dani: this is "bloomberg daybreak: europe."

i am dani burger in london with manus cranny in dubai. these are the stories that set your agenda. manus: for the rumor rally, the hang seng sets for its best week in a decade amid resurgent optimism that covid measures can finally rebate. today's jobs report is expected to show that u.s. earnings slowed last month but will it be enough for the fed. hong kong leads global stocks higher. plus, governor andrew bailey tells bloomberg's that markets should not conclude there will be a series of quarter-point -- three-quarter point rate hikes. >> people would be surprised when they see that we is in the fed are looking at things through slightly different lenses. manus: another day and another

rumor. if china really reopened, just think how much money would flood in from risk and how much global risk narrative would shift. it is palpable on the boards. dani: it is palpable, the superlatives are huge. hong kong tech on track for its best week ever. it's just started eight years ago. hsi is up the most is an 11 years. the market has been so bearish that the upside potential we are seeing this morning is massive. manus: absolutely, high beta reaction from commodities, oil is up over 2%, you are looking at currency moves, and indeed stocks are coming to bear as well. this reopening narrative is really strong. dani: and you also have to assume what this means for the rest of the world and inflation. it is the reopening optimism. it is driving moves in hong kong

paid i want to get to juliette saly who has been covering these moves for us. walk us through these moves for us. juliette: it is extraordinary. we are only on the fourth of november and it is the best month already for the hang seng index in seven years. he mentioned the big rally we are seeing in the hang seng tech index as well. we have moves from tencent and alibaba, moving that index for its best week since inception. we are also seeing moves in the offshore currency, but this is all based on what happens if we actually get some concrete confirmation of a reopening path which was quashed earlier this week and it is not just assets we are seeing in hong kong and china. it is the entire reopening basket. the likes of cosmetic players in south korea are rallying higher today, all of the airlines based on this unsubstantiated rumor. we had a quick look at that

chart in terms of the chinese stocks listed in hong kong, the hsc i index. it is now on track for its best week since 2011, all driven by rumors, not confirmed. a lot of analysts out there saying you do not want to be short on this market. we spoke to a guest earlier who was saying it is dangerous to not be in this game and you can see a 50% pump in stocks once we get confirmation of a reopening. united first partners is saying is it is -- saying it is a tug-of-war between the bulls and the bears until we get confirmation of a reopening. manus: you have got to hope there is enough stake on that bone for everyone to have. juliette saly putting this major move across the asian asset classes in context. it is pervasive across global

asset classes. we have significant rhetoric from the bank of england with a heck of a dovish guidance. they were putting a half a percent back on as the dollar drops. the dollar is the risk narrative, dropping off on a risk on narrative on a global basis. twos and tens, the definition of the hard landing is yet to be debated. it is the deepest inversion in the curve in nearly 40 years. how hard of a landing the fed deliver and how much deeper will the inversion go? we need validation. the aussie dollar up nearly 1% on the reopening narrative. oh china and australia. dani: we have seen risk assets specifically read up all week since that fed decision. china has strong enough this impulse to buy the risk on narrative for chinese demand coming to the fore again.

these are still rumors, but that is enough to list stocks up in the asian session. even so after a day of -- after more than two days of three point losses, the s&p 500 futures are up 0.2% and tech is almost up half a percent. manus: when it comes to delivery, there is something strong in the house of socgen. you are looking at the equity, the equity desks actually delivered better than wall street. they are up 1% on equity trading and that propelled income in that markets business to $1.5 billion. u.s. businesses saw 13% drop, banks in the u.s. saw 13% drop in their equity business, so let's see what socgen delivers,

certainly a nice beat in the ficc is this. we will have frederic oudea later, live in exclusive on bloomberg. dani: let's get to our other top stories and reporters around the world. lizzy burden is with us to digest the latest boe decision as well as the collapse of -- as well as, murphy. manus: my mortgage is just spiraling. taking interest rates to a 14 year higher, up 14%. >> there are different shocks and we are pricing a huge income shock. this is a real income shock in terms of energy and gas. there is a different inflation outtake, so i do not think people should be surprised when they see that we and the fed are looking at things through

