Transcripts For BLOOMBERG Bloomberg Surveillance 20240712

Good morning, everyone, and welcome to bloomberg surveillance. Inm Francine Lacqua here london. Happy thursday. Lets check in on the markets. A lot of focus about the turkish keene is alsom all over. He is really on what could happen in the near term. Apart from the turkish lira, there is quite of lot going on, and stocks are dropping in much of the world after the fed signaled continued concern on the pandemic, and that is weighing on the worlds biggest economy as well as treasuries advancing. The other thing i am watching out for is daughter holding, gold edging higher, and then we not need to talk about wheel, declining from a high after the fed and opec both sounding cautious we need to talk about oil. And lets get to the bloomberg first word news. We start with china, which says it is planning to hold talks after last weeks talks were canceled by donald trump. This is six months after the pack. The russian opposition leader, navalny has fallen ill, allegedly due to poisoning, unconscious in intensive care and has been put on a ventilator. Inarently, something was put his tea during his trip. Senator Kamala Harris has officially accepted the nomination for Vice President , opening the Party Virtual conference, which also included a speech from former president barack obama. Harris called on democrats to deal with republican efforts to suppress votes. China and the u. S. Have agreed to have a call soon to discuss the progress of their trade deal according to the Commerce Ministry of beijing. Stocks pairing off slightly on the news, sentiment dropping in much of the world after the fed signaled additional concern of the pandemic weighing in on the economy. , we get the july minutes from the ecb. Next, we get the july minutes from the ecb. Peter, what was your main takeaway yesterday . Else, weike anybody looked at the negative side of it is annd i think marketso selloff, but discover things in the details that they did not discover in the initial review. We have moved on a little in terms of where we are with the economy. The fact that the economy appears to be the recovery appears to be stalling a bit. That is backed up by sort of the more negative toll from those weorts, and certainly, affirm the view that there are significant headwinds for the u. S. And the Global Economy as we look forward to the year. The economyt if gets worse, peter, good the fed do more . P could the fed do more . Worse,would not say just not as good. Kind of a glass halffull. What can Central Banks do . They can ramp up asset purchases. They canlarge extent, do more. What they can do, by doing so, they will support markets, quite clearly, and i think we have seen that over the last five months in terms of what has been happening in terms of the equity market. So banks can do more. About it affecting the economy quickly i think is a moot point, but it will definitely impact markets, and i think for the better. The concern, of course, would be that in doing so, they will betweene divergence what the fundamentals would stay and what markets are pricing in the marketplace, so that, i think, could because for concern, but peter, what is your main assumption . That we have trade concerns that stay as is and no second lockdown . Or that we at least get a stimulus in the u. S. . Economyook at the world actually, the World Economy and especially the u. S. , what is your biggest concern, and who can do something about it . Concernell, the biggest will be the speed of recovery, and i guess the two main economic concerns, one is the unemployment, extensive unemployment, and the second one is what that means for government finances. Those are the two concerns. The problem is if there is a requirement for some addition of stimulus, then government finances, they are not exactly maxed out, but it will make a bad situation even worse. For, i think, is a problem tomorrow and beyond but certainly is a cause for concern. But the lockdown on a scale of what we saw in march, i think governments have gotten significantly better at managing the corona fallout, and i think what we will see is a significant wave of lockdowns which, of course, will damage sentiment, but they will not have the same kind of economic effect as the ones that we saw earlier this year. When should we start worrying about debt, debt in the u. S. And debt in the world . Is that a worry for 2021, 2022, or is that something people should Start Talking about now and positioning . Dont the thing is, i think it makes sense to make too many assumptions at this stage for the simple reason that an awful lot can happen between now and just the end of the year. I mean, for example, if we start to get a lot more positives out of the Vaccine Development players,with six major there is a possibility of a vaccine in the course of the Fourth Quarter even, and if we get to that stage, then the whole thing between 2021 and 2022 starts to change, because markets will have much bigger activity, and also some of the pessimism, which was a cloud of 2020, will dissipate, so do not look too far ahead i think is a watchword. We started the year on a positive footing, and and things cannot go on as they have done, but never in a million years would be imagined the kind of event that certainly overtook us. Peter, if we have a vaccine, then we go back to the end of 2019, or will there be thousands of Companies Across the world or even millions that will have to go bankrupt, and is it jobs that have been lost permanently . How do you quantify that . Quantifying it, your guess is as good as mine or anybody else. I think the bottom line here is whatever else happens, there has been a permanent shift in