Transcripts For BLOOMBERG Bloomberg Markets European Close 2

Transcripts For BLOOMBERG Bloomberg Markets European Close 20240712

Down nine basis points. Europe is jumpy holding onto positive territory. Who knows . Brexit conversations throughout this week. Coming up later in the hour, we are going to speak to gregory poland of the mayo clinic to get his perspective on the latest vaccine trial results from astrazeneca and pfizer. What does it actually mean for the market . Eu leaders are reconvening about premuch now for stimulus negotiations in brussels. The goal to seal the deal signaled that they are ready to agree on 390 billion euros of funding be made available. German chancellor Angela Merkel sounded optimistic earlier. Night, wealks last worked out a framework for possible agreement. Perhaps today an agreement will be made. Is underground for us. You have been covering this from the beginning. We understand there is a lower provision for grant and loan guarantees. Are they going to have people checking . Is there going to be an Advisory Board . What i would say is the mood has changed over the past hour. We understand the meeting that was supposed to happen in just a few minutes has been delayed until 6 00 p. M. Were going to have to wait another hour for the summit to begin. Rooted weark put the question to him, what is it exactly you want . He told me clearly we want to have this rebate. We want to have this special break that could potentially stop payments to countries like italy if the money is not well spent. He did not confirm the figure, the 390 billion euros, could seal the deal. There is debate as to whether the 390 is good enough. There is a lot of uncertainty. It is unclear as to whether a deal is imminent because the mood has changed over the past hour. Francine do you get any sense as to what would put every thing on track . It is complicated because it is not just the grants, which the Southern Europeans had repeated they didnt want to see cuts below 400 billion euros. That is 100 billion down from the initial plan. The grant is a huge issue. We do not have a figure on that. If you walk her this plan so much that the dutch are ok, that could become problematic for the italians because they cant take anything that looks like a troika and they cant be lowballed too much. Otherwise, this turns humiliating. It is unclear at this stage what could change and whether we are going to go back to negotiated amounts that will probably delay a deal further. Francine thank you. Joining us to talk more about this is mujtaba rahman. Thank you for joining us. You have great pieces. Your latest one is basically laying out more optimism that maybe certainly yesterday, the most contentious issue is the governments arrangement for the Recovery Fund. Will they be able to find an agreement . Mujtaba bigger than the question of volume is where the money is cut from. 310 billion,is which makes up this vehicle, that is basically going to dole this money to Southern Europe over three to four years. As long as that remains intact, i hope a deal could be done. Aat i hear in brussels from team close to the European Council president is his proposal will bring close to that 310 billion. The jury is out, it is going to be difficult. It is likely we are going to see the emergence in agreements that allows one Member States to kick this to eu leaders for discussion. I think that will ultimately be the price of a deal. The interesting question is what happens at the leader level when there is discussion . Does one country or one leader then get a veto over disbursement or not . That is unclear. What is clear is the leaders are going to get to have a conversation. What is unclear is how that leader discussion will be governed. Francine lets play the if game. What if you say three inch or 25 billion euros of grants thats a good side. The bad side is one member can kick it up the leaders and veto it. Is that a good deal . Mujtaba europe is still crossing the rubicon in terms of cooling risk. That is a big deal. Angela merkel has crisscrossed all over a number of red lines in order to deliver this deal in cahoots with paris and brussels. If you get an agreement, that is a big deal. It means every year there will be a little drama around the time of disbursement. That is part of what it means to business in europe, frankly. I do not think that fundamentally subtracts from the overall positivity of landing an agreement today or tomorrow morning. Or more longerterm, philosophically, is this just a fight of the francogerman alliance against northern countries . Is this about taxation . Really europe speak with one common voice . Mujtaba i think the plan is going to enable substantial borrowing at the european level, doling out that money as loans over the longterm. It is highly redrew distributed. It is highly redistributive. These are principles that would have been met with political opposition in germany even two months ago. The only reason they are being run over is because of the nature of the covid crisis. Given the magnitude and the nature of what we are talking about, there was always going to be politics involved. Folks in brussels suspect needs to do what he is doing to claim a win. He needed to run three to five days so he could go home and say to his parliament he fought hard. On substance, he will win quite a lot. Emergency brake, bringing down the volume of grants. These are all big wins for the dutch and the northerners. They will be able to claim as a win. It does not mean europe is now talking with a collective voice. The nature it is just the nature of decisionmaking. Francine poland and hungary have to go home too. Where are we with rule of law . Mujtaba i think that is norways. I think that is noise. If you look at the press conference, he is effectively preparing the ground for a climbdown. Explicitly blame the dutch for his inability to of rid of any mechanism rule law related or otherwise that would give the eu greater oversight over his territory. At the same time, i dont think the mechanism the eu agrees to is going to have teeth. France and germany have not been aligned on the question of