Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

With brexit continuing to be constructive, but any potential deal with the eu could be upended at home. Talks continue today in brussels. Strong countermeasures. China threatens retaliation if the u. S. Passes a bill opposing the situation in hong kong, and carrie lam had to prerecord her address after it was interrupted wise. And it gets better and better for roche, the drugmaker raising its outlook for third time as new drugs that boost sales, and we will talk to the ceo, severin hwan, about doing deals. That is at 8 00 a. M. Hello, matt. Matt about half an hour away from the european open. I am looking at the pound. We could see movement. We pretty much flatlined yesterday. There was the spike we saw at 4 00, right now hanging out just under 128. Lets take a look at futures. Kind of a mixed picture, not as red as we see in america. In europe, the dax futures are down 1 10 of 1 . Meanwhile, cac futures are showing a green arrow although unchanged, ftse futures solidly down. You see a more consistent drop in futures, although it is very early, obviously, in trade. We still have quite a few hours to go until the u. S. Opens, so we see nasdaq, s p, and Dow Jones Futures down about 1 10 of 1 . What else do you see, anna . Anna i am just wondering. What comes from us almost daily that are finally starting to catch up with u. S. Equities in u. S. Futures, when you look at what the chinese have been threatening to do in terms of trade negotiations or retaliation if Congress Goes through with some of the bills that the chinese sea are being favorable to the protesters in hong kong. That is part of the dynamic, isnt it, matt, because over the last few hours, there has been optimism around earnings, whether it is jp morgan or others, with the s p 500 closing at a fourweek high or not far from it. This is what we see on the gmm, catching up on the earnings story. In singapore, higher. On south korea, the cost become a we are higher, south africa, as well on south korea, the kospi higher, south africa, as well. Focusing onou were what is going on with the pound, because there is the potential for a lot of brexit headlines as they edged towards a deal. One official said progress was made after talks continued late into the night, but any agreement risks being jeopardized by the Northern Ireland party. The pound trading slightly lower though still above 1. 27. Mariaining us today is tadeo. We heard talks of them going into the Early Morning hours with the lights on, so where have we got to . Maria that is right, anna. This is a long negotiation, and ongoing negotiation, no breakthrough yesterday. We were told there would be one, but, of course, there was none. We are told there was a everyone staying at the table, but they have not been able to turn this in to a legal text. We are expecting Michel Barnier to brief ambassadors, and from that point on, eu leaders will have to decide whether they want to endorse the text and provide headway for a brexit on thursday. What is clear now is they are running very close to the deadline, and there are still gaps between what the europeans want to see and what Boris Johnson is prepared to offer. Of course, from the United Kingdom, the position has not changed. They will tell european leaders that they want to leave, and they will not ask for an extension. The United Kingdom plans to leave in a two weeks, deal or no deal. Time, deal or no deal. Matt this looks like the theresa may backstop. How is Boris Johnson going to get that through parliament . Maria that is the big question, and europeans do not want to be seen as moving too much until it seems they have the numbers together. Every time it comes to a vote, it has been rejected. Something we were told last week, the final deal will look very similar to that of theresa may. There will be changes made to the union and applicable question, can Boris Johnson convince the dep that he succeeded in areas that theresa may was not able to, that he is and thatbrexiteer, they should back this deal. Otherwise, it will be a cycle perhaps of mini extensions, and we cannot be in the same cycles forever. They do understand that this comes down to Boris Johnson, whether he is able to turn that into some kind of political spin that can help him back home, and i am sure you have heard already, suggestions at this will come down to the money, the dep wanting to see billions pouring into Northern Ireland. Anna it has happened before, hasnt it, maria, and we know the timescales, the time they were negotiating the support for the theresa may government. Thank you, maria. Picture, asian stocks follow their american futuresgher, but u. S. Are dropping as tensions over hong kong klein. Lets get into the markets. Our Bloomberg Markets asia editor in mumbai. It is interesting, futures dropping on concern of hong kong. This is finally being joined with what has been going on in hong kong for a long time and what happens on wall street, it may be a little premature, but do you think the hong kong story will influence the trading day in the u. S. . Reporter that is somewhat doubtful. Between hong kong and the markets, the issue is the u. S. Congress, because they have not really moved forward with a bill that is raising the issue as something that the u. S. Will act upon, which, in this instance, is the is far less interventionist. We do not like to see things taking an unfortunate path, but we also think that this is xmething, if only president i could sit down with the leaders in hong kong, he could probably find a solution. Is what hasthat happened. The hong kong situation has blown up a little bit as far as markets are concerned but also because we are at a very delicate situation regarding with what is going on with the trade talks. We had phase one agreed, the u. S. Sounding very enthusiastic, and then china saying, yes, we have made some more progress,t to walk closer