♪ manus: good morning from our middle east headquarters in dubai. tom mackenzie alongside me in london hq. let's set your agenda. china's a covering weekends. retail sales crumble as consumers pull back from the face of new covid outbreaks. treasuries hold yesterday's game after lower-than-expected u.s. inflation gives the fed wiggle room.

paring back bond purchases. apple debuts the new iphone. a lack of major upgrades push the stock lower. plus. >> this year, we will have recovered to pre-covid-19 levels before the end of the year. we had anticipated it would be 2022 at best. manus: europe's recovery is going better than expected. but risks remain. more on our exclusive conversation with the ecb president this hour. madame lagarde says it's going faster. 5.3%. the bond market took it well. the crack went mad for team transitory. good morning. tom: good morning. where does this year lead?

you are sitting in the middle east. will will you put your assets? look to the u.s.. junk bonds in the u.s. yielding less than inflation now, sub 5%. inflation at 5.3%. that's above what you're getting on u.s.. that issuance, the demand we have been talking about remains very strong. that's the dynamic in the search for yields. manus: that takes us to the point, whether you should continue to load up, take equity risk. can you afford to stay out of these markets? bank of america basically says, there is no alternative. their institutions are much more knowledgeable than i. they still believe that there is

nowhere else to go out -- grow. global growth slumped in september. equity allocations should fall. it's a rare moment of disconnect. good morning. tom: the macro taking a downturn with that data out of china. particularly concerning for me, retail sales which missed the forecast quite substantially. that's feeding into markets across the asian space. it is lowered today by about 5/10 of 1%. china data is a factor there. also a crackdown on the casino space in macau. they are falling more than 20%. you can see that reflected across the hsi. the futures in the u.s. gained 2/10 of 1% after being in the red yesterday. the gas story is taking a primacy now. we will get more details later

on in the show. gas prices year to date. they are up more than 90%. that's the daily price. the reaction from politicians across europe is in focus. let's get on -- get more on what has been a turbulent session. juliette saly. juliette: retail sales are a big disappointment here. 2.5% versus estimates of 7% for the month of august. this shows you the continuing unease in the economic recovery we are seeing in china, leading thoughts as to whether we will see more stimulus from the pboc. the yield also dropping in the cash market. we could see some more stimulus here. mark cranfield putting it, let the speculation begin. we are also focusing on what has

been happening with the crackdown on the casino operators in macau. $14 billion wiped from the gaming indexes. you see that reflected here in our gtv chart, playing into a number of these casino operators that have been downgraded by j.p. morgan. macau falling to a record, down at 24%. calls coming through as to what this means. i mentioned j.p. morgan cutting a number of these players. the proposed increase in government oversight shouldn't have any material impact on daily can see your -- casino operations. this could increase the casino's operating expenses after their license renewal. manus: thank you very much. let's get to london. she's back. dani burger joins us to talk through the latest calls on team transitory. i bet you were looking at yield curves.

tom and i are dreaming about a holiday. good evening. dani: i know. i feel like that's almost rude of me to be talking about the yield curve on twitter while i was on holiday. we did see the yield curve move to the flattest in over a year after we had the second month in a row of slow price rises in the u.s.. as you say, this could bring out team transitory. this confirms the fed views that they can wait to start the taper debate, pushing it further to december. we could see that rally in bonds. on the other hand, if that yield curve is confirming a view that it's an economy under pressure, a prolonged pandemic. you have things like airline prices and hotels not performing as well. in terms of the global picture, u.k. inflation figures in less than an hour. we are expecting those to reverse in july and move significantly higher.

