Transcripts For BLOOMBERG Bloomberg Markets European Open 20

BLOOMBERG Bloomberg Markets European Open July 12, 2024

How to taper without hitting prices . Polands president ial election is too close to call. We have the incumbent ahead by a thin margin. The result is seen as pivotal for the nations future ties with the European Union. Welcome to the European Market open. Matt is off this week, but just a month under an hour until the start of the trading day. European futures and u. S. Futures for you and both tell a similar story. European equity fund its pointing to the upside, u. S. Futures pointing to the upside. Between. 6 andp. 8 . Weve got u. S. Banks reporting, plenty of those coming through the week. Weve got a few Central Banks giving us their Interest Rate decisions, a little less likely to drive sentiment this week. Looking to the earnings season for any clues. Lets have a look at the gmm to see where weve been overnight through the Asian Session and any clues into the european session. Flying, chinese assets taking off despite caution in chinese papers. The japanese nikkei come also strongly up. 2 up over 2 . Perhaps denial about the virus isdeciding the virus worse behind us, the flareups and maybeof the world, policymakers looking to the fiscal side. In fx, appetite for riskier currencies, the aussie dollar up. 4 . We are getting risk on, which explains why sovereign bonds moved to the downside and commodities, copper showing its longest winning streak since 2017. Exploration behind the most move, supply pushing prices, but the longerterm story has been positive. The longest winning straight since 2017 and with the opecplus meeting this week, we will keep an eye on oil prices. Lets get a first word news update for you. Florida has broken the daily record for all u. S. States with more than 15,000 new coronavirus cases. New york city, reporting no new virus related deaths for the first time in four months. In hong kong, 38 new cases sunday sent fears in the hub. Africa, a curfew and alcohol ban after virus rules went unheeded. Exit polls in poland show the president ial election is too close to call, with both candidates claiming victory. The lead, 5149 by the incumbent doesnt take into account nearly half a million votes by those living abroad that may favor the challenger. The campaign saw the highest turnout since the fall of communism. Businessarter of leaders say their organizations are fully ready for the end of the brexit transition period. Nearly half of the u. K. Company directors polled late last month said they werent able to prepare for a transition now, with many saying they need more clarity. A survey by the institute of directors found the Financial Sector the most prepared while manufacturers had the most stilted and. Still to do. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. As mentioned, asian stocks climbing through the overnight together withope, u. S. And European Equity futures ahead of the start of an earnings season that will provide more clues on how companies are coping with the pandemic. Joining us is our Bloomberg Markets live editor garfield reynolds. You are positioned to paint the picture of what has happened through the asia session. Are you gripped by the optimism we see on display for chinese equities at risk assets, or by anxiety . Little hard to a be too consumed by anxiety at the moment, because that has become part of the furniture. Level ofn elevated commentary about there being concerns that stocks are divorced from economic reality. However, that hasnt stopped chinese stocks from rocketing to fresh highs and helping to take the rest of the equities complex the nasdaq future also stormed upward out of the gate even after a weekend that saw plenty of bad news on the virus front, but there are a few things going on here. One is that the economic surprise indexes are showing Economic Data is beating expectations very strongly. That is helping to validate the stocks narrative we are getting a vshaped recovery. Even as wehing is, have got concerns about the virus accelerating, we dont have any sort of fear there is going to be a rush into lockdowns like what we saw back in march. Meltedck when markets down in march, that was before Central Banks came in and said we are going to flood the globe with liquidity and not take our foot off the pedal on that front until we are absolutely sure we are across the bridge and into help land. F economic anna lots of reason to look to the positive side, the glass halffull, i suppose. What about as we approach earnings season . I know youve been asking which earnings are going to be key for broader markets and i wonder if it is going to be a case of looking for sector stories of resilience or whether it will come down to individual companies and the resilience of their Balance Sheets. One thing that might be important is whether a couple of individual companies that have been such spectacular performers, amazon as a prime example, if they spring any surprises to the downside, that could be nasty indeed. Stood out things that from reader responses and what we are looking at, is financials could be very key and we have those coming up i think starting today or tomorrow. There are a couple of reasons. One is financials underperformed somewhat. The other is they offer the for an uptodate guide on where the economy is going on might be going. One of the loan data showing banks are in touch with Consumer Sentiment through credit card spending, through animal spirits that their customers are showing. How many customers have come to them saying can we borrow more to buy stocks, or we want to stop borrowing so much because we are worried we wont pay it back. That is going to be key and on the flipside, getting back to the picks seen as benefiting more for the pandemic than most. That narrative has been persuasive for a lot of will benefitch from the workathome environment. The initial earnings in the covid period showed an uptick in demand for chips, pcs, cloud services. Is that continuing . Thanks very much, garfield. Have a good week. Markets live editor garfield reynolds, joining us. Some breaking news on the poland story. We mentioned this in the headlines. We are getting lines from the Electoral Commission. The polish president duda wins by 51. 