tv Bloomberg Daybreak Europe Bloomberg November 2, 2022 2:00am-3:00am EDT
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kailey: -- dani: good morning. this is "bloomberg daybreak: europe." i am dani burger. these are the stories that set your agenda. risk on rally. global stocks climb before the foc decision. the best today run since march amid ongoing speculation over china's covid policy. plus, the brazilian president begins handing over power to the incoming leader but stopped short of formally conceding. happy fed day. after we get today under our belt, it would be the most rate
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increases from the fed on record. then, we have to contend about if we are seeing a change or if that narrative is misguided. as larry summers said, was helping risk assets are the rumors swirling around china. we heard this yesterday morning. a committee is being formed to investigate covid zero. american equities are moving higher. yields are coming in a little bit. they did move higher yesterday. 4.5%. job openings did move higher, according to data. bloomberg dollar spot does continue to weaken. we are looking at a loss. we will be speaking to stephen gallo of the fx team at bank of
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montreal. u.s. stockpiles showing things have fallen. let's get to our other top stories. we will preview the fed with and occurring. then, our very own lizzy burden. juliette saly is on hand to talk about the reopening trade in china. u.s. job openings are reevaluating. also, adding pressure on the fed to extend their aggressive campaign to curb inflation. let's get more with enda curran. it is what happens after today. this data like yesterday give us
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any clue on whether this narrative has any credence? enda: it would make things difficult for jay powell. this is locked in. they may be willing to slow the rate of hikes. or will mr. powell double down and send a hawkish message? there is a big debate going on in the background. they believe it would be a mistake if they did shift gears. a key point to remember is that whatever happens tomorrow, it is not nearing the end. it will be about what pace the rate hikes are going for. they are not stopping them. we are just looking at the pace
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in months ahead. dani: that is a good point. that is a difficult needle to thread. the market has the potential to be dovish. enda curran in hong kong, thank you. we will have coverage of the rate decision right here on bloomberg. traders placed almost one billion pounds on a single bond in 2026 as traders dashed for scarce collateral. the be away concentrated its sales there yesterday. for more, let's get to bloomberg's lizzy burden. what do you make about how the start of qt has gone so far? lizzy: this is a significant moment. it seems to have gone pretty
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well. the markets absorbed the round. there is a hunger in the markets. there is more to come. we have to wait and see how it will handle sales on the long end that is where the market turmoil happened. we have a bank of england decision tomorrow. we're expecting a 75 basis point hike but we may get more detail on how they will deal with this. they are not going to want to trigger another crisis. dani: you're speaking yesterday with the trade secretary on the idea for growth and chris -- and trade. what did she say? lizzy: the whole conversation on growth was surrounding brexit. we asked about the forecast for trades and brexit. should the u.k. renegotiate its relationship with the u.k.?
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take a listen. >> i remember every previous forecast never being right. this is to get good forecasting rather than having a debate on if the government is correct. we respect these decisions and work well with them. we have different views. lizzy: so, he is questioning the policy. this is kind of worrying. if you remember, it was the lack of a forecast and the criticism of the watchdog by then ministers that undermined the many budget in the eyes of the market. it is all about market turmoil. we have another budget coming in.
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it is a very odd moment to be questioning that. dani: it is an odd moment literally for everything right now. lizzy burden, thank you so much. another busy day in asian markets. the iphone plant located in an area over there. helping us sort through all of it is juliette saly in singapore. >> the unconfirmed speculation that we could see a path to reopening is driving sentiment. you're still seeing pay up by about 1%. also, there is some trader
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speculation that if powell pushes back, that will trigger dollar strength. you do have a stronger yen today, up by .5%. these are the chinese shares listed in hong kong. they had their best to gain since march. let's look at the broader picture. yesterday we sell again at 5%. does that mean these investors that are buying into this rally are going to get burned? a lot of notes hitting the index. sustained momentum for this rally. we really need to see some concrete confirmation before we see this rally. dani: it just shows how negative
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or short this market is. they are able to see such a big sustained rally. thank you so much. juliette saly in singapore. let's look at some of the things we will be watching out for. we will have the latest figures on applications. a 30 year low as you see cracks in the housing market. then we have the adp employment report. just to keep in mind, it is not always the best predictor of what things look like. it does come two days ahead. we saw that unexpected jump up. we still expecting a tight labor market. the difficult needle they will have to thread.
