Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Tolls. President trump team preps plans to reopen the u. S. Economy. Boris johnson remains in intensive care. The single currency wobbles as she euro area finance minister struggle to come to an agreement on a Recovery Plan as the joint debt issue is a sticking point. A joint press conference expected at 9 00 a. M. London time. Oil moves higher on reports saudi arabia and russia could stop this comes as the u. S. Cuts its Production Forecast ahead of tomorrows opecplus meeting. As i said, just under one hour away from the start of cash trading in europe. Take a look at futures this morning. It is a bit of a flat trade. As we said, you have euro stoxx 50 futures down 1 as well as ftse futures. If you take a look at u. S. Futures this morning, you see a higher picture so they balance each other out. S p, dow jones, and nasdaq futures all of although you did have u. S. Stocks ending the day slightly down yesterday, whereas european stocks of course ended the day in the green. Anna. Anna lets talk about breaking news we got this morning, getting numbers through from heineken, a withdrawal of guidance coming through from heineken, withdrawing all guidance from 2020 due to of course covid19. They are giving some details on volume, q1 total consolidating volume decreased by around 4 , so as a result, withdrawing all of their guidance. The heineken impact is expected to worsen in the second quarter, according to the management. Also getting lines coming through from the e. U. Finance ministers have been meeting and matt, you have some further lines on what has and has not been achieved this morning. Matt certainly what has not achieved you find the finance ministers seem not to have reached a deal over a coordinated response to the virus. We are hearing right now from Mario Santana who was saying we can close to a deal but we are not there yet. He is saying that he suspended the euro zone, sorry, the euro group meetings. They have gone very late, of course, and he will continue tomorrow. We may not get that 9 00 a. M. Meeting. Looks like we are not going to get that 9 00 a. M. Meeting as we had planned, according to the head of the euro group, portuguese finance minister Mario Santana. Anna. Anna so that is some of the breaking news on the corporate side and the fiscal support side that we are getting or not getting this morning. Let us get uptodate with first word news. Here are your first word news stories from bloomberg, are top stories this morning. Boris johnson remains in intensive care. His deputy is trying to reassure britain that the fight against coronavirus is under control. The u. K. Is heading into the peak of its outbreak and the government is contending with criticism over its handling of the crisis. Is confident the minister will move through, saying he is a writer. At as theeing a mass city relaxes is locked down. 55,000 people had train tickets out of the city today and flights are resuming from the international airport. But fear of a resurgence in infections means some restrictions are still in place. Housing compounds will retain the power to put residence under lockdown again. The Worlds Largest Oil Producers are inching closer to a deal after the u. S. Says it sees production dropping by over one Million Barrels a day. That forecast paved the way for saudi arabia and russia to coordinate their own output cut at tomorrows virtual opecplus meeting. Reports suggest they could agree to reduce global output by 10 Million Barrels a day. Matt, lets come to you with some further lines on what we are hearing out of the e. U. Matt i am looking at a tweet from mario. He said after 16 hours of discussions, we came close to a deal, but we are not there yet. I suspended the euro group and continue tomorrow. Thursday, michael remains a strong e. U. Safety my goal remains a strong e. U. Safety net to commit to a sizable Recovery Plan. Interestingly, no mention of shared debt, mutual debt, but that is really the whole that. Thats get to maria tadeo on the ground in brussels. Is again another matter. It does feel like a situation we have been through before, but there are divisions and how do you shield europe from the Coronavirus Crisis . Spain, italy,nce, they shifted to this idea that there should be a recovery, a joint fund. It is hinting that is where it would go. There would be a level of mutual itt involved in this and would be done through a special purpose vehicle. For the countries that continue to believe that esm is the way to go about this, that was problematic and that was an issue. There are difficulties in getting the wording done to a way that can actually be implemented, and the other issue that is now also obvious is even countries that would be willing thatke that, they believe is not enough. To look at the esm, the Unemployment Insurance, the European Investment bank, that is not enough. There has to be strategy that goes to the recovery fund. Again, people are tired. Moving eacheally others ideas. Anna we have no agreement. Good morning. We have no agreement from these finance ministers. They have been planning to put whatever they have decided to leaders of the next e. U. Council meeting. I suppose it is early for any sense of what the path forward is from here, but we have seen it keeps passing, from leaders, to finance ministers, to leaders, to finance ministers again. I suppose the only way forward will be to try to get finance ministers in a room once again and try and hammer out some kind of compromise. Yes and you point to an extra difficulty, the fact that we are not able to see improvements. During the conference, everyone is in their own countries. This is creating problems. It makes situations difficult. Know there are bilateral meetings. Countries get together to try to hammer out those difficulties, you are sayings this is what i want but not leading that much in negotiation. This is almost a bigger political story. You would think this has something for leaders to deal with. If you look, the italian premier made it clear, i say no to the esm. I want a corona bond. For the finance ministers, it is difficult to engage when that is the guidance we have been given. While this whole thing was happening in brussels, in rome, he was saying if konta takes anything like esm, he is eventually selling the country out to brussels, so you can see the lines have been drawn so much, it is so entrenched, that it is difficult for leaders to move very much in the current setting. Much, maria very tadeo, reported from brussels on the ground with a lack of progress from the European Finance ministers in terms of trying to forge a way forward for the esm or corona bonds, even though it would not be called corona bonds. No agreement between france, italy, and spain, and germany and the netherlands on the other side. Coming up on the program, we will discuss this further, get an investment perspective on this, and we will speak to Peter Oppenheimer at goldman sachs. That conversation coming up at 7 30 london time. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We have breaking news on tesco which i think its interesting. On two different levels. Ae financials coming in little bit off. Fourth quarter, like for like u. K. Sales down. 0. 