It is the big heavy weights adding weight to the downside. We are seeing apple down, alphabet down. 1. 44 ,xx 600 down by less heavy on tech. Yesterday higher. The cable rate also under pressure. Pressure on Boris Johnson right now as he prepares walk away potentially from an international treaty. The other thing worth bearing in mind is the financials are under pressure. We put the german 30 year in there. The curve flattening quite significantly today, and that is having an impact into those financials. Alix yes indeed. Also, watch aerospace. Boeing is apparently slowing streamliner deliveries to inspect a new factory flaw. That stock off by about 5 . If investors are positive on europe, it tends to lead with the European Recovery Fund and germany lifting the debt break. Germany has said it needs to take on significant in 2021, according to finance minister olaf scholz. He sat down with Francine Lacqua for an exclusive conversation. Olaf we will find a solution, and anyone knows that after taking a strong activity this of bigd taking a debt size this year, it is necessary that we will continue the next year, but as i said also for europe, i hope that we will come back to something which is more similar to the normal from 2022 on. But next year, there will be a lot of strong Activity Still needed. Francine how do you see this if you look at what is needed in terms of the stimulus . Do you need the recovery to be completely in place to be able to balance the books . Is it much longer than one year, two years . Does it take for years because you also want to transition the economy . Olaf we are working on the transition of our economy. We would do a lot of things which are important for creating an economy that is co2 neutral in 2050, which is very near to today. This means a lot of decisions are also related to future questions, for instance, in the question of renewable energies, and the electrifying of our mobility, the question of hydrogen, which i already mentioned. This is all part of the package we decided on in germany for developing our economy in this direction. Situationre it to the after the last crisis of 2008 and 2009, and the bankruptcy of lehman brothers, and all of the consequences for the World Economy and for the german and european one. Ourere able to increase debt to gdp ratio from up to 80 at that time, and we moved it down to 60 just before this crisis now started again. So it is absolutely reasonable onthink that we will be back 60 at some time. Francine if russian authorities do not help clarify the situation surrounding the poisoning of alexey navalny, the nordu cancel stream 2 project . Olaf this is something we will not accept. It is against all of the legal ideals we have, and it is something which is absolutely impossible. There is always the necessity for having the chance to oppose your own leaders. This is democracy, and the way we think democracy should be run , and so you could imagine that anyone of us is absolutely sad about this situation. We are happy that we were to help him recover. Hopefully this will be successful. No one knows at this stage. Now toworking very hard discuss about the consequent this. This is why we ask the russian government to give an answer, and to cooperate in understanding why it has happened, and to find out what happened exactly. This is why we discuss the outcomes of our research, together with our partners within the European Union and nato, and as i already said before, it is now the time where it is the European Union who has to discuss it, not a bilateral conversation between one or the other nation. It is europe that has to understand what is necessary now. Alix of course francine of course, but you, mr. Olaf scholz, would you block it . Olaf the big problem of the world we are living in is there are a lot of governments that are not following the ideas of freedom and of democracy we are following, and we have to act within this framework, supporting those who are fighting for their right to be free and to live as free citizens. Part of Francine Lacquas conversation with the german finance minister olaf scholz a couple of hours ago. Joining us to continue the conversation, Morgan Stanleys chief economic advisor. We are seeing today, and olaf scholz confirming it, a significant change in the way germany is approaching its debt this in. It is prepared to issue significantly more debt, prepared to invest money, prepared to get it its economy moving again. How significant is that going to be in the way we approach investment in the European Union next year . Is germany going to lead europes recovery and outperformance . Good afternoon to you, guy. Good to be with you. I think this is crucial. The big difference between the European Response to this crisis versus the European Response after the last crisis, i think the European Response has been. Aster, stronger it has had a much greater degree of cohesion, and a lot of that has been led by germany. In that sense, what we just olz isfrom minister sch very important. It is significant in terms of investment in europe Going Forward. Ill give you one example. This morning, our equity analysts published their forecast for european equities Going Forward the next two years. Based on the actions that europe is taking, based on what we understand of the Recovery Fund, based on the fiscal expansions that have been undertaken in example,e expect, for earningspershare to grow by 30 in europe next year, 20 the year after, so very significant, and the policy actions are behind the kind of copulation. Alix does that mean that you expect the debt break to be removed altogether, or is it just a temporary debt break . A very goods question in terms of the policysetting in europe. In the short run, it is very clear the commission has suspended the ability of growth, so it means it breaks the fiscal deficit targets are not operational. They have also said they will not bring it back