tv Bloomberg Markets European Close Bloomberg September 27, 2021 11:00am-12:00pm EDT
guy: monday the 27th, what you need to know with europe. the spd's olaf scholz cuts a mandate to lead after the election. the u.k. steel crisis continues with 90% of stations apparently running dry. ministers met this morning with boris johnson, there are discussions about bringing the army in, there are industry discussions taking place this afternoon. paul starr agreed to go public in a deal that would give the bank it $20 billion valuation. the company ceo will -- ceo will join us.
equities are now negative, energy doing fairly well. take a look at what is happening in the energy markets and you will see crude is flirting with $80 a barrel. alix: huge, which leads me to my board which is the energy crisis. take a look at the last three. energy index in the s&p silty outperformer. financials of their best performing sector. still the best performing stock within the s&p. natural gas prices in the u.s. continue to push higher here almost 8%, there is a conversation involving an analyst community as to how much more these prices have to move. once you get past winter though you can see a material fall in gas prices, market currently not price for that. now we get to what that means for the reflation trade. last we were 98 basis points.
now we are a must at 103. all that winds up knowing some short-term if venus for the nasdaq 100. amazon getting a downgrade because of labor costs. does that cut -- plus higher yield putting a damper on growth stocks. all weighing into some choppy trading. guy: that kind of sums up the german election as well to be on a spit olaf scholz making his pitch to the greens and free democrats to form a three-way coalition following his incredibly slim victory in sunday's election. this will be the first time the country's history we have had a three party coalition potentially being formed. >> we will be very fast at getting a result of this government. on the other hand you should know germany always has coalition government. alix: here's the latest from patrick donahue.
where are we? patrick: we are not very far beyond what you just saw olaf scholz claiming the mandate to form a government. although was very close. the spd have 10 more seats in the bundestag and the conservative cdu and csu. since then we've had armen, the candidate for the cdu to succeed under angela merkel, last night he basically said he would also be willing to form a government. this turned a different language today. now he is saying he's not claiming a mandate for the government, but he is going to still try and do it, particularly if his attempts fail. he will try to stick around. >> how long will they give them, what's the timeline. >> by three months with most coalition agreements.
the big exception was four years ago. the first round of talks to form the coalition oversaw attempts to form a coalition with the greens, that failed when they pulled out and the social democrats were reluctantly pushed into another grand coalition as we like to call it. but once things get on track here, you can expect per luminary talks would take up october before going into official talks in germany. you basically have to draft a coalition accord that is a book length blueprint for what the next government is going to do. guy: it's going to be a fun few months per we look forward to the coverage. thank you very much indeed. let's bring another voice and the conversation. a traffic light government looks now the most likely.
how would you handicap that working. >> i think we will get a first idea of that during these talks. the interesting news is the two smaller parties were indicating they would actually start to weigh talks between the two of them deciding which way they want to go, whether they want to offer coalition talks to the spd of olaf scholz or to the cdu. they're getting some momentum of the social democrats. in the end, they are really pulling in different directions and there could be a difficult ride. >> what kind of specific horsetrading could we see then? maybe from the greens. >> the big question is basically how are we going to finance the
green transformation of the german economy. if it was down just to the greens in the social democrats, we would probably see a large role of the public sector, perhaps even somewhat greater fiscal largesse. you are dealing with a party that's fairly pro-austerity. so i think it will be all about finding market mechanisms and bringing business, that's what they will be looking at. guy: they have blown things up in the past because they didn't get the finance ministry. will they get the finance ministry? >> i think that's fairly likely. this is what they wanted. the one area on which they have to leave their mark if they are joining a coalition with -- which these two parties are being. alix: how long do you think it is going to take to get these
kind of results and how much uncertainty does it yield? in terms of how and when we start pricing this in, in the meantime will we see volatility, to people not care yet until there something official? >> really we have to look at four years back. where we only months into negotiations figured out the three-way coalition they were trying wouldn't slide. i think the lesson from that is we have to wait until the very end of this process and then we would have to go back to the drawing board. guy: as you say, this will be a fairly weighty document but ultimately it's constructed here as the basis, the foundation of this coalition. how stable will it be though. there will be some any compromises in that document and
