Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Hugerade agreement is a change between the worlds economic superpowers. Shock overhaul. The ruble slips before pairing losses as Vladimir Putin unexpectedly replaces his long serving Prime Minister and a major constitutional shakeup. 5g ambitions. Beats itsin chipmaker Sales Outlook on hopes that five ag 5g rollout. Just about an hour away from the open of cash Equities Trading. Lets look at how futures are looking after mixed trade in asia overnight. We did see some red arrows across asian trade. We see green arrows across european futures. Climbing on record car sales. Positive features in the u. S. You have those december car numbers. Anna lets get to this story because this is something we need to keep an eye on all the way through this morning. European car sales surging in december ahead of new emissions rules. A record for the region. Those are some of the headlines coming through. The details around the story. European car sales surgeon december. That is the headline. In mind theear structural drivers that are ringing that. For thoseterm relief in the car space. T we have computer Consumer Prices up in december. A one and a half percent gain. Same is true of the month over month gain. , the estimate had been. It looks like computer Consumer Prices are raising in december in germany. Not a bad thing, because we have seen inflation stabilize. Market participants are optimistic when you look at breakevens throughout 2020. For the last month of 2019, you had yearoveryear Consumer Prices increased by 1 . Jumped 21 toales a record. A number of breaking headlines. We have more coming from ab foods. As the name suggests, a food company but also the owner of t. R. Y. Mark, a cheaper end of the spectrum retailer here the u. K. The outlook for the group is unchanged. Trading was good in this Third Quarter. That is a very uptodate comment about what is going on. Sales up for to have percent. Trading was particularly good over november and december. Some of that was boosting sales of housewares. That set us up for some kind of expectation for primark. The clothing story was a little bit more you want nuanced. On the abat we have foods story. We will keep an eye the car sector as well. Let me tell you a little bit of what is going on in the markets. Markets calm over these given the news we have heard of late. The chinese equity market a little bit on the back foot. Broadly speaking, things are flat to positive. That is the backdrop. Market searching for a new catalyst. Will that come from the underlying data out of the u. S. Economy . We get some chinese gdp numbers at the end of this week. That will be crucial. We are keeping an eye on the ruble with politics developing in russia. And of course the earnings season is upon us. Morgan stanley is up later today. It sort of feels like the calm after the storm in terms of equity markets. I guess having sent thats been so long tracking the trade market, this is only the end of phase one. But the end of tensions between u. S. And china over trade. Real. Calm in the markets. How do you explain that . It does feel like the calm after the storm. The new storm, not the markets storm. It feels like this environment could carry on. We have thrown everything at this market over the last 12 months and yet we have seen a banner year for u. S. Equity markets. We had the iran incident last week. Open military conflict between the u. S. And around. Iran. Seems like this market can cope with everything. That is because we have immense centralbank support coming from all the major Central Banks in the world. Clear they are needing to keep on as much as they need. At some point, many people argue that it will stop working. But it does not look like that right now. Im not sure at this moment what will derail this bull market. Many investors will say it is expensive. That is different from saying it is a market that will correct. It is saying that this is a nervous time to invest. I love your macro column today. Kutcher. Ence ashton what about middle east tensions . Were on thee doorstep of the war. Is there no chance that this comes back . Mark we were on the doorstep of a war with iran. Yes, we had a spike on the friday before. It shows you how quickly we move beyond the stories. Saudi arabia set the game plan for this. U. S. Shale producers ramp up production. More supply comes into the market. We make it a spike that lasts of the bit longer. But it is not easy to derail markets. It would have to be an extreme military situation. Especially since it does not to get into that situation. They do not want to block the strait of hormuz. It is hard to see what this negative catalyst is. You are nervous about a black swan. By definition it is something you do not see, do not expect. Cant have a bearish stance on fears that things might happen. It seems we have thrown all of the worst catalysts at this. We will keep on motoring a little bit higher. We have to wait until a little bit further in the year. Perhaps new developments on the catalyst side. Anna dont look matt give you any trouble about quoting ashton kutcher. An 80s classic by starship. We have seen this agreement. There are couple of pages on currency. Many others have referenced it. Mark it looks a little disappointing. Like a lot of the agreement overall, these are quite grand statements. It is a little bit arbitrary how these things will be enforced or decided. What will happen if one side feels that the other is not playing ball on currency. Some of the deal was quite toothless. Many people have come around to this idea. We were not expecting concrete details. Specifics. The reaction in the market will be subdued. Not really much in specifics. We cannot get our hopes up. There is a lot more that could be delivered in a phase two. Im sure you will get a lot of those promises from trump ahead of the election. I am jealous that i did not get to have a starship reference and my piece. Matt it was a pleasure to have you with us. Can check out his work in the work of his team on the bloomberg terminal. There 50 minutes away from start of cash trading across europe. We will take a look at your stocks to watch this morning, including peugeot. The china unit sales have slumped by more than half but european car registration is soaring to a record. We will see which story wins out. Quite an attractive little vehicle. This is bloomberg. Anna welcome back. London. Es past 7 00 and european futures like broadly positive. The situation in asia muted. Lets get a news update. Has replaced putin his longstanding Prime Minister. He is calling for sweeping changes to the countrys constitution. This leads to speculation he is moving to extend his grip on power. Currently, his president ial term ends in 2024. He could take on another post. The house has spent two articles of impeachment to the senate. It is the first step to begin the trial. It is expected to end in acquittal. Chief Justice John Roberts will preside over the trial with the senate as the jury. The trial will begin next tuesday. Faster. Et is warming yearwas the second hottest in 140 years of recorded data. The decade with the hottest ever. The fourth in a row to set the new record. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Matt thank you very much. Your first word news out of london. We are looking at av foods. And covering Semi Conductors. And peugeot. What is up with the primark owner . The outlook remains the same. Primark was a star. Particularly good. Anna thank you. Lets get to the Semi Conductors. This is a real bellwether for the tech sector. Huawei. Ply apple and really good news for the sector. Investors are hoping that this is a real driver for sales in the industry. Reflected in the stock prices. The stock has fallen two days in a row. Already an the prices. We will have to see how they open this morning. Matt what is the story with this carmaker . Dani the entirety of european carmakers are positive. Peugeot bucked the trend and not an a good way. We will see how chrysler and bmw surged. Peugeot felt by more than 2 . The rest of the region does not look better for the carmaker. Asia fell as much is percent. Peugeot might fall while the rest of the carmakers do well today. Thank you for joining us. You can find out all of the Company Names that the equity team is focused on. More on the trade story. The phase i deal between china and the u. S. Is a key to change. The countries now want to work together. Executiver and chief of blackstone was one of the Business Leaders present for the signing. This got to be a deal basically because it has been going on for three years. It was two days before davos three years ago. We have had a lot of near misses. Now a lot of success. It takes a while for each for each country to get what it once out of the trade agreement. The compliance, the opening of markets. For china, you have to remember that the u. S. And china, other than the wto deal in 2001, fundamentally has not headed a trade agreement since the 1940s. It has been achieved. It is very significant. The two countries want to work together. That is a huge change. The tariffs are starting to be reversed. Things, notses of just agriculture, intellectual property has been reversed separately. The conversations in december , which issentinel killing over 50,000 americas that americans a year, china has made huge strides to cut off the supply of fentanyl. What we are seeing is countries that are competitive but also have this huge relationship in trade. ,ogether, these two countries depending on how you calculated, have between 35 and 40 of the worlds economy. Decoupling and everybody going their own way on virtually everything is impractical. It is not good for the world economy. What the two countries have done is figure out where they can start the dialogue, how they can implement it. It is a very positive feeling. Not a begrudging deal that has been entered into. You have been the role of statesman. Going back and forth between these two leaders who you know really well. You are a businessman, and investor. What does this do for you sitting at blackstone. Amplified, accelerate investment that you may be making around the world . Baseline of a a better world economy. Are seeing in the markets over the last however you want to measure, certainly the last few months, as this agreement has come together, this is not the only reason for strong markets. It is the Business Community globally telling you that things are better now. In terms of prospects than they were before. Matt he is the chief executive of blackstone. He has been advising on the steel. Coming up, car registration you turn. Thingsonths of decline, are starting to look up for the european auto sector. Will the optimism filter into the rest of the regions economy . We will discuss this. Matt welcome back. Right now we are 23 minutes sorry, 37 minutes away. I will get them out that some point. Let me switch the subject. Did you get a car for christmas . Decemberfrenzy in pushes new car registrations in europe to a new record. The 21 jump was enough to turn around the previous years drop. Investmentis an strategist with allie ons allianz. . S the sector turning around good morning. Good question. Todays figures are a bright spot. They are confirming that the domestic demand side is holding up quite well. Anna yes, indeed. What have you taken away from the German Growth data . We saw the weakest growth in some six years. But we see things looking brighter. This data yesterday confirmed a temporary cyclical rebound that markets often hope for. In the eurozone economy overall. This still remains to be seen whether these can be signs of a bottoming out. If they are on firm ground or shaky ground. Matt we have had some decent Inflation Numbers today. Expectations out of germany. We have this investment in green deals that we had earlier this year. Now we have another 95 billion going into the bond. It looks a things are turning around. Economyxpect the german to recover from the dip we saw in 2019 . I think there are increasing chances for the German Economy to experience a temporary rebound. This would be supported by some fiscal stimulus by the german state. And a consumer who is holding up quite well. Yes, there are some chances. Ourselvese to find with headwinds. Anna thank you. She stays with us. This is bloomberg. Matt welcome back. 30 minutes away from the start of cash equity trading. We do see futures gaining. The ftse is up 1 10 of a percent. Automakers climbing a little bit higher. The u. S. And china have signed a phase one trade deal. Another reason for optimism. A ceremony at the white house capped what has been years of acrimonious talk. China will crackdown on ip theft. Are you optimistic on this phase one trade deal . We are already starting to question whether it is enforceable. Whether china will make the purchases it says it will. Note, thingsive have taken a turn for the better. Investors should bear in mind that this phase one deal is limited in scope. It really covers the low hanging fruit. ,here are more structural longerterm issues. We dont know yet whether progress can achieved as quickly. There is no guarantee that after that theelections issues between the two powers will reunite. How do you think management boards around the world will respond to this kind of news flow . Do you think it will give