We will talk about that later on. The bank of england is sounding more hawkish or maybe less dovish. The pound is down. 1. 2419. The Banking Sector, we talk about tltros and what the story there is. 1. 3 out of the door to european banks later on from the ecb. The Banking Sector under pressure. We will wrap some of those issues up a little bit later on. Willem bt her, uiter, former member of the bank of england will be joining us. He is a visiting professor of columbia university. He will be giving us his take later on. Lets focus on the bank of england in more detail. One of the big Central Banks today. The boe stepping up its response to the coronavirus pandemic. To boost bond purchases by 100 billion pounds. Joining us is seema shah. Giltdo i do if i am in the market with what ive learned today . The bank of england chief economist sounding much more optimistic than people would have anticipated. Seema yes. Although they met expectation in terms of the size of the expansion of asset purchases, they did surprise with their. Awkish suggestions not participating to agreement with the rest. England is the bank of may be more optimistic than it was suggested today. It is a question of whether the market catches up. My question is the market is a lot more pessimistic about the u. K. Outlook than the bank of england. If they are going to start tapering to the point they end the current 100 billion increase by the end of the year, what are the implications for the issuance . How much pressure will the government the under when it comes to having to continue with the borrowing . The government is increasing the amount of issuance at a time when the bank can be tapering it down. You think that is what the bank will do . We are going from three scheduled appearances by the bank in the market to two. They have the capacity to keep going for a while. They did talk about flexibility. I wonder what the inputs are into that flexibility . You think issuance will be one of them . Seema they have to be careful because they have become sensitive about financing. Maybe that is what this is today. I would expect they would start to use that flexibility as we get closer to the august date. It is unusual because the bank of england does not get these tones wrong frequently. There must be Something Else they are thinking about for them to have indicated that the program will end at the end of this year. My concern when we think about this crisis, all around the world, Central Banks have stepped up. The emphasis has been for the government to take the money and feed it through to the main street. Anything that gets in the way of that in terms of increased finance costs will be a real issue. Ultimately the government cannot afford to reduce their plans at this stage. It is worrying, but im sure when it comes to it, they will exercise that flexibility. Alix forgive the rudimentary question. Why is the cable rate than lower . What they say indicates we should have a higher cable rate if they are seeing Something Better than we are, but the market seems to be pushing the Exchange Rate lower. What do you make of that . Market does not agree the outlook for the u. K. Is good then maybe the bank of england does. I think that speaks to the. Orries about the u. K. Economy that is what is going on in the currency market. You think the debate about curb control, negative rates further stems down the credit hierarchy when it comes to buying more risky debt . Do you think it goes more quiet, but you think all those policies are still live, Andrew Bailey talking about negative rates discuss today . Seema i think all of those things are live. While i do not think negative rates will end up being their favorite option, we are trying to investigate all of the things in their toolkit. It makes sense because not only is the u. K. Dealing with the pandemic issues, but it will also deal with brexit. They haveto make sure all of the toolkit available. They have more asset purchases. Yield curve control. I would put negative rates at the bottom of that list. Alix where you put Something Like we saw from the ecb like tltros . Can the u. K. Do something similar along those lines and it is paying banks to lend money . Expect theyould would move to copy what the ecb has done to help the Banking Sector along. In fairness, up until sometime last year, one of the concerns from the u. K. Was when it came to considering rates that Building Society has such a large role to play in the u. K. With rates low, their argument has diminished, which means there is a stronger case than there used to be. There are ways to get around it. Generally speaking, it is a controversial tool. Theres a lot of disagreement with how effective it is. We all know asset purchases will probably work better. That would be the first point of call. Guy andy haldane has been much more dovish lately. People are surprised he decided to vote against this 100 billion pound increase in the qe program. Andy is known for a bunch of things, but one is he is more plugged in to the realtime data. What you think you might have seen in the last few days that could have potentially changed his mind . Seema it was a shock to me. He has tended to look more pessimistic. Maybe it is looking around the world and seeing the improving data in the u. S. And china and parts of europe and thinking that will be the path we take. As i said, i very skeptical about that. I feel like the u. K. Will be worse and it will take longer for the u. K. To recover. We have to wait and see with a highfrequency data he is seeing, which seems like the rest of us are still not seeing at this stage. Has been value versus growth conversation. Scale, do you like u. K. Assets. If so, where, how, when . Seema when we look at all of our valuation measures, if you look across the world, the u. K. Is looking the cheapest. One of the cheapest. It is a mantra. One of the worst countries in the world, but the brexit negotiations do not