a lot of that is due to base effects. last august, support for the hospitality sector. that should result in higher prices. manus: -- tom: dani burger is back. thank you very much, breaking down the inflation dynamics and the read across to the space. apple putting camera center stage at the latest product launch. they introduced the iphone 13 as well as an update of the flagship pro. here is mac blood some. what stood out for you for this product launch? matt: it was quite vanilla, to be honest. incremental updates. no game changing new device. there's a couple things missing. some people anticipated an update to the headphones. some people expecting the phone to have satellite capability. neither of those things were there. a familiar narrative about familiar -- better camera, more

memory. that will keep enough to keep the volumes going. lots of incentives from the carriers. in the u.s., up to $1000 rebuttal on the high-end phones. there will be a big commercial push from the carriers to support that 5g network investment. nothing here to add to the story in the short term. manus: i know we will come back to you later ron and take a deeper dive into this price war in the usa. i can only dream of that here. in terms of a little bit of a better deal. i leave that with you. we will talk about the product in a moment. let's get your first word news with juliette saly. she's back. juliette: north korea has testfired to ballistic missiles in the second major weapons test in less than a week. japan says it detected two projectiles that waited outside

of its exclusive economic zone or get north korea said it fired off new long-range cruise missiles over the weekend. gas and power prices reach records in countries including germany, france, spain, and the u.k. it is pulling pressure on governments. italy is said to be planning to spend more public funds to reduce consumer electricity bills. in the u.k., energy suppliers with more than half a million customers have gone out of business as wholesale costs crush markets. voters in california have rejected a recall of governor gavin newsom. 68% of voters in a special election responded no to the ballot question asking if the democrat should be removed. about 17% of votes counted. the recall attempt was only the second for a governor in

california's history. president biden has denied reports that china's leader rejected his suggestion of a face-to-face meeting during a phone call last week or get -- last week. sources told bloomberg that biden suggested they meet in the next few months. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. tom? tom: we are keeping you busy. coming up, we discussed the slew of china data and the impact of the chinese economy. what investors make out of all of this. this is bloomberg. ♪

♪ tom: welcome back to bloomberg

daybreak: europe. the extremely fraught activity data out of china is fueling concerns that the nation's troubles may impede the global recovery. retail sales came in three standard deviations below the bloomberg survey. manus: i think you will crack on with this conversation with yves. i leave it to you. tom: thank you very much for joining us this morning. yves bonzon. you have interesting views on china. i want to talk about how you are changing your start. if china is becoming a headwind for the global recovery? yves: absolutely. in today's world, is not just

the u.s. economy. as well on the chinese side. china has tightened policy from the end of 2020 onwards. we initially thought the drawdown and underperformance of chinese assets in the first half was a direct consequence of that piping. and then came the regulatory crackdown, which is a complete reset for our investors. tom: you talked about reviewing your strategic positions in chinese equities. what changes are you making? is there an argument that maybe you are a little too late on this? yves: no. strategically, i think it is still time to review the position. china's government has given clear directions in terms of the way to manage the economy and society in china.

accordingly, this parallels with the chairman policy mix from the 1916's onward. that policy says -- favors creditors and is detrimental to shareholders. going forward in china, you want to position yourself higher up in terms of the structure. yielding instruments. manus: do you still see it -- you christened it in 2017 as a core asset class. there's been a great deal of debate as to whether it should stand on its own. when it comes to bonds and getting better position in the capital structure, where better to be the carry trade? do you think the world is still structurally deep into chinese government bonds? yves: no. chinese government bonds are in

their own asset classes. outside of china. i think you will see an increase in normalization. in the exact same way german boones can benchmark where great store of value is, it rebounds among fiat currencies. many trust fiat christie's to restore value. we can debate that. one of the valuable double -- data opportunities in the space is bonds. tom: we are blessed by time but in this case, we are. ewa grant will play interest until september 20. this is crossing the bloomberg terminal. china is telling banks that ever grand will not pay interest that was due on september 20. this is the company with $300 billion in liabilities. we've seen protests taking place

in cities across china as a result of what's happening with this country. to what extent does ever graham pose a systemic -- systemic risk to the chinese financial system? yves: chinese leadership is dealing with it to prevent financial instability. the pricing of publicly traded assets is already reflecting an imminent restructuring. i don't think this will come as a huge surprise. this is a stark reminder for all of us that the system is tilled of lading. there is simply too much debt in the system. too many nominal claims. therefore, you need to own u.s. treasury portfolios due to the scarcity of safe haven assets as well as the unique marriage they

have during times -- times of dislocation. tom: can you put in context for us -- this is an interest path as opposed to a capital haircut. is not a full restructuring. it's an interest rate path. can you put in context, $300 billion of liabilities from ever grand relative to lehmans. that was 12 years ago. yves: look, that's very different. it depends on who owns that debt. in every debt crisis, every restructuring, who is it that owns it? i don't know the details of how that pile of debt is spread out across the market. obviously, these bonds have been marked market. i don't think there's anything new.

