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tv   Bloomberg Daybreak Europe  Bloomberg  February 24, 2021 1:00am-2:00am EST

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and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music) ♪ manus: good morning from bloomberg's middle east headquarters in dubai. i'm manus cranny. daybreak europe. your top stories this morning. jay powell says the u.s. economy is a long way from its gold. playing down concern over rising news. global stock straight to the downside. chancellor merkel says germany is in a third wave of the coronavirus as astrazeneca is
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set to deliver only half the vaccine to the eu as expectations. shares in hong kong stock exchange operators slumped the most since 2015. increased transaction cost. we get the reaction from the city budget this hour. miles to go before i sleep. that's an encapsulation for -- of the message from jay powell. we are not done yet. we are nowhere near scaling back the money stimulus for the market. what caught my eye was basically saying, how much do central banks fear the bond poplar? parenthood and central banking. that will be the theme of this hour. this is what john says. in a way, it's a statement of confidence on the part of the market that we will have a robust and complete recovery, the words of jay powell. good morning.
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annmarie: definitely a definition tone coming out of jay powell. keeping the toddlers at bay. the next transition of parenting. what i found interesting was that there was no news in this press conference. when it comes to the fed, no news is news. he is steadfast. the fed is going to be unwavering. let's take a listen to what he had to say yesterday. >> the economy is a long way from our goals. it will take some time for substantial progress to be achieved. developments point to an improved outlook for later this year. you could see spending picked up substantially in the second half of the year. that will be a good thing. could put upward pressure on prices. we have the tools to do with that and we will. i don't expect we will be in a situation where inflation rises
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to troubling levels. there's a long way to go. monetary policy is accommodative and easy. expect us to move carefully and patiently and with a lot of advanced warning. annmarie: jay powell rising bond yields show optimism, not worry on inflation. a veiled rebuttal of what we have been hearing from the likes of larry summers. 1970 style inflation. powell says that's not true. manus: not at all. i will leave the baby analogy at this juncture. we had a picture of a screaming baby and the profuse are -- producer refused to create it. another 50 basis points is a monetary equivalent of the bond market threatening to scream until you are sick. that's a 1980's sit come in the united kingdom where a child screams until they are sick. the bond market traders won't like being analogy to toddlers. what is your market? annmarie: let's take a look at
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where we trade this morning. it's a red day across the screen when you look at asia. specifically in hong kong. that has to do with what's happening with the stamp duty, arise on stock trading. a report out of the city. i wanted to show the nasdaq futures. tech yesterday, a day. 3.5% on the composition. this morning, we trade in the red. you're a pound, nine straight days against the pound. the euro is lower. longest since 2015. this has everything to do with the vaccine trade. that is continuing. let's break down all the news with caroline simmons. she joins us now. we have to start out with powell. talking about rising bond yields. he says it's a sign of economic recovery, not a sign of inflation. whose camp are you in? jay powell or larry summers? caroline: we agree. it's a normalization of bond yields.
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they've been abnormally low. we think that bond yields will rise a little bit more over the year. another 20 basis points or so. it's not because inflation is running away. it's because we are finally able to realize the economic recovery post pandemic. for us, it's an encouraging sign. in terms of the speed, we have already seen the bond yields rise over 50--
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growth and inflation. you want to be in the physical sectors. those are our preferences. we have a preference for areas such a small caps. we are positioned for an increase in the bond yields. our forecast is below 1.5 for the year-end rather than the numbers you mentioned. annmarie: what number would where you? caroline: it depends very much
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on what's going on at the time. i don't think you could pick one specific level. the reason for why the gilt is going up and what it's responding to in terms of inflation, growth, employment are all factors that need to be considered. i don't think you can give a number in isolation. historically, we've had bond yields at 4% levels before it caused any disruptions to equity markets. i think there's a lot of room. we are coming from a lower level. the answer is possibly. what's important here is the messaging that we are getting from the central banks and the managing of expectations. the bond yields can move without disrupting equity markets quite happily. normally, bond yields rising as a good risk on scenario.
