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tv   Bloomberg Markets European Open  Bloomberg  May 6, 2021 2:00am-3:58am EDT

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♪ anna: good morning and welcome to bloomberg markets. mark cudmore joins me in singapore to take us through all the market action this hour. the cash trade is less than an hour away. here are your top headlines. the fed hawks out of -- are sounding more and more dovish. playing down inflation. tapering conditions could be
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lifted this year. stocks look for direction as attention turns to other central banks. the bank of england is expected to of great -- upgrade its outlooks. stepping on the gas. vw raises its outlook as a market recovery boosts demand. we hear from the sea -- ceo later in this program. welcome to the european market open. 7:00 here in london. it is later than that in singapore. let's get to mark who can tell us what the markets are saying to him today. hello mark. mark good morning. i've had all day to work out markets and they are confusing me today. i don't underwater -- understand why they are prayed -- trading differently. different sentiments. chinese equities are weak today. japanese equities returned from the holiday very strong. i think we are seeing that
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across assets. slight divergence and diversions among assets. it is not explainable by a single narrative. it's not a very clear day. anna: let's have a look at the futures picture. we are not getting very much. let's put up those futures. we saw strong moves in europe yesterday and a rebound from the day before. we have not moved that far into days. a big rebound. mixed in the united states and yesterday's session with the nasdaq under pressure little. that adds up for flat for positives in terms of the futures. the u.s. market flat. positive seems to be the message. it's difficult to get a clear picture of what's going on in asia. some markets have been closed for a number of days. mark: yes. we had both japan and china out at the start of this week. it was assumed that both would come back and trade heavily
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today. there's no sign of that. the gmm stream, we can see confusion across markets. we have green boxes, red boxes. there's only one clear theme for markets. it's not a new one but it's us as -- it is a surgeon commodities. it's incredible. still driving today. overall, this commodity surge is incredible. the strongest commodities rally in 40 years. it's across all commodities markets. metals, agricultural's, oil, everything. that's why inflation will stay top of mind for the next couple of months. anna: absolutely. the commodities picture. we will return to this deal conversation later. steel was flashing bright green as you were looking at it. let's mention the broader commodity space, bloomberg
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commodity index back at its highest for 10 years. if you look at the inflation rate, the year on year increase in commodities, that is what you are referencing in terms of the highest in 40 years. it looks quite stunning. plenty of people play down whether they can see inflation. they say it doesn't matter. mark: it's we don't know whether it's going to be sustainable or temporary. the problem is that we won't know for a few months. what i think is undeniable is that the initial figures we will see for the next few months are going to be much higher than we have seen in many years. in at least a decade. i expect us to go way beyond those levels for the next couple of months. it's the fact that we will see those high numbers. people who buy into the fed narrative, even if they are
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correct, they will get scared. they will get nervous for the next couple of months. what is the exact catalyst? that's what is unclear. uscp i next week and that is in the focus. anna: data out of germany talking about inflation. you mentioned the bpi number. factory orders rising by 3% month on month. that number coming in bullish ahead of estimates. it's only one month of data. many economies would caution reading too much into that. think about where we are on european assets right now. we had a strong rebound yesterday. is this back to fear of missing out once again? mark: one of the main things that is driving my confusion. i could not believe how powerful the re--- rebound was. it made the selloff even more
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confusing. i think the european assets have had their day in the sunshine. it's i'm not saying they will suddenly selloff. i'm not sure if they will outperform as much as they have been. certainly, the rebound yesterday was very powerful. i'm curious what the price action brings. i'm slightly more negative. i think we might be in for a slightly more difficult time. the forward pricing means we've priced in the enthusiasm of a good recovery. the reality is here. people are less excited. they will turn to other things. anna: geopolitics? we will talk later in the program about some of the things coming out of the g7 and the comments with regards to china and russia. thinking about tensions between the west and china, the story overnight seems to be to do with tensions between australia and china. that's not a new thing. some people attribute that to why we are seeing the australian equity market down, the aussie dollar weaker. is this a fundamental shift or
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more of the same? mark: i think it's more of the same. it's a slight escalation. it is a reason for why assets treated poorly. confusing action in the commodity space. it should not impact on why chinese equities are so weak today. it goes back to this idea that there are a few things that are not fully expendable. the backdrop is that geopolitics , these tensions with china, are really intensifying. we thought with the change in the administration, and might go on the back burner or subside. not at all. we are seeing g7 increase pressure at the margins on china. that makes it more difficult to rebuild supply chains that are already under pressure because of the covid pandemic. anna: absolutely. we will return to all of these themes as we go through the program. you can get up-to-date analysis from the team. to mliv on your terminal.
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you will find the landing page for the markets live team. coming up on the program, vw raise its its outlook amid a swift market recovery in china and higher demand for vehicles. we hear for -- from our interview. we will bring you highlights later on in the show. donald trump remains banned from facebook. we discussed that decision with head, cochair of the tech giants independent content oversight board, former leader of denmark. up next, it's a busy day for earnings. we speak to the euro now ceo about the results in commodities rally. that conversation is next. if you have questions, send them to us. this is bloomberg. ♪
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♪ anna: welcome back to the european market open. 50 minutes until the start of cash equity trading. these futures look fairly flat. where do we had this morning? mark: if you are a european trader, you are not getting much help out there. i'm sorry that i'm not providing any more help. it's a slightly confusing market at the moment. how people see this playing out. how will that play out in terms of pathways into the yields and rates market? anna: let's get to the earnings story. that is close to europe. europe posted a first quarter net loss of $71 million. that's as a stunted demand recovery and restrictive crude
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supply hit the company's bottom line. confident that the market will recover in the medium-term, the shipping from invested in new vessels with two companies with the first deliveries expected in january 2022. we are joined by the ceo hugo de stoop. how upbeat are you feeling about the recovery of your industry this year? hugo: i feel relatively upbeat since it has to happen. we know the reason why the demand for oil is so low. that's due to the pandemic. at the end of the pandemic, it's insight. i the end of the year, the demand for oil will have fully recovered to pre-covid levels. that's the first aspect. there's a number of ships that can carry these cargoes. that fleet age profile is relatively old. we expect a number of ships to go to the recycling yard.
