tv Bloomberg Markets European Open Bloomberg December 17, 2021 3:00am-4:00am EST
sanctions against russia as the block fails to agree to a solution to its gas crisis. and the lira tumbles to another record low. the turkish bank cuts its key rate. francine: let's look at the future is. pressure coming from the technology sector. markets trying to weigh in the inflationary pressure and what it means for the economy. we did see a selloff when it comes to technology stocks and it is filtering through to the futures in europe. ftse 100 futures down. tom: it was a whipsaw environment particularly for those invested in the tech sector. gains on the back of the comments from jay powell and then the big selloff yesterday and the read across europe. weighing out inflationary risks and the shift in divergence.
the spanish ibex down 0.7% in line with the futures. the cac 40 down 0.3%. maybe getting some support from airbus. and the ftse 100 flat after the announcement by the boe, the raise in rates by the bank of england taking some by surprise. there is still a view that the bears on sterling have something to go with. playing out across the sectors, looking at the grr function. technology was leading the pack yesterday. comfortably below the 150 level. the trajectory crucial to the growth stocks peered u.s. futures -- growth stocks.
a bit of a turnaround present he futures after heavy selling yesterday. gold above $1800 per ounce. blackrock saying the elemental may get a bid in 2022. and the turkish lira back in focus. further losses of 2.6%. another record low. inflation in that nation of 21%. another cut to the interest rates. an unusual policy mix. francine: so diplomatic. it took a while to break the 14 psychological barrier. this is what we are looking at for the sector is. technology stocks not as heavy in europe. travel and leisure, losing the
most peered technology down 0.6%. a mixed picture. european stocks down 0.1%. tom: broadly down. focusing on individual stocks. airbus, another deal in less than 24 hours. this follows the deal that airbus got with qantas. a big coup for the airplane maker. stmicro, apple bringing some of the semiconductor making in-house. sdmicro down 1.3%. statlantis.
stellantis teaming up with some of the lenders across the euro zone coming down 0.8%. francine: stoxx 600 opening lower. some of the world's policymakers weighing in on the inflation debate. >> the economy is so much stronger. inflation running well above target. >> inflation is expected to remain elevated in the near term but should ease in the course of next year. >> there are signs of more persistent price pressures which are a concern to us. >> raising interest rates in 2022. >> with elevated inflation pressures and a strengthening labor market, the economy no
longer needs policy support. tom: good morning, always good to have you on air to break down market movements. how should we be assessing the about turns in the markets given the gains we saw off the back of the announcement from jay powell? >> it is very interesting changes in price action over the last 24 hours and i think we cannot pivot. this looks like a concerted effort from the world's major banks. the ecb was relatively less hawkish compared to the be a we fed but even there, the markets had hawkish nuggets to take away from the meeting because lagarde was flagging upside risks to their inflation outlook and they
were saying that even though their outlook for inflation is to moderate jan 2022, there is a risk that those would beat to the upside. the messages that they are concerned about inflatiod it is feeding through to market price action. at was very much behind the price action we are seeing in tech stocks this morning. francine: we also want to bring up a wonderful bloomberg chart thanks to valerie that noticed the divergence. in terms of policy makes. they are dealing with it in a different way although the economies are different if you look at the ecb, the fed and the boe, the way they are thinking about inflation going forward is a little bit different. what does that mean for diversions in terms of currencies and how you play assets? >> it will be an interesting path for currencies and rate expectations into the first quarter of 2022. as you can see from the chart,
we have the most priced for the bank of england and after yesterday's surprised rate hike, economists and traders both moved to price more rate hikes coming. we saw pricing for nearly 25 basis points of rate hikes at the february meeting which is the next time the bank of england will meet, first meeting for 2022 and more getting built out for the rest of 2022. in contrast, the aftermath of the fed decision, there were -- there was not a lot of moves to price in the rate hikes. perhaps the markets are not quite believing apple's message just yet that the fed will have room to do as much tightening as powell flagged during the press conference. and so markets have been a little slower to price in those
rate hikes. and at the rear, ecb expectations -- they were very clear that it is unlikely for rates to rise in 2022 but given they also flagged upside inflation risks, there is a lot of room for markets to catch up there. tom: capped at around 142. bloomberg's kristine aquino. breaking news. dealing with high gas prices. gas futures falling as much as 16%. this is on the back of the russians increasing supply at the last minute to europe. it is on the back of an increase in supply from russia to europe.
