Good morning, everyone. This is bloomberg surveillance. I am Francine Lacqua here in london. The markets are really focused today in the u. S. , that second wave, we were debating on whether we could call it a second wave. Big resurgence of cases. Alsos are down, futures down. Rates, but also because jay powell talking about the economic a coverage. Rebounding from the losses we saw yesterday. Gold actually holding after most of yesterdays gains. Now lets get to the bloomberg first word news in london with dani burger. Hi, dani. Ani hi francine. ,californias hospitalizations are the highest in nearly a month. According to Johns Hopkins university, the number of confirmed cases have top 2 million. The government made a string of failures and is handling of the coronavirus crisis. Executivemedical spoke about the decisions at the coronavirus briefing. It put Boris Johnson standing next to him on the defensive. Johnsons that is still too early to judge the nations response. Just eat take away has agreed to by grubhub. It would create one of the largest Meal Delivery companies and give the European Company and entry into the u. S. Market. The purchase also sidelines uber, which has been a takeover talks with grubhub for months. To unify itss structure into a single parent company. It currently has two entities. Goods firmsumer thanks unify under the u. K. Company will be a significant benefit. It reverses an earlier plan to consolidate in the netherlands. Global news, 24 hours a day, on air and quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am dani burger. This is bloomberg. Francine . Francine dani, thank you so much. Bond buying and zero rates are not going anywhere for a long time. That from fed chair jay powell. Chair powell the extent of the downturn and the pace of recovery remain expert merrily uncertain and will depend in large part on the virus. Using ourmitted to full range of tools to support the economy in this challenging time. Discussedes we include explicit for guidance and asset purchases. We also reviewed the historical and foreign experience with targeting Interest Rates along the yield curve. Whether such an approach would complement our main tools remains an open question. We are not even thinking about thinking about raising rates. After the crisis has passed, we will put these tools back in the toolbox. The report was surprising. We are pleased. We hope we get many more like it. But we have to be honest, it is a long road. The rising joblessness has been worse for lower wage workers and women, africanamericans, and hispanics. There is no place at the Federal Reserve for racism, and there should be no place for it in our society. Francine lets get to our big interview. Scott minerd says the rally should go to the Federal Reserve, but the partner at Guggenheim Partners wars there still a great deal of uncertainty. Scott it does not matter which piece of data you look at, there is still a very high level of uncertainty, especially as we reopened the economy. Some in 19 states now are covid,ncing spikes in and those are mostly the states that open first, so i think they , be subject pause to a lot of uncertainty right now, at this point, and there is only so much the fed can do through the operation of Monetary Policy to address the issues other than to make sure the markets are liquid, and that termbasically maintain a structure of Interest Rates low enough that it does not interfere with Something Like mortgage rates, which would damage the housing market. Scott minerd, tom keene in new york, good morning to you. You wereutely dead on in february on the decline, you called it the ludicrous season. It has now become a ludicrous 2020 with this huge and abrupt recovery we have seen. Can you give chairman powell all the credit for this 44 move up in equities, or is there Something Else going on . I thinkou know, tom, that chairman powell probably deserves the majority of the credit. I think that, you know, we were in the midst of a rally, from , that looks lows like a correction in a bear market, until april 9 when the Federal Reserve announced aggressive policies in relation to dealing with Corporate Credit and the etf purchase program. Has supportedlly, the rally. When you look at the correlation between credit spreads relative to u. S. Treasuries and equity prices, that correlation is sotty robust and very tight, i think the fact that the fed managed to drive credit spreads tighter, has basically given the supports for the equity market that, you know, basically the signal was, we are not going to let companies fail, so you may as well jump in and get involved. Michael scott, it is mike. When you look at how the fed has brought everything in, and they are going to continue buying at the same rates, is this a little bit like shane, jay powells work here is done, they do not really need to do a whole lot more . Scott mike, there are two issues. The first issue is the fed is stuck being an intervention is now, simply for no other reason than they have to interventionist now, simply for no other reason then they have to