anna: welcome to "the european open." mark cudmore joins us from singapore to take us through the market action this hour. the cash trade is just less than an hour away. here are your top headlines. traders way the economic recovery after data overnight points to slower u.s. labor markets. investment garbage. talking trash about treasuries.

rates rebound after an initial selloff. plus the long march. the ceo of the hong kong stock exchange sees china's regulatory reform continuing and governments around the world following suit. we bring you that conversation and we look ahead to conversations with hsbc's ceo. welcome to the european market open. 7:00 in london this thursday morning. what are the markets saying to you? mark: good morning. in the very short term, markets are directionless. most stock markets are near record highs, but just in the short-term term we are lacking direction. we are always looking ahead to the next catalyst. this time it is the jobs report friday. i don't think that's going to derail us. the whisper estimate for it is

increasingly negative but i'm not sure that's going to bring -- derail risk assets. the fed is not going to be rushing to tighten policy. anna: so that is the backdrop. that is the nature of markets to focus on. let's have a look at the futures picture for europe and the united states an hour away from the start of cash equity trading in europe. the futures are a little lackluster in europe down by 0.1%. 0.2% on the dax futures. u.s. futures fairly calm this morning. yesterday you mentioned records in a number of markets. the nasdaq is one of those. mixed in the u.s. overall yesterday. the nasdaq did hit another record. some gains in europe. perhaps taking a little bit of a breather from modest gains in europe yesterday. it seems september has got off

to a strong start. yesterday we were talking about china and technology. more salvos overnight, but maybe the market learning to live, companies learning to live with what is happening on china regulation. and the latest on the data we received out of the u.s. and elsewhere. what do you see on the gmm? >> it is really quite a mixed picture. we have seen aussie stocks weaker. the iron ore story have talked about a lot, weakness there. every column across the board today is very mixed. there are not big moves. the aussie market is the biggest of the lot but it is not exciting. we are expecting september to be a positive month. we are going to get more volatility out of china. we are not expecting policymakers -- policy measures to end. we are waiting for the data to

confirm this idea that growth has peaked. does that really derail anything? as long as we are not heading toward recession, consensus for the forecast for next year for the world economy is 4.5%, a healthy level of growth even if it will not match up to this year. this is going to be an ok september, but we lost volatility points and tomorrow's job data is the next we are looking at. anna: disappointing data on job sales for the u.s.. yesterday, the private sector report. what about tapering and where that takes us in the u.s.? there has been chatter about how the taper comes in november, maybe that hits markets, more upside in the short term. what are your views on that? mark: i'm one of those people who thought we were going to get tapering clarity in september, that they would give us a firm date. i'm losing faith in that.

i think they are in no rush, they can taper later on. more and more people are thinking tapering might be a november story. if that is the case, markets will be happy. even if we did get tapering, and announcement in september, i don't think it would derail markets for long. the lack of supply in the fourth quarter, they need to taper just to stop it the extreme extra easing. tapering is not a hawkish move in the context of what we are getting on the supply side. anna: we talked about china, but let's dwell on that. we have had further detail of ride hailing apps overnight. we started this program using all kinds of methods. have we learned to live with a choppy your environment --

choppier environment in china? mark: i think that is right. we are becoming more experienced sailors, learning how to navigate these waters. we deal a little bit better. the announcement today did see gains and i think we are going to see more announcements in the weeks and months ahead. some people think the property sector is going to be in focus. certain sectors are going to suffer, but people are starting to realize this and top -- this is not bad for the economy. it is going to give china better quality growth over the long term. certain sectors will benefit. when i say right now, that means the next six months, i don't mean like today. this is going to be a stock ticker's market, but certain stocks are going to do well.

certain stocks will be -- it is hard to buy the index blindly and hope it goes up. anna: if we are not concerned about the delta variant and there are things that throw us off our bullish risk assets mantra that seems to have been so superior or dominant over recent months, where does that leave bond markets? the bond king has some views, always has a views, but he says long-term yields are so low treasuries are in the investment garbage can. and slightly lower on treasury yields this morning. mark: i can interpret this either way. people have been saving for a long period of time, but many people have been saying this for quite a few years. they don't offer much return, it is not exciting. but treasuries have outperformed

expectations. i have been one of those bond bearers who has been wrong. i am not bullish bonds. i don't think it is a particularly exciting trade. i don't think you're going to make money trying to sell bond. i think the solution is to look at other assets. that is why people pile into the stock markets. i think that is still a valid reason. last part of this year we have gone past the easy part of the recovery. gains are very clear. we are seeing the second derivative turn lower and that is not as good a backdrop for risk assets. the easing part of gains in every market is behind us. that does not indicate the need to turn bearish. we may get a consolidation phase before the next rally.

or we might find we are going to get the monetary policy shock where the growth shock that sends us into a bear market. for the rest of this year we are going to be -- we're going to see most risk assets do ok. bonds will do not much. do i think they are going to run away? i don't think so. anna: back to calm seas perhaps. you can get analysis from the markets live team, mliv is the function on the terminal for that. coming up, the latest ftse 100 reshuffle. it has booted out a tech startup. what does this mean for the u.k. efforts to nurture technology companies? we will get the latest on the ftse reshuffle. plus the countdown to the german election continues. next, assessing the economic recovery.

we discussed the taper timeline and inflation. this is bloomberg. ♪

anna: welcome back to the european market open. we see a little bit of downside coming through for european equities, expecting perhaps downside on the dax. let's talk about where we are on global markets. u.s. futures have been fairly flat after the biggest tech stocks rallied yesterday. the nasdaq 100 at an all-time high. the broader index.

