tv Bloomberg Daybreak Australia Bloomberg October 28, 2021 6:00pm-7:00pm EDT
the company renames itself meta. shery: evergrande made an overdue payment. what that means for the developer. we are seeing u.s. futures losing ground to tense of 1%. this after record closing highs for the s&p 500, and the nasdaq 100. we also have the dollar underperforming against g10 peers. on the other hand, the euro advancing the most since may. the ecb pushed back against expectations. oil a little bit of gain.
crude above $83 per barrel. it was all about the tech earnings after hours. let's look at what's happening right now. broad downside pressure for apple and amazon. the apple quarterly revenue missed estimates. supply chain issues were a factor. amazon, holiday sales are expected to bring several billion dollars in extra cost. we are seeing a bit of a rebound in after hours at facebook after they rebranded. i had a name change to meta. they will start changing -- trading under the new tech or -- ticker december 1. take a look at these two companies.
senior pbo fist -- pboc official said workers are engaged in illegal financial activity. we are seeing the downside pressure right there. double digit losses for those two companies. the bond markets are stealing the show because we are talking about the treasury yield curve inverting for the first time at the long and the 20 year yield topping the 30 year yield. we are seeing broad moves and -- and government bonds locally. now, this move in the treasury market for the first time since the government reintroduced the two decade maturity last year. haidi: the bond market revolve in this part of the world continues. backed into a corner by what traders are betting on as a more aggressive regime of tightening.
this is what we are seeing when it comes to the 10-year this morning. this after we saw u.s. treasuries sold overnight. we are getting this situation where the lack of intervention over the last two days has seen the april 2024 note doubling the rate target. shery: investors are watching closely what's happening on the fiscal side around the world. in the u.s., we are watching what's happening with the revamp. the tax and spending framework by president biden, he is urging congress to back it. come -- progressives are not completely on board.
this has big implications for what happens with inflation fears as well as more treasuries being printed out. we have to continue watching what happens on the fiscal side of things. haidi: continuing to watch developments with evergrande. incremental progress. good news it averted default once again. the overdue interest payment was made within the grace. -- the grace period. this is the second time they have been able to stave off a default. they skipped the interest payment at the end of september kicking in the grace period. we will continue to watch these
talks between bondholders and the company itself to see whether this could be the first step toward debt restructuring and negotiations. shery: another exciting day when it comes to evergrande. the big story of the day, amazon and apple reporting after hours plus facebook revealing a new name. let's bring in tom and ed. give us the headlight -- highlights that companies are hit by supply chain concerns. >> apple is having a hard time getting the product needs -- the parts that it needs for its products. the sense we get from the executives is that there is demand for the iphones and other products, remember they just refreshed those core products. there is demand, but they are having trouble on the supply.
supply chain problems cost them $6 billion of revenue in the last quarter and they expect more costs in the current quarter. this is the crucial holiday quarter which is not good for apple to have supply chain constraints. amazon is even more nuanced. there are supply chain concerns for amazon, but also a demand issue. demand not as robust as it was during the pandemic when everybody wanted everything from amazon right away. haidi: are these companies taken the right approach when it comes to the supply chain bottlenecks? >> let's start with amazon. they are spending through the nose in order to overcome the constraints. in order to get the products into the hands of customers and get them done in a timely manner. it is having to spend extra. what they said is that profit in the fourth quarter will be wiped
out. they are spending, they were absolutely increasing the spending to make sure they get the products customers want into their hands in time for the holidays. apple as well. apple is taking the steps it needs to in order to overcome the supply constraints but it won't be enough to keep them from having a hit on revenue. shery: ed, we have future rebrand a facebook. tell us about this. >> it's a change in name only. facebook becomes meta. the company's stay the same. there is no restructuring like we had with off a bet and google. -- alphabet and google. it's the biggest signal that we have had about facebook's future