i wonder how easy it will be to knock it off course. >> there will be compromises, that's exactly right. nobody would've expected this government, the outgoing government is the pandemic of a global scale. so i think you know something like personal trust, i think that in the end will be much more important than what's written down in detail. >> for a broader european sense, do we get a tighter fiscal union or at least the framework for it if we do get this coalition, the traffic light coalition? >> there were these expectations, we are looking at them with integration and all of that per die was a was fairly
skeptical of that. with them involved perhaps with the price industry, i think we will see a step-by-step approach and certainly not a major one. guy: we are facing quite a lot of uncertainty in europe and we will have a relatively unstable german coalition. plenty of things could go wrong, we have a french election coming up we still don't know ultimately which way it's going to go. again it could be really quite tight. from a policy perspective, we are still emerging from a pandemic, we have an energy crisis that is now increasingly gripping europe, it could be really difficult winter. does europe have the political leadership to navigate this and deal with china and figure out a chief applicable position in the world. it feels relatively rudderless. >> we have to differentiate
strategy. we have to go back to a year from now when we know who is in charge in france and have the government up and running in germany. in the short term, at least we can draw some positivity from the fact that on the german side, we are dealing with experienced politicians, so in terms of short-term crisis management i wouldn't be too concerned. guy: always a pleasure. interesting analysis. thank you very much. it will be a long drawn out process joining us there. we are getting a reaction the gilt markets. this is actually ahead of a speech the bank of england is delivering. bailey is talking about inflation. he says the response to inflation will be by rates.
the u.k. rate market at the moment is focusing on this idea that we should go qe taper, then rates and that starting to become a little bit more blurred over the last few days. it now looks as if bailey is pointing as in the direction of a rate response if we do get an inflationary problem. in the u.k. probably more than developed markets is facing the potential for that given the shortages and extremes we are seeing right now. alix: in some ways more of an error in policy mistake because of the effects of brexit like the petrol lines in the drivers. i find it interesting bailey with monetary policy can boost supply chips or drivers, there's only so much they can do. at this point they have to avoid a policy mistake that would make everything worse. guy: he talked about that in the past, the idea one military policy cannot fix the supply-side problem that we are currently experiencing and cannot deal with. maybe this is the first kind of
real recognition that may be monetary policy has reached its limits, recognition of the reality that may be all of this qe hasn't done anything really to solve some of the economic problems we are facing that are supply-side driven. what it's done is boosted out the prices. alix: did you fill up your car this weekend? do you notice lines or anything happening. guy: i made a massive tactical error. i was bringing my kids back from a rugby game on saturday morning. i drove past the petrol station on one of the big motorway, fairly large road it had very few cars in it. i did not stop. >> one third of petrol stations were closed here. i can't imagine what that would mean in the u.s.. guy: it's way more than one third. i don't know what the exact figure of that, it is a big
alix: it's going to be months before germany's coalition deal. what does it mean for the market players. the head of economics research joins us now. let's say we get a traffic light coalition. what does that mean for an allocation in your portfolio? what do you sell on that? >> a german election was never to create any short-term
movement in asset allocation. i think we do look here at something that could influence germany and europe over the medium to longer term. we don't affect a sharp reaction, that was never the case. what's interesting there were scenarios were markets may have reacted more abruptly would have been the possibility of a red green red coalition. that's no longer a possibility. for a traffic light coalition, markets will look to compromise. particular between the greens and the scp -- spd. how much spending will i get in which areas, decarbonization, digital spending is something everyone can agree on. what is probably off the table is probably some of the tax hikes like a wealth tax and some of the more aggressive intervention which someone in
the greens and also on the left would favor. overall, i think this is a progrowth message really for equity, whether it influences the rates market much remains to be seen really. over time we see bond yields going higher. but it does look as if germany overall will become a country that is spending more and become a bit more domestically driven rather than being focused on those export driven growth we see over a decade now. guy: can i bring it the conversation we were just having moments ago about what andrew bailey was signaling. if you are christine lagarde and you are looking at that kind of scenario that you've just laid out, what of the monetary policy implications are slightly stronger spend out of germany, is that enough to allow you