david, we will get onto the european, but thinking about global stocks and appetites for risk assets, we have been thinking about markets at really high levels. do you see anything that throws risk appetite off course? >> i guess the main theme people are talking about his china. we think about china relations with the west. i think that is something that could rock the boat, to carry on the nautical theme. on top of that i guess the other thing we are looking at is inflation. is it transitory, which we have talked about before, or something more sustainable? i think they are the main conundrums which ultimately affect interest rates, which benefit discount rates and cost of capital. they are the things we are trying to juggle.

inflation and china are the things that i think are front of mind when it comes to risks to this market right now. mark: i cannot resist, we have to continue on this theme. you say china risks and inflation are the big threats, the icebergs. for this invincible titanic of a market. how much of a risk are we seeing? are we underestimating china? are we underestimating inflation? >> a great question. obviously two thirds of an iceberg is underwater. we don't know. i would say we expect china, what has happened the past couple months, i don't think we expected it. that has come from the blue. the inflation side of things, the impulse inflation has been expected given the drawdown we saw last year. when we look at central banks in

terms of how we come out of this, they look better in terms of providing the glide path to where they expect to move rates over long period of time. the bigger iceberg may be china with the inflation a bit smaller. anna: we are keeping our eyes out. let me ask about big tech stocks. this takes us stateside. big tech did pretty well yesterday. other parts of the market were concerned about the jobs picture in the u.s.. data may be fleshing off some people's warning screens. i'm looking at the faang plus index. what defensive role is big tech playing at this point? >> big tech is carrying the market. the thing is with big tech, the way we look at business is what kind of returns today make? what is the glide path?

as a consequence, big tech provides high returns and good growth. as a consequence you get amazing earnings compounds over time. a lot of these companies -- the consequence earnings wise is relentless. it seems on ahead. they continue to carry the market. the values are still relatively reasonable. i can see the tide of these big numbers continuing to tip the market up slowly over time. mark: do you think a world where big tech can struggle -- not collapse, but maybe failed to make further gains, but the rest of the stock market does ok -- can they become laggards from leaders? or do you think that is an environment where all global stocks struggle? >> it is an environment probably

where all global stocks struggle. what i would point out, when we do think about big tech high returns, discount rates, the discounted future cash flows is really important to overall valuations. from that respect, if we did see interest rates go up rapidly over a short period of time, this might rock the boat. i have used that term already, in terms of valuation for these businesses. almost like a taper tantrum. we see rights progress up nicely , which we saw for the most part in 2010, i cannot see them being down too much. interest rates can probably derail these. anna: maybe we have to call a taper tantrum a mutiny today to go along with our nautical theme. david lambert with us this

morning. let's get a bloomberg first word news update. all the stock stories we are covering today. >> new york and new jersey declare state of emergency due to record-breaking rain as the remnants of hurricane ida pummeled the region. central park got three inches of rain in a single hour. new york airport in new jersey got more than six inches in three hours. roughly the equivalent of seven weeks of average rainfall. flooding halted train services, downed trees, and swamped streets. the u.s. supreme court refused to block a texas law outlawing most abortions after six weeks of pregnancy. the rejection marks a watershed moment allowing a law to stand that is at odds with previous rulings that protect abortion rights until much later on in pregnancy. the conservative court may be ready to overturn the landmark

roe v. wade ruling. the taliban and other african leaders have agreed on the formation of a new government and cabinet under the group's top spiritual figure. a tele-beneficial says an announcement will come in a few days -- taliban official says the announcement will come in a few days. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thanks very much. coming up on the program, ecb policy makers a spa over endings -- spar over ending stimulus. we will talk european stocks with david lambert. ♪ ♪

>> we should not ignore the risk of excessive inflation. anna: that was the buddha's bank -- bundesbank president. david lambert is still with us. from a european portfolios perspective, how do you -- how have you been protecting your portfolio from rising eurozone inflation? does that assume you have to see sustainable inflation? talk me through your inflation view. >> from a portfolio perspective we have not done much to the

portfolios to protect them from inflation. the main reason being, we still anticipate this being a transitory impulse. what i would say is what we have seen is raw material price coupled with supply chain issues have led to many corporate's talking about increased prices for longer in their industries. what is also fueling his people are advance-buying. what is almost happening is a self-fulfilling of the inflation gain. for the long-term, i still see this as a transitory impulse that should rectify over a year or so. but certainly this has gone on longer and stronger than we anticipated. if you invest in good businesses

, have good pricing power, ultimately the pass-through to the end consumer or customer does not impact your margins too much. businesses we tend to invest in cope with this quite well. as a consequence we don't have to shelter ourselves from inflation impulses. mark: as it continues longer and stronger than previously expected, even if companies are passing it on, that feeds the cycle further. that passes on to more inflation. what is the catalyst you are looking for to change your mind and go, wait a sec, this is not transitory. if you had to pick the most important indicator you are keeping an eye on for where you might have got this wrong, what would it be? >> i think it would be if we are sitting here after 12 months -- 9 to 12 months time and we are

still seeing outputs. i do believe that tech as it becomes more prevalent in all of our lives, businesses, not just the tech industry, it is a deflationary aspect to the world. it makes things faster, quicker, cheaper. it will allow companies to leverage their output at much lower cost. i expect tech to keep things under control. i'm happy to revisit this in six to nine months time if we are still seeing a pickup. at that point, we will beginning to lap higher numbers we saw this year. that is kind of the test i think. anna: tech could keep deflation to the four rather than inflation. what are you expecting in terms of cyclicals? you have made reference to lower

quality cyclicals going out. at this stage of the rally, what are you seeing there? >> what we tend to see is lead indicators at high levels, but not going up any further. in fact rolling over. mark mentioned this in terms of second derivative turning negative. we tend to see the market turn its focus away from higher risk, lower quality cyclicals to more high quality expensive names. this is the cycle we see going through, going back years and years. the recovery impulse is always predominantly high-risk. it is not necessarily bad for markets, but we see a rotation. we will be looking to add to those names that are of higher quality, lower risk, lower earnings volatility. these things tend to do a lot better. anna: thank you very much for

joining us today on the european market open. we will talk german politics next, counting down to the german election. we will look at what type of government we could see. it could take months to put that government together. ♪

