manus: good morning from our middle east headquarters in dubai. this is "daybreak: europe." energy crisis, gas prices continue to soar in the midst of supply shortages. analyst worn of blackouts and supply chain help. logistics are in a tailspin.

studies show a third dose matches the rate of infection as the vaccine fades over time. ever grand is pervasive in its contagion and its ability to affect everything. they're worried about bad performing loans, worried about growth. good morning, tom mackenzie. tom: this is now the key risk within the chinese market and the chinese economy. what we're seeing today is a bleed across to the rest of the proxy sector. you can see it with the hang

seng property index, it is now to five year low. the read across to the rest of the sector, what is the mean for regulators and the broader economy? manus: let's step back for a moment on risk. so far we've seen that ever grand for the moment seems to be a country level risk, not a global risk. we've got to resist the temptation to game the market, despite record highs and instead diversify the exposure and seek ways to protect yourself. will the earnings story take us through the tapered risk, a great note from the ebf. tom: it's an uncomfortable rally, that's the point of these

calls we are getting. jp morgan saying cut. ubs allying somewhat with that view. asia is in the red this morning. let's check in with what's happening on the msci asia pacific. casino stock still under pressure, reflected in what's happening, down almost 2%. the nasdaq gaining but the futures are currently flat. brent gaining .3%. that's get the latest from juliette saly in singapore. juliette: it is a contagion effect of evergrand, a chorus of

concerns about contagion. you mentioned some of the weakness in these players, down by almost 11%. evergrand at a near 10 year low, and all this playing into the broader hang seng index. let's flip the board and look at how it is weighing into the hang seng. the tech index is another one that's been hit incredibly hard over the crackdown, down another 1.6%. analysts are bearish about the sector but i did want to bring you some bright spots, crude at a six weeks high, the energy sector holding up in the kiwi holding up too after a strong gdp for new zealand. manus: just way for all those

research notes that will stack up in your inbox, juliette saly in singapore. that takes us to natural gas, energy prices have continued a record-breaking run generating fears about supply and security. dani burger is back in the house. >> when it comes to energy, it's either going to come from gas are wind in europe. both are experiencing issues. there has been lower input when it comes to the u.k.. we are having a crisis, prices keep sitting -- setting record after record and fire has knocked a key pipeline in france. in the united kingdom, this is a record high. if i take you back to what this looked like last year, that is 10 times higher than at this

point last year. it has quadrupled from what it was at the beginning of the year and it has been a mild september, so this doesn't bode well for what's going to happen during the winter. it's a similar story in the rest of europe. i'll give you a check of what german prices look like, it has already exceeded the average. it's an issue of the nord stream 2 pipeline not being online yet. and record high energy prices, there are economic consequences of this as well. government looking to ease the burden of consumers. and goldman sachs was a warning about a blackout for industries. tom: you have to hope the weather turns good to relieve some of these pressures. let's look at the various data, new analysis from pfizer and moderna suggest the efficacy of the virus -- of the vaccine

diminish over time. michelle, what is the data telling us about booster shots? michelle: we know that the potency of these vaccines wane over time. we are seeing additional breakthroughs that are occurring more quickly and people who are vaccinated long ago. meanwhile, data from israel shows that if you give a booster it really -- reduces by leventhal the chance of getting an infection. so there is a lingering issue out there that the vaccines are's not still very effective against preventing infections and death, or severe disease and death. do we want to significantly protect a smaller group of people, or do we want to get

them out more broadly and spread protection to everyone in the world? that's where we are right now and there is still scientific debate going on about this. the fda will be holding a meeting at the end of this week and we should know more than in. manus: thank you very much, michelle. let's get the first word news with juliette saly in singapore. juliette: australia is joining a new indo pacific security pack to pave the way to apply nuclear power sub means. leaders of the three nations had a virtual meeting. the asian nation will build the equipment itself. prime minister boris johnson is promoting woman as the first conservative female secretary.

