♪ manus: this is daybreak europe from our middle east headquarters in dubai. these are the stories that set the agenda. it's fed day. a faster taper looks all but certain on capitol hill. the house and senate vote to raise the depth -- debt ceiling. a worsening property slump drags on growth. jp morgan sees upside for the

bullish call to buy everything in china next year. no shield. a new study shows sinovac's is one of the most widely used vaccines in the world. it doesn't provide protection against omicron. a very good morning. it's the themes that are in charge. the quiet below the heard of the markets. the potential for a deflating moment. larry summers says he could affect spontaneous deflation. discomfort, disquiet, deflating moments. here's the very essence of the conundrum for the fed. the dollar is rising but the breakevens are rolling over. let's have a look at that relationship. tens rollover as the new york fed survey says inflation will be at 6% going into next year. the breakevens are diverting --

diverging from the soft sentiment. i take you to larry summers who warns about spontaneous deflation in markets but this is a challenge for the fed. the fed will have a very difficult time delivering a soft landing. all efforts at disinflation that we have historically seen, when the fact -- fed acted, have ended in recession. quite a punch a call from larry and the bake if it's are telling me something else. let's look at the risks on the map this morning. china is the engine of the world. it's not exactly firing on a v-8 cylinder at the moment. asian equities flatlining. as you see, some risk in the market going into this fed. it's not what i would call anything which is rambunctious. to bitcoin. we will talk more about that.

down 3.2 percent. 42,000 should hold the line. 10 year yields stoic as we go. the bond market doesn't seem worried about inflation, more concerned about growth. let's talk about the global economy. it slowed further in november, dragging down -- the worst property slump that we've seen for a long time. disruption attributable to covert outbreaks. our chief asia current -- walk me through the data and the scale of disappointment. >> they did confirm another slowdown in november. china has completely had the bottom. when you look through the numbers and the retail sales, auto sales were knocked. catering took a knock. that's been blamed on the jitters on the sporadic covid breakouts.

the investment side of things, weakness there. the thinking is that that's mostly reflecting what's going on in the property sector. the upside was industrial output. that's doing quite well because china's export story continues to go gangbusters. prices were in decline over the month as well. the broad take away is that the slowdown in china's economy continues. it has not yet hit the bottom. pressure on the government heading into the start of next year. manus: it is fed day. we have the highest cpi on an annualized basis on record. i started the show talking about breakevens rolling over versus the new york fed survey. wrap it together for me in terms of the tight rope they have to walk tonight. enda: interesting thing is that the world, the emerging economy world, is expecting the tapering side of the story. the fed is expecting to double

the pace of its tapering. that's understood. what message will they send on interest rate hikes? we are seeing ppi going through the roof. will powell send a hawkish signal? that would send jitters through emerging-market -- markets. the potential to suck money away from developing economies. hang on, we don't know where were going with omicron. we have to keep an eye on the recovery story. tapering doesn't feel like the story. a lot of unknowns when it comes to what the fed will signal on interest rate hikes, how hawkish they will be. that will be critical not just for the fed story but for the spill over to the emerging economy world. manus: absolutely. we are ready for two hikes to be penciled in, three on the dot. an additional six over the subsequent two years. that could be the dislocate or. -- this locater --

dislocator. smic in an effort to limit the country's access to advanced technology. how's it playing out in the asian session? juliette saly is monitoring all of that from sydney. juliette: not well. mixed shares leading declines among its peers today. falling to a near one year low. we are seeing trading volumes all some -- also triple. this after the biden ministration was said to be considering imposing tougher sanctions. that could tighten the rules on exports and further, look at the supply chain crunch. the national secured a council is set to hold a meeting thursday to discuss this change. when it comes to the overall market fear in asia, it's a range bound session as we way that data. also as we look ahead to the

fed, you can see the msci asia pacific index fairly unchanged. allete on for chinese stocks. this was called by mug -- mark cudmore earlier in the day or. -- day. asaf set of data and news that suggested that china is unprotected against the omicron infection, according to a study we've been following. a pickup in the hang seng property index. there could be further stimulus coming through from this sector. manus: i love jp morgan's call. it's my kind of call. by everything. yeah? one of everything. thank you very much. juliette saly there in sydney on the markets. sinovac's vaccine provides inadequate protection against omicron. that was studied by hong kong researchers. it's one of the world's most widely used vaccines. let's get to -- to put this in

