♪ >> good morning from bloomberg's european headquarters in london, i'm tom mckenzie. these are the stories to set your agenda. key u.s. data from the fed in minutes. a dovish hike. underwhelming intervention. oil holds again after a coordinated release of strategic

crude reserves from the u.s. and other nations falls short. jamie dimon says his bank is likely to outlast china's policy. will it affect their business? that is a more important question for jpmorgan morgan. three rate hikes by the fed next year as we look ahead to that data deluge later out of the united states. even the's, i.p.o.'s and some expensive soflt ware names as well. you can see a leg lower for that section of the market. hedge funds settling down. is this healthy? is it a sign of the market

adjusting to a higher rate environment? will it be sustained? let's check in on the marbles. red on the screen for asia for the third day. japan opening after a national holiday. the nikkei is down by more than 1%. u.s. futures looking flat with a mexicoed close yesterday. currently at 162. yields slightly lower. consumer and durable goods as well. prices higher by almost .2% for brent crude. around the release of reserves. we wanted to focus in on new zealand's currency. hiking rates yes but by .25%

bringing the rate up to 7.75% after half a basis point move. the markets seem to be expecting a larger hike of half a percent. back to that jpmorgan morgan story and the c.e.o. jamie dimon joking that his bank is likely to outlast the chinese communist party. he reiterate his commitment to the country. >> the communist party celebrated its 100th year. so is jpmorgan morgan. i'll make you a bet we'll last longer. i can't say that in china. tom: let's get to bloomberg's senior finance editor. what are the potential impacts of dimon's comments? has there been any reaction out

of china so far? >> that is an interesting comment, especially in a year questioning whether the communist party is a permanent fixture. it is hard to gauge the potential impact. we have had jpmorgan morgan and others making a big push into china now. they are looking at, you know, they are looking at getting approvals for expanning in wealth management. jpmorgan morgan earlier this year got approval to gain 100% of its securities venture. there is a lot of business risk at stake for the bank. in terms of impact, we're not seeing any official comments or anything in social media or from local media. they have reported on some of his other comments from the same panel. it is a very sensitive topic to bring up in china.

tom: absolutely. we know what happened to paul donovan at u.b.s. over congressmens around hawk inflation a couple years back. oil is holding onto gains after a coordinatedded global release of strategic crude reserves failed to meet expectations. dan, why did the release underwhelm so much? >> really it was built into the prices. exceeded before the release. when it was announced it was very underwhelming. for one thing, all the other countries involved, japan, korea, china, the u.k., have given small, almost nominal amounts for show. the u.s., 50 million barrels sounds like a lot except 32

million will have to be returned eventually and 18 million more will be spetd up. after all of this talk, traders looked at it and went eh. saudi arabia may be getting upset with this and stop increasing production with the opec partners. the u.s. is throwing a big water balloon at them. tom: i like that analogy. a water balloon. social democrats in the application of germany are report to be nearing a agreement to form the next government. it could be sealed today before getting put to a vote. germany weathers the worst

outbreak of covid since the pandemic began. not chancellor yet but has his first crisis on his plate. do we have a sense how he is going to deal with the pandemic and what it means for the coalition and the work of these three parties? >> we're possibly just hours away from the government coalition to take shape. you could argue the negotiations have gone better than expect and way quicker than expected. if you remember when the vote happened in germany september 26, we thought it would drag on for months. could be the next german chancellor in just two weeks. the timing and context here is key. he already has a crisis ahead of him. he is going to have to deal with the pandemic. the fallout from a crisis as bad

as it has ever been. infections going through the roof. there is a lot of pressure on the next chancellor to put together a cohesive plan to deal with this. perhaps looking at measures that are brand new, that we have not seen take hold in this country. there is a lot speculation by the german media, who'll be the next health minister and potentially the coalition is looking at more restrictions but also more checks and controls when it comes to vaccination and public transportation. ahead, a lot of work to get done in just a matter of a few weeks. tom: possibly just two weeks away from a new chancellor in germany with a major issue to have to deal with. thank you. let's get to bloomberg first word news now. the kiwi falling after new zealand hikes its bench mar --

