tv Bloomberg Markets European Open Bloomberg March 5, 2021 2:00am-4:00am EST
anna: good morning. welcome to "bloomberg markets: european open." today, the markets essay the end of the everything rally. jay powell sends yields soaring. european futures point lower. the cash trade is just less than one hour away. here are your top headlines. no pushback from powell. the fed chair does little to soothe the bond market, giving only a miner not to the recent
spike in yields. the saudi's keep their powder dry. saudi arabia and opec must keep a lid on oil supplies, pushing and above $67 a barrel. the e.u. astrazeneca spat continues. it blocks a shipment bound for australia, a move that risks triggering a global backlash. welcome to the program this friday morning. 7:00 in london. let's get to some breaking news for you. let's get to some numbers coming through from the london stock exchange group, giving us their full year total income. 2.4 4 billion pounds, broadly in line, a touch above what had been estimated and they are giving us dividend numbers, dividend per shares. 51.7 pence. looking for any commentary around the deal, which they have done and looking for any commentary around listing rules and not whole conversation.
we are going to see what regulators, what the fda does with that report, but lots to talk about. the boom in ipo's that we are seeing and post-brexit, post-brexit trade deal. not really including financial services so what do we need to still know about the quest for it in london? a lot to talk about with the ceo of the london stock exchange. david will be joining us later on this hour. really important conversation. do not miss that, coming up shortly let's get into these markets and where we are. futures pointing quite mixed in terms of where we are. euro stoxx 50 futures point to the downside. s&p futures fairly flat. mastec futures also fairly flat so perhaps we are trading -- treading water, waiting to see where we end up here. in terms of where we have been on the market story, pretty mixed in asia. the msci asia pacific down, but
digesting what we heard from jay powell as we were on the bond markets, carrying on with the bond selloff. that was one of the big movements in yesterday's markets. nasdaq selling off, equities selling off more generally. s&p is almost negative year today. nasdaq using. we sell those sectors that have done so well in recent months so that is the picture we have in terms of equities and fixed income story. 1.56 is the yield on the u.s. tenure. the oil story, there's a lot to talk about this morning. u.s. and european futures pointing to the red or fairly flat in the u.s. after jerome powell tried to reassure market that monetary support will be maintained. the fed's chief vocus is on maintaining employment. let's get into that markets conversation with laura cooper, macro strategist. good morning to you, laura. i said, as you were on the bond market. is that what it feels like, a
green light to continue the bond selloff? laura: powell said, essentially, the bar was so low for market disappointment, he did acknowledge the rate volatility has caught his attention. that is something we saw from earlier in the week but ultimately, he is quite comfortable with these rising yields because they reflect up the growth prospects so the central bank is comfortable to stand by and they did not even pushback on market tightening for rate hikes so, yes, we could see inflation come through but ultimately, powell sees it as some time before they actually achieve substantial progress so ultimately, kind of keep calm and carry on, from their perspective. anna: it might raise a few eyebrows but they are not worried about getting involved in the direction of that particular bond trade. let me ask you about oil. as if we did not have enough to talk about, we saw a substantial rally in oil prices.
print up by more than 5% at one point. we are at 67-92. is this all to do with being wrongfooted in our expectations of what opec-plus would do? laura: opec surprise market expectations by the fact that they are maintaining these production curves all the way through april so, yes, we have russia able to produce 130,000 barrel increase of that potential 500,000 rise but i think what was most surprising was just the caution coming out of saudi arabia so they want to err on the side of caution because ultimately, they see potential challenges ahead with vaccine rollouts and they are focusing on those elevated stockpiles. they want to get those inventories lower before they even think about policy. but really, the risks going forward our enforcement. will we see some of these other smaller errors stick to these cuts? as well, we have potential pushback from u.s. shale
producers. could they step in? they can ramp-up supply, in which case we could see prices -- yes, $75 a barrel on brent in the coming quarter, but whether it can be sustained yawn that remains unclear at this stage. anna: i read that yesterday. elsewhere, another thread to this morning's conversation is what is going on in china, setting a conservative growth target, it seems, and trying to -- they had a very different response to coronavirus in china because they dealt with it very differently. better in many peoples view. so monetary and fiscal policy looking more restrained as well. what has been the messaging for markets, do you think, in terms of these big meetings taking place in china? laura: it was another surprise overnight from china, just the fact that they came out with an economic growth forecast for this year, because as we know, last year, they did not, so yes, it disappointed market expectations for that above 6%,
but really, the signal that they are telling us is that they do not want to sacrifice the quality of growth to get a higher top line number. they want to have that tech driven growth. they want to have job gains. they want to support the fiscal side but yet at the same time, focusing on deleveraging, they don't want to add to those debt burdens and they already flagged financial risks not only in the chinese housing market brought up -- but abroad as well. they are telling markets at this stimulus cannot go on forever so it's exim tightening going forward. anna: there's been a lot of talk about bubbles. i was interested in all of the energy efficient the and carbon targets and all of that for anybody interested in the esg story on the green side, very much focused on that coming out of china for sure. laura cooper, bloomberg markets live macro strategist. coming up on the program, i just went through some of the earnings numbers from the london dock exchange group. the company reporting earnings and raising the dividend.
we will be speaking to the ceo about those numbers and the new rules for london listings amid a bumper year for ipo's. plus >> -- plus. >> when we have the get the ticket. anna: we hear from the german finance minister about europe's vaccine rollout and the country's plans to lift its debt spending to tackle the impact of the pandemic. up next, as they exit their irish business, we discussed ireland's changing banking landscape with the euro. we discussed the earnings from that business and their interest in other iris assets. that conversation, coming up next. this is bloomberg. ♪
so 50 minutes to go until the start of the trading session and europe in futures point to the downside. u.s. futures have started to look a bit more optimistic but now retreated to the downside once again, down by .3% on nasdaq eaters and european routers on the back foot. the bond selloff, -- let's focus in on the irish banking sector. the lockdown has hit hard. a loss in the full year, calling 2020 challenging. this comes amid changes for the banking landscape in the country. aib has been -- said to be interested in buying it. we are joined by the ceo, colin hunt. good to have you with me on the program. a full year 2020 loss. how much are you able to put 2020 behind you? how much visibility do you have for the year ahead?
