speculation about possible m&a. european stocks futures pretty much unchanged. depending on what part of the market you are looking at, it takes it differently whether the pfizer trial means that is good news because you have some protection or whether they worry about what it means if the variant spreads across the world. you can see the ftse futures were a tiny bit up, but nothing huge. first off the mark, you can see the ftse gaining 0.05%. aramark was gaining some 9% off the back of some buoyant news in china. things have stabilized somewhat. the other thing we are looking at overall is some of the five-year expectations weighing on some of the sovereign bonds. great chart looking at inflation expectations, we will get to it in a second. australia, for example.

what else we are looking at is equity. some of these are waiting to open. the cac 40 just opening. the ibex opening 0.4% lower. the picture overall is one of cautious optimism. yesterday, we had a nice slide forward. i think kristine aquino and mark cudmore is one of the biggest gainers since the pfizer monday. there is a lot of buoyancy and it seems like the markets want to latch onto any kind of breaking news. let's look at the s&p 500 futures. they give us a good indication of what we should be looking at them to the expectations going forward. the last couple of weeks, we have definitely seen asian markets or european markets tracking what we saw in the u.s. bitcoin, 50,522. let's get straight to the bloomberg business flash with laura wright. laura: s&p continues to believe

that a default by evergrande is inevitable. the rating agency says the chinese developer's liquidity remains bleak after a month-long grace period expired. stock exchanges in the united arab emirates will start operating monday through friday following the country's decision to switch it's working week. government official broke the news on bloomberg following the announcement that the gulf state is moving to a 4.5-day week with saturday and sunday off. >> now, we are aligned with the world economy. we believe that there will be an enhancement in the volume of trades and there will be gdp growth relative to this decision. laura: one ceo says there is no fast way to return supply. he said the industry needs a stable, transparent system to invest. conocophillips announced a $1 billion variable dividend to

return more cash to investors. >> our commitment is to return 30%, so we introduced a third channel, which is a variable return cash channel and we announced we would be giving a billion dollars additional on top of what we are doing already. the total return to shareholders next year will be $7 billion, a 16% increase in the recognition of the commodity price market we find ourselves in today. laura: that is the bloomberg business flash. francine: let's get into the key market drivers. with us is kristine aquino. great to speak to you. if you look at the stock rally, it is kind of there. powering ahead. kristine: it is kind of amazing when you look at european stocks. they had the biggest gain since pfizer monday in early november of 2020. that was when we first received good news about pfizer's result against covid and now we are

getting a bit of asymmetry because we are dining on good news from pfizer overnight regarding booster shot in the latest covid variant here. today, it is a little bit of a consolidation day, which you would expect after such a big in, but in general the mood in markets is very much welcome and open to receiving any sort of good news. francine: when you mention pfizer monday, i have it tattooed in my brain. i remember where i was. what does it mean for a lot of the foreign-exchange moves? kristine: there is a bit of a divergence going on. the chinese yuan hitting a three year high. a combination of chinese easing hopes that we saw from the pboc yesterday, as well as the idea

that investors are banking on that, supporting growth and omicron not being such a negative for growth combining to lift the currency over there. my colleagues and equities pointing out that if you are an investor in the u.s. versus and europe, it is going to make such a big difference whether or not you hedged your currency exposure. that is interesting to me because it speaks to the divergence we are seeing, powering currency markets. we are seeing the fed indicating , the ecb falling a little bit behind in the process. francine: where are we with the ecb? we have had a couple governing council members speaking lately. kristine: they are keen to emphasize that they are also an the process of normalization,

albeit not as fast as the fed. we heard them saying it is not warranted to add stimulus if omicron proves to be a surprisingly negative factor for growth, which they don't think it is at the moment. i think we have seen the ecb numbers recently emphasizing the state of their bond buying program and what they are going to do to normalize that rather than rate hikes, which is more of a conversation for the fed. francine: they have tried to really talk about sequencing and it seems like markets are falling into place. kristine, thank you very much. a new study has revealed that the pfizer vaccine provides less immunity to the omicron variant, however south african researchers also say a third dose of the vaccine includes a degree of protection against the variant. joining us now is sam fazeli. a lot of us in the newsroom read

the article three or four times to decide if this was a positive or a negative? sam: there are positives and negatives, but we have to say it is very preliminary data. there are six people in each of the groups they have studied. it is the kind of data that will come from other people. let's hope that the 41 full reduction in antibody neutralization is the worst that we see. if that is the case, given that the samples came from people who are just vaccinated about two weeks before hand and they would probably have the highest amount of antibodies in their blood, this does suggest that it would be the most vexing evading variant out there, at least when it comes to infections. francine: policymakers and authorities are urging everyone to get a third dose vaccine, a