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we really seen that 50 basis point increase in the treasury. that can happen again. it's quite reasonable. we just need to be cognizant of the reasons why. manus: another 50 basis points is a monetary equivalent of the bond market threatening to scream until it is sick. one of the big pieces that your house is put out is that growth, look at growthlue. we put it in the gtv library. gross to value has had a huge dislocation in the past month. the worst month for gross to value in two decades. your house would say, get ready for a big global equity rotation. are your buyers into any of these splendid dips and growth? are those opportunities? caroline: yeah.
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there's the shorter term and longer term. shorter term, if bond yields are going to continue to move higher, that generally supports value tight approaches. the growth value dispersions are still very big in terms of valuations and positioning. we can see quite quick rotations such as we did in november time. the approach we were taking is more around thing cyclical and going to small caps rather than calling appear value versus growth argument. that is so difficult to call around precise moves in the bond yields. we prefer the cyclical play with ties into an improving economic backdrop. that coincides with rising bond yields. manus: stay with us. ubs global wealth management u.k. chief investment officer. get your first word news with laura wright at london hq.
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laura: thanks.
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♪ manus: daybreak europe with manus cranny endure by and amory horton alongside me.
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angela merkel has warned germany is in the midst of a third wave of coronavirus infections. the chancellor says moves to reopen schools and businesses should be weighed with caution as the country debates exiting its lockdown. bloomberg understands that astrazeneca expects to deliver less than half the covid vaccine that it promised to the eu in the second quarter, threatening to reignite the feud with brussels. the company told the eu officials it would supply less than 90 million doses. let's get to brussels with maria tadeo. this is the last thing that europe needs to hear right now. a vaccine delay. talk us through we were with the story. maria: to some extent, astrazeneca has been problematic for the european union. it's the saga that keeps on going. astrazeneca reportedly will cut deliveries from q2. 180 million doses, the original
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target, to just 90. almost a 50% cut. this is coming on the heels of another cut for q1 that lead for a very public spats between the commission and astrazeneca. it's interesting that the commission does not want to confirm the figures. they don't want to comment on specific contracts. production can change. they know that they still believe they can hit that target of uterine amenity -- herd immunity. this shows, this is the latest issue with the vaccine. the astrazeneca rollout has worked well in the u.k.. it has not worked well in the european union. there's a number of issues, not just distribution but also reputational damage to the vaccine. the questions that were raised about it over the population of six he five years old. there's anecdotal evidence that there have been issues in countries like germany and belgium. this is not becoming a single episode story. the vaccine has been very
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complicated for the europeans. annmarie: we are looking at our vaccine tracker. the u.k., 27.8 doses. germany, 6.3. france, 5.9. on this basis, is it remotely possible for europe to achieve herd immunity anytime soon? maria: what they say is that they can get herd immunity, that 75% of the population, by the end of summer. they look at the end of summer as of temer 21st. -- september 21. they say that the astrazeneca vaccine is not to europe what it is to the u.k.. the european portfolio is built around the pfizer biontech. they have more doses of that. they have a big contract with johnson & johnson. the europeans believe that will accelerate the vaccination process. they still think we will get there. you will see distribution going much faster and quicker. the doses will come through.
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even though the numbers right now don't point to that 70%, we are far from that target. they say by the end of september, we can get there. manus: thank you very much. maria tadeo in brussels with the latest news on the vaccine. carolyn simmons has been listening in from ubs. this is the last thing that europe really needs. they don't want to lag any further behind the rest of the world in terms of vaccine rollout. that's the outlook for the u.k.. it's a draw down for europe. does it give me a better entry point on the back of a fairly tough story? caroline: yeah. it's a timing issue. our goal was that europe would be opening up by june. obviously, if there are delays in the vaccine rollout, there is a risk of further delays.
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within the market, the opening up trains -- trade, the cyclical, the consumer, those are the sectors that we will want the vaccine underway. an end to lockdowns can be seen. we saw that in the u.k. in the last few days. the planned listing of the restrictions here. the move that we saw in those very cyclical stocks. i think it just creates a bit of a delay in terms of the euro zone forecast. just below 50% for the euro zone this year. if there are significant delays, curtailment of gdp growth through continued lockdowns, that could drag gdp earnings lower. i would say that the restrictions in the euro zone have not been as severe in the u.k.. that's a drag on gdp from lockdowns and restrictions.
