tv Bloomberg Daybreak Australia Bloomberg November 3, 2021 6:00pm-7:00pm EDT
its outlook. shery: the pentagon sounds the alarm on china's nuclear weapons capabilities warning its arsenal is expanding more rapidly than previously thought. it is a picture. futures little changed. the s&p 500 and other u.s. stocks rose. we sold those reversing earlier. declines after fed chair powell's message there is a commitment to stay accommodative. the s&p 500, the dow, the nasdaq 100 seeing record highs for second straight sessions. something we have not seen since january of 2018. we also have data showing u.s. companies added the most jobs in four months and this ahead of friday's job numbers as well. the dollar index hit session lows under pressure after chair powell talked about there being no rush in raising rates. we also have oil under pressure
right now at the $80 a barrel level. we had u.s. will inventories -- u.s. oil inventories at the highest since august. we headed toward the crucial opec-plus meeting. treasury yields rising to session highs. take a look at what they have done. after the fed announced plans to slow the bond purchase later this month. markets in a way not entirely convinced the fed does have a tight grip on price gains from now on. remember the treasury announcing the first reduction in its quarterly sale of longer-term debt in more than five years. reflecting that perhaps the borrowing needs from the pandemic spending are starting to diminish. but really, that idea that chair powell wanted to emphasize is really the test for tapering and rate hikes?
that one does not since early in the other. -- does not necessarily mean the other. the fed also will be discussing how to approach the size of its balance sheet in its future meetings and overall, this sense that perhaps it was a reflection of other dovish messages we have heard around the world coming from whether it is the rba or the ecb. haidi: super interesting because we heard the same from the rba earlier this week saying abandonment of the target is not tantamount to saying the rate hike trajectory is going to get less patient. we heard pushback from christine lagarde saying the ecb is unlikely to hike rates into next year. saying there needs to be patients. that the economic recovery still requires a certain level of support and despite faster inflation, we will not be seeing the rate hike calendar going
into next year. shery: we are watching the fiscal space closely as well given that we heard the announcement from the treasury earlier today and we are watching president biden's economic agenda. it seems the democrats in the u.s. might have gotten a harsh 2022 wake-up call especially from the races in virginia, new jersey and other parts of the country with voters flocking toward republican candidates. a warning ahead of congressional midterms in 2022 and what president biden can do with its economic agenda in congress right now. it seems progressive took -- seems progressive took -- progressives took hits across the political map. haidi: biden is playing into his geo sensitive showdown. we know the president has been committing more output when it comes to oil. he wants the cartel to ease up when it comes to some of these restrictions and to help that ease, help ease the levels of
inflation we have seen in the energy crisis. president biden, saudi arabia, the allies must choose the way ahead when it comes to their policy. if we see a rebuttal of the u.s. request, we are looking like a bit of of a fight with the white house. very concerned about healthy energy prices are going to way into their economic agenda. this is a picture when it comes to australia. futures up about 5/10 of 1%. it has been a robust week for equities trading. after u.s. stocks climbed to the record. signaling monetary policy will stay accommodative even with the reduction of the bond buying program. the 10 year yield has been holding steady. we have seen bond markets take a breather after the incredible price action that led to the killing off of the yield target policy from the rba. new zealand, we are seeing a flat start to the trading day. chicago nikkei futures as tokyo
comes back online after yesterday's culture day holiday. 2/10 of 1% higher. it's get more on the fed decision and the fallout from markets. joining us now is case lane hayes. kathleen: -- is kathleen hays. kathleen: it was interesting what jay powell had to say about policy moving forward. the fed can be patient. still thinks inflation is going to approve to be temporary. he doesn't think he is on the verge of getting too far behind inflation that has gotten high. >> i don't think we are behind the curve. i believe policy is well-positioned to address the range of plausible outcomes. that is what we need to do. i do think it would be premature to raise rates today. that is -- i don't think that is controversial. i don't know anyone arguing for that today. the reason is there is still ground to cover to get to maximum employment. kathleen: for some analysis, let's bring in the princeton senior research scholar at bloomberg opinion and
importantly, he was the head of the new york federal reserve bank from 2009 to 2018. another crisis period for the fed. you have been warning that the fed could move too slowly on inflation and have to speed up too much. his jay powell on the verge of a policy error? >> we will see how things evolve. obviously if the inflation pressures turn out to be transitory and the federal reserve has more time, there is more slack in the labor market than suggested by the level of unfilled jobs. we don't know the answer to those questions at this point. the important thing is the federal reserve is making a choice to strive to find the maximum levels of employment consistent with her inflation objective. in doing that, there is a risk they will be late. kathleen:kathleen: you were the chief economist at goldman sachs. we worked with a lot of the guys on the bond desk explain the
