Transcripts For BLOOMBERG Bloomberg Markets European Open 20240711

California joins texas reaching one million infections. Picking a statement, President Trump bands investments and firms controlled by chinas military as u. S. Election Officials Say the vote was the most secure in american history. Welcome to the program, happy friday morning. Under one hour until the start of the cash equity trading session in europe. We have a mixed picture in futures. European futures looked negative. Yesterday u. S. And european stocks dropped around concern to the extent we may see new lockdown measures in the United States. We have a futures picture where europe is weaker, wanting to play catchup with latterday losses in the United States. U. S. Futures. 2 the upside. U. S. Futures point two the upside. Nasdaq futures are treated like havens during the coronavirus. Lets look where we are across the broader assets, weakness in china. President trump in the last few months of his presidency, focusing on the things he can still act on. China mobile and telecom falling as results of a new order from President Trump u. S. Investment into anything that is Chinese Military. We will keep an eye on the stimulus conversation in the United States. The white house is taking a step back from that dialogue. The potential for further tougher measures are focused on by the markets. To you, laura cooper, a lot a focus on yesterdays session to the extent which the United States might have to introduce tougher measures as we go through the Northern Hemisphere winter. And alarming commentary coming through, one of her colleagues in the u. S. Suggesting risk is on the verge of a meltdown. What are you seeing with the link between the virus and where we trade . Laura the fact we are seeing renewed lockdowns come across the u. S. Is shifting the market narrative away from the vaccine optimism that drove price action earlier this week back to could we be in a situation like march when risk assets sold off on the backs of the lockdowns and wave of infection. Markets largely shrugged off the second wave through the u. S. In the summer. Back in the spring we had this impulsive from the Monetary Policy, and we will not get that again, and that is keeping investors nervous. We will see these spurts of vaccine progress, and that might andnough to support overall not reach those march lows. We can expect volatility as tugofwareigh the of vaccine optimism for the future and near challenges of restrictions. Anna it will be interesting to see how markets navigate that. They can be medium term optimism around the vaccine, but in the immediate future, concern about how the winter develops. I suppose investors, with a base case for how tough the winter will be. People are a lot of focused on the extensive lockdown measures to be reintroduced in parts of the u. S. Laura absolutely, and if we look at gauges that point to the degree, they are not at the levels they were in the spring. The Economic Contraction we saw in q2 are unlikely to be repeated this time around. Ultimately governments want to keep restrictions localized and not have sweeping national lockdowns. As of yet it is not prudent to be as effective. In the u. K. We see the case count climbed to record highs, but it is too soon for markets to put their nearterm focus on the economic collapse, because we have support coming from Central Banks. For the u. S. It will hinge on fiscal gridlock. Mismatch for vaccine deployment and nearterm challenges on the growth outlook. Anna i must have taken my eye off that coin for too long, because it is doing something interesting. Aboveould drive bitcoin 20,000. It is currently above 16,000. Interesting to see it rally to the vaccine news. Some people do not like bitcoin at all, and others suggest it is a haven and can have haven properties. Why would a haven rally through the vaccine story . Laura bitcoin is one of those things that pops up on your screen once in a while and goodness, what is happening . We could potentially see it break above those 20 record highs. The fact it has rallied on the back of vaccine optimism is in part because a lot of Retail Investors can use it as a proxy sentiment. The fact they are piling in suggests it could be used for reflation and reopening trade, being priced into that affect. When we look at the bitcoin cycles over time, we are in a fourth cycle. Suggests it could be momentum building through 2021 before consolidation is due there. Given the extent of the rally, one her 30 yeartodate, it is a volatile asset. Its Intrinsic Value is questionable, but the fact it is a proxy for retails and a haven as well, those factors should keep it propelling higher. Anna something i found interesting this morning, i was not sure how much the comings and goings at number 10 and downing street will feature on radars. It could on who stays, set the course for how the government governs in the future. And specifically around brexit. On the current news flow, the talk of comings departing by christmas, we are seeing the pound a little higher. Perhaps it will have impact on the brexit negotiations. Laura it is not really surprising given the fact that Dominic Cummings is considered a hard exit tear. His departure hard brexiteer. It suggests we could see a softening stance in terms of brexit negotiations continuing into crunch time. Remaining, have gaps markets are priced for optimism in terms of a deal coming through. We are seeing a kneejerk reaction. Given the tight timeframe, i onld expect no deal is still the table and it is not priced in the market at this stage. Sterlingrobably see down from here. What thewill see market makes of that. Thank you, laura cooper, market live strategist. It involved with the question of the day they ask on the markets live blog. What could drive bitcoin over 20,000 . Next, do not stop now, the imf says action by governments and Central Banks have put a floor under the World Economy. We will talk about that next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. Ofminutes until the start equity trading. This is what the global picture looks like now, chinese stocks under pressure. Part of that is a global concern around the resurgence of the coronavirus. Futures point to the downside. U. S. Futures point to the upside. That is the mismatch we are dealing with. Nasdaq futures point to the upside. Europe needs to play catchup to losses in part of the session in the u. S. Yesterday. Laura the u. S. Is banning investors owned or controlled by the Chinese Military. Is part of trumps latest bid to apply pressure on what he abusived as practices. Relationships have curated with the president bowing to punish beijing over the coronavirus pandemic. State and federal officials headed 2020 election was the most secure in american history. A see no evidence of deleted or lost votes, or the election was compromised in any way. It comes as trump continues to make unfounded claims of fraud. Poland is joining hungary and threatening to veto the eus Recovery Fund to make sure funds only go to countries that uphold the rule of law. He eu needs unanimous approval if they block the budget, poland would lose 23 billion euros. Hungary would lose 6 billion. Global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna the imf is saying recovery, managing director said actions by Central Banks have put a floor under the World Economy. That comes as the virus ravages United States. No part of the country is being spared with california passing one million cases. Richard saldanha, fund manager, global equity, Aviva Investors Global Services joins us. Good to speak to you. This week has been incredible in terms of the news flow. We got the news around the vaccine and covid expectation. There was expectation and hope, then we saw concrete progress. The market jumped on that, pivoted to value. How did you do through all of that . Richard you are right, it has been an incredible week. Onthink the news you saw monday is a game changer for markets. The