next year, and the commission is talking about an overhaul of the entire stability and growth pact. If you have a monetary union, you do not have a fiscal union, you need some kind of fiscal framework to make sure that debt remains sustainable. So what is sensible to do bubbly is to have a framework which doesnt so much focus on specific targets for the deficit or for debt, but it focuses on debt sustainability, the path of debt growth in terms of bringing down the debt to gdp ratio. So i think the noise we are hearing from european capitals and the commission is positive. It looks as if we will be moving away from the traditional andility and growth pact, that makes sense from an economic perspective, and also from a market perspective. Guy youve got to keep Interest Rates very low to do that. The ecb has certainly been making sure that has been happening with a huge amount of buying that it has been doing. We are seeing a shift in focus towards maybe the ecbs concerns surrounding the currency. The euro popping north of 1. 20 a few days back. Philip lane, the ecb chief economist, stepping in with some jawboning comments to bring it back down. We are now seeing sub 1. 18. But do you think the ecb can stand in the way of a higher euro . Is that going to be problematic for europe . Reza we will have an ecb meeting later this week. We will get that perspective, i am sure. Madame lagarde will be asked about this issue. Circled,is in the ecb we at Morgan Stanley do not expect ecb to act, but we do expect them to have further action by the end of this year or the beginning of next year. Is, as youfor that rightly said, policy needs to remain very accommodative, and a key part of that is Interest RatesGoing Forward, and also the quantitative easing, particularly through the pet program through the pepp program they are doing. The last ecb meeting somewhat went under the radar, and part because the focus was very much on the Recovery Fund. But as you point out, this forthcoming ecb meeting, there will be a lot more attention paid to it, partially because of the Exchange Rate issue, but also partly because the Economic Data have not been good recently , or at best they had been volatile. The data in july were very good, both on growth and inflation. When the Exchange Rate is strengthening on top of lower inflation, core inflation was 0. 4 , incredibly low by european standards, by Global Standards in august. That gives an added perspective on the Exchange Rate, and part because the Exchange Rate in europe being a very large, open economy, feeds inflation expectations. I think your question is what can i do about it. What can they do about it. I think the focus will be on two issues, continued quantitative peppg i think the program has proved very successful. The way it has been designed, it can continue the on its current deadline of mid next year. Quantitative easing does have an impact on the Exchange Rate, and it has an impact on growth. But the final point, i think if europe is growing, if it is recovering, the current level of Exchange Rate dont think would be a concern. I think if the growth is not there, then you get much more concern about appreciating Exchange Rates, so the context is very important. Alix and as we see germany cases spiking, spain as well, france instituting lockdown measures. Thank you. Reza will be sticking with us. This is bloomberg. Alix some breaking news for you. Jp morgan is probing whether employees helped customers government programs. Protection, stimulus funds. Guy there were questions from theset go on how flexible funds were. You and i were talking about the news and the break. I think this will reflect also on what happens next area there was certainly a sense that the next stimulus package was likely to have significantly more draconian rules to avoid just this kind of thing happening, but certainly if this is found to be true, it doesnt reflect well on the bank, but i wonder if it is the only one. Alix usually we see these things cascade a little bit. Still with us to talk about it is his right amaq at them of Morgan Stanley is Reza Moghadam of Morgan Stanley. Do you see them extending the Furlough Program in the ok . Reza i think our view at Morgan Stanley is that the stimulus package will eventually get done before the recess, so i think we are building that into the shape of our recovery. We have a strong recovery in the u. S. Taking place already, and we are expecting the u. S. Precrisis be back to level of output i the Second Quarter of next year. If this doesnt happen, of course we will have to revise. On the u. K. , i think you mentioned the view, but i think generally iniety the u. K. Political circles, but also in the Monetary Policy committee meetings. So i think one attaches importance to his point of view, but i dont think one should interpret that as the view of the npc or the view of the bank of england the mpc or the view of the bank of england. As we have seen elsewhere, depending on the path of the recovery, depending on the strength of the recovery, Central Banks have reacted, so my guess is if the recovery is not as strong as the bank is hoping, some of these schemes are likely to be extended, and it is also likely that lsu support will be extended, but i think the degree of uncertainty as high. I think it is interesting to look at these views, but ultimately it depends on the actual weight in which the economic recovery evolves. Saying what you are that if this cultist deliver in the size the market if fiscal doesnt deliver in the size the market is hoping for, that monetary will compensate for that lack of fiscal . Reza not exactly what i meant. There is a limit to that. Factor aboutotable the strength of the recovery has been the strength of the policy action. That policy action has come from both the central bankers and the fiscal authorities, and that is what has helped for us to have the vshaped recovery so far. So it is not