♪ dani: good morning from bloomberg's european headquarters. 6:00 here in the city of london. this is daybreak europe. here's what you need to know. a tale of two strategies. boris johnson rolls out stricter covert roles before christmas. germany's chancellor tightens curbs. biden warns that the variant could result in more breakthrough infractions.

a global rebound in stocks moderates admits to a foggy outlook. europe's energy crunch deepens. a fresh record threatening to derail the continents economic recovery. happy wednesday and more web saws in the run-up to the holidays. usually, this is a time where you can step away from the desk and enjoy time with family. a santa claus rally. so far, we've been seeing whipsaw action. gains of more than 1% across-the-board in the equity markets. the day before, losses of more than 1%. this has been an unusually volatile december. this data comes from the spoken investment. it shows how starkly different we are seeing this december compared to history. december has been the most volatile month with moves of more than 1%. historically however, going back

to 1953, december is the least volatile time. it shows just how difficult this month is to navigate with liquidity. let's see how the data is shaping up this morning so far. looking at the equity market, it's more calm than we have seen. little changes in your s&p 500 futures. that's off of nearly 2% gains. we are looking at european stocks as well gaining more, up 4/10 of 1%, unchanged on the u.s. 10 year yield. little drama in markets today. a third consecutive gain in the lira. the literature -- lira has been tumbling. erdogan and the government stepping into the market, trying to alleviate the pain in the lira itself. that allowed for the biggest

gain since 1980. we are continuing to see that gain today as well. let's focus on the virus story. joe biden has warned that the omicron variant will result in more breakthrough infections among vaccinated americans but they are unlikely to be severely ill. he added, a winter of severe illness and death awaits the unvaccinated. let's get the details from michelle cortez. good morning to you. talk us through biden's strategy to fight this new wave. michelle: biden is really setting the united states out to understand what's coming. what's coming is a wave of omicron that is unlike what has been seen to date in the u.s. which has been the hardest hit of all countries. biden is saying he expects to have cases within the white house where everyone is vaccinated. he wants the entire country to know that they need to take

action, to get vaccinated, to get a booster, stay indoors number protect yourselves. at this point, the u.s. doesn't want to put in new restrictions. we are seeing other countries make different decisions. germany is rolling out restrictions. we are seeing them across asia as well. at this point, every country has a different approach but they will have to be dealing with this new pandemic. dani: in a blow to people who are hoping to travel somewhere for the christmas season, omicron doubles the risk of getting infected on a plane. why is that? >> -- michelle: this is the most transmissible variant of coronavirus that we've seen yet. up to 74 percent more transmissible than delta. we are seeing that on airplanes. airplanes have done an incredible job of filtering the air. the study is suggesting that if it's close to you, if there is someone sitting nearby you that has this variant, it can

penetrate through if you take your guard down at all. it's an increased risk. we are seeing additional curbs and flights across many places including singapore today, thailand. places are starting to dial back down there travel availability. dani: something the travel industry is not concerned about. thank you so much. here in the u.k., boris johnson rolled out stricter pandemic roles before christmas. he did urge caution, saying the situation remains balance. >> we don't think today that there is enough evidence to justify any tougher measures before christmas. we continue to monitor omicron very closely. if the situation deteriorates, we will be ready to take action if need be. dani: for more, lizzie burden

joins us now. does it seem we are well set up to have restrictions, after the christmas season? lizzie: lawrence johnson is stuck between his science advisers and his muteness mps. covid cases are at record levels. that's not translating yet into hospitalizations. if boris waits too long, he could overwhelm the national health service. on the other hand, the last time he tried to get new covid restrictions through parliament, he suffered a record rebellion. the only reason it passed was because of the support of the opposition party. what could happen is that we get a move to step two restrictions where pubs and restaurants can't serve indoors, households can't mix indoors as well. what we definitely have from the chancellor is an extra billion pounds worth of support for businesses and hospitality. dani: you've been doing great

