♪ >> good morning from bloomberg's european headquarters. i'm tom mackenzie.

this is "bloomberg european daybreak," and these are the days top stories. u.s. futures fluctuate. the nation's stocks are mixed. ever-growing has yet to make an announcement on yesterday. your p.m. markets race to --

europeans raced to reassure markets their exposure is limited. it is a tale of two central banks i want to highlight for you at the top of the show this friday morning. good morning. we will check in on the yield space in the u.s. and the back of that reflation push and the slightly more hawkish tone we got from jay powell yesterday signaled that the fomc are comfortable with the economic recovery in the u.s.. we saw the biggest one-day take up in u.s. 10-year yields since march. morgan stanley said 1.43% is a key level for u.s. 10-year yields. we are at that level now. more upside than is likely.

let's switch the terminal to look at what is happening in china. it is a very different picture as a result of the travails around ever grand and the concerns about growth in the world's second-largest economy. you have seen the pboc stepping into liquidity for a third straight day. you seen that injections of about 40 billion u.s. dollars in that timeframe. this chart shows what has been going on. very gradual, you get a few pickups around some seasonal demand for liquidity in china, and then it is very strong liquidity injection over the last three days in the people's bank of china. many say you will need to see a triple reverb cut from the pboc

to support the economy. goldman sachs saying don't worry too much about the plight of ever grand. the property sector, it is more about the drag from economic growth. let's check in on the markets as they stand. across asia, some modest gains, about .6%. japan is leading the pack with the nikkei gaining 2% after the national holiday. futures in the u.s. holding onto gains just about after wall street closed at the highest level since july. what's happening in the other yield space, you're currently at 1.44. let's get back to the ever grand story than. at least three ever grand dollar bondholders say they are set -- or yet to receive coupon payments. meanwhile, the developer is staying silent. stephen engle is at ever run.

great to get your insight for this stage. what is the latest? stephen: the latest is bloomberg news has learned ever grand has received a broad-based set of instructions urging them to avoid a near-term dollar bond default on those interest payments that were really due yesterday, and according to bondholders that we have spoken to, they have not received as of this morning their coupon payments, so it really has lent more uncertainty around the future of china ever-growing group and how it can navigate its way through this debt crisis without government intervention. in the set of instructions given to ever grand, there was no indication if the state authorities would step in with support, so it is a game of wait and see right now, to see if ever grand is just going to be using this 30-day grace period that they have, but they have more payments coming up to the tune of 150 million u.s. dollars

between now and october 11. they are far from out of the woods, despite some saying that this might be contained. it does not look very contained from my vantage point right now. tom: and what a vantage point you have. you point out the coupon payments coming up for this company. what else do you see going forward? stephen: this building behind me is china ever grand's center here in hong kong. it has been on the selling block, if you will. so far, they have not been able to find a buyer at the right price, so it has not materialized. this is a company that needs cash right now. including, it tried to sell a stake in its new energy vehicle unit, which we heard from some sources has not paid some of its employees and has not paid some suppliers, and that puts in question cash flow. it needs to sell cars, and it has a very ambitious delivery schedule starting next year. if they are not paying suppliers, they are not going to make cars, not going to sell

cars, they are not going to get revenue coming in. this is going to just contribute to this cash crunch, not being able to sell off their assets and not being able to sell the product. tom: bloomberg's north asia correspondent stephen engle. thank you very much. two days to go until the german election and the final debate shows the candidates' determination to make the eu a more assertive presence in international affairs. what were the key takeaways as we look ahead to that vote on sunday? >> i think the key take away was that the last debates before this were about who would be the most competent chancellor for the next german government, for the first post-merkel german government. this time around, the question was really what smaller parties they would enter coalition with. we were mostly paying attention to what the liberals and what the greens said about who they were more inclined to support, and what was really interesting from the outcome of those conversations is that the head of the fep said he would happily back a jamaican coalition, which would essentially mean he would go into coalition with the