provide u. S. Treasuries now. You asked an interesting question earlier is there really anything the fed can do to address the problems . Is i think, really, the fed stuck financing the u. S. Government, because of the size of the deficit. When you look at credit, however, credit spreads have the time, 40 of tighter 60 of the time, however you want to think about it. That is a pretty normal spread for credit. I am not sure that the fed is really finished in terms of what it wants to achieve, and terms of tightening credit spread. I think the jury is out there, and one of the big reasons for that as we have yet to buy any Corporate Bonds under the Corporate Bond purchase program. Theres so much demand for credit at this point, from the investment standpoint, that we probably will end up driving credit spreads in, and it will be supported by the fed. Francine that was scott minerd, cofounder of Guggenheim Partners. Coming up, with a second wave on the way, texas reports the highest number of daily cases since the pandemic started. California hospitalizations jumped to the highest. We have got that shortly. This is bloomberg. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. I am Francine Lacqua here in london. Now, lets get straight to the Bloomberg Business flash, heres dani burger. Hi, dani. Dani hi, francine. Heading for a lengthy probe of their merger. Sources told bloomberg, an executive sees the European Commission expanding the investigation, pushing the deadline for october. Oneyear putting a pause on use of its facial recognition software. It is a major push for a company that has been a defender of the controversial technology. Amazon plans to give them time to regulate the software. It comes after protests of Police Brutality after the killing of an unarmed black man, george floyd. In the u. K. , an estimated one billion pound hit from the coronavirus cases. According to deloitte, this amounts to about 500 Million Pounds of lost revenue for this Financial Year for soccer clubs. That extra 500 million will be deferred to year. That is down to broadcasters and lost business sales. And that is your Bloomberg Business flash. Francine . Francine thank you so much. Stock futures are lower as coronavirus cases in the u. S. Are rising. Texas reported the highest number of daily cases yesterday since the pandemic started. Californias hospitalization cases are the highest. According to Johns Hopkins university, the u. S. Cases have topped 2 million. Adding to a lot of unease in the markets, given the caution from the fed. Joining us today as a Maya Bhandari, executive director at columbia threadneedle. I am happy to have you on the program for insight and perspective. When you look at what is going on in the market, how much of it is fear of a second wave, that is not quite priced in, and how much is looking at what fed chair jay powell says, and how he was so cautious . Maya good morning, francine. I think it is a combination of both of those, but perhaps more importantly, the fact that the markets have gone quite a long way already. Equity markets and credit spreads have recovered about twothirds of their losses since the march low point, considerably less on offer. If we look at Global Investment grade, for example, this morning , deviations cheap relative to history versus 2. 5 standard deviations at the rise of march. I think there is a little bit of profit taking here. I would say, though, from my perspective at columbia threadneedle, there are two or three key reasons that keep us favoring direct highquality risk assets within equities and credit, and one of the key reasons for that is policy and policy support, both monetary and fiscal. Out, jay powell yesterday emphasizes the dovish commitment in the u. S. Europe have all gains, andpped their support of the economy to reopen and recover. To our mind come up with the artillery of measures, addressing and ultimately resolving some of the dislocations that covid has brought with it. Francine maya, what does it mean for, you know, do you think there is a correction due . Given some of the things that you said, do you think we will actually just catch a breath now . Maya i think it is the latter, catch a breath, but one of the things we have been focused on at columbia threadneedle is increasing the quantity of risks, it is very important, but also the quality of risks that we take. To participate in some of the Higher Quality risk assets out there, i mean, lets not forget we have a lot of policy support, but i a lot of companies are going to be in worse condition after we are through this crisis come up Balance Sheets that are in worse shape, so from our perspective, focusing on the Higher Quality pieces of risk markets has been really central here. Maya, do you make a difference from where the Company Actually stops or where it is based . Its it make a difference if is europeanbased compared to asiabased or emerging markets . Maya absolutely. We favor, much as when we spoke the last time, we continue to favor u. S. Quality Growth Companies where many of the secular trends, for example, have