reporting on how hard struck the hospitality industry is. thank you so much. to a new milestone in the fight against covid-19. israel is set to become the first country to begin administering a fourth dose of the covid-19 vaccine. simone foxman has more. it seemed like it was only a matter of time before we moved to four. how sweeping will the new camping be? -- campaign be? simone: it's very limited just to medical personnel. people over the age of 60 and also those at high risk of severe disease. if the last booster rollout was any indication, this is the start of a broader rollout for the population and potentially for the world. we've been talking about the booster dose for the past couple of months. we will start having to focus on the fourth dose. some of the worrying data we've seen from early studies in israel, a study of 40 of its

staff. it said that if morse folks -- there was no protection against the omicron variant. those who had received a booster saw the protection come in and increase somewhat. right now, israel is facing an uptick in infections, rising over 1000. thank fully, the number of severe illnesses remaining low. israel is a really good proxy for what happens in the rest of the world. it's vaccination rate is still stuck at 64.5%. 42% of the population is boosted. there's been hesitancy among various populations. for now, we are watching the increase in severe -- hopefully not an increase in severe infections in israel. the government is shutting down

travel from the united states, germany, and canada. dani: thanks so much. a great point. israel might give us an indication of the rest of the world. simone foxman indo how there. let's get to the first word news with laura wright in london. laura: president biden says there is still a chance he could strike a deal and build back better. the president addresses the future of his flagship $2 trillion economic plan for the first time since the west virginia democrat rejected the measure. the president describes the legislation as a tool to combat rising inflation. europe's energy crisis is threatening to derail the blocks economic recovery. prices are continuing to search and higher costs have forced energy companies to cut output. russia curb gaff -- gas. france was forced to boost imports to keep the lights on. amazon and meta are among the

firms scrapping plans to attend the annual ctf technology conference in las vegas. it is scheduled to get underway in early january. it's hoping to return to normal after an on loan only event this year. that's being hindered by the omicron variant. kathy woods is adjusting the forecast for her fund after criticism of the projection. she set the strategy to deliver a 40% compound annual rate of return during the next five years. now, they publish an update softening the numbers and clarifying that she wasn't referring to any particular fund. her etf is down around 24% this year. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. dani? dani: that last story is fascinating. kathy woods was so search --

soul-searching. coming up, investors brace for market volatility is omicron infections spread in europe. we discussed the impact on markets. we discussed the state of the u.k. retail sector and football in the preparest mess time. -- pre-christmas time. covid nervousness grows. this is bloomberg. ♪

♪ >> this variant is significant and the impact on our -- is powerful. i'm still heading into the new year. below the surface, there is

still a lot of opportunity. >> the undertow which -- with each successive wave seems to be weaker. we are on strong footing financially and economically. we think that the market will be able to withstand that, even as central banks look to tighten up monetary policy a little bit. inflation is high. people are going to be looking to the bond market for inflation hedge. they could keep some attractiveness in the equity markets. >> we think it's going to be more moderate. we are taking a less chrissy approach -- less risky approach. >> low basis. we will still have some with us in the first half of next year. the second half of next year will already be more normal. in other words, slower. dani: bloomberg guests weighing in on the volatility seen amid new curbs to tackle omicron. traders wait for u.s. gdp data

later today. the dollar slightly hyder, trading and arrange as it has done for much of the past week. it is seemingly unmoved by rising omicron cases that field volatility and risk assets. joining us now is parisha saimbi. thank you so much for joining us this morning. what do you make of the relatively sanguine dollar over the past few days? parisha: well, we've adjusted when we've had the news of the omicron variant. we saw a significant adjustment in our positioning metrics. there's a huge unwind of the risk composition. the market is turning more risk off. in that moment, the dollar long was well held. the switch out of low veto currencies, short euro, short yen positions and into short i veto positions. to a certain extent, like the

pound. the dollar positioning has rained rigorous here. >> it appears that there are a fair amount of rate hikes embedded in the dollar value. what are the risks for a policy error? the fed isn't able to be as hawkish as they broadcast of the market. parisha: at the fed meeting last week, they turned hawkish to head off inflation from the coming entrench. we think that the fed can be more hawkish. we don't think markets are pricing in enough tightening. we are looking for a cumulative seven rate hikes by the end of 2023. the market is only pricing in five. the variant does pose risks. i would say that in terms of the timing, we think that this will cause the fed to take an element of caution and raise rates, despite the fact that the