potentially to accelerate or at least keep on track plans to withdraw some of the monetary stimulus it's been delivered during the crisis? >> i think the ecb will closely follow on the fiscal side. what the europeans will do have been suspended now for another year, but in 2023 the europeans have to decide whether to go back to it or change it and how to modify it. a different german government could play a role and loosen up that a bit. tickly german itself -- germany itself find ways to go around its own data rate is probable be changed but there are ways to spruce up spending outside of that. the ecb will follow closely. but i think they will be very
careful not to assume anything before it is really decided. >> the idea we will get the input for more spending seems to be the prevailing theme coming out of the election. i wonder if we learned anything about how fragmented the political landscape is. just the fact we had a three party coalition seems very dramatic, are we more fractious than we are making it out to be. maybe this isn't how 100% a done deal. >> i think there is great agreement to spend more in general. public investment to something on the agenda particular when it comes to digitization or germany's far behind. i do think when it comes to how to implement greener policy, abruptly on the decarbonization efforts. whether through texas or maybe to the deficit, i think there's
a lot of disagreement. the discussion they will have over the next few days and weeks is probably crucial. i think the point we may get a more prudent german government, less powerful than merkel was. maybe you get the right one but you don't get the right forceful and focal policy you had before. guy: can i get your take on those comments from andrew bailey. the response to inflation if needed will be by rates. everybody has this clear, we will taper qe and then we will raise rates. the bank of england seems to be getting in a model about how the sequencing will potentially work, getting a lot more blurred. >> that is true.
people are already quite confused about the meeting. i think there's some clarity for the governor. i hadn't seen the transcript yet but it is true typically central banks get out of the longer end which is qe before starting rates. the bank of england so it had a big difference. they always gave themselves a stock they want to buy. it is an interesting step and i think is a policy mistake, that will be on people's minds. prices are high but the economy could weaken relatively abruptly, the question is whether or not it's better to earlier rate hikes are really the right response. guy: a quote from the statement, the monetary policy response if
alix: over the next few days google will fight hard and european court to counter antitrust suit that could be a $5 billion fine. at the same time, youtube in particular is saying free speech is a very core value the company , particularly when it comes to russia. google and apple both pulling a voting app from alexander navalny -- alexi navalny. youtube removed navalny's videos
after the russian government request came in. the ceo spoke to emily chang. >> we get requests from governments and we look and consider miley getting the requests. what's happening on the ground and based on a whole bunch of different factors we make a decision. we don't always -- they are not always requests that make sense for us to honor but in certain cases we will honor them. in that country. alix: she declined to comment on the specific request from russian officials. you bring it back to what's happening in europe as well. google fighting on a lot of fronts. maybe the case it will drag on. that's some serious cash that could be at risk. guy: these are very different stories. in some ways they are related. i think the navalny story, i
think the umbrella is getting full. but clearly google, and i think this will be a problem from all companies. you do with china and russia. you have your backup at home which has a different attitude to this. the really difficult challenge. to the apparel companies the gaming companies will be moved to china. and there is this issue of google and installing android on the phones. i'm not sure i can draw a line between the two. alix: how about big tech government. guy: we will go with that. we will talk to polestar. ♪
we have been fading throughout most of the day. as you can see there is still a little bit of green to be found on the side of the atlantic. the ftse up to tens of 1%. the taxes up by around three tens of 1%. the ibex is -- the main markets are just keeping ahead above water. you can see the impact of the u.s. session which is turned out to be a little bit more negative in terms of the impact. you can see that coming in here. we basically is closing with the flatline. looks cool, through the end of the day right on that. the stock 600 down by 1/10 of 1%. other assets may be more exciting than equities. germany watching what's happening there. the german election a factor to think about. that will have a long gestation period to determine the impact.
