anna: good morning and welcome to bloomberg markets, the european open. i'm anna edwards. mark cudmore joins us from singapore. the cash trading's less than an hour away. ecb policy makers call fernand to crisis mode after the euro zone inflation rises to 3%. europe bonds declined. opec-plus meets, delegates

expect the group to stick to planned output hikes as they see global oil markets tightening later this year. president biden defends his withdrawal from afghanistan, saying it saved american lives. welcome to wednesday, 7:00 here in london. what are the market saying? mark: i do not know if it is the change of the calendar month, the there seems to be bearish fatigue in asia. over the past month people were upset about the slowdown in growth and the chinese crackdowns, but the delta variant in asia. suddenly the narrative has changed. we knew this would happen come september when we got beyond jackson hole. without any real catalyst, people see the time to get back in or buy, they are still

debating it but the narrative seems to be turning more positive at the margins without any real major driver. anna: the first of september, that is all it takes it seems. you can see for europe it has picked up with enthusiasm, the turn in sentiment you reference. futures moving to the upside following negativity yesterday driven by a number of factors in europe and the united states. the u.s. futures actor is looking positive. -- the u.s. futures sector is looking positive. we were talking about enthusiasm for travel in the u.s. we have hawkish commentary from the ecb, that is a factor as we look ahead to next week and yields rising on the back of that. let's look at the gmm, and what

that is telling you about the new mindset we have put ourselves into. mark: gmm reflects a mostly mixed picture. the only column that gives a narrative is commodities where we see weakness across the board. oil is slightly higher today with opec-plus ahead. it is in context the bloomberg commodity index is near the highs still. this is a little consolidation, and it is exaggerated by iron ore. we are seeing mixed equities picture, mixed markets and affects, but the narrative is changing -- mixed markets and fx, but the narrative is changing. we are looking at assets that are trading poorly as when do you buy the dip. assets wrecking higher, do you

chase this rally? anna: do you chase a rally in the euro? is that what you expect to see? a couple of them are calling for an end to pandemic measures. the crisis era is what is being used. mark: do you chase a rally? probably not, it is low enough volatility and is unlikely to run away. i'm turning more constructive. negative on the euro for most of the year, and i feel the narrative is changing. these comments yesterday are about yields and the growth story. this comes back to the vaccination rate, and we have a scenario where the first quarter

was about how terrible the european union vaccination rollout is. they were bungling it. they were holding it up. there were mixed messages. america was doing a great job. the narrative has shifted. america has reached 62% vaccination rates and are struggling to get higher. europe across-the-board above 60% and they are still vaccinating at a faster pace than the u.s. we are going into a winter were europe has had a slower pace of reopening, but it will be one direction, whereas the u.s. has moved quickly, but it will be weighing on sentiment in the winter that they will have a bad covid problem. that divergence will be in favor of european growth, and favoring yields in their margin, but it will not be a runaway story. they will not jump away from being dovish overall.

anna: another part of the world where they are playing the catch-up game, the japanese covid vaccination rate, 46.2% fully vaccinated in japan. this is a factor you need to look at. mark: i cannot believe how quickly japan has caught up on vaccinations. they were a real laggard, had barely started coming into the olympics. they will be ahead of the u.s. in a few weeks. i have been shocked how much there equities have risen. it is less than two weeks from the low, and we were so negative on asia. and particularly in japan, they did not get all the tailwind the

olympics might ring because they were not open to tourists. we have seen the high of the year in japan. that narrative has shifted 180 degrees. valuations are getting better and better. people are getting excited for the topside. anna: u.s. futures pointing higher, but yesterday's session was way down. when you consider what is expected and hoped for from the services sector in the recovery as we come through the pandemic and vaccinations are rolled out, they have stalled in the u.s. the travel story in the united states and the way we have seen the number of people going through airports. maybe people are feeling with the delta variant that they are

not as enthusiastic as they were to get out. mark: i think that is absolutely right. high-frequency data will back up this idea that the virus will weigh on consumer sentiment much more in the u.s. relative to the expectation. we were super optimistic about u.s. growth, the best in three decades, and they were doing a good job returning to the real world. i do not think it is a bearish or negative story, but for markets, u.s. equities have been the leader of not just recovery but the last 10 years. people have called for the end of that before the pandemic, but we are getting to that stage where it will be a struggle for u.s. equities to lead gains. i can see them bouncing around in a range mildly positive while

the rest of the world wonders why they are not catching up in enthusiasm seen in u.s. markets for some time. anna: you can get analysis and insight from mark and the rest of his team on mliv . coming up, germany's election race tightens. we will look at the polling. plus, business travel as we have known it might be a thing of the past. a recent survey shows many companies plan to cut down on corporate travel. we dig into why. up next, the hocks push back -- the hawks push back. we discussed that, next. if you have any 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. european market futures pointing to the upside. european inflation data sent bund yields higher. some said it may be time to discuss the end of the government bond buying program. joining us now is marcus morris-eyton, portfolio manager / director, allianz. good to see you. give us your thoughts on the latest news flow from the ecb. the higher inflation print at 3%, and the hawks that have a

wakened as a result. marcus: the debate will go on and on especially as inflation numbers pick up. the august reading seems to be around 3% which is an uptick from july. there are reasons why this seems to be transitory. the first is the base effect of energy prices last year. the second -- a much broader topic, supply chain issues across-the-board. inflation clearly will remain a topic for the coming months, and i expect the numbers to trickle up but the verdict is out if this is structural. the ecb meeting, inflation will be a debate. it is possible they may raise the gdp forecast for the rest of

the year. whether they begin to tailback their programs is increasingly likely if momentum in the economy looks good. mark: they raised the gdp forecast and talked about pulling in their pet programs, but these are incrementally hawkish moves. will there be any change in the scenario in the next 6-9 months were the ecb is perceived as hawkish and a threat to equity markets, or do they have a near permanent tailwind? marcus: i think they are in the same boat as the fed, and they have to be careful how they communicate. we are seeing the effects of that. at the moment europe seems better positioned than many