2 of the vote. This is make clear still a partial vote, though having said that, the results come from 99. 97 of constituencies. We reported over the weekend it postalake longer to get votes from abroad that might favor the challenger, but it seems as if most the votes have been counted and duda wins 51. 2 . What does that mean for relationships between poland, eastern europeans more broadly, and the brussels hub . We will talk about that with analysis from warsaw and we have a guest to talk about this in the next hour. Before that, the yield curve control debate carries on. The ecb meets to review measures to rescue the economy. Central banks discuss whether to intervene in bond markets. We will discuss whether we could see yield control in europe. This is bloomberg. Anna welcome back to the European Market open. Still some time until the trading day, 45 minutes. Thepean equities look to upside, 1. 4 higher on european futures. Week onmeets this measures to revive the economy but it stimulus plan isnt yet opening the door to yield curve control. Economists see some Central Banks adopting boj style policy and while John Williams says the fed is thinking about it, the ecbs chief economist philip lane ruled it out sometime ago. We are joined by the senior european economist at jefferies. Let me ask about what is going on with the ecb. This assessment from many investors that yield curve control is going to be adopted in other parts of the world but not at the eurozone. Would that your assessment . Absolutely. Europe is fundamentally in a different place from other countries. Bloc made up of 19 economies and yield curves, and it is difficult for the ecb to be targeting yield curve. The question is, which yield curve are they targeting, germany, italy . The spread between the two . Task that iss a far too complicated and doesnt need to be that difficult. I think the ecb has a pretty effective suite of policies. Form,qe in its present whether higher or lower, the monthly amount, it is just a much easier policy for ecb to pursue rather than yield curve control. Yield curve control. Anna we will wait to see what they have to say on that subject. We have a summit on friday to approve the Recovery Fund, the european Recovery Fund. Do you think that what is your expectation for when we will see that pass, how much the resistance the frugal four will put up and how substantial this will be . Marchel clearly, there is resistance. I think the frugal four are pushing back on the final details. We are not expecting a resolution this week. This is a process that will run and run. Realize most countries whatever is made of this, it. Ill probably not come before 2020 one for now, it is discussion of how you sped the assistance. Is it going to be loans, grants, a balance between the two . I dont think there is not much urgency to get this decided at the meeting on friday. I think realistically,. It will carry on. There will be positive headlines over the course of friday, indication positions are starting to shift. In terms of the final details, i think those will not come out until much closer to the end of the year. Spacewhat kind of fiscal do you think various parts of europe have and what does the term fiscal space mean at this point . Asseems as if our rulebooks to what would be acceptable seem to have been thrown out. What does fiscal space look like for europe . Marchel the answer is, we dont know because we dont know what is happening to budget deficits over the course of this year and into 2021. Gdpreason we dont know is sizes across euro area economies. That is an important theme to watch over the course of the second half of the year. Increased focus on country detergents, divergence. Something referred to in an interview a couple of weeks, the idea being a twospeed recovery in the eurozone. A shutdown across all of europe in april but clearly in terms of how countries are emerging from the shutdown, there seems to be variation developing already. We willse variations, get indication of what is happening to gdp growth or contraction over the course of 2020 and what kind of growth you will getting 2021. Based on those fundamentals of there, economies, from you will get an idea of what budget deficits will be over the course of the next two years and what will happen to levels of debt to gdp and from there, you can talk about fiscal space. A company potentially running a budget deficit of 7 8 this year has more fiscal space than a country running a budget deficit of 15 . That is a debate that will be developed in europe in the coming six months. Anna thank you very much. Stay with us. Marchel alexandrovich from jeffries stays with us on the program. More to come from him. Lets get to a related conversation, eu leaders meeting for their first in person summit in months to hash out the details of her recovery package. Germanys european secretary tells bloomberg that the frugal four will not stand in the way of an agreement. The European Union has to face an unprecedented crisis and that is why solidarity and unity is key for us. We have to send a clear signal to the countries which are most affected by the pandemic. It is never easy to agree on such a huge amount of money, but i fully agree with the Member States which expressed a very strong commitment to the future oriented challenges of the European Union. That means climate, digitalization, strengthening the