A stimulus plan to offset the pandemic and another big week for earnings. Results from sap as europes largest tech companys speak year ceo speaks with us and ryanairs cfo. Speaking of ryanair, weve got numbers coming through from the airline. Tax, quarter loss after 185. 1 Million Euros. The estimated loss was 276. 9. That is a smaller firstquarter loss after tax than was expected. What we are hearing from ryanair in terms of commentary is the biggest fear is the virus second wave and fears are already swirling around that in terms of the news over the weekend with u. K. Imposing quarantine from spain. We will no doubt get comments from my ryanair. Losses are mounting. Basically, First Quarter customers, zero point 5 million versus 41. 9 million, the estimate was 96 , theor, 61 versus estimate was 57. 8 but the main number to look at is the first and basically ryanair said it will continue losing money through the summer. It is concerned a second wave could push back to recovery into next year and we will be speaking to ryanairs cfo at 6 30 u. N. U. K. Time. We are waiting for numbers from sap and it is raising its 2020 about 4 billion euros. It did see 3. 5 billion euros so it is raising its 2020 see a forecast and announce see its 2020 operating cash flow above 5 billion euros. It saw about 5 billion euros. Perhaps the market might take that positively to some extent. They had previously talked about a recovery going into the latter part of the year, but the other thing it the market might be more focused on what we heard over the weekend about s. A. P. Software stake in its unit through a u. S. Ipo less than two years after it bought the firm to compete with salesforce so that will be something the market will be focused on, perhaps the rationale and more Details Behind the u. S. Ipo. We will also be speaking to the sap ceo in the show at 6 40 a. M. U. K. Time. Lets get to the markets and it seems to be u. S. China tensions are weighing on the dollar and that has been declining to hit a nine 16month low, the lowest since march 20 19th. March 2019. You are seeing gold hitting a record after seven weeks of gains, the longest winning streak since 2011. A lot of that seems to be around the lower for longer rationale and concerns around u. S. China. The u. S. 10 year is steady. You are seeing underperformance in japanese shares, playing catch up after two days of holiday. Last week, we saw Global Equities and the week completely flat. U. S. And european futures are positioned a little bit positive ahead of those opens. U. S. China diplomatic tensions continue to simmer. Beijing has criticized the forced entry to its houston consulate by u. S. Personnel. Federal agents and local authorities broke and the consulate building late friday. Move brokes the conventions. It closed the u. S. Consulate in chengdu. Significant escalation intentions over a range of issues including trade, technology, security, and human rights. Bridgewater founder ray dalio said the conflict could hit the dollar if it escalates into a capital war. Say by law, dont possibly china or even withholding the payment of bonds that the United States goes payments on in china, these things are possibilities and they have big implications, such as for the value of the dollar. Nejra joining us now is the head of European Equity strategy at barclays. Freight to have you on the show with us. To what extent is further dollar weakness baked into your strategy and how would you play dollar weakness in your European Equity strategy . Good morning. A number of factors pressuring the dollar in the short term. All of this tension with china is not going to go away anytime soon, the titfortat retaliation will stay with us until the engine of end of the election so the market has to get used to this. Believe dollar ,egative in the First Quarter the direct for a growth between the differential between the usn rest of the role has been narrowing, pressuring the dollar and the differential of Interest Rate is telling. The somewhat helps the rebalancing from the u. S. To the rest of the world markets. We are long europe. We think europe will benefit from a stronger currency. Improving relative macro in europe and we think emerging markets, despite the trade war with the u. S. And china, will benefit from fed liquidity and from the weakening dollar. Nejra and you talk about euro strength in your outlook benefiting some of the domestic players. How much further do you expect the euro specifically to benefit to the upside from dollar weakness, and therefore, to impact here strategy versus domestics . Emmanuel there are two in play in the effects market. One is the weakness in the dollar coming from the massive fed liquidity put into the tariffsnd the risk of with china. Packagethe recovery approved by the eu plays a significant step to more integration. Are seeing good developments the pandemic in europe relative to the u. S. So far and the macro recovery has been strong. Nowed, stronger europe for should not be a headwind to further betterment for the someean market but takes rotation away from exporters toward the domestic part of the market. In the last few years, when we had positive