regions because of higher vaccination rates. all of these variants create huge risks on the horizon that make it difficult for central banks to manage. anna: i'm thinking in the european context, but it has a lot of relevance to the united states and what we heard from jackson hole last week. how much does the taper discussion get bound up in investor minds with a higher interest rate conversation? the fed seems to separate the two, talking about tapering but not leaving that in the market's mind about when they will hike interest rates. is that something europe should try to do, would that be helpful where the ecb goes next? marcus: i think it is difficult to say, and the two are

intrinsically linked. any tapering on this side of the atlantic must be communicated and not shock or surprise the market. that is when you get taper tantrum's. both central banks are keen to avoid the. mark: i know you are relatively bullish on european equities, and more worried about the overall equity outlook given the gains we have seen. where are you most worried about? what region are you most bearish on? marcus: we had a fantastic first eight months of 2021, but a few reasons why the next four months or more challenging, you have covid rearing its ugly head in certain parts of the world. we also have increasing signs we

may be passed momentum and peak growth. momentum is healthy but is lower than a few months ago. and then arise in geopolitical risks, and i do not just mean the middle east or afghanistan, but they are growing between the u.s. and china, which needs watching closely. maybe relatively more bullish on europe in terms of valuations and ownership, and we see that reflected in aggressive levels in europe in the u.k. in recent weeks amount which is a sign of an undervalued market. anna: let me ask about the earnings season and what we learned from it, and how it sets us up for the next one. one of the themes was all about pricing power, and the

businesses that had it would do better in a time when we saw supply chain disruptions and inflation threats. how long will that pricing power last and will it separate the wheat on the strong -- weak from the strong? marcus: it is lasting longer than we expected. generally it was very positive across-the-board. there were a few common themes that stood out from every company, and those were issues like higher freight costs, supply chain challenges. with regards to component shortages, clearly semiconductors have got a lot of media attention, but it is more broader now. we have issues of wooden pallets, and this indicates how every business is facing shortages. it is not demand issues

affecting any companies, it is supply issues. it will be more important than ever to have pricing power, and these pressures will last well into next year, which is better from what we were thinking a few months ago. anna: thank you very much, marcus morris-eyton, portfolio manager / director, allianz. let's get a bloomberg first word update. simone: president biden has declared an end to two decades of u.s. military operations in afghanistan, offering an impassioned defense of his withdrawal plan. speaking at the white house, biden called the airlift of more than 120,000 people over the last month unprecedented. he said he would not extend the war forever. pres. biden: we succeeded in what we set out to do in afghanistan over a decade ago.

and we stayed for another decade. it was time to end this war. simone: employees were told not to smoke for the next month even if working from home, the rules will be based on mutual trust, and will not include a punitive clause. they are the latest japanese firm to take action against smoking. a texas law barring abortion has taken effect as the u.s. supreme court deliberated over a bid to block the measure. the high court took no action. if it remains in effect, it will be the strictest in the nation. in the coming months, the conservative controlled court will hear an appeal that seeks to overturn the landmark 1973 roe v. wade ruling. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. anna: thank you very much, simone foxman with the latest news. china risk stories continue to pile up. the pmi in contraction while more sectors are pushed in the regulatory crosshairs. we will talk about that, next. this is bloomberg. ♪

anna: welcome back to the european market open. 40 minutes until the start of cash equity trading. european equity market futures pointing to the upside. risks to investors in china are multiplying as they slipped into contraction for the first time since april, 2020. slowing growth momentum in the

world's second-largest economy after china imposed strict measures to bring virus cases under control. marcus morris-eyton, portfolio manager / director, allianz is still with us. let's get your global perspective. and it comes to china, how dramatic of a turn from markets hasn't been in china, and in the mind of global investors, how much is it to the fore of exposure in china? marcus: it has reminded investors that china, unlike many develop markets that deserve a risk premium as a result of that uncertainty. one area we have seen that is in luxury goods were the european sector was hit hard as a result of president xi's campaign for common prosperity. the big question mark many investors have is what that means for the wealthy, and

whether that is a redistribution of wealth. that is the debate investors are having related to china in many sectors at the moment. mark: i understand people are wondering if this is a change in tack, but do valuations not matter? you take hong kong stocks and they are looking discounted in context of the rest of the world stock markets at record highs and expensive valuation given the liquidity priced in. does that -- is that not relevant, or will it be relevant again soon? marcus: i think it is always relevant, and valuations are high across-the-board in most developed markets. the problem is lack of availability for long-term investors, and what we have seen in recent weeks is the ability

of china to surprise on the policy front. any of these policy objectives can have ramifications for the whole industry in china, and that needs to be reflected in the valuation you pay for these companies. you will see a higher risk premium for china than we have seen in recent years despite the excess growth companies are able to deliver from china and other emerging markets. anna: thank you for joining us, marcus morris-eyton, portfolio manager / director, allianz. more on the subject of hong kong , that market coming up shortly. also coming up, traders await a decision on today's opec-plus output meeting. we look at the global oil markets and the challenges facing the industry. to what extent does the delta variant, how has that changed

plans at all for opec? how much are they sticking to the previous plans to increase output through the coming months? the oil conversation, next. this is bloomberg. ♪ ♪

anna: welcome back to the european market open. we see some positivity on european equity market futures. u.s. equity market futures point to the upside. two or 3/10 of percent. european equity markets looking to recover from yesterday's session. let's go global. linking it to what you were talking about with our guests, we want to talk about undervalued assets over in asia. specifically, you are talking about the hong saying and hong

kong stocks. the asia-pacific is underperforming. recent concerns around china. your view on whether you think the stocks are undervalued. you must think we are through the meat of the chinese countdown, i suppose. mark: i'm glad you phrased it like that. i think we are getting to the point in valuations where it becomes less about what you think will happen next on the policy front. that becomes hard to predict. i see no reason to think that the policy clap downs are over. at some point, because you can't know when it's over and that's not something you can forecast, you have to work it at valuation point. those valuations are looking so discounted relative to the stock market. what i want to draw attention to is the hong saying index price-to-book. going back to 1993.