confidence to Corporate Executives . The outlook for Business Investments is holding back the global economy. The outlook on the sentiment has brightened somewhat. Forget that it is just about the u. S. China trade deal. We have negotiations coming up between the u. K. And the eu. Matt what do you do in that case . Do you try to hedge against that risk . Overall, the base case for is subduedeconomy growth. Environment, the return outlook is on the modest side. We would rather hold a neutral edge. We could continue to see a temporary location toward eurozone and japanese. Anna how do you feel about sovereign debt at the moment . Per affable eurozone eurozonel yelp sovereign debt in particular . We have seen some struggling to get back to zero. Overall, i think that sovereign bonds in the eurozone will continue to trade at low levels. Seen some steepening of the eurozone bunker in the past month. Investors will continue to use bonds as a diversifier. Bonds,d with u. S. Eurozone bonds to offer lower returns. The u. S. Seems to be more attractive. Anna thank you very much. Lets check in with all you should be watching from around the world today. It is a central bank special today. Especially an emerging markets. We will be live in istanbul. We are live in johannesburg. A decision from the reserve bank. What can we expect on the turkish story . Estimate in a Bloomberg Survey suggests the central bank may cut Interest Rates by 70 . The central bank may indeed decide to cut again. The economy has seen its first recession and a decade in the First Quarter last year. We all know the country has a president who is keen on lower Interest Rates. The central bank may keep that in mind. One respondent in a Bloomberg Survey says that the central bank should hold. Survey sinceirst july. We are not seeing a consensus among investors. There is a reason for that. Matt the south African Reserve bank is starting to see reserves on hold. What impact do you see this having on the rand . Expect much. The bank hands will be tied. Even though we have seen in the easing of u. S. And china trade tensions. It is largely because of those domestic issues. With those headwinds ahead, investors will want to exercise some caution. Even with inflation at a nine year low. If we look at what the market is thinking, they are pricing in about 11 basis points. That is a 44 chance. Survey, only three of the 19 are seeing a cut to rates. Thank you very much. Lets get to russia. Could Vladimir Putin script on power beyond 2024 . He has replaced his long serving Prime Minister and called for sweeping constitutional changes that could rein in his successor. He is due to step down in just over four years. Himthe shakeup could see take on another powerful post to ensure his influence. Is this the narrative . Is this how russians explain his moves . That is certainly how it is been seen here in the moment. He still has not publicly tipped his hand on whether he wants to stay after 2024. Everyone expects some way to keep his hands on the tiller. This was a surprise series of moves announced yesterday. They seem to be the first steps creating options for him. To createght be able a configuration where he can still pull the strings. With all of this change, the comments from one economist in russia is that it is the face of the finance minister that really matters. Have we seen markets react to these news . The initial Market Reaction was one of the ruble. They came back within an hour or so. Who is they putin guarantor of tight money. And fiscal policies. Going forward, we are not expecting major policy changes. The new Prime Minister nominate was the head of the tax service. He has broadly from the same team. It does not look like there will be major policy change with this. For thank you very much joining us. Good to get the update. Up next, investors place record bids for bond auctions in italy. We will talk about the yield. That is coming up next. Bloomberg radio is live on your mobile device. This is bloomberg. Matt welcome back to the european open. We are just about 16 minutes away from the start of cash Equities Trading across europe. Investors place bids of more than 44 Million Euros for italian 30 year bond yesterday. Setting a new national record. Spain received unprecedented thirst for yield. It has been pushing up prices. Lets discuss. Let me start by asking you about this. We have seen record bids for spanish that. We are seeing banks come out with junk debt. Good morning. I completely agree. Yields will likely continue throughout the year. This is a trend we continue. Anna i wanted to contrast peripherals with the center of the eurozone. You do most of your business. We see a positive for overweight bonds and stocks. Treasuries around two and a quarter. Uptick in government bonds. Hence the need for yield. Mainly credit and private markets. Matt we have seen german inflation at 1. 5 . We have seen a record high in the month of december. Could this be fueling further gains . That is correct. Growth in thest european area. Mind and Central Banks on hold, we should expect this to continue. Me ask you about the latest news flow around trade. We have seen the phase one trade deal. Relief . Reet this with maybe some of the tension is debating abating. Or with some trepidation because what it could mean for transatlantic trade next being the crosshairs in washington. The signing of the deal yesterday was one of the major risks we have had in 2019. We expect 2020 should be a year where we will see growth and higher yields. But only on a modest basis. What about the business you do . I remember coming to that conference the last couple of years and talking to more and more Goldman Sachs employees who were new to frankfurt. How much of the market due to moving into Continental Europe away from london . Something we will be closely monitoring. Brexit is done but details have to emerge. Moved the continental seat of the bank to frankfurt. A newe moved into building, new premises. We are ready to move. Something we are closely monitoring throughout the year. What may or may not be necessary. What are the opportunities and challenges that face germany . We saw Andrea Merkel with a deal. What is the opportunity to invest in alternative energies in germany . Here, a search for yield will help. Hence, we are discussing different projects around solar and alternative energies with our clients. I believe change will provide us with new opportunities in the years and months ahead. Anna thank you. Coming up, tensions may rise again between the u. S. And the middle east. Will get details next. This is bloomberg. Anna welcome back. Seven minutes to go before the start of cash Equities Trading. It