3 . Revenue,the fullyear 63. 7 8 billion pounds, and fullyear adjusted profit was 2. 96 billion pounds, so that is better than had been forecast by tesco previously, or tesco previously. Let me tell you the other interesting thing which i think its a different aspect of this. They are talking about the hoarding, the panic buying that has been widely reported, things like toilet paper and i guess apparently not beer, according to heinekens most recent headlines. Tesco says panic buying has subsided and that Service Levels are returning to normal, so they have got everything in stock, including those moves of bread were boxes of pasta and tomato sauce you might not have been able to find previously. Its interesting on two different levels. They plan to return cash to shareholders. 5 billion pounds about special dividend. The question is, will they be able to stick to that . So Many Companies are having to esk their dividends ax their dividends lately. Stocks in asia extended a rally into a third day on light volumes as investors weighed science of the slowing growth in the coronavirus cases against up days in bear markets and that is what we have seen now. We can expect it to continue. All it needs from here now is some sign that the virus has not peaked and the numbers get over again. You are going to get down days. Yes. Incredibly speedy. 15 days from a bear market, from the bear market lows of march 23 two almost bull market in some markets to almost bull market in some markets. They are saying cash is trash versus gold. He would rather be in gold and some equities because of the negative returns you can get in cash. How much cash are you holding, that people should be holding right now . See a significant rise in cash holdings. In terms of the actual rebalancing, we saw a lot of them holding cash throughout q1, increasing holdings, but then towards the end of q1, starting to see some move back into equities, and then we had the opportunity some two weeks ago but we get to the level where we are now and you need to be a lot more cautious and defensive. Matt do you still think you should be defensive although howard mark says now is the time to dropped that play. He is a relatively conservative man. Listen to what everybody has been saying, there have been three things we needed for this market to really get some sense of normality back to it. First of all, the policy response. We have seen unprecedented levels of monetary and fiscal stimulus from Central Banks and governments worldwide. Thatdly, you need to see in the spread of the virus. Think has been forgotten. There was a bit of excitement initially that the u. S. Was turning over and that new york had got things under control but we have not seen that. The third thing is we need to know what happens to company forecast. Three things are in place. I think you need to remain defensive and very select. Talking about company forecasts, what will you be looking for during the earnings season . Cashbout the outlook, the piles, Balance Sheet, Capital Raising . What will be the focus for your . Rebecca it often is the case that the forwardlooking statement is so much more important than what the actual results are. Cash flow is vital for two things, really. One, the topic of the moment, which is dividends. Will the company in question be able to support that dividend going over to . Going forward . What will be their Capital Expenditure . There is a knock on effect to other companies in the market. Matt are there places that you like better right now, rebecca, for example, do you make Energy Stocks or do you like small caps or do you like those companies that seem to be able to hold their dividends . What do you think . Rebecca two definite areas which are playing very well in this market. Health care and technology, and for different reasons. Aalth care is traditionally defensive sector so it is very understandable that it is rational for that area but you have upsides people have forgotten about. You have a change in the democratic leadership race which has almost gone unnoticed during this crisis and you also have in that center a huge amount of activity on finding the cure, finding the vaccine, and ramping up the testing, and all of the Companies Involved in that are trading with Something Like msci world health. That is a very interesting place. You look at technology and what we are seeing their is that there are longterm trends that could be accelerated now because of behavior of consumers both retail and corporate in this environment. The Financial Authority putting out an announcement just this morning saying that they are putting in place a series of measures aimed at assisting companies to raise new Share Capital in response to the Coronavirus Crisis. This is something you are expecting many sectors to engage in or will it just be focused around travel and leisure . What is the appetite from the Investment Community going to be to participate in that kind of equity Capital Raising . Rebecca it is very early to comment on that so far. As you said, what we are seeing is a knock on effect in one area. It could well be traveled first. Leisure may be very hard hit, and we could see other Companies Seeking that. In terms of investors, we are seeing more appetite over the last couple of weeks and we expected to see in many different areas, so it could well surprise us on the upside. Rebecca, thank you very much. We will keep you around for a little bit longer. Senior equity actually, we will let you go. Rebecca from state street, as we get some breaking news on the French Economy. Let me bring that to you right now. 6 in q1eing a drop of , french gdp, this according two of france estimate. The French Economy shrank 6 in the first quarter, according to the bank of france estimates, so that is going to be possibly a bigger drop than analysts than politicians have been forecasting here. In germany, they are looking at a 5 contraction, although that is a fullyear estimate, so i want to take a look at these numbers and little bit the bird, compare and contrast these things, but anna, we are looking at, so far, i think the first big, officially, forecast contraction in the european economy. Anna absolutely. Really interesting to see some of the detail. French economy shrank by 6 in the first quarter, as you said, but they are saying 20 20 gdp loses 1. 5 for two weeks of confinement. This is the French Economy. It will not operate like other economies that this is a really interesting rule of thumb perhaps that we are getting to look at france and you can adjust for other countries around that. Forin france losing 1. 5 two weeks of confinement, so every two weeks of confinement, losing 1. 