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that means the supply will decrease accordingly. mark: good morning. when do you expect your margins for shipping crude to turn clearly positive? in that context of the fleet set up that you mentioned, how positive can i get given that there's an older fleet out there? hugo: it's always very difficult to predict markets because they are influenced by so many factors. i would say that are market -- next winter should provide more demand for transportation in general. we definitely hope that the rates will go up by next winter. that depends on when the winter will start. by the end of the year, we should see better rates, to the extent that they will turn to positive margins. that remains to be seen. we don't know. we cannot predict what the demand for oil will be. if we were to go to pretend -- pre-pandemic levels, we would be
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in positive territory by the end of the year. mark: ok. you talk about the factors. there are so many factors. i'm curious about the dynamics between the price versus volume of shipping for you and your margins. how much can be made up for the fact that there is not volume demand? price is rising and people are willing to pay more. hugo: i think that the price on many commodities, you can start with the price of oil which means there's more demand. the opec-plus countries are releasing some of the cuts that they had put in place because of the lack of demand. we will see more barrels coming to the market next month. they've announced that they will release 2.1 million barrels within the next two months. that will definitely translate into cargo available for the ships to be transported further. we can carry 2 million barrels. that's the equivalent of one
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every day. on the global fleet -- fleet, 33 . the other price is very important, the steel price. you commented earlier that steel was going up and will continue to go up. that's very important for the older part of the fleet. when you arrive to an age where you are doubting whether you should continue to trade your vessel or send it to a recycling yard, you look at the price of steel, recycled metal, scrap metal. then you make your decision. we are at an all-time high at this point in time. to recycle a 20-year-old ship that you have been operating for 20 years, you can fetch $20 million. knowing that a new one will cost you just under 100 million. it's 1/5 of its value. it's relatively high. it should incentivize people to do that. anna: there's a scrappage rate
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increase. that's interesting. i suppose you have a lot of visibility about supply vessels in your industry. do you have a sense? you told us about what you saw as older vessels. given the climate change agenda and the new regulations that are coming in as well, do you think you have a firm hand on the supply of vessels to market? hugo: we have a relatively good visibility for the next three years of what is coming in terms of new building. new ships that will hit the water and will be available to enter service. the order book has never been that low in the last 25 years. we are below 10%. on average, 20%. just to replace the old vessels but also to invest in new technologies. the problem is that we don't really know what the next technology, what the fuel type those vessels will use will be
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the winner in the future. we are all trying to de-carbonized shipping in general. there are a number of technologies that are available today that still it met a certain amount of co2 like lng. it's less than the feel that we are using but it's not zero mission. the entire market is looking to zero omission the fuel line. ammonia, hydrogen, other types of fuel that could be built specifically. unfortunately, those technologies are not ready. the market is in a standstill mode. we know that those technologies exist. you can still dip your toes into some new buildings. you need to make sure that they are prepared to be retrofitted at a later stage, 10 years down the road. you need to look at the structure and piping. you also need to bet on the fuel
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that will be the winner in the future. very few people do that. mark: your optimism is based on the reopening which seems rational. everyone is on ford -- on board. are you worried about the recent resurgence of the virus in asia? do you think it's a blip in terms of the optimism hugo: -- optimism? hugo: i would not call it that out of respect for the people suffering from this. i think it could put further delay. let's not forget that india is not a major importer of oil. for us, it's not going to stop the recovery on a worldwide basis. having said that, there are a number of companies who are using indian crude on board. so we feel that we see the scenario that we saw in the first wave in the second wave. that means those people are restricted from being rotated on board and have to stay on board
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for much longer time. that's ridiculous. if you are on board a vessel, you are quarantine. those are much longer than two weeks. you know that the people are not affected. unfortunately, the people that need to replace them have to travel to those countries where the ship stops. before they embark on the ship. that's the real problem. that's what we are scared about. anna: really interesting. the word quarantine references 40 days aboard a ship. let's get a first word news update. here with the latest on the top stories we are covering here, here is laura wright. laura: u.k. is set to lift the ban on international leisure travel but only to a handful of places. officials are studying the latest data to work out which
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countries should be added to a new green list of approved destinations. the details are expected to be announced tomorrow but mark -- singapore is anticipated to be on the list. modernity says early results show its covid-19 booster shots are giving positive results against new variance from south africa and brazil. the drugmaker says it's worried about even newer mutations emerging from india. >> the data will be coming out. we are seeing strains in india that are more ominous than the south african one. how is that going to fare against boosters? do we need another booster? people think we will be stuck in this battle for a long time. we are you get at least now we have a weapon to deal with it. laura: global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg.
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anna: thank you. coming up, unhappy with china. g-7 diplomats flagged a number of concerns with beijing following two days of talks in london. we get the latest next. this is bloomberg. ♪
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♪ anna: welcome back to the european market open. 40 minutes to go into the start of cash equities trading. the european what is markets are fairly flat right now. commodities are still a feature. you tell me everybody you speak to wants to talk inflation. mark: yeah.
