Transcripts For BLOOMBERG Bloomberg Surveillance 20240713 :

BLOOMBERG Bloomberg Surveillance July 13, 2024

Agreed to reopen. Welcome to bloomberg surveillance. I am Francine Lacqua. A lot going on in markets and the German Constitutional Court as we have reports why they came to that decision. First to your markets. On torkets are latching the gdp figure than the forecast, and people are expecting worse things to come. These are the markets we are looking at. There is a little bit of stabilization compared to what we saw on our ago, but the focus is from what we heard from dr. Soon. Cannot reopen too treasuries and gold holding onto the previous games. Thats get to the first word news in new york city. The European Central bank is not master of the universe and should not pretend otherwise, according to the german judge who gave his opinion on the qe program. He is asking for the bank to take responsibility for its qe program and explain it to those negatively affected. Level coronavirus cases have topped 4. 2 million. In the u. S. Cases slowed to 1. 4 . s licensing its potential treatment of remdesivir to five generic drugmakers to anticipate demand. Korea virus cases traced to a nightclub have reached 119. Dr. Fauci told the Senate House Committee he is concerned about states relaxing restrictions without meeting guidelines when it might be safe. Cut 2. 8 planning to billion in costs. The initiatives are part of a threeyear plan to be unveiled later in may. The carmaker is phasing out a brand and shutting down a production line and marketing and research costs. It is aimed at turning around the automaker after a tumultuous period. 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. This is bloomberg. Thank you so much. The u. K. Economy shrank 6 in march as the nation went into lockdown. It puts the u. K. Into a deeper recession, the deepest and more than three centuries. Gdp fell 2 in the first quarter. Joining us now is trevor greetham, head of multi assets, Royal London Asset management. How concerned are you we will see a recession, a deep recession with a slow recovery . What kind of crisis the you forecast . Trevor you are right to say this is a taste of things to come for gdp. Contraction was 2 but bear in mind the lockdown really started in march, and march had a 6 drop in the economy. April retail sales were down 20 . Worsek we will see numbers for the second quarter. The markets are looking through that a little bit. What they are doing in the recovery we see over april is they are beginning to factor in there will be some switching back on of Economic Activity over the next month, and tomorrow is the day the u. K. In syria gets back to work. The u. K. In theory gets back to work. You will get this big collapse in activity when switching back on. I am a believer in the 90 economy, that when you switch things back on, there will be sectors like leisure and retail that will not come back properly. It starts like a v, then goes flat and below where you would like to see it. That is what markets are grappling with, and the sideways trading we are seeing. Francine what does it mean for what you want to put your money . Be in thisoing to flat recovery, does it depend on the consumer, and willie u. K. Economy be similar to what you are seeing worldwide . Trevor i think it is a worldwide phenomenon, and different economies got into the locked at different stages. It is a long process. The most noteworthy data i 5 of thewas about u. K. Population has antibodies. This is historic because it reflects infections back foot five weeks back five weeks. If we have to get to 60 for herd immunity, we are 1 12th of the way through the crisis. There will be moments of powerful shutdowns and backtracks. It is a long slog. From an investment point of view, we have neutral equities. We are focusing on things, more support for highyield bonds versus commercial property. Stocks, we like the u. S. , the tech sector. We are underweight in the u. K. Willive value trades depend on whether we get a relapse or not, but the overall equity question is poised to go either way. Francine if there is a second wave and second lockdown, what does that do to market . It is unclear what is priced in. Probably. Some markets reflect our best guess of what the underlying economies are doing. Reflecting what markets are expecting the economy to do. If there were a second surge and another lockdown, which dr. Fauci suggesting could happen in the u. S. In some states, then i. Hink the markets go down again from a technical point of view, when you see a figure drop, that sixweek period was as fast as the 1929 crash, it wouldnt be surprising in three months we are back down to march levels, particularly if there is a second surge in the economy has to be locked down further. Francine we will talk about inflation later on, but when will economies be able to create the jobs that were lost in the last two months . Trevor it will take some time. Some estimates that the rise in the u. S. Unemployment rate, which was at a 45 year low, 20 if you include people on furlough. There are estimates that half of that comes back quickly, but it will not all come back because some services have to shut down. The 90 economy, what that suggests is unemployment will remain high for some time. There is a weird situation where it all happened in one month. If you saw that New York Times graph on its front page, then the april 2020 figure went down the side of the page, it is a weird one month map. Twice as many jobs destroyed as in the lehman crisis. But of that will snap back, the rest will be the long slog. We are dealing with the initial shutdown abounds back, but after that it will be tricky to deal with. It will feel like a recession from 86 to 18 months. Six to a recession from 18 months. We may come out of this with less damaged equities the higher Government Debt. Francine thank you so much. Trevor greetham, head of multi assets, Royal London Asset management stays with us. Coming up, as the u. K. Economy shrinks 6 in march and the government