we will get details on this story. asked futures falling on that news. francine: and huge implications for central banks and for trends going forward. consumers, it has been one of the biggest weeks for central bank decisions. some bet inflation is a bigger risk on the back of omicron. this is bloomberg. ♪♪
francine: welcome back to the open. 12 minutes into the trading session. we are seeing a little bit of sentiment taking a hit overall. we had some leading central banks make some pretty big calls this week. we saw a tex all up in the u.s. filtering through a little pressure in europe. time to digest some of the decisions made by central banks. we have our reporters standing by. if we look forward, what we heard from the bank of england surprising the markets but it feels like the markets took it in stride saying they will adjust slowly in the future. >> i have had a lot of emails
this morning from economists who called the decision wrong and now accusing the bank of england of a communications crisis. if you look back through what the governor has been saying over the last six weeks, the governor did say that the bank was going to focus on inflation rather than growth. and the interest rates might have to rise to do that. we had the cpi print on wednesday, 5.1% tipping past the 5% mark much sooner than the bank had expected. they also wanted strong labor market data which we had on tuesday. multiple mpc members said they were focused on the medium term. if yesterday was inflation versus omicron, inflation is a medium-term risk and the bank of england has decided it is going to live with the economic disruption in the short-term of covid. that is what changed. tom: is the february meeting
going to be and play as well? -- in as well? >> markets are saying february but economists are more cautious as usual. economists expect another hike in february and may. francine: the ecb was not as hawkish. what is the key takeaway? >> the president, madame lagarde was clear to say that interest rate hikes are still unlikely next year. what they said was inflation growth had made enough progress to allow for gradual reduction of asset purchases in the coming months. there will be a slow down and the pandemic program and the first quarter and under that program, the program will come to an end in march.
as planned. to soften the blow on the market and to make sure there are no disruptions or financial tightening that the ecb is trying to avoid, they took a few measures including an extension of the reinvestment under the pandemic program and they also decided on a temporary increase of the app, so purchases under that program will be increased in the second and third quarters but come the fourth quarter of next year, those purchases will go back to the 20 billion we have seen over the past months. tom: ok, our thank you to our reporters bringing -- breaking down the ecb decisions and the boe. alberto tocchio from kairos partners joins us. let's start with the ecb. the message i took from
christine lagarde is they are giving themselves as much optionality as a way out the omicron and the new inflation forecasts. what are the implications for european equities on the back of this optionality that the ecb's engineering into its response? alberto: first, i think we have to say the market was expecting this kind of reaction. the only surprise was coming from the bank of england. the type thing -- the tightening started. in the market [indiscernible] in the end, it is not surprising or outrageous. francine: going back to the ecb
entered tom's question, they seem to act because they want to avoid a brutal transition as they exit out of crisis mode. are you comfortable with the fact that they will manage the economy and market expectations and work through omicron in a way that will be stable? alberto: the big point is about the inflation. a temporary tale has been removed by everyone. the ecb seems to feel more comfortable than the bank of england and the fed for the moment. i think the main question mark is for next year. omicron is another point which is important now because we are seeing the spread in europe and i guess how it will spread in the u.s. it is a big question mark in the
short term but if we look to the long-term, omicron is not the main issue. it is inflation. tom: what is the market implications of the divergence we are seeing particularly between the fed and the ecb? which assets are most sensitive to that? alberto: the u.s. has done extremely well this year. they may get more volatile. in the composition of the u.s. indexes -- yesterday, for example, tesla was down quite a bit. this is assigned to me that something might change in the coming weeks or months. while europe is still supported by a very dovish central bank. and eventually might get some interest. francine: alberto, going back to
your big calls. the bank of england as you rightly said was the big surprise yesterday. does it make you more likely to get into u.k. assets or less likely? half the people got it right saying this is a bank of england trying to follow data and the ones that got the decision wrong said it was a communication problem for the bank of england. how did you view this? alberto: i think this is a move from the bank of england. to me, this is not a big change in the scenario. but the u.k. stocks -- i think eventually it will be quite nice to invest in them next year.
