News from california yesterday and have been. ,olatility is a little elevated and we have got a really negative u. K. Two year yield. We were below japan a little bit early on. Slightly better retail numbers, but i have to say a bleak forecast coming out of the obra. Even the medium one i do not think it was positive. What are we going to be talking about . We will be talking commodities. We will chat oil and a little bit of copper and gold. Francisco blanch will be joining us a little bit on a little bit later on, and he is the head of the Global Commodities research at the bank of america. His dash cam weighing in on those commodities commodities. Fargo, citibank and jp morgan with jp morgan the outperform or. What stood out to you. It was something that one of our guests said earlier, validating the thesis that the strong get stronger, banks like jp morgan can use their skill to build up the dominance. In terms of how the shares are performing it is a mix. Jp morgan all the loan gainer. Jp morgan scaling back after jamie dimon was cautious. Wells performer was the worst performer. Does wells fargo was the worst performer. Jumping, at least at jp morgan. I pointed that out as one example. Jp Morgan Building on its dominant decision. Trading was an area of strength with fixed income currencies and commodities doubling. Trading revenue rose to 10 billion dollars. Another record quarter. 68 andcitigroup, investment great banking rose seven percent. They collected more fees as companies rushed to raise cash. Of course, the outlook is uncertain, and if government stimulus does not come through, loans could turn bad quickly. 10. 5gan setting aside billion to cover bad loans adding to the 8 billion plus it set aside. Under 8 citi just billion and wells fargo setting aside 9. 5 billion. The stocks have been in the cellar along with energy. Banks are down 23 and this is oft the waiting weighting financials. It has been down for several years and it trades below book value. As a of people see them dangerous to a dangerous investment. Guy we are interchangeable. So, scarlet as scarlett was saying. It has been fascinating, the calls. Analysis of what is happening in the economy is worth paying attention to. He is not exactly clear on what is coming down the pipe towards us. Jamie it was the same stage at the end of the corridor. Clear, we cannot forecast the future, we do not know. It is also very clear that you will have a much murkier economic environment Going Forward than you had in may and june. You have to listen to what he has to say. Citis call underway and wells is getting further. Johnny is joining us now to give us a cake. Jamie was getting cautious, what are you getting on the other call . If you thought jamie dimon was being cautious, the others are pessimistic. The outlook is not only getting worse when it comes to credit provisioning and the idea of the u. S. Consumer, but the Global Consumer might be in worse shape tomorrow than yesterday. The reality is starting to bake in, and citigroup is starting to voice concerns about the mexican economy, the strength of the consumer in asia and all of these u. S. Banks that have spread their wings globally to make sure that they can keep growing, and now the Global Economy is weighing on them. Both banks have said, citigroup and jp morgan, citigroup and jp morgan have said that you cannot expect these trading headwinds, were huge windfalls, persist to the end of the year. Jp morgan says to expect that half of these levels to be more to be normalized, and citigroup, which fell short was leaning on the fixed income trading revenue. Like we have been saying, a lot of that has come from the federal reserve, and if the u. S. Government does not step up in a big way, a lot of the headwind that helped the bank may not process. Alix thank you very much. I should point out that wells fargos call is underway and the ceo is saying that the asset cap is limiting their ability to offset low rates. It adds another headwind for some banks like wells fargo. Byare joined by columbia walter todd. Jp morgan is one of his top holdings. The rally for jp morgan as citi and wells fargo are lower. Do you add positions for jp morgan or are you holding it at holding your breath . Walter thank you for having me. I think with new money, certainly the account is open and new money comes in, we fill out the position we have and we have a very healthy weight and it currently. Certainly, for new money we would add i do think the volatility that you alluded to with the share price will continue, so you could perhaps get it a little bit lower and on a down day in the market in the market has a range point. You can pick your spots, but we like the long term outlook and i would agree with everything said around what jamie dimon said on the call. It was honest and sobering about the challenges that the economy faces, but i think they are planning for the worst, and their base case reflects a lot of that pessimism. Let us say the scenario is slightly better, do you think we could see some of the money come back, you think they will be disbursement down the road, they are being a little cautious, and maybe the economy is on a better trajectory . Walter i do, jamie dimon addressed that. He says if their base case plays out, which is fairly pessimistic and realistic, if it is better than that they will have significant Access Capital that they would hopefully used to buy back stock, which i hope we can do before goes up too much. It is likely not this year, but he said he would not rule out the fourth for that happening if we see a better than expected outcome. I do think the build and reserves that has been very aggressive for a variety of reasons over the past two corridors should start to moderate into the third and Fourth Quarter, and was said earlier, the tail and of market tail end of market revenue is not replicated, so you will have this straight off between markets moderating. The i am struckalix by ceo of citi saying that the World Economy will not reach normalization without a vaccine, and i am