Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

Cash trade. Here are your top headlines from the bloomberg terminal. Trumpa on the defensive. The president stands by his handling of the coronavirus on day one of the Republican National convention. Says democrats are still blaming America First Nikki Haley Says democrats are still blaming America First. The chinese arrives in europe today. Demandsla merkel answers from russia after it was putin critict the was likely poisoned. We have figures crossing the wire right now. The German Economy shrank 9. 7 in the second quarter. The initial estimate was for a drop of 10 point 1 . This is a second look here, and so it looks like it is a little better than expected. Still, of course, a massive drop , the quarter over quarter figure. The yearoveryear figure is a drop of 11. 3 , so a big drop in the german gdp. That the bloomberg economists expect a rebound in the second half, and of fullyear drop of about 6 for 2020. Lets take a look at what futures are telling us after the new record highs in the u. S. The European Equity indexes in terms of the futures trade with dax futures up two thirds of 1 . The u. S. Futures, as well, after those new records were reached yesterday. We see the s p down, and the miniq many contracts contracts gaining. Weinteresting, the shuffle have with exxon and moving out, and really, it was old economy cloud and biotech back in. Anna . Anna lets talk to matt a little bit about m a that we have happening in the markets this morning. , Many Companies that sounds similar in europe, but they develop Computer Software and services for engineering and related solutions. It is the category you might put it in, and they are announcing they are buying a company added enterprise value of around 5 billion u. S. Buying a company at an enterprise value. We will look for that to have an impact on the shares at the start of trading. They see around 3. 5 billion in the proceeds, and that will go some way to meeting the required amount of money needed to buy this business. There is a bridge to equity of 3. 6 billion, so that is how they are funding this purchase, essentially. And one company owns a part of aveva, saying he they support the acquisition of osisoft. We will come back to that, no doubt, as we go through the program. They voted in favor of that, and that is part of the job done in terms of committing shareholders. Lets show you what is happening, matt come with a session developing over in asia, overall the equity markets up 4 10 of 1 . Underperformance in hong kong. We had really strong gains, didnt we, in European Markets yesterday, and that came off of what was running up to a new alltime high on the nasdaq, so another day of positivity in asia, a move to the upside. Optimism around treatments seems to be one of the things, plasma, and the like, matt, but the trade deal, the phase one trade deal, between the u. S. And china, both parties are convinced to making progress and committed to doing so. At least, that is what we heard from the u. S. Side of things. New news on trade, perhaps something the markets can work with. Matt all right, very interesting stuff, and we will take a look at that in about 55 minutes time. 55 leads mlifeber who the china trade, is that what is driving markets even higher . Absolutely. It is very obvious, and as you guys pointed out, it is the double whammy over optimism and trade, that investors are clinging onto today. It is interesting. This is against the backdrop of very poor data. We were just getting german numbers that are very bad. Perhaps not as bad as initially extirpated, but, still, well into the negative, and still, this is very much a contrast of 2020, isnt it . It is the contrast between markets powering higher on more newsdriven catalysts, with the virus and vaccine developments, rather than economic fundamentals, and this really will be probably the story of 2020 for the rest of the year, i would imagine. Yes, absolutely, so trade is very much in the center of things. We look ahead to Jerome Powells speech later on this week, kristine. Is that something to move markets . A lot of fixed income, and very interesting what he has to say about inflation. That would be an event to watch, for sure, especially the reaction we got last week after the fed meeting minutes. It was probably some saying that maybe it was overdone, considering the fed was not really changing its tune all that much. That goes to show you that, yes, the fed the monetary policy, it still very much figures into the equation of the risk assets rally all over the world, and it could be one of the things that proved to be the wildcard as markets assess that powell seems a little cool now in terms of adding more stimulus, and that could be something that stops this sort of rally in its tracks. It does sound like the fed will continue to be supporting markets, then it would be another sign that investors can take to keep powering higher here. Think abouto you the shakeup, exxon mobil coming the dow jones, industrial index . I thought it was interesting that pfizer was out, as well. If they discover a vaccine and double their market cap but it looks like some older economy stocks are coming out, and some like honeywell going back in. Yes, very interesting, matt, and one of the most accurate descriptions i read about today is that it is a sign of the times. It very much is. Energy companies being considered part of the old economy, and all of these kind part of the being new economy. It is also a sign of what the World Economy is going through right now, where there is very much a premium placed on tech stocks and all of these stocks that have managed to leverage this new sort of environment we are in, where lots of people are working from home and needing to Leverage Technology to be able to do that. In the meantime, energy companies, travelrelated companies, airlines, these have been very outoffavor this year as people avoid travel, staying at home, not really going on planes, as well, so very interesting. It is really interesting to see how this will move forward, especially as we kind of settle into this new normal, at least until we find a vaccine. Anna yes. What about the question of the day about which Asset Classes going to be the most sensitive to news around the vaccine . I would say gold, because gold has not continued to gain at the way ed had the way it had in recent weeks. This morning, another example of stocks going higher and gold going higher, like yesterday. What kind of response are you getting to that question . Yes, absolutely. Gold is one of the answers to the question, and that is the expectation. On a day like today, you would expect it to be falling, that i think that just goes to show the sort of mania that we have reached when it comes to gold prices. It is really not just risk sentiment that is driving it anymore. There is really a lot more to it, the broadbase of the appeal that it has garnered this year. It speaks a lot to how investors are evolving in the way they see this asset. A lot see it as value. Others see it as a way to hedge inflation. Whether or not inflation comes to fruition is another question. But a Good Alternative in a world where the pile of negativeyielding is still growing by the day. Mean, if, well, i Central Banks keep the Printing Presses running, covid ends up costing more than 30 trillion, maybe some people are thinking that one a more stable form of money than the fiat currency. You for joining us. She leads our mlive team. Economy the german shrank 9. 7 in the second quarter. We will discuss the data from the euro areas biggest economy. This is bloomberg. Welcome back to the European Market open. 35 minutes or so to go, 45 minutes to go before the cash equity trade, and european futures pointing up by about half a cent after half of 1 after yesterdays session. Lets take a look at what is going on in the european area. The German Economy contracted 9. 