how to deal with rule of Law Violation for the last 25 years. I do not think now is going to be the moment they align because they both agree getting an agreement on the package is more important than a mechanism that allows them to stand up to what the polls are doing. Those rule of law concerns will be sacrificed on the altar of securing a broader agreement. We are not too concerned about the hungarian situation over the polish situation. Have what Francine Francine what happens if we dont have an agreement today . Does it hurt the political standing of the italian Prime Minister that has waged a lot on this deal . Mujtaba first, based on all of the advice i am providing to market participants, if you do not get an agreement in the near future, there will be a market reaction. The longer the meeting is to late, i think the more probably the more problematic that reaction will be. Leaders have now been discussing for four or five days, it is going to be hard to reconvene in a week. If they dont do the deal tonight or tomorrow, youre looking at a longer delay or, probably august or september. In the intervening period, this will hurt. Has invested heavily in an agreement. Any deal that is diluted or not achieved will hurt his domestic standing. The foreign secretary in the house of commons said they would are we going to have a trade war, u. K. Versus china . If we are do not know going to have a trade war but it is clear that you do have tremendous pressure in parliament on the government to secure and articulate and adopt a position visavis china. Obviously we have seen that with huawei. I suspect we are going to see that going forward. G,u will have heard of the er vicki constituency the key constituency pushing parliament into a hardline position. Now we have the China Research group effectively operating in the same way. Coolerin for a period of ties between the u. K. And china. I suspect that will impact all elements of the relationship. Alix great to catch up with you. Mujtaba rahman, good perspective. To thee political side market, the euro slipping back from four year high. Atre going to take a look market obligations of the stimulus package. Uber this is bloomberg. The government leaves and the people of the country are left with the burden of debt. That is a cycle a data cycle we have to get out of. Canpoliticians and leaders benefit from the immediate loan, but it is hard for the people to repay that. Speaking tomopping bloomberg. That dynamic playing out here in the u. S. And europe as well. Jordan rochester joins us. As we grind forward to a potential deal with european Recovery Funds, what is the Downside Potential . Jordan there is actually more optimism than pessimism for sure. Investors, pension funds, insurance funds are long on the euro. That is a worry for anyone who wants to think about buying your on the back of a deal going through. The number is pretty big. The level of positioning we havent seen for a long time. I am not worried. I currently have my long euro trade on. Emergingmarket traits i think just because folks are optimistic doesnt mean it is the end of the francine what move zero if we get a stimulus deal today . What moves euro . Bigan the deal itself is for medium and longterm. A lot of it has been priced, we have been talking about this for months. If the headline hits that a deal has been agreed, i do not think euro is going to move too much because it is a matter of timing. It has comepened is earlier than expected. We did not expect it to happen this weekend. We thought this would go before summit in august rather than july. Good news is it has come earlier. Medium term, you have a common asset. You have a sense that european leaders will come together whenever there is a crisis and do right amount to avoid risks. You talkper long run, about european rate spreads going from near zero between each other like they did a long for ago in 2004 the outlook longterm European Assets is made more optimistic. Short term, what will matter is growth expectation. I do not think this will fundamentally change that. There are things driving that expectation view, which is the virus. Alix the idiosyncratic versus the macro. I was talking with david blum, he is looking for u. S. Dollar resilience. This is what he had to say about the euro. It is either risk on risk when one thing only matters in financial markets, you swing with that. Sophisticationhe committed idiosyncratic moves you get historically. That is something we have seen as outside of the box. It will go back to return. Alix do you degree it will go back to risk on risk off . Actualou think the things happening can move the material . Jordan i have to disagree with david. Euro has been trading idiosyncratically the past few weeks. I do not think that is going to change shortterm. The Recovery Fund does have aspects to it that means there will be european inflows. Even during risk off, we will see the euro not appreciate as much as the pound. Is goinge, i think it to be more resilient to risk on risk off. It is going to be more about growth. Chart ison risk off not working for the euro right now. What is working is expert patients of growth versus the u. S. European growth expectations have improved, whereas the u. S. Have improved as well, but not as much. That ties to the resurgence of the virus, lockdowns in the u. S. , and also the lack of mobility statistics. Unlike european data, it looks like this as normal for european commuters. Transit numbers are back to normal. Dynamic ist growth more important dan risk on risk off. Francine i was looking at some of the european emerging markets, for lack of better words. They are kind of moving on the hope of this eu Recovery Fund being signed off on. What happens once it is done . What will move those currencies . Are a those currencies high version of the euro. If you get good news for europe, those currencies outperform. Also, whats going on in terms of confidence for investors, will they hold back because of the u. S. Second wave . What is joe biden mean for the outlook of the dollar . A lot of factors are pushing year. Igher this those currencies should