colin: good morning, anna. good to be with you this morning. 2020 was a truly exceptional year. about 700 million. take into account the division of almost $1.5 million, we reported a loss of 700 million. we think we are very well provided at this stage and we will see normalization at the cost to risk over the course of the month ahead. that said, we are very much back in the lockdown status at the moment. restrictions are needed. we want to see those case numbers coming down. they are coming down. want to see that vaccine deployment over the course of the next number of months. we expect to have the population vaccinated in terms of first dose by the end of june so i think the prospects are brightening as we move to the next quarter of 2021 and indeed to 2022. anna: we look ahead with more
optimism perhaps. there seems to be a lot of things happening at the moment. give me a little bit more detail on your interest in ulster bank's commercial loan book. any update on how significant this is going to be, and the timing? colin: we signed a memorandum in february, releasing it to the proposed acquisition of 4.1 billion euros worth of commercial loans that are currently sitting within ulster bank. we very much are focused on finishing those negotiations. we hope to do so over the course of the next number of months and look forward to welcoming business customers to the group at the end of the year. this is very much in line with our strategy. we did a strategic update to the market in december of last year. we are focused at this point in time on the implementation of that strategy and the acquisition of the ulster bank corporate and commercial loan
portfolio is in line with that strategy. anna: you have also been busy in terms of buying the stockbrokers business and i noticed some other stock -- talk this morning about a joint ventures. what does the mna picture look like for you? what does m&a look like at the moment? colin: i have been ceo of the bank two years ago and at that point in time, i identified a set of gaps in our product range. we have been working to close those product gaps. the acquisition is important to us. it allows us to -- wealth and capital markets to improve the range of products and services we present to our personal business and corporate customers. this morning, we are announcing that we are in exclusive discussions with great west of canada with a view to establishing a joint venture
which we expect to launch into market in the first half of next year and that's going to see a significant expanding of our product range his savings, life, investments, and pensions. anna: let me ask you about the operating environment you find yourselves in and the yield environment in particular. it makes things pretty difficult for many in the banking sector. now, we are starting to see some steepness returned to yield curves and maybe that makes you optimistic about profitability or maybe it makes you concerned that yields my go up, borrowing costs might go up more quickly than the irish economy could handle. what are your thoughts on a rising yield environment? colin: the rising yield environment is very much a reflection of the fact that -- growth prognosis at this point in time. it's also an obvious consequence of the simple truth that we are dealing with an unprecedented policy session globally. monetary policy is
extraordinarily loose and we have also seen a reversal of the globalization trend which has been such a future of the world over the past number of euros and that will put pressure. from a customer perspective, i don't expect our interest rates to change. the plan we presented in december is built on developing unchanged interest rates over the course of the life of the plan and those low interest rates are very much double anchored unit that context by a negative interest rate policy sessions from the european central bank and the fact that we have very ample liquidity within this organization. over the course of the past 12 months, we have seen our deposits increasing by something on the order of 10 billion euro, and that's roughly split 50-50 between our business customers and our personal customers.
and that is very much a reflection of the inability to spend in the irish economy thanks to the understandable and severe lockdown we have been through. anna: that savings pool, certainly a really interesting conversation in many jurisdictions. thank you so much for your time. we appreciate it. thank you for joining us this morning on the european market open. coming up on the program, we talk about the new rules from london listings amid a bumper year for ipo's. london stock exchange ceo david schwimmer will be joining us next, right here on this program. this is bloomberg. ♪ when you switch to xfinity mobile, you're choosing to get connected to the most reliable network nationwide, now with 5g included. discover how to save up to $300 a year with shared data starting at $15 a month, or get the lowest price for one line of unlimited. come into your local xfinity store to make the most of your mobile experience. you can shop the latest phones,
volatile. all pointing to the downside as we speak. let's get to another one of our top stories. the group reported earnings that beat estimates and raised its dividend after the news that the u.k. will revamp stock exchange rules around blank check firms as part of wide-ranging reforms to boost the attractiveness of london's post-brexit. the city is off to a best start for a year for new listings since 2006. we are joined by the ceo of the london stock exchange group, david schwimmer. a pleasure to speak to you this morning. the performance of the business and where you see it heading from here, clearly it has been a big part of your story over recent years. i know it's early days but i wonder if you can tell us what advantages are you already starting to really appreciate? david: we have had a very strong 2020 with total income up 6%,
strong performance across our capital markets business, our post-trade as news, and information services. really pleased to see that given the challenging working environment we had. to your point, we are very excited. we close on the transaction five weeks ago. and that is a terrific business to have as part of that. we are now a truly global company with substantial presence in the americas, in asia, across europe, and emerging markets as well. it gives us multi-asset class capabilities. we were a major player in equities before. we now have a substantial presence across fixed income and foreign exchange as well so a multi-asset class capability and of ours, now, we are one of the leading providers on a global basis of financial market data, analytics, and workflow, so really excited about the
combination and about the path forward. anna: let me ask you about the path forward that we heard a little bit more about in terms of listing rules for the london market, here in the u.k.. we heard from jonathan hills report that has to be digested by the fda. they want to have a consultation paper out by this summer. do you think that this is going to move fast enough? david: i think that the more quickly it moves, the better. but right now, there is a pretty clear message to issuers, to investors in this market, that london is very much focused on being the most attractive listing destination it can possibly be and what we have seen in recent years is that there has been a bit of a change or evolution in some of the listing approaches in other markets and the regime in the u.k. has not changed so what
that has meant is that some companies were tempted to look elsewhere because of things like the free flow requirement and 25% because of the inability to have dual class share structures in the premium segment so i think with the recommendations to adjust some of these, i think that only makes this market that much more attractive. in some cases, companies will i think list now, and soon, because time is right for their corporate evolution, and they may have an opportunity to take advantage of some of the changes in the listing regime as they, and over the coming months. anna: because of some of the things you mentioned, some of the changes that might come through in london, some have expressed concerns about investor attention. do you share any of those concerns? david: the hill review recommendations struck a very good balance in terms of making some reasonable changes while at the same time containing the high standards of corporate
governance. for example, on dual class share structures, to have a sunset provision where the dual class share structure is only used in certain ways, in certain votes, and then sunset, so after a certain time period, would go away and go back to a one share, one vote concept. i think that is an excellent approach to balance the interests of a founder who wants his or her company to have the opportunity over the first few years of being public to meet strategic ambitions but at the same time, balance the interest of investors so there are ways to make these changes while at the same time maintaining very high standards of corporate governance and i think the hill review has done a good job in striking that balance. anna: we see plenty of traditional ipo's in london and elsewhere in europe and globally. we have seen plenty as well. clearly, that is part of the review.