7 in the second quarter. Initial estimates were for a drop of 10. 1 . The numbers show the height of the drop during the coronavirus. We are by a senior equities strategist at state street. Rebecca, this is a good news story for anyone trying to run a business . Some of the positives, some of our colleagues at Bloomberg Economic saying if any economy can rebound from a virus, it is germany. The fiscal headroom they have and looking at the exports and their relationship with china and think perhaps they have a point. What do you make of the german data . A surprise. , not some people were expecting it to not in at 10 , so this is the bank that some people expected, but it shows that the recovery is happening quite rapidly within germany. What germany has is it has got a very open economy, so it has got a lot of exposure, and it also has a significant amount of manufacturing. Therefore, when things take off, this is where to get your fix exposure, so Something Like manufacturing or industrial. Serviceoriented. That,yes, i was thinking actually, rebecca. I was reading another economists take, who said that germany did not lock down as soon or as hard as other european nations and also gave itself a lot more economic stimulus than almost any other nation, considering the size, and as a result is going to rebound more quickly. But then, i was thinking, hey, there are these companies in germany, like volkswagen, daimler, bmw, that are so exposed to global growth. Are they going to make a faster rebound than the rest of European Countries, or do they have to wait like everybody else . Rebecca there is a certain amount of timing, but it is what is expected and what is in the price, and what you have got is, because you are not reliant on the consumer, because you are more reliant on manufacturing, then some of the things like the fiscal stimulus and that eu planned that we had announced plan a month back, eu that we had announced about a month back, as you say, it took longer to cut back, but overall, they are starting to look like a very reasonable situation. The virus is starting to come back, but not to the extent, and we are not going to see any locked down. That is what the government said there. Let me ask you about m a, rebecca, and whether we should brace for it in europe. In the Application Software sector, Many Companies with a similar name, and they worth billionsl for osisoft. Does it seem like we will see opportunistic m a . Companies that get support from investors from this kind of activity . Rebecca yes. This could well happen. If you think about the Growth Drivers for a company, then if you have got the cash available to go out there and buy a weak competitor, you might pick up something cheaply, and you are bringing those sales onto your Balance Sheet and margins, i think there are some industries that we might see it in first, where you have this opportunity to go for a more dominant share of the marketplace. There still a lot more deals out there to be had, rebecca, because we had seen well, i guess in some countries, we have seen an amazing run in stocks. The u. S. , for example, is back beyond whate and was before the pandemic. The ftse is still down 19 . Are there some places where you think it is easy for companies to find bargains . Rebecca well, unfortunately for us, in the u. K. , it may well be the u. K. , because, as you say, the market has been left well behind. Ompanies are counting a lot they have to think about brexit and what comes out of these talks, so we may find ourselves on these shores getting these. But i am sure they are going to be areas, and the other obvious area that people talk about is banking is one area where you could see consolidation. Matt rebecca, we are going to keep you for a little bit longer now, senior equities strategist at state street. She stays with us this morning. Lets get the business flash news. Tiktok has asked a federal judge to block the white house from enacting a ban on the video at. President donald trump says tiktok is a Security Risk for the nation, but the company says the president s decision was made for political reasons, it is unconstitutional, and violates rights to due process. Apple has been spared from having to immediately reinstate fortnite to its app store. It is an early victory in its battle for epic games, but it was not a total loss for epic. A judge has agreed to a temporary request for blocking apple for technology being used for other apps. Unreal video game engine. Virgin atlantic is set to find out if it has enough support from creditors for a one point rescue. It already has got the backing of three other creditor classes and now has to see if they vote against the plan. The airline can take it to a judge to overrule, and that is your Bloomberg Business flash. Anna . The matt, coming up on program, in with the new. Tech and the shakeup of the dow. We will go through who is out and who is in. This is bloomberg. Welcome back to Bloomberg Markets. Open. S the european futures pointing to a positive open this tuesday. Rth withrebecca cheswo us. I want to get right back to her. Exxon, raytheon, honeywell. What does this tell you about, you know i thing anna said earlier, or maybe it was annmarie who said it was the sign of the times. We are seeing old economy stocks out and tech stocks in. Rebecca yes, tech dominates everything at the moment, including our working lives and including the stock market. Actually, the more we think about it, this is not going away. This dominance of structural trends and also the new normal that we are seeing, this is not going anywhere, and these tech companies, people worry about concentration in the market. They worry about the valuation. But they deserve it in terms of what they are earning, what they are providing, and their prospects into the future. And with that in mind, i have got a great chart here, talking about whether we are going to ca kshaped whether were going to see a kshaped recovery. Other parts of the economy are not bouncing back in the same way. Sort of a kshaped to the recovery, and i guess growth versus value could become quite interesting way of looking at that. Do you think the value is going to catch up . That, first time i have heard that. Do i think it will close . One day, but not for a long time yet. We saw it at the start of june as we saw value rally, so we saw people, yes, there is a big discount, but then people realized we are not seeing the conditions for value stocks. We do not have that certainty of growth yet. We do not have any inflation. We do not have any on the horizon for rate rises, and people will still going to the growth stocks, and that will retain that premium for quite some time to come. What happens to these stocks when we see inflation . If we see inflation, rebecca . A lot of people would contend, especially at the lower end, youre already seeing it, but i do not think that the big cyclicals have real Pricing Power yet, so what are you expecting in terms of inflation and its effects . Rebecca so we see very little sign of inflation, as you do. If you were to see inflation, then there are some beneficiaries immediately. One would expect energy to come off of its lows. You may see some expectation for rates, which would benefit the financials. But as i say, i think that is a long way off, and people spend many, many years looking at an inflation target, and it is unlikely in this environment. Provenes, it has difficult. Rebecca, thank you. Statea chesworth from street. This is bloomberg. Welcome back to Bloomberg Markets. Open, 30he european minutes away from the start of cash trading, and we are looking at green arrows. This is after the big, green arrows we saw yesterday in the u. S. Lets take a look at some of