Transcripts For BLOOMBERG Bloomberg Markets European Open 20

BLOOMBERG Bloomberg Markets European Open July 12, 2024

Infectious disease expert Anthony Fauci says the u. S. Could risk 100,000 coronavirus cases per day if this behavior doesnt change. In england and wales, the deaths fall to their lowest in 12 weeks. Slow start stocks dip in asia after indexes in the u. S. Post their best quarter in more than two decades. Manufacturing pmis today in europe, a sign of confidence in the recovery to come or not. Airbus begins the biggest risk structuring and its history. With theut 15,000 jobs majority impacting the main bases of germany and france. Just our under an hour away from the start of cash equity trading in europe and u. K. Lets take a look at futures right now. We finished down on most of the european indexes yesterday. The dax closed higher yesterday. We are still looking at futures lower for the euro stoxx 50, the futures, and the dax across any european contract. Quarter toout one 4 10 of 1 . Take a look at futures in the u. S. After 1. 5 gain on the s p 500 yesterday. Futures are now pointing lower, 0. 5 there. Nasdaq futures down about one third. Moment. Just under the 1800 mark. It did take out that level yesterday. Thats of interest. We will keep an eye on whats going on with Package Delivery companies as well. Lets get a bloomberg first word news update for you. Some of the top stories we are covering here at bloomberg. The u. S. Is going in the wrong direction when it comes to the coronavirus. Thats the warning of Anthony Fauci. He says daily case counts could more than double to 100,000 behaviors dont change. He added, we are not in total control right now. He declined to estimate the number of potential virus deaths but said the total would be very disturbing. Chinas security lover hong kong published last night. Extends to actions committed by anyone, hong kong resident or not. It appears to cover nonviolent tactics like those employed by protesters. Weve seen the first arrest made under that law overnight. Boris johnson unveiled his plan for the u. K. To build its way back to prosperity. The package ran into immediate criticism. It offers no new money and falls short of the new deal the government had touted the night before. A chancellor will set out more details of the Recovery Plan on july 8. 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. Matt asian stocks start the new quarter in a muted fashion with european and u. S. Futures drifting. Investors assembled mixed data on the global economy, concern over the coronavirus. Weve got that arrest that you mentioned. Lets get to the markets now with simon flynn. First off, on the hong kong arrested for was flying a flag in the middle of the park. Is that going to affect risk assets at all today . I wish it would. I dont think it will. Obviously, the new set of laws seems to be jacobian. They are willing to use them readily. To be honest, the market doesnt if thisare particularly doesnt seem to be spilling over into broader u. S. Relations. Most particularly the phase one trade deal. While that remains intact. I dont the the markets will react. Anna we are bringing live pictures of carrie lam, we will try to get those to you if they are not up are ready. We will keep an eye on those. Let me ask you about other matters. Will assets react more to data in the coming half year . Whats the assessment of the markets live team . Yeah. I think it will. You could argue is already started. U. S. Consumer confidence had a decent beat versus expectations and got a reaction from the market. Today, the chinese pmi was better than expected. That was quite encouraging. I think people will start looking at new types of data, infection rates, hospital capacity, mobility data. This is going to become more and more prominent in the second half. That kind of information gives us leading insight into the hard data. Terms of what risk assets are going to react to in the third quarter, what do you think it will look like . There was so much of the Second Quarter rally, just a play on a rebound that was expected. It wasnt shown in the economic data. Are we going to see markets react more specifically to the numbers that come out this quarter . Yeah. Definitely. I would add policy into that mix as well. Think Federal Reserve in particular is going to be relatively proactive. The piece i wrote today about the possibility of the introduction of yield curve control, theres also a wide range of discussion at the fed about introducing average inflation target. These sorts of things will strongly reinforce their commitment to bring about global recovery. Obviously in keeping yields very low and stable, thats also extremely helpful for risky assets. Anna thanks for your time. That is simon flint with his latest thoughts. Up next, credit markets, critic issuance. June becoming the third month in tops 200 issuance billion. The outlook for corporate debt, coming up next. As carrie lam speaks in hong kong, keep you updated with everything the chief executive has to say, live from the city. This is bloomberg. Anna 45 minutes to go until the start of the European Equity trading day. Theres point modestly to downside, 3 10 of 1 . A similar move in u. S. Futures. Lets get to the european credit story. The euro credit market is booming, issuance topping 200 billion euros. As the fed props up Investment Grade credit in the u. S. , the default risks in the highyield space seem to be rising with Companies Filing for bankruptcy. Lets have a global conversation about credit markets and bring headrporate ratings global Richard Hunter who joins us now from fitch. Good to speak with you. Let me ask you about europe and the outlook for defaults. Everybodys wondering, when support packages come to an end or start to be less generous, whether we will see this rising rate of defaults in europe. Do you expect default rates on the rise from here . Richard yes. Theres too a limits to that. We expect the default