this index is much longer. it's right around one. we get down here, we didn't get quite this low in the 2008 financial crisis. we got down here when we were panicking about china in 2016. we are right near the lowest levels it gets. that doesn't mean it won't get cheaper again. we could see major capitulation. long-term investors are going to go, unless you think that china is turning its back on capital markets, i find it hard to believe that given that they want money from the rest of the world, they are not changing their messaging around this at all. long-term investors are going to start getting pretty excited. the blended earnings were down to 11.5. the average is 11.9.

the price-to-book is 1.7. hong kong stocks are looking very cheap. can they get cheaper? sure. are they likely to cheapen in a years time? probably not. anna: cheap has become too cheap to ignore. he says, i like the way you asked that question. he said, that's not the point anymore. very diplomatically put. let's get a bloomberg business flash with simone. simone: thanks. wells fargo may face regulatory sanctions over the pace at which it's compensating victims and showing up its controls of its attempt to clean up scandals. two agencies are dissatisfied with his progress. the bank asked for more time to get the work done. it isn't clear win the watchdogs might proceed. shares dropped on the news.

morgan stanley has raised the wall street salary yet again. boosting pay for the second time in a month. our sources say the firm bumped base pay for junior bankers to $110,000. a mark that will now also cover first year advancement trading division. the news comes after the bank tightened wages to catch up with rivals. googles delayed its return to office until next year. citing pandemic uncertainty amid a pickup in global covid cases. a memo from the ceo says work on campus will remain optional until january 10. it didn't specify a mandatory return date. that your bloomberg business flash. anna: thanks very much. oil is ticking higher ahead of a virtual opec-plus meeting that takes place today. the alliance is widely expected to press on with planned revival of oil production and restore another 400,000 barrels a day.

that's on the bet that the global market can absorb the extra output. let's speak now to alex booth. he is with us this morning. good to speak with you. are your views in line with that view you expect that opec-plus will stick to their plan to increase production? 400,000 barrels, i think. alex: good morning. i think that's very much the case. if we look at what's happening in the physical markets, we are in a very tight balance scenario. we've seen opec-plus exports declined significantly through the month of august. down just over one million barrels a day. largely driven by saudi. nigeria has been struggling. also because extent. -- because axon. we've seen high refinery runs across the system. we've seen prolonged direct

crude. the summer has remained very hostile in the middle east, for longer than normal. in nigeria and other countries in west africa, they are struggling with increasing production all right anyway. we expect this again increase of 400,000 barrels a day, as is their plan. ultimately, the global balance is at a height as well. we are seeing net crude flows shifting into a net imports environment. that's taking more crude oil. we are seeing global onshore inventories declining slightly. including in china as well. we can touch on the demand concerns we are seeing there. overall, i don't see any reason to change the plan as it stands now. going forwards, one of the major risks has been kicked further

along the road. the amount of oil coming back from around. we could see a deal coming round the sanctions once the new government is in position after the elections. that has been completely kicked down the road. [inaudible] mark: you think that opec-plus is going to stick to the game plan of 40,000 barrels. this news is bigger for oil markets than opec-plus. is that naive? alex: i think the original plan with opec-plus accounts for any increase in supply with the wrong. it's really around the timing. there has been a clause within the agreement to increase imports. that should be used once we have

a better understanding of what's going to be happening. i don't think we should be seeing any surprises. that's the bottom line from the meeting this week. anna: no surprises. we get surprises in some parts of opec-plus holding out for a better deal. i guess we will see if we get any of that. the bigger picture about demand. talk to us about that. the delta variant, the spread of that to the u.s.. we have been looking at high-frequency data over the last couple days that has talked about topping out, particularly in air travel perhaps. does -- there's that part of the narrative. there's the china narrative as well. they've had fewer cases but they have cracked down much larger. what is the net result of all of that fight against delta? alex: is a very interesting point. up until now, there's been a lot of concerns around delta.

this isn't new. it's been with us for months. we have been living with it in europe for maternity now. i feel that the tide is changing slightly in the u.s.. up until now, the demand numbers have been strong. generally good through the summer for gasoline, good economic activity as a whole in the u.s.. what we are starting to see is a swing between the case rates and the mortality rates in the u.s.. where the number of deaths are increasing quite significantly in the u.s. compared to countries or regions such as europe and u.k. where there is ultimately a higher aged population percentage. up until now, the activity and demand driving for products in

the u.s. has been good. i feel that we could be going into a turning point. the news around google delaying its opening. i feel that that narrative is going to gain momentum. we could see demand topping out here in the u.s. europe, we have been quite resilient. there's been nowhere near the growth that you saw in the u.s.. things are taking off. mark: to jump in very quickly. i want to get your longer-term viewpoint. i'm aware of the uncertainty around this with the covid situation. for brent crude, we are at $72 now. do you think it will trade at $60 first or $85 first? alex: yeah. i think we are likely to see support here. i don't think we should see a trading lower. in the medium-term, it should be

in the 75 range. it's a fairly comfortable range. opec-plus managing that supply. could we see any demand shock to that? yes. as i say, the situation is being managed. ultimately, we are at low stocks as a whole on a global basis. is it going to hit 85 first before 60? possibly. do i think it's going to go up that high? not really. not for a good while yet anyway. anna: thanks for joining us. his thoughts on opec and the opec-plus meeting that takes place today. coming up, the fear card. one pole. the cdu tells us a red green coalition would govern from the far left. the latest on germany's election is next. this is bloomberg. ♪