the key events you need to watch. Visiting italy, the netherlands, norway, and france, a trip before xi. Virgin atlantic richardt bransons Virgin Atlantic told a court they will run out of money. They will have creditor meetings to vote on that. And this afternoon, watch for u. S. Data. At 3 00 p. M. U. K. Time, new home sales for july and Consumer Confidence for august, and those will, no doubt, be judged quickly by markets, as well. Anna . Anna yes. We will get to the conversation around the Chinese Foreign ministers visit to europe and just a moment, but u. S. And chinese trade negotiators have discussed the trade deal. Treasury secretary Steven Mnuchin and Robert Lighthizer spoke to liu he, both sides say they have seen improvements. We are joined now by the chief at a company. It is surprising we have seen this conversation around trade taking place. I am not sure it is known about ahead of time, and we get this very positive statement from the u. S. About intellectual property in china, access for u. S. Financial Services Businesses to china. This is all much better mood music that we have seen in recent months. How do you read it . With thatt agree statement, actually. With intellectual Property Rights and access to the china financial market, china actually has no problem with those demands, and at the core of all is to protect supremacy, and right from the start, it has been Crystal Clear that there is no meeting of minds when it comes to the issue of ideology differentsue of the models, economic and political models, and they translate very much into very distinct technological models. , in fact, your Previous Report was discussing tech stocks, and it is extremely important to keep this in mind. Andhe trade front, concession so far for china being easy to make, it does not change this great decoupling that is the allencompassing, marketsing force in the now and for years to come. Matt it certainly doesnt seem i mean, if you look at their equity indexes, they have had a great recovery since the. Ownturn due to the coronavirus there was a column today, talking about the caseshaped recovery kshaped that everyone is talking about, a bigger game for tech stocks then you have seen for old economy stocks. For oldyou have seen economy stocks. Well, instocks, as terms of recovery from february. Why do you think that is . There are two Different Reasons and china versus the u. S. In the u. S. , it is clearly due to the expansion of money, and to what, in contrast happened during the Global Financial crisis, where the ,iquidity exploded after q. E. Risky version decreased, and this time around, we have the supply of money. Like crazy. Now, in china, the situation is very different, because the chinese equity market is entirely divorced from what happens in the economy. So from the perspective of the still, theor, domestic investor rather than the foreign investor, very much what matters is the direction, and attitudes of the government and the authorities to work supporting equity markets. And it was Crystal Clear from the start of the year, and this was our forecast, that the chinese equity market would do well this year, that the authorities were taking a different approach. First of all, during the pandemic, they did not shut down the market, despite what was a major shock as they did in 2015. It became clear that for them to present to the world, one of the key elements of the was the stock market. But also, the Chinese People were stuck at home on lockdown. They had the stock market on their fingertips. As you know, the majority of investors in china are not Institutional Investors and professional money but individual, retail accounts. Game to playost a with cash prizes, so even during the endemic, starting in china, chinas equity market held up. And contrary to what i continue to read in the press that china was measured following the pandemic, the numbers do not bear out that story. On the contrary, the narrative has been pretty much on the chinese side in the way they are responding to the coronavirus because of their worry about debt, which pulled the rug out of the equity market last time, and they do not want investors not to come in. They really want Foreign Investors to come in. But the chinese domestic investors, they have plowed in. Ok, so that is the market side of things. Tona, if we were to give it what we are looking at the Chinese Foreign minister as a teen year of, how should europe think about navigating the relationship with china, given their tensions between the u. S. And china at this point . What should china be mindful of . Ofna they should be mindful first of all, they are way behind the curve in assessing the situation for what it is over the last two years. Years, twotwo decades, if we actually zero in on china entry into the World Trade Organization as a key point of where china became a key member of the Global Trading system, a system that was set up by the free, democratic world. That china never had an intention of abiding by. Something that was overlooked, even though the chinese made it clear in some of their statements. Wishful thinking and sort of the positive vibe of the fall of the berlin wall and the capitalism model winning out. So year up has very Serious Problems. Veryuro area, they have Serious Problems to start with in terms of the structure that has been created, and my view is that the only way the european project will survive in the long run is if there is political union. Not just a banking union. Not just a fiscal union. And one of the strategies that china has had, because when it looks to how it would like to shape the world to serve its needs, it certainly sees the a place of as influence, and china, in conjunction with russia, has made a lot of euros in europe on the principle of divide and rule. So one aspect the europeans have chinasry aware of is and how they recalibrate, because they are very far behind and how to deal with china. In even in the u. K. Here, terms of the decision that was ei a while ago has presented a serious problem. We have the same problem in a lot of European Countries that have already enmeshed themselves with the chinese system. Matt it will be interesting, certainly, to watch the foreign minister tour through europe and also see how europe confronts pressure, especially considering the recent events in belarus and what we have seen in here in navalny. H always good to talk to diana. Transparency from the kremlin over the case of alekseiedit critic likely poisoned last week. He is at the hospital charite and may suffer longterm damage. Walking back claims on the experimental plasma therapy. They said it provided dramatic benefits and could save a huge number of lives, but last night, the fda was forced to clarify those numbers. The benefits are not yet fully known. is coalition has narrowly avoided collapse after partners agreed to extend the deadline for approval of the national budget. If Prime Minister Benjamin Netanyahu and the defense minister, benny gantz, had not pushed the time limit, they would have faced their fourth election in just 18 months. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. Anna . Anna up next on the program then, matt, the Republican Party nominates donald trump for a second term on day one of the national convention, and more on the handling of the coronavirus pandemic by trauma. Up next, we discussed the rnc. The handling of the coronavirus pandemic by trump. Discuss the rnc. This is bloomberg. Welcome back to Bloomberg Markets. This is the european open. We are about 16 minutes away from cash trading, and we are seeing gains across equity futures. Afterget to the politics we talk price. The Republican Party has formally nominated President Trump has sought to paint aerm. Positive picture, of course he has, of his handling of the coronavirus pandemic. More broadly, he had a procession of speakers, including members of his own family, set out to counter the portrayal of trump as incompetent and an attempt to depict his opponents as radicals. Theident trump these are incredible workers who helped us so much with the covid. We can call it many different things, from china virus i do not want to go through all of the names, because some people might get insulted, but that is the way it is. Donald he is already talking of shutting the country down again. It is madness. Vice president pence the country is on the ballot. Law and order is on the ballot. Ideals ofherished freedom and free markets are on the ballot. So when it comes to what joe biden says he will do, look at his actions. Look at his policies. Look at what he already did and what he did not do. Donald the Chinese Communist party favors biden. Weaken usthey will economically and on a world stage. Biden and the democrats are still blaming America First. Donald trump has always put America First, and he has earned four more years as president. Matt joining us on the phone is our Senior International editor out of hong kong, jodi schneider. What is the republican strategy ahead of this election . Jodi yes, it is basically to have a portrait of fear of what a President Biden would do to america, that it would be a very pessimistic, dark situation, that particularly a warning of rioters besieging the nation, highers, social taxes, social upheaval. At the same time, trying to appeal to black and latino voters and also to say that the Trump Administration had a great economy going. We will bring that back, even despite what has happened with the coronavirus pandemic, and also saying, trying to paint a portrait of success with the virus even though he has been widely criticized, the president , for his response. At somes, i was looking interesting polling of republican voters, selfdeclared, republican voters, and they seem to be convinced of his Strong Performance on the economy, which is interesting. The phase one trade deal between china and the u. S. , we thought we were going to get a call on that a week or so ago. It was delayed, and now, it seems it has taken place. How significant is this . An interpretation . Yes. It is symbolically very important. We have seen these talks. There were supposed to be continued talks, status quo talks, and they have fallen apart. Now, we are seeing the u. S. And china both affirming their commitment to the phase one trade deal in this review. It is not new, new talks. It is basically on this deal that had already been announced in january, but given the, you know, rising tensions on so many fronts, from technology to hong kong to the Pandemic Response between the two countries, them both saying the same kind of thing, that they want to see this phase one trade deal take place and that china would like to continue to buy american goods, is positive. It is symbolically positive. Now, china does still need to buy about 100 30 billion in the second half of this year of these goods, largely agricultural goods needs to billiondditional 130 in the second half of the year of these goods. But they both say that they want to do this and are committed. Sign we haveitive seen on trade or anything else from these two countries in some time. Anna jodi, thank you. Our senior editor, jodi schneider, with the stateside news flow. Do not miss bloomberg coverage of the rnc. The speakers of Melania Trump and mike pompeo, controversial speaking at the convention while on a taxpayerfunded trip abroad. That is raising new questions about mixing politics with his role as americas top diplomat. We will have coverage of the rnc all through the week, just as we did with the democrats. Lets bring you the Corporate News we are following, a Bloomberg Business flash for you. Has been on the Dow Jones Industrial for years. Pfizer and others out, making way for honeywell. It is a stunning fall from grace for exxon. The worlds Biggest Company as late as 2011. Tiktok is asking a federal judge from blocking the white house from enacting a ban on the video at. President donald trump says tiktok is a Security Risk. But tiktok says the decision was ise for political reasons, unconstitutional, and violated rights of due process. Apple has been spared from having to immediately reinstate fortnite to its app store. An immediate victory in its battle with epic games. The u. S. District judge has granted a temporary order, blocking apple from limiting the technology being used by other apps. That is your Bloomberg Business flash matt . Matt all right, up next, we will take a look at your stocks to watch ahead of the open, and its majority owner after their acquisition of osisoft. This is bloomberg. The welcome back to European Market open. Minutes from the cash session. We look to go higher. The nasdaq, another record high. European stocks had a good day yesterday. Up another 1 . Minutes until the start of equity trading. Lets go to annmarie hordern. Annmarie i want to start with aveva. Billione agreed to a 5 deal with osisoft. Issue ofeen this people shifting to automation and the technology space. They have been resilient even during the pandemic, so aveva. Most airlines, another under immense pressure as they continue to suffer the negative impact of covid19, not being able to see when demand will come back with a loss in the third quarter, and like many airlines, they did have a right down of some of the aircraft assets, and september looking forward, we should get some more on recapitalization plans for sas. And the recapitalization plans. Getting months to conclude a deal set for august 24, and now until november, and a very important timeframe now for lvmh. We have been watching this space. It is the biggest acquisition in the luxury world, more than 16 billion. Waiting for them to put that blue box with the white bow on it, not yet, but potentially, we could get something before the end of the year. Anna . Matt . Matt all right, thanks very much for those movers, annmarie hordern, with the stocks to watch this morning. Coming up, the market open. Futures pointing higher both here and the u. S. After the gains we saw yesterday. The open is up next. This is bloomberg. To go until the start of cash equities trading. Here are your headlines. Trump on the defensive. The president stands by his handling of the coronavirus on day one of the rnc. Nikki haley says the democrats are still blaming America First. Committed to success. U. S. Stocks hit fresh records as trade negotiators say both washington and beijing saw progress in talks. Chinese foreign minister arrives in europe today. Angela merkel demands answers from russia after germany medics conclude putin critic Aleksei Navalny was probably poisoned. Matt . Matt lets take a look at European Equity Index Futures , heading higher ahead of the open. U. S. Futures pointing to a higher open on this tuesday after the gains we saw yesterday. At new. Equity index is record highs again after rising for 4 weeks in a row. Lets take a look at the global macro movers screen on the bloomberg. It shows us assorted risk assets. The lefthand column is equity indexes. These will pop out as they open up across europe. The ftse already open, up about 0. 1 . The omx in stockholm up about 0. 33 right now. Other European Equity indexes opening up. Pointing higher for all of them across the board. 0. 33 , in amsterdam up the dax in germany up 0. 