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tv   Bloomberg Markets European Open  Bloomberg  December 2, 2021 3:00am-4:00am EST

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problem, slowing demand. >> we are less than 50 seconds away from the market opening. it is a little bit of catch-up between yesterday's big loss happened when european markets were closed. it does seem that we are going to have to play catch up at the moment is to the downside. tom: it is indeed. the ftse 100 opening down 0.2%. basic resources part of the mix. you have seen oil prices easing up to add some numbers to that. still below $70 a barrel. the reversal that we saw on the s&p 500 was marked. the biggest reversal we have seen since april 2020. investors reiterating the case for a faster taper come december. the base case is for two hikes
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come 2022. the market is pricing and two, possibly three. the cac 40 is lower by more than that. the spanish ibex is also lower. let's move over to the cross asset. the futures stateside pointing to gains of 0.6%. edging up four basis points. the turkish lira remains in focus after the decision, the surprise decision by erdogan to replace the finance minister of that country and the turkish lira hitting a new low. we will keep across that currency. the worst performing currency year to date. brenton focus. -- brent in focus. dani: i'm looking at imap at the moment. it is a textbook move to safety
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in this equity market at the moment. red across the board. europe is having to reverse, as well. the only solid chunk of gains is in health care. this is one of those assets, perhaps a little bit of consumer goods, as well. elsewhere, even as you are pointing out, we are not seeing energy outperform. materials are still weaker. investors taking this opportunity to sell across the board. we are seeing tech also in the red. tom: that was interesting from apple's perspective given that they have already cut production by about 10 million units for the iphone. according to the bloomberg scoop, with the demand picture for the iphone 13 weakening, that message to suppliers around that impact, we will see how the readthrough is for suppliers to apple.
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losses of's 2.5%. you can look at asml and terms of what this means broadly across the chip space. dark trace. the record run-up it saw after the ipo in april, the run up until september, but there was a drop of about 50%. we will see how the tracking and that realignment, if that adds additional pressure to this stock. repsol, reports that they are looking to spin off part of the renewable energy businesses. losses of 0.9%. let's get the bloomberg business flash with angel feliciano. >> bloomberg understands apple has sold component suppliers demand has weekend amid the global supply crunch. the firm had already cut its production goal for this year by his many as 10 million unit down
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from a target of 90 million. they have given up trying to get the hard handset. hermes is set to join one of europe's main equity benchmarks. it is to replace universal music in the euro stoxx 50. they have been benefiting from a boom in luxury demand that accelerated during the pandemic. unicredit is planning around 3000 more job cuts after the ceo spoke about profitable businesses after an error of restructuring. many of the cuts will come from the italian lender. the banks current dividend is set to boost and focus on more lucrative products. that is your bloomberg business flash. dani: thank you so much. the omicron variant is
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continuing to spread globally. worries over that and hawkish comments coming from the fed sent the s&p 500 to its worst two day loss in 14 months feeding into european markets, which are sharply lower so far at the open. let's dig into some of those key market drivers. it does seem surprising in some respects that a headline about a new omicron case in the u.s. was able to do this damage considering it should not be that surprising that a case exists in the u.s. >> absolutely, it was no surprise it would reach the u.s. , but i think the markets were waiting for a trigger and the headline provided that trigger for the markets. at the end of the day, you've got to look at valuations. whether you take the s&p 500 or the nasdaq. depending on the index you take.