actually accelerated as a result of this crisis. And we hold the u. S. In a bit of a barbell with asian equities, which is, of course, asia is coming out of the crisis quite quickly. Chinese data about the precrisis levels in many areas. We are neutral european equities come along with japan and the u. K. Cyclicality in our portfolios, participate in Higher Quality assets but less cyclical exposure. Francine francine what do you do with gold right now . Maya gold has come quite a long way. Gold is an asset that my colleagues in commodities favor. When wethink certainly think about gold or we think about some of the base metals, they seem much better supported, to our minds, than, for example, oil, notwithstanding some of the supply cuts that we have seen in the last several weeks. The market remains quite considerably oversupplied gold and base metals in a very different position. Thinkne i know you monetary and fiscal response in developed markets has been extraordinary. Do you think they will have to do more, and can they do more . Well, i think it has been extraordinary. I mean, francine, what we have had both in the u. S. And europe, we have had months or quarters to be rolled out in the great financial crisis has been rolled out in a matter of days. I think the fed last night certainly left the door open for further increases in its asset purchases. They committed to maintain at least the current pace, which is of course the peak that we had the fed has left the door open to further stimulus. We will learn, on the fiscal side, a little bit more from europe today, on the european stabilization front. In that think the moves direction have been in a positive, increased stimulus direction, so, yes, i think Central Banks and governments across have shown a great willingness and commitment to do what it takes, and to our minds, you know, the measures that have been taken have already been very significant and probably are enough to stop the doom loop. Countriessts have recovering in somewhat of a us hape, so we are not in the v camp. The u. S. Recovered last year, gdp levels, only at the end of 2022, much like the fed, and in that environment, there is room for more. Francine maya, thank you so much, stay with us, Maya Bhandari, who stays with us. Coming up, a huge fight. Just eat takeaway to acquire grubhub when the Delivery Market heats up. Coming up, we will talk about valuations and possible m a activity in the markets with maya. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua here in london. Still with us, Maya Bhandari from columbia threadneedle. Maya, we talked extensively about the markets, what was priced in, and what would happen to them. At the world, at least at the g7 countries, what do you do with the euro . About european equities being something of a cyclical market, of which we are, at best, a neutral. I think some increasingly favor the euro, the announcement of the unified fiscal plan and the perspective flows attached to it is really quite important. Achillesses europes heel, if you like. Although it is small so far, it for the countries for which it will be allocated. Of course, it is open to increases further along the way. I think it adds to what has been remarkably and perhaps surprisingly constructed fed policy in recent weeks, interesting extension in the past, more supportive german fiscal policy, for example. Two other facets i think support the euro here one is relative Monetary Policy, and the second, albeit a longerterm one, is a surplus. I think europe is one of the few areas of the world where we see an account surplus, and when we think about the flows coming into european markets as a result of some of the fiscal moves we just spoke about, we can see some strength coming into the euro going forward, and we have expressed that in our multiasset portfolios in recent weeks. Francine maya, i do not know whether brexit and the fact that negotiations on going so far, from our understanding, if it will change anything, either on the euro, on the pound, or on assets. Maya well, on the pound, i mean, the pound is currency we actually downgraded recently. Again, we kickback our exposure to sterling and multiasset portfolio at columbia threadneedle. Three headwinds. The first would be a greater odds of no deal. I think that is just a timing thing, as the clock ticks on, odds are there are no deal, increasing. Exit, perhapswn further with some of the problems we are having around track and trade. And third, the mere prospect of negative Interest Rates. Now, while it is not our central expectation francine maya, thank you so much, Maya Bhandari from columbia threadneedle. This is bloomberg. W . W . Uhiono francine economics, finance, politics. This is bloomberg surveillance. Lets get to first word news with dani burger. Dani a second wave of coronavirus cases in the u. S. May be emerging. Yesterday texas reported the highest number of daily cases since the pandemic started. California sets but s california hospitalizations are the highest in nearly a month. The number of confirmed cases in the nation has topped 2 million. Scientists says the a longe u. K. Made list of poor decisions at the daily rifle virus briefing that put Boris Johnson standing next to him on the defensive. Johnson says it is too early to judge the nation separate response. Japan and france have agreed g7 should issue a statement about their worries over hong kong. That is according to japanese broadcaster nhk. Tokyo and others have expressed concerns about the new National Security legislation. It could see people and companies in hong kong a greater risk of arrest and prosecution. Blowoutommodities had a start to the year. A generation of 1 billion since may. Much of the push comes from oil trading. It was correct it was position for a collapse in prices. 