♪ >> the key issue now is that we are really fighting for the majority in parliament. opinion polls show that we are far behind this goal. we have to fight. now we are having the key persons on board. he's not the only one who is fighting. we are having a team. i'm part of the team. this doesn't mean that this is something. it's a decision for the future government. >> [inaudible] >> absolutely. i'm confident. i'm sure that we are having the chance to win the election. winning be -- means becoming the biggest parliamentary group. >> [inaudible] >> that is fair.

this is only part of the truth. the truth is that this parliamentary group will become much more far-left than we are seeing them actually running. this is the difference. these are the kinds -- guys behind --. we are seeing a parliament with a left-wing, very strong. that's the reason why we are now starting a very hard campaign. >> [inaudible] >> the key point is how we regain growth for our economy. we are lagging behind our potential. that's the reason why we are pointing out that this is not just a question of a green deal

or environmental policy. this is industrial policy. this is economic policy. this is social market order. these are instruments of a free market order for implementing the climate goals. that is something which fits together. in our view, that's the right answer. anna: that was the cdu economic council speaking to maria tadeo. four weeks to go until the german election. several polls, as we talked about. one puts the spd five points ahead of angela merkel's conservative block. a red green coalition would govern from the far-left. they are within touching distance of knocking the conservatives from power for the first time since 2005. coalition building looks more complicated than ever. let's get into the weeds on this

story with maria tadeo from berlin. good morning. bring us up-to-date with the latest polling. maria: yes. we had a whole string of polls that we've seen over the past 24 hours. one in particular is the spd pulling 27%. that's a huge lead on the cdu. another one thing the spd at 23%. a third one at 25. overall, when you take a 360 view on this, you see that the spd is now leaving by five points. it isn't about a tight race. it's about a firm leave going forward. it goes back to that conversation that we had yesterday. he said, the point is that we are tracking these polls. the campaign is going to start now. we are going to campaign hard. that is being reflected in the language coming out of the cdu. they are saying that this will

be a radical government. this is becoming much more on the attack, much more personal. some pretty tough language. she says, this is a left coalition. this will be a radical government. we need -- we will see taxes go up. that is the fear card. whether it translates with voters remains to be seen. if you look at the polls, that strategy is not really working for the cdu. the germans are not buying that. mark: good morning. in terms of stead being -- stepping up the rhetoric, they are playing up the fear that the far-left will join in a coalition. is that threat seeming like a viable? is it dissuading people or is it going too far? alex: -- maria: you know, when you look at the many coalitions that will come out from this lecture, we know that this will be in most scenarios a three

party coalition. it will require not just the green status effect but also a new force that would join in. to say that it's inevitable to have the left of the left party there joining in that government is not a given. it's a possibility but it doesn't mean that it will happen. in fact, the sentiment in germany is that the pay maker be the spd. we will speak with him tomorrow in a bloomberg webinar. it doesn't mean that it's a shock that it is radical to the left. that's the only option going forward. the focus is very much on the spd. whether or not the liberals will join the government with the greens. anna: ok. that's an important conversation with the spd. that's coming up on bloomberg. thank you. coming up, the stocks we are

watching this morning. a distiller says businesses back for 2019 levels as bars and restaurants reopen. this is bloomberg. ♪

♪ anna: welcome back to the european market open numeric -- open. equity futures pointing to the upside. a nice rebound expected for european stocks this morning. we start with the drink sector. doing pretty well there. sales momentum returning. >> yeah. it's very similar to what we've seen with us some -- a few of the some larger distillers and brewers. getting people back into restaurants and bars has been key. that's the part of the business that makes higher margins.

people drink and cocktails at home is great. people drinking cocktails and bars is better. it looks as though that is helping. shares rose this morning. some of this may have been priced in. we've heard it from other companies. mark: i haven't been contributing to those sales. that is interesting. what is happening with european minors today? >> earlier in the year, iron ore couldn't be stopped. they kept rising. there was a huge surge over the first half of the year. second half of the year has gone the opposite direction. we had arrived last week. that has turned this week. really, this is a focus for the rest of the year for the mining sector. analysts have been positive about cash returns. that will be something to watch as the day goes on. may well be a little bit of weakness in the mining sector. anna: thinking about companies that have been doing ok based on the pandemic. this is a french business.

tell us the story here. >> this diagnostics company got a huge boost from testing. the key thing here is whether the demand can keep up. whether they can maintain that strong performance. this morning, they probably kept in line with expectations. it was driven by costs. there may not be a huge boost to their shares. anna: thank you very much. car for as well. we've seen new slow there. the billionaire arno selling it for $854 million. that is something to watch when it comes to the french market. a number of stocks to watch on the french market today. we'll keep those in mind. big picture is that futures look much more positive than they did just a couple hours ago for european equity markets. u.s. futures up by three tents of 1%. europe looks as if it will recover today. mark: yeah.

it is similar to the end of yesterday's show. i don't see what will the rails a good mood. i don't expect this to be super enthusiastic. there's not any real catalyst at the moment to derail. opec-plus won't be it. it would have to be a shot for -- shock. even the jobs report, the bar is high to offset the overall tailwind. we know central banks are super supportive. earnings are really good. the economy is slowing down. central banks will stay more supportive for longer. the end of this year will be positive. not enthusiastically so. it will be talking about climbing a wall of worry every week. anna: we will do that through september as well. thank you very much for spending the past hour with us. tom mackenzie joins me in the next hour. we will take you through the market open. futures are pointing to the upside. up by more than 1% in some

cases. euro stoxx 50 futures up by more than 1%. some movement in french listed companies. we went through some of the news lines to watch out for. we will be back with the market open, next. this is bloomberg. ♪