latest numbers. then you ran the open markets desk at the new york fed. a very important position before you became the fed bank president. how would the markets take it if suddenly jay powell had to say we have to speed up the taper. with that because the kind of disruption they have been trying to avoid? >> absolutely. that is one reason why the taper is locked in stone. i would be surprised if they sped it up or slowed down. not only did they announce what they were going to do for november they also announced what they are going to do for december. while the medic clear they would vary the pace, that is not likely. we are on a path to where the fed has eight months to assess the inflation outlook, to assess the state of the labor market and depending on how that plays out, they will either be able to sit on their hands in terms of raising short-term rates or they will have to move in the second half of 2022.
kathleen: as an economist, what is the likelihood they will be able to sit tight that long at inflation will prove to be transitory and this goes as smoothly as they are hoping? >> that is certainly there view. in their statement, they softened the views a little bit. before, they said it was transitory factors. now they deem it as factors expected to be transitory. there slightly less confidence in how transitory these factors are. the key is not whether inflation pressures are transitory or not. does it get into wages and doesn't get into inflation expectation? the most recent data we have gotten on both of those things, wages have accelerated more than what is consistent with 2% inflation. inflation expectations by some measures are starting to show some upward pressure. we will see how this plays out. a good thing from the federal reserve's perspective is they have eight months to make a well considered choice in terms of what is next.
haidi: the supply issues continue unabated how difficult is this modeling a policy response when this was quite unexpected? there is a lot of concern this may be deeper structural issues as opposed to just coming out of the pandemic. >> i think the federal reserve's view is these are pressures that are going to turn out to be temporary even if temporary turns out to last a lot longer than what they previously had thought. what the pandemic did was a number of things. it shifted demand away from services to goods. you had good activity during the pandemic. you discouraged people from working because of fears of getting sick. and then you have a big reopening of the economy as the incidence of covid diminished and the severity of when people got sick diminished. this is a pretty big adjustment the economy is going through. it is not surprising there are a lot of frictions. what the fed is saying is we
accept there is a lot of friction right now affecting inflation. affecting the labor market. we think over time the friction will subside. haidi: the spread continues to be nerdier -- to be narrow. i am wondering when it comes to the actual tightening, how high does that peak rate need to be? will they want to overshoot that so they give themselves more room, more of a buffer for potentially the next time they need to ease? >> i don't think they would do that on purpose. what is going to have to happen is financial conditions are going to have to be tighter at some point. the financial conditions are going to have to be tighter because that is the thing that is going to slow down the economy. financial conditions imply higher bond yields, lower stock prices. some combination of the above. we can't be that confident of what will happen in terms of how the financial conditions will tighten. we can be tighten conditions
will be a look tighter than they are today two or three years from now. kathleen: are there any risk of financial instability if the fed continues and ultra accommodative policy at a time when the economy slowing toward trend growth but we have seen signs of strength like that? ism services, pmi that came out today. a record high for the series. the economy is not weak. inflation is high. markets are surging should will to be some risk on the stability side? >> the big risk is the federal reserve could turn out to be in error and there will have to speed up because they will be late june it will have to tighten faster. if that happens, markets are not going to like that kathleen: markets won't like it but you think there is a possibility. the last time we saw the dots, they worry evenly divided by a rate hike. the other half were not there
yet but moore moved to 2023. movement has been toward rate hikes and jay powell seems to be more stock on, don't think we will need to do it. maybe we well. he doesn't seem to be in that camp. >> he is trying to draw the distinction between the taper, which has to be complete in his mind before you start to lift off versus left off, which does not have to start because the taper is complete. we are finishing a taper, which gives us the option of raising short-term rates to see whether that is -- short-term rates. let's see whether that is appropriate or not. i think the dots will shift into 2022. the reason for that is the wage strength. the employment cost index report we got last week was a very firm. it was the highest reading we have seen in many years. it is not just we are seeing high headline inflation, pressures and a terms of supply
chain disruption. we are seeing that leak into the labor markets. haidi: always great to have you with us. senior research scholar and bloomberg opinion columnist could let's get you over to vonnie quinn in new york with the first word headlines. vonnie: the pentagon says china is expanding its nuclear weapons capabilities more rapidly than previously believed. report to congress says beijing may intend to have at least 1000 nuclear warheads before 2030. it cites construction of at least three silo fields that could contain hundreds of new ballistic missiles. the report says china is growing its nuclear delivery platform to land, sea and air to negotiations to revive the 2015 on the iran nuclear program will resume in vr now on november 29. it ends months of speculation over whether tehran could commit to resolving it standoff that has brought the u.s. and tehran close toward.