towards it there were grounds to expect a little bit of a pullback, some profit taking, and the shares have gone pretty far pretty fast in a situation where we still do on have definitive peace trade or brexit, so maybe that is giving some an excuse. ,att i wonder about the brexit garfield. Yesterday, it looked like Global Markets were trading on brexit progress for a moment, and that it made me question, how closely are you there watching the brexit negotiations . Garfield i like to watch the brexit negotiations, but do not touch. The real driver of bringing brexit home to the rest of the Global Markets is the impact brexit has had on treasury deals. For a long time here, it was a underlying part of treasuries, the sort of brexit haven flows, but it was not really showing up on the surface, but what brexit progress has done to bund yields, treasuries have become impossible to ignore. Earlier this week, we had a day when treasury yields fell sharply in the asian day because of trade concerns, and then the brexit happened, and treasury yields popped back up, so that has an influence on the treasury market, and that has an influence on the stock market, too. People are selling out of the treasury market because they see yields rising. Anna ok, thank you, our markets live asia editor, garfield reynolds, on the market move, a lot of news around trade and, indeed, round brexit. Up next, the imf downgrades its projections for the lowest in a decade. What impact will that have . A guest joins us next. This is bloomberg. Anna welcome back to the european open. 7 43 in london, mixed on the futures, the ftse going the way as you might expect with the intensity of the brexit negotiations. They continue. U. S. Futures a little bit weaker at this stage of the trading day, and slashing the output, cuts to the 2019 forecast, a broad deceleration of the Worlds Largest economy compounded by ongoing trade tensions, and Bloomberg Economics says any recovery year will be narrow and uncertain. How does the oil market perform with that as a backdrop . L. Ts talk to nei we have seen these downgrades this week from the imf, which makes me wonder if there is further Downside Risk, less demand, or are you already uptodate with what the imf is saying . In the last report that we published on friday morning, we did actually downgrade our expectations about growth, the headline figure down for 2019 and, indeed, for 2020. We have two some extent anticipated a downgrade from the imf without knowing what the full details will be, but i think what the imf numbers are doing is confirming a picture we are seeing as 2019 has developed, and we are now looking at the possibility that the demand growth could get a little weaker. We just have to wait and see when we run the final numbers, but it is not just a question of the imf numbers themselves. There is, of course, real data from the oil market as we go through the year, and in the second half of 2019 so far, oil data has been stronger than we might have otherwise thought, so the jury is still out as to whether we are definitively going to cut the growth any further. Anna ok. Matt how elastic is it . When we saw the attacks on saudi arabia, there was a brief spike, but, really, prices came under control quickly, and it makes me think that, certainly in the shale areas of the u. S. , but in other places around the globe, too, it is really to ramp up supply to meet demand. Is that the case . The i think the issue with attacks on saudi arabia was that the initial fears that we had was that it was a very severe disruption that would disrupt the oil markets materially for a long time, and saudi arabia did a very impressive job in dealing with the disruption. They have managed to maintain the supply for their customers, so that was impressive, and that explains why the oil market was able to adapt, and prices fell back to paris attack levels relatively quickie. Quickly prices fell back ck levels relatively quickly. Overall growth estimates being reduced as we head out of 2019 and into 2020, while we are thinking about that, what we are also seeing on the supply side is an expectation of a wave of new supply growth from the United States, which will continue to grow at fairly impressive levels, but crucially, we are also seeing very big expansions in production next year from brazil and norway and to some extent canada, so demand growth, the jury is out on where that is heading, but what we are pretty certain on is that there is supply coming into the market, and that suspects that the opec countries and russia working with them to manage the oil market, they will face a serious challenge as we move into 2020 to keep prices at the level with which they feel comfortable. Anna how much geopolitical risk do you think is currently in the prices west mark as matt said, the prices did not is currently in the prices . As matt said, the prices did not change often, and saudi arabia acted quickly. The saudi infrastructure. It is in some respects quite extraordinary that the prices did not rise higher than they did. Number one, wet, established that the attacks were not quite as devastating as first thought, but second, the World Reserve has a very large volume of stock. It is probably up to one billion or so in china, another 1. 