booster shot, how long does it take to have a new vaccine that would be better for omicron and if you have a booster now, do you need to wait two or three months? sam: i think three months is probably a decent amount of time. we know if you leave the immune system longer, it has a better opportunity to mature and give a better quality of antibodies, not just amount event embodies. three months is what the u.k. has started doing now and i think some other countries did that. if there is indication from the same study that if you had a covid before and you got a full dose of the pfizer vaccine, you have much better levels of antibodies than omicron. boosters will be able to help a lot, whether we will need an omicron specific vaccine or not, time will tell, and i think we will have a chance to decide that by march.

francine: thank you for the update and insight. in the meantime, we are getting live pictures from germany, it is the end of an era with olaf scholz elected as chancellor. today is the official day where he takes over. we will be live with maria later this hour. you can see olaf scholz in one of the front rows. everyone seems to be wearing a mask and we will have plenty more from germany throughout the day. coming up, how to navigate the uncertainty around the omicron variant. a great interview coming up later. we will speak in the next hour to the chief executive of the saudi stock exchange. this is bloomberg. ♪

francine: welcome back to the open. you can see markets are kinda fluctuating. we opened a little bit subdued and now we are pushing ahead. overall, the european stoxx 600 gaining. let's check in some stocks moving at the open. dani burger joins us. >> this is one of the big corporate stories today.

nestlé is selling some of its stake in l'oreal. it is still going to hold a significant portion of l'oreal. nestlé says it still remains committed to this partnership, but selling l'oreal stake, this is something that had been long speculated given that nestlé is undergoing a bit of a transformation. a little bit less sunny and the travel sector. tui giving an update in terms of their earnings, full-year missing expectations. what is driving this pessimism is the company warning they may have to trim their capacity for the winter. the ceo speaking on a call with reporters and analysts saying it is the media reports that have dented appetites for winter bookings. the last one, i chose it specifically for you and it is

ubisoft, the videogame maker, they are getting into nft's. francine: i'm excited. >> i do know video games a little bit better than nft's. if you are a video game character, you can buy new clothes, weapons, etc. now, in ubisoft games, you can buy those as nft's, so they will have their own specific serial number attached and then you can sell them on, as with -- as well. i don't know if the little ones have gaming consoles, but we might need to steal it and check this one out. francine: let's do it. dani and i on a rampage. we are so cool. we should have our own nft. european equities slightly firmer this morning after their best day in over a year. investors are drawing comfort from the fact that the omicron

variant may be less severe than previously thought. to help us sort through the noise and look at how all of these affect investment decisions, i'm joined by our guest. thank you for joining us. you must be having a field day. given the very little data points we have here. >> yes, you are quite right. it is difficult to model. we don't have a complete picture of the data. of course, given that incomplete picture, the market is vulnerable to investors misinterpretation of the data, which you were going to see evidence of now. it would just simply be that early signs suggest that this virus is more transmissible, but that the vaccines certainly accompanied by a booster shot can still show good protection against severe illness and

disease, and therefore this should not be quite so devastating for growth, but we don't have a complete picture and therefore we could get outcomes that are closer to our worst fears, but even in that instance, we have these antiviral drugs, where there is still great optimism about the impact they could have and therefore we can still retain a positive view on growth. francine: dan curtis made me this awesome inflation forward-looking breakeven. i want to get your thoughts on inflation. is the omicron variant, if it gets worse from here, is it inflationary pressure without hurting growth? is it trickier for central banks? could we be in a stagflationary environment because of it? >> if we look at some of the

worst case scenarios and omicron were to be more pervasive, i think we will see continued supply chain disruption, which we know quite vividly has inflationary pressure. you have to think about what policymakers would be doing in conjunction with that outcome and we would expect them to extend the generous policy settings and the deficits could be more expensive than they already are. we think investors should brace themselves for volatility in that there is an inflationary piece to that, but again, it is not necessarily the trigger to take evasive action out of equities. francine: where do you find the most value at the moment? is there something that is a little bit unloved you think now is the right time to pick up? >> i think the more obvious

areas of value do reside in european and emerging-market assets. and if omicron does not end up being so much of an issue, growth can push on and those types of markets can perform. in the context of building a portfolio, we are a little more cautious on that area. on the basis that growth is slowing from a very high rate and there are a number of risks that can disrupt the path for growth from here, we continue to favor u.s. equities. everyone seems to dislike u.s. equities on the basis of their valuation, but we continue to favor them in our portfolios. francine: what do you do with european small caps? i don't know how much differentiation you do if you

look at our chart, there is a difference between european stocks that have been significantly outperforming? >> i think it does depend on which region you are looking at, but typically we see small caps having long-term appeal in europe and the u.k. in particular. you can cut data and time horizons to suit your narrative, but it is not obvious to us that u.s. smaller caps are going to at a tremendous amount of value. there is a natural favoring in europe and the u.k., but there is also some cheapness as well and if growth can push on, that is another nice tailwind for european small caps.