-- close to war. the u.s. treasury has announced the first reduction in its quarterly sale of longer-term get in more than -- longer-term debt in more than five years. down from $6 billion from the record level seen over the past three so-called quarterly refunding. the wave of pandemic released spendings end air the world health organization has granted emergency health authorization to a vaccine codeveloped by india. it ends a months long way in the attic controversy to the homegrown shot. hong kong has approved booster shots to high risk groups to people over 60 and those with weakened immune systems. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. on vonnie quinn chain this is
shery: banks and asset managers representing 40% of the world's financial markets. a pledge to meet the goals set out in the paris claimant agreement. the glasgow financial alliance for ned zero is championed by mark carney. the group says it is a chart in more than 450 firms representing 100 $30 trillion of assets. meeting to science-based guidelines to reach net zero
carbon emissions by mid century. haidi: greta thunberg not convinced. she says the fossil fuel industry and banks are among the biggest climate villains. the u.k. chancellor says the world must translate the billions of dollars of pledges into concrete action on climate change. >> i think it is really important we take a moment to step back and look at what has been achieved today. you talked about this alliance. it is an assembled 400 50 different firms representing $130 trillion of capital. that is an enormous achievement. we know the public funding is not sufficient on its on. that wall of capital can be deployed to net zero.
it is going to be a process. and what fits on a piece of paper is going to turn into tangible projects on the ground that are going to make a difference in people lives. >> you are cutting the aid budget overall but sticking to your budget on climate aid. >> on the basis of our fiscal and economic forecast that we put out, we are scheduled and forecast the return back to .7% of our gdp being spent by 2024. it is worth bearing in mind even at the level we are at now, we are the third highest in the g7. significantly ahead of the oecd average. although there has been a lot of focus on our change, the last -- the vast majority people spend less. as you see, we can lead in other ways as well.