perspective. we are concerned about efficacy of the chinese vaccine in regards to omicron. what can you tell us? >> sinovac's has already shipped out 2.3 billion doses of vaccine , one of the most used not only in china itself but also in a lot of developing countries. the efficacy that we found from this team of researchers at the university of hong kong is another indicator about the efficacy against omicron. out of 25 people they studied, fully vaccinated with sinovac, none of them have sufficient protection antibody neutralization against omicron. this is a jarring sign. the researchers are studying with a booster shot and what it would do to increase efficacy. at the same time, they are suggesting the population should

take third doses when the manufacturers are coming up with new generation vaccines. manus: thank you so much. the very latest on sinovac efficacy. first word news, back to sydney. i like that. juliette: [laughter] thanks. the u.k. prime minister has suffered his biggest parliamentary rebellion. 100 conservatives opposed his plan to mandate the use of covid passports at nightclubs and other venues in england. he was forced to rely on opposition party votes. it's a significant blow to the u.k. leaders authority and comes ahead of a special parliamentary election this week. italy has tightened restrictions for travelers ahead of the christmas travel season. even vaccinated visitors must show proof of a negative test and the nonvaccinated must self-isolate for five days on

arrival. the u.k. has removed all 11 countries from its red list, given the high community transmission of omicron within the country. bloomberg has learned that the ecb projections due on thursday will show inflation is set to remain below the 2% target in 2023 and 2024. consumer price growth for next year will be stronger than the 2.2% predict it in september but the ecb thinks it will slow over the forecast to rise in. -- horizon. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. manus? manus: thank you very much, juliette saly in sydney. coming up, we discuss what's moving markets, risk to traders, how you want to position yourself to a faster taper. on bloomberg. ♪

manus: daybreak europe. let's get straight to the ship that shift in sentiment. the shift to cash. is that a contrarian indicator? it's one of the biggest things we are seeing month over month. it's a shift of 14% up into cash that i want to bring to hannah gooch peters. she's an equity analyst. she should be able to tell me if she's getting more defensive for christmas. how are you? hannah: good morning. i'm very well. i think the shift into health care is typical actually. it is slightly more protected, given its more predictable cash flow streams against the likes of lysing -- rising interest rates. people are thinking about

investor's right now. the move to cash isn't why we are with valuations right now. if you look at valuations in the u.s. in particular, looking at a 60% premium. potentially in the technology index which has shown to be very vulnerable over the last few days. it's become very expensive. i can see why managers may be making that move towards the end of the year. manus: here's the point that you make. as we go into next year, with the fed which will perhaps quicken the taper, these are your words not mine. it's unlikely that the u.s. will have the same ability to outperform europe to the same extent as last year. this is going into next year. that ability to not outperform, is that shaken by a faster taper? is it driven by a different narrative? hannah: with the starting point

in valuations, is looking quite high. the u.s. is about 27 times on an earnings basis. europe is 17. in order for that to continue to grow and perform, the valuations are already at a very high level to move off of that base. if i think investors want to be able to continue to outperform, the emphasis has to be on good stock selection, taking advantage of opportunities, quality assets are being this price. we are starting to see those opportunities come up with volatility surrounding the tapering and so forth we are seeing. manus: on that, what do you think we get? we are trying to speculate the speed of the faster taper. the fomc balancing.

perhaps not as aggressive a hiking cycle. what do you have pencil thin? -- penciled in? hannah: we have seen a five to 6% drop in those longer to ration technology stocks which are relying on -- they've taken a drop in recent days. there are some sectors within technology that have been hit very hard. something like paypal, which is a darling, with a 40% pullback. these are stored very news -- new -- moves in a short amount of time. they are looking for safer investments within the equity sector. if you look at that, you can see real change. you have the information technology sector down. consumer staples are up. they were left behind since the rebound in the markets as a result of the pandemic. the likes of really boring

consumer staples up nearly 10% so far this month. manus: you know what? sometimes boring is not a bad place to be. it means it's a little bit more predictable. we started talking about health care being a pivotal shift. i'm also drawn to yours. you are shifting the portfolio away from defensive u.s. health care. that's counterintuitive to me. i'm not paid to analyze equities. why are you doing that? at the same time, you say johnson & johnson has some value. can you combine the call with the perspectives? hannah: i think there are a lot of different subsectors within health care. the one big thing we've done recently is exit the opposition. they have the world's best-selling drug, humira.