do you think london risks being a little late to the game? david: i think the way to think about that is that they are a useful tool in the capital markets toolkit. obviously, there is a lot of focus in the u.s. market at the moment and there's been some concern expressed about the froth in that market in the u.s. , so i think it is important that the u.k. market moves down this path in a careful, thoughtful way. i think there are some aspects of the rule regime that could be changed. for example, when they announce a transaction to avoid the suspension of trading, that is the issue that keeps this market currently from being an attractive market. but at the same time, i think it is important that it is only one of many tools in the toolkit for investors and we will continue to see the traditional ipo's in
this market, but i think it's also helpful if we have a regime adjustment of the rules where if it is appropriate, investors can use that. anna: if london should move carefully down that road, what about the road to crude though? ---- your -- road to crypto? is london doing enough on that front, do you think? david: we have a number of offerings in the crypto space on the data side. i would say, in terms of trading of crypto products, that is an area where we will really take guidance from the regulators and i think that to the extent that there are government-backed digital currencies or government-backed digital products, that is something we would look at very carefully. in the current environment, with some of the concerns, both regulatory and in terms of how
investors may be treated in crypto markets, that is an area we would be very cautious about. anna: onto another subject, when we talked about a lot in recent years, the post exit environment. i wonder how the clearing business has been performing, how much business has moved as a result of brexit. david: with respect to our clearing business, we have seen it no discernible change in movement. volumes continue to be very strong -- including growing from market participants, the members and clients in europe. it is a global liquidity pool. and interest rate swaps, that's the area that has gotten a lot of focus. it has continued to be a very dynamic space as we see continued discussion around
potential return of inflation or reflation. we are seeing activity in terms of financial institutions, hedging, corporate hedging, so there's activity in our interest rate swaps but to answer your question, the business is doing well across swaps, across we pose -- repose, and all of those benefit from the volatility in the markets and those businesses continue to grow. we have not seen any shift of business in clearing out into other clearinghouses. anna: we have seen e.u. grant some limited clearing privileges to the u.k. and more generally, the conversation is very much in the air and i wonder what you make of that. we heard from hsbc that it is important. we heard from various insurance
businesses that i have spoken to, they have said how important it is, yet jonathan hill thinks broad equivalents is coming. how important is that conversation from london -- for london? david: let me speak about the equivalence for clearing. because of the systemic importance of clearing, the e.u. has granted temporary recognition so that our business can continue to serve e.u. domiciled market participants, e.u. member banks and other financial institutions. that today is what is referred to as temporary recognition and that temporary recognition lasts through june of 2022. so next year. had this has been a bit of a cycle over the past few years as the european commission has granted temporary recognition to continue serving e.u. customers for the last several years.
that is because there is a recognition that our services are systemically important. really important for e.u. customers. we look forward to continuing to engage with the various stakeholders in the e.u., the customers and members. it's the european securities regulator that directly regulates lch. it's the ecb. his thewe look forward to havinn opportunity to get permanent recognition when the temporary recognition expires. anna: that temporary rule does expire as you say june, 2020 two. in the broader equivalence conversation, given the conversations you must have, how important do you think it is more broadly we get more equivalence? >> i think more equivalence is
helpful. we are generally in favor of less market fragmentation and freedom of capital flows across borders. that is better for our customers. it is better for markets as we look forward to an economy that can recover from the pandemic over the last year. to have countries and regions turning inward is not helpful and will not facilitate an economic recovery. i think having greater flows of capital, if that is the result of equivalence, that would be a better thing. in terms of l sag, we are fully prepared for whatever may come. we have set up parts of our business. we have turquoise in europe now. when some of the trading moved to amsterdam, we were fully
prepared for that. equivalence would be a good thing. i hope the governments and the politicians involved in working through this can get to the right place in terms of equivalence. if there is not equivalence, we will continue to carry forward. our business is in excellent shape and we look forward to continuing to grow in markets all over the world. anna: david, thank you so much for your time. david schwimmer, ceo of the london stock exchange group. bloomberg lp, the parents of bloomberg, compete to provide financial data and news. important to make mention of that every let's get a bloomberg business flash. credit suisse is winding down a $10 billion group of financed chain funds.
earlier, it suspended them due to considerable uncertainty over their valuation. the moves were sparked when a major insurance security backed out of covering them. -- loves bitcoin. others, not so much. he's question the decision of mark cuban to allow fans of his basketball team to buy tickets and merchandise using -- the digital currency was created as a joke in 2013. >> let's put people in the safest, best stuff, not joke coins. i think mark is making a mistake. he would be better with 50 never ways to pay for his tickets -- 15 other ways to pay for his tickets. anna: goldman sachs is joining rivals by pledging to achieve net zero by 2050 and in its
supply chain by 2030. that is your bloomberg is this flash. 7:33 in london. kkr spending outpaced private equity rivals, but the head says repeating that will be difficult. more competition for assets provides a new opportunity. dani burger spoke with -- exclusively. >> i feel good about where the eu economy is. i think it is a timing question, when we are coming out of this time. it is taking a little longer than we had expected. i think the government is doing the right things in terms of providing stimulus. we will see that stimulus coming in effect may be a little bit
later, a little delayed. dani: turning to spacs because this is a hot topic, not just in private equities, it could be sports stars and financiers as well. what does it tell you about where we are in the market, we have these volumes of private equity products coming into the market? >> spacs have been around for a while. it is not something new, is just their volume has picked up. there is a difference between the u.s. and europe. europe has been behind because of what some of these exchanges have been able to do. a lot of the exchanges are trying to change that to allow spacs to come. we are starting to see a few listings happen in europe. it is a good thing.
it gives us another opportunity to exit assets. we may have some competition. there are two sides to it. overall, it is good. it provides more liquidity. anna: that was dani burger speaking with the kkr head at the sidelines of this year's super return conference. we spoke to the london stock exchange group, giving us his thoughts on psacs. february saw 90 spac's raise a record $32 billion. sentiment looks to be souring. an index has slumped about 20% from the peak in 10 days. the mania only seems to be catching on in europe, with europe set to join the boom.
let's talk now to henrik johnson, the cohead of catheter -- capital markets. let's get grew thoughts on the spac phenomena. there have been so many and they have not done so well. some are in sectors like technology, maybe you would not expect them to do that well. what are your thoughts on the most recent performance of spacs? >> when you see the kind of extreme boom we have seen in the u.s., there needs to be some part that needs to come back down to the ground. in europe, as we heard from the previous speakers, we are in a different position. the spac boom here is just starting here and the issuance is coming from high-quality
sponsors. a key difference between the u.s. and europe in europe, i don't think spac's are going to be as technology focused. there is going to be more industrial and other types of sectors. i think it is a robust position in europe right now. anna: is there any sort of lack of seriousness to some of the activity in the spac arena? the way they are named or perhaps some of the people attracted to finance for the first time to put their name to one. ? or is this an exciting democratization and that is the point? >> i think it is all of those things. clearly a spac is a democratic way to invest in a private equity situation.
