U. S. Treasury secretary Steven Mnuchin said additional fiscal stimulus is needed urgently. The dollar steady after Strong Manufacturing data. Above 1. 20 for the first time in over two years. It does not last long. Does mattere level for monetary policy. It is 6 00 a. M. In london, 7 00 a. M. In frankfurt where they are watching the eurodollar trade. Good to see you. So, volatility. Is the equity market to greedy and the rates market under assuming vol in the u. S. President ial election . Good morning. Annmarie that is certainly what the Options Market is signaling, that this is the biggest event risk to date on record and that is of course the u. S. Election. It signals investors basically maybe being in wait and see mode until november. They want a bullish spread and a bearish spread. Have two exclusive massive interviews coming up this hour im really looking over to. Manus there are a couple of things. We have had a huge month of property deals go through. These are the two leaders of those businesses. We just heard from them on the side of the deal. A 5 billion property deal. We will also hear about the view of the oil market. Apollo is part of a league of investors putting money into the uae oil property portfolio. That is a deal theyve done. You will hear in terms of the credit market. Two cracking, exclusives. Annmarie apollo oversees more than 400 billion dollars. Im looking forward to what he has to say. Reallyave stocks grinding a bit higher after up. Her s p 500 futures apple again pushed that index higher at the close yesterday. We are all tracking the eurodollar. We are now below that key threshold. Alley ins says that is a redline and philip lane, ecb is clearly starting to get worried. They say the eurodollar rate does matter. In. Manufacturing expanded august at the fastest pace since late 2018. A gauge of factory activity july,sed from 54. 2 in suggesting the fledgling u. S. Recovery is beginning to strengthen. Beovid19 vaccine could available earlier than expected of Clinical Trials produced overwhelming positive results. Dr. Anthony fauci made those comments to Kaiser Health news, pushing stock futures higher. On a relieftions package, treasury secretary Steven Mnuchin testified about the administrations response to the pandemic. Take a listen. I do think the economy is recovering very strongly, but let me say there are still areas of the economy, nofault to Small Businesses or workers that need more help to recover. More physical response is needed. The president and i want to move forward with more fiscal response and let me just say the expiration of enhanced Unemployment Insurance is something we are concerned about. I want to emphasize the president and i do support additional fiscal response and we have been working hard to try to get a negotiated agreement on a bipartisan basis. We would like to extend enhanced unemployment and send out more Economic Impact payments. Those have been critical to the economic recovery. From those are the voices medicine and capitol hill. Jim mccormick is the global head of strategy. Good to have you with us this morning. The risk is we get a skinny deal and we get a vaccine. Both of those are out there. What is the most difficult thing to do when markets are record highs on the equity market . How do you invest around these record highs . Jim yes, listen, i think as we head into the end of the year, the reality is that it is going to be very difficult. I see an environment of pretty low returns. You have stocks that record highs on many indices, the u. S. In particular. You have a lot of event risk from the election. You have growth i think beginning to slow into the end of the year. It is going to be a low environment. On growth, they say investors should stay overweight on Growth Stocks. No strategist is starting to price in rising Interest Rates. Do you agree and if you are looking at Growth Stocks, what area . They are clearly the ones pushing ahead on record rallies every day. Jim listen, i think the part i would push back on is the idea that Interest Rates cant rise. They certainly are not going to rise in the short end of the curve, but we see the taste for some fairly significant curve steepening across Global Markets over the next year or so. It is basically a combination of a lot of things. It is an enormous amount of bond supply coming into the market. To me, the biggest risk on this equity rally is that eventually bond markets have to react. We think the next three or four months is a real risk here. Manus in the context, i want to talk a little bit more about the fed. You have taken us on that route, so im on it with you. Have got this divergence ive trod that many times. We have the divergence between real rates and then we have these breakevens, so two roads diverged in a snow we would. Does that divergence continue and how do i trade around that . Or does it write itself . Right itself . Jim i think real yields stay the same for quite some time. To me, at the long end of the curve, there are many risks. Central banks that want inflation are one of them. If there is going to be an increase, it is going to happen for the longer end of the curve. I think real yields in the short end of the curve are anchored by what Central Banks are doing. Annmarie you are also short the dollar, now talking