when the sales of this drug dropped off, the market was not believing that the rest of their price would be able to offset that drop-off in sales. they were priced accordingly. since we were aggressively adding back in october of last year, the stock has moved 50%. it's really an extra ordinary route -- move in the light of everything that also -- everything else that has also gone on. we've been able to add to stocks like johnson & johnson which has been weak because of the omicron news delaying elective procedures. you have people worrying about inflation and interest rate hikes and tapering. when you have a very boring, predictable health care business that is less impacted by these outside pressures, there's more predictable resident -- revenues

, that will take it high towards the end of the year. manus: the other two big things that have been dividends, negative real dividend yields and buybacks. traditionally, we come to this time of year and we get a lot of reports about the skill of the buybacks we expect for next year from various companies. give me a brief line in terms of how they play into the portfolio construction for you. hannah: we are looking for companies that are able to generate yields and allocate that accordingly with synergistic acquisitions or share buybacks. that is positive for investors. they have extremely long-standing -- johnson & johnson has extremely long-standing track records as being able to grow consistently over time. that can be reinvested back into the company.

that's really good news for a quality business. manus: stay with me. hannah gooch peters. my guess this morning on equities on fed day. coming up, china's economy slows and j.p. morgan remains bullish on the company for the next year. this is bloomberg. ♪

manus: wall street is becoming bullish on china. stocks present a fine opportunity, a call from goldman sachs and j.p. morgan. hannah gooch peters. my guess this morning. it's a rallying call, a clarion call from j.p. morgan. i like to be very clear when i quote, buy everything.

by it all. bonds, you want china stocks. by everything. would you be as municipal and in your call or slightly more judicious? hannah: we are really excited about the opportunity in china. that discrepancy -- we've seen real weakness in the long term. very high quality names in china. what we've seen over the last couple of months is one of the best opportunities to invest in another very high quality business. it's growing very strongly from a valuation perspective. we are excited about china. manus: it's a long time since i've had kentucky fried chicken. in 1986, i used to go to

kentucky fried chicken. it was tricky then. you like kentucky fried chicken in china which is part of the family. why? hannah: we had a reason opportunity to invest. $700 billion is the size of the chinese restaurant market. only 17% of that is spent in chain restaurants. china is the largest independent restaurant operator in china. they've got net cash, a very high quality business. currently, 1200 cities in china that don't have a kfc which is unbelievable. they are investing in growth at the minute. very excited about long-term opportunity over a company like that. very strong brand. also, they benefit from this

common prosperity push in china. it has been proven that they consume the most fans -- fast food. manus: i love a chicken burger. i have to say, i love a chicken burger. i don't need them anymore because of the calories. that's a story with the topline line equity exposure to china. what is the rest of the world missing that you see? do i need to be much more exacting about what i buying in china and try to avoid the realm of regulation? that's a hard call. is it not that hard? hannah: i think that china is really starting to distinguish between those stocks that are exposed to the property sector, which has come under scrutiny. the banking sector is a problem. it's imperative that we focus on quality.

if we look at another example, something -- the second largest gaming company in china. they have extremely strong fundamentals. net cash on the balance sheet. online game is exit -- is exciting. what we think is important is to make sure when we invest in china, we are doing so with high quality businesses, a part of these key structural growth trends. manus: it's not good for your health. thank you very much. i can see people in front of an xbox eating chicken burger and then they have to go to the health care stocks, getting them from cradle-to-grave. earlier, we caught up with

galaxy digital. we got his thoughts on bitcoin. >> bitcoin, 42,000 is a pretty important level that should hold . we started the year at 30. there's been so much of a change in mindset in the space. manus: it is about the mindset. we put it on the top of the board. the pain is not done. another 10% drawdown to come. 32,000 is where we will trade down two. 40 to 30 day performance. if your long, it is painful. it's probably healthy and that's the message from mike nova grab. the entire spectrum of cryptocurrencies have been under pressure. coming up, bond traders start reducing their 2022 inflation concerns. what does it mean for the dollar? what will this man do to

redefine the narrative for currency which is quite literally resplendent? up 6% overall and its king dollar. this is bloomberg. ♪