you mentioned finance. as the presidents of the g7, one of the things we have been determined to do is green the overall financial system. how do we make sure climate reporting is all being embedded in the financial system to unlock that capital? shery: u.k. chancellor speaking to francine lacqua. the pentagon wants chinese nuclear weapon capabilities are expanding faster than believed. this is just ahead. this is bloomberg. ♪
the report to congress comes after reports china conducted hypersonic muscle tests in addition to increased tension between beijing and washington over taiwan. it's bring in our chief north asian correspondent stephen engle in hong kong. what are some of the main points of this pentagon report? >> we obviously know by the military budgets that china is most definitely modernizing its military. again, the assessment of the nuclear capabilities, this assessment is coming from the pentagon in its annual report to congress. they are saying the nuclear arsenal allegedly is growing at a much faster pace than previously believed. the pentagon is now saying china could have as many or at least 1000 nuclear warheads by 2030. that is a festive face -- faster pace than previously reported unit states has more than 3700. what you are seeing here is the
21 d. they are not necessarily nuclear capable but these missiles are known to the pentagon as the carrier killers. china is definitely modernizing. they also say it cites the construction, there were two construction of at least three missile silo fields capable of containing hundreds of new icbms . as you mentioned, this new report by the pentagon comes on the heels of those reports china over the summer conducted hypersonic weapons systems tests, potentially could send missiles and warheads down south , around the south pole and avoid the northern hemisphere antimissile systems of the united states. it is something general mark milley told bloomberg television last week in an interview that was potentially america's sputnik moment if china was
advancing to a hypersonic weapons system. haidi: we have mentioned the ramped of rhetoric over taiwan. there has been a flurry of sometimes worrying conversation happening. are we seeing beijing happened -- beijing backtracking a bit? >> not necessarily backtracking but more clarifying. when you stir the pot, a lot of aromas come up. i'm not saying china is during the pot. the united states, china and taiwan stirring the pot with the rhetoric a bit. when state media have come out and ministry of commerce was encouraging mainlanders to stock up on household necessities and supplies, there were separate reports, unrelated messages that showed china was preparing to mobilize military reserves. the china state broadcasters said the taiwanese themselves were hoarding survival supplies. the media is coming out because millions of posts, hundreds of
millions of posts have been swamping chinese social media networks speculating that perhaps some sort of conflict was eminent. state media urging the public not to overreach a ministry of commerce statement encouraging families to stockpile. this is because of the supply chain concerns. haidi: our chief north asian correspondent. let's get you a quick check of the headlines. citigroup is about to apply to set up an investment banking business in china in the next couple of what -- couple of days our source tells us the lender is planning to submit an application for a license to underwrite shares and conduct trading for clients on the chinese mainland. citigroup will also apply for a futures license in the next few weeks. we hear credit suisse will cut its prime brokerage business further. the unit was at the center of the archegos capital scandal.
new jersey governor phil murphy has won reelection in the garden state. the last two-term governor was 1977, and now we have confirmation governor phil murphy has beat his challenger. it was a big fed day today. let's get the highlights from jay powell's speech. >> it is time to taper because the economy has achieved progress towards our goals. our decision today to begin tapering our asset purchase does not imply any direct signal regarding interest rate policy. i don't believe we are behind the curve. policy is well positioned to address the range of outcomes, and i do think it would be premature to raise rates today.
i don't think that is controversial. i want to see the labor market heal further. we believe that will happen as the delta variant declines. inflation is higher than expected. bottlenecks have been more persistent and more prevalent. we see that. we see that is on track to persist well into next year. we think we can be patient. if a response is called for, we will not hesitate. >> let's look at the analyst calls. u.s. equities at fresh records. one person says there is more room to climb. the house as a prophet boom will power the s&p 500 to 4800 by year end. that target has doubters saying
it is nothing but the result of stimulus and argue that there are more fundamentals. forward earnings increasing since last year. >> the bod is next. -- boe is next. one person sees the doe waiting -- boe waiting for more jobs data and thinks it will not hike too soon and risk a crippling of business recovery. >> our next guest is watching global policy diversions. she is a senior portfolio manager. it is great having you with us. we continue to see this diversions, especially the difference between advanced
economies and a more hawkish central bank. how do you position in this environment? >> thank you for having me on. i think what we can say is there are countries going different directions in terms of policy on interest rates. it is a case-by-case situation. some countries such as south korea, poland, and latin american countries that have started to raise rates, a very progressive in thinking. there are countries on hold, larger countries such as india, on hold, but we are seeing we will go in the same direction as the u.s., and i think that is expected in the markets. we look at the situation and then look at the sectors and companies to assess what the risks are. we can still find interesting companies to invest in. >> tell us about those sectors