the european story is a little more frustrated by chinese issues, much more sensitive to china growth, where there are some concerns. francine: what do you do with bitcoin right now? >> well, this is where my wi-fi fails and i tend to not do much. i would be a little frustrated with the so-called smart people telling me that this is an accident waiting to happen. it would be arrogance of me to say don't have any exposure to cryptocurrency because there is a great deal of interest in that asset class and a positive narrative away from that money and the way consumers may evolve their spending habits and the way they transact, but i think my natural starting position is

one of caution. i don't think they are going to speed up transactions and i think you need centralization for cryptocurrencies to function properly which is something they are opposed to. i would caution against it, but it would be remiss of me to slam the table because it does deliver nice returns for investors. francine: thank you so much. coming up, nestlé sells part of it stake back to the cosmetics maker. more on what that $10 billion deal means. this is bloomberg. ♪

francine: welcome back to the open. 24 minutes into the european trading day. 0.2 percent higher for the cac 40, the ftse. in to corporate stories. nestlé selling part of it stake in l'oreal back to its cosmetic -- the cosmetics maker for $10 billion. the sale will reduce nestlé stake to 20%. joining us now live from berlin

is our guest. thank you for joining us. could you start by telling us about the sale and why now and how much does it mean to either company? >> this came out very late last night that the company announced they are selling a small stake in l'oreal. it is a 10 billion euro windfall they get from this, but they still have a sizable steak left in l'oreal, about 20% now. that would put that stick value -- stake value had about 50 billion. what will happen to that remaining stake? was this a one-off or will they start really withdrawing from that holding now. we don't know at this point. it is a question we have put to the ceo many times of nestlé. he has always feigned inscrutability and has said, we are quite happy. this might give the opening shot for that unraveling.

francine: how does the sale fit into nestlé's wider transformation plans? >> since he took over a couple years ago, he has tried to sharpen the portfolio. he has tried to move out of slow-moving areas like chocolate in the u.s.. he is moving into areas that are faster growth, coffee in particular. they have a promising partnership going on. this is a nice bit of money he can deploy. they did say they would use this for a stock buyback for the time being. if a big opportunity does arise, they might use it for something else. if they do decide they want to sell more of this, this will give them substantial firepower. francine: thank you so much for the update. coming up, olaf scholz takes over today in a major changing of the guard. that is coming up shortly.

this is bloomberg. ♪

francine: welcome back to the open, 30 minutes into the european trading day. the pfizer shot provides less immunity against omicron in an study, the first study. the changing of the guard, olaf scholz set to become germany's new chancellor today. london workers getting back to the office, and more on that later in the show. let's check in on the equity markets.

it wants to push ahead in europe. mark cudmore was reminding us that in terms of the share price boost we saw yesterday, at the highest since pfizer monday. everybody remembers pfizer monday was monday a year ago we started finding out we had a vaccine that worked that could help us get through the pandemic . stocks and u.s. futures rising. eased concerns on omicron. chinese policies seem to help buffer against the fallout against mounting property debt distress. there is a feel-good factor in the market even though the dax is down 0.2%. the sectors most on the move, yesterday we had travel and leisure. the ones in the past that had lost the most, i would keep an eye on. nestle, in terms of a share

price, i don't know if that moves as a whole. auto parts and chemicals are a little under pressure. the new government of olaf scholz, due to be sworn in today at germany's bundestag, after being approved by the three parties. maria tadeo joins us now. what will be the immediate focus for the new government? maria: it is a huge page turner, angela merkel has already entered the building. she had a major standing ovation. we see her sitting and writing notes, taking down what is her final page today in the reichstag. in terms of what to expect today , we are expecting the vote will happen in the next few minutes, but the swearing will happen mid day. we have a few hours to go. olaf scholz wants to focus on