does look like we are starting to see some of an upside. Not much. Lets get a Bloomberg Business flash. The parent of British Airways is complaining about the supply. The filing with the European Competition regulators says the u. K. Tax plan for the airline is not fair. Taiwan Semi Conductor posting a bigger than expected rise in profits. More advanced chips. The Company Hopes the emergence of 5g will underpin its business for the next few years. This Logistics Company is considering a spinoff. Goldman sachsd and jp morgan for the review. It ise learned considering an expert from its supply chain. That is your Bloomberg Business flash. Matt thank you very much. Are back in vogue after tensions seemed to fade between the u. S. And iran. Markets may be overly optimistic. Here is dani burger. Dani they say the market is under appreciating the risk of tensions whip up again between the u. S. And iran. The latest development did nothing to ease the issues. You have iran backing away from its Nuclear Agreement and the u. S. Adding sanctions. You need to hedge this risk, especially heading into the u. S. Election. The u. S. May step up its rhetoric against iran. It is all about the momentum traders. These things tend to revert. Anna thank you very much. Just a few minutes from the start of cash equities training trading. A couple of stock specifics for you. Secondquarter numbers coming out from the recruitment company. Strikes in france and the fires in australia and the elections in the u. K. Matt we also have a stock in frankfurt to watch. Hello fresh. Was higher than has been expected. This is bloomberg. When you move homes, you move more than just yourself. Thats why xfinity has made taking your internet and tv with you a breeze. Really . Yup. You can transfer your Service Online in about a minute. You can do that . Yeah. And with twohour Service Appointment windows, its all on your schedule. Awesome. So while moving may still come with its share of headaches. No kidding. Were doing all we can to make moving simple, easy, awesome. Go to xfinity. Com moving to get started. Anna a minute from the open of cash equity trading in the european sealing the deal. The u. S. And china sign on the dotted line. The trade agreement is a huge change between the worlds economic superpowers. Shock overhaul. The ruble slips. Russian president Vladimir Putin unexpectedly replaces his longterm and Prime Minister in a major constitutional shakeup. 5g ambitions. Spples main chipmakers beat it outlook looking to galvanize growth. European ship stocks of the open. One sector i am focused on. Matt we are seeing european futures indicate gains across the board, but more in frankfurt than in paris and london. That is because auto sales rose to a record in december in europe, or at least car registration rose to a record in europe. Rallying that sector which has strongly traded in frankfurt. The markets open. How do you see the trade out of the gate . Anna as the markets get into their stride for this thursday morning, very important to know what is going on in the auto sector. The news flow. How will that play out in germany, italy, france and beyond . We also have the tsmc giving us the story. From a stock specific perspective, some corporate reporting. Starting to get into the bulk of earnings season now. Some bigname still to come. We have the u. S. Banking season u. S. Banks reporting season in the u. S. European equity market opening with fairly muted gains, but we see gains this morning come up by 1 10 of a percent in the french market. There are stocks in general up by 2 10 of 1 . Really interesting to see how chips are doing and how the auto space is doing because they are very much in focus. More broadly, we are still responding to a little bit of relief that the phase one signing of the trade deal, it happened in washington. We arrived. Matt yeah, absolutely. It is driving more stocks up and down. That is the catalyst. We see over 400 winners and only about 100 losers on the stoxx 600 now. In terms of the winners, asml at the top. We had positive news from pfmc. Taiwan Semiconductor Manufacturing company. That will boost tech stocks across europe. Sap is gaining. Infinion is gaining. You will see a lot of tech names on the upside this morning. On the downside, there are very few stocks falling this morning. You can see some of the big heavy ones at the top. I believe among the heaviest stocks. Stock on the heaviest the stoxx 600 and it is down this morning, weighing on the index. Nestle will lead a change into plastics, i believe was the latest headline on the Huge Consumer staple. I guess it wants to go to cleaner plastics rather than or recycled plastics rather than regular plastics, but may be getting out of plastics completely would be the best idea. European markets are higher. That is after the u. S. And china signed a phase one trade deal. Joining us now is simon french, chief economist at gordon. What do you think about the trade deal . Is it everything you hoped it would be or are you starting to get concerned it is not enforceable . Simon i wouldnt say the enforceability that can is and is something that keeps me awake at night. Interesting subplot is it is a bilateral dispute mechanism. There is no question the wto will take place. It is going to be ongoing dialogue between the u. S. And china. In terms of the resolution, i think the biggest mechanism will not be any official level of discussion, but whether compliance with phase one will the secondnt trigger phase of negotiations because it is what is not in this trade deal that will be focusing chinese minds this morning. Nothing rolled back of 300 billion of tariffs that have been ramped up since donald trump took office. Anna absolutely to that point, i have a chart that illustrates that. Good morning. U. S. Imports from china. They have been moving in that sort of upwards direction for many years. We have this yellow line. Tariffs still exist on that flow. This remains still a big issue for phase two. Also interesting is phase two will go right to the heart of the structure of the chinese economy and their own aspirations around chinese growth. That is when things get much tougher. Simon much harder because strategically, the made in china 2025 agenda will come to the fore. While there is stuff in here around intellectual property transfer, around market access, actually in terms of rule competitiveness, rataces to be the preeminent standard, that will be something that runs. You are not going to get realistically, you are not going to get the kind of document we saw less than phase two to put that issue to bed. It will be a constant tugofwar. I have used the phrase, it is an economic cold