wondering does the value trade that one finds in investing and bank stocks, does it need government stimulus to make it a viable Investment Strategy . Yes, values have been a tough spot. It speaks to the need to have a barbell in a portfolio. I do think in the nearterm, you probably need to extend the access to Unemployment Insurance that expires at the end of this month, and have one more round of stimulus to get you to the other side of that bridge where there is a vaccine. I would note that in the base case, they are not seeing gdp in the u. S. Back to peak levels, even by the end of 21. I think there is a lot of bad news baked into the cake. The values outperformed in the past two days because that has been hit very hard. I think they were going to be fits and starts there are going to be fits and starts as we move into the Third Quarter economic reopening. I will ask you a slightly Bigger Picture question. Why do you want to own bank stocks . This is an area which is kind of uniquely limited in its ability to interact with shareholders, and i thought it was interesting that jamie dimon talked about stakeholders instead of shareholders. It is restricted by government in its ability to distribute money to shareholders. It has a restriction to grow via m a, are there better places to put their money to work right now rather than the Banking Sector . Walter it is a fair question. The holding at jpm and financials in general are part of a broader barbell strategy where we have exposure to other areas like industrials. We do see value in some of the bank stocks, collectively, financials is only about 6 of our portfolio, so the broad exposures beyond financials, because there is some of the challenges that you highlight, but we do see value in some of these key franchises like jpm, and bank of america, we think the dividend is safe unlike some other Financial Institutions that we have seen today. That is really kind of the thesis within a portfolio context. I understand your question, in isolation why would you want to own any, in a context of a broad portfolio, that is what i would say. Alix is there one value stock that is on your shopping list, like i will look at earnings and i am going to pull the trigger . Walter yes. We like the things that we hold. I would say a company like ray has been raytheon particularly beaten up and it might have good value. Here that is one that we own currently. Is one that we own currently, and that comes top of mind. Guy we really appreciate your time, and thank you for talking us through your vision of what is happening at the banks. The calls are still happening, thank you very much. John shrewsberry, wells fargo see cfo at 4 00 p. M. Eastern. What do we have coming up for you on the show . The u. K. s lackluster growth is a subject of attention. We will look at the recovery and we will talk to the c l economist and a look at the euro, through 114 to the dollar. This is bloomberg. Guy live from london, i am guy johnson. This is a european close on bloomberg. Office of budget responsibility posting three scenarios. Gdpr the downside scenario, could be as high as 14. 3 in 2020. We have had gdp data out, which to be honest, most expectations missed. The retail numbers were better and we also have a u. K. Twoyear that is in negative territory. And traded below the japanese two year. Joining us is paul dale. First up, let us talk a little focus the opr forecast. Do you think there is a growing possibility that the downside scenario from the u. K. Economy might emerge . Paul i think that has been a risk for some time, will attempt br our own forecast, the o scenarios are as downbeat as our. That showeddata that the u. K. Recovery seems to be slower than that in the euro zone in the u. S. , and that is even before the u. K. Has had a lot of second flareups that california is experiencing, and melbourne is experiencing. I think there is a greater concern that the u. K. Is already lagging behind and will only fall further behind, perhaps of the virus spikes again in the united kingdom. Alix does that justify where we are in the yield picture, where the two year yield is lower than what we are seeing in japan. Look at the curve and everything out six or seven years as negative. Does that make sense . Paul it makes sense when you think about the Economic Outlook , which is reasonably poor, and it makes sense when you have a proactive bank of england. We think the bank will increase its quantitative easing by 250 billion pounds, and the economic the is probably giving market more food for thought on whether the bank will in fact pay Interest Rates below zero for the first time. That does makes sense why the yield is so low, but it is interesting that that has happened at a time when the fiscal watchdog is warning that dealt that that could balloon in 50 years305 gdp time, so clearly the markets are putting much more emphasis on the nearterm Economic Outlook, the outlook for Interest Rates rather than the long or mediumterm physical out. Outlook. Absolutely. That would make life difficult for the treasury. I am curious, the obr painting a bleak forecast for what happens in the autumn when the furlough scheme runs off. Are they underplaying the potential for a pickup in unemployment . I am still struggling to get my arms around understanding how it will take properly from what i hear. A lot of firms will probably have to lay people off. How can we manage our way through this process . Do you thing that tapering is the right way to go . Paul it is certainly better than having a cliff edge. I would have a few rolling slopes to climb rather than one big cliff, and that is what the government has put in place. There is probably no perfect way to do this, there will be job losses. For work for what it is worth, they have risen from 4 to 10 in the best scenario. 12 is the middle scenario. 