♪ manus: very good morning from our middle east headquarters in dubai. your top stories. it's fed day. it's here. a hawkish tilt. capitol hill votes to raise the debt ceiling. china's economy slows, worsening the property slump. j.p. morgan sees the upside with a bullish call to buy

everything. plus, no shield. a new study shows santa vax, one of the most widely used in the world, doesn't provide protection against omicron. warm welcome to the show. there's a sense in this market perhaps of a little bit of tension. you want to belong risk going into this federal reserve announcement this evening. the faster taper is expected. there's a certain amount of discomfort and disquiet. larry summers paraphrased it beautifully for me. there's a risk of spontaneous deflation. more portly, it's about what the inflation market is telling us on the dollar. king dollar is on the chart as the breakevens rollover. is the dollar your perfect hedge in 2022? this is what larry summers says. it will be difficult for the soft landing to be delivered. all efforts at disinflation.

quite pressuring it morning from larry summers. let me show you what's going on in the market. sinovac and its ability to stop omicron. that has taken the wind out of the risk sales for asia. s&p 500 stoic as she goes in the green. it going down, back to flack. 42,000 could be on the cards. 143, is that pricing collect leifer inflation? according to a survey of 6% next year as ppi is at the highest level annually on record. let's see what's happening with the dollar. started with a chart which showed you the breakevens rolling over. the dollar in a standstill. this is the g10, the dollar is up. all of these have been demolished. krone, yen, euro, aussie against

the dollar. will the dollar remain resplendent going into 2022? jane foley question one. is the dollar to richly priced for too many rate hikes? good morning. jane: good morning. to be honest, we have to bear in mind that there's a lot priced into the dollar. when we look at the money market, it's more than two basis height -- can they do more than that? when we assess that, we have to look at the yield curve. it's extremely flat. that suggests that even though the fed has gotten rid of the word transitory, it still looks -- expects inflation to come back over the medium term. the bond market is expecting that. we can't get too excited about the dollar. what we are anticipating is that for now, into 2022, the dollar

remains on the front foot. perhaps pushing higher against currencies such as the euro which have a very dovish center back. as we move into the second half of 2022, the dollar might be finding it a little difficult at that juncture. bullish for now but we do have to bear in mind that there's a lot in that price already. manus: it is very rich. i'm personally hoping that is rich against cable for a whole variety of reasons. you say in the u.k.. i want to split them up. on the u.k., sterling, one could say it's on its knees. the issue and the risk is, here come the rate hikes. the market has taken those away. what is it that is keeping a lid on sterling? not just against the dollar but against the euro. perhaps the better way for me to

benchmark sterling. >> -- jane: if we take a step back and we look to see how u.k. assets have performed this year, the stock market, the ftse, the ftse 250 haven't performed well relative to other g10 stockmarkets. they've been underperforming. that's been a trend since 2016. that being the date of the e.u. membership referendum. sterling is nowhere close to where it was ahead of that referendum in 2016. if we look at u.k. trade data, the statistics in the u.k. compare u.k. trade data to 2018. they say that was our last stable year. the trade data is not doing too well either. i think there is still a brexit issue. of course, it's the pandemic. i suspect that investors are still waiting to

-- i think there's too much priced in. maybe even 129 at some point. manus: those are the wrong answers. [laughter] those are the wrong answers. i want you to go back and look at them again. come back with better calls. do you understand? [laughter] no personal talk. i love the way you put it in context. yes, you are all going bonkers for the fed, the ecb, and the bank of england. we need to look north don't me? we look for the really strong leader of the g10 pack.