moves you saw on monday reflect the positioning now. A lot of people sheltering in the work from home, some of the big names that we have viewed as safe havens. We have shunned the areas that have impact like travel and leisure. The fact you are seeing rotation over the last few days reflects the market is coming to grips that we are in the midst of a second wave, and the news on monday was very welcome and provides light at the end of the tunnel that we have been looking for. We need further data, and there will be hurdles in terms of logistics for the roll of the vaccines. That is why you see a retrenchment. We think this rotation on monday has legs, and you can see that play out in the coming months. Anna how do you where do you see further room for movement in that rotation . Indent into no real the value story . Richard certainly if you look at how much the moves you have seen in areas of the market, i suggest they could have further to run. A lot will depend on further data points out of m moderna and astrazeneca. In our view we think this could play out over an extended period. In terms of sectors we think are interesting, financials are a good example where we see potential upside. We see a return to can, activity in a sector that has had a big impact in taking provisions for credit losses. We see evaluations looking attractive. If we see movement in the 10 year yield, that is an area we are keeping a close eye on. Anna how do you position through what could be a volatile winter . Do you set your sights on a portfolio that makes sense on the others of this . Do you set your sights on that portfolio and sit through volatility in the short term . Depending on how tough things get, a portfolio positioned for recovery could come unstuck in the shortterm. How do you approach that . Richard in the shortterm it is hard to call right now. Bigre in the midst of a sector wave, and Jerome Powells comments focus on controlling and getting hospitalizations down. Longerterm, going into next year, we expect Monetary Policy to remain supportive. You have the prospect of fiscal stimulus in the u. S. , and there is a big gap to bridge where the democrats and republicans are, but a fiscal package would be helpful. The potential for resumption of Economic Activity with the caveat of rolling out a vaccine. 612 month on the view, there is reason to be optimistic. Thinking of some level of normalization playing out next year, but the next three to six months is tricky. We need to get a grip on the second wave. Anna thank you very much, richard saldanha, fund manager, global equity, Aviva Investors Global Services. He was mentioning the response from the central banking world. We will talk about that next. Bullet, the vaccine will not solve economic woes. We will linger on that. This is bloomberg. That is certainly good and welcome news for the mediumterm. Although significant challenges and uncertainties remain about timing, production, distribution, and efficacy for different groups. From our standpoint it is too soon to assess with confidence the implications for the path of the economy in the near term. As we get more news on the vaccine situation, i hope it will give encouragement and hope but also start to begin to reduce the level of uncertainty. We are not really there yet. For monetarytant policy, because we have to make Monetary Policy in conditions of extreme uncertainty. I dont want to be exuberant about a vaccination, because there are uncertainties about the logistics, transportation, the rolling out, the fabrication, the number of people that will be vaccinated in 2021 so we can reach the herd immunity which will give us more certainty from the health point of view. Anna a host of central bankers limiting their exuberance, christine lagarde, jay powell, Andrew Bailey warning that a vaccine is not enough to end of the economic challenges. Richard saldanha, fund manager, global equity, Aviva Investors Global Services is still with us. We talked about this, about how it is great news for the medium term, but how does it help in the shortterm term . What about central bank support . Do you expect the ecb to do more . Richard i think it is clear central bankers locally will remain supportive. The commentary we have seen suggest that. For us, the key is fiscal stimulus coming into play. The u. S. Is an area we are focusing on. We have to gap the bridge between where democrats and republicans are. A fiscal package will have significant implications for expectations on the yield curve as well. I expect Monetary Policy to remain supportive. There is an understanding that even though we have that policy data on the vaccine, it will take time to feed through. In the meantime we expect the backstop to be there. We want to see fiscal stimulus coming into play to support economies. Anna clearly the virus is the number one challenge we are living with at this point. When we look ahead, the challenge of our lifetime, more on the climate agenda. We heard from the Central Banks on that subject. When we think about this other challenge and the structural opportunities that maybe this brings, how are you positioning yourself around a green agenda . Is it around Infrastructure Investment . Richard yes, absolutely. After the one area u. S. Election result you can ca sea change in you can see a sea change. The Biden Administration can influence policy and rejoin the paris clement agreement, that is a major step. There are a lot of areas where you can see beneficiaries. Building efficiency. The biden climate plan outlines the upgrade of 4 million buildings across the u. S. , that would be beneficial for companies, air conditioning, Companies Helping on the Energy Efficiency side. Siemens, schneider as well. Companies can benefit from this. You really see governments step up. The European Union with a significant roadmap for transmission. The u. S. Rejoining paris would be a significant step reestablishing themselves as a key player in climate. As we go into next year. Anna how do you play are you looking for play exposure for renewables, or businesses moving in that direction . Richard for us, we need to think about the supply chain. We have seen the names you referenced that have done extremely well, whether it is wind power or solar power generation. If you look further down the supply chain and Cable Manufacturers playing a key role in connecting offshore wind farms to the main grid, that is an area of focus for us. We think companies that are helping in efficiency, helping making the grid more resilient, such as what we are seeing in the u. S. Had a role to play. It is not just about the peer play names when you think about the supply chain and the whole ecosystem. There are a lot of interesting areas. Anna thank you for your time, richard saldanha, fund manager, global equity, Aviva Investors Global Services. The latest lines out of china, the Chinese Foreign ministry giving a briefing, saying u. S. Executive order is harmful and they urge the u. S. To withdraw that order. This is in connection with the u. S. Banning investment in firms owned or controlled by the Chinese Military. Up next, we speak to chinese specialists about china. This is bloomberg. Welcome back. European futures look negative. U. S. Futures looked quite mixed, mixed to positive. Nasdaq futures up by 0. 