and themes you are following into 2022 that could be some good opportunities. >> the one area is financials, which is a function of the reopening of all the economies, so it southeast asia, some companies and countries are behind in terms of reopening, but it will happen quickly. it will happen in conjunction with the increase in vaccine rates coming up. so we see the financials, banks, insurance companies, stock exchanges, all interesting, non-bank financials, and real estate. i think real estate is interesting. there is pent-up demand. we have low levels globally. i think there are those who did have a comfortable home out of which they can work and live more these days, so i think
there is pent-up demand and interest in buying homes. >> your note on the importance of focusing on underlying economies is interesting. what is that public and private spending look like in light of the commitments on renewables in glasgow? >> i am glad you brought it up, because there has been so much opportunity. you can't run an entire country online. i think what we are pivoting to now with the reopening is the concentration of interests and some government fiscal spending. we are behind funding new industries with solar, water management, all sorts of things that were necessary, and gastric abuse and is an interesting area
-- gas distribution is an interesting area. we are looking at the policy behind that, but companies in those areas. we are seeing steady demand. we invest with dividends, so good dividend payouts, and the underlying economy should be focused on it more than it is. >> where are the opportunities in china given the selloff on the back of property, tech, and other crackdowns? where is there value, avoiding the biggest risk areas? >> we like to invest in that, something that is understood in china, but we have been investing in china for 25 years, so what is important understand is the government will always,
sometimes forget that, and last year, there has been a vibrant market online, but we are interested in industrials, some energy stocks, new, alternative energy, components, service areas that add value, such as property management. you have to tread carefully with the stock selection. you can't just buy anything in china. once again, there is interest in dividend yields. companies are paying high dividends, even companies well-capitalized, a little bit of that, as well as financials. it is a wider array of companies, but all high-quality. they made it this far. they have a track record. >> great to have you with us. senior portfolio manager.
let's get first word news. vonnie: thank you. ecb president christine lagarde pushing back on a rate hike for 2022. she says such expectations are inconsistent with the ecb's analysis. it reflected an agreement within the governing council that calling that could backfire. >> enough forward guidance on interest rates. we have clearly articulated the three conditions that need to be satisfied before rates will start to rise. and despite the current inflation surge, the outlook over the medium-term remain subdued. and thus, these three conditions are very unlikely to be satisfied next year. vonnie: opec-plus meets thursday.
they will consider u.s. demands for more oriole. the white house is worried inflation could derail its economic agenda. u.s. diplomatic pressure has been supported by japan and india, but key cartel members say they should stick to the current plan of adding 400,000 barrels of supply each month. china seeking to silence online rumors that conflict with taiwan may be imminent. posts have been circulating on social networks about the risk of war. china's call to stockpile food started the speculation. there are reports of people according survival supplies. -- hoarding survival supplies. global news 24 hours a day on air and on quicktake powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. >> democrats received a harsh
warning about their hopes for keeping control of congress in 2022. voters in virginia, new jersey, and across the country flocked to republican candidates, less than a year after joe biden took office. joining us for the latest is our reporter. perhaps a sigh of relief with governor phil murphy getting reelected in new jersey? >> free democrats, yes. -- free democrats, yes. new jersey is a state that president biden won 16 points, and for the race to be that close is concerning for democrats. in virginia, biden won by 20 points in 2020 now glenn young kin sophie: -- won it. democrats say they have a lot of soul-searching to do. they say they need to make sure they pass the two key pieces of
president biden's agenda, the bipartisan infrastructure bill, roads, bridges, traditional infrastructure, and the crucial welfare and tax package, like childcare, eldercare, health-care, employment change. democrats have been working on these bills for months, but it has been difficult to find consensus between moderates and progressive members. allison leadership says they want to make sure the bill passes this week, and they are working with members to figure out if there is support for that vote as early as tomorrow. >> what do the election results abode for the midterm? >> we knew the upcoming midterms would be very difficult for president biden in the democratic party, because if you look at the history and the u.s. , the midterms are worse for the party in power, a time for voters who feel like they lost during the presidential race to try to make some gains.