5 billion barrels of emergency stocks, a lot of stock out there, which clearly was available if necessary. Of course, in any emergency, the market, the private companies are the first responders, if you like, and the market springs into action, with the saudis leading the way, and we did not need the stock that the iea manages, but without being in oil shale general, you think maybe it can happen again, but the market seems for the time being at least content that a serious disruption can probably be dealt with by the market, but, of course, we do not know the nature of these things. Thank youright, neil, for joining us this morning. Son at the International Energy agency. For the bloomberg first word news, lets get to oanh ha. Oanh Democratic Candidates met last night for the fourth democratic debate in ohio. Former Vice President joe biden defended his son over attacks, and senator Elizabeth Warren faced criticism over how she would pay for her governmentbacked programs, but the candidates were united over one thing, the need for an impeachment inquiry into president trump. And pressure is mounting on ankara to end its incursion in syria, with accusations of war crimes. Now, moscow has come out to say the military operations are unacceptable. A former military chief under president obama said these actions could lead to the return of Islamic State in syria. Stopped j. P. Morgan from claiming the repo market, according to chief executive jamie dimon, saying they have the cash and willingness to steady shortterm funding markets. They went haywire back in midseptember. Dimon said jp morgan did not redeploy due to liquidity. Raise ang the fed to stake in bank of american, Berkshire Hathaway, to more than 10 percent, which often triggers a regulatory review. Iny hit their threshold back july. Its filing with the Federal Reserve said Berkshire Hathaway would remain a passive investor. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. I am oahn ha. This is bloomberg. Matt, anna . News outr first word of hong kong. Minutes away from trading. A look at stocks to watch at the open, including roche, boosting their outlook for a third time as new treatments gain traction. Severintalk to the ceo, schwan. This is bloomberg. Welcome back to Bloomberg Markets european open. Trading this wednesday morning, your stocks to watch. We are looking at roche. And we have also got a focus on the tech sector. Lets talk about roche first. Reporter this stock up 2 . Third Quarter Sales beat the analysts estimates, for the third time this year, raising estimates, they are starting to move outside cancer drugs, and that is gaining traction. And i know you will be speaking to the ceo. Matt yes, we will be speaking to severin shortly after the market open. Withhen what is the story Online Retail . Report good morning. This is pretty much in the middle of the guidance they gave with a profit warning in july, sending the stock troubling, so there could be a bit of relief today, with a solid end to the last quarter, sales up around 15 , and a good start to the new year. Margins fell 250 basis points, but a lot of that was probably already priced in due to the previous warning. Anna all right, we will look ahead to that. Morning, and people look at the outlook for q4, this is now valued at 100 billion euros, by the way, and they had sales whatbeat estimates, but analysts are looking for is the orders, and it is the strongest ever, and a big chunk of that is machines,ocalled euv valued at 100 million apiece, the latest generation. Matt all right, cool. Annmarie. , and you can get more on bloomberg. Anna a minute until the start of cash equities trading. Lets look at how we are positioned as the headlines around brexit, waiting for the new one. This is the picture on the msci pacific, up. 6 . The earning story, delivering positivity to u. S. Stocks and jpmorgan to johnson johnson. We are a little firmer. The pound showing volatility in the mornings session. From u. K. Briefing officials but nothing concrete in progress. Lets look at the s p futures. We are expecting weakness at the start of the u. S. Trading day, further push back from china around the u. S. , or congresss position on the progress of activity in hong kong. There seems to be more tension reflected in those futures as we look to the start of u. S. Trading. European futures, also looking a little like this morning. A little to the light. A little to the downside expected. As is the case in these brexit times, the ftse could go its own direction because of the movement in the pound. The ftse, fairly range bound at the moment but we will see what the rest of the european markets managed to deliver. Thee is the volatility in pound, producing a downward move of. 25 for the reddish currency. British currency. The euro, a touch stronger against a flat dollar, up by. 1 . The ftse opened not that far out of step with the others. The dax, north of the flatline, the ftse south of it. Not moving anywhere quickly. Clarity on what was included in phase one of the trade talks and what was behind that handshake between the chinese and president trump. That is part of the narratives the Asian Session has been dealing with and the european will deal with. That and earnings season. We will get a speech. Health care is trading to the upside, firmly in the green. Basic materials, and anything to do with energy and mining. That is in the red. Consumer discretionary looks mixed. Financials mixed with a bias to the upside. What are you seeing, matt . Matt if you look at the winners and losers, a pretty even split. 270 stocks are gaining, 311 are down. Is the biggest of the winners this morning, adding the most points to the stoxx 600. Roche with a gain of almost 1 , helping to hold the index back from bigger losses you see also. Losses. You see novartis, astrazeneca rising as well as consumer staple stocks Like Unilever and reckitt, and nestle. Take a look at the losing side of the ledger. You see asml taking the most points off the stoxx 600 hsbc, trading places right now. Even though asml had a robust Earnings Report for in the Third Quarter and sales in the Third Quarter. We do see the stock was at a record high, basically, yesterday and some analysts, including those over at citi have said you can expect profittaking today and indeed, that is what we are seeing now in terms of asml. You see hsbc falling as well as rio tinto, louis vuitton. Anna European Equity markets, opening fairly flat this morning. We are waiting mindful of the violence taking place in hong kong in recent weeks and carrie lam is supposed to be