it encourages -- allows private investors to participate in things like ipo's. that is very much a good thing. clearly also, when you see the amount of issuance that is happening, particularly in the u.s., there is the potential for things to go wrong. that is why it is an equity risk and equity return. some of this directional aspects are interesting. you do have the redemption rights to get your money back as an investor in case you do not like the acquisition. if you buy in the aftermarket at a higher valuation, the risks are higher. the real question to me is more about the de-spacing. at the moment, anyone can raise a spac.
what will differentiate the good from the bad is their ability to -- anna: this raises interesting questions around governance. if you are going to invest into these facts, pick things you will like to pick, you are not going to have any assurance the end investment is going to meet investment criteria you might have. this is a bit of a ed winter for some types of investors. >> you have the ability, if you don't like the investment the spac is making, to redeem your catch. you are protected big picture against that. once that has happened, it is like any other ipo. some deals will perform and some will do less well. that is something every investor has to evaluate for themselves.
anna: we are just having a little bit of a problem with his camera. i wonder if it has reestablished. i was enjoying listening to your thoughts on spac's. i will try again in an issue with debt issuance. your camera has been restored. volatility, we have seen in treasury yields and other parts of the sovereign debt space. i wonder how that is impacting on the outlook you have? is it having impact throughout the market? >> so clearly, rates is the other theme that is current at the moment. our view is you are going to see a short-term spike in inflation around the world, as developed economies reopen. i don't think it is going to be enough to stop the central bank
support of the economy which is what is driving rates. you will see short-term increases in rates, especially in the summer, but we think the central-bank easing is going to be there. even at the moment, with the adjustments, we do not think there is a crash coming. some products are an attractive place to park your money. you are insulated against short term movements. anna: good to get your perspective. apologies. for technical issues. 18 mins to go until the start of the european equity trading session. shock holds. -- to maintain supply limits. this is bloomberg. ♪
anna: welcome back to the european market open. 16 minutes until the start of cash equities trading. it looks like another down day for four europe. nasdaq, selling off more than 2% in yesterday session. s&p negative, almost. we do see nasdaq futures down another 0.7 percent. here are some of the top stories we are covering. china setting a target of above 6% for the year. at the opening of the national people's congress, it signaled a need to keep the economy going. beijing is also upping defense spending. jerome powell is sounding a
gentle note of caution for bond markets. he is stopping short of trying to rein them in. he says there is a lot less to do before the economy is fully healed. the u.s. and u.k. are weighing additional sanctions against russia over the use of chemical weapons. bloomberg sources say options range from sanctions to targeting sovereign debt. the penalties are a sign of deepening tension between moscow and the west. powered by more than 2700 journalists and analysts. now to one of our top stories, oil has surged past $65 a barrel. after opec chose not to relax supply limits. it adds inflationary pleasures. bin salman emphasized the need
for discipline. >> i care about discipline. i care about bringing inventories. within the controls of 2015, 2019. that is comforting. anna: joining us is andrew d ames -- james from our oil team. how much of a surprise was this? not only that did they not increase production, but they deemed the cuts as open ended. >> it was a pretty big surprise. they were looking at possibly returning as much as 1.5 million barrels. most people expected them to
return at least some of that. to return nothing was a shock. the saudi energy minister used the phrase drill, baby, drill. he was referring to the u.s. shale industry. the saudi view is because they will not be a supply response from u.s. shale. that is a bit of a gamble. that is the saudi view for now, and they are keen to push up prices and keep the rally going. anna: where do prices go from here question mark you heard him say we don't care about prices. but given the anticipated lack of american response, does he expect prices to remain at these levels are higher? >> they should go higher. a lot of the big banks have come
out with refreshed upgrades following the move. goldman, getting to eight dollars by the third quarter. jp morgan, changing their forecast by about 2-3 dollars a barrel. it will depend if the saudis were right. driving prices up. anna: thank you for joining us. andrew james and singapore. oil prices continue to rise this morning. rent, up 1.8% after the 5% or so move at one point in the day yesterday. we will keep in i what that does to oil majors. we will get you other stocks to watch at the start of the trading day. london stock exchange group one we are watching. had lots to say on the new listing rules for london as
anna: welcome back to the european market open. european market futures suggesting some downside at the start. we have seen some interesting sector dynamics. we will get into that conversation with regards to travel and ledger stocks, the reflation trade, where that takes us. we will talk about that shortly. european futures point to a downside. u.s. futures, lower. after losses of more than 2% yesterday. let's get a look at some of the stocks we are watching in europe.
we will go to dani burger. we will start with the london stock exchange. i spoke earlier about some of the wider more look ahead topics when it comes to the business. that is really crucial, obviously. >> it does point to a picture of more optimism. they did give a very optimistic forecast. part of that might have to do with the fact we could see more listings come to london. we have these rule changes proposed by the u.k.. i thought your conversation with david toomer was fascinating. part of the changes will allow for more specs. let's get a reminder what he said. >> i think the way to think about spacs is they are a useful tool in the capital
markets toolkit. there is a lot of focus in the u.s. at the moment. there has been some concern expressed about the froth and that market. i think it is important the u.k. market moves down this path and a careful, thoughtful way. dani: more spacs listed in london would be better for business. bloomberg lp competes with them to provide financial news data and information. anna: full disclosure, important. let's get some other stocks we are watching. dani: the aviation sector has struggled this year. they are targeting a net rise in sales in the coming years. they are funny a stock split. theoretically, if you believe efficient market hypothesis, a stock split should make a
difference to prices. every now and then, it will attract more retail investors. anna: a greco, thanksgiving competitive. dani: greco looks like it does have a buyer. two buyers, to be specific. both of them are buying in a deal that is going to be about $3.2 billion. it is priced what they are offering, 880 pence per share. we could see them come down today. anna: thanks so much. dani burger with the stocks we are watching. we are minutes away from the start of the european goodies session. the broad picture still responding to what we heard from jay powell. that put pressure on stocks in the u.s. session yesterday. we want to see what pressure is
♪ anna: welcome back to "bloomberg markets: european open." a minute to go until the start of cash equity trading. no pushback from jerome powell. the fed chair does little to soothe the bond market, giving only a minornod. the saudis keep their -- dry. the eu-astrazeneca spac continues. italy blocks a vaccine shipment bound for australia.