5 . Oil prices move to the downside. The u. S. Is banning investments in firms it says are owned or controlled by the Chinese Military. It is President Trumps latest bid and pressure to beijing. Trumps executive order says china is exploiting u. S. Capitol for its military. Joining us to discuss is jonathan fenby, chairman of China Research at ts lombard. We are looking at live pictures of the Chinese Foreign Ministry Briefing on this, pushing back against what we have heard from President Trump overnight. What is the significance of this . We might get more of this, i suppose, from President Trump. He can do this by himself. Jonathan yes, this is part of a steady ratcheting up of peoples, which i think in the Trump Administration want to get through before the transition in the u. S. At the end of january to a new presidency. Actions are quite probable indeed. Pointsme ask you about of tension between china and the United States. Hong kong has been on the list for a while. I guess we are looking for a continuation of sorts from president elect joe biden and his approach around hong kong. Do you since any change in strategy from the United States on these points, on hong kong and human rights issues with china . The biden, certainly, word from his team is that they intend to continue a tough line towards china, but they want to a more strategically organized strategy, if you like, bringing in western allies as well. And what can the west do on this subject . We heard from the u. K. Yesterday criticizing the actions in hong kong. U. K. E now hearing that the criticism of hong kong actions is a double standard in their view, but the u. K. Is critical, the eu is critical, but what can any of these western countries do if they want to try and influence the way china treats hong kong at this point . Jonathan on hong kong, the reality is there is very little biden will take much notice of. There was a decision earlier this year at the very top in beijing to tighten the grip on hong kong. We saw that with move against toislators, which led prodemocracy members of the Legislative Council either being dismissed or resigning earlier this week. That is for beijing, for the xi jinping leadership. That is part of the overall political effort to tighten political control in china, which we have seen in a lot of different areas. Xi jinping is looking forward to a long period of struggle, which is the word he uses, with the outside world, particularly with the United States, which goes everywhere from technology to hong kong indeed, and means that this is a central core element in beijings policy, which i dont think it is going to give way on at all. Do you have any sense of the way china might behave in the months to come as the u. S. Is slightly distracted by its own electoral process, perhaps . Do you have a sense of other moves china might make . Does the u. S. Being distracted open the stage for china to take other action, around taiwan, for example . Jonathan the rhetoric around taiwan has been stepped up. Mainland Chinese Military aircraft have been making flights in the space over the taiwan strait. That will continue, i think, and at the same time, china is trying to build up its domestic economy, its technological , saidces capabilities that it is able to act so that it is able to act more and more without any dependence on the external world, on the United States, which is called the americanization, which will be a long process, but we will see plenty of moves in that direction. Those will no doubt to the chinau. S. Sion in relations under the future president. But it does not sound as if you expect any escalation on taiwan eminently. Jonathan i think the rhetorical strait of islands in the , but not all out military action, no. Jonathan, thanks for your time. Good to speak with you. Those pictures coming through from the Foreign Ministry hosting, talking about the of issues in china, the u. S. , and its really a. Lets get a boom blurb a Bloomberg Business flash. Longerey is adding subscribers than expected last quarter. The growth of disney plus is softening the blow. It also saw gains in its abc broadcast network that led to a smaller than expected loss for the quarter. Tiktok has won a reprieve on its u. S. Ban. Of bytedance was yesterday, but judges blocked the order. Appealing are proposed sale of its stake to oracle. Goldman sachs and the New York Stock Exchange expect Staffing Levels in the u. S. Offices to remain the same until there is a vaccine. About 12 of goldman staff have worked in the office since september. It is 50 in europe. That has come down in recent weeks as the pandemic continues to surge. Laura wright in london. Ftse futures still in the red, down seven tents of 1 . S p futures and nasdaq futures point higher. Europe has been an epicenter of the pandemic sodom surge, even if there is no concern the pandemics autumn surge, even if there is no concern in the United States. Countries have enacted new restrictions. Joining us to discuss is dani burger. Dani the headline figures still are grim. We saw italy, france, u. K. , and spain also pass all surpassed one million cases, but there are differences impasse works differences in patch works in terms of how they are trading the virus. Germany at the u. K. Have a national lockdown, and the weekly growth, especially for that 332 million cases average over the past week 332 per million cases on average over the past week that is the story behind the u. K. Figures. The stringency index on your right is a way to judge how strict they restrictions are in these countries. Germany, their weekly growth down a significant amount before they had their lockdowns. The weekly growth was Something Like 80 . Now they are seeing just over 220 cases per Million People, the seven day average. Italy, which does not yet have a national lockdown, it does have a curfew, there figures remain higher than some of the other rebbie and nations at more than 562 cases per Million People over the past weekend. Big jump in see a infection numbers just yesterday in the u. K. It may take time for that number, but we will keep an eye on that. How is europes corporate world coping with the second wave . It is a case where the first time around, companies could not get forecast. They were projecting pretty grim earnings forwardlooking, but this time around it is more uneven, so we see some companies projecting more confidence that they would do better. In italy, Telecom Italia is one example of this. When it comes to the companys stock benchmark, you have this weird effect where they are pricing in the future. At the beginning of the week, we have vaccine optimism. It has started to wane. U. K. Confidence not doing great. Again, you see Companies Like burberry in the u. K. Beating on their sales estimate. Adidas one of the countries that really dragged down the german benchmark, saying that because of the second wave, they see a worsening outlook. Anna thank you very much, dani burger with a look at europe from a number of angles with the way the virus is playing out. Up next, europes new wave shows signs of nesting, perhaps in some countries, at least. Restrictions will ease and germany and france. Could restrictions be eased by christmas . This is bloomberg. Those two things are related for sure. I would expect that a Biden Administration would be substantially less belligerent in its rhetoric. That is probably what you would get. I also expect that some of the things that the trump ,dministration did on trade considering can opposes a National Security risk in not be sustained. I think we will identify those two areas as ones in which you could see more continuity in policy rather than less. The formerwas Federal Reserve governor on what we can expect from president elect joe biden when it comes to china, something we will continue to revisit. Lets get a first word news update. Laura some republicans in congress are starting to back the initial steps of the president ial transition. Texas senator john cornyn says joe biden should start getting president ial level classified briefings, but he and others are stopping short of recognizing biden as the winner. President trump is continuing to make unfounded claims of electoral fraud. Poland is joining hungry and threatening to veto the eu Recovery Fund, blocking the effort to make sure countries only go to make sure eight only goes to countries that uphold the rule of law. If they manage to block the about, poland would lose 23 billion euros, hungary about 6 billion euros. Boris johnsons top aide Dominic Cummings is quitting. Sources tell bloomberg it will be by the end of the year. He is the second key advisor to leave over tensions on how the prime ministers inner circle operates. He was the mastermind of the leave campaign in the brexit referendum. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna laura, thanks very much. Lets get to your market check, 15 minutes to the start of european trading. Stoxx 50 futures continue to be negative. U. S. Futures look a little more optimistic, in particular nasdaq futures. Lets talk about the lockdown measures we see taken in europe and germany. The imf is seeing recovery. The managing director said actions by governments and Central Banks have put a floor under the World Economy, and there is some hope for drugs worst affected countries for europes worst affected countries. The number of virus cases have fallen in germany and france. Joining us is marcel fratzscher, diw german president. There is data suggesting a bit of a plateauing happening in some parts of europe at this point. How do you view the winter with the virus for surgeons and the possibility of extended lockdown . Virus resurgence and the possibility of extended lockdown . Marcel most European Countries are in the midst of a second wave. Virologists tell us this might not end before christmas, that we have to be prepared for three or four months of repeated waves and repeated wave breakers , so intensification of restrictions to prevent declaring up to prevent the flaring up of the waves. If you believe this is the case for the next three or four months, this will be hardhit from the european economy, which is already a weak spot in the world, so it is already weaker in terms of growth and activity in most others of the world most other parts of the world. Anna when you think about germany, lockdown measures version two versus lockdown measures version one, of course they are not the same, what is the size of the impact on the economy the Second Time Around versus the first . What is your rule of thumb . Marcel so far, the restrictions in the second wave are a lot lighter than the first. For instance, in germany, schools and daycares remain open. Most shops remain open. This is a big relief, particularly for families. But still, we estimate that in the month of november, the companies in sectors most directly affected, so traveling, restaurants, are going to lose about 20 billion euros in terms of revenue. This is only for the month of november. The big concern is that companies have been cutting back on investment, that consumers actually are saving more, so even though the German Government has been very generous in terms of fiscal stimulus, many people dont despite the German Economy doing better than most other european economies, we still expect a contracting German Economy by about 1 in the fourth quarter. We are clearly in the seesaw pattern of the economy. We simply dont know how long that will last. That really depends on whether the second wave can be ended and we can return to a new normalcy afterwards quickly. Anna yes, it is very easy to find the bad news. We were talking here yesterday about how germany was projecting higher tax revenues despite the toll taken on the economy by the virus. Were you surprised by this . Was the forecast too gloomy the first time around, and this is a correction . What is the taxandspend situation in germany like at the moment . Marcel there is hardly any company in the world that has hardly any country in the world that has spent more on stabilizing the economy than germany. Yes, the tax estimates are better than what was feared in the summer. In the summer we had an Economic Contraction for germany of about. for 2020 we now estimate probably a contraction of 6 . This is a lot stronger than what the World Economy is contracting. It is weaker than Companies Like then countries like spain, france, italy, and the u. K. But this further winding up of the estimate is the key factor why now the tax figures have been revised. It is not that the government is receiving more tax payments, it is simply that the decline, the collapse in tax revenues is a little bit smaller than what we previously estimated. Anna what about the need for new debt . What is your thinking on the need for new debt to get germany through this . I know you have been critical of the debt break in the past. What are your thoughts on getting rid of the debt break at this point . Marcel the debt break clearly has strong support in germany. It is very restrictive and requires the government to run a balanced budget that has been suspended for this year and also for next year. But the big challenge clearly will be germany has a very quickly aging society. The working population is declining more rapidly than almost every other country in europe. After the crisis is over, germany can no longer rely on a big increase in employment to generate more tax revenues and to reduce debt. Moreover, germany will have to invest massively in digital infrastructure, in Digital Transformation and climate protection, in innovation and education, so that after the pandemic, there was a big contradiction or big problem that revenues probably will not be rising as quickly, tax revenues, as they did after the Global Financial crisis. Public investment will have to be very strong. Yet, at the same time, the debt break requires not just a stable deficit, but a balanced budget. That will be very hard to achieve without substantial tax reform, without substantial tax increases. This be aring whether key issue in the election debate. Germany will have federal elections next year. I thick this will be a hotly debated issue, how does germany want to reduce debt while being strong on Public Investment . Fratzscher, thank you for your time. Let me get back briefly to the china conversation. China is congratulating joe biden on winning the u. S. Election. That is something we had not seen up into the lives point seen up until this point. Russian oil giants return to a net loss, undermining dividend prospects. We will talk about that. This is bloomberg. Anna lets get your stocks to watch. Dani burger joins us for a briefing. The oil giant in russia swung to losses in the third quarter. I collapse in oil prices, production, and the ruble hit the oil giant. Bics also might be active today. We had a governing member from forecb emphasizing the need ultracheap loans. This would help banks, but banking stocks might struggle today with that value trade playing out. Chips might be active today as well after Applied Materials gave a bullish revenue forecast. Dani. Thanks, carnival cruises is also one we are keeping an ion, given the keeping an eye on, given the news to running the virus. U. S. Futures a bit positive, but a lot of that has to do with technology names. We will see how this last trading day of the week develops. The open is up next. This is bloomberg. You can go your own way its time you make the rules. So join the 2 Million People who have switched to xfinity mobile. You can choose from the latest phones or bring your own device and choose the amount of data thats right for you to save even more. And youll get 5g at no extra cost. All on the most reliable network. So choose a data option thats right for you. Get 5g included and save up to 400 dollars a year on the network rated 1 in customer satisfaction. Its your wireless. Your rules. Only with xfinity mobile. Anna a minute to go into the start of cash equity trading, here are your headlines. Jay powell joined by Christie Lagarde and Andrew Bailey in warning economic challenges despite the prospect of a coronavirus pub coronavirus vexing. Coronaviruss vaccine. China congratulates joe biden. The move comes as President Trump bans investment in companies controlled by chinas military. Tensions between china and the Trump Administration are still clearly in view. This is what we have in terms of European Equity markets. Weve got an expectation we will head lower at the start of trade. U. S. Futures have been pointing to the upside. Not a very risk on move, because nasdaq futures seem to be leading