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that's completely it. we are not any -- adding anything new to the debate. it's more like, look at commodities. every day, we get new superlatives. we are not going to decide this issue anytime now. we are hearing that from all the conversations we are hearing. the fact is that there are price pressures coming from many different angles. the theme isn't going away because we won't get a conclusive answer for some time. anna: let's turn our attention to geopolitics. this sometimes has the potential to move markets. top g7 diplomats have signaled -- singled out china in their communique after talks in london. they called on beijing to participate constructively in the system but also mentioned human rights abuses, taiwan, and cyberattacks. maria tadeo joins us. is this a more unified west in its approach to china?
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maria: to some extent, it is. when you look at that communique that came out from the g7, some of the language really does target china. they say that there are deep concerns about human rights abuses. also, forced labor and the way that minorities are treated by chinese authorities. to some extent, there should be a probe into those concerns. what is key is that that is the language. if you look at the actions taken by the g7, there's very little on that front. anything that could have economically targeted china is not in there. it means that reaction to each country to take to define their response to china. again, that very careful balance between tough language that calls out china. the u.s. secretary was clear. the chinese do not play by international rules. the europeans have said that they don't respect the multilateral approach. when it comes to taking decisions and action, that was lacking in that statement. still very much about the
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individual response to the language. it's fair to say it's much more compact in the way it is stealing its approach with china. mark: maria, i know it is firm words and not from economic actions. europe is turning cold on chinese money. maria: yeah. to some extent, it is. this relationship is becoming more difficult. you can see that over the past year, it has become a lot colder. the europeans have said that chinese companies come here on steroids because of the aid that they get from chinese authorities, the chinese are not reciprocating market access from european companies going into china. you have this suspension of the china eu investment deal that was approved and signed last year by european governments. it now has to be ratified. that process has been suspended. there's no political push for that. it won't be implement it anytime
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soon. anna: thank you so much. later on in the program, we are back to this theme of tensions with beijing. we speak to the president of the eu chamber of commerce in china. this is bloomberg. ♪
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anna: welcome back. half an hour to go until the start of trading. let's take a look at futures, pretty fat -- flat for european and u.s. markets. the commodity story, mark, is a much the same. the rise in still priced, we talked about what it means for the business. prices have rolled back, certainly in china. mark: yes, i think steel is one
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of the best examples of this incredible commodity rally we are seeing since last year. steel rebar in china, they are all reaching records, not just in nominal price levels, but the power and pace of the move since last year is also reaching new heights. we are seeing the steel rally that is going crazy. this is not just the inflation being we are talking about, but the strength of the real economy, it plays into the strong infrastructure story we are seeing around the world. this big by then plan we are seeing. -- this big biden plan we are seeing. it is not just feeding prices. as we just heard from our last guest, it is the idea we should be recycling, lots of things we
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are not thinking about. this rally is taking so many people by surprise. anna: it is an interesting one when you think about the circle or economy and recycling, the scrap value that you managed to achieve from a ship, the price of a new vessel from scrapping the old one. when we think about the roaring trade we have seen from economies as of late. let's talk about this with our next guest, richard saldanha from of investors global. it is great to talk to you, when things you mentioned is construction. you see a growth there. what is it that makes you more positive now than you were last year around the construction industry? a lot of parts carried on through the pandemic, eventually. richard: you're right.
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i'm not sure we are seeing a boom yet, but we are seeing recovery. if you think about the dynamic between residential, the market has been exceptionally strong and you have seen that in terms of housing numbers. the other side has been weak. you're seeing delays to projects, restricted access depths --restricted access to sites, think about that momentum index, the architecture index, picking up. you're starting to see focus on new projects coming through. whether it be companies that are providing lots and doors, heating ventilation, really starting to talk about that kind of recovery there are seeing in nonresidential. they will be interesting areas to think about in the second half of this year and in the next year. this is a sign that we will see
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that recovery coming through in nonresidential area of the markets. mark: good morning, richard, is it not circular on the commodity site as we see this search and prices based on reopening optimism which would validate that none residential construction trade -- nonresidential construction trade? prices are going so crazy and changing, how concerned are you about that? richard: short-term you're seeing that play out, we are seeing rising costs and it is impacting a lot of sectors. companies take the cost upfront and then it passes through and takes time to go through. and that nonrevenue site you are seeing that and across sectors, certainly. consumer staple companies, procter & gamble announcing increases. this will be an ongoing seen as you see the rising costs and we
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talk about the boom you're seeing in commodity prices. it is beginning to bite for corporate and you will see that passed through element starting to play out in terms of the end consumer as well. anna: i remember, richard, some 15 years ago when we are talking about booming oil prices and levels -- not the ones we have now, but much higher -- we still ask airline executives, are we going to see that phenomenon edging? is that something that will be more a part of the conversation? richard: i think it has to be. you look at what you're saying in terms of commodity prices and for companies right now, this is really starting to bite now, i think those conversations are starting to happen and need to happen. as we think about from a central bank perspective, you have this tapering that they are working on right now.