i would suggest that we are stable for the moment but next year, start investing for sure. tom: ok, alberto on the call in terms of the opportunity in the u.k. next year. alberto will stay with us. barclays, jp morgan and others, plans to boost bonuses. we will find out who will be getting the big paydays next. this is bloomberg. ♪this is bloomberg. ♪
tom: welcome back to the open. we are almost 23 minutes into the european trading day. a handoff from the u.s., heavy losses. in europe, losses of around 0.3 percent. the one index with modest gains is the ftse 100 gaining 0.2%. autos in focus. prices falling and banks as well, lower by 0.4%. let's get to another corporate story linked to what is happening in the banking story. our cleat is the latest bank to put in place plans to boost
bonus following moves by j.p. morgan and goldman sachs as they seek a competitive edge in the tight labor market. still with us is alberto. they need to hold on to talent. how do you read what is happening in terms of the bonus payouts and whether the banking sector will be able to maintain the edge in terms of talent in employees is a look to an environment of high yields? alberto: it is a very difficult topic because the environment is not great for salaries. it is difficult to talk about policies and general pure we know that the investment sector is made by people so you have to keep the talent and the only way to do that is to pay people. if they are making some on the returns that will lead to better
rates. i think they will be able to pay people quite nicely. francine: but then you get into a bidding war. i don't know what that means for mutual funds or whether there is pressure that feeds into what central banks could do. alberto: well, on our side, i have to say that the salaries are different. we can pay on performance. we react to the investment decisions. for next year, if the asset class is still invested, we should do quite well again. tom: i want to get your contrarian call. you suggest that maybe, if you are feeling pretty risk on, you might want to look at buying some reopening stocks.
unpack that call for us. alberto: there is a very nice contrarian story. at the moment, we are not talking about reopening because we may get some closures. i don't think we will get back to what we saw last year with heavy lockdowns but there will be some local restrictions as we have seen in the last couple of days in europe. it is not the right moment to start investing again but stocks have been really pricing this. also, the stocks dropping and i believe eventually, some point in january or february, we will start to get some positive news. and eventually, it will be the right moment. i think next year, these stocks should do quite well. francine: alberto tocchio at kairos partners. and have some great holidays.
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francine: welcome back to the open. 30 minutes into the european trading day. central bank divergence. the fed and the boe see inflation as the main right all the ecb sticks to its pandemic era on a tray policy. u.s. pushes allies for broader sanctions against russia as the block fails to agree to a
solution to the gas crisis. the turkish central bank cut its key rate and said it is ending its easing cycle. i am a little lire possessed. 16 to the dollar. tom: the technology sector is fascinating. you are whipsawed if you are an investor. investors trying to get to grips with what this is going to do. yields grinding higher. how that
be more focused on drilling down. maybe the big balance sheet skin whether this. and the nonprofitable sections of the tech sector will be more balanced. disappointing early in the session. more muted. down about 0.1 percent, less than one point across the benchmark. the dax is down 0.2%. modest gains in the cac 40. modest gains with airbus after the big deals. ftse 100 gaining 0.3%. the auto sector is interesting as well today given that for november, you saw a drop of 70%, fifth straight month. let's switch it on to see how things are breaking out in terms of sectors one week from the start of the holidays when it comes to christmas. retail gaining 0.5%. real estate in there as well. autos losing, not a surprise. energy prices, energy sectors down about 1%. gas price is coming off a
surprise addition to gas supplies by russia. francine: retail numbers surging shedding light on the strength of consumer spending for the omicron variant struck. rain newton-smith joins us. we are trying to figure out some of the political ramifications of omicron. how much will it cost the u.k. economy? rain: i think it is hard to say at the moment because we don't know how severe this latest wave will be out what we do know is the economy is in a much better state. businesses are more resilient and learning to live with a virus than we were a year ago. it is not a return to some of the previously stringent lockdowns and the impact on the
economy. but it is having a devastating impact on some sectors and some businesses. if you are -- if you are operating a gym in a city sector, if you are a high street shop in a city center, if you are a live event business, if you are pubs, the airline industry is being impacted from some of the travel bans we are seeing at the moment so our message to the government is we need to see some targeted cash flow support to some of these businesses living with the virus. and it will be tougher for longer for them. tom: there are those measures that you have outlined that the government should step in to support the businesses. labor supply has been a long-running issue. that is a more difficult problem to address. rain: yes, it is really challenging and it is also why i think the decisions for policymakers are tougher and