5 . Really interesting to get that will of thumb coming through from the bank of france to coming up, we will talk about oil prices. Prices pretty strong. They find agreement lashproduction to s production. What kind of agreement will we get from the United States, if any . This is bloomberg. Anna welcome back to the european open. 35 minutes to go until the start of the european trading day. We do see in terms of the cash equity open, we are considering italy we are expecting to be considerably weaker, reflected through into europe. Lets talk about oil prices. Crude is climbing. The price of crude oil, after a two day drop. Investors weigh whether any cut will be enough to offset the destruction we have seen from the coronavirus. According to a delegate, saudi arabia and russia are looking to agree on a global output reduction of about 10 Million Barrels a day. Annmarie hordern joins us now from new york. I suppose there are a number of dynamics going on. The ability of russia and saudi arabia to agree is crucial, but the involvement of the united ore either openly behindthescenes or just responding to Market Dynamics in some form will be critical here as well. Annmarie what delegates are saying that are part of these back channel negotiations say that the deal hinges on the United States being involved in some way. Potentially, we got that detail or a bit of that detail yesterday. U. S. Isrt saying the curbing this kind of forecast Oil Production by more than one Million Barrels a day and trimming that as well for 2021. Michael lynch, who runs an Energy Research firm says you can call it involuntary participation. He said that is the best way of putting it, so you might not see the United States come out sign on the dotted line of a quota. The question is, will this be enough . Involuntary, economically driven cuts out of the United States due to the markets, will it be enough for president putin and Mohammed Bin Salman . Matt thanks very much. Annmarie hordern with a look at oil ahead of tomorrows big meeting. Coming up, is cash really trash . Thanksio things so. We will discuss, next. This is bloomberg. Matt welcome back to the open, just 30 minutes away from the start of cash trading this morning. We got a dramatic number out of france, the French Economy sank shrank the most, i should say, since world war ii in the first quarter, due to the efforts to stop the spread of the coronavirus. Bank ofmp is what the france is predicting for the first quarter. It is comparable only to a 5. 3 date that goesa beyond even the memories of anna and myself. It is a terrible drop. Maybe the concern is this prestages other european countries. We expect similar numbers out of germany. If you look at the full year numbers, they could be this bad. S well anna really interesting to see our colleagues write ups on this, how the banks have come up with these numbers, saying like other Central Banks, they are sending highfrequency data instead of their usual methodology. They apparently had to go transactionst card and requests for unemployment benefits. That more fully reflects the current picture and the outlook for the French Economy. Apparently the automotive and machine making sectors being hit, but in the services sector, its all about hotels and restaurants and the like within services. Thats the gdp story in europe. Lets talk about whats going on in one of those manufacturing businesses that could have been affected in france. Tosans top priority is conserve cash while making better use of its assets as the coronavirus hits the auto industry. That marks a shift in strategy for the carmaker, which previously tried to find buyers for its subsidiaries. We spoke to the ceo. He gave us an early indication of the Recovery Plan at nissan. I think in our principle of prioritization and focus about indonesia, the closer is not the end of the business, it is the start of the rebirth of the nissan brand in indonesia. We are getting into indonesia. Ith our original dna of suv the 300,000pur customers which are driving the nissan cars in indonesia. As far as the plant is concerned, yes, we do stop the plant for the time being. However, we do hope that we will come back with a Production Facility in indonesia. When it comes to your u. S. Business, we have seen nissan putting 10,000 u. S. Workers on furlough. You have called this a temporary layoff. Does that mean you will be rehiring all of them when the pandemic is over . Absolutely. The plants are closed because we want the safety of the people first. This is what we did in europe. This is what we did in u. S. We are following the regulation and practices in each country. What is the current environment, then, mean for the introduction of new models, in particular the muchhyped rogue . The new models are the activist for our growth. We are continuing our new Model Development because we do believe that, one, in the peoples confidence, the customer confidence, and the market confidence comes back, we will be utilizing new technologies to get the momentum once again in the business. With all the pandemic concerns, i feels like an evergreen worry, like brexit has taken a backseat, but what are you doing to prepare for brexit . What lies in the future in england, given the absence of trade talks at the moment . Would you be looking for closure . One month before i had the opportunity to visit with send 11. They have a great history with nissan. We have produced more than 10 there. Cars out of this plant, we have created a new segment in europe which is called crossover suv with the juke. Juke,ently launched which is doing great in europe. As far as nissan is concerned, we are continuing with our regular business in europe, using that plant. Always, we as nissan follow local business practices. The impact on the brakes it brexithange on the could change the landscape in which we do business in europe. However, we do believe anticipating the impact of what it can have on the automotive industry, knowing that nissan is the biggest auto manufacturer in the United Kingdom, i do believe the talks between europe and the United Kingdom will be businessfinley condition for the auto market. When it comes to managing cash for nissan, we have seen you struggling a bit when it comes to issuing papers. In september, we have seen downgrades, raising the costs of capital for you. How will your Balance Sheet look if this pandemic is much longer than the summer and the fall . Shwandi these circumstances are putting a challenge on our financial situation. However, with the support of our banks and the governments support, we are continuing with our operational cash management. We do believe with what is all happening today, it is challenging, but it is not impossible, and we are continuing with our regular operations under the circumstances. Matt that was the coo of gupta, speaking exclusively to bloomberg. Here are the top stories. Prime minister Boris Johnson remains in intensive care. The u. K. Is heading into the peak of its outbreak, and the government is contending with criticism over its handling of the crisis. Rob says he is also confident that the Prime Minister himself will pull through, saying hes a fighter. Italy is beginning to look at easing its locked down after denmark and austria its lockdown, after denmark and austria have loosened restrictions. Us sources tell firms could reopen in mid april in italy. Protection for workers will be critical. The white house is also developing plans to get the u. S. Economy back in action, but those plans depend on testing far more americans than has been possible so far. The effort would likely begin in smaller cities and towns that have not been heavily hit by the virus. Detroit,like new york, and new orleans would remain in lockdown. Day,l news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. Anna . Anna matt, lets talk about whats coming up on the program. 