it's a mild measure to pass in interest-rate payment. probably, they are preparing for nominal restructuring of those assets. tom: is there something that you are looking for on the regulatory front that would give you some sense of clarity? what kind of timeframe might you be looking at? yves: i don't need any further clarity. it's extremely clear. you've seen it this morning. they don't want a disorderly expansion of business. we upgraded chinese equities back in 2017, sibley because at

the time, we expected the rise of digital platforms in china to actually outperform what we have witnessed in the u.s. with the rise of stocks. there was every reason for an even bigger potential of shareholder value creation in china. one of the reasons why they didn't intervene is precisely because they also want this. the way forward is absolutely clear. as an investor, it's an opportunity to redirect towards the best opportunities. again, going forward, it is similar to what you observed in germany in the 60's, 70's, 80's. manus: stay with us. yves bonzon.

coming up, the cpi is out. cooler than expected. transitory doing victory lap's. are you? this is bloomberg. ♪

♪ >> the narrative is still very much that inflation is going to be transitory. >> this is another report that does give a lot of credence to that transitory debate. >> i don't think this changes much of everything. >> temporary is the word of the day. >> we still see quite a bit of pressure coming through the pipeline. >> supply chains remain disrupted. >> looks what -- look at what is happening with supply chains, labor, wages. i don't think that this changes much for the fed. >> the cpi report gives them breathing room. >> they can be patient.

>> they are sitting in a good position regardless of which way they want to go. whether they start tapering september, november, december, i don't think it makes a big change in our outlook. manus: some of the key voices there on whether the u.s. cpi coming in less than 4.5 -- forecast bought them -- bought the fed more time. i listen to those voices and this is a market desperate for delay. therefore, justifying team transitory. is there a disconnect between the market desperation for a delayed taper and a print in inflation that suggests it might be at the peak? how do you read that narrative? yves: i think the market will take any reassurance on the transitory nation of inflation

potential. the earliest would be 2022. we will have further evidence as to whether inflation is transitory or not. i'm willing to change my mind if evidence is available. the market is reassured to a great extent by such numbers. the market is concerned about tapering. can the market really absorb the tapering? the rationale is not cpr. the monetary policy today transmits to asset prices. can asset prices withstand tapering in an orderly manner? the last thing we need is another financial market dislocation. tom: asset prices that have

built a dependency on monetary policy support. does this draw you in to u.s. equities? is it enough to get you add to your position in your -- you to add to your position in the u.s.? yves: no. i don't think it encourages us to increase u.s. equities. it encourages us to continue to own whatever we own. and stay the course. i don't think it increases equity allocations. manus: tom started the show with sheer plagiarism. he started the show with high-yields. it's worth asking you, high-yield is so compressed at the moment. do you still take high credit risk? i don't know whether you take junk in the trunk for portfolios. how much credit risk do you take in america, given the current

state of play? yves: look, this is probably the one among the three where i think the situation is actually the most stretched. interestingly, i had a conversation this week with systematic credit asset manager who has done interesting work on reverse engineering the falls probability. the findings are that the probabilities on u.s. issuers are today actually above the pre-pandemic levels. whereas credit spreads are at or below pre-covid, pre-pandemic levels. there's an interesting disconnect here. tom: i'm afraid we have to let

you go. we loved your insights this morning. thank you for joining us. coming up, the chinese economy. this is bloomberg. ♪ it's moving day. and while her friends are doing the heavy lifting, jess is busy moving her xfinity internet and tv services. it only takes about a minute. wait, a minute? but what have you been doing for the last two hours? ...delegating? oh, good one. move your xfinity services without breaking a sweat. xfinity makes moving easy. go online to transfer your services in about a minute. get started today. and there you have it— -woah. wireless on the most reliable network nationwide. wow! -big deal! ...we get unlimited for just $30 bucks. sweet, but mine has 5g included. relax people, my wireless is crushing it. that's because you all have xfinity mobile