about yield. The technicals on the dollar are signaling that we are overdone. It has room to rise. Are you still going to maintn your short position for the second half of the year . We have been short dollar quite some time. The early stage dollar story was focused mainly on the euro and we see the euro was one of the biggest movers. Think this shift in the fed framework last week probably opens up a broadening outlook of dollar weakness, so we see a bigger case for dollar weakness against emerging markets. We see a bigger case against currencies. May the euro part of it needs to take a breather. This jim, the debate is overnight, it did not pack the strength. There is a lovely line here. 2020, cold war currency playbook. This is what we are really launching into. This comes from over at global strategic strategists. 2020 currency cold war played with active Forward Guidance policy to be the new way to keep currencies artificially low. From is a lovely quote john steinbeck. A product a mans of mans failure as a thinking animal. The dollar is driven by rates, but that is fine, but eventually that has to be a kickback. How bad could these currency wars get . Jim one thing in the middle of the biggest Global Pandemic in a century, the largest fiscal expansion globally probably ever , this idea that Central Banks can control the short end of the curve, the currency seems fanciful to me. I think if you look at the empirical evidence on currency rates dont months, matter that much. It is really growth differential. I think it is going to create an enormous amount amount of growth differentiation over the next couple of years. To me, Central Banks are going to control the short end of the curve and they are going to have a hard time controlling what happens in currency. It is hard to imagine Central Banks confirming at just control everything. Annmarie hold those thoughts, jim. Jim mccormick stays with us. Lets get to the first word news. Thanks. A week after two protesters were fatally shot in kenosha, wisconsin, President Donald Trump has visited the city. The trip came despite the objections of the citys mayor and governor, both democrats. The president did not meet the family of jacob blake, the black man shot in the back by police. President trump you could take the people of kenosha that arent here and that are not protesting, but they want change also. They want law and they want to want a great police force. They want people that are going to keep them safe, where there houses are not broken into. Where they are not raped and murdered. That is what they want. Ofthe pentagon this morning the chinese increased nuclear capabilities. According to an annual defense itort, chinas program puts on the cusp of achieving the socalled triad of delivery systems. In japan, Prime Minister shinzo abes righthand man is the leading candidate to replace him. He is not ahead in the polls, but he has been supported by key factions in the party that will decide the succession. The contest will be held on september 14. Global news and a Bloomberg Quicktake powered by more than 2700 journalists and analysts in more than 120 countries. Bloomberg. Annmarie thank you. We had some breaking news just over the last 10 minutes to bring you. The Swiss Financial Market Supervisory Authority has officiated enforcement proceedings against Credit Suisse in the content of its they say this in a statement. Credit suisse says they willfully continue to cooperate with the regulator. Manus yes. This all goes back to a series of stories around allegations involving spying on an employee headed to ups ubs. Later in 2019, there was also monitoring of the head of Human Resources chief, he had been monitored, as well. It must be said that Credit Suisse is saying they will continue to fully cooperate. Complete an expeditious conclusion. We will certainly track that story, a new development. Annmarie certainly we will be watching the stock as we head closer to the open. Days left until the u. S. Election and it is now priced in as the worst event risk on record. How should investors be positioned . That is next. This is bloomberg. Manus this is bloomberg daybreak europe. Joe biden supporters are beginning to show signs of anxiety. Recent polls show a narrowing in the race between the democratic nominee and President Donald Trump. For more, lets bring in our Senior Editor. A good to have you with us. Concern . Primary i think biden folks, democrats are worried in general. A lot of them thought Hillary Clinton could not possibly lose in 2016 and then she won the popular vote and then she lost the electoral college. So, there is concern that even though joe biden still is up in the popular vote, surveys that by see around, he is not up an unrecoverable margin. Swingou look at key states, it is a little bit closer. A little bitare in of a constant panic over the last multiple months that they could once again when the popular vote and lose the electoral college. What they are pushing for as they want biden to be more aggressive in the way he is campaigning. Go out a little more because donald trump certainly will. Annmarie good morning. Become a defining contrast. President trump has been in kenosha. What did he say . It was very much as we talked about before his trip when we said he would probably stick to