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i think these inflationary pressures are here to stay. from a market perspective, we are seeing an element of consolidation right now, support from investors in many ways as a result. what is interesting, there is a lot going on when you scratch the surface, underneath the surface of this market, you have growth stocks trading at high values. for investors right now, it is hard to know which way to turn given that backdrop. mark: richard, you mentioned a couple times about the earnings season and the price pressure, how have you interpreted overall learning season overall in terms of the comments we heard, in terms of the pass-through to consumers? has it been above your expectation, below, do you see greater inflationary pressure or less from this learning season venue expected previously? richard: it is starting to
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build. i mention some of the staple names we talked about earlier, talking about price increases, i think this is a think that will stay for a little while. as we think about the results in general, it has been strong on both sides of the atlantic. what has been interesting for us is the reaction of markets being muted. i think that has been an element , given quite high expectations going into result season. my sentiment remains quite strong given the vaccine rollouts we are seeing. underneath the surface, you are seeing a tug-of-war playing in terms of growth and value. when we think about expectations and what that means for bond values, i think we expect that tug-of-war to continue. anna: richard, stay with us. richard saldanha from aviva with us. let us get some coverage of some of the top corporate stories we are covering. laura: u.s. regulators have set
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the strongest signal that strictest rules could be reduced after the gamestop frenzy. apps like robin hood exploit game-like features to keep customers trading, there is also concern that that transactions rooted through a few big players are stopping competition. credit suisse has boosted across the asia-pacific region. they're hoping to increase the revenue from the region. sources tell us on was half, the pretax index -- income almost doubled. uber is confident it can achieve profitability by the end of the year, but shares are falling in extended trading as they state spending on recruiting drivers will had earnings in the second quarter. bonuses and other incentives will reduce the rates uber takes
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by about 20%. that is that bloomberg business flash. anna: laura, thank you. coming up, raising the outlook. what remains a concern? the highlight from the ceo. this is bloomberg. ♪
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>> i think we are going to see recovery. i think q2 will be the weakest, we will see some recovery in q3 and q4. i do not have anything to share right now, there is a whole menu of things that we are working on.
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things that we are changing, more to come later in the year on how to make sure we are never in the situation again. we have a dedicated team on that as well. anna: that was that gm ceo on her company's plant to overcome the global chip shortage. voltswagen has raised its outlook following a robust first quarter. the results were boosted by a swift recovery in china and higher demand for battery powered vehicles. we spoke earlier about the earnings and the global chip shortage. >> we would be happy if we could finish the year basically on levels of 2019, that would be our target. there is still a lot of challenge ahead of us because of the shortages. i think we could merge very well in the first quarter. the incidents in japan and in
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america, they are going to hurt us now in quarter two. over the year, we think towards that your end, we are hopeful to recover. matt: can you quantify how much they will hurt in the second quarter? we heard some shocking numbers, forward for example, close partner of yours said 50% -- 15% will be cut because of the shortages. what do the specific numbers look like for voltswagen? >> i will not give you numbers now because of your fighting date by date, we are going to be hurt, but not in that kind of magnitude. we think we will see some stopping for a few days and weeks, but not as brutal as the figures we see some from -- we
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see from some of our competitors. matt: how long will it last? some say a couple months, some say a couple years. how -- years. how long will it be from your point? >> because of the ramp up, it will take time. hopefully, we will not see some kind -- we will not see the incidents from next quarter. semi conductors are going to be in tight supply, but i think also there is a lot of additional capacity and we are in discussions and dialogue with manufacturers and we think it is a transition. it has raised a lot.
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it is important to add capacity as fast as possible. anna: that was the ceo of volkswagen speaking on their earnings and global chip shortage talking to our matt miller. let's get back to richard saldanha who is still with us. it is curious, this earnings season, such a talking point, this chip shortage. plenty being written about it. yet you see players in this sector raising their values. tight some of these things together for us. richard: absolutely. it is a big focus, for all. 2021 is quite a pivotal year in terms of lunches. vw got the idea. a lot of these copies are upgrading.
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yet the stocks have sold off. i think with that is telling me is that the supply issues are really driving the stocks, certainly in the short term. longer-term, it could be an interesting opportunity. when you think about demand, the rebound volumes, we think the long-term demand outlook remains as robust as ever. for investors willing to look through some of the short-term supply bottlenecks, i think it could be an interesting opportunity. the gm results show that they maintain it. it is affecting in various ways. certainly it could present an opportunity for investors in the long-term. mark: richard, there is a big bloomberg threat this morning,
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talking about how car companies are completely changing the specs they are offering customers, removing a lot of high-end specs, how do you think this will play out to consumer demand when they are losing that big screens, navigation system, some of the perks that are commonplace and modern cars? this is all due to the chip shortages. how will that play out in the consumer side? do you think that is a severe concern or a temporary thing? richard: it might be more temporary. from a consumer perspective, when you think about it from affordability, it will bridge the gap when it comes to new vehicles. the intent you are seeing from countries will play an important element. battery will remain an important thing. the fact you're seeing these partnerships between the likes
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of voltswagen and the battery makers tells you how important it is to get those battery costs down. there are lots of areas that are factoring in. the supply shortage is one element of that. as i said, this year will be pivotal in terms of those rollouts and lunches and seeing the consumer uptake will be an important barometer for this industry going forward. anna: we talked about the earnings season, we talked about some of the schematic investments themes -- investment themes. from the global equity portfolio, where do you see the best prospects going into 2021. richard: even sectors that were from last year, you see them coming out with decent cash
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balance sheets coming into focus. i think dividend prospects remain good. i think i will be an important factor. some are growing their dividends quite strong. we think it remains good for income investors. the key for us is trying to find those opportunities in a market that is in more of a consolidation mode. it is about looking at those long-term opportunities that we talked about in some other sectors or we have seen a bit of a selloff. prospects remain very good. anna: thank you very much. richard saldanha, aviva investors global services. let us get an update. laura: diplomats have singled
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out china after talks in london. the statement because on beijing to participate constructively in the system. it is also mentioning alleged human rights cyberattacks. leaders are meeting in the u.k. next month. the u.k. set to lift the band on international leisure travel, but only for a handful of places. officials are studying the latest data to work out which countries should be added to a new green list approved destination sheet. china is suspending dialogue with estrella, a largely symbolic move intended to signal beijing's growing frustration. that's mike, australia decided to cancel the agreement on the road agreement. -- last week, australia decided
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to cancel the agreement on the road agreement. global news, 24 hours a day, on-air and at bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. anna: coming up, we will look at your stocks to watch as they seek the best trading revenue. we will get you your stocks to watch, next. this is bloomberg. ♪
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anna: welcome back to the market open. futures are flat for europe. let us get the stocks to watch. dani burger joins us. dani: equity trading just blew it out of the park. over 800 million euros put it at the highest. for the most part, banks have had higher trading figures. that could -- that good start
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means they were able to be on profit. this will not have much impact on shares, but we spoke earlier to them who sent they will work remotely for up to three days a week. another corporate story is air france reports sizable loss and because of that, in order to strengthen their balance sheet, they are thinking about doing some equity offerings, using some instruments. investors will vote on that. we will see if that has any effect on shares. the retailers, more brick and motor and online once are beating the sales, they are updating their forecast. a really strong rebound as people are coming back into stores. of course, the online shopping boom.
