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tv   Bloomberg Markets European Open  Bloomberg  December 15, 2021 3:00am-4:00am EST

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since becoming prime minister but manages to pass his covid measure. waiting for jay foul and the fed, what is expected to be a faster taper and where that leaves us in terms of the pace of rate hikes in 202 markets still pricing and three heise2. test three hikes next year. continue concerns around omicron and the china did that disappointed, at least showed that the growth and recovery is continuing to stop. futures in germany down. essentially flat for the mom. first few seconds for the ftse 100. investors weighing out that inflation data that we saw above 5% in the u.k. how that plays into the decision-making of the boe on
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thursday, whether or not the inflation overtakes those concerns about omicron. are you going to get a hawkish tilt from the boe are they going to hold off until the new year before hiking? in germany, seeing gains of 0.3 %. retail store and focus as well with inditex, h&m. let's move it onto the cross asset board and see how things are playing out. futures in the u.s. pointing to some modest gains. it was the big, mega cap tech names that drag the nasdaq lowered by more than 1%, concerns about a higher yield. yields just edging up. economic data out of china reinforcing the view that there will need to be more support from policymakers, the property sector remaining a key drag, and retail sales coming in as a significant miss.
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the consumer in china remains fragile. brent crude down 0.8%. as the oil investors and markets way up the impacts of omicron on the drag on travel, the iea saying there is a surplus on the oil markets. let's get the bloomberg business flash with laura wright heard laura: inditex has reported recognize, buoyed by online sales. earnings -- the owner of zahra more than tripled to 2.39 billion euros in the nine-month door to october, in line with estimates. sales in the first weeks of the company's fourth quarter were 10% higher than the same oeriod in 2019. bloomberg has learned that the biden administration is considering fresh sanctions on china's biggest chipmaker. sources say smic will be discussed at the national security council meeting on thursday. tighter rules on smic would severely limit the ability of some u.s. funds to sub light
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geared to the company. toyota is planning to invest $35 billion to supercharge its push into electric vehicles. the carmaker is aiming to roll out 30 new ev models by 2030, by which time it hopes to be selling 3.5 million units a year. the new target is a step up from toyota's previous plans and shows it is serious about competing with the likes of tesla and volkswagen. that's the bloomberg business flash. tom? tom: thank you very much indeed. let's get into the market action with the bloomberg mliv's eddie van der walt. we have to start with the fed, and the assumption that you're going to get an increase in terms of the taper that will give the fed that optionality when it comes to the need to raise rates next year to tackle inflation. what are you going to be looking for? what are the signals that are going to change things for you in terms of your assessment of how the fed impacts markets? eddie: you know what, tom? absolutely right. the fed is going to set the tone for everybody. yes, we have 20 central banks this week.
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the one that really matters is the fed, because the fed is ahead of the curve of everybody else. they are already talking about tightening. and really, we just want to see how much their thinking has been impacted by omicron, right? i think that will be the key point for markets, whether that means that they are expecting more inflation, or does it mean that they expect, you know, they expect inflation to come off a little bit and they don't have to tighten as quickly. i think the narrative, particularly the commentary afterward, that will be key for setting the tone for the central banks and how markets interpreted. tom: how do you assess what is happening with tech stocks? the argument has always been as the yields grow higher, that is going to be pressuring these higher valued companies. these are also companies with solid balance sheets. who are looking at a u.s. 10 year yield that looks pretty benign. what is happening when it comes to technology?