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, dani burger. This is bloomberg. Francine . Francine thank you so much, danny. In europe, ecb policy makers tiptoed in a debate whether they will need to boost monetary stimulus again, days after the emergency Bond Buying Program was doubled. Executive Board Members reiterated they will react again if the economy and the inflation outlook deteriorates. Banks echoed by saying the is so active because Inflation Expectations declined so fast. He commented on the outlook for the italian economy. Here he is. Reforms. Uncil needs recently a number of statements about what kind of reforms, and and think that we should it is right. It is a long time for this to take place, but it is not ofause there is a purchase lagging behind. You need firms to increase the rate of growth in the economy. Cannottary policy increase because of the economy purchase. The use of level reasons, reducing the level, reducing the gap, raising the possibility of the economy going back to employment that is sufficiently high. Substitute ofa improving negative growth, and improvements that the economy needs now to face the effects of covid. Yourine governor, what is opinion of italy using esm funds . A number of people have been asking that question. I gave a testimony in parliament a few months ago before the covid started. I think that now it is clear that they come without strings attached. Beis clear that they have to used for particular reasons. Dont see anyi reason to use. Loan. Is is still a rather than being a loan in the is a loan with respect to europe. Francine i am also getting a lot of questions about the unwinding of the special measures. When will this happen . Ecb balance an sheet increasing for the next five to 10 years . How do you see the timeline of this progression . How long . I will say investment has to go on for some time, and certainly the monetary stance has to remain easy for a long time. We still have projections that it will take years before we go once we define we have to avoid mistakes. Being able we are to able to do this through qe. This is a new instrument that we have. Francine secondtier banks survive with a round of new nonperforming loans. I have to say the first round has beenrforming lows very difficult because italy has been tremendously hit by the combination of the global thencial crisis and the economy has suffered a lot, followed by 10 . Which is by the way what we are seeing post covid possibilities. Case correct, and in that there has been a substantial fall in the quality of credit. Of banks. Mber at the end i used to say the in itsstem was entirety, but obviously there were a number of cases which were fairly weak, and some did persist. E to 90 of the system has gone through this very difficult period sufficiently well. Clearly we start with a much better position than 10 years ago. The capital ratios of banks have doubled. Backonperforming loans are to where they were. Italian that was the central governor speaking to me yesterday. Coronavirusise in cases as texas, california, and florida sound the alarm. We also have an update on the markets. The markets looking at a it has to doart of with the rally that we saw last week. The other part of it is concerned that there is a second wave of these coronavirus as rates jumped in parts of america. Ahead forty long slog the economic recovery. All futures in the u. S. Down between 1 and 1. 9 . This is bloomberg. Francine this is bloomberg surveillance. Thats get to the Bloomberg Business flash. Here is dani burger. Has Just Eat Takeaway agreed to buy grubhub for 7. 3 billion dollars, creating one of the largest Meal Delivery companies. It gives the European Company an entry into the u. S. Market. The purchase also sidelines huber, which has been in takeover talks uber, which has been in takeover talks with grubhub for month. Debt for months. Checking stocks in the region has munched a Record Number of inflows. Enjoyed five Straight Days of injection, totaling almost 1. 7 billion dollars. Jp morgan itself is the biggest holder of the fund. Citigroup traders are on track to have their best Second Quarter in more than a decade. Trading revenue is expected to climb by about 40 in the Current Quarter from a year earlier. Fixed income is driving much of those gains. That would put revenue over 5. 