his law and order message. That is exactly what he wound up doing. He was effusive with his praise for Law Enforcement officials. He said looked like riot damage in kenosha. Now, joe biden is going to hit back, we understand, the New York Times has reported that he will run an ad based on his monday, so you can expect that some of this is going to continue going forward. That donaldssue trump feels like he might have an advantage on. It is a real touchstone issue i think for people across the united states, whether you are worried about unrest in the worried that are your child or your childs friends could come into interaction with a Police Officer and not make it out alive or both. There is a lot of concern around a lot of issues here. Forward, thisoing is going to be a really salient issue this fall and it certainly is not going away. Annmarie bloomberg Senior Editor in singapore, though he spent years in d. C. Thank you for that insight. In the u. S. , the stock market continues to rally to record highs, but novembers election is a dark cloud. Hedging against volatility is currently the most expensive event risk on record a student of the common way to that volatility known as a butterfly trade. Jim mccormick is still with us. Heading into the u. S. Election, does anything else matter when you look at this type of volatility . Jim listen, i think lots of things matter, we saw even there covid that the end of year was going to be about the election. Starkestbly have the differences in economic policies in modern history. We now have an election that is going to be a pretty close race. There is going to be a lot of anxiety headed in. Into november. Manus thank you. We will pick up that conversation. Coming up, we hear from our exclusive interview. The cuts the oil producer is making to comply with the opecplus deal. That is next. This is bloomberg. Manus this is bloomberg daybreak europe. Im manus cranny in dubai. In reordering is in london. Adnoc has done a property deal with apollo. We had an exclusive conversation and we got his thoughts on the oil markets and what it takes to support the current prices. Take a listen. Oil marketsber have truly tightened in recent months. Are actually moving in the right direction. That, it is my view that i find it too early to make any longterm predictions. On the demand side, i know love. Ve shown some tellis the latest you can me on the demand side that you are seeing . Seeing is that there are multiple variables in marketght now that make predictions somewhat difficult. , markets have clearly tightened in the last few months and as we see economies open back up around the world and in particular we have seen demand strengthen in asia. Having said that, the Energy Sector must remain cautious and flexible as we navigate complex and evolving map of economic developments. Ground, weding our are staying the course, we are being positive, and we are cautiously optimistic. Narrative isf the that this is about opecplus deliveringd job in compliance. How important is overall compliance over a reasonable period of time to the market. Opec you have mentioned, played a very Important Role during this challenging period and it continues to help build confidence back into the market. Veryve continued to work closely with opec and its members and we are very committed to ensure the compliance. Anus i know you dont have crystal ball and you have used the word caution, but every trader wants to get a sense of what you do think when we can really realistically get back to 100 Million Barrels per day. Best reasonable estimate . No one can really predict how the future will unfold as far as the market is concerned, but we around 75 fall to Million Barrels a day. It is starting to head back in the right direction. Looking ahead, we expend expect demand to hit 90 Million Barrels per day by the yearend. We are being very flexible and dynamic and maneuvering through these market cautiouslyd we are optimistic that the markets will pick up. The ceo of was adnoc. When we get back to that magical 100 Million Barrels per day in terms of demand, what is ironic is that compliance, it is critical for the market and that they have done a very good job, but some of the data for us here in the uae in the past 24 hours, we have been slightly overproducing, havent we . Annmarie they have slightly been overproducing, but part of it is what we saw, they are going to need to produce more to make up for the overwhelming need domestically. Toq and nigeria are starting come in line. Manus this comes back to the whole point. It is about what has the prince managed to achieve in terms of compliance . Many have tried this before, but others have not unsuccessful. What do we have in store . Annmarie the pinocchio problem. The euro falters after breaking the key threshold of 1. 