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eddie: you know, tech stocks at the moment, there is a lot of exuberance still in the markets. tech stocks, it's been a little more volatile in recent sessions, but we are still not very far off the heise. -- highs. there hasn't been a change of narrative completely in markets it. and i think buy the dip has been so strongly ingrained with investors that we are not seeing them change their ways just to. i think we will have to wait for next year for the. tom: when it comes to gold, do we have to throughout the consensus that this is an inflationary hedge? when you are singled under pressure again today, around 17 68, you'd have many who would be scratching their heads at why gold did not get more of a bid. eddie: looking at yesterday's
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reaction, we had ppi numbers beating expectations. that was a big surprise in the action, to me at least, from gold. i think gold, at the moment, is acting a little bit more as a pu re haven than as an inflation player and i think markets are not looking for haven just at. tom: eddie van der walt, thank you, as always, for setting us up with the movers, the movement within these markets as we look ahead to that fed decision. let's check in on a some stocks on the move at the open. cineworld, a court in canada has ruled that they will have to pay close to a billion dollars to cineplex, in canadian cinema chain that cineworld had entered into an agreement to buy. they pulled out as the pandemic ravaged that sector. cineworld coming out and saying
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they don't expect to have to pay any of this of, for the moment. . they are appealing the decision. generali, you had some announcements around buybacks in terms of that italian insurer as well. a big focus on asset management and nonlife insurance from generali. buybacks and dividends of around 6.3 billion by 2024. veolia getting preliminary clearance from the european commission to buy almost half the assets from its rival, usez, after they walk through some -- rival, suez, after they walked through some plans for divestment. governments around the world focus on the impacts of pollution. those are some of the stocks on the move for us today. we will keep you across those corporate stories as well.
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ok, coming up, where going to be talking about today's fed decision, of course, among other things, with emmanuel cau, head of european equity strategy at barclays. this is bloomberg. ♪
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♪ tom: welcome back to the open.
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we are 10 minutes into the european trading day, seeing gains of around 0.5% as investors await the decision from the fed, and then of course on thursday, the boe and ecb. we have some lines crossing from the new chancellor, olaf scholz, giving his first speech to the bundestag as the new german chancellor. of course, the questions about the response to omicron, the pandemic and the vaccination program in germany front and center. scholz saying he and the team will do everything and there will be no redlines in overcoming coronavirus. it is crucial that all receive a vaccination booster shot. they are still aiming, scholz says, for 30 million vaccination shots by year end. he is saying germany has admitted 19 million vaccination shots so far. this is an update from olaf scholz addressing the bundestag for the first time.
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scholz saying germany will overcome the covid-19 pandemic. we will bring you more lines when we get them from the new german chancellor as he addresses the bundestag. let's switch focus from the european concerns about the spread of omicron to the federal reserve, which is of course what expected, as we discussed with eddie van der walt, to announce doubling of the pace of its taper later today. . that is the view from bloomberg economics. we will be watching for any signs of what this could mean for the timing and the pace of rate hikes. to help us figure out what all this means for investors, i am very pleased to say we are joined by emmanuel cau, head of european equity strategy at barclays, joining us on set in london. great to have you with us. we are talking about the taper and how it leads us up to rate hikes. how important is the time for? what is your assessment of the gap, the lag between the end of taper and the start of rate hikes?
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emmanuel: good morning. this is a day of reckoning for markets. we are going to hear from the fed. as he said, i think expectations have been reset with the hawkish people two weeks ago. two things to watch. based off tapering, we think they will accelerate from 15 to 30 billion and that should take us to march. when are they going to hike or leave options open to hike rates in march. the market pricing in two to three hikes in 2022. we believe they might move forward and start hiking rates as early as march 2022. tom: and yet, you and the team at barclays remain constructive on equities. how much, what pace of rate hikes and at what level, in terms of the alternate rate, can these equity markets handle, do you think? emmanuel: [indiscernible] will
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be a big, major theme for markets next year. the market has to get used to a new regime. we are in a very high uncertainty because we just don't know for sure what this reaction from central banks, what kind of data they are looking. we do expect three hikes next year, four more hikes in 2023. we believe the fed should be around 2% by the end of 2023. by acting early and fairly quickly, they might and they should be able to keep a lid on long-term yields and keep inflation under control. the question is whether the fed will give some clue about the, you know, terminal rate and the dot. tom: what is the root across then to the ecb and how it is starting to think about the end of the pep program, possibly in
