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tv   Bloomberg Markets European Close  Bloomberg  December 14, 2021 11:00am-12:00pm EST

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starts right now. >> the countdown is on in europe. this is "bloomberg markets: european close" with guy johnson and alix steel. guy: european stocks at session lows. the stoxx 600 breaking 470. down .8%. the inflation narrative getting an extra boost. gas prices climb. up 8.3% in europe. the two day meeting starts today. we are trading 112.73 -- we are treading 1.1273. alix: we did have a bounce off the lows after the hot ppi number. we have rolled ever since then.
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s&p now down before percent. -- now down one full percent. part of that is the bond market. yields up, prices down, the curve steeper. that is the news in there and that is leading financial and leading energy. you get volatility and you wonder are we selling into the fed and you have to buy on the news, or is this something fundamental going on or is a liquidity issue? all this potentially answered tomorrow at 2:00. guy: the main event coming up. then we have the ecb and the bank of england later in the week. the data are hot on both sides of the atlantic. the u.k. labor market in particular continues to show signs of strength. companies adding jobs a record
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pace. unemployment fell sharply despite the end of the furlough scheme. bloomberg economy reporter joining us now. why are we interested in the jobs numbers? i thought we had moved on to the inflation story. this is a post-pandemic number and it is unbelievably strong. >> this was meant to be the deciding factor in whether the bank of england would heights in december, but that seems to be off the table because of the new omicron rules. policymakers have said they will hike in the coming months. we will see how the end of furlough hits the labor market. even if on the face of it the data seems like good news, more than twice as many vacancies as there were last christmas, if you take the october unemployment figure, not the three-month average, you can see
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that is the first four months after furlough ended and a rise in economic inactivity. that is fueling the recruitment problems. it is the tightness in the labor market that will weigh on the bank of england because of the pressure. alix: andrew bailey saying he does not think omicron will be a stress event for the market. is he trying to set us up for any hawkish signal on thursday or is that still looking forward to february? lizzy: i do not think it is a hawkish and from the governor. this is him comparing the impact on markets to the earthquake at the start of the pandemic. even though there has been a marked movement in markets after the news of the very it first emerged so that is now reversed. markets do not expect a december rate hike. we have interesting analysis. the bank of england saying it is
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more about the race for space in the interest rate cuts and it says there are some stability risks from the growth of crypto. alix: thanks a lot. bloomberg u.k. economy reporter lizzie barden. -- lizzy burden. let's get some more. why didn't the furlough program and insult the jobs problem? it looks like we'll do something similar here in the u.s.. >> i think the furlough program went on for so long that i think a lot of companies that want this to reduce their staff numbers, they would've done so before the furlough came to an end. by the end of the program, given it progressively became less and less generous, i think any businesses that are thinking we will not meet all of the staff
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-- we will not need all of the staff. the reason we are getting the first official data post the end of furlough, the october figures , that is why we are not seeing significant impacts. there has been suggestion that if anybody was let go at the end of the furlough program they could still be working off their notice, but i think that would be the case for the minority of recipients. guy: in terms of how the bank of england will think about the labor market, is a job done? can they move on to worry about the implications of the labor market recovery and the inflationary impulse we are seeing right now? nina: there could be that. i think that could be the case
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if it was not for the new variant of concern. i think we have had this reminder in the past few weeks that at any time we could have a new variant. variance will come and go in the coming quarters. new tougher restrictions are not entirely out of the question. i think there are jitters for the longer-term. certainly one has to look pretty hard to find the worrying fits of the labor market. it was predominantly good news. guy: we will wrap it up there. we are slightly struggling with the connection. steve -- chief executive at the center for economics and business research. we are getting heads out of boeing, just run you through the details of what is going on. the company focused on getting
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planes out of the door, both the 737 and the 787 but send they delivered 28 max jets in november, including 10 to ryanair. now michael o'leary, as we saw yesterday, pretty ticked off with the way the u.k. government is hand like the covid story right now -- is handling the covid story right now. alix: it was a good speech. check out. guy: a very funny tweet. it is worth paying attention to. they have been irreverent taped a house news flow work -- to how news flow works at ryanair. boeing has received 692 orders for the max this year, which is pretty interesting. i'm kinda look for stuff on what is happening with the 787. that is where some of the problems have been. i cannot see the details. the company delivered 30 jets in
