tv Bloomberg Daybreak Europe Bloomberg December 2, 2021 1:00am-2:00am EST
outlook into disarray a grin. -- again. plus apple holiday woes, the iphone maker now faces a new problem, slowing demand. good morning, everyone. happy thursday. it's a. -- it's a period of market agility and we saw that play out yesterday. cases of the omicron variant popping up, this time in california in the u.s.. in what has ensued as the worst today selloff in the s&p 500 since october 2020. the volatility of volatility gauge flashing warning signal, it's at its highest since january, signaling this ability for stocks to continue to whipsaw even more as who wade through this period of uncertainty. as more stocks hit the 52-week lows, which is the most since 2020 in march, where you find
solace, where do you find protection? we are divided on this bond market. tech haps not as reliable as it once was. can bonds do it? yesterday, bob michelle at jp morgan asset management said we are not heading toward session, monetary policy isn't getting back to normal, so take this time to sell government bonds and jump into credit. it's not just a period of uncertainty when it comes to the virus, but also uncertainty with how to hedge your portfolio and treat these uncertain times. let's jump into today's action, europe has a bit of catch-up to do today because yesterday when we saw this big selloff in the s&p 500, it happened with a 1% loss in the european stoxx 50
index. the s&p 500, a little bit of a bounceback, up more than .5%. a similar position yesterday morning, s&p 500 futures started to gain, but that quickly reversed. not necessarily stability in the market. the 30 year yield had a lot of buying yesterday, yields dropped to the lowest since january. some selling in today's asia session. crude, the second of the opec meeting, up 1.5% as we contemplate what the outcome could be. let's stick with the omicron variant which is continuing to spike globally. new infections found in south korea and other countries. we're joined by will. what is the emerging consensus
on just how deadly or benign the omicron variant looks? >> i think it is too early to say. i think it is reassuring now, the austrian chief medical officer said it's not more deadly than other strains. it is early days still so no one is quite sure. the cases reported so far are very mild, and saying fully vaccinated americans should proceed with the holiday with the normal precautions you would take. the general consensus is wait and see, perhaps it might not be as deadly as it could. dani: the big reaction yesterday
in the stock market, selling off when there was a new case in the u.s., but that's not really surprising, is it? how prevalent do we think this variant is in the world right now? >> the focus in south africa in that region, being located at the borders, really. there's a couple of cases in australia and a couple in hong kong but it has been contain now. so the central focus is still in southern africa. dani: thank you so much. let's move to turkey where president irvin has released the countries -- president erdogan.
what is behind -- what is the reason behind the latest move? >> turkey's former finance minister has been replaced after weeks of speculation that he was planning on stepping down. this is due to a risk over the central banks aggressive rate cuts despite high inflation. he was in the job for just over 12 months. he has been replaced by the man who was a deputy finance minister since 2018. he has a close relationship with the president's son-in-law. he is a controversy -- had a controversial term as economy minister back in 2018 and resigned two years later. recently he has been showing support for the fight against
high interest rates. dani: this comes at a time when the lira is already trading near record lows in the central bank is being forced to intervene in the fx market. >> that's right, over the past few weeks the lira has been an absolute turmoil due to unorthodox economic policies. the lira has depreciated 30% in one month alone and it is hitting multiple record lows against the dollar. yesterday as you said the central bank intervened by selling foreign currency. it's the third official time to have done this in almost eight years. so for the central bank, having to do this could signal that is actually worried about turkey's new economic program of low rate in the economy despite it affecting the lira. some analysts we've been speaking to also say that turkey doesn't have enough fx reserves
to do this on a daily basis. dani: the lira following another 1.7% this morning against the dollar. thank you for your excellent reporting. now let's get to a bloomberg scoop, apple suffering from the global supply crunch is now confronting a different problem, slowing demand. the company is said to have told it's employees that demand for the iphone has weakened, as customers have given up trying to get the hard to find device. what is apple telling its suppliers exactly about this weakening demand? >> what is happening is, apple has cut its production target for about 10 million units due to a component shortage and now apple is calling for measures to
make up for the loss in yield while it does look for components. due to the slowing demand, it looks like they might be able to make it up later on dani:. thanks for the latest on apple. let's get to the bloomberg first word news. conservatives in the u.s. supreme court have suggested a rollback on abortion rights to uphold this is a piece 15 week band. the justices indicated they would like states to start banning abortion earlier than is now allowed. under 1992 ruling, states can impose significant obstacles to
determine fetal viability. the women's tennis association is suspending all term it's in china including hong kong, effective immediately. steve simon says he has serious doubts about star player peng shuai being safe and free and not subject to intimidation. unicredit is planning around 3000 more job cuts as it ceo focuses on profitable business in an era of restructuring. sources tell us many of the cuts will come from the italian lenders corporate center to reduce bureaucracy. it is set to boost the banks dividend quality and improve products. that is your bloomberg first word news. and cleveland fed president told bloomberg in an exclusive
dani: welcome back to bloomberg "daybreak: europe." cleveland fed president says she is very open to scaling back the fed's asset purchases at a faster pace so it can raise interest rates a couple of times next year if needed. she spoke exclusively with bloomberg's kathleen hays. >> going into the september meeting, thought there was a strong case for tapering at a faster pace than we had announced. since then, the data have come and supportive of that case, so i'm very open to a faster taper. kathleen: many suggest they should wrap it up by march instead of june.