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the central bank is widely expected to hike for another meeting. the debate revolves around what they do. finally, fourth quarter earnings at 8:45. that should give them a sense on if they are weathering an industrywide slump. coming up, it is fed day. investors are looking for guidance on where rates may peak. we'll discuss that, next. plus, and while king on the challenges of doing business in china. this is bloomberg. ♪
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>> central banks will tame inflation. i think it is improbable we will get back to the percentage of inflation we enjoyed before this crisis or the next two years. we will have to do with that. arvest lee, unemployment will take up during this period. dani: morgan stanley ceo speaking through the investment summit in hong kong. we have yet to release that. former treasury secretary says pausing interest -- pausing rates soon will be misguided. if the fed does not carry through markets and others will
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see it as an easing. precisely what the fed does not want to happen. does our next guest believe in this narrative? joining us now is stephen gallo head of european fx strategy. stephen: i think the fed at some point will pivot. the question is, when. for the market, [indiscernible] in the event of a slightly dovish fed, i think this pivot
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mania, there is moderately high disappointment risk. because of this bit hike and mania, i don't think we are there yet, but we are getting there. that will probably last for about three months depending on if the fed remains hawkish. dani: i like how you put that, pivot mania. if the risk is potentially for a dovish surprise, how dovish does
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it need to be? if we do get powell talking about a slower rate hike, is that enough to feel more losses in the dollar? stephen: i also think [indiscernible] on the sidelinesi am not just te fx market. it could prompt a movement into risk assets. i think this market has been through a lot. it is kind of tired and weary.
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i think the market won't move away from powell. that basically means the market pricing for december, if powell does what we expect, she will not alter pricing. it is 50 basis points or 70 basis points. it will be depending on data. it will be with more inflation data. dani: we also have u.s. midterms. are we underestimating anything? stephen: on the way things are
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headed for congress, generally we are headed for gridlock. nothing really meaningful in terms of policy initiative. i think midterms will have a dramatic impact on the u.s. dollar. i expect the uncertainty is a slight dollar negative. the dollar may rally but we are headed for gridlock. dani: let me try to bring up someth impact. everything we have heard so far is of a potential committee
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the economy, many businesses are affected negatively by covid zero. one of the benefits of it is that it helped keep inflation in china low. i think the inflation dynamics dictates when the policy releases its grip on the covid policy. when you are sure it will not unleash massive pressure on the western economy, i think we are more likely to see the covid zero policy rolled back. dani: before i let you go, i need to get your view on sterling. you said you are skeptical that 2022 will have marks of the last
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currency, fiscal crisis for the u.k., what is your thinking on currency at the moment? stephen: in the post-pandemic era what we are headed to going forward, it probably needs to be higher than it were prior to the one we are in now. what we're saying is that current deficits may cause more -- cost more to finance. [indiscernible] no, and may not been there.
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we have to get these economies back. that is our thesis. not just about the u.k. either. a lot of european countries that had a lot of rigidity and not a lot of ability to coordinate policy responses quickly. we'll see how it goes. dani: this idea that there is a lot we have had to relearn, whether it be political dynamics , inflation dynamics, economic dynamics. what's eu has been the most shocking lesson that needs to be learned? a paradigm or playbook we are
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not going to return to? stephen: there will be elements of globalization. i have benefited from mobilization. there will be elements that carry on throughout the decade. i think that less economic decoupling between europe and china, the united states and china, china turning more inward , politicians looking more inward and trying to solve internal problems will have some friction. it will impact gross and investment going forward. [indiscernible]
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sentiment is swirling around the downside. folks are calling second quarter results severe. also saying that uncertainty drove a decline in revenue. we talk a lot on this program about the yens fall and what that means for the boj. nomura also blaming it for risk in the business. nomura, second-quarter earnings missing and profit. we will also talk about the iphone plan. this is bloomberg. ♪
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dani: good morning. this is "bloomberg daybreak: europe." i am dani burger in london. as jerome powell is ready for a 70 five basis point rate hike, higher making outlook for further increases. the hang seng heads for its best two day run since march amid ongoing speculation over china's covid policy. plus, brazilian president jair bolsonaro begins handing over power to incoming leader lula da silva, but stopped short of formally conceding. with this pivot mania, is the potential for the fed to disappoint when it comes to that. are they going to continue being hawkish? are we going to see the dollar bump up along the high end of
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the rate? you are seeing a weaker dollar, down 0.2%. u.s. two year yields are up some 4%, but we still have not pushed higher after adult -- a jolted job report. this is still a tight labor market, something we need to contend with when we have these narratives about the fed potentially pivoting. it is something larry summers has called badly misguided. even so, some of that china reopening narrative has helped futures this morning. it is also helping oil that is moving higher by more than 1% along with the fact that we did get a report out of the u.s. that u.s. stockpiles have fallen. let's get to your first word news. standing by with that is simone foxman.
