>> welcome to bloomberg markets. european stocks climb buoyed by china's latest stimulus measures and wagers u.s. rates are approaching their peak. a potential fed paws with the data showing a labor market undergoing -- oil holding steady after hitting the highest level since november.

opec supply cuts will tighten the market. it is labor day in the united states and canada, the regular band is out for the holiday and i've taken over for the interim period. a little bit of visibility of what is open. what we know is currently off-line are the cash, u.s. equities and there's also no cash u.s. treasuries. many firming up by 1/5 of 1%. the folks at jp morgan and goldman sachs making an argument around the story. in terms of valuations those are looking stretched. international equities more attractive. the two-year german bunds with the country selling 5.5 billion euros of two-year government bonds that's coming up at the beginning of this month.

a weaker greenback and then brent crude hovering short of $99 a barrel. let's set the scene with assets in china. china builder shares surging with the nation boosting property support. shares advancing 8.7%. we've taken the real estate index after the country cut down payments for homebuyers and encouraged lenders to lower rates on existing mortgages. first-time homebuyers can renegotiate their mortgage interest rates with banks. they expect the recent measures to help restore homebuyers sentiment. to help us digest some of this, the bny market strategist. a good chunk of u.s. markets off-line there's plenty to get through around the china angle. how do you interpret the latest measures and is it going to make a meaningful tent at a time of

anxiety amid structural reform over there? >> i think what's more significant than even the housing measures is actually finally the government targeting the household trying to help cash flow. there are announcing taxation so great tax deductibility on issues like childcare, elderly care. that coupled with the improvement on household cash flow really is a sign they recognize in the short to medium-term the household needs to drive growth from very low levels. yousef: what does positioning look like around this narrative given your analysis? what do you recommend clients do in terms of actionable trading guidance. geoffrey: we still like emerging markets, we think clients are very underweight emerging-market assets in general.

we like emerging market bonds at this point especially on the hedge, fx has done quite a bit. if you look at latin america these are very liquid bond markets they could be able to capture a bit of the commodity from stronger chinese growth. so this is one sector which we are really closely looking at. >> going across to the united states reflecting on economic data from last week. also looking at the folks at black rock saying the two-year treasuries which are very sensitive, those are screaming by. we have a chart on the terminal this is the 210 spread. whether or not the steepening will find their is incredibly -- is an entirely different question. do you subscribe to the broader economic view at play here? >> we subscribed to the view the fed will be higher for longer.

there's a big difference between labor market growth softening versus labor market weakening. right now what we are seeing is wage growth starting to stabilize. that is very different from saying the unemployment issues with wage growth is contracting. if you look at it in an inflation context i think the fed can shift the narrative towards holding rates where they are but if you're looking good rate cuts or anything like that i think it's way too early to even discuss. >> i kind of wonder what i need in the morning given everything that's happened last week. there was a time where bad news is good news and good news is bad news, which broader paradigm are we in today in the u.s.? >> i think good news is good news so you're seeing a slowing economy. you are seeing that towards a soft landing. everyone's going to welcome

that. the broader risk allocation basis with a negative narrative so to speak in china starting to stabilize as well. that's a conducive environment for risk. that has at least in recent weeks and months been outperforming the european narrative is much softer and let's say for the sake of it you are looking for negative news we probably focus more on it at this point. yousef: if the fed is pretty much done here were getting to peak rates does that mean we will get to peak greenback as well. looking at a lot from standard charter and they're saying we are getting close to a scenario where it makes a lot of sense to add dollar short on a tactical basis in particular. >> the only area where we would add dollar short, if we look at some currencies it from the

china narrative improves that's where the dollar can struggle a bit. being very careful against the sterling narrative. i don't think the same can be said for the likes of the ecb or boe were growth headwinds looking at a potential for economic contraction is much more pertinent. you can see the fed staying where it is. talking about easing at an earlier horizon. but that's where the divergence is going to come into play. for dollar bears out there i think that's not where i would prefer to put that at this point. >> point taken. in terms of some of the fed speakers we don't have any major economic data but we have plenty of verbiage to cut through including the new york fed president, of the boston fed president susan collins speaking in new york. how are they going to manage the message here if what they've

done over the last four to eight weeks could be considered successful. >> geoffrey: i still think it will be a case of data dependency and now it's justifiably point to the data going to the data and saying the u.s. economy and the labor market inflation risk is heading to where they want to see. no pre-commitments, no central bank will pre-commit. even though inflation numbers are surprisingly to the upside. we need more data prints perhaps to confirm a trend from the fed's point of view in terms of their communication and reinforce the previous message. the higher for longer narrative i think that will determine how the yield curve will behave ahead. yousef: also speaking this week will be christine lagarde. in many ways the european inflation story is a lot

trickier than what the u.s. has to deal with today. how do they bring this home and make sure that inflation and cost pressure stay under control within mainland europe? geoffrey: in her sintra speech she was clear about the divergence in various parts of the economy in terms of labor growth you low productivity sectors in the euro zone actually driving labor market growth as manufacturing is in the opposite direction. where did she see the balance of risks up ahead. so steep based on the pmi's up ahead. best, drag down that overall demand as a whole. she actually has a much narrower path across compared to her colleagues over in the u.s.. let's see how that development is going there but she needs to expand on what she mentioned

during her speech. >> i would love to leverage some of your strategic insights built from years and years of front lines of the industry. looking at european stocks beginning to think whether those evaluations stack up. this is something j.p. morgan drives home is the u.s. index on a forward priced earnings ratio is high considering the rising bond yields. pe multiple showing positive correlation with eps momentum. if anybody is looking at europe willing to add europe where will they add in europe. geoffrey: on a tactical level in the manufacturing sector we have looking at our flow indices seeing a bit of a pickup on a relative basis it could benefit from improved chinese demand especially on the infrastructure side. that correlation clearly as they are. being wary of the notion of

value in europe looking at the banking sector right now. appointing decline and demand decline. what is the ecb trying to achieve here? can you actually point up to a good valuations environment for european equities. i'm not sure we are there yet. stabilizing the euro zone before making that case. euro is soft but in a weak export environment that's not exactly going to compensate for a decline in export volumes. heading into the winter of energy prices go up again and just watch for margins as well. going back earlier into the safest em bonds is what i like there. >> you read my mind because that was good to be my follow-up question. brent crude up over the last five trading sessions.

back closer to highs we have not seen in about a year. in terms of brent, that brings back memories of global central banks panicking trying to bring down cost pressures. is the second wave material wave of cost pressures priced incorrectly or would you say that's being disregarded at this point? >> i would say somewhere in between. we can see what supply changes do. we don't have that reopening demand impulse here that we saw last year. if anything we might get a bit of a china growth but it's not to move the needle especially given the large culture driven at this point. they will need to incorporate it into their guidelines. it is not going to be the same situation, the demand dynamics are completely different. yousef: this has been a lot of

fun. great to catch up. giving you a snapshot of what is still to come. the chinese president skips this week's g20 meeting in india. more on his controversial decision next. this is bloomberg. ♪ at cdw, we get the importance of clear communication. and when your teams are spread out, that's not always easy.

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yousef: welcome back to bloomberg markets. another trending story. xi jinping won't be attending this week's g20 summit in india. the first one he's skipping since taking power in 2012. joining us with a look at what's behind the decision is our bloomberg news director for emea . a lot of mystery around why chinese leaders decided to snub the g20. what are you hearing from sources? >> that's the key question. is it driven by the desire to snub his indian counterpart, he's hosting the summit. we've seen an uptick in tensions between china and india of late in their long-running border disputes. does he need to stay focused in china on the turbulence's economy is facing. is that the priority or is he trying to shift again his focus towards alternate power,

recently attending the summit in south africa and is looking to build out those as an alternate to what he sees as the western driven agenda. is it a combination of all three, we may never know. the question is what is the repercussion of these actions on the summit including the china relationship but also for china on the global stage. yousef: let's flush that out in more detail in terms of a fraught china india relationship and to what extent that was a factor in the decision making in the upper echelons of the chinese government around the g20. what can you tell us in terms of that dynamic? rosalind: tensions have been long-running. when they both came to power they had quite a good relationship. pictures of them sitting on a swing together talking about normalizing ties and creating ties but it's really been on a

downward trajectory since then. in particular there's border disputes, tensions over technology, india has been slowly drawing further into the orbit of countries like the u.s. in some of those alternate power and certainly critical of china and its behavior and so you've seen that overhang relationship and perhaps xi jinping is saying i can use this as a moment to signify my displeasure by sending my deputy to a meeting he's attending every year since he's came to power. what that means is at the top levels of power in china and india are not communicating. there is no desire to let these border disputes spiral out of control. yousef: the message is carefully managed within china about anything related to the top levels of the government, how is

this story being spun locally? rosalind: certainly the message is the premier is capable of going to a meeting like this and representing. he's very attuned to matters at home. the chinese message will be it's business as usual focused on the economy. all eyes will be on whether xi jinping travels to the u.s.. there's been a lot of talk he might finally have a proper sit down with the u.s. president joe biden. that's really the most important relationship when it comes to china. they will probably focus on that conversation, the dialogue with the u.s.. we seen a parade of officials in recent months trying to reset ties there. the focus within china is it's business as usual, no big deal if he doesn't go in the focus is on the u.s. china relationship. >> this has been fantastic.

we still have of course an important breaking line in the bloomberg kicking off the ipo roadshow this week. we will be looking at what is a busy september. the red headline hitting the terminal is about alibaba. the fundraiser we've all been looking forward to and that may draw telcos, of the understanding is were talking about 10 to 20 billion yuan around for the hong kong listing. so that gets about 1.4 billion u.s. dollars to $2.8 billion at the upper end of the race. that's according to people familiar with the matter planning to spin off the unit is by distributing a stock dividend within 12 months until the company had announced in continuing to monitor. much more ahead this is bloomberg. ♪

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yousef: welcome back to bloomberg markets. september shaping up to be a busy month for ipo's. alex weber bloomberg quicktake joins us now for more. running through some of the superlatives and why it's worth counting these. >> there's been, we've been looking at a massive slow down

in the market over the past two years partly to do with higher interest rates and so there is real anticipation that if this arm ipo does badly then it will -- there will be more caution for companies ongoing public from firms like birkenstock and instacart also eyeing ipo's. if the arm ipo goes well it's not a guarantee the others will go well. it's in a different space. chipmakers are hot right now. if arm is able to convince investors it's an ai lead stock similar to nvidia and others then it gets the juice evaluation. it's unclear if it can do that. >> what about the latest lines on the terminal within the last 10 minutes about alibaba's cloud fund that could draw state backed. the nuance of the state backed telcos you deem significant.

why is that. >> at the moment the relationship to the cloud operators and telecoms firms around the world is sort of frenemy's that the telecoms operators are cloud services from google cloud but at the same time the cloud operators getting closer and closer to the edge of the network. they're putting servers very close on telecoms towers. some see it as a threat to the operators so it looks as though if they invest in alibaba cloud as it's being reported by our colleagues then it could make a tighter relationship and less of a threat. yousef: this has been super helpful, thank you. alex weber bloomberg quicktake. the iphone launched the next couple of days. let's give your snapshot of what's coming up in the next few minutes. friday's u.s. jobs report.

that supports a potential fed pause. the data showing the labor market undergoing a controlled cooling. equity futures largely cooler on this labor day. this is bloomberg.

>> welcome back to "bloomberg markets." yes, it is labor day in the u.s. and canada so quite a bit of the regular volume is off-line but we still have some indicators to work with. the rest of the world for the most part is online. not going to be any cash stocks or treasuries trading on the u.s. to year, or the german to your. germany announced they are going to sell 5.5 billion euros of two-year government bonds at a time when there is already a

debate about supply. currently we are up by 9/10 of 1%. the euro-dollar is pretty much up 1/5 of 1%. brent crude just short of $89 a barrel. the data gives a mixed picture of the labor market as job creation exceeded expectations, but the unemployment rate inched higher. joining us now for more, sandra. you talk about something that the market could finally put its teeth in, but i also get the sense that there is a hint of stagflationary signs from this latest batch. do you agree? >> certainly i think we have to look at the big picture. the fed has been trying to achieve disinflation without too

much pain. the latest data that we've had have been quite supportive and helpful. if you'd asked the fed before the summer would you be happy with these sorts of numbers, i get the answer would have been yes. softer job growth, some rise in unemployment, but not a really big downturn. you're getting similar messages from the service which are pointing to a cooling economy, but no collapse. obviously the quicker you get down in terms of inflation, the more pain that entails. the fed must be relatively pleased so far. yousef: in terms of what that means for the terminal rate, this is a look at the fed terminal rate. what is going to come from this

point onwards? there is a roughly 50% chance of a rate hike that it priced in. >> this is not too far off. we may now be at the point when we are at peak rates. it is obviously not certain because much does depend on data. we have a data-dependent fed stressing that time and time again. obviously you don't need to go further if you are getting enough. we didn't just have payroll figures but we actually had some inflation numbers on that -- on the fed's own objectives which do suggest the momentum on the inflation site is helping. probably in terms of interest rates, we think. yousef: you also think that the ecb hit peak rates with the july

interest rate increase. to what extent is there a risk of a surprise additional level enough of interest rate hikes that every acceleration will be warranted, given what we are seeing in commodity prices? especially energy. >> it's a very important question. what we've seen recently in europe is pictures of the oil price moves started to be translated into petrol price rises and we may be getting some moves in terms of consumer headline prices because of natural gas being much lower than it was. how much disinflation will be stilted? perhaps not much going forward. certainly the energy price doesn't look quite as helpful going forward as it has as a

driver downwards of inflation. the question is where do you get disinflation from? a lot of that relies on the goods market. we see manufacturing starting to fall weekly for some time now in the euro zone. we need to see this reflected on the price side as well. hence, we think that will be the main form of disinflation. yousef: a lot of it has to do with demand, resilient demand, over the next 6-12 months. that ties us back to china. we are seeing some euphoria in property stocks. the chinese government announced a series of measures to try to offset some of the weakness. bloomberg intelligence was up 7.2%, the most in about seven weeks. are you convinced by the steps the chinese government is taking, and is that going to settle the matter for the

markets? at the moment, we do get these spikes, but they often don't last. >> i think it is very hard to declare, call the bottom on china's property market. we are dealing with an economy that is generally quite soft. unemployment in china we do know is very high. if you think of the people who could be first time buyers, they are not looking at a rosy picture right now. certainly, the property developers are feeling it. it is a large part of what has driven chinese growth in the past and it is still difficult for the government to get to grips with it. it has repercussions for government funding, bank funding as well. we think it difficult period does still lie ahead and we can't quite say we are out of the woods despite the latest,

more positive steps. yousef: we are going to dive deeper into some of these things. let's get you a bit of a preview of what else we have in the pipeline. 10% correction in equities could be on the horizon. nouriel roubini from roubini macro associates. this is bloomberg.

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♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. ♪ yousef: welcome back to "bloomberg markets." international leaders, economists and ceos gathered over the weekend at the annual forum in chernobyl. francine lacqua sat down with

the chairman and ceo of roubini macro associates and asked if he sees a chance of the global recession. >> compared to six months ago, we see a real hard landing for the global economy. but i think that there is -- on whether they are going to open a soft landing. that short and shallow recession has already started in the euro zone. very high inflation is probably headed toward a recession as well. united states, the jury's out on whether we will achieve a soft landing or a short and shallow recession. >> that depends on what, the u.s.? is it fed policy or the tight labor market that could suddenly collapse?