♪ anna: welcome back to the european market open. a minute to go until the start of cash equity trading. tom: here are your top stories. ecb policy makers call for an end to crisis mode after eurozone inflation rises to 3%. opec-plus meets. delegates expect the group to stick to planned output hikes. they see global i -- oil market is this year. president biden defenses report with afghanistan, saying that it saved american lives. we bring you our interview with the nato secretary-general.

anna: 20 seconds to go until the start of the european equity session. let's have a look at where we are positioned across the futures. there will be higher at the start of the european trading day. it looks as if we are putting to one side concerns of yesterday. the inflation story, weak consumer in the united states. instead, focusing on a resilient japanese market. a recovery in chinese stocks. it looks as if stocks go higher in the start of trade today. tom: a strong trade session in japan lifting the broader a -- msci asia-pacific index. a lot of turnover in shanghai as well. some relief that may be the regulatory challenges of china have reached a bottom. that's true in hong kong as well. some of the big tech names gaining as well. let's check in on how things are shaping up. futures pointing higher. solid gains in spain. the ibex is up more than 1%.

the ftse 100 close to that 1% gain. you are seeing 53 points upside for the ftse 100. up in france as well. brushing off those concerns about higher inflation. brushing off the voices we've been hearing from the ecb, pushing back and suggesting now is the time to start talking about where you are moving that crisis support in europe. anna: a lot to talk about this morning. we will focus in on the conversation. european equity markets bouncing this morning despite ongoing hawkish comments by ecb officials on phasing out stimulus and surprising euro area inflation data. it may be time to discuss and exit from crisis mode. that's after euro area inflation trumped to 3% in august. let's focused on europe. georgina taylor is with us this morning. good morning to you. do you have sympathy with those

who use being expressed by the hawks of the ecb? it may be time to discuss bringing some of those pandemic measures to an end. what is the time horizon you are looking at here in europe? georgina: good morning. angst for having me. they have to take some opportunity to start to slow the exit from these extreme stimulus measures that have been in place. it's what makes of data they respond to that is a very important nuance to all of this. starting to exit these extreme measures, starting to reduce qe is not the same as rate hikes. that is something that the market is grappling with at the moment. even if we get a move to exiting some of these extreme stimulus measures, we don't have to necessarily become too concerned that rate hike -- rate hikes are eminent. that's a real dilemma for markets at the moment to work out what is going on. tom: a dilemma indeed.

if that is the scenario that unfolds, how do assets react? the market needs to start pricing in a more hawkish ecb. georgina: i think there are a couple of impacts on markets. the first is that all equity markets around the world have benefited from an incredibly low interest rate environment at the same time as having stimulus measures alongside that. that has allowed a risk premium to reduce risk to assets. everyone has enjoyed that environment, particularly cash flow companies. that discount rate is made relatively well anchored. the second half of this year, we will get more volatility coming through. that environment is set to change. the actual mix is quite tough to call. i think you start to get a

change with how companies are performing across the market. auto, generally a more volatile environment as investors start to work out what this really means. a big change in the landscape ahead. anna: where does that leave european government bonds then? we saw that market responding and yesterday's session. it will again. i wonder how all of that filtered in. we have to be mindful of the fact that some of the voices that we've heard are some of the hawks at the ecb. others may have a different view. are you rethinking your strategy around government debt as a result of this? georgina: where we do have high conviction is different bond markets around the world. incredibly low level of bond yields in europe. that could start to change. it could start edging up of european bond yields. very much relative to the u.s..

that gap between the u.s. bond market and the european bond yields. it has already been happening. it's about repricing the difference between central bank policy approaches to this environment where we are seeing inflation rising. it's a different mix we are seeing. we see more value at the longer end of the yield curve in the u.s. bond market relative to the european. exactly as you say, that's where there's a bigger change in rhetoric that's happening. in europe versus it hasn't started in the u.s.. tom: that divergence in global bond markets is worth focusing on. an opportunity. in terms of the yield environment, we saw this. higher yields here in europe. how does that play into the financial sector? this is a defensive play, you argue. georgina: yeah. it's interesting actually. a lot of sectors have done well.

economic growth has improved. the pandemic is by no means over, unfortunately. banks and financial stocks have lagged that. they did better earlier in the year. they started the market moving. for us, if you want some cyclical exposure, there's been an increase in economic growth. also, a beneficiary from a slight set -- shift in the yield environment in the background. we think the financial stock could do well. we like european banks relative to the market. what's interesting is that they behaved on certain days. if equity markets start to become concerned about a higher yield environment, that's one area of the -- of the market that can benefit from that. we like that. it's a nod to that slight shift in the environment in the

background. tom: stay with us. georgina taylor. we will be talking about the u.s. consumer confidence falling to a six-month low. ahead of the august jobs report later this week. or on that next. this is bloomberg. ♪

♪ tom: welcome back to the open. we are nine minutes into european trading. anna: equity markets making moves to the upside. substantially so. recovering from yesterday's losses. let's get onto the move. we start with the french supermarket change. there's a few movers and the french market this morning. the supermarket chain based in france, the billionaire part owner of this is the world's third richest person. he is selling his remaining stake in this company. 14 years after he's bought it. you can see that the whale -- the sale is putting weight on the share price today. tom: the drink's maker reporting for your operating income. it beat estimates. there's a line here.

they will be buying a stake in sovereign bands as part of their push into the u.s. markets. getting 3%. anna: the retail space in the u.k.. the business is on many high streets in the u.k.. we put it in here. the outlook for this business looks to be fairly cautious. those are the words of an rbc analyst. they see profitability at the lower end of market excitations. that stock is selling off a little this morning. tom: a core part of every u.s. high street. we are switching focus to the u.s. now. consumer confidence falling to a six-month flow. it's just ahead of the august jobs report. friday is expected to show a deceleration from the rapid employment that we saw in july. georgina taylor is still with us. is there a jobs number that you're looking at that would

change your investment strategy at this point? georgina: for us to be honest, we are pushing through a longer-term horizon. it's about volatility that will come around these jobs report. powell is very clear that inflation is transitory. we need to focus on the mix in terms of inflation and how that spurs further growth. wages form a part of that relationship. for us, it's ok. you get a bit of a softening. the emphasis goes from the concern and focus on inflation. for the u.s., it has moved on to growth. and what that means for that policy response and the response function of the federal reserve to do that. for us, growth might soften a little bit from here. we might be able to weaken growth metrics.