extend its furlough scheme, we speak with the shadow chancellor next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. I am Francine Lacqua. Thousands have returned to their offices across some of asias financial hub. Things will not return to normal for a long time. Hong kong is planning for partitions in some workstations. Employees will be able to choose to work from home permanently when the outbreak finally receives. Half theey has told company that they are unlikely to reopen offices, but most can work from wherever they want. Employs around 5000 people around the world. The Indian Government is planning a 65 billion spending plan to support the economy. It expects a contraction indias top motorcycle maker, hero, is urging the government to reduce taxes on its products. Bloomberg business flash. Francine thank you so much. Lets get more on the u. K. Sinkingws the economy into the deepest recession in 300 years. The government has confirmed the extension of its furlough program. More than 6 million workers will get paid at least until the end of october. It could cost 84 billion pounds. We are joined by Anneliese Dodds , shadow chancellor, uk labour party. Thank you for joining us. The gdp figure was bad, maybe not as bad as expected but still bad, and many think this is a taste of uglier data to come. How should the government try to fix the economy . Anneliese that is absolutely right, and these figures reflect the beginning of the lockdown in the u k unfortunately it is likely we will see more reductions. The u. K. Government has an jobsmic package to support and incomes during this crisis. We have been trying to work with the u. K. Government. Some changes in the furlough scheme. I demanded the u. K. Chancellor come into parliament to talk about it. It is critical now that we ensure everything is working as well as possible, and that we avoid any cliff edges. I am concerned with the furlough scheme that we could see an employer contribution, a substantial one required on august 1 for all employers. That would risk and increase in unemployment, large numbers of people coming into the jobs market at the same time. We need to avoid that affect if possible. It will be difficult for the labor market, given many of them have jobs that are put out of reach as a result of this crisis. Francine would you say the government is doing a good job ,rying to cushion the economy and is a difficult to be the opposition now . Anneliese we did call for a number of elements in the package. In the case of the furlough scheme, we are asking government to look at other International Examples for quite some time and encourage them to work with businesses and other organizations to get some kind of furlough scheme introduced. We hoped they could have supported those working. We do not have that in the u. K. I was hoping the chancellor might be open to that for the u. K. , but she said it would not. My concern is many businesses want to get some people back parttime now because they need to have some parttime working to keep the business going, so it will be ready to reopen. We asked the chancellor to do all we can to get into the fertile scheme earlier than august 1, because it will potentially be too late for many businesses. Holesne do you see any tothe government Assistance Companies and workers . Do you see anything that could be done . Been ase there have number of different elements, and economic package. I wrote to the chancellor last. Ight if at all possible, we need the gaps to be filled. It is an issue for the u. K. In comparison to other european nations. Our Social Security system covers a very small element of peoples previous incomes. Our social to security system, and that is not the case in other european countries. It is much more of a problem in the u. K. Than comparable nations. The government needs to fix those gaps and ensure that people who fall outside the scheme are covered properly by Social Security. We have a lot of families without financial resilience. Francine what are those gaps . Have a scheme for selfemployed people that went live today. There are a large number of people who might be recently selfemployed. That relies on previous tax returns to assess their income. For the a big gap there newly employed as well. We trying to suggest a solution to that so there are different ways people can deal with this. They do not want to they are concerned about the risk for fraud. We think they can combat that and deal with anybody who tries to manipulate the systems. There is a shared agenda. We think in a number of areas government needs to look carefully at futures, particularly our loan scheme. The package is loaded heavily toward loan guarantees as a proportion of its overall value. We said that may be sensible in the u. K. Context, there may be other mechanisms ready to go compared to other countries. But we need to ensure especially for small businesses, it will not be unsustainable in the longterm. There are discussions with the various lenders. We need to make sure those businesses can continue into the future. How would the government actually be paying for all of this . These are expensive schemes. Do we need to get used to more debt for much longer . Anneliese ultimately, the u. K. Will be accruing substantial debt through this crisis, as are many other countries. That will be the norm in many developed countries. , the debtuntries burden will be much more of a problem. We are urging more International Cooperation with that. When it comes to the u. K. s finances, in the long run they will need to pay down that debt. Proposals, ande one of the u. K. Newspapers, the telegraph suggesting the pay would come from a reduction in public funding, increase of taxation. My main concerns are first of ,ll we need to do all we can the crisis has taken an enormous amount and we need to think how to help support household spending. Too quickly, it will impede the recovery and the economy may grow more slowly than necessary. Secondly, the u. K. Recovery from the previous financial crisis