Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

Money market mutual funds. Welcome to daybreak europe. Extraordinary action as usurps theagarde Bond Buying Program with a pandemic Bond Buying Program and considering raising selfimposed qb limits. You wonder if omp is in the cards. We are still seeing this Dollar Strength as if these centralinary times for bankers also in markets with all people wanting to get their hands on dollars, seeing almost indiscriminate selling across assets as everyone just wants to hold cash. Tosef extraordinary times say the least. At the end of the day, this greenback strength is now getting to a stage where it is causing major dislocations and other key crosses in terms of the fx space, but also we have this mountain of dollardenominated debt in the emerging market space. Seven point 8 trillion globally. Thats going to be an issue in terms of interest payments. Raises the stakes for further coordinated responses in terms of Central Banks sitting together and to come up with a plaza cord. You do wonder when the fed might step in with dollar intervention. The euro briefly rose following the ecb. We are back on the back foot. Dont get started on cable, which yesterday had a 1985 low, continued its decline. Rates, the rba cutting but also talking about yield curve control. The boj buying bonds. A three year low in u. S. Equities yesterday. All the gains from the Trump Presidency have been wiped out. Futures taking another leg lower. Equitieselling across and bonds, which suggest the selling is happening to move into the dollar and try to get to cash. Terms almost meaningless. Its get to lufthansa. Grounding aircraft. Untillief schedule runs april 19. The leptons executive board also basicg 20 of remuneration. Lufthansa very much in survival mode as repatriation and supplies are in focus. We will be talking to the Airline Industry later this hour to get a sense on the impact on Global Markets. With iag also struggling, emirates, the worlds biggest longhaul airline, looking to ground 150 airbus jumbos. Back to the market action, some important metrics. This global liquidation is causing down in the asian equity session. Down to the tune of 3 . You have limit down in manila, jakarta, seoul, risk off in brent crude initially at least, but rebounding from what was a massive move that we have not seen since about 18 years. Citigroup saying 17 a barrel is in the pipeline for the second quarter. U. S. 10 year yields at 1. 24 . Just got a headline from saying the rba has not intervened but is prepared if needed. Intervention in fx markets. Extraordinary measures we were talking about. The ecb launched an extra emergency Bond Buying Program in the latest attempt to calm markets and protect a euro area economy struggling to cope with a coronavirus pandemic. Christine lagarde says extraordinary times require extraordinary measures. There are no limits to our commitment to the euro. Here is what guests are saying about that midnight decision. Thehey are catching up right way. You dont do Monetary Policy decisions that midnight on wednesdays. It tells you how serious they are. It is about one third of the previous qe program, so it is still a very tepid program. There will be a lot of liquidity in the system. You want to call it helicopter money. Whether that is too little or too much depends on how long the virus will be here. Targetedsomething very at trying to calm markets down. Joining us now is maria tadeo in brussels. This was unexpected from christine lagarde. The ecb stepping back into the market. Promising of course an extra round of qe from now until the end of the year. Be flexible, to perhaps could be more flexible if we were to get to a point where we need to increase the limits we have into some of the prices, it implies they would consider that. Also there is a very specific comment, we would be willing to step into the greek bond market, a very tricky market. There are still restrictions. Uturn in the language from christine lagarde, saying my job is not to narrow bond spreads, to sing am committed to preserving the euro. There are no limits to what the European Central bank will do. It is also interesting to see the timing of that. Unscheduled, unexpected. Happening on a daily were seeing big moves in bond yields across europe. We were seeing costs climb out a point where it is going to be difficult for companies to service costs. It was a wild day for btps. What is interesting is to see the reaction from the italian government. Well done, ecb. Yousef thank you very much for that. In the united states, the senate cleared the second major bill responding to the coronavirus pandemic. Lawmakers are rushing to follow up as president Trumps Administration says it will cost 1. 3 chilean dollars 1. 