tv Bloomberg Markets European Open Bloomberg July 8, 2022 3:00am-4:00am EDT
condition after being shot at a campaign event. pressure on boris -- the prime minister faces calls to speed up his exit from downing street. it is jobs day, the feds back another 75 basis point hike dumpling concerns of a recession. we will get the latest details on that shocking event, the sad news out of tokyo. let's focus on the moment for what's happening in these markets. we did seat three days of gains on wall street. the heads -- feds hawkish again, were looking for payrolls, 268,000, and unemployment level 3.6 percent. the ftse 100 currently lower, just a few seconds into the open , the political situation in the ok'd of uncertainty as we continue to look at who is likely to be the contender
taking over for boris johnson, says he wants to be caretaker till around october. there is pressure on johnson to step down. we have matching nations -- machinations in westminster. let's switch over and see how things are playing out. we continue to keep an eye on euro-dollar, whether or not we get the parity, suggesting the payrolls data number could be consequential in terms of whether we get below one to one on euro-dollar, future state side pointing to losses, the two-year, 2.98, now to 98. brent down to 104. let's go to the breaking news that sent shockwaves across japan. former prime minister shinzo abe has been shot at a political
rally and is unresponsive in hospital. bloomberg opinions with more on this. what is the latest on the former prime minister's situation and condition. >> the latest that we know, unfortunately, there's been no significant update since prime minister kishida spoke a little while ago. he described abe's condition as grave, said made eggs were doing everything -- medics were doing everything to save his life. he was described as being in the state of cardiopulmonary arrest, that means he had no vital signs . he was airlifted to hospital. as of right now, we have no more update on what his condition might be. tom: we have heard there's a suspect in custody. what more do we know about the individual? >> we know he is a man aged 41
years of age. his described in reports as being a former member of the country at self-defense forces. we don't know too much about him after that, including a possible motivation he may have had for this attack. he is reported to have told police he attacked albeit with the intention of killing him. another unusual turn of events seems to be that the weapon he was using is described in reports and looks from footage we've seen of being some sort of homemade gun that he may have crafted himself. as to what could have spurred him to take this action, we do not know yet. tom: jared reedy in tokyo, a sad day for the people japan.
let's get to bloomberg first word news with alice. >> president biden will discuss possible reductions in u.s. tariffs on chinese goods and meeting set for friday. sources tell us it is not clear if he decided -- points to decide on a path forward. he has been weighing on this to help curb inflation. his predecessor impose duties on some $300 billion worth of chinese imports. china's ministry of finance is considering allowing local governments to sell 1.5 trillion yuan and special bonds in the special -- second half of this year. the bond sale will be brought forward for next year's quota. boris johnson is taking pressure from his party to speed up his exit after finally agreeing to quit as prime minister following days of political chaos. he suggested he stay on as caretaker until october while the conservative party chooses its next leader.
possible successors include liz truss and richey's and the -- rishi sunak. germany appears to be preparing to return district borrowing limits. if russia ends deliveries of natural gas. the euro zone peers must scale back to avoid the risk of more deficit spending and higher inflation. the consensus that may be shifting. global news 24 hours a day on air and a bloombergquint take powered by more than 2700 journalists and analysts more than 120 countries. this is bloomberg. tom: let's get over to bloomberg's managing editor. you're looking at the fed on this job state, the survey is 260 8000. what is the goldilocks number, put it in context of the
unemployment rate we are seeing there. mark: the goldilocks number is almost always the one that comes in line with consensus and doesn't scare the market. that is a glib answer, it is more so the case today were dollar strength is one of the issues squeezing conditions for many economies around the world. if we get number, will not to see yields rise, if we see bad numbers, dollars strength -- a number could be goldilocks today. the fed will definitely accelerate 75 basis points unless there's a shocking turn of events the next couple of weeks. the real issue is a credibility issue. they relate to realize inflation wasn't transitory, they were massively behind the curve. now desperately trying to catch up with that story, they can't turn dovish now or they will lose credibility. they talked about that in the minutes this week. that is why there will be 75 basis points.
while unemployment is a lagging indicator, the point is the narrative, if they suddenly pulled back from being hawkish when unemployment is near record low levels in the jobs market seems hot, that will be hard to explain. that means the inflation problem will explode and they will have to hike more later. expect the feds to do 75 basis points. i'm looking for that job stated to have an asymmetric reaction function, the recent -- market cap excited about bonds rallying. tom: credibility in question for the fed. thank you very much. joining us now, richard dunbar, good morning.