look promising at this stage. Is little bit attractive on a valuation basis, and maybe from a technical because it has suffered outflows. From a fundamental basis, im still not a fan of the u. K. Guy ok. On that note, we will leave it. We will be back with you looking across the channel to get a take of what is happening over there. Seema shah, Principal Global Investors will stay with us. We will talk about the tltros story in just a minute. Talking of the channel, we are looking at pictures from 10 downing street. The french president is in the british capital. A facetoface meeting. The first time Emmanuel Macron has been on a foreign visit since the lockdown grip europe. We will see whether or not the president and the Prime Minister make any comments. Gallery inal press 10 downing street. We will continue to monitor what is happening. This is bloomberg. Alix live from new york, i am alix steel with guy johnson in london. This is european close. Strongest ecb tltro saw demand. Scarlet fu is here to break it down for us. Scarlet the numbers indicate the strong demand. 742 bidders, the total takeup was 1. 3 trillion euros. The next allotment will be in three months. This is a flood of liquidity engineered by the ecb, which has been steadily expanding its Balance Sheet to stimulate its economy. In addition to negative Interest Rates and qe, mario draghi of the ecb introduced another tool in 2014, the supercheap longerterm loans known as tltro. Banks can always borrow shortterm from the ecb, but tltros are different because they are cheaper and have a longer maturity. Three years in this case. The goal is to entice banks to lend out more to companies and households to spur the real economy by also subsidizing the banks from the negative hits they take from negative Interest Rates. As a result you have seen loan growth pickup. The ecb has extended three rounds of ltro. This is round four. You and guy speak with megan greene of Harvard Kennedy school , she calls tltro the biggest bazooka in the arsenal. The ecb can set the tltro rate below the deposit rate. The rate can be as low as 1 . The ecb is paying the borrowers to take out a loan. Tltro is also set up so the more a bank borrows, the cheaper rate it gets. As for market impact. One side benefit is banks can use tltro as a carry trade to buy higheryielding assets such as italian or Spanish Government debt. Breaths elp this depressed yields and narrow spreads. They do not need to borrow money through the Capital Market when they can borrow it on the cheek from the ecb. Guy . Is supercheap. Thank you very much, indeed. It does come with significant risks of the european economy. Seema shah of Principal Global Investors is still with us. Scarlet says is used to pump into the economy. Europe relies on the back channel as a transmission mechanism. However, the carry trade is a banksensive story for likely to put a lot of this to work. How effective is this tool in boosting European Growth . Margin, it should be. Some of this will find its way to the real economy. For a lot of lenders, they can still be concerned about the outlook of the economy. They do not want to be lending there is the case to be considered. Essentially it is positive. And ais a potential risk lot of banks use it to plug it into markets such as italy and spain. As we know, there is a doom loop and play for europe where banks are exposed to the government and the government is exposed to the banks, and as things get worse there is a spiral of fear. This does not break that. This exacerbates that issue. At times like this, maybe we need to put that aside and concentrate on whatever the marginal positive is that goes through to the main economy. Guy at what point alix at what point are we doing the moral hazard conversation . At some point we will have big liabilities on these banks. Seema absolutely. Everywhere,ook whatever the ecb has done over the last 8 years, every time it tries the last eight or so years, every time they try to pull back, youll start to spike again. They are unable to leave the market intervention. It is a bubble that keeps growing. At this moment, i do not think we should be worried about these things. Time to throws whatever we have of the situation. This is a problem that is not diminishing. It is only growing. Just as we saw the financial crisis ended up with european sovereign debt crisis, i fear that in a few years we will be back in that same position. Guy you think the ecb Balance Sheet gets close to where the fed is . The fed has increased its Balance Sheet quickly. At some point that will slow down, but there does not seem to be any evidence. Do you think the ecb will reach that size, what you think it falls short . Seema i think ultimately it will fall short. Ive been very impressed by the ecb, especially in the past month. They have a lot more credibility. At the same time, they have natural barriers in place if you consider the issue from the german constitutional court. These problems will not go away. I think we should take away from what the ecb has achieved. If you look to and a half months ago, the general feeling was that though there was real confidence that the fed was going to step up and stand behind markets, the ecb did not require that same kind of confidence. Now i think things have changed and the ecb is inspiring confidence. I would still be worried if they need to get to the point where they need to expand the same magnitude the fed is. I think than they would fall short. Alix how do we ever get out of this in terms of rolling back some kind of support . How will they ever pervak these tltros how will they ever pare back these tltros . Seema i think the only way to do it is to produce strong growth in the euro area. If we look back over the years, they have struggled to get above the trend growth rate. With the eu recovery fund, that will help because it means government can think about infrastructure plans a bit more and spend where they