20 minutes before the start of the European Equity day. We will talk about what has and has not been achieved by europes finance ministers, testing time as they fail to come up with a united plan to limit the Economic Impact of the coronavirus. We are getting assessment of growth in france. Welcome back. 15 minutes to go to start the European Equity day. Financetween eu ministers are taking place in brussels, and our colleague, maria, was there for us. Bring us uptodate with the latest developments. What has happened after hours of talks in the morning . Maria they are still keeping everyone far from a deal. Fundamentally, there is this idea that has been floated about creating a recovery fund. Countries that are impacted by the coronavirus, you fear that ld potentially use the money would be funded by going to Capital Markets. It is something the french put forward. The italians could potentially be on board with it. But, of course, if you are against a new joint type issuance, you dont want more risk. Is like aess it corona bonds undercover, and you will like it. There has been disagreement on the terms and language that would be attached to the recover funds. By the same token, the countries like this fund. They believe that just looking at the esm, the European Investment bank, and taking Unemployment Insurance is not good enough. There has got to be something longterm. The impact of the coronavirus could be pretty dramatic for some of these countries. The central bank expecting the biggest contraction since the second world war. Unicredit has a 50 contraction for spain and italy. The stakes are very high. , and soany, the dutch on still prefer the matt the french saying for every two weeks of confinement, they lose 1. 5 of gdp growth. That shows you how serious the lockdown hit the financials. We are hearing some countries are easing the lockdown across the eu. How is that going to work . Maria every time they go into a lockdown this size, the economy is lights out. You make the decision that you are going to sacrifice your economy to keep people safe, and thats what the europeans have done until now. When you look at the french situation, now that you mentioned the central bank, there has been reports today suggesting that Emmanuel Macron is not a board with the idea of an early end to the lockdown. That would perhaps signal to people that they can start going out on the streets, and you could see the curve spike up again. Hes not convinced about that. You hear the same thing with the italians. There have been reports that they are looking at opening some of the economy, which for two months has been lights out, no business. A signale take that as that everything is fine and you go back to normal. The reality is for that to happen, its going to be months and months. Containment, but beating the virus is not easy to do. Make sure people dont treat this as everything is fine now. Anna we continue to watch the developments of the virus itself, the lockdown measures across europe and whether they will or will not be lifted. In terms of the fiscal response, though, and the failure to reach agreement, any sense of where they had to next head to next . Maria we know the finance ministers should come up with a solution. This is the second time a meeting like this failed with no deal. Now they are saying there will be a followup meeting tomorrow. There was no point in doing it because everyone was working for 16 hours straight and nothing was sticking. Finance minister and german finance minister are going to speak tomorrow, but there is the possibility that this escalates to european leaders. Its something that they need to take to a much higher political level. If you look at the italian it is, he is saying simple, almost brian terry almost binary. Very difficult for his finance minister to really move. He has no wiggle room to really engage. The other issue, very reflective of the times, is that these negotiations are happening over the phone, via teleconference, on a video camera. It is difficult because people dont actually see each other. Yes, difficult operating from your home. Thank you for joining us. Maria tadeo with the latest on whats going on in brussels. We are 20 minutes away from the start of the European Equity day. Dipping quitees considerably now, and u. S. Futures are dipping into the red now. Up next, companies around the world continue to cut their dividend payments. Is this being priced correctly by markets . Has the cutting back on dividends been priced correctly . We will talk about that. Matt welcome back. We are looking at futures pointing considerably lower than the where an hour ago. An hour ago. They are telling us we will have a risk off open. We had big gains in europe yesterday, 2 across the board, where is the u. S. Closed marginally lower on the dow and s p. Australian banks are the latest to join the dividend delay train. Lenders across the country are slumping today as the bank of queensland put its payout on pause following the urging of regulators. The same story is playing out across sectors in europe, but bucking the trend this morning was british supermarket tesco. It is returning about 5 billion pounds to shareholders. Our next guest thinks the dividend story is priced too conservatively, with Downside Risk and potential recovery being underpriced. Joining us is Peter Oppenheimer with goldman sachs. What do you think about tesco holding onto its payout as everybody else folds . Is a obviously this particular story for this company, but i think the broader asset is quite wide. Our view is dividends will be cut quite aggressively in the u. S. And across europe this year , but a little bit less, in the case of europe, then the dividend pitch and market has been a decline. Going to come down, and part of that is the economic story itself, and the other part is pressure from regulators, governments, and that are trying to encourage companies, particularly those in which they have stakes, to pass on dividend payments. Peter. Ood morning, what kind of timeline are you looking at right now, in terms of the corporate earnings story . Ben bernanke saying its not like a depression, this is not going to last for 12 years, but he did say if all goes well, in a year or two, we should be in a substantially better position. Do we have to start thinking about things in that time . Right, wehink thats do believe we will get out of this and the recovery will be quite strong, but the dip in the meantime is pretty significant. We are looking at u. S. Gdp falling by 6. 2 this year, 9 across the euro zone, and globally a contraction of 1. 