they have been for a while. we saw the bank of england tightening interest rates and that is because we are seeing supply chain pressures turning into inflation. and we are seeing stronger wage inflation and more tightness in the labor market. that is one of the reasons why we see the bank of england take some action. over the longer term, the only way we will solve our skill shortages in the u.k. is focusing on training and how we upscale people -- upskill people for the world of work but it is better to have this issue now or we have low unemployment and high vacancy rates rather than what we thought we might've had a year ago with the potential for unemployment being in double digits and i think it does mean that a return to a strong jobs game does not feel like the
right measure to support the economy. i think we need really targeted support for some of the businesses in the crosshairs of the latest wave of the virus. francine: with interest rates going up, with the bank of england's surprise announcement yesterday, with omicron, is there a danger of businesses going under? rain: i think there are two things -- the bank of england's decision is really about -- we have to remember that it is only 15 basis points and we are still looking at interest rates at .25 basis points. i think it will obviously have an impact on slowing some demand , it increases the cost of mortgages for some people that have variable-rate mortgages, it has an impact on the short-term cost of are waiting. but i have to say for the longer
term, interest rates are still very low so i don't think we are going to see a big impact on wider growth but i think it was an important signal by the bank of england that they are prepared to act. we have to recognize that inflation is over a percent and they expected to peak over 6% and i think it is important that the bank of england says they will act on the inflationary pressures we are seeing and the decisions they are making now are also looking at the future prospects where pressures on the economy will be in 12 months' time. tom: supply chain pressures -- what is the data telling you about where we are in terms of supply chain issues and the adaptability of businesses as well? rain: i think we have seen a huge amount of innovation and resilience in businesses and all of us as individuals and the last year and a half and some of that will carry us through what
will be an intense but hopefully short-lived spike in infections that we are seeing here in the u.k. at the moment. what i think -- but i think businesses have adapted to what we are seeing but that does not mean that for some businesses, the pressure is very acute as i was talking about those sectors in particular. francine: how difficult is it to find workers? you go into our restaurant and a lot of them, even the high-end restaurants say they can only do one service because there is a shortage of people that can come from the european union or elsewhere. will that continue into 2022? rain: i think what we are seeing is definitely a shortage in semiconductors. it is one area expected to persist and that is having an impact as well on the supply of cars. and also, we have seen very high
shipping costs. some of that seems to be easing and coming down but everyone is holding their breath as we see the latest wave of the virus. one of the things the bank of england vote -- pointed out is it could make the supply chain shortages worse and that is one of the reasons why they acted. when you talk about the availability of people, we have all seen it at our local cafés saying we cannot do in-store service because we cannot find people to open. i think the availability of people as businesses are trying to open up has been one of the big challenges over the last six weeks. now, we face a different challenge because the infection rate is so high. let's hope it is a milder variant. there are some indications it is. there are a huge amount of people self-isolating and i think that is where we will see the biggest challenge for the economy over the next couple of
weeks. the lack of people. and i think that is important we used testing. that everyone goes out and gets their booster as i did yesterday to help contain the virus. tom: we are running out of time but great perspectives on the impact of omicron across the u.k. economy and implications of the tiger monetary policy from the be -- of the monetary policy from the bank of england. >> boris johnson has lost a key parliamentary election. the liberal democrats get the majority of nearly 6000 in a special election after a lobbying scandal. the prime minister's party wanted the rural won the rural seat with more than 62% of the boats. the u.k. has reported more than
88 thousand positive tests. underlining the spread of the omicron variant. data shows almost half of the workers in the city of london did not go to the office on monday. new york city's health commissioner says covid-19 numbers show an alarming trend in infections. u.s. health officials are backing the use of pfizer and mow down those vaccines over the johnson & johnson shop. a panel of experts told the cdc to vote unanimously for the recommendation of adults. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: we are going to digress. carrie bradshaw, in the news for a lot of things. we are not giving away spoilers
and tom looks puzzled but she is using the bloomberg terminal. tom: i was a fan back in the day. francine: we are all a fan. our producers said, now we know how she can afford that apartment in new york city. tom: i am pretty sure we see the terminal popping up in succession. i don't know if you have seen that series. francine: european leaders warning of massive consequences for russia. all of that next, this is bloomberg. ♪
tom: welcome back to the open. 44 minutes into the european trading day. the about turn reflecting what is being seen in european stocks. the politics and central-bank action of the u.k. front and center. the tory party taking a big blow. and the boe raising rates. in terms of sectors, retail at the top but it is broadly losses being seen. autos down 1.4% on the back of november registrations falling 17% for the fifth straight month.