speaking this morning in hong kong at the legislative building, after she delivered a prerecorded annual policy address. It had to bp recorded because there were a couple of interruptions from protesters. It would appear she is appearing live in hong kong after delivering the prerecorded statement. The earnings season has been a theme in the United States and remain so in europe. Lets talk about what is going on at roche. The Health Care Business has boosted its outlook for the third time this year and says profits may be better than expected. The swiss drugmaker said strong sales in the Third Quarter have been drinking driven by demand for new medicines. Joining us from switzerland is the ceo of roche. Us understand the message you are giving us. How surprised were you by the positivity versus your previous estimates for the business . Strongrly, we had a very thirdquarter again, and actually, the demand for our is evenunched medicines stronger than we would have expected at the beginning of the year and that is entirely driven by the level of differentiation, the benefits we bring to patients in diseases like multiple sclerosis, hemophilia, or cancer. Very pleased with the results. Matt is the european situation different . It looks like from the first nine months, sales are down 1 hurtrope as bio similars products and new products not making up for those lost sales . Can we expect the u. S. To start looking like that as bio similars gain traction. Severin the development in europe is actually very positive as far as the new medicines are concerned and we had an earlier impact of bio similars but we will see this turn as new medicines get additional traction. In the United States, we will have a Significant Impact of biosimilars for the coming year but on balance, driven by this Strong Demand for our new medicines, we are confident we will grow our business beyond this year. Anna let me ask about the deal with sparks. I know youve recommitted to the timetable to get the deal done by the end of the year but that leaves you 2. 5 months to get clearance from regulators and reach a conclusion. How long will it take you to wrap things up after you get regulatory clearance . Confident we can close the transaction this year. I wouldnt be able to comment on any specifics regarding the ongoing process by the regulatory authorities, but indeed, we are confident to close the transaction this year. Anna confident to close the transaction but can you give insight as to what is Holding Things up . Youve reported Strong Performance in your schema feel your business. Is that Strong Performance counseling against you because maybe it gives regulators reason for concern . Severin again, i wouldnt be able to give you more specific comments, more color on the ongoing process, but the bottom line is we are confident that we will close the transaction by the end of this year. Matt im sure investors are looking for a little more transparency here, severin as far as what regulators want from you. Can you tell us at least if u. K. And u. S. Regulators have the same issues . Severin i wouldnt be able to give you any more details. Im sorry. Matt because anything you say here is Public Information and therefore shared with all investors, you can share anything that is important to your business, when do you expect regulatory clearance . Severin again, we are confident well close the transaction by the end of this year and that also means we have regulatory clearance by the end of the year. Anna there have been reports the u. S. Might consider imposing tariffs to counter a trade deficit with switzerland on swiss medicines. Is this something you are thinking about at roche . Severin actually, if you look at it from a roche perspective, we have important operations in have most ofbut we our activities in terms of research and development, in terms of investments across the whole value chain in the United States. Twice as many people employed in the United States than in switzerland, so we are actually a net exporter of pharmaceuticals as far as the United States is concerned. Matt are you concerned about in the u. S. , attempts to control pricing there . Attempts to put feeling on prices for drugs, or have you got it pretty much worked out with suppliers . Severin as far as roche is concerned, we are very focused on highly innovative, highly anderentiated medicines experience shows, and i am confident for the future that in particular in the United States, this is a country where innovation is appreciated and will be rewarded in the future, as well. From my perspective, the key issue in the United States are the high outofpocket payments consumers and patients have, and there is a need for reform and we should really Work Together to reduce the outofpocket expenses which are relatively high in the United States to a degree where certain patients can simply not afford it anymore. Anna severin schwan, the ceo of roche joining us with the latest on the numbers and a little insight into the dealmaking. Next, stocks on the move including the Online Clothing retailer, soaring after saying it is bouncing back from warehouse troubles that had previously hit sales. It is up just shy of 10 . We are mindful of hong kong, carrie lam is speaking at the Legislative Council building after delivering a policy address that was prerecorded due to being interrupted twice by protesters. So far, she says she hopes people can drop their differences to find solutions. We will listen in for a moment. Lam should adopt cautious commercial principles in its operation. The Property Owners on the basis of property. Ura was supposed to matt welcome back to Bloomberg Markets the european open. 13 minutes into the trading day and looking at red arrows across the board. The dax, little changed but the ftse, the cac are down more than 1 10. 