the weight in the United States way in the United States. Lets see how European Equity markets manage to open up. Weve been focused very much on the second wave of the virus in europe for many weeks, many months in fact, and it only seemed to be yesterday in the u. S. , the prospect of a second lockdown measures, however limited and however geographically specific, seem to capture the imagination of u. S. Traders. That seemed to weigh on the u. S. Story. European equity markets opening lower as we play catch up with what happened in the u. S. , the ftse 100 down. 7 , the cac around down. 4 . When you look at the ftse, keep an eye on the pound, the pound stronger this morning. A lot of comings and goings. I use that word intentionally, comings and goings. Some further plans before christmas, and that has pushed the pound a little higher. Joining us now to talk about where we are on the global risk story, steven major, global head of fixed income research, whose with us this morning to give us his thoughts. Great to speak to you. Its been an incredible week. We start with the news around the vaccination. For many people, that increased their risk appetite. Looking at feeling yield estimates, where treasury yields exit, i wonder if you are not buying into some of the risk on vibe the vaccination created. What are your thoughts . Steven well, theres been something for everyone this week, as you pointed out. For me, these periods of volatility are an opportunity to reset the portfolios for longerterm performance. So, it fixed income, we believe were in for a lower for longer rates environment, which means we need to pick up cheap bonds when they come. Im talking about taking duration here, and to look at ways of diversifying, so switching across the globe really, across different parts of fixed income. So this week, we cut our bond 20212022, to 10 year treasuries before they were 100 basis points. And the premise is this, is that nothing much is going to happen. Bond yields are going to be in a range of 50100 for the tenure. If we see the yields at the top of the range, we have to have the strength of our convictions and step up and buy. Thats what happened this week. We had the opportunity. It just happened to be the vaccine. There was an expectation of a blue wave. In the space of one month, weve had two buying opportunities. Anna does that mean the fiscal stimulus wont have an impact, the vaccine wont have an impact, because Central Banks will simply keep a lid on these yields . Is that your expectation . Steven well, look, theres no doubt the vaccine is good news for everybody. But valuations are whatever, bonds, equities, effects, must have incorporated, to some degree, the likelihood of a vaccine in 2021, many vaccines actually. It just so happens one of them seems to be ready earlier. Theres still a few questions about how this is going to be rolled out. That is good news, lets face it. Its good news, but its partly in the price. And the thing that matters to the bond market is what the feds going to do. Is the fed going to meet in december and change what it said a few months ago . Theyve already committed to three years of zero and have an average inflation target. Rates may not be going up for as many as five years. Does this change anything . To me, not really. And if other people think differently, perhaps that makes an opportunity for me. As for fiscal policy yeah, please . Anna sorry, you dont see what the fed said there is contingent on vaccine news . Im looking at your research, which im very grateful for. We should illustrate how low yields will stay, and for how long. Even if we stay at the low boundary for three years, we only get up to a yield of 1. 47 . This is illustrating just how low Interest Rates and yields were stay will stay over a long period. Steven let me explain the chart. Our view is its the path of the short rate that matters most of all. The fiscal policy, i can take that later. But will me value bonds, its about the short rate. As you move right words on the chart,w rightards on the chart, we go upwards on the blocks, you change the terminal rates to higher levels. 2. 5 is the terminal rate the last dot plot indicates. Well stay at zero and then slowly go up to 2. 5 . Thats how we would value the bond, based on that path of short rates. But to me, to buy percent seems most likely. 2. 5 seems seat unlikely. Case, the 10 year treasury is bounded by between 50100. You have to look at the chart in the way you look from left to right, three years, five years, seven years, and upwards based on how high the terminal rate is going to be. Those are the most important criteria for valuing bonds. Its as simple as that. Anna really interesting. Apologies, we werent able to show that chart on air. You mentioned your thoughts on fiscal. What are your expectations . Many people have limited expectations, given what the senate looks to be made up of come january. What are your thoughts on that . Steven as were trying to imagine charts, ill create one in our minds. People tend to think as the deficit goes up, theres more this more supply of bonds. The greater the supply of bonds, the more likelihood price will go down and the yield up. So, more supply, high up on yields. Thats what people think. But the empirical evidence of the last 20 years for bond markets in the developed markets show that just isnt true. In fact, the opposite is true. The increasing debt has been associated with lower and lower rates. Thats because we cant afford higher Interest Rates. Here,verse the causality and i would say debts are policy instrument. And the more of it you have, the lower the rate has to go. People dont want to believe this, but ive read a lot about it in the past and the data has borne me out for the well this year. If ever there was a stress test of that hypothesis, it was this year. It seems to have held up pretty well. Anna really interesting stuff, thank you. Us. En major, he stays with more thoughts from stephen shortly steven shortly. Stocks,wn around. 3 on he was pointing to the upside, increasingly so, nasdaq up. 75 . Coming up, ultracheap loans could be the core of ecbs next stimulus package according to a councilmember. Well focus on the European Central bank next. This is bloomberg. That is certainly good and welcome news for the mediumterm, although significant challenges and uncertainties remain about timing, production, distribution, and the efficacy of different groups. From our standpoint, its too soon to assess with any confidence the implications of the news for the path of the economy, especially in the nearterm. As we get more news on the vaccine situation, i hope not only will it give encouragement and hope, it will also start to begin to reduce that level of uncertainty over the outlook. Yet, but really there that is important for Monetary Policy because we are having to make Monetary Policy and conditions of extreme uncertainty. I dont want to be exuberant about the vaccination, because there are still uncertainty about the logistic, about the transportation, about the fabrication, about the number of people that will be vaccinated in the course of 2021 so that we can reach the herd immunity, which will then give us more certainty from the health point of view. Anna christine lagarde, jerome powell, and Andrew Bailey warning the possibility of a covid19 vaccine isnt enough to end the economic challenges created by the pandemic. Steven major, global head of fixed income research, is still with us. Good to speak to you on this subject. Lets get into the ecb conversation, as we look ahead to how the winter will develop, the stresses and strains the your economy european economies will be put under. Steven theyve kind of precommitted because in the various statements and press conferences, theyve spoken about their preference to do more. And it seems to be clearly forwardtowards the guidance type of policies, and away from rates. I think the one thing that happened this week was the possibility of