the pandemic. he has managed to bring in a three-way coalition, unprecedented for german politics. he has been successful at doing this so far, he put together a government in three months that on paper should not work. the social democrats, liberals and greens are different on the spectrum but he found ways to bridge them together, and he hopes that formula will work for the next four years. we hear time after time we will be dealing with the pandemic in this country. francine: the government coalition deal talks about progress. in what ways will it be a departure from the merkel era? maria: there are two things that are potential points of departure. one has to do with foreign policy. the criticism of angela merkel is that they did not have a

foreign policy. germany was pursuing a trade policy and was after business deals for companies and industries. for a while it was successful, but it has put the country in a tricky spot you look at china and its relationship with russia . the other has to do with public spending. the collation -- the coalition -- if you look at the details, there are ways around it. in that agreement they make reference to special-purpose vehicles that could help with the green transition. they say state companies could have a big role to funnel that and that will depend on christian lindner and if he will be less hawkish. yesterday was more of the same, that everyone has to be responsible. francine: we will have plenty more from maria throughout the day. let's bring in grace peters,

executive director / european equities strategist, jpmorgan chase bank. a lot of questions on equities but if we start with germany, can we give a lift to the dax? grace: the thing we are excited about when we look at the new coalition and what they are proposing is the clear focus on modernizing germany through automation, and climate change. these are two facets we are pleased to see the coalition get behind. also what we see around the world will be think about covid response, driving strategic initiative around climate change in decarbonization and digitization. we are constructive on the dax. tech, industrials, and all of that feeds into a positive called on europe as we look to 2022. francine: if you look at some of

the charts, there is a clear discount for european equities. was it justified? grace: we are at an unprecedented 25% discount to the s&p. if you think about that on a forward earnings ratio, it is 16 times that 3% yield. the key thing that will drive europeand global equities at large, to buy in you have to believe you can get double-digit corporate earnings growth next year, and in 2023 high single digits as well. we think that will come through despite omicron. does some demand get delayed into 2023? but for the cycle ahead, looking back where europe has had abysmal earnings growth for the post financial crisis cycle, things could be different this time.

capex is one of the drivers as to why we think europe can be optimistic. francine: what would it take to have a correction? it seems like market participants are taking any excuse to buy the dip. grace: those dips are short-lived. we are optimistic on equities and risk broadly, but you have to take that with the full acknowledgment that risks are out there and mounting. we look to the concept of a fed policy mistake, to delta, and whether consumers spend the accumulated savings they made in the u.s. and europe. if they fear inflation or a new variant and mobility restrictions, that were present another risk. when we look at the

fundamentals, we feel comfortable. francine: what is a policy mistake from the fed look like now? grace: powell has bought himself optionality. at the time the new variant was coming to the fore, and we were seeing volatility, almost in a n unexpected way you saw powell lean into the inflation narrative. the market is pricing aggressively. we think the fed will be more patient. we have the first hike in december 2022, and through the second half of the year -- next year as growth and inflation is slowing, the market will come around to our way of thinking that it is better to be a little late. francine: if you look at industrials or tech, there are pockets where you can get a bargain? grace: yes, and last year we had

a barbell strategy, and that worked very well. some of that we want to carry forward into 2022, but being firmly in midcycle we want to increase your sector diversification. we like industrials, financials, materials on the cyclical side, but we want to introduce with secular growth some defensive like health care. we like to invest thematically, that is an elegant way to get coverage across sectors. clean energy, health care innovation and automation feed into what we know our global priorities to improve automation , modernize economies coming out of the pandemic. francine: what do you do with china right now? we have heard of policy stabilization messages, and we need to see the details. grace: it is still very volatile

in china. it is good to see early measures taken, they will be at the margin to stabilize growth around the 5% gdp level. we like to invest in china. we like on short chinese equities, and leaning into areas we know the government has lended support, bringing health care onshore, focusing on the upgrade of manufacturing in semiconductors, decarbonization, sustainability. we have seen a lot of regulation aimed at getting young people off the sofa not playing video games as much. some of the consumer brands for sports are interesting. a lot of pockets of value, but needing to be more selective. francine: is luxury and that industry attractive? grace: luxury, we like.