different lessons -- lenses. i have heard people saying that you should do the same as this other central bank. francine: will you be more aggressive in tightening quicker? >> nobody should read into it, that is the new goal. that is my priority. francine: at some point he will step away from this tightening spree. what indicators do you look at to see when you can go off a bit? >> we always look at what the profile of inflation is going forwards. as i said earlier on today, we look very carefully at the labor markets because we have a tight labor market for this country. it is interesting that there is a long way for slowing. there is some evidence that the labor demand is beginning to slow but we still have a tight labor market. francine: are there specific surveys or indicators that carry more weight than others? >> no, we have always widely

avoided that sort of debate because it means that the individual is given a sense of too much evidence and it changes over time. the things we look at the economy, more particularly in -- than others, depends on the situation. there is not a close focus because it is so tight. dani: with us to break all of this down is lizzy burden. it is interesting listening to andrew bailey saying that it is reasonable for us and the fed come to different conclusions. the fed is trying to get the terminal right up and the opposite problem for the boe. lizzy: as big as this hike was, it was priced in and economists expected it so the focus was on the commentary. it was as dovish as a hike could get, one commentator put it.

you heard andrew bailey. he throughout the press and he was pushing back bluntly on market expectations for the future path for rakes -- rates. he wants that message to be conveyed through to mortgages which have shot up in the aftermath of the mini budget, but there could be a bit more hiking because the upside risks inflation are the biggest ever because of the labor market risks, because of the energy price risks. a sharp messaging -- a sharp contrast with the higher and longer messaging from the fed, but whatever happens to rates is a gloomy outlook for the u.k. economy. manus: some of these numbers are staggering. your mortgage, if you are getting it on a low number, 6% versus 1% at the end of last year. the market does not believe bailey so there is a mistrust not only in mp but fp.

lizzy burden with the latest on the bank of england. the chinese president welcomed olaf scholz on his trip to beijing. the agenda, trade ties, human rights, and they have strained the relations between beijing and brussels. let's get to our china government reporter, colum murphy. what would you say is the biggest take away from the meeting was? colum: it is still ongoing so we can say definitively what will be the take away, but i can tell you what would be the aspirational take away, and that would be for germany to walk the thin line of maintaining economic ties with china, making sure that it's companies who are heavily invested here can secure market share going forward. and they will not alienate beijing in any way, but also at the same time, germany is hoping

to cool down without alienating their home base back in germany. also there european partners and the united states, who would be more than happy to see germany taking a more assertive view of its relationships with beijing. dani: thank you very much. bloomberg's colum murphy. let's turn to the u.s. were tech companies are once again tapping the brakes on hiring as they contend with higher interest rates and the impact of a strong dollar overseas. this trend in tech goes against the wider u.s. economy with jobless claims near historic lows. however, we had a report yesterday showing a 40% uptick in jobs being lost. let's get more with michelle jamrisko. an important jobs report today in d.c. given what is happening with the fed and the american economy. what are we watching out for? michelle: what you will see from

this report is a little more on the town that you are marked about the headlines around tech job cuts, other job cuts, headlines around morgan stanley and other big employers reducing headcount. the october payrolls report is at least a direction that aligns with that, less job gains this month. there were 500,000 added in october compared to the prior month. that would be the lowest since 2020, that 195,000. i looked at the decade long average, the monthly average is 154, so other things to reports, unemployment rate could take up to 3.6%. also to watch would be wage growth. average hourly earnings should come down 4.7% from 5%.

a chief executive says that he wants the wage growth more in line with the 2% wage growth target, so perhaps loosening this still tight labor market and giving a further knowledge to the fed slow down those rate hikes that we might see in's -- in december. manus: it will all come down to that wages number. and there is no sign of that abating at the moment. they hip -- hits the tape at 1:30 u.k. time. setting the agenda for the rest of the day, this is how the slate looks. at 7:00, you will get the german factory orders. then the ecb president christine lagarde speaks on monetary policy at an event hosted in estonia. yesterday she talked about the propensity for slow down and it will not be that much of a recession in her view just yet. dani: a mild recession would not

be enough to stop inflation and the central bank talk continues. there will be a briefing on the monetary policy report, and then it is u.s. nonfarm payrolls at 12:30 u.k. time. there is now a four hour difference between now and the u.s. coming up on the program, global stocks trended a weekly loss but a rebound in chinese tech shares helped offset the drag from this week's fed rate hike. we will discuss the markets next with frederic oudea, ceo of societe generale. manus: joined the team on bloomberg. this is bloomberg. ♪

