♪ dani: good morning. just 6:00 a.m. in london. i'm dani burger. this is daybreak europe and here's what you need to know. the bulls roar back amid earnings optimism and a falling u.s. jobless claims.

the s&p 500 posts its best day since march. goldman sachs rounds out the week for big bank earnings after a surge in pandemic you making and trading continue for rival u.s. lenders. and a watershed moment for the crypto industry. bloomberg learns the sec is poised to allow the first bitcoin futures etf's to begin trading. well, happy friday to you. you made it to the end of the week, and we are off the back of a day when the bulls are back in charge. the bears have been dictating the pace of these markets for much of the past month, but yesterday we had the third biggest gain of the year in the s&p 500. so to paraphrase a little bit, the bulls are never going to give you up. that's the word from rich ross, who says the pillars of this bull market are impact, and we've seen those garden-variety pullbacks from all-time highs. but given the marriott of -- myriad of storms, a classic victory for the bulls. will that rally sustain itself as we end the week?

we had lower jobless days and claims yesterday. we had stronger data, softer ppi, which seemed to soothe the market, that earnings picture helping us. let me explain how ferocious that appetite was yesterday. what you are looking at is the tick index. in other words, when there's an uptick minus down tick, if the upticks are winning, this will be higher, yesterday straight out of the gate from the day, we had the highest amount versus selling -- buying versus selling since back in march, really a ferocious appetite to buy the dip. let's see how your markets are shaping up. we're continuing to buy the dip when it comes to the future session, up .4%. in that risk on attitude means there is not a lot of demand for haven's so far, looking at the end weakest since 2018 versus the u.s. dollar. and copper above $10,000.

the lme metals index hitting a record high. this isn't necessarily an optimistic -- economic optimism, rather we saw zinc soar yesterday. so, some optimism continuing for a second day in these markets. let's see how this is shaking out in asian markets. let's get over to juliette saly in singapore. it looks like a positive tone to end the week here. juliette: exceeds me. absolutely, dani. i just got so excited, i choked on myself, but yes, certainly the bulls in china, asia stocks to round out the week, their best week in about a month, the weaker yen boosting the likes of the nikkei, hong kong coming back online, and some pretty good support. lower yields, growth stocks going well, earnings beat, the

infotech stocks leading the game. we're seeing australian stocks rise. new south wales is scrapping quarantine for vaccinated arrivals. dani: we've also heard that china's loosening restrictions on home loans amid the evergrande contagion. what more do we know at this point? juliette: this is a bloomberg scoop that we are hearing, that some of the big banks are being told to start to loosen some of the approvals and quicken approvals toward the end of the year, adding to concerns about the evergrande contagion. you do have the china csi 300 up about .3% in late trade, and we're watching a bloomberg gauge of the property developers, down by 2.6% before the bloomberg scoop coming back online after the lunch break, down 1.4%. let's have a look at some of the banking stocks. this isn't going to solve all the problems. we had the head of china hong

kong research telling us that this is positive for developers and for some of these banks, but unlikely to resolve their liquidity problems, all of this coming ahead from the data dump, how all of this is weighing through into slowdown in the economy and what we can expect from the pboc chart, another calling for 50 basis points. dani? dani: thanks so much. now let's turn to another market move, a bloomberg scoop. the sec is allowed the first bitcoin etf's to trade. it would be a watershed moment for the cryptocurrency. let's bring and mark ran field. mrk -- mark cranfield. this is something bitcoin bulls want. what does this mean for the market? mark: well, we already have a large bitcoin etf, as well, but this completes the sweep by

having fts on the futures market. you're offering a wide range of contracts, a wide range of bitcoin trading you can do, futures contract which are pretty liquid. there's already one large etf, but now you will have another one based on an increasingly larger futures market, not just bitcoin. we also have futures, as well. so, all of this is going to generate more volume, more interest, also a recognition that institution ore cryptocurrencies have made their place in the wider market space, really a recognition that they're not going to go away. they're here, part of the landscapes and these instruments are going to be around, part of what most portfolios are going to have to take seriously. it's been taken as a very bullish sign. you can see the bitcoin boys up

