Transcripts For BLOOMBERG Bloomberg Markets European Open 20

BLOOMBERG Bloomberg Markets European Open July 13, 2024

The cash trade is an hour away. Lets get your top headlines for you off of the bloomberg terminal. Operation work speed. President is organizing a Manhattan Project file effort to fasttrack a coronavirus machine. Big pharma will work with washington and the military to develop it by years end. Lasting damage. Jerome powell voices concerns about the longterm fallout from the outbreak. Attention turns today to Christine Lagarde as economists expect the eurozone economy to pump the most since the Second World War. Grenada cuts. Norway joins opec in slashing oil output. We will see shortly what the ceo , after exxon mobil throws its dividend for the first time in 13 years. Just under an hour away now from the start of cash equity trading across europe. Lets take a look at futures here. We have gains on the euro stock. In bluechip benchmark index europe of almost 1 . Dax futures are up more than 1 this morning as ftse futures rise about three quarters of 1 . Anna . 6 anna lets talk about breaking news. Around the subject of the earnings coming out of shell. The big headline is around the dividend. The board decided to cut the cord we dividend to . 16 a share. They are talking about further prudent steps to bolster resilience in this tough time. They are fighting a drop in demand driven by the coronavirus. Negative oil prices on wti in the United States. We know the backstory well. Adjusted profit coming in at 2. 86 billion for the fourth quarter. Thats ahead of the estimate that was in the market at 2. 2 9 billion. What they are saying about the dividends, the cuts of the dividend, something i have seen called sacrosanct at shell. That will be one of the big headlines. It will have implications for Pension Funds and many people who hold the stock for income. Deering has come down a touch. Theres been concerned about whether that might be on its way above that 30 level. We are going to be talking to the ceo of shale shell. Then interview shortly after 7 30. What is earnings . Matt an exclusive interview. One you dont want to miss. We do have other earnings. Lloyds coming out with firstquarter Net Interest Income of 2. 95 billion pounds. Thats a drop of 4. 3 yearoveryear. Of 558erlying profit Million Pounds is a 74 drop yearoveryear. Impairments have been rocketed up to 1. 4 3 billion pounds. So, big headlines right now out of lloyd. We are getting big headlines right now out of glencore as well. Glencore cutting its 2020 1. 5 billion versus the previous expectation of 5 billion. Pex as Commodity Prices drop. The bloomberg first word news. The u. S. Is organizing a tohattan project ill effort drastically cut the time needed to develop a coronavirus vaccine. P speeded operation war once doses for most americans available by the end of the year. The program will pull together pharmaceutical companies, Government Agencies, and the military. There areences says more than 50,000 courses of this experimental covid19 therapy ready to ship right now. The company is waiting for approval from u. S. Regulators. Infectious disease expert Anthony Fauci said the drug showed a significant positive effect in treating the virus. The scientists are urging caution as this is neither a vaccine nor secure. Is it a cure. The French Economy suffered its worst quarter on record. Measures to contain the spread of the coronavirus hit gdp by 5. 8 . Figures for the euro area later today will likely to show the end of seven years of an expansion. The worst is still to come. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Anna . Anna lets look at whats going on in these markets. Asian stocks rose on the final they of the month amid optimism from corporate results. Signs of progress in treating the coronavirus. Some of that coming stateside from gilead. Nasdaq futures advance at results from microsoft and facebook. That listed sentiment. Lets get to the markets now with mark cudmore. He joins us from singapore. We hear a lot about work speed from the u. S. And the Manhattan Project being created. This time, not around Nuclear Weapons what about finding a vector faster vaccine solution. There are headlines around reading the virus and vaccinating against the virus that do seem to guide the markets appetite for risk or not at this point. Mark that is absolutely correct. The overall things are clear. We are experiencing an unprecedented economic shock. I think most people are understanding that it is even worse than pessimist projections from a month ago. There is surprise that the data, the headlines who cares about it . The french didi became an worse than expected. We know what will be absolutely terrible. Unemployment, economic growth. We also know that Central Banks will provide a lot of stimulus. Keep on doing more. They dont know how much more. They have no limit. That means the decider of which side wins in this tugofwar between the bullish and bearish themes here is whether we get the coronavirus controlled. If the risk of a second wave is contained. Essentially, if we get to a world where we are confident that later on this year, it doesnt matter exactly which month given that Central Banks have said they will provide asport as long as needed, long as we think the coronavirus will be controlled in the next few months, people will buy into the bullish theory. If theres any disappointment on this potential treatment or on the hope of a proper vaccine coming through later on this year or next year, i think there will be a real shot for markets. Thats the way we are trading at the moment. Make of jeromeou powell yesterday . What do you expect from Christine Lagarde today . Mark im going to be honest. These are the Central Bank Meetings of the fed and ecb meetings. They are the least cared about in the last 20 years. Who cares . We know Interest Rates are zero. We know the ecb is 0. 