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march, and then getting back to its rager purchase of bonds -- regular purchase of bonds? what is the read across from the fed's decision-making to the ecb. emmanuel: the u.s. and europe are in a very different situation. we don't look for the ecb to hike anytime soon. probably we will hear about them tomorrow about some tweaks to the program. they might increase app at least for the next few months. there will be some changes to the asset purchases program. we see the ecb moving -- we don't see the ecb moving on rate hikes anytime soon. that is not as much inflation in europe as we have in the u.s. we believe the ecb is in a much more wait and see situation than the u.s. is. tom: have you and the team at barclays made any changes to the portfolio to hedge for the omicron risks? emmanuel: we did. we published our outlook for 2022 three weeks ago. we took some risks off the table, closed our lungs on
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banks. we think banks in the short term might -- yes, we have a hawkish fed. as you said, the virus is bringing back downside risks to -- and the european economy. we want to have a bit more balance in the portfolio. it's a sector which can defend their valuation, which can benefit from a strong economy in 2022. we like industrials, we like energy. tom: the support from negative real yields, to what extent does that continue to be a key factor for equity investors into next year? emmanuel: the support is still going to be here. but obviously, real yields will be less negative. if our fears are right, the
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terminal rate is around 2%, you should expect real rates to still be negative and still provide some support financial markets and equities. if we can combine for a bit longer strong growth and very low interest rate, that's not a bad mix for equities. tom: emmanuel sticking around with us. emmanuel cau, head of european equity strategy at barclays stays with us. we will dive into the latest economic data from china, which did show signs of a continued slow down and a worrying new study on the effectiveness of the sinovac vaccine. all of that is next. stay with us. this is bloomberg. ♪
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♪ tom: welcome back to the open. we are 20 minutes into the european trading day. you still see gains of about 0.5% across the benchmark stoxx europe 600. the futures in the u.s. pointing to gains of 0.2%. technology is the outstanding sector across the european space . little bit less, you've got energy and basic resources. the chinese economy slowing further in november, dragging down by a worsening property market slump and disruptions from repeated covert outbreaks.
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investors are betting on further policies apart from beijing after research showed that the vaccine made sinovac, the dominant shot in china, does not provide enough antibodies to neutralize the omicron variant. let's bring in bloomberg's chief asia economics correspondent. let's start with the economic data. walk us through what we have seen and how much of a disappointment this is, what are signals about the policy response from beijing. >> we had big ticket numbers from november pretty much all confirming the slowdown in china is continuing. retail sales was a mess. it was expected to be -- miss. it was expected to be better because of singles' day. there was a hit to restaurants and catering there, which is of real concern. and then of course, fixed asset investment continued to show weakness. some spill over from what's going on in the real estate sector.
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the up arrow stuff came with industrial output. we know that's all about china's manufacturing story. exports continue to go gangbusters. if you take these numbers in their totality, more support will be needed. that's going to come especially on the physical side of things into 2022. tom: possibly more infrastructure spending to try and support the economy. we have been weighing out the impacts of this study. it's a small number, about 25 participants, i believe, around the effectiveness of sinovac. there was always concerned about the effectiveness of china's vaccine, but this paints a pretty stark picture. what are the implications? enda: we've got two readouts today, we've got the university of hong kong study, which is basically showing, look, effectiveness is pretty low against omicron with two shots. sinovac themselves have released their own study saying with
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deterred booster shot, your protection is increased sharply. either way, it is early days, but it is certainly a worrying signal, no doubt about it. this matters not just for china, but for all of those, especially in developing economies around the world, that have leaned heavily on sinovac. it will raise questions. or china itself have to undergo a massive booster camping? it will'raise questions about chinas own, very aggressive zero covid strategy. can they keep omicron at bay? is that hurting demand and the consumer story? everybody is watching closely how this sinovac effectiveness is in the coming months. tom: thank you for getting us up to speed on the data and implications of that study on china's vaccines. enda curran joining us out of hong kong. we are going to bring you pictures of president xi jinping having a virtual some with his russian counterpart, vladimir putin.
