Of more support. European futures point to a negative open. A Company Agrees to buy its pivot toa deal as they innovative therapies. Good morning to you. Welcome to the European Market open. Just under an hour away from the start of cash equity trading in europe. Lets get to the futures picture. This is what weve got for you. Its interesting when you cast your mind specter friday. Friday straight and did with a minds back to friday. You might expect to see more catch up in the futures story for europe. Futures,or the bottom European Equity futures suggesting more down. Ftse futures fairly flat. It looks flat for the european start of trade. Interestingly, u. S. Futures expect to go higher even after we saw more strength in the u. S. On friday than in europe. We see more room for maneuver to the upside. U. S. Futures point higher. Lets get to the gmm. That shows you one of our headlines, around china, pboc injecting liquidity into the market. A lot of people are asking whether we will see Interest Rate cuts from the pboc. We see the csi 300 up to par 4 percent. Theres 2. 4 . Theres a lot to work through. Story, then equity dollar stepping slipping a little bit, but not any big moves. No progress on the u. S. China trade front as they failed to hold that virtual meeting. We had japan gdp, virus concerns, and m as to talk about in your, so theres in europe, so theres plenty to discuss. Not a great deal of market movements. Lets get a bloomberg first word news update. In fact, lets not get an update. Let me tell you more about whats going on in these markets. I mentioned the japan slide. That is part of the focus, the worst numbers of gdp since 1955. With virus concerns in japan, there are concerns about what kind of policy response were going to see. Seeing europe, were some action to clampdown on activity, but we will return to further thoughts on the verse shortly. Lets get virus shortly. Lets get into the markets. The china trade deal was was postponed. President trump officially ordered tiktok parents to offload u. S. Business. He talked about it many times. We got the official notification. Lets get into the markets with mark cudmore, who is with us from singapore. Good to speak to you this monday morning. Let me start on the u. S. China talks, the fact they didnt happen. How do you think, and i know you have been throwing this question around on the blog, had we think of the u. S. And china in the past will affect assets, if at all . Mark well i guess whats amazing is how little impact its been so far. We got used to this idea that the u. S. China trade tensions. Its not like its a new thing this year. But it did seem like it was escalating than last month or two the last mother to, especially the last month or two, especially with that trump orders. Weve seen another weekend were trump is taking, actions of orders against tiktok and wechat, and yet markets seem impervious. Its interesting to note chinese stocks are soaring and it seems they are focused on the fact theyve got more liquidity from the pboc, and liquidity and momentum are driving stock market rather than these concerns, whether u. S. China, or stimulus top, all these longterm talk, all these longterm things are not hurting markets anymore. Anna what do we make of the latest movement in yields . Last week, a great deal of focus on that subject. What does that mean for treasuries, or what does that tell us about appetite for other asset value stocks, for example . Mark well, weve got quite a bit of supply and treasuries. We are going to see a little more steepening. Weve got fmoc. Its not like people are expecting rates to rise, but we might see steeper curve. We might see yields rise just because the fed may not keep rates permanently at this low level if we get a vaccine, and after rush approved a vaccine last week. There is a greater russia approved a vaccine last week. There is a greater narrative, rates being stuck at 0 for a longer periods of time, which means yields will rise. That will put pressure on many assets and cause rotation into value away from growth stocks. It will cause a lot more rates volatility, which will affect measures and squeeze other assets. People are nervous, especially after high cpi at of the u. S. Im a little suspicious. Im not sure whether sustainable inflation is going to come from in a world where economies are really struggling. It doesnt matter the liquidity. That leads to asset price route inflation price inflation. From my point of view, im suspicious. But its important to recognize that is the market at the moment. Investors have coalesced around yields will go higher before they go back lower again. Anna its interesting thinking about inflation and the fed story. It wasnt so long ago a lot of people, including the fed, were talking about inflation has been so below target for so long that perhaps to allow inflation to run hot, the other side of the target. Is that still part of the markets thinking . Does the market believe it only gets to target, but if it goes beyond sufficiently, the fed than ask . Then acts . Mark one of the risks, if there is an of leave we will get enough belief we will get enough Consumer Price inflation, then the fed takes their foot of stimulus, or maybe eases back from some of the more aggressive plans. Theyve never gone toward the yield curve control route yet. Implicitly, theyve achieved Forward Guidance and i think theres a worry if they get complacent, they go look, markets are going doing fine. We make a vaccine. They may say were not too worried about where rates will be two years from now. That would scare markets. I think the idea is that we are going, if we get too much complacency, that will be the thing that scares markets enough to ironically cause yields to drop as people rushed back into haven assets. Anna talking about how far markets, weve seen risk assets, some have suggested this is one of the reasons we cant see the two sides come together to force further fiscal stimulus to the United States into the economy. If the economy was panicking more about the cliff edges and fiscal support, perhaps that would