emphasized that may will be the first meeting for next year. dani: seven hikes before liftoff. what happen on's to this phenomenon around tapers around the globe putting their money into u.s. treasuries? we saw that with the 20 year treasury auction yesterday. is that going to be keeping a lid on yields for 2022 and the foreseeable future. parisha: there may well be. yields will be rising. our rate strategist penciled in up to 2% by the end of next year. that will be predominately real yield driven. dani: a lot of that demand is coming from european bonds. european investors. there's not a lot of demand for european bonds. the 12 month outflow from bonds is higher than it was in 2016.

when we look at an ecb, it looks to start pulling back on some of their purchasing programs. what result will that have on the euro? parisha: what we have to bear in mind is, while the central banks are moving to take their foot off of the gas pedal and move towards tighter policy, ultimately what matters -- some things are short-term. when we think about the pace that the ecb is moving relative to the fed, it will still be purchasing bonds through the course of next year. the fed may be lifting rates several times next year. to that extent, the widening rate between europe and the u.s.. they should put downward pressure on the euro. dani: if you want to be short the euro, what is the pear you want to have on the other side

of the trade? parisha: we particularly like high risk with euro. we have a confident outlook on growth and inflation through the course of next year. the trade will be short euro sterling. when we look at valuation, the pair looks richer. the current models would suggest that the value is around 85 level. we have a more cyclical diversions between the two economies. we think that justifies euro sterling. dani: thank you so much. don't hang up the zoom. we have much more to cover. coming up, no one could have predicted how 2021 shaped up. do we have any more clarity on 2022? we discuss the possible risks, next. this is bloomberg. ♪

♪ dani: welcome back. let's take a look at some of the events that we will be watching today. 11:00 u.k. time, ireland's latest producer price index figures. later this afternoon, u.s. quarterly gdp. u.s. housing data. home sales are expected to rise and then decline over the next two years. we get confidence data as well. 4:00 u.k. time, russia is due to route -- release industrial output figures. line growth is set to slow year on year. it's the end of another year and many come -- people are looking forward to the holidays. for us, we are looking further ahead. into 2022 and what we can expect

for markets. still with us is the g10 fx strategist. what is your biggest risk for 2022? parisha: covid is one of the risks. it would be supportive strength. if we see disruptions proving to be longer than not -- lasting then we assumed, certainly that could put downward pressure on growth and upward pressure on inflation. that could be exacerbated if the central bank moves to try to head on further and tighten worsens. beyond that, there are political risks that need to be factored in for next year. there is tension ongoing between u.s. and china. we have french and italian elections coming up as well which adds to the disruption.

parisha: interest -- dani: interesting. let's start with supply constraints. this has been a concern as we see the boe starting to tighten. or they going to tighten into a weakened economy? if least -- we see continued sub -- supply constraints, what does that mean for policy? monetary policy can't fix supply chain issues. parisha: certainly. we do think that if these constraints proved to be more prolonged, that could have second-round effects on inflation. the mindset will change. supply chains -- that could filter through into higher structural pressure. a lot of news flow, the data increasing in wages across the board and economies. to the extent that continues,

that's a reason for the central bank to continue on their tightening. dani: on the political risks front, you mentioned the elections. u.s. china tensions as well. they might not be priced in. where's the biggest area that you see markets ignoring these risks? parisha: certainly, if we look at the fx bull market for the french elections, there is a very low premium being priced in. while the pulse would suggest that macron would have been in a second-round, certainly there will be many changes between now and then. to the extent that we see that, that puts pressure on the markets. we certainly see arise -- a rise. that's now starting to narrow the gap for the second round. we think she would be market friendly outcome. the changes in the likelihood of who will win in these elections

could see markets pricing in increased risk. dani: is the energy crisis and the impact the growth -- to growth priced in? should it be? parisha: to some extent, it is being priced in. certainly we've seen significant blinders and gas prices over recent weeks. we have a fairly bullish outlook for oil prices and gas prices for the next quarter to reflect this. it looks a little punchy here. we are expecting brent crude at around $86 per barrel on average for q1. while that might seem a big jump from here, we've seen almost $10 in just the space of a few days. it's not complete we out of the woodwork there. we've bake that into our growth assumptions.