they will not be assuaged. they raised rates. you think maybe they might not just be as glorious going into 2022. talk me through the pause factor. jane: i think this is really interesting. i think this will be an interesting thing to watch to get a flavor of what other central banks might do. this bank is a hawkish central bank. norway is a very wealthy economy, very different to most other economies around the world. the central bank tells us what it's likely to do. he told us in november, having already hiked in september, that it's going to hike again in december. that's what the market is generally thinking. if we look to see what the government has announced with respect to omicron restrictions, that changes the dynamic. it's going to be interesting to see whether or not the central bank pushes through with its

interest rate hike. whether it gives itself a little more time. watching a small economy like this, how it response to omicron, can be quite interesting in terms of what other economies could do into the new year. manus: mark malone sent through his morning note. hungry, 30 pips. four hikes over the past 24 hours. in 2021, 35 central banks have hiked 100 times. from a broader perspective, i was looking at volatility. i know we have a gtv on ethics volatility. do you think it's going to be a demonstrably more volatile 2022 for fx and less one-way trade? we know dollar is king dollar.

you said that might top out a little bit. how much volatile the wood spec 2022 to be? -- how volatile do you expect when he 22 to be? -- 2022 to be? jane: producing a lot of comfort in terms of more accommodation. it tends to threaten investors. they are dead-end to bad news. once you start taking that blanket away, taking away the cheap money, investors get a little bit more -- that allows for more volatility. when the fed is moving into a tightening cycle, the likelihood is that we will have more market reaction to bad news and we will have more volatility. manus: stay with us. more volatility to get through

with the ecb. james foley is my guest this morning. let's get the first word news with juliette saly in sydney. ♪ juliette: the vaccine made by sinovac, one of the most widely used in the world, doesn't provide sufficient antibodies to neutralize the omicron variant. that's the finding of research from hong kong. a group of 25 people, fully vaccinated with sinovac, and none showed enough antibodies to tackle the new stream. the effects of a third dose is yet to be determined. boris johnson has suffered's biggest parliamentary rebellion since becoming leader. almost 100 conservatives are mandating the use of covid passes at nightclubs and other venues in england. he was forced to rely on opposition tally votes to get the measure through. it's a blow to the u.k. leaders authority and comes ahead of a special parliamentary election this week. china's economy slowed further in november, dragged down by a worsening property market slump

and repeated covid outbreaks. industrial output was up 3.8% on the year. retail sales growth weekend to 1.9%. economists have predicting a gain of 4.7%. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. manus: thank you very much. the retailer with 92 .3 billion. delving into numbers. gross margin comes in at 59%. we break those numbers down in just a moment. coming up on the show, the ecb's new projection shows inflation below 2% in 2023 and 2024. what does that give to christine lagarde? ammunition?

we discuss the story right here on bloomberg. ♪

♪ manus: this is daybreak europe. the ecb's new projection shows this, inflation below 2%. what does that give christine lagarde? the ammunition to argue against a swift increase in interest rates? she has all the swag in her bag to help her fight back the hawks. james foley -- jane foley, how much ammunition does this give her? apparently inflation will dip and it will be transitory and rollover in 2023. does this help christine lagarde? jane: it's it certainly does.

gives her more ammunition, as you say. the ecb is not like the fed. they've never thrown out the word transitory. there is something really important. there's a big difference between europe and the u.s., the labor market. central banks aren't that worried. they don't react to cost push inflation. if costco up, it takes money out of our pockets. we have less demand, gross goes down. what you have in the u.s. are significant signs of a second order of inflation. that's wage inflation. that creates the potential for a spiral of inflation. in the euro zone, the latest data for q3 on wages is that there's no sign of wage inflation. therefore, the ecb has all the reason already to remain dovish and all the more reason to end -- expect inflation to fall back. this was expected for the ecb. the latest projections underpin

that. she will remain dovish. policy will remain accommodative. juliette: manus: what does -- manus: what does that duty euro? someone said 109 on the euro. how bearish are you? jane: well, it's part of the puzzle of bringing dollar strings together with euro weakness. we have had that trend lower in euro-dollar. our forecast was 112 which we suddenly hit just a few weeks ago. i didn't change the forecast at that point. it was just too fast and too furious. i'm glad that we've seen a few pullbacks, a. of consolidation. as we move into early next year, there's a chance that we will see 110. as we move into the second half of the year, i'm not sure that the dollar can carry on going