3 trillion. The fed saying it is launching a program to support money market mutual funds. Alarm over the coronavirus continues to cause that train in the funding market. Fewmarie, another eventful hours. Thats right. Before midnight we heard from the fed about supporting money market mutual funds. You have to think the fed is thinking back to 2008. Mutual funds going to under one dollar. This is another emergency measure that complicates other measures from the fed this week. On top of that we had heard from the hill, the Senate Passing that second measure. Donald trump signing that. That is aid for families, paid family sick leave, as well as Food Assistance and financial help. For anyone seeking to get a coronavirus test, if they are able to get their hands on one, but as the senate voted, we sort of public and we saw republicans and democrats rush to work on the third phase. That is going to add aid for families. They are also reviewing federal aid for Industries Like airlines. We heard from larry kudlow, the top Economic Advisor for president trump, he floated the idea that u. S. Stake in corporations that want taxpayer money, this brings us to flashback from 2008. Some people in america would call gm government motors. He said that is a good deal, but that would be highly controversial politically. Right now just one idea being floated. There is a rush to get all of this done. D. C. Haveaffers in tested positive for coronavirus. Two lawmakers have. These lawmakers are urgently trying to get home to their families to hunker down as well. We are likely going to hear more from the hill. Now lets bring in our guest for the hour who says all attempts of Central Banks to support businesses and consumers will not work. Great to have you with us. With all the action from Central Banks, also governments being theged, there is no stem in rush for dollars. Credit markets still reeling. Is the next step fx intervention by the treasury and the fed to weaken the dollar . It probably is. Think when saying Monetary Policy is not going to help, clearly monetary policies need to do something. They need to do something to help the Financial System, doing everything they can to do that. It does not help the real economy. It does not help consumers. It does not help businesses. They cannot travel at the moment. Lower rates are not going to do anything to help the real economy. All Central Banks are doing at the moment is trying to plug the gaps in the system. The issue weve got is the Financial System is so systemic. Its going to be more systemic than it was at the height of the financial crisis in 2008. Given just the speed and the scale of the news flow we are , you were talking about the fed and the ecb overnight, it is so hard for Market Participants to process the sheer volume of information at the moment. That is why you are seeing some of the movements you are. Ise kind of fx intervention probably not too far away. Yousef it has been a busy couple of hours. We had the boj make some moves when it comes to bond purchasing programs. You have actual rate cuts from barnier. Now just crossing the bloomberg, one from the central bank in the philippines. I want to flesh this liquidity story out in terms of what the fed is doing to try to extinguish the fires burning. This is a story that will drag on for quite a bit. Are they risking doing too much here . It is a very fine line you need to walk. At the moment it is all about protecting the system right here right now. This is a longerterm effect at the moment when it is in this very critical state. At the moment, i dont think the much is something we have to worry about. Right now it is about getting liquidity back into the system and reducing systemic issues that we are seeing at the moment. In terms of what is happening in markets, a simultaneous selloff in stocks and bonds. Some interpretation is that it is indiscriminate selling. Will we see any of that reverse in the near term . The near is difficult to point to. The trouble is at the moment, although you have these stimulatory measures coming out, a lot of good news, i would argue, fiscal policy coming out very aggressively, helicopter money already, but i think the problem is investors are really just trading the coronavirus news when it comes to markets. What we need to see is those case numbers starting to stabilize. We need to see progress being made on a vaccine. Unfortunately at the moment, looking at the reported numbers for the last 24 hours, that does not seem to be the case. I think a lot of it is around the virus itself until you see those numbers coming out. It makes trying to estimate earnings, trying to estimate Monetary Policy in the future, exceptionally difficult. You were talking about airlines at the top of the hour, trying to estimate where they are going is not possible. We do not know how long those aircraft are going to be grounded. Even when we get those aircraft nejra thank you. Ben jones at state street staying with us. We will come back soon. Lets get to the first word news. Will close, schools friday as Boris Johnson tightens restrictions as the coronavirus outbreak continues. He warns he could impose strict controls on london and elsewhere if necessary. The capital is closing up to 40 underground stations. From tomorrow, there will be no night to. The Australian Central Bank has cut the cash rate to 0. 