we still hold our consensus outlook. the higher gas prices and oil prices rise, that will be innovative for growth. when we look at the short term, oil prices only hold a small effect on the likes of euro-dollar. there are much greater drivers. dani: to be fair, $80 or somewhere in there for oil doesn't seem too crazy when we've seen trickle digit predictions as well. really appreciate your time. enjoy your holidays as well. we are looking at a market rebound when it comes to european equities. up half of a percent, basically flat when it comes to the u.s.. oil up 3/10 of 1% as well. again, we are currently at $71. not quite in the 80's. coming up, we are going to

discuss the state of the u.k. retail sector. we will talk about the disappointment ahead of the christmas weekend. covid nervousness rose. this is bloomberg. ♪

dani: good morning from bloomberg's european headquarters. 6:30 here in london. i'm dani burger, and this is "bloomberg: daybreak europe." boris johnson rolls out stricter covid rules before christmas. germany's canceler tightens curbs. president biden warns the variant could result in more breakthrough infections.

a foggy outlook for u.s. fiscal stimulus. europe's energy crunch deepens, prices soar. it is a market with gains of 1%. previously it was losses of more than 1%. we are experiencing an unusually volatile december. according to data, the average for december has been more than 1% of the move, and that outstrips every other month this year but it is typically december that is the least volatile period. it is a time of year when volumes are usually low. let's look at the data. we are seeing european stocks rebound, up 0.5%. owning flat on s&p 500.

-- holding flat on s&p 500. we are looking at losses in the lira. a half hour ago, there were gains. it is even more volatile than that december stoxx story. let's focus on retail in england , and the major shopping district was down before christmas compared to pre-pandemic levels. it is another sign of the toll omicron is taking on stores. joining us now is diane wehrle, insights director, springboard. we have heard many times people talking about whether we are experiencing a voluntary lockdown, but what does the data tell us? diane: at springboard we are tracking activity in the bricks and mortar destinations of high street shopping and retail.

we have seen a muted approach to christmas. this weekend was very poor in terms of attracting additional shoppers from the week before. in most places footfalls declined from the week before. we are seeing a cautious approach from shoppers. they are staying local to smaller neighborhoods. central london really struggled. matt: what accounts -- dani: what accounts for the uptick? diane: people were cautious over the weekend, nervous about crowds. they know the last weekend before christmas is busy, so they stayed away. where christmas falls this year, on a saturday, a working week

before the day itself, a lot of people are taking off early. that is what they are doing. dani: how much of the pull forward effect did we see in terms of people worried about supply chains, so they shop early? diane: that is a real thing that we are anticipating, and black friday is not as big and the u.k. as in the u.s., but we saw shoppers make the most of discounts around black friday. typically we see a lull in the weeks after black friday, but we expected more shoppers on the streets in brick-and-mortar stores. what we are seeing because of the omicron variant, people are nervous, staying away from high

street. when they are still and quiet, footfall is lower. that is exactly what we are seeing. dani: as an american who has done the midnight black friday shopping, it is not the worst thing in the world to avoid. i wonder if we get a restriction, a circuit breaker lockdown post christmas, and what this means for retailers, and that rush to snap up post-christmas sales. diane: that is what we are anticipating, increased restrictions to kick in. if it kicks in, retailers will breathe a sigh of relief that it was not pre-christmas like 2020, but it will impact getting rid of stock they held over christmas. rather than being short of

stock, they anticipated being short, and bought more supply. a lot of sales after christmas day are online, so we anticipate a quiet boxing day and getting busier after that. if we have formal restrictions in january, it will hit retail, it is inevitable. dani: it hits retail after the beginning of covid times, and until restrictions were lifted this year. it is a difficult period. can most retailers survive another lockdown at this point? diane: there will be a lot of retailers who will not survive, particularly the shorter ones short on cash flow. the chains will get through, and they will get additional funding. smaller retailers, borrowing is limited. support from the government, while modest, it will help

paying for staff who are sick. a few thousand pounds will not make up for what they lost over the christmas period. we will see business failures, and we have seen vacancy rate climb as nearly as high as it was in 2012-2013 when we were coming out of the recession. we are likely to see that go up in 2022. dani: given that, should the government do more to help out small retailers? diane: that is typically what we need to see, a greater weight to smaller retailers, but unfortunately the large retailers have the ear of the government and contribute financially, and have greater influence over what the government will do. smaller retailers really need more funding than the larger retailers to get by.