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that has been less in europe than the u.k.. annmarie: ftse 100 values, you say year-end, your call is 7300. that's a double digit upside. vaccine narrative, isn't that mostly priced in? what do you like in the u.k. sector that you think is underperforming? caroline: yeah. there is further upside for areas, particularly, that will deliver a lot of earnings growth. in the ftse 100, we are thinking about financials. banks particularly. energy. we have further upside on the oil price. that continues to help the energy names. i believe there is further upside for the reopening trades. admittedly, a lot of those stocks fit more in the two 50's than the 100. quite a few areas that we see continued upside on. overall, 55% earnings growth target for the u.k. this year. that is a significant profit
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growth. that can help with the fact that valuations are in line with long-run averages. the u.k. can help deliver that upside for our target. manus: let's talk about the currency exposures. you like the euro from a cyclicality point of view. sterling as well. i look at the cross on euro sterling. that's bruising. sterling above 141. is sterling getting a little bit of head of itself -- ahead of itself? is there much more to go? caroline: yeah. in terms of our forecast, it's in line with where we think it's going to go. it's moving a little bit faster. for the end of the year, we think that sterling could get to 1.6 against the dollar. the moves in recent weeks have been faster than we anticipated. it could be that we get a little bit of applause while people
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consolidate their concessions. an element that is lent around the dollar and the fiscal pallets -- bent around the dollar and the fiscal package in the u.s.. strengthening moves in the cyclical. sees -- cyclical currencies are more against the dollar than each other. that is linked to continue dollar weakness. that is linked to a sizable stimulus package we are expecting to come next month from the u.s.. annmarie: i know you don't recommend bitcoin. our clients asking you about it? caroline: we get quite a few questions about bitcoin. our view is that it is not a store of value. it is not a currency replacement in its current form. it is highly speculative and highly volatile. in terms of future development,
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we need to be mindful of what happens with the central banks and the development of digital currencies that central bank's are working on. what longer-term impact that might have on the more retail, cryptocurrencies. it's not something that we recommend or have an official view on. we don't force cast -- forecast bitcoin prices. it is more for those in a speculative nature than those looking for a currency replacement. manus: bill gates says, it's for people who should be wary than having less money than elon musk. thank you very much. caroline simmons. quick check. asian markets are moving quite virulently on the csi 300. extending the decline this morning. a new stamp duty coming through.
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credit suisse and ubs moving bankers off of the bain land of china. we are seeing this story in hong kong on stamp duty. hong kong trading to a 0.13%. we have not seen a move on that since the 1990's. the chinese market down by 3% as well at the moment. annmarie: the hang seng market down more than a third. 9.7%. hkex plunging. this is on the stamp duty tax. the operators slumping. this is the most since 2015. this is just bringing down the entire aipac equity trade today. looking at my bloomberg, it is just rows and rows of red today. coming up, more when it comes to bitcoin. back above 50,000 for a moment. aided by comments from kathy would at arc investment management. we talk crypto, next.
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♪ >> we are positive on bitcoin. very happy to see a healthy correction here. no market is straight up. everyone should know that. everyone should have dry powder for days like these. i've been saying that for a while. annmarie: after that endorsement from kathy woods, the largest cryptocurrency climbed above $50,000. dani burger joins us now. she still likes bitcoin. what move did she actually make with her fund? dani: not a fair weather fanned of these sorts of momentum trades. you heard the founder of arc investment. a lot of these popular etf's, especially popular with retail investors.