moving away from the dependence on the core advertising business toward the use of augmented virtual reality. on the hard side with oculus coupled with verizon. the presentation we got today was about e-commerce online. conducting business through vulture -- virtual reality and the metaverse. haidi: meta is proving to be confusing to people. it will not be trading under the meta ticker. >> the ticker is going to change on december 1. not a lot of change in terms of what happens, what the company looks like. it's an important symbolic change. facebook brand has been so tarnished after reports of toxic content, misinformation, hate
speech. anything they can do to get the public, investors, users to think about something other than facebook is good for them in their estimation. remember, it would take years and were for these investments they are making an the metaverse to change the user experience. for the time being, it's all to be the same apps we are accustomed to. what's out instagram, facebook. what is the user experience going to be like? they want to get ahead of that and the new and different. -- build something new and different. >> the impacts are already being felt by facebook. they announced that operating income will take a hit because of existing investments in reality labs. capex is growing from $19 billion and 21 to $34 billion in
fiscal 22. this is a massive commitment. by the end of the decade, the metaverse may touch one billion people. think about that relative to the existing user base. this is a company that is due to print $120 billion revenue this year so it gives you a feel for how it will take -- how long it will take for this to be the forefront of the company. haidi: the white house has issued a revamp outline to pay for the spending agenda. it includes a new tax targeting large corporations and millionaires. >> these plans are this responsible, fully paid for. they don't add a single penny to the deficit. they don't raise taxes on anyone
making less than $400,000 per year. haidi: let's get the details from our u.s. government managing editor. is this going to be more palatable? >> it appears that it is more palatable already. the congressional progressive caucus which is the wing of 100 house members who are liberal democrats have agreed to go along with it. the more conservative democrat senators have also agreed to go along with it. it looks like it's all going to come together. the devil is in the details. they are working furiously now to turn the framework into an actual piece of legislation. that will be more than 1000 pages that they will have to go through all of that.
it does look like this is actually going to happen. shery: will we see a vote on the infrastructure bill before text on the bigger package which is what the more progressive democrats wanted or will this go their separate ways? >> i think it will happen separately. that's what the progressives are demanding at this point. i think you do have some leverage because a lot of their favorite items were cut from the bill. paid family leave among them. also a lot of other spending that they wanted like free community college. they may have some leverage to say no, we are not going to vote on the infrastructure bill until we see and agree on the legislation for the rest of the spending. republicans may fight that, but the democrats have the narrowest of majorities so they may be able to pull it off.
haidi: take a look at the final trading session of the week. we are one hour away from the start of trading insignia -- in sydney. we are weighing the gyrations in the bond market. mostly with the 10 year in australia. potentially a little bit of upset when it comes to the start of trading in sydney. >> the ecb has renewed its pledge to keep emergency bond buying at a moderately slower pace as inflation surges. the president's bid to ride home the commitment to loose monetary policy has fallen short. she told a virtual conference that it's not for her to say if markets are ahead of themselves. >> our analysis does not support
that the conditions of our forward guidance are satisfied at the time of lift off as expected by markets. nor anytime soon thereafter. >> g20 leaders have pledged to stop coal-fired plants. they are still wrangling over climate objectives that are crucial to keeping global temperatures and tech. china says it is sticking to existing climate change targets. beijing's updated pledge reiterates plans to reach peak greenhouse gas emissions before 2030 and net zero by 2060.
