Transcripts For BLOOMBERG Bloomberg Markets 20240713

First time in decades. Going there for more from beijing is bloombergs selina wang. Give us an update on the situation in terms of the death toll and some of the evacuations from the ships, and also what we have heard about potential delay to the National Peoples congress. Selina we heard from the head hospital that he turning point may be reached, but we did see the number of , so it looks like the virus has not reached a peak yet. Outside china, countries have been stepping up evacuation efforts from these cruise lines. The diamond princess cruise ship in japan reporting the number of infections jumped to 454 after another 99 new cases right in the fight. In beijing, you can still feel the effects on the local economy, with stores and restaurants still closed. There has been a slight uptick in activity as people have resumed work, but only about 40 to 50 of the economy has been running at capacity this week. In beijing, anyone returning from the city has been ordered to self quarantine. For 14 days government quarantine for 14 days. The government is now considering delaying its annual political meeting for the first time in decades. It has been planned for march 5 in beijing, but given all of the travel restrictions, it would be a challenge to bring thousands of highprofile political leaders to beijing. Nejra liquidity injection we got today in terms of the mlf rate cut and talks of fiscal stimulus, is that a precursor to more broadbased stimulus from chinese authorities . Selina we havent seen any massive stimulus yet, but Bloomberg Economics is expecting that, that you may see a cut in the loan prime rate. They lower the rate by 10 basis points, but this was largely expected by analysts. We also saw plans for reducing corporate taxes and fees to try and calm Financial Markets and companies, but so far seeing incremental moves. Also want to bring up a new data point from bloombergs most recent survey of 18 economists which forecasts chinese economy will grow by 4 in the first at the, down from 5. 9 end of january, but a lot of big challenges the economy is facing. It is not going to be stimulus. Monetary a lot of workers are unable to get to the factories because of travel restrictions and quarantines. All of this putting more pressure on an already weakening economy in china. Nejra selina wang, thank you so much. For more on the coronavirus and chinese response, joining me in london is lothar mentel, tatton investment founder and ceo. Great to have you with us. Is china going to have to embark on a much more aggressive and broadbased stimulus measure, or is the assumption of a vshaped recovery a somewhat has been announced are really announced already . Lothar i think we will see some pretty significant stimulus, much more than was planned already. Lets not forget, next year is the 100th birthday of the communist party. They wouldnt want to be going through recession then. Q1 is going to be really difficult in terms of the dataflow we will get from china, so yes, i do expect there will be quite a bit more than what has been already announced. Nejra what do you expect in terms of quite a bit more . Do we get a cut to the loan prime rate, more rrr . That is the monetary side. Theres also the fiscal side of things. Do you expect both sides to be of limited . To be implemented . Lothar i think the fiscal side to the more relevant previous policy of bringing the house in order, not letting credit get carried away again, and creating something that actually pays dividends in the future. I would expect a lot of localized Infrastructure Projects kicking off quickly. Nejra the deleveraging side of thing, does that get put on the shelf . Concernill that markets, or is the focus on supporting growth and that vshaped recovery . Lothar maybe not put on the shelf, but at least put on pause. The chinese authorities will be very mindful where that could lead, but i think at the moment, the priorities will be to get vshapedmy into the recovery rather than lingering in that slow down. Nejra if the assumption is quite a bit more stimulus from china, particularly on the spending side of things, what is the best way to trade that . Lothar i think Southeast Asia is where you would want to be. Where that is comfortable in the shortterm is a different question. Certainly, that is how you would play it, but lets not forget up to this point, the stimulus was of a level where there wasnt really any expectation of massive demand over spill into the rest of the world. That could well happen, so emerging markets tend to do pretty well in those sort of arcumstances where there is demand push pull from china. Nejra could be your get support from that could the euro get support from that . Could it get much support from stimulus to ensure that vshaped recovery from coronavirus, or will there other factors or are there a third factors that will keep it stressed or are there other factors that will keep it stressed . Lothar i think there was a reaction to the slow down in china, and germany getting worse before it gets better, so that should feed through into the euro as well. Not quite sure about the timing, but that should be coming through over the course of the year. Nejra Southeast Asia is one of the ways to trade if we get this vshaped recovery, but if we get the stimulus you are talking about from china, is that going to be enough . Or do you see a response globally that is needed to keep these concerns at bay from the impact . Lothar that depends a little bit. If china gets back to work, and there are questions about how quickly that is happening, it might will be contained to china servicesm some of the and tourism side. Changes to the supply chain, it is becoming a larger global problem, and we would expect to see it more globally. From what the Central Banks are telling us, they cant do the heavy lifting anymore. It will need a concerted approach for some fiscal spending, not just from china. Nejra the disruptions to the Global Supply chain, potential impacts that can have on corporates in coming quarters, fourthquarter earnings dont take into account the coronavirus at all, but could there be a significant enough the perception of a backstop from Central Banks . Lothar that is the question. Everybody must have been surprised looking at equity markets, how quickly they shook off that fear of the coronavirus, and have just decided to look through it because undoubtedly, there will be a hit to global earnings. It cant be any different if youve got that much of a slowdown from all of the actions taken to contain the virus from spreading. Theres just not much doubt in my mind that there will be an impact, but at the moment, the markets have chosen to look beyond that because the previous experience is that these things are shortlived, there is a sharper recovery coming later, and therefore, good times are ahead. Therefore, equity markets seem to be willing to not take that too seriously at the moment. Nejra what would break the resilience of Global Equity markets . Lothar i think if you got a supply chain stock that really sends us into yet another industrial manufacturing slow down, as we have just had over the last 18 months, that would probably revive fears that perhaps we are going to see a bit more than just a very slow one quarter. Also, if Central Banks are deemed not to be supportive sourh, that could also market mood. Nejra where are you in your portfolio construction right now . Are you derisking . Are you waiting on the sideline to see how this plays out . Are you loading up on duration . Lothar weve actually increased our equity exposure. We went into that market slow down and raised our allocations because we feel that the general case of growth this year, perhaps growth surprising because of trade frictions, are of trade frictions are declining, is really on the cards. Interesting. Are you offsetting that with protection in treasuries, and gold, for example . Or are you happy to take that risk . Lothar weve actually taken money away from long bonds, so we have reduced that side because we feel that bonds are going to rise again slightly, but theres not much money to be made in long maturities, and thats why we have reduced that position. Nejra interesting. Mentel of tatton investment stays with me. Lets get the first word news. Economists predicted a decline because of the impact of a renewed sales tax hike. There are concerns that the Virus Outbreak could make things worse. Prime minister shinzo abe may have to consider another round of spending. The fight between the u. S. And europe over Chinese Technology is threatening to split up nato. The u. S. And bessette are to journey warned that any nation who uses an the u. S. Warned that any nation who uses chinese hnology in 5g Networks Energy secretary said that russia will be unable to circumvent u. S. Sanctions on the project. President trump has assailed germany for buying russian gas while it benefits from u. S. Military protection. U. K. s chief exit negotiator will lay out the countrys goal for its future relationship with the European Union today. The two sides are trying to work out a trade deal by the end of the year. Boris johnson says the u. K. Doesnt want special treatment, but says the eu is offering more stringent terms than it did in the deals with south korea, japan, and canada. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im laura wright. This is bloomberg. Nejra thank you so much. Coming up, more on the Market Impact of the coronavirus and a look at headwinds facing the eurozone economy. This is bloomberg. Nejra live from london, im nejra cehic. This is a special edition of Bloomberg Markets. Ets get more reporter we are getting some relief for the time being of the coronavirus. European stocks higher by 0. 2 . We are also looking at copper. A lot of these growth sensitive gaining today. Open saying growth is going to be cut dramatically for the commodity, and slashed their price target. Closedse, u. S. Markets today for president s day, but i want to give you a check on what is going on in the futures. The Asian Session up 0. 2 . Recordek, we had that inflow into bond funds. 24 billion, to be exact. Bank of america saying that when you analyze, you get a record 1 trillion, calling it a 1 trillion bubble, so not too much action may be after that very big week. Weve heard from people like scott miner of guggenheim saying markets are acting irrational, saying theres cognitive dissidents cognitive dissonance currently. One thing that has really been hurt as of late is the euro, tumbling to a 2017 low. Today just barely moving higher. Not enough, though, to undo the damage done over the past month. A lot of this has to do with weak european data. Not only that, but the issue surrounding the supply chain that Coronavirus Impact might have. For now, a little bit of rebound in the euro. Could we see parity . Traders are most bearish on the euro cents june on the euro since june. Nejra thank you. Still with me is lothar mentel of tatton investment. Youve taken money out of treasuries to put into emerging markets. Why are treasuries not appealing to you right now, even as investors keep piling into them at the long end . Lothar treasuries are always attractive when we have an expectation that there may be a recession ahead. At the moment, there are not many catalysts that would point towards a recession. A lot of that talk of ludicrous valuations are really focused on a couple of stocks in the u. S. , in the tech sector, but if you look more globally, that is not true. Emerging markets have suffered quite a lot. Lets face it, at the very low yields that we still have everywhere in the world, where are investors going to go . Nejra when we talk about based on just some stocks in the u. S. , the s p 500 has had a little bit of a safe growth inal because shares make up a big part of it more than ever. Do you find u. S. Equities appealing, or not so much because you dont have that defensive stance in your portfolio . How it is depends on going to pan out this year. Not going very much, u. S. Is still attractive because there is still more growth to be had. It is, to a certain extent, a safe haven. If we see a recovery, and this seems to be the third midcycle recovery we have experienced in this drawnout cycle, then the other, less valued areas that benefit from a pickup in global trade have a lot more recovery and upside potential than the u. S. Currently has, and that is really quite highly valued. Lothar does that include europe as well nejra does that include europe as well . Lothar that includes europe as well because if we get into china spillover demand, that should get europe out of the doldrums pretty quickly. Lets not forget, backwardlooking, the data from europe does not look pretty, but it looks like it is troughing. That may be delayed by the coronavirus, but it is still on course. Nejra youve also done a little work looking at growth versus value. This discussion getting a lot of momentum over the summer. You say we shouldnt necessarily be looking at p e ratios. Theres another measure to gauge how you pick growth over value right now. Lothar if you look at the earnings yield, obviously you want to see whether that has morphed as well. Hase we observe that there been a constant relationship between growth and value of around 2 . That hasnt really changed very much. What has changed is that yields have obviously fallen, and therefore, that differential has become so much more valuable therefore, we shouldnt look at historical comparisons. We should also look at whether the comparison in earnings yield has changed. That hasnt massively changed, although it is still pritikin that Growth Stocks will be able to grow businesswise, at least 2 faster than their value equivalent. That is going to be a tall order for some of those big names to consistently outgrow the other part of the economy by 2 per annum. That is perhaps a little bit of so eventually it will go the other way, but we are not convinced that just the high pe levels at the moment indicate that it is about to turn. Lothar when is the time for you nejra when is the time for you to turn from growth to value . Lothar we will have to watch, but we might see that more and more Growth Stocks become value stocks because their Business Models are starting to look more subscription model, and they look a lot more like utilities. Those things when really have to be watched. The other thing is if we see a recovery in global trade, the normalization of the Global Economy, then value may also be more attractive then growth at that point. Nejra while we have been so preoccupied with coronavirus, we barely talk about where we go on trade talks between the u. S. And china. Is it your base case that phase ii gets delayed, and that is a good thing for markets because at least the bad news is delayed . Lothar you could look at it that way, but the more positive thing coming out of phase one is the sentiment change that it is already bringing about in the u. S. That is coming on the back of phase one. It doesnt even need phase two at the moment. If we keep it a bit quieter until after the president ial election, that met that might be the best thinkers the the best thing for the cinnamon side. The sentiment side. Nejra lothar mentel stays with me free hour. This is bloomberg. Nejra live from london, im there hh. Time im nejra cehic. Time for the Bloomberg Business flash. Heres laura wright. Reporter gm will take a 1. 