welcome back to the second hour of the european market open. crucially, we get to the start of the european equity trade. futures pointing to the downside. interesting to see what happens with oil companies given the strong rally we saw in oil prices. $68 is now the handle that we see on brent. in terms of the wti price, as these markets open up, bearing this in mind for london and paris, wti crude top $65 per barrel for the first time since january of 2020. some context around the moves we are seeing. we have just had a year where we saw oil prices go negative. there's been some incredible recovery from the and we are now flirting with that over $65 per barrel. we will keep that in mind as we watch european equity markets opening up or opening down, in the case of the london market. the ftse 100 moves 0.7% to the
downside. the vibe around europe is a negative one. cac down by 0.6%, ibex down 0.4% . u.s. futures continue to point to the downside. a lot of this has to do with the big picture around interest rate expectations, inflation, around what we heard from jay powell, so let's get to that conversation. jerome powell tried to reassure markets that monetary support will be maintained. his focus is on restoring employment and he will keep policy loose as the bank is far from achieving its goals. no hints of intervention from the fed chair at yesterday's "wall street journal" webinar. >> we want to see labor market conditions consistent with our assessment of maximum employment. we want to see inflation sustainably at 2%. these are highly desirable outcomes that would represent an economy that is very far along the road to recovery. as it relates to the bond
market, we want to see and would be concerned if we did not see orderly conditions in markets. we don't want to see a persistent tightening. that is really the test we think. we are likely to see. inflation move up during the course of this year. businesses will be potentially hit by a lot of demand as the economy recovers. you could see bottlenecks, prices moving up. we are inclined to see those as transient. as far as the rate guidance, it is pretty specific. it will take some time to get there. anna: all the most important parts from jerome powell at the fed. joining us now is max kettner, hsbc multi-asset strategist. very good morning to you. what did you take away from powell's testimony -- his interview yesterday? carry-on, bonds seems to be one of the messages you could take
away from the fed. max: good morning, anna. it was somewhat surprising that there was not too much of new things that we learned from powell. it was very much reiterated what his colleagues were already saying in the previous days. i guess that's what led to this selloff in equities and bonds. the near-term risk, yes, is still for yields to go a little bit higher. i would not be too concerned about the whole reflation narrative. we just heard and also in your sequence where you are playing powell that basically most of the inflationary pressures that we are going to see are most likely transient. pent-up demand, especially the pent-up -- initial pent-up demand story will probably be transitory as well. that is one of the things the fed has highlighted for a couple of weeks already. that is probably something that they will look through. it looks to me that really the
fed is looking for more stress. there has to be more stress in the system until they really come into the market and really do more than just intervention. anna: put some of that stress in the system be a big selloff in equities? if we did see a substantial bid that would then lead them to have concerns about the underlying economy perhaps, would that powell put be them back in play -- then back in play? max: unequivocally, yes. some of the fed's financial conditions indices, they are essentially following high yield spreads. they are very much related to broader risk measures, whether that's in the equities space or risk appetite or risk assets more broadly. very definitely, i think if you saw the s&p tank 10% over a very short time, that would cause
quite a bit of tightening of financial conditions. that would be the sort of unwarranted financial conditions that probably would really keep the fed on -- anna: more broadly, the inflation conversation, max, how do you view that? interesting piece yesterday talking about a new inflation regime change. it was by one of my colleagues at bloomberg citing paul volcker in the 1970's and saying there was a real shift, a real determination to tame inflation. and then asking questions about the average inflation targeting regime suggests a break with the past, a really different perspective on inflation from here. max: i am not particularly convinced about a new inflation regime. let's not forget my what we are seeing now, it's almost like people are pretending that only now the fed, only now central banks are trying to get inflation higher.
that has been something they have been trying for a decade. that is something they have actually been trying since the financial crisis and desperately so. still, they failed. the verbal guidance and pretending that that is sort of the sudden change, that's not going to be enough. some of the inflation we are going to see now in the second quarter, that is mostly covid related, mostly base effect related. very closely related to base effect and energy prices, food prices. there is a risk that there is higher and stickier inflation, particularly in emerging markets. that may affect emerging markets on the local site in particular in the second half of the. more broadly, particularly for developed markets, things like of weakness that we are seeing still, the continued weakness, the continued weakness in things like low income employment are also the broader recovery of
labor markets. think about asia, where it is not particularly convincing either. that is really something where i say, let's be careful with declaring this all of a sudden a sudden inflation regime shift. that's just going to be a one-way street higher. i believe there is going to be much more normalization in the second half of the year. let's not forget there are other things like rental inflation in the u.s. that are really actually going to probably drag down the inflation rate in the second half of the. something that no one -- second half of the year. it's something that no one talks about right now because the focus is on base effect. rental inflation is something for the second half of the year. anna: max kettner with us here. further thoughts from max to come on what is going on in europe. the eu pulls the trigger on its vaccine export ban.
continue and yields to go higher seems to be one of the market's conclusions from here. let's get the latest on what is happening in europe in terms of the vaccine rollout and virus fight. italy has blocked a shipment of astrazeneca's covid vaccine to australia using a recently introduced eu regulation for the first time. italy said australia was a non-vulnerable country while the nation's prime minister spoke about the move. >> contact with european leaders. in italy, people are dying at the rate of 300 a day. i can certainly understand the high level of anxiety that would exist in italy and in many countries across europe. as is regularly conveyed to me. so, they have some real difficulties there. they are in an unrivaled crisis situation. that is not the situation in australia. anna: the australian prime minister giving his response to this mode. joining us from brussels, maria tadeo. a bold move from a relatively
new prime minister, who we of course know well, in italy. bring us these details. >> this is the first time this very controversial export ban has been used. to some extent, it really is that lane that mario draghi has taken, saying that europe has got to be more forceful when it comes to enforcing contracts. you could argue it is not a good look for the european union. it is this idea of nationalism when it comes to vaccines. if you look at the overall context, that is important. 100 70 requests for export vaccinations and export shipments to be made outside of the european union have been approved. in the case of australia, this is very particular because this is a country that were not qualified for humanitarian use. it has been less hit by coronavirus. when you look at the contract, it says that the majority of the
production, about 50 million vaccines, will be made in australia. it's a very different situation compared to the european one, or so they argue. there were cuts to european production. that really signals the thinking behind this move. you could say it's power move from mario draghi. they see this as fully justified. anna: certainly bold. what is the virus situation on the continent in terms of restrictions? because we covered the rollback of some of the restrictions, the tentative rollbacks we were seeing in germany. that was earlier on this week but in france, italy, hungary, we are seeing a different trajectory of travel. maria: yes. there has been a lot of questions around the french. what is the next move? what is going to happen? there has been a lot of speculation about whether or not there would be a new lockdown in the country, and the city of paris and around the region.