>> hiking rates above 5%, the economy has gone recently above potential. that is good news in terms of achieving soft landing, but is actually bad news for the fed to get the fed is not done yet. may have to hike once more, twice more. the more that happens, the more that potentially there might be a shallow recession. economy will be reasonably strong even if it is slowing. >> what our markets most misunderstanding about the world economy and how equities should behave? >> in china, the reduction growth is the aging of population, the housing overhang. i think that potential, 3% to

4%, that is not going to change over opening up. i would say on markets in my view, if the global economy is going to weaken, a bumpy landing, markets have rallied to much today. that is maybe going to lead to a correction in the second half of the year. if the economic data is still weak, it is a way of essentially fighting inflation with real rates rising as well. that means that probably bond yields may go higher rather than lower while inflation is still high. >> a 10% correction in equity markets, or is that too high? >> it is not totally unlikely. if the economy starts to soften up and if you have inflation that is above targets still high

in the u.s., u.k., europe, i would not be surprised in the second half of the year for a 10% correction in global equity markets. >> what would you do if you are the bank of england governor? >> the bank of england is facing a dilemma. on the one side, growth is lower. it's the most likely case of stagflation. on one side, the economy is headed toward a potential recession. the other side, core inflation is still too high, so you face a dilemma. you want to have a lower inflation, but higher interest is going to imply financial instability. interest rates go higher. you have that perfect storm.

fiscal policies are also landmark. now, fiscal policy with monetary policy, that implies that the opposite is happening, and that makes the goal of central banks of achieving price stability harder. yousef: let's get out again to sandra, investec economist to flesh out some of the points he was making. one of his many theoretical works in the world of economics. sandra, the concept of a hard landing in whether the imf is over-optimistic with gdp forecast for 2023 of 3%, which is higher than the prior figure, 2.8%, what is your take? >> i think at this point, we

would say that things are looking more difficult. yes, we have had a good start to the year in many ways. it has surprised people, which makes the four-year figure better than it might have been otherwise. there have been upward durations over the course of this year to take into effect what we've already had. if we look forward, we do have to bear in mind more of the pain from high interest rates is yet to come. we are likely to feel this increasingly, not just in terms of housing, but also investment for companies as well as the construction sector in particular. that is likely to slow the economy further. softer growth is probably likely. indeed, recessions may well be in store in the u.k. and the u.s. in particular. quite possibly the euro zone

may be heading for a soft patch, too. >> just in terms of where the u.k. is, we had comments from jeremy hunt, the chancellor, and he made the point that it is going to be inflation divided by two by year-end, 5% by december 31, 2023. is that a realistic projection? >> we would think it is. we are quite hopeful. one of the factors is simply how electricity prices are set and gas prices are set at the retail level in the u.k., and they are filtering through which is likely to reduce the inflation rate quite a bit further by the time we come to october. that is going to be a very helpful factor in driving headline inflation rates down. on top of that, we already talked about the weakness in the manufacturing sector.

that side of things where we like to see further competition also will help the lower inflation prices. less good news on the services side. yousef: if i can get a call for year-end for the cable trade, what are you using to plug into your economic models here? >> at the moment, it is very difficult to step away from the prospect of interest rate differentials as a key driver of fx rates. right now, if we think that in the u.s. and the u.k. we are probably at peak rates and the market is not too far off, probably very big news likely at the current rate. fundamentally, we still think sterling is probably undervalued and as we head into next year we may see some further gains but in particular, we are likely to see the dollar weakening. but that is probably not a near-term story as yet. yousef: this has been wonderful,

thank you for making it to the show on a very busy morning schedule. let's get you a bit of a view on what else is around the corner. volkswagen ceo tells us how his company is trying to rev up sales on his electric models. we are going to get into that in a moment. this is bloomberg. ( ♪♪ ) sometimes, all the tenacity and grit in the world... ...can't overcome

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♪ yousef: welcome back to "bloomberg markets." volkswagen is adding improved design to a string of changes aimed at enticing more buyers with sales of its cvs lagging in china. >> we are at the show in munich. it is a great opportunity first of all for the german automotive industry to share the progress in terms of technology, but we have guest presenters from all over the world and a good opportunity to share experiences , how we will develop the mobility of the future.

in terms of volkswagen group, we have the opportunity to show the progress. yesterday we presented the progress of what priorities we are taking in terms of financing agents like china and north america, our platforms, mobility services and sustainability. so for us, it is a huge opportunity also to show what products our customers can expect in the future. very promising and i'm looking very much forward to it. >> a year from now, where do you expect volkswagen to be, where would you want to be at the munich auto show then? >> we are updating our existing platforms. for example, we have shown a

glimpse of the iconic gte brand, what customers can expect. next year we will come with a new platform for audi and for porsche, and driving this car, testing this car is so promising and exciting. and then developing fast air future unique platform with a lot of starting projects. so i think you can expect a lot from volkswagen group during the next years. >> what are they demanding from you now and how are you meeting that demand? >> we are in the middle of a transformation. it is about conductivity. how are the numbers thriving?

i think volkswagen group, on the one hand side, we have traditional -- in terms of driving abilities. then yesterday, we announced that we moved volkswagen group to a design-driven company. we are very strong on design and it will be an important factor for the future, and combining this with new technologies, developing a and combining this with some partnered solutions, being able to offer the ecosystems our customers are expecting in different regions of the world. yousef: that was the ceo of the volkswagen group. started his career back in 1994 at audi. craig, i was in the french resort town over the summer.

i took out an electric toyota, drove around with that, and it didn't really get a lot of kilometers under my belt because i had a range problem. now mercedes are looking to set the standard with 750 kilometers of range. >> that's right. and in a very small package. in model three fighter is the best way to think about it. i do think that this is a model that is going to be hugely significant for mercedes when we think about the transition that this company is making and where they have gone electric first, they've gone electric at the higher end. we've seen impressive specifications and models, attractive product coming out of mercedes, but not necessarily volume. they do an awful lot of volume, so for them to get this product right is going to be massively

important for the success of this transition that they are trying to make. yousef: they are also grabbing headlines with this baby g wagon which is meant to be electric which is very counterintuitive to what you see, which are these monsters back in the heyday. what else is on your radar? >> the electric baby g wagon is absolutely a-turning idea that was very smart on mercedes part two throughout. i think bmw with the changes they are making to really prepare them for the next few years of dedicated electric vehicle platforms, bmw has taken this approach for some time of sort of diversification and not necessarily showing full commitment to going all easy, -- ev.

that represents their own big effort to go fully electric. yousef: i always love a car chat, thank you for that. here's what is coming up. global data. we discuss with skylar koning ♪ explore endless design possibilities. to find your personal ♪ style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

♪ yousef: welcome to "bloomberg markets." let's get you a that have a snapshot of what we are looking at in terms of the top stories. china's stimulus measures, u.s. -- approaching their peak. munich for the iaa car show with focus on evs. joseph stiglitz tells us why he is worried about china and

europe that thinks the u.s. is going to be ok. welcome to the program. it is labor day in the united states and canada. still plenty of other action in most parts of the world and on the s&p 500, just a few indicators we can work without that of the united states. u.s. stock valuations, jp morgan is preferring international equities, describing them as much more attractive. looking here at the german two-year, we are off by 0.03. look at for the announcement from the german government at a time when there is already a debate around a potential plot. the greenback weaker on that china stimulus move and then brent crude holding firm at a show of $89 per barrel. i want to get to the wider markets. sam has been looking at some other important indexes. sam: good morning. interesting today that we are

seeing quite a good picture of the european stocks here. i think you had a little follow over the u.s. on friday. pretty much came in exactly where was expected, exactly where markets wanted to, a kind of controlled cooling of the economy. mostly sentiment, i think, but you are also starting to see some of the tinkering around the edges from chinese authorities starting to feed through a little bit. yousef: thank you. let's widen out the debate and bring in scarlet montgomery -- skylar. we saw assets and mainland china rally significantly especially at some of the property plays. what are you telling clients? >> i think for china will we saw

was a very initial strong rebound. the chinese recovery story from their was very strong, but since then it just continues. part of the problem is that households are very cautious, they are unwilling to consume or invest. on top of that, the nature of the stimulus has changed. the threshold is higher but also stimulus is slower and it is not flooding the market like the historic experience. that said, it is forcing more stimulus. that means overall, we think that activity will continue to decelerate to the second half of this year. unemployment and stimulus will stabilize growth in late 2023. while they can get better, it is certainly not good in china. yousef: i'm wondering to what extent the currency is a major consideration in this equation because the signal, sending a

positive message because they are trading with almost identical rates as of monday. what do you make of it? >> i think for us right now, it really comes down to the basics of growth and differentials. in china, yes, the economic recovery is underperforming expectations, i'd say. we think this is set to continue so markets will continue to be disappointed by the scale of that stimulus. at the same time, the trade surplus is deteriorating as exports slow. and there is a strong drive-by corporate and households. and yes, there is concern in beijing about the speed of the creation, but it is stopping the rapid decrease rather than stopping altogether, so we are still comfortable.

yousef: most of the time, the offshore you one is priced with a slight discount. what else is the chinese government need to do here to keep momentum on their side? they are getting a little bit of it in the last trading sessions. >> i think the problem is that we are still going off of the model of previous chinese recoveries. the market is looking for this stimulus that will have a positive impact on global growth, a positive impact on commodity prices. that is just not a recovery we are getting. i think it is very hard to see a sustained uptrend when you are getting that kind of recovery. it thinks you're going to find the bottom, and given the amount of sentiment that is negative more broadly, we are likely bottoming in terms of other assets and equities, but it is very hard to see a rebound in the actual currency without that kind of stimulus and we are just not getting it. on top of that, you have such a

large differential in rates between the u.s. and china. let's dig deeper into u.s. treasury yields. you just mentioned some of the bond yields. i'm looking at two-year yields and compare that to a note from jeff rosenberg of blackrock. he's getting really excited about this. i can remember the last time he wrote that. do you subscribe to that? >> i think we are moving through a backdrop we have this perfect storm for u.s. fixed income that was very bearish. we had the yield curve tweaked, the u.s. downgrade, increased issuance that obviously is continuing. but there has been resilient growth. but the fact that we have had this perfect storm, no doubt u.s. issuance increasing and being sustainably higher.

but the medium-term outlook is the set outlook. for us, we expect recession and the fed cuts. even without recession, the fed can cut quite significantly. there is a rally across the curb with the biggest move at the front end and steepening. for us, that means we also like being along the two-year point. there is the sealed upside risk. yousef: that chart was just showing the spread. skyler, you think the fed is done here? we have a sequence of speakers over the next few days, four last i counted. how can they get this right? >> they've done a remarkable job. we are at the end of the tightening cycle. what we've seen is that the u.s. economy is more resilient than we initially expected. at the same time, the u.s. has had five months now of negative

inflation. this progress on inflation, i don't think it is actually hard given that we have actually had that progress. the fed will cut aggressively in line with the experience, the fact that we are now in restrictive territory been so we will get cuts eventually, even if we get a soft landing and the fed cuts the rest of it to neutral. but certainly on a recession. it is actually quite remarkable that they are essentially very much buying into that. yousef: gasoline prices are on their way up in the united states. brent crude is flirting with $89 per barrel. you begin to wonder if the charts you see from many on twitter around some of the houses around a second wave of glacial and akin to what we saw in the 70's and 80's, are you a believer of that kind of scenario or do you think that the possibility of that is pretty much a tail risk that you don't really need to talk about?

>> there is certainly a risk that that puts upward pressure on inflation. also there is certainly a risk of supply shock with commodity prices rising to the detriment of inflation, market and growth more broadly. we very much saw that strongly in action last year, but i think even the recent, more moderate rise has put upward pressure on breakevens. you are seeing an impact on metrics within the market, the markets responding to these higher commodity prices. we've also seen a rise in commodity prices for that into the war in ukraine. and this is a characteristic of the economy now. geopolitical disruption and climate change, that means prices are consistently feeding into the volatility of inflation. there are signs that the market is excepting this because you do have those longer-term inflation expectations kicking off. yousef: the other thing that

stood out to me was from j.p. morgan. complacency in sentiment evidence of record low positioning has increased. they prefer international equities. what is the read on u.s. stocks today? >> i get the point in terms of sentiment as well as positioning and valuations. what i will say is that we went into this year fairy, very underexposed. everyone went into this year expecting a recession. there was a strong rotation at the end of last year of equities and risk assets more broadly, and the market is still under u.s. equities, so there is room for that positive tailwind for the equity market. in on the other side effect, valuations are very high, but there needs to be some kind of catalyst for that. you can have a valuations being

sustained high for a significant time, and they also don't look as unreasonable. in terms of where we are looking from a regional exposure, yes, we've seen this quick normalization of inflation. essentially, that means the central banks don't have to create a recession to keep prices under control and you are seeing that the u.s. is underperforming and you can expect that to continue. yousef: so a 12 months forward price-earnings ratio of 19 times. that in your view is not stretch? >> it is certainly stretched and if you look at it in particular, it is more than one standard deviation. it is definitely stretched. but the problem is you need some kind of catalyst like a recession or earnings turnover for that to turn itself over. in terms of valuations in the long-term, you need some kind of short-term catalyst to get there. yousef: for a global investing audience looking for opportunities outside the united

states and outside of china, where would you point to as "it to the end of the year? -- as we get closer to the end of the year? >> japanese equity reform this year has largely been driven by two things. this a relative -- relatively advantageous macro cycle. with the global economy softening in china underperforming, japan's dynamics the relatively positive. at the same time, the economy faces an easy fiscal stance and a monetary stance. you've also seen this very slow policy normalization progress from the bank of japan. that means monetary policy likely continues to be a tailwind for equities. what is more, four and investors are paid to hedge their exposure when they by japanese equities. this also this tailwind of a weak yen and equity valuations on a relative basis. yousef: the swings that we've

seen in yields in japan, that hasn't been helpful at all. the cancellations are mounting up. to what extent is that a credible warning sign for some of the stormy seas that may be imminent? >> i think a lot of this has to do with the bank of japan. you are having this really slow normalization because there is very much a risk when you have yields rise in japan. broadly speaking, japanese investors, there is this large risk of repatriation. you can buy hedge develop government market bonds, the hedging cost means the yield is negative. or you can put bonds on hedge, but the risk is depreciation. and with the fed angling for a long pause, indeed, the flows that show the hype around the

doj normalization in 2022, those have been buying u.s. treasuries from japanese investors. there is also maturity positions. this calculus very much means that there is a risk that when you get higher yields in japan, you get this larger repatriation flow that the bank of japan generally would want to prevent in terms of getting large losses or other worries. yousef: that is will because setting a distinctive tone on labor day monday with plenty of tangible guidance for the remainder of the week in terms of actionable trading strategies and longer-term investment ideas. his was coming up. we are going to get back to the auto show in munich. evs are in focus. this is bloomberg.

♪ yousef: welcome to "bloomberg markets." the autoshow revving up in munich. the carmakers are jostling with competitors for the u.s. and china for the edge in the ev space. oliver spoke with the mercedes co and asked have the latest model meets consumer demand. >> the concept is in its technological offering revolutionary. three figures for you. more than 750 kilometers range. 12 kilowatt hours per 100 kilometers. i'm not aware of any car in that class that has that level of efficiency. an equally important for the customers, 400 kilometers range charged nearly 15 minutes. so it really takes the game to

the next level. >> i want to talk about how that plays with the range. it has that stylized mercedes, a brady grill, a big face. how do you balance that arrow dynamism that range? >> mercedes has always been about the perfect blend. this timeless elegance on the other hand, the aspect of the desirability of mercedes. we have really smart engineers that get this down to the lowest drag that you could possibly think of and at the same time, it is absolutely beautiful. and on the inside, it is more roomy than you think. i'm 6'4". i can sit comfortably in the backseat of this car. >> when will bc this car on the road? >> we are looking at market knowledge first ask of 25. >> will it be more or less than that? >> we are not announcing prices at this stage but all i can say

is on the technological front, we are taking a significant step up in the segment and at the same time, it will be mercedes through and through. look for something exciting. >> and with bmw announcing, does this bring back the importance of the autoshow? >> i think the autoshow importance never went away. during covid, we learned to deal with a digital format, but it is a physical product, a product you need to see, touch, feel. >> and terms of pricing more broadly in the business, how is the pricing holding up for mercedes more broadly? >> our goal is value over volume. we are very, very careful about how we go to market strategy. as you can see it for the first six months of this year, that has been working quite well for us. >> and can you continue to ignore tesla price cuts? >> we are focused on value for

the customer. i don't think the customer expects eluded of a roller coaster ride, but something that you can depend on, so we will continue with that strategy. >> we see the supply chain kinks worked out. is that going to help you on margins going forward? >> we are working on deep sourcing. not just to make sure that we have sourcing stability, but to make sure that we have more economic stability in terms of raw material pricing. i think there is an opportunity there at the sector scales, that we can find a variable cost improvements in this area. >> and there's huge concern about the state of the chinese economy. what has mercedes experienced right now, is it affecting japan? >> all big economist at the moment are grappling with some challenges. we have higher interest rate in the united states and also in europe deal with inflation. in china, they have their

structural problems after 30, 40 years of economic wonder. they are reaching a level of maturity where you are dealing with structural issues as well. i think we have to take a little bit of a cautious stance on that, see how things develop and not expect rapid growth as far as the economy is concerned in the short term. >> this car show will also be marked by a lot of chinese automakers bringing their cars to the market for the first time for many people. how do you view that in germany? >> the auto industry is in transformation. it is natural that new players are going to come in. we respect both the established competition as well as new players trying their luck in the business, but that is not the focus. the focus is on the mercedes customer, to give that customer the perfect blend between technology and desirability. >> i have to ask now, is this a g? >> the g wagon is an icon.

it is almost impossible to get one, it is sold out. but tonight, we are announcing for all the fans out there, there will be a little g. a son or daughter of the iconic big g. we have not announced timing yet, but if you wait for something good, it will be worth the wait. >> i want to step back into the past. but with the first car you own? what did you learn how to drive on? >> my very first car was a vw golf one. but my first mercedes was a c- class in the early 90's. yousef: island have to how to drive in a fiat 128 in the 1980's. i don't know what to get more excited about. the electric g-wagon or the prospect of being able to drive an electric car for 750

kilometers, which translates to 466 miles. >> that is a range larger than any of the tesla offerings, which is really one of the main competitors here. it is really the battle of the at electric vehicles. everyone in munich trying to show their offerings. a lot of these companies coming forward with offerings but really trying to establish with the shape of the company will look like in a fully electric future which they haven't really done yet entirely. you have mercedes, bmw also have mercedes, bmw also doing these things, and doing and while on friday before the car show, tesla fires another shot in the price war, lowering prices across the range, showing a revamped model three. that is sort of the background here. along with the weakening market and the darkening economic outlook, particularly in china.

