Fromw a bit of whip sawing the euphoria we saw yesterday on the back of the vaccine that was very promising from pfizer and biontech. Lets go straight to the markets and give you an idea of what they are doing this tuesday morning. The focus is on gold, some other things. For example, such as european stocks in general. Again, im excited to speak about the vaccine euphoria and some of the hurdles ahead. Maybe a little bit of profittaking after the rally we saw the last few days. Maybe the question of the vaccine is the question of the day. Bloombergto first word news and laura wright. Lauara the European Union is imposing tax on 4 billion of u. S. Good starting today as part of that titfortat escalation. Spirits, nuts, tractors and videogames. The eu says it will drop the duties if the u. S. Dropped levees imposed back in 2019. The u. K. House of lords has rejected breaking International Law over brexit. Voted to remove the most controversial part of the bill which comes with legal action from the eu, but Prime MinisterBoris Johnson is refusing to back down, pushing ahead with the new law. The house of lords can only delay legislation, not block it. President trump has fired defense secretary mark esper. The relationship soured in recent months after he resisted the president deciding against using active duty forces to quell protests. It foreshadows a broader postelection shape up. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than 2700 journalists and analysts in more than 120 countries. Results of the covid19 vaccine trial from pfizer and biontech are getting optimism that the world will soon have a way out of the pandemic. Arerts are there questions about production and distribution. And how much and how long the vaccine will protect you. Joining us now who covers bloomberg intelligence. Sam, always great to speak with you. Do you have concerns that the market was too optimistic on how quickly and how viable this vaccine is . Sam good morning. That theoing to say market was overblown or not overblown. I dont think its abnormal we had a Massive Party after all weve had to deal with, increasing cases and worries about how we can get out of this conundrum we got ourselves into. But, there is no question this is only the first step. Going to the moon and back, we have only fired the rocket so far. This a lot of other things that have to happen yet. Francine this was a successful launch, to continue with the rocket analogy, sam. Market,lem is that the a lot of people watching are not biologisvirologists. If you have 90 , does it mean you can really have a vaccine . The longevity is the main concern you would have . Sam concern is not the right phrase. I have no reason to not think this will not be longlasting but we just dont know. At the end of the day, we are starting from a very good place. It could have easily been the case. A lot of people expected that. So its fine we are starting at this point, we now have to wait and see how durable it is. Francine how quickly will we know how durable it is . Sam its literally no way of speeding that up. We just have to wait the length of time. The next six months to 12 months will tell us a lot more about how long this can protect people. Lets not forget, we had phase two trials that have been about six months already. There is data that will build over the next few months. Francine how often do you think we will have to get the vaccine . Is it too soon to say . There are a number of studies since april or even since march that say if you develop antibodies, antibodies could fade quite quickly. What does it mean for this trial . Sam that really has no bearing on hell well a vaccine works. The virus has mechanisms that it can interfere with the immune response and stop us developing antibodies. That is very different. Here, you dont have the virus, you have the vaccine. I think it is a matter of time for us to be able to tell. Muchhe vaccine has just as longterm immunity as you have with any other vaccine. The key question is how quickly will the virus mutate to get around a vaccine . Francine which is the milliondollar question. Sam, thank you as always, from bloomberg intelligence. Joining us is jennifer, Principal Research fellow. ,hen you look at the vaccine the conversation we just had with sam, your initial thoughts are that this is all positive or is there a danger we stop social distancing and we think a vaccine is around the corner . Jennifer good morning. I share the optimism that most of my colleagues have. Cautious optimism. I do also worry that people will let their guard down too soon. There are many countries on lockdown. We are trying hard to flatten curves. We need to keep up the good work because it will take some time for the vaccine to be rolled out. Of course, it might not work. I am feeling more optimistic. Francine how quickly do you think we will have the perfect formula that passes all the trials . And from the moment we have a perfect formula, how long will it be to manufacturing and distribution . Jennifer pfizer will ask for emergency authorization in a couple weeks if everything looks ok, but it will take time to scale up production. The countries even bought doses in advance. Productions will be scaled up. This is a very interesting new kind of vaccine made out of rna. It is not an oldschool vaccine so theres