gas station in the u.k. up about 9%. we are facing a two-pronged energy crisis. we have panic buying at petrol stations but we will talk to an ev maker in a few moments time. maybe this is an opportunity to think about an electric car. then we have the gas story with super gas prices. those coming together putting a squeeze on the u.k.. that translates into print. still flirting with $80. 7958 79.58 is where we are trading on brent crude. energy is having a great day. european banks are having a great day. you can see energy is up by 3%. the banking sector is up. technology down to the bottom. luxury stocks are down at the bottom. that's where the weaknesses coming through. basically terms of waiting, fairly evenly matched. rolls-royce, the jet engine
maker not to be confused with the car maker. a couple of things happening here. one of which is spinning off the division to private equity, of the other is it signed a deal with the u.s. air force to retrofit b-52s with new engines. the b-52 i think entered service in the mid-50's. this is an incredible story continuing to reengineer and improve an existing airframe. rolls-royce will be doing that for the u.s. air force. the lifecycle here will be something like 30 years. that's an incredible annuity in terms of the way the deal works. with those travel stocks, up by 5% today. i wg, that the flexible office solution company, potentially looking to break this company up what you may have some of the
past valuation story, i wg up by 4.99%. alix: ev maker backed by volvo and leonardo dicaprio, polestar is going public. the transaction will apply a $20 billion enterprise valuation. the polestar ceo joins us. it's been a tough time, so congrats on getting it done. because we are tv i have to ask about leonardo dicaprio. how did that relationship start, how did the conversation evolve. how did that happen? >> will one of the strong stories is sustainability. obviously it's very well-known, it's very important for leo.
him investing our company obviously that makes sense to us. guy: couple of things to say. alix is ridiculing me for calling him leo, obviously those close to him call him leo. i bet you didn't expect this to start with a conversation about leo dicaprio. let's talk about the spac. what will you use the money for, how does it help you on your journey? >> it is a very important exciting day. we have two cars on the road. we have established our system in 14 markets. but a big future ahead with three cars coming out of the next three years and expanding into many markets. and of course this growth story is of course really nicely
supported by this injection of capital and the access to capital market. alix: when you come to new chapters, part of that chapter will be building the ev's is china. you have a 27% import tariff in the u.s. because it is built in china. how quickly and aggressively will you be looking to build plants elsewhere? >> we already are outspoken about the plan for the next car being produced as well in south carolina in the charleston factory is up and running so we are implementing that and it will be an important first step. and very much, it very simple way of utilizing that manufacturing footprint that
exists within volvo group. we clearly have that advantage. this existing footprint not only when it comes to manufacturing as well as having 500 service points already today and bringing us to the number of 800. this is possible because we can use this infrastructure that exists in a group. we will be producing american cars for the american customer. this is what will happen over the course of time in europe. not only for financial reasons or geopolitical reasons as well, very truly important for the company that take sustainability serious. it's the most sustainable way of producing a car if you do it close to market. >> volvo announced it will invest another $600 million in you. i'm wondering what the cash flow position looks like right now in terms of your expansion.
the spac is going to take a while to get done and obviously there is going to be a gap before you get that financing. is that what that $600 million is designed to do. is that an investment to hold you over until the spac cash effectively kicks in. >> no. guy: i think we may have lost him. there he is. i think we may leave it there. i think we are experiencing technical difficulties, which is a huge shame. it's a great story in terms of what's happening here. what i think it's also fascinating is a $20 million valuation we've got there's some talk that volvo, the company this was spun out of, they could
end up with the same kind of legacy assets and superclean new ev assets. alix: if you just compare alaric: -- polestar two other companies, tesla is worth $770 million which makes 20 billion feeling -- 20 million file chump change. just feel like chump change. alix: -- guy: they have two cars on the market. this isn't a we are going to need a lot of money to wrap this up. we are already starting to produce. that valuation gap is quite significant. we've moved beyond value. i think we may be valuing them as a different ballgame. let's talk about what's happening with the close of play in europe. we are through the auction, these are the final numbers.