1 billion charge. The restructuring will allow gm to focus on new technologies such as self driving cars and electric vehicles. Ceo mary barra is shrinking gm to the point where it gets almost all of its profit from the americas and china. Hasch train maker elstrom confirmed it is in talks to buy bombardiers real business. It would make them a stronger rival in the business. The coronavirus may make it harder to find Nintendo Switch consoles in the u. S. And europe. Bloomberg has learned that because of a production bottleneck, there has been a shut in china. A shutdown in china. That is your Bloomberg Business flash. Nejra thank you so much. Coming up, we will hear from the imf managing director on the outlook of the Global Economy and the impact that the coronavirus. What would investors make of a synchronized and coordinated Global Response . That is next, as we see a bit of response comes into markets across asset. This is bloomberg. When it comes to using data, everyone is different. Which is why Xfinity Mobile created a different kind of wireless network. One that saves you money by letting you design your own data giving you more choice and control compared to other top wireless carriers. Now you can choose unlimited, shared data, or mix lines of each and switch any line, anytime. No one else lets you do that. Design your own data with Xfinity Mobile. Its wireless reimagined. Simple. Easy. Awesome. Nejra live from london, im im nejra cehic. This is a special edition of bloomberg market. Kristalinag director georgieva spoke to bloomberg. We need to recognize that there is a great deal of uncertainty around the nature of the virus, how exactly it is would it spread beyond china, and for this reason we do not make projections. We operate with scenarios. We are still hoping that the most likely scenario would be relatively rapid containment of drop ins, a vshaped Economic Activities in china, some impact on the rest of the world, and then very fast recovery. Would that be the case, we would know more in the next couple of weeks when we get a better handle on the nature of this virus, and also on the speed of containment. The initial drop in that, is that likely to be containable . We expected to be, yes, because today, chinas share of the World Economy is quite. Ignificant 19 of the world. Chinas tourists are a very important part of the tourism industry. Terms, 28 ofng manufacturing. Even a month of reduction in activities inevitably would have an impact on china, and some of it would be translated to the rest of the world. We need to give it a bit of time. On the more positive side, we see china taking very aggressive measures both in terms of containment of the virus thestically, but also approval of 115 billion from peoples bank of china, cutting stimulusrates, driving already in the direction of affected regions. My most Important Message here is actually a broader message. Uncertainties. ,ousef at the imf level what are you looking at to mitigate the Downside Risk . Banks set upentral a synchronized rate cut and more monetary easing. What they had done is the equivalent of 0. 5 growth. We also saw some fiscal measures around 0. 3 , boosts coming from countries that have fiscal space and used it. What is missing, however, is a ine aggressive swing Structural Reforms. Expect that, if there was to be more attention, it should go. Obviously, Monetary Policy space is shrinking. Measures, on fiscal as well as Structural Reforms, to boost growth up to be stronger. You talk about more coordinated response. I am quite optimistic that in a very difficult moment, we would see the appetite for more coordinated action, and obviously we are now on our way to more bank governments in the g20, and that is a good way to talk about that. Yousef lets talk about argentina. They now have the largest credit line in imf history. Say a deeper restructuring is needed. Do you agree . Kristalina they are going to come up with an assessment of where the policies of the government are headed, and an update on the sustainability analysis. Lets give it a little bit of time to get the data. But broadly speaking, we are very supportive of the commitment of this government to stabilize the economy and return to growth. The job of thed government to look at that, but we are very supportive of the government doing what it would take to restore growth, and to protect the most vulnerable people. Nejra that was bloombergs yousef gamal eldin speaking with imf managing director Kristalina Georgieva. Still with me is lothar mentel of tatton investment. Talk about the response of Central Banks, as limited as it may be. The fed led the dovish turn by Central Banks last year. Where do they stand this year . Lothar we are close to the lower bound. Theres not much Central Banks can do except perhaps trying to push general sentiment into the direction of, look, we are not going to upset the apple cart. We are going to keep Monetary Policy easy. But seriously, how far can they go . There isnt that much further they can go. Therefore, i am encouraged by policy initiatives like lagarde knowing around and europe and saying, look, theres a few things we can do across europe like fiscal, but also, perhaps banking regulation, creating some real crossborder banks in europe, not having all of those individual regulated areas. Nejra even as investors and markets see the limit of central bank policy, are they nonetheless going to start bringing forward bets on a fed rate cut . Youve got deutsche bank, Credit Suisse arguing the fed could be forced to cut rates by july. Youve got citigroup bracing for the market to price in a reduction. Lothar the yield curves tell us that they should tell us of the moment that that is what the market is expecting. Is it going to have that much of an impact on the real economy . It depends. At the moment, it has been positive that risk assets have gone up. Therefore, the fear that equity markets may be signaling that there is a recession coming has gone away. That does help with Business Sentiment and gets activity going. But at the end of the day, it does need a bit more of a concerted effort. The Central Banks cant do all of the heavy lifting anymore. It needs to also come from the fiscal side. We heard Structural Reforms and quite a few things that can be done. Nejra the bloomberg dollar index has had the best start to the year since 2015. Does Dollar Strength continue through 2020 . Even if see the fed begin to cut, if everyone else is cutting as well and youve got the yield advantage of treasuries, you could argue the dollar stays supported, particularly if it is acting as a safe haven because Central Banks are cutting on coronavirus concerns. That is Lothar Lothar very much the point. Safe haven has gone up lothar that is very much the point. Safe haven has gone up. It seems to be turning. It will very much depend, are we getting that very sharp to vshaped recovery . If we do, there may be less for strength of the dollar because other areas look equally strong, or perhaps with more upside. That could then weaken the dollar. At the moment, that is not yet on the cards. Nejra lothar mentel of Tatton Investment Management staying with us. Lets check in on the first word news. Heres laura wright. The annualhina, meeting of Parliament May be delayed because of the coronaVirus Outbreak. It hasnt happened in decades. The National Peoples congress is set to convene march 5. Casinos in macau will be able to resume operations thursday. Authorities close them for an unprecedented 15 days to prevent the virus from spreading. The price of oil is steady after the biggest weekly gain since september. Hopes for an emergency meeting meeting ofies opec and its allies are fading. Democratic president ial candidates have ramped up attacks on michael bloomberg. Bernie sanders says bloomberg will not create the kind of excitement needed to defeat President Trump. Others criticized him for comments about policing women and race. Bloomberg is the founder and majority owner of bloomberg lp, the Parent Company of bloomberg news. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im laura wright. This is bloomberg. Nejra thank you so much. Coming up, Facebook Ceo Mark Zuckerberg heads to brussel to meet with eu officials ahead of regulate ai technology. We will have more next. This is bloomberg. Nejra live from london, im nejra cehic. This is a special edition of bloomberg market. Facebook Ceo Mark Zuckerberg is in brussels, meeting with eu officials ahead of planned legislation that would impose new rules on ai. Bloombergs maria tadeo. So Mark Zuckerberg is going to talk to eu officials, asking for more regulation . Maria exactly. Pr could say this is a operation, a charm offensive, or Mark Zuckerberg really want to work with regulators, but also preempt some of the moves we are going to get from european officials. They have made it clear they want to see tax reform on the digital sector, and they really want to see those issues around privacy and Data Protection being addressed i facebook addressed by facebook. Critics will tell you what Mark Zuckerberg is also trying to do is say we are doing what regulators are telling us to do, and that is a debate at this point. He decided toed publish today in the new york meeting the woman at the European Union cracking down on tech giants. The language coming out of facebook is very similar to what she has said in the past, so it is six a significant change in tone. Nejra what kind of regulation is zuckerberg looking for come hesf looking for, that hoping the eu will address and that he can respond to . Maria theres a number of issues here. We have seen the company come under huge scrutiny. I remember the last time he was here, he had to apologize over a number of issues. One was failing to crack down on hate speech, but also election meddling. That has become a huge issue for the European Union. It is Mark Zuckerberg saying this is something where we want to work with regulators. Social Media Companies should not have the final say on what should be on the web and what should not be on the web, and clear guidance would be good for western democracies. Secondly, we have data and potential new legislation and artificial intelligence, which we know is the next frontier when it comes to digital and Tech Companies. The timing is interesting because we are going to get a new framework from the European Union on wednesday, looking at those areas. Nejra give us a little bit more detail on that. The eu is fighting for what they have talked about as purpose in this grand plan that, as you say, encompasses artificial intelligence, among other things. Maria in terms of what to expect from it, we still really dont know. This is something that has been kept under wraps, but it is clear that the europeans feel they lost the battle on the personal data, and now they want to focus on business and industrial data. This is businesstobusiness data that could be shared. They actually feel this is something where the europeans could do well. And artificial intelligence, there is a lot of concern on facial recognition and the way that some countries, perhaps in particular china, are using this. For the europeans, they do take a much tougher stance when it comes to individual privacy. Facial recognition poses a lot of questions when it comes to that. But again, it is interesting the timing of this, that Mark Zuckerberg came here just before that. Some will say he is really just trying to preempt those moves from regulators because victim a state the regulators here are clear that they really want to go that way, and they know there should be new rules put forward. Nejra lets turn to another topic because we are looking ahead to britains chief brexit negotiator laying out the u. K. Side at the start of these negotiations with the eu. What can we expect from europe on that front this week . Maria we have european leaders meeting here on thursday, the first time they meet with the u. K. Officially at the negotiating table. This is the eu 27 meeting for the first time, and they will have to deal with a number of issues related to the u. K. Leaving. Of course, you are looking at the trade negotiation, looking at the new budget. Thatusic out of europe is they do want to get a comprehensive trade deal with the u. K. Come about a lot of this will depend on just how closely aligned the u. K. Wants to stay. That goes back to that principle of equivalence, being able to recognize each others rules and not diverge too much from the eu rules, but this is a decision that will have to come from the u. K. The door is open from the eu come up at conditions here are , butclear from the eu the conditions here are very clear. You could argue that the u. K. Position was to do the exact opposite. Nejra maria tadeo in brussels, thank you so much. Still ahead, huge overhaul at hsbc. Why europes biggest bank is making big changes. This is bloomberg. Nejra live from london, im nejra cehic. This is a special edition of the bloomberg market. Its time for the Bloomberg Business flash. Heres laura wright. Laura bayer could be facing another multibilliondollar problem the u. S. A jury has awarded millions of dollars to a farmer who says that herbicides destroyed his peach orchards. Bayer is already trying to settle thousands of lawsuits over its roundup read killer roundup weed killer. And germany, a court says clearing forests for a new plant must stop immediately. Tesla is hoping to have the factory running by the middle of next year. Sport is hoping to fetch about 1 billion in a sale. Billionairesa conglomerate. 63 in newn about york since july. Nejra europes biggest bank is set for its third Major Overhaul in a decade. Trading desks and back offices at hsbc are bracing for changes that could see a surprise new chief executive and job reductions across the globe. We are joined by harry wilson. What exactly are we expecting in terms of the restructuring and any overhaul at hsbc tomorrow . Harry we think there will be widescale restructuring across the bank, particularly in investment banking, but also regionally in europe and the u. S. , which are the less well performing part of this business. We are looking at a redoubling of efforts into asia, where the vast majority of bank profits come from. Nejra are we likely to get any news on future leadership . Harry i dont think we will see anything about the ceo tomorrow. Weve already had several executives announcing retirement or switching roles inside the bank, but i dont think we will see the top man tomorrow nejra theres a great quote top man tomorrow. Nejra theres a great quote from your story from one of the traders that hsbc should take risk now or shrink and shrink fast. Harry i think theres been a hsbc. Morrow for people have been waiting to finally see the share price lift off, and that hasnt happened. What people are looking for is a major restructuring that delivers that. Whether that be a shrink at of the business or some kind of strategic repositioning, people want to see something dramatic. I think expectations have been lifted quite a high level, so they really got to deliver tomorrow. Nejra how certain is noel quinns position . If the bank comes out with something that satisfies shareholders tomorrow, is he safe . Harry hes got a very good topic getting a very good shot at getting the job. It is plain is wellliked by the market, if we get good share price reaction, then yes. But theres a high chance they bring in someone from outside. We dont really know yet. Of challenges, but weve also got the new challenge of coronavirus, the impact it has already had on hong kong and what it could have on chinas economy going forward. Harry what i think we will probably find out is that maybe the staff this year have been pretty good, and around when coronavirus started to take off, thats probably where you will start to see some sort of downturn of business. I dealt whether we will see anything particularly meaningful at this point. This is probably a lag effect. Maybe this is something for q1, q2. Nejra what could be a big surprise for the market tomorrow . Harry a chance for surprise in the provisions. Expectations from analysts have been around for billion dollars. If we see something beyond that billion dollars. If we see something beyond that, that could be an area where we might see surprise. Imagine they could well have managed towards it this time. The numbers were looking in the right direction, so unless something dramatic has happened in q4, they are probably quite likely to hit. Nejra great to have you with us. Bloombergs harry wilson will no doubt be up early tomorrow to get those earnings on the bloomberg. Thank you so much. Lets get a check on the market. We have seen quite a bit of green on the screen in terms of european equities. Percent. 600 up 0. 2 u. S. Markets closed for president s day, but futures indicated just a bit higher. Asian equities, the csi recouping all of the new your losses on the announcement of the midterm Lending Facility rate cut from the pboc, so liquidity into the markets and stimulation about further stimulus. At 1. 0836. Adier we have recovered in that broad risk rally we have seen in assets. We await the chief negotiator for the u. K. Giving a speech on the position tonight. If you look at the risk sentiment and tone across markets, the yen retreating slightly. The aussie was moving higher, but gives up some of the gains right now. The bloomberg dollar index has had its best start to the year since 2015. Will that continue as we expect a vshaped every on coronavirus and perhaps a single nice response from goebel Central Banks . That is from global Central Banks . That is what the imf was talking about. Gold is on the back foot. Coming up, we will bring you highlights from our conversation with the Energy Secretary on the outlook for oil and much more. This is bloomberg. To the people of new york, good president s day morning. Im matt miller from our European Headquarters in london. This is a special edition of Bloomberg Markets. I would you check in on what is going on in this index is open for trading. The ftse and the dax are both gaining. We had a relatively good start this morning on optimism that the chinese are going to release more stimulus into the economy after cutting key Interest Rates. You had gains in chinese markets. The csi 300 erased the losses we have seen since the Lunar New Year holiday. A little bitbbed after we got headline from Cathay Pacific saying that the first half was going to be very difficult compared to last year due to the coronavirus. Here ucsb futures. No cash trading in the u. S. S py here you see futures. No cash trading in the u. S. Today. Sentiment is positive. Toex crude coming down 0. 