mark rate. rating borrowing cost business 25 by a points ises. the central bank's latest forecast shows it expects to lift the cash rate to 2% by the end of 2022. that is a year sooner than projected. the turkish leer ea steady as plunging to a record low of more than 13 against the dollar, as much as as 15% yesterday. in a statement, turkey's central bank said the currency moves were completely detached from economic fundamentals. astrazeneca is opening labs for its covid products at a new u.k. r & d site this year. the c.e.o. said the vaccine

could be the reason the u.k. is faring better with hospitalizations than europe. he discussed the durability of the vaccine. >> likely this pandemic will be a pandemic -- it is more orless a pandemic in some areas of the world could be like to flu and come back on a regular basis. the question is do you need to be vaccinated every year or two years? we done know that. depends on the durability of these vaccines. tom: china calls on media to stop the talk about peng shuai. a spokesman said the case should not be politicized. peng was seen in chinese state

media and the international olympic committee. coming up, traders are weighing the economic risks while awaiting key u.s. data later today we discuss all of that. everything is moving the markets next plus we have eyes on spacex and nasa intentionally crashes, yes, crashes the spacecraft into an asteroid. you can see the pictures there live as we prepare for this. we will bring you more on the show and follow this event. this is bloomberg.

tom: welcome back. this is bloomberg daybreak europe. i'm tom mckenzie in london. clamping down on inflation has set the stage for policy makers and is posing a test for

markets. fed minutes will give investors a read on price pressures and the economic recovery. joining us is the head of global credit at royal london asset management. thank you for joining us this morning. what are you going to be looking at this terms of the data out of the u.s. that is going to form your view and the fomc's view about where they need to be when it comes to rates? >> clearly we have had -- the data is quite clear in terms of some of those elements. oil is down but it is a demand shock element which is more important at this juncture. so it's really -- we're trying to get a -- how much we have transmitted through. will wages really increase? tom: ok. so looking at wages, is there any data that you're seeing that suggests that wage inflation is

for -- stateside? >> we haven't got the details. a lot of data is -- you have to look at some of the employment. the rate of the five million jobs that have left, over half are not going to return. that is pretty material. also i think we have sometimes underplayed the ill pact of the immigration debate and up to 2 million jobs therefore may have been lost by a lack of innovation in the -- immigration into the u.s. as well. we need to find out how that is transmitted into wages going up.

tom: clearly this is a challenge for jay powell. the markets surprising in as many as three rate hikes next year for the fed. are they getting over the? >> three weeks ago they only priced in two. clearly -- you take a step back though, we have a huge amount o. this is a very different type of stimulus than we saw in the jfc. the difference is really that we have had fiscal stimulus direct -- and therefore that is -- as that demand shock starts to feed through, actually the fed is going to have to hike. i think it is a good thing that the markets have been able to move now but quickly over the

last few months without too many eruptions in the market pricing three hikes in. three may be too much. i suspect we're probably going to be a little bitless than that. at the end of the day, the fact that the market is going to -- without interruptions is a good thing. tom: three might be too much. possibly two is more realistic. that's your view. in terms of the extent to which the economy, the u.s. economy can handle higher rates is there a level where it becomes a strain on the economy, particularly given the very high debt levels? >> the credit market, this is really the most perfect environment we have ever had. absolute yields for corporates are the lowest you see. that means that we can really stomach much more significant

rate hikes than the three or four being priced in. i don't think we're going to get there. but certainly the market is more than capable of absorbing that. tom: 10 or 15 years ago we had a much more significant interest rate environment and the fact that we have been able to -- corporates have been able to -- the u.s., rates haven't been around -- have been able to really do really well and leave the in an environment are wrait raits have been as shows it is not something to worry about. tom: the former new york fed william dudley said you could be seeing rates in his view as high as 3% to 4% by the end of this rate hike cycle. what'll that mean for the credit markets?