what a tumultuous week across these markets, politically as well. i want to get to the situation around u.k. politics shortly. i want to talk about what's going to the fed. is number for the payrolls that would change your views on the feds reaction function at this point? richard: we had some thoughts yesterday, those are ones we should focus on. they are clear about 75 basis points. and then 25's beyond. i think the fed's view is pretty clear. of where the economy is going and was required. it will look at this number closely this afternoon, i think we should be listening to the words come out of the feds. tom: indeed. some will point to the fact they are hawks, bullard, talking early about the need to type and tight more quickly. when it comes to the clarity,
that we are starting to see in terms of the expectations are on the fed hawkish in us, does that give some space for investors to turn more bullish? is that what we've been seeing this week? three straight days of gains, what was behind that move, was of the bear market rally or something else going on? richard: in terms of bond brought -- bond markets, the acceptance of tightening conditions, the fed are doing their bit. markets are extremely doing their bit. financial conditions are tightening everywhere with the acceptance of slowing economies on the side of the pond. the u.s. is much more accepted by investors now. slowing commodity prices are adding to that, greater certainty of slowing inflation. he start to believe that that target, the chances of them achieving that sort of inflation, and then bonds and treasuries, you start to look to devalue. tom: have you increase your
exposure at these levels? richard: we have. we describe it is leaning into duration is how we would describe that. tom: is that the long end of the curve? richard: leaning into duration, at the same time, we would be surprised if we saw inflation -- is there still a tight labor market yes? -- is there a risk we could see low expectations -- new expectation swing back and forth. absolutely. if you believe the fed believe the tightening market conditions in the tightening markets are doing themselves, you can start to see value at these levels. tom: how much more work to they need to price in a potential recession? richard: a bit more. it feels like equity markets are
not pricing the shift out on the valuation shift rather than any particular downgrade in earnings. i suspect supply-side expectations are more cautious and published at the moment. but not cautious enough if you believe we are heading into a recession. on the side that pond, we are certainly seeing stagnation, we may be seeing recession in u.k. and europe. the earnings implications that is not priced into most equity markets. tom: good news for the fed? richard: richard: certainly. richard:probably a reflection of investor expectation. we've got that way between expectation of recession and the supply-side problems in copper and soft commodities, oil, we talked about it -- supply problems in some aspect of the commodity complex. particularly helpful, you've
lost probably 10%. tom: is there further to go or are we starting to talk about in terms of the levels we are sitting across commodities? richard: there could be a little more to go. we would be wise not to forget the oil price supply constraints , copper supply constraints. the war in ukraine continues, we are not going to see a huge supply increases and the weak side from ukraine anytime soon. tom: one-on-one currently. richard dunbar, the wife investments director and fund manager. u.k. mps are drying up accelerated plans to choose johnson successor. who is going to replace him? this is bloomberg. ♪
similar picture for nasdaq futures. we keep an eye on euro-dollar, one on one. the survey is 268,000, amid the tight labor market. let's get back toward the u.k., boris johnson's plan to remain as caretaker prime minister, they are under increasing pressure. the ruling conservative party seeks to accelerate the contest to choose his successor by the end of the summer. we are joined from must miss just westminster by lizzy burden. what comes next, what we know about the runners jockeying to replace johnson? >> it's a wide-open race. if you look to previous leadership contests, all it takes is a slip of the tongue to knock a the running. the front runners are driven by those with military experience and credentials. this is -- defense secretary ben
wallace, former one penny mordaunt , served in the armed forces. because of the war in ukraine, they are taking the spotlight. we are also in the midst of a cost-of-living crisis in the u.k.. that lends the limelight to the former chancellor rishi sunak. he hopes presiding earlier in the week will revive his goldenvoice status after that debacle over his wife's tax affairs. also his involvement in the party gate scandal. there new chancellor, has also said he would be more willing to be less frugal then sudak went comes to prep tax cuts. there are many names. it is important to note that some of them privately acknowledge they don't stand a chance. but they are merely entering
their names into the ring because they want -- hope to get a cabinet position in the government of whoever wins this race. tom: indeed. in self marketing. lizzy burden on the ground, thank you for joining us. still with us is richard dunbar, investment director at standard life investments. u.k. assets, are they complacent , we saw an upside move for sterling, not a huge amount of movement, more driven by what's happening across u.s. yield is there risk? richard: there's always a risk that we see what's going on in westminster and downing street. there's a slight strengthen sterling, on the sense that whatever comes after this government is likely to demonstrate greater competence than the one that went before.