citigroup will require all u.s. employees be vaccinated against covid-19 citing president biden's directive. the wall street giant has asked employees to submit proof of vaccination. a memo says january 14 is the final cut off. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ shery: still ahead, we discussed australia's commitment to reach net zero emissions. up next, we get the market outlook from a portfolio manager and her reaction on u.s. gdp as
>> q4 should be much better now. we should see an increase of semi conductor supply quarter after quarter. >> we have seen recovery on the impact of q3 from the supply base that caused deeper impact. i am optimistic that we are through the worst of it. >> we are already seeing issues with finding product on the shelves. >> we have a fully aligned supply chain when it comes to 2022 and 2023. shery: ceos talking about supply
chains. that weighed on the u.s. economy in the third quarter. our next guest is cautious about the pandemic outlook and the earnings power of some businesses. if anything, we saw profit margins continue to widen even with cost pressures. how cautious are you about the economic outlook given that we have infection variants? >> i think it's still an uncertain economy out there. covid variants could continue. we passed may be the worst of delta, but vaccines in emerging markets are still very low and that's where a lot of new variants could occur and come back here. it's hard to discount that that's going to go away. a lot of businesses start coming
back to work in december and that's at the peak of flu season. i'm concerned there's going to be a lull from covid going forward. it comes to margins, businesses have been sharp and thinking about -- shery: this chart on the bloomberg also showing extreme valuations with amazon versus its peers. where do you go for some safety? these were the safe havens during the pandemic. now, the valuations at these levels, where you go? >> smaller cap for tech is still really interesting. we have a long way to go for
digitization. when you think about insurance companies, they have only just started modernizing to cloud architecture. a quality business that we like is -- technologies. helping insurance companies modernize and compete against these newer insurance companies like lemonade. -- >> bringing to light the challenges in terms of encouraging companies to minimize their working capital, run as lean as possible. unfortunately, now that's rearing its ugly head were we are caught without any inventory and with delays to the supply chain, it's putting a lot of pressure on company earnings.
manhattan associates is a great job of being able to give companies transparency and visibility into their supply chain and to manage it at every level. a level of complexity we are seeing in supply chains is only expanding because if you were dependent on china for your business and you realize i'm a party to this huge energy crisis in china, that just adds or complexity. we like their value proposition to its customers in giving a lot of clarity and being able to plan accordingly. haidi: you touched on the energy crisis. i want to get your thought on esg especially going into cop26 and how long the energy transition is going to take. the crisis we are seeing is a lack of preparedness to that transition. >> it's wonderful to have
enthusiasm around new renewable technology. there is for sure a place in an esg portfolio for that. we have overdone oil and gas companies which are typically not a big focus because we are long-term investors and we like to invest in quality businesses that are less cyclical. i do think there's a point where the assets in oil and gas become so cheap that it doesn't tie back to the fundamentals. these are businesses that are going to exist for decades because we can't just turn off the spigot of fossil fuels right away, especially in china. i think it's important to bear in mind that price still matters. the converse is true as well. haidi: always great to have you
haidi: group is looking to raise, it's biggest ever capital raise. it's commodities and global markets business also seeing strong income. a bank of china profit jumped thanks to easing bad debt pressure. the lender reported net income of $10 billion. following from the start of the year. china's biggest cross-border -- plummeted.
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haidi: this is the moment so many australians have been waiting for. after being cut off from the rest of the world, millions of australians on the east coast will be allowed to travel as far as london and new york. although most of them will not be able to travel to a lot of the australian states. it is great deal of excitement and we will be checking the airlines and qantas of course.
let's look at the day ahead. we start off with new zealand. consumer confidence falling 6% in the month. in australia, we are expecting september retail sales data. origin energies first quarter production numbers. the bank of australia has released its forecast of an interest rate hike. the bank sees the economy expanding 3.5% on the year. it boosted its growth forecast for 2022. we appreciate you joining us on the start of your vacation leave.
the spotlight seems to be the 10 year yield this morning. our markets getting ahead of themselves in terms of pricing in this aggressive cycle tightening? >> we think they are compared to our own forecast. we are expecting the reserve bank to tighten policy at the end of next year. other forecasters don't have the reserve bank hiking until 2023. markets have moved quite aggressively over the past couple of weeks. i think there ahead of themselves. the central bank here is still a patient one in terms of normalizing the cash rate. they have a high hurdle to raise interest rates.