rate the matt d you expect that to be reflected in your second half ratings actions . You completed 600 ratings actions so far since the virus since the pandemic has become something that the market is focused on. How many fallen angels do you expect to evaluate in h2 . Companies going from Investment Grade credit that you then move down to junk rating. Richard yes. Its been about 150 billion so far. Thats only about 25 companies, interestingly. We dont think Investment Grade will come where the action will be in h2. Of thebecause the bulk most obvious candidates and affected sectors have already been reviewed. We could see another 100 million moving. A confluence to be of events. If you look down at the other end of the scale, weve got 95 freshly minted triple c category ratings. Those are the ones you are looking at to see that default rate pushed up. Anna does europe look very different to the United States when it comes to the path ahead . Is it different is it similar . Richard it is similar and different. That similar in the sense the same factors are affecting both marketplaces. We might see a diversion and efficacy of the response to the crisis. Thats a caveat right up front. Generally speaking, the way weve been looking at this, the stressors we have been throwing at the sectors have been consistent across the u. S. And europe. Theres one interesting thing. The European Market does not contain a lot of those sectors that are most affected. They dont go to the bond markets. Things like leisure, transport. Europe are notin bond market participants. They are smaller, familyrun. They are dealt with in the bank market. They are invisible from a rating perspective. Very important for the economy. A worstcaseed scenario outlook. The fact that widespread disruption to civic life could threaten to a road the social contract. It seems we are seeing that in some pockets around the world. What do you mean by this . What are you concerned about, in terms of the social contract . Richard i should stress, that is from our downside case. Hugging closely to the baseline case. When we are talking about that, we are not talking about what one would consider as relatively traditional levels of protest. This is not the first time weve seen the levels of protest we have in hong kong or across the United States. We are talking about where that multiplies and you start to see a breakdown in law and order. You see regular situations with looting. Not a case of looting but looting out of necessity. That would be part of the severe downside case that we put out there, that we certainly help we dont see and is not embedded in the ratings. Anna thanks very much. Stay with us. Stay with us for another conversation. We will look at some of the sectors in particular that are seeing an impact. Coming up, the developments in hong kong. Hong kong police make their first arrest under the new National Security law. We will be live in the city shortly. This is bloomberg. Matt welcome back to the european open. We are 40 minutes away from cash equity training and the first day of the third quarter. Futures pointing slightly lower. Lets get the Bloomberg Business flash for you. These are todays top corporate stories from the bloomberg terminal. Airbus is planning to cut 15,000 jobs as part of its biggest restructuring in history. That will come from its main bases in germany and france. The company says output will be about 40 lower than expected for two years, due to a dramatic slump in demand. Nearing achs may be deal to resolve its biggest legal threat in a decade. The wall Street Lender is hoping to avoid a guilty plea for its role in the 1mdb scandal. Prosecutors allege it helped malaysia raise money, some of which ended up being diverted to 1mdb officials and their associates. The u. S. Federal communications zteission says huawei and our National Security threats. The move prohibits federal subsidies being used to buy their equipment. Both companies have close ties to the communist party and chinas military. The u. S. Has repeatedly argued its equipment can be used for spying, a claim that Chinese Companies deny. That is your Bloomberg Business flash. Richard hunter from Fitch Ratings is still with us. We were talking about the probability of defaults. 2021hink coming more in than 2020. The possibility of downgrades. Do you think there will not be so much action in Investment Grade credit . What about an industry near and dear to my heart, automotives . Its of who huge truck huge chunk of what you evaluate. It has been hit hard by the crisis. Richard yeah. If you look at that on a global basis, its a very substantial chunk of the revenue base we look at. About half of all the manufacturing revenue if you take all the companies together. Of all the sectors where weve been, they are the median sector. We have been slightly more optimistic around autos. The course of the lockdown, we saw positive signs there. We lowered a couple of the comic ors. We lowered renault. Most of the carmakers have been affirmed with a change in outlook, simply because of a number of things. They already have substantial cash facilities on hand to write out trouble. They are used to dealing with cyclicality. The oil and gas industry is facing a her registry years. It is used to dealing with profound swings and demand. We would not say that they are not exposed. There are big challenges in the supply chain. With moret dealt exposed sectors. Anna in terms of the actions you have taken so far, i was looking globally in terms of your gown downgrades. A lot of it came from highyield. In particular, five sectors. You mentioned oil and gas. Has there been any surprises . There have been areas where you would look to during this crisis as aussie us obvious victims. Were there areas less prepared than you might have anticipated . Richard probably. Its more the flip side of that. There are some that have done well. Coming into this, we felt that everyone was going to take a hit. Weve seen slightly stronger performance from the Health Sector than we expected. I dont think theres anyone theres one, media. At the start of this, we felt that media would probably be resilient. Up until now, weve had 75 negative action rate on media. Thats because you are covering across entertainment, advertising. Over the course of the lockdown, we started drawing the conclusion that if you think about where the cost are going to come, food, beverage, tobacco, ok at the moment. When you look at advertising, the impact on other areas of media, media is a straight answer to your question. We thought, at the start of this, we were, about it. Now we see more negative actions on that. Matt 30 seconds left. Emprise 8. 