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tv   Bloomberg Markets European Open  Bloomberg  January 3, 2022 3:00am-4:00am EST

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records. they deliver over 300,000 vehicles in the fourth quarter. let's check in on the markets on a day when the major markets, china, japan, australia, the u.k., remain closed during this final part of the holiday season. we are focused on some familiar themes. inflation, rate hikes, and what happens with omicron, the impact on the global economy after three years of double-digit gains stateside. the futures are starting to turn here in europe, pointing modestly higher. u.s. futures up as well. the u.k. is closed but we will be looking in on the docks in the cac when we get them -- the dax and the cac when we get them. this is playing on sterling end the euro, slightly weaker for both currencies. on the cac 40, gaining 0.6%. the spanish ibex also in
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positive territory, up 0.2%. let's have a look at what is happening cross assets. the futures stateside were pointing higher, after a modest loss of u.s. equities. this seems to be an emerging consensus that you will continue to get gains in these equity markets, but possibly at a lower momentum. that is after three straight years of double-digit gains for the s&p 500. europe closing up through the year around 24% gains. the u.k. gained 42%. the dollar, as i said, stronger in today's session, up 0.2%. it is weighing on the euro and though sterling. we are back to a familiar theme, weakness in the turkish lira after that 37% increase in inflation out of that nation. lower by 3%. and oil is in focus.
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there is a view that opec will increase their output, relatively bullish on that demand for crude, currently up 1% at $78 a barrel. libya has reduced in the last few days. let's get the bloomberg business flash with laura wright. laura: happy new year. china's evergrande sales have been suspended from trading in hong kong pending an announcement containing inside information. the move follows local reports that the company has been ordered to tear down apartment blocks in its development because a building permit was illegally obtained. tesla delivered 300,000 vehicles, smashing its previous record. that drove total sales to more than $936,000. expectations has led to the $1 trillion market valuation, although shares are up from
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november's record. at&t and verizon have rejected u.s. requests to delay the launch of a new variation of 5g mobile service that airlines say might interfere with their aircraft's electronics. the ceos of the companies say they would be willing to postpone six months near airports. the industry maintains levels are low enough to avoid interference. the latest spider-man film has held on for the third week in a row. "no way home" generated nearly $53 million over the weekend in the u.s. and canada, according to projections by sony. north american cinemas took $1.4 billion, a big jump from 2020, but a fraction of the $11 billion they were seeing pre-pandemic. guy johnson told me he really enjoyed seeing this film for his son's birthday. tom: if it has gotten his
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approval, i might add it to my list. that is notable that we have guy johnson approving of this new movie. good for cinemas, of course. laura wright, thank you very much, out of our london studio. let's get into the key market drivers with lynn thomasson. happy new year. we are starting on the front foot with all the caveats about trading in today's session. lynn: absolutely. i think you are seeing a green flavor to markets. also, trading is subdued. but clearly, there is a lot of good news. there is a lot to learn, looking at the tesla results, a huge quarter for them. a lot of analysts saying it was quite a surprise. given how big tesla is in the u.s. market, you can certainly see that through in the u.s. trading day.
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tom: so there is the tesla at more than $300,000 in the last quarter. what are some of the catalysts investors are looking at that could drive some of the price action? lynn: stepping back from today's action, if you look at what strategists are talking about for 2022, there is caution given that the market went up so much in 2021. i think there is definitely a mood of how much further can this go? how valuations are already at extremes, and do you want to put your money in assets that are quite elevated already? if you look at what people are recommending, it is often with a value angle, with cheaper, europe, japan markets that have not risen as much as tech and the u.s.