conservatives and the greens above the spd, and essentially no longer would he be willing to support the social democrat leader, or at least he would not say this about histy that he has the most alliance with. on the other side, we see the een candidate, who at the last debate seemed to be very much in line, was unwilling to put her cards on the table. tom: great stuff. thank you very much for the update there in berlin ahead of that boat, that important election in germany sunday. bloomberg will be covering the election live. let's take a look then at the key events that markets are watching today. 9:00 a.m. u.k. time, we will get insights into germany's recovery with the ifo survey. at 3:00 p.m., we will hear from jerome powell as well as richard clarida. at 3:00 p.m., more data. the u.s. recovery with new-home sales figures. yields jumped as central banks tighten their outlook.

up next, we discussed the latest market moves with edward park from brooks and donnell asset management. stay with us. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak: europe." i'm tom mackenzie donlon -- in london. happy friday. joining us now is edward park, cio at brooks mcdonald asset management. good morning. thank you for joining us this friday. more hawkish tone from central banks. the pboc injecting liquidity, but the norwegian bank and the bank of england as well, the rate cycle needs to be firmly in

focus. the yield moves we saw overnight, that spike in the u.s. 10 year, do ucs getting back to a level around 1.7%, where we were in march? >> i think we are still a ways away from that. we saw a flattening of the yield curve. the federal reserve might do more now sooner than initially expected, but that will dampen inflation down the line. especially one of the things we are watching very closely is where that 10-year is, in the middle of that. . we have seen disappointing growth since the middle of this year. our expectation is inflation is going to be a controlled transitory narrative that will ultimately win out. as a result, we will not be testing that 1.7 percent, 1.8%

we saw at the beginning of the year for a little bit. tom: what is the level that poses a challenge to the equity run-up that we have seen? >> one of the really useful metrics we have had throughout this pandemic over the last few years is that difference between looking at the next 12 months earnings overpriced compared to what is happening in bond markets. for that to be question, i do need to see a big run-up in the u.s. 10-year, so you see an early run-up in the u.s.. there is still quite a big gap there, but clearly, it has to do with what is happening in growth sectors such as technology and health care. if we did see a meaningful move up, that would probably be more

of a swing from growth that has done really well in the last two or three months. i think it is less of a challenge overall for equity but more about the style that wins out. tom: let's draw that out into how you are positioning. do you start to reduce holdings in sectors like tech as yields at higher and expose yourself more to value in the cyclicals? >> overall, we are trying to keep balance. last year, we had a very strong growth focus. we are looking to start to bring in more value to the u.k. and asia, making sure those elements are balanced. we are using this opportunity to reduce some of our technology

and put that into some of these sectors that are quite undervalued. just to give you an idea, 12 times the next 12 months' earnings in the u.k. we thought now the attitude so firmly in the minds of investors and central banks, that now is a good opportunity to start easing up a little bit. tom: how supportive is the environment in europe when inflation concerns are less pronounced, and of course, you do have a lot of big cyclical

and value names? is there an opportunity to gain more exposure to europe? quickly think about particularly over the last six months, where to get the cyclical exposure. you have a political will in europe, and clearly, we are not out of the woods yet in terms of the delta variant, with it looking globally like it has not lost as much momentum as we thought early in the year. we don't really see this kind of coordinated backdrop which should be supportive by cyclical names, and europe has not really dispersed as much, and indeed, eu recovery funds that took so

long to get over the line, my expectation is that we don't see as much fiscal and monetary stimulus ahead, and what really matters is the general election over this weekend and the coalition that ultimately leads to. this will in some part determine the political will of the germans in terms of fiscal support. tom: how germany and the government their shape the fiscal response out of brussels. i do want to get your thoughts on earnings for we end this broadcast. we had a ms. overnight again in terms of sales. should we be bracing ourselves for more disappointing earnings, more missed forecasts? >> earnings in aggregate have definitely beaten expectations. i think the well is more nuanced