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simone: good morning. israel's a fifth election in four years looks to return benjamin netanyahu to power. his strategy with forming an alliance with the far right has succeeded. he is on course to getting 62 seats. that will be enough to form a slim majority in the 120 member chamber. resilient president jair bolsonaro has vowed to respect the -- brazilian president jair bolsonaro has vowed to respect the constitution. his staff acknowledged sunday's defeat, saying the president had authorized them to begin the process. bolsonaro lost to lula by two percentage points, the narrowest margin in the country's history. the bank of england sells 750 million pounds of bonds in its
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qe portfolio for the first time yesterday. the move is aimed at propping up a program that helped the country through the pandemic and the global crisis. 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. this is bloomberg. dani. dani: thank you so much. simone foxman in doha paid i want to bring us breaking numbers on novo nordisk. they are having a beat when it comes to their third quarter net income. net income coming in at 14.4 billion danish krone. they are also seeing a 14 to 17% growth. for their operating profits, it
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is a 13.6% growth at constant fx. it is a beat, continuing to see double digit growth in the teens when it comes to sales and operating profit. that is the latest with the health care giant. let's get to tech. china has ordered a seven-day lockdown of the area around foxconn plant, the world's largest iphone factory. joining us now is bloomberg's executive editor for asia tech. we continue to see a lot of supply-chain issues when it comes to chipmakers and we continue to see pressure trickle down to apple. what could this lockdown mean for the tech giant? >> we had been keeping a close eye on this situation in zhengzhou where apple has this plant, but it is called iphone city because they make more iphones there than anyplace else
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in the world. it is responsible for 18% of the iphone 14 and production is now supposed to be ramping up because apple needs to get ready for the holiday season. the trouble is there have been covid breakouts in zhengzhou and also within the iphone city manufacturing plant. that has led to's cascading problems where workers have been confined to the plant. the company has had out hard time getting food to certain places, so the workers started walking out. the orders today where that there would be a seven-day lockdown as they try to get the covid outbreak under control. at the same time, they are saying only vehicles carrying necessities will be allowed in and out. that is not certain of whether they will include the components
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needed to make iphones. we will see what happens in the days ahead. dani: you mentioned this being the rush before the holiday period. we have seen other tech giants and amazon struggled when it comes to this holiday period. we had earnings seeing some of the slowest growth ever for what usually is there most profitable period and now we have reports that amazon is looking to cut staff at its profitable advertising business. what does it tell us about the current state of amazon and consumer demand? peter: online advertising tends to be a leading indicator of where the economy is going and you saw a number of companies that make their profits from the online advertising business. snap in particular had a rough quarter and meta surprised everybody when they talked about how soft the advertising was.