>> 3% or 4% over a period of time are currently working through. that would not derail the credit markets. they would be healthy. having an ultralow rate environment is not -- you start to -- from excesses doing this. a little bit of a pullback from a credit perspective. when your debt to g.d.p. is -- having a slightly lower nominal rate is quite important. tom: ok. the resiliency of these corporate balance sheets. stay with us. let's bring you live pictures now of spacex.

this joint spacex-nasa launch. we are showing you live pictures on the screen. a dark mission from the space core space out in california. alex, what do we know about what spacex and nasa are trying to achieve with this outlandish mission? >> he is going to send this device up to -- two asteroids that are very close together and collide into one of them. it makes it easy r to track the movement of the other one. if you impact one and it changes the orbit around the other.

>> should anything -- 114 meters in diameter, should that come within close range of earth any time then they would be prepared and know how to handle it. there is no sign of that happening in the next century but it makes that risk diminished. tom: this is the first time we have ever seen something like this. is that correct? >> absolutely. we don't have perfect data on the number of asteroids coming close to earth. eight years ago all of a sudden something hit an area around russia and injured some people. >> on the way. the first ever planetry defense mission. >> vehicle downrange.

tom: ok. that is the spacex launch then of the star mission in partnership with nasa to test whether or not you can push asteroids out of the way from hitting earth. this is the first time it has ever happened as alex webb was telling us. how long is this process going to take and what is involved exactly? >> you can see it headed north. it will be sometime next year, likely in september that it actually meets these two asteroids. there will no b no question whether it has been a success. the ability to change the or be bit by a few minutes will be successful.

we would like have as much warning as possible. these things do take time. it won't happen within week as perhaps hollywood would have you believe. it is going to be a year until we until it becomes in orbit of these two asteroids. tom: we're watching this. still have images of bruce willis in my mind as i think of trying to knock asteroids away from the either's surface. we are watching live on bloomberg tv. alex webb. thank you very much indeed. the head of global credit at royal london asset management. i'm not quite sure how to segue from spacex and allbl london as.

interplanetary. give us your sense of where the opportunities are. are you focused on investment grade as yieldstment grade as yields rise or is there still an opportunity in high yields? >> inflation adjusted, high yield is the only game in town at the moment. i think that is important. i think the important. i think the that the pace of rate shieks not going to detrail investment detrail inves rate credittment markets either here. incremental money should be -- the high yield. the higher markets are really in an absolute -- we're going to hit the lowest rate we have ever had in the next few months and you know, in the markets, default risks really do detail the terms.

the interest rates are much, much lower. tom:m: tom: is asia still in focus when it comes to high yield? >> it is relatively small relatn terms of the overall global market. it is going to be the one areaa of trouble. defaults in chinese property we're all trying to work out what the range is going to be. it is going to be double digit, very convincingly over the next few mons but in the scheme of the overall credit markets, chinaachina is relatively small. the impact on global economies. the broad develop market default rate is really, really bought in we the stimulus we saw last stit year. we had almost half a trillion of

refinancing just this year. that is 25% of the global high yield market and we a similar level last year. within six months we could have haddhad more than half the high yield market to lock in much lower rates. tom: do you havevetom: do you hs at this point? >> i think -- preference at this point? >> i think in the last year energy the last year ener was an easygy place to invest. now we're getting to the point where it is not that that great. there scaling back toward moreae defective sectors within credit markets makes a lot of sense. the oil markets it is a lot harder to call the oil price

from here. tom: you talked about china. do you get the sense that markets are maybe underestimating the economic drag that a slowdown in china could have more could broadly have more for the global economy? >> i do. i i think markets have short memories. but markets in this casecase remember what happened last and the last sort of china slowdown. markets got over tight about it. at this point they are slightly underestimating the magnitude of change going onnchange going o r itn is the particular slowdown n the property sector. this is almost more important because it has become so significant to china and the demographics in china are not great. the median sainl now above the u.s. -- age is now above the u.s.