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november. coming up, our question of the day? is it enough to decrease risk into 2022? the bank of america fund manager survey pointing out people are rotating into cash. we will speak to charlotte ryland next to get her take on what is happening. this is bloomberg. ♪
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>> assuming the covid situation starts to come back under control, and i know we are dealing with a lot of headlines, i think you get a rotation from lower beta mega caps where all
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the money has been funneled into, into higher beta, which includes higher beta in the u.s. and higher beta brought. guy: jp morgan global head of equity macro research talking to alix and myself earlier on. positive on the s&p next year. middle and higher in terms of the pack out there on the sale site in terms of expectations for next year. charlotte ryland, ucla investment management cohead of investment joining us now. how balled up are you feeling right now about next year? we just had a bank of america fund manager survey. some evidence managers are starting to rotate out of equities into --. -- into cash. are you in that camp? are you cautious or you feeling because it? -- or are you feeling positive? charlotte: we have had a strong
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running equity markets. the s&p is up over 23%. valuations have been pretty frothy. i'm beginning to see a little bit of that rolling over. we are certainly not expecting is fantastic year in 2022 as we saw. we are reasonably optimistic, we do not think the bond market is anywhere you want to be. we would not be hyper bullish. alix: if you do not like treasuries but you do not think next year will be terrible, where do you put the money? charlotte: some of the more steady stocks, consumer staples, business services names.
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still focused on quality companies, whether that be companies like microsoft or mop -- or more broadly in those areas like health care. guy: how vulnerable is this market to a slightly more than consensus fed on the hawkish side? if the fed says we will taper faster than the market thanks, we will raise rates faster than the market thanks, what is the beta on that to the market? charlotte: we've begun to see a little bit of that happening already. the market, you still have reasonable levels coming through in the market is anticipating two to three rate rises. to see something much more aggressive than that would be surprising, prickly as the fed still views -- vertically as the
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fed still views -- some of the -- those begin to ease off into next year. we need to see a dramatic move upwards in the markets. alix: what kind of liquidity drawdown do you think we would have to see to see bubbles like tesla or the meme stocks for crypto take a sustained hit? charlotte: it is difficult to say. cryptocurrencies for us is a struggle. we cannot see any fundamental justification for
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regulations look at what investors are doing. there are markets that could unravel that quite quickly. within the equity markets as a whole there is a more stable pattern. does europe -- guy: does europe look like a better player than the united states next year? charlotte: no, but in terms of the breakdowns of markets within the u.s. it is still much more attractive in terms of focus on the leading technology companies and the leading health care companies and the leading consumer brands. that continues to be a much more attractive area than europe. there are excellent companies in europe, things like schneider electric, but in general we would say the u.s. provides better options. alix: what about emerging markets? china had a lot of headlines today, property sector spillover from evergrande continuing. along the same lines, some say over two to three years you should get monetary fiscal support. how do you increase risk into that area? charlotte: that still remains a difficult area, particular on
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the regulatory front. you see elements of that in education, into gambling in the macao area, i think that will continue to be an area of risk. for the china exposure we tend to buy companies that are quoted within? it's but you have exposure. -- that are quoted within western markets but you have exposure. estee lauder. companies benefiting from the growth in chinese consumption without having to take on this regulatory and government risks. guy: i want to relate it back to the labor market story. a lot of people have left the labor market because their financial asset returns have been so good they can support themselves through early retirement. when you talk to clients about their risk tolerance now, what does it look like and how bumpy
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a ride they will get? how with the you think this -- how whippy will the market be, what kind of volatility are we looking at? charlotte: we are seeing volatility pick up from where it has been. less support from monetary policy than we have had over the last decade plus. more unstable in terms of economic picture. i think the problem is you look at the asset classes, cash -- the same thing with the bond market will be a very difficult place to be. in finding areas where you have strong cash flow growth, that will be the attractive area in the area that will weather the storms. alix: we have been talking a lot about the risks. is it omicron in the variant, will it be from the fed and a surprise there?