yesterday, the prime minister was very clear that there will not be a full lockdown in the country. emmanuel macron is doing everything he can, every trick in the book to avoid that third lockdown. sometimes, it means a longer curfew. also, a weekend lockdown to some of the regions that are badly hit. sending the clear message that he does not want a third lockdown to take place in the country. as soon -- as long as we have vaccines and fridges that are not being used, we are not going to lockdown the people. this is more about accelerating the vaccination process than shutting the whole country. the french rollout of the vaccine has been very problematic in the first few weeks. they still say they can get to that target of about 20 million vaccinate the summer. anna: maria tadeo with that important update from brussels. clearly some of this plays out in markets around expectations for the summer and the travel
and leisure sector. the stoxx 600 travel and leisure sector has soared this year on optimism for the return of summer vacations. we've been speaking to the ceo of lufthansa. >> it is now time to replace restrictions and quarantine rules by digital, international testing or vaccination certifications. that has worked on in brussels. that will allow our customers to travel again this summer. anna: max kettner, hsbc multi-asset strategist, is still with us. not only is a summer holiday a great hope for many people, it has also turned into a great market trade. up until today, we have seen this sector, the best-performing sector in europe, up 17% year to date. today, it is the worst performing stock in today's market. i wonder how you balance the short-term pessimism that must've blight this kind of sector and the more medium-term,
slightly more optimistic picture. max: well, it is certainly a great hope, not only for markets, for us personally as well. i guess if you look at the sort of reopening versus lockdown basket, there is still a bit of room for really those reopening baskets to rally, whether that is in credit, whether that is in equities. the short-term gyrations, that is something very much related to sentiment. days like today, that may well be some profit-taking. if we think around the next two, three months, particularly the outlook until the middle of the second quarter, i would argue there is going to be probably a little bit more of a cyclical overshoot. there is going to be more space for those sectors to rally. there is more cyclicals to rally, for the winners from last year to actually lag a little bit more.
that is probably going to continue. it is probably then going to be a little bit different in the second half of the year. with those reflation trades and those reflation hopes that we have been talking about in the first segment, with those reflation hopes fading in the second half of the year, we might very well be off again to the sort of playbook we were playing from april last year until october. buying more growth, buying more quality, not necessarily only buying the lockdown sectors but going back towards the old sort of growth, quality, and duration proxy playbook. anna: that is interesting. it sounds as if you are not saying it is all over for tech stocks. question of the day has been around the nasdaq and how long it will take for the nasdaq to be in a bear market. we are almost in correction, nearly downturn percent from the february peak.
another 10 percentage points to get to bear market territory. is that the direction we are heading? max: it seems so right now. i would caution against that because if we really see a very quick entry into bear market, that is really, that brings the fed up. that really brings the fed up. that will very much warren the sort of -- warrant the justification that the fed is seeking. it leads to un-unwarranted tightening of financial conditions. i would be wary of proclaiming the big bear market in the nasdaq dragging down the equity complex as a whole. this year going to be a disastrous year for risk assets, i would be very wary of that. things are looking very bright. things do look bright. over the summer, that will be trickier for risk assets. that's when we see much higher
expectations. we see the fiscal story. we see probably the base effect driven reflation story. the summer is going to be a little tricky. right now, throwing in the towel already, that is a little premature. anna: thanks so much for your time. have a good weekend. max kettner, hsbc multi-asset strategist. max will be continuing his conversation with us on bloomberg radio at 9:00 a.m. u.k. time. eu leaders attempt to walk the tightrope between containing virus cases and mitigating economic damage amid a stumbling vaccine rollout. we hear from the german finance minister. that conversation next. this is bloomberg. ♪
♪ anna: welcome back to "bloomberg markets: european open." 22 minutes into friday's equity trading session. european equity markets down by more than 1%. futures have suggested a little bit of weakness. nasdaq futures down by 0.6%. i mentioned the nasdaq and single it out because that is where we have seen a lot of selling. we have seen selling more broadly across u.s. equity markets and certainly the s&p under pressure. eu leaders are racing to ramp up their faltering vaccine drive as the bloc grapples with rising virus rates and in some cases, reintroduced instructions.
allow schulz -- olaf scholz said europe will need to increase spending. he spoke to matt miller about the vaccine rollout. olaf: there should have been more activity to organize more vaccines, especially if you understand that most of the important developments for modern vaccines have been made in europe. two of the three big companies that develop new vaccines, moderna and biontech are from germany. this is a good basis for doing the right things. in the end, i think we are now on the right track and everyone is working very hard, all the countries. we are now vaccinating the people and we are organizing that this will happen as fast as possible and there will be, in a short time, millions of people that got the ability to have their vaccine. matt: considering that those
companies are german, why didn't the government act to get them first those vaccines out to the german people right away? olaf: i think it is absolutely clear that this is something that should be organized in europe together, and it's also clear that this is something that should be part of an international collaboration, which is working necessarily for saving the world. as you know, we are already working very hard on international and global initiatives supporting those countries who have not the means to organize the vaccines for themselves. if we want to fight successfully against the pandemic, it will be necessary that we gave the chance to all the people on the globe. coming back to europe, germany, i think we will make it. matt: you are responsible for dealing with the damage done now by extended lockdowns to the german economy.
our reporter found that the government is considering as much as 50 billion euros in additional debt spending, supplemental debt spending, in order to deal with the deeper damage from the extended lockdown. can you confirm that? olaf: we will do extra activities, yes, this is true. and we are able to do so. as you know, we were in europe and the first to fight against the pandemic with fiscal means. in the last year, we developed the first very strong recovery program and managed a political activity that made it possible that this whole european union is answering together to this crisis. the effect on the german economy is obvious. we are having a very good situation at the labor market, much better than anyone expected the last year. we have a very good situation in
the economy. if you compare the development of the german economy to other countries in the world, you see we are between the best fighting against the economic consequences of the crisis. anna: interesting conversation. german finance minister olaf s cholz speaking with matt miller. he says germany will need to increase debt spending this year to tackle the impact. let's get to our movers now. dani burger has details. dani: lse one of the biggest movers to the downside, over 5% dip, despite the fact of a pretty optimistic forecast, also raising dividends not enough to please shareholders at this point. one of the biggest gainers, a medical device company listed in london. we are seeing shares gain almost 3.5%. we are also seeing analysts say that those looked really good in terms of forecast. hello fresh, a lot of the
♪anna: welcome back to "bloombeg markets: european open." 30 minutes into a trading session that looks negative. we are losing ground across all sectors in europe. down by 0.9% on the stoxx europe 600. looking at the sector picture, travel and leisure is one of the sectors that is not doing very well today. it is by far and away the worst-performing but it has been the best performing. travel and leisure down by 2.3%. to the upside, the least bad performance coming through from energy, health care, utilities.