>> i want to talk about demand globally for cars. in august car sale number showed 18% year on year increase in august. our other carmakers seeing similar things here in terms of deep double-digit growth? >> you seen a lot of growth in the beginning of the year, and you seen a lot of these companies have order books that are absolutely packed. it has to do with all the supply chain issues we saw in the last couple of years and finally getting those deliveries out. the people and i've been speaking to here, they are really seeing a softening in the market across the board. ev's are still growing that they are coming from a very low base, so it is a bit of a mixed picture from that front. >> what about the performance of some of these car-makers? i look at mercedes, bmw growth. i asked different questions about growing divergence.

what are you hearing from analysts about which company is better positioned to really level up on some of these ev theories and execution? >> there's absolutely huge divergence. in terms of the automakers in europe standing to do pretty well, it is all at the luxury end. mercedes, bmw, all the luxury brands. volkswagen has a market cap that is within $10 billion of ferrari. volkswagen sells 8 million cars every year. for ari sells like 13,000 which really tells you about how investors are seeing the future of these traditional legacy automakers. ubs put out an absolutely scathing report ready for the auto show saying that chinese companies will bubble their market share globally and basically the legacy automakers are going to lose 20% of global market share over the next six years, all down to the cost base of models from china but i 25%

cheaper to produce for a lot of those companies than any of the european counterparts. the ceo, he said that the rumors of their demise have been greatly exaggerated, so some fighting back here from legacy automakers. yousef: i will take a mercedes test drive over a -- test drive any day of the week as it stands in the month of september. ask me again in october. let's get you a preview of what else we are going to talk about. we are going to get into the global rate environment. this is bloomberg. this is bloomberg. discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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♪ yousef: welcome back to "bloomberg markets." i want to get back to some of the market indicators we are working with, it is u.s. labor day, a holiday as well in canada, so some of the important cash trains are currently not open. but what we can work with is the s&p 500, many would call higher by one for the 1%. affirming of risk appetite after the china stimulus move. jp morgan saying that u.s. stock valuations are looking stretched. seeking international equity exposure, much more attractive. two-year bonds currently at

3.16. germany selling government bonds. september 12, right in the middle of a debate around the supply. euro-dollar, 1.08. brent crude just short of $89 per barrel. want to get to the global rates in more detail because it is turning into quite a bit of divergence. the u.s., you've got bets growing that the fed pauses in september thanks to a cooling labor market. then you've got the ecb facing higher inflation rights -- crates and some officials say they need to hike again. marcus, let's get a little bit of historical context around this and where it could end up in the next three months. >> i'm not sure there's going to be that much divergence. i long-standing theory is that whatever the fed does, we saw earlier this year central banks for the second time because, perhaps now reflecting too early

and we are forced to sort of go back on to the hiking route. the same time, clearly we've got both the bank of england and the european central bank white influx at the moment. the fed having done a hawkish pause and then i expect them to pause again, probably this will be the top of the range. i don't see how they cannot follow. we've certainly seen a lot of rhetoric the last few days. he's been quite hawkish. i think if the ecb does pause this time around that it will be the end of their hiking cycle, and they will be very careful not to try to let that the

embedded. it is all about trying to price out the rate cuts, make sure they are not priced in. yousef: with that picture in mind just outside of cape town, what is the potential pitfall of a growing consensus of optimism that is beginning to emerge if the soft landing is pretty much done and dusted and we are going to be able to avoid a recession? where does the fed, and to a certain extent, the ecb, need to be careful to prevent any complacency, or maybe even just jinx it? >> this is exactly the point. they've been very careful to sell at this higher for longer platter. they very skillfully taught the market into believing they would not be rate cuts certainly for this year or next year.

the ecb were even more paranoid for pricing any rate cuts. the markets get ahead of themselves. they will end up getting a shock because the banks will want to call them straight back. the last thing a central banker wants now is to lurch higher later this year, early next. and they seem to be telling us that is what they feel more. we've got the dip now, but if it were to lurch higher again, they really want to avoid that. i'm not sure i believe them, that is clearly --. yousef: your latest opinion these deals with ideas on how to pass on more savings of higher rates to consumers.

it is something i struggle with here in the united arab emirates which is just one microcosm of the global economy. but you've got a certain set of benchmark rates and by the time you look at your bank account, it has been downgraded quite a few times. it's a real struggle for people to get their hands on these higher interest rates especially on a wider retail basis. what are some of the ideas that you've been working with? >> i certainly think the u.k. government has come up with a little savings plan which would offer rates at 6.2%, way better than the current bank of england base rate. you are going to have to pay tax on that. may not be the greatest way to save, so you can buy short government bonds.

that could be a more tax-efficient way of doing things. we certainly see in italy and belgium, and number of different government bonds to try to compete. perhaps not too heavily, but the banking sector. if they don't raise their savings rates, to at least something within normal boundaries, if it's gone to wide, they could tax or regulate or compete. yousef: marcus, we are getting to sort of mid-september now. supposedly there should be at least a seasonal pickup in terms of the appetite of the european banks to raise capital. what i you seeing in the numbers? >> seeing a definite pickup in

august. i expect this week in europe to be very busy. something like 37 issuers, and more interesting, difficult types of borrowing. italian bank which has had a checkered past, that was able to raise money below 7%. but more interesting i think was seeing the large italian bank and belgium right now coming with the perpetual debt which had such a hard time after the credit suisse collapse and the cancellation of that debt. so it is great to see these types of deals coming back from market. yousef: marcus, appreciate the

time and the insight. want to widen out the discussion . going to up the script and just get you to respond in terms of appetite from your side to tell clients to get into that in mainland europe. where is the thinking? >> obviously, there's been some tricky times in that structure in the european ranking system and very, very recent times. i guess our starting point, we are among investors first and foremost in the credit world. we do have significant resources so we will do our homework and try to allocate capital where we think we are getting the most value, understanding the fundamentals of work. at this stage, you do want to be prioritizing balance sheet strength and robustness. that is not to say that we would dive headfirst, but it is

equally not valid to say that we would avoid it altogether. yousef: i mean, that is possibly no surprise. in terms of what really matters to global markets, it is all about stimulus from china, the pop that we saw and some of the real estate place. goldman sachs has a view and jp morgan has a bit of a different view in terms of thinking that goldman sachs is saying the reason measures to help restore homebuyer sentiment and alleviate household interest payment pressure, it paves the way for fourth-quarter sales. what kind of impact is this going to have? maybe we are just in the first beginnings of replacing chinese assets. >> i think it is two different stories, first and foremost. acid price outlook and shorter time horizon, the structure and

issues, the big picture. we've seen this before. china measures, pretty piecemeal , and we can see that there will be some benefit to some portion of the population, but i don't expect lasting impact. none of them really get to the heart of the problems. property has been highly speculative. no significant rental market in china. now the chinese investors and homeowners have seen the damage that can be done by the government, it is very difficult to undo that psychologically. unless there is a burgeoning and thriving rental market, it is very difficult to see chinese investors looking at property the same way that they have. connected sectors have been such a significant driver. yousef: what we do know is that

global emerging market investors are replacing china within that realm because of policy issues and tensions with the west. that could bolster other emerging markets. are you looking at other emerging markets and which ones are those? >> for me, it's not really about looking away from china and therefore looking elsewhere. it is really about fundamentals and evaluation. policies and the emerging world has largely been much more credible, much more orthodox than the developed world. that really leads some of these budgets looking very stretched. look at some of the big emerging markets, lee stands out, but there are plenty of others that

they haven't abused that fiscal position even through the lockdown and monetary policy setting has been orthodox as well as that has created value in real markets but also created the chance for cyclical assets which are very cheap compared to cases like the u.s. market to benefit significantly in this next stage of the cycle, from a is beyond the recession. yousef: james, you've been cautiously skeptical the last few times you were on the program as to whether the u.s. is going to be successful in keeping inflation at bay and achieving a soft landing and avoiding a recession. when are you going to hear from the fed speakers later this week? what do you expect to hear and how is that going to weigh on what you expect? >> a very carefully chosen selection of words.

i think what we are seeing is increasing divergence. we've heard just in the last several weeks that there is a core of doves who believe now is the time to start thinking about the time aspect of monetary policy, not just the rate aspect. for what it is worth, i strongly agree. the closer you get to your best guess, you have to start considering the future more than the past. i definitely think we are at that stage. there are some who still very much think inflation is too high, so you keep hoping. those have been the thought leaders in the early stage of the cycle. that becomes dangerous because you do risk is significant over-tightening and of course, i think chair powell is probably in the middle. we will continue to hear some disagreement and divergence on the committee. they are going to go back to the conversation in markets, trying to manage expectations is

difficult. your forecast and my forecast give us very different rate views if they are different forecasts. so i think volatility remains high, data is key. but of course, we will see the market balanced around hawkish or dovish. yousef: the trillion dollar question is whether we are in a new phase of the cycle. james, thank you for breaking that down. let's get you a bit of an overview on what else is coming up. joseph stiglitz is worried about china's economic slowdown. more from his interview next. this is bloomberg. endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

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international leaders, economists and ceos are gathering at the annual forum in italy. francine lacqua sat down with joseph stiglitz and asked about the current state of china's economic tensions. >> china has sometimes been analogized to riding a bicycle, going at 7%. everything is going well. very hard to ride a bicycle at a very slow speed. and for 40 years, the mentality has been a high speed system. when you have a high-speed system, well in advance of what you need, you make mistakes. six months later, a year later, those mistakes are corrected because there is so much demand. now they have to do a better job of fine-tuning.

i think their system is not a well-adapted to doing that, particularly under president xi who has dismissed a large fraction of his economic experts. >> is this, first of all, a political decision? he wanted to consolidate power, he could only do that if the economy was strong. does he change now that he has more control? or do you think he has weakened? >> i think he has assured weakened, but that doesn't say how he will respond. when you feel things are not going your way, you may respond in a more stronger way. that may actually be adverse to your real performance of the economy. steering and economy of the size of china is not easy. china, in what we call purchasing power parity, a way

to equalize different economies, is larger than the united states. no one would even conceive of trying to steer this monster. but china, president xi thinks he can do that kind of steering. i'm suspect. >> by saying you are suspect, are you expecting a lot of volatility with china? and what does that mean for the rest of the world? >> i have been expecting exactly what we've been seeing, they do a little bit too much of this and that, and did worried, and then we go back to this. they shut down part of the tech sector. it is not just the property sector, which is a very large

part of the economy. but it is many other sectors of the economy. >> is the only way than to slow the economy, to readjust? and what are the impacts to the u.s., the fed, and europe? >> i think we have to remember that in the 2008 economic downturn, china was the source of engine for the global recovery. it was pivotal. it won't be there. in fact, i worry it will be breaking down the global economy. and that is one of the reasons i'm so concerned about what has been going on particularly in the united states, that they've pretended that nothing is going on in the rest of the world. they fit raising interest rates

well beyond anything that is reasonable, and have put that peril particularly on the european economy. i think america is going to do ok, but i worry about europe. yousef: from one conversation, let's get to another one. this one with dani. i know you've been following closely some of the key moves in assets around the world, but i want to know what you are looking at specifically. >> i take the reins from you in a few minutes this labor day holiday. yousef: i don't give them away easily. >> it's true. for those who don't know, i have to wrestle them out of his hands. the u.s. might be closed today. we might just have a trading session, but that doesn't mean it is any less important than we got on friday. does this solidify for strategists that they can indeed start to price in the end of cycle-type playbook?

does this mean a soft landing is in hand? are we finally in the land of unicorns and fairytales? maybe it is time for jay powell to take a victory lap. if so, i've got to imagine -- and i'm going to press for some this on the show -- is the trade steepener curb the trade you want to be in?not just because the outlook of potential end of rate hike cycles, perhaps cuts in the future, but also we are historically going to be in the land of a day lucia -- del;uge of issuance for this corporate bond market. that is when you get companies issuing this. that will put pressure on durations. it is kind of a double whammy on why you probably want to be here at least for the week to come. yousef: that escalated quickly, i didn't expect we would talk about unicorns. what else are you going to be talking about with some of your guests? he talked about the fed, the

steepening trade. what else in the other asset classes? >> we are going to have a lot of china conversations. i mean, it matters a lot what happens to europe. we've seen this piecemeal approach coming out of china. it feels like every single morning we get a new announcement of something else china is doing targeting mortgages and the housing market. is it enough to shake things up? we also have the political angle of xi not going to the g20. jp morgan saying all of the soft landing is priced in, the only way down. and of course, oliver continues the fantastic conversations from the auto show in munich. i am interested to hear what they are going to be doing to compete with the european electric car-makers. are we going to see the ed pricing make its way into europe? it has been a big thing in china

with tesla continuing to lower prices. vw and mercedes, are they going to be facing that same kind of pressure to be reducing prices for the european consumer? yousef: one of the store is getting a lot of hits is this announcement that they are going to build a smaller g wagon, a baby wagon with electric power. wouldn't land well at all. yes, electric might fly, but something smaller doesn't usually work. usually, bigger is better. when you drive a baby g-wagon? >> this is the thing about a g-wagon. it is supposed to be function. if you are driving it, the point is you want people to see you. you want a black one, you can't see through the windows, make the rims black. i think the point is it is kind of supposed to look ridiculous. and i mean ridiculous in a good way. the only thing i would say is you have plenty of open road to drive around with.

have you driven in london? you don't get that luxury. maybe if you want a flashy car, you want the baby version. maybe that makes sense. >> i guess something to consider. there are so many other good options out there. the electric ford bronco. take your pick. this has been great, thank you for that. of course, full coverage over the next couple of hours. let's get back to some of the market action for you in terms of the few things that are open outside of the united states. most of the world is open outside of the united states, let's face it. we are not going to get a cash treasuries trade. seeing risk appetite and little bit firmer on the s&p 500, caught higher by about 1/10 of 1%. german yields just north of 3%. the euro-dollar, betting on the

china stimulus move. once again, very much the entire g10 complex getting a bit of a repricing. that is likely to move the needle especially on the front-end of the curve, and then brent crude currently, $88 $.69 per barrel. i'm looking at china more broadly, and something i'm thinking about is the chart that we showed at the beginning. it is a chart i wanted to part with as well. consideration of the big moves we saw in property. it is all about the stimulus measures, and yes, you did get a pop. 8.7 percent, the bloomberg real estate index. that is a massive move, but we have seen these massive moves in the past and they tend to normalize and quickly retrace. answer the question will be, can these moves be sustained off the back of these policy measures, and some of the down payments for homebuyers?

lenders are being encouraged to lower rates on existing mortgages. much more ahead. it has been a real pleasure. this is bloomberg. this is bloomberg. st you money. to this day i only paid what i had to pay for the device... when i go back everything is covered. there's so much you're missing by not having hearing aids. we'll find you a hearing aid that fits your lifestyle and budget at one of our over fifteen hundred locations. call miracle ear at 1-800-miracle and schedule your free, no obligation hearing evaluation today. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently.