need and it also increases confidence in the euro area. I have a great deal of skepticism about where this goes with europe because it does not have the dynamism as the u. S. Economy in terms of its labor market. Unfortunately, i think we have to have aspirations that europe does produce the growth rates that are required. Happens . Hat you talked about the doom loop earlier on. Is that the central case . If europe does experience economic problems, given the relationship between banks and the Government Debt market and the risk we have seen that can pose, do you think we get back to dealing with what we had to do a few years ago in the european debt crisis . Will that doom loop be realized . Seema it depends on the growth outlook. I think one thing is is when you look at all of Government Policies within europe, when i think about the fiscal policy, what they have been doing, taking it from point a of is aown to point b, which normal resumption of activity, we hope it gets to that point, growth resumes, and then the doom loop starts to fade because there is generally greater hopes and debt is no longer such an issue. Theres a lot of work need to do from a structural perspective to get to that stage. It seems to me the ecb will be in play for the market longer than the fed is at this stage. I think we should be anticipating low rates in euro area longer than what weve been anticipating for the u. S. Suchalways alix always a pleasure to catch up with you. Seema shah of Principal Global Investors. Thanks a lot. This is bloomberg. Guy live pictures from 10 downing street. Emmanuel macron visiting boris johnson. Is that two meters . I imagine somebody is out with a tape measure. This is the first time the french president has left the country since we saw the lockdown. While photography at the moment. We apologize for that. The french president putting pressure on the british Prime Minister to lift the quarantine we have been enduring in the u. K. If you return to the u. K. And visit france, you are required to quarantine on both sides. They are there. They are celebrating the 80th anniversary of Charles De Gaulle broadcast recorded for the resistance in france. Alix they do not look like they are two meters apart and not wearing masks. Does that mean Emmanuel Macron has to stay in a hotel for 14 days . That does not seem to apply. I do not know how they will stick with that. How do you enforce that . Guy i checked this. There is a clause in the u. K. Quarantine rules that allow for foreign dignitaries to visit and not face being quarantined. They obviously anticipated this coming into the quarantine period. Some would argue these rules are unenforceable, but the french are very keen for them to be lifted. They saw that threat coming and they knew you would ask that question. Alix i appreciate that you check that for me, because it was bothering me. I feel like it is right to shine a light on that clause because tomorrow will be a big deal as we look ahead to the first european meetings of the 27 leaders talking about the 750 billion euro program and how to disperse that. He feels like Emmanuel Macron and Angela Merkel at the forefront of that and rising more in the power laid, i should say. Guy the french president very that 750ake sure billion program goes through and it seems like he has found a friend in Angela Merkel. She has been pushing the line quite hard, but there is still a frugal four led by the netherlands that are very determined to make sure this is not a blank check and some of this money gets paid back, not grants. I think this will be a huge fight in europe and it is only augmented by what is happening with brexit, which will make the mass even harder to add up. That is what is happening on 10 downing street. We will have the normal 10 downing street on the quarantine and the covid story later on. We will carry that on the cable. European close is coming up next. We will deal with the details of what is happening in the market today. This is bloomberg. Guy 30 seconds to go and then we are done with the day in europe. Volume has been a built like today. I think you can volume has been a bit light and i think the market is trying to figure it all out. A lot of centralbank news, a lot of corporate news, a lot of political news, a lot of covid news, i think the bank setback. Volume is light. Honest, we gave up most of the gains we had early on, midmorning fairly quickly and we have bumped along the bottom. We are climbing a little bit out. The u. S. Market faring better, but we are down. 7 . The markets around europe look like this. Kind of fairly even stephen. The cac 40 underperforming. The german dax, we will talk about wirecard in more detail in a moment. Andpound has been a factor, the euro weaker against the u. S. Dollar. Slightly less dovish bank of england. We thought it would lead to a more positive picture on the pound, but it has not. Breakdownf the sector , what we have seen today is banks under pressure, some of the miners have been under pressure. A more risk off kind of mix in terms of the market set up. Travel and leisure at a relatively good day. I will show you carnival in just a moment. In terms of the individual names, wirecard is an idiosyncratic story hitting the dax. We talk about how much longer it will be a member of the dax given the volatility we have seen in the stock. Trading at 39. It was 100 coming into the day. Carnival is down 1. 8 . Still struggling where to get ando, back to work and zal good numbers out the german retailer. The stock is trading at 64. The more internet portion of your business that is doing well , but varies in terms of share price. Lets get back to the wirecard story. Gambling joins us now to give us his take on wirecard. Lets go over the history. Wirecard has a big accounting problem which it cannot figure out, and we are talking about a significant amount of money. I am wondering how you now see wirecard Going Forward. Lots of questions ab