tom: we're running short of time. we appreciate your insight. thank your insight. thank you. london royal asset management. coming up, it is shattering all kinds of records. the turkish lira will be focused on

tom: good wednesday morning from bloomberg's european headquarters in london. these are the stories setting your agenda. key u.s. data from the fed. a dovish hike from the r.b.s. underwhelming intervention. oil holds a gain. strategic crude reserves from the u.s. and other nations falls

short. plus jpmorgan c.e.o. there is a loss. we enter the midweek session of course. you're seeing on the screen. futures in the u.s. and europe are pointing to modest gains. i want to show you what's happening with the chart. the rational of president biden to intervene on the oil markets by releasing reserve with india, the u.k. and china. this is why biden has acted. prices at the pump in the u.s. have been rising at a fast and significant clip. consumers stateside, we have seen in the past this can have a

political price and impact in the u.s. this is what biden is attempting to do. pe actually made a call to try to encourage those oil prices and companies to reduce their prices at the pump as he seeks to pressure these prices lower. brent is at $82 a barrel. asia is down by .3%. japanese equities weighing after a holiday. u.s. 10-year yields are still off after a rise of 4 or 5 basis points yesterday. brent is up .3% of a percent in the markets. the new zealand dollar as well. the markets describe more hawkish hike, half a percent possibly with the expectation. our survey thought there was going to be an increase of a quarter of a percent.

that is what you got. looking at 2% by the end of 2022. ok. let's switch focus from the new zealand dollar and the kiwi there to the turkish lira. it has shattered all kinds of records. the currency is stable today but we'll let's see how long that lasts. young us is an fx market analyst. thank you for joining us this morning. is there a technical level that will support the leer ea going forward or is this free fall going to be see more action in the days and weeks ahead? >> it is difficult to say. i think it was only going to be a matter of time for the lira to go through that given the high inflation. central banks, growth combating

inflailings and a general mistrust. on top of that, we have higher u.s. rates, falling capital out of turkey. hitting that 11 -- is what is going to happen to it peace in? the 12, 13 level is huge. markets are skeptical that it is actually able to push back on the political pressures getting from erdogan. and then rates will remain lower for a longer time. definitely putting pressure on the lira. >> ok. that skepticism some would argue is justified as you touched on given the application of the central bank. we know that he had a meeting, a call with the central bank governorror. illustrate for us and remind our viewers to what extent this is erdogan's central bank and what the mechanisms are they have to

push back if they can do that. >> yes, there are few real scenarios as markets can expect. pushing back on that on face with inflation to at least moderate somewhat beyond what we're seeing, the initial with the surge in energy prices. that would be one scenario. the other scenario is that it continues to lower rates and this would be disastrous for the lira. looking at markets for the past 48 hours. even then if the cbrt would choose to push back on this political pressure, markets would still be concerned that it would be followed by another

replacement of governor along with 10-20 other cbrt members. which is a big concern for the cbrt. tom: we have seen that one before, haven't we? what is the lira at 13? what does that mean for the economy of turkey? >> first and foremost, inflation without a doubt. inflation. of course there will be more growth and more employment which is what erdogan also mentionedded in a speech earlier this week. that will naturally happen with policy like this. but in the real term it doesn't mean that much for the economy if there is going to be inflation. and the central bank is combating those high levels. beyond inflation, i think instability is -- this is all going to weigh on erdogan's popularity really. elections coming up in 2023. question is can he even get that

far? tom: what is the connotation risk from the turkish lira -- contagion risk from the turkish lira? >> remember that the cbrt is cutting rates at a time when all other emerging markets are hiking. that is definitely putting pressure on the lira. i think inflation could filter through. those largest trading partners are germans, for example. as for emerging markets, i think the biggest risk of contagion is sentiment as a whole. towb in where near as aggressive as what we're seeing. tom: ok. thank you very much for joining

us and breaking down what is happening with the turkish lira. let's get the bloomberg first word news. german chancellor angela merkel held an emergency meeting last night with the leaders of the next government coalition covering escalated covid cases. she said the latest virus surge is worse than anything germany has experienced so far. data from the health ministry suggests the pace of vaccinations has doubled in the past two weeks. the u.s. is set to release 50 million barrels of crude from its strategic reserve in concert with china, south korea and the u.k. it comes after weeks of lobbying by president biden. opec nations warned they could respond by canceling plans to boost their crude output.