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dani: welcome to bloomberg markets. from london i am dani burger. stocks in europe and asia on the rise after china ruled out another round of its embattled property sector. a high-stakes meeting, turkeys

president looks to persuade vladimir putin to revive a great deal ahead of the g20 meeting this week and we are live ahead of germany's international motor show. we spoke with the ceos of some of the largest automakers. u.s. might be closed but china takes the mantle. it was a positive handover thanks to more policy announcements coming from the region. that is help to support european stocks, bonds, those are seeing declines in germany as the euro gains after strength coming from the dollar on friday after a positive jobs report. nymex crude trades at a november high. what we are seeing in europe with the german two year yield above 3% is different from what we saw on friday. it was a story of stagflation fears gripping european bond markets with morgan stanley saying the end of the right height cycle for europe is upon

us. let's get more on that. joining us is european macro strategist at macro hive. let's start with this call. morgan stanley that's -- says because inflation is on a downward trajectory the ecb is done. would you agree? henry: there is probably more hiking to be done by the ecb. it is a hard call. one of the main reasons we have higher conviction more tightening is needed is because the ecb has been unequivocal focusing on their inflation mandate as well as growth or employment. i think the stagflation argument is definitely gaining ground. it is mentioned a lot. the comments last week played a decent role in setting out the neutral ways for and against hiking. that needs to be taken into

context with a couple other things, which includes the fact it seems she is towing a line in terms of not shifting too hard towards a hike or towards a pause. i think that is reflected in what was agreed at the last meeting. the main burning question is employment and the tightness of the labor market. if we consider where europe stands right now, the situation where despite pmi's being incredibly negative the overall employment growth is slowing but continuing, which is quite at odds with previous recessionary situations. when we look at the forecast, which will be one of the things they lean on in regards to the decision, the reason why they revised their forecast so much more hawkish leak, that had been our argument since the start of

the year, on the basis of labor cost. if you're having a tighter labor market and slower growth, that is low productivity, higher wages, higher unit labor costs, it'll be hard to balance that and try to lead towards a lower medium term core inflation rate that would justify that. at this stage we are much more 50-50 than the market is pricing. dani: can you have any conviction? if you are 50-50 on that front at the front end of the bund because german two-year-olds have been stuck between 2.9 and 3%, where's the next breakout? henry: on september we are 50-50. we lean more towards there'll be terminal rates of at least 4%. it seems much more reasonable from a fundamental perspective. two, the price into next year

seems to be driven partly by what is going on in the u.s. as opposed to the fundamental story in europe. our lien is very much towards short end and paying rates there. further out i think bunds have been well capped in terms of yield curves but still at very high yields versus historical versus what the market is used to. the fact that supply, the finance -- we have had no real breakouts or pullouts are generally in terms of spreads. the story seems a lot more stable and inflation expectations for that part of

the curve are a lot more capped than would be the case in the u.s.. dani: if i can go back to one thing you just mentioned, the cuts that are priced for next year being more driven by the u.s. is it your estimation the ecb of the will not be cutting next year and it is a risk that policy is unduly tight if we are an environment where the fed is cutting at the same time? henry: our lean overall is more hawkish with the fed and the ecb. from a relative perspective the better value would be the comparison between the u.k. and europe. for context, the bank of england very little price and terms of cuts next year. almost three hikes priced in until they reach terminal rates. that is in contrast to a europe where unemployment is still very low, core inflation and wage

intensive inflation services -- the momentum is still decently above target. we quite like that play of being positioned for a soft u.k. steepening versus a european flattening in that respect. in terms of will the ecb cut next year, i think a lot can change. it is very hard to make a strong call. i think in the near term the ecb will be pushing back on that pricing. we heard talk about the fact that the market is basically being more dovish on the rate further out and taking out some of the tightening they like to see. i think that tone will continue. even if they were to pause in september they'll be doing everything they can to shift towards a hawkish pause and

dampen that kind of mood. it does not help them doing that job. dani: what does a china that struggles to get economic growth off the ground mean for europe in the midst of all of this? henry: a stronger china would help exports, autos, manufacturing, machinery. that being said i think the weakness of the global market is probably less of a risk to european manufacturing and the systematic changes in the structure of the european economy from higher energy prices and much more competitive chinese auto sector. things like batteries, electric vehicles, china is doing well in going ahead, advantage elsewhere while europe is comparatively

having a much harder time on that front. i think all things equal, a stronger china should help european exports. you also need to look at where the chinese growth is coming from. if there consumption has shifted toward services, that benefits europe less. as we have seen with the support last week, if it is all around housing, getting first time buyers or it is the market supporting parents, that is going to have less of an impact on the european exports than other measures would have. there is nuance at this stage. it is not entirely positive story. the nuances -- dani: the nuances are screaming from the macro picture. i think about china growth not living up or india's gdp said to grow at 7% while sweden and

chile are said to see their economy shrink this year. how much of the end of 2023 and 2024 is going to be about this global divergence of growth? are there any screaming buys or sell you within that context? henry: i think the divergence in the european context is going to be around energy intensity. i said it already. it bears repeating how structurally changed european energy market is now versus what it was before russia's invasion of ukraine. they are now much more exposed to markets. european gas prices were rising on that and that is exposure to lng.

it is the same with geopolitics. there is going to be a lot of concern around securing supply for energy and insulating against the geopolitical a people's we might see in regions where europe does by a lot of energy from. that is certainly within the european context. from an international perspective i think while not that familiar with indian and swedish growth, one of the themes we have been seeing is around -- particular you on the equity side -- european equities and the stagflation environment. we would be more bearish on things like homebuilders, value being more long, staples versus

that and that kind of environment. the overall politics in europe has definitely had a much stronger lean towards targeting profits. dani: i'm afraid we'll have to end it there. really appreciate your thoughts this morning. let's get further into this markets conversation and pick up where henry left off. joining us is bloomberg's eddie van der walt who joins us. the european handoff seemed very positive on a drip feed of china measures and perhaps signs of growth. you look at this and say it is labor day holiday in the u.s., maybe we do not believe the market action? eddie: in the newsroom earlier, one of my colleagues saying this is starting to look less like a bazooka and more like a machine gun.

they keep firing more and more bullets at this problem. i do not think it is a drip feed anymore. measures they are taking are substantial. if these had been announced in a single package, i think the market would've been almost overwhelmed. these are substantial measures that china is bringing in that supports the chinese economy. that supports european growth. europe exports a lot of it stuff to china and a lot of german factories making high end equipment that ends up in china making goods that gets reexported to europe. i think this is a significant turning point for the european economy as well. dani: i saw this great piece arguing that the best growth stocks, it is not u.s. tech, it is french luxury. that is where it is at. translate that into this equity market rally. will it be europe's time to shine?

eddie: europe is overdue a time to shine. european banks have struggled for a while under inverted yield curves. also as you say luxury is the big thing. europe is good at making luxury. they are good at exporting that to china. also to the rest of the world. you need to see strong chinese demand to make that work. that is the big missing piece in this puzzle is strong china. dani: thank you very much. eddie van der walt on not just markets but luxury. that makes sense. coming up we will be going live to the iaa autoshow in munich where we will discuss electric vehicles and the european market. this is bloomberg. ♪ ♪ it's not just tech, it's not just people. it's how they work together to provide

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dani: welcome back to bloomberg markets. a positive day in europe. the u.s. might be off but we are doing ok without them. it is positivity coming from china -- may it is not fair to call the policy measures a drip feed. maybe it is fair to say is not a bazooka, it is a machine gun. it is a lot of smaller measures that impact in a big way and that big way is being reflected in europe. the strengthens this morning were not back at one .09 but we are at 1.08. concerns about stagflation meant the euro had been weakening. the opposite of that is happening today. nymex crude at a november -- at

a high. bloomberg's oliver crook is at the munich autoshow. i know you are a european autoshow but you and i were talking about this during the break. how many chinese automakers are there? oliver: it is an international motor show and it is the chinese who are here. right now we are at the stand for byd, which is absolutely mammoth. they are trying to put their stamp on the autoshow. they are trying to break out of the chinese market. after toppling volkswagen there try to go out into europe and build brand awareness with the consumers in europe. we spoke to a lot of executives and we caught up with the volkswagen ceo and the economy in china. >> in munich the iaa is a great

opportunity for the german automotive industry to show the progress in terms of in munich . we have visitors from all over the world. for us it is a good opportunity to share experiences. how we will develop the mobility of the future in terms of the volkswagen group. we have the opportunity to show the progress in the volkswagen group. i am in charge since one year and yesterday the group presented the progress of our 10 point plan, what priorities we are taking in terms of finance regions like china and north america. software and technology. our mobility services and sustainability. for us it is a huge opportunity to show a glimpse of what products our customers can expect in the future. very promising and i'm looking forward to it. >> here is a long time of the auto industry. a year from now where you expect

volkswagen to be? >> we are updating our existing platforms in terms of electro mobility. for example the meb -- yesterday we have shown a glimpse with the iconic gte brand, what customers can expect. next year we will have a new platform for audi and porsche. in the background we are showing the audi q six. testing this car is promising. then developing a future unique platform with a lot of projects. you can expect a lot from volkswagen during the next year. >> what is the consumer demanding from you and how are you meeting that demand?

>> it is about electrification, connectivity, striving, and i think volkswagen group is well-prepared. on the one hand side we have traditional strengths in terms of driving abilities, the high quality level. yesterday we announced that we moved volkswagen group to a design driven company. we are very strong on design. that will be an important differentiating factor for the future and combining this with new technologies, developing our platforms and combining this with partnered solutions and the different regions of the world. being able to offer the ecosystems our customers are expecting in the different regions of the world. oliver: the volkswagen ceo talking to us earlier about their plans.

how they stay on top? how do they continue leading in a market there falling behind in, in china and in the eb space. -- in the ev space. all launching new concepts, but the cars are not ready for market. these cars are here and ready to break into the market. went to they start building manufacturing capacity in europe? dani: to that point vw fell 4% on friday off the back of the ubs note. harsh words not just on vw but renault. the analyst saying there is no way they continue to live without that competition from china. is that the top there? the assumption that vw, once they get that manufacturing capacity cannot keep up? oliver: i asked the renault ceo about that and he said the rumors of by death have been exaggerated.

this ubs note was very scathing. it was a eulogy for the legacy carmakers. let me go through some of the main points. because the chinese automakers are such a cost advantage, 25% up over that, they are way ahead of them. by the time in 2030 the chinese will double their capacity of global market share and that means 20% of legacy automakers market share will be lost in that time. dani: passive. in the meantime a lot of the conversation has been about china. let's go back to the european automakers. what conversations have you had about what they are doing and where the history goes? oliver: listen, the other backdrop around this is let's not forget on friday tesla cut prices yet again. they send out their model three. this is all mounting pressure. a lot of executives are

concerned about the darkening macroenvironment. longer-term, it is not clear what the outlook is looking like. dani: i also have to ask you. what cars have you seen? anything has surprised you? oliver: mercedes, they have teased their baby g wagon that will be coming out at some point soon and that will be a very big seller. there mercedes amg gt 63. i was informed it is $200,000, solo bit out of my range. even these that i have seen, there is something for everybody here. dani: there certainly is. i was in vietnam two weeks ago and everyone was excited about byd. not necessarily the other asian

electric carmakers in the u.s.. great stuff. we will be with oliver crook at the munich autoshow. a lot more conversations to come and a lot more executives to talk to. will we see oliver give us a test drive of the wagon? all of the important questions. as we go to the break, let me show you where markets are trading. the u.s. is off. it is the labor day holiday. does that mean the u.s. is not more important. we have the jobs data in hand. how comfortable are you to trade with the view the fed is done with its rate hike cycle? this week, starting tomorrow, we'll be getting a day lucian of corporate issuance. it is something we typically see off the back of the labor day holiday. last year was $35 billion worth issued on the tuesday after labor day. that could put pressure on duration. elsewhere it is the unwind of the friday trade for europe.

that was europe down, stocks down. today it is european stocks up, euro stronger. it is china and it is stimulus. we have a lot come out from things like lowering mortgages, make any easier for first-time homebuyers targeting that segment specifically. it was enough to get this market going. the hang seng was off on friday. here is the rejoin. coming up, we will more about this. property stimulus measures in china lifting sentiment. will be spit doing the hudson institute china center director. that conversation is next. this is bloomberg. ♪

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dani: welcome back to bloomberg markets. european stocks are up, halfing some of the losses we have seen. a positive hand up from china. stimulus measures supporting global risk sentiment. speaking of china come industry inching into europe when it comes to autos. let's go to bloomberg's oliver crook who is at the bloomberg autoshow with a special guest. oliver? oliver: i am joined by michael

hsueh, the managing director for byd in europe. we are here at the munich autoshow. you've done an amazing job conquering the market in china. are you ready to enter the international market? michael: thank you. yes, we have a very good marketing performance in china and the past two or three years and we found that the market loves byd technology and products. we are trying our best to introduce those technologies and products to the overseas market and definitely europe is our strategic market and we want to look at it with the customer here and let's eat. the -- and let's see. the iaa is a great opportunity to have this conversation. we are happy to be here and we hope every customer in europe can be in munich. oliver: what countries in europe

will you be starting in? michael: europe is a very big market. following china it is the biggest market for a vehicle in china. we think of customer here is more technology care and german is the biggest market in europe. we generally do not have a focused market in europe. one communication with the pan-european market. oliver: what does be we do you have that other carmakers do not offer -- what does byd have that other carmakers do not offer? michael: we invest naughtily in

the product itself but the key technology inside. the telematics but we have full technology for the product. that can bring our customer different experience because with that the customer can get safety is our first priority. based on the battery technology. secondly it is the premier design of the car but with access for price. oliver: rice will be a very big issue but one of the issues you may face in europe is brand awareness. how do you build the byd brand in europe. michael: step one is through this autoshow. hundreds of thousands of people are here. most of them are industry people. also some of the consumers that come to the autoshow to test

byd's bar and compare the technology and the product with the industry partner, and also we have a good partner in different countries. 150 stores. oliver: at a certain .21 to build market share you will have to build factories in europe. have you thought about what countries? michael: localization is one of the very important strategies of byd europe. we are considering different locations in europe and where we can build the cars. we hope we can have some announcement at the end of this year. oliver: and you've had

constructive conversations with different governments? they are excited to see you build factories? michael: we are so welcomed by different countries. oliver: have you also studied the japanese and korean carmakers? it took them a long time to enter the european market. how will you not have the same challenge? how are you trying to go around that to not have the same problem? michael: as a new brand of the carmaker we started the history. we also studied about how people like the new technology and how they like the new technology brings them value. we can bring them value and with that the timeline will be shorter. currently we have very good progress. the feedback from the customer is positive and so we are

confident we will be faster. oliver: in terms of the russian market which has no western players, where does that fit into your european strategy? michael: we are still making a plan, but we do not have a plan yet. oliver: that is the president of byd in europe joining us at the munich autoshow, trying to build that brand awareness around the european consumer. michael: fan tat -- dani: fantastic conversation as we look at the industry in china. let's talk more about china, china industry. joining us is miles you, sina -- senior fellow at the hudson institute. previously served as a china advisor to the white house under

trump secretary mike pompeo. president xi, for the first time since taking over the lead position, he will not be attending the g20. what you make of that as a shift in his approach to geopolitics? is it a shift? miles: it is a very subtle message. the g20 will be hosted by india, which is a core member of the brcis. china has placed a lot of hope on brics is a coalition against g7 and the western free market system. the g7, brics just had a summit in south africa and vladimir putin could not go because he was wanted by the criminal justice system. i think xi jinping will give

vladimir putin some kind of consolation award. you cannot go to south africa and i am not going to india. this also indicates there is internal strife for leadership within brics. there is a clash of ambitions. dani: does it not make relations with india more complicated? he is supporting bricks. bodie was at the -- modi was at the brics summit but the g20 will be in delhi. does that not complicate relationships? miles: people have spent a lot of time focusing on the tip and point of the explosion over the taiwan strait. people often forget that china and india have a tense border dispute that could erupt at any moment. those countries are building up

military capabilities along the border. i think since 2020, after the clash of the region, china and india, once they are beyond cold war it is hotter than a cold war. what i am thinking is modi and xi are just on the surface. below that is enormous hostility towards each other. dani: there was this moment when president xi came to lead as president of china when he almost had a reputation, released an image of a global peacemaker. he went to all the g20's after the three years of covid isolation, going to the g20 meeting in bali, tried to facilitate peacemaking between ukraine and russia.

is there any degree towards focusing more on domestic issues of not going to the g20? miles: china is a very important country geopolitically and economically. china has an impetus and potential to be a global leader. china, in terms of the population, economic size, the military development and the position at the united nations, the problem is not that. the problem is china lacks two things. number one, china does not have the credibility. if you want to be a peace broker you have to be fair and make sure people are convinced you are fair. like ukraine, china is decidedly on the side of the aggressor, on russia's side. it will not work. china said you have to really respect each other's sovereignty. that sounds very good but china

does not respect many neighbor sovereignty. china has border disputes with its neighbors. talk about south korea, japan, vietnam, philippines, india. this is a problem. it does not have credibility. two, china does not have the credentials to do so. china makes a lot of promises over the issue of hong kong, the degree of economy of promised. it keeps breaking it. that is why it is very hard for me to see china have this ability to lead a large portion of the world with value and credibility. also keep in mind china's coalitions, many allies have their own designs. it is hard to imagine that russia and india would concede to china's leadership.

dani: given you are an expert in military enable history, especially as it pertains to china, how worried are you about the military conflicts that have started -- that are started by china were involved china? miles: this is not just america's problem. china has ambition for global dominance. right now you can see, mostly through the economic march into the global key markets how this byd official, he talked in germany. the predominance of tesla and a traditional automobile industry. you can say that and tesla has a problem in china -- the government cannot buy used tesla

cars because of its international connectivity. i think you talk about the military. the military -- china has made substantial advancement in key technologies. it is not just united states. every country in the periphery worries about china's rise. dani: we only have a minute, so we have to be quick, but in a world where china does go that way, is china economically prepared to face the same fate as russia, that is being cut off from much of the western world? miles: it depends on china. if china takes military action against taiwan that sanctions will be quickly imposed on china. unlike russia china's connection with the international free

trade system is much more intricate and comprehensive. the impact on china's economy is going to be much more catastrophic. dani: we really appreciate you taking the time on this labor day holiday. hopefully get to enjoy after this. miles yu of the hudson institute. thank you so much. there is positivity emanating from china. european stocks in euros stronger. coming up we get back to the geopolitics. russia strikes ukraine great exporting ports amid a that a mere prudent erdogan -- amid a vladimir putin erdogan talk. we will have more on that next. this is bloomberg. ♪