the structure of the economy, and a significant number of those jobs will be lost over the course of the coming months and will not return. The consequence, we will get to a stage where there is a huge pool of unemployed labor, which would take a considerable amount of time to be reabsorbed into the market. That has been the experience following most major recessions over the past 50, 60 plus years, 2008 the exception in that sense. So there will be a significant willt of that, and that feed through to the wider economy with Wage Inflation muted, which i guess Central Banks will respond by keeping rates long for as long as possible. How long it will take, four or five years to offset the impacts of the shock we have experienced in the first half of this year. Francine thank you so much, peter dixon. Harris accepts the Vice President ial nomination and we discuss the latest from the Democratic National convention. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. I am Francine Lacqua. We start with apple and corporate news, the worlds most valuable publicly traded company just hit a new milestone. Apples rally pushed the market cap to 2 trillion, the first time in American Company hit that level. It took apple 48 years to hit the first trillion dollar value, and the next trillion dollars only took two years. Airbnb has filed to go public as the Company Emerges from the effect of the coronavirus pandemic. The price range has not been set. Airbnb already began seeing signs of recovery in june. Bookings were down only 30 from a year earlier compared to 70 in may. Delivery hero is replacing wirecard in the dax index, and the food company has gained almost 50 since january as the lockdown boosted demand. Position may spark controversy. The company has yet to have a single profitable year. And that is the Bloomberg Business flash. The on to u. S. Politics, polls are projecting joe biden will win, but as the markets prepare for a potential biden presidency, proposals from his campaign indicate higher taxes for both individuals and companies. Onjoe bidens for gritty super tuesday sent equities soaring on his selection of Kamala Harris also lifting bidens success on super tuesday sent equities soaring. His policy proposals have investors worried. Outlined 3. 4as trillion of tax increases funded by rolling back parts of the 2017 gop tax reform including a one trillion dollar increase in new taxes for corporations, bringing the Corporate Tax rate back up to 28 from 21 as a way to provide revenue for health care, finance infrastructure, and education policies. For individuals, biden would like to restore the top tax rate to 39. 6 up from the court level current level. Tax on would like a Capital Gains and to cap tax on the wealthy at 28 . It would also repeal the caps on state and local taxes, which was unpopular in many blue leaning, hightax states. His plan also targets Companies Like amazon through a tax which imposes a 15 minimum tax on companies that reported more than 100 Million Dollars in net income to the United States but paid no federal taxes. Francine well, that was bloomberg analyzing joe bidens tax plan. Everyone to check out the blog on the bloomberg terminal. Our main question is what would a biden win mean . You can go to ib tv on bloomberg. Mean if we does it have a Biden Administration in the white house . What does it mean for assets . Peter well, i think the underlying theme here is one in which, as we just heard, tax on corporates will go up. And as a consequence, this would clip Company Earnings when they have already been significantly damaged as a consequence of the corona fallout. Notooking forward, it may go quite as well as it might have otherwise done, which might place a limit on where you would see u. S. Equities continuing to rally. That said, i mean, companies be almost seem to recession proof at this stage. Be fang sector, which will one of the targets of mr. Bidens tax plans, is acting as a disruptor. It is taking the economy in a different direction at the time when the coronavirus is showing how much we need a direction. So it may well be that the fang sector continues to propel the u. S. Equity markets forward, but there is what is happening in that sector and what is happening elsewhere, and i think the biden tax plan will exacerbate that difference. What is the one thing, you lookat you when at trade, do we understand how a democratic president , how biden, as president , would actually do with china . I suspect he will take a more conciliatory tone thatot have angry tweets has characterized the last four years, but i think the underlying substance of a biden presidency will be to continue to take a firm line, because, after all, republicans and democrats appear to think that the u. S. Has been badly treated in terms of its trade deal with china over the course of the last, say, three decades. So i think the underlying issue will not go away. But one thing i think we will see is that may be a biden presidency will reach out to its traditional allies in europe and stop with a big stick and the european space. We make ituence, more of a western alliance in terms of any trade deal with china, which would certainly reduce the extent of the concerns over the last few years of inflamed tensions. What to do with gold now, peter . Is there still value in gold . Actually, i am fine with gold at any time, but actually, when the opportunity cost of holding it is pretty much zero now, this uncertainty persists in the Global Economy and the financial markets. That it a good reason continues to hold. Whether it will move significantly around the 2000 level, i have an open mind. I think it could poke around that level for some time to come, but i