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dani: the rumor mill is up and running again. more tweets talking about the possibility of covid zero ending in china, or at least examining it. risk assets moving higher, a monster rally in hong kong tech, headed for the best week for the

hsi in 11 years. hong kong tech since its inception. manus: and when there was a big deal done in europe in terms of greek government bonds, so that is the equity story rating ahead. could it be that we are set for a china-europe job? china taking an m or a job. maybe that is the rumor. that is what came at alphabet. iron ore is up 6%, aussie dollar, what a bangor, up nearly 1%. it is a six-month slide. we are all in on china reopening optimism. the dollar is dropping and that is the risk narrative. anton bouvier is watching his bloomberg screen. he is the rates strategist at

ing bank. good day to you. we are all raging risk on. if china reopened, what would it do to your big perception of rates? good morning. >> good morning and thank you for having me. unfortunately, this is probably not good news for bonds. the main takeaway we see arising with the prices is that markets will become worried about another wave of primary inflation coming in from these inputs prices at a time where a lot of the world is grappling with second-round effects. so it is potentially not good news and we can see this negative correlation between equities on the one hand and bonds on the others. dani: what's nation would be the most vulnerable to this story? which bonds would you be the most worried about having to potentially chase rates higher

to match the inflation that would be emanating from china? antoine: all of them, really, but of the number of markets i am following, i would be the most worried about germany. one of the reasons is economically speaking but the other is because the pricing on the euro curve in terms of how much tightening is priced by the ecb is that it is tagging aggressive on the major markets. manus: how much more aggressive could that pricing become? madame lagarde says there is no sign of stopping. there is still a way to go on rates and lots we behind her. so how much more of a come already upswing, how much more -- how much more of a commodity upswing, how much more pressure could that put on the jumbo hikes? antoine: the ecb given a choice

probably do not want to raise rates much beyond 2%. the problem is it is not entirely up to them. if the inflationary pressure continues, we have inflation above 10% now in the euro zone, than that 2% rate is not going to cut it. that is the main takeaway and they will have to go above the percent potentially. it is the risk scenario but the market has been pricing in 3% before. that will do some damage to the economy and it would be unfortunate to divest the level of trouble. if the fed does not stop its hiking cycle later in 2023, the ecb has a problem and they will have to raise rates for longer. dani: it is almost that basically everywhere outside of the u.s. faces this dilemma that they need the fed to pivot, they need them to stop to fix the problem of a weaker currency.

perkins from ts lombard says it is a lose lose situation. you either match fed policy or keep hiking until something breaks. what is the lesser of two evils? antoine: it is a black or white way of putting it, but it is essentially right. it can central banks outside of the u.s. ultimately win that fight against the fed? if this is the only purpose of hiking rates, then the feds will not win that fight. there is too much haven flow into the dollar to begin with, the u.s. can withstand higher interest rates because it has a stronger economy. just on the basis of loads, there's not much the central banks can do. with us ignoring and not putting enough weight on the issue of generated inflation, which is

not something that a stronger currency can solve, and an inflationary environment, you will have to hike rates. i am not saying this is the beginning of a new approach of what we have seen, but from the point of view of an investor, you are not in a position to chase the end of tightening cycles. you are not in a position to prepare for it because even if it is three or six months down the line, the amount of volatility we have seen in the markets given the uncertainty of inflation dynamics, you might have to see it through too much market loss, too much volatility to have a lot of risk allocation. dani: really great to catch up with you this morning. antoine bouvet, senior rates strategist at ing bank. coming up, hong kong shares soar on the hopes of a china reopening.