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anna: thank you very much. dani burger with the latest on markets. commodities are very much at the heart of things. we are watching the london market with how they deal with the moves. not all commodities are moving. mark: yes, coco is one of the few commodities that are suffering on both demand and supply side. they are not making impulse purchases because people are stuck at home. also, unlike many other commodities, they are getting very good weather, appropriate whether in the coco regions of the ivory coast. supply is ample, demand is down. it is the one commodity that is the exception to the broad trend. anna: no impulse buying is in the face of that evidence i am seeing from my particular cohort, but i will take your
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word for it, mark. thank you for spending time with us. more back on the market -- more on that market open. that is next. this is bloomberg. ♪
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the european market open. a few seconds to go until the start of the training session for this thursday morning. let's look at the futures. they suggest we won't be moving a little bit higher at the start of the trading day. u.s. futures are positive and increasingly posited as a go to the session. let's get to the start. the ftse 100 is up by .1%. there is a focus on higher commodity prices. the ibex in spain is now up by two tens of a percent. -- 2/10 of a percent. there is the earning to look at.
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there is also the inflation narrative. as mark told us, inflation, inflation, inflation is the only thing people in the market want to talk about. that is interesting in itself. we will return to that in a moment. we are just getting markets to open to the upside. we are seeing corporate moving to the earning site. interesting to watch. talking of equity markets, europe world's largest economy recover, some banks make start walking back emergency support. >> we are going to taper if it becomes clear that the economy continues to improve at that pace that most forecasters have. i am expecting a strong recovery
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, most forecasts are expecting that. many people are anxious to start spending again and spending and away that they do not have to be socially distance. there is likely to be a surge in demand at the same time that there are going to continue to be white restraints. that will push up inflation for this year. we are not expecting that into next year. anna: joining us now is steven major, hsbc global head. interesting to hear the president talking about his expectations around inflation saying that it will pick up this year but we do not expect that to sustain into next. i think you are a little more relaxed about inflation. give me your top thoughts on the inflation threat at this point. steven: i think it is temporary. it is interesting that so many fed speakers have been coming
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out in recent weeks. i am sure bloomberg will produce some kind of chart to show it. it is almost as it yields got to a certain level in the fed started to push back against where the market is taking it. i think this is one of many of the orchestrated comments that are coming out of the fed. they are trying to drive home the idea that something has changed. they are waiting for the actual inflation to come in probablyg.
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it is counted in the price. anna: i suppose that nature of temporary is important. what it means to see inflation pressers temp -- pressures temporary. it may have a longer impact than anticipated, i suppose that is a risk to your view perhaps? steven: totally, stuff happens. inflation may go out and it may stay for a bit. in previous cycles, you had interruptions. that might not happen this time. our assumption is that the base fx and transitory nature start
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to fade in the second half. and we are back within the 2% level by then. we could be wrong, but the fed is focused on something quite different to what the market seemthe fed is acknowledging tht they have undershot for about 10 years. they have some catching up to do. they recognize they havethey ard wait while inflation overshoot. the market pricing into it for the next years. that could happen. if that is the case that inflation six for a bit, bond yields do not have to go up. they have already incorporated those. anna: that is what you say when you look at commodity prices on the rise, the highest in some 10
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years, the height since 2011. when you look at that year on year inflation in commodity prices. when you look at that you say, that is already in the price, we knew that was coming. steven: we knew it was coming but also the fed is targeting something else. it is looking at a flexible average. i think that people are having these discussions because they are excited, but have limited information. it has to include the fact that something has changed in the way that the fed is looking at inflation. i get it. there is some upside inflation pressure, everyone should have known that is going to happen. there are some some bottlenecks. we have had very unusual time, to put it mildly, we have had the biggest fiscal stimulus since the last war.
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of course, things are different. investors need a bit of risk premium to compensate for the unusual circumstances. that does not mean to say we have a huge rift here and yields are going to keep going up forever and ever. the markets already made the adjustment. i think that, yes there is plenty of excitement about inflation, but it is of it in your face, it is in that news and bonds tend to look through that noise. anna: good to speak to you on that front. stay with us. steven major, hsbc global head of research. coming up, the u.k.'s economic rebound. the bank will talk about when to taper its stimulus. all of this is ahead. this is bloomberg. ♪
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anna: welcome back to the european market open. the european stock markets are a little more buoyant than we anticipated. u.s. futures have gone up higher than the start.