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volumes are lighter but european risk assets are doing well. shares of the european stoxx 600 companies up .5%. two year yields move higher in germany thanks to expectations that perhaps europe will face a stagflation environment. morgan stanley said the ecb was finished with hiking rates. not exactly what we are trading, but perhaps just a breather. nymex crude stays steady with oil trading around november highs. turning to geopolitics, turkish president erdogan has been urging russia to return to a deal allowing ukraine to export grains but a barrage of drone strikes against ukrainian port facilities have said a somber tone ahead of the talks. maria tadeo joins us for more. a lot of ground to cover in the developing's in ukraine. can we start with this. the talks between prudent and --

between vladimir putin and erdogan. what is expected. maria: the meeting is underway in sochi and russia. there was speculation whether vladimir putin would go to turkey. we see it is erdogan that has made the move to go see vladimir putin. the focus of the meeting is to reinstate the brain deal russia pulled out from a month ago, unilaterally. this is a great deal that facilitates the shipments of food out of the black sea, this was negotiated and mediated by the united nations and erdogan up the turkish president as made it clear he wants to see it reinstated. we have 's from vladimir putin who is meeting erdogan. he says he is open to talking

about this deal but to me i do not see anything specific that would point at this deal would be resuscitated anytime soon. there is a lot of pressure in terms of facilitating exports out of the black sea. we have seen tensions crescendo over the past weeks because in pulling out russia said it would treat ships as potential military targets, so that no longer guarantees the safety of ships, the same goes for ukraine which retaliated in the same way. dani: for ukraine there is been a shakeup you have been reporting on when it comes to defense leaders and advisors. what is happening there? maria: this is the defense minister who has been dismissed by president zelenskyy and has tendered his resignation. this goes into allegations, not personal allegations about corruption, but the idea of the ministry may have mishandled and

inflated contracts when it comes to food but also uniforms for soldiers. he has resigned from the ministry and been replaced. today i spoke with one of the top advisors to president zelenskyy and asked him what does it mean for the counteroffensive if anything. let's take a look. >> the minister has done a very good job for more than 500 days of the wartime. you see ukraine is now gaining the arms, it is gaining ammunition. this was not happening before the open aggression of ukraine and immediately after the opening aggression of russia to ukraine, only after several months. we started to receive numerous amounts and that allows us to make several major counteroffensive's and now we have another very important

counteroffensive, which is going on as it goes on. this is not a hollywood movie. the president is making his decision. his chief military commander of the country. we hope the counteroffensive will be -- achieve very significant results soon. maria: just to end on this subject, a counteroffensive, the defense ministry is important for a lot of the contracts and supplies. it is the generals that handle the operation on the front line. will this have any impact on the counteroffensive, and i wonder, your foreign minister, last week he was very open about what he believes is too much criticism and how this counteroffensive is going on and he said it does not play on twitter time, it is

happening in real life and critics will be proven wrong. do you feel there is too much negativity about this counteroffensive? >> like i said, i'm not directly involved in the planning of the counteroffensive, that is up to the military people in the generals. i do not think there will be any significant changes in the relations on the military seen amongst the military commanders. criticism is always in place in a democratic country. you're a journalist yourself. you know how journalists like to go into every single detail to criticize, sometimes for the slow pace, sometimes that something is not happening. let's leave the pieces and the particularity of our counteroffensive to the professionals. when the result will be in place and the result will definitely be in place.

ill be first to commemorate -- to see. maria: this week, equally important is the green deal and focus. you had agreed to this deal with united nations and then russia pulled out a month ago. the deal has been broken. the hope is for it to be reinstated. you have hopes president erdogan can reinstate this deal? have you had any talk with the turkish delegations because they are the ones going to russia with a message for vladimir putin to reinstate the deal. >> like you rightfully said, ukraine has not withdrawn from the deal we had with turkey and the united nations and we are trying to continue the existence of the green deal, we are working on alternative rules. already using technology abroad to former export ukraine

agricultural products. at the same time we know about today's meeting and several representatives from turkey, including the foreign minister, who knows the position of ukraine. we are down on the turkey exposition to support this great deal. it is suddenly for ukraine to have this deal, it is also for the poorest countries in africa and asia. we are exporting more than -- and we are ready to do this. the crops in ukraine are quite good. we are ready to be the world's breadbasket even though the world is suffering from russian aggression in the world of suffering when russia uses aggressive instruments in the food security area. maria: you trust the turkish delegation can get to a breakthrough? that is your expectation?

>> week trust turkey will do everything -- we trust turkey will do everything possible and impossible. maria: thanks for that. that takes me to the second part of the brain deal. you are also exporting to a number of european countries. there was a restriction on the number of exports you can get. this was led by european union countries. do you believe this would be detrimental to overtime? what sense do you get from the polish on this? maria: that is that in fortunate -- >> that is an unfortunate development. we have the resolution of the european commission, which has to see his insistence on september 15 this year and we hear the position of president

ursula von der leyen when she communicated several times to my president that after this period the european commission will not exist. we have to save the principles of free trade. ukraine and the eu as the association agreement. part of the association agreement. a free trading area between ukraine and the european union. it is important to stick to the role of the european union and stick to the association agreement. ukraine is producing and transiting its products. dani: president zelenskyy's advisor speaking to maria tadeo. coming up, we will turn to the stock market with sophie lund y

ates. you want to chase a rally question mark that is coming up. this is bloomberg. ♪ you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989!

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>> welcome to bloomberg markets.

i am dani burger. stop toronto -- stocks around the world -- u.s. markets are closed for the labor day holiday. a major meeting in sochi. turkey's president -- later this week. top automakers from around the world together in munich for germany's international motor show. it was a good handoff from asia, the hong kong stock market taking off and it was closed on friday. more hopes of the stimulative measures from china are having an impact. european equities up .5%. little change after hitting a november high. stocks continuing to march higher and the msi world index is up 15% year-to-date and such

investor confidence could be a warning sign according to jp morgan's official. there is no safety net. fomo is in. when -- in full swing. joining us now to discuss is sophie lund-yates. so great to see you. what do you make of that car -- call? sophie: thanks are having me. fundamentally, i do. complacency is a really good way to put this. we look at what the nasdaq has done, almost 30% -- 35% of your today and we look at what consumers are thinking. this is not a market that is pricing in any kind of wiggle

room for a rougher landing and i think that is still feasible. we look at the extent of rate rises and this has been talked about so much for look at the rate of cooling that has happened. there is a possibility that there is a significant disconnect between what markets are expecting and what might be happening. complacency is a good way to say -- frame this. dani: whenever i talk with my producers and i say who do we want to bring about -- on about tech come out to say it is always you. are safe in a hard landing scenario or are valuations too high to justify what they should look like during an economic downturn? sophie: we have this incredible megatrend and it is ai and there are some incredible names in the space tickly on the chip side and i am not just talking about nvidia.

it is downtrodden -- the downtrodden rivals are pedaling hard to take some share justly mably from a value option and potentially some room to grow there but fundamentally, valuations are looking incredibly full and we know what that means. i do think the rest of fall -- the risk of volatility, there is the potential that. opportunity there. this trend is enormous but i think some risk. dani: can you break down for me, an absolute amateur, i look at broadcom earnings, ai was fine but was not enough to make up for the downturn. if you are broad like broadcom, you will not survive?

sophie: i don't know if it is about survival. in terms of driving, absolutely, i think intel, which is more on the hard -- hardware focus and that is where the environment is more challenging. we are seeing expenditure trimming down. more exposed in that area so if you are more exposed to hardware than the rai, it makes sense to move over into that tech -- van ai, it makes sense to move over to that techy sphere. dani: maybe the measures around property are taking effect. have there been enough measures in your mind to translate into strength in europe? sophie: it is a huge one. fundamentally, the amount of stainless we have seen coming for china is huge and it is having a bit of a but i think that the chinese economy needs

more of a shelf than what we have seen, particularly before i am in a position to say i'm comfortable with the demand and profile -- i don't think we are there. it is concerning any look at the creaking property market. this ministry europe. -- this is important for europe. dani: we have gotten a lot but not money directly to consumer and. --hands. sophie: china has more levers to pull economically so there is more to come. the big question is whether or not it will be deep and strong enough to have the desired affect. we are not there yet.

dani: the idea of perhaps needing to support luxury stocks. i thought of you, -- if you want to look for the best growth stocks, the things that have a moat around prices and luxury, it is not tech. what you think about the idea, that is the power -- what do you think about that idea, that is the power of players? sophie: i understand what -- where they are coming from. the level of resumes -- resilience when it comes to luxury, -- you might see advertising spend trimmed in the face of a hard landing. that hurts tech but you are call demographic for luxury players, they are not as put out by inflation as recession -- and recession as maybe customers relying our -- on tech are.

it comes back to the huge valuation question and some of those valuations, you are really paying for that strength. dani: do you think in this earnings season, doubt that it has gone safer random ubs earnings, have you learned anything about corporate europe that you hadn't thought of before going into the season? sophie: what has stood out, i was expecting the picture to be a lot more gray and difficult than it has been an margins are holding up -- the outlook for margins are not as bad and i was expecting and you look at consumer discretionary spend, that is another conversation. this -- consumer discretionary is a better spot -- at a better spot than i thought it would be. dani: i could say we have been talking for over the years and you are not a negative person. you are a realist. we don't have time to get into the consumer conversation but i

wonder what it means for all the stagflationary expectations for europe. if we have a strong consumer, is there really going to be nor growth? is that lending itself to more stagflation? sophie: potentially and the ecb is that nice -- knife edge. it has a narrow channel of either allowing inflation to become entrenched at 5% or dripping recession and that policy -- policymakers are saying, the consumer backdrop is not behaving in a way that suggests inflation is coming and that says further he needs to come out of the economy and rates have to rise again as they go to get things moving in the right election and time will tell -- right direction and time will tell. dani: let's turn from equities to the broader market story and joining us now is a bloomberg reporter. want to go to oil.

-- i want to go to oil and we were looking at november highs, what is driving the market? if this -- is this all opec-plus rights cuts? >> we have seen this narrative time and time again, this year, a big factor is those opec cuts and we have to apex conference in singapore -- we have the apec conference in singapore and that as to the sentiment and vigorous field. we talked about the oil market structure and time spreads pointing to strength in this rally and we have seen the june rally fizzle out and we -- and we have seen the june rally this audit and -- making their site on the highest they haven't seen since november and we are talking about $90 for print and

we are seeing it in spreads and turning steeper into backwardation which is a bull market structure. this could potentially .2 that rally really having its momentum and strength to go further. dani: does anyone talking about inflation re-accelerating off the back of this because there is not just oil. there are fears that european energy could pick up again with potential strikes in australia. is that a concern? nour: absolutely and we talked about, me and my colleagues, about inflation could research out towards the end of the third quarter and fourth quarter and that is something potentially on the minds of central bankers and jackson hole, central bank governors and policymakers tell us that we are on a data by data approach and we will take it at

a meeting approach and look into the data. debate book is coming -- the beige book is coming out. all of these concerns point the visa -- the central banks could not be done in their restrictive cycles. we are talking about them ending raising rates potentially soon and maybe one more hike for the fed and the ecb and the u.k. is a different story. you still have the risk of inflation researching and being a lot stickier -- inflation researching --resurging and being a lot stickier. it is -- for them to loosen the shackles of tightening just yet so we may see a scenario where interest rates will be restrictive for longer so we are no longer talking about higher for longer as more interest

rates to come but we are seeing, people stay in restrictive territory for as long as it meets for the central banks to reach their target. dani: that is not stopping the curve steepener fans. nour: this has been a dominant theme through the governor -- through the summer. there is talk about the soft landing narrative you talked about there is a lot of complacency in the market and we are seeing there is a lot of bids and calls for the two year. it is time to buy and i can see that and the labor market in the u.s. is showing signs of szekely in the wages aspect that the fed has been looking for an that really points to potentially a pause in september or a pause in

november -- and hike in november and it depends on the data and i can tell you today, this is the time but next week, inflation, core cpi show something different and that puts the hawks in charge and it depends on the data especially after the summer surge in that seasonal data wears off -- and the season the -- the seasonal data wears off. dani: maybe they can talk to their friends in the print media but they can't come out right and nuts the market in any direction. thank you so much. we will talk about china's president xi jinping claiming to skip the g20 meeting. this is bloomberg. ♪

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dani: welcome back to live our markets in european equities pushing higher alongside the euro. yields start to go higher in germany. ceos and economists are gathering at a meeting in germany. >> china has sometimes been -- and i'll adjust --been anologized as writing a bicycle --as riding a bicycle.

when you have a high-speed system, you build property well in advance of what you need and you make the stakes. -- and you make mistakes. a year later, those mistakes are corrected because there is so much demand. now they have do a better job of fine-tuning. i think their system is not well adapted to doing that particularly under president xi jinping who has dismissed a large fraction of his economic expert. s? >> is this a political decision? does he change now that he has more control but you think -- or do you think he has weakened? >> he has surely weekend but that does not say how we will respond.

when you feel things are not going your way, you may respond in a more stronger way that may be adverse to the performance of the economy. steering an economy of the size of china is not easy. china in what we call purchasing power parity, away where we try to equalize different economies, it is larger than the united states. no one would even conceive of trying to steer this monster. china, president xi jinping thinks he can do that kind of's -- of steering. i am suspect. >> by saying you are suspect, are you expecting a lot of concern and but to lizzie -- and volatility with china and what

does that mean for the rest of the world? >> i have been expecting what we have been seeing -- >> you called it. >> try this and it doesn't work and they do to much of that ended did they get worried and then they go back to this and that shut down part of the tech sector. is not just what we are talking here. it is not just the property sector which is a large part of the economy. it is many other sectors of the economy. >> is the only way to slow the economy, to be able to readjust and what are the impact for the u.s. and the fed in europe? -- and europe? >> we have to remember in the 2008 economic downturn, china was the source of engine for the global recovery. it was pivotal. it won't be there and in fact i

worry it will be dragging down the global economy. that is one of the reasons i am so concerned about what has been going on in monetary authorities. particularly in the united states, they have pretended that nothing is going on in the rest of the world. they have been raising interest rates well beyond anything that is reasonable and have put at peril, critically the european economy. i think america will do ok but i worry about europe. dani: it is hard to run --ride a bike that is going slow. i should say that conversation happened on friday. we got data over the weekend, that existing home sales for beijing and shanghai doubled over the weekend versus the

previous one. there is have -- hoped that on the property front, some stimulus is having an impact. president xi jinping is planning to skip the g20 summit this weekend, sending another official. this is happening among simmering tensions with host country india. joining is -- joining us is a bloomberg official. i know we don't know for certain but what is some of the thinking as to why? >> there are a number of potential reasons and perhaps there is more than one in play in the first one is that they things are a particularly in uptake in tensions between china and india over trade and economy and border disputes and perhaps xi jinping doesn't -- there is

the reality of what you were talking about which is the turbulence we are seeing in the chinese economy and lots of strange there and questions about how they will get on top of it and perhaps signaling he wants to stay home. and sending messages to the people in china that this is priority number one and then there is the push to create alternative power groups among xi jinping and the move away from western led institutions like the g7 and g20 and create their own power blocks and he did attend the rip summit in south africa which is brazil and russia and india and south africa and china and they are seeking to expand that by bringing other countries including saudi arabia. perhaps he wants to prioritize his own outfits. what is --dani: what does this mean for the prime minister modi

to not have xi jinping come? >> having china send the premiere instead of the president is a complicating thing for modi. and makes it harder to get out of communique. on the india side -- and they even get an end of meeting statement from the g20, that will be a source of pride for the india group to get that so that is a big question, can you get for full conversations about some of the key things at hand? the continued follow-up globally from russia's invasion of ukraine, the state of the global economy. can you get coherent policy responses from the group to that so for modi, that national pride of hosting. dani: in over two months, the

asia-pacific economic cooperation is said to meet in san francisco in the u.s.. this this -- does this throw into question if xi jinping will meet that and what does this mean for a joe biden, xi jinping meeting? rosalind: it probably has a stronger incentive to attend that meeting, there has been gradual signs that china and the u.s. are moving towards a profit -- a meeting between joe biden and xi jinping. it is a press stage for xi jinping, being invited to u.s. soil and be hosted by joe biden and being seen as a great visiting meeting -- leader. they have a lot to sort out when it comes to the state of the global economy and we have seen certain signs that the -- that they want to put the relationship at an even keel.

we won't know for sure potentially until beforehand. dani: again, two months to wait for that. rosalind mathieson there. european stocks moving higher in just under 460 on the euro stoxx 600. still ahead, italy may accelerate its sale of its stake in -- to boost public finances amidst slowing growth and italy talk about -- talking about selling more stakes. we will bring our interview with the deputy prime minister of italy. this is bloomberg. ♪ slesmart bed is now only $999. plus free home delivery when you add a base shop now only at sleep number.