8 , and thats in gdp terms. We are extent to earnings to fall by about a third in the u. S. And by 45 across the euro zone, by over 20 across asia. These are big numbers, relative to even other recessions and financial crises. Because this is effectively stocking up demand, from which there should be a recovery, as long as there is not too much damage in the economy during the period of lockdowns, we would expect quite a strong rebound after. Earnings picking up next year by and europe,the u. S. And alongside that some improvement in dividends. It is that improvement into the future that the market is not really reflecting in the dividend story. But we do expect to see Global Growth next year rising by about 6 . It wont take us back to the starting levels, but i do think thats a prospect, which will trigger, we think, quite a strong rebound, but that lower levels than currently. Matt peter, how can that be when you have companies and consumers around the world that are getting no income, no revenue, and getting loaded up with debt that has Strings Attached . On the others of this crisis, they are going to come out with more debt other side of this crisis, they are going to come out with more debt than they had before. How does that drive the economy . Peter again, we need to be careful making a distinction between growth rates and levels of growth. With a very low base, you have large parts of maine economies doing nothing at all. Some relaxation in mobility, demand should be cut, but you will get quite a strong growth rate. But you wont get back to the previous trend in growth for a very long time, and that will be true across as well. For example, earningspershare europellen 45 across and a 50 rise next year. The actual level of the share would still be below the peak that it reached in 2007. I think there is a difference between a growth rate from a very low base and the sort of pace in growth thereafter. But to your point in taking on debt, which is true for Many Companies and the governments themselves, this doesnt serve to demonstrate the importance or value attributed to companies with strong Balance Sheets that at least will be in a position to be able to generate stable cash flows and pay dividends into the future. These companies are benefiting on a regular basis in the credit market as well as the equity market. Think it would be true coming out of this, the reasons you suggest. Anna peter, thanks for joining us. Peter oppenheimer, chief Global Equity strategist at goldman sachs, joining us ahead of the market open, and it will be that market open coming up next on this wednesday morning. Just a few minutes until we get to the start of cash equities trading. It will be negative. Futures pointing down by more than 1 for the major European Markets. Nowadays you do more from home than ever before. The xfinity my account app puts you in control with Digital Tools to give you the help you need when you need it. Get fast and easy answers with personalized help 24 hours a day, 7 days a week. Change your wifi password to a phrase thats easy to remember. Even troubleshoot your services on your own. Were working to make things a little easier for everyone. Download the xfinity my account app today. Start of cash equity trading for this wednesday. Lets get you an update on headlines. Worstrk state with its daily death toll since the pandemic began. Plans to reopen the u. S. Economy. Boris johnson remains in intensive care but stable. Finance ministers disagree on a response to the coronavirus. Thebank of france forecast biggest contraction since the second world war. Oil moves higher on reports that saudi arabia and russia could cut global output by 10 Million Barrels a day, this comes as cuts its Production Forecast ahead of tomorrows opecplus meeting. Matt we are looking at futures that have dropped considerably over the last hour of trading, and it is pointing to a risk off open on this wednesday after gains for european stocks the last two consecutive days. Lets take a look at the gmm. The ftse coming out of the gate down 0. 5 . You will see other equity. Ndexes dropping maybe even falling into the first few minutes of trading now that ftse losses are accelerating. Spains ibex coming down straight off the back. The netherlands coming out 0. 75 down. Interesting to see as we got the first gdp forecast at of the bank of france, a drop of 6 in the quarter. 1 now. Wn more than European Markets are opening down, 1 and change this morning. Anna European Markets opening lower, we heard about the collapse in talks from the eu finance chief. Unable to reach a deal over the response to the coronavirus. That is something we will be watching and factoring into the markets assessment of fiscal support available. Lets talk to karen ward, chief Market Strategist emea, jp morgan Asset Management. She is on the line with us. Good to speak to you. We have gone, 15 days ago we were in the lows of the bear market on march 23. We are in a bull market in some parts of the world. How convinced are you by the upside we see in markets earlier this week . Byit fundamentally driven better expectations around the virus, or is it Short Covering nothing to get positively excited about . I have not turned significantly positive. In my view the progress we have made in this story is that we know shutdowns work to contain the virus. We have seen infection rates peak. That is not enough, we need a clearer sign how we will exit the shutdowns. On that, whatever part of the world we look at, we are looking at asia as the lead indicator, there is not enough information on exactly how we exit the shutdowns. We do not have either the medical solutions nor the practical solutions. We have some way understanding, not q2, that is awful. It does not matter. I do not think we are in a world where we have conviction that q3 will be significantly better. Matt what are your expectations for earnings for the full year . , ir expectations right now recognize visibility is not strong. Karen yes, absolutely. If you look at gdp as a guide for example, Something Like 20 annualized contraction for the u. S. Looks about right. It does not transmit perfectly into earnings, but something of that kind of magnitude for the whole year looks correct. That is a lot better than the contraction we saw in the last financial crisis. I think it is going to be better than that, but that is a lot further south from current earnings estimates from the consensus. Much are investors looking to get into cash right now . Trash,io says cash is but he likes other havens such as gold. Exposure to some stocks. What is the balance of cash to other things . Karen that is what is challenging the last two years, not just now, but traditionally , you go to your core bonds because they give you the upside when stocks are falling, that negative correlation you rely on. Challenging aspects of where we are right now is that those core bonds are go to diversifier probably do not have the upside potential for us, certainly not unless we get to the point where the Federal Reserve and bank of england are in attending idea of negative rates, which they are not at the moment. Alternative of diversifiers is critical. Thinking of currencies such as the yen, you mentioned gold, and some of the other alternative funds, macro funds do a good job with volatility. I do think that is one of the main conversations i have having with clients, thinking more broadly about diversifiers and what is available in the alternative space, even though our go to bonds do not have the potential to do what we do normally and in traditional bear markets. Out rayant to point dalio says cash is trash on a reddit, this is not something we have heard, he is telling his clients. Would you be remiss holding dollars right now . It does not look like we will have massive inflation around the corner, does it . Karen not imminently. It is an interesting question as we look slightly