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she went ahead and bought bitcoin when it dipped yesterday. we don't know the exact amount. bitcoin isn't the only momentum play that she winton. she also bought the debt from tesla. three of her etf's bought a total of 240,000 shares of tesla. we saw the effect of that. it got a bit of a boost after falling as much as 13% yesterday. it is a tough and testing time for these arc funds. they had their steepest back to black declines. we saw investors pull a record amount from the fund yesterday. more than $400 million. these have a cultlike following. it's telling that they had this big pull of assets from the fund when usually people stick with it. manus: well summed up there. big moves. bitcoin and tesla. dani burger on the markets. coming up, copper hits a nine year high. we'll try it -- the market
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experiencing shortages. we dig into the commodity complex, right here on daybreak era. this is bloomberg. ♪
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♪ annmarie: good morning from bloomberg's european headquarters in the city of london. manus cranny live from dubai. here's what you need to know. jay powell says the u.s. economy is a long way from its goals while playing down concerns over rising yields. global stocks trade to the downside. angela merkel says germany is in a third wave of the coronavirus. this is after astrazeneca was set to deliver only half the vaccines the eu expects in the
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second quarter. shares in hong kong stock exchange operators slump the most since 2015 on increased transaction costs. we get the reaction from the city's budget this hour. very good morning to you. 6:30 a.m. in the city of london. we have to start out with jay powell. he will speak yet again today. we will get that today. no news is news in a way, unwavering support. what he had to say about inflation was interesting. republicans are trying to get him to say, it is too much fiscal package. the democrats are trying to get him to endorse the $1.9 trillion. he did not do either of that. he played it very well politically. we will see what happens on day two. manus: we just had a conversation with ubs. we are not bothered about 1.6%. for me, it was powell's dovish tilt. putting a cap possibly onto the
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bond market. this morning, look at u.s. yields. we are back below those highs we've had. the bond market is like a toddler screaming. another 50 basis points and it is saying, i'm going to throw up. let's just check in with everything that he did say. >> on a play mid and inflation goals, it's likely to take some time for substantial forward progress to be achieved. an improved outlook for later this year. you could see spending pick up substantially in the second half of the year. that would be a good thing. it could put up or a prices. we have the tools to deal with that and we will. we don't think we will see a burst of fiscal support or spending. it would not change those inflation dynamics. i don't expect we will be in a situation where inflation rises to troubling levels.
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there's a long way to go. monetary policy is accommodative and needs to continue to be accommodative. expect us to move carefully and with a lot of advanced warning. manus: there's a long way to go. john authers says, how much does the central bank fear the bond toddler? the bond market threatening to scream until it's sick. let's look at the market. the hang seng on stamp duty increases. the s&p 500. let's have a look. nasdaq lost 3.5% yesterday. a managed to pull itself off of the ground. the bond market comes off of highs. euro sterling is killing me. day nine of the sterling rally. let's talk bonds. oil has dipped after the american drilling it's a dude
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reported crude stockpiles rising last week. the iea outlook also weighing on crude. it sees recovery to pre-covid levels by the end of the year. copper holding your 2011 highs on expectations of a global economic rebound. steph curry runs goldman sachs research unit. he talks to bloomberg about the potential for super cycle. >> the revenge of the old economy. we have not invested in old economy production capacity in some cases five or 10 years. the reason why is that capital got redirected toward tech. you overlay efg issues on them. the sectors are severely starved of capital. take oil. capex down 40-70% in the first half of last year. >> tell us about the metals. i understand copper. we are arguing about, let's stop
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the show. the you quote london copper or chicago copper? >> london copper. 1788. >> very good. there we go. copper is moving up. tell us about the other metals where if price goes up, supply doesn't come on. >> it's anywhere from 5-10 years to bring on a new copper mine. it's the last of the old school commodities that you still they got of the ground. that's where we have the real demand push. you have green capex that is starting to begin to be behind this energy transition story. we have a blueprint for energy transition in the u.s., europe, and china now. something we did not have eight weeks ago. we believe the cap eft's -- capex would be around $16 trillion over the next decade. put that on par with china in the 2000's. it's about the same. >> we have to talk about the
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energy transition story but let's down the metals for little bit. let's talk about what happened in the last 10 years. that shift away from volume to value. the lack of investment we've seen in the last decade off of the back of the top of the last super cycle. how profound is that? >> it's the same story. very low prices over the last decade. very poor returns in the sector. underinvestment. no demand. now we are adding demand on top of no supply in creating really take markets. whether you're talking about metals, energy, agriculture. at the core of the demand story is where this amulet is going. over the previous decade, it operated through the wealth channel and benefited higher income our souls. today, lower income households who spend more on commodities. annmarie: jeff curry speaking to
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bloomberg. we agree with him. it's all about quoting the london price. joining us now is michael widmer. from your notes, you have a lot to say on copper and oil. you say copper is a proper growth market, hands-down. oil is not. it doesn't have to be bearish for oil. it's a very different dynamic. everybody is talking about the super cycle. where you can have a super cycle where metals are bullish but oil is less so? michael: i think you can get there. by the nature of what is driving that super cycle over the next year, [inaudible] these are all metals that you require to build renewables and ev's on the roads. structurally, you have very strong demand growth momentum. oil has done very well as well.