he was criticized for his handling of the afghanistan withdrawal. north korea says to ballistic missiles it test far this week suggest kim jong-un has added a new option. telling bloomberg that north korea is being reckless with its diplomacy. >> america thinks in such a naive way. i thought north korea was like europe, like a monarchy from a futile area. juliette: global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus: juliette saly with the

latest first word news headlines. monetary policy and the international economic situation, 1:00 u.k. time, christine lagarde speaks on the european economy. tom: and over in the u.s., in terms of jobless claims, and me just check in on retail sales, that's at 10:30 u.k. time. manus: gas prices continue to surge. will discuss the hot topic that is next.

tom: spacex send civilians into orbit. will look at that later in the show. this is bloomberg. ♪

manus: this is "daybreak: europe." tom mackenzie is alongside me at london hq. gas prices continue to soar. as well as the rising cost of emitting carbon. here's what ben ammons had to say in terms of market inflation data in the u.k., showing the impact of how prices may have

implications for ecb. you are on camera live. i think you want to take the other side of this trade. do you agree? >> of course it will lead to inflation. it will not impact monetary policy in europe. anything that takes away from the consumers power will lead to the ecb trying to install very efficient functioning of the monetary mechanism and higher inflation rates will be working more closely with the banks on

monetary policy. if anything is going to delay the taper. tom: i guess the question is to what extent this could lead to pressure across the corporate space as consumer start to rein in spending again on the back of high energy cost. mads: yes, but this is a short-term concern. what we are seeing is a transition from monetary support and physical support into the recovery by consumers and investments. in the 12 month horizon this is going to lead to further investments and add to the drive for green energy and add to the drive for support. there's no way of saying this

will be negative for the long-term investment scene. this is a very positive thing because we need to build more installations to ensure this doesn't happen again. so this is leading into a very strong global recovery. manus: maybe what this episode does, whether it's the pandemic, or real eye-opener, maybe it does push change more rapidly. you seem from what you said to be liking growth. an uncomfortable rally, everyone seems to want to believe in this rally. why are you then 40% overweight

in the funds that you manage but benchmark equity exposure is 60%? is that a less than fully engaged bullish position? mads: we are as engaged as we can be. in the u.s. we are in technology and this rally has less support -- the last time you had me on the show we talked about a strong recovery in that's what we are investing in. of course it is uncomfortable, is very fluctuating and strong nonfarm payrolls are perceived as weak because they are not record strong. we're fully into the rally and

you want to try to capture the upside. tom: it looks pretty benign when it comes to high-yield. is it risked changing once we get to the point for the fed is actually tapering and withdrawing from markets in the u.s.? is that something to look forward to? mads: exactly. this is why the tapering will be so gradual. any sign of a pickup will hold back the tapering. the tapering is a gradual process and we need a strong economy. i'm very convinced we are going to get tapering.

it's going to be the most gradual test of the fed, but it's possible to start the tapering without creating damage. manus: calling for 3% in the next 3-5 years. that's what compliance will get you in the end. the biden tax plan coming to bear, the most read story on the bloomberg. does that affect near-term investment strategy for you? mads: it does, and the moderation in the gradual work we see out of the u.s. will have an impact on the markets going forward. what we're seeing is a democrats

, as many of us have hope for, or being careful without going too hard on these issues. this is an important balance. the recovery and the market rallies are uncomfortable because we have these tough issues, but actually the democrats are less aggressive than a month ago. they are less aggressive on the tax issue and it is a delicate balance, but it matters a lot. it's not going to hit earnings as much. tom: we will come back to you after the break with your explanation for why you are underweight china. the crisis with evergrande has deepened. can the risk be contained?

more on that when we come back, next on bloomberg. ♪

tom: welcome back to bloomberg "daybreak: europe." i'm tom mackenzie in london, with manus cranny in dubai. evergrande is whittling through the nation's financial markets. bond trading put it among the countries risk is issues. the cio and founder of human edge investment technology is still with us. you are looking at plus 15 in the property sector, does it entice you?

mads: no, not at all. because i'm very happy and comfortable with the strategy we manage. 6% return in this environment, i don't need 50% with a lot of risk and a lot of default. the fed has a very strong commitment which they not wavering on, they are very clear. the china situation i think is good for the global economy. china needs to support the economy, but i'm not moving into that space. we have 5% in each of those areas.