so democrats already knew they were in trouble, but the total vote shows that democrats are potentially in more trouble than they realize, that the games are being made not just in virginia and new jersey, but local races across the country. they have raised concerns, and there have been discussions about how much this was influenced by phone numbers, messaging, the current narrative in washington that democrats are not aligned, so a lot to think on in the next year. >> are bloomberg government congressional reporter. next, more countries committing the net zero goals. we will hear from the brazil energy minister, who is denying they made a u-turn when it comes to plans for carbon neutrality. this is bloomberg. ♪
its position. we have always been keen to cooperate, collaborate with the international community. as you know, brazil has one of the most cleanest energy and power matrixes. it is the most clean of countries. and we think that to have a lot to collaborate, to cooperate with other nations in these efforts to reach net zero. then, brazil has not changed its mind, just i think now we can talk more freely and clearly
with the rest of the world. >> minister, this was a big commitment. you have a climate-skeptic president. there were lots of pledges, so this is him was the new brazil, a different brazil that will see more on the environment? >> we have been combating the deforestation in brazil, but now we decided to present to the international communities that we are committed to eliminate illegal deforestation until 2020. we already have been working on this issue since the beginning of the crisis, but now, i think we have good data to present to
the international community, and for sure you reach this target. >> minister, how optimistic are you a deal can be reached to create a globally regulated carbon markets soon? >> i think this will be mainly for developing countries, and brazil has a lot also to cooperate with others. there are other things, like the energy transition. without the energy transition years ago, when we established the first biofuel program, and we started building large hydropower and nuclear plants, and the bio-energy, we will need
a lot of effort to other countries to develop and to reduce the co2 emissions. >> minister, how has brazil dealt with the energy crisis? how difficult has it been? >> this is a challenge, not only to brazil, but to every country. the price of fuels in brazil has increased in 2021, and as the economy is rebalancing brazil, this is a real challenge, but i think every country has to establish its public qualities to tackle this crisis. >> that was francine lacqua with the brazilian energy minister. much more to come. this is bloomberg. ♪
what are we expecting the outcome of the review to be? >> this has been six months in the making. we are expecting some results thursday, tomorrow. what we are expecting is a focus on the prime brokerage unit, so capital is expected to be reduced further from that unit at the heart of that scandal, which lost the bank $5.5 billion. the investment bank more broadly is expected to be spared from severe cuts. were expecting less than 500 job cuts, and a division of 17,500 employees, even that is big, and no other major personnel changes. >> citigroup opening in china. what steps are they taking? >> they are applying for an investment banking license in china. the country opened up to the foreign banks last year. this is a huge opportunity for them, a $54 trillion financial
market, following in the footsteps of goldman sachs and jp morgan. they will underwrite deals in yuan, and private wealth clients as well. >> let's turn to the world's largest smartphone chipmaker, qualcomm, optimistic, giving a stronger-than-expected outlook for the current quarter and says they have diversified suppliers to ensure access to its input materials. let's get more from our senior analyst. what were the key takeaways and how positive are these developments? >> the demand side look strong, both from a capex spending perspective from the carriers, as well as demand for android high-end smartphones. look, i think qualcomm has done much better in terms of
diversifying their foundry exposure, which is why they were not as hit on the supply side, as we have seen from some of the commentary of other players in the space, but net-net, the demand drivers look strong, the 5g buildout looks like it will sustain for another few quarters. >> what did they have to say when it comes to the pipeline, the supply outlook? >> yes, so, clearly, they are impacted on the automotive side. that is something we have heard from every chipmaker, that there are constraints on the automotive side, but for high-end smartphones, they seemed quite optimistic. in fact, that is what is driving growth and gross margin improvement. i think overall, automotive was the only segment that was in
line. they beat the top line across nsaids and industrial iot, so clearly the demand was stronger on that front and they were able to fulfill it. >> our bloomberg senior intelligence analyst with the latest on qualcomm. >> here are the business flash headlines. volvo sales plunged 22%, as supply chain issues in the chip crunch hit the carmaker, saying shipments down by a third and china, and 21% in europe, because there were not enough cars available. the volvo ceo says he does not see bottlenecks is a long-term problem. ikea forecast and more difficult year, after reporting a 17% drop on full-year profit. the company says inflation and raw material prices and supply chain challenges will limit growth and prevent it from
meeting growing demand. the franchisor saw additional costs and expected those to increase. a loss of more than $3 billion on the stake in didi global for uber. shares have plummeted since chinese regulators ordered the app to be removed from stores in the home market, citing security risks. land development paying $6.5 billion for a prime plot along victoria harbour in hong kong, including mixed-use buildings and outdoor areas. for the first time, the government looked at design and price before awarding the site. the tender comes as hong kong's market struggles with demand and