policy catalyst in , 2012, French Election that showed president macron getting over, we had a period of butng currency in europe, again, with rotation from exporters to domestic. Emmanuel, how much do you expect the cyclical nature of the European Equity market to be potentially impacted by an escalation in u. S. China tensions . Emmanuel this is one of the big risks markets will have to deal months andhe coming the action taken by the u. S. Administration last week, in my view, implied the u. S. Has decided to put china at the center of the Election Campaign so i think the market will have to accept uncertainty on this which might help popular trades like tech, which has been a strong outperform of this year linked to the u. S. China relationship, so part of our strategy will rotate away from some of the strong winner sectors overly exposed to trade and move back to some of the more domestic areas which are less exposed to these issues. Stays withnuel cau us. Tensions, listing at home has become more attractive for chinas Tech Companies and the newly launched hang seng tech index is to give more access. Kwan spoke to bloomberg. Hong kongs market is now capturing new opportunities, previously a place for investors to look at Hong Kong Opportunities are china stock opportunities. We have the hang seng index and the Hang Seng China Enterprises index. A lot of great advisors are using the Hong Kong Market to invest into the fastgrowing china stock, china sectors. Now i believe the market is being perceived by investors as a venue they can invest into tech stocks. The tech index is expected to the bit more volatile than indices we already have, so how much will add in fact effect investors appetites when it comes to the index . Vincent i believe global whether america, europe, or even local investors in hong kong and china, we are factors inking at hong kong as more volatile than the traditional stocks. If you expect high returns, you also expect high volatility and higher risk and for the tech stocks, we understand some of might be testing their business model, so people need to recognize that. Vincent, do you expect this new index to become almost a proxy if the u. S. Government and set banning their funds and index providers from having access to Major Chinese tech stocks . For hong kong, in the past couple of years, we have been criticized to a lack ofextent, for a new factors, and new economy factors. We do have a lot of traditional thesebanks, properties, are in hong kong and now, there are opportunities. We are seeing some American Companies returning to the local market. Used the u. S. Ey market as a funding source, they are clearly interested in those stocks. Now, there is opportunity because the Hong Kong Market, the infrastructure, the regulatory changes as well as the stock, we are bringing Mainland China investors to hong kong so that other conditions are now ready for large china tech stocks, whether they are in china or already listed elsewhere. Now they have the opportunity to come back to hong kong and we attract believe we can inbal investors to invest these important emerging tech markets in hong kong. Ceo vincentseng kwan speaking to bloomberg. Spain is hitting back at plans to oppose quarantines on travelers to the country. Details next. This is bloomberg. Nejra this is bloomberg daybreak europe. Nejra j pitch im nejra cehic in london. Japan is weaker in asia but the msci index green overall. The 10 year yield a steady. The dollar is getting hit by u. S. China tensions at a 16 month low. G10 currencies strengthening against it. Gold at a record, oil pulling back. Airlines aretish hitting back at the decision to quarantine visitors from its top tourist destinations. The spanish say it is a safe country and working hard to contain outbreakss. Spains Health Ministry report 930 new cases thursday and friday. Emmanuel cau from barclays is with us. 30 days with what we are hearing from spain, but is this enough to shake your thesis that we are going to see a strong rebound in europe and in many ways, europe has weathered covid better than u. S. . Emmanuel i dont think so. I think the situation on the covid front is across regions so infection remains high. In india, in japan, spain. I guess markets and economies will have to deal with this uncertainty for much longer, at least until a vaccine becomes available. To limit the spread of the virus. In terms of the covid constraint, the economy and uncertainty, it should somewhat forced Central Banks and governments to remain in full stimulus mode. We had a significant eu recovery package last week. Another 1. 