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those are not sustainable valuations in the long term. perhaps twice next year raising rates, then there has got to be -- that will mean that stocks will have to [indiscernible] they have to head down lower and that is what we saw yesterday, a taste of things to come, i would say. tom: we are just at the early stages of a broader selloff, a more prolonged selloff. is that where you stand at this point? >> absolutely. i think stocks definitely have a downside from here depending on how the fed raises rates. if the two year yield and 10 year yield starts rising, there is no way stocks can sustain these lofty levels, so we are talking about a significant correction and i don't mean the correction in the sense of it
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decline, but it is going -- that would signify a bear market, but there is some correction. >> i have another head scratcher. how do you explain the bid for the euro in a post omicron world when otherwise we have seen bids toward haven currencies? >> absolutely, the number of people messaging me about the euro is amazing. what is going on is slightly complicated. i've written about it, the way i'm looking, if you are talking about a massive global risk off, i.e. this omicron proves to be a big driver for the economy, and the fed is not going to go faster on taper and start raising rates, than the euro will find a bed. if the omicron variant is going to lurk in the background, growth is going to continue, the
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fed is going to tighten, then the dollar and's up rather than the euro. that's how i'm looking at it. tom: that is a currency that is well bid. one currency that is not is the turkish lira. we had the finance minister stepping down, being pushed aside, however you want to characterize it. hitting another record low for the turkish lira. where do we stand on the outlook for this currency? >> in the case of the lira, policy took on the markets and they are saying, we are not going to go down the road we did in 2018. at that point, you will remember they raised rates from eight percent to 24% in the span of a couple of months. this time around they are saying they're going to intervene and take on the speculators. is that a great strategy? if you look at the total reserves, it is [indiscernible]
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it is pretty much negative. what is the size of the war chest they have? it does not look pretty big. if you've got a fever, you don't treat the symptoms, you treat the underlying bug and the future --'s will take care of itself. the bug is deeply negative real rates. even in a normal environment, that is not sustainable. in aggressive tightening, that is not a good recipe at all. it looks like they are taking on the market. how successful they will be remains to be seen. >> we will see how long the new one lasts as well. betting on growth. ven ram, thank you very much indeed. coming up, omicron spreads to
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america, but gsk adds to -- that existing medicines will be able to treat the new variant. is the narrative starting to shift? we will discuss that next. this is bloomberg. ♪
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dani: welcome back to the open.
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13 minutes into your european equity trading day shaping up to be a negative day, reflecting a lot of the losses we saw in the u.s., which happened when the european markets were closed, so we are seeing losses of more than 1% for all of these indices. the ftse 100 faring a little better, but we are looking at an overall headline index drop of 1.3%. the biggest drop is in the technology sector. in early testing, the covid-19 antibody treatment looks to be effective against the new omicron variant. tom: the comments coming amid uncertainty about whether omicron will be able to evade existing vaccines as many mutations, particularly on the spike protein that is the target of most treatments, but have sparked concern and spoke to financial markets. joining us to discuss is tim low. are the signs now pointing to a picture where omicron is actually less severe than we had feared last friday?
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>> yes? a caveat of we are still hopeful. last week, and a lot of people's initial reaction was, oh boy, are we heading back to square one with this pandemic? earlier this week, moderna caused some anxiety talking about that its current shot may have a significant loss of efficacy. a couple days later, today, we are seeing more positive signs around the world. it is still too early to say definitively. we are still waiting and it will take another week or two for a lot of the big data points to be clear on just how good our current vaccines are against omicron, but we are seeing some positive signs. this news this morning pertains
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to a monoclonal antibody therapy and it is one of the first real out of the lab affirmations that one of our tools is not losing efficacy at all and so that is a very good sign. one of the reasons for that is this therapy targets a part of the virus that scientists did not think would evolve. in fact, it was present on the sars virus 20 years ago, so smart thinking. tom: ok, tim loh piecing together what we do know, what we don't know about the efficacy of these treatments when it comes to warding off omicron. thank indeed. joining us now is our guest to walk us through the market reaction to what we are hearing not just about this variant, but of course the shift in stance
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from the federal reserve and jay powell, who reiterated again what he thinks needs to be a faster taper possibly come december. thank you for joining us, florence. let's start with the variant. what is your level of concern given what we do know and what we don't know at this point and are you adjusting your portfolio around what you are hearing? >> i was listening to tim's answer when you asked him the question, where do we stand in terms of knowledge of the omicron variant and he was very hesitant and actually i agree with him -- it is very difficult at the current stage to have a clear view because we just don't have enough information. what is gradually coming out is that maybe treatment could be working, maybe vaccines could be effective, especially on difficult cases. obviously, that will be some