war. We cannot expect nearterm resolutions that will reinsure investors to put this issue to bed. Matt where do you think the best places are to invest ahead of a phase two deal . Simon really good question. So, the timescale for a phase two deal looks unlikely before the u. S. President ial election. An awful lot in terms of the istext for where to invest the fundamental question which will change over the next 12 months in the Global Business cycle. Having said all of that, i think a phase two trade deal that focuses on greater bilateral ofket access opening up financial services, Payment Systems and china to u. S. Companies. U. S. Technology, which has despite its incredible gains, itll the opportunity if can break into the world secondbiggest economy. That may be the place material progress can be made. Anna we just dip into. This is the eu chamber of commerce giving his reaction to one of my colleagues Tom Mackenzie overnight in china. Lets listen to a european voice and what we see by the chinese and americans. For the likes of European Union businesses as well as brazil, it means for the next two years, 1200 billion dollars will basically be traded between two nations without this kind of cap addition. This is what we dont like about this. We dont know if that is wto conformed. The fact that actually it is negotiated trade deal, they are rewriting globalization. Anna i thought this was interesting because on the one hand, Market Participants may react with relief. If youve got the chinese busy buying u. S. Pork, seafood and soybeans, that will have implication for other parts of the world where they will not be going to buy those things. It is interesting to ask where this leaves the rest of the world and how the u. S. And china have bilateral he tried to rewrite some of the global trade. Simon the concern is you have some trade diversion rather than trade creation. That will clearly be the principal concern. The European Community and the wider third country community, that you just get a sort of most favored nation emerging within the wto system. Which is not quite in keeping with the global rules system we have heard from the europeans, and to be fair, the chinese trying to align themselves too. Another thing which is the europeans being word with tensions off the table for the next few months, does auto tariffs come back in the eyes of the u. S. Trade representative . Anna simon french, stay with us this morning. Policymakers revving up on Central Banks being pushed into action this year growing . One influential economist is not so sure. We will get more details next. This is bloomberg. Anna welcome back to the european open. 10 minutes into the trading day that looks pretty mixed for European Equity markets. The stoxx 600 almost entirely flat. A little bit of downside in london, a little bit of upside in germany. A few other really interesting movers we will get to shortly. Bets on Central Banks being pushed into action this year are growing, but that is contrary to the expectations of some policymakers. Earlier, we spoke to the chief economist of Goldman Sachs. We are basically expecting very little from the developed market Central Banks, normal from the Federal Reserve. Normal from the ecb. Normal from the bank of japan. Probably also normal from the bank of england, although there is more of a question in the nearterm given the week data and dovish commentary. For the most part, we think 2020 is going to be pretty stable in terms of Interest Rates and Central Banks. Anna simon french is still with us. I want to jump off that conversation about where Central Banks go and the European Growth story into what we have been talking about around cars because we have seen this uptick in auto sales which looks great on the surface but it is coming ahead of some rule changes which is adding structural impediments. What is your perspective on the auto sector at the moment and what should governments be doing to try to secure their auto production . Simon this time of the year, economists are asked what is your big risk factor, your outlook for 2020 . For me, it feels like the u. S. Indeed, all the major car producing countries will look at what is a once in 40, 50 year transition from the internal Combustion Engine to electric vehicles. Nontarifftariffs and barriers in terms of restricting trade is a Good Opportunity for the producers in their country to grab a foothold in the market because we know once you grab a foothold, actually repeated sales followed on through the neck technology is quite sticky. It makes a lot of strategic sense for autos in a year where most producers are rolling out the mass market, not just a minority market, the ev ranges. It would lend it strategically not just to support the agenda, but i narrow industrial strategy. Matt it takes a long view to make that kind of move and not all politicians are known for their long views. Simon, where do you see the best where do you see the best opportunities then to invest in this generational, multigenerational shift . So, i do think there is an opportunity to identify the winners and losers within the auto industry, and indeed the component part. I think it is often the supply chains where the best margins will emerge because there will be an awful lot of potentially loss leading activity amongst the producers together market share. That is what you see when you get into an industrial transition. In a battle for what is capacity, limits on capacity, we heard a lot out of volkswagen on their ability to deliver on some of the orders on their new ev range. They are actually stopping supporters because of capacity constrained. Have ay be able to significant pricing power. Anna talking about support for particular industries, it helps me lead to the next subject. Given used to work at the office and have experience in government in that sense, let me ask you a bit about the support for u. K. Government is giving to flybe. This is quite a Small Business by global standards, but not a government that typically would step in to save a private business. Do you buy the arguments around this being an important regional connectivity story . What is moving this for you . Simon an awful lot of industrial support is made as a political calculation. The narrative the u. K. Government to level up its support for nonlondon, nonsoutheast regions of the u. K. An Regional Airline for this have been politically difficult for the government to stand aside and say we will not provide any support. It has attracted great decision from aig, ryanair and other commercial operators. This is state aid anywhere using it under the cover of your Regional Policy agenda. Im not sure it is a great use of