around guidance, which has been more mixed in certain sectors i think the earnings should become easier to read as we go through the year. we will have more clarity around how supply chains have reacted to the restarting of economies. i think those individual stocks might be slightly weaker than some of the sentiment surveys had suggested over the start of the summer, but in aggregate, we expect earnings to be fairly robust. clearly as we go into the year and as we go into 2022, we will

not see blockbuster your on your numbers as some of the expectations from last year move through. tom: stay put. we will be back with you. let's get your first news now with julia. juliet: the u.s. is considering forcing companies in the semiconductor supply chain to provide information on industry and salesmanship. they could do this by invoking a cold war era national security law. secretary gina raimondo says the goal is to alleviate bond hoarding. bp is temporarily sharpening some of its petrol stations as the truck driver shortage effect fuel deliveries. the u.k.'s exit from the eu has constrained a flow of workers

from the continent amid a tight labor market. supermarket deliveries have also been impacted. the u.s. is set to begin giving covid-19 booster shots to millions of americans starting as soon as today. a panel of experts advising the cdc recommended users for over 65 to receive the pfizer job and for younger people with underlying medical conditions. however, they did not recommend them for staff in high-risk occupations, putting them at odds with the fda. india has long-delayed plans to overhaul its military. the prime minister's government is integrating the army, air force, and maybe in the biggest reorganization of its military since independence. india is also moving closer to the u.s. and its allies strengthening their cooperation against china. global news 24 hours a day on air and bloomberg quicktake

powered by more than 2700 journalists and analysts in more than 100 20 countries. tom: china's ever grand bonds remain on edge after it made no announcement on if it will meet a deadline for a coupon payment. the latest. this is bloomberg. ♪

>> the ever grand -- evergrande situation is seen as particular to china. >> direct effect and direct towards evergrande is immaterial. >> at this point, i don't see this developing into a global crisis. >> i don't see this as something that should bring the whole system down. >> increasingly, china's problem is domestic.

tom: edward park is still with us. does your team have any exposure to evergrande or the chinese property market? >> it is difficult to avoid that, and that is why contagion is what markets are critically concerned about. the reality is it does not look like kind -- like china is going to allow heavy contagion into the property market over the water equity market before a bit of liquidity after china came back from holiday on wednesday, and again, the rhetoric so far from china has been to retain retail investors who are

invested in evergrande securities to a design, to make sure it does not spread much wider than ever grand itself. there is a 30-day grace period, but once that starts to run through, people will get more concerned. our expectation at the moment is this will be contained. tom: i want to get a sense from you and the clients you are speaking to as to if you see this as a short-term -- significant issue, obviously, but a short-term issue, or if this leads to a deeper scarring of the psychology and the psyche of investors who are looking at exposure in china. is there a longer-term impact?

>> i think this should all be looked at in the context of the regulatory reforms we have seen over the past few months, which has undoubtedly hit sentiment. there is this belief in financial markets that a more activist chinese government is negative short-term in terms of foreign investors in particular. what the ultimately means is china in favor of the structure, which is a major way for foreign investment to get actors to chinese mainland companies, so that is certainly an issue over trust in the very short-term. longer-term, where china is trying to achieve and trying to establish, some social rules and privacy rules in some areas of the economy and also trying to readjust where it is spending

its economic dollars by moving away from areas such as property , which it has been heavily into over the last five years. i think we are seeing some of the sharp movements in terms of regulation surprise foreign investors who were expecting a bit more morning and a bit more of a benign backdrop. longer-term, i think the jury is still out. some of the regulations are less market only, but short-term, this definitely has created a lot of uncertainty, but our view is a lot of this uncertainty is priced with msci china trading 12 months early, but i think a lot of that is in there. tom: we appreciate your time. have a great weekend.

up next, the main candidates star in the final tv debate, only two days to go before germany heads to the polls. ♪ 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.