that has to feed into your investment strategy about how much you want on the table. we are thinking about going into the second half. we want exposure. maybe we will put protection around that now. there will be a lot of volatility around that response function at the central banks as they way that inflation data. anna: linking the inflation and jobs data. the wages conversation. what are you looking for on wages to tell you whether we are going to see something, a more structural change in the u.s. market? just anecdotally, there are two different parts of the u.s. economy that stood out to me from the news flow in the last 24 hours or so. what are you looking for on the wages front? georgina: for us, there's two parts to the story. there are going to be pockets within the wage inflation data

where we start to see increases. there's a reduction in supply in some sectors. in different countries. in the u.s. as well. you might start to see pockets of wage inflation coming through. there will be a broader picture. if you get in -- wage inflation, it's about pricing power for the greater inflation picture. whether this is a story about this we john margins or whether this is a story about consumers being able to benefit from that or not. it's about that mix between the wage inflation coming through. for us also being able to be passed on. that's important for thinking about the profit outlook. it's the mix that were looking at as opposed to one specific number for one specific segment of the economy. tom: tie that into the rates environment. maybe there is mispricing around real wages.

georgina: yeah. it's interesting. for us, we are macro investors. we are looking for anomalies. it's interesting to us. there's a mismatch of what is being priced in. the negative real rates that are persisting are perhaps something that does start to correct over the next couple of years. you have very low interest rates. this is more around the five-year part of the yield curve. there is some rate hikes being priced in. what's interesting is that inflation expectations remain stubborn, remain incredibly high. there's negative real rates, showing that there's a mismatch here between what the market expects. for us, that corrects in two ways. they can come from either side. either inflation is transitory and it starts to reduce and you get the current action -- correction coming, or we get more persistent inflation in the

fed has to respond more directly to that. you get interest rates being the correcting part of that anomaly that we see in markets. as i say, over the years, we see that real weights will start to rise. the anomaly starts to correct. anna: how will the dollar respond to that? how much do you like the u.s. currency as a result? some talk to us about how they wonder if the u.s. dollar strength can last, given the concerns around inflation. what is your thinking on the u.s. currency? georgina: for us [inaudible] coming into this year, we started to increase exposure again. what can support the dollar? a lot of macro uncertainty. looking for opportunities that could work in a couple different macro environments. if you start to get that move in

real rates, there's a positive relationship between real rates and the u.s. dollar. it's not consistent over time. we think that that could kick in again. also, there's more macro uncertainty. we think the u.s. dollar can be a little bit more of a defensive currency than what we've seen over near-term history. for us, it is twofold. a bit of defensive exposure. if you believe in the real rates , that could provide some support for the u.s. dollar going forward. anna: various reasons you see to support the dollar. thanks very much. georgina taylor. let's get a bloomberg business flash with simone. simone: thanks. wells fargo may face regulatory sanctions over the pace at which it is compensating victims and

showing up controls as it attempts to clean up scandals. to u.s. agencies worn that they are dissatisfied with the progress. the bank asked for more time to get the work done but it is unclear when the watchdogs might proceed. shares dropped on the news. morgan stanley has raised the wall street salary yet again. boosting pay for the second time in a month. sources say the firm bumped base pay for junior bankers, a mark that will also cover first-year staff in the train division. the move comes after the bank hiked entry-level wages to catch up with rivals. nomura will tell its employees not to smoke during office hours next month. that's even if they're working at home. the roles will be based on mutual trust and won't include a punitive clause. it's a latest japanese firm to take action against smoking. google has delayed its return to office until next year. setting pandemic uncertainty

amid a pickup in global covid cases. a memo from the ceo says work on campus will remain optional until january 10 but it did not specify a mandatory return date. mcafee woods new etf will follow an index that excludes industries including alcohol, banking, gambling, or gas. is largely tech and consumer firms. if approved, it would be the second etf that would -- that they launch this year. anna: thanks very much. coming up, 84% of companies have told us that they plan to spend less on post-pandemic transport. we bring you our survey on the future of business travel, next. this is bloomberg. ♪

♪ tom: -- anna: anna: welcome back to the european market open. european equity markets made gains, recovering lost ground of yesterday. let's discuss today's bloomberg big take on the future of business travel. eu nations have voted to impose fresh restrictions on nonessential arrivals from the u.s., dealing another blow to

the transporter's history. tom: 84% told us they plan to spend less on travel after the pandemic. majority of them plan cuts between 20-40%. joining us from paris is torpid tell. what exactly did the survey reveal? >> that's right. the survey revealed that the findings were uncontroversial. companies, organizations going after the pandemic plan to cut back on travel. business travel happens for many reasons. it happens to seal deals, for internal meetings, for business people who need to go to conferences. the findings were little bit lumpy. companies will probably not cut back on travel if they are going to seal a million-dollar deal and they are talking about the

cost of one business trip. definitely, the signs are showing that for internal meetings, going to conferences, a lot of fat will be trimmed. companies will resort or will go back or continue to use a lot of the tools that they grew to rely on during the pandemic. that's video calls, all kinds of virtual communication. anna: what do company bosses have to say about the reasons why they are cutting back? you touched on it slightly there. they are able to do things in different ways. >> it should be noted that we are talking about a structural change. we are talking about the next couple of months, assuming vaccination takes hold and the pandemic starts to subside a little bit. there will probably be pent-up demand. companies will get back.