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relief. what we have been seeing for now is really a price discovery in markets when they are faced with very high uncertainty and market reaction has been very strong, very negative. because this uncertainty is very high and if omicron is contagious and lethal, then the whole growth story for next year could be endangered. what i find interesting is that when you compare the market reaction for this variant to what happened when we had the other waves or even the delta variant coming out is that in the past, reopening suffered a lot, but stay at home and tech fared well. what we saw yesterday that the nasdaq down nearly 2% is that this is really a broad-based selloff and why it looks a little bit like panic. if we do start to have better
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news, we tend to think this looks like an entry point. dani: do know that point, not only is tech experiencing abroad selloff, but it has its own idiosyncratic issue of apple warning its suppliers on demand, as well. is there any safety to be found in tech? or is that now finished? >> well, it is a difficult question because we saw that tech from a macro perspective did not benefit from the lower rates on the long end, which we saw coming down in recent days because the curve flattened significantly. in addition, we have these views coming out about demand being lower at the current state, which in fact could worsen during the coming weeks because all of the news flows linked to covid, omicron, and even the delta variant, which is the real issue today, could weigh on
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consumer confidence and demand. in that context, it is this negative news flow is maintained, i think all stocks are going to suffer, but if we get better news, which i think could be the case, that is our central scenario, then i think tech could recover. tom: ok, and we are currently seeing yields comfortably below the 1.50 level, but yields have edged up by about four basis points. we heard from the bank of cleveland president and she told bloomberg that the central bank could move faster next year if necessary. take a listen. >> as strong as it is in many dimensions, i do think that we have to be in a position that if we need to raise rates a couple of times next year, we are able to do that.
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again, quickening the tapering gives us that optionality. tom: you have been very nuanced on your moves on where omicron leads us and the changes around central bank policy. as we look ahead to 2022, do we have to consider the risks around stagflation if you get a slowdown in growth as a result of this virus, but inflation remains persistent? is that a concern we should be considering now and his two hikes part of your core forecast for next year? >> it is clearly one of the risk scenarios. what is interesting in this hawkish shift is that i does come at a time where growth risks have increased. it is different to what we saw previously, where every time there was a risk in growth, we were able to count on dovish fed comments. we would listen to them saying
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increasing the pace of taper would give them more flexibility. the issue is that all of these comments come at a bad time because they coincide with the growth risks attached to omicron, but in fact i think it makes sense for fed officials to have some additional flexibility in case inflation increases. if you look at what is happening today on markets, the task of the fed is really been complicated because on the one side, the virus is going to be negative for inflation, it is going to be supported because commodity prices are lower, but on the other hand it could potentially increase the supply bottleneck issues we have seen and push up prices. it could also weigh on labor participation and push up wages in the u.s., which is a clear concern for the fed. the task of fed officials is complicated, but overall, what we tend to think is that if
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inflation increases too much, that is a bigger risk than omicron. we do call for two rate hikes next year. dani: sticking with that consensus that seems to be developing in the market. great to have you on the program, florence. thanks so much. coming up, first it was the global supply crunch. now apple faces a different problem, slowing demand for the iphone 13. we have that for you next. this is bloomberg. ♪
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tom: welcome back to the open. we are 24 minutes into the european trading day seeing losses of 1% across the benchmark, the top selloff in terms of the technology. dani: let's get to a bloomberg scoop. part of the reason technology is doing so poorly, apple is suffering from the global supply crunch, but now it is confronting a different problem and that is slowing demand. the company is said to have told component suppliers that the demand for the iphone 13 lineup has weekend, signaling that some consumers have given up trying to get the hard-to-find device. joining us on the phone is alex webb. how severe is this warning that apple has given to its suppliers? >> it is coming out of sources
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reported by our colleagues and it seems to be a bit of a blow, not catastrophic. they have already told suppliers that they expected -- they expected to make 10% fewer iphones because of the supply chain crunch, but that has initially been expected to carry on demand into next year. now, they think that is probably not going to happen. it also gets to the point that the iphone 13 wasn't a significant update to its predecessor. the update next year is expected to be far more substantial. why buy a new iphone when perhaps only six months later i will be able to get an even better one? that might not be such bad news for apple because ultimately the demand will resurface at a later date. tom: ok, many thanks to alex webb on that call by apple to