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♪ tom: good morning from bloomberg's european headquarters. it is 6:30 in the city of london. i'm tom mackenzie with manus cranny live. this is bloomberg daybreak: europe. here's what you need to know. china's recovery weakens. retail sales crumble as consumers pull back in the face of new covid outbreaks. taper flexibility. treasuries hold yesterday's gains after lower-than-expected u.s. inflation gives the fed

wiggle room, apple debuts its new iphone. the lack of major upgrades pushes the stock lower. >> this year is going faster than we thought. to the point where we will have recovered to pre-covid-19 levels before the end of the year. we had anticipated it would be early 22 at best. tom: europe's recovery is going better than expected. risks still remain. more of our exclusive conversation with the ecb president is coming up. that's want to put in your diaries. it was interesting to hear saying that he's adding european equities for the first time in a long time. manus: yes. cautious on commodities. skeptical on the dollar. what, air --, my ear was

inflation. more portly, he says it's not cpi prince that will define when the fed tapers. it's actually asset prices. asia taking a real pummeling on the asian stocks. s&p 500 trailed on the back of that disappointing retail sales data. let's have a look at the board on the risk we have for you. asian stocks lower on the back of the long arm of regulatory reach into macau. weaker china data on the retail sales. we can debate that in a moment. you have your 10 year bonds. is it a taper delayed? natural gas, 7.5 year high. this is the unspoken real risk

in the real economy for normal people who heat their houses in the wintertime. tom? tom: the government reaction in europe becoming more pronounced around the issue of those sky high prices. let's switch back to the chinese economy. the government imposed stringent measures to contain a widespread covid-19 outbreak. in sumer spending took the biggest hit as retail sales slowed sharply to 2.5% on the year. much lower than the 7% consensus estimate. fist asset investment was below estimates. joining us now is robin xing. good afternoon and thank you for joining us. you are sitting in beijing. it's great to get your insights on the data that comes out of china. you are on the ground and you have a feel for this. you speak to regulators and businesses. what stood out to you from this

data set. robin: thank you for having me here. the bottom line here is china's growth slowed. the approach came with a price. it was a blessing last year for china's recovery. the downside of this approach became more and more obvious. it capped consumer activity recovery. china's retail sales are tracking around 2% growth. due to the irregular suspension with the lockdown measures in the resurgence of delta variant. this combined with the ongoing tightening and things like financial conditions for the housing sector has led to a difficult road to recovery. third-quarter gdp is tracking at

4.7% year-over-year, below policymaker expectations. manus: good morning to you. this scale of the miss, this is a three standard aviation miss on the retail sales. in your mind, what is the near term policy response to that scale of miss? is it on the rrr to the banks to drive the credit impulse? is it to reconsider the zero-tolerance policy? which road will be travel? robin: yes. more policy easing is definitely warranted given the policy risks. local government bond issues students -- issuance grows. that's an over arcing indicator for financial conditions.

that will likely bottom in september. rebound in the fourth quarter on the back of the fiscal years and. about $550 billion of government bonds sitting there to be issued from september to december. that's a level much higher than the last four or five months. also much higher than the same time last year. that kind of fiscal year and could arrest the downside risks to growth. we think gdp growth will likely improve modestly in the fourth quarter and as mobility improves. consumer activity will likely remain below the pre-covid growth, given china will likely speak to their covid approach. tom: is any of this leading to a recalculation or rethinking of the regulatory crackdown that we've seen in china? robin: yeah. on the regulatory front, it's a

long-term, profound policy shift. we call it china's regulatory reset. it represents a shift in the government's priorities from growth first to balancing growth and sustainability. that includes things like social equality, supply chain, data security, as well as financial stability. you mentioned the targeting, the housing, the gaming sector. probably in favor of labor. of course, that rebound comes at a price. if they want higher wages in the economy, which can help households over time, that could affect the owners of capital. we may see a decline still of profit over time in gdp. that means many sectors