5 trillion in the u. S. , so the uncertainty will warrant significant support from Central Banks and governments. Meanwhile, we had some positive news flow on Vaccine Development by oxford university, as well last week. There is some potential good news here that could help sentiment. Nejra in terms of good news, some of the recent measures of highfrequency activity have suggested a stronger recovery in europe and the u. S. Also, jpmorgan say europe will do better because it has broken the chain that links mobility and the virus. Effective virus control is one reason they expect a steeper and smoother rebound in the euro area and elsewhere. What does this mean for the rotation into value and cyclicals overgrowth and defensive . How much further does that trade have to run in europe and globally . I do think the policy , a fiscalrom europe plan on the stimulus front, very successfully entering mechanisms so it has put together a meaningful stimulus and you could see a bit of revival in the inflationary dynamics in europe and for a long time, europe was falling into the trap of inflation for years and now they could help rotation toward a more economically sensitive part of the domestic market, some of the beatendown consumer plays so positioning is still very polarized within europe and the do virgins between growth divergence between growth president. Sident if you see investors going back to europe and buying assets and betting on the recovery in domestic activity, that could help some of the beatendown domestic plays. We like sectors like banks, because we think they could attract investors moving away from europe for so many years now. Nejra emmanuel cau from barclays stays with us. A big week for bank earnings. Fallout coming amid the of the coronavirus pandemic and limited forward visibility. Wednesday, results from barclays and deutsche bank. Santander will be a bung among the european lenders reporting. Suisse, capital and dividend guidance after ubs signals it may resume share buybacks as soon as next quarter. We will get results from Standard Chartered, lloyds, and bbva. Bnp paribas reports friday. Natwestk. , watch for results. Coming up, larry kudlow sees a positive picture and thinks a vshaped recovery is possible. This is bloomberg. Nejra this is bloomberg daybreak europe. Ae u. S. Economy is poised for Third Quarter rebound according to white house economic adviser larry kudlow speaking to cnn. He says the impact from hotspots in the sun belt is likely limited as he sees a vshaped recovery. Putblican party has together a stimulus bill that will replace 70 of lost wages for jobless individuals but nancy pelosi says the proposal is too complicated. Emmanuel cau from barclays is with us and we will hear from the fed this week. A lot of people are expecting the fed this week to give a signal to markets of lower for longer for bond yields and they stayed suppressed. How much of a risk for high yields do you see from a potential vshaped recovery and the stimulus . Marketl the bond doesnt seem to be betting on a vshaped recovery. A disconnect between the Strong Equity market and strong bond market, so it is anchored by the dovish fed and that is not going to go a quickly. However, given the significant stimulus put in place to fight shock from covid, we think for the not take much market to stop the return of inflation which no one is preparing for. We are at the bottom of the range and we might move to the top of the range over the coming months. You say in your outlooks that the equity market has a very deflationary positioning at the moment so what sort of changes could we see if the market wakes up to higher inflation emmanuel interesting some of the assets are starting to price spikes in inflations. Gold is going up significantly above the last few months. Stocksonary, quality after doing well and are getting a bit from investors, value sectors which could benefit from inflation are not doing very well. Our advice is to have a barbell allocation to reduce exposure to the expensive how performers and perhaps had to some beatendown value sectors so i dont think we will see such inflation in the short term but the market might start to buy the recovery and could have the rotation we have been waiting. Or benefit if would Inflation Expectation were to pick up again. Nejra and you say rather than dividing the market cyclical versus defensive, youve got to be more selective in your sector allocation. Emmanuel cau, head of European Equity strategy at barclays. Ryanair is concerned a second wave of infections could push the recovery back until next year. We will speak to the ceo cfo next. Positive positioning in u. S. And european futures. Some green on the screen in asia. It is the dollar being hit by concerns of u. S. China tensions hitting a 16month low. This is bloomberg. Anna good morning from london. Im nejra cehic. This is bloomberg daybreak europe. U. S. China tensions continue to simmer amid consular closures consulate closures and arrests over spying allegations. Ray dalio warns a capital war between beijing and washington could hit the dollar. Gold soars to a record high. Spain scrambles to stay ahead of new outbreaks has the u. K. Imposes a quarantine on returning travelers. In the u. S. , republicans unveil the stimulus plan to offset the pandemic and another big week for earnings. Sap reports as europes largest tech Company Plans to spin up. We will be speaking to ryanairs cfo. The dollar is bearing the brunt of concerns around u. S. China tensions. The bloomberg dollar index had a 16 month low. G10 gaining against it. Golds longest winning streak since 2011. The 10 year yield, steady, equities fairly resilient, losses in japan, playing catchup but green on the