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its suppliers. they are seeing weaker demand for the iphone 13, but maybe a pickup with a new model out next year. coming up, crude talks. a lot to discuss. we will dig into the implications. this is bloomberg. ♪
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dani: welcome back to the open, 30 minutes into the european cash equity trading day. apple's holiday woes. the ifo maker faces a new problem, slowing demand. europe is facing an unprecedented energy crunch. energy ministers meet to discuss how to believe he the pain. it is not just junior banking pay and focus. david solomon and his deputies at goldman sachs are looking at ways to juice up their pay
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packets. it is shaping up to be a negative day. it is not just powell and omicron but apples demand markets have to contend with. tom: they are saying demand is falling off for the iphone 13. if it is more than that, that will be concerning. in terms of what the markets are looking at, jay powell reiterating that he sees the need for a faster taper. two hikes here are looking appropriate. where there seems to be a view that is crystallizing with the caveat that maybe this variant is less dangerous than some had thought. there is still a lot we do not know. jp morgan saying this is an opportunity to buy the dip. you are seeing losses of more than 1% across the benchmark.
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the ftse 100 down 0.8%. oil still below $70 a barrel. in terms of what is red, a lot. at the bottom is technology, apple is part of that. losses of two point 5% across the technology space. travel and leisure still weighing the restrictions when it comes to travel and governments trying to come to grips with the variant. dani: another risk is europe, which faces an unprecedented energy crunch. energy ministers are meeting today to discuss what to do to alleviate the pain. italy is the latest eu member state warning about potential blackouts. we go to our european correspondent, maria tadeo, in brussels. how much of a concern are the
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rocketing bills? maria: it is another week we are debating energy prices. this is the purpose of the meeting. it is happening today in brussels, and it has big consequences. the impact this will have on consumers and households as we go into the winter, everyone wants to heat their home, but you do not want that to cost you an arm. we also know it feeds into the biggest economic and political debate in europe, which is inflation. those stories are feeding into one, and we are seeing going into the meeting there is a document making the rounds in brussels. the spanish, the italians, the greeks and french suggesting there needs to be a common european response. national measures will not begin off, and this needs to be dealt at a european level.
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we know in the past some do not share this opinion. every nation has to put forward its own plan. tom: the divisions among member states on how far to go, is there any sign that prices will start to ease if or if not we get intervention? maria: big divisions within governments in europe. look at the chart we have. this tells you the story of 2021 when it comes to the energy market. year to date you see prices with triple digit increases, and this goes to the consumer. in terms of where we are at, i want to focus on q4, this is were concerns kick in. in september we were back from the summer holidays with concerns of temperatures dropping. we see prices peak, and then go
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down. prices are again jumping this week. record energy pricing kicking in, especially for electricity. supply is very tight, and the eu has cold feet about russia. they do not want to tap into the nord stream 2. that has been delayed i the german regulator. tom: maria tadeo breaking down the energy space and potential responses as they look at these high and sustained prices. as the debate is happening in brussels, another argument over energy is taking place virtually. opec and its allies are heading into a second day of talks on whether to pause production increases as the resurgent pandemic throws the outlook for
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next year into disarray. it is an important week for opec-plus. arguably, what is happening with the pandemic and on cron, what is our sense of how the debate is unfolding? >> as of yesterday, there was the idea of cutting productions as an idea. it seems like the most likely outlook is a pause in production. there are so many variables with the pandemic and omicron that you do not know. if you think about last year and the devastating effect the virus had on demand, the ministers will be mindful of that. we had negative oil prices. there are so many things that could happen. it could be mild. if that goes, if there is no
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impact on demand, they carry on. they have to watch for every data point and evaluate everything. dani: it does not matter if you are long or short, you have probably gotten burned at some point in the past year. going forward, is opec going to be a driver of prices, or will that center around demand and potential demand destruction if we get higher prices or a variant that throws a wrench into the cog? >> opec bus will stay relevant, it constitutes a huge part of global oil supply, and saudi arabia has shown it can lead the other producers in making policy decisions. last year the rest said they would not cut reduction, so they said they will pump at will and crashed the market. then they thought we have to comply and work together. they did, and they supported the market.