any combination would be better. turning to the problems that were in front boris johnson, his -- they're the same problems, the problems of brexit have not found the weights of the u.k. economy relative to other economies. in the problems on taxation, are they a taxcutting party or tax raising party? the bank of england have a strong view about the implication of tax cuts and the implications on inflation. that balance that was problem attic -- problematic for the johnson administration will beat for the new administration. i hesitate to say the tory party is in for a difficult -- more difficult three months. it is going to be a difficult three months, the idea --
tom: another challenging few months for u.k. politics. how are you allocating more broadly in this environment? richard: it's a complex environment. in terms of our general allocation, it is sterling defensive, sterling diversified. we seem huge swings and sentiment in terms of caution on the bond markets to exuberance over the past few weeks. we seem caution on equity markets. we are cautious equity exposure, leaning into durations, but be careful in some of the bond markets and careful. these are dangerous times. there's also a significant tightening in financial
conditions. we want to be careful we don't seep into the lower ends of the market. tom: cautious, defensive, the 10 year u.s. looking attractive. richard dunbar, always important to get your insight. thank you for joining us. his investment director and fund master -- fund manager at standard investment. later this hour, the fed's push for another 75 basis point hike in july, the u.s. employment picture next. this is bloomberg. ♪
tom: welcome back to the open. we are 24 minutes into the european trading day. european stocks just turning into positive territory. after being lower by around .2% at the outset of the session. 25 minutes into the trading date, future stateside, losses .3%. the s&p down by .4%. let's look at individual stories
that grab our attention. first up, swedish match, this is a smokeless cigarette company. it is being built out by elliott investment management. it is a smokeless tobacco company which has agreed to be taken over in a $16 million deal. the activist investor may want to change that. jd sports, a new chairman, rolls-royce up but -- up .5%, more to mind -- more demand from wide-body jets. let's get to the bloomberg business flash with alice. >> the hsbc executive at the center of a row over climate change has resigned from the bank. he said in post he quit because of the bank's behavior toward
his speech in may. hsbc suspended him days after he used a speech to criticize the finance industry for spending too much time worrying about climate change. volkswagen has broken ground on a new battery plant in germany. in marks the first step in an effort to generate more than 20 billion euros in annual revenue by the end of the decade. it is one of six battery plants the w has planned for europe. the ceo says he strong demand for batteries. >> we feel in good shape to get up to six plants, 20 billion investment, 5000 people, 20,000 jobs in europe will be created by this endeavor. we are still open for several partners. the demand for batteries will be huge. >> that's your bloomberg
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pressure on boris. the prime minister faces pressure to speed up his exit from downing street after resigning. plus, jobs day, downplaying concerns of a recession in the u.s. waller of the fed expects a reassessment of where things stand. the payrolls survey is for 268,000. this plays into the considerations of the fomc. the unemployment levels are at 3.6%. the tightness of the labor market being cited as the reason from jay powell.
this is after losses of the start of the session. this is after three straight days of gains stateside. the dax down 0.1%. and to the ftse 100, amid all of the uncertainty for politics, currently down by just three points. not a lot of movement. energy back in the green. we continue to keep across the decision-making in beijing around an additional $220 billion of infrastructure spending. officials could support the commodities complex going forward. the rest of the sectors led lower by real estate troubles. really modest moves here in europe, lack of conviction as we head up to that payroll data. let's get back up to the
politics of the u.k. boris johnson has yet to leave downing street, but the race to seek the next prime minister is underway. we are joined by lizzy burden. get us up to speed on what the main contenders are for this job. lizzy: the rookie favorite at the moment is driven by proximity to boris johnson and their experience on the issues of the day. you have got ben wallace, the defense secretary, penny mordaunt, the former defense secretary, and tubing heart. he has offered us a new start, because he has not held a cabinet role before.