it's not an area i'm looking to get into at all. manus: people are talking about the dollar, the differential between china and the united states of america. i think that's beginning to come were evident in risk asset allocation. when it comes to equity, do you think that ultimately what's happening with evergrande is something that's detrimental to the equity story in the near term in china? mads: for people who are interested in the space it's creating a buying opportunity, but it's dangerous, so we remain very underweight. with the global benchmark around 15. for us, is not a necessary risk to run with the strength of the

underpinnings of the developed world markets. i don't think the chinese will let it spiral out of control, it's way too high in the headlines. they don't want to be embarrassed by the story in a further. but it doesn't make me think that i want to buy chinese equities because every month we see it's getting tighter and tighter to be running a capitalist company in china. tom: you live across the ocean from china and japan, is there an opportunity there? mads: there is an opportunity, and many people talk about it. change has to be substantial, and substantial change in japan happens, but it happens very slowly. we don't know who's going to be the prime minister and we don't

know what the story is going to be. so it's not enough to go into this risk because it doesn't only at a strategic opportunity, it adds a huge, significant risk if there is not growth, japan will not go anywhere. we don't need to add uncertainty in development. we hope it goes well in japan but it's not for me. manus: well done, we will see you soon. the european governments are going to scramble. we will discuss the pressure in the energy sector. join us as we debate the crisis

of power in the u.k. and beyond. this is bloomberg. ♪ (announcer) looking for a better way to lose weight and feel good? how about the one with the 98% success rate and the more affordable weight loss solution? that's golo. there are no monthly fees and it's guaranteed to work or you don't pay. how can golo offer all of that? because it's not like any of those diets you've already tried. it's the new way to lose weight. no stimulants, no starving, just results. results you'll keep for life. no more sacrificing to lose weight only to put it back on. no more sacrificing, period. it improves your lifestyle and delivers incredible results. with over 2 million satisfied customers, golo is the new way to lose weight. this is the only program i have ever done that i have never deprived myself of anything. (announcer) if what you're currently doing to lose weight isn't working,

or you feel like diets don't work, you're right. don't give up. get golo. go to golo.com and get your life back, with golo. (chorus) golo!

tom: good thursday morning, it's 6:30 a.m. i'm tom mackenzie with manus cranny live from dubai. this is "daybreak: europe." energy prices, gas prices continue to soar amid supply shortages. afar knocked out part of u.k. power cable and some warner

blackouts. difficulty sourcing everything from master plastics. and a boost for. a shoddy -- study shows -- pfizer emmett turner both warned vaccine efficacy fades over time. we've been discussing the risk in these markets, they are very present and very obvious within china. the property sector under a lot of pressure. we're looking at the dot plots and whether that's next mark in the sand when it comes to conversation about central banks. manus: we just had a discussion with mads pederson, he doesn't think default rates will be that high in the united states.

when it comes to equity exposure, the commodity market, the gas market and oil market, he sees that is something that doesn't stymie stimulus with ecb but elongates that. the risk is in the asian market and slightly in the u.s.. the hang seng, the h index is down for the fourth day in a row . that's something to keep an eye on. a nice discussion around that, so keep an eye on 24,000, s&p futures just dropping and jp morgan still positive on stocks. earnings will trump any kind of taper. however we've got tax coming in

from the biden administration but it's growth that will dominate. oil prices are higher. let's expand the story and discussion to natural gas and higher prices in europe. it's raising fears about supply security. good to have you with us again. >> the issue for europe and the u.k. is that there is low inventories a low wind output. this is a very fragile market and we expect it to last for some time.

europe is running out of time to build up those gas resources before it gets cold. electricity is at a record high, 10 times the price it was at this time last year. the issue for this story is we're not even in the depths of winter yet. it's been a very mild september. as we get into the winter this could even worsen. but as i said, it's a fragile market, so should we have a mild winter, this in the rest of prices could plummet as quickly as they rose. for the most part, what we've seen from spain, italy, greece and france, all of them has been going to lessen the burden and households are going to face because that's part of the economic consequences of this, the consumer impact. mario draghi saying they will do whatever it takes. spain is trying to reduce some of the profit that companies have seen in order to lessen the burden. we haven't heard much from the u.k. which has been becoming

increasingly reliant on those renewable sources of energy. perhaps the response that investors are overlooking that they should have their eye on is not from these governments, but from the central bank. it's likely to keep ecb policy easy. ben emons thinks the opposite. they're already showing the impact of price power and that may have implications for decisions by the bank of england and the ecb. tom: dani burger breaking down the energy story for us, getting us up to speed. we heard from goldman sachs warning of the risk of blackouts in the street. danny just did a great job of breaking down where we stand. hout said is this risk now?