also issues of scala and the fda will want to see evidence that the product is just as safe and efficacious as the trial version. It will take ages. It could be middle of next year before countries really start rolling it out. Francine what is the next step . What is the next piece of trial . What will pfizer actually look at . Jennifer over the next few years, they will be seeing whether immunity lasts as the previous gentleman was discussing. There will be looking if those percentage of people that dont lessovid, do get covid, serious version. Does the vaccine prevent more serious and those that dont get prevented in the first place . And how long does that immunity last . That is the big question. I agree with your previous commenter that it is looking good. There is a chance it will be quite robust that even if it periodicu can see vaccines which is definitely possible. Francine is there something in the trial that we need to look at more deeper that gives you concern . It is mostly working on symptomatically people. Do you worry if it is not given to enough of the population and if it doesnt have an impact on covid infected people, then the virus can still be out of control . Jennifer it is preventing infection. Whether it is symptomatic or not, 90 of the people were affected. It is a very small sample size. Probably only about nine or 10 people got the job if you look at the stats. We have to see how it plays out in a Larger Population and trials are very different from the real world people have underlying conditions, lots of different people get it. The real world, this is not true. We just have to wait and see to see how it works when it is rolled out in the population. Francine how do you convince people to take it to make sure it is safe, especially in the first wave of giving out the vaccine . Jennifer clearly, the fda will not approve it if it is not safe. There will be a raft of safety data packages to examine and people will just have to trust that the fda knows what it is talking about. The problem with the antivectors who dont trust any vaccine in this will be a serious problem but this is a problem with all vaccines now. We have to hope the specter of this terrible pandemic will be enough to focus peoples minds about actually trusting vaccines. Francine thank you so much, jennifer rohn, Principal Research fellow at ucl. Next, much more on the markets overall. It is clear we dont have the euphoria we saw yesterday. Maybe a bit of profittaking, maybe the market realizing some of the hurdles on the vaccine we are just talking about. That will be distribution but also the trials coming up. It certainly feels like not a risk on, not a risk off mood, markets trailing sideways. We will have plenty more market action. This is bloomberg. I must stress that these are very, very early days. Clearly, this vaccine even if approved will not be widely available for many months yet to come. We absolutely cannot rely on this news as a solution and i think it is a mistake would be tos slack are resolved at a critical moment. We are still facing a dark winter. Francine that was president elect joe biden and british Prime MinisterBoris Johnson. If you look at some of the stocks of european banks, gaining quite significantly. Today, we are taking a bit of stock so now we are seeing the vaccine euphoria playing on the markets. European stocks seeing modest gains. Futures still turning higher. I think theres maybe a bit of concern about a promising Coronavirus Vaccine still has hurdles to clear. Ive also heard the market is still quite optimistic. What they are focusing on is more of the profittaking after the rally we saw. Now lets talk about what the vaccine does to the markets. Joining us is the head of fx strategy. John, great to have you on the program. There is so much news i want to ask about. Vaccine, ifwe get a it is a viable vaccine and enough people take it, what does it mean . John i think it is so important, some of the caveats. You have been mentioning at a previous guest mentioned we have seen the market taking the ball and running with it to a degree. If we do see this vaccine rolling out aggressively and get all the right news on that front in the ensuing months, the markets are always happy to react and trade on expectations. I think we will see an extension of what we saw yesterday and that basically is, safe haven currency is very weak. The japanese yen, swiss franc. The more procyclical currencies which will thrive off a weaker dollar longterm. E. M. Currencies, Commodity Currencies doing very well in the long run. If this is the beginnings of the light at the end of the tunnel and we do see a world with this terrible covid19s shadow lifted from it longerterm. I hope thats the case and that is my how i think the market will react to that, if that is the outcome. Francine when you look at some is there a currency pair that we need to look out for that is not the classic haven that would benefit when we get a vaccine . Is there something a bit more unusual we should start looking at . John that is an interesting question. I think it will be brought. What are the more procyclical spots to place your money in . That is the procyclical currencies. E. M. Everything that thrives off of dollar weakness. Plenty of dollar liquidity out there will thrive. Rubles,g from russian