but there is a cost-of-living crisis, so that helps former chancellor rishi sunak. he has tried to present having resigned from boris johnson's cabinet as redeeming his reputation after the scandal of his wife's tax numbers. but there is also nadhim zahawi who has appealed to tax cuts despite the tory call. tom: there is pressure the prime minister to step away as caretaker. they will move forward with the election and the choice of who will take over. what is the vote the prime minister facing and could he hang on until october? lizzy: at the moment, the leadership election where it stands, the conservatives want to get two names done by july and pick one by september, but that is not fast enough in the
party, including the former prime minister john major. he said the interim cabinet will not be able to restrain boris johnson. johnson said he is not going to make any strange policy changes as caretaker. there's also the question of whether the opposition will bring boris johnson down through a vote of no-confidence, but that seems like an extremely uphill battle when you have the tories turn on their own tide and turning on their own leader as we saw yesterday. tom: lizzy burden outside the house of parliament following all of this for us on the leadership contest to take over from boris johnson. for more, i am pleased to say we are joined by john caudwell. thank you for your time this morning. it has your phone been ringing off the hook with these people jockeying to get your support?
who is the favorite at this point? john: the phone has not been being bravely -- gravely. [phone ringing] tom: was that rishi sunak giving you a call? john: [laughter] no. but i think the tory party needs a desperate leader who is strong, and that is comprised of several aspects. the ones that are likely to support ukraine is a very vital and that would continue and accelerate and lead europe on those gains and that is a crucial element. also a crucial element is to run the country like it is a business, because it is a business at the end of the day. we need investment in britain, in gdp growth.
we use that tax revenue to make the lives of people better. if we don't have a business type, we will be in trouble. i like nadhim zahawi. he has been a successful businessman and i think what he did with the rollout was amazing. he could be a strong contender. of course, there is other talent like sajid javid. i really want a business leader that can make britain great. tom: you have outlined for us what you think some of the priorities should be for whoever takes over for boris johnson. when it comes to the economy, where should this new leader focus? john: in the short term,
attracting investment. the long term, it is the same. what i would advise conservatives to do is to create a silicon valley of the environment somewhere in the u.k., have an enterprise zone where we try to stop all of the technologies from around the world on environmental technologies because that is not only the future, but will be written's future in terms of intellectual property. -- britain's future in terms of intellectual property. that should be the vision that any new leader has to grow written's cash -- britain's gdp. tom: would you be lobbying for tax cuts at this point? john: we do need to make britain
attractive. have got all the damage to the country's balance sheet from the pandemic, damage being done by ukraine. but we have to be attractive. it is this difficult balance of running a prudent country balance sheet while making the country attractive to investment. that is the big challenge, lift the tax regime and still be able to do what we need to do as a society and look after the british people's interest. tom: how concerned are you about the damage being done to your conservative party from prominent leadership from boris johnson and now a leadership conference that could be toxic? how concerned are you about your conservative party rebounding? john: let's just say, it is not my conservative party.
it's just so happens that the conservative party aligns most likely with my views. but if another party came along that would do that, that is an environmental silicon valley, i might be supportive of those people. but the damage done is huge. i am afraid that what we inherited from the last election was an incredibly strong position to change britain, to make dramatic changes from the power we had in the tory paredes -- parties, and that has been stripped away over the last two years. that is devastating, not to me as a tory, but not even just the tory party but for great britain. we need to get it together. whether the -- it is the labour party or the tory party.
i think we have to support the tories, but they have got to get together and they have got to get strong, dynamic leadership, clean and moral at the core to do all the right things. tom: the prescription for the conservative party's next leader from u.k. conservative party donor john caudwell. thank you for joining us at this tumultuous time for u.k. politics. coming up, former japanese prime minister shinzo abe is in critical condition after being shot at a political rally. we go to tokyo for the latest. this is bloomberg. ♪
tom: whatcom back to -- welcome back to "bloomberg markets: european open." we are now seeing games a little over 0.1% across the equities. you see the moves in the sovereign bond flows. we are up on german bund. let's get back to the sad news out of japan. former prime minister shinzo abe is in the hospital and unresponsive after he was shot while speaking at a political rally. current prime minister fumio kishida has described his condition as grave. security at the scene
immediately tackled the suspect to the ground and the man is now in custody. risa is in tokyo. what is the latest on the former primer -- prime minister's condition? reporter: it has been a shocking date in japan. former prime minister shinzo abe was shot while giving a speech in the town of nara, close to kyoto. we know that he sustained a gunshot wound to the right side of his neck and had internal bleeding on the left side of his chest. while he was being transported to the hospital, he reportedly fell unconscious. we heard from his brother, his princely japan's defense minister, that he was receiving a blood transfusion. that is the latest we have on his condition and something we are keeping a close eye on. tom: lisa du in tokyo with the
latest on the condition of the former prime minister. let's bring in james brown, professor and the author of a book titled -- what is your view of the events that have happened in tokyo? >> is a shock. some instances of political violence are unusual. there have been few postwar cases and it is nothing comparable to the scale of today's prevents. tom: how do you expect japanese society to react to this event, given the context you have given us around this being aware event and gun crime in this country? what is the societal reaction?