antoine telling us it would be a problem for bonds and germany with this injection to the market. more on that next. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." we have gone for the yield curve in germany because the wrong end of the stake is the bond market on a china reopening narrative. you see futures rise with the equity narrative, but if china reopens, this is where you will see a testing of real rates. dani: volume is light so maybe we will see more pain come the european open, but this is what

antoine was talking about, the ecb and lagarde continuing to chase the fed with a higher rate and that means pain for europe. manus: he did say in an extreme case you could see europe going to 3% rates even though we are guided for 2%. roll it over and have them look at the impact on this potential reopening narrative coming through from china. it is pervasive. there are the futures. let's look at some of the cross acids as we go to this reopening narrative -- cross

manus: this is "bloomberg

daybreak: europe." i am manus cranny in dubai and dani burger in london with the stories setting your agenda. dani: hang seng tech stocks head for the best week ever amid ongoing optimism that covid measures could ease. xi jinping tells olaf scholz that china and germany should unite for peace. today's jobs report is expected to show u.s. hiring slowed last month, but will it be enough for the fed? plus boe governor andrew bailey tells us that the markets should not conclude their series of three-quarter point rate hikes. >> that is not the norm. i do not think people will be surprised if they see that we and the fed are looking at things through slightly different lenses. manus: don't get comfy with 75 basis point hikes, a dovish hike if you ever had one.

socgen beat estimates on the quarter. that drove the net income up 80%, higher than the analyst estimates. the company's ceo sitting down with bloomberg's caroline this morning. caroline: i will say good morning to frederic oudea, the societe generale ceo, live from france. your fixed income revenues are up 34% in the third quarter. what drove this and can you actually sustain this going forward? frederic: first of all, good morning, and as we said, strong beat across the board. we are very happy with the performances. it is fair to say in fixed income in particular, we have a business model which has more of the rate and we have benefited

from that. we have a strong government but it is true across the businesses. caroline: equities are up 1%, limiting the damage there. do you think you should revise your trading targets? frederic: this year, we have been very strong with the benefit of strong commercial volatilities on equities and fixed income, good capacity to manage the volatile environment. we stick to the target range of 4.7% to 5.3%. caroline: new provisions are actually slightly lower than estimated, around 6 million euros this quarter. are you worried that given the current headwinds you may have to raise those provisions? frederic: what is markable in this third quarter is the low level of defaults. just one third of the -- comes

from loans, which are defaulting. and the ratio carries on going down. what we decided to do is to add to our buffers in f1 and f2 provisions. and the announcement of our reserves, we will bolster this policy to move as much as possible for 2023 onwards. caroline: how do you see 2023 in terms of growth outlook? we had deutsche bank's cfo on board tech about recession in germany. what is your forecast on the european economies? frederic: there is an enormous amount of uncertainty from an economic, geopolitical, and financial point of view. we have a range of scenarios which are pretty significant

from zero plus years in the euro zone as well as the u.s. to effectively if inflation is more difficult to control. again, -2% in the euro zone. it is difficult to know at this stage how the economy can develop. what i think it is important is to be as prepared as possible. that is what we are doing in 2022. caroline: that is the key question, how much central banks , the european central bank is going to react when it comes to this weaker outlook. we have had a lot of rate hikes at the ecb. do you see more coming? what is your scenario in terms of central bank policy and how this is going to impact? frederic: two major uncertainties and i would still position the conflict in ukraine is the major one with off the consequences in the lng market.

but this question is also an important one. our central scenario, with a certain level of probability, is actually a normalization of the inflation with the lower development of the economy. and then rates coming down from the end of 2023 into 2024 because central banks get comfortable with the illusion of inflation. it is one where central banks keep interest rates high. very difficult and we have to manage how things are developing step-by-step month after month. caroline: how much is socgen benefiting from raising rates at the moment? frederic: there is a lot. as in the french market, the sensitivity to rates is relatively progressive. it is a market which protects a lot of consumers.