beyond the next six months. Going, it ison is important in times of crisis like this to not get bogged down in the next month or two, but to step back and see what interesting things develop over the medium term. I think reemergence of some degree of inflation could be one of the consequences. Not just because Central Banks are printing money, we have been there in 2008, we know Balance Sheet expansions do not necessarily deliver inflation. It is an fiscal policy this time around. Austerity is not coming back regardless of what debt levels we reach in this crisis. As we come out of this, and the Central Banks who opened the monetary spigots alongside authorities, if those combined authorities are reluctant to turn it off, or find it of thatt to remove some stimulus, the conversation about where inflation is going coupled with the fact we have a supply hit to the Global Economy as well, i think that conversation about inflation will be interesting, and have some broad allocations. Will it trouble the bond market more broadly . We arene of those things starting to talk about because it is important not to get bogged down in the next two months. Matt thank you very much, karen ward, chief Market Strategist emea, jp morgan Asset Management with us akeep you little longer. Up next, companies around the world continue to cut their but is thisment, being priced correctly . We will discuss. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are 11 minutes into the trading day and looking at significant drops. Ftse and cac down more than 1 . The dax down about 1 right now. Asset management is leading the effort by an alliance of hsbc shareholders to call for extraordinary general meeting. The group wants to call the meeting after the bank decided to scrap dividends due to pressure by u. K. Authorities. The founder offers us an update on the effort. We have about approximately 2 on the way right now, and ,000 to 3000 investore activist david webb saying on facebook withinbc is making news its legal capacity, and investors have a choice of selling shares to raise cash. Do you agree with that view . Possible. Is legally ,or the minority shareholders it is inferior to the market. Soon doo will retire not have much in technical terms no matter if it is legally enforceable in terms of the Dividend Distribution cancellation. [indiscernible] it is hard times for the investor to give such notification from management. Plans. Any other action role the d. C. A government can play do you see a role that the government can help with . Has to try toent regulations, or other extra measures to regulate. They have to regulate the. Anagement [indiscernible] the dividend is going to be on the way. I think it is one of the loopholes, it might be the regulator has to put effort to try to make clear to the. Nvestors it is quite technical. Yvonne given this thinke with hsbc, the of headquarters could return to asia after all this . To return to asia we understand they have a diverse point of view. [indiscernible] i think many investors will think they have to go back to hong kong. I understand it might be a. Ifficult situation [indiscernible] we are on the way to better than 5 . Tois not a good moment discuss whether it is good to move back to hong kong. They advise at least 200 Retail Investors and does not own shares in hsbc. On some of the stocks moving this morning, all of which have dividend news. One of them is Deutsche Post delaying its dividend, withdrawing its 2020 guidance. The shares are down 1. 8 . Direct line insurance down more than 5 , it will not recommend a dividend. That is the story across the globe, retraction of dividends. But not the story for tesco plans to pay a 5 billion payout in special dividends. Still tesco down 3. 4 . Tesco is a different story. You are more likely to be benefiting from the current environment than asking the government for assistance. Lets talk about where we go on dividends and Balance Sheet management by corporates. Karen ward, chief Market Strategist emea, jp morgan Asset Management is still with us. , is it to bestory expected that companies, when they look at the demand picture, the outlook, they have cut back on dividends. Is this driven by companies, or are they mindful of taking government assistance and furlough staff, it will look wrong, the optics will be bad . It is a think combination of all of those and something we have been talking about for the last couple of the webcast this afternoon. I will go into detail with clients. It is critical to think about which sectors particularly are most vulnerable to dividend folds. And the technology stocks, i think it is worth remembering it depends on which , but the plans to take share buybacks out of the system. The u. S. Market is less about returning capital to shareholders, and more about share buybacks. We need to look at the areas of buoyed by which are high dividend payers or high buyback programs, and who are vulnerable to that. It is fairly broad. If we look at the dividend paid by financials and energy, they are the top two payers. The Technology Sector is third. We have to get into this in quite a lot of detail. Matt are companies who pay dividends or buyback shares going to be shunned . Is this something the market does not want to see right now . , faking certainly think about the context here, over the past few years because of the problems of fixed income not providing a lot of income, investors have increasingly been going to equities for their income. Are a European Investor and had a 5050 portfolio, the whole of your income was coming from stocks rather than fixed income. It is seeing incredible support. , ither investors retrace think it depends on how shortterm this is expected to be. That need for income, the desperate search for income has only become harder. Oneoff,presented as a the dividend will be skipped this year but we have every confidence business will return, and those dividend flows will come back, i think those stocks will reward a premium, because that search for income as we come out of this will be even more desperate. Let me ask you about capital rating, and the market appetite, sometimes you see them respond negatively, but today we see Online Retail space rating around 300 million through a cash equity rating. This is the largest u. K. Share sales we have seen amid the pandemic. Do you think investors will look to shore up this the Balance Sheet . Karen i think it will depend heavily on the company, and it comes back to whether this is a company and this is a shortterm squeeze, but we believe as we come out of this, we will be better positioned within our sector, we are going to be one of the winners of consolidation, so we just need help to get through this liquidity issue in the next three months. As we go into next year, if that think case, then i shareholders will be on board with that story. If it is less clear that it is for liquidity purposes and there are broader questions about the bounce back prospects for next year, then it will be more difficult. It is hard to say. It depends on the case. Thank you for joining us, karen ward, chief Market Strategist emea, jp morgan Asset Management. She will be continuing her conversation with bloomberg on Bloomberg Radio at 9 00 u. K. Time, around 35 minutes. Tomp team prepares plans reopen the u. S. Economy, crucial questions around timing. That would depend on testing capacity. We will discuss the u. S. Response to the coronavirus next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are 25 minutes into the trading day and looking at losses of about 1 on the ftse, 1. 