>> i think in terms of gas supply, the question really is how much are we prepared to pay for it. manus: please continue. >> at the moment -- unless something is done about it over the coming few months, the situation could resolve itself if we have a mild winter. manus: what does the near-term supply landscape look like? asia is outbidding europe for lng. this strikes me as being a very tight market so where are we, and is it going to get a lot

worse? >> we been following the gas market and for 22 years, we've never seen prices like this in forward markets. as we hit winter things could certainly get worse. if it's mild, the situation could resolve itself fairly quickly. tom: what are the specific steps that governments can take to alleviate the pressure? >> you've already highlighted a number of things in terms of -- there are other aspects to consider.

it can happen because the prices are too high and we've seen the first signs of that in the last 24 hours or so, but also they can save the market gets very for a few days. come off-line nus: when we look at the u.k., and you been tracking these markets for decades now, in the u.k. we've had a number of go out of business. of course those customers will be offered new suppliers, but presumably the probability is they will be offered higher tariffs as well. what kind of risk is there in the supply side? >> it goes without saying that

the rising prices in the wholesale market will ultimately go through to the residential market. in terms of those who think there's no chance of being cut off, often the energy regulator will immediately and automatically switch their supplier and there's no gas and power to those homes. tom: so just briefly, do you see a read across to the question of whether it leads the situation we are facing right now into re-think about the intermittency of the energy sources? >> i think there is an interesting debate happening in terms of low carbon and renewables. it's a three-pronged argument regarding security supply versus

low cost versus low carbon. and the events of the last week or so or longer has shown where paying through the nose for energy and yet that energy -- this debate has been around for some time. manus: tom, thank you so much for being with us. let's get up to speed with the first word news from juliette saly in singapore. juliette: australia joining a new indo pacific pack that could pave the way for nuclear powered submarines. leaders announce agreement which will also increase cooperation on the side of security in a virtual meeting. i 2016 deal with the shipbuilder

will now build the equipment itself. we are hearing that a third dose of the visor vaccine can dramatically reduce the rate of illness in people 60 or over. a short-term study in israel -- pfizer is expected to flagged the data and a meeting on friday. prime minister boris johnson has overhauled his cabinet, the reshuffle is expected to continue over the coming days. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

tom: juliette saly, thank you very much. coming up, supply chain chaos. how the pandemic and labor shortages are causing congestion at some of the world's biggest shipping ports. that story is next. this is bloomberg. ♪

tom: welcome back to bloomberg "daybreak: europe." let's get to today's big story, it focuses on the chaos disrupting supply chains around the world. logistics managers are battling the pandemic, a labor shortage and shipping congestion, all while -- trying to get goods to your front door. what is the state of the global supply chain now?

what is the big take away from the big thing? >> the supply chain is still a mess. the conventional wisdom was that economies would sort to reopen, we go back to movies and take vacations and services would become what we spend our money on. the supply crunch is continuing. the port of los angeles just reported near record volumes. so it is still happening, if your company right now and you need to import goods, you are dealing with a lot of headaches and logistics managers are on the front lines of the battle. manus: we heard from one of the ship users talking about what they're doing to try to overcome these supply issues. our people preparing to onshore

in 2022? we need to get through this and prepare. how are they navigating this? brendan: the discussions about diversifying supply chains has accelerated over the past several months. this was a big issue during the u.s.-china trade war in the few years before the pandemic. companies are looking at these disruptions lasting longer than a few months and possibly looking at years. so definitely the companies are looking at far-flung sourcing systems and saying we might need to have some buffers in their to move our supply chains to more regional as opposed to global. tom: we started shipping stuff early in july. don't expect stuff to arrive in u.k. until november. the key question is how are