when we look at the wealth accumulation over the last 18 months, a lot of that is in higher net worth households. they have a lower density to spend, but luxury can benefit. europe is the best place to access luxury because of the heritage of the brands. that is another theme linked to the post-pandemic cycle, but also in china to the longer-term wealth effect that we like. francine: thank you so much, grace peters, executive director / european equities strategist, jpmorgan chase bank. countdown for the french election. we speak to a campaign spokesperson next. this is bloomberg. ♪

francine: welcome back to the open, 44 minutes into the trading day. we see acceleration on gains on the cac, the ftse and european stoxx 600, getting 0.4%. the french residential election takes place in four months. lepen is facing a challenge for

right-wing voters. we are joined from paris. thank you for joining us. laurent jacobelli, president great east region, national rally. how was your candidate doing? >> we have a strong campaign in france, looking like a gigantic contest. [indiscernible] different cities always vote for the original. lepen is ready to be the next president of the french republic.

francine: the polls are neck and neck. could we see a combination? laurent: knowing he has no chance to win, should retract and say i join lepen's team. i think he will not do that. and mr. macron called him, and i hope all the french voters understand he is running a campaign to make macron win. francine: is the republican nominee, how do you see that disrupting the political field? laurent: things are clear now.

all the competitors are waiting for a french presidency. she is the one talking about security. she destroyed 12,000 police jobs. she is fake, and like mr. macron with a dress. the choice will be very easy. francine: i understand you are in campaign mode, but we are trying to figure out what le pen stands for. would le pen be in favor, like the european donald trump, putting extra tariffs to protect the french economy? laurent: we want to protect the

french people. the french had of companies, and globalization is not a bad thing, but we have no control. products coming from china do not have the same rules as french products in the same department store. we have to create taxes at the entrance of our market to create fair competition, which is not the case today. francine: thank you so much for your time, laurent jacobelli, president great east region, national rally. let's get straight to the first word news. laura: president biden has warned vladimir putin that the u.s. and allies would respond to any attack on the ukraine. bloomberg understands that includes a push to stop the

north stream pipeline. the kremlin said it will not tolerate nato expanding eastward or deploying weapons in ukraine. the first reported experiment on the effectiveness of the pfizer vaccine found it provides some protection against the omicron variant. omicron's ability to evade the shot is robust but not complete, and it would reduce the chances of infection and severe disease. warning of a rough waters ahead for financial markets with the fed poised to tighten policy. during the webcast the billionaire money manager advised on the high-yield bond market, which she called a canary-in-a-coal-mine for risk assets. with elevated debt levels after the pandemic, trouble could emerge when short-term rates surpass -- australia will not send officials to the beijing winter

olympics although athletes will compete. a diplomatic boycott of the games. china said the u.s. will pay a price for the move. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: up next, staying at home, a growing number of people in london take advantage of remote working policies with christmas around the corner. stay with us for the details. this is bloomberg. ♪

francine: welcome back to the open. 53 minutes into the trading day, european stoxx 600 getting 0.3%. the dax is the outlier, down 0.2%. some in london are trying to reduce the risk of getting covid ahead of the holiday season. firms have seen -- are taking advantage of the flexible working range from home. i love this story.

the dynamics are often subtle. how big of a shift are we seeing of people working from home? tom: it is on the margins but the trends are moving. various ceos say they see offices lighten up. this is bottom up, workers are deciding to pull back to not ruin the family christmas. they do not need a memo from the ceo. francine: is it omicron related, or a surge in cases? tom: it is difficult to pick. it is driven by the worry, i do not want to catch something in the office and would rather pull back a little bit. francine: is everyone still having a christmas party? tom: a lot has been canceled.

there were hardly any big events, but this week is probably the last week you will see big gatherings. francine: is this across all firms? not all firms have the same policy. tom: the big investment banks, goldman, jp morgan, they are not seeing a drop off in attendance. invesco has seen a drop off. a london broker said they saw a little drop off, and he expects it to pick up pace next week. francine: what do you expect for the new year? tom: it is like a mixed message. you will not see an empty london afte christmas. it is seasonal, no one wants to ruin christmas again. in january i expect the travel will pick up.

in the short term we see a drop off. francine: thank you so much, tom metcalf. let's look at what stocks are doing, stocks are rising. it feels like market discipline -- market participants take any excuse to buy the dip. we also heard about more chinese policies buffer against the fallout. investors taking comfort from early studies showing vaccines provide a partial shield against new variants. the dollar, little change, crude falling. there is a lot of speculation on what happens next. the sectors on the move, a little more balanced than yesterday. health care, utilities on the way down. that is it for the european

market open. "surveillance: early edition" is up next. we have some great interviews. this is bloomberg. ♪

>> our view of interest rates, they will rise next year multiple times. >> currently it is russia's deliberate choice and aggressive actions that continue to destabilize security in europe. >> the discussion between president biden and president putin was straightforward. there was a lot of give-and-take. announcer: 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.