In Wealth Management, we had a very strong performance, plus 70 in asia, plus 16 in europe, 3 in switzerland, upsetting the u. S. , where we saw the effect of net recurring fees being based on the previous quarter with an impact in our profits. Was there any sense of caution in the clients . How would you describe your client activity this quarter . Sergio still very active. More of a wait and see, starting to think about the second half of the year, which is full of events which potentially will trigger a change in investors sentiments. The geopolitical situation that we all know about the u. S. And china is going to the next level europe,ituation in which as we speak, is probably resolving but is still very complicated. Last but not least, the u. S. Election. According to our clients, 61 of our clients are thinking about changing their asset location post the election no matter who wins. Manus do you think that is holding them back, the election, overtraining and trade . Over china and trade . Sergio the conviction level of clients in the market is not something typical, but it is not to similar to what we saw in the last few years. Low conviction, and clients keeping their Asset Allocation i expect this to change towards the end of the year. Manus does it concern you that it takes an explosion of equities to drive these clients to actually really shift years . Heres . Gears . Sergio people start to look at opportunities to step in, to build up positions. Manus your Global Outlook has 70 on occasion to base case and 30 crisis. Talking through your basic scenarios, it sounds right now without a vaccine. Based it is the factor on severe economic contractions in the next two quarters with recovery, although not for the same extent that we will see out of the slowdown in 2021 and coming into 2022. The 30 is severe recession. This is really the one that we need to put in our models in order to have the prudence if necessary. Hours,in the past 24 vaccine and volatility have combined. The narrative has shifted. Could a vaccine deliver the kind of alpha for markets in the second half that dislocation that we have seen in the first half could this vaccine change the narrative . Sergio the vaccine could probably be a better hope in my point of view at least. Midterm, notthe the short term. Maybe there is a little bit of rebound. It is the impact for the next 12 months. In any case, i think the reality is that what we will experience after this crisis is that Many Companies will be able to make it and go through and be probably Even Stronger and be wellpositioned for the future, and the one that we are already struggling but the crisis probably will have a hard time to recover. This is where we will see probably a second leg of the economic consequences of the crisis being played out. Scenario, areat we underpricing, under assuming the level of defaults that will come globally . Sergio cat remains to be seen, but it is fair to say that complacent. In quite d say at there is not a lot of, if you look at equity markets, even credit, which were quite a good investment, as we spoke last time. Spreads, thet spreads have been coming in. Therefore, there is not a lot of room for many negative surprises going forward. Matt that was the ceo of sergio ermotti. European leaders have agreed on a landmark stimulus package that will see the blockage of 750 billion euros of joint debt. The deal, which came after four days of tough talks, is a big win for the french president , Emmanuel Macron, and maybe even a bigger win for Angela Merkel, who drafted generally outline for the proposal in may. They still demanded a rebate in order to vote for it. The Emergency Fund will get about 390 billion euros of grants and 360 billion euros of low interest loans. Maria tadeo joins us now from brussels. Who here benefits most . Know, thel, you beauty of a european deal is that everyone is claiming it is a great victory for their country and a very good compromise. If you look at the overall fund, you are looking at 750 billion euros, grants and credit. That will be delivered to countries hit by the coronavirus. The amount of money paid out in grants is 290 billion euros. That is down from the initial proposal that is 500 billion euros. If you look at the actual allocations, not a lot changes for countries like italy and spain. They are going to benefit the most. We have a break down now. The Italian Government says they will be getting 82 billion euros in grants. The Spanish Government saying we are going to be getting 72 billion euros in grants. Both governments claiming that this is the best way to restart their economies going forward. Giuseppe conte very interestingly speaking, saying that this means that the esm is moving away, that he is not intending on tapping that. The flipside of course is that the frugal four will tell you they managed to get a real stress on reforms to make it clear that this money has to be used for reforms and they are getting a bigger rebate for the next seven years. The german one will stay flat but Angela Merkel in her press conference just an hour ago suggested perhaps this was ultimately the price of a compromise. It is a victory for merkel and macron who crafted this plan and took it to the commission for the european council. I suppose relief and no regret is part of the story here. Exactly, and look, when you listen to macron, this is the french line, saying some things really have changed in europe, that the foundations of europe have been changed by this decision to go for collective debt, to have the European Commission cap targets and distribute those grants to countries badly hit. If you look at where we were a few weeks ago, it seemed that this was going to be your typical bailout. I give you cash, you have to engage in reforms. There is a strong rank component to this even though it has been watered down. The flipside, the beauty of a european deal, is the fiscally conservative countries will tell you this was just a oneoff for an unprecedented crisis that no one could have predicted, but again, this is how it works in brussels. Everyone this