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the two sides at a point where geopolitics front and center in terms of the u.s. approach to both countries. the u.s. looking to line up additional sanctions on chinese companies, where vladimir putin has lined up troops along the border with ukraine. he's under pressure to avoid a further escalation of tensions on the ukrainian border. both of those countries' presidents meeting. we will keep you across any lines that come across from that. emmanuel cau let's bring back inemmanuel cau, head of european equity strategy at barclays, remains in studio. the slowing economy in china, but what are many are saying is a pivot in terms of the policy response. we saw the triple-r cut. the likes of j.p. morgan, goldman sachs saying now is the time to get more exposure to chinese equities. where do you stand? emmanuel: indeed. growth is slowing for sure in
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china. we have a mix of policy tightening. we have obviously very painful zero covid policy, which are hurting growth momentum. again, we think china will do pretty much [indiscernible] china will act cyclically and stop supporting the economy. we have seen rate cuts. we are seeing liquidity barton up -- bottom up as a. we expect more proactive policy support in china. the long-term objective is to -- the economy. the momentum should somewhat stabilize through the middle of next year, because we will see a bit more support from the policymakers. more credit, more rate because probably, in a moderately, but enough to stabilize the economy. tom: are there particular sectors that are of interest within the chinese markets at this point, and areas that you are avoiding? emmanuel: for now, we are very selective in our approach. we have betting adding exposure
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to industrials. we expect industrial manufacturing activity somewhat to benefit from this pickup in credit impose. we like the auto sector as a way to capture a bit more support to consumer. we are still not yet in commodities, in miners.we expect price control to stay in place for the time being. if inflation starts to moderate, that may be the time to add commodities, because then you might see pboc acting more aggressively to support the economy. tom: interesting and solid insights, as ever. emmanuel cau has joined us on set london, head of european equity strategy, on the opportunities around industrials, are those in china. coming up, 99 tory rebels voted against their embattled prime minister in a vote on covid curbs. we will dig into the details, implications for bojo next.
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this is bloomberg. ♪ hey, angie! you forgot your phone!
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30 minutes into the european trading day and hear are the top stories. it is fed day, a hawkish tilt and a faster taper look all but certain. the ecb and other central banks decide this week. a drag on growth. the white house thinks of -- boris johnson with his biggest rebellion since becoming prime minister, but passes his new
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covid rules. u.k. inflation searches to its highest level in over a decade. let's check in on markets, gains across the benchmark, european stocks, 0.5%. basic resources are at the bottom. technology was near the top. investors are weighing what will happen with the fed and the faster taper expected, and where that brings us with rate hikes. we may get a hike soon, the first quarter in 2022. then we are looking to the ecb and boe. inflation focus in the u.k. and what it means for the bank of england, doesn't push them to a more hawkish position and hike rates or weight until the new year -- wait until the new year. in terms of markets in germany,
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gains of 0.4% as the new chancellor addresses the bundestag, and his focus is on how to address the spread of covid-19 and omicron. the cac quarante seeing gains of 0.7%. we had earnings and data, and oblique story -- a bleak story with a billion-dollar fee according to a court in canada. we move on to sectors. technology is at the top of the pile, 1.6% gains. the nasdaq selling off heavily on wall street yesterday on concerns about inflation with consumer prices coming in at 10% but comfortably low on the u.s. 10 year. basic resources down 0.5%, and energy as well. the data out of china showing
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the recovery slow down continues a brisk response from policymakers. let's switch the focus to politics. we saw what happened with boris johnson yesterday in a crucial vote where there was a rebellion among his own party members. >> order, order. >> ayes to right, 369. nos, 126. tom: boris johnson taking a hit after suffering his biggest rebellion and's becoming prime minister. nearly 100 mp's oppose his plan.
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that left the government to rely on opposition votes to implement new covid curbs to stop the spread of the omicron variant. is party gate a crisis too many for johnson, referring to scandals around parties at downing street at the height of the pandemic. you can read her columns on bloomberg. has boris johnson lost the support of the nation over these scandals and his handling of the pandemic but also a significant portion of his party, or does the support come running back because this is a prime minister who can win elections? >> there are two issues, what the mood of the nation is, in the mood of his party.