03 52 a barrel. Gold coming down as well. The dollar gained strength against the japanese yen. As the coronavirus continues to spread in china, the number of confirmed cases climbing to above 70,000, the country says it is considering delaying its most highprofile any will political meeting for the first time in decades. Joining us from hong kong is bloombergs rishaad salamat. Telus first about the spread of the virus. What kind of numbers are we looking at right now . Rishaad we are looking at 71,000 globally. The majority of them have been in hubei province. That is the epicenter. But there is a human tragedy going on, and also an economic one going on. Bloomberg economics suggesting that last week, we saw 40 to 50 reduction in chinese Economic Activity. , that isou an idea about half of what it should be. The diamond princess cruise ship which is been docked outside of yokohama 3700 people on board, that has been the biggest concentration of coronavirus victims outside of china. Then we have another boat, the westerdam. The those that have been released from that ship fanned out across 40 different countries. Symptoms starting to develop there as well. The big news here has been macau. As of thursday midnight, we are going to have the can seen as reopening the casinos reopening. This economy has lost Something Like 3. 3 billion to us far in the 15 day closure we have already witnessed. We are talking more about it being 12 days without a case there. That gives you a case of why they are probably reopening. We talked about Cathay Pacific, sending out that profit warning. We have others. China southern, china airlines, china eastern. Again, that belies what is happening because there are suspensions of flights, so february is going to be a horrible month for it. Then weve got sporting events being postponed, such as the tokyo marathon, the beijing auto show also postponed. That is the current position we find ourselves in. Nintendo saying if you want a switch, perhaps you will not be able to get one because of production and supply chain problems. Mattel says if you want a barbie doll, perhaps you will have to wait for it as well. Delta, we are looking at american manufacturers being delayed. The Npc Standing Committee could see a delay as to what they are going to be saying about growth and beyond that. Matt this wont mean anything to americans, but it is president s day, so maybe they are still asleep. Postponed andns the formula one race postponed. 450, 5 hundred Million People tune in to watch formula one. So it is a big deal. What is being done by the authorities . Are they trying even harder to contain the spread and stimulate the economy . Mentioned think you the pboc medium lending term facility and the key interest rate. On top of that, they are shoring up loan growth as well, underpinning that. We are just waiting for more to come out. Corporate tax rates were cut over the weekend. But what happens on the demand side . That is key because consumers arent going out on shopping. Retail sales are falling off a cliff. Meanwhile, singapore could actually see contraction in 2020 about 0. 5 . Thailand looking at growth anywhere between 1. 5 and 2 . They were looking at is much as 3. 7 before. Theres a lot to do here. What will they do next is the question. Matt thanks very much. You stay safe as well. Rishaad salamat joining us from hong kong. , theore on the Coronavirus Response from china, and how it is affecting markets, joining us now in london is kit juckes, socgen global strategist. Thanks for coming in. Let me first ask you about the pboc cutting rates, the stimulus we all expect to nazi coming, is it really going to help expect to now see coming, is it really going to help . Kit the chinese economy reacts in terms of lending, but put it this way. I dont think it can help while everything is stuck because no one wants to go outside or interact with people. But it would certainly help the pace of recovery once we get through this phase. Thats probably where the problem lies. The question is how long is this phase, when the government starts saying people should go is, to work, how quick that any hiccups along the way in terms of new cases, and then we will see where we are. Thishinese economy at point is one of the ones where rate cuts will stimulate activity given the right conditions. Todays conditions just arent the right conditions. Matt we are looking at the yuan right around 6. 198. The dollar coming off a little bit here. What do you expect in terms of the chinese economy . To ask the chinese were my opinion, i would say invest all of the bond flow money flowing into your bond market through opening that up, invest all of that on getting more rate cuts rather than fewer rate cuts easy Monetary Policy to offset that. How much it weakens from here i think is a question of what kind of agreement they we chew with the United States, how to trade kind of agreement they reach with the United States, how the trade discussions go. Matt it is interesting because theyve got the trade war going on right now, theyve got growth slowing, theyve got these issues even before coronavirus hits. But they have to trillion dollars in fx reserves they reserves. Illion in fx cant they use some of that . Kit but why would they . Im not sure that is necessarily what they are trying to solve. Use fiscal policy with fx reserves in the background . Yes. You wouldnt want to describe it is taking from reserves to do fiscal policy, but i dont think you want to rush into those kinds of things quite yet. It is a bit separate from the currency, where youve got a deal effectively to keep the thing stable. They are not going to let it strengthen. Matt it is not time for whatever it takes. We heard Kristalina Georgieva give a li na to our given interview to our yousef gamal eldin earlier and say she wanted some kind of concerted global action. I dont know if she means Central Banks allow financial crisis banks a la financial crisis or fiscal stimulus. Do you think that as far off . Kit at this point in time, making the price of money cheaper or spending somewhere else, is that really the solution during a medical crisis . What we want to do is get the folks who are ill well, make sure this doesnt spread further. Of course people arent going to be going out and mixing and mingling, spending money. Of course big sporting events are going to get canceled. All of that has to take place. There is a sense that when you get a sense of how long this gets worse, if it and worse and spreads globally, that we need to all be more proactive in easing to offset the hit. But certainly, if the chinese were ever to ask my opinion never going to happen but deal with this crisis, and make sure the machine gets up and running with as much hope as possible once it can. Matt i am not sure if John Maynard Keynes wrote about medical pandemics, but we are going to talk with you in a little bit about some of the stuff you studied in school, a jekyll and hyde moment as well. Kit juckes of socgen is going to stay with me. I want to check in on the first word news now. For that we go to laura right. Laura in japan, the economy may be heading for recession. Of shrank at an annual rate 2. 3 in the fourth quarter, the most in five years. It may haveredict been because of the sales tax hike. Prime minister shinzo abe may have to consider another round of extra spending. The u. S. Reportedly may limit chinas access to chip technology, according to dow jones. The Commerce Departments dressing changes to current rules that could require chip factories to get licenses if they plan to use American Equipment to make chips for huawei. The u. S. Has been urging allies to ban huawei from helping build 5g networks. The u. S. Says it is confident pressure wont be able to complete the nord stream 2 gas pipeline to germany. President trump has assailed germany for buying russian gas while it benefits from u. S. Military protection. The uks chief brexit negotiator will lay out the countrys goals for its future relationship with the European Union today. The two sides are trying to work out a trade deal by the end of the year. Prime minister Boris Johnson says the u. K. Doesnt want special treatment, but says the eu is offering more stringent terms than it did in deals with south korea, japan and canada. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Wright. A this is bloomberg. Matt thank you. Coming up, more on the Market Impact of the coronavirus, and a look ahead at the headwinds facing the eurozone economy as well. Thats coming up next. This is bloomberg. Matt live from london, im matt miller. This is a special edition of Bloomberg Markets for the u. S. President s day holiday. Lets check in on the markets with dani burger. Dani one of the big movers this morning is the yuan, gaining on the dollar after china said it would help stimulate the economy, cutting corporate taxes. That seems to set off some reprieve from the coronavirus fueled selloff we have seen, at least for now. European stocks gaining today, as well as some of the more growth sensitive commodities like copper. Oil not too much changed, but copper up 0. 8 . This is odd if you are goldman sachs, who recently warned copper is going to see a huge collapse in demand because of the coronavirus. They cut their outlook, but even so, at least for today, we are getting gains in the growth sensitive sectors. Of course, u. S. Markets closed for the holiday, but we are seeing some futures trading. Here are some u. S. Markets that are not the cash markets. Following a similar pattern to europe and asia as well. We are seeing bond futures and the dollar little changed. This might have to do with the haven rally we saw last week. Bond fund flows seeing their biggest week on record, about 24 billion coming into the sector. We are now living in a 1 trillion bond bubble. A lot of warnings out there. But despite that, ever so slight gains for the futures. A zeroo was headed for point 1 rise, but today it is basically unchanged. Still hovering around its lowest level since 2017. A lot of weak Economic Data coming in for the eurozone, as well as the continued weakness thanks to the disruptions to the supply chain from coronavirus. Traders dont see a much Better Future for the euro, now the most bearish against the currency since june. Matt repeat again, who said we are living in a 1 trillion debt bubble . Kit that is from dani that is from bank of america, that they basically annualize the bond flows and said we will be 1 trillion, a twin bubble between stocks and bonds. Matt i wanted to get that repeated because kit juckes from socgen is here. I heard a chuckle when you said that. What do you think about the idea we are in a 1 trillion bond bubble . Kit is it a bond bubble if there are very few inflationary pressures, where Interest Rates are lower for the foreseeable future . It is the other side of putting money into the equity market because if the equity rally runs out of steam, that is not coming out of bonds. Marketnitially, the march higher has really been amazing to watch. We hit new highs everywhere you look, at least in the u. S. And in europe, and at a time when the trade war is still a serious problem, and youve got the coronavirus freaking people out around the world. What is driving it up . Of youve got a combination the u. S. , a limited number of stocks are driving it, which is making really big money from a position in technology. Behind that, youve got very low rates now, ease of funding, and a lot of buybacks. It doesnt take that much money flowing into it to get prices to levels that a nonequity guy like me stairs at and goes, oh. But you could look at the whole rally by the way the csi has traded this year. Bouncing back so quickly, while clearly, the chinese economy is taking a big hit. To keep just needs doing what other central points five central points points off of a central loan rate here, five points there. Matt do you expect they are going to give us a little bit more from the party . Using the fed is going to cut rates . Kit eventually, yes, because the u. S. Economy is slowly slowing. You get enough indicators at the moment that some say it is in trouble, that the jobs data arent universally fantastic. Jobs numbers last week were awful. I think it is slowly slowing. Odds are, they will cut rates before the end of this year several times. I think in the u. S. , i am always uncertain about the feedback loop, but if that helps the equity market, does the equity market help the economy . That is not true in germany. Matt certainly not. Kit the equity market is not a big factor. Matt not everybody is invested. In the u. S. , everyone from the wealthy, middleclass, to cops and teachers are, at least through their pension schemes, are invested. Kit right. To some degree, i think that surely, thinking the u. S. Economy is in great shape just because the equity market is good, that is pushing it. In europe, it just means the ecb may feel the need to do something more. I just dont think it will achieve anything. Unless we get fiscal policy moving, nothing will change. Matt hold that thought because i want to talk about what is going on with this euro. It is of the weakest level i have seen since i started considering purchasing an antique ducati in sheffield. The Exchange Rate has been killing me, and i am not sure if im going to be able to get the bike. Stick around with us a little longer. Kit juckes of socgen our guest host on this president s day. Still ahead, a huge overhaul at hsbc. Why europes biggest bank is making big changes yet again. This is bloomberg. Matt live from london, im matt miller. This is a special edition of Bloomberg Markets for the president s day holiday. U. S. Equity indexes are closed european indexes are rising. Here with the first word news is laura wright. The deal would have a Sticker Price of 5 billion, other discounts are common. Boeing failed to win a bid for any of its aircraft in january. A 1. 1 billion charge. The restructuring will allow gm to focus on new technologies such as self driving cars and electric vehicles. Ceo mary barra is shrinking gm to the point where it gets almost all of its profits from the americas and china. That is your Bloomberg Business flash. Matt thanks very much. Laura wright there. Europes biggest bank is set for its third Major Overhaul in a decade. Trading offices and desks at hsbc are bracing for changes that could see a new surprise chief executive, job reductions across the globe, or any combination of all of those. Lets get more with our finance reporter here in london, harry wilson. Why the incredible amount of uncertainty here . Harry theres a lot of options for them. This is a banquet is absolutely vast. Its got a lot of operations in a lot of different companies, and so many things are happening here. Youre talking about restructuring europe, restructuring u. S. , reallocation potentially of capital into asia , and also the fate of 230,000 odd people. These are big things. Matt what is the likelihood we will see quinn carry on . Harry i think certainly for the next few weeks. I dont think that is into much doubt. It is possible they could announce a new ceo tomorrow. It doesnt seem very likely. I think what we will see is that no quinn continuing his interim that noel quinn will continue in his interim role, and then the board will make a decision. Matt if you put the stock up versus jp morgan over the last decade, jamie dimon has done incredibly well. Hsbc has not, even though it has got the size, the scale, exposure to quickly growing economy in china and asia. What is the problem . Harry i think although you have this fantastic business in asia, you also have a lot of laggards. Assetsng like 1 3 of returning something under 1 , and that is putting a drag on the rest of the business. If you just have hsbc asia on its own, you would have a very strong, very successful bank. But on the other hand, you have these large operations in u. S. And europe which simply arent making return on equity. The real challenge tomorrow is to announce a strategy which enables it to do more of the things it is good at in asia and less of the things in europe and u. S. That it isnt good at. Matt we get the earnings overnight, tomorrow morning . Harry we get them at 4 00 a. M. , and we will see what we get. Matt excellent. Get some sleep. You are going to need it tomorrow morning. Harry wilson covering the Hong Kong Shanghai Banking Corporation for us. Coming up, Mark Zuckerberg is in brussels, facing eu officials today as he fends off privacy concerns and antitrust scrutiny. Hes just come from the security conference in munich as well, so a little bit of a European Tour for the super billionaire. This is bloomberg. Matt live from london, i am matt miller. This is a special edition of Bloomberg Markets for the u. S. President s day holiday. Lets check in on loom work first word news with laura wright in london. Laura in china the annual meeting of Parliament May be delayed because of the coronaVirus Outbreak. That has not happened in decades. Be able tomacau will resume operations thursday. For 15ties closed them days to prevent the virus spreading. The price of oil is steady after the biggest week of gains since september. Hopes of saudi arabia has not given up on an opec summit but russia has refused the idea. In Opec Committee has recommended additional production cutbacks. Democratic president ial candidates have ramped up their attacks on michael bloomberg. Bernie sanders says bloomberg will not generate the kind of excitement to defeat President Trump. Others criticized him for comments about police, women, and race. Michael bloomberg is the owner of bloomberg lp, the Parent Company of bloomberg news. David redditors offthecuff panics may have spurred on what became known as black monday. He presided over the final phase goode Insider Trading david rutter was 90. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am laura wright. This is bloomberg. Matt thanks very much. Laura with your first word news. Some legendary names. Hero area finance ministers are gathering in brussels to take stock of the latest economic forecast. Joining us with more from the ground is bloombergs maria tadeo. Tell us what is going on. Maria we are still waiting for finance ministers to arrive. They are late. We have not heard from anyone at this point. They are going to be talking about the coronavirus, what type of impact will that have on the european economy. This is another headwind for the your area. We are seeing the German Economy flirting with a recession. We are seeing weakness in italy. Not good news for the euro area. Concern about the implication of the virus for the implications on the chinese economy and of course for exports, which are so key for the european economy. Matt what is the story with Mark Zuckerberg . He was just in munich, i saw him there with eric schmidt, former google ceo. Now he is in brussels. He last time he went there, did not have the greatest result. Is he prepared for a better result this time . Maria no he didnt. That is what he is hoping. Here, it was a very rough trip for Mark Zuckerberg, who had to apologize to european lawmakers for not doing enough to tackle election met like and some of that misinformation on facebook. You can look at this as a pr operation for the company, you can look at it as a charm offensive, you can also look at Mark Zuckerberg trying to preempt some of the regulation we will see from the eu. It is interesting that just before his meeting with the commissioner for antitrust issues, he put an oped out where he is saying we are open to more regulation. He says he feels this could be a good thing for everyone, both government, companies, and users. This is a huge change in tune for Mark Zuckerberg used to criticize of regulation, now he is saying he is in favor, but you can also look at this as Mark Zuckerberg conceding facebook is not able to tackle misinformation on its own. He could also say this is also the regulation, we are following their guidance. Matt very interesting stuff. Maria tadeo talking about what to expect out of that meeting of finance ministers in brussels, what to expect out of the meeting with Mark Zuckerberg. We will see a bigger meeting of finance ministers on saturday when the g20 gets together. Still with me in london is kit juckes from socgen. I was talking with you about my need for this old motorcycle. I want to pay in euros, they want to sell it in pounds, and i started looking six months ago. What has happened to the euro pound over the last six months . It has been amazing. Kit juckes most of it is on Boris Johnson. If you think that six months ago there were fears the u. K. Would leave the eu without a deal. There was uncertainty around the politics and there was concern that conservatives would lose an election at some point. The whole thing was falling apart to some degree from a economic perspective. And we goton came in the spike lower for the pound when people got worried he was just going to take the u. K. Out. Then he got a deal, he got the thing done, one election, election, won an promised is your fiscal policy, and that is where we are now. We have taken on a lot of good news about what the government can do to help the economy, and we have months and months of what could be fairly brutal trade negotiations that have us. Before we get to the trait discussion, lets talk about easier fiscal policy. I think it was a book one of your professors wrote about the pound, or about the economic starts and fits britain went through in the 1970s and 1980s. What you expect from the pound now . Kit it is a bit jekyll and hyde. On the one site, europe is crying out for easier fiscal policy, the u. K. Will get easier fiscal policy. That will help sterling. The u. K. Economy will be able to recover the lost growth relative to europe they got as a real as a result of the brexit referendum. The trade talks on the other side of the beast. Last week we are optimistic about the whole focus on fiscal policy, particular with the resignation of the chancellor. Matt it is not all about fiscal policy. For those Americans Still asleep , the chancellor of the exchequer suddenly resigned and he was a hawk. Now i am hearing all this talk we will get loose fiscal policy. Kit the treasury is the barrier to a Prime Minister here being accommodative with fiscal policy. The more control the Prime Minister has over the budget, much as the same if you let President Trump have control over the budget, you would get easier fiscal policy than you would otherwise. No different in that sense. That gave sterling a lift. I do not think we can go through the year just looking at easy fiscal policy is a positive, it is not always, because it will ,oost your budget deficit already huge. If we go out with a bad trade deal at the end of this year, the u. K. , certainly will trade lower. At some point this year we will price some of that in. Matt that makes sense. Take us through the theory on spending and the currency. What you learned from Michael Stewart . In my mind if you just open the taps and give Boris Johnson the power to spend as much as he likes, fulfill his Campaign Promises and buy votes for the next election, that should hurt the parentheses. Hurt the currencies. Why did they get a lift . Kit the more ies fiscal policy, the less i have to ease Monetary Policy. This entire relies this entirely relies on capital flowing as much as possible. If Global Capital will by u. K. Gilts, then the pound can benefit. If the size of your budget deficit scares investors and capital does not flow freely, youre in trouble. The u. S. Is a good example of significantly easier fiscal policy boosting the currency because it allows the u. S. To have higher rates. We are not worried about the ability of the u. S. Government in terms of paying debt. If you are argentina running these policies, or turkey matt it would be a bigger problem. Kit the strongest currency have independent Central Banks and account surpluses. Economy. Is still a g7 as long as that is the case, it is ok. Matt there are does uncertainties trading the pound. The foot there are two uncertainties in trading the pound. The first is what is the chancellor of the exchequer do with the budget and the second is what kind of deal does the u. K. Get with the eu . If it is a decent deal in terms of keeping the u. K. Close to the single market, you think the pound as well . Kit yes i do. A minimal hit to the u. K. Economy because of brexit and because the u. K. Has the ability to do with european should be doing, which is ease fiscal policy. Matt do you expect that from the europeans and what you think about the euro . We were stuck in a range forever and now we are dropping down to a multiyear low. You expect the european government to start to loosen the Purse Strings . Kit not significantly. Spending out more of a shift of power in germany, you could get something. We need Something Big and something preferably paneuropean. It would be a huge game changer if it would happen. While i am in germany, i hear no enthusiasm for this at all. Matt i hear two excuses from berlin. They say if they spend money it will not help the peripheral economies, and they say they cannot spend that much money. It is difficult to actually get it out there. Kit the private sector does not necessarily have enough demand on its own to create enough demand to have full employment. The european economy is not going fast enough, there is too much unemployment, there is economic weakness, and tons of much,ans saving too companies not investing enough. You could hire italian and spanish workers to build bridges in an aging infrastructure in germany. What a fantastic way to kick off the week. Thanks for coming into the office. Kit juckes from socgen talking to us about currencies, but the Bigger Picture and a little bit of an economics lesson as well for me. ,oming up, trouble for tesla trouble for berlin as well. The electric car maker a new setback as legal risks and potential delays to its new berlin parkland. This has been hailed as an economic and jobs breakthrough in berlin, and now it is on the brink of failure. We will have more on that, next. This is bloomberg. Matt live from london, i am matt miller. This is a special edition of Bloomberg Markets for the u. S. Holiday, it is president s day. We will focus on problem in germany for a california carmaker. Tesla is facing a setback with its first european car plant. The german Court Ordered a temporary halt on a forest clearing for teslas new factory outside of berlin. The latest developments, we welcome bloombergs stephan nicola in berlin. What kind ofout forest this is. As i understand, it is a fairly new growth pine forest, it is not like they are clearing away, butlish trees rather something that was meant to be cut down anyway. Stephan that is correct. The plan was to cut down about 100 soccer fields worth of trees. Those are pine trees planted in neat rows, so it is not like it is a rain florist that was supposed to be a rain forest was supposed to be cut down, but it is clearing a site that was meant to be harvested anyway. Matt what is the likelihood tesla is not able to clear the forest and build its plant. What is this hanging on . Stefan it is hard to judge the likelihood, but in the coming the or the coming week berlin court is expected to make a final ruling whether tesla can go ahead leering the final third of the trees. Apparently it has already cut down two thirds of the trees. Work is well underway. The court will make that decision in the coming days and of course everyone on the ground, the local officials will hope the work can continue. Heard tesla plans on planting even more trees somewhere else than it wants to cut down in brandenburg, or rather i am not 100 clear on who will be doing the planting in the clearing. The idea is that if it were not for a deadline coming up in march because the wildlife there will start to breed in march, that this would be a lot easier. Is that the case . Stefan that is the case. Between march and the end of september, no cutting of trees can be done because of wildlife breeding, birds nesting, all of that stuff. The hope is tesla will finish the cutting before hand. It is not impossible they can do that. Two thirds of the trees have already been cut down in a matter of a few days. The estimate is that once tesla can get regulatory approval, they can cut the remainder of the trees quickly and Start Construction afterwards. Teslait is not just riding on this. There is an industry moving into brandenburg based around electric cars, right . Stefan that is correct. Or hope is that brandenburg the region as a whole will become an electric car hub with another battery factory being basf andbsf by huawei is producing nearby. There is a hope this will be a help to the german car industry. Matt thank you very much. Stefan nicola covering that sector, whether or not tesla will be able to build its plant in berlin brandenburg dispense on a German Court Decision regarding wildlife. Coming up, we will bring you the highlights from my conversation in munich with the u. S. Energy secretary. A fascinating conversation and a fascinating place. Well give you all of it, next. This is bloomberg. Matt live from london, i matt miller. This is a special edition of Bloomberg Markets for the president s day holiday. As we watch the impact of the coronavirus on global markets, i spoke with the u. S. Energy secretary Dan Brouillette at the energy conference. Upcoming about opecs meeting as well as how the virus might impact oil demand. Sec. Brouillette opec is in the position it has been over last four or five decades. With regards to their meeting, i would expect them to continue to consider cuts. It would be interesting of all of the members would follow the cuts. That would be the expectation. I think it is the markets expectation. I was looking at the oil prices, it looks like we are up 2 on brent. I think as we move forward, we will continue to see opec manage its position in the marketplace somewhat aggressively. We will have to wait and see what they decide in the next few weeks. Matt the demand side of the equation looks to have weakened substantially by the coronavirus. What is your reaction to the coronavirus on the market . Sec. Brouillette we are still trying to figure out two things. What is the virus and we have a complete picture of the actual virus . How fast does it spread, who does it infect, what types of populations are most affected . The scientists and doctors are still trying to learn more about the virus, and then we have to evaluate the response to the virus. That is what we are looking at closely. If the World Health Organization and others can put together an effective plan to contain the virus, i think we will see a smaller effect on ultimate demand than what some people are anticipating. If that is true, i think you will see these companies bounce back fast. There are supplyside issues as well. Libya has been taken offline by the civil war. How do you expect that to affect the market . Sec. Brouillette i think we are seeing it today. We are up 2 today. Pricing has been stable over the last 18 months. Attack,back to the others coming offline like libya, yet we have seen no real price spike, we have seen no real jump, as we wouldve expected to see 40 years ago. David in terms of this matt in terms of the situation in libya, do you expected to deteriorate . It seemed like there was a possibility of to taunt and now it has evaporated . Sec. Brouillette i hope not. I hope we can resolve the issues in the near future. Libya has a remarkable ability to produce oil and gas. We think having them come back online provides additional stability in the world oil marketplace. I hope these things get resolved relatively quickly. Was my conversation with u. S. Energy secretary Dan Brouillette from the bloomberg got from the Munich Energy conference from the Munich Energy conference. Hsbc is laura preparing for its third overhaul in a decade. The moves will be announced tomorrow. One of the Big Questions involves the state of the interim ceo. Virus could be facing another multimillion dollar problem in the u. S. A jury in missouri has awarded 265 million to a farmer who herbicidest bayer destroyed his fortunes. There are similar lawsuits pending. Settles trying to thousands of lawsuits over its roundup weed killer. Bloomberg has learned a company is hoping to get about 1 billion in a sale. Shares have dropped 63 in new york since its debut last july. That is your Bloomberg Business flash. Matt thanks very much. Laura right with your business flash. Lets get a quick check on the markets as we head into the top of the hour. We do have continued gains across europe. Not the strength of which we saw earlier in the session, but we are looking at gains nonetheless. Up ftse up. 25 , the dax. 2 . Pound dropping. Around 1. 