tom: good morning from bloomberg's headquarters. it is 6:30 am here in london. here's what you need to know this friday -- the reflation trade leaps as traders bring forward expectations for quality tightening. u.s. futures fluctuate. silence from evergrande.

the developer has yet to make an announcement on a coupon do yesterday. europeans raced to reassure markets their exposure is limited. and the candidates race off in a final debate before voters head to the polls on sunday in germany. a market selloff in longer-term u.s. sovereign bonds, the yields spiking the most in terms of the one-day pickup in u.s. 10-year yields since march. you're looking at u.s. 10-year yields now at around one point 43, 1 .44%. you have morgan stanley who came out recently and said anything above that level of 1.43 suggests that yields will go higher from here. this is the market betting that a modestly more hawkish fed is looking at a more optimistic scenario in terms of the growth picture for the u.s. economy. the reflation trade is back.

that is the message from the bond markets, at least for now, so just to highlight that, we are going to look across the markets now. across asia, you are looking at gains still of .6%. the nikkei in china is higher by about 2%. that is a picture generally. the futures in the u.s., by the way, coming off slightly after a two-day -- the biggest two gains you saw over on wall street since july. let's get back to politics then and the politics of germany front and center. two days to go until that election in germany, and a final debate showed that the candidates' determination to make the eu a more assertive presence in international affairs -- let's get the very latest live from berlin. what indication did we get on how these parties plan to form a government? >> that was really the crux of

this debate, what everyone came to here, especially from the greens and the liberals, where they would be supporting, and we heard from the liberals no higher taxes and returning to the debt rate, putting him firmly in line with merkel's conservative bloc, with arm and lash, who is running to lead the country from her own party -- with armin lachet. he was saying that he think the most aligned policies for him would be to join a coalition with the conservatives and also the so-called jamaica coalition. tom: thank you for that update on the back of that debate. joining us now is the chief economist at the center for european reform. thank you for joining us.

this is turning out to be a pretty interesting german runoff. there is, of course, broad consensus from most of the party there needs to be more spending, particularly on things like the climate crisis and the need to digitize and reform and upgrade the german economy. what are the chances this will raise the funds that need to be spent, or can you rely on a negative german bund? >> i think economically, yes, you can or you could, but we know the general reluctance. democrats in particular do not want to lose the christian conservative vote they have gained over the past couple of months because many may fear that they enter a coalition with the democrats and greens and let

go of their fiscal orthodoxy in a way, but there is a tension, and i think that has become pretty obvious. the democrats and conservatives both make pledges, one to bring the german economy into the 21st century, and at the same time, one to cut taxes, ideally, so they in particular have to make up their minds. i think the social democrats and the green party minister still in that sense has to monitor and say it is fine. we can incur a little bit of higher debt. there are ways of using the german flex ability with the rules to make sure that happens. this is really the key issue -- how do we fund this? it is clearly possible, but this would be the crucial question.

tom: removing the debt break would be one solution. looking at polling numbers as things stand, do you think the numbers are there to be able to move forward on the debt rate, which is meant to snap back in 2023? >> that's right. in order to properly reform a constitutional rule, it would need a 2/3 majority of all houses of parliament. i think one of the few certainties of this election is there is absolutely no way they will agree to a debt break. ironically, if the christian democrats into government with the greens, with the greens very reluctant to make the social democrats the leading party in the government, demand a

greening of the constitution on the debt break. that is really the only way i see them touching the constitutional rule, but it sounds very straight on paper, and it is, but there are ways to circumvent it, and it is easy to circumvent when you use some flexibility on the european central rules. tom: we have seen some of those -- some of that flexibility. i'm thinking about hamburger and railways in schools. is that essentially an option for the next government? >> exactly. this is essentially what the democrats have not been excluding. the black zero on the balanced was sort of the main issue of the christian democrats.

they use almost kind of an attack line, and that was interesting, i thought. there are ways of tackling specific issues. the german state-owned investment bank, if it includes debt, for example, if you wanted to set up a big fund to make sure that businesses invest in the climate position, you can do that off balance sheet, and it does not count toward the tax break. there's a broad consensus to do that if necessary. even the left party has proposed to put together a 20 billion euro a year transition fund for german industry, which is remarkable. tom: we can talk, of course, about what could happen. i want to get your views on the data and the polling you have at your fingertips. what do you think is most likely in terms of a fiscal response from a future german government? which parts of the government are going to receive the most support?