switching to the geopolitics and energy prices. russian troops still gathered near ukrainian border and the biden administration is pushing its european allies to finalize a broad package of sanctions. with about 40% of europe's gas imported from russia, the potential disruption of global energy markets could prove problematic. >> it is of great importance that the borders are not moved. >> we maintain our call on russia to
situation where relations with russia are good. but this is very much depending on the choices made by moscow. >> we had an important discussion with president zelensky and we are very clearly affirming our attachment to the normandy format. also together with russia. >> we have agreed that if there is a military aggression against ukraine, consequences would be massive. we are disposed to coordinate concrete measures together with all of our allies. francine: we go to our european correspondent, maria tadeo live in brussels. massive consequences being warned. what could those intel? -- entail? maria: that language when the head of the european council said the consequences for russia would be massive, and the economic damage to the country would also be severe. it is worth noting that yesterday, european leaders met behind closed doors for more than two hours to debate the situation in ukraine. ukrainian prime minister was here two days ago.
a delicate issue. they don't want to have leaks. the question is what kind of sanctions could we see? the european union yesterday was very cautious not going into specifics about companies are sectors but the head of the european commission said we have a list and we can put it to work , a clear message to russia that if they do this there will be severe consequences. other thing that feeds into the conversation is we know the north stream pipeline will probably not be finalized -- regulated by the german regulator until 2022. they are in no rush to approve this. tom: european gas prices are falling on the back of additional supply from russia. this was a topic discussed. what did we hear from european leaders on this issue? maria: vladimir putin been careful to keep supply tight but also not be in breach of contract.
yesterday, energy prices featured highly on the agenda. european leaders expect prices to continue to be high in the medium-term. there was no agreement over joint solutions. we are waiting for a big european solution. it did not come through. he did get a big debate about nuclear energy and the role we should get. today, i spoke with the commissioner for the internal market and he spoke to us exclusively and i asked him --do we have nuclear energy, yes or no? and this is what he had to say. >> we will need nuclear energy. maria: that was the official speaking at the european open. he and macron are french. yesterday the dutch announced
52 minutes into the trading day and it is not getting any better. quite a lot of pressure on energy. autos the biggest losers as well as banks. yesterday, the market was pretty cool about the fact that we saw an adjustment because of inflation. today they seem to be taking a bit of profit or worried. we saw pressure on technology stocks overall. the auto market having record low registrations for november reflecting how slowly the industry is coming back. some of us remember that. joining us now is kreg. give us a sense of the supply chain issues. a lot of companies saying they should get better in 2022. what does that mean for how much they can ramp up production? >> i think we heard over and
over again the latest round of earnings that the worst is behind us by than the same breath but we have heard from the executives is that they are not expecting any sort of quick recovery in the supplies of chips and that has been the inhibiting factor for the industry all year. the expectation being that it is going to take quite a bit of time for more capacity to come online and also the semiconductor -- the auto industry is used to procuring older ones and the chip companies are in no hurry to boost capacity four. they want to move into the next generation of chips so you have a situation that while the industry is trying to shakeup their supply strategies and work out some procurement deals, this is not going to be a quick and
easy fix. we are going to see this well into next year and potentially for years to come. tom: in this for the long-haul. in terms of the ev space, rivian missed expectations and the stock got hammered but broadly, the ev space is holding up. >> absolutely cured here in europe, -- absolutely. here in europe, that is the story. electric vehicles are doing well. it is a situation where the industry knows it needs to manage their emissions across their fleet. they are in a saturation where there capacity can be strained and they have to make decisions about what they can and cannot make. there is demand in terms of the amount of electric vehicles that volkswagen and some of the major carmakers are selling.
tesla also having a really good year in part because of china. a lot of imports of vehicles from china has been a major story for them this year and their ability to expand in this market because they have more supply to work with because of the second assembly plant to send cars this way. francine: i cannot let you go without asking about elon musk who sold another batch of tesla shares. >> i am counting down the days when this will all be over. i think we are three quarters of the way there. hopefully, it is something we will not have to continue to talk about into 2022. i'm sure he will give us other storylines to work with. tom: craig on all things autos. and talking tesla. a 2000% gain.
crocs, 1900% gain. francine: i still don't know one person that admits to wearing crocs. tom: we will find one in the newsroom. futures pointing lower stateside. that is it for the european market open. surveillance, early edition is up next. have a good weekend. this is bloomberg. ♪ >> inflation is running well
above target, growth is ahead of potential. >> it is very unlikely that we will raise interest rates in the year 2022. announcer: this is "bloomberg surveillance: early edition" with francine lacqua. anna: good morning -- francine: good morning. here is what is coming up. central bank divergence, while the fed and boe see inflation is the main threat, christine