parties together and able to get this known two months should be big testament to his political ambitions and be a big win. it has been eclipsed by the pandemic. there are many questions he is going have to face. does he want to go for a vaccine mandate the way the austrians have or go for more restrictions? many are saying the federal government, the next government has to come with a plan. in terms of what we're expecting of course we're keeping a closey on the finance ministry. in berlins, it is almost a given this will go and there is speculation there will be a megaenvironment ministry combined with the work ministry that would go for the greens. who is going to be the next
health minister? just yesterday that was proven to be a very difficult job to fill. there is a lot of focus in terms of who is that finance minister and the health minister and who is the person that scholz will pick to deal with the pandemic. tom: do we know what the economic focus, the financial focus will be for this team once they take their seats? >> yes. when you look at the cap, he said he wanted to increase the minimum wage, talked about rebalancing the german economy and there are questions that will come with the industrial policy. there is a lot of regulation coming over from brussels. this is something for the german industry that could be key in the next 10 years. the greens have said they want to transition their position out of carbon and how to make the
relationship with china be a two-way street. there is a lot to the agenda but the focus point and real test for this pandemic is how to deal with covid. that will be the big mission and crisis for scholz to deal with. francine: thank you. we understand for the vote they are aiming for the sixth. we could have a new government in place pretty soon. thank you for joining us. we were just talking about some of the coalition movement over in germany. it is concern that the biggest challenge for any northwestern charge at the moment in europe has to do with covid. does that mean you have to look and take down some of your forecasts for equities are do you think valueses are so low it won't make a huge difference? r. >> good morning. thank you for having me here. you're right the growth concerns are the number one concern on
investors' minds now. we have to remember we are therg the -- in europe with growth over -- economies already cutting their g.d.p. forecast for the last two months. we now expect -- g.d.p. growth. if germany went into a full lockdown, it would affect the growth for the next year. out of examples of -- in one month lockdown in the country takes away 1% of annual g.d.p. one month. so it is definitely we are going to see a fight for this.
tom: not insignificant. when you weigh that up against the commentary we have had from some e.c.b. officials. more hawkish arguably. do you buy what they have been saying that they stay or is the -- going to turn more dovish? >> the asset purchases program is going to get diminished as well. you will see it by the end of year. i'm sure this is something that they are considering at the moment. francine: are you expecting equities in general to actually go up from here? what do you buy with conviction?
>> a way of putting our equity -- bullish. short and cautious. we worry that actually pressures of economic growth are going to have -- growth. so actually we expect -- there will still be positive. a imin eation of higher rates. talking about the -- a combination of higher rates. talking about the fed. the combination also are higher evaluations. the monetary policy.
putting pressure on -- markets in the near term. tom: i know you buy into the tilt toward cyclicals and value. where does that take you in terms of regions? >> the monetary policy. we think that treasury yields are going to go all the way up from -- where they are right now by the end of the year. this will be done with the help of real yields moving higher and the higher real yields are crucial for us. lower yields historically in the news, the biggest driver of growth over value. we think this is going to reverse. our number one call is to buy financials.
