The banking index very much under pressure. Names like bnp paribas dragging at lower. Rising case count likely to put pressure economically on europe. That is going to feed back into the Banking Sector. By 0. 4 . S up arodollar now trading with 1. 16 handle. We are down by 0. 4 . Alix as you were talking about travel restrictions and lockdown light, european leaders grappling with how to bring the virus under control. Hospitalizations are climbing following a surgeon cases. There are concerns about madrid being overwhelmed at a hospital level. Joining us is maria tadeo from brussels. Walk us through what we might see over the next 48 hours. Maria thats right. There isnt a single approach here from every european country from every european government. Every country is doing this differently. France had a record 16,000 cases. Of course, that is much higher than a neighboring country like italy or germany, which the french government keeps repeating that they dont want to go for a national lockdown. They believe the restrictions on a local, targeted measure will serve to flatten the curve, and that means we wont see need for a national lockdown, but that question really remains. Spain, we areat seeing pressure on hospitals in madrid, an area that has been badly hit by the coronavirus. This is not just about testing more people. You are really seeing more people meeting that medical help, going to hospitals. These look similar to what we had in march. The concern is that we are entering into the flu season. Doctors have said repeatedly that this could be very dangerous for europe, to get a crossover between the coronavirus and the flu season, and we would see that pressure on the medical system becoming difficult for governments to deal with. Guy and some suggestion from the wto today that there may be a shortage of flu vaccinations in northern europe. Lets return to the coronavirus, the covid19 coronavirus. There is pushback in madrid and in marseille and in other places against the restrictions that are being imposed. There is pushback, for very different reasons. Marseille feels that this idea of shutting restaurants and bars will be bad for their economy, that they are being treated differently to the rest of the country, and that they believe that paris, which is a big rival to marseille, is being given a little bit more leeway. When you look at spain, this is really very much at this point a story of social class, and how that is a factor or has an impact when you look at coronavirus. The districts being put on what i would say is a very light lockdown, they are being encouraged to go to work, they can get on the metro everyday. The idea is the richer areas are not being hit is hardly as workingclass areas, and this brings all kinds of questions as to protections paid by the state. Pay . An a family afford to two different stories, but they highlight that people to some extent are becoming tired of restrictions, but also becoming tired over what seems like uturns from governments. One week, they say something. The next week, they change it. Guy maria, thank you very much, indeed. Maria tadeo giving us an update on what is happening in europe. For insight into the Market Reaction to the virus surge, we are joined on the phone by alan ruskin, Deutsche Bank chief international strategist. Can we start off with what is happening in europe and talk about the market and locations . European equities under pressure. We have seen the euro go from 1. 20 to 1. 16 in fairly rapid order over the last few days as a result of what we are seeing here in europe. What do you expect to happen next . The covid crisis is definitely not under control on the side of the pond. Alan yes, i think the second wave and the effective convergence between what is going on in europe and the u. S. Is a long way away from the virus divergence story. We were all talking about when eurodollar went up to 1. 20. But it does feel a bit like it is a perfect storm evolving. So a couple of things. Theres obviously a lot of general derisking going on, partly related to the u. S. Elections. I think the fact that the messaging from the last fomc suggested the fed was not about to ease anytime soon, that additional qe was quite high, the fact is, even on the fiscal side, theres a certain lack of responsiveness. I think that has not been helpful. There are quite a few things which have created a reversal positioning, and the positionings have built fairly long euro and the move from 1. 15 to 1. 20. Alix denmark is now saying it may increase covid restrictions until october 18, and then could actually increase them. So how much more of that positioning and shift do we still have to see, or do we just stay around these levels right now . Alan i think we are fairly advanced in terms of the corrections. The big breakout point was around 1. 15. If you look at what happened a couple of days ago, we did break some pretty important levels on the dxy. 94 was being signaled out in particular, just below 1. 17 on eurodollar. That points the way toward Something Like 1. 15 on eurodollar as the next area of support. I dont fare there is a real enthusiasm for the dollar. I think this is much more of a case of position squaring than people embracing the dollar, and that the dollar is going to go on a particularly long or sustained run for the next few months. Guy with the dollar be a safe haven in a contested u. S. Election . I know it sounds counterintuitive, but in the past, the dollar has been the place you go for safety. Alan i think it is counterintuitive. When it is as u. S. Specific as this, i think people will be looking elsewhere. The logical alternatives are probably the swissie, looking anywhere in europe, and possibly the yen as well. I would single those two out. Normally, you would perhaps even think in terms of gold, but gold is quite caught up in the vaccine story, yet another undercurrent donating Global Markets and could become a very big factor, and even bigger factor in