rule of law. That is in our common interest. What we really need is the willingness to form a compromise. There is some tensions with the socalled frugal four, some Member States who want a degree of conditionality in terms of dispersing the funds. What do you think can be offered to the frugal four in order to get a deal . Michael i agree with the that wed frugal four, have to modernize the European Union and we have to focus our financial activities on climate, digitalization, rule of law, there ishesion, and room for maneuver but at the end, im rather optimistically will agree as soon as possible. As soon as possible means even next week or do you think this could spill into august . It is a special responsibility for all number states. We have to face an unprecedented crisis and need a Swift Solutions need Swift Solutions and an ambitious outcome of the negotiations, so i hope we can reach an agreement which is acceptable for all in july. Anna that was Germanys Europe minister michael roth speaking to bloomberg. Interesting he kept talking about the importance on increasing threatening the conversation of Judicial Independence will come up between brussels and poland into the next polish term because we have the more definitive result, the Election Commission saying duda is set to win the ballot, even though we dont have the exact results, but the Electoral Commission is saying the results will differ much. This looks to be certainly heading in that direction. Having lost 0. 4 against the euro this month, lagging behind emerging market peers. We will get details from poland at 7 30 u. K. Time. We will get more details in just 15 minutes or so. Coming up, jeffries european activities radar sees a pickup in sectors across the continent. We will be back with Marchel Alexandrovich to discuss the clues in the highfrequency data. Anna welcome back to the European Market open, still 40 minutes until the start of the cash Equities Trading day which looks as if it could be positive. Marchel alexandrovich from jefferies is still with us. I want to ask about the jefferies Economic Activities radar. The euro zone economy is at 62 of its previous level. Get a sense of whether this is gaining momentum are losing momentum at this point. The activity radar is something weve developed a couple of months ago, trying to pick up on the more frequent data coming out of the eurozone. Data comes with a long lag and monthly data is not something you can get on a weekly basis so we developed the idea of tracking electricity consumption, things like public transport usage and transport on the road. Trying to get a sense of how the euro zone economy is recovering and we been tracking that since the meaning of may beginning of may, there has been a change. Eurozone consumption is about 90 of where it should be for this time of year. Congestion on the roads is about 80 of where it should be this time of year. Clearly there is a recovery going on. Part of the story, trying to get a sense of the aggregate level and second, a sense of country differences and if some countries are outperforming others. The other kind we are picking up in the data, certainly data for needs to be a slightly higher level and indicators we are tracking for italy and spain. That could be an interesting theme to watch over the coming months. This doesnt pick up the whole story and we need to be quite upfront about it. It is picking up indicators we are used to following. Some of the fact ive spoken about doesnt pick up on peoples ability to work from home, for instance. That wont be picked up by our indicators. Those factors anna if you are not traveling to work but you are working, officially from home at high productivity levels, then that changes things. Europe. Twospeed is this about exposure to hospitality and tourism . Marchel i think that is part of the story. That will be the big develop over the course of july and august, trying to understand how much International Tourism is coming into spain, italy, and portugal, but as we go through september and october, it will be about the fundamentals of those economies. Are they able to keep pace with the recover we we like to see in germany, the netherlands, austria . That is going to be the question. If we move through the coming months, those countries are lagging behind, i think rating agencies will take focus on those countries. Anna Marchel Alexandrovich thank you. Thank you fors, joining us. This is bloomberg. Anna welcome back to the European Market open, 30 minutes until the start of the european cash Equities Trading day for another week, another monday. The political story in europe, polands Electoral Commission said the incumbent has taken 51. 2 of the vote in the president ial election. The campaign saw the highest turnout since the fall of communism, with almost all results now in, the election body of the Electoral Commission says the final result is unlikely to differ much. Lets get more with our executive editor for international governments, rosalind matheson. Duda looks set for a win. Is there anything that could change that . We heard about time being taken to count postal votes or votes coming from abroad. How close to the end result are we . Electionms the commission is ready to call it. They say it is unassailable, but at 51. 2, that is pretty close, within the line of error. They are coming out today to respond to those howing tensions at and tight the race was. The Election Commission says they are expecting not expecting a change a very much. We heard from the overnight we heard overnight from the opposition camp, indicating they think there have been some irregularities. They are signaling that already under the possibility of a Court Challenge or we could see protests emerged in the capital because that is where you

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