would you be in favor of this? >> we will have to discuss that, but in the first quarter or maybe early in the second quarter, right now, i could support that, given what we know about the economy. we will know in two weeks more about omicron and talk about what the appropriate cases. dani: what do you need to see, then? just a little confirmation to make sure you make the right decision? is there something you're really doubtful about making the case and actually saying yes, go ahead, do that taper? >> the momentum of the economy is clear. we've seen very strong labor markets and price pressures that high inflation rates. i think the new issue is the risk of omicron. and frankly, we just on have enough information yet. i haven't changed my outlook. the economy is just coming in very strong, the momentum of the
economy is coming in very strong. if the omicron variant turns out to be like delta, one thing we've learned over time is that with each new variant, there is some diminution in activity, but each time it is less. the economy is -- has learned and households and businesses have learned how to cope with cases and we've had a higher vaccination rate over time as well. so really it's going to depend on what the real risk is there. dani: the president of the federal reserve bank of cleveland they're speaking to bloomberg's kathleen hays. a spring in our markets guest, good morning and thanks for joining us. we heard from loretta mester they're saying her outlook so far hasn't changed based on omicron. has yours changed at all? >> not really, at this point.
she was saying, it's still early days. is going to take a couple of weeks to have more data enter billy see but this means, more -- and to really see what it means, how resistant to vaccines that can be rather than transmissible. we already know it's very transmissible. the question is, exactly as she said, we have seen companies able to adapt better, the growth momentum i think gets slowed a little bit but it just gets delayed and pushed back into 2022. so the growth prospects again at this point are not really altered. dani: in that case, when we see days like yesterday when the market gets spooked by a case presenting itself in the u.s. in california, is it just a warning of what more is to come? >> i think yesterday was a
little bit particular. no one should be surprised if there's a case of omicron in the u.s. and in most european countries now. we should assume it is almost everywhere at this point. we weren't able to contain any of the previous variance, and people traveling more than they were 9-12 months ago. you had the news about omicron spreading and then at the same time this more hawkish or perceived more hawkish tone from powell, and the view that if omicron isn't that big a deal, maybe the fed is going to tighten sooner, and if it is a big deal, then it is a push for growth. so i think we saw a little bit of that play out yesterday. again, not a big surprise to see this reaction in markets. i do think it's going to ease out in the coming weeks.
dani: we saw a lot of hedge fund selling yesterday and as you said perhaps i just want to lock in that performance before year end. but bonds present another conundrum and the ability to hedge, whether you want to buyer you don't. jp morgan asset management said get out of that market, going to credit, go into the riskier areas. where do you stand? >> it really depends what you're hoping your bonds are going to do. if you want to have a small allocation purely as a hedge and you are worried about omicron and all of this, then it will -- it has been protecting for this growth concern. but that doesn't seem to be the overarching concern, from my perspective. new look at where yields are and the growth momentum, for me the direction for yields is up. it is a risky hedge and i would favor credit. i would rather take this credit risk, you have very few
maturities across the high-yield space next year or so people's resistance is quite low. up until recently it has been stable throughout the other assets we've seen. i think i would probably fall more into the credit camp. dani: it is interesting because we have seen yields on high-yield credit start to -- november was a particularly ugly month. in that space are you finding a lot more opportunities of value following some of the crack study merged in november? >> for sure. these happen few and far between across the credit sector, there are opportunities. a little bit of the swings in oil prices that we saw in november contributed to that a little bit. still find that energy companies