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no prime minister wants to rely on opposition to win a vote, let alone in the midst of a public health crisis. this is bad for johnson, the largest defeat of a prime minister since theresa may lost a major vote on brexit. his party is sending him a message that is not simply to do with the particular restrictions they were voting on but his credibility, his authority in general after a month of negative headlines over his management of everything from parties at downing street. the vote will be at of depth with the public mood. omicron cases are rising at an alarming rate. the fact that people are lining up for booster shots, responding to the government call, lots of
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christmas parties being canceled, that suggests the scientific advice is something resonating with the public and they are responding. whether that translates into confidence in the government and the prime minister, that is where doubts come in. we will see more thursday, and clearly his party has put him on notice that a potential leadership challenge -- not this year for sure, but next year -- and the party is showing divisions between those willing to back boris johnson, and those who want to rethink the pandemic policy. this is not just about vaccine passports but a realization that we have to live with potentially variant upon variant, and the party wants to know this will
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not result in waves of restrictions and lockdowns and spending and rising taxation. this is a moment where the party is debating what the philosophical approach is to the pandemic going forward. tom: that debate continues putting the prime minister on notice and possibly a leadership change next year. is there someone within the party who could possibly replace boris johnson? therese: that is the problem for those who have lost confidence in johnson. he is a proven election winner, he won the london mayoral race twice, and a victory in 2019.
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the tories will be reluctant to ditch a politician of his undoubted ability to reach across party lines and demographics for someone who is untried. there are many pretenders to that position. any list would have to include the chancellor, and there are other former contenders for party leadership who voted against him last night. it is hard to see anybody in his league as a politician. he would have to follow long way before his party would abandon him for someone else, but never underestimate the capacity of the conservative party to be ruthless. tom: thank you for the implications for boris johnson as a result of these further
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restrictions and scandals out of downing street. let's switch focus to the central banks, it is a major week not just for the fed but the ecb, the boe and on friday the boj. new projections show inflation below the 2% target in 2023 and 2024, according to officials familiar with the matter. in the u.k., inflation surged to its highest level in more than a decade in november, adding pressure on the bank of england. joining me to talk central banks is sylvia dall'angelo, senior economist, federated hermes. thank you for joining us. when it comes to the u.k., how much of a buy in does the boe have as a result of the inflation numbers and the rapid spread of omicron? silvia: the bank of england is
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in a difficult situation. inflation surged well above the forecast they had early in november when they released the monetary policy report. however, on the other hand, we have uncertainty with the labor market after the expiration of the furlough scheme. the impact on the market has been limited but we might see some strains going forward. more importantly, more concerning is the omicron variant, which is rampant in the u.k. at the margin, the bank of england will remain on hold on thursday, and will look for more time to get more clarity on the full implications of the omicron
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variant. tom: they stay on hold is the marginal call, and hold off to the new year to hike rates possibly. does that leave them vulnerable of being behind the curve on inflation that is looking more and bedded in the u.k.? silvia: there is that risk, and the meeting thursday will be a close call. we also have to take into account there will be no press conference thursday, no new round of forecasts. the bank of england will lack the opportunity to explain its decision fully. it looks like february will provide a better opportunity. it is only a difference of two months, from an inflation perspective should not make much
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of a difference even though we know winter months will be tough for inflation anyway. tom: in the euro zone inflation remaining elevated in the short-term, but the forecasts in terms of the ecb suggesting inflation starts to moderate in 2023 and 2024. does that give the central bank of europe and christine lagarde more optionality? does it reinforce the doves at the ecb to remain supportive of this economy? silvia: president lagarde's rhetoric has been consistent since the last meeting, suggesting the medium-term inflation outlook, so very unlikely rates could be raised in 2022. this narrative will be preserved