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tom: do we fade the omicron risk? lynn: i think a lot of people would have said a few months ago yes. but now, especially with the headlines we are seeing, it is more uncertain. i think what you are reading from oil is clearly there is some bullishness that maybe omicron is a blip, but hospitalization rates still remain low and people are starting to look through it. but that is the story we have been talking about for months and months and everyone keeps saying, we are done, now lots of us are back to working from home. lots of uncertainty in that picture, i think. tom: we are seeing the ramifications for the travel industry, particularly in the u.s., with all of those flights canceled. when it comes to emerging markets, there was a significant divergence between the performance of em last year versus the u.s. and europe as well. one em that arguably can be
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carved out of the pack is turkey. we had an incredible, eye watering number when it comes to inflation there. how should we be thinking about the question of turkey? lynn: absolutely. turkey is a market that has surprised and surprised and surprised. the craziest things that could happen now almost seem like they are part for the course at this point. today, you got inflation data at the highest in 19 years last month, and that is feeding into another weaker lire, a currency that has already had a major collapse in 2021. at this point, it does not look like erdogan is changing his tact. the thing to watch is whether growing political pressure will cause something to shift there. but at the moment, he is very
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adamant that lower borrowing costs will likely mean the lower lira is the way to go. tom: another major issue last year was the question of supply chains and companies, corporate's, and investors having to wrestle with supply chains. tesla seems to have been able to work through this issue with semiconductors. we have data out of asia that suggests manufacturing is back to decent strength. where are we in the question of supply chains and the ability for corporates to rework the supply chains? how much of an issue is that going to be this year? lynn: that is the big risk for 2022. a lot of strategists were mentioning inflation as their key concern, and that is directly linked to the supply chain that we saw last year.
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the difficulty will be figuring out who can manage it, like tesla is doing well, and who will suffer from the ongoing disruption and shortages. and i expect that is what investors will be trying to pick apart in their portfolio. one thing we have heard a lot from investors, like every year but this year in particular, is that it is not all going to be something that goes off, where everything games. you may need to be more particular at picking your spots and trying to figure out who is able to whether the supply chain disruptions -- to weather the supply chain disruptions. tom: lynn thomasson, looking at some of the key beats. alpha book's chief economic advisor joins us for his views. they are pretty bullish on what 2022 has in store. he sees inflation making a sharp
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reversal from current highs. more on that next. this is bloomberg. ♪
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tom: welcome back to the open. we are 12 minutes into the opening trading day. we have seen solid gains, with the caveat that it will be relatively thin trading. we have seen gains across the european stoxx 600, up about 0.5%.
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real estate, autos at the top of the list, gaining 0.8% to 0.9%. every sector in the green in europe. a sharp downturn in inflation, interest rate hikes all over the world, and the s&p 500 hitting 6000. those are some of the calls from for 2022. training us is martin malone, alphabook chief executive. a bullish outlook for the year ahead. the context is the s&p 500. we now have three years of double-digit gains further u.s. equity index. you see further solid upside, 6000 as things stand. what gets us there? martin: i guess it is the increasing contributions of america to global stocks. you just mentioned three years of very solid gains. in 2019, the u.s. contributed
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40%. last year, or in 2020, 15% -- 50%. last year, it contributes 60% of the gains to global stocks. we would like to see a lot of other global markets, particularly the asian markets, perform very strongly in 2022 as well. we think the tailwinds are there simply because global macro like the last few years will remain extremely bullish. tom: i know you have a view on china. we want to get into that shortly. but will we see a more pronounced shift in terms of that value trade in 2022? martin: i think so. we can all see the sectors that have performed strongly in the past year, and particularly we had the technology sector, but energy and real estate also performed strongly. but consumer discretionary's and
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industrials were lagging. there were particular twists and turns that could take place. but i think the global sector, a lot of the u.s. investors stayed at home, and i think u.s. investors with the fed hiking in 2022 are probably likely to search for opportunities globally in 2022 compared to what they have done in the last three years, where they really were not participants in the global stock market. tom: how much exposure do you want to have to to the u.s. versus europe this year? martin: the european stock market can play very strongly simply because that ecb is going to be a solid tailwind throughout the year, but also fiscal policy will be a solid tailwind. it is very different from prior periods where we had fiscal contraction of various extents. that is going to happen, but nominal gdp will be much stronger, monetary and fiscal
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will be positive, and the investors will have the effect of there is no alternative, and european stocks will be supported by domestic players. there is an area where u.s. investors should be active in the european space, as they should be in the asian space. tom: tailwinds from ecb, tailwinds from fiscal support in europe. you see global central banks doubling their rate hikes from last year and you say that is bullish for the markets. house a? -- how so? martin: the rate hikes were dominated by emerging markets over the last six months. actually, 2021 was quite an odd period. there was very limited rate hikes in the first half of last year, but in the second half it accelerated. and the markets have done the work for the fed and the bank of england in the last three months. for instance, at the end of
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september, two year treasury yields were 0.2. they are now 0.75. we have priced in a lot of what the fed is going to do in 2022, and we expect the fed to kick off rate hikes in mid-march, at their second meeting of the year. and we also expect a hike in june. these are fully priced in. in the second half of the year, we will confirm we have a solid peak out in inflation, which will be good for the fed as they probably will not have to be as aggressive on rate hikes in the second half of the year compared to the first. but markets have done the job for central banks, central banks being active is just lifting the emergency rate cuts that were put in place for the pandemic. tom: so the first hike in march, continued support from the central banks even as the rate hikes begin.