5 . They will not hike anytime soon. We know they are providing massive stimulus. They are clear to provide more. They dont really care about what the guidance says. They dont have a clue about the economy either. The guidance in the economy will be pretty pointless. They are no longer influencing inflation. Inflation will become about supply by destruction versus recovery in the economy. Inflation has nothing to do with what the central bank does anymore unless a keeps on pumping money. We are already pumping money. That is not the driver. I dont really care that much about what powell and lagarde said. Its the most boring centralbank meeting that ive seen in the last 20 years. Anna [laughter] ok. What about the french cbp number . Two weeks of closure in that. Enough to two weeks, eradicate growth in that quarter and send it down. It does really prepare us for the secondquarter numbers which will be even worse. From what you just said, you want care much about that either. Perhaps the market will ride through that speedbump in the same way it went through the u. S. Data yesterday. That myybe it suggests slightly negative bias, i care more about that than the march mutterings of powell. I agree that i understand why investors are looking young this. The point is, we know that march, april are going to be really bad. Probably may will be really bad as well. What we care about is when the pickup is. To me, its a little bit interesting that march was even worse than we feared far for many of these countries. April and may will be very appalling. That means the data when it comes through will come in below expectations. I understand where many investors are going. Who cares . What we care about is when the recovery starts. Thats what the focus is. It would be unfair to say that this data doesnt matter at all. And some fair to say that the Central Bank Meetings dont matter at all. They are not the Game Changers they once were. Andmost of my career financial markets, the fed said something profound on a new stimulus program. It was like, all hands on deck to trade that new information. Now its like coming he will offer stimulus. Who cares . Its a marginal impact. Matt thanks for joining us. The bloomberg mliv managing editor out of singapore. You can join the debate on todays question of the day. When will the s p 500 reached a new record high . Reach out to was on the mliv team. Up next, europe has been 2020s stock laggard, falling harder and rallying slower during the coronavirus pandemic. Bank of america is head of equity strategy sees a chance for a huge upside in the coming months. We get sebastian wranglers question, next. This is bloomberg. Matt welcome back. This is the european open. We are 46 minutes away from cash equity trading across europe. You can see futures are still pointing higher, both in europe. We had he was futures also still pointing higher. Lets get your business flash. Top corporate stories from the bloomberg terminal. Socgen posted a loss for the First Quarter as Stock Traders were wiped out by the market volatility to the pandemic. Revenue from Equities Trading slumps 99 to 9 Million Euros. The bank posted a net loss of 326 Million Euros. It is setting aside 820 million for bad loans. Thats the most read story on the bloomberg right now. Elon musk decries what he called fascist restrictions during an emotive tesla earnings call. Thats the stayathome orders putting the electric carmakers hot streak at a risk. He says this is not democratic. This is not freedom. The comments coming after the Company Reported its firstever profit for the First Quarter of the year. That is your Bloomberg Business flash. European stocks have gained less in the relief rally the global fears. The euro stock index is down 50 on the year. As firstquarter earnings role in, 2 5 of custom is reporting have lagged already. Low market expectations. Our next guest thinks the worst is over for europe. 20 more upside for stocks year over the next four months. Joining us now is sebastian radler, head of European Equity strategy at bank of America Merrill lynch. Thanks for joining us. Let me ask you, specifically on european stocks, by the optimism why the optimism . Itastian in chaotic times, is very good to have a clear framework and a good idea of what moves equities. Typically, what has moved them over the last 20 years continues to move them through the crisis, the rate of change and growth momentum. It doesnt matter so much whether Economic Activity is we get the moment or whether earnings are being downgraded. What matters is, is the rate of change from the current point over the next 36 months, will it be positive or negative . We are in a very bad situation is getting better. The pmi picks up. The movement is a gauge of business sentiment. Is,simple takeaway point when the pmis on the floor and things are getting markedly better, thats a tremendous buying opportunity. Weve seen that in february 2009. Growth was on the floor, pmis at an alltime low. If you had invested in equities at that point, you are setting yourself up for a 70 game. A similar dynamic took place at the moment. The virus is fading. The spread of the virus is fading. Countries are preparing to end their lockdowns. There is a lot of scope for the range of change in pmis to turn positive. Thats the dynamic driving markets at the moment. Anna good morning to you. Would threats include a second peak of the virus in europe . Would that throw your view in question . Constant permn a a lockdown that is not as tough as we are now but still has substantial restrictions on society, would those situations threaten your view . Sebastian these are very good questions. The second i am less concerned about. To the first point, the best theoretical framework, the best framework for thinking about the situation is the hammer and the devil. Its a famous paper written about the situation. Crisisety