these -- how long are these disruptions likely to last? brendan: that is the big question. most people in the industry think it could extend well into 2022. we are looking at getting through the holidays, chinese new year in february. that is a big time for shipping. i think we can expect these disruptions, well over into the first or second quarter of next year. manus: you can't build a ship overnight. i don't know many things about engineering, but i know you can't do that. but there is a ripping trade in secondhand tankers and an older cargo fleet, and this is where the real money is being brokered. talk me through what you are hearing in terms of shipping companies. brendan: the shipping companies are making more money than they

ever have. $100 million this year compared to -- 100 billion dollars as compared to $15 billion last year. and they are ordering more ships, like you said. ships take anywhere from two to three years to build a big container ships. so we are looking at all that extra capacity not coming online until 2024. so the strains on the system, the higher cost for ocean freight, we can expect to stay at these elevated levels, record levels for the next year at least. manus: my heart beats for tom mackenzie sitting at home waiting for a sofa. coming up, the future of

european geopolitics. and outgoing german chancellor angela merkel. we will discuss the agenda. this is bloomberg. ♪

manus: this is "daybreak: europe." tom mackenzie is at home in london hq. angela merkel prepares for her last meetings with emmanuel macron and they will discuss current affairs. i wonder what's on the menu. good to see you this morning. how important has merkel been in franco-german relations?

did she back macron? >> she's been the pillar of the french-german relationship over the past 16 years. remember during the pandemic, the recovery package of 750 billion euros clearly has the signature of angela merkel and emmanuel macron. the french president trying really hard to convince angela merkel that some common debt was not a bad idea. four different french presidents through the years, in the early 2000's angela merkel had her own relationship with jacques chirac.

arguably they save the euro together. then they had some pots about austerity but join forces on international deals with the situation and crimea on the migrant crisis families, and with macron, she -- he was a young 39-year-old leader when elected. he will likely become the defect oh european leader when merkel leaves. he's building his new international leader -- image as the leader of your. tom: september 20 six is the date for the german elections but the french elections as well we should be thinking about.

how much of a threat is a real a pen to emmanuel macron -- paris -- caroline: it depends on whether he gets reelected in seven months time. it will be seen over the next few months. the paris mayor has thrown her name into the hat over the weekend. on the right wing you've got three different candidates but the biggest threat for emmanuel macron on the right wing is from the northern region of france. he has local roots to appeal to the people.

then you have those from the far right wing and the far left ring -- left-wing. another candidate is a far right wing writer who is very present in the french media. it's enough to weaken marine le pen and put her in the second rotation. tom: caroline impact us on the politics of france. today, olli rehn will speak on monetary policy and economic -- the international economic situation. retail sales will play into the

u.s. inflation picture. manus: if you pay more for gas at the pump, it will impact where you spend. and outgoing chancellor angela merkel will be meeting with french president emmanuel macron. technically it is my friday. you might have me five days a week but i can't confirm it. that's the mood we have out there in the market. tom: and what is the risk of the tax owed on that?

people are factoring in that the democrats are coming closer to agreement and another factor over in china, the focus on the property sector. that is it for bloomberg "daybreak: europe." the european open is next. this is bloomberg. ♪

in business, it's never just another day. it's the big sale, or the big presentation. the day where everything goes right. or the one where nothing does. with comcast business you get the network that can deliver gig speeds to the most businesses and advanced cybersecurity to protect every device on it— all backed by a dedicated team, 24/7. every day in business is a big day. we'll keep you ready for what's next. comcast business powering possibilities. the comfortable way to work out. -that looks fun actually. -looks like a paisley. -hey, a paisley, we'll take it. -yeah. oh my god, i could do this and watch tv at the same time. -exactly! -fantastic. oh yeah, i can do this. this is easy. and definitely better than the floor. -it feels sexy. -it feels good. i want this in my house. (host) wondering if the aerotrainer is tough? (engine revving)

>> good morning. i'm anna edwards live in london. mark cudmore joins me in singapore to take us through all the market action. the cash trade is less than an hour away. here are your top headlines. energy crisis, gas headlines continue to soar. analysts warn of blackouts. energy