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anna: half an hour from the start of cash equity trading this thursday morning and european market futures point to the downside. u.s. equity futures are fairly flat. let's talk about where we go longer-term. we have spent a lot of time, we talked with david lambert about whether tech has been leading. in the u.s., that remains a dominant theme. more global picture, valuation pictures look a little different.

that is something you have been diving into. mark: look, i think a theme of quite a few of our guests is this idea that it is going to be a tougher environment for equities, and i agree. that is a different statement to turning actively bearish equity. i do find sometimes our viewers and readers can see those things like, look, it's not going to be easy gains. i just don't see any reason to be particularly bearish. people tell me the reason people are buying is because of fomo or tina, there is no alternative. these are valid reasons to buy. there is not any alternative out there. what are you scared of that was not more threatening a few weeks ago? we know the fed is less worried about inflation. all the inflation measures are cut lower. commodities have stalled.

we have got to september, we are hopeful the labor supply shortage might be eased up. even if it is not it is not going to be worse. if anything, the resurgence of the virus means growth is less aggressive and therefore the fed will not be stepping in. i am just not seeing what is going to scare this market. because of the liquidity is providing or the fiscal stimulus, there is new money to keep chasing after. therefore it is not a particularly vulnerable market. it needs something negative to derail it. i got distracted by my little rant. global stocks use the ms ci all country world index excluding the u.s.. this is saying look, -- sorry, the 12 month pr average. go back to the five-year average. the five-year average is 14.2,

we are close to it. stocks globally are not cheap. but they are not expensive either. they are in line with average. we did not have this amount of support, this amount of stimulus a couple years ago. a much better environment overall. it does not preclude the idea u.s. stocks -- there might be a better investment out there. i don't get why people can be very bearish stocks here. anna: outside the united states, things not so expensive. i remember the days you used to be a stock bear. it takes me a while to remember, but i do remember. let's turn our attention to politics. germany, we are just over three weeks out from an election that will change the political landscape in europe's largest economy, and arguably across europe, as we near the end of angela merkel time in power. the focus turns to what government we could see postelection.

maria tadeo is in berlin tracking the buildup to the german election. you have been focused on the coalition options that could come out of this vote. which of the options have we seen gaining traction? >> there are many options. that is one thing about the german election i have learned. after that september 26 the vote , there's about five parties that mathematically could at into the next government. this goes from the jamaica coalition to the germany coalition and everything in between. there is one in particular gaining traction in the political debate here in berlin and that is the traffic light coalition. if you assume olaf scholz will win the german election, polls suggest he is on track to get a victory, he could be inclined to go for this coalition, which represents the three-way coalition between the liberals, the greens, and the spd.

that is one of the possibilities that could come into play after the election. it is a tricky coalition because he would have to reach a compromise between the more progressive, especially on the climate front, ideas from the greens and the liberals led by christian lechner -- christian lindner. that is the coalition that is gaining momentum in berlin. it frankly occupies a lot of the political debate in the media these days. mark: you mentioned christian lindner. what is his political calculus? >> it is funny to think how the conversation has changed the past few weeks. just about two weeks ago, this was about the greens and whether they would turn left or right. it is now assumed they will join either. they could work with armin

laschet or olaf scholz. it is about lindner and his choice, he is seen as the kingmaker. he was close to entering a government with the cdu. that coalition fell apart. what i would say is if you look at his political calculus, this is a move many germans believe he is not in a position to repeat, to pull out of a coalition and make a government fall. some argued in terms of his political career he is in the final stages perhaps. his final opportunity to enter a government. he may have a political incentive to this time join a government. anna: the sep leader -- the fdp leader will be speaking to

bloomberg today as a green party becomes increasingly likely. maria was just setting out how that could happen. catch that conversation on live go on your terminal at 12:00 p.m. london time. coming up on this program, as just eat takeaway is taken out of the ftse 100, tech makes up less of the benchmark index. ♪

>> the complexity has increased, but we will navigate that as we have so far and we will continue to do so going forward.

anna: that was the hsbc ceo speaking exclusively to bloomberg's francine lacqua. you can watch the full exclusive interview on the bloomberg terminal starting at 11:00 p.m. london time tonight. midnight friday it will start to appear on bloomberg tv and bloomberg radio. the changing regulatory environment is top of mind for another big company. the hong kong exchange ceo spoke exclusively to bloomberg about china's regulatory reform and its impact. >> the regulatory reforms that we are seeing in china is something that we are going to see continuing for quite a bit of time. but not only china. as it relates to data, as it relates to big tech, it is a regulatory process that i would expect will be a long march. not only in china. also around the world.

it is an area of a lot of sensitivity. there is data, the privacy, whether it is national security, whether it is issues of how to regulate companies that have monopolistic powers, this is something we will continue to see. >> we heard it in july that listings that will come to the hong kong exchange will have less cybersecurity review than those coming to the united states. is that a fact? how is that affecting potentially boosting listings? >> i think it will be consistent all around. the move will be about consistency. any companies -- >> hong kong will not have that advantage? >> i don't think that will be the advantage. companies will need to make sure they protect their data, that the data is secure. it cannot be permeated to other areas. the likelihood of having that as

a very specific advantages low -- advantage is low. there will be a consistent application of rules and regulations. >> we are hearing from the likes of citibank and other analysts saying there are $637 billion of market cap in chinese adrs. who have not come back to hong kong. what are you seeing with those companies thinking of a u.s. listing? are you seeing that pipeline increasing given that there's a lot of companies that potentially would find regulatory scrutiny in the united states to difficult? >> absolutely we have seen that, quite a significant increase in terms of companies that were originally thinking about the u.s., now inquiring about hong kong. some have already switched and started focusing on hong kong. part of this is the regulatory pressure from the u.s.