it is a fixed rate markets so the inventories of loans are fixed rate and you have savings products, and immediately the yield is increased with revenues to the clients. the cost of risk on the consumer will remain lower than in other markets where you have rates reset on the mortgage. sensitivity will take some time. on the other hand, like in romania, it is much quicker. it varies by majorities. caroline: your head of the investment bank is taking the reins in may of 2023 so that will be a couple of challenging corals before he takes over. in terms of the role of the trading activities in the future model, what can you tell us? is it going to move away from

markets? how is the transition going in terms of strategy? frederic: first of all, let me highlight my priorities for the coming once -- months. the first is to pursue the merger projects. we pursue that in january, particularly in the first half. second, we have better visibility on the timeframe. we have filed with the eu commission, the ssn, and we are planning to increase the capital increase before the year end and that should take place in the first quarter. a lot of hard work to complete the job and ensure a smooth transition. if i may, i do not think we will change much the strategy, which has been on the capital markets. we have very strong recent measurements and strong profitability, so i think we

pursue this trajectory. caroline: given the current headwinds and your 15 years at the helm, what would be the first advice you would give the successor? frederic: we know each other very well and we have been working together. he has a strong experience of banking. to be consistent with his own convictions and to build a management team in which he can rely upon because it is not an individual effort. the coming years will be difficult. you need to be able to align people to be resilient on projects and create an environment which will stimulate and motivate people, even if circumstances outside might be difficult. caroline: and cooper will see a collection of the troops as much as you have. thank you so much. the ceo of societe generale from france. manus.

manus: rate interview and the future is all about teamwork. this is part of the narrative about where you see monster risk on moves in china and currencies. china is planning to scrap covered flight suspensions. this is a step change to the covid policies. this would be stepping back from the ban and it would be part of the narrative to normalize. if this is part of the reopening movement we have had, you are looking at growth that might be the reaction in the currencies in the first instance. the dollar is dropping across the globe on g10 and that is allowing the yuan to rally. the cross asset on the hang seng, what you have is up 6.8%. is that stepping back from the flight ban enough to warrant the rally or does it show you the scale of the repressed risk in markets? dani: it has got to be the

latter because it was always -- already a monster rally based off of rumors and it does not add to this narrative of china reopening, adding that into the global economy. it is remarkable to see that a market that was so beaten down from a hawkish fed, so beaten down from dollar strength to completely turn on this narrative. it is not just chinese equities moving higher but u.s. futures moving higher off the back of that. it is european futures as well. as you point out, it is are you an that is remarkably strong at this moment. -- it is a yuan that is remarkably strong at this moment. manus: one commodity to keep an eye on is the oil markets. we have opec+ that did a 2 million barrel a day cut on the back of the economic outlook in their view.

we are up over 2% on the day on the markets. if china reopens, more especially think about the jet fuel, the overall needs for transportation and mobility in china as we step out of zero covid and in terms of global demand. let's look at the oil in china and you understand that we are up over 2% at this stage the trading session. this is on brandt -- brent. let me give you the price chart. 2.5% now is where we are. is where we are on the oil market. dani: we are over $90. we were at $88 yesterday. that is where we closed on thursday. if we see higher oil prices, i cannot help think, what does the swing factor of china reopening in for global inflation? what does it mean for a fed that continues to hike, and ecb that

continues to match it? as our last guest said, it is pain for the german bond market. manus: it is additional pain on the inflation trade. if you are grappling with 10% inflation in europe right now, what will it be as we go forward? in terms of germany and china, we know that scholz has been speaking to xi about the countries' ties. we discuss the ramifications of that next. this is bloomberg. ♪

dani: asia and risk markets are taking off this morning around

rumors that there could be an abandonment of covid zero, as well as china looking at reopening when it comes to flights. the backdrop of this, we have chinese president xi jinping welcoming his german counterpart for a one-day trip to beijing. on the agenda were human rights and economic issues that had been straining their relations. manus: let's talk about the diplomacy. colum murphy and christoph raw walled are with us. in the midst of our ukraine-russia war, by which all accounts china is on the side of russia, how significant is it that scolz is in china? is it about trade or the war? >> so far we have had scant details, but china would be

looking at -- to have a friend in the western democracies because right now it is quite isolated. of the potential candidates, germany is one of the most likely ones to step up and continue this cozy relationship with beijing. that is primarily because of the economic ties. they are hugely important to germany. it is a very important investment destination for some of the major german oil makers. scholz will want to make a close relationship with beijing on the economic front while also navigating the geopolitical issues back home, not least of which is the ukraine war. the european union's stance on china is also emerging, so it is a delicate balance that he will be trying to strike while he is here. dani: chris, let me bring you into the conversation. standing from the viewpoint of