25 of the emergency meeting. The reserve bank also announced a funding facility for the nations lenders to keep credit flowing to the economy as it heads towards its first recession in almost 30 years. For the First Time Since the Coronavirus Crisis started, the chinese province at the center of the outbreak has reported no new cases. Total confirmed cases around the world have topped 210,000 according to official data. Around 85,000 people have recovered and 8700 have died. Early coronavirus drug trials have yielded mixed results. A pill used for hiv showed little benefit, but a flu medication seemed to result in a faster clearance. Another trial i gilead is ongoing, but we dont have any results yet. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Coming up, historic dive. Investors flee u. K. Assets as the coronavirus spreads through britain. The prospect of closures in london jitter fx markets. Yousef this is bloomberg daybreak europe. Extraordinary actions from Central Banks globally overnight. Fed, but the, and selloff in equities continues. Selloff in bonds also continuing. Selling everything to raise cash. Dollar strength is demonstrated by the fact we are seeing the yen retreating today. Oil rebounding from an 18 year low dropping the most since 2008. Get back to the fx markets. If we look at the pound, it has hit its lowest since 1985. A multidecade low against the dollar. Here with the details is dani burger. Stunning moves in sterling yesterday. The decline continues today. Falling 4 yesterday. The lowest level since 1985, as you mentioned. That means current level has taken declines of the financial crisis and the brexit drop. Concerns here twofold. Stemhe u. K. Done enough to the spread of coronavirus . If london is forced to go on lock down, what does that mean for the hub of the Foreign Exchange market . Inhave liquidity concerns the market, which brings the second reason we are seeing sterling selloff so violently. Greenback surging to the highest on record. Investors are doing anything they can to get their hands on cash. That especially means selling u. K. Assets. Part of the reason we are seeing steep declines. Thank you very much for that. Boris johnson has warned a locked down in london could be on its way. The u. K. Prime minister announced schools will close from friday. Moving to tighten restrictions following criticism. Of state street is still with us. The moves we have seen in cable, for sterling, its the weakest since 1985. You look at the scope, it feels like an emerging market currency trade almost. How does that shift your view on the u. K. . View have a negative through this year. We have been surprised it has been so long coming. A little bit surprised by the scale of the move yesterday. Perhaps i should not be surprised by anything at the moment. The issue youve got is the u. K. Was in a difficult state to begin with anyway. Obviously it seems a long time ago when you are talking about that brexit and issues there, for us, that was a reason to be negative on sterling. Prior to that what you have seen is investors moving back into sterling. You had seen a reasonable appreciation in the currency. We do not think that was warranted now. Lockdownihood we get a in the u. K. Is looking much more likely. That is going to put more pressure on sterling, i think. It is hard to distinguish how much of this is selling of sterling and traders unwilling to take a position against a surging dollar. On the prospect of a lockdown in london, what will that do to markets with the liquidity strain we already have . It is not going to help. You have a lot of people working from home. That is going to be an issue, i think. You have people working from home. Its very difficult to know you have the infrastructure that is going to work properly. Why are you going to commit risk when you are uncertain in that backdrop . Hold that thought. We still have a lot to get through. Heres what is coming up. Copper concerns. Extending losses after the biggest slump since the financial crisis. We will get the details next. Als demandek met expected to cause catastrophic surpluses according to credit suisse. Lower prices on copper and aluminum. Copper has extended losses after its biggest slump since the financial crisis, dropping as much as 7 on the metal exchange. Futures from hong kong fell by the daily limit. Let us start with copper and this metals complex that clearly is losing the floor from under its feet. Absolutely. What you are seeing is copper has held up relatively well in the past week, but now it is really starting to take a dip. There is a realization that china is going to the affected by the shutdowns you are seeing across europe and the u. S. , and thats really going to affect the global economy. There any other metals we should focus on, or is this a question of correlations and indiscriminate selling . Is both. There is a degree of indiscriminate selling happening across the board. Perhaps the most surprising aspect of this is what you are seeing in gold right now. Gold is typically viewed as a safe haven asset. A place people go in times of stress. It has also been in freefall the past week. Theres a few reasons. Commodities,for for lots of commodities, its a stronger dollar, lower inflation except patients, and also everyone just wants cash. And does not willing to put it into gold right now. Nejra thank you so much. Jones fromack