haven't really benefited from this rally in oil prices so potentially some opportunities there in the high-yield space. dani: how about oil itself as an asset? root coming to the end of an opec-plus today meeting. there have been fears over demand. some of those call for $100 a barrel for oil. do you see us heading toward a more bullish oil outlook? >> i'm not sure we get to 100 but i think there's a little more upside. again, we don't know so much about omicron, but it could slow things a little bit for december. maybe have a little bit less holiday travel with all these travel curves that are being imposed. the demand factor should last into next year. we know from europe that you do have this energy crunch which in general i think will keep some support. opec talking about the risk of a surplus next year which means they might steady production
increases, wait and see what it looks like. i think prices should remain relatively underpinned unless this new variant is a lot worse than expected, which is not the base case. dani: the new variant is certainly that asterisk on many of these markets. coming up, more on the scoop. this is bloomberg. ♪
inflation, it is weighed heavily on the company going into the holidays. let's bring at -- bring back our guest. i love to get your take on the story. it is an about-face from an issue for apple previously that there was too much demand. >> absolutely. there's a lot of ways you can interpret this. supply chain disruptions, and were starting to hear anecdotal evidence that it is improving, factors in asia reopening, it's easier to get some of these semiconductors and some of these steel components. now are seeing a bit of the flip side people are thinking maybe we just wait it out and look at something else right now. there's plenty of other options as we get into the holidays. what you often see is inventories get drawn down and you have these delays in shipping, companies tend to over
order because they don't know what is going to arrive and how long it will take, so they want to have extra extra. then at some point those inventory start to replenish, demand stabilizes, like we are seeing with this apple news. and then you have this improvement. so maybe not fantastic for apple itself but it is very dependent on iphone sales. from a broader supply chain perspective, probably encouraging to see that may be one more of these better anecdotes about the easing of disruption. dani:? ? can resume into tech does it make you concerned about the sector at all? esty: not really. if your growth momentum is strong, your cyclicals should do well and tech should underperform a little bit. it's not fantastic for the
overall index, given the size of technology, but it would suggest more confidence in the recovery and where we are going. what we've seen recently on the tech front is, it has always been seen as defensive and sometimes if things don't look so good, go buy tech. but we still like the tech sector. we think the stability -- ability of his companies to generate sustained earnings growth, a lot of the position in the market and the size and scale mean it is difficult to count them out. especially given the news recently, we like the approach to have some tech and some cyclicals, and i think that is going to continue. dani: europe is a market that has many more cyclicals than the u.s., less tech.
bloomberg news recently did a poll of strategists, and by year end of 2022, they saw these stocks moving about 90%. a lot of these markets moving 10% as well. ari also seeing these level of gains play through to the end of next year? esty: i think those levels make sense. i think european stocks should benefit from the more cyclical value as the recovery progresses. there are couple of hurdles for european assets. the first is that we never got that massive rebound and growth that we saw in the u.s.. it was supposed to come and then there was delta. now it looks like we have another hurdle. we had lasting containment measures and lockdown measures renewed across some of the countries. you also don't have the same margins that you are seeing in the u.s. market. a lot depends on the inflation
dani: good morning from bloomberg's european headquarters in london. i'm dani burger. this is "daybreak: europe." the omicron variant spreads with the first case reported in the u.s.. austria says there's no indication strain is deadlier than the others. crew dilemma, opec and its allies meet to discuss production increases as the research -- research of the
pandemic throws the markets into disarray again. apple has a new problem, slowing demand. along with those concerns about tech and software makers, we are seeing a lot of fragility in this equity market. we saw selloff yesterday in the u.s. stock market which was the biggest two-day selloff since october 2020. the number of stocks that are trading their 52-week low is now the greatest amount since march of 2020. of course we know what happened then, the pandemic field selloff. this to shows you how many gyrations markets are having to deal with the stock market and bond market as well. volatility is picking up around all these calls we been discussing. esty was saying she expects a lot of growth and volatility in this market.