always possible to compensate by the other leg area you are likely to have a weaker recovery. Other leg. You are likely to have a weaker recovery. Of morgan moghadam stanley, thank you very much. This is bloomberg. Karina it is time for the Bloomberg Business flash, a look at some of the biggest business stories in the news right now. Im karina mitchell. As the tech sector says off today, we spoke with the coceo of netflix about his companys structure. It is really dependent on the people. It is an unusual situation. But if you think of every family, there are generally two ceos running the family. They just have to be really close. We have been together for more than 20 years, and with the two of us, we are totally comfortable working. Karina we invite you to catch the full interview at 5 00 p. M. New york time on bloomberg technology. Tomorrow more and highlights with david rubenstein. Morgan stanley says carrere very Morgan Stanley says recovery from the coronavirus pandemic will be bumpy, but airlines will return once a vaccine is found. That is your Bloomberg Business flash. Guy thank you very much, indeed. Lets talk about the airline sector. Easyjet shares sinking after the company said it is cutting about city. Also dropping guidance. Joining us is rob bernard, Bloomberg Intelligence senior analyst. They are cutting significant amount of capacity. This decision as we approach the autumn, what is this likely to impact onn revenue . Rob most of the discount carriers are looking at a 50 decline in revenue this year because of the pandemic, and i think what we are seeing now is that we are probably not headed towards a quick recovery. Thatignal from easyjet is it is probably going to be tough. Weve got new quarantines coming into place that are really denting demand in the near term. Probably if you look out to 2021, 2022, we are not going to snap back into the 2019 level, so i think youre seeing Market Reaction to that. Alix which is why it was so surprising that we saw that upgrade for u. S. Domestic air travel, like for jetblue. Did that surprise you in terms of it being early, or is there really going to be a distinction between u. S. And european carriers once we really come out of this . Rob i think a lot of analysts are certainly trying to look for the bottom here and say, have Airline Stocks come off enough . But i think we are probably still looking at bad news for the european segment. I do think theres a little bit of an analog because just like the Morgan Stanley note had some pretty positive things to say about the discount carriers in the u. S. , i think we also look at the discount carriers here in europe, ryanair, easyjet, as being better positioned to recover more quickly on the long haul segment of travel, the transatlantic piece that british lufthansa are more exposed to. If you are looking for a faster recovery scenario, you probably should be looking at these discount carriers despite the reduced guidance from easyjet today. Agm as well,its talking about the fact that we need to get the transit lynda cruz up and running area i talked to shay weiss of virgin last week on the very same subject. How close to you think you are to do you think we are to reopening the atlantic . Rob i certainly have a keen personal interest in the topic. My sense is that we probably will spend some time away from business as usual, and what i would note is that even if the routes are allowed and you have lifting of quarantine restrictions, every indication is that businesses are going to be much more reticent to return to travel, even if the rules allow for it. So i would expect it to still be once the rules open up a little bit. Guy rob, we appreciate your time and your analysis. Rob barnett of Bloomberg Intelligence. European stocks are about to close. Looks like levels are holding on both sides of the atlantic. The european close is next. This is bloomberg. So youre a small business, or a big one. You were thriving, but then. Oh. Ah. Okay. Plan, pivot. How do you bounce back . You dont, you bounce forward, with serious and reliable internet. Powered by the largest gig Speed Network in america. But is it secure . Sure its secure. And even if the power goes down, your connection doesnt. So how do i do this . You dont do this. We do this, together. Bounce forward, with comcast business. The big events are back. Xfinity is your home for the return of live sports. 30 seconds to go until the end of regular trading here in europe. We are down but off our lows. Look at the chart on both sides of the atlantic. The nasdaq is holding its allow at the moment. You see Europe Holding friday lows as well. Will we see this as a floor to bounce off . The end of the session will determine that. Down by 1. 1 at the moment. In terms of the way it breaks off, there are competing factors. The ftse 100, 5926. Is outperform you because the pound is being smashed lower again. You have to take that drop, translate the revenue streams, and reprice the ftse off the back of that. The ftse does better but it is a mechanical process. Down 1. 