going forward after that demand, they are saying that the biggest reason is to cut costs. there just isn't a lot of justification for many of the trips that happened before. there's also reasons, such as climate change. companies have made a lot of commitments going forward to cut back on their carbon emissions. airlines and air travel is a major source of emissions. tom: do we have a sense of an impact longer-term on airlines? georgina: this is bad news -- >> this is bad news for airlines. if business travel is cut back to such a significant extent, airline business travel may not take a significant amount of space and airplanes. it can make up as much as three quarters of profits because business travelers tend to

reserve at the last minute. they change their reservations. they want better service so they pay much more for their tickets. this is a very lucrative end of the business model from many major network airlines such as air france, delta. they could be facing a big structural change after the pandemic in the way they make their money. tom: a big hit to those airlines. that's a big take. well worth a read in terms of the changes around business travel. coming up, sbd five points ahead of angela merkel's conservative block. the cdu merges. a red green coalition would govern from the far-left. the latest on germany's election is next. the markets are in the green here in europe.

optimism is the name of the day. this is bloomberg. ♪

anna: welcome back to the european market open. here are your top stories. ecb policy makers call to an end to crisis mode. inflation zone rises to 3%.

opec-plus delegates expect the group to stick to planned upward hikes as they see oil market signing this year. president biden defenses withdraw from afghanistan, saying it if -- it saved american lives. half an hour into our european trading session. i had to check, it is september already. we seem to have started a new trading session. tom: you cannot keep these markets down. futures are over in the u.s. up quite strongly. it is looking pretty solid. stoxx 600 is gaining. u.k. is also in good shape. the dax is gaining. a full 1% gain for the cac. some optimism brushing off some concerns. it is time to think about waning

the european economy off some of this ecb support. inflection -- inflation remains in focus for the month of august. let's switch on to the sectors where it is green all the way across the board except for two sectors. travel and leisure are at the top of the pile. gains around 1.5%. there was some selling yesterday on the back of the news that there would be a restriction of passengers. retail is also at the top of the sector list. let's get first word news with simone foxman. simone: president biden has declared an end to two decades of u.s. military operations in afghanistan. he offered a defense of his withdrawal plan. speaking from the white house the day after the last american forces left the country, he

called the airlift of more than 120,000 people unprecedented. he said he was not going to extend the war forever. pres. biden: we succeeded in what we set out to do in afghanistan over a decade ago. then, we stayed for another decade. it was time to end this war. simone: in california firefighters battle to keep the raging wildfire out of south lake tahoe. have been able to keep the blaze away from homes and cabins. it is one of more than one dozen wildfires that are major in california. 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. this is bloomberg. tom: simone foxman. with less than a few weeks before the german election, one

pulls five points ahead of angela merkel. the cdu counsel had warned of what the coalition could mean for germany. >> the truth is that this group of democrats, including the greens will become much more far-left than we are seeing them actually in the running. this is the difference. these are the guys behind all of the faults. we are seeing a parliament with a left-wing becoming very strong. that is the reason why we are now starting a very hard campaign. tom: let's get the latest from berlin. is this new strategy from the cdu expected to hold up? this is what they are banking on, the fear card. maria: yes. it is. and the interview that we had yesterday with merz he was very

clear. he said, we have four weeks ago. the real campaigning starts now. we will tell the german people and they will come to understand that voting for him does not -- it leads left to the left climate extreme makes -- extremists getting into the government. that is what they're hoping for. if you look at the polls, they tell you a different story. the stb is cementing its lead. have an incredible lead. if you look at the numbers just a few weeks ago and highlights and signals the huge decline from the cdu. so far the message is propped up by very radical members in very radical proposals is not something that is sticking with the german public. anna: a few weeks ago.

thank you very much. maria tadeo in berlin. let's stick with that german theme, guntram wolff is br uegel's director. we will widen to the european economy, some challenges that we all face right now. i know you're just embarking on your meeting. just a focus in on that german story right now, how significant do you think these german elections are going to be in terms of setting the direction for policy in germany? there is a lot of talk on the fiscal side. guntram: it is a hugely consequential election. the first time in 16 years that there will be a new chancellor. who will be the new chancellor? that is a question of importance for germany but also for europe as a whole. what we are seeing is very

different ideas about the direction of germany, the foreign policy direction which is important, the attitude towards china. there are very fundamental shifts. on the fiscal policy front i would say it is still unclear. my impression is that -- place the cards relatively tightly means he will not radically change the approach fiscal policy making that germany has taken. he will be less frugal than the finance minister. it is very important, but it is not that germany will all of a

sudden become a spending state. in that sense, there will be a lot of continued he. i also think the red campaign is not really going to stick with the german electric. tom: that is one component. you're saying that maybe we should not overplay what some are arguing could be a seachange in terms of how germany looks at fiscal spirit when it comes to monetary policy, we have heard from a number of names. holtzman over and austria. now is the time to start thinking about the support from the ecb. guntram: the first important point is that it is already an

interesting pattern emerging here. even the german president has been a little more cautious over interpreting one or two single data points on inflation. i think there are good reasons. a lot of inflation that we are seeing, inflationary analysis that we are seeing and what short-term cost pressures will fade in the course of the year. -- fade in the course of the year. if you want them to get out higher than the inflation target you need to see wage settlements that are much higher than they are currently. i don't think the data -- they are still quite moderate. the union is now demanding more, but that does not mean they are going to get it. i really think next year they have to decide and they have to really evaluate the data.