the months ahead. Alix the other wildcard of course is brexit. The eu reportedly telling the u. K. It is time to commit to key element of a trade deal. I feel like weve been hearing that now for four years, but the eu is trying to set some conditions for negotiations to actually advance. What is the cable pricing and right now . Alan i think probably eventually, we will end up with some type of freetrade stillent, but one that leaves a lot of latitude for nontariff related issues to creep into trade. Secondly, the u. S. Election is obviously having some input into where the u. K. Sits, as to whether it looks isolated in relation to the rest of the world or not. I know that people are beginning biden could be elected, and sterling will get penalized, and that would be favorable for the euro, so part eurosterling trade relates to the biden victory. Guy how seriously are you taking Boris Johnsons october 15 deadline . Alan i think you have to treat seriously. Ly we have seen deadlines like this , some people have suggested false deadlines disappear very quickly. I think the inclination is to take these dates seriously until told otherwise, but with an acknowledgment that one could be told otherwise quite quickly. Alix where are we going to see the best recovery . Do we understand that yet . It feels like to take a longterm call, you need to know who is going to come out of this the best. Do we know that . Out, i think china stands and north asia to some extent as well. It is just part of the china pole effect. China is going to have the strongest gdp growth of any major country this year, almost certainly the strongest gdp growth next year. Growing this year is a huge achievement in itself. See a bigless we second wave in the virus in china, which i thing would then catch the markets by surprise, i would certainly put my money on china outperforming pretty much every other major economy in the next 12 to 18 months. Overlap ofput the the election on top of that. Youve talked about the fact that the yuan will be a winner under biden and a loser under a trump second term. You kind of slip that over when youre looking at what is happening with russia, and many are increasingly arguing that russia is very nervous about the prospect of a biden administration. Talk me through those two trades. Tendings, i think it is to play out that way, to some extent. I dont think it is all about the elections, but the ruble has underperformed and china has outperformed, and part because of what is happening in the economy. But i think what you are seeing is it has become the more prominent feature that the ruble is responding perhaps to the idea that biden is holding up in the polls. The thought process is simple enough. It is all straightforward geopolitics. The idea that biden will align more closely with congresss views in terms of their attitudes towards russia, were russia to transgress or pose any particular problems to u. S. Interests. Pressure would be much more easily subject to sanctions. Certainly under a biden administration, the Putin Administration would not have nearly as easy a time, and i think it micks an awful lot of sense to for the ruble to be penalized relative to a trump victory. On the china side of things, i think it is more perceived that biden is more pretty double in terms of his negotiating, as it relates to trade. Not necessarily easier on trade, but he will bring the Multilateral Coalition that effectively will be somewhat easier for china to navigate against, just because it is more predicable, and therefore, and that sense, it will be hopeful for the chinese yuan. But as i said earlier, i think the chinese fundamentals are very much in favor of the yuan regardless of the election, so i would belong china regardless of the election results. Alix many pointing to testing and Contact Tracing is what many emerging markets did right. Thank you very much, alan ruskin, Deutsche Bank chief international strategist. Coming up, we will take a look at the risk for private investors. We will speak with symon drakebrockman, Pemberton Capital Advisors partner. This is bloomberg. Guy my from london, im guy johnson. This is the european close on Bloomberg Markets. Lets turn now to the private credit markets. Joining us is symon drakebrockman, managing partner at pump Capital Advisors at Pemberton Capital Advisors. How different is the experience in the private met the private credit markets to the public credit markets . Symon i think the private markets have held up incredibly well over the last six months, and i think probably similar to the stock markets, you have seen bifurcation in different sectors. The typical food, technology, health care, though sectors have done extremely well. I think probably the big change in the private markets for lenders like ourselves has been that many of the old economy sectors have been ones that we have avoided over the last couple of years, as we have Seen Technology develop and transform businesses in the new economy, and i think that a lot of capital has been flowing into those new economy sectors or into nondiscretionary spent areas of the market. Alix does that pose a problem when theres a lockdown, and terms of those businesses needing aid . We definitely got hit on the private equity side in the u. S. Did you get sucked into that also . Symon i think europe has been in a slightly different situation to the United States because firstly, leverage across europe was lower than it was in the United States in the private markets, so therefore, you didnt have companies quite as extended as the u. S. Companies. I think likewise, you saw a lot of companies have started to build cash in the first quarter, and drew down on their shortterm funding facilities, etc. Obviously, this leads to cases where vendors like ourselves have worked with management teams to provide additional liquidity, but i think the biggest difference has been really the government furlough schemes in europe, where what would have