maybe some sanctions risk. The South African rand, mexican peso, etc. Canada, and a smaller degree, the canadian dollar. I think the euro is stronger, but not a pronounced move. Fiscal, whatlarger we have seen so far in the recovery package comes out on the generous side, i think that can be interesting and charge more euro strength. The dollar weakness story we are going to see plenty liquidity even without the need for as much stimulus as this political gridlock scenario is there. The u. S. Treasury yiel ready to spend if the stimulus bills are released. We have a lot of that cash slash we saw in the u. S. Economy. Ready to spend. If there are changes on the ground, i think they will be ready to spend it. The u. S. Current account deficit, the dollar is weaker there. The treasury needs to absorb. Fed still doing qe and will not be going anywhere on rates even if inflation ticks higher, with the average inflation targeting regime. And if long rates in the u. S. Pick up aggressively, i think that is the one risk shortterm. If that move we saw yesterday at anything resembling that pace in the next week or so, we might see a bit of volatility across markets that could ironically support the dollar a little bit. If the fed comes in and supports lower yields across the curve or caps yields across the curve, some kind of soft, whether it is explicit or not, soft yield curve control at worst, that helps the longerterm dollar weaker narrative. Would the support of dollar in terms of composition, if anything . Ahn well, theoretically, scenario we thought we would see a lot of market volatility and potentially a stronger dollar was the one we have seemed to have gotten. I think it is ironic we saw the dollar quite weak after what apparently will be a gridlock. We still have the suspense. We dont actually know the final outcome of the senate because of the two georgia races. We have to wait for those elections on january 5. We assume gridlock will be a bad scenario for the dollar because we have far less stimulus then assuming some degree of covid19 hangover that maybe or maybe not this vaccine has lifted. I think the market took i am not sure the Market Reaction was entirely trustworthy. I think the narrative is supposed to be that means the fed will be that much more hyperactive. I still think that scenario brought some risks for the dollar bearish view. But if we get a covid19 vaccine, i think some of those worries about gridlock for the dollar bearish scenario have been lifted to a degree. Francine thank you so much. Fxn hardy, head of strategy at saxo bank. We will get a check on the markets shortly. This is bloomberg. Francine vestas is bloomberg surveillance. The risk asset rally is stalling after mondays euphoric trading. This get a check of the markets with dani burger. Dani looking across asset, you can see some of the assets that have big moves yesterday are turning around today or really not doing too much. One of the trends we saw with the euphoria over the vaccine was a big selling of u. S. 10 year. You can see the yield moving a bit higher today but really unchanged compared to yesterday. The dollar changing to losses from its gains. A lot of Short Covering we saw yesterday perhaps fueling some of those gains. Gold is getting another bid. The real question over markets as they digest the optimism over pfizers vaccine is what this actually means for the mediumterm. How long will it take to distribute . Does congress coalesce its narrative of a vaccine soon which means there will be less stimulus . Certainly questions the market is asking today. A slight reversal of trends. But one trend that is certainly holding up is the equity market. I want to show you what the stoxx 600 is doing in terms of sectors. You notice in terms of best performing sectors, gains in energy. The worstperforming, health and technology. This is a clearcut value versus momentum trade. Momentum got pummeled yesterday and it continues to get pummeled today with tech stocks selling off more than 2 . Value, that bank play, up more than 3 . Look, i would argue rather than this being a big rotation into value, it more so is a big stop out of momentum. Let me show you my chart. Basically momentum falling 4 yesterday. This is the pure momentum of the u. S. Those momentum positions flooding out of there. We will see if this rotation has any staying power. Francine dani burger with some of the market action. Coming up, transatlantic tit for tat. The eu slabs tariffs on 4 billion of u. S. Goods. We will discuss the longstanding trade disputes. We will also ask what a Joe Biden Administration means for world trade, what it means for multilateralism. And we will talk about china and with the next 18 months will bring. The markets no longer rallying after the two days of gains. Focusing on not only the hurdles the vaccine may bring up, but the markets saying this could be a bit of profit taking. Global stocks tempering. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua, here in london. Lets get to the bloomberg first word news with laura wright. Laura good morning, francine. Her cup results of a covid19 vaccine trial is fueling optimism the world will have a way out of the pandemic, but experts are cautioning there are many hurdles to clear. There are questions about production and distribution as well as for how much and how long the vaccine will protect you. U. S. Attorney general barr has authorized Justice Department officials to open inquiries into election fraud. He says u. S. Attorneys across the country can pursue substantial allegations of voting irregularities. His acknowledging there is no thatusive evidence and orul or far fixed farfetched claims should not be open to investigation. Coming days after azerbaijan captures a key strategic city in the region, Vladimir Putin says an agreement will be the basis for longterm stability in the region. Global news 24 hours a day, on air and at Bloomberg Quicktake, powered by more than 2700 journalists and analysts in more this is countries, bloomberg. Francine . Francine the European Union will impose tariffs on 4 billion of u. S. Goods starting today. The decision is the latest in the transatlantic fight of a legal aid to aircraft. Manufacturers boeing and airbus. Haveariffs are said to nothing to do with joe bidens. The decision is related to boeings case, not linked to u. S. Elections. It isked to the wto linked with our internal procedures. Francine joining us from brussels is our reporter, maria tadeo. How much of this is genuine escalation . Maria i think that is the way to frame it. When you look at what is happening, you have tariffs and retaliation that is coming into play, but a lot of it is purely the mechanics of it, their bureaucracy, the European Union was awarded the right to do this by the wto. They did not get the United States to pull their tariffs, so they went ahead and did this. The politics of the decision the europeans have no appetite to escalate going forward. They are hoping that when you get a Biden Administration in 2021, it will reset the reader reset the relationship between the United States and the European Union, that this is the end of tweets as politics, and you would go back to a normal relationship. I would say dont read too much into that decision. The European Union has no appetite to escalate or go down a path where they continue to use retaliation and tariffs to set policy. Thank you so much. We will have more on trade and the key relationships, and the questions we are trying to understand as the Joe Biden Administration tries to transition, what his victory means for multilateralism. Coming up on bloomberg surveillance, going for green. Goalsommon Climate Change during the u. S. And the u. K. Together . This is bloomberg. Francine this is bloomberg surveillance. The u. K. Chancellor of the exchequer is making Green Innovations the centerpiece for britains Financial Services future as he looks to overhaul the sector. He spoke exclusively to guy johnson. We want to remain one of the most open places of anywhere in the world, on the leading edge of technical technological adoption, and a portly, a leader in green finance. We will be issuing a green sovereign bond for the first time next year, and we will be climatet mandate for disclosure in 2025. We want to be a Global Leader on these issues. Guy lets dig into that. Lets talk about what is happening with the gilt market. It was seen green gilts we will see green gilts being issued. How will a regular gilts be different from the green guilt . Premiumhere be a higher for regular gilts, and how will investors be sure that the promises made as part of those green gilts are actually delivered upon . We have been watching this market for a wild to make sure that it was the right thing to do, and i think what we have been convinced of, looking at the markets, is a couple of things. Making sureously that the proceeds go to the areas that they are supposed to, and there is an existing framework. To the point of pricing, what is clear looking at the market is what green gilts do is bring in a new class of investor, and we are now seeing repeated issuances of sovereign green bonds which trade at tighter spreads to existing gilts, partly driven by different investors coming in. That is something we want to tap into. The other benefit of launching a sovereign curve is that it means that private companies then have the ability to piggyback on that. It will help grow the private green market in the u. K. And give u. K. Investors also access ,o more gdp to nominated bonds where they dont have to invest in the green sovereign bonds will help catalyze that. Guy do you think there will be a high yield for green bond . Markets are markets and they will price what they want to do. We are seeing beings. Some other countries right now, that there are green issues that isng something that we have been watching. Whatnteresting thing is else it catalyzes. Once you can start making that sovereign green on market, that will help private participants also issue green bonds, make sure there is more gdp oriented liquidity in that market. All of that is great. What we are trying to do is attract capital into funding projects that will help us meet and that will be part of that. A joee will now have biden presidency in the United States, talking about the fact that there is more that unites us than divides us. Do you worry that calculation has not changed . Minister has a close relationship with donald trump. Do you think this will make a trade deal less likely . First of all, joe biden ands to kamala harris. As a father of two girls, it is a female Vice President of the United