to ben state street, our guest for the hour. What strategies are you implementing across markets right now . I still would like gold from a longerterm perspective. It has had some pressure the past couple weeks. Its biggest weekly drawdown since 1983, i think it was, a week and a half ago. Because we want to get the cash and a lot of it is because people are having to meet margin calls and potentially cover losses on other assets to meet redemptions. You want to look at the action Central Banks are taking at the moment. Longterm, that has to be supportive of gold. We have real rates very firmly in negative territory, far more negative then 2011 when we had gold at 2000. Youre going to have an awful lot of volatility in gold and a lot of commodities, but gold is the way it stands out. For me. In the short term, copper is going to see quite a bit of weakness. What we need to look at is when this starts to ease and starts to move into the background, china in particular is going to be stimulating like hell. That means you are going to have a lot of spending to get growth back very very rapidly. We will go back to the old infrastructure way of doing that, and that is potentially what we start to see, and bottom in Industrial Metals. Today, i dont think it is. I would be on the side of gold rather than Industrial Metals right now. Yousef there was so much more i wanted to ask you, but for now, hold that thought. We will be back with you shortly. Coming up, aviation pains deepen. Delta ground plane and cuts flying capacity. More on the evolution of that story. It is affecting every corner of the world including emirates with similar moves. This is bloomberg. When you move homes, you move more than just yourself. Thats why xfinity has made taking your internet and tv with you a breeze. Really . Yup. You can transfer your Service Online in about a minute. You can do that . Yeah. And with twohour Service Appointment windows, its all on your schedule. Awesome. So while moving may still come with its share of headaches. No kidding. Were doing all we can to make moving simple, easy, awesome. Go to xfinity. Com moving to get started. Nejra good morning from london, this is bloomberg daybreak europe. I am nejra cehic. Yousef i am yousef gamal eldin. Bond buys worth 700 billion euros to smooth markets rocked by the coronavirus. They say there are no limits. Gains selloffal again, the pound slumps. Boris johnson tightens restrictions on the u. K. The u. S. Senate passes a relief , 1. 9 trillion to support the money market. Nejra welcome to bloomberg daybreak europe. With the action from Central Banks, the story in markets is selling to raise cash. Stocks and bonds selling off simultaneously. The dollar at a record high. The euro was dropping. The aussie getting pummeled. The yen is retreating. Teachers on the back foot in europe and the u. S. Futures on the back foot in europe and the u. S. Yousef it is hard not to get smacked from the left or right, little place to hide. Msci of asian equities, down 4 , the lowest level since 2016. Circuit breakers triggered in manila and seoul. How much new issuance are we going to get from countries around the world . Brent crude getting a lift after the massive selloff overnight. Nejra investors sell to raise cash to rush to the dollar. Those are the markets. If we turn to culprits, coronavirus if we turn to corporate scum of the Airline Industry has felt the impact more acutely. Across the pond, Delta Airlines is parking more than half its as it cuts itses flight capacity. The airline added it expects revenue in march to drop 2 billion. While the u. S. Government tries to save the Aviation Industry, the idea of a bailout amid the coronavirus pandemic is a political nightmare. Airlines have purchased 45 billion worth of stock. Today they are asking for 50 billion worth of aid to bail them out. I think that is a political nightmare. Nejra joining us now from sydney, peter harbison. Great to have you with us. Central banks and governments are pulling out all the stops for Financial Markets and the economy. How soon could we get a bailout of airlines globally . I think immediately is the answer. We have already seen in australia, it did not achieve much. It is inevitable. Airlines are a Public Service and have to be supported. We need productivity, it is as simple as that. Yousef to what extent will this be a game changer for the power in the global Aviation Industry . Oil prices have cratered and these carriers have to ground flights. , will that carriers be their time to shine, or a time where they have to break up . Peter you mentioned one of the better liquid companies at the moment. Liquidity. 