knock some Heads Together and more would be done. Mark absolutely. If you said to me a month ago we would have a stimulus package, i would say markets would be way lower. Many people thought that. The fact the markets have shown no worry, youre right, has raised this complacency, and may it will compromise the election and offer the other side, whichever way you look at it. It is worrying. If markets are impervious, in the longer term, were driving a much longer inequality wedge, helping that economy get wealthier the economy get wealthier and wealthier, btut were not helping the economy. Many people will not get the support and the aid they need. Thats not the faith of the longterm. If it doesnt reform result in markets collapsing, it will result into collapsing toward resolution. This is something that will need to be addressed and divergence can continue ad infinitum. It can continue for many investors. Mike talkingng to about something similar to our colleagues. Thank you for joining us, mark cudmore joining us from singapore. Coming up, we talked about it already. Well get the perspective of an investor, we can trade talks between washington and beijing are delayed. No timeline for a new date. Well discuss that next. This is bloomberg. Anna welcome back to the European Market open. We are still 45 minutes to go until the start of cash equity trading day. You might have expected we play catch up a little bit in europe and see more positivity, but european futures point to the downside despite u. S. Futures pointing higher. Lets get a Bloomberg Business flash for you, some of the top corporate stories. Sonafi planted to by a biotech company, a deal worth 3. 3 billion, as the french drugmaker pivots to innovative therapy. They focus on treatments for multiple sclerosis and a range of autoimmune disorders. Sonafi is playing 100 per share. Interested in expanding its purchase of tiktok acids, including the video app assets including the video apps u. K. Operations. Its unclear if they want to sell the u. K. Unit. The bullish government says it has no plans to block tiktok in the country. Amazon is being probed by the german antitrust regulator, according to a newspaper. It is looking into whether the ecommerce giant is abusing market dominance to exert price pressure. Amazon blocked individual vendors because they charged excessive prices. Bloomberguber business flash. The pboc injected about 100 billion in one year funding, which more than offset the value of loans due today and next week. Thats as u. S. China tensions continue to show no signs of easing after weakened trade talks were postponed with no timeline for a new date. Trump has been touting the success even as agricultural sales lack targets. John. G us is many people were waiting before the weekend of confirmation of what they, wouldnt they, and at what time discuss trait over the weekend. And then those trades, it seems, were shelved, canceled, at least for the short term. How concerned are you about that or does that just add to the many things you knew about intense geopolitical situation between china and the u. S. . Not soell, concerned about the nearterm. You have a Trump Administration that may be on its way out the door in just a few months. I wonder if well see this dragging along with almost no development until we get to the other side of the election outcome. That could be an exciting process, more so than any time in history. If we have an entirely different administer ration dealing with the chinese, im not looking for decisive developments administration dealing with the chinese, im not looking for decisive developments at this time. Anna does that mean you dont expect any Real Movement in the yuan . Could it do more . Could it cut Interest Rates . The yuan is partially managed, so what are your expectations for the chinese currency as we had crucially to november head crucially to november . John i dont have expectations. Its a relief to china the dollar has remained relatively weak, and allow the u. S. To track the dollar to the week side week side. Weak side. China certainly trying to avoid making a strong statement. Either way, mismanaging the u. S. At this point in time. Its heading back to the strong side and the u. S. Administration somehow weaponizing the dollar. Weve had the fed providing liquidity to keep that from happening, but this is going to be a massive focus on the others of the election and going forward, both the weaponization and the ongoing disengagement of these two economies, which i expect, regardless of which administration, to be going on regardless. Anna that political weaponization of the u. S. Financial system that you talk about, is that in the driving seat when it comes to the dollar or is the dollar at the mercy of other factors . Goldman sachs out this morning saying that they see the dollar falling further against g10 peers. Whats your expectation . John well, i dont think thats the focus right now, broadly speaking. It could be the focus between the u. S. And china at some point down the road. The focus for dollars is on liquidity, plans to do stimulus wise. I think thats where the focus is. Its odd to see the dollar weak as siit is. We topped out in june. Other factors actually shrinking since then and not going anywhere, so this whole liquidity argument, at least in the nearterm, driving dollar weakness, not sure i see it right now. In the meantime, a lot of speculative long in the eurodollar, euro versus the dollar and u. S. Futures market. I find that interesting. Again, scratch my head as to why we should be trading higher on the eurodollar given liquidities, lack of support from liquidity narrative out there and this positioning situation is rather interesting. Anna and let me ask you about gold, a lot of attention on that. I know Warren Buffett, we got a comes of what hes doing. A glimpse of what hes doing. Credit suisse out with a note, 2500 ofbout 2005 gold. What is your expectation of gold . Expectation, i dont have an expectation until you tell me we are seeing real money printing not to purchase assets, but whether its the fed or whether