>> considering that polling has social democrats comfortably in the lead, i think this will be interpreted as a voter mandate to form a government. i think this is what they will put at the center of their argument after sunday. if we have a social democratic/green/free democratic government, which will take time to form, there is potential to take the best of these three parties, and that means having the push for a very bold green investment agenda in public transport, in insulating homes, in subsidized renewable energy, in making green industry out of our car industry, in particular, so i think this is what we can expect with relative certainty. then there is the whole aspect of public administration, digitalization of the public sector. i think the pandemic brought this point home, and this is where free democrats put a lot

of emphasis. this would be one of those two big areas i would expect to see quite a bit of activity. tom: how are those likely to bleed across into decision-making in brussels and how the eu is looking at reforming its own fiscal ball? >> i think germany could live with setting at some debt rules. i think at the european level, reforms are urgent or at least some clarity on the way to go. this is where germany's debate will inform the european debate. my sense is that the biggest opening for that debate is a green investment clause or something like that that makes sure that european rules are straight on current spending and support and are a bit more lenient on the debt reduction

pace because i think it is no longer that much of a priority given the low interest rates in other countries as well. it is clear even conservative parties are trying to tackle climate change through carbon prices only. it is going to create political resistance. and i think the gas prices -- this is sort of a detour, but the gas prices we are seeing will probably stick with us through september and for the rest of autumn and through winter. i think that will bring this point home because there will be a lot political damage through these spike gas prices, and this brings home the message that addressing climate change through more investment is politically the way to go even for conservative parties. tom: the fragility of europe's energy infrastructure certainly being highlighted over the last few weeks. solid insight. thank you very much. bloomberg tv will be covering election day live with analysis

as polls close in germany on sunday. do not miss that. let's get to first word news now . juliette: the u.s. is considering forcing companies in the semiconductor supply chain to provide information invoking a cold war era national security law. the commerce secretary said the goal is to alleviate bottlenecks and identify possible hoarding. bp is temporarily shutting some of its u.k. petrol stations as a truck driver shortage affects fuel delivery. a small number of tesco-branded sites have also been affected. the u.k.'s exit from the eu has constrained the flow of workers from the continent. supermarket deliveries have also been impacted. yum! china plans to open 1300 new stores in 2020 one, outpacing expansion from last

year. in an exclusive interview, the ceo told bloomberg that smaller satellite restaurants are seeing a payback period of two to three years, faster than its biggest stores. it also wants to double the number of coffee shops in the country by year end. >> the opportunity for this market is fantastic, and we certainly hope to grow. >> the company posted first-quarter sales that missed wall street estimates. this as production and shipping delays have hobbled nike's efforts to meet strong demand for shoes and athletic wear. sales in china also remained lackluster, rising only 1%. global news when he four hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries.

tom: coming up, the u.s. cdc has recommended covid booster shots for americans who received a pfizer jab in what could be a shot in the arm for the biden administration's flagging vaccine drive. more on that next. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak europe." i'm tom mackenzie here in the city of london. the u.s. is set to begin giving covid-19 booster shots to millions of americans as soon as today, but only some citizens

will be eligible despite a white house drive for more access. for more, we're joined by michelle cortez. will this give something at least of a shot in the arm to biden's vaccine efforts, which we know have been lagging with an entrenched minority refusing to actually take these vaccines? michelle: millions of vaccines are going to get into the arms of americans starting tomorrow because the cdc just minutes ago back a recommendation. of course, they will go into the arms of americans who have already gotten two doses of the vaccine and what they really want is vaccines in the arms of people who are unvaccinated. it's not going to get the biggest bang for the buck as if they could get those vaccine hesitant people to roll up their