taxpayer money, to be honest. Matt are we going to see yesterday, we asked about the possibility of moral hazard. She said you can push that off and say it is so important regional. I felt like she was covering a little bit for the Prime Minister. Our going to see other Companies Jump in and try to take advantage of this soft conservative perspective . Simon that is absolutely the question to the should be asked, because if i am a private company right now with a regional story to tell and i feel like there is an opportunity to get some of the governments increased larger the physical footprint in the u. K. Is the first time going to be quite expansionary. I am going to look at this and take the message a way that there is money on the table and i have the opportunity to get some explicit state support. Moral hazard, absolutely big risk the government has to get ahead of and stop some perverse incentives in the marketplace. Anna simon french, chief economist at panmure gordon. We are getting some breaking news on the relationship between corporate and government, but a different slant. What is the story out of germany . Matt we are seeing some moves here in a lot of different shares. Obviously, you have the car news today that is very interesting. Youve also got news on rwe this morning. We were talking about Angela Merkel going out and talking to ministers about a coal exit. The German Government is going to award rwe around 2. 6 billion euros for a caooal exit. This has become a trend across europe. A government will say it wants to go Carbon Neutral or zero emissions by, and then you pick a year, some observably long time in the future. In germany, they have chosen 2038, which is 18 years away. In any case, the German Government will pay rwe 2. 6 billion euros for a coal exit. Theyve got to do it within the next 18 years. I could have a kid now and the kid would be in college before they have to achieve this. But, i suppose that is better than no progress at all. Lets get to the Bloomberg Business flash in london. Thanks. Istish airways harris, aig complaining about the paris rescue of flybe. The filing with the European Competition regulator says the u. K. s tax plan for the airline is unfair, but the government is denying that, saying changes the Passenger Duty will apply to all headlines. Convinced hong kong is heading for a financial crisis. You are going to see a fullscale banking crisis in hong kong because youve got such a tightly wound economy in a state of freefall from an economic perspective. The warning does not seem to be convincing markets. Hong kongs economy is suffering after months of unrest. The citys markets has shown little son of an impending banking collapse. Goldman sachs has sold off stakes in uber after the disappointing ipo in 2019. Nedl Street Lender owe about 12 million shares of the time of the offering. It took a hit in the Third Quarter. Uber shares plunged. Like other investors, goldman was restricted from selling shares until six month after the ipo. That is your Bloomberg Business flash. Anna thanks. Up next, we will bring you more business stories that are affecting one of the movers on the stoxx 600. Pearson. The educational publisher is slumping after forecasting further declines in u. S. Down by 12. 7 . This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open right now. Minutes into the trading session where we see continental indexes gaining but the ftse falling too tense of 1 . The gains we are seeing are not that strong. The top individual stock stories with annmarie hordern. Annmarie we have a lot of trading updates today. That is why we see a lot of individual movers on the move. Hellofresh is on the move. Beat the highest analyst estimates and that is why it is giving the German Company left. Up nearly 8 this morning. Theyy much in line but expect better cash generation in the second half. Pearson plunging, down 12 . Biggest louver on the stoxx 600 this morning. It has everything to do with their coursework for the u. S. Higher education system. Another drop in that demand that is weighing on the stock. Anna thanks. Interesting moves, big moves in fact for the fairly sizable company. Lets focus it on the worlds biggest economy. Dallas fed president Robert Kaplan told us the capacity of the United States consumer remain solid. Be months there may where the consumer pulls back, saves more, does not spent. But the capacity of the consumer to spent is solid. Household Balance Sheets are in better shape than they have been in 10 years. Not perfect. We know the job market is very tight to the consumer has the ability to spent and overtime, i think they will. Anna simon french is still with us. Do you think the fed fancied and easy year because they set the bar high for any move in Interest Rate policy in 2020 . Simon i think over the last few years, the best communication strategy for the Federal Reserve they have said to the marketplace we are not going to be buffeted by shortterm movements. Be when thosemay points arrive, the behavior will change what i think it has provided a high bar for a policy change and in the u. S. Economy were graded credit availability, cost of credit does not appear to be a constraint on activity. I think that is a smart move. Matt it is not the same everywhere. You are not looking for moves in the u. S. , do not looking for moves in frankfurt, but you will likely see a change where at least markets betting on the change for the boe. Simon that is correct. Youve got to economists agreeing with each other. There is a lot of commentary coming out of bank of england at the moment that the january will cutn january 30 Interest Rates by 25 basis points. I think you want to lean against that. I think the surveybased data has suggested a real pickup since december 12 in terms of economic activity. Clearly, the bank of england policymakers are concerned that will translate into the heart Economic Data and they want to try to get ahead of this given the heart Economic Data for almost three years now and inflation is running at 1. 3 . Anna let me ask you about the dollar, talking about the where the u. S. Economy is going on Interest Rate policy globally. Let you get back to the dollar. Dollar positioning is pretty bearish. This is leverage funds. They are pretty bearish on the dollar in relation to where they have been in the last year or so. Youre a strong dollar bull. Why . Simon probably because of that chart. If you try to progress data points onto understanding where major currencies are heading, actually trading positioning is a great contrarian indicator. It does not matter which currency you pick, traders tend to be herd animals. They actually want to lean against any extreme. I happen to be and have been for many years a structural bull of the u. S. Dollar, given the yield spread between u. S. Assets and european assets. Anna simon, thank you very much. Simon french. We will be continuing the conversation on Bloomberg Radio at 9 00 u. K. Time. We will talk about global trade coming up next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. Alongside matt miller in berlin, i am anna edwards. Some of the trade news coming through in yesterdays session, but in the last few minutes gaining on european stocks. Matt gaining that chart is interesting, only 0. 