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dani: welcome back to bloomberg markets. a nice risk on type of day, probably unfortunate for those in the u.s. who are off-line. stocks features are still trading. the next day -- the nasdaq tower -- rally up a quarter of a percent. are looking at for 60 on the euro stocks -- stoxx 600. the euro is trading just below

it after following the weakening versus the dollar. many estimations helping to support the dollar and the german two year -- your yield -- the two year yield -- i am x -- nymex trued --crude -- trading just around a november high and does that we accelerate concerns about inflation, energy-based inflation just as we are getting more confident at least in the u.s. that perhaps the worst is over and perhaps the fed can put things on autopilot. perhaps they can end the rate hike cycle. in italy, the government is considering to accelerate the sale its stake in a company in a effort to boost finances as the country faces worst than expected economic growth. deputy pm tajani: my party is in

favor of privacy tatian -- in private -- privatization. we need to work in this direction, the debate is open to the side which sector we need to achieve these results. >> which ones are you looking at? deputy pm tajani: there are a lot of state building. is possible to work in this sector. leading to the side the services, my idea, my priority is to privatize the services. in the courts but also to provide service -- >> when you say you want to accelerate this sale, how quickly could it happen?

deputy pm tajani: it could be on a short-term basis, in the economy and we propose two or three and then we decide the short-term. we need to do it because for me, we need less state and more companies in the economy. also for attracting new investment from abroad. we need to organize a revolution for the privacy tatian -- for the privatization. or less democracy -- bureaucracy -- for less bureaucracy. if you want to involve the private sector, we need to organize this. dani: italy's deputy prime minister speaking with our

reporter in italy. joining us now is christian scholz. right to have you on. at the moment, we have less than 30% odds priced into the market that the ecb moves in september and morgan stanley on friday changed their calls saying they think the ecb is done. do the markets and morgan stanley have it right? christian: it is finally balanced. -- finally --finely balanced. two weeks ago, i would have said i don't think they are going to hike and i think they are done. after last week, i am let's sure and i am more convinced that they will high-five 25 basis points in the inflation data was

relatively strong and we have what i think was a hawkish speech which the market saw aversion. there are arguments and in the composition of the council, they could stick with the call that they will hike 25 basis points. dani: i asked if you had any controversial calls and this is one because the market took his speech and ran with it saying the economy is looking weaker than some of the forecast -- forecasts. what should have we been paying attention to in that speech? christian: they should have paid it intention to -- they put have paid attention to why growth is slowing. the reason why she thinks growth is slowing is essentially that the potential of the euro

economy has been diminished and if the potential is diminished, the speed limit of the economy has gone down to where the economy can not grow at all but can still improved -- but can still produce inflation. she has been making clear that if inflation does not come down to target within reasonable forecasting horizons and that forecasting horizons -- rises at the same at the ecb projection in 2025, the policy isn't restrictive enough. we don't see them revising inflation forecast -- if they don't, the council will conclude that policy isn't restrictive enough and will deliver yet another 25 basis point rate hike. dani: this idea that the potential of europe and its economy to grow it is diminished, i want to take that out beyond current expectations and beyond 2025.

we talk about getting inflation back down, a trough in a growth essentially, what happens after that trough? is it possible to get -- europe to get back up and running if the chief energy model of germany are no longer available to the european economy? christian: those are the structural issues the economy is facing, the series of energy shocks, the shift from g pipeline gas to more expensive lng, that is the sort of development that reduces potential growth and labor market changes and immigration, the composition, important industries in europe are facing for china because china is a growing fast enough anymore. all these factors say the economy isn't going to accelerate, can't grow any faster and if it cannot go any faster, it will produce

inflation even if it does not grow potentially. labor markets are tight. it could be cyclical. it could just be it takes time for the energy shocks from last year to dissipate. demand is going to come. it could be the reflection of tight managing policy and have gone too far, in which case we will fall into recession and inflation will calm down like a walk -- rock. inflation will not come down michael rock -- like a rock either way. dani: does that mean if there is more of a structural element, the transmission mechanism of the ecb is different? is that the right interpretation? christian: there is great uncertainty about the trend -- the transmission. we haven't had a rate cycle for

an extremely long period of time and the economy has changed. you see transmission in anything related to the housing markets. one of the reasons white northern europe has weaker economic confidence than southern europe doesn't have to do with energy or manufacturing weakness but it is the housing markets in the north that were overheated. managing policy is working and it may -- monetary policy is working and it may working more. and may be working quite a lot and that would say the ecb should stop. dani: christian sschulz maybe with polite disagreement.

>> compared to six month ago where there was a series of -- a landing for the global economy, that is the good news. a bumpy landing would be a short and shallow recession and that has started in the euro zone. their u.k. is probably headed towards that recession -- the u.k. is probably headed towards that recession. the united states, the jury is out on whether they will achieve a soft landing or whether there will be a short and shallow recession. >> that depends on the u.s.? is it that policy or is it a tightly wound market that could collapse? >> the economy has gone recently

about potential, tight labor market and type goods market. that is good news in terms of at -- achieving the soft landing but it is bad news for the fed. the fed -- the more that happens, the more risk -- and might be at risk, a short and shallow recession but economic data has been strong. >> what do you make of china right now and what do markets misunderstand the most about the economy and how equities and bonds should behave? >> as to do with aging of population, leverage, the housing overhang. and the corporate geopolitical depression. the policies that -- potential growth used to be 10-5

and now it is at 3% to 4% and now it will not change because it is emphasizing security reform. on markets, at the global economy is going to begin, if there is a meaningful chance of a bumpy landing, probably markets have rallied too much to date. that is a correction in the second half of the year and if economic data is weak, it is a way of essentially fighting inflation and that is going to lead to our nominal -- rates rising and that means that probably bond yields may go higher -- while inflation is still high. >> at 10% correction in equity markets or is that too high? >> it is not unlikely. if you have inflation that is above target with core instinct high in the u.s. and you pray --

and u.k., i would not surprise that they get the 10% russian in globally -- global equity markets -- 10% correction in global equity archivist. -- markets. both is lower because of the self-inflicted goal. it is the most likely case of stagflation. the economy is headed towards a sharp slowdown potential recession and on the other side, cory inflation is too high. you face a dilemma. you want to have lower inflation that will cause a recession and high interest will climb. private and public that's our high -- public debts are high. >> is anything that is -- that fiscal or government policy can

do to mitigate that? >> if you want to maintain growth, -- fiscal policy costs purposes with monetary policy. that implies that structural fiscal policy is retrenching in the opposite is happening and that is making the goal of central banks of achieving price stability harder. dani: coming up, we are going to going live back to the aii auto show in munich. we will be speaking with bloomberg's reporter. this is mover. ---- bloomberg. ♪

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>> welcome back to bloomberg markets. two year -- yields in germany is

hovering around 3%. 1.0796 is where the euro-dollar is. nymex crude lower, and around a november high. let's get to all of the group -- to oliver crook. he is there with a guest. >> we are here in munich and we are joined by the ceo of ziegler europe. you are approaching the european markets and the cars have not quite hit the roads. talk to me about the expansion plan in europe. >> we are entering the european market and we are launching our first two countries which are the netherlands and sweden which

are the home base in europe because we design and engineer and a large part of the engineering is done in amsterdam. we will be delivering cars in both of those markets this year and we have launched the preorders in germany and we preparing for germany and denmark and france. oliver: you chose europe and those markets for a reason. >> the interest is amazing because a lot of european consumers who are saying my next car will be a ev are struggling to find a solution within historical brands. they are considering brands, a much wider range -- range of rents. if you can get the volume proposition right for that

consumer, that is a huge opportunity. oliver: what you -- are you looking for pricing and terms of the european market -- in terms of european market? >> 620 kilometers of range and going up to 69,004 having our will -- 69,000 -- really hard to beat. oliver: you spent 25 years in toyota and japanese and other carmakers took a long time to bring to the european market. >> the market is shifting right into where our core strengths are and if you look at the two fundamental axes, you look at the advancement of software lead

in the second is electrical -- electrification and we have a competitive advantage that allows us to structure a great value proposition for the customer today but also something that can continue to evolve in the coming years stop -- years. oliver: you have cut prices to stay competitive and get the volume up. do you see that spilling into europe? >> europe will be more complicated because of the impact other factors have in defining your price point and the other thing that is different in europe versus china is the high presentation -- is the high penetration of the lease market and lease sales are so high that any radical shifts in price will hit redid -- will hit residual values. that makes things complicated. oliver: i saw your august sales

numbers were up. the slowdown of the chinese economy, could that bear on your expansion and is it a difficult time to make aggressive moves out of the market? spiros: if you look at china and the european union, how inflation will evolve and you look at leasing, lease rates -- where lease rates will go, we are watching it closely but if you look at the momentum in the market, the desire to shift to ev, and makes a great opportunity. oliver: i saw you fall for an ipo. you are not in the united states market. spiros: the u.s. will always be the u.s. and the capital markets there are the strongest anywhere so i think it is important and for the u.s., we have an active present group are collaboration

-- through our collaboration with the fully autonomous vehicle with waymo. the latest product that will be released is developed fully by us and our r&d center in europe and this is one of the most advanced driverless vehicles. oliver: we talked about driverless vehicles for a long time. when do you think we will see the first autonomous cars in the roads and in what market? spiros: it is a factor of different things. you need to have the right conditions meaning you will have some cities were active and more advanced than others in terms of developing smart grids. from an oem perspective is rolling out the capability in use cases that makes sense for consumers and you maybe close -- you may see closed systems advanced faster than open world use cases and we will see that

evolve. the first step is l2 plus hands on to l3 hands off. oliver: how many cars do you think you will move? spiros: we haven't announced volumes but we are aiming at by the end of the decade, we want to be on the podium or the pure, premium ev players. oliver: what are you looking at in terms of cars? what is the probability outlook for zeekr? spiros: we are not disclosing profit margins. the fundamental opportunity, we designed pure ev from the ground up and we can think about the cost structure of the vehicle that the bill of materials reflect a true value proposition for the consumer. oliver: what sort of volume what you have to see to look at

manufacturing operations? there is a protectionist and post we are seeing. we want to produce things locally. are you thinking about that or is it too early? spiros: anyone who is not contemplating what to -- about manufacturing in europe is probably not doing their homework. our advantage is that we know how to produce at europe and in state -- scale. we know what logistics looks like so for us, it is not a question of how well it will happen, when we decide the moment is right, we have an advantage moving quickly. oliver: what is the hardest part of expanding in europe? is it brand awareness? spiros: how do we grow the brand recognition and for that, we have a strategy. we are not looking to enter the market and dominate the entire country.

we are city focused. if we are entering answer -- amsterdam, how do we focus on amsterdam? oliver: thank you for joining us. zeekr europe ceo talking about expansion plans. dani: thanks so much, oliver crook at the auto show. he is showing the amount of different brands and we should point out, chinese brands hoping to crack into this market. china also crucial when it comes to european growth trajectory. sophie young late said that she wasn't yet -- sophie lund-yates says she wasn't yet ready -- to say european growth would be supported and citi telling us that recession bets for europe, he is not buying to that and

there will be another rate hike and at the moment, the market pricing a less than 30% chance that we will see the ecb go again in september and that was the drag lower in yields on friday and some of it out doing -- undoing itself. the german curve is moving higher by three basis point trading over 3% against some of the optimism from this coming from china that some of the mortgage measures for first-time homebuyers, all of that support is having an impact so the euro is trading stronger. the euro stoxx 600 up one fourth of a percent and we are trading without the u.s., it is the labor day holiday stop futures are trading and the nasdaq leading a quarter of 1% and nymex crude grades weaker but near eight november high -- trades weaker but near a november high.

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tom: welcome to "bloomberg markets." u.s. teachers pointing to upside. there is optimism in europe, three straight days of losses in european equities. china is a theme with concrete measures in terms of real estate property prices and using your ability to buy and purchase in major cities like beijing and

shanghai. that has lifted sentiment in asia and that comes across the european session. across your sectors, travel and leisure up. utilities down. interest in the u.s. closed but futures pointing to the days of last week last week the best week for u.s. stocks in equities since june. euro-dollar 1.07. up .2%. the divisions remain acute. we hear from mario santino is saying we need to be aware of the risks of higher rates in this environment. in the weakness of the eurozone economy has been underscored,

particularly with pmi out of germany. 1.07 on euro-dollar. looking ahead to the ecb decision. brent crude, oil prices since the end of june, a 20 plus rally for brent aird $88 a barrel. expectations from traders the saudis will extend their cuts as part of opec-plus into october. how that plays into the inflation debate remains consequential. let's get back to the markets or stay in the markets and get more detail. bob elliott is joining me. this is a goldilocks spread in terms of whether fred is -- spread is standing you're starting to see cracks in the u.s. labor market that has remained so resilient.

talk about what stood out to you. bob: if we look at the holistic set of labor market data out there we are starting to see that moderation in a bunch of different laces. we are adding only just over 100,000 jobs a month, particularly when you take into consideration revision also seemed weakness and other area the counter? survey showed factor five for the year. you are seeing in the jolt survey were basically every measure you are looking at is starting to soften and adp soft. we definitely have a downward momentum that is beginning in the labor market and the trouble is once you start to get that downward mental, weakening, -- that downward, weakening, 18

months of strength but we might be starting to see the beginning of the weakness. tom: maybe this is the tip of the iceberg for the jobs are get. what does that read across for the fed? is that enough in terms of weakness that you have identified the fed to pause and have confidence? bob: inc. the fed is going to pause matter what. they have outlined that in are waiting to see given the banded two of the hikes how that is flowing through. just because they are pausing doesn't mean it is effective tightening. it surprised in 2024 are a bunch of cuts. the extent that they take it easy and state level and the cuts start getting priced out, that is an effective tightening. a wait and see approach from the fed. while we are seeing weakening in the labor market, it is still secularly strong and wages are

elevated. the wage inflation is still elevated and that is a particular concern for the fed when it comes to structural inflation pressures the economy. tom: there was a line coming through on the prospect of a soft issue -- soft-ish landing. expand on why the calls around a soft landing may be misconstrued at this point. bob: argus are all in on a soft landing. equities pricing in at 12% growth next year. you have modest cuts being priced in, expecting the fed to use in response to moderating inflation. markets are all in on a soft landing. the reality is it is very difficult to achieve soft landing. particularly when you start to get the downward momentum going

on. with the fed, the dynamic is very different than earlier cycles when the fed could cut immediately at the first sign of softening growth. wages are still growing at 5% to 6% on a matched basis. that is too high relative to productivity growth. as we start to see the weakening of the economy the fed will not ease like many people expect. that will get hard to achieve that soft landing. certainly harder than the 100% probability of the soft landing currently priced in. tom: what is this relative caution take you? are you taking money out of the tech stocks, nasdaq? what is your positioning bias with the macro data? bob: you have to look, particularly in the equity market.

the s&p 500 is pricing in 12%. the bond market is pricing in cuts. both are two elevated right now period are we are going to see less earnings rose than what is priced in the equity market and fewer cuts priced in the short end of the market. when you go under the hood and look at the equity sectors, you've got to start at what the pricing looks like relative responsiveness of eight weakening economy. you have highflying tech stocks pricing in near perfection in terms of outcomes. those are the areas that will be most sensitive to a bit of a weakening in the economy. if you compare that to other areas, and the commodity complex and oil related stocks and materials related stocks, they are pricing in essentially a terrible outcome starting to

tightening and seeing upward pressure in the materials complex and in oil and that further is exacerbated by the fact that if china comes online, that will be further supportive to those stocks. dispersion in terms of pricing and under into -- underlying momentum. tom: there is your regional focus -- where is your regional focus? bob: has to be outside of the u.s. in a late cycle period with tightening and elevated inflation almost always aligns with a very weak outlook for stocks. you compare that to other areas of the world, particularly in emerging markets which are in easing cycles plus economies closer to the u.s. are benefiting. those economies, stock markets

look more attractive, latin american stocks and even if you look at a place like china, there is ambiguity about whether or not this is the set of policies necessary to open the economy. a terrible outcome is priced into chinese equity markets. even a moderately good outcome and some stimulation from here is beneficial to those markets. tom: there has been a lot of news -- bad news priced into chinese markets. bob elliott, the calls from unlimited funds ceo in the cio. i appreciate it. go enjoy your everyday. coming up -- your labor day. coming up, oil at the highest level since november. what is driving the bullish activity in the oil market. that is next. this is bloomberg.