think as we start to see some form of economic normality begin to creep in, and talking maybe 12 months from now, maybe we start to see gold and investors really do not have a cost of holding it, so it probably can stay like that for some time to come. Peter, thank you so much, Global Equities strategist. Coming up, ahead of the turkey Rate Decision, we discussed turkey and the turkish lira turkey and the turkish lira next. This is bloomberg. Biden i approach this with a serious mind, because this is a serious moment for our nation. This is bloomberg surveillance. I am Francine Lacqua in london. Lets look at the markets, focusing in on the Rate Decision, the majority expecting the central bank to keep on hold, but many say a hike is probably needed, so lets get into it with our government reporter based in istanbul. First of all, thank you. What is the market expecting from todays decision . Reporter hi. Financial markets demand higher Interest Rates, and present erdogan, the Turkish Central Bank will likely be unchanged at when it meets today. In fact, only a few are of the 20 economists expect a rate hike. The rest say they expect a whole. But 13 of the 18 forecasters acknowledge that the central bank should increase Interest Rates instead, but the difference is because the Central Banks track record calls, which he repeated this month even after the lira went to a record low against the dollar. What is the trajectory for lira . How much more pain can it take . Reporter it all depends on the Central Bank Decision and the recent announcement by the president. The central bank may also be encouraged to hold after good news on friday. Soon after the announcement, two people with direct knowledge of the matter told us that turkey has discovered energy in the black sea, and it sent the lira to a session high against the dollar, so the trajectory of the lira depends both on the central an also said. Erdog francine great. Thanks so much for the update. We will get more on turkey throughout the day. Coronavirust the has upended how companies operate, so how can they take advantage of the disruption . We speak to a chairman of a Consultancy Firm to talk about disruption, next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua, here in london. Get to the bloomberg first word news, and we start with President Trump. President donald trump says he will call on the u. N. Security council to restore all Nuclear Sanctions on iran in an attempt to kill off the 2015 agreement and forced tehran back to the negotiating table, but allies say the u. S. Has no say in the deal because it left the pact in 2018. And a reciprocal tax arrangements on shipping. It is art of the white house efforts to pressure china over the new security law. The European Union has rejected the Election Results in belarus, but stopped calling for a new vote. Managed to agree on a call for dialogue in a peaceful transition. Previously announced sanctions on people responsible for violence and vote rigging will be introduced as soon as possible. That is the first word news. T year, consultant seeing a Consultancy Firm looked at the impact on business and companies were responded. Almost no one could have predicted a few months later the coronavirus pandemic we cause the biggest and most widespread disruption to business in modern history. The firm revised on the largest the crisis has demonstrated the Central Economic reality of our time which is disruption in the new economic driver. Joining us to talk about this is stefan of a versa, that stefan no a versa stefano aversa. When we talk about disruption, how will covid reshape our parameters . Are the trends already in place accelerated by a couple of years, or is this a disruption that takes us into a different wave . Stefano that is exactly the case. Some of it was there before the pandemic and the pandemic for example, the socalled deglobalization or regionalization. This is something that was going on before, just bigger numbers in the last 10 years. In 2018, the investment as a percentage of gdp went from 3. 5 to 1. 8 . That was the trend going on. It has been dramatically accelerated in the last few months. That is also causing, for example, the fact that we are getting more important resilience because the supply chain, as we all know, changed its weakest link, and therefore see redundancy to support to protect the supply chain. What does it mean for the industries that will be disrupted the most . I know you spent a lot of time looking at health care. How will health care change, and will everyone win in that industry, or are they actually or are pieces of Health Care Going to no longer be viable because of the disruption . Crisis, we seery winners and losers, and i think we will see that also enfolding in the next few months. We have seen now what we call wave one. These are the companies that have been actually having trouble before the pandemic, who ittinue to have trouble and has been worsening. You have companies that were actually doing rather well before the pandemic, and now they are in trouble, or appear to be in trouble because of the pandemic. Have a a number of them Business Plan that have been more resilient. The sectors are obviously obviously all the sectors that are connected through lack of through Companies Like airlines. Companies that work with airlines, all the Business Travel agencies, and so on. Obviously all the entertainment industry, the theaters, the , think about companies that do organize concerts. They provide all the technical equipment. Suffering terribly from it. And then retail. This is a trend that has been also going on for years, moving toward ecommerce and online buying. Was expectede that to happen between