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saudi arabia has the leadership potential if it wants to use it. i'm sure they will if it comes to it. there is no reason to suppose that will change. dani: thank you so much. coming up, turkey has another new finance minister. will the new appointment push the lira lower? we continue to see it hit new record low levels. this is bloomberg. ♪
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>> omicron is new, but i am hardened what i am hearing the past few days. i am a positive person. >> airlines are an easy target for changing signals to the public. >> it is early to say. we had a strong thanksgiving in the u.s. >> i'm seeing reports now that vaccines are working, and it seems to be less virulent. >> i feel the vaccines have been fundamental for people to fly. we have seen a significant recovery in the u.s. market. >> not to the same level of
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downside previously but there are restrictions introduced. >> what i'm telling my team in the government in the u.k. is as quickly as you introduced those measures, if things turn out not as significant, take them back immediately. dani: those are executives from the airline industry speaking to bloomberg tv about the impact of the new omicron coronavirus variant. i love the comment that you have to be positive to be in this industry. there is a lot to not be positive about. tom: they have had to navigate a lot in the last 18 months. we're seeing people booking last-minute. i am risk averse when it comes to travel. there is pent-up demand. dani: last year i booked a trip
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to asia which did not play out, but it is difficult for the airline industry. if people wait until the last minute, it is difficult to gauge demand. tom: let's get the bloomberg first word news. angel: jay powell has said for the second time in two days that officials should have policy support. he said inflation has become more persistent and policy will adapt. cleveland fed president told us she supports that view. >> going into the september meeting, i thought there was a strong case for tapering at a faster pace than we announced. since then, the data is supportive of that. i am open to a faster pace of
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tapering. angel: south africa's covid cases have doubled in a day as the omicron variant takes hold. three quarters of sample sequenced in november were of the new mutation, replacing delta as the dominant variant. there is no indication that omicron is deadlier than other covid strains. 300 cases reported around the world all have been mild or have shown no symptoms at all. conservatives in the u.s. supreme court suggested they may rollback abortion rights. in an argument that lasted almost two hours, all six republican appointed justices indicated they would let states ban abortions. under a 1992 ruling dates can impose significant obstacles, which court suggested to around
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24 weeks. all tennis tournaments are suspended in china, including hong kong, effective immediately. the star chinese player is free and not subjected to intimidation. 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. dani: thank you. there is yet another change of turkey's finance ministry. resident erdogan announced the new finance minister -- president erdogan announced a new finance minister. the lira is at a new record low.
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what is the reason behind this latest move? >> turkey's former finance minister has been replaced. this, after weeks of speculation that he would be stepping down. this comes as president erdogan pushes for aggressive interest rate cuts despite high inflation , and undermining the lira. the new finance minister used to be the deputy finance minister. he has close ties with president erdogan and his son-in-law, who used to be the former finance and treasury minister. tom: the lira trading near record lows, the central bank forced to continue, under pressure, to cut rates despite inflation close to 20%.