we also -- industrials outside europe really, in europe we like out of cyclicals we like financials. we have a little bit of a defenseness, overweight as well. we worry that sometimes -- so we are also overweight. overweight health -- in europe and which effectively -- tom: is it still a potent force in these markets? >> definitely. we have the framework in play. it is one of the most popular frameworks we have done and we also get asked about the updates
every time the market goes down. it is a combination of all of the kept factors in the market and -- the different factors in the market. all that they had inen gone the past. right now there are only 7 1/2 out of 18 with the warning signals. basically what the market is telling you is to buy into the next dip. francine: is there anything you think that you would be selling off now, if evaluations don't make sense and there is no upside from here? >> coming back to the real yields upside. the growth is going to underperform. we are buyers of growth for a
long time but we have downgrade the u.s. to neutral. tom: global equity strategist at citi. thank you for joining us this wednesday morning. let's get in and check in with some of the stocks on the move. what are you looking at? >> we start with ryanair. the c.e.o. michael o'leary said he is expecting a -- christmas for the airline after the lockdowns were announced in austria. he sees pressure on bookings next summer if the u.s. also renews reopening its borders. he says he doesn't see a tightening of u.s. and u.k. borders because the european flare-up is more about low vaccine booster taper than new
viral threats. we'll be keep an eye on ryanair. keeping an eye on the british banking and financial services brand. it posted full-year results today. the digital transformation is closing almost one in five branches. that is going to weigh on profits. they are down so far and finally we're watching johnson mathews, the chemicals giant. on the brink of fall out with the ftse 100 at its quarterly review at the index next week. it posted a loss. the big story here is abandoning the venture into car batteries. saying that with the new boss the group could be more likely to break up but it is in the green so far. francine: thank you so much. the latest on some of the big moves we're watching.
the other beg they think. every day i feel leak there is a 10 billion deal in equities. it is the second day in a row. i wasn't sure what it did. private equities circling. tom: back into play. a lot of cash at hand. we have seen the kkr bids. watching that deal sweel. a lot going on. this is bloomberg. ♪
it has been in a holding pattern waiting for data. tom: it is going to form the view where the fomc and jay powell goes for the taper. three hikes priced in by the markets and the u.s. pretty decent gains across europe. making up some of the losses we saw yesterday but wrestling with the rapid pace of covid-19 infections. the news out from germany. scholz is going to be the chancellor. taking some of the tot spots within that coalition. they will have to face up to the crisis of koad there. the dax is currently flat. the u.k., india, china and south
korea release. basic resources at the top of the list. energy gaining 1%. in the red, travel and leisure. not a big surprise. infections continue to take their toll. also auto parts. that is the shape of play across your sectors. the oil story is still front and center for us as well. the markets looking past this reserve release after posting the biggest gains in two weeks on tuesday. the u.s. decision to release 50 million barrels of crude. japan, india and south korea and the u.k. falling short of expectations. let's get more from our energy team out in asia. what has been the reaction? talk about the fact the markets have looked past this. is that going to continue and what can we expect from opec?
>> the reaction is disappointment. it has been talked up so much over the past month with biden going from country to country trying talk people into it. in the end, it is large, in historical terms but not nearly as big as some analysts estimated. 18 million barrels of the u.s. release was planned. it is just going to be accelerated. another 32 million is just an exchange. not exactly. it will have to be returned eventually. the market had already priced in a big reserve. when the numbers came in, oil prices fell as we saw. francine: when you look at the money that you save from the eventually thetic reserve, how much does it help consumers? >> we have seen some analysis that says about 10 cents a gallon could be saved from this.
but a lot of this depend on how opec responds. if saudi arabia is annoyed by this release of reserves and opec decides not to increase. that could turn around and oil prices support it. we'll have to take a look and see how the especially eck meeting next month resolves this. francine: thank you so much for joining us. we'll see everyone now trying to figure out exactly what opec plus does and whether we fight a global fight, a control of oil. it is a critical time for astrazeneca. they are opening a research center in came bring. we spoke to to the chief executive.
>> it is likely that this pandemic will be a pandemic over time. it is already. which means it will be like the flu. it will come back on a regular basis and people r-will have to be vaccinated. the question is do you have to be vacs natted every year, every two years? we don't know that. it depends on the durability of these vaccines. right now we are in the urnl si of the moment which is -- urgency of the moment which is to stop the pandemic from spreading but we also have to think about how we're going to live with this virus and like the blue through and how often do we vaccinate -- like the flu and how often do we vaccinate
people? francine: is that why you changed this for profit model and would it have been wiser to call it an indemic instead of a pandemic? >> you have to think about the fact that the -- it is a reminder is always going to be . the new others will be delivered next year. we are talking about next year. next year hopefully we'll have more progress in terms of vaccinating people. that is the environment that you have to consider this decision. number one. number two, our price will always be quite reasonable so it will go from no profit in some countries to some profits for others. we will always look for modest profitability. at the end of the day our
company is about cancer, cardio vascular disease. we never look to make enormous profits out of this vaccine. francine: prince charles opened your new one billion pound research facility in the u.k. what look most promising in the pipe line? what are you most hopeful on? >> people ask me that question. it is always like choosing between your kids? which one do you prefer? i like all of our products. we have a tremendous lineup of new products. recently we had absolutely tremendous results in breast cancer with a new product. it really delivered amazing results in the treatment of breast cancer. results in kidney disease and heart disease.