States. Climate change is something that i would put at the top of the list. The announcements i made today about the u. K. Wanting to show Global Leadership and progress Climate Change agenda when it comes to Financial Services hopefully that is something we can work very closely on. It is something president elect biden spoke about a lot during the campaign. So i remain very optimistic and excited about the relationship we will have with the new administration. Was the u. K. T chancellor of the exchequer, rishi sunak, speaking with guy johnson. Lets get back to the new u. S. Administration and what it will mean for trade with europe. Amy,ng me now is pascal the wto director general. Congratulations on the peace forum, which i know starts this week and last a couple of days, and it really spans a lot of the good work done with sustainability but also a trade. When you look at what a Biden Administration does for trade, are we going to go back to multilateralism . Pascal well, i think some things will change. Bidens view of what International Corporation means and the way to run it will be different from the previous trump stance. Demolish theing to for reasonsl system of his own, because he doesnt believe that open trade is a good thing. He is a protectionist, but biden is with a different stance. The attitude, the method to move things will be profoundly different. What will not change is that situation with the covid crisis, it is even more fragmented than before. With the necessary reforms of the wto, a necessary consensus. I expect the u. S. To be back at the negotiating table at the wto, and this is extremely good news. Tolso expect the e. U. Cooperate a bit more, notably to get china more into further wto disciplines. But biden does not have a magic wand on trade. The of it which is run by aflcio, it is more protectionist than average, so this will be an issue. Francine can i ask you what the Biden Administration will do to reach out to europe and settled the dispute between airbus and boeing . Airbusboeing dispute has been going on for the last 20 years, when the u. S. Stepped out of the understanding which existed at that, according to which they recognized that they have to subsidize. The question is, are boeing and to better this . Between airbus and boeing in agreement that they both subsidize in different ways but in porch portion but winning but in proportion with both . That is the main question. If that is the case, it has to go to the political level, and i think if boeing and others think it is a good thing to do, which i would advise them to do, stop spending hundreds of millions of dollars in legal fees, with with both sides of the atlantic, then the question is, will they agree . I think with trump answer was no way. With biden, theres a good chance that the answer is yes. Francine is the timing of it . Is it a miscalculation on the e. U. Side to put tariffs up front today when they could have negotiated with biden in 2021 . Think that is the right thing to do. The americans are upset with tariffs. Now we are on path, so it is a good to it is good to start new goshens. Lets deescalate, lets on both sides remove the tariffs we have put against each other. Things are now balanced. This is the condition for negotiations to start. Francine are there ways that europe can work with the Biden Administration to have a united front, to look at distortion coming from china . I think there is scope for that, which did not exist with trump. Hade all know, macron conversations with trump several times saying, why dont we Work Together . Why dont we bring china into further rules, from Warfare International trade . Trump did not want to do that because he did not want to be seen as the guy that arm twisted china. I think the e. U. And the u. S. Will more cooperate with the Biden Administration in order to try to move the chinese into accepting more global andiplines on subsidization enterprises, which we know is a problem which has not been solved so far. The wto sohy is enabled to select a new leader . Pascal the wto is an sovereigns, between so the wto on one side and Member States on the other side, Member States in the wto wrong agree, there they is no agreement. So the question is, are the main trading powers ready to go back to the negotiating table and say we have this, this, and this problem. Tradee subsidies, digital can we agree that we review the wto in order to address the problems we have . The precondition is that they would be ready to negotiate. I think with the Biden Administration. The answer is yes, whereas with the Trump Administration the answer was obviously no. What trump tried to do was destroy, paralyze, damage the World Trading system. This can change. It doesnt mean it will. What would you do for the wto to be more more relevant to citizens . What is your vision for wto 2. 