morning claiming victory. Thanks very much. Maria tadeo on the ground in brussels, covering this all night for many nights in a row, actually. It was almost a record negotiation. I think maria said earlier if it was 27 minutes short of an alltime record for europe. Up next, can the s p 500 extended its 2020 gain to the rally . We will put that question to our mliv managing editor, mark cudmore, next. This is bloomberg. Anna welcome back to the European Market open. 50 minutes or so to go until the start of cash equities trading. The Asian Session up pretty strongly and u. S. Futures continue to point to the upside. Lets get a bluebird first word news update. Here is laura wright. Laura e. U. Leaders have reached a landmark deal on 750 billion euros of stimulus. It will see the block issue joint debt to help Member States tackle the economic downturn. The package includes 390 billion euros of grants and 360 billion of low interest loans. The agreement comes after more than four days of negotiations and requires unanimous approval. Some lawmakers are looking for the u. K. To take an even harder line on china and they will use a visit by the u. S. Secretary of state, mike pompeo, to put pressure on Prime Minister boris johnson. Sources tell us the mps want johnson to impose sanctions on chinese officials over human rights abuses. One mp is calling for a strategic overhaul of the u. K. s relationship with china. The increase in virus cases is slowing. That is as a surge in infections hits australia. Theres promising results in early human testing including a vaccine trial from Oxford University and astrazeneca, but they raise the possibility that two doses may be needed, not just one. That doubles the number of jabs required. Jeff bezos added 13 billion to his network yesterday. That is the biggest single day jump for any individual since the bloomberg billionaires index was created back in 2012. Bezos his wealth is up more him theis up, making seventh richest person in the world. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna, matt. Matt laura, thanks very much, laura wright in london with your first word news. European and u. S. Futures are pointing higher on the news that a landmark e. U. Stimulus deal has passed, and also on progress for a coronavirus vaccine. Lets get into the markets with mark cudmore, our bloomberg mliv managing editor in singapore. Let me first ask you about this e. U. Deal. It was watered down in many ways, even germany demanded a rebate to vote for the plan that it crafted. The markets had already priced the sin. In. Ly, price this surely this is not pushing things higher. We have confirmation for equity futures. You are kind of right that the euro has been completely nonplussed. If anything, it has eased a little bit. This was the expectation in the short term. People are going to find the kind of slight problems, the criticisms, the fact that it is not as big as was hoped for a month or so ago. I think ultimately, after kind of a shortterm negativity and i expect that could last to the rest of the week, the Bigger Picture for the months ahead is this will lead to more inflows into the european union, antieuropean assets, and it will be a real benefit for the euro because this is something that was completely unimagined three months ago, and yes, we have not delivered the total hopes and dreams of merkel and macron but it is so much better than we could have hoped three months ago. It is a really impressive package. It opens up a joint debt, which is groundbreaking. I think it is massively positive in the longerterm, but not in the short term. Yes, so better to travel that arrived and all the other cliches. Let me talk to you about tech stocks because theres a lot of expectation about this center, the resilience of tech during the covid selloff has been incredible. Looking at the nasdaq, the highest and some 20 years. Does all of that carryon the other side of earnings season, do you think . Mark all these parabolic momentum trades are impossible to call the end of the dotcom to the people lost their livelihoods. These are momentum trades that are not sustainable in the same way the dotcom bubble was not sustainable and did come crashing down but many people called the end six months too early. We have the hurdles of those, you know, big tech earnings, and they have to get through them. I dont think this will be the moment that collapses that tech bubble. That will still go on further. There is another big difference in the dotcom comparison. A lot of these are solid companies. They are making profit and earnings. Most but not all of them. Therefore, the valuations are stretched. The underlying fundamental story is much more positive than it was 20 years ago. Matt what do you think about the possibility of a vaccine . I know it is a difficult question to ask a market strategist, kind of an epidemiologist question, but obviously, the market is trading on this. What does the market expect . Mark i think market people are just playing the aunts, being told. A number of vaccines are getting through to the phase three level of testing and they are doing many of those phases simultaneously. There is a number of different hopes that produced positive results so far. Many of those vaccines are at a stage where normally one and eight get through production but we already have four or five, which means there is a lot of hope that ultimately, he vaccine will come through. The debate is how quickly it can be how quickly it can get to many people in the market. Most of the market, whether correctly or not, is convinced we will have a vaccine that is functional in the next few months. That is very different from saying that hundreds of millions of people or billions of people around the world who really need it will get the vaccine, will get the right dosage, and it will be affordable and efficient. That is what the market is really negotiating about. Anna thanks very much. Mark cudmore from our markets live team. We were talking about the reaction we have seen in markets or lack of it in some asset classes, to the summit. The italian bond