00 days of even so, looking down the tunnel , we are looking at an environment unfortunately which means a genetic change in the way the airline dramatic change in the way the Airline Industry works. Nejra what can airlines do right now on the revenue side . Peter really there is very little on the revenue side. As nations close their borders. Qantascost side, we saw put 20,000 workers of 37 thousand on extended leave 20,000 workers out of 30,000 on extended leave. Yousef how quickly can we expect a bounce back . The best Case Scenario comes through and this is wrapped up in four months, will it take time to be deployed that capacity and get supply chains working . Peter yes, but more broadly you mentioned china. China airlines are supported by the government, but they have been active in encouraging airlines to fly domestically. We will see that come back faster because the coronavirus [indiscernible] see some shifty in the political balance globally, a start of a bigger geopolitical shift i think we will see after the coronavirus. The u. S. Will come out looking different, no doubt about that. Nejra in europe we were reporting that france and italy want to help airlines cope with the pandemic i doubling the links of a proposed suspension to use airport slots. Something oning friday. If that happens and the waiver gets moved until october, how much will that help . Peter i think the way things are looking at the moment, it is academic, it is obviously necessary to do it. The airlines who will be bailed out [indiscernible] it makes a lot of sense. Nejra thank you for joining us, peter harbison, chairman emeritus founder, capacentre for aviation. Bankrupt bys being may of this year. Yousef absolutely. Breaking lines, richel will start additional fx sales if the euro goes below 25 a barrel. Programs,f the wider the bank of russia and daily fx selling volume will sell on the domestic market to underscore additional fx sales if we go below the 25 a barrel mark. We are therefore brent. We are there for brent. Nejra this morning it is all about the rush to dollar, concerns about liquidity and bond market. We have Global Market coverage. Joining us is juliette saly, Annmarie Hordern and dani burger. Lots of Central Bank Action overnight including from the rba. Juliette yes, an unprecedented move to cut rates. The rba announcing a form of yield curve control. Rising asr bond yield much as 120 basis points, the most on record. We have seen a steepening of the curve. It could take time to see the three year yield at 2. 5 . The aussie falling to its lowest levels. Australian stocks, there are earnings and the fact australia came through with a travel ban for noncitizens. You are looking at the boj to stem the bond rally. An unprecedented move from the boj overnight, they are thatshing 2 trillion yen, helps to sell down from yesterday. Look at this chart. This is volatility, the highest level in four years. It is starting to ease a bit. It is still very high. You think the boj wanted to come in today, it will be a long weekend. Nejra thank you. We are talking about the mad for cash and liquidity markets. What are you focusing on . Has been breathtaking, this rush for cash and trying to find havens. The one month, three months and tbills, yields have turned negatives, record lows for each of these securities. Negative yields reaching americas shores. This is the remarkable thing, that these dropped negative while the 10 year yield surged. Is a scramble for cash. We see a combination of private demand for debt and the fed making purchases that is driving these yields lower along with greenback, one of the last meeting havens. Dash fort was that fo cash, you wonder what the fed will do next. Thank you so much. Lets get to the first word news. Has anopean central Bank Emergency Bond Buying Program with 750 billion euros. Chris in the guard says it short many times require extraordinary action. Is consideringk raising its qe limits. The white house top Economic Advisor says the u. S. May take kudlow added the bailout of General Motors was a good deal for the government. The administration could up the ante on its stimulus plan. The First Time Since the Coronavirus Crisis started, the chinese province at the center of the outbreak has reported no cases. Talked tocases hundred 10,000, 85,000 have are covered, and over 8500 have died. The biggest factory shutdown since world war ii is hitting the u. S. And europe. Auto plants are closing on both sides of the atlantic. It echoes the shutdown in china earlier this year that reverberated around supply chains. A global recession may be already underway. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Up, the attempt to calm markets, we talk shortselling and what you need to know. This is bloomberg. Yousef this is bloomberg daybreak europe. I am yousef gamal eldin. Nejra i am nejra cehic. Liquidity and a rush for cash. Equities selling off in asia. Futures point to a low open in the u. S. The dollar atnto a record high. Oil rebounding, jumping the most since 2008 after hitting an 18 year low. The European Union top market regulator is facing increased letter to ban shortselling. Bansuntries have imposed on shortselling. Dani some european lawmakers are urging a ban on shortselling, arguing it is amplifying Market Movement to the downside. For germanker conservatives called for european securities and markets authority to ban short across the block. He is joined by the french finance minister calling for this unprecedented step. The market watchdog has tightened requirements for speculating against the stock and is prepared to use its powers to ensure the orderly function of markets. Several countries have gone their own way, italy, france, belgium, austria having a onemonth ban. A ban could be counterproductive. There is a study looking at shortselling bands from the financial crisis, and found restrictions increased the these calls are happening but there is an argument why these should not exist. Nejra thank you so much. Back to our top story, and extra emergency Bond Buying Program worth 750 billion euros to calm markets and protect the euro economy struggling to cope with the coronavirus. It short lagarde said and i times require extraordinary measures. Clearedthe u. S. Senate the second major bill responding to the pandemic, lawmakers are rushing to follow with an additional rescue package. Estimates are it will cost 1. 