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tom: welcome back to "bloomberg markets." i'm tom mackenzie. oil close to its highest level. brent at $88.59. trading flat. this is on expectations that opec-plus leaders will keep tightening the market. we had the news around russia last week and its extension of cuts. the bloomberg executive enter for energy and commodities, will kennedy, joins me now.

there is expectations among traders that the saudi will also extend the outlook for cuts into october what is the thinking behind that? will: because i think opec-plus is determined to assert its control in the market. they feel there are reasons why there has been little concern about prices and uncertainty about the chinese economy and more oil coming out of iran. there are reasons why they want to keep control of the market. it is expected saudi arabia will do more. tom: we are closing on $90 a barrel. is that kind of level that would compel to bash the saudi's to think about relaxing output? what is the level that gets them back into the market? will: i don't know and they don't tend to talk about price.

if you look at the budget they probably want something closer to above $90 that is a fairly obvious thing to say. what they do want is to make sure the market isn't oversupplied and we get prices falling back and they want to feel confident the market is better balanced and they can put it back without prices falling away. tom: is it distracting from chinese economy holding up? will: there is an oil conference happening and they are talking about the market. what we are seeing is people are saying there are clearly issues in the chinese economy, especially in the property sector. demand for crude oil is holding up well and that reflects different aspects of the chinese

economy. and also that china is below refining capacity and is taking crude oil to refiners. surprising optimism from people at the center of this chinese demand. tom: the u.s. and shale, is there any sense u.s. shale will be a factor as prices push higher? they complain about labor shortages but is there anything material in u.s. shale? will: the story is that people have said the shale industry is tough and concentrated on returns. bone all is said and done, have put more oil in the market. -- when all is said and done,

they have put more oil into the market. it is clearly part of the supply story, people will want to know what role it will play in 2024. tom: thank you for breaking down the latest trends in the oil market. wti at $85 a barrel. apple embraces new technology did not want. the change will come with the new iphone 15 here details our next. this is bloomberg. ♪

tom: welcome back.

a week away from apple's annual upgrade event and will unveil the iphone 15 which is expected to use charges compatible with billions of non-apple devices. why is apple doing this finally? alex: they are underdressed. the european union asked said that they have to be standard and are forcing everyone who makes electronic devices to convert to usb c. that is what apple is going to adapt and will come that all laptops will have to use it as well. i'm sure you have any number of different cables to tone -- charge double phones and smart watches or whatever. it is very wasteful and not transferable between different devices. apple has clearly said we are coming with different supply chains and regions.

tom: why not just get rid of the box? what other product launches will apple have up their sleeve? alex: this is usually the time they would show up a new apple watch. but it will be concentrated on the phone because that is the big revenue driver. they talk about travel tom: >> and the >> tom: tom: release. and we will lisa: keep an eye out -- they won't talk about travel release. we will keep an eye out. some people may excited. the main thing people talk about now is charging. re-flee on how the demand for smartphones is old and up -- tom: briefly on how the demand

for smart phones is, had they seen increased demand for iphones? alex: unit sales have not1 and brilliant0. but from some of the data15 it looks like prices have -- but from some of the data it looks like prices have stayed. they had the services revenue increasing. higher-margin business on the whole. and it ties people to their devices and means that even for the next iphone, it is harder to justify trading the device in one android. tom: arguably as you are illustrating it is the services for apple. thank you for the details on these functionality details.

let's get to the auto sector. restated spence is taking on tesla and unveiling an ev with a longer range than any tesla market model. the company ceo spoke about the strategy. >> our goal is value over volume. we are not pushing volume. we are very careful about how we go to market strategy. for the first six months of the year, it has been working well. i don't think the customer expects a roller coaster ride but something you can depend on so we will continue with the value over volume strategy. tom: we have been watching the developments. there has been a lot and focus on the chinese automakers with a big concentration of ev makers in germany.

let's start with the mercedes challenge to tesla. will elon musk be quaking in his boots or is it part of the catch-up? craig: the importance is both volume for mercedes-benz. they will price it above the model three and where it has been trending but they will do a lot of volume of that model relative to some of the higher priced and bigger electric vehicles0 that they have brought to830 markets already -- that they have brought to market already. they are not shaking in their boots yet but certainly a compelling product and a lot of specifications if they can hit those numbers will absolutely

make that product attractive relative to what tesla has to offer. tom: we will have to see. we will have to see how they compete with others. what is your take from the offering from china? can they finally develop market share in europe? craig: in our set at peace we called it the least german german car show because the amount of a chinese companies exhibiting this year double what we saw two years ago when the show was last in munich. we know they are at the show in force this time around. what we have been seeing his reluctance on the part of most brands to come in with vehicles priced in the same neighborhood of what they have been offering in china and are sensitive to the fact that if they come in and cracked a lot of heads it will raise eyebrows among

regulators and we know this is a nationalistic this tree, particularly in europe. we are seeing products that have managed to win market share to a significant degree in china priced much higher to where we will see how much of an impact they have in the near term. tom: what else stands out? craig: the bmw they have is a similar story to what we saw in sadie's, an entry-level sedan in the lineup that will be significant, similar to mercedes in 2025. a bit off in terms of timeframe. that will be important and it is out there in terms of look. it is certainly unique and different from what we have seen out of bmw. in terms of the germans, a bit of a disappointing show if you are vw.

there are warmed over concepts. they have one headed to production. we saw it in shanghai and not a lot to get excited about. tom: despite the huge portfolio of brands and models. thank you very much. oliver has been speaking to the executives on the ground. we will bring you highlights from the event. coming up, more from the german show. it'll be interesting in terms of inflation story and supply chains and china as well in terms of demand for their products. the interview coming up next. just briefly checking in on the european equities as we look at gains holding up at .3% across the european benchmark. nasdaq futures up .2%.

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tom: welcome back to "bloomberg markets. i'm tom mackenzie. the largest german car show is underway. oliver is there. oliver: we are joined by the ceo of contee at this show. they have an announcement today and tell us about that. nikolai: we have production and

testing and we are bringing generated ai together with google into the car so the consumer can interact intuitively with those functionalities that google offers today. oliver: talking about ai, how is it going to impact the car for me? nikolai: you can talk to the car and get an answer. it might be on your travel and how is my tire pressure on the left side. and they learn how you speed and what you are doing and if you want to share you can share so using the environment of the car. you are always connected. it all combines.

oliver: right now when we are talking about how the outlook is , there is a lot of pressure on the auto sector and the economy, how do you see it for the next few months rather than the next few years? nikolai: coming out of the pandemic, the market has grown by 6%. i would say there is solid growth but we see a lot of technology and it is not so much about the volume of the values it delivers. so there is more value and innovation coming which is needed for sustainability, smartness and assisted driving. so the future is relatively technical. oliver: there are two transition, the electrification and we conflated with the digitalization of the car but the ev is less complex and requires fewer parts and something you stood in the center of. how are you adapting your new

vision? nikolai: it is off of the powertrain side. there are still a lot of hardware, for tires that are getting more sustainable and smart and software increases above the powertrain electric cars upper opportunity electric brakes and in particular the complexity of what the user functionality can use, this is growing day. oliver: what is the biggest growth opportunity for contee right now? nikolai: there are things like sustainability and making the world a better place for that is what we are striving for. there is assisted automated driving.

we are incorporation with chipmakers and working on automated driving for level four trucks. having trucking we can automatically steer goes are new growth opportunities and they are making the world better because it is more efficient to drive 24/7. oliver: you talked about the spinoff of powertrain and you are looking to possibly spin that off. how does that fit into your strategy? nikolai: we have reorganized and generated to be independent and part of original equipment solutions. what we will do later on with this is not decided. so do we find partners if we need them? we open the system to make each

piece of the country better. oliver: one of the big themes have been chinese automakers making in some ways their debut trying to get in front of european clients and if they want to get serious they will have to establish factories and manufacturing. how can contee capitalize on that? nikolai: our business with chinese oem's has grown. but as you mentioned, we a strong legacy in europe and the auto market. we are more than happy to serve with our knowledge and our footprint. it might be an opportunity. oliver: i was reading note that

ubs out that gave a stark look and a lot of the chinese companies make a lot of things in house. is that a concern? nikolai: we are used to competition. we have some new competitors in the market and we are competing with in-house development and production. if we offer more value they will come to us and will be more than happy to offer our products. if others can do it better, then we have to in to the fitness gym and come more competitive products and values to offer. so we are adapting to the new reality. oliver: from what i hear from executives and a lot of tech companies the future of the car seems closer to the iphone mix with your living room.

nikolai: i mentioned the living room. that is what the consumer wants. they want it more comfortable. you have the feeling it is entertainment on one side and you are getting comfortable, safe, more sustainable. the car is becoming a more intuitive part. it is less going from a to b but doing it in an environment that you enjoyed which is safe and sustainable. oliver: do you think there will be less ownership and more sharing? nikolai: we saw during the pandemic that mobility was important. our this -- how this goes further in the future it remains to be seen but this has proven that across the globe people value the own mobility device so

it might be a mixture. other: i think we all remember getting our drivers license and having that freedom. what is the first car you drove in? nikolai: for me it was a scooter and then it was a small car and then developed myself to the upper side. oliver: he is joining us from the unit auto show. i will send it back to you. what was -- tom: what was your first car? oliver: it was a 1993 volvo station wagon, fire engine red and it is still running today. tom: that is a big part. you very much indeed. in the next hour, a really

interesting take. the ecb president christine lagarde says the euro area is an environment of high inflation. a few more details from the speech which lead up to the all-important decision from the ecb and it will be a tough call. more from jeanette garrity. that is next. this is bloomberg. ♪ ♪ [announcer] if you're thinking

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tom: welcome back to "bloomberg markets." i'm tom mackenzie. let's get analysis on the global

economy. let's bring in jeanette garrity at stevens wealth management. thank you for joining us. as you pass the data that came through stateside and look at how you tie that into your view in terms of 2020 for, how has it informed we think the economics of the u.s. will be in 2024 and the resilience or fragility coming from the jobs market. jeannette: it is resilient but doing with the fed in the united states wants it to do which is to slow down some and come back to better balance here the question about 2024 is interesting because the issue we are looking at here is despite a very strong job market that is keeping personal income up and feeling spending, there still

seems to be a pattern of consumers consuming off of what we are calling excess savings, higher levels of savings in bank accounts and most of us expect that excess will not be a factor going into 2024 and will have disappeared. it will be very much dependent on the job market continuing to be strong in 2024. i think it will. what economists do is often when they don't see a recession when they expected they kick the can down the road. it will depend on whether the u.s. economy can continue to weather as it has thus far these higher interest rates because i expect them to stay high well into 2024. tom: in that environment, where

do you expect the pain point to be most acute, corporate balance sheet, reissuing debt or the consumer a real estate market? is there an area you are focused on in this higher for longer rates environment? jeannette: you named them all. in particular what we are focused on is commercial real estate because there is a great deal of refinancing that needs to happen over the next couple of years. a lot of the refinancing would be beyond 2024 so we are watching that carefully because of the impact that has on the banking system, and regional banks which are holding a lot of loans. the big question, housing continues to be of great interest. we are now at a definite pay point in terms of mortgages in this country and mortgage

applications that have fallen substantially. home prices have held up. biggest concern is actually anything that is highly leveraged. it is hard to pin that on one sector. everywhere you look companies are individuals who have positioned themselves to be extremely dependent on debt. it is going to be tough. it already is tough so the employment growth we are seeing in the united states is happening despite the fact that there are already pain points out there. they are just going to go away. tom: when you switch focus to europe and the dollar plays a role in we have headlines passing from christine lagarde

talking about the inflationary impact in the euro zone and the ecb will achieve a timely return of inflation 2% but the euro area is an environment of to heighten inflation when you think about the european union and others on the governing council to continue for higher for longer in the euro area, how concerned are you of the health of the euro zone economy? jeannette: germany, it is both the weakness in the domestic market but what is going on in china. europe is in a similar but different place than the united states so i have some concerns. we still see the same pattern of strong consumer spending in certain areas that overall growth rate is clearly lower than what we are seeing in the

united states. the fact that inflation is still high you have an economy like britain which has its own set of issues which are dramatically different than a lot of other places and concerns on the inflation side will be a different place in the united states. no surprise in what christine lagarde said, strong coordination among central bankers to fight inflation. tom: that take on china, there have been measures in the last weeks, are you becoming convinced that maybe china as a growth driver will come back in the fourth quarter of this year? jeannette: they are not posting per se negative numbers but their version of a recession which is not meeting their expectations. the growth is there but i think

the slowdown or with they would call stagnation, economic problems domestically are going to continue because i do not believe the bank of china or the government is going to do much about the situation. if they were, it would have happened already. i think this is a new environment for china and for the world, a much lower growth rate, higher to mystic unemployment and problems in getting domestic demand out. that will be with us for a while. tom: isolating the short term from the long-term is important and you put your finger on what many people think about china and the trajectory of growth. thank you very much indeed for the analysis and take on the u.s. economy, eurozone and input coming through from china. we are going to get you live pictures of president biden as

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tom: welcome back to "bloomberg markets." in ukraine, president zelenskyy announced his most significant wartime cabinet shakeup yet, replacing the defense minister. it comes as kyiv ramps up and anticorruption crackdown and continues its counteroffensive. we spoke with the chief diplomatic advisor about the cabinet moves earlier today. >> the minister has done a good job for more than 500 days, uc support. only after several months,

started to receive what allows us to have made several counter offenses and now a very important counter offensive. this is not a hollywood movie. it is very important this is going on. the president has made a decision and we are hoping it will be increasing and giving significant results. >> of course a counteroffensive in the defense ministry is important for supplies but it is the generals who handle the operation on the front line. will it have any effect on the counteroffensive and your

foreign minister last week and was very open about what he believes is too much criticism and how the counteroffensive is going on and he said it is happening in real life and critics will be proven wrong. do think there is too much negativity about this counteroffensive? >> like you said in the beginning, under offensive is up to the military people and i don't think there will be any significant changes in the relations criticism is at play. you know how they like to go into detail. sometimes at a slow pace and something is not happening in

the pieces in that sleep it to the people and professionals. tom: maria tadeo speaking with the chief diplomatic advisor to volodymyr zelenskyy put on the counteroffensive i ukrainian forces and the decision by the ukrainian president to replace his chief military had. european markets holding onto gains of the day. gaining .3%. still on course to snap three days of losses for european stocks. sentiment coming from asia and china in terms the stimulus response measures and an expectation that maybe the fed is positioned to pause at its next meeting, looking european

sentiment. futures by a 10th of a percent. euro-dollar at 1.07. brent gaining .3% at close to $89 a barrel. coming up, catherine avery joins us. ♪ -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

tom: welcome to bloomberg markets, are in london. gains for monday up .3%. technology gaining close to 1% in terms of sectors, insurance down .4%, the benchmark move higher by .3%. hopes that the stimulus may be certain to have an effect coming from china and policymakers in beijing, the next -- next

petition but maybe the fed has room to pause at its next meeting. 4026 on the s&p, again after the best week since june last week. the single currency yields in terms of eurozone sovereign debt moving higher in the session about the debate continues among ecb officials leading up to the september 14 incision. and brent crude, a gain of .4%, worth noting this well for the context you see an upside of plus 20% since the end of june. let's get more analysis from our team, and from bloomberg, joining me now, great to have you both. you bring the expertise on china and i want to start with that. has been sentiment across equity markets, you saw it in asia and the follow-through to europe,

that maybe some of these measures that come to the last few days and weeks are certain to have an impact and there is optimism. do you think that is going to be sustained? >> yeah, and why is optimism versus when it was actually announced. it is the evidence that people were russian out to buy higher. to show you how busy it was for proxy records in beijing, existing transactions doubled on saturday from the prior week and in shanghai, the number of new transactions in one day was equal to all of those in august. state media propping this up, highlighting this. when chinese state media highlights this, it was something that clearly local authorities want to highlight. people going into the property market, new homes and existing homes. it seems to be a sentiment

shift. if this does happen, there is a follow-through across the consumer sector. we will get consumer spending again. there is a sense that retail sales may not be as bad and the chinese economy will kick into gear. is this the time to get--to finally believe in the stimulus measures and that they are working through china's economy? >> an interesting point. it is the first time the rhetoric, policymaking -- policy -- we have seen a change on the ground. to maintain and sustain this, what is more important, data that comes through or additional policy measures a? >> i do think we need hard data. pmi's were better-than-expected, on the manufacturing side, not the services side, that sort of the conversation last week. you and i were talking china's

economy might be better than feared and we were seeing these policies work. that could change sentiment. but i think markets still want more. their consulate calling for more stimulus in china, especially outside of the region when there is a little bit of a misunderstanding, why is china not through more stimulus of the economy if it has all of these leaders become pull? you make a point that it is using the old leader in the property market, nothing was sustainable way to grow the economy but it is what they might want to say. it is good for the u.s. stock market -- you can stock market even its tenets on china and it feeds into that move that actually the global economy will be fine and we will get those central-bank causes. a good start of number. tom: let's bring you into this

point on the question about central banks. do you think a market is right to be sidelining another fed hike? have fed officials seen enough to have the confidence to pause at the next meeting? >> an excellent question. we are starting to see signs that in fact the labor backdrop appears to be cooling. it adds to the discussion and the calls we have seen from bigwigs, blackrock, pimco. they are saying it is the time to jump in on shorthand yields. back to what powell said at jackson hole, their own a beating by meeting approach and data-dependent. they will need to see more consistency in the data, especially after the seasonal data goes away. we won't get that before september and we don't think the fed is going to its blackout period next weekend.

it gives the markets room to run with that momentum we are seeing. although it is a u.s. market today, i'm looking at treasury futures and those are trading today. you're seeing the prices following in line with the footsteps with the european sovereign debt market. i expect it to at least catch up with those european bonds in the run-up to the blackout period. tom: do you expect that to be a short-term move? mark from our team on his call last week said you want to be buying the two u.s. treasury pack. things yields of peaked and blackrock is coming out with their call, a screaming by at the front of the buy at the front of the yield curve. what are you looking at in terms of the yield curve? >> is an excellent question.

we've had these discussions. venmo is on the other cited of the spectrum as well. it is a live debate and when those lively debates come in, especially with the markets coming after the summers, that is going to shape the narrative for the rest of the year. i'm am of the opinion that if you look at the real policy rate, it could potentially be sufficiently restrictive, or to maintain rates where they are. i don't anticipate cuts to come as soon as possible. we have notes from the equity analysts at j.p. morgan talking about the complacency we are certain to see in the stock market as well. if you compare it with real yields and the valuations were certain to see in the u.s. stock market, will see that they are quite lofty. it is either that real yields are meant to follow-through those valuations, which is not likely, or we are about to start

seeing valuations downgraded as well. we have seen the u.s. market maintain itself and strengthen throughout the year. now you're starting to see the neighbor market just starting to show some normalization. i do anticipate that you can't go against the momentum trade as we've seen throughout the summer. but the data starts pointing toward something else. it is continuing on the path to fight inflation, which is what they have said. >> the risks of finding that momentum trade, maybe concerns about complacency in the equity market. let's bring you back in and tie in and tie-in the geopolitical line. there has been fantastic reporting from our tech team in asia on our way -- while way -- while way -- huawei.