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is it going to be demand, is it going to be supply chains? when you're looking at the right kind of portfolio this year, what is the biggest question you have? charlotte: inflation. we certainly see the argument all of this is transitory in relation to the pandemic and that shuts down. -- end of the shutdown. there is longer-term question about why the pan -- why inflation has been so low. technology is still in play, but if you think about things like demographics, that would get difficult, whether in western markets or areas like china, which is aging very rapidly. a shrinking workforce there. can the world cope with that in terms of manufacturing where will we see productivity gains allowing us to produce things local even with a tight labor market? that is the big question. not just of next year but looking forward. alix: thanks a lot.
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charlotte ryland of ccla investment management. a couple of breaking headlines. in new york and are kathy hochul says new york hospitalizations are up 70% since thanksgiving. if that is the post thanksgiving surge in new york, imagine what that will be in january. you are seeing increased deaths in the u.k. comment almost 60,000 more covid cases. guy: the numbers are picking up quickly. a lot of places are canceling christmas holiday, but the advice is christmas carries on. we will have a christmas coming to be think about the ripple effects of that, maybe this is why the government is getting nervous. there seems to be a growing feeling that maybe we do not get many more restrictions this side of christmas, but post christmas, things might change. we have had warnings over last couple of days about schools,
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that kind of stuff. it feels like january and february could be very bumpy. if you look at the transmissibility omicron seems to be delivering. alix: you go. guy: alix is looking nervous. i am feeling good about it. alix: that categorizes our personality. this is bloomberg. ♪
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ritika: time for the bloomberg business flash. the international energy agency says the release of tight oil markets is on the way. it says surplus in the market and agency forecast a bigger oversupply early next year because the omicron variant is impeding international travel. in france the majority of renaul t's union have signed on to a
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plan to cut jobs, part of the manufacturers overhaul and shift to electric vehicles. it will target production of more than 700,000 vehicles a year in france. in the u.k. oak auto forecast shale service -- company requesting demand for shopping for food to grow. it also won the first phase of a fight over its robotic warehouse technology. goldman sachs and jp morgan are opening their wallets to try to keep bankers happy. that will put pressure on their rivals to do the same. jp morgan may increase its full by 40%. the banks dominated this year's dealmaking frenzy. they may have to overpay to keep the people they want the most. that is your latest business flash. guy: thank you very much. another sign of inflation. paid going up, the second round of fact. i know it is not a direct line
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but nevertheless another example of this inflationary narrative which we are focused on. the ppi data representing that pretty clearly. u.k. cpi numbers tomorrow could be hot. alix: part of this is when you compete for talent it is the hedge fund and private equity world poaching a lot of the bankers from these investment banks because they can pay a lot more. that is what the big banks will have to do. i do not know how that winds up ending and how if it height or fed taper will impact that part of the market. guy: it is another example of -- froth is the wrong word. exuberance. in order to get the right people you have to pay. is that it investment banking? yeah. if you take it as a percentage story, plenty of companies are having to step up and pay more
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to hang onto staff. there are lots of bonuses at the moment. fixed pay versus variable pay is an easier thing for the banks to manage going forward. nevertheless, it is across the economy. it is not just in banking, it is an warehousing, shipping, trucking. alix: that also speaks to the issue. you may offer a signing bonus but that is happening in areas where people do not want the jobs, they do not want to be on the road for trucking. maybe the retail job is not that appealing. for jiggly as we have also reverted to work from home and have to go back out to not work from home. even without signing bonus. i wonder how long it will take for us to realize any structural changes that have happened with the pandemic in terms of wages and where the jobs are. i do not they will know that for a while. guy: a lot of people have left
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the labor market. the financial markets are very elevated. if those people can support themselves on their pensions and their savings and their assets, that allows them to leave the labor market. do assets continue to be is elevated going forward? do they get forced back into the labor market? i don't know. the labor market will be tricky to figure out for some time. financial markets will have a tough time managing that. european markets into the end of trading. near session lows. it is been a tough day and both sides of the land tick. the ftse -- of the atlantic. the ftse coming out. the big miners have had a big day. this is bloomberg. ♪
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guy: european stocks under pressure today, but it is not
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uniform. he sectors are diverging significantly. there are also single stocks having a fairly significant effect. the dax a big outperformer recently. cyclicals taking a hit today. the cac 40 down .6%. the ibex in spain is positive. italy is positive as well. the u.k. absolutely flat on the day. let's figure out what the session looks like. will do this through the stoxx 600. way been flirting with 470. we are near session lows. this is when the u.s. gets involved and that is when the narrative starts to turn negative. it is the tech stocks during the damage. let's break the market down. that is instructive and explains why we are getting this big divergence across the comment.