sources tell us 401 (k) r is considering boosting its order for telefonica italia. they said the bill was too low. it had received a e preliminary bid of 5.5 per share. vivendi owns about 25%. that is your bloomberg first word news. coming up, jpmorgan morgan's jamie dimon joking that his bank is likely to outlast china's communist party. will beijing see the funny side? we have that e story next. this is bloomberg.

>> one of the reasons we built up our information to china in 2020 was because we saw china's response to the coronavirus crisis was much more responsible from a policy point of view, fiscal policy and monetary policy. than many other countries around the world and we thought ok, maybe china is going to become the new germany or switzerland, known for its monetary discipline and fiscal discipline, but what happened in november of that year was somewhat startling. the episode with jack ma and watching how he and many other executives who had created incredibly, rapidly growing and exciting companies, they basically were told and maybe there was some reason for it,

but you know, you're not welcome there anymore. you go off and do some charitable work or whatever the message was so that is what they are doing. we became concerned about that. while that kind of rhetoric and activity is taking place, so you're right. we pulled away very early out entirely out of our flagship, not out of all of our specialize it portfolios because in autonomous technology, for example, they have low margins. very friendly from a capitalistic point of view. they are pushing services in tier three an tier four cities which is great. they were regulated by one regulatory crackdown after another. we didn't know e where it was going to stop. now wee we see an opening up. you can't tutor children after

school but you can tutor professionals so now there is a little bit more give there but we think the evaluation of the chinese market has been hurt significantly by this and the way the chinese market will have to grow and stock also have to grow is if the underlying companies grow. once we reached the right evaluation structure and haps perhaps we have now, i don't know, we'll be listening to what the chinese government is suggesting that it wants next and we'll be listening to what the companies are doing and watching what they are doing and we'll act accordingly. the other point there is we have heard many investors say oh, china is uninvestable. we don't think that is true. we're just waiting for the evaluation dust to settle.

and to make sure that the incentives for growth re-emerge and china is a very determined country and when it puts its mind on growth, that's what it gets. tom: ok. talking about doing business in china. jamie dimon has joked that his bank is likely to outlast the country's communist party. he reiterated his commitment to the country. >> i made the a joke that the communist party celebratedded its 100th year. so is jpmorgan morgan. i think we will last longer. i can't say that in china. they are probably listening listening anyway. tom: i can't say that in china.

they are probably listening anyway. what is the potential impact of these comments on dimon's businesses that he has been building out this china? >> yeah, the impact could obviously be huge. questioning the permanence of the communist party could be a serious matter, even if it is done as a joke. one of the biggest banking opportunities most people ever faced now that china is opening its financial markets. it could also be it starts losing deals with chinese companies that may be too sensitive to work with jpm. there are a lot of ways this could go. tom: what has the reaction so far been out of china? are we seeing anything on the official front or from state media? >> no, so far we are seeing no

reaction from china which speaks for itself. not in global media or social media. there have been reports on other comments he made at the same session. it could be that we'll never see a public reactionly but that criticism will be handled behind closed doors. he obviously has confidence in his relationship with beijing. tom: we'll see whether that confidence is merritted. how significant is this for the bank? >> jpmorgan and others are not that huge in china now. that is worth remembering. jpmorgan has about $20 billion in exposure to china but it has grand plans to expand in investment banking, asset and wealth management. jpmorgan and all of its competitors are trying to gain a foothold there. it is the fastest growing