it was one of the first targets of this, maybe sanctions have been less effective than euros officials hoped. what is your takeaway in terms of the ability for china to adjust to these restrictions and what the story tells us in terms of the geopolitics? >> mrs. fascinating. the fact that the chipmaker who is powering these phones, both chinese companies, both restricted in some way by the u.s., the fact that they can produce advanced chips, more vents than the u.s. had anticipated, so soon after the sanctions were -- this is not the most advanced technologies the u.s. has access to. china is still in some ways behind. it is taking less time to catch up. the fact that the u.s. is leading a global campaign, the

u.s. and its allies, to cut off china from the most advanced technologies, will that even work if china can make these technologies within china? we don't know how advanced these are or how cheaply they can be made, at what kind of scale and volume. we do at least know that this smartphone is more sophisticated than people had anticipated. it will sell quite well in china and it is powered by chinese chips. tom: and maybe that window is closed in terms of the most cutting-edge part of this. contacts on the context of course, messages from china, on this rate environment and the next steps for central banks, coming up we will have more from the ceo of -- catherine avery investment minimum -- investment management. this is bloomberg. ♪

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>> trust is probably not the word i would use. we need to see action and until we do, there can be no trust. tom: the u.s. commerce secretary speaking about china on face the nation. the president of catherine avery investment management, thank you for joining us. china was becoming other investable in the eyes of some u.s. executives. i want to know how you think

about the geopolitics and the risks around china as you position in the months and years ahead. >> the real question for us, what really means to the u.s. equity markets, is china's ability to get back on its feet economically. as you mentioned, it looks like we are seeing some good improvements in the chinese housing market. that is good on all fronts for us in the u.s.. because china doing better gives us more confidence here. china has a lot of exposure and u.s. multinationals, it is good for u.s. profits, our companies in the u.s.. tom: indeed. the importance of seeing china enact those policy measures, europe is very exposed as well to what happens in china. at least switching focus back to the u.s.. are you concerned there is complacency in these markets, equities had a bit of a rough august but last week was descent for u.s. stocks.

our u.s. markets looking through some of the risks, and is there complacency? catherine: complacency, i would say yes. about 20 times this year's forward earnings, there seems to be complacency. we came off of a very tough august. people were concerned about jackson hole, china. but coming into september, we got decent numbers from the jolts. we got a nice employment number, which was all good news for the doves. but our expectation is that these numbers are not going to be a smooth sailing going forward. you're going to see a lot of discrepancies where we have pockets of strength in the economy, pockets of weakness. whether or not the inflation numbers continue on that downward trend. it is looking like that, but i will caution in july and august,

we said -- we did see an uptick in energy prices. if china does come on line strength, we will continue to see energy prices rise. however, i think that there are some places in the market that you can take a look at two -- that have to catch up or to help ride you through those waves. what we have come through has been an earnings recession, i believe. we do think the consumer will probably hang in there, were not going to see negative gdp numbers. but we had that in the earnings numbers in the past. but as the inflation numbers start to come down, they going to start working themselves into the profit margins of companies and better earnings into next year. go ahead.

tom: the warning on their earnings recession is pertinent of course. so that leads me to the follow-up question, which parts of the equity market are most vulnerable to the earnings recession and where are you finding resilience and companies able to maintain margins? >> consumer is deftly one of those areas that we would be cautious on. we would stick to sectors where there is opportunity for the profit margin expansion, like what we would call stable tech. technology that works within the overall ecosystem of the growth sectors, you are not paying up for the stock prices. like a broadcom or oracle, trading at 50% discounts to the overall sector. but you need the chips and the

software support from oracle to be able to create the ecosystem. and you're getting a dividend and strong dividend increases. cash flow is important. it is all about valuation, cash flow, dividends. tom: that is the rationale for being overweight in stable tech. all those characteristics will be reflected in the energy sector. we have been dissecting moves higher in oil on the show today. when you look at the energy sector, are you seeing similar characteristics? is not an area you may want to lean into in the weeks and months ahead? catherine: it is another area we are overweight in at this point. given the fact that energy prices have increased in july and august, we have not really seen that reflected in the stock prices. chevron is a great example.

we are seeing inventory starting to draw down. china, if we continue with the good news, you will start to see energy prices continue to rise. they are already high for this year. they have not yet hit the hives that we have seen over the 52 weeks. upside surprises in the price of oil moving from these companies and areas that have not participated in the overall market run we have seen this year. tom: catherine avery, ceo and president of catherine avery investment firm, have a fantastic labor day. making the case of how to go on in a volatile environment, a preference for energy and tech. still ahead, biggest auto show in germany, thomas joins us next on the latest lineup.

stay with us. this is bloomberg. ♪

tom: welcome back. thousands left stranded in remote nevada desert after heavy rains turn the burning man festival into a mud pit. festivalgoers were told to shelter-in-place and conserve food and water. they festival taking place more than 100 miles from the nearest major city, festivalgoers who usually only had to battle--or were wading through ankle deep mud and facing contamination from failing toilet facilities, some opting to make the seven mile hike out of the festival by foot. one death has been reported,

police have not confirmed whether it was related to the weather. western to our coverage of the auto show in bloomberg. standing by with the ceo of electric carmaker, taken away. >> thanks for joining us. the ceo of this company with us, you had spectacular growth, almost double your volume. can you keep that kind of rate up for this year? >> the production for this year was from 60 to 70 and that is great growth. but clearly 2024, two new cars in our portfolio coming, that will be an even bigger potential for faster growth. a great story. >> in terms of that macro headwinds, raising questions around rising rates and demand

slowing in china. how do you see that affecting the demand picture? >> there are two elements. generally, they electrification -- whatever you see, there is a clear path over the next year. the midterm long-term is participating in this. but i think it is a great story. thank god they actually set that as a company in 27 markets. of course means set up in 27 markets, you always have locals up and down, certain legislation in one country coming in and out. there is an inconsistency in what support they get. and through this broad footprint , we can level it out to a great extent. >> we have seen a lot of new

competitors from china to europe. you think the field is getting crowded? >> i'm not surprised. it was always clear that there will be -- the competition will catch up. the oem coming with the electrification of their fleet. to your question before as well, we have our clear setting of knowing we will be the premium luxury brand and that is the focus that we have. there might be lots of brands coming but a lot of that is addressing different markets. the competition is clear. we have a company portion, we want an electric alternative and it is not that much comfort. >> how helpful is it that you come from an established european brand? a lot of these companies are just trying to get a touch up

the first time. >> again, this thing about trustworthiness, it gives us a lot of credibility and customers knowing that safe product -- on the other hand, the knowledge about what you have to do to be successful in the market is not that easy. so that is popping up an opening a shop. the depths of understanding, especially in europe, of the european market, where each and every country has sound legislation and they have very different needs of customers for financial options. that is something i think we managed in the last year to invest into. >> the ceo of polestar talking about the challenges of the ev race. we are at the battle in union -- unit. thus munich.

tom: ahead, chinese automaker ne-yo, and european markets paring some of the early gains, up .1%. this is bloomberg. ♪ endless hardie® siding colors. textures and styles. it's possible. with james hardie™. every business it's possible. that's why comcast business de is launching theal.

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tom: welcome back to bloomberg markets. i'm tom mackenzie at european hq in london. checking on the european markets and optimism that pervaded the start of the trading session has faded. looks like we will be ending it flat or in the red for european stocks. the benchmark at margin 58. there has been early optimism given the handover from asia. a solid print from the engine session. it ended up over 1% and a strong session in hong kong as well,

stimulus measures coming in from beijing. what optimism has faded and yields ticking higher across the yield curve in germany. two basis points, more pronounced in italy. yields up four basis on the front end, euro-dollar trading at 107, about .1%. idiot dollars, close to $89 a barrel on oil, prices remain elevated. a gain of about 22% since the end of june on russia cuts and expectations from russia that they will extend those cuts. brent trading -- gaining .3%. looking ahead to the restarting of trade on tuesday, given the labor day holiday, now suck futures looking healthier, pointing to a gain of .2%. travel and leisure of the top of

the list in europe, gaining .7%. technology in the green, getting .6. utilities down, insurance off by .6. a breakdown of a more muted you and optimism that has faded across the european session. we touched on oil, but copper and iron, prices are coming off despite input is coming through from china. you saw a pickup in home sales from beijing, cuts to requirements around down payments and mortgage interest rates. let's get back to what is happening in munich, our coverage of the car show has been comprehensive, led by oliver crook of bloomberg. he is standing by with chris chen, head of an ev maker in the european division.

>> we are pleased to be speaking to chris chen, the head of ne-yo in europe, a carmaker pushing into this european market. you're trying to establish itself. you've launched in denmark, germany, netherlands, sweden. what have you learned about the european consumers and what they are asking for the ev's? chris: they're different from china but not that many different from chinese users. they care the vehicle quality and your ability, care about vehicle performance and driving. but they are less concerned about the digital or the space of the car. when we get through this market, there are a lot of regulations we need to think ev had a competitive the car, it is also something european users will care about. >> there's also the question of brand awareness for a lot of the

countries coming to europe. any brand awareness to get the volume up? >> we are from the other brands. we're doing the direct sales business. we don't use dealers or distributors. and we try to introduce the ecosystem to europe. this includes the car, services and their systems and the lifestyle park. we introduced the chargeable, upgradable power system. it is fancy. people can enjoy a good time. >> what kind of volume are you doing in a year, two? >> in the first year we launched

into september 2021. we saw over 1000 cars, the large u.s. aid and the suv. this is the result, number two in terms of the share. we are launching another three cars in europe. in germany, netherlands, sweden and denmark. you know that they were introducing the high premium product. our product starts in europe. we are not looking for a fancy number of deliveries. the top four, top five premium brand in the market. >> do you think manufacturing in china can serve as that delivery, or user to think about where you would begin to produce cars in europe? >> that is good. you always need to look at the economy model. for now we have imported

factories in china. and we have 10% of the import tax. in the future, nearly 5000 or 6000 cars a month, we can reach the economic level. the local plant, or the local manufacturing. that is in the future. >> i want to talk about your home market in china and the price were underway. how do you see this affecting the market for you these? >> i don't see too much price pressure. people always pay for the good product and services. we are based on the platforms. this is scalable and upgradable. we also provide the good services, the worry free services. people are willing to pay this much.

i don't see a lot of fierce competition in terms of pricing as we see in the china market. i feel comfortable of that. >> one of the big complaints about ev's is how expensive they are. it is certainly a concern in europe at around the world, particularly for higher end vehicles. you have an interesting subscription model and batteries sold separately. how is the european audience finding that? >> there is one figure -- you can subscribe to the batteries. in of worries from users. now it is updated according to the new technologies. the current one, the battery of the service, 98%. almost all of the users chose to

purchase or sent -- send the car or bus. >> battery is sold separately. as the battery density improves and you are not wed to a single car with a single range, you will be able to boost the range as technology improves. >> there two batteries. as a lower price. and going for a long trip, you can subscribe for 100 for just one month. >> in terms of building infrastructure, this is a quality that french it's ne-yo. how has the european audience on that? >> we have power swapping stations in europe. i drove from enter them to munich on saturday. i stopped at three power

stations, the new technologies. it could take five minutes. it will save you a lot of time. time is precious. will get more power swapping stations. the highways in europe, only four days. our power swapping stations. it takes a long journey. >> you are a ceo of europe. competitors coming in trying to build awareness and a slightly different model for many of the others in europe. tom: on the ground in munich from the ia mobility car show in the german city.

in the past week, following the russia announcement, it will expend export curbs. joining us next with her take on these oil markets, stay with us, this is bloomberg. ♪ i need it cool at night. you trying to ice me out of the bed? baby, only on game nights. you know you are retired right? am i? ya! the queen sleep number c2 smart bed is now only $999. plus free home delivery when you add a base shop now only at sleep number.

tom: signs of strength in the oil market. momentum as opec-plus leaders a planned supply cuts. let's get the forward-looking analysis with director at --

capital. we appreciate your time. give us your view on where and what the drivers are for this oil market. are we looking toward the end of this year possibly at reinvigorating, reviving that forecast around $100 oil? >> it is possible. the market has been super negative. going into the summer, the speculative positioning was future -- super negative but now we are seeing things change especially in the physical market. we are seeing tightness, bullishness. we look at the speculative side of things, we see very little investment. that means we are at almost $89 a barrel and the bulls are not in it. if they see signals, we can absolutely see those numbers. however, we are still waiting to hear what saudi arabia is going

to do for october. are they going to extend our cuts through voluntary cuts of one million barrels a day or not? we need to see what is happening with this first before we can talk about your end in terms of the official forecast. tom: if you had to -- nadia: we see space to come back in right now. but right now the balance is maintaining the million barrel per day extra cut. the oil price is cut. we need to see the expert out of china, we expect exports of refined products vote higher. how that plays out versus the entire macro picture.

how -- right now, the saudi's are likely to hold the course. tom: you talked about the road. what changed, is it price level or -- what is the inflation in terms of this industry? >> we've actually seen production guidance going higher on the sales side. being flat or being lower, there's confidence on the cycle because the market expects them to continue to tow the line alongside russia and maintain a tight market. as the starts to come up in terms of higher expectations on

russia, by year end on the u.s. production, opec of course is investing. tom: what are you looking at in terms of china and demand? is a going to be so consequential in the quarters ahead in terms of china's demand? nadia: in the short-term, we see increased buying by the -- it was 12 million tons. 10 million with expectations, we

did not see that it rally, we did not see the market reaction we saw last year. it suggested a little hesitation in terms of what is needed and where the internal demand is sitting now. the market continues to be quite bearish on china in the general macro picture. it is all skepticism when it comes to domestic demand. tom: is the bearishness justified? i know you look at this, 115 is the price. i'm looking at basic resources in today's session up .5%. can you expect this to pick up measures as they push through? >> we see a lot of analysts falling for much lower. that is where we see a floor at

100 because that is when we seek production cuts coming in. there's a healthy range. the negative demand in china, copper prices are all strong. there is not a reason to be alarmist. tom: sankyo, a look in terms of how iron ore ties into this as well. a director at capital, it has been a tough year. morgan stanley is more optimistic. more on the call around u.k. property coming up. this is bloomberg. ♪

tom: you are watching bloomberg

markets. morgan stanley analysts are calling u.s.--u.k. property stocks a value play. we are alive to the fact that broader u.k. exposure and offices as a subsector are out of favor. the risk reward is compelling. the equities team, it talks about the pressures on the u.k.. how they performed year to date, and what are some of the challenges the sector faces? >> it is a tough sector. the investor trust index up a percent, versus the one that is flat on the year. very negative data points. the u.k. house prices fell the most in 14 years. the bank of england saying there has been a fallen mortgage approvals, it is been bad and

not great. the interest rates, getting people hesitant into buying a new property but also putting pressure on refinancing, companies and the debt that they have to surface. tom: the multipronged impact of rates, looking to refinance all of the companies with those debt load. what is the rationale for turning positive on this sector? what are they saying that the sum -- this markets are not? >> they are saying there looking like a value play. maybe it is time to take a look at them. the u.k. specifically, they say their positive on the fact that the companies don't have higher debt levels as may be some of their european peers and they see the balance sheet that is

adequately capitalized. this already positive especially for some sectors, office real estate has struggled, struggling with things like a home dynamic, the push and pull between employers trying to come back in. in the companies wanting to do these power blocs that might be sitting empty. it is an interesting, contrarian view for morgan stanley but there seem to be positive for the u.k.. tom: any point out the balance sheet lines. the relative resilience of the real estate sector or company balance sheets in the u.k., at least analyzed by morgan stanley. one of the catalysts you are looking at? is it all about the boe and whether central bank goes with rates or other factors at play in the months ahead? >> it is all about the boe. with got the meeting later this

month where people will be watching the inflation report before the 20th of september. we've seen the sector react strongly. there was a softer reading and the sector went up a lot. investors want to see whether these trends can be sustained. are we seeing inflation easing or is it still going to come in hot and will we see more interest rate hikes? this is going to be crucial. tom: what is your sense of whether to use land in terms of residential property, commercial and office? how divergent are those paths? >> it is an interesting question. i have seen over the course of our coverage analysts being quite bearish on the sector overall. hsbc back in july cut 11 stocks because they basically saw those issues persisting. there are questions over asset values falling, there has been a little talk over certain areas

in the west end but overall it seems a rod base negativity. the stocks are fallen so much, you've got british land down 20% for the year. maybe investors will see value and opportunity. tom: excellent. you can read this on the terminal and on bloomberg.com. the valuation opportunity. briefly checking on the markets, the stoxx 600 and european benchmark, u.s. futures and s&p pointing down by about .1%. after the labor day holiday, euro-dollar at 107. sniffing 89, up .4 presents -- percent and the upside across

european equities has a center, insurance down .7. across european markets, we are closing out a fourth straight day of losses. this is bloomberg. ♪

tom: it is monday the fourth of september. the countdown to the close starts right now. ♪ >> the countdown is on. this is bloomberg markets european close with guy johnson and alix steel. tom: let's check in on these markets. tom mackenzie in the london hq on this labor day. the china stimulus o