.4%, and it may go towards its record high from earlier this year. but certainly it's a sign that they've got more instruments to play with. if you look at what's happening in the futures contract, the spread between the current contract is october. it will soon be in the november contract. between the two is as wide as we've seen so far this year. that's a very bullish signal because it means people are willing to pay even more to bitcoin in november than they are now, so that suggests that they see more upside, so good sign for the market. dani: we're looking at the price of either, so some sympathy moves. mark, if you'll pit it with me, also a lot of strong bank earnings yesterday. how much of that is behind the positive momentum of we've -- momentum we've seen in stocks the past when he for hours? mark: certainly plays a big role because if you look at what the breakdown of what is driving

these bank earnings, a big chunk of it came from dealmaking and trading. these things pose an optimistic view on the economy, certainly in the united states, at least major wall street firms have announced these good results. there would be a lot of money to be made from dealmaking unless people are ready to put their money to work because they thought the economy was rebounding, going to get even stronger in the future. that's a very positive signal. as you were saying earlier, the response is we're seeing one of the best days of the s&p 500 this year. and it's continuing to rise in asia today. the fact that trading is improving is a very positive signal because it means portfolio managers are doing more work on different aspects of the economy. they all perceive opportunity, and that gain is a positive sign for the wall street firm. what you see there is likely to be reflected in the european banks and other banks around the world. all in all, certainly positive

for equity markets. dani: mark, thank you so much. that's mliv's mark cranfield there. let's go to juliette saly for the bloomberg news. she's back and she's excited. juliette: very excited. bruno le maire is calling on the u.s. to drop trade tariffs against european countries after the global deals on corporate taxes. the u.s. is unhappy on french tech levees, which lemaire says will be abolished. speaking to bloomberg, he says the allies have a different approach to china. >> the united states want to oppose china. europe wants to engage china. so there is a difference of view who need to discuss about that because of the strategy question. juliette: president biden says the number of unvaccinated americans remains too high, and he's calling on more businesses to impose mandates. biden also said u.s. health officials will soon decide on pfizer on biontech covid

vaccines to kids age five to 11. >> we're going to continue protecting the vaccinated. this work, this week, the food and drug administration and the fda is reviewing data on moderna and johnson & johnson boosters. we expect a final decision from the fda and the centers for disease control and prevention, the cdc, in the next couple of weeks. juliette: a weather roiling amina emerges across the pacific, setting the stage for worsening droughts and california and south america. frigid winters and parts of the united states and japan, and greater risks for the world already strained energy and food supplies. the u.s. climate prediction center says the phenomenon could continue until at least february. global news, 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg.

dani? dani: juliette, thanks so much, juliette saly in singapore. 7:00 a.m., we will get new car registrations from across the european union, this amid pressures from the chip shortage and with a lot of focus on any increases in electric vehicle sales. u.s. bank earnings continue, gold and sex rounding out the week and lots of u.s. data to digest. retail sales coming in at 1:30 p.m., university of michigan sentiment at 3:00 p.m. it will be interesting to see what the sentiment around inflation has been for that survey. coming up, much more on markets for you, speaking to the cio at flow bank, but also later on in the show, we are going to be digging into this big week for bank earnings. we get goldman sachs later today and talk about what you should expect. we will be speaking to magdalen from morgan stanley, very wise on the bank sector.

can forward to that conversation. this is bloomberg. ♪

♪ dani: welcome back to daybreak europe. i'm dani burger in london. so, it seems the equity bulls aren't in hiding after all. it's all about the dip, by the s&p 500 posting its best day with a range of macro factors adding to investor sentiment. we had very robust earnings reports, as well as a drop in jobless claims and ppi posting its smallest advanced this year. plastic into these markets more. -- let's jump into these markets more. congratulations on the new role, as well. let's start with the earnings picture. we had seen some of the pace of upgrades in expectations start to dwindle heading into this

earnings report. but so far, these companies have been surpassing expectations. what have the naysayers been getting wrong? >> well, you know, it's exactly as you said. it's still early days, but we've seen quite a few strong earnings results across a number of sectors, and i think we've just been underestimating how nimble a lot of these businesses have become, how adaptable these companies have become through 18 months of the pandemic. we know there are challenges with costs, with labor, with supply chains, ng, and companiee adapting. i think we're going to have a much better than expected earnings season for the third quarter. we also had a lot of delta worries through august. they had been able to dissipate faster than expected throughout september. so the outlook is certainly improving, as well, and i hope guidance will follow that. dani: so esty, then, when we do