now there's the omicron variant and what that means for demand. yesterday there was it selloff that happen when the european market was closed. .6% is not really going to chip away that much, and were looking at some gains after we saw a lot of buying in the 30 year yield yesterday. finally, brent crude up to nearly $70 a barrel, still hanging around a bear market. let's talk about energy, and europe is facing an unprecedented crunch. energy ministers from across the block are discussing what to do to alleviate the pain. a warning about potential blackouts. maria is live in brussels. how much of a concern or these
rocketing bills for energy costs? >> you alluded to the number one priority as the coronavirus tayshaun. if you can put that aside i would argue the energy crisis we are seeing in europe is probably the number one concern. we know this feeds directly into the social fabric of european citizens who are going to have to pay more this winter to heat their homes. we also know it has a huge effect on inflation. you could argue the inflation story and the energy story are essentially one. we know there is a paper going around signed by the french, spanish, and the italian saying there needs to more -- be more coordinated european action but this has run into big tensions, from those saying this is still a national story. dani: any signs of respite at
all at this point? maria: no, but don't take my word for it. i want to show you the evolution were seeing from gas prices in europe. if you look at the start of the year, this is a very different story. were talking about three increases in this market. this is q4, we are seeing prices increase in september. the idea is that temperatures are going to drop in the focus is on the gas market, but also the reserve. if you see the increase until october when we reach a peak, that is an intervention from the russian president saying gazprom will honor its contract. that hasn't fully manifested in the real market. prices once again are increasing, all of this ahead of winter in the christmas season. this is a particularly difficult time when it comes to energy prices. in the real impact this has on people. dani: i think it is two degrees
right here in london so it seems like a cold winter could be in the cards. rhea, thank you so much. another side to the energy story, opec and its allies are headed into a second day on talks whether pause reduction increases. we're joined by luis dixon, thanks a much for joining us this morning. it wasn't that long ago that we were talking about perhaps triple digits when it comes to oil prices. now we are in a bear market driven by some of those virus fears. how does that change the potential outcome? >> you are very correct, we have seen a tremendous influx in market sentiment and it has been
big bearish surprises for opec. while the negative market risk is a coordinated release, it is sort of a known risk. the big risk is the omicron variant and how much is going to shift consumption for the oil price due to lockdowns and this is still a big unknown. this is data that opec-plus will not have in front of them today. it's going to be very difficult to know how to try to hedge the oil market the next few weeks. dani: is your base case then that opec just to first their decision? louise: in general, in the past year we have observed that opec has sort of taken the path of
least resistance. they have often waited for the chips to fall and then make a decision on how they will manage the slide. so for today's meeting we expect them to take the path of least resistance. that would mean putting the tapering on pause until we know more about the new variant. the market still might be quite disappointed because they are expecting opec to act a bit more. even though powell is skewing bullish, the market may make the reaction negative. dani: what could that reaction look like? louise: if opec-plus decides to put it on pause and not create
-- not increase the barrels per day, it could sort of be neutral. but the market is on a very bearish trajectory. dani: there has also been some rumblings that the action that opec-plus takes is actually to reduce supply. is there any chance in your mind of that happening? louise: it could definitely be a surprise action from opec. it would be uncharacteristic of the group which generally likes to take a rather conservative approach to supply management and stay behind the demand curve. so it would be such a rash decision, all the risks and all the unknowns are bit more
calculated and quantified. that would definitely be a surprise move from the group. dani: in terms of a new variant impacting demand, we have seen this play out before. we had the delta variant we also had to grapple with. what kind of demands could we see in terms of its loss, should we get this new variant, causing more lockdowns and mobility restrictions? louise: more mobility restrictions and lockdowns are already sort of underway in many countries, sort of a knee-jerk reaction to the new variant. you see a lot of flight and travel restrictions. so the mobility restriction is already brewing. until we know more about the variant, in the worst-case world, we estimate that the impact would be a -3 million
barrels per day on oil in the first quarter of 2022. and new lot downs and travel restrictions globally. of course the main deciders here, the downside factors are not opec-plus. that is going to come from the government's who decide which restrictions will battle the new variant. dani: so in that case, if it is the government, we of course have been talking as well about spr releases as well. is there any sort of political pressure given that, that opec will face if they just hold any sort of action, considering that we do continue to see the white house wanting to make sure that supply continues strong? louise: i do think that there is
sort of -- it's not going to be short, i think this is going to be a continued theme that actually brings a lot of volatility into the market into 2022. however, from today's meeting we have actually not seen the external pressure that we saw at the previous meetings. so the group does seem well-equipped to make a more independent decision on their supply fundamentals. dani: really fantastic to have you on with us this morning on the opec-plus decision. that's luis dixon. let's get to the first word news. fed chair jay powell has set for the second time into days that officials should consider speeding up withdrawal of policy
support. he told the house financial services committee that inflation has become more persistent and policies will continue to adapt. the cleaving fed president told us that she supports that view. >> going into the september meeting, i thought there was a strong case for tapering at a faster pace than what we actually announce. since that time the data have come in supportive of that case. very open to considering a faster pace of tapering. dani: the first case of omicron coronavirus has been detected in california. a san francisco resident traveled from south africa. they were fully vaccinated and had only mild symptoms. turkeys president erdogan has abruptly replaced the finance minister over interest rates cuts, or rather lack of, and has determined the currency on
inflation. he will exit after little more than 12 months on the job. unicredit is planning around 3000 more job cuts as it ceo talked about unprofitable businesses after an era of restructuring. also set to boost banks dividend product and focus on more lucrative products. that is your first word news. i want to get a currency check as we head toward the end of the hour, looking at the lira, weakening by nearly 1% after erdogan make some drastic changes when it comes to the treasury continuing to push for cuts. looking at a dollar that continues to weaken, despite this idea of higher rates, a little bit of a conundrum for the u.s. dollar. the intake taking a breather in terms of its -- a stronger
increase their own pay ticket. for more on this, tom metcalf joins us now. tom, is something we concentrate on, junior bankers, what are we starting to see on the senior side? tom: they want to increase their pay come the most interesting example is around that spac's that the banks are doing. they're all looking to effectively get a chunk of any kind of return dani: dani:. spac's are not going anywhere anytime soon. how likely are they to stay with the junior bankers? tom: all you're seeing are junior bankers complaining about their workload.