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what we are talking about is a decarbonization of the global economy. you are taking one set of commodities out to some extent over the next 5-10 years. it will be a long game. you have to put something else in. that has a diversions between the two sectors of commodities. manus: good to see you this morning. jeff goes on to talk about $16 trillion green capex which will ultimately be the driver of commodities like copper. is that part of the building blocks? can it get to 10,000 or is the supply constraint? michael: it's both. [inaudible] oversupply has not increased since 2017.
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let me give you an idea for this year. you are looking at all of the big producers in copper. they are looking to increase supply by 3% this year. supply fell by 3.5% last year from those guys. that means even in a post-covid rebound, copper will be below the 2019 level. we had three years of essentially no growth. i would look at it in terms of copper demand growth over the past 10 years. 2.1%. if you throw in renewables and ev's, that's up to 2.5 or 3%. doesn't sound like a lot. every percentage point really matters. annmarie: we know the demand is there. i'm not sure if you answered manus's question. how quickly can we get to 10k? michael: it's in the price
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forecast for this year. markets are trading with an exponential rally. we may get there sooner. we've been at 10k for quite a while for this year. manus: that's the case there. i want to pivot to gold. you say it has to walk the line. i'm interested to know what the biggest headwind is to gold. is it bitcoin? is it perhaps a little bit more in the form of central banks not buying as much? which is the biggest hindrance to the gold rally? michael: i think gold is walking a very tight line. i think central banks have to do with it. the market really started with the perspective on how to price in inflation or reflation. nominal rates move up.
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gold is effectively normally trading on the rear rates. as long as they push higher, it's going to be very hard for gold prices. what we need is a firm commitment that nominal rates may not move higher the same time as inflation pick up. until that happens, it will be very hard for gold prices. annmarie: do you think that part of that story that manus mentioned is that some investors that want to hedge against inflation and -- are actually seeking cryptocurrencies? michael: to some extent. i look at cryptocurrencies from different angles. i want to replicate a risk return profile in the cryptocurrencies and some of the traditional inflation hedges.
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if you want to have a flirt -- pure inflation hedge, you are looking at which commodity has the biggest correlation. [inaudible] copper is the best inflation hedge out there. always has been. at the moment, it still is. manus: let's close off with the oil market. what i'm drawn to is, one is a cartel. the oil market. driven by opec. certainly in the west. and copper in the other commodities driven by free-market enterprise. oil has delivered 9% returns. over the past year. why are you not calling it higher? goldman at $70. your outlook, you are at $50. why are you not more bullish on oil? michael: look at the difference
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between how the oil and copper have stood up. copper, no spare capacity. that's the starting point. if opec wanted to prevent this bike from here, you could find more demand that prevents prices from going higher. annmarie: thank you so much for recapping. coming up, hong kong stocks slump this morning, plummeting as the city announces an increase of the stamp duty on stock trades. all the details on the budget announcement, live from hong kong next. this is bloomberg. ♪
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♪ manus: it's bloomberg daybreak
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era. hong kong has pledged a 50.5 billion u.s. dollar fiscal support for the economy battered by covid-19 and social unrest. budget measures include guaranteed loan programs for the unemployed, consumption coupons for the residents, hong kong stocks slumped on the news that the city will raise stamp duty on stock trading. let's get to stephen engle in hong kong. what stood out in this budget? was it as big as everybody expected? stephen: it wasn't that big actually. a little more fizzle than sizzle. last year, they were handing out 10,000 hong kong dollars per person here. 1300 u.s. dollars per person in direct cash. now they will give out cash coupons. half of that amount. the one thing that really stood out that moved the markets was what you just talked about.
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that was the increase in stamp duty on stock trades. it doesn't sound like a lot. 0.1% is what the current stamp duty is. it will go up to 0.13. not a lot for each individual trade. could bring in about 10 billion hong kong dollars or 1.3 u.s. -- 1.3 billion u.s. dollars to the coffers of the hong kong government. the reserves are down significantly after various stimulus measures including cash payments last year. part of this budget is another 15 billion u.s. dollars in various tax breaks and countercyclical measures to help stabilize the economy here. annmarie: i like that, more fizzle than sizzle. give us a sense of how they will reach the 3.5 target of annual growth for this year. stephen: it's interesting. the stock market is not the economy. we all know that.