here about companies, apple this week, we learned that because of the supply chain issues, they might have to cut some of their production. shares selloff a little bit. in those type of situations, because you are more optimistic, you go in and buy the dip? esty: generally speaking, buying the dip has been one of our strategies and has been a very successful strategy. it's been a difficult weeks for investors. we have seen a bit of seesawing and markets. being

to be stronger than the positive. but again, expectations have adapted, even if you think of the apple production, the numbers that the street was expecting aren't that far from where apple mentioned. so, you see that it isn't maybe as bad as it's been painted out to be. and so yes, i think going forward, we still like the cyclicals. we think there's still more room there. we still think that having a bit of a barbell approach and having those tech and defensive's will continue to work, so still buying the debt. dani: it reminds me of yesterday. we spoke to research affiliates who were saying, making his case for value, saying the spreads between value and growth is at an extreme more so than the dot com bubble, and he was recommending fill up your basket with value as much as you can at this moment. how bullish are you at this moment? how far are you willing to go into that trade? esty: maybe not that far in the sense that i'm not sure we're going to close that valuation gap entirely. but there's certainly more room to catch up. we're seeing vaccination rates accelerate everywhere. we're seeing reopening improve. as i mentioned, some of these supply chain stories are starting to look like maybe the worst is behind us in the next

six months should gradually see some improvement. you're seeing steps being taken in that direction, so there definitely is room for cyclicals. obviously, still in energy, with the winter coming, and some of these shortages there. but as i said, a little bit of a barbell approach, and a lot of it is also a question on the investor horizon. dani: we'll get to the energy story in just a bit, but i am curious what your thoughts are on the seeping inflation story into consumer sentiment. we've seen some surveys reflect higher levels of inflation. at one point -- what point does it dampen outlooks? esty: i think the first thing to keep in mind is to never underestimate the u.s. consumer. we've seen, time and again, an ability to continue to go out and spend and consume. so, i would always keep that in

mind in this story. the other thing is, when you have these consumer surveys, consumers tend to react more than economists or so because you have that reaction of what you think you're paying more for, so there's a little bit of a perception, as well, right? what you're paying to fill your tank, what you're paying at the grocery store. and some of these elements have become more expensive, so it's not a surprise to see that coming into the consumer sentiment. but the reality is, it's probably still transitory, but it is going to stay higher for longer than the inflation story. again, if you're looking six to nine months out, you have to think that improvements are going to come, so you have the reaction sort of immediately in your survey. but if you think longer-term, i'm not worried about spiraling inflation either. dani: you've brought up the "t" word, i didn't go there, but

let's go to transitory. i much is team transitory getting right now considering the strong data we've gotten? esty: i think it's a question of time horizon. we know that a number of the factors that are leading to these higher inflation numbers are going to dissipate. they're not dissipating as fast as we would've thought or we would've hoped six months ago. inflation is clearly still here. it's going to last a little bit longer. but a number of these factors i don't expect to continue to rise six to 12 months from now. that said, inflation is going to be higher for longer, and some components are probably going to say -- stay more expensive for longer. so, it's a tricky balancing act, but i think most of the central banks still seem to be on team transitory. and from a market perspective, that's going to matter. we're not going to get these emergency rate hikes from the fed or elsewhere, or at least

not in europe either. we've seen a couple elsewhere in the world. but the fed probably not going to be rushed into this because of this transitory queue. dani: team transitory still in the game. you're going to stick around with us. much more to cover. now coming up, eu leaders are poised to authorize emergency measures to blunt the impacts of the energy crisis on households and businesses. w'ell talk about energies and commodities. this is bloomberg. ♪

♪ dani: welcome back to bloomberg daybreak: europe. i'm dani burger in london, just past 6:23 a.m.. european union letters are authorizing measures to blunt

the impacts of the unprecedented energy crisis on the most vulnerable consumers and companies. all of this comes as we've been seeing surging commodity prices, and this is the bloomberg commodity index at an all-time high. it's not just this. it's not just energy commodities. it's lme metals at an all-time high. let's dig into this more. still with us is esty. you'll have to forgive me. i think i placed you at a different company. you are still getting used to the new title. let's stick with this energy story. we see the bloomberg commodity index at an all-time record, the lme record index at an all-time record. how much of this is due to pure speculation among traders versus the fundamental structural issues that the sector is facing? esty: it's a combination of both at this point, but there are certainly structural factors that are happening. we're seeing different stories across different regions, but a lot of them are happening at the