inevitably with the current government, it is about the market deciding, and unfortunately the market will decide some smaller retailers cannot survive. dani: thank you for joining us, great insights, diane wehrle, insights director, springboard. let's get the first word news. laura: boris johnson has ruled out stricter covid rules before christmas. he is drawing a line on the speculation that people may have to rethink their plans for a second year in a row. he warned the government may impose more curbs after december 25. the u.k. says people who test positive will have to self-isolate for seven days rather than the original 10. in the u.s., president biden says the omicron variant will result in more breakthrough infections in vaccinated individuals, but added they are unlikely to become severely unwell, especially if they have

had the booster shot. the white house is considering restricting travel from south africa. omicron was detected there, but it is the dominant variant in the u.s. the ceo told bloomberg the firm is working to determine how well it works, based on older technology. the messenger rna vaccines got clearance from european regulators earlier this week. >> we are evaluating those already vaccinated, and looking at the omicron response, the antibody response to omicron. we will have that data within days. our expectation based on what we saw with alpha, beta, and delta is that we will have a robust, protective level of antibodies with omicron as we had with the others. laura: cathie wood is revisiting

forecast after criticism of her forecast. a published update softens the numbers and clarifies that she was not referring to any particular fund. her etf is down 24%. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. dani: thank you so much. we want to bring breaking lines across the terminal. we are looking at mirsky buying ls logistics, -- mersk, buys lf logistics, as an arm of hong kong supply manager. we have seen high rate costs and

supply issues. that extra firepower is put toward acquisitions. this is another acquisition that helps them do that. it has been almost a year since the u.k. severed ties with the european union, and it is time for a report card on how britain has fared. we are joined by lizzy burden. is it too early to separate the effects from covid versus brexit when it comes to international trade? lizzy: it has been difficult, but what we have seen is u.k. trade with you has declined compared to u.k. trade with the rest of the world. there is interesting analysis showing the volume of trading goods has declined compared to if the u.k. had not brexited.

from january 1 you will have extra checks on goods coming from the eu to the u.k., and we have seen the brexit minister resign, and the foreign secretary will not be soft on brexit. she said she would be willing to trigger article 16 of the northern island protocol. if that happens, it could tank the entire brexit trade deal which would be worse for eu-u.k. trade in 2022. dani: we get the final gdp figures at 7:00 a.m. london time. how has brexit affected growth? lizzy: before the u.k. brexited, the anticipation of higher trade barriers was weighing on investment but pushing on economic to any toward the european union. the u.k. fiscal watchdog found by december 2020 there was a 1.5% hit to growth already.

the figures this morning are likely to confirm third-quarter growth, and that will be overshadowed by omicron in the fourth. looking out longer-term, the office of budget responsibility sees a 4% hit to the u.k. economy from brexit alone. dani: thank you. coming up, we stick with the energy story. european energy prices hit records as europe struggles to keep the lights on. we will discuss those skyhigh prices, next. this is bloomberg. ♪

>> in our industry we are used to challenges.