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how does this play out for the fx markets going forward? what are traders saying? >> that is the million-dollar question -- where does the lira go from here? over the past month it has lost 30% of its value, hitting record low after record low against the dollar. yesterday, the central bank intervened officially in the fx markets by flooding the market with dollars in order to try to halt the lira's slide. this had muted impact. they spent around $1 billion u.s. this shows they are extremely concerned about the lira's slide. the central bank can be in less than an awkward situation when it meets next week. earlier, they assessed a
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stopping rate cuts as early as this month, however a few days ago president erdogan said rate cuts will continue until the elections, scheduled for 2023. tom: possibly further pressure on the turkish lira. thank you. coming up, it is executive renumeration in focus. we take a closer look. this is bloomberg. ♪
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tom: welcome back to the open. losses across the european markets. futures in the u.s. pointed to gains of 0.6%. that's look at the stories we are following today. 10:00 a.m. we will get the latest euro area unemployment rate. mid-day, brazil third-quarter gdp data will be released amid rising concern about the near-term outlook for that country. dani: later this afternoon we expect numbers on the u.s. initial jobless claims, and finally opec and its allies at a second day of meetings as the omicron variant sparks price
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turmoil. the recent focus on wall street is on junior pay and helping to retain young talent. at goldman sachs many of the bank's senior leaders have come to think they are not getting paid enough either. ceo david solomon and his deputies are looking for ways to increase their own pay packets. we are joined by tom metcalf. sympathy to the senior bankers, but what incentives are they whipping up for top management? tom: they are taking a special purpose acquisition company, and leadership is pushing for them to get a cut of the profit that the spac might make. they are really looking to juice their salaries and a number of ways. tom: how is it likely to sit with junior bankers?
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is this deserved? tom m.: that dynamic will be fascinating to follow. be the junior bankers will see the ceos getting paid $30 million but it may be it helps the junior bankers, they can look at the top ranks and see that they can get paid well if they stick it out. dani: shareholders might react to this, would they be ok with the idea that executives are getting higher pay? tom m.: goldman's share price is up. they have record revenues, record profits. what is interesting is the various ways they are pushing for this, and they are being
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aggressive. tom: what is your sense of how concerned they are about political blowback? tom m.: not much. they are probably looking more in the hedge fund world and thinking their conversation is meager compared to the top-tier. dani: if they get this extra added pay -- tom m.: we are talking in the millions territory where some hedge fund managers pull in hundreds of millions, low billions in a year. elon musk's incentive packages tied to performance, that is in the billions. tom: tom metcalf on the changes afoot for senior executives at goldman sachs as they look to
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get rewarded better than they already have been. the big corporate story today beyond goldman sachs is what we are hearing from apple, and the message they put out to suppliers, most in asia, that they are seeing weaker demand for the crucial iphone 13. dani: i had a fascinating conversation earlier, for apple this is a bad thing, but macro wise maybe this is positive. we are seeing supply-demand imbalance start to balance out. this at the moment is just an apple story. tom: matt is talking about his desire to get a hold of new apple products, and now we hear that those weights have been shortened to two weeks. alex webb saying this may be a
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case of customers waiting until next year when the new model comes out. dani: you have to make sure -- you can see we are looking at the screen, technology leading to the downside, dropping more than 2%. otherwise, they will not be able to find any sector outperforming. everything in the red today. it is the fed, the virus. tom: to reiterate, this is a buy the dip opportunity. their analysis is this variant will be less dangerous than some assumed. two hikes by 2022 which is essentially priced into the markets. that is it for the european market open.
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"surveillance: early edi tion" is up next. this is bloomberg. ♪
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>> the u.s. needs to get back on a sustainable fiscal path. >> purchases in the first quarter or early in the second, right now i would support that. >> we know vaccines are likely to have some protection. announcer: this is "bloomberg surveillance: early edition." dani: good morning and welcome to "bloomberg surveillance: early edition." i'm dani burger in london. the omicron variant spreads. the u.s. has its first case, and anth


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