20. What is next for the shared currency . That is next. This is bloomberg. You can go your own way go your own way your wireless. Your rules. Only Xfinity Mobile lets you choose shared data, unlimited or a mix of each. And switch anytime so you only pay for the data you need. Switch and save 400 a year on your wireless bill. Plus, get 400 off when you buy the new Samsung Galaxy note20 ultra 5g. Annmarie good morning from bloombergs European Headquarters in the city of london. Im Annmarie Hordern with manus cranny in dubai. This is bloomberg daybreak europe. The s p closes at an alltime high. The u. S. Election is shaping up to be the most expensive event risk ever. U. S. Treasury secretary Steven Mnuchin says additional fiscal stimulus was needed early. He places a call to nancy pelosi. A redline for the euro. The currency breaks below the dollar 20 for the first time in two years. T clearly has the ecb worried manus, good morning. We just had some breaking news this hour we really should recap and this has to do with Credit Suisse. This Swiss Financial Market Supervisory Authority is initiated enforcement proceedings against the bank in the context of its observation activities. Credit suisse says they are of course going to comply with the regulators, but we are going to be watching all the lines coming out of zurich this morning. Manus absolutely. Part of this investigation in particular will be and how these activities were documented and controlled. Those are critical words within that press release to Credit Suisse. And they areponded in the observation matter. No further details on that. Credit suisse says they will fully comply. They are determined to support the effort for an expeditious review and incorporate the lessons learned. So, the executive board of Credit Suisse agree and unequivocally confirm that observation of employees is not part of the culture at Credit Suisse. That is the state of play. What stands out . We have a couple other breaking news headlines, but the market sent of this. Body who tunes into this she sends me mega doc every day and i have to read it. What is topline . Annmarie topline for me is the election risk. The volatility, the most ever on record for a single event. It is pretty huge. Are investors just in a waiting pattern mode until november 3 . We are 60 two days away. Manus the question is is the equity market to greedy . Calls ramping higher. One other piece of breaking news ecurring operating income 2. 26, that is a beat another 2. 2. There is continued uncertainty and challenging conditions ahead. When it comes to the revenue side, they are saying 8. 45. That is just a wee bit lighter than the 8. 54. Jemison whiskey, as well. Any other lines that stand out . Annmarie for me, what stands out for the changes of behavior. We are literally seeing the fears at home, this idea that cocktail hour is coming back at home in your living room is clearly helping them weather this storm, manus. [laughter] manus i have this vision of you Walking Around with one of those sort of like cocktail shakers, annmarie, at 5 00 p. M. It is 5 00 p. M. Somewhere in the world. We are lighting up the s p futures like a torch. We may get a vaccine sooner than expected. We have mnuchin talking about the possibility of a skinny deal with nancy pelosi. No fiscal cliff risk is what the market is attaching. We guest house this morning, will talk about that. Roll it over, have a look at the currencies. That is the prism of risk where i would say you were going to see the new salvo slide. Aint nobody looking for 1. 20. Boil rallies by 0. 9 . Demand will return to 90 Million Barrels per day by the end of the year. The aussie dollar on the crop. Saying we are ready to go. That trade differential, that currency differential is top of the agenda there. Annmarie im glad you brought up in still you because they dipped into a recession this morning. Back to the 1. 20 level, the euro faltering after breaking about that key level. Lanehief economist philip said the Exchange Rate matters for the regions economy. The shared currency has rallied since its march lows. The European Union response had supported the euro, while the ands move to rates to zero massive liquidity undermined the dollar by shrinking the u. S. Advantage. Jim mccormick is still with us. Lets kick off with the eurodollar this morning. Started to see this rapid ascension of the euro, this was the time that mario draghi would start to get very uneasy. Are we going to see the same from Christine Lagarde . Jim listen, it was a very quick move in a short period of time. Doesusly, the currency matter for the inflation outlook. It came on a day a very low inflation. What is that they are really going to do . Dont know how much the ecb can do then push on rhetoric. You may see a slowdown in the eurodollar moves. You mentioned that pretty awful print on the inflation side. How does that translate terms of what comes next for the ecb . Does it translate in some ways to your positioning being long spain versus france . Think then, i Inflation Numbers over the summer have been highly distorted by covid effect. Europe was tood inh in july and too low august. I think the ecb understand that. Meeting in ecb september is going to be a pretty boring one. The ecb in spain versus germany, the moves were so significant. Story fore underlying peripheral bonds and europe are still pretty positive. Germany says the country has reduced their reliance on exports. Exports are huge for the single currency market. Do you agree . Has germany been able to reduce that alliance. I think that is probably an multiyear story. You cant reduce your reliance on exports that quickly. Thinking about the nature of any covid recovery, it is no doubt you are going to generate domestically. Germany has had a pretty good