you tackle a big problem, you trying to develop new treatments . sometimes you succeed, sometimes you fail. sometimes those failures are disappointing. we are used to dealing with challenges and success and setbacks, sometimes criticism. it is part of life. we had to take it on the chin, try our best. our focus was on delivering the vaccine to the world. i think people sometimes forget, but europe, not everybody in the world lives in europe. there are 7 billion people living outside the u.s. and europe. in many parts of the world, when we were looking at a global basis, we realized we had to

help europe to deliver more vaccines, but we knew around the world everything was going bad. dani: astrazeneca ceo on developing the covid vaccine. you can catch more of his interview with francine lacqua thursday night at 7:30 p.m. in europe energy prices continue to soar, surging 20% yesterday, a fresh record after russia curved gas flows to europe -- curbed gas flows to europe. does it seem like we might get more supply from russia? >> yes, i think that is what traders were expecting yesterday. there was an indication how much more russia could send, and those numbers were

disappointing. flows will continue to be capped in january, maybe slightly better than in december, but it is not looking good. today specifically, russia has not -- it looks like we will have zero flow into germany again. dani: how much political power does this give germany with the european union, if they are dependent on them to help solve the energy crisis they are facing? isis: the whole of europe is depending on russia. most analysts, when you look at it, it does not put europe in a good position when it comes to bargaining for anything politically. europe is hostage to the gas crisis, and that does not put them in a strong position. we have not seen europe do much

these days. dani: as we look forward to 2022, what can european governments do? what structurally can they change to make sure we do not get a rate of this next winter -- get a repeat of this next winter? isis: one thing government can do is look at the storage situation and figure out how to force companies to put gas in storage, or give incentive for that to happen. in the u.k. where there is no long-range storage, they could look at returning it. it does not look like the u.k. has any appetite for that either. dani: how will that mix in the push for renewables next year? isis: i think renewables are part of the story. it is important that we have

more capacity, so the truth is, renewables are intermittent. when the wind is not blowing of the sun is not shining, we need that backup. at the moment, that backup is gas. dani: thank you for staying on top of that for us. coming up, the biggest u.s. banks are making more money than ever, so why are financed veterans feeling uneasy? that is next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i'm dani burger in london. time for the bloomberg big take. you can get it on your terminal.

major u.s. banks are making more money than ever with record bonuses to match, but there is a feeling that success and wall street is being overshadowed by crypto and whatever elon musk is doing. being the master of finance no longer means being the master of the universe. why all of the angst amongst bankers? tom: it is a fascinating story from my colleague, who identifies three reasons where this angst is coming from. they have had a record year, that means a lot of hours and a lot of stress. and these very competitive people, despite all of that work and big payouts in february, they have fallen behind people in crypto, intech, in private equity.

2021, covid, a rough year, and people are exhausted. dani: 2021 was a record year. tom: if you listen carefully, you hear the world's smallest violin. we have been reporting that dealmakers goldman are expecting 50% bonuses. in some cases it is difficult to feel much sympathy. dani: what does the outlook look like? is there anything in 2022 that can lift their spirits? tom: tech is still eating the world, crypto, but the bonuses that come in february might change the sentiment a bit. in 2020 bonuses were more restrained as people were trying to work out what was going to happen in the pandemic. you may see pessimism turn to

more optimism. dani: while we have you here, what does the outlook look like when it comes to wall street banks for 2022? does it look like they can keep up their pace next year? tom: sort of a mixed bag. some smaller banks are expecting an increase of normalization on the trading side. the dealmakers at the investment bankers made hay the last six months, and in london we are seeing the pipeline strong. people are taking more caution into their decision-making, related to inflation and the supply chain crisis. it might be a tough start to 2022. dani: thank you so much. you can read more on that story

on investment banker angst on your bloomberg terminal. we are looking at markets that look steady. we have european stocks gaining. flat s&p 500 futures, off the back of 2% gains in the s&p 500. 2.3% for big cap tech. cathie wood will have to put a footnote on what she said on annualized returns, she certainly is optimistic. we are seeing appetite for the 20 year option yesterday. we are looking at games in the lira again -- gains in the lira again. it was losses 30 minutes ago. investors are trying to wrap their heads around erdogan's government rules, and trying to

curb some of the losses. we are looking at gains again. "bloomberg markets: europe" is up next. anna edwards will be here for that. this is bloomberg. ♪

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to "bloomberg markets: europe." i'm anna edwards live in london. joe biden says omicron will result in more breakthrough infections among the vaccinated, but a winter of severe illness and death await the unvaccinated. boris johnson warns new restrictions are possible after christmas. england cuts is covid isolation