6 . European markets are solidly higher in the castrated, amid optimism cash trade amid optimism on coronavirus treatments and signs of progress on trade negotiations. Joining us now is paul markham, Newton Investment Management Global equities portfolio manager. Tol, you know, we are driven ever higher highs in new york, while here in europe, we are still, for the most part, down 10 to 20 year to date. When are we going to catch up . Paul it is probably dependent on some kind of sector rotation. Because the European Markets in general have much Less Technology in their makeup, are more what you might call cyclical style stocks. I think that the problem for european indices as a whole is that until that cyclical trade its hardhe fore, to see them moving up higher. Quite a lot of the European Markets are made up of companies which are quite global in nature, so they like a weaker currency. I think both of those things may have to alleviate a little bit before we see a catchup trades take place. Anna let me ask you about the german market. Very good to have you on the program. All that said, it is interesting to me that the dax not that far from being flat year to date, whereas other European Equity cac,ts, the ftse enand still down. Do you put that down to better handling of the virus . Is it reduced exposure to china and the economy . Them,quite a lot of although they tend to be quite big cap in nature. There is a sort of degree of confidence around the way the German Government has handled the crisis. Some individual stocks which have done well, lets not forget that two of the largest four tech names in germany sit in germany. It helps indexes as a whole. It is not have much exposure, if any really, to the energy sector, which has been a big underperformer year to date. You still get some of those nuances around the way the indexes are constructed. The impact can be quite meaningful. For it to make further meaningful progress forward, i would expect that kind of leadership to have to boil down. We would expect to see some of those names participate, auto parts and auto manufacturers, and that would need the relationship between matt you are absolutely right. Sap is one of the biggest 15 , obviously the Biggest Tech Company in europe. I find it interesting that the biggest gain or on the dax year to date is delivery hero, which is essentially i guess a Food Delivery Company headquartered in berlin but that does not even operate in germany. The big losers come of course, as you point out losers, of course, as you point out, are the carmakers, daimler, volkswagen, continental. What will it take for these companies to make up the 20 losses that they have seen year to date . I mean, are consumers going to start buying cars again next sameor in 2022 at the level that they did in 2019 . Paul its a key question and there are several aspects to it. Clearly my just as you would expect coming out of this severe economic shock, there is going to be a sense of caution around the consumer, particularly when it comes to discretionary items. Employment is a big question mark here. If you dont have a job or are worried about your job, you are less likely to replace your car. If you are in a position where you feel like you can finance a new car, you can get that financed a very easily financed very easily, unattractive interestrate an attractive Interest Rate and so on. Evs have become a headwind for automakers. The key here is whether or not the consumer will go back to buying one more sort of combustion car before he or she decides to trade that in for an ev. There are a couple of really big significant factors in that. One of them is how far the price of those start to come down. Because what we all know with new product launches, particularly technologically related product areas, is it takes a little bit for the price discovery to come through. Lets not forget that in the largest cities, where the biggest impetus to convert to evs is, many people live in apartments. Its a difficult to find a parking space which has the ability to charge. You cant charge from a cable through your window or driveway, for example. There is the question of the attractiveness of products. Thats where the individual Car Manufacturers will have their own questions to answer. It may be a little bit uncertain as to whether or not the consumer will bounce back into buying autos to where they had been in the previous cycles. Anna if we need to see a bounceback in autos, if we maybe think about other sectors that europe is really strong on, and one of those is financials, do you see value making a return . Financials are not playing the same role in this crisis as they did in the Global Financial crisis more than 10 years ago. Is there room to see a pickup in bank stocks . Positive side it and it is certainly true that the banks are overvalued. Over the last decade, they have been appalling performers. They are much better capitalized 2009. Hey were in 2008, the opportunity for redemption is kind of there really for the banking sector, as they are encouraged by governments and regulators to come to the rescue to some extent with some sort of loan forgiveness, government driven programs to encourage lending into the economy. I think the big question marks over them are firstly, the Interest Rates. Byks tend to be dominated balance style Balance Sheet style businesses, lending on spread. That is a big question mark. Someurse, there is the the loan quality question. As the economy starts to suffer in the post pandemic period, you will see difficult conditions, particularly around corporate bankruptcies and the condition of loan books. If we had a reflationary environment, that would benefit them from a Balance Sheet perspective. There loan books would look their loan books would look a little less stressed stretched. Anna thanks very much. Paul markham, Newton Investment Management Global equities portfolio manager, stays with us. Up next, we will get some of his top calls. Stoxx europe 600 extends early gains, testing its 200 day moving average. A strong picture for european equities come up by more than 1 equities,r of them up by more than 1 on a number of them. Watching the dax very closely. This is bloomberg. Welcome back to Bloomberg Markets european open. It is 12 minutes past 8 00 in london, so 12 minutes into your european trading session and we are making some really decent gains, in particular the dax and cac, both up by more than 1 . Lets get a Bloomberg Business flash for you. Findn atlantic is set to out if it has enough support from creditors for a 1. 2 billion 1. 2 billion pound rescue. It now has to convince suppliers. If they vote against the plan, the airline can take it to a judge to overrule them. Tiffany and lvmh extending their deal deadline by three months, according to reuters. It gives the french luxury giant until november 24 to conclude the purchase of tiffany. Both companies have been hit hard by the pandemic. Lvmh has previously said it expects a gradual recovery this year. Apple has been spared from having to immediately reinstate app store. Its they u. S. District judge has granted the companys request for a temporary order blocking apple from limiting the Developers Technology being used by other apps. That is your Bloomberg Business flash. Matt . Matt speaking of epic games and the unreal engine, lets talk about tech. Isinance of the sector shaking up the Dow Jones Industrial index. Raytheon were and kicked out of the index in the biggest reshuffle in seven years. Those three make way for honeywell. Com, and to take their places next week. Paul markham is still with us. This tell you, because i know you have stuck with an overweight in tech, that the sector still has legs, in terms of the rally . Paul it does feel that way, matt. There to, we expected potentially be a bit more of a rotation on a shortterm basis into the more value style areas. We thought that those tech names would be victims of that. We have seen a market which has started to slightly lose that focus on the growth versus value. We start to see a market which is a bit more constructed with equities in general. We have a couple of the biggest names in the sector doing stocks blitz stock splits. At a time when the Retail Investor has become