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the s&p at 6000. martin malone stays with us. coming up, we will get his views on all things china as well. by the way, chinese property stocks plunge after reports of pressure on evergrande. the details are next. we will get martin malone's call on the fiscal stimulus and the easing of it out of beijing. ♪
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tom: welcome back to the open. we are 20 minutes into the european trading day. autos and banks top the list. tesla is a contributing factor, at least those linked to the company after they posted deliveries of more than 300,000 for the final quarter. futures estate side appointing -- futures stateside pointing to 0.4%. there were reports that china evergrande has been ordered to tear down apartment blocks in height and province. did not shut -- stop other property developers from taking a steep dive. let's get the latest on all of this with enda curran out of hong kong. what does this signal for the wider property market?
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it is unusual to get this call by local governments for developers to pull down part of their portfolio. reporter: it is a pretty nervous start to the year. this latest development comes from a local media report. evergrande -- the government is taking down properties. the last thing that evergrande needs. their trades were suspended in hong kong. there was a spillover effect for other share prices. it adds to the jitters around the real estate sector that the worst is not over. we note that our colleagues have calculated there are at least $200 billion, covering everything from bond payments through two wages. the whole real estate sector
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plays out over coming months with falling sales, falling prices, and stress on developers. it will be critical for the wider economy and china's economic story. this news relating to evergrande is certainly a bit of a wake-up call that the real estate jitters have not gone away. tom: we are not taking our eye off the ball with the property sector in china. thank you, in the current. still with us is martin malone. what do you assess to be the key risks out of china as we look ahead to 2022, or as we look further into 2022, and how supportive do you expect the pboc to be? martin: we have already seen the move with their economic meeting in december. fairly quickly, they preserved the ratio by 50 basis points and the long-term prime rate was cut by five basis points.
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they have a lot of room on monetary policy. they have a lot of room on fiscal policy. we can see this with the 10 year bond yield in china. it has almost doubled the level of the u.s. level. that could easily at 2.75, 2.8, that could easily move to 2% in 2022 if a credit impulse or further easing is needed from the authorities. the reason for that is simply the pivot by china and chinese leadership to the domestic arena. they really have to keep real gdp above 5% through this year and next year. there is no inflation problem in china at all. it is very different to what we are seeing in the u.k. and the u.s.. it is a big scope for the chinese central bank to ease both in liquidity terms and
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interest rate structure. tom: that lack of constraint when it comes to inflation for policymakers in beijing to enact further easing. you touched on this in the first block and we have highlighted the underperformance of em versus the u.s., also versus europe. does that start to change on the back of a greater fiscal impulse out of beijing? martin: it will to a certain extent. it is not just the em space, it is the entire asia space. we have to look at the china periphery very closely. japan, australia, south korea, taiwan. if we look at the export out of china, but also the experts out of other countries surrounding china, even vietnam, there has been a very significant twist to those other countries. the aussie dollar is doing very well. these are positive tailwinds.