now and 2025 happened in five months instead of five years. We saw 75 only being on store and 25 coming online. This is also a big disruption. There are winners. The system we are using now and the like that provide confidence , ecommerce, amazon continues to have record months, month after month. That is also trend going on but has been tremendously accelerated. The consumer being much more so,ious about Health Health checks, but also healthfood, good health habits, protection, being much more mindful of not only cleanliness but the help of everything surrounding us. I think these are opportunities. Francine you are working from home today, im working from home, my Production Team is also working from home today. How will we go back to normal if we have a vaccine . Is this going to be the new reality . Less confidence, less traveling, or do you expect us to go back time . 9, 70 of the how would that influence the chief executive . That a lot ofar we hear a lot of articles and discussion about the new normal, and we also find people saying that the new normal is going to be like the old normal as soon as possible. I think it is going to be something in the middle. I do think that the continental Business Travel will be reduced ,nd will stay reduced forever so you have to adjust to it. Because we are more accustomed to the fact that you need to go to tokyo for a meeting of one hour and come back, and may be both parties will agree that it , and wee more sense flexiblealso a more working from home, but not to a point where they would only be working from home because we are seeing here also the negative homet of only working from , avoiding the teamwork that inevitably in person is different. And this is particularly important, we found in our own company, alixpartners, for the young generation, that need to learn, need to socialize in an equal way on social not only on social and on video. You talk stefano, when about building resilience in a company, is the first point just putting more cash to one side to make sure that if there is something hard that comes, you have that buffer, or is it also teaching or retraining chief to make a choice . If it is a furlough scheme, do you put your employees on furlough . Do you ask for some kind of relief . What are the Big Questions that you seem that you have seen Companies Get wrong . It is a complex matter, because it regards not only liquidity, lets say the hard facts of the company, but also is very much connected to also the leadership style that needs to be put in place in a crisis like this. That is no question without cash the company wont survive. This is a must do. You make sure that your Balance Sheet is Strong Enough to survive to pay at least what is due. Put on that have 100 companies, 100 of their employees, including the ceo, he over to reduce the 80 . You have to go ahead with 20 of the cost with no revenue whatsoever, a little bit may be online, but that is negligible. Be veryash continues to important, but also you have to to retainor a way your own people, your best people in particular. Through, youone know, reaching out to them. There is no successful leader that i know that doesnt provide positive energy. But this is even more important in a situation like this, connecting more frequently, also i thinke, and thes very important to show long term one thing for sure, every crisis is different, but every crisis ends. Are at thee if we beginning of the end of the crisis or at the end of the beginning, but i do think we are very close to the end as a crisis. We are going to be leading with this likely lead with many other things, as we lead with the the attack of the twin towers. We will lead with masks in some Public Places for a while, but it is not something that will impede business for long. 70, a final question. How many bankruptcies are we going to see . Fano, a finalte question. How many bankruptcies are going to see . How many copies will go bust . Is it healthy companies, or is it companies that will have failed anyway . Stefano i was mentioning before this wave, i mentioned before wave one, which had been mainly the sectors that i just mentioned. That have been hit hard, think about cruises that were doing pretty well, and now fromare suffering terribly the current environment. But there is another wave that is coming. These are companies that not only were doing well, but are also doing ok now because they have a strong Balance Sheet, and the consequences are coming in the next 18, 24 months. And these are companies also in the real estate, when the space, office space may be reduced. Marketrelated, aerospace, they have been planes that are not needed or less needed now. So we will see. One thing is absolutely different in this crisis. Two thousandand 10. The liquidity is very available. And the Balance Sheet is stronger than it used to be, but there is leverage available, so reset,s an lot of maybe review of the elements of the credit, but not necessarily bankruptcy. So relative to the crisis, we are having much less formal bankruptcy. With exception of the u. S. , where bankruptcy is used to relieve, restructure some businesses that needed to be restructured anyway, but we will see it less so. I do think, looking at it by region, we have to look at, for example, latin america. You see a number of airlines there, that a lot of countries there like mexico a lot of countries like mexico going into bankruptcy. There is less infrastructure protection, and higher debt, and they will be suffering more than , a third more than their western world in general. That this time have reacted very, very quickly, from the thernment standpoint, with markets, an incredible amount of cash. About three times more than what happened. Francine stefan no, stefan , thank you so much. Stefan no versa, from alixpartners. We talk of course about the wto and trade. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua and london. Opecplus kept up the pressure on nigeria and iraq to stop cheating on crude production targets. The group is emphasizing the need for all members to stick closely to their agreement as the Market Recovery remains fragile. Lee. Ng us now is julian crude has been trading in the 4. 5 range for quite some time. What would it take to move it out of that rain . Julian i think if we are hoping for a move upwards, then it has to be stronger demand numbers coming out of the United States and other parts of the world, where the recovery that has been underway seems to have stalled. We are seeing an uptick in coronavirus cases, and we are demand,hat gasoline which was recovering quite strongly, has flattened out in the u. S. 90 percent of last summers levels. Jet fuel demand is still well down globally. Commercial flights are 40 below where they were in the early months of this year. We have still got a way to go on demand. On the supply side, i think we are seeing pretty good compliance from the opecplus countries on their output deal. Certainly much better than we have seen in past deals or even in these sort of first round of opecplus cuts that began in 2017. Saudi arabia is clearly not letting up on this pressure that it is applying to those countries that have not done as well as others. Yesterday the oil minister was stressing this. The weakness of the demand recovery, and the risks that it may falter. Will continuet we to see this pressure being put on those other members. Francine what can you tell us about iran . It seems President Trump will ask the u. N. Security council to restore Nuclear Related sanctions on iran. What are the implications for oil . Julian im not sure there are big implications immediately for oil. I mean, iran is exporting almost nothing at the moment. There are relatively small volumes that are escaping sanctions and going to china and syria, but nothing much beyond that. There is a little bit of gasoline that they were trying to send to venezuela that was interdicted at sea over the last month or so. I think that President Trump has already tried once last week to irand the arms embargo on that was soundly defeated in the security council. It was only the dominican inublic that joined the u. S. Voting for the resolution. They are going to try again this week under the iran sanctions agreement. The nuclear record that was agreed in 2015. I think they are going to struggle again there because the other parties to that agreement say that since donald trump walked out of that deal years ago, the u. S. Had no mandate to do it. Julian francine julian, thank you so much. We will have you back on. More on the developing story next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua, here in london. Lets talk about russia, and the leader,opposition Alexei Navalny, has been hospitalized with suspected poisoning. Activist ismlin unconscious and in intensive care and has been put on a ventilator. Lets get more on all of this with the russia government editor, tony halpin. What do we actually know about what happened under the circumstances . Alexeiolney navalny was meeting with candidates ahead of the september regional elections, and he was returning to moscow, as you say, from siberia when the plane made an Emergency Landing and he was taken to hospital. His aides say he was the victim of a poisoning. Doctors at the hospital have said the fact that he is in a serious but stable condition on a ventilator, they are still investigating whether indeed he was the victim of a poisoning. Tony, why might Alexei Navalny be the target of an attack if it is confirmed that he was actually poison . Tony he has any number of enemies. He is the most highprofile critic of president Vladimir Putin in russia and has led opposition campaigns against him for years, including big street protests. He was very much focusing on septembers elections as a way to deliver a message against putin. But there are many others that have been the targets of corruption investigations by anticorruptions foundation. So there are enemies that are not necessarily connected to the russian state, but clearly many of those around him are pointing the finger at some state entity because there are many examples in the past of poisonings of kremlin critics. Thank you so much, tony. Russianpin there, our government editor. We will have him back on as soon as we have more news about the developing story. Tom keene joins me in the next hour from new york, speaking with amy pope of Chatham House about the dmc. The dnc. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Francine stocks pair losses as china says it would hold a call with the United States on trade in the near term. It comes after the u. S. Suspended its extradition treaty with hong kong. Fed minutes warn that coronavirus will weigh heavily on economic activity, so a september guidance shift isnt on the cards. It comes amid worrying uptick in cases across europe. And the turkish lira sits near its alltime low, but dont expect any hikes from central bank today. Economists expect it to hold its key rate despite fears of a currency crash. Good morning and welcome to bloomberg surveillance. Im Francine Lacqua in london. Tom keene is in new york. Tom, a busy day. Norway, newson coming up later on russia, with the poisoning of the opposition party, something that has not been confirmed but that is the speculation. In the turkey Rate Decision later on. Tom turkey will be interesting. We have a stronger leader over the lasle