quite prominent, day traders and so on that can be quite influential. They can now start to trading smaller size. Front, we were hearing from leon cooperman, a hedge funds manager come overnight manager, overnight. He was mocking the fact that we see an increase in the value of companies that do stock splits. Does the fact that it makes it more accessible today traders, does it increase the pool of investors and therefore does add to the value of a business . Paul absolutely. We tend to think of day traders as guys who literally hold stocks for a day or less, or very short amount of time. They quite often have a portfolio approach. They will on several stocks own several stocks. It is quite challenging for them to own chunks of the portfolio. Traderweight of the day going through markets has been pretty high from the Retail Investor, it is therefore important that some of those big names are accessible to them. It also opens up new, interested parties for the investor registered. It is not just institutions. That being the case, you have more parties looking at your stock and more guys likely to buy. It certainly does make a difference. It makes absolutely no difference to the fundamental value of the company. It does increase the net that can be used to capture investors buy yourr equity equity. Matt absolutely. Honeywell shares have gained 10 out of the last 11 years. After it was kicked off the dow, it still continue to do well and now it is joining back up again. I wonder what you think about inflation, paul. It has been such an interesting question for bond investors. It has helped fears of inflation, at least partly, gold to rally. What are your expectations for inflation . How do you think stocks will do as a safe haven for inflation . Will generally react well for the short to mediumterm in an inflationary environment. The only inflationary environment they dont like is a back leash and every 1 back flationary one. Ofhave had a couple commentators say that they thought we were returning to a reflationary environment. Of course, that is what the authorities want. It is always very tempting as an economic policy. We saw it implemented through the 1950s as a way to try to inflate away the debt that came as a result of the second world war. There has been an unprecedented amount of change in terms of Consumer Behavior due to technology. That is a very disinflationary force, and the sense that the consumer can see pricing very easily. That may be normalizing. Wideat happens, we have a Monetary Base and a lot of fiscal stimulus coming through, that could well be the environment for inflation to pick up. Over the standards are last 10 aars, pickup inflation of relatively modest nature could still be quite significant for markets. I think equities will probably quite like that environment, as well as the usual suspects in that sort of scenario, which are emerging markets and the commodities suite as well. Anna ok. Interesting, talking about a modest pickup in inflation. Let me ask you about the airline sector. You had an interesting take in terms of defining what we mean by a fragile Business Model. Do you think that post coronavirus, when we look at stocks to invest in, we will put them through a new filter, if you like, and Balance Sheets will have to be a lot tougher in the future for this particular sector and may be for others as well . Paul yes, absolutely. I could not agree more. Episode this episode has reminded us just how many businesses live almost hand to mouth and without a few months of free cash flow, they really are in a very bad position. By theance sheet airlines, the intensity of capital that they need to operate is significant. As soon as you take away the ability to the asset, therefore being able to sit a certain number of people within every square foot of an airliner, the Business Model really does not stack up. What we are likely to see as a result of that is higher prices, which will be a necessity. We will see a situation where nationstates will continue to and i thinkrrier that is something that will be seen as integral to a countrys credibility as a business nation being open for trade. Some of the Value Airlines that are stronger in terms of their benefits of scale and existing franchise could do quite well. I think the guys in the middle could well get squeezed. They dont either have the ability to turn around their planes very quickly the way that the budget guys do. At the other end, they dont have the flag to wave and that kind of implicit support from governments to keep them operating. I think we will see a shakeup in the number of operators in the industry because it very soon becomes quite a distressed situation if you dont have the right revenues coming in from your passenger base. Anna thanks very much. Thanks for your time this morning. Paul markham, Newton Investment Management Global equities portfolio manager, will be continuing his conversation with us on bloomberg radio. 8 21 in london. Coming up, germany demands answers after doctors say a prominent putin critic was likely poisoned. We bring you all the details next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. A German Medical Team determined that russian Opposition Leader Aleksei Navalny was likely poisoned. As the putin critic was transferred to a berlin hospital after falling severely ill last week, his supporters suggest suspect poison was placed and a cup of tea he drank on a cup of tea in a cup of tea he drank . Where does this leave russias relationship with the eu . Having a more normal relationship with russia will be difficult at this point. We had heard from Emmanuel Macron say that the relationship had to be reset, that russia is still an influential global player. If anything, this is going to once again reignite the talk about extending more sanctions on russia. In particular, when you look at Angela Merkel yesterday, the tone was very severe. She said they need to come up with answers, they need to be very transparent on this and the russian government needs to cooperate. The problem for Angela Merkel is that there is a very complex business relationship with russia when you look at gas, when you look at the nord stream pipe. There is also this transactional aspect that makes the relationship with russia so complex. Matt absolutely. Germany wants to pay russia hundreds of millions of dollars for its natural gas. The question is, what does that go to find . What does fund . What does that allow putin to do, that money . What should we expect from the European Union . One of the best hospitals in the world says the tests show Aleksei Navalny was poisoned. For sure, the European Union is going to take this very seriously. They are going to take this a german line that there is now evidence that something here happened. What we will probably find out about this at the press conference in brussels is whether or not the eu feels they need to escalate this. That this is not just a story concerning germany and Angela Merkel. Of course, this is happening because he is in a hot zone in berlin. But whether they feel that this merits a bigger european investigation going into russia. It will be interesting to see whether the language changes, whether they say Vladimir Putin once again, it is clear that he is not a trustworthy partner and again this idea potential sanctions. Matt thanks for a much. Maria tadeo there out of brussels. Wizz air wants to extend its new base from just one plane to 20. Matt welcome back to Bloomberg Markets european open. We are 30 minutes into the trading day right now and we are looking at gains across European Equity indexes. Lets take a look at the broader benchmark. This is the stoxx europe 600. You can see the gains about 0. 