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it is the same factor, and that is global macro is bullish, it remains bullish, and global nominal gdp will be at a much higher level than we have seen over the past decade. this year, we will see nominal gdp's surpassed $100 trillion. that is a much higher level and a much more intense level compared to prior periods, which all global companies will have to set up and take notice. tom: martin malone, alphabook chief economic advisor, happy monday, happy start to the new year. with that bullish forecast and the importance of focusing on china for the impulse of the global economy in 2022. let's check in on the markets cross assets. across the european benchmark, with the caveat that the u.k. is closed, 0.6% in gains.
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futures stateside pointing to gains of 0.4%. the dollar is stronger by 0.2% and that is weighing on euro, sterling, and the turkish lira, weaker again. plenty more on that in other stories. this is bloomberg. ♪
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tom: welcome back to the open. we are 30 minutes into your european trading day and here are the top stories. european stocks climb as investors weigh the impact of omicron on the global recovery. any markets, including the u.k., remains shut. turkish inflation blows past expectations to hit a 19 year high amid a slumping there a and lower -- a slumping lira and lower borrowing costs. plus, tesla smashes records. they ship over 300,000 vehicles in the fourth quarter.
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tesla almost shipping close to one million vehicles in 2021. let's check in on how the markets are performing on the front foot in today's session. you would get thinner trading because it is a holiday in many jurisdictions. the european stoxx 600, the benchmark getting. 0.6%. at the top of the list, autos and banks. let's look at how the sectors are playing out. in the currency space, the dollar is gaining. a bit of pressure on the euro and sterling. in terms of gr, the tesla story was that they delivered more than 300,000 vehicles in the fourth quarter. managing those supply chains and the semiconductor demand efficiently. the read across the other makers will be under consideration. chemicals gaining 1%.
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u.s. treasuries not trading yet. that will happen in the next few hours. we have seen a significant turnaround in terms of gas prices, significantly lower in the last week or so after that story about rally and grind for gas prices across 2021. oil prices are higher. we are looking ahead to the opec-plus meeting, whether they will increase output. bullish on the outlook for demand for oil. let's switch focus to turkey, the question of inflation, surging to a 19 year high in december after accelerating for a seventh month. prices rose by 36%, far higher than estimates of around 27%. that comes after a slump in the lira'and president erdogan push for cheap -- president erdogan's push for cheaper costs. our reporter has been on this from the outset. what is the acceleration of prices? reporter: as you said, the
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inflation at 36% is the highest level since september 2002. driving these prices is thus slump in the lira and also lower borrowing costs. encouraged to take -- the central bank has been cutting rates since september by a total of 500 basis points. this brings the benchmark rate to 14%. now, annual inflation is at 36%, marking the lowest real yield in emerging markets, which is now at -22%. of course, the lira has really been struggling last year, hitting multiple record lows against the dollar in the past few months and losing 44% of its value.
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by far the worst performer in emerging market currencies. today, it is falling for the sixth straight day and it down more than 2.5%. tom: what is the reality on the ground? how is this playing out on the ground for everyday people in istanbul and across turkey? the impact of these very high prices? reporter: turkish households are really struggling. we have seen price hikes on almost a daily basis. the turkish people are struggling to buy bread, sugar, milk, eggs, because prices have risen massively. red meat, chicken, fish is considered a luxury for some turks. of course, this is really playing into president erdogan's popularity. the opposition party are calling
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for early elections, saying that the government is out of touch with the economic challenges facing everyday turks. let president erdogan denies this claim and says elections will go ahead as scheduled next year. tom: do we have a sense of how this is impacting his popularity? he is obviously under pressure by opposition parties, but are his poll ratings being effected by this -- being affected by this? martin: absolutely. his poll ratings are near record lows. another reason is because of the handling of the economy. turkey, as we can see, is dealing with extremely high inflation and also high unemployment. and at a time when investors especially say the turkish central bank should be raising rates, president erdogan is
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pressuring for an economy with low rates in order to transform turkey into an industrial powerhouse. but of course, this, as i said before, is not playing well with voters. tom: simin demokan on the ground, assessing the latest in terms of inflation numbers. the political implications for president erdogan as well. let's get the bloomberg first word news with laura wright. laura: the u.s. is considering adding a negative test requirement after last week's news to cut the isolation period from 10 to five days. speaking on abc, u.s. chief medical advisor anthony fauci acknowledged pushback without further testing. the possible change would come at a time when many americans are struggling to obtain a test. president biden has reaffirmed