13 in its worst scenario. Frankly, they are all pretty bad scenarios. We are slightly more optimistic, we have the Unemployment Rate at 17 at 17 peaking next summer. Wings will not be quite as bad the obr expects, but not let us not beat around the bush. A badnemployment rate is result, and i think that is one of the reason that the u. K. Might be slower to emerge from the crisis they on some other economies whose labor markets might prove a little bit more resilient. Alix thank you very much. Ahead, bank of americas renewed confidence in oil demand. We will break that down with Francisco Blanch. Wells fargo ceo speaking on the call does not seem particularly positive when it comes to the outlook, saying that the issues with the fed is preventing real offset on loan growth, and talking about debit card spending returning to precovid levels and still down. This is bloomberg. It is time for the Bloomberg Business flash, a look at some of the biggest stories right now. Will ban why away tech Huawei Technology by 2027. Isver dowden says that it about longterm telecom security. President trump has pressured the u. K. , and the prime ministers decision to impose the band as a major reversal from his earlier decision. Virgin Atlantic Airways has secured a one point billion dollar rescue, a major victory for richard branson, whose airline could have gone under. Were and davidson will provide about 460 million in funding. Urgent election Virgin Atlantic will get 1 billion in relief. Lockheed martin is the primary contractor. China previously threatened to sanction American Companies over arms sales to taiwan. That is your Bloomberg Business flash. Thank you very much indeed. Is ongoing and definitely worth paying attention to in that is happening with that company. Charlie sharp making it very clear that we are going to see aggressive cost cutting coming through at the business. He is pretty blunt about it. Layoffs. Management we will get a series of the situation that wells is bad. He has known as a cost cutter and he has big work ahead of him. Alix and bloomberg reported about wells fargo cutting jobs, so there is something coming down the pipe, and that the virus will negatively impact earnings. Also, i am super interested. Underway,oup call is talking about hong kong. He said this you had the ceo saying you cannot just look at hong kong, there are a lot of other issues. We will follow the rule of all a rule of law, it felt like they were skirting the issue. At some point you think that u. S. Companies will have to choose between china and the u. S. Yes, and you wonder whether it has make made that decision. Big decisions coming up for the banks. The new security law puts them in a bad position. If sanctions, and after the united states, the u. S. Banks will have to abide by those, but that put them in a difficult spot. In theory, they would be in violation of it. A really difficult spot for the banks. I understand the need to prevaricate therefore, and figure out what exactly will be happening. I think everybody is trying to put themselves in that position. European close will happen and we will have the mom the numbers in a minute. Guy european stocks wrapping up the day. 30 seconds away from regular trading coming to a close. Stocks pushing higher over the last hour on both sides of the atlantic. The price action yesterday fairly grim. As a result, what we saw this morning was europe coming in, fairly negative start. A tight range we are trading in. Pushing up a little bit. I talk about session highs. I think that is a fairly pointed story to be talking about. These markets are struggling to find direction after the price action yesterday in the united states, which took some of the tech stocks down sharply. Where we finish today is really important in terms of the price action. At the moment we are largely positive. In terms of the individual markets, tltros doing relatively well. We are seeing the oil stops trading strongly. Some of the things helping out the london market, down. 1 . On the continent, the numbers are more ugly. The dax down a percent, the cap down the cac 40 down 1. 25 . Some of the tltros doing quite well. Despite what we are seeing in terms of the u. K. Government about huawei. Tech is down. Health getting knocked. Bp doing relatively well. Sector tradinggy strongly. Travel and leisure, some of the cyclicals getting knocked lower. Insurance, oil and gas the best performing sectors. Lets show you single stop names. Single stock names. Bp trading ok. You wouldve thought the huawei story would have a meaningful impact. The stock would be concerned. Interesting to see erickson trading softer. You would think they would be beneficiaries of what is happening. Not thinkying he does it will affect their company. Hello fresh coming out with decent numbers. I wouldve thought the hello fresh numbers would have been received more positively today. Good news already baked into the share price. That has company benefited from covid. On a day where the markets are taking a more cautious line, not seeing that kind of stop pulled through. Alix in terms of the commodity market, oil is grinding its way higher. Wti over 40 where copper has taken a break, down over 1 after a monster rally. Lets get more into the details with Francisco Blanch, bank of America Merrill lynch head of commodities. I feel like the market today is faced with two things. One is strong imports into china on the copper side, on the oil and, on the iron ore side, on the flipside continued potential shutdowns in the u. S. And potentially weaker gasoline demand and refinery utilization. How do you understand these different narratives . One of the biggest stars we will have from covid 19 is that the gap between the u. S. And the chinese economies in terms of gdp size will close at a faster rate, which is the major geopolitical shift and also has huge implementations huge implications. Chinas doing a lot better than a majority of emerging markets in terms of controlling the virus. If you look at emerging markets like brazil or chile or peru, they are not doing as well as china. They are doing poorly. Mexico as well in terms of controlling the outbreak. We are having disruptions on the mining side, which are supporting industrials, and china, we see