cutting the negative rate even more negative. I think thats been knocked on the head. Perhaps helped by the virus, actually, and by developments elsewhere in the world. I think in new zealand, for example, there was expectation of negative rates, and thats gone away. So it seems to me its all pointing towards a bit more of the same, but they want to somehow keep the optionality because ive heard various speakers try to talk about being more creative. Because if they become too predictable, the marginal utility of each step fades, and has less impact on the real economy. Anna very credit business, hasnt it . An fiscal stimulus in europe. When we look at the different ways they are trained to raise money, at a european level, we see sure bonds and moves on the Recovery Fund, and those with green bonds. How do you go about pricing those kind of bonds when you look at the various countries that that covers . At this newook class of bond from europe . Steven this was the Game Changing event of 2020, certainly in the bond market. Others might have preferences for other storages stories, but the other common bond issuance, in for the form of the sure bonds, and the next shore bonds, it changes everything. It focuses on the little details. I hear poland and hungary have issues, and there are countries not that happy about the fact they could be paying in, it seems some countries might be concerned about the stigma of taking the loans. But its happening. In terms of pricing, theres already a curve for the esm. An eu curve,dy albeit much less liquid from the bonds ensure an nexgen on shore and nexgen. Theres a swap curve. It seems to me weve got some good reference rates. And overtime, these bonds from the European Union, in their various guises, are going to take over benchmark status. Its going to take a few years, but this is a game changer because it reduces the pressure on individual countries, particularly italy for example. And in the longer run, it gives europe a chance to have a debt instrument that can challenge the u. S. Treasury market. Anna so how long until the bond is no longer the benchmark in the euro . Steven thats going to take a good few years. Those kinds of things will take ishile, so 750 billion euros planned of the eu issuance. And i imagine that wont be the end of it. I think this is not a temporary program. I think this becomes a permanent treasury facility in the end. And so, it will take way beyond next year, 2022, 2023, until we see the benchmark see the buns chipping away. That has to be true. Two year bunds, even after the vaccine, or about 70. Thats 20 below the policy make policy rate. Bunds still have the safety appeal. But it will be gradually chipped away overtime. I would give it a few years. Anna so just to finish off, you are bullish on u. S. Treasuries and mildly bullish on various other parts of the world . Give us a sense of where youre diversifying, geographically. This year, youve had great opportunities in fixed income with the benefit of hindsight. I look at it, and what china bonds have done nothing, although the highyield market stonework. But the government markets dont work. Where you have return is in the currency. The question is whether that might rotate into 2022, whether it could be the bonds give you the performance. Chinas bonds give you well more than 3 . Thats a good source of diversification in a country that has no inflation, and the rates arent going to be going up. It could be going down possibly. Then there are places like the u. K. And canada, which i would see as good surrogates to the because the price action and the evolution of yields is very much the same. They are moving intended. They have local stories in tandem. They have local stories, but rates arent going up in these countries. You look at mexico. Just how different our things today compared to 2016 . Four years ago, mexico was right in the sights, and there were always talks of various actions from the president back then. Its complete different, so now you see the yields moving parallel with the u. S. , and theyve got yield. Anna things are very different from 2016 in a number of ways. Steven major, thank you very much. Steven will be continuing his conversation with me on bloomberg radio, where we will continue to paint pictures of chart in our minds i,. Effect minds eye, very effective process. Europe,aring losses in the Energy Sector feeling pressure, oil prices down 43 a barrel on brent. Nasdaq futures point to the upside. Coming up, we will talk about things stateside, a happier place. Disney shares gained after subscribers jumped last quarter. Well get the latest on whats happening at disney next. This is bloomberg. Anna welcome back to the European Market open, friday morning, and this is the picture across the equity markets. We are down, but not as much as we were. U. S. Futures point to the upside, oil prices weaker, Energy Stocks to the downside. Disd jumped in late trading as it reported a smaller than expected loss. Star was disney plus. They emphasized streaming. He spoke on the companys earnings call. Despite the many challenges and hardships, im proud to say we have been steadfast in managing our businesses under enormously difficult circumstances. We havent just persevered during these tough times. Weve also taken a number of deliberate steps and smart risks and have positioned our company for greater longterm growth. Disney, alexe on joins us now. We come to the more challenged parts of the business in a moment, but lets focus on disney plus. Can it take away netflix dominance in the streaming market . Alex i think, actually be a wrong way of looking at it, not necessary taking away netflixs dominance, but coexisting in a way that both can. People on the whole will have 2, 3, maybe even four six who shouldnt subscription services. It has recorded staggering growth inside just a year of being launched. Its tattered almost 74 million subscribers locally, which is a staggering number. Ulan was a film that premiered on disney plus. It had an interesting political baggage that went with it, so maybe not a full test case, but how did it test, the straight to disney plus formula . To subscribetried some of these difficult these for these considerations. Im not sure thats entirely the truth behind it. Ultimately, what they did, they had to subscribe to disney plus and pay an additional 18 to rent the film, centrally. It was an expert essentially. It was an experiment that didnt seem to work. But they are trying different things, seeing what does work for them. I do think it may be poses questions about the value of investing in bigbudget films going on these platforms. But there is still, of course, absolutely the argument that they need to invest across the board and having more original content for disney plus. The what about the side of business that has been challenged by the pandemic, the Theme Park Division . How is it coping . Alex not brilliantly. They say they are running at 35 capacity. One can question the wrist him wisdom of that. Parks andly, theme their broadcast networks have historically been money. Thats not the case now. Colleague i recommend everybody reads her column disney plus was the service became that came in addition to that. Thats a thing investors are looking at. Everything else, the theme parks come in addition to that streaming service. Alexanks very much joining us to talk about disney plus, covering all things media in this case, but also technology. Lets look at where we are on the markets, stoxx 600 moving to the downside. Some European Equity markets into green territory. The cac floating to the flatline. The ibex has been moving more than your average of the European Market over the course of this week, the ibex up. 5 . 