for the moment they need to focus on the orientation or the medium term numbers to not suggest that we have a huge cost push. anna: you mentioned, i think -- will be speaking later today. perhaps there is still time. thinking of the support to european economy, i know this will come up at your and meeting, the eu recovery fund. how much of a huge structural shift has this been for europe, how much as his changed their ability to respond to future crises? guntram: the recovery fund has been a game changer. it has brought back confidence that european countries can work together, agree together on joint stemless programs to find the green transition. a lot of that money goes to

greening our economy and achieving the green goals of the european union, decarbonization of 15% by 2030. this is a significant piece of stimulus and peace of fiscal support for the european economy which was needed at a moment last year. in that sense, i am very positive on that front. the key now will be proper implementation, making sure the money goes where it is supposed to go in is no corruption. then the debate will gradually turn to a question of will it have to be repaid and at what stage in how to repay it? that discussion will come a bit later. tom: what else can that european union be doing to build resilience into the economy, into the society?

fifth, some argue, we will be seeing -- if, some argue, we will be seeing more pandemics? guntram: i think that is crucial. the start of the meeting was this topic. the global risk of pandemics has been rising over the last decades due to the loss of climate change -- due to climate change. this risk is an important risk in the likelihood of new pandemics locally emerging has gone up. europe as well as all the countries around the world have a big interest in increasing the funding for pandemic prevention and response. we have been working closely with the g20 under the italian presidency to ensure that there really is an ambitious program for more funding to ensure that

not only we can end this pandemic -- because we have the needs to end the pandemic -- but also to have the funding available to detect new pandemics emerging. and to stop them before they become so deadly. i think this is one of the key priorities for the world community. priorities -- priorities for the world community. your complete big part. -- europe can play a big part. we have the technologies. the european union has supported mass amounts of vaccines during this pandemic. i really think they can contribute something to the world. anna: what would preparedness look like? in terms of the amount of money that government should have ready to go on the sidelines. what have we already learned or is it too early to say just yet?

guntram: i do think preparedness means not only global detection systems that need to be funded properly, but local preparedness meaning you have to have a proper infrastructure, laboratories and so on. some of those hospitals and laboratories need to be better equipped. there is a question for the world community, how could we make sure that the poorest countries of the world have that kind of infrastructure? it is often that the poorest countries -- new viruses that can jump over from animals to humans. is at that stage where you have to have the findings to detect those things and be prepared. the other big point is if we

have the manufacturing capacities ready for producing larger quantities of vaccines and other medical countermeasures in a short period of time. i think that is where the eu comes in. we have to subsidize these kind of industrial capacities. tom: some ideas there on how to build resilience in the european economy. thank you very much. coming up, nato tells us the alliance is committed to aiding anyone and evacuating afghanistan. that conversation is next. this is bloomberg. ♪

pres. biden: we succeeded in what we set out to do in afghanistan over a decade ago. then we stayed for another decade. it was time to end this war. tom: president biden giving an impassioned defense about the u.s. withdraw from afghanistan, rejecting criticism that the process was mishandled. following the exit, nato says the alliance remains committed to aiding anyone at risk in leaving that country. they have the capability of

conducting long-range strikes. he spoke to tom keene. >> to ensure the afghanistan does not become a safe haven for terrorists. we have to remember the reason white nato allies joined the united states going into afghanistan in 2001, in response to the terrorist attack on the united states. hundreds of thousands of canadian and european soldiers were alongside american soldiers for 20 years. we have prevented afghanistan from being a safe haven and we need to ensure that is the case in the future. we will monitor new rulers in kabul in nature that nato allies have the capability to destroy from long-distance, terrorist groups if they try to breach that allegiance. >> because of the time

constraint, i want to focus on the important resolute submission. the idea of the italians west of afghanistan, the germans up north where the northern alliances, and now there is a turkish flight in the middle providing nato support to afghanistan. -- turkish flag in the middle providing nato support to afghanistan. explain the turkish --? >> nato has ended their military presence as that united states has. those men and women have endured it for so many years and their efforts in service was not in vain. turkey has played a key role in the airport and they offered to continue to support the airport. the airport in kabul is a vital link to the world to get

military a in but also enable safe passage for those that want to leave. nato allies have strongly stated that we will not forget all those who are still in afghanistan who supported us who are at risk and we will ensure they can leave afghanistan. anna: that was the nato secretary-general speaking to bloomberg. coming up, we will back to the markets. later today we get jobs data out of the united states. we will look at what the private sector tells us when it comes to the broader sector. payroll numbers are due on friday. we will get back to the markets conversation next as u.s. futures point to the upside. this is bloomberg. ♪ this is bloomberg. ♪

anna: welcome back to the european market open. european cream markets seem to be flying this morning. joining us now is from the bloomberg markets lifting. she can give us some insight. good to see you. what is behind this bout of optimism? is it just the date? >> i do not know what to tell you. it is september, the markets are

back alive. markets are rising. those who have come back from holidays are looking at these and thinking, this is a dip for me, the moment for me to jump in. that is something to keep in mind. there is nowhere else to go but equities in 2021. tom: it seems like investors in this part of the world are brushing off comments from the hawkish ecb. how are you reading into that? >> the ecb has been pretty much darvish, as we get more hawkish comments that are more known to be leading to that side, it may not really have an impact on the bottom line. they have been very clear about the march deadline. it may get little more interesting come september. inflation is running high. especially in germany, it is expected to run it 5% there.

we also have a speaker later who is a known hawk. . anna: we have the highest inflation numbers in germany. we saw u.s. data driving a little bit of risk aversion yesterday. we have the adp number, job creation do later. -- due later. what are you expecting? >> the number came in last month at lower than expectation. it was posted given in vic -- give an indication -- it was supposed to give an indication of where they would be. we expect the number to be higher. that is a quote number on the terminal. -- cool number on the terminal. the manufacturing numbers are

coming out in the wage subsection there can give us an even more clear picture of what to expect come friday. tom: looking ahead to friday, from our market lifting. the importance of the wage -- market live team. the markets of the wage numbers. u.s. futures are pointing up. surveillance early edition is up next. this is bloomberg. ♪

>> think the exit itself was badly bungled. no question about that. the mistake goes back to the trump administration goading -- negotiating with the taliban. >>