year spread false to the lowest since february, the lowest since march. Incrementally, they are pricing in news coming out of brussels even if a lot of it was predicted. Coming up on the program, position for a recovery. We will talk with the head of European Equity strategy about why he is confident on an economic pickup and when he thinks the e. U. Recovery plan to Recovery Plan is radical enough to wrestle this is bloomberg. Anna welcome back to the European Market open. 40 minutes until the start of equity trading in futures are pricing in a jump. Agreed toeaders have a landmark stimulus package that will see the e. U. Euros of support to help fight the coronavirus downturn. After talks through the night, the bloc reached a compromise. Andbillion euros of grants, three to 60 billion euros of low interest loans 360 billion euros of low interest loans. What difference does this package make to your assessments prospects . Next yearth is, it is and will peak in 2023, 2024. For us what matters is what will happen in the near term. It will have very little impact on that. There is an organic Recovery Process that is already underway. That should be enough to further lift growth rates in the euro area. The crucial measure of business confidence, the pmi, as translated to another 10 to 15 for european equities. Matt is this a list, sebastian, that you saw happen first in china or asia, and is now happening in europe . And you expect to happen in the u. S. . As far as i can see, the virus shut downs really hit china first, then europe very hard, and now, they are sort of hitting the u. S. In different places. Is that how the recovery is going to work as well . Sebastian i think that is a great way of putting it. China has been our playbook throughout this period so we saw how lockdowns were at two months in china. The growth rate for the virus slowdown to 1 . China started to lift restrictions. Into rebounding growth momentum. We follow that playbook. In china, the pmi is close to 10 year highs. We expect that to happen in the euro area. In china, we have seen a tremendous jump in Industrial Production which is back above the precrisis levels. In europe, it is 20 below. As recoverythis potential sitting in the pipelines, waiting to be realized and that is effectively what we have positioned for. The underlying recovery story, picking up in terms of the pmis, i know that you see the pmis seemingly as important as ever. You are watching in the momentum in those pmis. We put together a chart that shows the pmis sixmonth change and the way that ties in with u. S. Bond yields. Do you think we continue to watch this pmi data and it is a useful indicator of where bond yields are going to go . And then maybe where stocks go . Sebastian i think that is a great summary. I can see it on my screen. It does not look all that impressive. If you take a long time history, 20 years, and you look at the rate of change in the mi versus the performance of equity markets, the performance of credit, the performance of bond yields, even individual sectors like banks, pharmas, utilities, it is the best determinant, the best expiratory factor for why these rates move as they do. To give you one case in point, the pmi trend rose by 20 points. That immediately triggered a 30 rally in banks, 100 basis point increase in u. S. Bond yields, and 50 rally in european equities. A are now just getting into period where the rate of change in the pmi goes from deeply negative into positive territory. This is very likely that the pmi will hit a new alltime high which means extremely positive momentum in the pmi over the coming months. That implies for the equity market upside. Finally, for bond yields to rise, outperformance of the cyclical sectors like banks. Matt you are talking about cyclical sectors here. We have been talking about until now the market as a whole and how it is affected by the shutdown and a reopening or a recovery. Is there something that you think is fundamentally going to change preand post covid in terms of sectors . Are there sectors that are going to be less interesting from now on or sectors that are going to be more interesting from now on . Sebastian i think that is a great question. Effectively, what we are is thetly for historical macro relationships fault. There are a couple of question marks. They lack the recovery we have seen so far. As we have seen in china, once it continues to normalize, flights can take off again. Because they have not really moved yet. They have the most rebound potential. There is a real question of will these old macro relationships hold . We are positioned for them to hold. A secondary big question mark is the energy sector. You have seen oil price more than double from the trough. Energy has lacked that recovery. Theres further upsides for the oil price because we expect the dollar to fade. It is a powerful driver of commodity prices. We expect that to lift the energy sector. The question is, has that relationship broken now . It is another thing we have to focus on. Anna Sebastian Raedler from bank of america stays with us. Thank you so much. We will get further thoughts from him shortly. Coming up, early promise. The results were not enough to convince all in the market. Why he is underweight pharma, next. This is bloomberg. Anna matt 30 minutes from the start of cash trading across europe and in the u. K. Futures pointing higher this agreement. Er an eu marcus seemed unconvinced by astrazenecas vaccine trial despite more promising results in earlystage human testing, the vaccine being developed by the company and the university of oxford showed increased levels of protective neutralizing antibodies and immune t cells that target the virus. But while astrazeneca rose as much as 10 in london trading, it gave back most of those gains after the details of the results were published. Thesee seen basically roller coaster rides in a lot of different pharmaceutical companies. What do you think of the sector as a whole, the industry as a a time, we areo smack in the middle of the time where everyone is so focused on every little detail that c