screen in asia and u. S. And european futures position to positively ahead of those opens. Lets get back to earnings and ryanair said it will continue losing money through the summer ofit posts a quarterly loss 100 85 Million Euros. The airline says the Current Quarter should see a shortfall as flights resume but are ryanair is concerned a second wave of Coronavirus Infections could push back the recovery from the pandemic into next year. ,oining us now is neil sorahan cfo of ryanair. Thank you for joining us. Lets deal with the second wave concerns because they could be becoming a reality in spain. The u. K. , imposing the quarantine. As youve heard that news over the weekend, do the second wave fears and the way you have to deal with it in your business become more live for you today . Neil it is something every business will have to do as we move forward. The government has done a good job of the lack down of the coronavirus in march and april. Strategyhe current will hopefully reduce the lock down as we look into the winter and beyond but it remains a big risk for the Airline Sector into the winter months. We are planning this year to carry about 16 billion customers, a 6 reduction over last year where we had 149 billion and we had a difficult ofrter where we made a loss 185 million. We hope to lose the loss into q2 or lower than we saw in q1. Just talk me through as to what impact that could have on the numbers. I know it is difficult to predict, but if those second wave fears materialize to the extent that we see more quarantines imposed to other countries other than spain, does that mean potentially several quarters of losses . Year, we are not guiding for the full year, but you are not going to see a profit in the current financial year. I think you will have to look into next year before you see recovery on that front and that innovation is important at the end of the quarter with 3 billion cash up from 3. 8 billion in the previous quarter. It puts us in a pretty strong position into the winter period. We have a lot of competitors receiving a significant amount which leads to below cost selling from them, reduced fares, so it is very important that the likes of our business, get our cost base better than it was, reducing labor costs, reducing airport and handling, working with aircraft manufacturers to reduce the cost of aircraft Going Forward so we are planning for these scenarios we hopehe business and the strategy by the government will stave off a second wave and lockdowns. We are also hopeful see some kind of vaccine either this year or early next year which will give people confidence in flying. So youve talked about some of the measures you have taken on the cost side, but in terms of the revenue side, how is demand shaping up at the moment and what are your projections for demand over the summer . At the moment, we are flying 40 of capacity, over 90 network and load factors over 70 . We hope and expect to increase that up to 50 capacity and 70 of capacity into september. There was a fair amount of demand as we saw lockdowns being relaxed over the months of may and june. A lot of visiting friends and relations for leisure traffic. Businesses have been slower to come back and i dont doubt will come back. Demand has been fairly solid. We are taking a relatively cautious approach and rolling out the various routes. We are working on our laser schedules and hope to find leisure schedules and hope to finalize the coming weeks. Our best estimate is we will carry approximately 60 million customers this year which is the 49 million we carried last financial year. Nejra when do you see prices normalizing . Neil difficult to say. Wherean environment now carriers have been given so much stated theyll be able to do costs for months to come. Our strategy has always been to fill planes and to keep the fares down and that is why weve got a 200 gap between our average fair and affairs of our intent competitors and we wont be found wanting when it comes to having low fares in these markets. Cuts, are there any further job cuts planned . Neil we would hope to minimize job reductions within the business. There have been some and there will most likely be more. We work very well with our people and the unions and they recognize where the world is at the moment. They have been willing to accept modest pay reduction and enhance productivity returning over a three to fiveyear basis. That helps reduce the number of jobs taken out of the business but there will be more job cuts in the coming weeks and months. We are looking at all of that. The u. K. And ireland and some of our other markets, and we hope to have more success. Nejra you just mentioned the fact he reached a deal with violets with the union on pay cuts. Isterms of customers, there no doubt a lot of people anecdotally are quite hesitant are youso what measure taking to encourage people to fly beyond the price point . Neil weve taken huge steps to ensure a safe return to flying. Weve implemented the cdc recommendations published in may. We have a relatively young fleet with hepa filters. Face masks and face coverings have become the new normal onboard aircraft. I have to say