is hit by this in an unexpected way, the best reaction it could have is to hammer. Very aggressive restricted measures. The more you learn about it, the more you equip yourself and and put response mechanisms in place, you can switch to more finely tuned, more targeted responses. Testing, tracing mana best racing, monitoring. Containmentted measures. Rather than the broadbased responses we have seen. The main risk is that either the hammer doesnt work, lockdowns dont work but we now know how effective they are so theres less of a concern. Lockdowns, you have a second spike of outbreaks. Weve seen how successful countries have been that have switched from the hammer stage to the dance stage. Hasarticular, south korea brought daily new infections down to the Single Digits without using lockdowns, sibley by using finely targeted based on very broad testing. Yesterdays risk. We also know that these strategies, which are negative for growth, have been employed successfully. They do work. Lockdown anent threat . I think the risk of that is very low. Rampinhave prepared, via testing, how effective masks are in stopping the spread of the virus. The risk that you will not be able to emerge from lockdown that is very low. Thank you very much for your thoughts. Stay with us. We will get his further thoughts on m a in europe. Europe scrambles to protect its most prized asset. Fears of a global powers. Looking to pick up during this crisis. We will bring you that conversation, next. This is bloomberg. Anna welcome back to the European Market open. Five minutes until the start of the european trading day. Europe is ditching its longstanding opendoor policy on the m a from burlington paris. Havef these governments increased their powers to veto investment from outside the eu in recent weeks. The block is introducing new screeningwide rules takeovers on the basis of cans debt secured concerns. A virus induced could let other global powers acquire European Companies at bargain prices. Lets get back to our conversation with sebastian rutland. Strategist,equities and a negative something you think about. If europe is a little bit more closed to m a from the outside ,n the next four or five years some people talking about 510 does that have significance for you . To delve intoe the details of how it drives the markets. Whenever we test the importance of m a activity in europe, it is simply not i a strong driver of the market. Partly because of the low volumes. If you look at the relationships of the main macro drivers, they typically explain over the last 20 years, more than the market. It is the rate of changing growth, the rate of change in the pmi. The currency is very important. At its current rate, the real these are two blue typically the main macro drivers. Things like m a and secondary drivers are simply for statistical perspectives and not very important. We dont focus on them. Matt i wonder about the autos call. Do you expect weve been hearing a lot about german cash for clunkers program. You expect that type of help to save this industry . Sebastian i think it would be it was obviously a powerful driver of the activities in the sector when you recovered from the financial crisis in 2009. Its not part of our forecast. It would be an additional boost. It comes back to the same framework i just discussed. Look at what typically drives the auto sector. There are two drivers that are very reliable. The rate of change in growth measured by the pmi. Why did the auto sector underperform by 25 since the market peak in the middle of february . It simply because the pmi fell to an alltime low. From 50 to 14. As we discussed, the simple logic is, what the pmi measures is the monthtomonth change in Economic Activity. If it picks up, that is consistent with the pmi rising back above 50. If your starting point is 14, thats a tremendously positive rate of change in the pmi. If the rate of change is the main driver for the auto sector, it is very hard not to be positive on autos. If you think that this tremendously positive rate of change is about to occur. If you have cash for clunkers, thats a nice cherry. It is not the main driver. Interesting to see the role and importance of the pmi data that you discussed there. Thank you very much for joining us today. Up next, we get back to the banking earnings story. We have reporting numbers. A significant drop in profits this year. We speak to the ceo of austrias biggest bank. We also talk about exposure to eastern and central europe. We will get his thoughts on those economies as well. This is bloomberg. This economy is that tough and unemployment goes that high, we have observed what credit losses are to be. The response is so robust around the world, starts to mitigate contraction in the economy, that will free up reserves later on. What this will be most dependent upon is probably two or three things. First the success that countries have losing out of lockdown periods. If we see countries, whats happening, tentatively in northern asia coming through this quicker, that will bode well for credit. There is a very sharp contraction that is expected in q 2 and then a recovery already starting in q 3. The challenge of course is that we dont know how deep and throng downturn will last based on the extent of the lockdowns. Matt those were some of the european banking boss who have been speaking to us amid a really busy week for earnings, especially for financials. Lets hear from another now. Eriksson Group Expects a significant drop in profits this year. E are joined by the c. E. O. Bernd spalt now. Thank you for your time. Lets talk about your loan loss provision. I thought it was surprisingly low in the First Quarter. How much higher do you expect that to go . Let me start by saying that the First Quarter has been showing an economically complete intact development until mid march fr

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