$100,000 of stock, fantastic, but then you look at the ceo pulling in 27.5 million. a very big disconnect, and how they can kind of manage that internal dynamic will be very interesting. dani: it sometimes goes to shareholders as well. our shareholders going to look at this and say i don't know if it makes sense given recent performance, or does it justify the pay increase? tom: in the last four quarters there was record revenue and record profit. you could make the case that kind of performance deserve such rewards, but some shareholders might sate last year, $27 million is more than enough. while you're trying to find a way to increase that? dani: how does this compare with the rest of finance?
tom: apparently solomon's been very focused on that, certainly as well-paid as top investment bankers are, they get paid a lot more. look at someone like elon musk, it's not millions there, it is billions of dollars. dani: i wonder if in a weird way it helps the junior bankers, if i leave i go to private equity, but maybe if i stick around, this is the golden era that waits for me. tom: absolutely, that is one way to read it. it's just one of those things where a very small sample rises to the top. goldman has always been the pinnacle of money and power. it's just a move to sort of reestablish that trend. dani: such a great story, really
dani: welcome back to bloomberg "daybreak: europe." i'm dani burger in london where it is 6:52 a.m. at 10:00 a.m. u.k. time, we will get the latest euro unemployment data. then, third-quarter gdp data will be released. there you have rising concerns about the near term outlook and inflation. later this afternoon we will be expecting the numbers on initial u.s. jobless claims prayed
finally opec and its allies hold a meeting on the second day as the omicron variant sparks turmoil. we're talking to our guest earlier, saying the path of least resistance is perhaps to continue on the path that were going. let's get to another story we will be monitoring throughout the rest of the day, apple suffering from the global supply crunch. it's now confronting a different problem, slowing demand. demand for the iphone 13 line has weakened. consumers have given up trying to get the hard to find device. debbie, what is apple exactly telling its suppliers about this weakening demand? >> previously, bloomberg reported that apple cut its production target for this year by 10 million units.
suppliers were hoping that by next year or bubs -- other time they have enough components they will be able to make up those orders. but due to market conditions, apple is telling vendors they may not be able to fill these orders later on. dani: what are the implications for apple this quarter? >> apple is still on track to achieve a record holiday season. at the same time, the softening demand means apple probably won't be able to achieve sales a strong as they had expected. we are seeing that consumers have been frustrated with the tight supply and some of them have not been able to get their hands on these smartphones.
so apples chief executive officer said that some of the holiday orders -- consumers might not be able to buy these gifts for the holidays. dani: i guess was saying it's a good thing, on the supply side dynamic. if that's the picture for apple, what does it mean for the read across or their suppliers? >> i don't know yet, we will have to wait and see. but overall the supplied components and chips may ease up a little bit for other companies other than apple. dani: thank you very much. debby wu on the latest bloomberg
scoop. let's get a quick look at the markets and how they are shaping up. european equities easing some of their losses. they were down 1%, now just under 1%. this reflects the turmoil we saw in the u.s. market yesterday. there was one headline about one case of omicron in the u.s., and california, that was able to set markets off. we've seen from history, we are not able to control these variants, so it gives you an idea of the fragility of this market. a little bit of a rebound in s&p 500 futures, coming off the back of the biggest two-day slump since october 2020. and after ferocious buying yesterday, higher by three basis points. brent crude up about 1.5%. opec-plus decision coming after a two day meeting. will they make a further decision given the uncertainty
anna: good morning. welcome to bloomberg markets europe. mark cudmore joins us from singapore to take us through all of the market action this hour. the cash trade is less than one hour away. here are your headlines paid the omicron variant spreads with the first -- here are your headlines. the omicron variant spreads. no indication that this strain is deadlier than the others. opec and its allies meet to