further. 110 has to be within our sites now. i'm not sure if we can go beyond that. manus: jane, good to hear that there's a floor for the euro. were to be done for 2022. i want you to come back with a bullish call. thank you so much for being with us. we will see you on the other side. her calls at 110 on the euro against the dollar. thank you very much. the european leaders are meeting in brussels and they will be with their counterparts from eastern europe including ukraine. that's as the block considers ways to become less reliant on russian gas. let's get to our energy reporter . how prepared is europe for this winter? it doesn't look like they are very prepared. anne: yes.

it looks like we are heading into winter, that europe is heading into winter with many of the same issues that plagued the continent the previous winter. as a preamble, when we came out of the previous winter, we had an issue with inventory levels being very low. over the past nine months, it doesn't seem like inventory levels have built up significantly enough. we are still at about 62% of capacity which is far below the five-year average of about 80%. one of the reasons this year has been unexpected, production in norway. more sniffing italy, we are not seeing to pipelines to bring additional supplies from russia. it is still stymied.

manus: what are some of the key factors that have led to this gas price surge? there are outages, the industry is using less. talk me through the biggest factors. anne: yes. we've had a tremendous recovery from the pandemic over the course of the year. that's despite the virus happening. that has pushed up energy demand across the board, all the way from oil to coal to natural gas. that has pushed up demand for gas at a time when those supplies have occurred. i know i brought up norway previously. it's not just about norway. issues have been happening in the u.s. and australia which has reduced production across the board. i want to bring you back to the pipeline. that pipeline was originally

completed on some timber 10th. the market expected some sort of volume coming on at the end of the year or perhaps even early next year. it's looking like that target is getting further and further away. we've also seen some geopolitical concern over russia's military prescience on the you can border which has -- presence on the you can border -- ukraine border. the benchmark of gas has risen 600% from the start of the year. it's not really the best going into winter. manus: no, it certainly looks like a tough time. thank you very much. quick line before we pause. this is from's turnoff he. they are going to delay their covid vaccine results until q1

of 2022. both of these drugmakers announcing today that the single booster dose of their covid-19 vaccine delivered consistently strong immune responses for the phase three trials. they will be delayed and they will fire -- file booster data with regulatory authorities following the phase 3 results. a little bit of delay coming through from gsk. coming up, it's that time of the year again. goldman sachs, j.p. morgan dish out the bonuses. they retain top talent. we have the story on bloomberg. ♪

manus: it's daybreak europe.

the markets will obviously be watching the fed for some banks. they will also be thinking about their bonuses and how they trade their position. the business has been dumb. let's get to our finance reporter. daniel pinto last week said, j.p. morgan's investment bank is roaring ahead. these big bonuses, the size, the scale. bonuses for everybody or top talent? >> these are big numbers. it's for a certain section of the global banking crew. investment bankers, the guys doing nma. jp morgan, their bonuses could be up to 40%. i goldman, even higher, 50%. that reflects the incredible business they've been putting in over the years. that will set all sorts of records across bonus land and

wall street. manus: it's not just the advisory side, is it? there's also the fixed income side of the business as well. this has been a battle to retain junior staff throughout 2021 as well. fixed income is expected to be reported -- rewarded? >> not so much. they had a very good year last year. looking back, they are still doing pretty well. that business has normalized since 2020. investment banking has been on an absolute tear. that's where the really big jumps you will see our across the board. manus: rates traders will be asking for supper at the investment bankers thrown, so to speak. thank you very much. the very latest on the expectation for higher bonuses across some of the biggest names. goldman sachs, j.p. morgan to raise 50% rewards.

the team will take you through the open on bloomberg. europe giving a little bit back. there's a worry about omicron and the impact of sinovac in asia. this is bloomberg. ♪

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♪ anna: good morning and welcome to bloomberg markets erupt. mark cudmore joins me in singapore to take us through all the market action this hour. the cash trade is less than an hour away. it's fed day. i hawkish tilt and a faster taper look certain. the house votes to raise the debt ceiling. china's economy slows, dragging on