1 . Not big drops. You could call this a mixed start to the trading day after asian stocks followed, for the most part, their american peers higher. Of earnings optimism following bank reports yesterday that u. S. Futures continue to slide as concerns grow over u. S. China tensions and over Global Growth, as well. Joining us now is simon french, chief economist at paying their gordon panmere gordon. What do you think of the u. S. China talks . It seems hong kong has thrown a wrench in the works. Is it that serious . Take two perspectives on the u. S. China situation. The nearterm ability to come to an arrangement on currency, throwing in geopolitical issues, korean won,wane, the airbusboeing situations, towardthe shortterm is some resolution that reduces nearterm worries for investors but as ive said previously on this show, the longterm outlook is this has to be a constant backdrop for investors throughout this Economic Cycle and future Economic Cycles. We are in an economic cold war, these issues will wax and wane. The question is understanding in tosector will come across hairs most because that is the most relevant part for investors understanding which sector will be hit by tariffs or restrictive nontariff barriers in the future. Anna it has been fascinating to watch from trade wars to capital wars to fx wars, the culture wars. Growth, downgrading yesterday. A reminder of where the growth story is from their perspective. If we getpside progress on trade or is that last years conversation . It is too difficult to see a way forward that is substandard . Substantive . Largely ahave had bilateral friction trade. U. S. China, yes, we had japansouth korea, suggestion of potential new tariffs coming in, 7. 5 billion, but it has been relatively contained bilaterally. The Downside Risk which skews upside surprise is that broadens. That becomes more broadbased and much more about nontariff barriers, restrictive market access, the withdrawal or restriction of capital flows. Can you start to think the 3 Global Growth projection starts to pare down to the downside. Matt weve got all these warnings from manufacturers in the u. S. Due to the china trade war. Youve got clearly issues with auto production and we see bad auto Sales Numbers out of china again. Simon, is it possible to have manufacturing recession without that spreading to services and the entire economy . Simon this is the question i a masked and have been asked most frequently from investors. That decoupling of the manufacturing pmi and services pmi have been noticeable. I wouldnt say it is unprecedented but we havent seen it during this cycle to this degree. And you are worried about negative spillovers the longer that happens, and you are seeing and the signs are that there is a rolling over of leading indicators in employment markets across the g7 and wider g20, which sets the specter that manufacturing weakness is spilling over to the consumer and yet, their spending hasnt been impacted but the cases from the labor market will, the longer they persist, start to bring in Service Sector weakness. It does represent the biggest risk right now. Anna we will save time for our brexit conversation, which looms. Chief economist at Panmure Gordon, he stays with us. Lets get the top stock stories with Annmarie Hordern. Up from 11 , really as they are making a come back into 2020, seeing a positive and solid starting to next year. We dont have the exact guidance numbers, so we will be keeping an eye on this for the new year. Signify up 2. 5 , one of the biggest gainers on the stoxx 600. It comes off of m a news. Theyve agreed to by Cooper Lighting solutions, a 1. 4 billion deal, giving platform to expand into north america. Halk bank, as the u. S. Is bringing a criminal case against the bank, a scheme to evade sanctions against iran. Matt Annmarie Hordern with movers. Thank you for that. Next, edging toward a deal. Brexit talks make progress. Can an agreement make it through parliament back here at westminster back there at westminster . We will look at what markets are pricing next. This is bloomberg. Anna welcome back to the european open. 21 minutes into your trading day and we are down. 2 on the stoxx 600. The ftse 100, down. 1 . The german market, up. 2 . The brexit is moving things around this morning, certainly the pound. Negotiations are edging toward a brexit deal. A british official says progress was made after talks late into the night but any agreement risks being jeopardized by Northern Irelands Democratic Unionist Party. Simon french, chief economist at Panmure Gordon is still with us. We have been trying to draw up a table of how many mps would support Boris Johnson are not. This is difficult as we do not know what was discussed late into the night. We dont know the details around customs, etc. , but what is your thinking on how difficult this will be to get through parliament . Simon formidably difficult. The arithmetic hasnt altered from the arithmetic faced by theresa may and ive broken it into four groups of mps he needs to appease simultaneously. The democratic unionists, we know the u. K. Leaving as an entirety within a u. K. Customs arrangement is key for them, but also some legislative processes installment, but money might lubricate deposition. The second group is the conservative 21 with the whip drawn. They dont like the idea that the u. K. Might have a future relationship differentiated from the eu. Threatened toave be delivered. The fourth, the European Research group, or spartans, who andhe moment, the state seems more conservative under the johnson government, but they are anxious that the 11th hour, this will be conceded to the europeans and lead to rev telling in the house of commons rebelling in the house of commons. Throughors an extension the act this weekend and we move on to later in the year and january in terms of article 50. Isis there any way there any way to avoid a hard inder if you are not staying the Eu Customs Union as a whole or stranding Northern Ireland in the eu . That is essentially what