a little bit of a pop coming through, but it's fairly flat session as we've spent most of the day in and out opossum -- positive segment territory. alix: trying to understand what that means for their portfolio. if it's one more part of the supply and demand mismatch that we've been seeing all over the globe in different sectors. let's examine one of them. we will talk to the executive director of the port of l.a. next to talk about congestion. we will break that down. this is bloomberg. ♪ this is bloomberg. ♪
alix steel. this is the european close. talking about the huge supply and demand mismatch. 62 ships are still waiting to dock at l.a.'s sport. the port of long beach is doing 24 hour operations monday through thursday to ease the logjam and the port of play, the busiest in north america is focusing on improving efficiency. ed ludlow is reporting from down there with the ports executive director. >> we are joined by the executive director of the port of l.a. where 40% of the u.s. container in come into and 30% of exports go out. thank you very much for having us here at the port. where the pressure points? >> all throughout the supply chain. output is at record highs yet we are still at record orders. increase as much as 30% of the transpacific have been deployed yet we still don't have enough space. cargo coming here is like taking
10 lanes of freeway traffic and compressing them into five. cargo is sitting for longer at the port as it is a warehouses. we need to speed the velocity through the supply chain as well. >> is the issue infrastructure? if you speak to the line they will say the pandemic has exposed shortcomings imports like l.a., is that what the problem is here? >> there is no one answer but infrastructure has been a topic of discussion. over the last decade, the u.s. federal government and congress has out invested the west coast at a rate of 11 to one, more than $11 billion that's gone to the east and gulf coast versus more than $1 billion here on the west coast. >> talk about labor pressures. you a lot of different arms of the port working, of the dockworkers, of the warehouse on what is the story there. >> three segments of labor basically. dockworkers have been out on the job an average of six days a week since the pandemic began.
second is the fact that work being done on the docks has improved productivity by 50% since the surge started last summer. we are moving more containers on and off ships on average per call than any other port in the world. second, the truck drivers only about 50% of all truck drivers are calling here at least once a week. capacity is increased by 30%, a capacity has increased by only 8%. the last segment is a warehouse worker. we have more than 2 billion square feet of warehousing on the shores of the pacific, they are overflowing with cargo. we need more folks on the job and to expand work hours like everyone else. >> how does this all get better? do we need to make more investment in infrastructure, is the federal government getting involved? how can we fix this problem long-term? >> short and long-term answers.
the federal government is involved at the highest levels prayed the executive order on supply chain including certain commodities like agriculture is front and center. bringing on the former u.s. department of transportation deputy secretary and the secretary of transportation of maryland has been an absolute light on the subject and has been working around-the-clock to help us out as well. alix: i apologize, you are finishing. >> in addition, we need to take advantage of the 30% of truck appointments that go unused every day at the port. alix: thanks a lot. i was going to ask, you don't have a crystal ball, but will we have a christmas this year? are the toys for kids going to be in stores? how long is this logjam? >> we will have a christmas. many of our importers,
especially in the retail community have been very savvy evaluating the supply chain occurrences and they pulled forward much of their holiday season inventory. we began seeing elevated levels of cargo as early as june this year when normally that happens at the end of august or september. i feel confident the retail community will rise to the occasion once again. guy: can i look further forward than christmas. we are clearly seeing a huge amount of demand fuel services at the moment. in a years time will that demand be as high? you invest now, are you going to invest into a slowing market at some point as we start to see some of this extreme demand fading from the system? >> great question. what we see is at some point in the future, the import cargo plateau. if we can get past the delta variant, go back out and start
spending discretionary income in the service sector, we are not quite there yet. at the same time we see a strong market through an early new year and the first of february. retailers are telling me following the holiday if there is one because of the work at hand, they will focus on replenishment in the second quarter of 2022. guy: we hear a lot about china, seven out of 10 of the world's biggest ports are in mainland china. policymakers won't hesitate to shut down the port. what is your communication like with the point of origin in terms of dealing with that backlog? >> i worked overseas 11 years, four them in china. what we see these rolling third and fourth weight of covert exposure from vietnam's factory community up to the port communities in china. it has not impacted us. so one terminal shut down, a slight shutdown of another which meant a 50% productivity for two weeks. it keeps blowing at record