its the government actually doing outright money printing and not just asset purchases. We see the fed turning as it purchases into money to ingest into the economy. The gold argument is geared toward that eventuality. If that eventuality comes, you can put any number on the gold price, 5,000, 10,000. If it fails to arrive and we see Interest Rate tick up, weve seen recent volatility the aim rather minor a rather minor uptick. If you dont see that coming about, we could have a volatile two way market for the time being. Its all about the monday pretty money printing narrative. Its about the regime of money printing narrative for direct fiscal issuance, fiscal stimulus into the economy. Anna very interesting. Under specific circumstances, you can put any number you like on gold. John, thank you very much. John stays with us on the program. We talk more about whats going on in europe next. Coming up next, occupational had words hazards. Is putting jobs at risk. Hes putting jobs at risk. Well discuss that next. This is bloomberg. Anna welcome back to the European Market open is monday morning. 40 minutes ago until the start of the European Equity trading day. The cash equities market expected to go weaker, but u. S. Futures two point to the upside. U. K. Chancellor has been warned. Hes putting jobs at risk by ending the furlough to early. The institute of Public Policy says the move would cause longlasting damage to the economy and peoples lives. Takehink thank think his recommend in a scheme that will likely be sustainable in targeted sectors. Still with us is john hardy. How is the ending of the firm will furlough at the end of october the ending of the furlough at the end of october, is it working its way into the market . Is this still a relevant development, do you think . John it will be, eventually, in the mediumterm, the market focused on the shape of its trade deal with europe post brexit transition period in euro. Weve seen a Holding Pattern. The issue you bring up is key for the u. K. And elsewhere, this Emergency Support measures and to what degree this can be sustained, because the impact fiscally. And because we are facing a restructuring of the economy, do you want to subsidize businesses that are no longer able to operate at this incapacity post crisis this same capacity post crisis as precrisis . That damage is at the risk of being large if they pull the plug too early for the given industry and jobs. Anna yeah, and i suppose from a seenone perspective, weve the signaling very positive, with the Recovery Fund being agreed to. We dont see the funds from it yet. You mentioned the net long euros leverage position. The business is the most in more than two years. Is that something you see continuing, or does that lead to further gains in the euro . John i think it very much enters further gains. If you track the net, noncommercial long, its the longest its ever been. Even during the era of the weaker euro, where we saw the euro zone crisis in 2012, it was only about 20,000, 2 on the short side. We are in historical extremes here. A lot of it has been the reset of rate spreads, trend of the trends, these kinds of arguments. If you look at positioning, its a slog higher. The fed balance sheet, the narrative is not quite there for a higher eurodollar. Theres no technical reason to look for a break down just yet, just flashing a bit red from a positioning angle, for sure. 1. 1867. re at where should it be . John eurodollar loves a big, round numbers. It doesnt have to hold position daytoday, but lets watch 1. 20. That will be a big battleground. See if the market takes stock at that level if we are headed a bit higher. I would argue the positioning is a strong headwind for higher levels of eurodollar. Anna really good to speak to you. Have a good week. John hardy joining us bright and early this monday morning on the European Market open. 35 minutes to go until the start of cash equity trading. Well get further details on the relationship between china and the u. S. They have postponed their trade talks as their phase i agreement. Well hear from the shanghai resident about the impact president about the impact that could have. Well bring you details of that conversation next. This is bloomberg. Anna welcome back to the European Market open, 30 minutes from the start of cash Equities Trading, a bit of a summary feel to the markets, treading water in asia today, apart from what is going on in china. U. S. To the upside lets look at the things happening this week you need to be aware of. In terms of u. S. Politics, the Democratic National convention, the dnc, gets underway today. The event will be virtual because of the Global Pandemic. Opecplus ministers are meeting online tomorrow to review strategies for compliance when it comes to oil supplies. On wednesday, well get u. K. Cpi, plenty of focus on the u. S. Cpi and ppi data. Swedish unemployment data comes out on thursday. Sweden is an interesting case because of the different handling of the coronavirus weve seen. On friday, pmis on the u. K. And euro area will be published. Well focus on what that does and does not tell us about the state of the european economy. U. S. And china postponed talk plans over the weekend that has been aimed at reviewing progress at the sixmonth mark of that phase i trade agreement. To the shanghai president about it. We are eager to see the discussions get forward and start moving towards a more constructive path. Your leader there was talking about the wechat ban and were watching that very closely, but the important thing is the two sides talk, talk constructively, and figure out what is going to be the future structure between the u. S. Economy and the chinese economy . Theres a lot to be benefited from. We can simply work together. Its been a very productive relationship the past 3035 years and we would like to see that continue, if possible. Tell us more about how your members are reacting to this wechat, tiktok ban. How damaging is it going to be for u. S. Businesses that operate outside the u. S. , in china . Oh, its got our full attention, thats for sure. Execut