25 gain on the stoxx 600. We do not see the moves where you might expect. I was looking for automakers and autoparts makers because of the news that european car registration sword to a record high, a rebound of 21 yearoveryear registration soared to a record high. You do not see automakers up at the top, they are gaining, but only by. 04 . The gators are chemicals, media, and retail. At the bottom uc media, travel, leisure and construction. Lets get the bloomberg first word news. From breaking news this hour, the German Government is paying , angelabillion euros merkel got the deal to phase out dirty fossil fuels. It was announced it wanted to become Carbon Neutral by 2014. In russia, Vladimir Putin has replaced his long serving Prime Minister and is calling for sweeping changes to the countrys constitution. There is speculation he is moving to extend his grip on power. President ial power and in 2024. The u. S. Has sent two articles of impeachment to begin president trumps trial. A majority of senators would be needed to convict the president. Chief Justice John Roberts will preside over the trial with the senate as the jury. The trial will begin next thursday. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Bloomberg. Matt thank you very much. The u. S. And china have signed the phase one trade deal, a ceremony at the white house capped years of acrimonious talks. The agreement commits china to crack down on ip theft, closes trade imbalance, and avoid currency regulation. Joining us now is georg schuh, managing director partner, dws investments. What do you think of the deal . And are you expecting everything needriced in, and now we to see stocks move on earnings. . Georg good morning. We are happy that this long period has come to an end. The details as we have seen r. O. K. The details as we have seen ok. One paragraph, the u. S. Could reenter some capitulation, but this is a tool that will hold a long time until the u. S. Elections. That investors look at earnings, and we see a rebound and momentum. It is a good backdrop for europe, european stocks. Exposedpean industry is to global trade and trade to china, so it is a positive. We have to look at how this translates. Anna we will look at the earnings story. This is positive for european stocks, will 2020 be the year when we see european stocks outperform the u. S. . Georg yes, we think so. Stocks, if you look at the earnings picture, this is similar to every year where you expect 10 earnings growth. To the lasterent decade is the need to invest money, and this phenomenon, there is no alternative. It is very powerful in europe. If you look at the alternative in the next two years in the eurozone alone we have 500 billion maturing bonds, and these bonds have an average of 3 . If you would like to reinvest in bonds, the coupon would be close to zero. The need to look at alternatives and dividend paying equities is very high. This relative advantage given the zero rate environment will increasing high, and from the pension industry. S for we see record bid italian thirtyyear bonds, record bids for spanish 10 year options, we see banks in those periphery countries able to sell that for 8 . Sell debt 48 . Sell for 8 . Georg this will continue because the regulator will force the pension industry to invest a lot in bonds, if it is negative yielding it is a central bank. These institutions have to buy so the curve for demand of altra long credit is high. Those investors are not restrained, they will take a look and see equities relative lastnds compared to the three decades. You should not forget we have ample equity. , we have almost 40 billion a month into the markets, and this liquidity has to go somewhere. The consumer is very strong. European stocks have a significant chance to outperform u. S. Stocks. Anna i want your thoughts on the climate agenda. This week we heard from blackrock, they are getting more of their the part portfolio they are able to, and this is big news in the sector. The you think the move to a climate conscious investor is a threat to passive investments. It seems investors want Asset Managers to be more active in this field. Georg for sure. Disinvestment this investment if you look at this positioning already come the exposure to energy is very low. Component is below 5 now. Trends are going on, and that is one reason we think , so it is notcks the time to invest in energy stocks. Is is important esg important. You should avoid because regulation and client demand forces Investment Managers to invest very carefully. Thank you so much for joining us. Georg schuh, cio emea, dws investments. Up next, fixed income trading continues to be a bright spot on wall street. Take of america and Goldman Sachs, shares dropped after the earnings are released. We will bring you details on wall street earnings, next. This is bloomberg. Back to the european open, we are 42 minutes into the trading day. Things have improved in the last halfhour. 0. 25 . N equities up by the ftse 100 is flat. Goldman sachs has sold off its stake after the disappointing ipo in 2019. They loaned 10 million shares at the time of the offering, and took a hit in the Third Quarter plunged. Hares goldman was restricted from selling shares until six months after the ipo. Taiwan semiconductor expecting adaptedfter customers more small chips into their phones. They are investing new Chip Technology to safeguard its market lead. They have shown the emergence of 5g will underpin its business for the next few years. A spin off of selling off of units, the transportation conglomerate has jp goldman for the review. We have learned it is considering an exit from its supply chain in europe. That is your Bloomberg Business flash. Much. Thank you very season is innings full swing. Fixed income trading continues to be a bright spot for the industry, bank of america and goldman saw their shares dropped. Here is dani burger with the reasons behind that. The trading that continues to be the star on wall street, results show yesterday the trend is continuing with banks beating fixed income revenue, though we have a high bar set by j become organ j. P. Morgan. Still beating expectations. The four banks have seen an increase in 56 in their fixed trading. Bank of america and goldman have not continued the trade a better trading, they saw those results disappoint. The small disappointments are exactly the reason we saw goldman and bank of america shares dropped yesterday in the trading session. Goldman, one of the big conversations on the call was cost. They had 1. 