they are planning on doing, isnt it . Simon there is a way. It was called the alternative arrangements commission. Borisas the basis of johnsons third opportunity to the europeans but unfortunately, internal analysis in the u. K. Government and that of the europeans suggested the technology and infrastructure is more than a decade away, and therefore, the europeans have always said through this process an allere needs to be weather alternative to this which in the nearterm was always the backstop. The question is now, if that is being rejected and a deal requires a zero hard border basis, it has to be a northern aeland bespoke arrangement, Northern Ireland only backstop and this is the potential landing zone, but that racks up the difficulty for Boris Johnson in parliament. Anna ive got a chart showing ftse 250 with its strongest week the week before the since the week before the referendum, which is impressive. Supposed the future relationship and the way that is crafted between the u k and eu will have a bearing when we see the detail of that on where this sector heads. Simon two things. U. K. Stocks when you benchmarked them against global stocks, they are 20 undervalued. There is opportunity for long investors looking on a deep value basis to say this noise i promise you, it will eventually go away. It will happen eventually. It may take some years but that will close. The pathway to it is important. This is what the future relationship will codify. What barriers will we have . That will determine what earnings damage you get to the domestic basket. Matt simon, we will get more from the chief economist at Panmure Gordon through the morning. A decade since the debt crisis, today marks 10 years since greece admitted it was in serious trouble. We will look at the road ahead for the European Union next. This is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of Wireless Network, designed to save you money. Switch and save up to 400 a year on your wireless bill. Plus, get 250 back when you buy an eligible phone. Thats simple. Easy. Awesome. Call, click, or visit a store today. Matt 30 minutes into the trading day, lets get your top headlines. Downbeat on a deal. U. K. Government is not hopeful on reaching a Brexit Agreement as the dup holds up progress. Talks continue in brussels. China threatens retaliation if the u. S. Passes a bill supporting protesters in hong kong. The citys chief executive is speaking now after being interrupted twice during her annual policy address. European car sales search. Surge. The numbers mask a truly gloomy outlook blighted by the economy. Good morning, and welcome to Bloomberg Markets. I am matt miller in berlin alongside anna edwards in london. Anna half an hour into the trading day. Lets take stock of where we are. We are down by. 3 . A little bit more Downside Momentum as we have just gotten headlines around brexit and the u. K. Side not being hopeful about a deal. Firmly putting the fate of that at the feet of the dup. Signify is the biggest gainer, up by 2. 6 . Cooper lighting is part of the story. Volkswagen is one of the biggest gainers. , the brexitide story is impacting what we see here. Names, these u. K. Ftse 250 had a very strong week last week on the back of some of the more positive headlines around brexit. Things seem a little bit different, things look different with the latest lines out of brussels. We see Construction Companies moving lower. These are the big beneficiaries of the brexit optimism. Retailers likehe kingfisher. There is a u. K. Consumer flavor to the downside this morning. Lets get a first word news update in hong kong. Thanks, anna. Germany is warming to the idea of fiscal stimulus. Lawmakers have long been the most vocal opponents, but the cdu could be ready to move away from its commitment towards a balanced budget. We know they are ready to support a bold stimulus package if the economy needs it. Offa has caught traders guard with a surprise injection into the financial system. The loans, head of data this friday. It is expected to show a further slowdown. They have added the equivalent of 28 million of one your cash. Its a surprise, because it usually happens when the loans are due. Onsouth africa, s, is caring carrying on rolling blackouts. They are battling 30 billion of debt and out of date power plants. They are reliant on a state bailout to remain solvent. The government is announcing plans to restructure the end of the month. By the end of the month. Mgm is selling the bellagio resort to blackstone. It will continue to operate the property under a lease agreement. It is under pressure from investors to unload its remaining casinos. When all current deals close, mgm will just have to two fullyowned properties. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna, matt . Matt thanks very much. Today marks 10 years since greece admitted its economy was in serious trouble. The Prime Minister said at the nation faced quote unprecedented fiscal derailment. The eurozone debt crisis and then followed. Heres a look at what happened happened happened and how the ecb reacted. Greece unveiled a black hole in the nations finances. Udget deficit quites twice as big as expected. What followed was an unprecedented debt restructuring and did not stop at greece. It was the first of five euro area nations to be bailed out, calling into question the very fabric of the single currency. But it has held together. Much can be ascribed to the ecb and mario draghi. The ecb is ready to do whatever it takes to preserve the euro. And believe me come it will be enough. The support has been most apparent in the bond markets. Its asset purchase programs has yields. Reases 10 year but the sustainability of the recovery is what counts. Mario draghi has stressed that Monetary Policy alone is not enough head is calling for more ask active fiscal support. The eurozone in parol is a story the imf knows all too well. Deep divisions over