it has been a credit to our customers and staff that this has been observed without exception across the board. Weve made the travel experience a safe as take as possible. We are offering competitive fares. A lot of choice for customers out there and we will continue to offer choice and good value over the coming months. Nejra great to have you with us. Thank you for joining us. Neil sorahan, cfo of ryanair. Lets get breaking news from tsmc, surged 10 at the close lifting the taiwan stock index to a record. Weve seen a 35 billion rally in tsmc, putting the taiwan stock index above the 1990 peak, now at a record and the news overnight on tsmc specifically was a report in the commercial times that it got a semiconductor order from intel. Coming up, sap plans to spin off twoconsumer survey unit years after buying the firm. We speak to the ceo next. This is bloomberg. Nejra this is bloomberg daybreak europe. Im nejra cehic in london. Sap has raised its free cash for 4 billion euros after the Company Announced plans to sell off its unit qualtrics through a public offering. It marks a quick turnaround from the purchase in november 2018 which received lukewarm reception from investors put off by its price tag. Christian klein, thank you so much for joining. Talk us through the rationale of this qualtrics ipo just two years after the record deal. When we are talking about qualtrics, let me outline qualtrics was one of the best acquisitions as if he ever did. They above performed above and beyond. Three months back when i become sap, ryan smyth and i discussed options about how to move qualtrics to the next level and a partial ipo, and we are both fully convinced it is a winwin for sap and qualtrics. Why . First, it will allow qualtrics to focus on the noncustomer s. A. P. Base in a highgrowth market and second, despite the ipo of cost, sap will remain fully committed to Development Joint gonue with the to market. Sap will be highly committed to qualtrics and will remain a Majority Shareholder of qualtrics Going Forward. Dora with that structure, you expect to be able to compete with salesforce still, which was the rationale initially of acquiring qualtrics . Christian absolutely, we kicked off in the last months great use case for customers. We launched human experience, which accelerated sales of qualtrics but also our or applications to subsectors. We did the same in commerce. We plan to expand experience management. They see the benefit for our customer and this wont change with the ipo. Allowing qualtrics more autonomy to go after the market of nonsap customers as this is a growth sector. Nejra is there a risk though that investors start to see some flipflopping or lack of clarity around strategy, not just because of this change with qualtrics in as much as two years, but also that youve gone from a coceo to a ceo structure . Christian absolutely not. First of all, when you look back to our last quarter, we are very proud of the result because it shows the resiliency of sap during this crisis. We closed over 17,000 transactions. Aboveld deliver go lives 18,000. Our current cloud revenue backlog is up 21 . Customers are realizing they for sap solutions intelligent supply chain, commerce, profit. Sap is more wellequipped that relevant than ever in this crisis. Free cash flow is up 59 so we are able to on the one hand highly manage our bottom line and at the same time also investing to our future Growth Drivers like the industry cloud. We are doing this out of the position of strength. Nejra right, yeah. In some ways, not to belabor the point of what might be negative thethe outlook in outlook, but you have almost been given a tailwind by covid. Are to me about what you doing actively to benefit the business rather than benefiting from a market shift that has kind of happened outside of the business . Christian when im talking to the ceos the last three months, it is always about driving a higher resiliency for their business Going Forward and in order to do that, they want to double down on their business transformation. When you are transforming businesses, you have to transform the way your company runs and that requires Intelligent Solutions for commerce, supply chains, experience to feel the sentiment customer and this is what sap is doing all the time and this is why we have seen already now a Strong Demand for so weoud applications continue to develop on our promise of intelligent enterprise by having the broader solution portfolio in the market and also making integration work so customers can really drive the business and to end. Talk to me about the broader strategy of carving out noncore businesses. The you expect any more divestment in the near to medium term future . Christian what we have done the last three months come you probably have seen a solutionsnt trend for industry partners. We launched a partnership with honeywell to deliver for the real estate industry. We are all up for board forming a big ecosystem which helps our customer, to offer endtoend solutions for the digital transformation. This is what we will continue to do because sap also has to focus on our set of core applications to deliver the enterprise