profitability's, especially when there's uneven communication around court needed action across different agencies. that leaves the private sector in need of clarity. eventually, given the downside risk to the economy, we think beijing will have to strike a balance between regulations and maintaining the economy's progress because of the private sector placing such a crucial role in innovations, productivity growth. we think policymakers will have to understand these challenges. over the last five weeks, the remarks from policymakers signal a more institutionalized approach. manus: you talk about that uneven communication which is a

very generous way of describing what's going on. it is certainly not over. we've talked a lot about what's happening domestically, internally, the social agenda, the gig economy, regulatory change. from a global perspective, we are worried about a slowdown. what do you think the pboc and authorities are concerned about? does that play into the economic thinking and adjustment that we are going to look at in 2022? robin: yes. from the global perspective, if china's growth slows more than expected, things like car sales, it's going to have an over effect to the rest of the world. having said that, if you look at the other side, chinese investment in manufacturing is gradually picking up, given the policy healing on the way. we talked about 550 billion

government bond issuance. meanwhile, export resiliently into the recovery. look at japan's exports into china. we may see chinese demand improving, probably when the fiscal year starts to take effect. manus: thank you so much for being with us. have you been to limit close? that's part of the ownership of the entire street. they've delivered 1.9 4 billion euros. they were looking at 11.9 for the year. this is about europe reopening, u.k. opened, asia grappling with

rolling lockdowns on the asia-pacific side. the online side looks good. delta of 36%. will you ever go back to a shop? tom: that transition, right? some of this is disposable fashion. i'm trying to stay clear of that. when the paycheck starts to run down, i will be tempted. for now, i will leave that to you. manus: fast fashion. there's a woman in this organization who doesn't do fast fashion. it's juliette saly. good morning. juliette: good morning. north korea has testfired what appears to be to ballistic missiles in pyongyang's second major weapon test. japan detected two projectiles that landed outside of its exclusive economic zone. north korea fired off new come along lane -- long-range cruise missiles. voters in california have rejected a recall of governor gavin newsom. 68% of voters in a special election responded no to the

ballot question asking if the democrats should be removed. this according to the secretary of state's office with about 17% of votes counted. field by anger over pandemic restrictions and the direction of the states policies, the recall attempt was only the second for a governor in california's history. china's embassy in london has condemned as despicable and cowardly a decision to ban the country's new ambassador from the u.k. parliament. an invitation to the ambassador was withdrawn after criticism from british politicians sanctioned by china. lindsay oil said the visit wasn't appropriate. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. tom? tom: thank you very much. christine lagarde says europe's recovery is going better than expected. risks still remain. more of our extrusive

conversation with the ecb president is next. this is bloomberg. ♪

♪ >> europe is recovering more rapidly than we had anticipated. as a result of that, we have significantly upgraded our projection. our projection for this year's plus 5%. it's a significant upgrade. plus 4%, 4.6% next year. a pre-covid type of growth. this year is going faster than we thought, to the point where we will have recovered to pre-covid 19 levels before the end of the year, 2021.

we had anticipated it would be early 22 at best. it's not going to be 21. >> are you worried about the delta variant impacting what you've just said or the so-called move variant which is on the horizon? >> it's very closely related. we used to say that the best economic policy wasn't accelerated fascination. we are still in that situation. vaccination matters anonymously. on that front, europe has done quite well. more than 70% of the adult population is completely vaccinated in the euro area. in some countries, they are doing better than that. that has been a significant boost. it has helped governments not go back to the stringent containment measures that we had seen previously. >> you put together a package that was designed to make your economic problems dealt with.