6 trillion of revenue destruction over two years. A huge number. Think the bulk of it europe will be hit harder. Why europe . Richard they have one of the worst gdp performances, down 8 and our forecast. The eurozone, theres a slight optical thing. They hire a lot of the big oil and gas things. Those revenues are generated globally. Its a mixture of the weaker gdp out for the regional economy and the fact that its the headquarters of the big oil majors. Anna thanks so much for joining us. Good to speak to you. Come back and talk to us again. Great to get richers perspectives this morning. European equity markets, still a half hour to go. European futures point downward. 3 10 of 1 for euro stoxx. Geopolitical tensions focused on whats going on in hong kong right now. China asserts its rollover hong kong. Beijing passes it security law. The west is concerned about the citys economy. Were live from hong kong, next. Police make their first arrest under the new security law. This is bloomberg. The best tv experience just got better because now you can watch all your favorite hulu shows and movies on xfinity. Youre only a voice command away from Award Winning shows like the handmaids tale, to new hits like little fires everywhere. And fx originals you can only watch on hulu. Thats just the beginning of what you can experience with hulu on xfinity. Tv made simple, easy, awesome. Anna welcome back to Bloomberg Markets european open. European equity markets futures will be weaker at the start of trade by 0. 25 . Concern about the virus lingering. Virusl get back to the story later. Hong kong police have made the first arrest under the new security law. The city is marking 23 years of rule from china, with beijing imposing new laws that would give licenses to critics. Us. Ie kamaruddin joins what do we know about the arrest that has been made . Within 24 hours of the security bill being passed Hong Kong Police have made the first arrest. Saids bearing a flag that hong kong independence, and a black tshirt with the slogan free hong kong. There are plenty of protesters. Anthems are being sung. This more packed in shopping area since midday. Over a thousand people have congregated so far. Wearing the allblack attire we have associated with protesters. There is a heavy police presence. Sidewalks, and very much on high alert after the first arrest that was made. They are raising banners warning people against activities that could be in breach of the new law. A new bubble flag was raised a new purple flag was raised showing people could be prosecuted under this new rule. . Att what are the specifics do we know the specifics of the law, it was not clear at this time yesterday . 66 articles of the law, but there is still not clarity. There is an extraterritorial element. In hong kong and nonresidents could fall afoul of it along with those outside the territory should they be seen to commit offenses highlighted under the bill, mainly secession. Ctivities, terrorism bill, provision under the there was more information [indiscernible] it is unclear how this will be implemented. We are seeing the Police Take Action under the new rule. We can hear animated voices in the background of your shot. What are the implications for businesses . For those in hong kong or those who visit in the future, what are the implications . Messagethe underlying is to stay out of politics, that is the interpretation of some. Saying Research Firms criticizing government along those four offenses, they should of falling a of these rules. There is criticism of the government, a call for independence, that is where there could be gray area. Businesses such as barclays saying they are not willing to comment and this is a political matter ultimately. Matt Sophie Kamaruddin on the ground for us in hong kong. Stay safe. There is a lot of activity there. The pictures tell an amazing story, along with your excellent reporting. Hank you for that lets get to another issue, even when cruise ships are allowed to sail again, how do you make the experience as enjoyable as it once was for some people . That is one of the challenges facing Companies Like carnival. Its ceo told bloomberg how he is preparing for a return to the seas. Out, our entire been extremelyd busy these past many months. We are retraining crew in an environment that is difficult to do so. Repatriated over 70,000 crewmembers, and have over 10,000 still in ships at sea that we are trying to get home. It is unprecedented. We voluntarily paused. Since then the cdc has issued a no sail order. Going beyond that, our industry in the u. S. Has already extended our voluntary pause into september. Outside the u. S. , we are more optimistic. We think there is the possibility for some sailings to occur again in europe. Germany is engaged, italy is engaged, spain is engaged and are taking a look at resumption of cruises for their domestic travelers. That could occur possibly, but who knows . It is unprecedented. E have no revenue basically we still have to maintain our ships, and we have thousands of crew is see thousands of crew at sea. When we are able to resume, we resume. Ready to it has been absolutely devastating. I am sure the others will say the same thing. 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