25 . Weakness in the Energy Sector in europe, pulling things down. Stint as headar of the ocd comes to an end. We will speak next to somebody who will like to take his place. This is bloomberg. Businesses today are looking to tomorrow. Adapting. Innovating. Setting the course. But new ways of working demand a new type of network. One thats more than just fast. You need flexibility to work from anywhere. And manage from everywhere. Advanced technology. With serious security. And reliable coverage, nationwide. Forwardthinking enterprises, deserve forwardthinking solutions. And thats what we deliver. So bounce forward, with comcast business. Anna welcome back to the European Market open, 30 minutes into the trading session. It is positive as we go through it, the stoxx 600 and negative territory. A lot of that has to do with london, where they seem to be weighing things down. Elsewhere, things are improving and europe as u. S. Futures point to the upside. This is what we have in terms of the weight the session hat the way the session has developed. Lets get a first word news update with laura wright. Laura china is congratulate and Kamala Harris on winning the election. It ends days of speculation on when beijing would formally acknowledge the victory. President trump is still contesting the results, making unfounded allegations of voter fraud. Italys governments are asking for parliamentary approval for up to 20 million euros. Sources tell bloomberg rome was to cover measures to protect businesses. No official comment yet. Bloomberg earlier reported the monthly costs in italy could be up to 10 billion euros. Prime minister Boris Johnsons top aide is quitting. He will leave by the end of the year. Hes the second key advisor to leave amid tensions over how the prime ministers inner circle operates. He has been a controversial figure in british politics. He was the mastermind of the campaign in the brexit referendum. Stuart global news, 24 hours a day on air and on quicktake by bloomberg, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Anna thanks, laura wright in london. Lets turn to the green agenda. Jp morgan released new etfs to track your Global Carbon transition. The purpose is to offer equity transition to carbon wealth, taking direct and indirect emissions into its track. Katie, good to speak to. I want to understand a bit more about how the etf works because you say you dont want to rely on excluding various companies or sectors, so how do you make sure this is green enough without excluding things . Katie good morning and thank you for having me. Its in easy question. Its simply by excluding the high emitting factors. That messes up on a lot of the misses out on a lot of the opportunities. What do we mean by that . When we think about combating Climate Change, we are going to need to see a reduction in the use of fossil fuels, but also an increase in renewable forms of energy. Our Climate Change research has focused on three key pillars. To help us identify the winners and avoid the losers in every sector. These three key pillars focus first on really what can companies do to prepare themselves for this transition to a low carbon world . The first pillar focuses on Greenhouse Gas emissions. As you mentioned, we look at both direct, as well as indirect Greenhouse Gas emissions, and how this has changed over time. How are companies thinking about managing their business for the future in a Sustainable Way . Anna does that mean if i could pick up on that, in terms of the screening that takes place into your etf, does that mean that if your are the best in your sector, if you are the company in your sector during the most unkind agenda, you get in where others are left behind even if you are in a sector thats not as great as climate . Katie absolutely. We invest across all sectors, want to avoid the winners sorry, invest in the winners while avoiding the losers across every sector. Even in the high imaging sectors like energy, were seeing Companies Make a significant change, where we are investing in the solutions of change, renewable forms of energy while changing their own businesses to reduce carbon emissions. Anna what have you seen in esg related etfs over the last couple of weeks or so . Because when we saw the news around the vaccine, a lot of people thought, as the momentum trade dropped away and trade tech dropped away, we would also see etfs dropped away because some of them rely on heavy tech exposure. That didnt seem to be the case. How do you justify the ongoing strength from etfs . Katie im sure weve seen strong support across the industry for across the year, and this is capturing a longer term trend, that we are going to need to see companies transition their business take advantage of the new opportunities coming through in this space. And we expect that trend to take place in the next 310 years. This isnt something we expect to go over this go away overnight. Go away overnight. Anna an interesting way to look at green issues. Speaking of the green agenda, dont miss our new show, bloomberg green, premiering on quicktake and over the weekend to bring you the news, science, and data to understand one of the biggest doors of our generation biggest stories of our generation. Weve got markets on the back foot, but thats very much on london. Peripheral markets in europe make decent moves to the upside as u. S. Futures prior. Were trading in and out of the virus story at the moment. This is bloomberg. Anna welcome back to the European Market open, 40 minutes into the trading session that has been improving as we been going through it. Behind, but wegs have had a move in the pound to keep an eye on, up one third of 1 . Portfolio Companies Reveal Ethnic Diversity of their board, or they will name and shame. For more, were door josh we are joined we are joined by dani burger. Dani they need companies to take more seriously the diversity makeup of their board and the transparency to keep their investors updated. Membersnt association oversee about a. 5 trillion pounds worth of assets 8. 5 trillion pounds worth of assets, a lot of money to use as leverage to comply. They were disturbed that three fourths of the ftse 100 companies did not report the ethnic makeup and gender makeup of their boards. They are ready to call out these companies, give them a red top, a warning to investors that theres issues with equality within these companies. I spoke to the ceo of the trade group, chris cummings. Heres what he had to say. Chris we will hold them to account on the plants that they set out in terms of increasing boardroom diversity, and we will want regular progress reports. I dont think thats too much to ask with what there is to do with the environment, the really diversity ofues of company leadership. This is a time to make those changes. Dani and the ceo, chris cummings, really emphasizing to meet that the time is now and Companies Need to get with the program. Anna there is also a report out , looking at how investors acted when voting for diversity plans at companies. What are the rules of investors themselves . Of this investor association, they go through a very important proxy vote process. Morningstars morningstar study various votes and found some voted for these various social initiatives put forward to the board. However, the troubling thing is that increasingly, the larger companies, somebody like lycra or vanguard, or less blackrock or vanguard, are less supported. It 19 d only supported and blackrock only 13 for various racial inequality votes. They say they will continue to hold more have to as passive income becomes more popular. They are important in deciding the vote. Anna thanks very much, interesting to think about, dani burger with the latest on the diversity agenda. Look at European Equity markets then, u. S. Futures, down. 2 on the stock 600, ftse underperformed. Its banks and energy under sector this morning. Partly the reason we see the move. Eak, partly the fx u. S. Futures, now the nasdaq, dow futures all up around. 5 . 