burned a lot of cash and having to put employees at home was largely funded by Government Support schemes, which has meant that companies have been able to right size their workforces very effectively, and we saw actually in q3 those employees starting to be gradually brought back in business start to pick up. Guy Central Banks and governments have supported public credit markets and a number of different ways. Central banks have been buying credit. We have seen governments trying to avoid defaults. That is the Public Markets. Private markets have received less support. Is that problematic, and is that going to mean that default rates are potentially higher in private markets than they are in Public Markets . Because dont think so i think the Public Markets, what the fed did was step in and really create stability for funding. That stability has flown across all of the markets, which is why we saw such a huge rally and credit spreads over the last three or four months. I think what is now happening is the second phase of that, which is fixed income markets arent looking particularly attractive at the moment. I think investors are looking to put more money to work in private markets, where they think the riskadjusted returns are looking very attractive. In particular, it is an interesting situation because, as you talked about earlier today, banking stocks are getting hit very hard. Banks are pulling back even further, and that is giving an opportunity for organizations toe ourselves to come in extremely attractive businesses. So we have recently seen funding for the purchase of hermes parcel in the u. K. , which is a Delivery Company that has benefited tremendously from the movement to online. I think you are seeing a lot of sectors in europe where they are ripe for consolidation. I think this will actually speed up consolidation, and you are seeing a lot of private equity money coming into europe to try to capitalize on that. ,lix how big is your cash pile and how quickly are you putting it to work right now . Symon we are constantly raising capital. We had several billion to put to work inside the market, and we are continuing to raise new funds even through the crisis, and have raised about 4 billion this year. So i think the access to liquidity for the right fields continues to be there, and we will probably grow over the next 12 months. As i touched on, the benefit of the european markets are private lenders makeup 30 to 35 of the market. Private lenders are roughly 90 of the market in the u. S. , so the ability for european lenders to grow as banks feel the need to withdraw because they are under a lot of capital pressure and under liquidity pressure, because the banks have been the mechanism that a lot of governments have used put this funding into the market for Larger Companies under these guarantee schemes, that has drained a lot of liquidity out of the Corporate Lending part of the banks. Alix it was really great to catch up with you. Would love to touch and as this crisis evolved. This is bloomberg. Ritika its time for the Bloomberg Business flash. Im ritika gupta. , one ofsearch engine the most profitable businesses in history, is about to face its biggest challenge. The u. S. Government is gearing up for an antitrust lawsuit, accusing the company of crushing competition to protect and extend its monopoly. Bloomberg has learned the Justice Department is focusing on whether google skewed search results to favor its own products and whether it uses an iron fist over access to users to shut out rivals. U. K. Gambling group william hill is fielding at least two takeover bids from u. S. Companies. There have been separate cash proposals to william hill. Shares rose as much as 40 in London Trading today, hitting their highest level in more than two years. Deutsche bank is changing its work from home policies. The bank says it is mapping out a hybrid model for how staff can split work between their office and their homes. It is meant to permanent really dos office space and safe cost permanently reduce office space and safe cost. Managers have said they are surprised at how little the shift has reduced productivity. Guy i am sure they havent been positively surprised when it comes to the european Banking Sector on the way that it is trading right now. On an intraday basis, the stoxx 600 Banking Sector hit a record intraday low a little bit earlier on. Over the last year, the numbers are i watering leak horrible are i watering are eye wateringly horrible. It looks like pretty hard once again. Alix i also had some data yesterday that the euro zone money supply growth slowed down in august at a 9. 5 percent pace, and that was before the next resurgence and lockdown light. So if there literally isnt demand and you cant get the money out, it doesnt really matter how much the ecb will let these banks actually borrow with a huge take up of those tltro loans this week as well. So what is the catalyst . Guy the ecb may have reached the stage where there is no demand ultimately. It may have been there for quite some time. The banks are also dealing with negative rates, which is a huge problem. Theres likely to be a rise in nonperforming loans, which isnt particularly clever either. Ned interest margins. It just goes on and on. It is not a particularly new story, but it is made worse and worse by the pandemic. M a, ands time we have it is not becoming a catalyst. Guy we are going to talk about the european close, coming up next. The european Banking Sector one of the worst performers today. The close is next. This is bloomberg. Look here, its your very own allinone Entertainment Experience xfinity x1. Its the easiest way to watch live tv and all your favorite streaming apps. Plus, x1 also includes peacock premium at no extra cost. This baby is the total package. It streams exclusive originals, the full peacock movie library, complete collections of iconic tv shows, and more. Yup, the best really did get better. Magnificent. Xfinity x1 just