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technology, look at what is happening with the nasdaq. tech is taking a fairly significant hit. then you get to industrials, down 1.8%. the auto sector down 1.33%. at the top, banks and basic resources. the telecom sector is having a good day, the energy sector is having a good day. the u.k. has a lot of miners. the telecom sector is in focus. energy also fairly heavy. that is why you're getting this divergence across the continent. it is specific as to which sectors you are strongest in. let's talk about some of the single stocks. bt group, the serial consolidator of the telecom sector in europe has built up in 18% stake. there are plenty of analysts from the likes of berenberg who think take-out is difficult. bt group down .6%.
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rentokil initial is going on the hunt at the moment. try to remember the name of the company. this is a pest control company. sometimes these things leave your mind. it is a pest control company. the problem with it is they are paying quite a lot of money for this. as a of which rentokil initial is being marked down 13.2%. it is a valuation story the market is concerned about. then you get to ocado. you think about omicron, you think about people returning home, you think about the industrialization of the grocery sector, robots are playing a bigger part. all of this is around the ocado story. not only has ocado want to keep battle, but it is also making
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noises about what consumer demand will look like. ocado, which a lot of analyst is confusing and hard to understand, certainly popped today, up nearly 6%. alix: we call those senior moments. guy: i'm getting more senior. i have my little piece of paper that tells me what i need to know. alix: i have four of them. back to covid. u.k. government advisers but make recommendation within days is whether kids five to 14 could get a covid vaccine. we are seeing the case down from italy reporting 21,000 new cases as of today versus the day before. let's get an assessment of where we are. a clinical eb up -- a clinical epidemiologist and lecturer at queens college in london joins us. your assessment of where we are right now? >> i think we are in the middle of a crisis this will likely be
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the next global crisis. this is a rapid growing variant, it is growing rapidly even in countries with high levels of vaccination. we see in denmark showing the rate of vaccinations is as high as the delta -- that would be considerable in areas that is growing it is likely to show growth across the globe whenever he does manage to enter communities. guy: i am confused. everybody keeps telling me it is mild and that is what the data out of south africa is telling us. why is that data wrong? >> i do not think the south africa data is telling us. it is clear hospitalizations have been more than doubling every week or so. the level of severity of people being hospitalized his last, but that could be related to them being younger.
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many people have bade the conclusion without waiting for time to see what the impact of the massive surges. u.k. in western europe is very different than south africa. if you want to look at the impact of this, it will look at countries like denmark and the u.k. and denmark suggests not just the face of price but also hospitalization rates is not lower than the delta. even if it were milder, the rate of exponential growth will have a serious impact because it will impact a lot of people very quickly. alix: on that point, i've also read about how south africa got hit so hard with delta and other waves but there is a natural immunity assignment -- a natural immunity aside from the u.k. -- we know the efficacy of the vaccine versus the natural immunity? >> not entirely yet.
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there are some indicators. that would be another difference between the u.k. and south africa. south africa has a lot of exposure, about 80% of our patients have been exposed. we have relatively reasonable levels of vaccinations delta. our impact may not be milder because not so many more people have the vaccinations. in terms of vaccination it looks like there is not high protection from infection with two doses, but certainly there is some protection. about 70% protection with pfizer and a boost in that protection is expected to rise. it is an important time to get that booster vaccination. guy: can you explain why the booster make such a big difference? >> what the booster does is it massively increases level of antibodies you have.
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when levels are high, we tend to overwrite some of the escape the virus has. certainly the efficacy will not be as high as the delta but it will raise it to a level where you have much higher protection than you had with two doses and hopefully the production will be durable for a period of time, boosters by themselves are not going to be sufficient given the rapid rise, but that needs to be coupled with other things like high-quality masks, ventral is a, and limiting sick -- ventilation, and liberating -- and limiting socialization. alix: when will we know how much -- how data omicron can be? when we will have enough data to make a cohesive land? >> simply looking at western europe and the u.k., i think we'll have those answers within one or two waves. the indication now -- one to two weeks. the indication from denmark
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suggests this will not be sufficiently mild to counter the x financial spread. we have seen doubling -- the exponential spread. we have seen doubling in denmark. guy: appreciate your time and your analysis. senior lecturer at queen mary's university college of london. thank you very much, indeed. let's check the european stocks. this is the picture. a little bit lower possession lows. -- a little bit lower to session lows. the mining stocks did well. the dax got hit hard. it is had outperformance recently. the cyclicals have been doing well. the cac 40 down .7%. forrest johnson has a huge boat this evening and will likely face significant pushback from his own party on these covid restrictions. we will pick that around.