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-- that the start of our trading session. let's talk about what is happening and the u.k. today. the economic rebound is fueling speculation that the bank of england will start to talk about when to taper stimulus. the hsbc will expect to keep its target of bond purchases but could begin slowing its pace. joining us now is a bluebird correspondent. -- bloomberg correspondent. >> we can anticipate it will be on hold. the gross forecast was 5% gross for the year. since then, we have had lots of good news, the success of the vaccine rollout which has allowed the government to loosen restrictions and we the economy. we are seeing extended government support measures and so, as a result, we have seen that resilience of businesses
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and consumers affected in all the economic data. put all of that together and bloomberg economics see a significant upgrade, 7.5 percent growth for the year. pause on that because gdp has been swinging a lot. what investors will be watching even more closely is inflation. bloomberg economics does see it tipping past the banks to percent target. if the bank agrees with that forecast, one economist i spoke to says it will be a super hawkish sign. anna: what does that mean about the talk of tapering? lizzy: the recovery is going so well that everybody wants to know when and how the bank is going to end all of this stimulus, take as foot off the pedal. if it will ease out the program or take aleve more sooner.
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if it chooses option number two, investors will see it as another hawkish signal that it interest hike is in the pipeline. anna: thank you very much for the look ahead with what to expect from the bank of england. steven major is still with us. how is the u.k. story playing with the global narrative? steven: thank you kate is an input to the whole story. -- the u.k. is an input to the whole story. the idea that it will move towards the short rates is making a big assumption that the exit principles are being maintained like that. it could be that they choose to taper and then start to run the balance sheet off. frankly, we do not know. we should be very careful about making assumptions that link the
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decision on the asset purchases automatically to the timing of the first rate hike. i can say that based on the work that we have done. i can also say it on the basis that it is an unusual time so why would you assume it would be the same as previous cycles? if rates do go up in the u.k., they will not go very far. that is the key point. anna: what kind of assumptions argue making on the large savings that that u.k. has managed to acute late during this devastating, but also a recession and recovery -- also
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a-typical recession and recovery? steven: it depends on what area you are in. some people have not. pay back debt, that is something that is important. -- some people have not paid back debt. that is something that is important. this money that ended up with households was borrowed by the government with some help from the bank of england. a rational view of this says that we have borrowed money from future generations to find the income and consumption today. why would that be a fantastic thing for economic growth? it seems to me to be buying some time. this idea that there is a great big amount of money waiting to be spent, i am not so excited
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about it. anna: interesting to talk to you today. thank you for joining us. steven major, hsbc global head of research. steven major will continue this conversation on bloomberg radio. i want to get to some breaking news. the eu is backing the proposal to discuss waving the vaccine protections. you may remember yesterday we heard from that u.s., they backed a waiver of vaccine protections at the wto, this is something that needs to go through the wto. here we have the eu presenting its willingness to back the proposal to discuss this at the wto. we will look for further lines coming through on that. they are also saying they will have doses for 70% of the citizens in july.
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coming up, donald trump remains banned from facebook, for now. that is the decision of the oversight board, we discussed that next with helle thorning-schmidt, cochair of facebook's review board. more on that next. this is bloomberg. ♪
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anna: welcome back to the european market open. 20 minutes into the trading day. donald trump remains banned from posting on facebook. that decision was announced by the independent oversight board. they also recommended reviewing the status of the former president within six months. joining us now is helle thorning-schmidt, cochair of the facebook oversight board and the former prime minister of denmark. the chair says -- the chair says they feel facebook is waiting on it. helle: we thought it was the right decision. we felt it was the right
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decision in january and we look at it from the facebook standards and rights they want to abide by. it was not right that facebook invented and used sanctions for this particular user because facebook have -- has standards and rules for everyone and they cannot just invent a ban that does not exist and make up rules as they go along. that is why we are saying that facebook should go back and look at this and look at our committed asians and in six months look at it again. anna: do you think facebook is moving quickly on this? people have called for a long time for facebook to apply those rules consistently and have consisted application and consider the implications on what they do and the political round. do you think facebook is moving quickly enough?