james: it is shock at the moment. and we never anticipated something like this could occur. abe is a divisive figure that has led to criticism and protest. it is very early, but this could be a moment that some japanese would consider as a jfk moment when people would remember where they were when they heard of this incident. tom: a jfk moment for the people of japan. given your extensive knowledge and research experience there, of the work that the japanese prime minister did, the longest-serving prime minister of japan, we focus on the economics. what for you stands out in terms of the political legacy? james: take your pick. you can certainly move on the
economics side of it, but in terms of the foreign and security policy, he made important changes. the one thing i focus on is putting japan back on the map. before abe returned to office in 2012, there was a period when people weren't paying much attention to japan anymore. it was seen as a country that had its best days behind it. it was being overlooked. there was a revolving door of prime ministers every year that seemed to be a different one. by staying in power so long, by making important changes, by representing japan on the world stage, really restored japan to a position of first rate importance internationally. tom: restoring japan to a position of first rate importance internationally. he managed to balance elation ships -- relationships with
beijing. as kishida manages an emotional dame for his cabinet and the people of japan, how does this affect the leadership of this country? james: a lot of the policies that prime minister kishida are pursuing are the same as abe. there are some differences when it comes to economics, with kishida promoting something he describes as new capitalism, but when it comes to security and foreign policy, you could say that the kishida administration is continuing with abe's policies. a big part of that is getting japan to play a bigger role internationally and to increase the capabilities of their self-defense forces. that is something that abe did as prime minister, and that is something that kishida is pursuing.
tom: whatcom back to -- welcome back to "bloomberg markets: european open." investors await the nonfarm payroll numbers. the expectations are softer than the month before. you can see the selloff when it comes to sovereign bonds. german bones -- bunds lower as well. they move eight basis points and the italian 10 year is currently at 3.22. the euro-dollar is flirting with parity now. we have got our chief rates correspondent. it seems like parity is close.
the nonfarm payrolls number could be there. >> this could have happened before payrolls. it looks clear that there is a lot of nervousness, particularly in european assets, about what it is like. you have had fed leaders make it clear overnight they are unchanged on the idea of going 75 basis points in july to get inflation under control. that, along with recession fears that are still out there, means the dollar is the ultimate fear gauge and is very strong at the moment. if you see that chart up on the screen, you round that up into 1.015 dollars per euro, that seems to be a crucial pivot point. when we went through that just
now, a lot of officials are looking at that low, and that is through 1.01. there are probably more stops closer to parity. there are likely to be strong positions there. unless something actually breaks on the newsprint for payroll, it will likely go through before then. but until we get stronger than expected payrolls print or even stronger than expected wage growth turning up in the data, that could readily send the dollar higher against a lot of things. the euro is among the most vulnerable right now. tom: what would be the next level you are looking at for the euro-dollar? garfield: i am going to be looking nervously at the level we bounced off just now.
$1. 007, and if it does get down to parity and goes through, probably it would stop at some point, but it might go considerably lower, down towards 99 cents before it comes back. that is the sort of move that will catch a lot of traders unprepared. one of the issues that has been going on across fx and bonds in the post goc regulatory and post-covid central bank stress, there is not a lot of willingness to step in with the risk. you do not have markets that are going to say, this level will not stain, so we will buy full because it will come back. tom: garfield reynolds, our chief rates correspondent for asia, focused on the euro-dollar
ahead of the nonfarm payrolls. we checked in again on the broader market when it comes to equities. something to hold the position across european stocks after two days of gains. the futures in the u.s. pointing lower. nasdaq futures pointing lower bite 0.4%. you have a bit of move into that sovereign debt and yields are lower for the euro zone sovereign. the two years in the u.s. at 3% and the 10 year at 2.97. we look ahead to the payrolls with the fed saying that 75 basis points is on the table for july. bloomberg surveillance: early edition is up next. this is bloomberg. ♪