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the table -- we will kick that around. you can listen to it live in new york on dab digital radio -- you cannot listen to it live on new york on dab digital radio, but you can listen to us live on spotify and apple. the podcast is available. alix: i am very happy about it. markets are really rolling over. the nasdaq here is down almost 2%. is it sell the rumor, by the news? we will break it down also. guy: we are in today one of the fed, day two tomorrow. a huge day for global markets. is the fed going to be more hawkish than what is currently priced? that is the question. coming up, we also need to focus on the crisis in china's property market. what is the risk it could spread to other parts of the economy? how the authorities continue to manage this narrative?
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we will talk about that next. this is bloomberg. ♪
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ritika: coming up, the galaxy digital holding ceo and founder at 1:00 new york time. this is bloomberg. let's check in on the bloomberg first word news. italy is planning mandatory covid testing for travelers entering from other eu nations. vaccinated visitors will have to show proof of a negative cast. bloomberg has learned requirement will take effect december 15. the imf warns the british economy is headed down for a mild slow down early next year because of tighter restrictions
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aimed at limiting the spread of the omicron variant. the imf is forecasting 5% growth in 2022 after 6.8% increase this year and it says inflation will peak at 5.5% in the spring. in china property stocks sank to a five-year low. shares of the group and its property service unit fell by the most ever today. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. alix: i will pick it up. we will get to china in just a second but i wanted to hit on the nasdaq 100, down 2% now. this could be the seventh straight fall of more than 1% for the nasdaq 100. the biggest decliner czar apple, they try to test that three chile dollar market cap, but also nvidia and microsoft getting hit, the biggest fall
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since september. yields higher. will you sell some of the winners? the rollover, you look at the seven day chart, big rollover in the last couple of days. guy: it does seem as if the market has been spooked by this ppi number. the number coming on the first day of the fed meeting, it is a very hot number. it points to embedded inflation within the supply chain story. we will get cpi data out of the u.k., the consumer price, these numbers are coming in hot. the market has marked the idea the fed will be hawkish but not that hawkish. it will tap the brakes rather than hitting them. as the evidence starts to mount up this is more embedded, maybe that assessment needs to be readjusted. guy: tech looks like it is front and center in the firing line. alix: also we mentioned china property, the tone was overnight
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by the chinese property sector. guy: and we probably need to focus on what is happening. ritika was talking about it. it is perceived as being one of the safest companies, but what it is trying to do is one of a lot of other property companies have to do is take money out of the management side and into the development side, trying to manage their cash flow story. tom orlik joining us now. as i say, should about was meant to be one of the safer companies. we know the riskier end of the spectrum is on the scale of evergrande. if we are seeing problems with cash flow, how deep does the problem go? how big of a red flag is this? tom coleman -- tom: you have put your finger on it. it was meant to be one of the
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more liquid chinese property developers. here we are just as the market starts to think it has got to grips with the evergrande rises, and another -- the evergrande crisis, and another is making this opaque transaction and the markets do not like it because it raises concerns about corporate governments but also it raises concerns about the cash situation at the company and by extension china's other property developers. maybe the rock does not stop at evergrande and kaiser. maybe they developers who are thought to be solid are actually not so solid. alix: the chart speaks for itself. i mentioned the risk off tone set in china by shimao. i wonder what is the contagion factor outside of the property sector? tom: that is the critical question. if you add it up, china's property construction, the
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demand for commodities, the employment of construction workers, the knock on effect on demand for things like a car in the garage or home appliances to stock up the kitchen, all of that adds up to 25% of china's gdp. if the evergrande problem is contained, we are looking at another strong year of growth for china. we have penciled in growth between 5% and 6%. if it is not contained in we start to see contagion spilling over and other developers getting into trouble, if you say goodbye to 25% of gdp, that is a very significant blow. guy: what does the policy response look like as we manage our way through this obsessed? -- as we manage our way through this process? there does seem to be a sense we are turning the credit hierarchy on its head. we are making sure the most vulnerable are being protected.