we think they won't lift the cash rate until the end of next year. haidi: i'm going to bring up this chart. the april 2024 note which saw most of the action this week. going into the meeting next week, does this potentially change what you expect from them in policy guidance and you expect interventionism point even though they have refrained so far? >> in a lot of ways, it was all about what they didn't do yesterday rather than what they did do. with a didn't do was step in to defend the yield curve target and that's why the market sold off aggressively and it has left a lot of people unsure as to what the banks intention is with the yield curve target. yesterday we said explicitly that they just abandoned the yield curve target at the november board meeting. if they have to upwardly revise
their inflation forecasts, that means -- it's about the conditional forward guidance. if they have an inflation profile that is no longer consistent then they can walk away from the yield curve target. until that board meeting, i think markets are on edge as to what they might do over the next few days. >> all markets are obviously affected. the equity market -- the currency bounces around as the market is trying to price in the hikes. it has all been around the money markets. when you think about yield curve target and what the bank's been trying to do, they have been trying to suppress interest
rates at the shortened. artificially suppress them if you like because they are trying to make the case -- raising the cash rate for many years. the markets don't believe them at the moment. the fact they didn't step in and do anything yesterday has got everyone on edge. if they don't do anything today, they're going to do something about the yield curve target next week. we have been making the case all year that this yield curve target was going to prove problematic. around the middle of the year, the reserve bank decided to stick that target, to take it to the november -- april 24 bond. basically it went from three year yield curve control targeting a particular bond. we are of the view that if the markets thought the reserve bank would be moving earlier, then
it's going to cause some real problems and that's where we are today. shery: talking about cpi when it comes to the yield curve control, does it lower the hurdle that raising the cash rate -- why -- what is it about the -- that makes you believe it will be on hold for a while? >> we have only had one print that you would say is strong print and that came through this week. the consensus was around .5%. a genuine upside surprise. we only had one upside surprise and that took the core rate to 2.1%. we think it will take a few more prints to get inflation up to around the midpoint of the target bend. that won't be sufficient for the reserve bank to raise the cash rate. they will want to be sure that wages growth is headed upward. that's a key difference between
australia and a lot of other countries. we have not yet seen in our official data wages start to head north. we think it will happen, but it hasn't happened yet and that's what gives the central bank some time. they have to see two things. inflation moving higher, confident it's going to stay there and they will know that if they see wages moving higher. we think that's going to happen next year. a key logic is that higher actual inflation is going to make it easier for people to get a lift in wages because they will point to actual inflation. we think the whole process will take off next year, it just takes a little bit of time. shery: it was good talking to you. holders of another china
evergrande bond received another payment. this is another payment very close to the deadline. what do we know? >> they made a $45 million interest payment within the grace time. again, they avoided a default and welcomed more time to negotiate with the bondholders. the company has been making slow progress. a lot of people are watching, they will look at ways to pay their debt. the offshore creditors laid the groundwork to start talking and
about contagion or the broader risk there is perhaps going to afflict other developers as well as we have started to see? >> we have seen other developers with weaker financial standing traded down or getting downgraded. it is largely reflected in the market and a lot of them have already started addressing their issues. with some positive development over the past week in china which is providing a little more insurance to shareholders that they should be treated equally against other creditors. i think it has improved a little bit. haidi: coming up next, we speak
fortunes depend on the passage of his agenda. the framework has one widespread praise from democrats including progressives who wanted higher spending. they continue to hold up other parts of the agenda, the infrastructure bill. >> compromise and consensus are the only ways to get things done in a democracy. important things done for the country. i know it's hard. i know how deeply people feel about things that they pay for. this includes historic investments in our nation and our people. >> india has deployed u.s.-made weapons. the countries remain deadlocked over territory and the himalayas.
india and the united states have been strengthening defense ties. beijing city will join a trial program aimed at eliminating hidden government debt. the state council approved the capital joining the trial. authorities elevated it to a national security issue this year indicating greater termination to curb unregulated lending. emmanuel macron has told australia's prime minister that it's up to cambria to improve their relationship. emmanuel macron says australia must now take tangible actions to improve ties. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries.