sleeves. then they would be in a better position, but something is better than nothing. tom: yeah. on the corporate front as well. we are still seeing the fallout from all of it in terms of supply chains, the impact the virus is having in some areas. nike missing quarterly sales targets amid that pressure. >> we are seeing manufacturing facilities across asia, specifically in vietnam were much of nike manufacturing occurs, shutting down because of covert outbreaks. we have also seen facilities in china and elsewhere close down because of smaller outbreaks there. this is something we have seen across the entire supply chain. this year, it has been difficult for people to get their products where they want them to go. we are cutting into the holiday season. this is something we will be seeing in greater numbers as the months continue. tom: michelle cortez joining us

with the latest on the impact for the covid-19 vaccine and the approval for booster shots in the u.s.. and plan expected to phase out coal powered power plants. the prime minister spoke exclusively to bloomberg. >> we took over in july 2019 with a very clear mandate to make the economy grow again. we were hit by the pandemic, but we still managed to implement very significant reforms, and i think we used the fiscal room that was available to us to support the real economy. we were worried at first by the recent data. the economy grew 16.2% in the second quarter of this year. we revised our forecasts upward to 5.9%, and this may be a pessimistic forecast from 2021.

we see lots of interest for foreign investment by american companies, european companies. we are making big progress in digitizing the state. we have a very ambitious plan, and i think overall, the mood has significantly changed. tom: i just want to point out that everyone but jon ferro and i on the team has visited greece in the last six months. >> that's one reason for you to come see what is happening. >> people talk climate change. you have a fire recently, 13 miles, 18 miles from athens. you are living fires. you are living wreckage. what do you need from europe, from leaders to jumpstart the climate change debate? >> of course, this is all happening -- i'm not talking about the climate change debate. tom: then the real energy crisis

. >> that is hitting us very hard. europe is at the forefront. as you know, we have a commitment to be clumping -- climate neutral as a continent by 2015 and to reduce greenhouse gases by 25% by 2030. we are shutting down coal-fired electricity plants. we said we would do it by 2028. i think it will be possible to do it by 2025, so we are significantly contributing towards decarbonizing by changing our energy mix. obviously, we are adding renewables and in the interim, we will be dependent on natural gas. tom: that was the greek prime minister speaking exclusively to bloomberg. let's check in on the futures. europe futures edging slightly lower after a solid close on wall street yesterday, taking a breather, some of these investors out there. futures in europe down almost .1%. not too much, but just edging

into the red as well. gains across asia remain, and they are holding up. mix picture in china, the mainland and hong kong. the nikkei, though, in japan, japanese equities performing strongly indeed. more coming up. this is bloomberg. ♪

tom: welcome back to "bloomberg daybreak europe." i'm tom mackenzie in london. flagging some other events coming up to note in your diary. georgia's world bank governor

gives a policy speech, set to raise rates earlier this week, a likely successor to the governor when he steps down. then the 43rd ryder cup tease off between europe and the u.s., that old rivalry, after being delayed a year by the pandemic. at 3:00 p.m., fed chair jerome powell speaks at a fed listens discussion on pandemic recovery after that modest hawkish stance. letter in the afternoon, the ecb chief economist to separates in a conference and president biden will host the first in person leaders summit at the white house, that shift to focus on the geopolitics of china and the centrality of the tension for biden, certainly in focus. let's check in on the futures. after a solid close on wall street, the reflation trade back. yields are higher, but they have

taken a bit of a breather after the gains we saw yesterday. nasdaq futures lower by .2%. stay with us. this is bloomberg. ♪

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>> good morning. welcome to bloomberg markets. the european open. i'm dani burger live in london. our editor joins me in singapore to look at all the market action this hour. the cac trade is less than an hour away. accounts vie to take over from chancellor merkel.