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u.s. support for ukraine's sovereignty in a call with the country's president, volodymyr zelensky. the white house says the u.s. will respond decisively if the russians invaded ukraine. goldman sachs is asking u.s. employees to work from home if they can until january 18. the news comes after most of the bank's major peers adopted a more cautious start as the omicron variant spreads rapidly. goldman has been one of the fiercest champions of getting staff back into offices. u.s. airlines are beginning the new year with 6500 cancellations. a winter storm sweeping eastwards and shortages caused by the omicron variants are causing problems. more than 1300 flights are
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already dropped for monday. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. laura: tom: tom: laura, thank you. france has assumed rotating presidency of the european union. what it means for european policy and president emmanuel macron himself as the country gears up for a key election in april. this is bloomberg. ♪
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tom: welcome back to the open. we are 40 minutes into the european trading day. gains of 0.6%. the french index for the year 2020 one posting gains of more than 25% on the demand for luxury. every sector today in the green amid the caveat that there is thin trading on this holiday for many jurisdictions. autos up almost 2%. let's switch focus to what is happening in france. for the first time in 14 years, france is taking over the eu rotating presidency in january for six months. it is a difficult time as president emmanuel macron is facing elections in april. what is at stake and how much power will france have in this is a should -- in this position?
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reporter: the french colors will dominate the eu stage for the next six months, but opportunity for the current president to push his vision in brussels at a time when the new german chancellor is getting his bearings. >> the country holding the presidency, especially france which is a big membership state of the eu, has influence. you can have influence over the agenda. reporter: quickly, france will preside over the eu counsel. they set priorities and approve key decisions. >> we must move from a europe of cooperation within our borders to a powerful europe on the world stage, fully sovereign, free of its choices, master of its destiny. reporter: to put the french touch on the agenda, macron is
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proposing an eu minimum wage, tax at the eu border, and an independent european force of 2000 to be deployed quickly. a key issue for him is a huge summering contract. but a few domestic and international challenges derailed his agenda. first, the increased tensions with a former member of the io, the united kingdom. the ongoing crisis and threat of the new variant will impact eu growth. >> when it comes to holding the council, you are more of de facto leader. i think he will use this to a fine result and show his skill. reporter: politically, the last and great test for emmanuel
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macron will be the elections taking place in april. if he loses, a deep euro skeptic like marine le pen could end up presiding over the eu. tom: that was our reporter in paris, wrapping up what to expect from the french presidency. let's dig further into what this means for eu policy as france gears up for a key election. joining us is the senior fellow at the schachtel our institute. happy new year and thanks for joining us. what will the priorities be for emmanuel macron and his team as they take over the presidency? guest: we expect emmanuel macron to be cautious when he was presenting the program of french resiliency because he while only have a month to deliver the key outputs before the launch of the
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presidential campaign. when macron presented the program, he was very ambitious. first of all, the key priority is to make a more powerful europe. so that means more defense of european borders, to manage more the european borders, to increase the european defense, with the adoption of the combat force, which means europeans should be able to agree on international trades and the way they want to increase their defense capabilities. this is to stabilize the eu, mainly trading partners in the
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balkan countries, and to invest more with those partners. this is the first package. then you have the second elements, which is to adopt an economic closed model for europe, which is based on more industrial programs at the european level. following what has been launched with hydrogen, the cloud, emmanuel macron wants more industrial capabilities at the european level, maybe in the health sector. tom: you have talked about the ambitions of emmanuel macron. what are the realities? how realistic are some of these goals for the french president? what is likely to be enacted and what is very unlikely to actually come into place? elvire: most of these proposals
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are on the institutional side. the eu position has been active in has put on the table 250 proposals and many of those proposals that were mentioned by emmanuel macron are ready to be discussed with the european commission, and the council. the idea is to be able to deliver those elements during the french presidency and to speed up the negotiation during the presidency. then you have more problematic issues. for example, what he is proposing is to have more political performances. this is a more problematic issue and may be more complex. tom: i don't mean to keep
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interrupting you, but i do want to get through a number of questions before we lose you. the domestic issues and the external factors, and you touched on some of those, domestically there is the question of hungary and poland. how much of a focus will the french president be able to put on those issues, and what is the likelihood of some of those issues being resolved or progress being made? elvire: it would be a clear pillar. to really secure the protection of european values. macron's approaches to not only focus on sanctions, but to focus on how to bring together europeans. it is a central issue. he may have more flexibility with hungary.