this is bloomberg. ♪ >> haidi: cop26 is almost upon us. the business council for sustainable development australia is a group of businesses and ngos. i wanted to get your thoughts on the plan for australia's climate change path that was unveiled by the prime minister earlier this week. >> thank you for the invite. a good start to frame this conversation. the plan is an interesting one. if we think about the context of why the plan is coming to be, it's for the purpose of negotiation in glasgow and under five days. that plan at this stage, the scorecard is that in terms of
activity, it is a landscape changer and transformer for the country in relation to what it needs to do to get to net zero by 2050. in terms of a lot of commentators including ourselves, -- countries were expected to bring tangible progress in relation to the paris agreement. businesses are interested in whether it's actionable. haidi: so much of it depends on futures of technologies. scientists saying much of the action needs to take place between now and 2030. what are the businesses and groups you represent calling
for? >> an important question around the framing of action that needs to be taken. when we think about it, in a little less than 30 years. the thinking around that for business, that is really a set of three times 10 business plans. in that regard, you have a real challenge around the changes that need to be made. from the perspective of companies, what they are looking for is strong stable supply chains. a healthy and engaged workforce. a financial system this went to help them thrive through the transformation. that's going to occur not just as our country decarbonizing but the rest of the world. the benchmark of 2050 while it's important requires a midway check around 2030 to make absolutely sure we are on
progress to achieving net zero by 2050. from a business perspective, the real challenge is to see that we're going to be reducing emissions aggressively and quickly. we're going to be removing emissions wherever possible from our economy substantially and ultimately reporting them as companies do at the moment. shery: you mentioned some of the elements that need to be there in order for businesses to push for these climate goals. especially when it comes to supply chains resiliency. a lot of the specters are not there. add to that -- a lot of the factors are not there. are your members concerned that it may be harder to get there? >> absolutely. i don't think any company, any society or government at this stage thanks that this is going to be easy. that doesn't mean that it's not
important to do. the urgency is exacerbated by the report that came out once ago indicating that we are not on track and the you went reinforced that recently in the last few days around the progress of companies -- countries in relation to our change toward 2050. i think you are seeing a substantial business appetite transformed to a cleaner and much more resilient economy and industry in particular faces now in's -- unstoppable. most importantly, how it takes risk going forward in relation to the decarbonization pathway. shery: what sort of conversations are industry leaders having now with the government? the updated pledge coming from the administration does not look like it's going to lead to emissions reduction between now and 2030.
>> it is an important one to understand for australian business because in one sense, australian business much like the rest of the business world has moved on from seeing the challenge as an environmental one. the national government in australia has identified that there is a technology solution and that's absolutely right. the thing that businesses are wanting to understand is how does the economy respond and be resilient toward the change and traction and transition that's going to occur? the notion, it has to be framed in the question as to what is going to enable that technology to be brought forward as quickly as possible and to be efficiently and effectively transforming and economy where in australia's case, it is very much historically aligned to a
fossil fuel based economy. haidi: we have seen prominent business leaders taking innovative personal stands. what is distinguishing between meaningful action of corporations and ceos and what someone would refer to as greenwashing? >> that's going to be a real issue going forward. how do we effectively understand that what corporations are doing is actually tangibly and meaningfully responding to the need to decarbonizing effectively and quickly? and the real challenge becomes what is the benchmark that needs to be done not just by countries, but increasingly by companies. what you are seeing over the last few months particularly businesses calling for is not an
international reporting standard around esg. harmonized reporting requirements that align with historical frameworks whether that is the international framework sustainability standards or the work of reporting counsel or the important work of other organizations like the cdp. it's important to harmonize and bring these altogether so that meaningfully, the finance sector understands what is the tangible progress that is being made and how ultimately you can finance the particular progress. shery: it was great having your insight. we have breaking news right now. meta has been working on a line of smart watches and is planning to watch -- want those watches soon as next year.
it's all about central banks. goldman sachs sees rates rising in january rather than july for the bank of canada. goldman sees a policy rate of 3% by the end of 2025. haidi: a gloomy future for the japanese yen. while it's not immediately on the horizon, he could face a weakening of the currency is the bank of japan's outlook diverges with the feds. shery: staying on japan, the prime minister is regarded as the safe party when his party elected him.
that raises more risks for the party as the nation heads into a general election. we explore what's at stake for japan's new leadership. >> the japanese prime minister has only been in the job for a month, but he heads into sunday's general election with the lowest approval rating for an incoming premier since 2008. while the ruling party is unlikely to lose its majority, a major loss of seats could weaken the party's faith in his leadership and perhaps sent him through the revolving door of japanese leaders. none of japan's opposition parties have support. they set a modest goal for this election, to maintain a simple majority.