disclosures, and the need others feel that it is easier to be closer to their home markets. i would expect that in the medium-term, we have companies listing in both venues. i don't think that is going to be all hong kong and that is healthy for the market. >> what about longer term? >> same thing. short term there will be more toward hong kong. medium to long-term, it will be a balanced approach. anna: let's get a bloomberg business flash. >> paramount has delayed the release of the top gun sequel into next year as hollywood continues to wrestle with the pandemic that has kept people from theaters. the film, starring tom cruise,

was expected to debut in november and is instead moved to may. the company wants to release it exclusively in cinemas. wells fargo pushed back its return to office plan by two more weeks to mid-october. the company, which has most employees of any u.s. bank, will start bringing back staffers who have been working remotely starting october 18. apple has resolved the wrong letting dispute with -- long-running dispute. many developers will no longer have to pay an app store commission up to 30%. the change is part of a settlement with the japan fair trade commission. apple says it will be implemented globally early next year. that is your bloomberg business flash. anna: thanks very much. the latest ftse makeover has been announced, reshuffling the u.k. benchmark index following

the quarterly review. two targets, morrison's and meggitt will join the ftse 100. booted out are just eat takeaway and weir group. what did the changes tell us about london stock market as it seeks to expand post-brexit? tim craighead joins us now. a bit of a strange reshuffle, isn't it? some odd reasons behind this. what is your assessment of these changes? >> i would agree with you. there is odd stuff going on. this is a bit of a football analogy. relegations are going to happen. it is every three months to keep the index current. often it is the same companies that come in and out because they are on the margin. this one is odd in that the companies coming in -- they are

driven by m&a inflated market caps. they have been relegated before. they are almost certain to disappear again. either they are going to get taken now with m&a or maybe they deflate and the m&a disappears. in this instance specifically, he creates a technical change. mark: is there a longer-term strategic signal with where the few u.k. tech companies are being removed from the index? >> that is an intriguing question and i guess in my perspective it is certainly highlighting scarcity value of u.k. big tech. you think about it, germany has software and semis. holland has semi equipment. the u.k., this being the biggest of the tech in the index hereto for is a pandemic online

retailer. not the same. if we think about technology in the u.k., we are looking more toward areas where there are real strength, whether that is health care, potentially fintech. the element in the room at this point is what happens post-brexit. a lot of things have been hidden by the pandemic, and that will start to normalize as we look forward. and can businesses like this really develop here in the u.k.? that will be critical. anna: there are some days, we are looking at the ftse, a play on basic resources, on mining companies. let's think about that. we have seen announcements that bhp wants to shift its primary exchange to australia. does that have an impact on the extent to which businesses are going to continue to be lifted and big players in london? >> a great point.

i would totally concur. if you think about the cyclicality of the ftse, quite often it is driven by commodity prices. whether that be energy or industrial. we have written how the ftse's ultralow valuation is essentially stemming from its uniquely large exposure to minors, energies, and banks. commodity trader like bhp trade across multiple -- of earnings. the departure, assuming it happens, will lessen this drag of being the relative later -- relative weight of other sectors. i think this is more significant than the quarterly rebalancing that we just talked about. it is not a bad thing from my perspective. anna: thanks very much for

joining us. coming up on the program, we will look at today's stocks to watch, including advent international and gic agreeing to buy swedish bio venture may be. ♪

anna: nine minutes into the start of cash equities trading -- until the start of cash equities trading. we are flat, and improvement of where we were half an hour ago. let's start with swedish orphan biovitrum ab, also known as sobi . >> quite an obscure part of the

pharmaceutical market. sobi focuses on rare blood diseases. quite difficult to predict the earnings, but they have had quite big approvals in the european union. we have seen this bid coming in. some value in these new products. the bid is worth around $8 billion. 35% premium. those new drugs in that obscure part of the market, we should see a big jump in that stock this morning. mark: cnc markets have earnings out. what is the big news there? >> this is one i have been following quite closely. throughout the coronavirus pandemic, they have really put out a lot of bullish statements on how well they have been trading. new traders coming to the

platform. celebrating the meme stock era. finally today we had a negative report from cmc. they say actually trading is starting to weaken and volatility is coming down. they are seeing a decline in not trading, but also client retention numbers. new traders that were attracted by volatility, by game stop, amc, meme stock companies, are getting bored and doing other things. anna: talking of lockdowns, gyms went out of fashion. for some they will remain so. but not all customers. >> membership numbers are getting close to where they were pre-pandemic, just above around 700,000, where they sat before the virus caused them to shut

virtually all of their gyms around the u.k.. the revenue is still down around half what it was before because they have had to cut membership fees just to get people back in and to get them out of doing home routines and get them back into gyms. so sales numbers are nowhere near where they were before the pandemic, even though membership numbers are getting close to where they were around two years ago. anna: thanks very much. a host of stocks we are watching. just a few minutes to go until the start of the cash equities session. we do see improvement in the margin on european equity market futures, a little bit less negative as we head toward the start of the european trading day. u.s. futures, fairly flat. record highs once again on the nasdaq. mark: it is the context we are

in. markets are overall at very high levels. it is unlikely to be a massive surge. we have taken a bit of a tailwind, we are getting positive direction. i don't see any reason to gain enthusiasm in either direction. we are going to have more negative moves until we get the job reports tomorrow and we will see after that. anna: interesting to think about what we mentioned earlier with david lambert. you were talking about the extent to which you want to be overweight equities. maybe that is where the conversation goes that part of this year. mark: very very relevant. i have been chided for not being bullish enough because i did not say to borrow against all your wealth and leverage up 20 times. anna: probably best not to say that then. mark, thank you for spending the

past hour with us. tom mackenzie joins me to take us through the market open. the futures turning a little more positive, still in the red, but getting less negative than half an hour ago. ♪

anna: welcome back to the european market open. a minutes ago for the start of cash equity trading. i am anna edwards. tom: traders weigh the economic recovery after data overnight points to a slowing u.s. labor market. that is ahead of the key august jobs print tomorrow. investment garbage. trash about treasury. rates rebound after an initial selloff on his comments. the long march.