33 . With any index, you can type grr go and see the group ranked returns. That shows you which sectors are doing the best, which sectors are doing the worst. If you try that with the stoxx 600 index, and lets go ahead and pull that up. You can see the travel and leisure stocks are doing the best. This is fitting since we are about to talk to the ceo of wizz air. Banks and insurance up there as well today but really all of the Industry Groups are showing gains on this tuesday. Absolutely. Really interesting to see the extent of those gains and watching whether the dax will turn positive for the year to date. Lets get him bloomberg first word news update. Are of the u. S. And china seeing progress under their phase i one trade deal and are committed to it success. Senior officials from the two sides held the discussions to review the six month old agreement. The u. S. Says they discussed steps china is taking, including greater protection for intellectual property. Beijing is to a long way from meeting its promise of increase purchases of u. S. Goods. President donald trump has officially been nominated as the republican candidate for the white house. The president and his supporters used the first night at the rnc to defend his response to the pandemic. The administration has been criticized for failing to do more to combat the virus, which has now killed more than 177,000 americans. Israels coalition has narrowly avoided collapse after partners agreed to extend the midnight deadline for approving a national budget. If Prime Minister Benjamin Netanyahu and defense minister they gantz havd pushed time limit, israel would have faced its fourth election in 18 months. Tropical storm laura is poised to become a powerful hurricane. It is due to make landfall on the u. S. Gulf coast on thursday. An alert has been issued in parts of texas and louisiana. Another storm has weakened to a tropical depression. Global news 24 hours a day, onair and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Matt . Att lets talk wizz air the Company Wants to extend its new base from one airplane now to 20 within a year if the airline can secure enough takeoff and landing slots. Wizz air is seeking to leverage the airline industrys lowest cost base to grab market share in london. Of course, the coronavirus has pushed other carriers to trim their fleets. Wizz air has complained that a lot of the incumbent carriers are blocking slots, even though they dont intend to use them. Lets ask jozsef varadi, the ceo of wizz air, about this now. An told chris jasper in interview that you want to aggressively expand at gatwick but that incumbents are blocking up spots unfairly. Do you think that you will be able to get those slots . Jozsef good morning. Certainly, this is what we are pushing for in the u. K. As well as with the European Commission. We think it is unfair. There is a slot waiver right now for summer. We think it should firmly end at the end of october and the market should decide who takes possession of these slots. There is a use it or lose it principal behind this principle behind this. Who are you talking to to try to get the slots and the rules around them changed . Jozsef at this point in time, this is a decision imposed by the European Commission. They are talking we are talking to the European Commission but we are also talking to National Authorities in various countries, including the united kingdom. Anyou think about this, airport is a public property. The right to use the airport should not be privatized for the sake of processing possessing those slots with no intention of opening them. If they cant open, i think wizz air should be awarded them. Ballpark you confirm a figure of how much you want to expand . You said 20 planes at gatwick within 612 months. What does the Bigger Picture expansion look like to you . Jozsef thats correct. If you look at our operations in london at this point in time, we have 10, 11 aircraft pretty much flying out from london. We have around 20, 22 airplanes coming into london. We will be looking at doubling that over the course of the next three to four years. In the first 612 months, we would be ready to deploy around 20 aircraft. A good strategy for failingo buy up airlines . Do you see any that your interested in at this point . Jozsef probably. Those slots should be returned to the market. They should be reallocated free of charge. Of course, we will consider mode, i ampansion assuming you dont have to cut any jobs. Have you had to during the coronavirus pandemic at all . Do you plan to do any kind of restructuring . Jozsef we did at the beginning. We had to address the current weakness resulting from coronavirus. There were less labor requirements for running the business. We would be looking at adding that labor component back to the system and we would be rehiring those people that were laid off on initially a temporary basis starting this year. Matt can you quantify how anna let me ask you about matt and how much you want to up . D a backup build back jozsef the u. K. Remains totally intact during coronavirus times. We are running at full capacity in the u. K. As we speak. On a total company basis, we would be looking at rehiring these people going into the beginning of next year, so in the next 56 months, we should be rehiring and in recruitment mode. Anna this is quite amazing. How are you able to run at full capacity in the u. K. . How are you able to expand so much as others are considering bankruptcy . Is this a reflation of your Balance Sheet ,route network . You seem to be operating in different conditions than other airlines. Jozsef we are not immune from the coronavirus. This was affected by the pandemic but mostly by the measures imposed by governments. Time, we have maintained our views on the future. We are also looking at how to cut through the jungle and how the markets will look postpandemic. It is not only that we are saving and moving capacity around the shortterm. We are certainly looking at the longterm and investing into new market opportunities. The u. K. Has been a very strong folder for business. Have a very balanced business proposition has made a lot of sense for the market. We are becoming more and more the preferred carrier in the u. K. As a result. Competitorsou see bailed out or allowed to restructure, i am looking at the virgin story today, do you think this market is running with an amount of competitive fairness that makes it a level Playing Field . You know, we are clearly seeing two major issues here. One is that level Playing Field has been distorted by by injecting Financial Resources into the industry. More and more, we are seeing governments become stakeholders in airlines. That has never been good. They are also having a political interest in a lot of the players and that is not right. This is not good for the industry. Secondly, we are seeing some other administrative measures being played into the game, like this slot waiver measure. It is just preserving the status quo, preserving the inefficient incumbent carriers, basically eliminating the opportunity for newcomers, more Efficient Airlines to come to the market and compete. We are seeing actually quite marketplaces in the , distorting the market and putting pressure on the level Playing Field here. The argumentw, from governments is that the incumbents that they bail out legs,ontinue to provide you know, between destinations that may are not as profitable as or those legs that would not be filled by an airline such as yours. Could you guarantee if you get those slots at gatwick that you are going to fly to cities that they u. K. Need you to wk need you to the u. K. Need you to . Jozsef if there is government interest in certain destinations, they can procure that capacity. Difference real between us and the incumbent [indiscernible] they are unable to compete with us. As a result, they have become incredibly shortterm flying has become a commodity. People just want to go. They want to have an experience. [indiscernible] we could be one of the contenders. We are doing it in hungary. Anna thanks very much. Really good to speak to you. Aleksei navalny, the ce jozsef varadi, the ceo of wizz air. Coming up, it was a positive session for european stocks this morning. The year of the day trader, perhaps, is upon us. We take a look at the surge in Retail Investment around the world. Thats next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 45 minutes into a positive session for European Equity markets. We are off our highs of the session but still up by more than 1 on the cac and not far off the from the next. Is 2020 the year of the day trader . Omberg intelligence invest 200 surgeon Trading Volume in Trading Volume year on year. This is not just about the u. S. There are some more global reference points. Good morning. Example, i take you to china, where we are seeing new brokerage accounts o pened at the fastest pace since the stock bubble 2019. F 6. 