5 on the cac. The bank of france forecast the drop of gdp. President trumps team is developing plans to get the countrys economy back in action, and the plans depend on testing far more americans for the coronavirus than has been possible to date. Signs of a possible plateau in new york have given the white house optimism. Infectionsirus tapered for Third Straight day, but it recorded its most deadly day of the pandemic so far. Annmarie hordern joins us from manhattan. Walk us through the latest in new york. Big question is this a turning point or not . Three Straight Days of infections tapering and potentially a plateau, but at the same time, the most deadly day for new york state in terms of deaths. 731 fatalities, devastating numbers out of new york state. Governor cuomo says social distancing is working, and if we let up we might see a different curve. , potentially we are reaching that plateau with infections. Us to start thinking about restarting life in new york. Thank you, all about that timescale. York. Ie hordern in new up next, we focus on the u. K. As boris thatlls on. On. Oris battles he is still in intensive care, but his condition is stable. We will focus on u. K. Politics, that is coming up next. This is bloomberg. Matt welcome back to the european open. We are 30 minutes into the trading day and we are looking at a the index is down in europe around the area of 1 or more. Lets take a look at the broader european benchmark, the stoxx 600 down 0. 9 or about three points. At the Industry Groups in the stoxx 600 that are moving, you will see that we have a little bit of a mixed. Them are down. Oil and gas. We have gains in technology, real estate, travel, and leisure. Anna . Yes, lets talk about what is going on on the u. K. Fiscal seen. Heads into the peak of the outbreak, Prime Minister Boris Johnson has spent a second night in intensive care. We understand his condition is stable and he is receiving oxygen, though he has not been diagnosed with pneumonia. Very besteceiving the care from the Excellent Medical Team and he remains stable overnight. He is receiving standard oxygen treatment and he is not required any ventilation or respiratory support. That was the foreign secretary speaking. He is standing in for the Prime Minister in a number of levels. Professor, great to speak with you once again. What is your assessment of where the power really lies right now. Clearly, the Prime Minister is on oxygen in intensive care. When asked what happens if the cabinet is divided, he just quoted shared responsibility, collective responsibility. , but where does the power really lie right now . A point, we do have cabinet government in this country. Hase the Prime Minister responsibilities to sum up the conclusions of the cabinet, it is still a collective enterprise. Although the Prime Minister is there to knock heads together, sometimes to coordinate policy if the government, the government of the u. K. Is not as quite as president ial as some other countries, most notably the united state of america. Matt is there any precedent for this. Have you ever had a Prime Minister incapacitated for longer periods of time. We have. You can go back to the last pandemic, the spanish flu just after the first world war. Ventilatore was on a for a number of data. Those Health Crises were covered up and no one knew about them until afterward, but at that point, what happened was that the cabinet fulfilled its roles, there was one minister who had responsibilities that the Prime Minister would normally have exercised, but the whole thing passed off reasonably well. We have collective responsibility, government by cabinet. Citing have some people strengths in our institutions. Is that something the u. K. Falls back on esther and mark think it is important to say that ministers decide, a lot of their daytoday work is done by officials in the program has been set with the help of Boris Johnson earlier and officials working to that plan. There is ank immediate need for people to worry that the government is rudderless. There has been some talk about meeting the queen is the Prime Minister does, it does not appear he is going to be doing that. That does not mean there want be constant official basis contact between number 10 and the palace. See this crisis reflecting on the government in the u. K. . Here in germany, Angela Merkel and the Ruling Coalition have gained tremendously in popularity, political support, because of their handling of the crisis. The u. K. Ot seem like is quite as happy with the governments handling of the crisis. No, i think that is true to say. There always is a rally around the flag effect. It is different for different governments. Depending in part on the perceived handling of the crisis. In the u. K. , we have some pretty severe criticism of the government over personal protective equipment and testing. Eventually of course there will be a washout from this. There will be public inquiry. Any danger of losing widespread support. It is not quite as strong as it is elsewhere. Just briefly, we have seen a new leader of the labour party. Is this going to make a difference . Think Jeremy Corbyn was pretty absent over the last few weeks. I think you will continue actually the pretty constructive criticism the labor had been making of the government over the past few weeks through its Shadow Health spokes and. I think the criticism will still be constructive. Lets get the bloomberg first word news. Terminales of the starting with the European Union finance ministers. They have failed to agree on a strategy to combat the coronavirus. Cashed out over the chances of weathering the economic storm. An emergency teleconference lasted more than 16 hours, but the nations were unable to bridge the gap. Exodus aseeing a mass flightslaxes its are resuming from the international airport. If youre of resurgence in infections mean some restrictions are in place. The white house is developing plans to get the u. S. Economy , but those plans depend on testing more americans. The effort would begin in smaller cities and towns that have not been heavily hit by the virus, whereas hotspots would remain on lockdown. Day. L news 24 hours per matt, lets talk about the Investment Strategy and how it is dealing with the global pandemic. Time for a balanced portfolio when investing the market. What an impact is certainly going to be felt and he expects to see several quarters of decline. Take a listen. No one can predict the future. I think the situation really underscores that. , there is a forward multiple of possible futures. And number of Fund Managers dont suddenly become epidemiologists. The fact is we dont quite know how long we are going to be in lockdown in Different Industries and we dont quite know how much damage is going to be done to Underlying Companies the longer they have to live without cash flow. Count on a to variety of futures. We are seeing a balanced portfolio. Looking at sectors within