the ceo of the hong kong stock exchange sees china regulatory reform continuing and governments around the world following suit. we get the take leader. anna: markets just a few seconds away from the start of equity trading. features certainly pointing well. not in any direction. flat for many markets. even the german market. now pretty much in with fairly flat being suggested for the start of trading day. jobs to look ahead too. chinese regulation. tom: a big focus on what is happening with jobs as we lead up to the open. the u.s. open as well. weighing up that picture with the one we got overnight. in terms of the pmi and a rollover. amidst all of that, the discussion about the travel for stimulus. the ecb yet again calling for

focus on those risks. ppi out at 11:00 a.m. the ftse 100 is down in the first few seconds. spain is losing. it is also lower. by close to seven points. that is the picture in the first few seconds. the euro-dollar about 118. 10 year in the u.s. about 130. anna: that is where we started the european trading session. no big movement in terms of equity markets. -- interest rate expectations in europe. the euro climbed to a four-week high. more ecb officials weighed in on an intensifying debate on when to end stimulus ahead of the central bank policy meeting. europe's economic rebound and surge in inflation has sparked a debate with the official to weigh in. >> we should also not ignore the

risk of excess inflation. considering the existing uncertainty, we should not set in stone this very loose monetary policy for too long. anna: let's get analysis on where we had with jeremy stretch. he joins us. the perfect voice to talk about it and its recent run of form. the euro at a four-week high. launched into a new school term and a new conversation around the euro. how much stronger does the euro get? >> we have seen a substantive rally over the last couple of sessions. eight daily highs in terms of that low. i would not want to be chasing it higher from these levels. tested up to the early august high, 11857. unless we break up through that

significantly and go to 119, we are toward a top. it feels we are getting it over the board. there has been a fight over the last 48 hours. they have been pushing for the case of a rollback in terms of bond purchases. the central bank narrative for the councilmembers will continue to argue inflationary pressures will fall back into 2022. core inflation measures remain relatively contained. look at the market based expectation, below 2%. the euro rally is valued. that depends on tomorrow. tom: how do you fall into your view on the u.s. dollar?

>> in go the policy perspective and tapering dynamics. we have been one of the ones over the recent months. we have anticipated a strong gain of 900,000. after the miss yesterday, the second stream miss and weakness in the data. we have tempted our enthusiasm, but we are looking for the employment again, which will be above consensus. that should keep open the debate about tapering coming sooner or later. i think that will help sustain dollar valuations. this recent dollar weakening will start if we see a payroll above expectations tomorrow. anna: in terms of the european conversation, do you see any substantial change to the meeting next week?

will it be on the radar? as vocal as the hawks have been, will they be outnumbered? >> i think they will be, they have become more for safer is. we have seen the degree of percentage and the guidance in the last meeting. they will become more vociferous, because we have identification pressures because of that reading. it will be pushed back by the predominant majority on the governing council. next week's meeting includes the updated gdp and cpi forecast. since the upgrade in it gives them statistical justification for their argument. they will be pushed back and the reaction will remain unchanged.

purchases may also remain unchanged. tom: focusing on the german elections, the outcomes and different combinations, what would the coalition mean for your view? >> that is interesting. it wasn't the primary likelihood, in terms of the coalition congregation. certainly the beginning of the summer. looking likely it will be the new chancellor on the new opinion polls. how will the coalition be comprised? if it will be a red green coalition or something of a looser fiscal environment. i think it would be put back in place in 2023. there -- is a risk for the easier system that would otherwise see a continuation of the german government. the margin provider with the

offset for very easy monetary from the ecb. i think we are still assuming the ecb will remain exceptionally through 2024. as a margin that may have an impact, but i don't think it changes the parameters, in terms of the euro trajectory. anna: sticking with the german electoral theme, i want to get your time horizons that will be interesting here with assets related to germany. the election coming in a few weeks. we know it takes months put together coalitions. that in mind, what kind of market preparation do you take for this kind of electoral risk? >> that is true. in the last election, almost six months. you end up with the immediate market reaction with those results and make an assumption

to the governing coalition. then you have to wait for the coalition to put out an effective policy platform. there is a two-pronged attack. you will see markets are reacting immediately after the election results come through. then we will make assumptions as to the likely coalition process and how it will play out. then you may get a smaller reaction over time as the negotiations work through and we see the policies formulated on a more prescriptive basis. tom: jeremy on the complexities of the german political landscape. it jeremy stretch stays with us em and other currencies. u.s. companies added fewer jobs than expected in august. assistant hiring challenges

suggested a slowdown in the labor market. the biggest economy. this is bloomberg.

tom: welcome back to the open.

we are 11 minutes into the european trading day. european stocks just about turning around very modestly in green territory. anna: certainly a little bit greener than the futures suggested, but not by much. let's have a look at some of the stocks on the move. starting with the pharmaceutical space. specifically, bio vikram ab, also known as sobe, being sold to private businesses for $8 billion, the largest shareholder, the worn bird family, supporting the transaction. it has been talked about as a potential takeover target for many years. buyouts set to be in interest. terms taking this business. they both say substantial investment required would be better done in the private space. we will watch it with interest. you've got gamers on your mind. tom: gamers in poland, strong

earnings. the stock up more than 5%. currently up 9%. keeps going up. getting more than 9%. strong earnings. very strong, heavy trading volume. may be a beneficiary of that work from home. at least the pandemic play through to the gaming space. strong earnings. anna: moving onto the sector. jp morgan analysts cutting recommendations. neutral from overweight. the stock down by over 2%. top estimates for the quarter on august 18. this is the view from jp morgan analysts. anna: u.s. futures fairly flat as we stay on the european markets turned around. this is after tech stocks rallied on the u.s.. nasdaq 100 to an all-time high. investors looking ahead to the

u.s. nonfarm payrolls after wednesday's adp reading showed companies added fewer jobs than expected in august, reflecting persistent hiring challenges. jeremy stretch is still with us. you talked about your views on the dollar. i want to unpack your analysis on the timeframe for tapering as we look at the jobs numbers forecast. 700 50,000 forecast. what it does for jay powell and the taper, or weighing it out against economic data with the u.s. suggests the growth trajectory has started to peak. how are you factoring it into the long-term view on the u.s. dollar? >> you are absolutely right, there is a lot to unpack. the labor market is integral to the tapering debate. we saw that reflected in many of those speakers ahead of jay powell last week.