1 billion charge for litigation, a lot of that has to do with settling their scandal. Inc. Of america declined 2 bank of america declined 2 . It shows how closely linked bank of america, executives say they do not see the environment what comes to Interest Rates becoming more favorable for 2020. Investors are trading this like they will continue to see that pressure. Not much brightness to come, but on deck we have morgan stanley. We will see if they have the same fate as bank of america or if they surge in trading. Nna thank you very much lets bring you an exclusive interview, the ceo of allianz is not betting on rates soon. He spoke to Tom Mackenzie in shanghai. Actually china, and i wish the u. S. Was the same have committed to multilateralism. Most of the things the chinese , is that itoes applies everybody. My assumption is they promise, whatever they do they do in a multilateral way. I am optimistic. Deals lastke two year in brazil in china. You have excess cash on the balancefind appropriate targets . We have high valuations in all asset classes. Some people are saying we have overvalued assets almost everywhere. When an investor comes to our bank and says we have a beautiful insurance company, can you buy it, it is relatively cheap. That means relative to other listed companies, not that it is expensive relative to its cash flow generation. We are disciplined to put our money to work on behalf investors, and we have looked at opportunities. Few have made it in terms of financial returns relative to the risk involved. We remain disciplined to deploy the capital of are investors going forward. Tom which regions are you looking at for dealmaking . Globally valuations are very high. What we look for is what we Call Partnership deals. What comes into all transactions is that we have established relationships to these partners over many years. They are typically not auctions, so we participate in transactions where we can balance the interest of the buyer and seller that allows us not to overpay, and share the synergies out of these transactions. That is rare these days. Comment make any particularly in the public about transactions. Tick up . Ld we expect a it depends on the opportunity. We systematically look and have an active strategy department, and active m a department. It depends on the opportunity. It has to make sense for both sides, and given where asset valuations are, we would rather be cautious. Buying high and selling low should not be part of my strategy program. Matt that was the ceo at tomanz speaking to mackenzie. Up next, the stocks on the move. Restaurant group is falling after a lackluster thirdquarter update. This is bloomberg. Anna welcome back to the european open. Europe up byoss 0. 3 . Strong gains on the periphery. A lot of trading updates is pushing movers. British foods one of the bigger gainers up more than 2 . And december sales was the star performer for the company. A bit of a profit warning in their update saying growth slowed in december. Most recently bushfires in australia. Look for downward 5 , having their worst day since 2017, lackluster thirdquarter performance. Thank you very much. Looking at some of your movers including whitbread. The bank of england will cut rates according to Richard Jones. Thank you for joining us. Predicting this in the market for days, and the market is increasingly pricing it in. About two thirds of ability the bank of a when. Without probability that high, other Central Banks are in the business of tripping up markets. If it stays where it is, they will cut rates by five basis points. 25 basis points. Juliette we moment,e problem at the any data coming out has been backward looking to fully reflect the mood in corporate boardrooms around the u. K. Given the election fell in the middle of december. Richard the pmi data next week will be important. Retail sales will be important. Expect the december meeting to rebound. I would say the bank of england has one mandate, to keep inflation at 2 . The headline yesterday was awful , not where the bank of england wants it. It peaked at the end of 2017 at has come down sharply since that time. Over the past six months it has accelerated. That trajectory is concerning the bank of england. Saunders talked about yesterday and said why they have to act sooner rather than later. And the softer data across the board is something they are concerned about. Matt i want to ask about the euros because you have written that berlin needs to turn on the fiscal taps to bring about any increase in the value of the currency. Is that happening now with the investment in the bond, you have the lukewarm green deal we had a few months back. You are starting to see more spending even if it is not increasing or decreasing the surplus. Richard it is a start, and we will see an incremental approach. Economic feed into the data and support the europa. We will see a big move in the eurocom a i do not think that will happen because this will be slow, steady, methodical. Anna we seem to be heading higher on risk asset. Bonds are fluctuating. We have the phase one trade deal signed in the rearview mirror. Do we rally further . Or are we looking for other catalysts . Richard i do not think phase two is front and center on anybodys radar. It is something that will take a long time to negotiate. As long as we keep yields low, and equities can continue to grind higher, any pullbacks we see will be limited by there are lows of liquidity in the system. Central banks will add more in the case of the bank of england, but others will monitor that situation and add liquidity if necessary. Anna thank you very much, Richard Jones in berlin. That is it for the european open. Matt we see now continental indexes starting to rally. Automakers are losing ground. It is oil, gas and basic resources that are boosting equity indexes today. Bloomberg surveillance is up next. Francine sealing the deal. Blackstone says the trade facts are chewed are a huge change. A major constitutional shakeup that allows the president the russian president to extend. The house of representatives sends articles of impeachment against trump to the upper chamber. The historic trial is set to begin on tuesday. Welcome to bloomberg surveillance. I am Francine Lacqua here