and expand our portfolio with strong players in the markets to drive the business transformation of our customers and to end. Yes, we will have the right focus while we expand our portfolio with developments in the industry but developing it with Strong Partner solutions. Nejra christian, what is the focus on diverse city diversity at sap now that you are the sole ceo . Our people strategy, we are completely convinced a Diverse Company at the end of the day will deliver better results. We are doubling down on our objectives on diversity, both from agenda, but as well as ethnic perspective. We have set ambitious objectives but it is not only done by quotas. Actions into real recruiting, in the development of talent that will come up with more Diverse Companies in the years to come. With the loss at sap of jennifer morgan, there are now daxemale ceos running a listed company. Great to hear you are making moves. Christian klein, ceo of sap, great to have you with us. Lets get the first word news with laura wright in london. Billionaire investor ray dalio says the conflict between the u. S. And china could expand, telling foxnews washington and beijing could face a capital war. He warns there may be rules about not investing in china or even withholding bond payments. He says policies like that could harm the dollar. Rollsroyce is exploiting the emergency sale of the unit that ases parts for typhoon jets the engine maker rushes to an raise billions of pounds to see it through the pandemic. Rollsroyce is in early talks to sell the unit to a private equity company. The finance industrys gender cap looks to be widening as the number of female candidates for top jobs has taken a dip, according to a survey. Women make up 1 5 of applications for Senior Management roles, highlighting sluggish efforts to make the industry more diverse. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Laura wright, thank you so much. The dollar is losing its luster and many strategists see the selloff continuing. We discussed the greenbacks outlook as the bloomberg dollar index hits a 16 month low. Thats next. This is bloomberg. Nejra this is bloomberg daybreak europe. Im nejra cehic in london. Risk on inequities despite u. S. China tensions. Japan underperforming after being closed for holiday. The 10 year yield, steady below a 60 handle. Dollar weakness, 16months low in the bloomberg dollar index. G10 gaining against it and oil pulling back slightly but gold is the story hitting a record high. Higher eting in rocketing higher in march, the greenback is heading for its worst months since the beginning of 2018, but how much weaker could it get from here . To discuss is dani burger. What is the consensus right now . Do investors think dollar weakness will last . Dani we are seeing investors piling to shorts on the dollar which would suggest this is temporary weakness in the dollar. Two bits of evidence we can point to. Bearish shorts since 2018, similar to the action in the dollar and as Standard Chartered analysts point out, the dollar is moving lower during new york hours primarily which suggests Asset Managers in america are the ones jumping into dollar shorts while local currencies do better in their local hours. That is evidenced this isnt just temporary weakness. At the same time we are in a weird environment where gold is going higher so the question is, is this some strange risk off move and the dollar is losing luster as a haven currency . That cant necessarily be true considering u. S. Stocks are doing better so not environment but one refrain from a lot of strategists is this is about relative performance in the u. S. , namely the eurozone is doing much better in coping with the coronavirus pandemic. They are getting stimulus out there to the countries. Meanwhile, the u. S. Congress is struggling to get any fiscal stimulus through. Because of that, the euro is doing better and we are seeing other Currency Pairs like the yen perform better against the dollar. Before, the yen was having a hard time buying into the dollar weakness story. Those would suggest we should be prepared for dollar weakness to stick around for some time to come. Nejra great to have you with us. Thank you, dani burger. Lets get to breaking news and earnings. Is mullingt iag closing four spanish basis. It is iags Budget Airline and we heard about a reimposition of travelers from spain. Thisoke to the ryanair cfo hour, firstquarter loss coming and85. 1 Million Euros wasnt quite as big a loss as expected but the biggest fear is the second wave and sap, raising its 2020 Free Cash Flow forecast to about 4 billion euros. It plans to spin off its qualtrics u. S. Ipo but keep a majority stake. The ceo telling us it will compete with salesforce post the ipo. Tricks qualtrics the european open is next and it looks positive just to buy future judging by futures. This is bloomberg. Welcome to bloomberg market the european open. In londonie hordern aside yousef gamal eldin in dubai. Markets, the dollar continues its decline but bullish cases for the euro are growing, futures on the continent point higher and the cash trade is under an hour away. Here are your top headlines. U. S. China