we have also had other results in liver cancer. cancers that haven't seen much progress in the past few years. the treatment of a disease that is a rare amount of copper in the body. a whole line of conditions. in cambridge, we are arth at the heart of science in the came bring community. we have tremendous technologies -- cambridge community. francine: that was the astrazeneca chief executive. you can watch that full conversation a few weeks from now in the next episode of "leaders with lacqua." it was a timely interview. this is into the winter months. a big concern for politicians is do you make the vaccine
mandatory? tom: we're seeing a similar thing from australia. another country that pushed this zero covid policy. they have walked back on that. the u.k. government is trying to ramp up boosters. francine: i have mine december 24. right before christmas. in my mind maybe two years ago, maybe the idea we get over the pandemic we can reopen and move on. it depends on country to country and the kind of vaccinations you have and the policies that you're deploy. it is very difficult to see the whole world come together in and out. you're going to have countries where you see lockdowns. tom: in the u.s., michigan for example very high rates. they are betting very much on the response in terms of the medication coming through from
pfizer and others in 2022. francine: it depends on all of the i.c.u. beds that you have or not. now let's get straight to the bloomberg first word news with laura write. >> scholz is set to succeed ajla merkel. two months of intense negotiations. they have finalized and agreement with the greens and the pro business democrats. they will hold a news conference at 3:00 p.m. in the german capital. the kiwi fell and they will have to tightennen policy faster than expected in order to contain inflation. the central bank's latest forecast show it expects to have the cut rate at 2%. a year sooner than predicted
three months ago. the lira plunging to a record low of more than 13 against the dollar, falling as much as 15 yesterday. it trig red an unscheduled meeting between president and the central bank chief. china has called on people to stop the malicious hype about the tennis star peng shuai. her disappearance earlier this month after alleging sexual assault by a top chinese party official caused international outcry. a spokesman said the case should not be politicized. global news 24 hours a day on bloomberg and bloomberg quick take powered by more than 127 journalists and analyst. tom: coming up, bitcoin slumps
uncertain but we're the stoxx 6 headline gaining 0.5%. a little bit higher than we saw minutes ago. the focus clearly on fed minutes, the focus on the u.s. data coming out later today. a little bit of m&a here and there and then the million dollar question probably what jamie dimon was talking about china making that joke that they would outlive the communist party in china. i'm happy to be joined by our chinese expert. tom: i'm a little uncomfortable with that term, but thank you. they have a $21 billion exposure to china. so far the team over in asia said they have not seen much in state media or official response. we know the communist party has thin skin. francine: india preparing to regulate cryptocurrencies.
they are preparing to help a central bank develop an official cryptocurrency. joining us now bloomberg's expert when it comes to all things crypto. first of all, what are we seeing in india? it look like they could be supportive of crypto but trying to safeguard smaller investors. >> yeah. i think the big question now is there is a lot of speculation around this bill. you have to remember what came out in the past days a short the same on a draft of a proposed bill. the initial reaction within india itself to this news seems to have been one of basically panic. we saw investors sell off a bunch of coins, sheeba and doge, were at one point down more than 20%.