policy within the central bank wont make her job any easier. Greatest hits of the eurozone debt crisis 10 years on. Simon french is here with us to reflect on how far we have come or not. We had a similar chart in the package showing the way greek spreads have tightened. A top of them of that even they have backed down. Things look very different from the debt market perspective 10 years on. They do. It probably speaks to the idea that we had that neutralization by the back door, courtesy of the ecb. Anna whatever it takes. Simon absolutely. And that statement from mario draghi has aged really well, but we now stand on the cusp of what next. Bond buying and quantitative easing buys you time, but that time is starting to run out lyrically. Politically. Therefore, developments on the fiscal side will determine whether this recovery of sorts gets a leg of momentum if the World Economy slows. Does this experiment last longterm . If you step back and look at the possibility of local Banks Holding less of their national debt, if you step back and look at risk sharing on the possibility of eurobonds getting what does this fall apart in 10 or 15 years . Part of the challenge with understanding the longterm future of the Monetary System is when does the political appetite for the federalist structural , but asits not pithy the requirement for a Capital Markets union, a banking union, and common fiscal tools to buttress Monetary Policy. Has been thecy single most important weapon because it is federalized. When you federalize other parts of the architecture, it becomes sustainable. So do the politics in europe lend itself to that . The outgoing head of the eu commission, Jeanclaude Juncker has still come up with the best quote. We know exactly what we need to do, we just dont know how to do it and get reelected. There lies the constant problem. Anna something to reflect on in many a democracy im sure. French will be continuing his conversation on Bloomberg Radio at 9 a. M. U. K. Time with matt and i. You can find us on dab. Up next, we will bring you some stock movers. Surging the most since 2015 after posting its fullyear results, china to put previous dramas and fire events behind it. The stock is up by more than 15 . This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. We are looking at live pictures of carrie lam speaking after her policy address. Questions are being posed from the press here. She assumed leak will answer willing you assumedly answer. Citing a global slowdown and months of protests, she has admitted that the city has entered a technical recession in the Third Quarter. She is taking notes there, getting ready to answer a question, it looks like. Lets get into the situation from hong kong with bloombergs yvonne man. What did we learn from carrie lams address . She delivered this 29 page address of this morning with bold measures to try and fix some of the key societal economic challenges, particularly when it comes to the land issue and the skyrocketing property prices we see. She did so, but not without its drama initially, she was at the chambers delivering the speech, we saw prodemocracy lawmakers come through, projecting words like five demand, not one less. The president ultimately had to suspend the meeting and the address before adjourning the whole meeting due to the ruckus we saw. Enforcer ultimately to end up taping this policy address. She did say that hong kong was likely to enter that recession. A lot of questions about what was highlighted here. Andmentioned more land making it easier for homebuyers to get a mortgage. Also, when it came to subsidies much she is there offering those as well as cash handouts. Does this go far enough to address Economic Issues . She did stick to the economics. There is no mention of el toro reform electoral reform. Anna it is certainly having an impact stateside. Saw the latest state of u. S. China tensions play out in congress. Hong kong is finding themselves right in the middle of the trade war turning into a culture war. Thats right. And beijing responded quite quickly. Its interesting to see what these bills would require and what it would entail here. It would basically allow an annual review of whether hong kong maintains its economy in order to justify its special trading status. It would also allow officials to be sanctioned if freedoms were taken away. We spoke with a congressman from new jersey earlier this morning talking about this bill. He says the senate is likely to get through this as well, given the bipartisan support for it. Take a listen. He basically said it was an issue involving start about sorry about that. Basically, this is a way to get involved in the hong kong situation and how they justify hong kongs special trading status. China says they are likely to retaliate here on clear questions. Can i separate the hong kong canada ahe u. S. Separate the hong kong issue can they separate the hong kong issue. Latest headlines suggest british officials have been explaining Northern Islands Democratic Unionist Party is holding up progress. The pound extends of the session losses and we see the ftse 250 trending down as a result of the headlines. The twists and turns continue. Joining us in london is simon fraser from the foreign and commonwealth office. Now he is managing partner at Business Advisory firm flint global. Good to have you with us. Officials in the last halfhour laid the blame for this stalling at the feet of the u. S. The dup. Remind us why the dup is holding out here. There are more unionist voices. This shows that Boris Johnson has to not only negotiate with the eu but deliver support in the u. K. Different parties will have different views. One is the Democratic Unionist Party for very concerned about any differentiation between Northern Ireland and the u. K. It appears the deal he is pursuing create a separate status for Northern Ireland. That is politically incredibly insensitive in the