08. Ing there is no cash trade in the u. S. In honor of president s. Ay, but we do see futures up this is bloomberg. Top coronavirus cases 10,000. A frosty reception. Britains chief negotiator david frost will set out the uks brexit goals and a major speech tonight. The French Foreign minister is already warning about a brutal clash as london seeks divergence from the rulebook. Elon musk traverses the environment. His new factories could be delayed by months in berlin as a german court holds a clearing of a forest key fors new plant. We are now counting you down to the european close on Bloomberg Markets. Guy u. S. Markets are closed as a result of which we are seeing light volume in europe. That show you what the numbers look like. Still very weak europe. Equities going nowhere in a hurry. There is the stoxx 600 up. 2 . Weakness in brent but we are trading at 57. 24. Single princi still trading with the 108 handle single currencies still trading with the 1. 08 handle. Coronavirus cases climbing above 70,000. We do not make projections. We operate with scenarios. We are hoping the most likely relativelyuld be rapid containment of the virus, a vshaped dropping in Economic Activity in china impacting the rest of the world and then a very fast recovery. Guy meanwhile the u. S. Is evacuating citizens from the diamond princess cruise liner in japan, including 14 people who have tested positive for coronavirus. Japan said infections on the ship jumped to 454 after 99 new cases were identified. Lets get the latest on what is happening in china. Lets bring in bloombergs selina wang in beijing. We know the numbers continue to climb. Are we seeing any sign of stabilization . Selena the number of cases nearly 20000,000, new cases today. That is slightly higher than a day earlier. We are starting to see it in line with the trend over the past few days. We are seeing a return to stabilization after the jump in nearly 15,000 cases after the revised method of counting cases. We want to remind viewers that most of the cases and 96 of the deaths still remain concentrated in the same province. There have been 10,000 patients with charred discharged so far. You can still feel the impact of the coronavirus on the local economy with stores and restaurants till close. There is only been a slight pickup of activity. Local economies are trying to balance trying to prevent outbreaks in their areas with strict travel and Movement Restrictions while also trying to get their local economies. Bloomberg economics estimates chinas economy has only been running 40 to 50 capacity in the last week. Here in beijing we have also imposed a self quarantine of 14 days for anyone returning to the city, which brings me to my next point which is that china is considering delaying its most highprofile annual political meeting in beijing as a result of the coronavirus. This would be the first time they have done so in decades. It is no surprise given the challenge travel restrictions would pose on officials trying to come from across china to beijing. Guy we are seeing evidence local authorities encouraged by beijing are starting to put in place economic accelerants. Benefits to buying cars, tax changes, etc. What are people saying about those in the effect they will have . Selina we are seeing all sorts of measures from the Central Government to try to boost the economy. You have the liquidity injection from the pboc, 30 Million Dollars in mediumterm lending facilities. You also have the announcement of tax breaks. You see a lot of incremental steps from the central bank on both the monetary side but also the fiscal side. You see increasing special bond issuance. A lot of the challenges the economy is facing cannot be solved by monetary fiscal stimulus, some of these are caused by these restrictions. You have workers stuck in their hometowns and cannot return to their places of work. You see a lot of factories that have not been able to get up and running. Alibaba reporting they are facing constraints. Their merchants they are understaffed. That will be a serious down pressure on their earnings. The economy is not back to business as usual despite the fact the Central Government is encouraging the factories and companies to try to restart production and make up for that lost time. Guy selina wang joining us from beijing, thank you very much indeed. Joining us in london is miranda carr, and from geneva, Vasileious Gkionakis. Miranda, let me start with you. Bloomberg thinks the chinese economy, 40 to 50 capacity, does that feel right . Anda and this week we will be going off again. Many of those factories do not have the Safety Equipment or the protective gear. Even though the workers can go back, they will not be running at full capacity. Guide . The managing director of the imf was talking about a vshaped recovery. Miranda av might turn into a u. They see that is a problem that will hit the q1. A lot of them are still maintaining the for your guidance on the back of that. If it gets into the next few weeks and the restrictions remain in place, then it starts to taking q2, the supply chain. Even if people are not affected themselves, they cannot get the parts from china, they cannot get the deliveries in. Then we start getting revisions to sales and Earnings Guidance for 2020. That would be the second round hit. Guy at the moment the market seems to be assuming this is a q1 phenomenon, if it is contained. If it turns out to be a q2 phenomenon, how much more market repricing to we need to see . Sinceious so far, january 21, when this news started hitting the wires, the dollar, the tradeweighted between 1. 5 and 2 trade basis. The market has priced in some transitory impact. If that transitory impact the market is pricing becomes more sustainable or substantial, both in terms of gdp and the time it will take, then the market is going to start repricing the dollar higher. It will start pricing Interest Rates even lower the number of Central Banks. I do not think we are there yet. The next weeks will be crucial. We when it comes to dxy, are at one year highs. How much higher could the dollar go as it continues to benefit from being a safe haven . Statement excuse the , but i do not look at the dxy index. If i want to look at the euro, there is no point in looking at the dxy. It is interesting the point youre making. What we have seen is the dollar is not doing a lot, but we have starting seeing a differentiation. The differentiation can be linked into the rebound commodity prices. , the likes last week of the aussie, canada, rebounding quite strongly. At the same time, the negative euro and swiss franc. Story focused on china with the ramifications, especially for the markets that rely heavily on exports to china like germany and europe in general. If it remains transitory and we get a vshaped recovery, we get a rebound in q2. I would expect the dollar to start consolidating from q2 onwards. If it move to something more significant, then the flight to safety will remain. Guy there is an expectation in the markets that the chinese will deliver significant stimulus. As a result of which, everything is ok because there will be a centralbank story that will be the central story. How much capability does china have in terms of delivering stimulus . Much dry powder is there on the monetary and the physical front. And the fiscal front . Miranda it has loosened on the property side, see getting property stimulus. It has loosened on the auto side. That doescremental reduce firepower in terms of the infrastructure spending. You do not want to go back to creating the same problems you did during the last stimulus. You cannot flood stimulus again. Guy if it turns out to be a q2 problem, how different is the bank in terms of the stimulus they deliver . They can stimulate with the infrastructure in the state owned enterprises can take a lead. However, it is going to be the sme that are always a problem. They are the ones with different projections, then they start going out of business. They are the ones that need the most help. They are the ones china has struggled for support when the economy is in a downturn. Guy stick with us. Gaia carr and vast and Vasileious Gkionakis sticking with us. Laura the u. S. May limit chinas access to chip technology. The Commerce Departments drafting changes to current rules. The changes could require chip factories to get licenses if they use american factories to make chips for huawei. The u. S. Has been urging allies to ban huawei in 5g networks. Hong kong may be heading toward a recession. Gdp trump at 6. 2 , that is the most in five years. Economists have predicted a decline because the impact of a sales tax hike. Now they are concerned the Virus Outbreak could make things worse. Me minister singh joe Abe Shinzo Abe may have to consider another round of spending. Energy secretary Dan Brouillette said russia will be unable to circumvent u. S. Sanctions on the nord stream 2 pipeline. Chief exit negotiator will lay out the countrys goals for the future relationship with the European Union. The sides are trying to work out a trade deal by the end of the year. Boris johnsons office says the u. K. Not want special treatment but it says the eu is offering more stringent terms than it did in the deal with south korea, japan, and canada. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am laura wright. This is bloomberg. Guy thank you very much, indeed. Coming up, the euros snapping back from a 34 month low. Only just. We will have more on the Market Impact of the coronavirus and a look at the headlines facing the eurozone 00 the headwinds facing the eurozone economy. That is next. This is bloomberg. Guy from london, im guy johnson. This is Bloomberg Markets. U. S. Markets closed but trade around the world. We also have u. S. Futures trading. Here is kailey leinz. Kailey equities a klos the globe equities across the globe are in the brain. Most of the benchmarks are higher after china has committed to supporting the economy amid the ongoing coronavirus concern. That building a lift toward assets and potentially the growth impact may be less bad. The stoxx 600 is off the highs of the session, off. 1 as is the dax in germany. The ftse 100 outperforming. 2 . U. S. Markets are closed for the president s day holiday. Nonetheless, youre getting a bit of buying into the s p future. All of this follows a strong session for china. If you take a look at the benchmark csi 300, that rose 2. 25 today, the best day for the index since february 4, which was the day after trading resumed after that extended Lunar New Year holiday on the first day of trading that index fell 8 . With the gains we saw today, it has recouped all of those losses from that period when the holiday ended until now. The same goes for the shanghai composite. The more risk on tone we are seeing today is confirmed when you look across other assets like copper, higher. 8 . That is a very growth sensitive commodity. On the flipside, youre not seeing a bid into another commodity, which is gold down. 1 . The japanese yen weaker against the dollar by. 1 . As for some of the movers in the european session, among the biggest laggards are chip stocks. All down more than 3 . Semiconductors are highly sensitive to china, but they do not seem to be taking advantage of the broader equity risk on sentiment. Guy thank you very much, indeed. Kailey leinz joining us with the latest. Lets switch to the foreignexchange market and talk about what is happening with the single currency. Trading slightly higher after touching a 20 low friday. Data for the region already week. Datafriday we will get pmi which will clue us in to how severe the impact will be on demand. Miranda carr and Vasileious Gkionakis still with us. We are trading 1. 0 837 on sell thear, buy or single currency . Vasileious this is a tough environment for the europe. From a technical perspective it is heavy. You will find a lot of people looking at the 1. 05 level. Fundamentally, i think there are reasons why that would be a significant drop from below 1. 10, below 1. 09. The coronavirus and the possibility the market surprises for the chinese that will affect german exports. You have Political Risk premium being priced in. You now have the trade being reignited again. Nonetheless, if you take a bunch of models, it is difficult to 1. 08fy eurodollar at 1. 09. Youre probably looking at fair values from 1. 12 to 1. 15. From fundamental perspectives, people should be buying. I at respect the technicals and understand why people are saying it is heavy weighted. I like fundamentals. I am happy to buy it here. Guy that is a firm indication. Maranda, you are shifting your attention away from china and starting to look at the supply chain story. Europe is very exposed from a demand point of view coming out of china, but the supply chain story is just beginning to be understood. What is your work telling you about the exposure to europe and what the relationship with china will look like . Miranda in terms of the key market, it would be the auto market. Was meant to be the year the auto market would finally recover. Of 10 to 20 ths forward in the auto sales. This was just in january you are beginning to see the sales pick up. All ofls and auto parts, the industrials looking a lot rosier. Q4 reflected that. 10 , that istting our perspective for 2019. If we are getting a 10 down again, it will look like a much broader picture for the industrials and all of the auto parts suppliers. Your than beginning to start looking back into 2021. Guy in terms of what is happening with inventories and how the supply chains are set up, how skinny are they . Fiat chrysler had to shut a factory in serbia. They got everything except the stereo and had to shut the plant down because they cannot send the cars out of the door without the stereo in serbia. How does it work . How problematic will it be at the moment, how problematic will it be does been months down the road in terms of the Inventory Management within the system. Is it possible to get an idea about that . Miranda the trade war davis indication of the weakness in the supply chain based on where you can get supplied stew and how you can shift production get supplies to and how you can shift production into china or Eastern Europe or vietnam. You can switch around a lot of it is still based in china. A lot of it is on the electronic side. That was hit the worst. Again,e chip stocks down it will be the electronic supply chain. Componentsity of the , a lot of the justintime delivery, it then becomes problematic for that sector in particular. Other sectors can probably survive better. It is electronics that will be problematic. Guy if this turns out to be a problem, we start to see factories being shuttered because they are missing a single park and we have to see a single part and we have to see workers laid off, what is the response in europe . I hear people talking about the ecb trying to cut rates again. How likely could that be . After the i think margin it becomes more likely. Everyone now realizes, not just the markets, but the policymakers themselves, that Monetary Policy, especially in ae eurozone you are at point where an additional 10 to 15 basis point cut will have an even lower marginal benefit. At the same time, it is not exactly clear this offsets the negatives that, with further negative Interest Rates. It is clear, we have been saying this for a while, we need a physical response in the response ina fiscal the eurozone. Does it make it more likely we will get a more substantial productivity spilling over to q2, potentially yes, but we have been down this road many times with inches of bidding a stimulus with germany and it has not manifested. If you asked me what it is aleding, it is definitely fisc response. Guy the german political paralysis does not help matters at all. We will leave the conversation there. Miranda, thank you for coming to see us. Miranda carr. We will be back shortly. When you talk about what is happening in brussels. A big speech later on. The uks chief brexit negotiator set to speak in brussels after frances foreign minister predicted the two sides will rip each other apart. More on that, next. This is bloomberg. Guy time the Bloomberg Business flash. Ernst getting a multibilliondollar boost at a time when it really needs one. Vietnams Bamboo Airways is expected to buy 12 of knowing snoop 737 jets in the next quarter. 737 jets in the next quarter. To leaveotors plans australia, new zealand, and thailand. The automaker will take a 1. 