same time, which is leading to this global -- not just energy, but energy crisis to start with, and that is feeding through into some of these other categories, including that metals. so, there is a combination. and now that we know there are these factors and we know that we're coming into winter, of course you have some speculation coming on top of that. but it is here and i think it is going to last a little bit longer. dani: so, if it does last a little bit longer, how does that factor into your cross asset allocation? esty: as you know, we tried to think three to six months out, so we're trying to look through most of the winter and into what spring will look like and improvements there. we heard from a lot of different areas that there are going to be steps to alleviate these energy needs. and again, in the next three to six months, this should improve

in any case. so, it's an example of what can happen with these policies that can be implemented very quickly. from a portfolio sector, we like cyclicals. we liked energy for sometime. that can continue. but we don't think this is going to derail the recoveries -- i'm sorry, i didn't hear that. dani: well, i'm just curious in terms of you like cyclicals. you still like energy. but how much further, how much more potential does this sector have to run? we learned energy etf's have seen some of the biggest demands that they have on record. how much further can it run if a lot of it is being driven by these commodity prices which, as you say, might sort themselves out post winter? esty: so, for now, we still have discrepancy between the oil price and the energy sector and how some of these companies have performed, so there's room for the energy sector to continue to catch up. that's especially the case in

the european energy sector, which is still behind the u.s. so, definitely room there. for a lot of these trades, it is a question of investment horizons. for now, i'd still be in it. we'll have to review that. but i don't think it's really in question for now, and there is this gap that there's plenty of room to fill with stocks catching up to energy prices. dani: less than a minute here, and perhaps a complicated question for you in just less than a minute, but you're pretty optimistic on these markets. are there any areas that are of concern to you? esty: well, we have to keep an eye on the inflation trends, supply train trends, the tax situation in the u.s. with the infrastructure package. and i think we've been ignoring a little bit what the tax might look like that comes with it. and of course, we kind of kick the can down the road, but we're

going to have an interesting december with the debt ceiling, with these negotiations between democrats and republicans, so still lots to keep an eye out for. dani: absolutely, and he certainly help us do that. thanks so much for joining us. now up next, we're going to talk u.s. banks. goldman sa (announcer) if you've struggled to lose weight, you might think you were born with a slow metabolism, but what you may have is insulin resistance. fat becomes trapped inside your body and it becomes very difficult to lose weight. now there's golo. golo works to reverse the effects of insulin resistance, increase metabolic efficiency, and targets stubborn belly fat. join over two million people who have found a smarter way to lose weight and get healthier. go to golo.com and change your life. that's g-o-l-o.com.

♪ dani: good morning from bloomberg's european headquarters, where it's just on 630 i'm a.m. in the city of london. i'm dani burger. this is daybreak europe, and here's what you need to know. the s&p 500 posts its best day since march. goldman sachs rounds out the

week for u.s. bank earnings after a surge in pandemic dealmaking for rival u.s. lenders. and a watershed moment for crypto, bloomberg learns the sec is poised to allow the first u.s. bitcoin futures etf to begin trading. happy friday to you. you made it to the end of the week and the bulls are back in charge. yesterday in your american benchmark index, you saw the biggest gains up sometimes since about march, the third biggest gain of the year and we are continuing that positive action so far this morning. we're up .4%, that more positive attitude driven by more earnings, driven by softer ppi data, also driven by better jobless claims. that also means some of the havens like the yen moving lower today, 2018 low versus the dollar. meanwhile, looking at copper just below $10,000 from that rally, losing steam this morning, but we are seeing

commodities like metals and other commodities at an all-time record as some of that supply crunch really weighs on the sector. finally, u.s. 10 year yields up nearly two basis points. now again, a lot of what's driving this positive action are wall street earnings yesterday, which were very robust when it came to the banking sector. goldman sachs also reports the focus will be set on investment banking fees. they're expected to soar 140 percent at morgan stanley, bank of america, and citi. let's dig into this. joining us is the head of vanke's research at morgan stanley. thanks so much for joining. i want to start on these huge earnings profits when it comes to equity trading. we saw a 40% rise at citi, for example. what do you make of that when banks are trying to tow this line of taking on more risk, and proving shareholders that they can bring the returns?