3 trillion. Centralbank action underway, the fed is launching a program to support mutual funds. Alarm over the coronavirus causes strain in the money market. A lot of Portfolio Managers are under tremendous pressure to make significant losses because of the scale of the synchronized not supposed to be happening, it is not what diversification promised. How do you get stabilization into this . It is difficult to see how we get it anytime soon. We are saying widescale losses across everything. Managers i am speaking to are this is exceptionally painful from an absolute perspective. Investors have not been hit as badly as expected because what you are saying is areas that were winners last year not underperforming this year. We are seeing momentum versus value trade performing a little better. Pressurergin there is at the moment. In absolute terms it is exceptionally painful. Is we areed to see getting this virus under control, then we can see other fundamentals and make some we canent as to how influence the economy. All of the policy is going to influence the economy further down the line, and hopefully the second half of 2020. And asee a stabilization slowing in case numbers and activity starting to improve, we are starting to see hints of that in china. It could be a snap back in the same degree as with the unwind over the past few weeks. Markets are so systemic that if you get good news, we trade those and you can see a sharp snap back. Unfortunately it is not coming today. I think we have a few weeks as the west deals with these corona cases before we get to that point. Nejra how would that not back reverberate across bond markets . Long yields rising globally, we can put forward reasons for that, selling off to raise cash, but on the prospect of government stimulus. Where do bond markets go from here . Njamin i think they do. The fear is when this pans out, and you get the sending, inflationary pressures are great and people have to worry what pressures will come down the line. The story is more about deflation today rather than if this is not longlived, you can get helicopter money and stimulus that might finally be the time we get inflation coming through. That is a worry for bond markets. Bond markets are expensive at the moment. About bondworried markets in the longer term. Theef that is exactly point, bond markets are expensive and equity markets are struggling to find the bottom. What you do from a portfolio point of view . Benjamin it depends. Moment,fficult at the but you try to look at those areas where you have got the possibility of a greater stimulus happening. One area i like is chinese equities at the moment. They are down for the year but far less than the markets in the u. S. The reason for that is china took the pain far more quickly than the west. You have stimulus coming through more aggressively than in other areas. I like u. S. Equities, particularly on the tech side of things. I think the tech sector will come out of this stronger. Influenced by the coronavirus and shutdowns, if arehing because companies having to up tech spending in the short term. A lot of Software Companies are relatively low in terms of labor concentration. Less. Ill be influenced the tech sector is the place to be in the u. S. Yousef thank you very much for sharing your latest views from state street bank. Into some of the key calls and have more on the market. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Yousef i am yousef gamal eldin in dubai. A Bond Buying Program worth 750 billion euros but as monetary stimulus grows around the world, what else is needed to fix the economy . And reporter and reporter has the morning call. Line, it was am good decision from the ecb, but the onus is on fiscal policy and the absorption of credit risk by the public sector. He thinks that will stabilize markets more durably. Markets are screaming more and more that fiscal policy needs to step up. Nejra thank you so much. These purchases are large enough to tighten spreads. Will we see a selloff led by europe yesterday . European futures in terms of equity markets are in the green now. This is bloomberg. Anna good morning, we are live from our European Headquarters in london. I am anna edwards alongside matt miller in berlin. Matt the market say nowhere is safe, the dollar remains strong as gold and the yen selloff. U. S. Futures down again. To losses pointing but has turned around. You can count on volatility, the cash trade is an hour away