tv Bloomberg Markets European Open Bloomberg November 26, 2021 3:00am-4:00am EST
concerns make this year's dale --deals failed to impress? francine: a bloodbath out there. an ugly day. you see a clear move, everything selling off even to havens. there is concern about the new variance. -- variants. tom: that is a one and only story the markets is focused on -- are focused on now. the who says a could take weeks to know details. for now, a singular risk off move within the markets. you can see this playing off -- playing out -- the ftse 100 down. the spanish ibex falling 3.4%. losses of almost 300 points in
spain. as a continued open up these markets, we will read across how deep the selloff is going and a shift into safe havens. we have seen this across into treasury markets as well buying into treasury bonds in australia and in the u.s. as well. yields coming off markedly. we can look across asset boards to see how this is playing out and commodities as well. the japanese yen is the safe haven of choice. 80 point drop for the u.s. futures as traders get back to their desks after the thanksgiving holiday. the u.s. 10 year now 1.52, a drop of 10 basis points. brent is down 4.2%. 4.3 percent. it was not the recent reserves of the concern about the new variant emanating from south africa at $78 a barrel.
gold is bid as well. the metal has been lackluster but now it is above $1800. it is the state of play as these markets get realigned to the new risk. francine: it is clear that if you look at haven bids, it is the yen. a lot of focus on airlines and other travel stocks across the board. they are by far the biggest decliner as traders react to further flight risks. energy and travel down 3.5%. it is difficult to see how much and how long the selloff will continue because we do not know what the variant looks like, if it is more deadly or what that will mean for monetary policy going forward. for now, it is a selloff. then volumes -- thin volumes because of the day after
thanksgiving. let's get straight to the bloomberg headlines. laura: china is said to have asked dd global -- didi global to delist in the u.s. because of concerns about sensitive data. we are told that didi has been told to work out precise details. bloomberg has learned that private equity giants kkr and cvc are being told to work together. meanwhile, a crucial meeting today. the chief executive of telecom italia has offered to resign to move along the kkr offer. dime is north east asia -- daimlers northeast asia chief
is expecting a very positive year next year. sadie's bends sales and china slumped in the third quarter. the shortage of semiconductors is a factor. amazon -- a fresh legal challenge. amazon alleges 1.5 billion dollars was diverted away from indebted future retail including to a company owned by one of its founders. an investigation is being demanded. that is the bloomberg business flash. tom: laura wright in london. a significant selloff in european equities with news of the covid variant. let's get into how markets are reacting and how concerned investors should be. joining us now is kristine aquino and sam. let's start on the markets. and how the repricing is shaping up across equities, commodities,
and affects. how sustained -- and fx. >> the mantra is sell first and ask questions later. we are seeing this across the asset classes particularly in the emerging market. this has been battered this week by various things, geopolitical risk, risks associated with central banks and it comes to turkey and mexico and this was the last thing on currencies needed for this week. we have seen that index for the emerging market currencies are raising its gains for the year ended is set for its first decline in three years. francine: i like the fact that you said sell first and ask questions later. when did we first learned or wended scientists first learned about the variant? how long will it take to learn what we are dealing with?
sam: good morning. i think i started seeing references to this super you tainted variant of the virus about three or four days ago. there is a site where the sequences are loaded. and there are thousands of these mutated viruses. but when they start forming a cluster, that is when you start worrying and it really got going a couple of days ago. and it would take at least a week or two to simply know whether the virus is more resistant to the immunity induced by vaccines or a prior infection and that is what i am hoping to see. in the next few days, we will hear more data out of south africa about how widespread this virus has become. tom: for now, governments are acting from the u.k., israel
singapore, and taiwan. and germany curbing travel from south africa and the nations that surround that country. the stoxx 600 slumping 6.6%. what do you make of government actions? sam: i think exactly as you said, this is for a period of time. it is very possible the variant has already gotten out because there is the expectation that by the time the south african authorities, and i can say that they have acted very fast, that they have come to understand this virus, it has probably already traveled out. we know there is a case in hong kong from a traveler. but, by closing the doors, you do prevent a more rapid inflow giving countries more time to figure out how to protect their populations. francine: kristine aquino, we are looking at iag. an incredible move.