>> yes, i have to say the third quarter has been a surprise so far, particularly on the investment banking side. and you know, for me, we are at the stage of the economy where the m&a volumes continue literally reaching all-time highs this year. and that's across factors. technology leading, but also your financial sector seeing a huge transaction. of course, on the equity side, trading very, very strong. there is still a level of activity which is out there. there is still a level of volatility that the banks are taking advantage of. and i have to say, i think some of that is actually likely to continue. dani: yeah, i guess that's the big question here. i feel like it's a question you and i have been discussing for maybe the past year, when the trading prop has started to roll in. just how long can they last?

we heard from baking executive in prior quarters, this might be as good as it gets. magdalena: yes, and i think we are looking for the peaks. that's correct. whether it's the first quarter or the fourth quarter, we've heard from u.s. banks, it still pipelines are strong. so i do agree that we're reaching the peak. it was quite extraordinary for 2022 and 2023, at least on our analysis, that we think the activity is likely to continue at the levels of kind of 25%, 30% higher. that's what we've seen pre-pandemic. so i think cyclically, we're almost there. we're either there or almost there. but structurally, that activity continues. there's a lot of things in the background. there's a deepening of the credit market, particularly in europe. in europe, also we've got this tremendous level of investment needed for transition. that's ending in markets, as

well. and activity, i have to say, there's tension. it's inflation transitory, is it not? what is going to happen to growth? there is mass disagreement in the markets to continue to see this activity coming through. dani: yeah, there certainly is a lot of disagreements. that's a good way to put it. one of the over overhangs here is the loan growth picture. looking at some of these numbers we saw at morgan stanley, consumer loans down 2%. if this doesn't pick up as we perhaps reach some of the cyclical peak of the trading revenue side, can we still be bullish on banks? magdalena: i think overall, we can. but let me may be address the last question. you're right. we're waiting for the inflection in long growth. we are just as much in the west as we are in europe.

and i have to say that, for us, it is actually 2022, because i think that as the economy kind of goes through supply bottlenecks, the supply kind of reopening, there is a sort of investment that still needs, that seems to come through. investors are likely to see the working capital demand also picking up. but it is, i think, next year, because to be fair, the corporate will find it through the government guarantees program back in 2020. but you know, for me, the reason i'm quite constructive on the banks is the earnings situation is still looking very into next year. for europe,, for example i think the earnings were almost double in 2021 for the whole sector of about 95% earnings growth. that's, of course, super cyclical.

but in terms of 2022, 2023, i still think etf's can grow. dani: it's interesting, though, because with this positive, constructive view of banks,what's happened at these banks is they've had to hire more. they've had to beef up their debts. and they've had employees overworked that they're now paying them more to try to compete and keep them around. what does the cost picture look like right now? magdalena: so, there is no doubt we're going to see cost inflation on the wage side. i think from one perspective in the u.s., in the investment banking, it's the inflation which is driven by this, so i always look at this as the right inflation hike. revenues are growing. but i think there's also kind of a bigger picture in europe, where i think that next year, in the more universal banks, we're likely to also see inflation i

think driven by the increasing inflation, increasing cost-of-living, and maybe even unionized type of agreement. dani: all right, i'm afraid -- got it. really great to have you on. i'm afraid that's all we have time for. fantastic to catch up with you on this friday. enjoy the rest of your day and weekend. let's get over to the first word news with juliette saly. hi, jules. juliette: hey dani. in a watershed moment for cryptocurrency, u.s. currencies are going to allow them to trade next week. unlike etf applications the ftt previously rejected, it is based on future contracts. the etf's proton -- profiled said they provide "significant investment protections." french finance minister bruno le maire is calling on the u.s. to

drop trade tariffs against european countries after the global deal on corporate taxes. the u.s. is unhappy on french tech levies on tech firms, which le maire says will be abolished. speaking to bloomberg, he also says the allies have a different approach to china. bruno: the united states wants to oppose china. europe wants to engage china. so there is a difference of view we need to discuss about that because it's a clear strategy question. juliette: bloomberg has learned to china is loosening restrictions on mortgages on some of its biggest eggs, adding to signs of concerns of contagion from the evergrande debt crisis. they told major banks to accelerate approval of mortgages. lenders were also committed to sell securities back by residential mortgages. a banks he painting has sold in london for a record 60 million pounds. previously known as girl with

balloon, the piece was partially shredded as an artist prank after it came to auction in 2018. rename love in the been, -- love is in the bin, the auctioneer joked he was relieved that the artwork "was still there." global news, 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. viviana: --this is bloomberg. dani? dani: juliette, thank you. coming up, we're going to talk about the debt securities firm in south africa, a multimillion dollar deal, the idea to develop renewable power on the continent. we have that story for you next. this is bloomberg. ♪