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amazon, their core business is e-commerce. this is a sign that even amazon is seeing some weakness in that market. they will cut headcount as they try to build up profits in some of the more profitable areas for their cloud computing. dani: i am going to bring you a breaking line, this coming from a report from reuters saying that tesla is shutting its flagship china store in beijing. again, not seeing too many details at this moment as to why that might be, but it comes as foxconn is having lockdowns around there, so adding to this overall sentiment. does it mean that the markets propensity to rally at this moment around this reopening narrative is perhaps folly if we are seeing an area around foxconn and tesla shutting its flagship store in beijing? here we go, reuters saying that
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they are pausing it as covid-19 restrictions play. peter: you mentioned this reopening narrative that got investors quite excited over the past day or two as there were these rumors circulating within the market and perhaps the beijing government was getting ready to begin reopening the economy. there was talk of a committee that was going to be set up in order to lead that reopening effort. that has not been validated why any official word at this point and investors are beginning to pull back from this idea but it is hard to make out this tesla news because we are seeing the first details of what is going on here. overall, that reopening narrative is faltering at the moment. dani: thank you so much. peter elstrom, bloomberg's executive editor for asia tech. let's continue the conversation on tech and stocks. drawing us now is blue whale capital's cio, stephen yiu.
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we have more shutdowns, speculation about reopening, a committee looking at undoing some of the covid zero. we continue to look at a lot of supply chain bottlenecks when it comes to chipmakers. i know you have a decent amount of exposure. how are you viewing this narrative and what it means for your exposure, how much you are buying, and whether you go back at all? stephen: the supply chain issue has been resolved by itself by some of the demand for this consumer electronics products have come down recently. the biggest issue is what is going on between the u.s. and china in terms of the restrictions of sending technology to china. but the way that we see this, this is all the same as the overall thesis in terms of what
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we are going to ensure more of the silicon manufacturing capabilities in the western world and that will be positive for some of the semi conductor manufacturers. dani: how much of that are we already seeing in terms of re-shoring? stephen: it has been going slow but if you look at a lot of the plan that has been put in place in the u.s., europe, or even saudi arabia, we would expect in the next couple of years that there is going to be a 30% or 40% increase in capacity in the western world but it will take a long time because the lead time is four to five years. dani: how much does that take a backseat if we are looking at consumer spending slowing? if we are looking at a slow down generally of spending on technology, does that setback this project of making more steady supply chains? stephen: one, if you are
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referring to consumer electronics, we had too many of those during the pandemic period, but there are two new drivers which were not in place five to 10 years ago. the first one is the hyper-scale data center, so we do need to have more chips for the clouds we have real-time recommendations to us and processing power. the second thing is about autos. if you thought five or 10 years ago, most of their cars wouldn't have the autonomous driving capabilities, all of these sensors in place, but nowadays all of the new cars produced will have a lot of that. in terms of the chip content within a new car that is coming to the market will be a lot higher compared to before. that is why there will be less new-car sales this year and next year but in terms of silicon content in the car, that has been sold more than before so that will offset some of the
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weakness in demand the next three years. dani: still some structural reasons to be bullish. you have dumped your exposure and you know longer have that, but are you tempted at all to jump back in when you look at amazon trading at a two year low? stephen: it is a tricky one, offsetting if you look at the valuation of some of these stocks like amazon or even their valuation now is looking more attractive than before. but the way we see it is they are quite interconnected with the real economy which was not much the case five years ago when we first started the position. nowadays, we are worried about inflation, consumer discretionary spending, digital advertising, whether advertisers will cut back their budget because we have less money to spend. the better question is how long this will last. is it going to be a couple of quarters or years? at the moment, it is unclear how
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long this will last given the interest-rate is very height in terms of mortgages and etc. energy prices in europe as well. dani: we were talking to a different stephen earlier this morning, stephen gallo. he covers fx but he was talking to us about this idea that 2022 has been an idea of relearning, relearning the economy and inflation. 's 2022 also the year when we had to relearn tech and tech leadership and what it means to invest in the sector? stephen: 100%. that is a reasonable look at all things for this year and late last year. the one thing i would say is if you look at alphabet all over the world, that was a time when digital advertising market was only 30% of the advertising market versus traditional media. but five years forward for today, especially being accelerated during the pandemic,