0 . Iscal i think there to change theance rulebook where technology has changed and supply chains have changed. Address issues in order to make sure that trade. Emains the way to go this is the strategic view. We need to do that with china on subsidies, with the rest of the wto membership on trade and environment, and with issues. Round the adjustment we need to recognize the rules for digital trade. Providedis possible countries will negotiate. On top of that, there are i was with the wto for some time ago, and my own view for what it is worth is that the wto as a machinery come as an organization, needs a rebalancing. Member states have in a way too much of a say. The wto has two go where has to go where other International Organizations have gone, which is the capacity to influence the agenda and to make proposals, and this also needs to be addressed in my view. Francine thank you for joining us this morning, pascal amy, the former wto director general. A quick check on the markets because we had the euphoria of yesterday, partly because of joe bidens administration, together with a possible republican senate, means there would not be much news. It really yesterday the euphoria was driven by the vaccine. Cooler heads are prevailing in the markets. We are looking at some of the hurdles, but also there is chatter that there was profittaking after the huge rally we saw over the last 48 hours. Coming up we get the latest on the u. S. Election as President Trump continues to dispute the outcome. This is bloomberg. Governments have been at this for decades. While we have made some Good Progress and we have good initiatives and good schemes, it is not enough. We are not on track to hit the net zero by 2050, which is what is required to keep lima change to under 1. 5 degrees. Private markets have stepped in to do their own thing. Francine that was the Standard Chartered chief executive, bill winters. Theiam barr will let Justice Department investigate potential voting irregularities in the president ial election. Barr has acknowledged there is no boosted evidence and he warned against what he called farfetched claims. After he announced new policy, the head of the Relations Branch resign. More from Senior Writer stephanie baker. Always great to get your perspective on things. What is the overall significance of William Barrs latest move . Unprecedented, and he admitted as much in his memo. Fraudlarities and investigation are supposed to be conducted by the states and the doj does not get involved until after elections have been certified and confirmed by the states, which has not happened yet. They are not supposed to be conducting overt investigations. It is reassuring that barr asked prosecutors to not investigate what he called fanciful or farfetched claims and only to pursue claims that if true would impact the outcome of the election, and so far none of those claims that have been advanced would do so. But by doing this, he is undermining the results of the election and adding to questions about election integrity, which is the opposite of what he says hes doing. So as a legal strategy, it doesnt seem to be working. It does seem to be in response demandss claims and that is Justice Department pursue the whole issue of voter fraud. Stephanie, why are republicans backing trumps claims . It is a very curious strategy. It is not a legal strategy that is expected to result in anything. You see Mitch Mcconnell say that the president is justified in pursuing these claims, and that the democrats should not expect him to concede, seating this narrative. You would think on the one at that if they wanted to retain control of the senate, republicans would acknowledge bidens win and move on, not get distracted by pointless recounts and challenges that are not. Xpected to result in change key runoff racists will determine if emma kratz control washington in january. If democrats control washington in january. The strategy i think now clearly seems to be to motivate trump voters to come out in those races by advancing this Conspiracy Theory that the presidency was stolen and they need to come out and vote for republicans. That is the only thing i can see as a political strategy, showing that trump is still kingmaker in the Republican Party. Francine stephanie, how disruptive can the president be during the transition . Hugeanie i think it is a problem that they General Services administration, by a trump appointee, is refusing to this election and crucially allowing security clearances to proceed, allowing security briefings for president elect biden. I think it is a real problem. Even the 9 11 commission acknowledged that, that any delay in security briefings in particular could weaken the incoming administration. I think it is a real problem. You even see marco rubio, the republican senator, saying there is no reason why the gsa can perceive francine thank you so much. We will have more on u. S. Politics shortly. This is bloomberg. Francine market euphoria over a vaccine stalls. Theres concern pfizers study still has hurdles to clear. President elect joe biden warns of a tough winter ahead. Pandemic warning. The fed says there could be major downsides for asset prices if the Economic Impact of the virus isnt mitigated. And trump continues his fight to overturn the election results. Attorney general barr authorizes the doj to open investigations, while acknowledging there is no conclusive evidence of fraud. Good morning, everyone, and welcome to bloomberg surveillance. Im Francine Lacqua in london. Tom keene is in new york. We definitely dont have the euphoria we had yesterday, but we need to spend some more time back on u. S. Politics to try to understand what they Republican Party is trying to do with michael with attorney general barr. Don lets remember j. P. Morgan at one point