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helle: i think the oversight board is pushing facebook in the right direction. the position we took yesterday will push facebook to not invent a sentient but does not exist in their own rules. it is very clear that facebook took a good position, but then invented this sanctioned the does not exist. with the ruling that we made, they will not do that again. we advised facebook to look at all of our recommendations. they will have to answer our recommendations within 30 days and put them into place and on that basis, decide. this does not mean it is an automatic way back for president -- fort mr. trump -- for mr. trump. they have to decide on sanctions that are within their own rules. anna: who should make these
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decisions? facebook may think that is part of your role as the oversight board. the board has kicked it back to facebook to have them do better. mark zuckerberg has a lot to weigh in on what should and should not be on the platform. are there other question marks on who makes those decision? helle: the oversight board was never created to lift facebook's responsibility. that is why we are pushing it back. we have already proved our position but also why it is important to have the oversight board. we are no longer in a situation that is ultimately facebook
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deciding on their own content. they have asked us to do it. before, it was ultimately mark zuckerberg deciding what could stay up and whatnot remove. now we have an oversight board, we are independent and do not take instruction from anyone. we will follow up on our decisions and recommendations. we are really proving why it is important to have an oversight board and i think facebook never again just invent rules as they go along. anna: do think we are getting closer to a time where actions will be taken by lawmakers and washington to try and limit the protections that facebook and other social media platforms have? this is something that facebook has come to, just as many social media outlets have. do you think we will see further regulation of these platforms? helle: i will speak just as me, not from the board. i am a former primer minister,
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it is one of the values i believe most is giving agency of voice to so many people. i will policy members to think hard about what it happened. that's why it happened. -- about why it happened. we have to be careful not to make rules that would work in our part of the world but not in parts of the world where they have less democratic regimes. i am worried about lawmakers deciding. anna: thank you very much for your time. helle thorning-schmidt, part of the facebook oversight board. coming up, we will be back to
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talking about the supply chain issues. the latest on how the chip crunch is hitting the auto industry. we will speak to ceo of auto supply. that conversation is next. this is bloomberg. ♪
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anna: welcome back to the european market open. half an hour into our trading session. european market, broadly speaking is up on the stoxx 600. let's get into the sector details. u.s. futures also improving over the last hour. this is the picture we have for you in terms of the sector moves across the european market. auto parts are moving to the
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upside. we will talk to cottonelle shortly. -- continental shortly. i want to get to another sector and the market reaction we are seeing. this is the pharmaceutical sector the eu has backed a proposal to discuss waiting vaccine patient protections. this is around whether vaccine protections should apply around covid vaccines. we saw some heavy selling in chinese vaccine sellers overnight. now we see the narrative moving into europe. it seems europeans are on the same page as the americans, trying to open up these conversations at the wto. we saw big drop in the share price of beyond tech -- b
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iontech. let's get a look at some of the other sector moves. dani: i want to look at the banking sector because it was the third biggest gaining on the screen. a monster beat when it came to equity trading, the highest amount since 2018. this is something we are seeing across the banking sector. also learning french staff is working from home three days a week. also seeing its fees rise significantly. what is standing out from the pack and not in a good way, is ing, their model is very different.
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they did have lower provisions, but perhaps for the recent the stock is weaker is they are relying on lending and there has not been that demand for lending , and said a lot of consumers are building up deposit. if we want to talk about the other big theme, it is inflation. let us look at those inflation sensitive assets. yesterday we had the nasdaq following, which was odd, you think there would be a bid for growth stocks, today it is coming through and we are seeing a weaker dollar. that is a bit of a reversal of some of that trait we are getting. one asset that is still trying to fight catch-up is steel. open again after the holidays, this is a standard deviation move, trading at its highest since 2009. anna: a lot of focus on the commodities, steel specifically.
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china returning to the trading fray. auto parts maker issued a new forecast which excluded its trading unit, that since the company plans to spin off the division in the second half of the year. despite the global shortage of semi conductors, that is hitting the auto industry. we wolfgang schaefer wolfgang schaefer are joined by -- we are joined by wolfgang schaefer, continental board member. give us the impact on your business at this point? wolfgang: if you look at research companies which are estimating the effect of the shortage on the market for the year, they think now the number is something around 1.5 million cars less than they thought.
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we are one of the big suppliers of electronic parts and products to the automotive industry, and yet we are affected and more than 700 million people are working 20 47. -- 24/7. anna: that is interesting to hear. will it result itself or does more me to be done and over what time frame? wolfgang: it will not be resolved in the next days. we think the second quarter is seeing the peak of this shortage , but there will be at remaining effects in the third and fourth quarter, probably into the first half of next year. it is hard to predict, it is not over now. we think q2 will be the peak. anna: let me ask you about the
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broader raw materials story. supply chain constraints are a feature of cart manufacturing in a number of areas, not just chips, but other parts of the supply chain as well. how does that affect your production? any other issues with any other parts? wolfgang: we are mainly affected from price variations, on the rubber side, natural rubber and synthetic show increases. shortage of raw materials, we do have it in other parts in that automotive division, but they are not significant. it is more the cost effect for us besides that semi conductor topic. anna: you have issued some new guidance, i am asked by one of
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my colleagues about your potential for reaching a percent-11% on the margin -- 8%-11% on the margin? wolfgang: we have done measures and our program for the next couple years to have positive effect of about one billion, it will be a big push for that. our order intake is showing other increases over the years to come. it will be another effect to get us to this target that you mentioned. anna: if the company still on track with the spinouts? i know you factored that into the guidance you are giving. is that still on track, is there
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anything that could slow the timetable? wolfgang: that is still on track. after the shareholder meeting, they approved that spin off, there is nothing that needed further approval. we are just doing the implementation now. i am sure we will be ready in september. anna: can i ask you about demand outlooks? you supply many automakers that are turning themselves into electric vehicle manufacturers. what does the outlook look like for battery ev's? what kind of numbers do you have in mind? wolfgang: we see a strong increase for these products and i am not referring to parts manufactured, but what we are delivering to those electric cars and components. it was an increase of 65% versus
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last year. anna: what is the outlook for european auto demand? you supply to the automakers. in china and that united states we sought demand bounce back. we are seeing extended lockdowns in many parts of europe, it is your sense of how quick that rebound will come in europe? will it be v-shaped, or will it linger for some time? wolfgang: we believe markets will pickup stronger than we are seeing. we expect in the second -- we expect it will be increasing in the second half of the year. anna: thank you so much.