levels and the productivity is at record levels in the port of los angeles. guy: to jump -- >> are you paying your people more and if you are, do you think that higher level of wages you are paying and your contractors within the sites both a warehouses and on the port are going to pay more? do you think wages go up? >> i think that's a great question. we are a landlord port. we lease our properties out to the private sector service providers who bring on labor. what we are seeing is everyone here who wants a job has a job today. we have to get a little bit more activity in the truck area and a lot more in the warehouse community itself, all private sector jobs which will continue to work with those segments and partners to push forward. >> you are doing critical work,
we thank you for it. working our way through this backlog it will be fascinating to see what the picture looks like in six months time. executive director of the port of l.a. and of course our thanks to our good friend and colleague, ed ludlow. this will be the question paired we are trying to figure out whether or not this is a speedbump, whether or not this demand was created stopped as a result of the pandemic is going to be something that's temporary, how do you define temporary. at the moment as we just saw their, a huge amount of inventory still sitting offshore. alix: key things we will have a christmas or the question is how much you pay for it. they are filling the jobs, i wondered how quickly or how sticky those employees are. talking to them, they have a u.k. hospitality business for example. they keep hiring and those
people keep leaving. you are wasting productivity, training people are they keep going to other places where they can get better pay. i don't know how that becomes temporary. -- transitory. that feels stickier to me. guy: i think you are right. i also think what you said about productivity could be interesting here. they love the lasting effects is that we do start to see companies investing more in their people. this has always been one of the challenges with productivity we've had. companies have an abundance of labor. the output gap was global and as a result they didn't need to invest. now they do. maybe this improves the picture. guy: which could have more -- alix: which could have more lasting impact. we will break this down for you here. this is bloomberg. ♪ ♪
alix: we are about 2.5 hours into trading. let's get you caught up on that action. abigail doolittle is here with us. abigail: here are the tech movers. here is that inflation feel. we have tech down in a big way as yields shoot higher. yields above 1.5%. that brings into question valuation. it will probably be digested at some point but that puts pressure on the next level. right now you see big decline for tech with a little bit of an exception for facebook. this as instagram is pausing the kids site amid controversy. facebook seems to be rewarded for that. as for the reflationary piece, it has over the to do with energy. we will see big gains here.
j.p. morgan chase along with bank of america both up more than 2% as yields are boosting those banks on the idea lending will be better. and then of course energy, oil now back above $75 a barrel, up for a fifth week in a row, demand is seeing a little bit of a supply crunch. occidental petroleum flying up. that sector is the top sector on the year, up 35%. it is not up as much is oil. the top one of the year could be a catch up trade. guy: we will see what happens next year. markets looking through what could be a difficult winter. we will park that for the moment. new york fed president john williams, the fed governor will be speaking later today, the satellite launching.
tomorrow, we moved back to the central bank story. alix: the ecb form on central banking, but treasury secretary janet yellen and jay powell will be testifying on thursday. that's the main event of the week. plus you get evans and bullard speaking tomorrow. talking about what kind of christmas we will have. if you were buying christmas stuff you by that at the end of summer. i think in the main event it will be janet yellen and jay powell together, the debt limit will be so politicized and front and center in that conversation. alix: we will take -- guy: we will take that live for you tomorrow. we will watch that with a deal of interest. the director of policy research joining us on balance of power. this is bloomberg. ♪
announcer: to the world of business -- >> bitcoin and many others are kind of settling and have not worked very well. announcer: this is "balance of power" with david westin. david: from bloomberg world headquarters in new york to our television audiences worldwide, welcome to "balance of power." looks to be a packed week on capitol hill. to set the stage, we go to our washington correspondent up on capitol hill. give us a sense of the schedule. what are we looking at? anne-marie: it's an incredibly dizzy schedule. the democrats are meeting at 5:30 and the senate is going to vote on that bill to fund the government and address the debt ceiling stop but you know as well as i do that