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but i think this will be more complex for him to manage as the presidential campaign will come in the middle of the french presidency, because we have to keep in mind the right candidates like marine le pen getting closer to the position of the state members like poland and hungary. it will be a tricky issue for him to manage, as he will be in opposition with those candidates. laura: tom: really important context. elvire fabry from the jacques delors institute. let's switch focus briefly and
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get you up to speed on what is happening in turkey after that very high inflation for the month of december, 36% increase inflation, the highest in 19 years. further pressure on the turkish lira today. there, you can see president erdogan addressing the audience at an event to talk about exports. he is saying the economy is beginning its developments, turkey moving to a different league in at the economy, according to the turkish president. we will bring you more when we get it within the context of very high inflation that continues in turkey where, of course, monetary policy is characterized as unusual, to say the least. coming up, tesla smashes its previous record for deliveries. we will take a look at the numbers next with laura wright. this is bloomberg. ♪
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tom: welcome back to the open. we are 53 minutes into the european trading day. gains across the stoxx 600 up 0.6%. futures pointing up 0.4%. every sector in the green. the u.k. closed today. let's focus to one of the corporate stories, tesla smashing its previous record for global deliveries it cap say year where the company joined the $1 trillion
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valuation club. joining us is laura wright. what were the key takeaways? huge numbers despite the supply chain constraints. laura: just over 300-8000 deliveries this quarter, surpassing the previous record set by last quarter for 2021. total deliveries just under one million, up 87% year on year. tesla was able to do this because their engineers were agile, adapting software to whatever chips they could get their hands on. semiconductors have been an achilles' heel for the industry for other carmakers. it has impacted their production, impacted technological advancements, which is why we have seen such an exposure and in the second half. but these numbers for tesla show they are able to execute on that proposition of future growth. tom: is this being cheered on by the markets? laura: the markets have reacted positively.
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we expect some upsides later in free-market training. one analyst, his top takeaways in a note to clients what was this surpasses the best expectations, and he called it a job dropper. we are seeing a read across with autos and parts being the best performing sector in the stoxx 600. company such as volkswagen, porsche, and volvo are experiencing buying as well. tom: bloomberg's laura wright on that stellar set of numbers. the european auto space gaining 1.7%. let's check in on some assets before we let you go. u.s. futures pointing to gains of almost 0.4%. familiar themes. there seems to be a consensus coming around that you will get further upside for these equities, but possibly at a lower rate.
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martin malone. does not necessarily agree he sees the s&p hitting 6000 by the end of the year. the dollar is stronger by almost 0.2%. the turkish lira once again in focus on the back of an increase jump of 36% in inflation for december. brent is gaining 1%. let's check in on the sector by sector with the grr function. we talked about autos being at the top of the list. they are breaking down the tesla impact. you also have chemicals and banks almost up 1%. every sector in the green. health care is the laggard at this point. that is the shape of play. you will get relatively thin play as the markets are closed. we will get cash trading in the next few hours. japan, china, and australia also closed. the full action will kick off later, flowing through to
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tomorrow. but we are on the front foot at the start of this year. "surveillance: early edition" is next. this is bloomberg. ♪
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>> let's not kid ourselves. there still way to -- for what developments are and what forecasts are. >> you are right to have some concern about why you don't ask people at that five-day period to get tested. the cdc is very well aware that there has been some pushback about that. >> bye should this be any different from 2021. it's knocking to be as exciting


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