experience in managing covid. Domestic numbers have been pretty good. Story. Ngterm manus one risk that we havent spent a great deal of time talking about recently is brexit risk. If parliament returns and as we discussions ore take discussions to the next level for the u. K. , do you think the sterling will run against the buffers. Eurosterling, is that about to reprice . Market has so much on its mind. Frankly, there is some important space coming up in the next couple of months and i dont see any good for brexit. You want to get another extension, you get a no deal, or you get a very skinny deal. I think brexit as an event risk is going to come up quickly and is going to pose some potential Downside Risk for sterling over the next 68 weeks. Jim, thank you very much. Jim mccormick stays with us. Lets get you up to speed. First word news now. Thanks, manus. The u. S. Economy needs more stimulus, according to treasury secretary Steven Mnuchin and. A conversation with House Speaker nancy pelosi amidst stalled negotiations. He stopped short of offering a fresh proposal. The nations first recession in almost 30 years. A percentage point more than expected. Is the in the recovery ongoing lockdown in melbourne. Chinas Charm Offensive in europe may have backfired. Of the Chinese Foreign minister culminated in a Tense Exchange in berlin, confronted by his german counterpart, saying he would pay a heavy price for a visit to taiwan. Saying europe would not be intimidated. Global news 24 hours per day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. Annmarie, manus. Manus thank you very much, laura. The apolloled group that has made one of the biggest property deals ever in the middle east. We continue that conversation. We hear from my exclusive interview with the copresident of Apollo Global management. All things credit coming up. This is bloomberg. Manus it is daybreak europe. Im manus cranny in dubai. In reordering at london hq. Annmarie hordern at london hq. 2. 7 billionesting in real estate, one of the largest real estate deals in the middle east. I spoke to jim zelter exclusively about the deal and markets. Take a listen. We are in a low rate world. That will continue for a while. While we have parts of our business that are trying to get double digits plus, a midsingle digit yield works very well for us. Perspective, it is getting more challenging. Have to navigate the environment that is pretty tricky right now. But when you are trying to make 5 , six percent, 7 , you can find places like at that are appropriate. Manus pimco is prepared to go overweight travel sector come along airlines and secured bonds. In would say that is a big risk play. Is that the kind of risk you are prepared to take at the moment . Travel, energy, hotels . Would you have that level of risk . Jim z. listen, you have your finger in a lot of pots. That weeen well noted have been participating in some of the really unique opportunities, whether in the Airline Space or the travel space. We transacted with expedia early this year. We were active in a variety of financings around the Airline Space. We took some dips in latin america. While we are a thematic investor, i think it is too early to call leander the bottom of this pandemic. I think you really need to think about structure and where you are in the capital structure. We are not afraid of investing in challenging industries, but it really gets down to structure, security, and making sure the skills we honed over 30 plus years that we are bringing to the table. We have been able to continue to do that. Manus i look at spreads. You compressed all the way back in to where you were precovid. Do you think that they continue to compress given what you heard last week . Jim z. i think the fed is going to continue to be a very active player on high quality assets. There is going to be dispersion of the markets between lowquality quality and high quality assets. About this is it is hard to get Long Duration and we were able to do that in this long transaction. Certainly, the trend is positive in terms of ig spreads. Us, we have been in the ig world, we have reinvested a lot. A focus on that area in our business. Manus what is the biggest risk . That a vaccine comes to early and the big opportunities pass you by . Jim z. i think you have to be patient. Certainly, this pandemic came out of the blue and the impact on consumer behavior, on consumer activity, especially in the u. S. Where the consumer is 70 plus of the market, there is a law of known unknowns in the next 24 months. So, i think again we are fortunate. We have a broad platform between private equity, credit, assets. We have our finger in a lot of opportunities, but i think at these kind of levels, one needs to be measured and thoughtful about how they are putting money to work. We think about asia broadly speaking, we think there are opportunities that are consistent with how they are. We seed say opportunities in india a bit, australia. We are trying to pick our spots in that region that fit how we invest with our value and structuring things. Dm,s in terms of em versus do you have a sense of where that goes next year . What the fed did last week was an ignition torch to buy eem, people are saying to me. In terms of that lien to dm or em, my apologies. Jim z. certainly, the concerns