the united states had a similar package. would you say the package worked as well as you thought, not as well, or better than you thought? >> when we put it together, we were hopeful that it would work. you know, it was a matter of days before we really appreciated that the message was received. fiscal authorities began to act in tandem and in good court nation as well. i think the impact of next-generation eu, when all europeans decided to bothered -- paro together jointly, this entire package actually responded well and fast and big to the unbelievable crisis situation that we faced. all in all, i think it works well. we certainly responded better

than we had in 2008 and 2011 and the european sovereign debt crisis. manus: the european central bank exclusively to david rubenstein. interesting how she uses the phrase next-generation europe. we are going into a serious time of political change with draghi at the helm in italy, merkel leaves the stage, macron will battle for his position, boris is out. it's a very interesting phrase ullage he about the common borrowing that she uses. tom: what is significant change that was as a result of the pandemic. we are still adjusting to that reality. technocrats in control in italy. olaf scholz still pulling comfortably ahead of armen lasch rick. the desire and the ability for

the german government to step on those fiscal speed accelerators as well, rather than pulling back the brakes. you are right. let's focus on a corporate story. we charged this at the top of the show. apple. you can see the background is blurred and the foreground is in the spotlight. portrait mode was one addition to this new apple 13 ipo. that was one of the launches. we got more details. we will break this down with bloomberg intelligence. recap for us where this leads the product lineup for apple and how they will continue this momentum. you said that there wasn't anything major from this announcement. matt: that's right. business as usual upgrades. cameras, performance, more memory.

a lot of emphasis from apple around the semiconductor level, the investments they are making in their chips. it's essential. it's all driven by their own chips. early important. that's the biggest thing they said yesterday. perhaps the biggest change that stood out in terms of the product was the entry-level ipad. they got a significant upgrade. that's important ahead of the christmas bending season. these are all strong upgrades that keep them at or ahead of their competition on the android side. samsung. nothing i described is a game changer. manus: growth doesn't come cheap. that's the line in the story as we go through the launch. this is price wars in the united states of america. they are practically giving these things away. t-mobile, you get credit. at&t, you get $1000.

verizon will give you $800. explain to me where we are in pricing. robin: yeah. this is a familiar cycle. apple launches a new product. all the carriers use it as a massive platform to drive volume and market share in terms of subscribers. also to encourage customers to move to more expensive data plans. the telecom industry is an industry that has low single-digit sales gross -- growth at best. they have to push that very hard. we will see hand-to-hand combat and the carrier market in the u.s. and europe this fall. manus: thank you very much. thanks for getting up extra early. coming up, two weeks until the

german elections. we hear from some of the key figures in the german business world. what are they most concerned about? who will be the best leader? right here on bloomberg. ♪

>> days until the election and europe's largest economy and the only certainty is change. anand to angela merkel's 16 years of chancellor. now germany's major parties battle to succeed the eu's longest-serving leader. on election fought on pandemic recovery, climate policy, and foreign affairs.

whoever wins will oversee huge shifts of germany's business community. waiting to see what the future could hold. tom: francine lacqua there and our special coverage of the german election continues today with germany deciding. we will speak to key figures in the dermis business world about what is at stake including the leaders of drew -- europe's biggest tech company and bank. that's coming up at 9:00 a.m. u.k. time. you have to wonder to what extent the gas price pressures will feed into the politics in germany and beyond. we touched on this at the top of the show. i know you are passionate about illustrating this. the price increases year to date , 90%. the political ramifications, mario draghi stepping in, the spanish, the greeks, the german, french. they will help ease the price pressures.

citigroup says households facing a 20% increase in energy builds. manus: i think he puts a great deal of context around this. in the u.k., they are up 9% yesterday. that's 95%. prices in the u.k. for gas, 95% since the start of the summer time. in europe, up 9% yesterday. up 93% since july. that took mario draghi into the market. you are looking at a million users looking for new homes. where are we in terms of the impact on the pound or the euro in your pocket and the real economy from the gas bike? tom: this over lining is that prices in europe are now so elevated that they are getting up to asia levels, maybe some of that supply shifts from asia to europe. manus: exactly. let's see where the cargo goes.

i know you and anna get together. in the next hour, european market open. mark and anna will discuss the decline in chinese growth. germany decides it special today. ♪ (announcer) looking for a better way to lose weight and feel good?

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>> welcome to bloomberg markets, the european open. mark cudmore joins us in singapore. the cash trade is less than an hour away. china's recovery weakens. consumers pull back. global gas rallies. prices up as the center -- the sector