economy. it is one of the biggest banking plays over the next 10-20 years. it is really important to be in on that and not rock the boat. tom: beyond this joke, beyond these comments from jamie dimon, talk to us about the potential vulnerability of the wealth management push, from wall street and the europeans as well trying to get a slice of that growing wealth pie. what is the vulnerability there for a business like jpmorgan? >> well, exactly. clearly as you're going into china and being a major play to do a wealth push, talks of common prosperity is not something welcome. most of the banks we speak to are not overly concerned about it because china will still be

going rapidly. there will still be a fair amount of wealth created and there will also be a rapidly growing middle class they are counting on. they are trying to get both the asset management and wealth management side of that. that is sort of a big play. beyond the investment banking areas where they are also looking to expand. tom: joining us out of hong kong on the potential reaction to jamie dimon's joke about jpmorgan outlasting the communist party of china. also more broadly on the business. coming up, raiding hikes again. what that means for global markets. this is bloomberg. ♪ ♪

>> it is likely this pandemic

will be a pandemic over time. it is already. it will be like to flu and come back on a regular basis and people will have to be vaccinated. now the question is do you need to be vaccinated every year or two years? we don't know that. it will depend on the ability of these -- durability of these vaccines. tom: ok. at a.m. this morning, we're going to get data from germany's institute ahead of our interview with the president. a big day for the u.s. data kicking off at 12:00 p.m. when we'll get mortgage applications data. we'll get more economic data from the u.s. including initial jobless claims and g.d.p. at 3:00 p.m., we will round it up. the fed's preferred inflation

gauge keeping people busy the thanksgiving holiday and we'll get production numbers from russia. let's switch back to the central bank action we had earlier this morning. new zealand cemented its role as a leader on a clampdown raising rates and signaling there is more to come. the kiwi and bond yields fell as some expected a more aggressive move. mark, what do you make of the market reaction then through this decision to raise rates? it was suggested it was going to be a quarter point move. >> yeah, there were some people in the market who thought it could be 50 basis points and possibly the trajectory of implied future hikes would have been a little bit more aggressive but it is reasonably fast. they are talking about having rates go up 2% by the end of next year, still more than 1%

above where they are at the moment so it is not that slow but obviously disappointed some people particularly in the rates market who thought it could be faster than that. new zealand has should be in the past it often can lead the rate cycles for the other countries. the fed will be looking at this closely thinking they are well behind the curve now with new zealand having raised twice in the past two months. in the early 2000's, the fed pretty much matched them quite a bit of the way until it was about 5%. we have some history in terms of following what new zealand does. it is going to be very interesting. so many fed speakers coming up in the next few days. markets will be watching this very closely.

tom: the importance of not underestimating the central bank. the relative size of that economy. data out of the u.s. later today, is there a particular data point that you are going to be focused on? >> i think myself and the rest of the bond trading community will be watching that pcenumber which you mentioned earlier. bond markets are already -- the bears are having a pretty good time pushing bonds down and keep getting encouraged. if we get 4% year-on-year, when you take into account it is just before thanksgiving, probably people want to finish their trading a little bit earlier than usual today, the liquidity might not be that great. if you get a higher inflation print it really could be a tumultuous day in the bond market and spill over into the end of the week as well. on the high side of expectations, certainly the bond

traders will be jumping up. if it suggests the inflation is not under control. tom: a flattening of the yield curve possibly, mark? >> yes. it would imply short rates need to go up more quickly than they currently are. tom: thank you very much indeed for breaking it down what you're looking at and the market reaction. let's check in on markets. you're seeing downside of about .3% in asia. just about -- veried modest gains mainland china. lower by more than 1.5% in japan on the nikkei. the futures in the u.s. are flat-to-up. futures in europe pointing to gains of .3%. brent is at $82 a barrel. higher by .4%. markets looking through the

coordinating release by the u.s. and others. up next, bloomberg markets europe. stay with us. this is bloomberg. ♪

anna: good morning. welcome to "bloomberg markets: europe." mark cudmore joins us from singapore to take you through the ark action this hour -- market action this hour. treasury yields dip. the currency also drops after a dovish hike from the rbnz. overwhelming intervention.