2 billion charge. To the is shrinking gm point where gets all of its profits out of america and china. 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. And save even more when you say bring my own phone into your voice remote. Thats simple, easy, awesome. Click, call or visit a store today. Guy from london, im guy johnson. Lets get an update on the first word news with laura wright. Laura in china, the annual meeting of Parliament May be delayed because of the coronaVirus Outbreak. That has not happened in decade. The National Peoples congress is set to convene march 5. Casinos in macau that will be able to resume operation thursday. Authorities closed them for an unprecedented 15 days. China arounds in shanghai will be back in work this week. According to the American Chamber of commerce, three fourths of them do not have enough to run at full speed. The severe shortage of work due to the coronavirus will hit production and Global Supply chains. Democratic president ial candidates have ramped up their attacks on michael bloomberg. Bernie sanders is bloomberg will not create the kind of excitement needed to be defeat President Trump. Other democrats criticized him for comments about policing women and race. Bloomberg is the founder and majority owner of bloomberg lp, the Parent Company of bloomberg news. The man who was chairman of the securities and Exchange Commission during the 1987 crash has died. Offthecuff remarks may have fanned panic on black monday. He ran the ftc from 1987 to 1989 and presided over the final phase of the Insider Trading. He was 90. Global news, 24 hours a day, on air and on take by bloomberg, powered by 2700 journalists and analysts in 120 countries. I am laura wright. This is bloomberg. Guy britains chief brexit negotiator will deliver a major speech in brussels which will lay out the u. K. Position. It is highly controversial. A significant degree of divergence from the u. K. Still at is Vasileious Gkionakis. It is becoming increasingly clear that the u. K. Once divergence and the eu does not. We have the French Foreign minister over the weekend saying both sides will reap each other apart. How much of this is in the price . Vasileious of fair degree of that is in the price. I do not think what is in the price is the possibility of a no deal brexit. If that happens, i can see the cable trading till one 20 or below trading to 120 or below. The past few months, we went through the summer of 2019, we had Boris Johnson, cable trading 1. 25 which0 and meant a significant chunk of no deal brexit priced in. Now we have the deal ratified. Rex it has happened. Cable is trading around 1. 30. There is still a brexit premium, but nowhere near that we had in the summer of 2019. The scenario, we have been there many times and it becomes anyones guess how we will get out of this mess, is that by the end of the year we will get limited in Scope Agreement on a , but some of the essential ones will be left for afterwards. Cable mayy then, start finding its footing between 1. 30 to 1. 35 as long as a no deal brexit has been averted. If we go over the cliff edge, i can imagine cable trading at 1. 20 or lower. Guy you think it is becoming more likely that is the case . We now have language which talks about an australia style deal which is also known as the no deal you just talked about. We have Dominique Cummings, a hard brexiteer increasingly pulling the levers of power in downing street. We have just seen the finance minister, the chancellor of the exchequer, being pushed out because 10 downing street wants to consolidate power. Isis johnsons government looking increasingly like it is prepared to walk away. I wonder how that gets priced in . Youleious i agree with that between the election days right now, definitely the probability of the no deal brexit, of the glitch of the cliff edge has increased because the market assumes of Boris Johnson gets a bit majority he will sidestep the hard brexiteer. Probabilitye, that has increased. At the same time i would say it is politics. We have been there before. Declared heson would never seek an extension, he would never request an extension, yet the parliament forced him to do that. Guy parliament is not risk any more. Vasileious critics in the parliament are still different. I find it difficult to believe. If weld happen that even have a Withdrawal Agreement in place that has been ratified, brexit has taken place, given the fact that these people have to be crunching the numbers, thatcannot realize anything away from the eurozone will deliver a longlasting blow to u. K. Gdp growth. A lot of political may be at play, but when push comes to shove things may change. I do not wanted downplay the probability of a no deal brexit. It is still there. Guy i wonder if we are in the Financial Markets underestimating politics over economics and we are ascribing too much value to economics. It looks like maybe Dominique Cummings and some of the others do not care about the economic effect that will be felt. Is ane will see expansionary budget. Gone. Has we will get a budget that is likely to be determined by 10 downing street rather than 11 downing street. It is likely to see significant borrowing. How much will the pound benefit if we were to see significant fiscal stimulus in the u. K. . In the near term, all fiscal stimulus is doing is putting a floor underneath cable and around the 1. 31 level. It is doing that because to a certain extent it is pushing the fact that investment is not present in the u. K. Because it has been postponed and because it reduces the probability the may impactland rates, so gilt rates will be higher. In the long term, youre talking about a deficit that will increase and after two or three years, the line will compound to the issue of the actual brexit taking place. What it will do, it will provide some tailwind to sterling, but from a longterm perspective, we are low equilibrium value of sterling. Guy you talked about germany needing fiscal stimulus. Will the market in europe reward those countries that deliver fiscal stimulus . Vasileious they cannot do it in an Exchange Rate if youre talking about the eurozone because it is common currency. If the primary driver of the stimulus is germany and germany is not doing much, but you have some other smaller countries delivering some sort of a fiscal loosening, it will not have that much of an impact on the Exchange Rate. I think it is clear if youre talking about currencies, we saw that even in the u. S. A huge fiscal stimulus and we saw the dollar rising. Right now the narrative in the market is Monetary Policy has played its role. It is no longer effective. What is needed to get us from this low yield environment is fiscal policy. In principle regions that deliver fiscal expansion, they could see asset prices and their currencies getting a boost, getting support. What happens after that will definitely be a factor of the nature of the expansion. Guy great to see you. Thanks for spending time. Vasileious gkionakis joining us. A couple of things we need to talk about. One of which is what we have coming up next. The coronavirus upending the imf policy priorities. The managing director sitting down with bloomberg. We will hear about that conversation in just a moment. To release some breaking news and we will do that in just a moment. Lets take a listen to what the afd had to say. Today china is sharing china share in the World Economy is quite significant. 19 . Tourist we are a very important part of the tourism industry. 20 of manufacturing. Reduction inof activity inevitably would have an impact on china, and some of it would be translated to the rest of the world. Gain, we need to give it time on the more positive side, we china we see china taking executive measures in terms of containment but also in pouring liquidity into the economy, the equivalent of 115 billion from peoples bank of china, cutting Interest Rates, driving stimulus already in the direction of affected regions. My most Important Message is a broader message. We do live in an era of heightened uncertainty. We just saw a reduction of trade concessions and the coronavirus. If i may flesh out a bit more detail. Youre just coming off the back of the trade tensions. Now you have the coronavirus to deal with. Kind off level, what tool are you looking at for a potential synchronized response to mitigate the downside . When value the fact that 2019 shaped up to be the worst year since the financial crisis, to aal banks stepped up synchronized rate cut and more monetary easing. What they have done is the both. Lent of. 5 . E also saw fiscal measures is a moressing aggressive upswing in Structural Reforms. Expect that ife there was to be more attention, it should go. Monetary policy space is shrinking. Measuresnce on fiscal as well as Structural Reforms to boost growth ought to be stronger. Directorimf banking speaking to bloomberg in dubai. Breaking news. We are seeing the lows on the it looks like cohn is walking away from a trade deal to buy jason elevator unit. It came with much more antitrust risk. Essentially a higher offer. Thyssen now with the talks ongoing, which will not yield the same price but come with a lower regulatory risk. Thyssen lower on the back of the news, trading down 1. 92 . This is bloomberg. Guy from london, i am guy johnson. Time for our stock of the hour. Here with the details is kailey leinz. Kailey our stock of the hour is bayer. Shares are shrinking to percent, on pace for the worst day in three weeks. This after a first loss in the u. S. Trial over the herbicide. That is a legacy product of acquired which bayer in june 2018. A federal court in missouri awarded a former 265 million over claims the herbicide destroyed his peach orchard. That is a liability that will be shared by bayer as well as basf. They share liability. They face more than 140 more lawsuits. Claims rate havoc across the midwestern United States because it drifted from one farmers land to another and affected crops not designed to resist it. This comes with other legal woes the company has over roundup, which is another monsanto legacy assets. Roundup had phased thousands and thousands of lawsuits, claiming it causes cancer. The shares have recovered in recent months over speculation a settlement was getting closer. This case may put a fresh dent in sentiment. On the street analysts noting this creates another headache for investors to worry about, but it should not be viewed through the exact same length as roundup. Is noting less than 200 cases. The roundup affects human life and the herbicide cases of explants, which may make the scope of the liabilities lower. It should not be roundup 2. 0. That is your stock of the hour. Guy thank you very much indeed. The coronavirus has been weighing on the commodity market china numbers have promised economic stimulus to impact easing concerns after hope of been opec meeting faded. U. S. Energy secretary Dan Brouillette discussed his outlook with bloombergs matt miller at the Munich Security Conference over the weekend. Brouillette opec is in a fundamentally different position. With regard to their upcoming meeting, i would expect them to consider cuts. Itll be interesting to see if all of the members follow the cuts, but that would be expectation it is the market expectation as well. I was looking at the oil prices. It looks like we are up 2 on brent. 57, i guess. As we move forward we move forward will continue to see opec manage its position in the marketplace somewhat aggressively. We will have to wait and see what they decide in the next few weeks. Matt the demand side of the equation looks to have we can substantially by the coronavirus. What is your reaction to the coronavirus on the market . Sec. Brouillette we are still trying to figure out two things. What is the virus and we have a complete picture of the virus itself . How fast will it spread, who does it in fact, and what types of populations are most affected. The Health Community are still trying to learn more about the virus itself and then we have to evaluate the response to the virus. That is what we are looking at with regard to demand. If the Chinese Government and other governments can put together an effective plan to contain the virus, we will see a smaller effect on demand, ultimate demand than what some people are anticipating. If that is true, i think you will the economys bounce back fast. Of supply side, their issues. Libby has been taken offline by the civil war. How do you expect that to affect the market . Sec. Brouillette pricing has been remarkably stable over the course of the last 18 months, with large external impacts to the marketplace. I think to the attack, others coming offline like libya, yet we have seen no price spike or jump, as we would have expected to see 40 years ago. Guy in terms matt in terms of the situation in libya, do you to deteriorate . It seemed there was a possibility of detente and now it has evaporated. I hope not. Ette i hope we can resolve the issues in the near future. Libya has a remarkable ability to produce oil and gas. We think having them come back online provides additional stability in the world oil marketplace. I hope these things get resolved quickly. Guy u. S. Energy secretary damper let speaking dan the yuante speaking at security conference to matt miller. Lets bring in our reporter who attended the conference who is now back in madrid. I want to bring in the energy story. There seems to be a competing narrative from the states about whether nord stream 2 is on or off. What you pick up . Fromthe comments we got the u. S. Delegation in munich were hawkish. They were clear the sanctions they put in place would be enough to prevent completing the pipeline between russia and germany. That was surprising. We have been speaking to people in the market today. The view is that somehow or another the gas problem will find the Technical Expertise they need to do that despite the sanctions from the u. S. The other issue that continues to be a problem between europe and the United States is huawei. What did you pick up there . Ben mainly that it is getting worse. The u. S. Delegation was strong on the huawei issue, very united. They had nancy pelosi there as well on the democratic side. Backed the line from the Trump Administration that they see huawei as a threat to security and they will be cautious about how they share intelligence with any countries that use huawei. Guy thanks for the update. We greatly appreciate it. Ben sills reporting from madrid. I want to focus on what is happening with the single currency. We are still trading at the 1. 08 handle. We hit 2017 lows toward the end of last week. Toward the end of the session on friday. We have bounced a little bit, but less than. 1 . This is bloomberg. Guy from london, im guy johnson. It is time for a Bloomberg Business flash a look at the biggest business stories in the news right now. Hsbc is bracing for its third Major Overhaul in a decade. It could involve a reshuffling of senior management, withdrawals from business lines, job cuts, and writedowns. The moves will be announced tomorrow. One of the question involves the fate of the interim ceo. The french train maker has confirmed it is in talk to bite a rail business. It could be a 7 billion deal. It would make a stronger rival to the industry leader, china see rrc. And year the eu blocked merger between elstro between alstom. Bloomberg has learned a company is hoping to fetch 8 billion in is part wonder sports of a billionaires conglomerate. The Company Shares have dropped 63 in new york. It debuted last july. That is your Bloomberg Business flash. Next, more on the coronavirus and what is happening with central bank reaction. This is how european markets are trading. Light volume today. This is bloomberg. Sometimes your small screen is your big screen. And with the Xfinity Stream app, which is free with your service, you can take a spin through on demand shows, or stream live tv. Download your dvrd shows and movies on the fly. Even record from right where you are. Whether youre travelling around the country or around the house, keep what you watch with you. Download the Xfinity Stream app and watch all the shows you love. Guy coronavirus cases topping 70,000, but china will now allow macau casinos to open again in an attempt to restart the economy that is now predicted to grow at its lowest rate in 30 years. A frosty recession. Britains chief negotiator david frost will set out the u. K. s brexit goals in a major speech tonight. The foreign minister already warning of a brutal clash as london seeks to diverge from the you rulebook the eu rulebook. And elon musk versus the environmentalists. His new berlin factory could be they halt months as the building of a new plant. Guy quick look at the markets. It is president s day in the United States. Who is your favorite president . In terms of what we are seeing in europe, we dont seem very inspired. That is the picture, as you can see. The stoxx 600 is up by 0. 