♪ ♪ >> whether it's heat waves in canada, storms in texas, or flash in indonesia, no country is immune from extreme weather events fueled by climate change. but not everyone is equally to blame, and not everyone can afford the massive costs of cleaning up disasters like this, or just as importantly, chasing their economies away from these sorts of things and embracing more of these. take africa, for instance. as a whole, the continent is only responsible for around 3%

of global greenhouse assess. yet it's the most vulnerable. take the cyclones in mozambique or the droughts and africa. they can impact food production and increase the risk of malaria. some argue that wealthy nations -- were able to burn fossil fuels like coal. now the goal is to keep these sources in the ground to stop temperatures rising even more. but what if you need to tap those fossil fuels to cheaply industrialize your developing country? well, joe biden's doubling of the u.s. climate pledge to $11.4 billion is a step in the right direction as global problem needs a global response. and that's what the united nations framework convention on climate change wants to solve. how to get rich countries to agree to a plan to help poor

countries pay for solutions. over a decade ago, wealthy countries promise that by 2020, they would help to raise $100 billion a year for projects to combat climate change in poor countries. but support was lackluster, even before the pandemic hit. and once that took hold, governments worldwide shifted their focus to emergency response packages to cope with the shock of the outbreak. another challenging element is that most of the money raised so far has gone to green technologies like wind turbines and solar panels, and to mitigate climate change. but fewer funds have gone to resilience measures, like flood banks helping countries adapt to severe weather. u.n. secretary general has said the adaptation and mitigation money should be flipped 50-50. developing countries have noticed the failure of rich countries to deliver on their pledge. and the inequality of the

coronavirus vaccine rollout has heightened tensions. without the promised funding, they say they are unable to announce carbon cutting goals, which are desperately needed to keep global warming below 1.5 degrees celsius. even if the $100 billion goal is met, the reality is that trillions, not just billions, will be needed to pay for the green transition. ♪ dani: bloomberg's just shankman there looking at the key issues going into glasgow in a few weeks time. let's get you a quick check on the crypto market. after bloomberg learned the sec is not likely to block a bitcoin etf that's due to start trading next week. now, this is an etf that would attract bitcoin futures, so not the actual cryptocurrency itself, rather the derivative contract. but that was enough to put it client just below $60,000. you can see separately moves

from other cryptocurrencies, as well. now, approval of a bitcoin it tf is something the -- etf is something that the bulls were hoping for. what they wanted is the etf's based on the cryptocurrency itself, not on the futures contract. but for many, this is a step in the right direction. of course, it doesn't trade until next week, so it is still possible this could end up not being approved. it could be blocked, but that would be quite the last-minute reversal. so all signs pointing to approval of bitcoin pictures. again, your bitcoin currency right now trading just under $60,000. now, coming up, shifting gears, we look at the state of the auto industry. those are out at 7:30 u.k. time. that's next. this is bloomberg. ♪

♪ dani: welcome back to "daybreak: europe." i'm dani burger in london. let's get a quick look at the european futures session. very positive day, this is after we saw a gain of more than 1% yesterday, the biggest gain in about a month. it was more strong on wall street, where it was the biggest -- third biggest gain on the year, earnings season rolling on so you are looking at a ftse 100 index up .3%, much the same for the dax. let's look at the key events to watch out for today. around 1:30 p.m., goldman sachs reporting earnings. we will see if they keep up with rivals. later this afternoon, angela merkel will be leading -- meeting with the belgian prime minister and brussels as coalition talks rumble in berlin. throughout the day, brexit talks continue through the u.k. and the eu over northern ireland