we have seen a big rebound in energy prices from this time yesterday. 67.63 on brent. bond proxies doing pretty well relative to other stocks. private equity has enjoyed a golden era of fundraising over the past decade. money has continued to flow, despite the pandemic. in 2020, the industry raise $939 billion. private equity has raised almost $5 trillion in capital over the past five years. joining us now is dani burger, who has been covering the events around the conference taking place, the private equity conference. it is virtual. she is standing by with a guest. dani: joining me now is johanna barr, advent global cohead of limited partner services. thanks so much for joining us. you know this virtual world more than anything because as someone who is essentially in charge of fundraising for emea, your job
has looked wildly different, not being able to interact face-to-face. how much more difficult has it been to raise funds this year without that? johanna: thank you for having. it has definitely been a different year this year. i have not been on an airplane for business purposes since february of last year. i think many of my peers are in the same position. overall, the industry has, your colleague just mentioned the stats, been continued to raise capital. investors have seen great returns over the last 10 plus years and so continue to support the asset class. fundraising has just changed more generally. i think the gp's in the market have been able to do business over zoom largely, do diligence meetings over zooms. there is a long history of face-to-face meetings and the goodwill we have built up, i think that has supported that.
it is not the first time that investors are meeting with gp's. relationships are very strong. you can take that more easily. dani: what happens if you don't already have that relationship? what if you are not advent, you are a new fund trying to raise capital? was that not possible this year? johanna: in select spaces, it has been possible. it depends on the funds and the person and people raising it. if you have the case of a spin out where may be a team leaves a well-known gp but the individuals are well known to the community, it is definitely possible to raise. it also depends on the sector that the new funds are potentially targeting. for true startups and new funds where the team is less established, what i am hearing from the industry is that that's been tougher this time. also because the larger managers
have returned to markets more quickly maybe than historically. i think the average has gone down to every two years coming back to market. the re-up pipeline has been very strong and kept lp's busy. dani: a lot of fundraising we have seen. a lot of change happened. there was a lot of social change happening now. has that changed your interactions or at least what investors are asking of advent going forward? johanna: yes. what you are touching on is really the topic of esg, environmental, social governance. these big topics are important to our investors. they have been important for the last years, but particularly this year with covid, with black lives matter. that has been elevated on the agenda. lp's asking the right questions. they should ask the questions of
gp's, in terms of what they are doing in their own house but also with portfolio companies they own. as a stewards of our companies, with a strong governance framework, we can really affect change. from that perspective, we are really doing the best in pushing certain agenda items forward in our own company and our portfolio. dani: you mentioned asking about what is going on in house. what are they asking about? johanna: it is often times and maybe not surprisingly, particularly through covid, a lot of questions around culture and how we at advent have been able to continue to do business. it is questions around in particular diversity, equity, inclusion. what are we doing to drive and to establish a more diverse workforce? i think at advent, we have done a lot around that topic. we take the topic of diversity, equity come inclusion, it's very important for us.
we think about it around development, recruitment, retention, back to culture. lp's have asked a love those questions last year. how we continue to work well remotely and continue to thrive, even in this difficult environment. dani: that's interesting. does that mean that a lot of the change that happens in the private capital industry in terms of diversity, is it investor led? johanna: look, it's lp led, gp led. i think it's plain and simple, the right thing to do to make sure that our workforce represents the current world out there. it is investor lead as well. investors ultimately speak with their capital. they are very much in the position to demand change, and to at least open the discussion about change. i think that is what lp should do. what are you doing internally to promote more diversity along gender, ethnicity, and all these topics? when the lp asks these
questions, the gp starts thinking about the. that will change the industry. it has been the same with esg topics over the last 10 years. i think that focus this year has shifted more onto the dei topics. dani: we are seeing that throughout pretty much every single industry. it's been fascinating to see. johanna barr, advent global cohead of limited partner services, thank you so much for joining us. anna: thanks for bringing us that conversation with johanna barr from advent. really interesting to get her thoughts. coming up, we discussed the soaring cost of ocean liners. the hit to businesses and what this means for global trade, those freight rates, we have been showing those charts of spiking freight rates. we will talk about what that means for companies who buys space on those liners. this is bloomberg. ♪
♪ anna: welcome back to "bloomberg markets: european open." 40 minutes into a european equity session that shows increasingly negative action for european good markets. all sectors and negative territory. with a global shortage in semi copters -- a global shortage in semi conductors has slowed production. it has led to action from the u.s. and china. the eu is planning to produce
its own advanced semi conductors by 2030. part of the plan is to reduce high-risk dependencies on technology companies in the u.s. and asia. fixing the supply chain long-term is not straightforward. ed ludlow looks that way. -- looks at why. >> semi conductors are essential components in things we use everyday. they are made from the material that gave silicon valley its name and they handle everything from artificial intelligence processing to simple functions like translating the price of a button into an electronic signal. think of them as the brain of a device. so what happened? when the pandemic shut down car factories in march, automakers expected less orders for passenger vehicles. in turn, they cut their orders for chips. at the same time, working from home and 5g drove demand for laptops, smartphones, cloud services and data centers.
those industries increased orders for semi conductors. that caused chipmakers to switch production to those areas rather than pileup chips they could not sell. what both car and computer companies did not expect was a quick rebound in demand for their products. here lies the problem. there is now not enough supply to meet demand and building chip factories takes years and costs in's of dollars -- costs billions of dollars. >> nothing can be done in a grand way that could increase supply. supply expansion takes time. >> how bad could it get? chip shortages are expected to wipe out $61 billion of sales for automakers alone. big chipmakers like qualcomm, and xp and infineon say the auto industry is not the only sector to get hurt. games consol makers say things will get worse before they get better, potentially impacting
holiday sales. president biden has signed an executive order to look into why the u.s. is so rely on overseas chip manufacturers. >> companies such as qualcomm, nvidia, all of these companies do not have factories of their own and rely on third-party manufacturers. over the last decade or so, have become extremely reliant. >> how long before supply meets up with the demand? it is a guessing game. some analysts say we will not see signs of a turnaround until the second half of the year. ed ludlow, bloomberg news, san francisco. anna: that was bloomberg's ed ludlow looking into the global semi conductor shortage. sticking with the theme of disruptive supply chains, let's look at the world of shipping, which is responsible for about 80% of the global goods trade. an ongoing surge in the cost of shipping is causing a scramble for cheaper solutions, as liners charge three to four times more for freight than a year ago.