7 billion. And that is the Bloomberg Business flash. Francine . Francine thank you so much. Lets get the latest on the coronavirus in the u. S. , a surge in cases in some case causing concerns about a second wave. Do infections have pushed the overall count past 2 million while the countrywide increase is the slowest in march. Californias hospitalizations are the highest since midmay. Texas reported its biggest oneday total since the pandemic began. Joining us now is a senior t. Armaceutical analys . S this a second wave good morning francis francine, sorry. I think you have to look at the numbers and they are rising. Whether you can call it a second wave or not is semantics come in my view. I think the key things to look for is hospitalizations, because that is where the numbers can be real and the percentage of patients testing positive when they are tested versus the number of tests. We are obviously testing a lot more. But certainly it is something that is worrying and that we have to keep an ion. Francine is there a better way, sam, to track it . I dont know if you contract the virus and see what happens to it before you count the number of infected or the number of people in the hospital. Sam i dont think so. You have to keep testing and try and identify people who have live virus. Not people who have been infected but who have live virus, and that is doable. It is expensive and timeconsuming and often you have to wait a while before you get results. It is very difficult to call it. The key issue is we do have countries that have reopened in asia and have not had a resurgence of cases. I think we have to look at individuals and peoples behavior. Not just the fact that the states have opened and there is a rising numbers of cases. We have to figure out why is it that some states have it and others dont, why asia doesnt have it and we do. So many there are conflicting reports. The w. H. O. Does a uturn about people that are asymptomatic, not presymptomatic, but asymptomatic. A number of doctors in italy say they almost got rid of the virus. What is true in all of this . Can we just get rid of the virus or is it only through social distancing and measures that it will slowly abate . Way is not giving at the opportunity to infect people social distancing i will not think we will get back to the way things were before unless we have a massive second wave. The other way is a vaccine. If you manage to control social distancing and have done it well enough, like new zealand apparently has, then you have the opportunity to get rid of the virus. If there are no new cases reporting, they have done it. But before anyone does any highfive on any of these things, you have to give it time. The virus takes time to incubate, etc. It is important to wait and see the next few weeks how this all goes. Francine how bad could it be in a couple of weeks . Sam that is difficult to tell. The hope is that the Health Care System is queued up and ready to respond much better than it was in the first wave. Some in terms of the severity of people, the mortality, it will hopefully be a lot better than it was before. When thessue here is states and the countries reopen, are they behaving correctly . Are people handwashing . Are they keeping distance . Are they Wearing Masks . So many studies have proven that mask wearing is a key control measure. You can see it in real life comparing asia to the u. S. These are the elements that we have to keep looking for. Francine what do we know about antibodies . There are these antibodies tests, and it is unclear it shows you whether someone has had the virus, but it is unclear if you have the antibodies if you are protected from catching it again, is that right . Sam well, we say it is unclear because we do not have enough data to prove that a year later a person who has the infection has never been infected again. In Animal Studies and lets hope it is true, it seems that once you have the antibody, then you are protected. The hope is that is the case for humans. At the assumption has to be that these tests are looking at the antibodies that do concern immunity. So much sam, thank you for bringing a bit of clarity on the whole thing. Sam fazeli for bloomberg intelligence. We are also getting breaking news actually, michael gove is answering questions from parliament, some of the things coming through the bloomberg terminal. You can also follow what he is saying he says Michel Barnier has indicated he may move on fisheries. We saw flat negotiations through negotiators in brussels, between the u. K. And the e. U. Michael gove also says access to fishing waters may be something that is subject to annual talks. This was one of the most difficult points in these negotiations. Our interview with the deputy cfo is next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Lets turn to the middle east, underla, 230 Million Investment has released its 20 annual review. Incomeled copperheads of 10 billion higher than the year prior. Incomeotal comprehensive 10 billion higher than the year prior. Saeed the first thing we do is to see if there is enough