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the stock market has surged up over the last year while the economy has sunk to the worst contraction on record, down 6.1% is the number we will get today. obviously, they need to get beyond the pandemic. they need to open up the borders eventually. they need to get people vaccinated. they need to get restaurants all open and theme parks are now opening up. they will be injecting this economy with that kind of stimulus and hope that the vaccinations and the measures they will take will lead to that. again, 5.5% best case scenario for the economy. a lot of it has to do with a low base amount from last year's carnage. annmarie: thank you so much for that update. more on the market reaction to that stamp duty increase. we are seeing it across asian equities this morning. juliette saly, what's the deal? juliet: a big deal when it comes
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to hong kong exchanges. the first stamp duty increase in nearly 30 years, seeing the stock plunge the most in almost 13 years. flowing through into other pockets of the market as well. hong kong exchanges are disappointed by this decision to raise stamp duty. it understands it didn't -- is needed for government revenue. chinese investors set to sell 10 billion hong kong dollars worth of stocks on the back of this news, poised for a record. let's flip the board into the hang seng index. on track for the biggest drop since made -- may. the biggest stocks as well. bloomberg intelligence saying the new stamp duty hike will threaten turnover and valuation and also we are seeing stock price for hong kong exchange at or near parity with a 12 month consensus target price. a rare catch up on this big sale down. manus: thank you very much.
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coming up on the show, we talk chemicals next. this is bloomberg. ♪
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♪ annmarie: this is daybreak era. i'm annmarie hordern in london. it's been in the business since 1863. solvay plans to separate its soda unit as the chemical company reports a 9.3% drop in fourth-quarter sales after the pandemic hit markets like aerospace and energy. we are joined by the ceo. very nice to welcome you on the program. let's start with what's going on with so --. will you have to do more than die -- divestment? ilham: we are accelerating the transformation. today's announcement is about
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six takings -- about taking steps to organize to separate and fully control the legal structure. we did not make any decisions about it. in general, we continue simplifying her portfolio. to billion euro ev out of the portfolio after the divestiture. we announced the but -- divestiture of six business units. those are underway. 350 million euro. that's in our growth strategy, part of the portfolio. manus: so it's a carveout. what is the value of the carveout of that asset on the soda? are you tempted to look for evaluation to sell it or ipo it? ilham: all options are open. we did not make any decisions. a carveout is putting together a
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business that has its own merit in terms of strategy and investment. full potential, reaching its full potential. the business has been delivering cash flow. we are the number one leader in the market with innovative solutions. long-lasting customers. automotive construction. yes, the carveout will give us more flexible strategic and operational flexibility going forward. manus: ok. annmarie: the core of your sales go to on a made of and aerospace industry. i want to get a sense from you, the pandemic was so hard on the aerospace industry. what are you hearing from airbus and boeing? ilham: 5% of our net sales topline. it has been hit hard the last year.
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we took actions. we closed assets. we announced that we are closing . those are low return assets. we are not wasting the crisis to really review our industry without losing volume. we cannot the -- defy gravity. really removing the old, aging, low performing assets and putting the volume into a better asset. obviously, focusing on our customers and innovation. manus: i like the pace you are giving us. you are a ceo in a hurry. 500 million euros out of the business. what can you do this year in addition? ilham: last year, about 175 million euro.
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more than 40% of the plan was around 400 million. today, half a billion by the elimination of 500 positions. this is reshaping the whole functional infrastructure for the company. we would have done it above and beyond the crisis. this is part of our growth strategy which we will launch in 2019. it has become more efficient of an organization. at this time time, giving us the capably to reinvent a new platform like ev. tapping into the ev battery market, for example. not to speak about the hydrogen platform we launched a few weeks ago. manus: we will have to draw a line on that unfortunately. well done. we wish you well.
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come back and speak to us soon. thank you for joining us, the ceo of solvay there. we will do it all over again tomorrow morning. the european market open is up next. this is bloomberg. ♪
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anna: good morning and welcome to "bloomberg markets: european open." i am anna edwards. the powell push is yesterday's news, stocks fall in asia with futures as investors balance strong inflation versus the fed pledge. the cash trade is less than one hour away. fed chair jay powell says the central bank is nowhere near unwinding its p


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