journey -- germany, we had colum laying out what scholz would want. how receptive what a german population be to that? >> the fact that scholz is accompanied by the delegation of various leaders of big business companies, it underscores the importance from a business and economic perspective. that is something that is being closely watched from germany on the backdrop of all of these political tensions, not just between china and the u.s. but also between china and the european union. dani: thank you both. coming up shortly on bloomberg programming, we will be speaking to danny alexander, the aiib

vice president for policy and strategy. manus: we have had this breaking headline around potentially stepping back on airline restrictions into china. it is part of a broader reopening narrative, step one of a step change in the china covid zero policy. whatever it is, the hang seng is romping home at 6.3%. global fx rate is higher. we will talk about the depth of these markets in a moment on bloomberg. this is bloomberg. ♪\

>> flooding in pakistan.

hurricane ian. wildfires in california. droughts in somalia. just some of the emergencies that will be addressed at this year's cop27 summit in egypt. but the landscape since cop26 a year ago in glasgow has shifted dramatically. that is mostly due to the energy crisis sparked by russian president vladimir putin's invasion of ukraine. the fuel shortages have put climate change on the back foot, making it tougher for governments to follow through on their promises. according to bloomberg nef, there is a four in 10 chance of this year's summit becoming a success. the goals had already been slipping. developed countries committed to giving $100 billion a year by 2020. the oecd expects that aim will be met three years late.

even last year's pledges are struggling. of the 194 countries that signed the paris agreement, just a handful are updating their pledges towards the emission reduction targets every year. now with political and business leaders gathering to discuss climate, the risk of its becoming a giant copout. manus: the road to cop27. yusuf has already packed his bags, some of the team are ready to camp out, and yusuf will be on the ground covering cop27 with the whole team. part of that narrative is going to be, how does the world look as we go into next year? we have this headline that china may be working on a plan to disrupt their covid flight suspension, but that has got tremendous impact because it is part of a bigger read engagement

narrative. the impact is palpable across the markets. the hang seng up 8% at one juncture, chinese stocks up 3.2%, but hang seng tech and the currency, this is where the acceleration is coming. the dollar is dropping across the world because we have gone into this manic risk on mode if china reopens in a demonstrable way. the dollar could will begin to materially reprice. dani: you see that in the end right here -- yuan right here. i do think oil at the moment, what we are looking at, up 2.5% for nymex crude. it encapsulates why this is such a massive risk on move everywhere because you get the china demand coming back. those are just rumors, of reopening, but bloomberg is talking about easing of flight

suspensions. what does that do to jet fuel and overall inflation? can the good bullish times last of what this result in is higher oil prices, higher inflation, more rate hikes from the fed? manus: let's stay with oil because oil trading at 90 bucks. chaya -- china's oil demand may increase by 900,000 barrels in .23. -- 2023. passing the growth in 2021, so you are looking at the potential for a huge reassessment of oil demand, product demand, jet fuel demand, heating oil, gasoline, all of the products can and have the potential to explode higher. let's take a moment together because we share a mutual set of

conversations with martin malone. this is the important one that you woke up to in the car this morning which is about the potential for an mr essay vaccine. is that part of the discussion between scholz and -- dani is right there beside me. come on down. this is -- why are you hiding on me? dani: [laughter] i did wake up to those texts from martin malone, and can i bring you a line coming from cctv? china is willing to work with germany on the aviation, so that adds to the bloomberg scoop we have gotten but also willing to work with germany on covid. we know that china has not yet approved and mrna vaccine. manus: i wonder who martin

malone was speaking to last night. dani: [laughter] someone knows something. i do not have a ton of detail for you on that, but look at these markets taking off. it is clearly risk on. it will be interesting to see what happens in the european session, especially to the airlines. manus: exactly and i think you will see some big moves both on the casinos and the asian session. the airlines will be quite important. maybe not ryanair. certainly across iag, lufthansa, air france, they will be in focus right here on bloomberg. ♪

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anna: good