5 e seen a surge o this year. I could tell you about this rise in Retail Investors in so many markets around the world. We could talk about india, the u. K. We could talk about schwab, td ameritrade, who also say they are seeing new accounts. We could talk about the huge surge in asia Trading Volume. Muchjust indicative of how of an effect they are having on the composition of the market. Matt what do we know about where the retail money is going . Well, we know it is coming out of bank accounts. Look at turkey, it is going out of accounts that are earning essentially negative real Interest Rates and it is going into a couple of things. Bloomberg intelligence did an analysis of the things that Retail Investors like. Profitability, high volatility and cheap stocks. You were talking with paul markham earlier. He was bringing up all those concerns about the airlines. Those are an example of the low profitability names that robinhood traders have gotten into. This is also behind some of the surge that we have seen in these smaller cap indices. All, china, and japan are good examples to look at the have really surged in comparison to the country benchmark. Anna thanks very much. Good to speak to you. Interesting story. Certainly one that has dominated a lot of the thinking stateside. Lets take a look at some of the movers. European markets to the upside. Aveva gaining after its takeover of osisoft. Bank, an american judge has thrown out a lawsuit alleging the bank hit its money and money laundering. Lvmh marauders reporting that the deadline for the tiffany lvmh, reuters reporting that the deadline for the tiffany deal has been extended. Matt coming up next, from brexit and gold to the survey due in 10 minutes time. We will talk about the factors moving markets with the market live teams. Richard jones next market live teams Richard Jones next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are 50 minutes into the session and looking at gains of 1 on the cac. The ftse 100 in london up about 35 points. Lets take a look at what is moving markets across Asset Classes with Richard Jones, our mliv affects and rates strategist fx and rates strategist in berlin. We are seeing gains in equity indexes. The ftse is a huge laggard when you look across its global competitors. You have got the furlough scheme about to end, as you are writing about on the blog right now, plus brexit coming out. It up. It does not look like we are going to see any headway. Are we going to continue to see cable at its current level . The bleak prospects for a brexit deal will provide a really challenging backdrop for the economy and for the pound. And empty office space already damaging the countrys prospects. I think that will get much worse in the coming months. On brexit, i think the messaging we got from both sides was rather downbeat. U and u. K. Blaming each other for a lack of progress in negotiations. The u. K. Said the eu approach makes its unnecessarily difficult to make progress. I dont think the current transition could and without a trade you end without a trade deal. There are fears that unemployment will spike in the autumn. Rishilike rishi soon i sunak is not keen to extend the plan. Present a can potential cliff edge for households in the u. K. Brexit deal and the means the pound will fall considerably. Anna the brexit conversation and whether we get a trade deal is still relevant for u. K. Assets, isnt it . I suppose relative to other economies, other economies are also experiencing covid19 but not trying to renegotiate trade deals with their largest trading partner. I think you just hit the nail on the head. A massivevid is such challenge for policymakers around the world. They have got their plates full in trying to do with the economic and Public Health impact of the pandemic. If you add to renegotiating traders on top of this with your biggest trade partner and with others, i think it just becomes too big a problem. In a relative sense, currency markets very much are relative valuations. I think as a result, we will see the pound suffer against other currencies. The Public Policy the amount of Public Policy challenges we are facing in the u. K. Will really be too much in the coming months. T i keep thinking back to anna sent me a call and morning talking about the kshaped recovery. That is kind of the hot word for economists right now, or the hot shape to talk about in terms of the and equality inequality. A gain for some groups of people, some groups of stocks and a loss for others. The interesting thing was the outperformance of china. Authors writing about the equity indexes, but i wonder what it looks like from a rates and currency perspective. I mean, do you see that inequality there as well . I think one thing we need to really get our heads around, i think this point was made within the context of a broader view on gold, is that the current lower for longer rates posture that we are seeing everywhere is something that we are probably going to have to get used to for at least the next five years, if not for longer. I think real rates are at record lows. That will not change anytime soon. I think you are going to see different winners and losers across the globe. In the currency space, if i look at what europe is doing, i dont think they have dealt perfectly with the pandemic. I think they have taken a slightly more proactive approach than u. K. In the u. S. In the coming months, we will probably see the euro continued to do well against the dollar and pound. Ishink the way Public Policy approaching the pandemic is slightly more joined up than what we are seeing in the u. K. And u. S. Anna thanks very much. Thanks for joining us. Richard jones, our markets live fx and rates strategist in berlin. You cant get involved in our question of the you can get involved in our question of the day. Reach out to us. That is it for the european open. Stay with bloomberg television. Up next is surveillance. They will continue to follow the strength in these European Equity markets for you. This is blumberg. Bloomberg. Businesses are starting to bounce back. But what if you could do better than that . Like adapt. Discover. Deliver. In new ways. To new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back. But bounce forward. Thats why were helping you stay ahead and adapt with a network you can count on, 24 7 support and Flexible Solutions that work wherever you are. Call or go online today. Francine u. S. Trade negotiators say both washington and beijing saw progress in talks. Equity markets continue to rise. Trump on the defensive. The president stands by his handling of the coronavirus on day one of the Republican National convention. Nikki haley says the democrats are still blaming America First. German slump. Europes biggest economy shrank 9. 7 in the second quarter. We will talk the outlook for the recovery with the