about em versus dm in march and april have certainly subsided and there has been a nice compression between em. How much more has it tightened . Portfolios,at our we are probably a majority of pm around the globe and we do have some overlay em, which we are excited about obviously. Approach more balanced that is probably the way. That is how we investor may value bet. Manus for you, where is the biggest opportunity at the moment . Jim z. certainly early days in commercial real estate, early days on aviation broadly speaking. Two big ecosystems that you really need to be involved from front to back. Aviation is from manufacturing to airlines and everything in between. Certainly in commercial real estate, it is a slower moving train, but it will have a big impact. A lot of capital has been raised, a lot of money has been put in the ground. As the consumer readjusts to this new world, there will no doubt be opportunities in commercial real estate that are probably again a bit slowermoving because of the nature of the assets. , the jim zelter copresident of Apollo Global management, overseeing 414 billion. Jim mccormick along with annemarie, my cohost. That t listening to you never know he said anmmarie coming you are not going anywhere. Too early to call the end of this pandemic. Interesting he said in terms of capital structure. Where are you most comfortable in the capital structure and of corporaterms bond allocation . He talks about aviation and commercial. Tie those together for me. Jim yeah, cant say much on sectors. Better marketsis have generally been in this kind of goldilocks scenario in the last 36 months. I think too many people contribute that attribute that to easing monetary policy. I think the bigger story is the fiscal policy. There have been stories done by the oecd that if it were not for fiscal support, 50 of oecd companies would be already facing some serious liquidity shortages. I think looking forward for credit, youve got two real risks. One is that markets the other is that we have had a very modest cycle so far, more modest than the 2008 crisis. Defaults are going to pick up. Havenk credit is going to a tougher period in the next 36 months. Annmarie jim mccormick, think you so much for your time. That was jim mccormick. Coming up, banks were so 2019. The new economy is in. We will look at the euro stoxx 50 makeover next. This is bloomberg. Annmarie good morning. This is bloomberg daybreak europe. Manus, to recap some of the breaking news, switzerlands financial regulator has opened enforcement proceedings against Credit Suisse over the spying on former employees that damage to the banks reputation and led to the ouster of the act ceo. We will be tracking that story through the morning. We have another blow to europes banking sector. Is losing itsle place in one of the main stock benchmarks, one of the many changes coming to the euro stoxx 50 when the index shuffle takes effect. Dani burger has been looking through all this. How does this change the european benchmark backup to the prior . Dani the Third Quarter typically does bring more changes than the other ones because the requirements and the hurdles for entering and exiting the benchmark are lowered, but this quarter specifically brings with it the biggest changes we have seen to the euro stoxx 50 in at least a few decades. If anything, this really shows the pandemic fueled this really big surge toward Growth Stocks in favor instead of value ones. Areaw banks, for example, now getting kicked out of the euro stoxx 50. Also some Telecom Companies like telefonica. In their place, we have the new economy. We have things like a dutch payment provider, as well as an internet provider. This inclusion in the benchmark may help fueled these growth names because once they are included in the benchmark, it means there is a lot more passive money coming their way. 50 is so, the euro stoxx not the only gauge to have change numbers. We have seen Similar Companies added benchmarks in terms of across the globe. Dani yes, the trend really does hold beyond europe. For example, the Dow Jones Industrial average just shot saw its members get reshuffled on monday. It is the same theme. Some of the more value names losing their place and in their place comes the new economy. Some gas Companies Like exxon were kicked out. Instead, we have things like salesforce. According to ubs, this really signifies that investors need to be diversified beyond the benchmarks. They need to buy cheaper names likely to lead the next leg higher. Those companies they say are ones that reflect the new economy. They point out things Like Companies related to 5g, renewable energy, and in general that is where you want to be and that will prepare investors for changes in indexes to come. Manus . Manus dani, thank you very much. Dani burger with the latest. That is that. 5. 5 billion joint lead deal between apollo and adnoc. Big deal, big day. Zeltere dr. Sultan and in one day. If you missed those interviews, had to bloomberg. Com. Anna welcome to Bloomberg Markets european open. Cash trade is under an hour away. Trump in kenosha. The president condemns antipolice rhetoric after protesters were fatally shot. Joe biden accuses him of failing to meet the moment. The euro breaks 120
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