and then even for bitcoin that was down almost 14% in india but basically down .5% on something like finance. i think we're going to see some volatile movement in crypto going forward because there is going to be speculation on what exactly is going on with this bill and bloomberg just reported now that actually india may be considering a proposal to treat cryptocurrency as a financial asset so maybe limiting retail investors involvement in crypto but still allowing big institutional investors to get involved. tom: does that price discrepancies create an opportunity for investors? >> this is one of the ultimate ironies when it comes to crypto which is supposed to be this decentralized money. it is still very difficult to
move it between exchanges across national borders without necessarily running into individual sovereign -- so for something like india you might see a discount but it is going to be very, very difficult to go into that market and quickly buy crypto on the cheap and sell it somewhere else for a higher price. here we have to talk about the premium. this was the famous price discrepency in the market. basically the idea that in south korea bitcoin was trading for far higher prices than in the u.s. or elsewhere. at one point i think it was 15% more expensive than in the u.s. if you could go in that market you could basically make like $15 for every $10 you put into bitcoin. so free money on the table but of course the problem is you can't really do it in scale.
there are regulations of taking won out of south korea. it is difficult to make money off of it. francine: thank you so much. a great story that she wrote today talking a little bit more about the opportunities that could be opening up in india. come up, turkey's lira in free fall as erdogan continues to campaign for lower interest rates. this is bloomberg.
tom: welcome back. 52 minutes into your european trading day. the breakdown is this. gains of .5 in the u.k. slightly less in germany. the dax eking out some minute ma'am mall gains. you have the coalition, scholz. the fx, the story of the turkish lira now. stabilized a little bit in today's session. it has shattered all kinds of records. president erdogan has
intensified his campaign for lower interest rates plunging the currency into a crisis. a chief economist joins us now. where do we stand on this? can we expect further cuts in the place of very high inflation? >> it hasn't been good for the lira. down 40% year to date. it is due largely to the domestic factor. cutting rates in the face of rising inflation. it is much lower than the historical norm and much lower than other emerging markets. that hasn't helped the currency. that is happening in the context where you have rising global interest rates in the u.s. and elsewhere.
also a decline many the lira. you think about what happened to the lira yesterday, it was down more in one day than the emerging markets were down for the whole year. the local factor has been much more important. francine: we have a bloomberg story actually that just crossed the bloomberg terminal saying this erdogan lira experiment will test his grip on the country. does this weaken him if it goes badly and what are the chances it doesn't go badly at this point? >> it is going badly enough. there is elections in 2023 motivating everything that is going on these days. we have seen this happen before, we saw it happen in 2018 and 2020. both cases we saw emergency hikes in interest rates in an attempt to stabilize the currency. will this be repeated now? i think the threshold pain is
probably higher this time around. the president does not want the economy to slow down before the elections. if you look at the playbook from previous episodes the only way to stabilize the currency is probably higher interest rates. that is to come sometime next year. tom: should we be looking at capital controls in turkey? what does it read across the rest? >> capital controls it is the nuclear option. it has large fx needs. imposing capital controls would not help in finding its financing needs over the coming months. it is possible that it will have ramifications that will hurt the currency more. we haven't seen contagion yet but the lesson from 2018 is that
you had rising interest rate rates in the u.s. that is not good in general and some are vulnerable. might be exposed to the risk of contagion from turkey. francine: thank you so much. we have a great quick take that crossed the bloomberg terminal this morning. bloomberg's chief of e merging markets economist. there is so much to talk about when it comes to turkey. you look at the quick take it explains what is his beef with higher interest rates. they didn't answer the last question. it still has to play out. tom: we'll see how it plays out. of course also worth noting what's happening in germany. maria is on the ground in berlin for us. we'll see what the makeup is. francine: and then we'll see
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largest ever release from the u.s. strategic petroleum reserve will help provide the supply we need as we recover from the pandemic. >> this pandemic would be end in a cover time. >> i do not think it will have an impact on our intention to wind down the pandemic emergency purchase program. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg surveillance: early edition." i'm francine