volumes are thin. the timing could not be worse. a lot of traders are off because of thanksgiving. does this reflect the anxiousness in the market? >> it is the perfect storm of thin volumes and then you get this big risk off lurch in markets. monday is when we will see a lot of the u.s. traders back in full force really digesting this news. and it is worth keeping an eye on on what this does to write hike expectations going forward. we are seeing the bank of england pare expectations. the ecb is getting pushed further out into the future. tom: the adjustment from central banks -- goldman sachs before these headlines hit was looking at a doubling of the taper and then a rate hike potentially in june. whether central banks have to
re-quantify the impacts of this variant is something to watch. >> this is what investors will be watching out for. is it the reaction function for central banks. they are expecting them are ready to do something about inflation and this is another risk factor on the central banks' playbooks. francine: sam, i was trying to jog my memory but there are instances in the past when we thought there was another dangerous variant and then it was less dangerous than we thought. there is panic on the markets. is it right to panic? do we need scientists to tell us what is going on? sam: i have my launchpad with all corners of the market showing up. i can see the selloff that kristine aquino was talking about. i think the issue with the other
variants we have seen is that you have always got these turning up and it looked like they were more pervasive in the immune system but what has been dominating for the last year and a half has been more transmissible viruses. those that can spread faster which displays those that can evade the immune system. here, it is possible, it has to be proven, that we have a virus that is not only able to evade the immune system, but it is also potentially as transmissible as delta if not more. there is a tiny amount of hope that these new tatian's mean it is less virulence in terms of the disease it causes. time will tell. tom: there had been a lot of hope in the treatments coming
down the pike. how will the drug companies react to what they are seeing? sam: from the treatment side, you cannot adjust the treatment that quickly if it does not work against this variant. but they will be able to tell quite quickly how it responds in terms of the antiviral pill from pfizer and merck. as far as vaccines, i would like to see data but i suspect they will be scrambling to put the new sequence into their mrna vaccines to see if they can induce a better immune response to this variant. francine: kristine, is there a haven you are looking out for to quiet things down? i know we spent a lot of time on the italian bond deals, it was
counterintuitive. >> i think the move we are seeing in european bonds is being led by what we are seeing in treasuries because that is the overwhelming force in markets at the moment. but when it comes to havens, it is showing where markets believe which ones will offer them shelter. the yen in particular has been a prominent haven in this bout of selloff at the moment and you can understand wipe your it is a currency that is exposed to low interest rates whereas the dollar, at a time earlier this year was the preferred haven, but now we are talking about other dynamics including the strength of the u.s. economy and the prospect of fed tapering and the potential rate hikes in the future. the yen is winning today as far as investors being or preferring that as a shelter in this out to of selloff. tom: we are trying -- in this
bout of selloff. tom: there is -- there are some commentators that say we have a playbook for this. does that playbook -- should he give us some assurance? sam: we have a virus that we have learned to live with to a degree and i think of all of the attacks that we have here and they are able to come in here. the issue would be if it is seriously able to evade the immune response and if that is the case, we need to consider another shot of the vaccine representing this variant. remember, then we end up potentially losing our antibodies critical for reducing death rates and hospitalizations in immunocompromised people. if we lose that, that is a setback and we have to reassess
what we have got. we have the pills and let's hope they continue to work. francine: thank you both for joining us. we are seeing this post-thanksgiving selloff accelerating spreading across local markets. futures are down also amid fears that this new variant may spark fresh outbreaks. i have a viewer to thank. the spread is wider. we will have much more on the markets coming up in the fallout from this variant. we will also be speaking to the south african minister for public enterprise to get his take on all of this at 9:30 a.m. u.k. time. this is london -- this is bloomberg. ♪
francine: welcome back to the open. we are 17 minutes into the trading day. the markets are accelerating some of the declines. the dax, the ftse and overall european stoxx 600 down between three point -- 3.2% and 3.5%. researchers have yet to determine what the variant is whether it is more transmissible or lethal but the markets are selling off now and asking questions later. you see a lot of asset classes
being dumped and investors flocking to havens today. let's check in on some of the stocks that are moving at the open. lizzie joins us. the first thing we should be watching out for is travel and leisure. >> it is all about the new variant discovered in south africa. the biggest loser on the stoxx 600 is iag because the long-haul carriers are being the hardest hit from the news that the u.k. has temporarily banned flights from south africa and five neighboring countries. this will have ripple effects for the low-cost carriers like easyjet and ryanair. and for the wider space, you have the hotel years and the airport operators. on the flipside, you have the winners. the british food delivery company has typically done well when people have been locked down at home. and it is in the green. you also have its rivals like
just eats and hellofresh and think about the computer equipment providers with people working more from home. that is doing well today. and telecom italia, the ceo has offered his resignation to help move along a takeover bid from kkr. it is in the greened so far because investors will be hoping it can get the deal over the line. bloomberg hearing kkr make up its software to get it done. tom: looking at stocks to watch on a turbulent day. the shift to havens. yields sharply lower. let's check in on the bond markets. investors start to pop back into treasuries amid the search for havens. the yen and gold. the u.s. 10 year is now at 1.51.