i think if we can see unemployment again, which is still above consensus, that leaves the tapering debate alive. i think that tapering discussion will be integral to the september fomc decision. we are likely to see tapering before the end of this year or the beginning of next year. then we will see the fed looking for the third quarter of next year. that underlying structural support for the recovery story or the labor market providing structural support will play into that support of the u.s. dollar narrative. we are looking for the central bank divergence play to be evident. the assumption of the terminal rate in the u.s. just over 1.5% still looks low to our expectation. over time, the resilience of the labor market, we see the

disconnect between vacancies and employment start to correct, that will play into a stronger u.s. dollar narrative. anna: we see a lot of stories about labor shortages. not just european stories, but over in the u.s. is it something you think will correct and will not be a structural issue months and years to come? >> clearly, there have been issues, particularly for those workers who have had difficulties with things like childcare, school closures. that has meant people had to stay out of the labor force. and the risk of uncertainties as the covid crisis continued for some people to move back in return to previous labor employment. there are some structural factors i think will take time to work through. yes, you can argue vacancies are at work in levels, but we are not seeing record ebullient -- employment growth.

so perhaps skills are not matched. it might take time to facilitate that closing of skills gaps in certain sectors. i don't think it is a protracted and structural problem that will persist indefinitely. i think we will see the imbalance starting to close over time. in the nearer term, we have the issue of wage growth. that is another factor central banks will have to consider, whether wage growth will also become rather more systemic. it could create a stronger inflation dynamic than we have become accustomed to. tom: which again affects are most vulnerable to that view on the u.s. dollar? >> i think you end up looking at those that probably have the highest degree of leverage. if we will see u.s. rates gradually climbing over time, it does lead those that are indebted and potentially having the weakest structural

positions, in terms of current accounts and fiscal positions, potentially the most vulnerable. the key dimeric -- the key dynamic is the growth trajectories going forward and whether we will see further variants coming into the northern hemisphere winter. one hopes not, but it will be another risk to the global growth story. it will be a structural, systemic risk factor for the yen space. i think we will see a moderate, supportive u.s. backdrop and gradually increasing u.s. rates. that will put some issues on both -- those have that the greatest funding needs. anna: jeremy stretch, thank you so much. let's go to the bloomberg business flash. the stories we are tracking. here is simone foxman. simone: paramount has delayed the release of the top and sequel in the next year as hollywood continues to wrestle

with the pandemic who has kept many from theaters. the film starring tom cruise was expected to debut in november and was said moved to may. exclusively in cinemas rather than trying to pursue a simultaneous release on a streaming service. wells fargo pushed back its return to office plans by two more weeks to mid-october. the company, which has the most employees of any u.s. bank, will bring back staffers working remotely starting october 18. apple has resolved a long-running dispute with third party app developers, i'll delete -- agreeing to links for sign-ups. which means many developers will no longer have to pay an app store commission of up to $.35. the changes part of a settlement , and apple says it will be implemented globally early next year. that is your bloomberg business flash. tom: thank you very much. coming up, counting down to

elections. three weeks away. we look at what kind of government we could see after polling day in europe's largest economy. that story is next. this is bloomberg. ♪

>> one of the jobs of an international bank is to comply

with complex laws and sanctions laws were ever implemented. that complexity has increased. but we will navigate that, as we have done so far and will continue to do so moving forward. tom: that was hsbc's ceo speaking to francine lacqua. you can watch the full interview first on the bloomberg terminal at 11:00 p.m. london time, and an hour later, you will catch that conversation on bloomberg television, bloomberg radio, along with our other platforms. we are 23 minutes into the european trading day. flat across the benchmarks as we look ahead to producer prices at 11:00 a.m. the key data in the nonfarm payrolls keeping investors. that is out friday. that is the picture across the european trading day. anna: u.s. futures positive. turning to german politics. over three weeks from the

election. it will change the political landscape in the european largest economy. now the focus turns to what kind of government, what kind of coalition we could see postelection. maria tadeo joins us in berlin. every few years, we have to become an expert in the flag of jamaica, kenya, germany, many other countries to get the gritty of general policy. which coalition options are gaining traction? >> it is very hard. there's about eight different options, five different parties that could get into this coalition. but one in particular is really gaining momentum, especially in the political debate in berlin. that is the traffic light coalition. a lot of it would assume the spd wins the election. we just had a new poll putting the spd on 25% in the election.