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wolfgang schaefer, the continental cfo. i mentioned what was talking with biontech, and that falling this morning. we are still seeing a fall and not share price this morning. in his -- it had fallen as much as 19%, this is coming as that suggestion has been made that the thinking is in line with the americans that they are considering the suspension of these protections for pharma companies. it could be a long process. you see that share price reaction in this german biotech business. coming up next we speak to the eu chamber of commerce. more on that conversation.
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they have a lot to say on the china relationship. that is next. this is bloomberg. ♪
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>> it is that makes of positive markets, high volatility and no dislocations.
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overall, an appetite for investors with inflation trades. activities on the corporate side, also. a lot of elements were aligned to help less. -- help us. we saw the bmi index which was at the highest level since 1997, services are more impacted these days with the lockdowns. vaccinations make progress and we are positive the economy will open. it will help your -- help europe. anna: that was socgen ceo. they had their best trading
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revenue in years. that was pushing the share prices higher and continues to do so. that stock is up 4.7%. the european union will not -- eu sanctions on chinese officials over alleged abuse in the shanghai region. they also strategizing ways to counter takeovers. for more on that eu-china relationship is our brussels correspondent maria tadeo. in the briefing we are seeing, the one coming out of china, they are willing to keep the conversation open. take this conversation forward for us. maria: let us go straight into our guest, joerg wuttke, the head of european chamber of
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commerce. this was a deal that was agreed between china and the eu at the end of last year. this is something that germany was pushing for but now it seems that eu is not in a rush to ratify the deal. if it cannot be ratified, you cannot implement it. what will happen? joerg: it might be another seven years before they see it ratified. it is not dead in the water, but it is a's and thematic. -- it is assymptomatic. they are opposing the sanctions. i do not see it happening anytime soon. we are in an unfortunate situation. maria: what you're saying is
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that your hopes it will go through quickly will not happen. you're in for years? joerg: yes, sanctions are easy to import but difficult to lift. just look at the west and russia. thousands of years later and nothing has happened. these sanctions from the chinese side they will not be listed anytime soon. there is discussion going on. unless china makes a major step and lifts the sanctions. maria: i wonder, what does it mean for european companies, the whole point of this deal was to provide a level playing field european companies. that was the spin that this was good for the european companies. if there is no deal, what happens to them? joerg: they will not fall through the cracks. it is still 7%-8% growth.
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we will just participate as we did over the last decade. we would have been better off with more transparency and accountability. we are going to wait for this one. you have to be in china and in china more than ever. i guess we will do just that. maria: yesterday, the european commission put out the strategy and sent that state a was problematic when it comes to china. they also reiterated that there listen to needs to be more reciprocal. we'll have into the big chinese products like the road -- what will happen with the big chinese projects like the road?
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joerg: we have to make sure there is a level playing field because it is heart -- hard to compete against state-funded companies. we are looking at the relationships because we are competing against chinese companies in the markets against this level of initiative. we have lost a lot of deals because we cannot compete against state-funded enterprises. the road is something that is fading away. china will not throw money at companies but will ask for repayment. you can see in other places have their economies are struggling. i would not put much into the road initiative. i think it is being scaled down from the chinese i. maria: what type of chinese
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reaction are you expecting? joerg: political tension is bad for business. you have the case of h&m being chased down the road. my experience has been that despite the trump-induced tensions, china went the extra mile to safeguard u.s. interests within china. the guys on the ground here actually got the support from the chinese bureaucracy and i can see this already now. compartmentalization of politics on one thing and very harsh reactions from beijing. at the same time, they want to have more european business and make the extra effort in order
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to attract high-tech. it is also a bit strange because at the same time we still have the red carpet here. maria: thank you so much for your time and those insights and joining us on bloomberg tv. that was joerg wuttke, the head of the european chamber of commerce in china. anna: very interesting conversation. maria tadeo, our brussels correspondent. thank you to maria for bringing us that. coming up, central banks are in focus. we will discuss the market outlook with our market live team editor. this is bloomberg. ♪
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anna: welcome back to the market open. european equity markets are on the front. u.s. futures also point higher. ven, our strategist joins us. central banks are making decisions today. what will you be watching for? ven: in terms of the bank of england, we will be watching for
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expectations in growth forecast, there is no doubt they will do that. what will be interesting is what they say on bond purchases. it will and sometime in november, early december. the slowing of bond purchases is necessary if they are going to continue with those bond purchases to the end of the year. we will be watching for any signs of hawkish this although i do not expect it. anna: globally, we are thinking about inflation. away from the u.k. experience, inflation globally, what are your thoughts on where we have gone to on that inflation narrative? ven: fed officials have pushback on the notion of a taper because they are not concerned about inflation expectations down the line.
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they have sent that inflation will overshoot for a short time. after the framework they unveiled last year, they have moved to inflation targeting. the tolerance of average inflation will be higher than it used to be. the fed is thinking that temporary inflation will be a problem but they are willing to look through it. and all of the expansion, the biggest we saw -- before the pandemic -- we never saw 2% inflation for a long time. that is the message that powell is saying. anna: thank you so much for joining us. just a quick mention of one of the themes, that is a companies under pressure. we heard from the eu that they are considering suspension of the intellectual property rights on the vaccine.
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that has had a big impact on the share price of biontech. they are not in favor of waving it. we will continue to cover the story. "bloomberg surveillance: early edition" is next. ♪
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>> many people are anxious to start spending again, and spending in a way that they do not have to be socially distant. >> we will not go back to something similar before the pandemic. we will adapt, and i think it will be attractive. pres. biden: i'm not willing to not pay for what we are talking about. i am not willing to deficit spend. >> this is "bloomberg surveillance: early edition" with francine la


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