a 12 basis point move lower. that is your u.k. guilt gaining -- gilt gaining. the german bund is bid as well. that is the ripple across the treasury markets as markets readjust to the risk around this new variant. let's get more from althea spinozzi. fixed income strategist at saxo bank. what do you make of the market moves? how far do you think this selloff will go? althea: i think it went quite far because we are watching a very liquid market on the back of the thanksgiving holiday. the value we are witnessing might be short-lived for the simple reason that it is not the
first time we are seeing a new wave. the market knows this is going to be temporary. and if there are new lockdowns, that means that a supply chain buckle will become worse and will apply even more inflationary pressure to the economy. at the end of the day, we are going to see central banks going forward with their tapering agenda and hiking interest rates. and this morning, the commonwealth bank of australia hiked mortgage rates. francine: you seem to suggest the selloff has been overdone and that is because it is the day after thanksgiving. is that because you think that
no matter how deadly this virus could be, we are better at dealing with it? or you think it has been overdone because even -- althea: i believe it is overdone because in the market at least among central banks, the big topic is inflation. if there are new lockdowns, inflationary pressures can get worse especially in terms of bottlenecks and for inflation to stick around longer rather than it being permanent. we will have a better picture on monday when liquidity is back on the market and how traders are going to position ahead of the december fmoc meeting. tom: i think we have a chart that shows the credit default risk.
what is the extent of concern? is there a default risk more broadly as covid-19 restrictions become more pronounced? althea: definitely. if lockdowns and travel restrictions continue, that is becoming a real risk. it is likely that what we see is a spike on the back of the news. we have recently seen high-yield bonds folding on the back of expectations of higher yields. it is still around pre-2008 global finance crisis. it indicates [indiscernible] the deterioration would -- widespread markets. francine: thank you for joining us, althea spinozzi. coming up, we will have more on the markets and the fallout of the variant. they'd or, we will also speak
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francine: welcome back to the open. variant concern, a new strain identified in south africa prompts flight bands. european stocks selling off with treasure -- travel and leisure slumping at the open. ended this year's deals failed to impress? a clear move into havens and risky assets are getting dumped quite severely. tom: liquidity in the markets given the thanksgiving holiday
and the fact that we don't know much about the variant. the who saying it will be 1-2 weeks until we know how dangerous the variant is. we know ed has more mutations from previous variants but we need more details. it is selling heavily on the back of this news around the variant that is emanated from south africa and the movements and actions from governments around the world to restrict and curb flights. euro stoxx 600 down 3%. the dax has lost 500 points. the cac 40 is the lowest in terms of the major indices, down almost 4%. using -- losing 240 points. in the ftse 100 is also down 3%. every single sector is in the red. crude -- highlighting the energy space.
this is a hitting the crude and wti picture heavily. brent is down 4.6% and wti down almost 6%. what will this mean for opec-plus as they consider their next steps? every sector in the red. travel and leisure at the bottom. iag down more than 20%. losses of 6% across travel and leisure. germany, italy, israel and others putting in place curbs around travel and flights from southern africa. the least losses in health care. the flight to safety taking investors to the yen which is gaining it as is gold. that is the state of play. francine: it is a really ugly out there. the last thing retailers would've wanted on black friday is talk of a new variant. this fresh twist just hit
yesterday, this may provoke fresh concerns among retailer -- among consumers hitting stores today. lisa hooker is with us. do people not go into a store or do they worry about their purse? or is it just travel and leisure that will be hit? lisa: at the moment particularly in the u.k. and europe, black friday is very much an online story with only 20% of purchases in store and 80% online. i am not sure the recent news will impact the short-term and impact black friday because people are keen to spend more this year and get ahead of the game in terms of worries about shortages but also because they save money amidst the pandemic. tom: what are the forecasts for
how much will be spent? lisa: consumers we believe will spend about --. in 2019, we started to see a bit of waning in the interest about black friday. this year, we have seen 6% interested and a clear indication that people expect to spend more. francine: what are people buying? i'm kicking myself because i started my christmas shopping very early forgetting about black friday and i go online seeing things i bought about two weeks ago that are 20% off. are people just spending more? lisa: people know that black friday is an interesting time to purchase. it is very much about electricals and fashion. it is also mainly about buying for yourself other than buying for others.