so cementing that lead would be -- in this high political traffic light coalition, joined by the green and liberals in germany. it is a coalition really driving the political conversation in germany. it is seen as the option they would favor -- he would favor if he were to win the election. polls are saying it would be the case getting to september 26, it will be him. the coalition meeting will be very difficult. when you look at the greens, they have said that for them, hitting the climate targets is a crucial point. the liberals say it is about not increasing taxes and some of the climate targets would be detrimental for the german industry. so it is a tricky balance of power that would have to be overseen. it is a very complicated mix of different parties to put together. the difficulty it is not just

two different groups working together, but the fact we are heading into a three-way coalition. tom: one of the contenders of the freedom democratic party, increasingly seen as a kingmaker. what is happening with that already and how can they play a role? >> he is. it really signals a huge change in dynamics we have seen in the german election. a few weeks ago, it was about the greens. now it is clear that they would have a very strong incentive to join a government. whether led by -- they can work with both. the focus is now on the third party. if you remember in 2017, that coalition they blew up the government agreement. at the time, he decided it was better not to enter a government than to enter a bad government. the incentive was that type of operation carries so much risk,

he might not be inclined to repeat it. tom: maria, the potential combinations when it comes to german politics. tackling climate change. how jp morgan is backing companies developing solutions to the climate crisis. that story is next. this is bloomberg. ♪ next. this is bloomberg. ♪

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anna: welcome back to the european market open. here are your top stories. traders weigh the economic recovery after data points to a

slowing labor market. that is ahead of the jobs print tomorrow. investment garbage. talking trash about treasuries trade. an initial selloff of his comments. the long march, the ceo of the hong kong stock exchange sees regulatory reform continuing and governments around the world following suit. we also get the take on hsbc's ceo later. a lot going on with the markets. we have some of the jobs picture from the united states, private sector. waiting for the full picture. tom: i would argue, may be a goldilocks scenario. you have the pmi data rolling over. you look at j.p. morgan, their survey of the pmi. and the fact that you have central banks and cp's to provide the support. the recovery in the economy is turned to slow.

that is what we have been hearing, calling for a focus around the risks of inflation. just about last few minutes, gains about more than a 10th of a percent. the ftse 100 is flat. basic materials are a bit about drag for u.k. stocks. dax is gaining. the cac is up. focus on producer prices is up later today in terms of margins in the inflation conversation. switching to the sectors. the fact that materials are running in pressure, auto parts as well are having some modest gains. the bottom of the list, real estate, technology, basic resources under pressure. let's get the first word news with simone foxman.

simone: new york and new jersey declared state of emergency due to record-breaking rains. the remnants of hurricane ida pummeled the region, manhattan central park got three inches of rain in e-cig lower. an airport in -- in central. the u.s. supreme court refuses to outlaw in order to ban abortions. it marks a watershed moment that protects abortion rights until later in pregnancy. the order hints that they may be able to return -- overturn the landmark rule. taliban has agreed on the latest direction of the government.

taliban officials say the announcement will come in a few days. we're told the taliban had been waiting for the full withdrawal of the u.s. troops before making any public or ship plans. -- public leadership plans. 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 in doha. let's turn to climate change with the climate crisis. the urgency of focusing on global warming. some investors may be wondering how they complete their part in low carbon transition. j.p. morgan has set up a fund seeking to invest in companies which are developing solutions to the climate crisis. joining us now is katie magee, investment specialist at j.p. morgan. what is the gap between technology, innovation and the challenges posed by the climate

crisis? katie: thank you for having me. that is a good point. the u.n. report they came out last month reflected the urgency of the climate change challenge. temperatures have increased one degree celsius. every single year, we admit about 50,000 tons into the atmosphere. our demand for energy across the globe is increasing as more countries develop, as more people move into the middle class. we will need more energy. the answer to addressing climate change cannot be, let's stop using energy. what really has to be is identifying innovative new solutions to address the challenge. that is what we're trying to do. anna: you are looking at companies that are developing d scaling solutions to tackle climate change, where do you put

the criteria for success? how much material change to businesses have to create for them to qualify on your radar? you talk to any energy business, construction business, consumer product business and they will tell you they are trying to address climate change. how do you measure the actual improvements in the actual advancements they are achieving? katie: we are going to need to see is that every company across every industry is going to make a change and think about new and different ways. they can still provide the same goods and services but with a lower carbon footprint. what we are looking at is so companies that are developing innovative new solutions. we have taken a step back and said, what are the key drivers of greenhouse gas emissions, of climate change? and broken them down into five areas. these are based on the five

biggest drivers, electricity, heat, buildings, agriculture. companies that are producing renewable energy sources. whether that is wind, hydro, solar power. also big companies focused on electrification and helping other countries get there to reducing their carbon footprint. electric vehicles, or pushing the envelope in the transportation sector. also in the agriculture sector, an area that you may not think of but contributes to a fifth of greenhouse gas emissions. we are finding exciting news of companies developing new technologies to help farmers, only full arise -- fertilize and water the plants that they needed. tom: from an investment perspective how important is it to align with government policy? katie: completely important.

we think about the shift -- we are already seeing this shift towards climate change improvements happen. we see a lot of tailwinds here. whether that is the tremendous advances in technology, the big shift in consumer attitudes, focusing on more sustainable products. finally, -- finally, the fact that governments and policymakers are pushing in this direction will have a meaningful impact on all the companies we invest in. when we look forward to things like -- later in the year and see how different governments and policymakers will think about subsidiaries for green energy or new and different regulations, we need to make sure the company so we are investing in our well-positioned to withstand that. anna: let me ask you about recycling and reusing.

we talked about a circular economy in companies that are designed to enable us to move towards more circular practices and allow things to be recycled more. where do you see the excitement there, the businesses that are managing to drive consumer change or get the pricing right to make these viable options? katie: that is a great point. the more and more we can develop new goods and less carbon intense ways, that is great. if we can also reuse the goods we have, that can be even better. there are companies we may be interested in here. some are focused on individual consumers ability to recycle things. reverse lending, or consumers can take materials they have used and recycle them there. also things like reuse of materials or recycling steel.