10 candidates have been nominated to lead the Economic Cooperation and development. They will succeed the person retiring as secretarygeneral next year after 15 years on the draw on the job. The u. S. Has put forward a top aide to President Trump. But being the single largest contributor to the budget, doesnt offer any guarantees there is a strong competition, all clamoring to get a seat at the head table with Global Policy negotiations at the g20. Seven nominees hail from europe. Among them is polands climate and environment minister, and which is now. Good to speak to you. I wonder if you think the fact that your government is threatening to veto the eu Recovery Fund over the will of law, does that damage your chance of getting the top job at the oecd . Im confident we can find a consensus, and we all are aware that the climate challenge is our common challenge. And that somehow we need to address it. In when we are addressing, the context of the European Union, but also in the context of the ecb countries, there is an overwhelming majority of us thinking that we need to mogul mobilized funding for job reach recovery after the pandemic. And in this regard, i think we can do all which is possible, whether in European Union or oecd, in order to create the framework to reach our goals. Anna you want to mobilize funding to cap tackle Climate Change, as many people do. Thats what europe is trying to do, and poland is threatening to v2 the eu Recovery Fund to veto the eu Recovery Fund. What is the stance . Michal poland can be one of the biggest beneficiary of the justice anderns of Recovery Fund. It is extremely important that we are able to move forward in this direction. We are all aware of the fact that there are some countries which are in a very different position than others, and poland, with energy inherited from a previous southern era, is still a country with a very different starting point. We need more resources. I hope that we can find a consensual way, and build solidarity among Member States. This solidarity could be expressed in the upcoming budget of the European Union. But as you rightly also pointed out, a candidate for oc cd im candidate for oecd position, and there is a growing understanding of the fact that part of the Recovery Process of our economy is essential. So, i believe, i trust that we can find a way through all this difficult mess difficultness among the group. Anna so it will take more money, perhaps, prepares to sign up for the neutrality targets . Michal well, this is a very capital intensive revolution, which is going on. When you are moving from previous weight of producing electricity with gas or coal, and you are moving to renewables, such as solar or youou are in fact, need cheap capital. This part of your is unlucky for europe iseurope unlucky for historical reasons. And it is recognized by many. It has also been recognized in the conclusions of the European Countries last december, stating that European Union, we go for the target of climate neutrality by 2050. And still, we recognize there is one member state which needs additional solidarity and support. And when we are speaking right beyondthe context of European Unions borders, we are thinking of common goals in asia and in americas. And we have recent examples of declaration by japanese government, the korean government to reach neutrality by 2050. And i believe it is an opportunity for all of us to put our forces together and to make sure that this Climate Transition could be at the heart of the new recovery, which is so much needed this unprecedented time of the covid19 pandemic. Anna yes, so muchneeded. I go back to the first point i was making. On what basis is poland blocked this attempt by your to spend more money on europe to spend more money . They are threatening to veto the Recovery Fund. You think that is the right course of action . I think the, budgetary debate inside the European Union is a very complicated discussion, and we have seen an example of this. I think all countries recognized one year ago the need to increase the transition fund. And still in july, this fund has been decreased. So, its a very complicated, complex discussion between solidarity and integrity of the European Union, and interest of Member States in this unprecedented time. Solution is the role of heads of state, and European Council in december will be decided in this regard. Anna when youre going from a role with such profile, minister, the oecd role, does it make you uncomfortable to see the prochoice the way that your government has handled the prochoice demonstrations that have taken place over the subject of abortion in poland . It seems poland has settled on abortion. Al ban on what would you say about that . Off, theres first a lot going on in polish politics, but theres a lot all around the world. Its not an easy time for everybody. At oecd,ieve that we we can find a rulesbased International Economic order, and we can build together conditions under which the Recovery Process will happen smoothly. I have been myself, during my career, working relentlessly to build consensus among different parties. I have been cop 24 president. Ive also chaired ministerial 2019 meetings. And we found compromises. And i think that the spirit of finding compromise is something that we can, i can bring to the table at oecd. And i hope that we can altogether find solutions to economicurgent needed social and industrial trades challenges, at which are ahead of us because of the pandemic. Anna i know its a little away from your remit, minister, given your climate and environment. But given your importance of this neartotal ban on abortion and the aspirations you have, do you think poland should stand by abortion,total ban on or should stand down and back away from it . My role inl, government is to ensure a smooth transition. And this is the first ever created ministry of climate here in poland. And i have presented for the first time an Unprecedented Energy policy which foresees that within the next 20 years, we will be within zero Emissions Energy system. Task, a hugee challenge which i am facing, and that i am driving right now here in poland. And of course, there are all issues of politics, which you mentioned, which are around, but nevertheless, we have to also make sure that we are able to advance international community, as European Union. And that is my job and these are my strengths. Anna ok, thank you very much. We certainly heard a lot from you around the climate agenda. Michal kurtyka wants to lead the ecd. We will be speaking with the current secretarygeneral on bloomberg tv. Domestic conversation at 9 30 a. M. U. K. Time. Coming up, no several bullets, central bankers warning the vaccine wont solve economic woes caused by the coronavirus. This is bloomberg. Anna welcome back to the European Market open, 55 minutes into the treading session, and this is where we are, european equities on the back foot, u. S. Futures positive, possibly underperformance driven in london under strength in the pound, attached to comings and goings at downing street. My colleague on the blubber, hes talking bloomberg, hes talking about how the selling of havens, some of that could be premature. Given weve been talking a lot about the extent to which we need to see virus fighting measures in the United States, we are bearing in mind where havens have been going this week, and indeed where they continue to go through the winter. That is it for the European Market open. Stay with bloomberg tv. Up next, youll have surveillance. Well be speaking to the current secretarygeneral. Hell be appearing on bloomberg tv. Dont miss that conversation at 9 30 a. M. U. K. Time, 15 years in the job, 15 years hes been talking about Economic Cooperation and development and commitment to democracy. Well see what he said what he things about his successor. This is bloomberg. s ine President Trump he calls china a National Security threat. Beijing has congratulated biden on his election victory. Million virus one cases. The countries is almost no part has the virus under control. Another round of brexit talks is likely to end today. Good morning, everyone, and welcome to bloomberg surveillance. I amrain