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at the upcoming ecb meeting thursday. and the forecasts will likely show inflation below the 2% target in 2023 and 2024. that will reinforce the case for keeping monetary policy for the foreseeable future. tom: how important is it for the peripheral nations of the euro zone to have a more flexible asset program if pep comes to an end in march? silvia: that is a great question. the ecb suggested the pep program will expire in march as expected. the ecb will confirm this view at the upcoming meeting on thursday. however, in this context of
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bonds issuance in the euro zone, they need to avoid a widening of the spread. i think at this stage, there is much uncertainty about the omicron variant, about inflation, that the ecb might want to buy it self time to iron out details of the new framework. there is a possibility it will remain vague on the amount of the new program, and about the situation of reinforcement of the program. i think the ecb will make clear they will remain in assistance for a long time, and flexibility
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of the pep program will be adopted. tom: thank you very much, sylvia dall'angelo, senior economist, federated hermes. coming up, record earnings buoyed by e-commerce. we look at the numbers, next. this is bloomberg. ♪
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tom: welcome back to the open, 48 minutes into the european trading day. the stoxx 600 gaining 0.4%. top of the list, technology, 1.4%. bottom of the list, retail space, down 0.5%. record earnings buoyed by e-commerce as the biggest clothing retailer emerges from the pandemic stronger. h&m reported sales that met estimates. onset with us is laura wright. what were the key takeaways? laura: it was a huge milestone
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-- passing pre-pandemic sales levels for the swedish rival, h&m. they are still lagging pre-pandemic sales. digging more into the earnings picture, a slight miss, but they have been praised for swift cost-cutting, benefiting from the long-term trend of online sales on target for 2021 and growth margins. the biggest factor is marked down price in stock and they have tight inventory that mitigates that risk. tom: what are we hearing from the retailers about the supply chain constraint, and what they are doing to offset those pressures? laura: they are both pivoting toward more online distribution,
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and at inditex, we heard about the manager shakeup, the founder's daughter will become chairman in april. that suggests a more fundamental shift is needed. the chart compares inditex and h&m over two years. we have seen a diversions with inditex rebounding more strongly , and that is because the market feels h&m is more vulnerable. one longer-term secular headwind that all players are facing is sustainability. whether there is the same demand for fashion as there was 10 years ago. tom: thank you. let's shift the focus to sustainability and -- in
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clothing. not many people have captured the fashion and business worlds quite like the british handbag designer. from princess diana to kendall jenner, she has fans around the world with luxury bags. she is also known for her stance on sustainability. she spoke with francine lacqua and discussed what drives her to be more green. >> i'm scared about the climate situation, and i think we look at the last summer and the flash floods, the fires, the heat waves. imagine if that was a monthly situation. we all have to change your behavior. i love fashion with purpose, that is interesting to me. it is hard to imagine anything
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luxurious if it is doing harm. francine: how is that working with the u.k. supermarkets? you have more impact because it reaches so many people. >> with this project, we are working with supermarkets around the world with the idea it is about eco, not ego. collaboration will be the way to solve a lot of problems. it is hard for all of us to think in that way because we are geared and bred to think of our own businesses and shareholders. it is the solution, and that side is the most innovative side of the project. francine: do you see a shift in fashion overall? you make profit by selling, so how do you match the two?
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>> it is a hard circle to square. we need to maintain a healthy economy. the thing that will answer the claim issues the most effectively will be big governments paying less wealthy governments to stop deforestation or whatever it might be. we need to contribute to good things. we need to employee people, and fashion is a fantastic employer. we need to carry on buying but buy better. if you want five teachers, -- five t-shirts, buy two really good t-shirts. tom: stay with us. this is bloomberg. ♪
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tom: welcome back to the open, 56 minutes into the european trading day. the handoff from wall street and asia not affecting what we are seeing in europe. top of the list, technology, bottom of the list, retail. the cac quarante is gaining 0.6%. the ibex lower.
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the u.k. lower, dragged by basic resources. "surveillance: early edition" is up next. stay with us. this is bloomberg. ♪
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>> bitcoin, 42,000 is an important level. >> i'm quite confident next year we will be hitting all-time records in terms of mobility bookings. >> we think we will be number two for some time to come in the u.s., and aiming for number one. >> this is "bloomberg surveillance: early edition." tom: good morning and welcome to "bloomberg surveillance: early edition." i'm tom mackenzie in london, here is what is coming up.


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