liquidity. Companies affected by the lockdown or by the covid19 because of the shut down in operations. Clearly when you look at the u. S. Market today, the equity markets have almost erased all the losses they have incurred on the back of covid19. , in the economy, are we going to see that catch up . If we take the u. S. Markets, which is a huge market we invest in, the u. S. Market is resilient. The u. S. Market precovid19 has a very low unemployment rate, it is the lowest in the last 50 years. We dont see any systemic risk. We have seen a strong capitalization in the Banking System in the u. S. , and more importantly, the u. S. Government as well as the Monetary Policy has been very supportive of the Capital Market. I think it will go down to, on the next few weeks, which we have limited data, are we going to see another lockdown . It seems the u. S. President is not going to close down the economy because of the next election that is coming in september, so i think our eyes should be on the job creation and the acceleration of job creation in the u. S. , which will increase Consumer Sentiment and spending, which is 60 of u. S. Gdp. Important is this 0 rate out through 2023 . How important is that . I think if i look at it from the debt Capital Market and fundraising, it has been very helpful to us. I look historically over the last 10 years and we have done interest,re than 6 coupon interest payments. I think a zero interest environment, it could be very but at for raising debt, the same time are we going to an increase in the Capital Market, in inflation, which will force the fed to start increasing Interest Rates . This month help to recover on the m a activities because that will be available and it is going to be cheap. Today we see at this location in the market because of the evaluations that we have seen over the last few weeks. Helped m ahave activities to pick up over the next few must. Can we circle in on that . Mega tech is at a 20 year high not a 20 year high valuation. Are you worried about valuation, that they are being pumped too high . S it money i think the easy has been made on the equity market. The question where are we heading from this point i think the upside i will not be able to comment on it. But i always look to the downside on this. I believe we are not going to see a correction the same we whenseen it post covid19 the markets reached 2100. Maybe we will see the 2500, the 2700 because there is huge liquidity and there is huge support from the stimulus, and the fed has made it clear that they will do Everything Possible to stabilize the Capital Market. If you will remember 10 years ago in 2008, 2009, the fed was reactive into taking action. I think we live in a different world where valuation highly impacted by liquidity. As i mentioned earlier, 6 trillion has played a major role in the equity market and the debt Capital Market. A few weeks after the government issued debt, it was just at the beginning of the covid19, we were able to raise money very cheap compared to what we have seen previous. Was manus cranny speaking with the dividend cfo of mubadala. With the deputy cfo of mubadala. That was certainly how the markets are interpreting it. Part of it is that an part of a discussion on the markets because the Coronavirus Infection rates are jumping in parts of america. That means that a lot of the markets are a lot more cautious, partly do of course to what we also saw last week. So i am looking at the ftse, the downthe cac, the ftse between 2. 5 and 3 . If you look at the other Asset Classes that are moving. I do want to show you what is going on with gold. European policymakers, many of you know, meet today to decide whether to boost aid, and we will know a bit more on the negotiations between the u. K. And the e. U. , how they are actually going. Are down i dont know if significantly, but it feels like a bit of a correction, or the start of a possible correction. Bloomberg surveillance continues in the tower. We speak with former ecb president jeanclaude trichet. This is bloomberg. Francine markets sink as a second wave of covid19 hits america. Cases top two million in the u. S. As the number of infections rise in texas, california, and florida all recently reopened states. Not even thinking about raising rates. A dovish jay powell signals that zero rates are here to stay as he seeks to manage expectations about the u. S. Recovery. And enough from the ecb. Policymakers are tiptoeing into a deep debate on more seamless, some warning that inflation risks are too high. We will speak with jeanclaude trichet this hour. Good morning, everyone. This is bloomberg surveillance. Im Francine Lacqua, here in london. Tom keene in new york. A clear reversal when it comes to the cautious outlook that the fed outlined yesterday, partly due to the number of infections rising in the u. S. , it also partly due to the rally we had last week. Tom those are the two big stories francine, there is no question that the chairman ended the debate about a vshaped recovery. Amy that will
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