6 . Day worth bearing in mind, seeing some action and what is happening with the euro. Down againrading today. Like he will potentially tear up recent deals that had been done in maybe violation of International May be season opportunity to help the economy out. In terms of what we are seeing with the grr and single stocks, lets assess what is happening on a sector basis. Premature everything was trading higher yesterday. Today, premature everything is trading lower. We have a meeting between Angela Merkel and over in germany. Oil and gas down at the bottom end of the market. Trading lower. We are seeing a significant flattening of curves on both sides of the atlantic reflected in the Financial Sector. Lets look at individual names just to see what is happening in terms of detail. I want to show you what is happening in the European Tech sector. I wanted to highlight some good news today. Good this is the british male delivering company. It will refocus its business to the parcels business in a meaningful way and restructure its business. It is seeing a significant rating today. That is what the markets look like. Bloomberg learned President Trump discussed spending as much as 100 million of his own fortune on his reelection campaign. It would be unprecedented forever an incumbent president putting his own money toward a second term. He has been scrutinizing heavy spending by his team earlier in the year. Plus, other others were out raising in recent months. Thesident is vowing president threatened to for bid companies who do business there from contract. Plus, tariffs would be slapped on companies who leave the u. S. To create jobs in other companies. The president set of joe biden wins the election, that china would own the u. S. A drugmaker is racing to produce Coronavirus Vaccines and came out with unusual public letter in which they promised they faced pressure to rush to market. Many signed the pledge. Theident trump is hinting u. S. Could approve a Coronavirus Vaccine in october just before the election. In california, the electricity crisis has gotten worse. It expects to cut power to 500,000 people to prevent live wires from sparking wildfire. California is expecting high wind to come sweeping off the pacific ocean. 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. Thank you. Lets check where european stocks have settled. Look like the final numbers. A significant out by the u. K. Market. Back down by. 9. To roll backing over on the nasdaq. We are holding off friday lows but that could be a big line in the sand. And roku tracking higher. Facebook, tracking lower. We will carry on the conversation about what is happening on the next hour. This is bloomberg. Up next, trade commissioner this is bloomberg. In london, i am guy johnson and alix steel is in new york. This is the bloomberg close on Bloomberg Markets the european close on Bloomberg Markets. Angela merkel says any response will be court made with partners. Francine lacqua spoke with the German Finance Office earlier today. Quested is not bilateral. Is europe that has to understand what is necessary now. No risk that germany will hold the project. The georgenow Marshall Fund senior fellow. What is your assessment of the situation . The German Foreign policy approach normally is quite versatile. Doit now going to change or you think Angela Merkel is prepared to pull those strengths . We are in an interesting situation. It emerged after crimea. Bad ties between you and russia have not prevented the completion or the starting and dreaming up of new energy ties. But right now, we are seeing a shift in rhetoric in germany surrounding the future of the ties between germany and russia. The evolving situation should has shown a change. What we have seen is Angela Merkel and the foreign minister have not taken those two off the table in terms of repercussions. Thehe past, we have seen Democratic Party not want to jeopardize gas relations and economic ties with russia. It feels as if it is a different moment right now. I wonder if this is because germany today might not need the. Ipeline a year ago plus, you wind up having a Faster Development to renewable energy, maybe you could lighten off a little bit . What you think of that . We have a big choice and energy. Gas, coal,is natural nuclear, but it does have renewables. Sees really hard to longterm what those might be. Many decades at long relationships between germany and russia, it is not clear whether new redid Additional Resources will be required. It will absolutely be a part of the German Energy vix. Natural gas stop from anywhere will be. It is hard to say now what the future holds more broadly and where the energy needs to come from. This end up being a huge win for donald trump . Think donald trump would be happy to see the pipeline not be completed but at the same time but at the same time, solving themselves would be a better way for european foreign policy. We will leave it on that note. You for the update. Lets stick with german politics. The eu has elected the next trade commissioner. One of the top economic policymakers. The move highlights the eus determination to uphold the global commercial order. We are joined now. Thank you very much indeed. Hat. Talk about your new when will you go to washington . What message will you take to him . Good afternoon. First of all, i would like to thank the president of European Commission for her trust and confidence in proposing me to take over the trade for portfolio. It is a major agenda and i am looking forward to it. It is important that the eu and the u. S. Stay engaged as we work closely together and strengthen our transatlantic relation. I am looking to working closely together with the ambassador. Exactly today, the European Commission came with a proposal for a deal reducing tariffs on certain goods in the eu and the u. S. You have advocated multilateral rulesbased systems. Many companies mountain now might not. How confident are you you can avoid retaliation and getting sucked into a u. S. China trade spat . The eu has consistently for thed the need multilateral system. At the end of the day, it is better for everyone. Know, they have been putting forward proposals on the forum and we are willing to continue andork on this, advance it, at the end of the day, everyone is on its own as it pleases. Global trade is suffering and the Global Economy is suffering. You talk about the need for a rulebased system. I am wondering what your terms ofs are in europes relationship with china . Do you think that needs to change . Concerns onmany issues like intellectual property rights. On susser substance, we see many of the same issues. Is work ony comprehensive investment agreement. We are able to finalize it substantialn a number of points which need to be codified before it can be done. It