steel and cement production are some of the biggest drivers of greenhouse gas emissions. it is very challenging to find ways to make those goods and less carbon intense ways. the more that we can recycle and reuse them, the better we can all be. tom: how or to quickly get your views on height cut through some of the noise, how you avoid some of the greenwashing. i just got backed -- top from china, it all cost money, how do you avoid the risks? katie: couple of different things. when we think about investing in the strategies, one of the exciting things is that these opportunities can exist anywhere. they are not regulated to one specific industry or region. we really need to find ways where we can uncover these opportunities where they exist. many of the really exciting innovations can be smaller,

newer companies that are pushing the envelope. we use a two step process in terms of investment security selection. we use a tool that is very much based in machine learning and big data. it helps us scan through and use our data analytics to look at hundreds of millions of data sources, company reports, broker research, news articles. we narrow down the list of companies around the grove -- globe that could be involved in these areas. the second step is a human the -- human element. we are focused in on sector specific due diligence, knowing the companies in and out. digging into the weeds of is this a company that we want to own? do they have a sustainable business model? making sure we are comfortable in the portfolio. anna: thank you for joining us.

katie magee, investment specialist at jp morgan. investments in treasuries are likely to lose money. talking trash about bonds. we will get to the conversation, next. this is bloomberg. ♪

tom: welcome back. gains across the benchmark are up more than a 10th of a percent. the euro-dollar is currently at 118. u.s. futures are also pointing up. this is what we're watching today. we have eurozone ppi at midday. have a bloomberg webinar. it 1:30, we have u.s. data, including initial jobless claims and factory orders. over the next two days, eu foreign ministers will be having informal meetings. let's get the bloomberg business flash with simone foxman. simone: paramount has delayed the release of the "top gun"

sequel. the pandemic has kept many people from the theaters. the film was expected to debut in november, it will move to may. the studio plans to release it exclusively in seminars rather than simultaneously with streaming. most fargo pushback return to office plans two more weeks. the company which has the most employees any u.s. bank one out bring back staffers who have

been working remotely starting october 18. apple has resolved a long-running dispute with a third party app developer agreed to allow links to external websites. many developers will no longer have to pay an app store commission of up to 30%. the change is part of the settlement with the japan trade commission. it will be implemented globally next year. anna: thank you very much. simone foxman there until hot. talking trash about the bond market. treasury yields are so low that the funds that by them belong in the "investment trashcan." he also said intermediate and long-term bond funds are in that same trash receptacle. let's talk to justina -- she was going to join us, she is not billable yet.

-- available yet. long bonds and yields are so low, they can only go from here. i feel like we have had a few people saying that and even he has had this fee for a while now. tom: there seems to be a consensus that you are looking to 1.5 by the end of year. there are variations in the forecast. he says that tenure -- u.s. 10 year is on the up. anna: let's get to justina. that is the gist of the argument. he is not the only voice that is arguing this. many say that they cannot stay the way they are. >> a lot of people had said similar things. he probably said it with more colorful language. his is one of supply and demand. on one hand we are seeing very strong fiscal spending in the u.s..

treasury issuance will still be robust. at the same time, he is wondering where the demand will come from. we have heard the fed talking about tapering asset purchases, on the other yields are not that attractive, in his opinion. tom: let's expand on that. not as attractive as the chinese sovereign. what are the flows looking like into the u.s. treasury market? >> that is exactly right. one of the reasons u.s. yields have gone down over the years is definitely foreign demand. the question for people in his camp is that if you think u.s. inflation is going to pick up and monetary conditions can only tighten, this is not a good time to add to treasury purchases. anna: he is also concerned about supply.

governments or central banks may stop buying quite as much treasury debt as they are the moment, when supply might increase and governments need to borrow to find some of the stimulus that they have been doing. on the other side, there plenty of investors that argue that the delta variant is still there and making people nervous. there are lots of structural reasons in investing -- and the investment community that people still need to get exposure to government debt. >> i think investors have learned the lesson in the past decade. it was in that period of time, it was not that wise to be a bond bear. bill has been bearish in times. you have seen yields spike and then plunge and they only picked up a little more recently. that has been a bit of a mystery. it shows that a lot of technical factors. can come into bolster demand

-- factors can come in to bolster demand. there are a lot of macro reasons. may be to not turn that bearish just yet. tom: that was our reporter justina on the trash talk. we will continue our treasury conversation as we look ahead to u.s. jobs data. we will bring you the latest from the markets with lives ven ram. this is bloomberg. ♪

tom: welcome back. 54 minutes into the european trading day. the picture is mostly positive. euro-dollar is currently at 118. joining us now is ven ram. you're talking about insanity echo markets. -- at the markets. ven: the citigroup analysts have said that snp will not go away. it may keep going up. the point is, he was not too far along in a sense that he claims the markets are overvalued. few will disagree with him when

it comes to u.s. stocks. if you look at it in terms of aggregate marketable -- market capital. it is expensive. they do not have a choice. -- not have a choice. there is no real investment alternative. you cannot be in cash for too long. the city growth analysts is wrong. i do not think sucks can continue to search forever and ever. with thanks being where they are, he is not wrong -- with things being where they are, he is wrong for the moment. anna: let's think about how those treasury markets have become unhinged. how have they prepared for the jobs report?

the full picture tomorrow, how do we see treasury markets play with this? ven: it was a bit about disappointment. it is strong through june and july. it continues to be strong. there has been a gap in favor of out put -- output, if that continues to be the trend, then the rate markets will continue in their stride. that just tells the fed that we are still making progress in terms of the labor markets. in april, i think there will be far bigger move on the downside.

if you are metrically positioned -- tom: do you have a view from what we heard about bill and his trash talk? ven: let's remember what he said back in 20 -- he said it was the shock of a lifetime. they were trading at 10 basis points. look at where they already know. -- -- are right now. treasuries are expensive and no one should be touching them. there's so much money chasing any investment to be had. there is little choice. anna: thank you very much. the limits are being conceptually more right than the markets. ven ram from our markets live team. that is it for the european market open.

"bloomberg surveillance: early edition" is up next. flats are positive. this is bloomberg. ♪

>> considering the existing uncertainty, we should not say in this policy stance for too long. >> it is a process i would expect to be a long ma