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digital advertising is 75% of the market and 30% being traditional media. what it means is if the advertiser is going to cut back their budget because of the concern of recession, they will cut back everything. in contrast to five years ago, you could still see digital advertiser gain shares despite us having a recession. a lot of things have changed. dani: i have got to jump in here. it is a completely different way of thinking because this used to be an entire equity market that was led by the advertising giants. when you talk to clients about this, how much pushback do you get because it is a different from what -- framework of thinking? stephen: we need to acknowledge a lot of things have changed this year. in terms of geopolitics, in terms of the deglobalization, the strong dollar, a lot of things that were working over the last few years is not going
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to work as well the next few years. we are seeing more opportunities in the u.s. we have invested into some of the railroads and also even the likes of -- which will benefit. from a high interest rate. that would not have been a case the last couple of years but it will benefit the next couple of years. dani: thank you so much for joining us this morning. stephen yiu, blue whale capital 's chief investment officer. coming up, hong kong is fighting to prove it is still a dominant financial center. we will hear from the hsbc ceo next. this is bloomberg. ♪
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the lender is still focused on management and sees growth coming from china as the country opens up. he spoke to yvonne man and david ingles at the investment summit in hong kong. >> it is my third business this year. it is good not to be in quarantine and that is the story for hong kong. hong kong is coming out of covid problems, it is very determined for everyone here to make sure hong kong can rebound, that the come -- country is recovering. it is important for the international community to support hong kong. yvonne: what is the biggest thing that you want to get away with from this? >> we want to hear from the chief executive on how he and the government will keep hong
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kong as a global financial center. they have policies to make sure that hong kong reaches out to the rest of the world, they have made progress in unlocking hong kong since the summer. it is great to see progress and more to come. what we know to do is to support hong kong. it is an important international and financial center. i have no doubt it will remain as such for the long term. david: does it mean more staff from hsbc moving to hong kong? >> we are investing more in asia and hong kong. we continue to grow our trade business this year, so that is doing well. we continue to invest in our wealth business in china but i am also investing in singapore and india. i still see asia has a strong form for growth, connecting to the rest of the world. yvonne: do you think china needs
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to adjust its covid zero policy quickly? >> when i look at china, i look at china over the long-term. china will emerge from covid as every country in the world has done paid it will be important economically to do so and we will be ready and willing to help them rebound their economy. yvonne: the think that is why we are seeing this turmoil in chinese markets? >> i think covid is a big story because with a restriction going in and out of china, it is hard for the international community to connect with that economy, but it will rebound. china will reopen at some point in time. it is important for the economy for china to eventually find solutions to the covid strategy. but we are still trading in china. our trade -- we continue to invest in our wealth business. we have increased over one
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hundred 30 wealth managers and folks have been tapping into the wells opportunity in china. we continued to do that during covid. david: can you give a numbers in terms of staffing and headcount, how much you want to see an increase? >> we want to take our wealth managers in china to over 3000, so we are over a third of the way through that. dani: hsbc ceo noel quinn with yvonne man and david ingles in hong kong. coming up, jair bolsonaro else to respect brazil's constitution but falls short of formally conceding election defeat to lula da silva. this is bloomberg. ♪
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where jair bolsonaro has promised to respect the constitution. he stopped short of conceiving the win to lula da silva. joining us now is bloomberg's bruce. is this now a peaceful transition of power? >> it was a significant moment last night. the speech from bolsonaro was a significant concession even if he did not actually yield concession. he said he would respect the constitution. his supporters and opponents -- antidemocratic, he would have been more as a citizen as a president. there is more on his chief of staff to formally recognize the vote and to say that the transition process would begin on thursday as today is a public holiday in brazil.
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also pointing to a relatively smooth transition of power. this is about the bland just speech one might have expected from bolsonaro after two days of silence and it will hopefully start to end the blockades we have seen in many of the roads across the country for those supporters coming out in force. there have been shortages of fuel and food and fertilizer caused by these road blockages and hopefully bolsonaro's speech will go some way towards encouraging those protesters to leave the roads. dani: to that point, it is interesting. he did call for it to be suspended, describing them as leftist methods. bruce, to what degree can that risk of continued blockades continued some forms of unrest.
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in 30 seconds, how much of that can reprice out at the moment or is that risk still laid in this market? bruce: there is still a significant minority of brazilians who are very unhappy with the result. there are certainly some radical elements among them, but it is more about significant gains in the party congress and the sentiment -- senate. there is a lot to lose if protesters continue. it could seriously impact their ability to govern. so i do not expect it to last much longer. dani: really appreciate it. bruce douglass on the latest in brazil. up next, we will talk about markets on "bloomberg markets: europe." this is bloomberg. ♪
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