outperform. Thee will be the idiosyncratic story, but for now, the topic is large, the global pandemic. Willratic stories matter for a day or two, but what is happening in the u. S. Is a bigger driver of currencies than domestic stories. Alix to this point, once we get over this hump of the euro deal and u. S. Stimulus, what is the next catalyst for the fx market . The intoet past august. Weve got the Democratic National convention, republican as well. Who knows how many can attend . We are still waiting for joe bidens Vice President ial pick. He has alluded to picking a lady, but we do not know who it is going to be. Harris . H warren, kamala that will really matter for markets. If we see a farleft candidate, that comes joe biden is more left of center than many folks might assume. Stockight see technology if you see more talk about regulatory reforms. Once weld be a catalyst know that information. We will see how polling goes for joe biden and donald trump as well. Then we have got second wave risks. Would it comes to autumn, whether we see second waves pick up, what kind of lockdowns will be see . The big question is do we get the same response from Central Banks and policymakers . In the u. K. , furlough schemes are coming to an end. You will see a massive pickup and unemployment in the u. K. Just as the risk of second wave might be arriving. It is going to be a tricky winter if the government sticks to the furlough scheme. If they dont and i am talking more broad, fiscal policy makers, if they say we have done enough, it is going to be tough. Alix jordan rochester of nomura. Treasury secretary Steven Mnuchin speaking at the white house, saying he and mark meadows will be reaching out to democrats. He thinks they need a technical fix to unemployment. Not sure what that means, but says they are looking at 1 trillion in the next stimulus, far below what democrats want. President trump says he is negotiating with democrats on a plan for small business. Sticking to his payroll tax cut. That is a redline for him. We will update you. This is bloomberg. Francine a look at some of the biggest business stories in the news. Ritika talks and a potential sale of its u. K. Grocery unit as a potential multibilliondollar deal was put on hold amid coronavirus pandemic. Bloomberg reported that private equity firms tdr capital submitted their for earlier this year. Chevron has agreed to by nova energy for 5 billion. The deal would be valued at 13 billion when you include data. This would be the largest takeover in the industry since it was rocked by coronavirus. That is sure Bloomberg Business flash. Alix we are also following the 200 billion dollars is going to go public in hong kong as well as shanghai. I she was and like look, the market is going to be open. This will be a good indication of that. Francine this is also interesting given what it is. This is a Parent Company of chinas largest mobile payment company. It is interesting because it will pursue this deal in hong kong, but also their Shanghai Stock Exchange is star board, a new place just for it has changed from this online a bidrom food delivery in to get back shoppers lost to tenzan. It is kind of nittygritty fight at its best. We will see if they get the valuation and what it means. To thelmost headed european close, lets take a quick look at markets. Overall, you are seeing a good rally in the equity market. A bit into the bond market as we edged toward a potential deal for the euro group. This is bluebird. Alix the european trading session just wrapping up. Heres a quick check on where we stand. Overall indices solid in the green. The ftse off by about. 5 . The dax 1 . He also have italian equities up 1 . It will be tech and health care leading the way. I want to give you a check in the cross as it landscape. A powerful rally in the bond market across the board, but particularly in ptp. Switch up the board. You can see what i mean. Yields in italy down eight basis points. The spread between the two fell to the lowest level since march. The question becomes how much tighter connect at how much tighter can it get on any deal with the European Union . Kind of jumping around. The same question. How much more upside if we wind up seeing a deal . Francine of course, the big story we had over the last two hours is the Coronavirus Vaccine from the university of oxford with astrazeneca showed promising results in early human testing which is why we are seeing health care up. Technology is the biggest gain or, but he also have construction property on the up your you also have construction property on the up. Astrazeneca giving up early gains so there is caution on the prospects. It was up 10 , then 2 , now it is up 1. 2 . Italy this is one of the big italian banks. Natixix trailing the market after the short lived takeover speculation was shut down. A couple of the stocks we are watching out for today. Alix muted reaction. From more perspective on global vaccine rates, dr. Gregory poland joins us. When we get good news about a vaccine, the markets go crazy and they get excited. That did not happen today with the exception of the move in astrazeneca. Can you give an insight as to why that might be. Is there anything wrong with the astrazeneca news, or is there complacency . The markets are rational in my viewpoints. We have gotten good news. We have gotten reports on three of the front runners. All three are showing remarkably Good Progress and important data that will leave each of them into phase three trials. Pfizer, oxford vaccines will go into phase three trials. The important thing, and people may be beginning to understand is immunological data alone is not enough, that is what the markets are reacting to. What we need is movement into phase three trials to tell us are people protected against . Xposure and if so for how long francine i am not sure the market is 100 irrational. The market is saying we have to be cautious about the prospects of this. To some ofd speaking our folks and Bloomberg Intelligence on the antibody front, may be the pfizer trial was more promising. Is this because we are just

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