in the u.k., men spend 60% more than women but it is generally things that they want. tom: our consumers -- are consumers worried about price pressure? lisa: we find a correlation between confidence and spending. confidence dipped a bit in september but is still very strong so i don't think inflation will have a significant short-term impact although we still think we will see some concerns. but the real concerns about inflation will come next year. the only good thing is that we are seeing -- when we came off low, we saw employment hold up well. that should help mitigate a little bit. francine: give us a sense of what we should be watching out
for in the future is. a lot of stock build up because of the pandemic. and retailers had to readjust. do they have less stock? how are they affected by supply chains? will it be more difficult to have more sales post christmas? lisa: we are starting to see that supply chains are beginning to move better. we do expect some level of disruption through 2022. we are finding that retailers have been quite agile at replacing an item they could not get with something else. i think there will be a level of stock outs but i don't think it will be that severe. the areas we have to watch out for is the must-have gifts will go quickly but there are some parts of collectibles and bicycles where there are parts you cannot get.
i do think things will improve as we get through 2022. tom: you talked about the off-line and online and how that diverges from what you see in the u.s. are we at a peak online in the u.k.? lisa: you saw the massive jump 30% through the pandemic. we will grow from the 20's. we are at 26% at the moment and we will see that continue to grow in the next 20 or 30 years. francine: lisa hooker, head of consumer goods at pwc. laura: a new covid-19 variant first discovered in southern africa is raising fears about mutations with the u.k. adding six african countries to its travel read less from midday today. germany is also restricting
travel to and from south africa. scientists have described the strain as very different from previous ones. in germany, the new government plans to channel 60 billion euros to fund its climate goals in the next four years. bloomberg understands the money will be earmarked from a supplementary budget. the new administration has made a pledge to end coal used by 2030. france's leading union of fishermen -- the protest will start with a one-hour blockade of a port in the morning with access blocked from 2:00 until 4:00. ensuring there are no illegal actions and trade is not affected. global news 24 hours a day, on air and on bloomberg quicktake,
francine: welcome back to the open. 41 minutes into the start of the trading day and it is not getting any easier. down between 3% and 3.9%. investors are dumping risky assets and flocking to havens. a number of caveats. thin volumes so there is not much liquidity. we could see moves exacerbated. i just received a note. thank you, peter. he is talking about the fact that because sequencing has not been mandatory in certain countries, it could be much more widespread than we think and this may be why there is more worry anticipated in the markets. tom: and south african officials say 90% of the cases in johannesburg are these -- is
this new mutation. francine: we have been doing our homework. and we have a great quicktake piece. researchers have yet to determine this new variant and whether it is more transmissible and lethal than the previous one. tom: for the moment, mliv is saying this is a question of investors selling and asking questions later and you're seeing that across havens and the equity space. haven is the yen. cryptocurrencies proving they are not a hedge in this environment. bitcoin is down 20% from its november peak. let's get a bloomberg business flash. laura: china is said to have asked didi to delist.
take the company off the stock exchange. didi has been told to work out precise details whether privatization or a hong kong --. private equity giants kkr and cvr are considering teaming up for a bid on telecom italia. in a letter to the board ahead of a crucial meeting later today, the chief executive has offered to resign to move along the kkr offered. daimler's northeast asia chief says china's demand will be high next year. for models including the mercedes s class. sales slumped in china and the third quarter do to significant shortages of semiconductors.