joining us now is rogier spoel, european shippers' council policy manager. we have spoken to a number of companies that own these big ships and send them around the. good to get your perspective. how would you characterize the level of disruption you are seeing, that your members are seeing at this point? rogier: yes, good morning. one of the biggest disruptions that we have seen in maritime shipping since -- for a very long time. this has been going on for really over a year now, starting off with chinese new year in 2020 where the chinese ports were congested and production facilities in china were closed. it was basically the start of a development in which we have seen capacity shortages, container shortages, rates soaring, and reliability really dropping below what is expected
of the market. it's a very difficult situation for all those companies, ranging from multinational to sme's we are very dependent on maritime shipping to ship goods around. anna: we have been showing these charts of what it costs to ship from shanghai to l.a., or more interestingly, from a european perspective, shanghai to rotterdam. we have been looking at what it costs to put products on a 40 foot container. how concerned are you about consolidation within the liner industry? 10-12 shipping lines controlling 80% of the market but then they have alliances within that. should we be concerned? should your members be concerned about that? rogier: we. are very concerned we have already been there for a couple of years. with also american and asian shippers on this issue, because the market has been very consolidated.
there is no real regulation. we as a customer are very much protected in this market where there is a very dominant position in the carrier position. we have been saying for years -- gives carriers the possibility to discuss sharing capacity and putting capacity on certain trade lanes. they get sort of a waiver on competition law. that is a wrong instrument. the european commission decided to extend it last year before the pandemic started. we always knew a situation like this would eventually come to the market. that is why we are also calling on and looking at more ways to protect the customer, which is shippers and cargo holders. just like we have seen in other markets, like aviation or rail transport or even electricity or
telecom markets. that's basically what we should be moving to. basically, get a bit more balance of power. anna: the liners certainly suggested that their alliance is like the airline industry and they try to make it seem -- that's how they describe it. you say it is sort of competition law exemption. do you get any sense that regulators want to change this at all? rogier: i think there is a difference worldwide. in the united states, the federal maritime commission really stepping up. they have already started an investigation. really concerned on what is happening therefore shippers and agricultural producers. we have seen korean authorities stepping up, chinese authorities. in europe, we are lagging a little bit behind in the discussion but it's also because i think from a european perspective, we would rather much more look at a structural bylaw with all the supply chain
partners to see what we can do to fix this issue. how can we help one another? we are not looking at a big legal fight on this issue. we just want to have the problem solved. we need all the parties at the table. the carriers are really missing in this discussion and they have been for a couple of years. that's a little bit of a concern. we have the idea that they are in their bit comfortable with the situation they are in. making record profits in 2020 but our members are paying the bill and suffering. the shareholders and executives of the liners will be satisfied with the situation, but they have a responsibility to make sure that we get this conundrum that we are in fixed as soon as possible. anna: i wonder how inflationary this ends up being. how much of this cost of they have to pass on to end consumers , is that something you have been thinking about? rogier: the impact is different in a way. for multinationals, who send a
lot of containers around the world, they have some room to absorb all those costs. they have been stuck in this for over a year now. especially problematic is for the sme's. they have no way of negotiating with those big liners. there is no transparency, no communication. basically, they have no idea when cargo will arrive. the retail sector in europe, a lot of shops have been lockdown. we are looking at spring, summer, shops will be opening up of some of them do not know if they will get their supply. they end up opening shops with empty shelves. that is not a situation we want recovering from this pandemic. they may have survived the pandemic but if they open up and have no supply to sell to consumers, the economic situation might be even worse. anna: really interesting conversation. thanks for coming to speak with us. rogier spoel, european shipper'' council policy manager.
52 minutes into a negative session, but less so than it was. down by 06% on the stoxx europe 600. u.s. futures still pointing to the downside. nasdaq futures only down by 0.2%. perhaps things improving a little bit if you are long equity markets. laura cooper from our markets live team is with us, macro strategist of course. interesting to see the extent, the way that the markets have responded to jerome powell. this is the big question overnight, was, was this going to lead to an end of the selling and bond markets? it has not. yields pausing around the 1.55 level right now. >> we got some soothing words from the bank of japan saying that they are not ready to change their band around their tenure target. i think that has really brought some calm to the bond market. we are seeing limited spill to
the equity market. it is all about those big payrolls numbers today coming out of the u.s.. the fed is focused on the employment side of their mandate. we are expected to see quite a wide range of estimates around that consensus 198 print. if we see a stronger-than-expected number, i would expect that that would add conviction to markets' expectation for tightening. we could see the long end, under further pressure today. anna: we are waiting for that, waiting for the payrolls number. i wonder what markets are expecting to see. also thinking about the selloff we have seen recently in technology stocks and the extent of the nasdaq selling. now negative year to date, nearly negative year today on the s&p. you have been asking this question about, how long before the nasdaq enters a bear market? we are quite far from that the moment but not far from correction. >> the path of least resistance
is just for the nasdaq to go lower. that is something we would expect against a backdrop of these rising yields. i think for it to go into that bear market territory, so that 20% peak to trough, that would only bring it back to october levels. it does just capture the extent of the rally that we have seen and really underneath the surface, we are seeing this rotation, so the small-cap russell 2000 relative to the nasdaq has actually continued to gain traction. that is something we would expect in this environment. if we were to see a sharp correction in the nasdaq, in which case that starts to have spillover effects to equities, wider credit spreads, and overall tighter financial conditions, the fed would step in. at this point, we are not quite there yet. anna: oil prices heading higher once again, $67.81 for brent.
some of those stocks going higher, even if the sector is in retreat. laura: it is something i would expect to see. we have those travel and leisure stocks leading those declines, but energy is kind of not as down of a performer today. that does reflect just that upbeat optimism that we saw coming through these oil prices with opec surprising. we could potentially see energy gain further traction, because they're likely is still some room left for oil to rally on the back of the surprise cut. whether those levels beyond kind of that $75, $70 handle for brent in the coming quarter remains to be seen. anna: laura cooper, bloomberg's markets live macro strategist. that is it from the european market open. surveillance is up next. they will be sure to take you through the latest market moves. european equity markets still on the back foot.
>> i would be concerned by a persistent tightening in financial achievements that threatens our goal. >> not for us. >> great when players join, either traditional financial players or new ones. >> this is "bloomberg surveillance: early edition," with francine lacqua. francine: well, good morning and welcome to "bloomberg
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