was imbalanced. We cannot have that in the future. Francine thank you for joining us, Anneliese Dodds, shadow chancellor, uk labour party. Plenty more from bloomberg next. Francine this is bloomberg surveillance. I am Francine Lacqua in london. We are talking not only to the shadow chancellor from the u. K. , who is getting us some scenarios for markets. The focus is what dr. Fauci was saying, markets are taking that in stride. Treasuries and gold holding onto the previous days gain. Stan druckenmiller, we discuss that next. This is bloomberg. I think we ought to have a humility. Dr. Fauci, i dont think you should be the only one to make a decision. As you listen to your advice, but the facts will bear this out. We keep kids out of school for another year, what is going to happen is the poor and underprivileged kids that dont have a parrot to teach them at home are not going to learn for a full year. I think we have to look at the swedish model and our kids getting back to school. I think it is a huge mistake if we dont open the schools in the fall. I have never made myself out to be the endall. I am a scientist, a Public Health official. There are a number of other people who come into that and give advice that are more related to the things that you spoke about. Needing to get the country back open again and economically. I dont give advice about economic things. I dont give advice about anything other than the Public Health. That was some of senator rand paul and his testimony to the fed. Lets get to first word news in new york city. Ritika an easing of the u. K. Lockdown begins today with Prime Minister Boris Johnson calling baby steps, reopening the economy. In england, people will be able to spend unlimited time out doors, and people working from home are encouraged to go to their jobs. Says the economics total costs could reach 84 billion pounds. Almost. Economy shrank 6 in march as the nation went into lockdown. It almost certainly puts the u. K. Into a deep recession, potentially the deepest and more than three centuries. Gdp fell 2 in the first quarter. The current three months likely to be even worse. Saysornias Alameda County tesla can start operations as soon as next week. It came amid a test standoff as ceo elon musk says he is getting back to work regardless of the rules with county officials. World set by shipping container line is warning of a 25 slump in volume, suspending its fullyear profit outlook, saying the pandemic is having a Significant Impact on activity. While the outlook is grim, they still managed to generate growth and its operating profit. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in im than 120 countries, retake a good death. This is bloomberg. Francine . Francine thank you so much. Stan druck and miller says the risk reward for equities is the worst he has seen in his career. Still withager trevor greeson greetham. We talked about the recovery you are seeing and we were worried about falling off a cliff and the slow recovery. What do you do with inflation . Do you worry about inflation coming back with a vengeance because of the stimulus, or is it something that at the moment we should not be thinking about . Trevor i think it is premature to worry about inflation at the moment. What we have heard with the pandemic is an amazing inflationdeflation shock. With the med more precipitously than supply, they have both fallen. But if you look at the oil price, there has been a collapse in the oil price. Seeing the biggest monthly drop in core Consumer Price inflation,. 4 monthtomonth drop. Then what happens next is the supply recovers faster than demand does. You can already see that in china. Consumer confidence and Consumer Behavior has been hit very hard. So youre likely to see this wave of deflation going around the world. Andupply switches back on consumers are still very much retrenched. Further out, you could argue that the degree of money printing and the sort of fiscal stimulus you are seeing will end up being inflationary, but that is more of a medium to longterm political question. Whether the way the people actually decide to set policy in the recovery is inflationary or not is something to worry about later on. Francine should we worry about the big picture political questions, trevor . Thenok at the ecb and being challenged by the german court, saying this could be the breakup of the euro. We have a story on the bloomberg terminal looking at the ghosts of the 1992 italian devaluation. Are these worries about bailouts and things that frankly we thought we put behind us going to come back to haunt us . Trevor i think this is a defining moment for the european currency, because i have often thought that youre only going to have a properly functioning euro when you have a large central budget or fiscal transfers, and the only likely situation which you could actually cross that rubicon and enter into what the germans would disparately disparagingly call a is if you have a single enemy the euro countries are facing. This is a war on coronavirus. It is an opportunity for europe to come together, and i was interested in the idea that the ecb should be inch should be issuing very largescale irredeemable bonds. To fight the coronavirus. We are talking about a trillion euros. Smallt that, with the budget that the Member States have given the e. U. , even doubling that small budget, they will look like they are fiddling. I think there is a major risk around the euro area at the moment. Im hopeful they come through it, but i think you might get more stress in the financial markets. Just as you get the echo crisis with the i think there will thenother echo crisis with pandemic. I think the euro will come through it. Would you worry about the lack of solidarity, and if there is a second euro crisis coming . What is the timeline for that . Is it three years, or could it come much sooner . Trevor i think it is in the next year or so. Do question will come, and i sympathize with the because they can only

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