2 . Volume is very light. Eurodollar is absolutely flat. We hit 2017 lows late friday. Brent crude, which earlier on i was hoping would give a little bit of updraft, is now turning positive. 57. 30 is where that is trading. The coronavirus dominating the market picture. Cases, killed,0 more than 1700. The time totaking respond. Lets get an idea of what is going on, and the updates we need to get. Rishaad salamat joins us out of hong kong. Is the focus shifting away from dealing with the coronavirus and restarting the economy . We are hearing more and more at a local level to try and get the economy moving. Rishaad what you just mentioned was the auto sales restart at the moment. Fiat chrysler stopping their aants because they had a part off parts, that supply chain in this globalized world coming from china. We have over 71,000 people affected by the coronavirus. We have 1775 who have sadly died from this. About 10,008 hundred people discharged from hospitals in china. To give you an idea of what we are facing now, lets take an example of the westerdam cruise ship that docked in cambodia. A few people were let off. Others are being let off slowly. Ended up in malaysia and was showing symptoms of the virus. People have gone to upwards of 40 countries. Who knows if they have spread this further. From an economic point of view, we have the industrial capacity of china down 40 to 50 last week, according to Bloomberg Economics. Youve got a huge impact when it comes to the economy itself. Further afield, looking at thailand, they are looking at a hit for 2020 growth. Singapore the seeaporean saying they will growth this year at about 0. 5 . On a more microeconomic level, nintendo saying if you want to buy a switch, you are looking at a few production problems with that. They cant get parts, and we could see delays there as well. In the American Chamber of , the Yangtze Delta is the reason why manufacturing of vehicles is very important here. Many manufacturers saying they are seeing sharp slowdowns taking place. That is where we are at the moment. Just looking at the big story this evening, which is macau, they45 minutes by ferry are set to reopen. They have not had a single case of the coronavirus in 12 days. Theyve had 10 concerned cases. After a big hit for these tin 10ceded chains these casino chains, they are restarting here. Perhaps there is an urge to get things back to a degree of normalcy. Guy great stuff. Thanks for the update. Rishaad salamat joining us out of hong kong. Joining us now to get a further assessment of what is happening, et mui, cousin of capital janet mui, Cazenove Capital Management global economist. Even ifa thought that the coronavirus gets worse, it will be met with massive policy response, and it is ok to keep buying risk assets. Is that a complacent view of the world, or a reasonable view . Can the stimulus compensate for the damage we are seeing done . Janet i think it is a rather place in view. I think markets are generally expecting that this Virus Outbreak is going to be contained by the end of february. That is what i feel the market consensus is. They are looking for massive stimulus out of the Chinese Government, which we have started to see more and more , but i really doubt the possibility of a grand scale stimulus from china because of the starting point of the debt level from the in the monetary sense, they will definitely ease policy, but not what the market is looking for. I think it really depends on whether it starts to affect the deployment in china in the the employment in china. Will probably think of bigger scale stimulus. Janet do you think the market guy marcus, do you think the markets are of resting that are overestimating . Marcus i agree with janet. The answer is we some plea dont know. The reality is sometimes Central Banks cant solve all things. If you shut down half of your factories were more, then a rate cut stimulus isnt going to make any difference whatsoever. There needs to be a governmental response, much wider thinking about what is going to happen and what they could do to reengineer the economy if end win this virus gets contained. But if it doesnt get contained and we start seeing bad numbers out of places like japan, weve got a really serious problem globally on all demand. Guy guy do you think the market doesnt understand the complicity in nature of supply chains . Marcus the justintime supply chain phenomenon has been a wonder, but it works in reverse here. We have something which is uncontainable, not just in the literal sense of the disease, but in an economic sense as well. You dont know quite how it is going to spread, how you will be able to reboot back from the effects of it. Im not saying this is going to be an absolute disaster. Chinese authorities have done as much as they can. Some good news out of place like macau showing that certain things can be controlled. Forel incredibly sorry people on cruise liners trapped on ships, but apart from that, there has been a response that has been far from perfect, but on balance, probably pretty good. I think we should take some thing out of that. Guy we will leave that aside for another time. Janet, the Bloomberg Economics reckons that chinas economy is running 40 to 50 last year of normal capacity last week of normal capacity. Does that your right to you . Janet it feels about right because it takes time for factories to restart. A lot of Migrant Workers have difficulty traveling back to work. I think a lot of people are still in self quarantine. The report by the manufacturer running 40 hone is to 60 capacity. I think that is a good Reference Point for the rest of the country. Trade was a guy factor going into this. Do you think there is even greater incentive for people to reshore back to the United States . To be ahis is going very shortterm impact to the chinese economy. To cite ae, i want survey by the American Chamber of commerce in shanghai. They did a survey of 115 companies in china, and they asked them, is there any change to the longterm strategic plans . It really highlights that they are very much committed to china in terms of being a manufacturing hub and supply chain. Guy stay with us. A the meantime, lets get first word news update. Heres laura wright. Laura in virginia, democratic Governor Ralph Northam attempt to ban the sale of assault weapons has failed. Members of his own party balked at the proposal and voted with republicans in a Crucial Committee vote. The legislation would have banned the sale of certain semiautomatic firearms, including the popular ar15. The u. S. May reportedly limit chinas access to chip technology. The Commerce Department is drafting changes to current rules that could require chip factories to get licenses if they plan to use American Equipment to make chips for huawei. Allies. Has been urging to ban huawei from building 5g networks. The u. S. Is confident that russia will not complete the nord stream 2 pipeline to germany. President trump has assailed germany for buying russian gas while it benefits from u. S. Military protection. Bayer could be facing another multibilliondollar problem in the u. S. A jury has awarded 265 million to a farmer who claims that bayer herbicides destroyed his peach orchards. There are more than 140 similar lawsuits pending. Bayer is already trying to settle thousands of lawsuits over its roundup weed killer. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im laura wright. This is bloomberg. Guy thank you very much. Still ahead, the u. K. Chief brexit negotiator is set to deliver a speech in brussels after frances foreign minister predicted that two sides will rip each other apart. More on the future of the u. K. Eu relationship next. This is bloomberg. Guy from london, im guy johnson. This is Bloomberg Markets. Lets check those markets. Kailey leinz is a new york. Kailey european equities in the green. Slight underperformance of the dax so far in germany, but still up the better part of 2 10 of 1 . We are still closed in the u. S. For the president s day holiday, but you are seeing some buying. 0. 2 . Tures higher i about the strings in western markets follows a strong session in china after the government in beijing pledged to support the economy amid the ongoing coronavirus. Plans, president xi jinping outlining a plan for chinas auto sector. That affects the o market of the world that is of about 1. 3 . On top of that, the optimism have fourna, you also cia higher,have faure giving a boost to other stocks like the leo like the valeo. Like we are bouncing off of the fresh 34 month low we hit earlier in by session, the euro down 0. 75 over the last few days, but on friday, it hit the lowest since back in 2017. It has really been a currency under pressure. Seeing maybe a bit more optimism today, but still a lot of growth concerns weighing on eurodollar. Janet that is certainly true guy that is certainly true. Thank you very much, indeed. Britains chief brexit negotiator david frost will deliver a speech in brussels tonight, likely to prove controversial as it will show the significant degree of divergence the u. K. Is seeing from the eu rulebook. Still with us, as is Marcus Ashworth. Marcus, what are your expectations for this speech . Marcus that it will not be very well received in brussels. The language since Boris Johnson confirmed his position and got a clear majority is that the negotiating stance is unlike approach. Here is our negotiating position. They are being pleasant and polite, but firm, and clear that preference that the is to diverge from the eu rather than be under the isr on the of allhe eye of sauron of the regulatory organizations. That is their negotiating stance. Guy but there seems to be this perception in the markets that it is economics, then politics in terms of setting up the agenda. Is it the other way around . Is this a political determination rather than economic . Marcus absolutely to start off with, and it ought to be. There needs to be a political framework at the start of negotiation. Everyone puts out their wish list with the next flex ability to with enough flux ability to get a deal done with enough flexibility to get a deal done. Theresa may made the best take of making her position clear and failing to hold the line. That is not a mistake that will make again. Guy the budget is going to be delivered by the new chancellor. The expectation is that the u. K. Is going to adopt a looser fiscal policy. We are going to be spending more money. With the market be ok with that . Will the market reward that . What kind of Economic Impact you think it will have . Janet i think from the Immediate Reaction of the naming of a new chancellor, the pound areup, so i think markets generally more optimistic on the prospect of more easing from the new chancellor. Markets are a bit more positive on this prospect because i think the u. K. Does need more fiscal boost. The u. K. Is going to grow below trend again this year, and although some brexit uncertainty is removed, i think the u. K. Economy fundamentally is not going to be very strong. Theres going to be a lot of destocking this year, which would drag on growth. I think the chancellor will need to announce some more direct measures that can actually benefit the economy. I think the markets will view this quite positively. Guy using investors now see major countries, major modern economies that deliver fiscal stimulus, will they reward that . Is this a lesson for germany, basically . Janet i think where countries actually have the room for fiscal easing, if they do it, i think markets will be quite encouraged by that. I thing markets have come to the view that further monetary andng is quite limited, more fiscal easing should be welcomed by markets where countries can afford that. Guy how aggressive are they going to be . Marcus potentially very. There was circa what he 5 billion already announced circa 25 billion already announced. Used. S 100 billion to be there could be even more. The question is, spending is clearly going up. Thequestion is whether overall tax changes. Guy we will leave it there. Janet mui of Cazenove Capital Management and Marcus Ashworth of bloomberg opinion. Coming up, the imf agenda impacting Monetary Policy. We will hear from the managing director Kristalina Georgieva. That is coming up. This is bloomberg. Guy from london, im guy johnson. This is Bloomberg Markets. The coronavirus has upended the imfs policy priorities. Managing director Kristalina Georgieva sat down with yousef gamal eldin to discuss relatively rapid containment of the virus. Chinas shareday, in the World Economy is quite significant. 19 of the world. Chinas tourists are a very important part of the industry. Tourism,lar spent on 0. 18 come from china. Even a month of reduction in activity inevitably would have an impact on china, and some of it would be translated to the rest of the world. But again, we need to give it a. It of time in terms of containment of the virus domestically, but also in the equivalent of 115 billion in already affected regions. Important element here is a broader message. We just saw a reduction of trade tensions. Yousef i was going to follow up on that. You are just coming off the back of these trade tensions. Now youve got the coronavirus to deal with. An imf level, what tools are you looking at for a potential synchronized response to mitigate the downside mitigate the downside . Kristalina when 2019 shaped up to be the worst year since the financial crisis, Central Banks cutup a synchronized rate and more monetary easing. What they have done is the equivalent of 0. 5 boost. We also saw some fiscal measures coming from countries that have fiscal space and used it. However, is ag, more aggressive swing in Structural Reforms. Expect that, if there should be more attention, it should go. Obviously, Monetary Policy space is shrinking, and the reliance on fiscal measures ought to be stronger. Directormanaging Kristalina Georgieva speaking with bloombergs yousef gamal dubai. Into by in by nearly is down half in terms of volume. Are seeing a positive day for equities on that like volume. Eurodollar is pretty flat. Brent has been dipping over the last hour and 40 minutes. We are now negative by 0. 2 , 57. 23. This is bloomberg. Hi were glad you came in, whats on your mind . Can you help keep these guys protected online . Easy, connect to the xfi gateway. What about internet speeds that keep up with my gaming . Lets hook you up with the Fastest Internet from xfinity. What about wireless data options for the family . Of course, you can customize and save. Can you save me from this conversation . That we cant do, but come in and see what we can do. Were here to make life simple. Easy. Awesome. Ask. Shop. Discover. At your local xfinity store today. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Guy from london, im guy johnson. This is Bloomberg Markets. Lets get the first word news. Heres laura wright. Laura the National Peoples congress is set to convene march 5. Will bein macau able to resume operations thursday after an unprecedented 15 days to prevent the virus from spreading. Most u. S. Factories in chinas many factoring hub around shanghai will be back at work this week, but according to the American Chamber of commerce, 3 4 of them dont have enough staff to run at full speed. The shortage of workers will hit Global Production and supply chains. Democratic president ial candidates have ramped up attacks on michael bloomberg. Bernie sanders says bloomberg both create the says bloomberg wont create the kind of excitement needed to be others have, and pointed to his comments about policing women and race. Chairman of the securities and Exchange Commission or 1987 crash has died. Until 1989. Ec david ruder was 90. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im laura wright. This is bloomberg. Guy thank you very much. This week, the European Union will unveil new plans for rules on artificial intelligence, facial recognition, and data management. Release, the regions tech czar will meet with zuckerberg. With markr from zuckerberg. Joining us from brussels is maria tadeo. What can you tell us . Why is Silicon Valley so worried . Maria it is interesting because Mark Zuckerberg has been in brussels all day. He has been taking meetings with various senior European Union officials. You could read this as a pr operation for facebook. The company has come under a lot of scrutiny for issues such as hate speech, election meddling, Data Protection, privacy. You could also look at this as a charm offensive, but also a preemptive move because he does know that regulators want to crackdown on tax reform and it comes to digital services, and also want to look into artificial intelligence, which is seen as the next frontier when it comes to tech. It is interesting that today, the tune from Mark Zuckerberg has really changed. This is a white paper that the company will put out, saying that the company would welcome more regulation. They believe there are issues with governments, and that Tech Companies and governments need to work together. The tone has really shifted, and you could look at this as facebook saying we know there is more regulation coming, we want to play nice, or if we make mistakes, dont blame us. We are following guidance. Guy what do we actually know about what will be in this release on wednesday . Theres been a big focus on ai. Is europe looking to set the rules when it comes to ai . This, andy want to do theres a number of issues they do find concerning. They find facial recognition and point to the way the technology is used in china is problematic. The europeans often take a much tougher stance on privacy. That has been shown and a number of court cases. In terms of the content, we dont actually know, but we did hear from the commissioner in charge for the single markets, there are a number of issues in which it still can win , industrial data. That is making sure that the industrial data that comes from europe is protected and allows companies to profit from it. This is not just about the u. S. And china. We still see a niche market for europe. Guy switching gears a little bit, david crossed, the u. K. Brexit negotiator, will deliver a lecture later on in brussels. He is expected to take a hard line when it comes to divergence from the eu will book. What are the expected eu rulebook. What are the expectations in brussels looking like . Maria what we are expecting is he will say the u. K. Is still deal, to get a big fda but that they arent able to move quickly enough with the deal because the eu was being too strict. They want to impose a level of equivalence with other countries that they have cut trade deals with. On that note, i would point to the words of the French Foreign minister who said at the start of negotiations, we are all going to rip each other apart. This is how it is when it comes to big trade deals. Guy maria, thank you very much, indeed. Maria tadeo joining us from brussels. Joining us in the studio for more, timothy graf, head of microstrategy of macro strategy emea at state street. At the moment, there is an expectation that we will get some sort of deal done. This is what the market believes. But the political tone out of downing street is getting tougher and tougher. Timothy i suspect what we will hear tonight or in the coming weeks will be some version of the cake and eat it that they want. That ist the answer to they will come somewhere in the middle, but i think longerterm is a widewind up degree of divergence. The government is already trying to sell this as an australia style trade deal. Guy australia is essentially no deal. Timothy no deal. But you cant introduce that as a political reality just yet. Guy the eu is saying we need a level playing field. You are not very far away. This is a different situation to canada, and as a result of which, you need to stick to our rules and we need to have a level playing field. That is not politically palatable here in london. You talk about significant amounts of divergence, so you are basically talking about a no deal. Timothy i think that is probably where we are heading. You may be able to get a simple offtheshelf deal that covers very little, but on the things that matter most to the u. K. Economy, i think they want virgins they want divergence. That is how they ran their campaign. That is where i think they wind up. Maybe there will be compromising between. They will tear each other apart. But in the end, this government was elected with a mandate to get this done, and their belief, it seems, is to get as much as they can. In our view, theres a fair bit of good news preston. Good news priced in. We see sterling is overvalued right now. When you look at purchasing power parity based indices. But that fair value argument for sterling in the wake of the referendum, especially for longterm players who have an interest in direct invest in the u. K. , that is basically gone. So there is a fair bit of news priced in to sterling against the euro. Guy to what extent will fiscal this . Factor into we now have a new chancellor, and the idea is that number 10 is going to be dictating this. The u. K. Numbers, data wise, i would have thought would get better. Timothy the composition of the budget is what is going to matter. If it is a physical boost, that should help and should alleviate some of those concerns. At the same time, if it is favoring the wealthy more than the middle class, or if it is so guy Boris Johnson basically looking at leveling up. Hes going to be spending money in the north of england. Timothy we will see, but if you require a currency concession to be able to fund yourself, that maybe what is required because you are introducing greater budgets, wider budgets. Guy that looks pretty attractive, doesnt it . Youre getting a better pickup then you are in germany right now. Timothy you are, but it is a very different economic reality. It is different on levels of trend growth. Therobably is fine because scenario i see playing out, theres going to be disappointment on a trade deal, and uncertainty will reign. That probably is fine because it suggests growth will be pretty the bank of england may ultimately have to ease. It may make sense even though you are in the middle of a fiscal expansion. Guy do you see countries being rewarded for fiscal expansion . Theres considerable pressure right to deliver. Seethy i dont think you them being penalized. The u. K. Has run looser budgets and wider budgets for the last couple of years and not been penalized at all because of the need to address the growth concern. Guy at what point does this become clear to the market, the kind of scenario you are painting . Timothy i think it is a scenario that we are obviously talking about and thinking about, but i think the market has it in its head that everything will be fine with some sort of offtheshelf deal. Thats going to be highly competitive between the eu and the u. K. For years to come. Thats were so much of the economy is driven from, financial services. Guy tim is going to stick around, the head of emea macro strategy at state street. Coming up, why a german court stepped in to halt work on a tesla factory just outside berlin. It has to do with trees and birds. That story is next. This is bloomberg. This is bloomberg. Fromhy from lunch guy london, im guy johnson. This is Bloomberg Markets. Time for our stock of the hour. Heres kailey leinz. Kailey our stock of the hour is alstom, on pace for its best day in four years on talks to the rail unit of bombardier. Those talks were first reported back on january 21. The stock is up 11 over that time. Discussions are still ongoing. Nothing is final yet, but the purchase would make alstom the Number Two Company in rail equipment. Of course, the big thing is it would put it in a better position to compete with crrc, the chinese industry leader, which is targeting more global sales. Morgan stanley says the common nation could have significant sale and pro forma revenue for european sales. Of course, this isnt the first time alstom has tried to do some thing like this. It had a failed deal with siemens that was denied last year by the European Commission on antitrust concerns, so it does raise concerns about possible antitrust questions. Our analysts at Bloomberg Intelligence say this may have a better chance at regulatory this couldiven that create more competition between notingand siemens, and that alstom could raise the Failing Company defense, saying that bombardier could exit this market should a deal not go through. That is our stock of the hour. Guy thank you very much. Lets get back to our conversation with tim graf, head of macro strategy emea at state street. It seems to be the view of the market that we are going to get a vika shaped a vshaped recovery from the coronavirus. As a result, you just by risk assets you just buy risk assets. Is that a complacent view of the world . Timothy it is pretty complacent. We dont know how deep this hit to growth from the coronavirus will be. They probably will be considerable. China has growth targets they want to hit. Maybe they wont get 100 of the way back, but they have fiscal space. Europe has fiscal space. Whether they will use it or not is another matter, but europe is the secondorder effect as we saw last year with rising trade tensions. What happens in china happens next in europe. So europe has the fiscal space. Whether they use it is another question, but that is what markets are pricing. Theres probably some disappointment going to come on the excitations of european fiscal easing because of the politics and how difficult it is to get that over the line. There will be disappointment undeveloped market on a terry policy because there is disappointment on developed market Monetary Policy because theres not much you can do. Guy is it a realistic prospect for a cut . The there is narrative will certainly have changed. It might happen, but it is not going to do that much. Guy there is some talk as well that we get credit. As the european credit frontrunning . Timothy it is a really small market. I am not certain, relative to fed buying credit or at that point, you have to be longer risk because central bankers are telling you that is what they are going to be buying. But europe is a much smaller market, so even there, i am not sure how much that is going to move the dial until you get a proper physical response. Guy weve got fed minutes coming up this week. The fed seems to view the u. S. Economy chugging along just fine at the moment. Timothy especially where coronavirus fears are concerned,he u. S. Is a Consumer Driven Services oriented economy. It is really comfortable for the fed. Inflation is not going anywhere, so they dont need to think about tightening. There will be some fallout from the virus and what is going on, probably through tourism most notably, but at the same time, i suspect that is why you are seeing the dollar perform as well as it has. It is kind of insulated from these fears. Guy that briggs me to my next question that brings me to my next question. Last year, the line from just about everybody was come out of the u. S. Timothy that is very challenging right now. Where else are you going to get growth . The u. S. Market is very expensive, but Earnings Growth is a rare source, particularly relative to somewhere like europe. Europe has had a phenomenal run in equities, but you have these open economies, industrials that are heavily exposed to the trade cycle and growth cycle, that are going to be subject to downward revision in the coming days. It is hard to avoid the u. S. Guy what does it take to get people back into the kind of cyclical stocks . What does it take to get back into unloved areas . If we get a vshaped recovery, even if you dont get out of the u. S. , the kind of sector rotation story what kind of sector rotation story and im i going to see what kind of sector rotation story, going to see . Timothy the problem with going back into classic value is you really need higher rates to justify that. Maybe you will get them next year. Maybe at some point, the tightness of the u. S. Labor market, continued improvements we have seen over recent years tightens wage demand to the point where you get inflation, but we are a long way from that now. Buying classic value is really difficult until you have to start thinking about a rate repricing. Guy thanks for stopping by entering some of your thoughts. Tim graf, head of macro strategy em ea at state street. Tesla is facing new problems in germany. Its plant is facing delays that could see a delay of months ordered them to stop clearing trees for the site. Benedikt kammel joins us with this story. What is going on here . I understood this is a forest that has only just been planted, so what is the problem . Benedikt these are sort of trees swinging in the breeze. Sort of an industrial type forest. So there is some surprise that the people would feel so precious about it. It might not be about the particular plot, but rather, is elon musk doing something without having the full authority to do so . Is he rushing into this project . That is the argument of this environmental group, that if we let elon musk it away with this, it might open a precedent for others as well. Ofhas already cleared 2 3 the space, so any interruption now is almost for not come up still, we might face a distinct delayed vending on how the court might rule. Guy what is the issue that the courts ruling on specifically . If it doesnt get on with it, i understand the breeding season for birds and bats and other creatures could be are the problem lies could be where the problem lies. Benedikt thats right. Its all about a lot of things i didnt know previously. The breeding season starts in march, and essentially between march and september is where you can forget cutting down anything here. That will quite dramatically delay the project should that happen. The absolute worst case scenario, we might see elon musk say, ok, i am going to look elsewhere. Maybe poland, maybe somewhere entirely different. Theres a lot riding on the next couple of days. We might get a ruling from the Court Tomorrow that will say permission to proceed, or might say we need to check this out in greater detail, and then we run into this breeding season, so worst case, it might slip into september, and then that could mean that elon musk loses interest in this project. Musk beingriefly, is welcomed . Benedikt it depends on who you talk tobenedikt benedikt it depends on who you talk to. Germany notck of being able to get things done anymore is it emblematic of germany not being able to get things done anymore in this region that needs infrastructure . On the other hand, there are those saying we cannot let them get i way with anything, so these are the two extremes fighting with elon musk in the middle. Guy thank you. Benedikt kammel joining us from berlin. On theur special evs brink of change this friday. Still ahead, another revamp at hsbc. Why europes biggest bank is making more major changes. This is bloomberg. From london,guy im guy johnson. This is Bloomberg Markets. Hsbc bracing for its third Major Overhaul in a decade that could involve a reshuffle of senior management, withdrawals from businesses, job cuts and writedowns. The news will be announced tomorrow. One of the questions, what is the face of the what is the fate of the interim ceo . Alstom in talk to buy bombardiers real business. That would make it a strong rival to the industry leader, chinas crrc. Last year, regulators blocked a merger between alstom and siemens rail operation. Is looking to get about 1 billion in a sale. One a sports shares have dropped wanda sports shares have dropped since their debut last july. That is your Bloomberg Business flash. Quick check on where we sit with the markets right now. The u. S. Is closed. It is president s day. As a result, we are seeing very like volume in europe. When you take a look at what is happening with the stoxx 600, trucking a little higher today, up by about 0. 3 , you should appreciate that is not confirmed by the normal volume you would see in the market. Eurodollar trading absolutely flat right now. Still trading at the 1. 08 handle. Last friday, we were trading at 2017 levels. Down about 0. 2 when it comes to brent, 57. 23. Up next, counting you down to the end of european trading. This is bloomberg. Top 70,000virus case come about china will allow macau casinos to open their doors once again to restart an economy now predicted to grow at its slowest rate in 30 years. A frosty reception. Willins chief negotiator set out brexit goals at a major speech tonight. The French Foreign minister warned of a brutal clash as london seeks to diverge from the eu rulebook. Elon musk versus the environment list the environmentalists. A german court halts the clearing of a forest for teslas new plant. Live from london, im guy johnson. We are counting you down to the european close on Bloomberg Markets. Guy president s day in the United States. Happy president s day if you are watching stateside. In europe, very like volume. The main u. S. Markets are closed , as a result of which come