is important we address the existing imbalance in eu china regulations, where we see the eu market is more open for trade and investment to china than china is to eu companies. It is something we are actively negotiated with china and within the framework of eu and china. The third issue has to do with brexit, traveling to the u. K. Today. The headlines yesterday, financial times, they change the legislation which overrides some key points to the agreement earlier last year. Those threats seriously . How do you read the conversation coming out of the u. K. . It is a major concern for the eu. Do you think they are well prepared enough in terms of how we will approach the change in the relationship, or do you think more needs to happen . Indeed, eu is negotiating with the name to reach an agreement. I do not think it is an eu or the you ks interest and at the end of the day, we need to trade on wto terms. Turning to happen to us successfully to move forward. Side, Financial Services we knowbanking side, there have been discussions for as we base future ofations on the system decisions for both sides. Those are autonomous for each side and it is something we are currently doing. The Financial Sector is aware of this situation and i would say it has had sufficient time to do what is necessary when the u. K. Will be outside the eu single market. Switching back to the trade hats, we will get the ruling from the wto very shortly on boeing airbus. Had that in the white house used that ruling to slap a series of tariffs on european goods. Do you think europe will have to do the same thing when we get to the airbus side, to ultimately reach a compromise and what has in a very long feud . We will if we have to. Our need to have an agreement , thathe u. S. In between has been introducing following a , and that instead of from the u. S. S that we withdraw those tariffs and discuss how we in the area not only for future u. S. But also other. Ompetitors to manyyou talk investors, the highlight that Recovery Fund from the European Commission as why they are bullish on europe. What are the chances that itself through . Hungry seems to be holding it up a bit. How confident are you that it will pass . Well, we are quite confident it will get because unanimous backing of all eu. Ember eu Member States us the financial power for seven years, much needed. We are confident we can go to that conclusion and the aim is to stop drawing on those funds as soon as possible as of the beginning of next year. Thank you. Good to catch up with you and congratulations on the new job. We keep our eye on a selloff in the u. S. Still down by 3 . Equity derivatives strategist joins us now. Have we reached the bottom . A great question. I do not know the answer. Most likely, no, because of some of the technical situations we the camera and what have you. The position we have seen in slices and moves on the upside. How they are processing the different positions we have seen but also from the retail community. I think we will get a better sense of that in days to come. Just talking about the shortterm. One way we are looking at that is just kind of the supply demand balance between those. Right now, in a lot of those large names, all of those spiked up sharply. Ow much higher we will see how the metric continues. Is other thing i would say we saw last week the actual positions like in facebook, and we are also watching the market to see if any positions placed in august continue to roll up. What kinds of stocks are you looking at . To tellions are going you the most about where we are going . Tesla is interesting. It is in a special camp almost like the canary in the coal mine to me. Name. Is the retail right now, the stock is down 13 or 14 but volatility is down. That is mind blowing. Part of that is not what is happening. This dynamic saw which is not normal. Usually, stocks go up in the volatility trades down. We are having a little bit of an unwind of that. Investors do not have these on the sidelines. We saw on the early part of the pandemic. One thing i think is interesting is a lot of the flagship names like amazon, apple, and tesla, which we know retail has been continuing to selloff, it is really the first time through the pandemic, where they really were hit this hard in the portfolios and it is not even a question of will they reload, but a question of, can they . I do not know. There was some chat late last week that maybe what we are seeing is a shift to a post covid, procyclical kind of world and that actually, that is what is starting to be priced. Do you see any evidence that the market is starting to discount a different kind of environment . I have tried to dissect that closely. Just from thursday to friday, just slays and dies s p 500 who is doing well and who is not, there were stocks that were up, first of all. Uite contained you saw cruise lines up. On friday, you saw people buying financials, consumer discretionary, and cyclicals. One thing i think is happening there is a timeline for the vaccine and people are reacting to that. It is not always about positioning. There is an element that we know we will not work from home forever and one day there will be a vaccine it it will be accessible. Got to leave it there. Thank you. It up for us. Power withbalance of david westin. Nancy pelosi. This is bloomberg. David welcome to balance of power, where the world of politics meets the world of business. We will check on the markets because they are selling off once again. They are off lows. Abigail it appears to be a continuation of intense selling pressure we saw last week as mel mega cap stocks sold lower. The nasdaq 100 leading the decline down about 3. 1 . It is important to recognize that it does not feel panicked. Dow transplants transports are down. You would probably see that truly sensitive to the economy index. Rather, there seems to be a continuation of technical selling in terms of frothy accident