amazon is trying to delay the plan to take over of india's future retail with a fresh legal challenge. amazon alleges 1.5 billion dollars was diverted away from the indented future retail including to a company owned by one of its founders. it is written to india's finance minister and regulators demanding an investigation. future says the allegations are baseless. francine: laura wright in london. the countdown to christmas has begun. the impact of rising inflation will have a disproportionate impact on lower income families. coining us is fiona boal from s&p dow jones indices. thank you for joining us. we are looking at the impact on lower income families which is something that politicians around the world really need to address and readdress. food inflation in the u.k. filters into central banks. you look at the new variant,
does that exacerbate some of the problems we have? fiona: food inflation is already a massive problem. more in countries like the u.s. and the u.k. then in some of the asian countries. what i think something like a new variant -- we always thought this could happen and it will be fascinating to see how that impacts energy prices which will likely flow through to food prices as well. tom: there is a link between energy prices and fertilizer and how that plays into the food space. how much divergence is there in the food commodity space? fiona: look at coffee which we all need to have at this time of the morning, the coffee index is up 77% year-to-date and that has to do with bottlenecks in places like brazil and with issues like farmers not delivering on contracts. it has to do with all of the
things we are seeing in terms of supply chain issues and higher energy prices. but other food commodities have not risen quite as high. francine: is this something that is here to stay? we are trying to think if in a few months things will get better or if this is a new normal. fiona: i think it is hard to say. we know energy prices can move relatively quickly in both directions. sometimes, when we are talking about food, it can take quite a while for high raw materials to work through the system and it also depends on how food manufacturers react. will we see them do the old trick of size-flation or will they be forced to make significant price rises at we will see when we go to the grocery store? tom: how much is this affecting investment in the agricultural?
space? -- agricultural space? fiona: i think it is making things more difficult. i think it is making a lot of investment managers, many who have not invested through periods of high inflation, really have to take case that back -- really have to take a step back and look at different scenarios. francine: policymakers can put things in place i can benefit and safeguard those that have less. what is the impact on poverty across the world? fiona: food inflation acts like a regressive tax on those that already spend a large portion -- proportion of their income on food. while you and i may be able to look for a cheaper alternative,
these consumers are already purchasing those alternatives. there is a safety net around spikes in prices. we have seen wage growth and it is increasing but it is all about if wage growth is keeping up with the cost of living. tom: there is the conversation about the detrimental impact of higher food prices. fiona boal, thank you for breaking down what is going on in the food space. coming up, we focus on travel industry stocks being hit heavily today on concerns of a new variant and the curbs on travel. we will get more. this is bloomberg. ♪
yields. and travel will remain a focus. the new emergence of this new coronavirus variant that emanated out of south africa is hurting travel and leisure just as the sector looked like it was catching a break. this is what airline stocks around europe are looking like right now. significant selling. most 10% loss for iag. air france down 7%. lufthansa down almost 10% and ryanair seeing losses of close to 8% in the session. ruining us now is our transport industry reporter. -- joining us now is our transport industry reporter. as we look ahead to what many would have hoped in the industry would've been a decent season for the airline industry. >> good morning. for the airline industry, this
is a double blow. we have seen the likes of the airline industry having to face lockdowns across europe in places like austria and now, with this south african lockdown and also the travel ban, you basically. a 1-2 punch for the airline industry. it was really hoping to recover from the pandemic. we are still not out of the woods with delta. travel was just beginning to start again and this will come as a blow just as they are getting restarted. francine: i have to say, a 20% move for iag is pretty punchy. what are the airlines saying? is this the worst case scenario? >> i think it is a case of that because the airline industry is saying that it is restricted to south africa and it is not a wider ban across the world. but these kinds of things change quickly and localized -- and a
localized ban can morph into a wider ban and before you know it, travel restrictions come back and that is the big concern right now. tom: how we heard anything from the airline industry -- airline companies? >> we have heard from british airways. they say they cannot do anything about south africa at the moment. they are working with customers. so far, they have been positive. we have seen michael o'leary talking about the travel restrictions earlier this week and he said it will affect sentiment going forward especially in the winter season which is typically the peak season for travel outside of summer. it will also have a knock on effect for bookings next summer. typically, people tend to book summer holidays in the last week of december. francine: thank you so much. our expert when it comes to
travel and leisure in europe. investors dumping some riskier assets and flocking to safe havens. these moves are bigger than they would've been on a day that is not the day after thanksgiving. we don't know what we are dealing with. researchers say there is a lot of variants. tom: and when you look across the bond space, the 10-year is at 1.53 and the five year at 1.22. the two-year seeing nine basis points lower. the question as to how this could change the calculus for central banks. francine: we also don't know how long it takes to have a clear
be and whether it is long-term. >> from now on the vaccine booster will be open to all adults age 18 and over. >> indication came that indeed they were observing what looks like a new variant. >> this is "bloomberg surveillance: early edition" with francine lacqua. francine: good morning and welcome to "bloomberg surveillance: early edition." i'm francine lacqua in london.