equity, within credit, defined opportunity. We are not being very heroic rationally at the moment and to be honest, that is the way we tend to position our portfolios all the time with not having a strong directional bias, but trying to find opportunities. Seennk the episode we have in recent weeks and months playing out really underscores a not being too of arrogant about our ability to predict the future. Anna that said, have you made changes to take a more cautious stance with less exposure to cyclicality . We did. I think in terms of our more simple balance in structure, we started the year anticipating modest economic peaks action and positioning the portfolios for that. So slightly overweight equities, that kind of obvious positioning when you want that view. Picture, wenomic are potentially looking at a couple quarters of at least 10 , maybe 15 economic decline. I just noticed there was a piece of data coming out from the International Labor organization. Working hours have been lost globally in the crisis. I would wager that the rest of the working hours are not as productive as that might normally be because a lot of them are being spent dealing with the crisis. Were expecting a Major Economic hit. Agolso felt a few weeks when you had the opportunity with treasury yields going up at the same time as equity markets going down, we think that was an effective edge funds hedge and traditional risk off strategies were doing poorly at the same time as equities were falling. That gave us an opportunity to rebalance and buy more treasuries. We were in afeel good position. To be successful over the last little while. Although me away we might regret selling out of equities, the policy response has been beneficial to treasuries. That was the ceo of aviva to bloomberg. King coming up, testing times as europes finance ministers failed to come up with a united plan to limit the Economic Impact of the coronavirus. And they reach a compromise. This bloomberg. Anna welcome back. We are negative, down by 1 or so on the european stocks. The dax a little bit more resilient. All the major markets to the downside. Have beenes suggesting some move to the downside as well. We will keep our eye on what those are doing. With the crisis economics and alphabet soup as solutions from global policymakers. Some ofbeen analyzing what is being delivered to west by these policymakers. If you are consuming confused by what some of these acronyms mean, weve got you covered. Centralbank action is getting even more technical. Ecb is launching the bl we had the fomc is unleashing ott. N all get a little lets look at the Federal Reserve. It has recently announced new programs including the commercial paper funding facility, an initiative to buy shortterm debt directly from u. S. Companies. Next, the pp cf, or primary dealer credit facility, that is for purchasing a wide range of securities from big banks and brokers dealing directly with the fed. Fundhe money market mutual the quiddity facility that authorizes the purchase of highquality assets from the fund to help relieve any funding blockages. Behind all the jargon are trillions of dollars being put to work. To shield the Global Economy from the coronavirus outbreak. Of some of the acronyms. Europes finance ministers have failed to come up with the united land plan to limit the Economic Impact of the coronavirus. Looks like its not going to cut it. It haslast few minutes, been tweeted about the need to reach a compromise and the discussion will continue tomorrow. Joining us to discuss further is i reporter in brussels. What is the latest from this meeting . It seems the story continues to develop. It continues to develop. Divisions play out in terms of the impact. Conditionality attached to it and whether or not there should what shouldfunding be affected by the coronavirus by going through Capital Markets , but also sharing some of the risk and some of the debt. Germans doand the stand on the opposite side of the spectrum usually. They are coming together. See a compromise emerge, which perhaps may mean that tomorrow people make it a little bit of sleep. Mentioned, and a lot of of the recovery fund. Some countries to claim victory. If there is solidarity. Of course, that would mean some conditionality attached. What i would point out is that we are signaling to working. It is four weeks and weeks to come. I reported there on the ground. The latest and the finance ministers talks. What is going on in oil markets. Can russia and saudi arabia find agreement . We look ahead to the opecplus meeting tomorrow and what role the u. S. Is playing. Thats next ever get this is bloomberg. The welcome back to European Market open. European equity markets on the back foot. U. S. Futures, a few points higher. Up by moreres all than half a percent. Lets talk about another asset bouncing. That is oil prices. Crude climbing after a two day drop. Investors weigh whether any production cuts by opec plus will be enough to offset the demand we have seen with coronavirus. A delegate, saudi arabia and russia are looking to agree on a global output production of about 10 Million Barrels a day. Joins us now. So many things to ask you. We start with the offer from the saudis around 10 Million Barrels per day. Oil is bouncing today, but lots of people have been throwing this number around for a while. Will it be enough to make a difference . Plaques the 10 Million Barrels per day number floating around since last week, but i think it is important to bear in mind for a huge range of producers including saudi arabia and outsidend countries making a contribution, including norway, brazil, and perhaps even the u. S. It would be perhaps about 10 of current production. Oil demand ishat probably down 30 from its normal level . It will buy time. But is it going to solve the problem . Matt of course, we have the u. S. , now the top Oil Producing country in the world, what kind of cut are going to from American Drillers . This is really an important question. Exactly what the u. S. Will contribute and whether it will be sufficient to make the russians and the saudis ok with the deal. What we expect to happen is that the u. S. Will come to this meeting of g20 ministers and he will say, look at the government upon figures, there was a saying thaterday they expect u. S. Production to fall by a Million Barrels per day. They will say, look, while we are not going to direct people, you can see from the forecast that it is going to happen anyway and here is their conclusion to balancing the global market. Matt thanks very much for giving us a call. Bloombergs executive editor for energy and commodities. Fascinating story. We get the opecplus meeting tomorrow. Coming up, and exclusive interview with the chief executive of wpp. After noon. Ust that is it for the european open. Stay with bloomberg television. Up next, surveillance, im heading over to Bloomberg Radio. Tune in. Francine euro area finance ministers failed to agree on an economic plan to tackle the crisis. The latest from brussels. New york and the u. K. Report the worst death toll since the coronavirus began. Wuhan has returned to normal after lockdown is lifted. Boris johnson remains in intensive care. The government says his condition is stable. Welcome to bloomberg surveillance