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that is one of the responses. the other responses we are seeing what is happening with the rrr at the currency. in terms of the levers available, what do they look like? tom: one reason why i am optimistic that china is not going to face that worst-case scenario of a lehman brothers moment or a japan 1989 property crash moment is because china's policy are managing this process. evergrande did not going to restructuring by chance, it went into restructuring as part of a planned process with china's policymakers have a national and local level. they still have multiple instruments they can use. they have instruments at the macrolevel cutting the reserve requirement ratio, cutting interest rates if that becomes necessary, pumping up lending.
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they also instruments they can target at developers. they can open or close the credit figures for developers and open and close the property sales spigots. that is what they have done to avoid a hard landing for the sector. this time around the pain threshold seems higher. in the final analysis they are always going to privilege growth, employment, social stability over the resolution of these long-term moral hazard issues in the sector. alix: thank you so much. tom orlik of bloomberg economics. that was the one thing, the other thing is the fed. market still down. the s&p often over 1%. more on that next? will it be sell the rumor, buy the news? this is bloomberg. ♪
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alix: two hours into the trading day in the u.s. yields higher, stocks lower. all eyes on the for decision tomorrow. michael mckee has more. you think that is what we are seeing? is it a cell the rumor, buy the new situation? michael: i wish i knew. i would be a really successful fund manager. you can probably put it down to a little bit of everything. we know inflation is high and the fed will do something. i do not think the markets are totally fixated on that. they will be tomorrow at 2:00. the first thing the markets want to know is what is the fed going to be doing about tapering. the consensus is $30 billion a month, we will see if that happens. that would get them out by
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march. inflation, they have been behind the curve. how high is inflation going to go and for how long? the dot plot, what does that mean for the fed rate increases? when do they start moving and how far do they go? guy: how sensitive is the u.s. economy to any form of tightening? michael: that is a lot of quest -- that is an interesting question a lot of people have tried to answer and i've a lot of good information from everyone at the vet. -- at the fed. the economy is running pretty strong. it has a tail wind behind it we have not had coming out of past recessions. with all of the open jobs we have, there is still a possibility for that to increase. it is a question of how high can you go, how fast before you start to have a psychological effect than anything else?
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alix: any chance we get a dovish surprise tomorrow with the rising cases of omicron and what with the language look like? michael: i do not think there is any chance we get a dovish surprise. the fed would know that would not go over well in the markets. the question is how hawkish they feel. the idea has been they want to tell people this is not a promise to taper ahead, but we will see how that gets taken by the markets. guy: in terms of the base case, you have accelerated taper. is that enough to convince everybody the fed is serious about tackling inflation? the perception is the fed is behind the curve, both in political circles and in the markets. what does the fed need to do to be perceived as in touch with where it needs to be right now? does it need to go above and beyond?
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is doing what the market expects enough at this point in order to change the narrative? the market to make the weather and i'm wondering whether that is enough for the market? michael: is interesting the market has pretty much gone along with what the fed has said so far. it is only been in recent weeks, maybe last week or so we really see a reaction there. the fed only updates its forecast once every three months. they are behind the curve in that sense. if they do all three things, changing the dot plot, changing their inflation forecasts, then they probably will convince the markets for now. guy: going to be great coverage tomorrow. really looking forward to it. bloomberg special coming up, the fed decides. one of the more pivotal ones. 1:30 in new york. this is bloomberg. ♪
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>> from the world of politics, to the world of business, this is balance of power with david westin.
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david: from bloomberg world headquarters in york to our radio and television audience worldwide, welcome to balance of power. as we wait for the fomc decision tomorrow we start with the markets and their anticipation with what might be coming from the fed. without bloomberg markets correspondent, kriti gupta. the market is a little rocky right now >> a little rocky. a falloff in the stock market, led by big tech with software companies and all coming back onto rising inflation. jp morgan, like adobe, will be under pressure as we see rising rates. off the back, you are seeing this big expectation for inflation and it is a story of translating -- that is translating to the bond market. they are not waiting for the decision. those are higher. david:

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