protocol. the chief brexit negotiator has voiced optimism that the two sides will arrive at a solution in the next few weeks. now, i also want to just bring breaking lines that are just crossing the terminal about toyota. so, we've known that there's been production issues when it comes to a lot of the carmakers. toyota, their global output is said to be 50% lower than what they had planned for. -- 15% lower than what they had planned for. again, 15% lower than what had been their plan. along with these numbers in about 10 minutes time, we're going to get numbers from the eu that say how the auto industry has fared in september, several headwinds coming together to hit the industry at a time where the economy is in a period of recovery after the pandemic. we're joined with craig trudell. let's start with those toyota numbers, nikkei reporting their

plan is 15% lower than what their plan had been. what does this mean for toyota? craig: so, it's obviously a little hard to assess the plan. whether or not the plan has been a lower bar for them. but what we do know is that this is a company that was sort of on top of things, relative to some of the other biggest carmakers in the world. and the fact that they came out and really sort of were one of the early wants to say that september was going to be really disastrous for them, that was really unsettling for the broader industry, and it portended really tough times. we really had a tough stretch recently with a back end process in southwest asia, and that's been a pinpoint we may not have seemed to have lived for the companies in the next few weeks. dani: so set the scene for us for eu carmakers, because we get those numbers out today. what are we kind of expecting heading into these figures? craig: i think just based on

what we've heard from the companies, what we've seen in terms of, it's rare that a day goes by where we don't hear of another car plant that's gone down for some downtime or that's going to be idled. this is going to be really tough. and inventories are depleted, the expectation being that chip prices is something that's going to be with us well into next year, potentially for years to come. and so we're in a state now where the demand is actually very strong, but the amount of inventory on the ground, the dealerships are really hurting for inventory. dani: so if this is an issue that's going to stick around, indeed it has been longer than expected, what position does this leave automakers in? what can they do to cope with the shortage? craig: it's actually really interesting. profits for the automakers are going up. they are prioritizing the most profitable models in their lineup that's actually helping profitability's. they're able to pare in

marketing incentives. it's the part makers that are getting hurt. they don't have those expenses that they can really pull back. it's also really hurting economies. we heard yesterday that germany, the expectations for growth this year have been pared back, a lot of that having to do with supply issues. we've seen weak numbers for the u.k. and some other economies, or i think that's where we're going to see implications for the chip shortage, where is the carmakers are actually getting through this relatively ok. dani: and we've seen consumers willing to pay higher prices, as well for the cars? craig: so far. there is a question of how far they're willing to swallow this. we are seeing astronomical average prices. but the private -- problem is you can't turn into a used car market. in normal times, you would say new car tires saying forget it, i'll go used. we're seeing such a broad dislocation in the market that the used car market is also

really, really difficult. you're not going to find a bargain there either. dani: you also have to worry about paying more at the pump, as well. has this really pushed ev sales to grow at all? craig: it absolutely has. i think there's organic demand. but manufacturers, not only are they prioritizing their most profitable models, it stands to reason that they would want to prioritize electric vehicles, as well. they need to sell more of those to be compliant with very tough rules here in the eu. and it's interesting. a year ago, there was concern about whether these companies were going to meet those rules. we're not hearing much concern about that now. dani: how does that translate into costs? what does that look like? craig: i think at this point, electric vehicles are still at a premium, still generally expensive relative to internal combustion engines. but the expectation is with battery cost coming down, innovation, and the increased

scale of the amount of production coming on for batteries, that costs are going to come down. it is going to be something interesting to watch from a labors perspective, from the sheer. fewer number of moving parts there are fewer workers needed to produce those powertrains, so we will see some real pressure on jobs as a result of this transition. dani: craig, thank you so much. i know you have a very busy morning. thank you again. now let's get a quick check on your markets yet again. we're looking at a positive session heading into the european open, again about an hour and four minutes away to be exact from the s&p 500 futures, up .4%. that's after they gained nearly 2% yesterday. we saw huge demands on those indexes. the bulls squarely in demand, rich ross at evercore says the set up for the bull market is still there. it has oversold the structural issues that might have deterred

the bowls not there anymore. they're happy to go there and buy the dip. we are seeing a continued flattening despite some of the inflation worries, but that is somewhat reversing this morning. we're looking at higher earnings yields, up 1.5 basis points, as well as a 10 year yield. that's it for us on bloomberg "daybreak: europe." the european update is next. this is bloomberg. ♪

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anna: good morning. welcome to "bloomberg markets the european open." mark cudmore joins me in london to take us through the market action. the cash trade is less than an hour away. here are your top headlines. global stocks rally amid earnings optimism