unionist immunity community. They need to make sure they are representing that unity. Anna without dup support, how difficult is the math for Boris Johnson to get a deal . Simon it depends what the deal is but the math is very tight anyway. Hehas not got a majority and has lost a number of his own mps. There are different factions he would have to bring on board. It is very tough for him. The eu side will be very conscious of that. They want to give him a deal if they think he cannot get through so it is a balancing act. What happens if you cant get the deal done . If he cant get the deal done . Does he have to ask for a delay or do you think he is going to try to somehow pushed through push through . Simon he has said they will leave on the 31st but he has been told he cannot have a no deal outcome. That would be the question. My view is it is very likely that if there isnt a deal done with brussels but by next week, then there will be some sort of extension of the article 50 process. Imprisoned we move towards a pretty rapid election in the u. K. Were talking earlier with a guest about what might happen from here. Thatme back to the idea maybe you talk about separating the Withdrawal Agreement from the future relationship. Maybe there is more chance of getting something theresa may tried to do. Is that some way brexit gets done . As you describe, there are sony different factions with different views that seems very compensated. Complicated. Simon its not about the future relationship, its about a deal to leave. I dont think you can get to the fact that youve got to be the first before you get to the second the two are obviously linked and one thing to remember is that Boris Johnsons version of the relationship is actually a harder brexit than the one theresa may had in mind. But i dont think you can jumble the two up. The eu will want to know the terms of separation for they talk about the future. If we have a deal, we have a transition which gives us time to have that negotiation rather than a bad rupture through in no deal. Has parliament essentially tied to the Prime Ministers hands in terms of his power of negotiations . What kind of leverage has got . Simon the eu does want a deal. They dont want no deal but none of us do. But its true that they will be looking at room to maneuver politically. It is. True that parliament has tied his hands but only in the sense that parliament has said we are not going to allow a very disruptive no deal outcome. So there is support for negotiating a deal both in london and europe but it is very difficult time is short. We have to be realistic about that. The eu oncethe case a deal unless they can see a way to a second referendum . What is your assessment . Felt they could get a satisfactory deal, they would take that. Its not that they once the u. K. To leave, but they are fed up with this process. More uncertainty would follow if there isnt a deal and we then go to an election. I definitely think they will not go for an unsatisfactory deal, one which does not protect the borders of the european single market. Anna thank you very much. Good to speak you. We will return to the markets next. The s p 500 and shanghai composite are both up 20 . But which will come out on top . We put that question to mliv Richard Jones next. Important conversations on trade and the tensions beyond. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. We are 55 minutes into the trading day and looking at a mixed picture. The ftse and dax are unchanged to the upside. The cac is falling, but not by much. About what istalk going on in terms of stock indexes is Richard Jones, our mliv rate strategist in berlin. Anna was asking the mliv question of the day before break. Will the s p 500 beat the shanghai composite this year . I wonder what kind of feedback you guys are getting. Richard i have written a couple of things over the past two days. I think the s p is running out of optimism. As a result, further gains will be hard to come by. The s p will struggle but i dont think well get a massive decoupling. If it doesnt struggle, i think the shanghai composite will struggle. If you are an equity bull, i think they go in the same direction. I dont think you see a massive decoupling. Anna we continue to look for any signs that manufacturing matt picked up on has really moved into other parts of the u. S. Economy or other markets. What is her latest feeling on that . We are getting what is your latest feeling on that . We are getting into earnings season. Richard the data was pointing to a slowdown and thats where the rubber lies rub lies. We are in the nascent stage of u. S. Numbers deteriorating. That is what is going to weigh on the s p 500. The fed will continue cutting rates to deal with that weakness and will be like a cushion for equity. But bad news for the economy will be bad news for the markets. Put i saw our colleague out a story on the possibility of stimulus. Is the market getting excited about berlin . Richard i think there is still too much conditionality attached. But if it gains traction, that will be a positive move for the euro. Anna Richard Jones, joining us on set. Carrie lam is still speaking in hong kong at the Legislative Council. One of the key lines coming saying that violent protesters should be responsible for the unrest. Hong kong needs to ask whether violence can resolve the problem. She has continued to speak this afternoon in hong kong. This is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Call, click, or visit a store today. Francine progress in brussels but trouble at home. Boris johnson edges towards a deal, but can he win over skeptics . Threatens retaliation, bowing countermeasures if the u. S. Enacts legislation supporting protesters. And the former Vice President defends his son and challenges Elizabeth Warren after she overtakes him as the Democratic Front runner. Francine welcome to bloomberg surveillance. These are your