Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Antibody tests. Good morning, good evening at everyone. I hope you are safe at home. Our thoughts are with you, and together we are stronger. Yesterday, or two days ago, we had that huge swing, that huge impact that we saw with negative prices on wti. It is now filtering through the brent. We are nowhere near negatives, but if you look at the price action, it has been pretty brutal over the last 24 hours. Selling pressures definitely intensifying. Wti downok at brent, more than 4 . Lets get to bloomberg first word news in new york city with viviana hurtado. Viviana hi, francine. Here in the u. S. , finding a new pandemic relief package totaling 40 484 billion, including some for the paycheck protection program, to help Small Businesses keep workers on the payroll. The money will also go towa rd coronavirus testing. Donald trump says he will suspend illegal immigration to the u. S. For at least two months to help americans out of work because of coronavirus crisis. The president says it would be wrong and unjust for americans to be replaced in the workforce by new immigrant labor. Now to the u. K. , the government there separates first major test of the global pandemic. Videoers questioned via conference, most mps taking place remotely, with the Prime Minister out of action, recovering from coronavirus, secretary dominic raab will be joined by the labour party leader. Policymakers will discuss whether to accept junk rated debt as collateral for lenders. Sources telling bloomberg the move is intended to head out concern some sovereign and Corporate Bonds will be cut below investment grade. Italys Credit Rating is said to be reviewed by s p this friday. Today, turkey likely to lower its Interest Rate for the eighth time. Has issued aank bigger than decisive cut since its new governor took the job last july. Predictions are for a 50 basis point move, but a sizable minority in bloombergs poll sees a bigger migration. Global news, 24 hours a day, on air and quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine . Francine viviana, thank you so much. Now lets focus on oil and the market movement. Frenzy a selloff, some would say, when it comes to the price of oil. Lets look at how brent is doing now. Brent is the one we are watching out for, coming to the lowest level in almost 21 years. That is as the Global Benchmark gets stuck into the selloff that sent the bti futures below 0 for the first time in history. June futures are also down a touch. With Global Demand crushed by the lockdown, concerns that unwanted oil will affect selling capacity. ,oining us as Burkhard Varnholt deputy global chief Investment Officer at credit suisse. Thank you, burkhard. This is basically an economy that is, you know, being suspended. We also have a role in the etf and the fact that they did not want to take hold of the physical crew just because they do not have Storage Capacity, or does it say that the economy is much worse than anyone is expecting . Dr. Varnholt well, thank you, francine. Climbedly, the u. S. Oil just so, 1. 7 billion inflows just a few days before wti what wasfrom obviously looking at the bottom, which has still yet to be found. But i think what exacerbated this crisis was, you know, a very unfortunate confluence of the belief between riyadh and moscow, that really kicked this off in the beginning, that has all of the ingredients to just exacerbate this. Oilwhile, european and u. S. Producers seem to have sleep walked into this. They did not seem to have memo that suggested to them what the International Energy agency suggested a month ago, that they should cut their supplies dramatically. Well, the reality is, if you look at the u. S. Oil market, they obviously thought that to about lastpumps just week, and of course we all know running world is simply out, somewhat embarrassingly, like the faucet is running over, and nobody is turning off the tap. The world willis come to normalize again in some kind of ushaped recovery. Again, andbe fought oil prices at this level are simply not sustainable. They are quite simply not sustainable, and we have seen that both in the futures curve, but they will move substantially higher over the next 12 months. And there will be accompanying us and investors making a killing from this. Francine burkhard, very quickly, given the dislocation that we saw on monday, are we going to see more dislocations like that elsewhere in the market . Everyone is well, nervously watching the latest iteration at wti later in may. Expect but i would last this monday was the most frantic of the mall, because it was just caused by this share by, come june, we should be out of the darkest woods. Francine alright, burkhard, thank you so much. We will get back to burkhard atnholt, deputy global chief credit suisse. Talking about oil and tinkers, he is executive director of the energy agency, that is 11 00 a. M. U. K. Time. That is one of our top interviews. This is bloomberg. This is bloomberg. Francine welcome back. This is bloomberg surveillance. I am Francine Lacqua here in london. The u. S. Senate has passed a 500 billion package to help Small Businesses. , andoke to paul krugman asked if the federal government has done enough now. Take a listen. Is veryman it insufficient on several fronts, and there is a bottleneck. The money is not really flowing, ini am very disappointed this deal, because theres no state and local fiscal relief, and that is a gigantic hole that is opening up, and it is obvious. Everyone knows it is there. And it will be a real impediment to economic recovery, because state and local governments will be forced into severe austerity, so there is nothing there. The ppp, the paycheck protection program, you know, it has all been spoken for, but it looks like a lot of the money went to the wrong people. It did not go to the businesses. And unEmployment Benefits, which are the most temporal, given what has happened to the job market, is we have all of went to the states. That is a big mistake. Our fiscal response, you know, it could have been worse, but they can always be worse. But it looks like we are falling really way short of the challenge here. Joe so we all know what a big fan of the New York Times President Trump is, and i am sure he reads your columns regularly. If he were to ask you to call in and design your ideal program to keep the economy afloat during this period of widespread, shelterinplace, what would be your ideal design . Prof. Krugman ok, we should, first of all, we need to on bottleneck the unEmployment Benefits. Ae canadians just that us special federal program, their federal, not ours, with a hotline, and canadians can use it on covidrelated come on Employment Benefits are getting it within days, 2000 a month, just quickly. We could still do that. The second thing is, we need several hundred billion dollars locale to state and governments, because they are on the front lines in dealing with this. And then i think there been this lending is, you know, conceptually, we have pieces of all of the right elements in our program, but we there we do not have the administrative capacity, or we have not allocated enough money. But i was a state and local and a sterilization of unEmployment Benefits. Over to thewitch it fed side. The fed has moved extremely rapidly, by fed standards, building on tools that were developed in the last crisis, even expanding them, and you mentioned a state and local, actually setting up a municipal lending facility. What w grade would you give jerome powel, and what further do you think is in the feds potential toolkit to further ameliorate this crisis . Prof. Krugman i do not think the fed has actually i mean, they have gone [laughs] they have gone very extreme. They have taken, i think, the right point of view, which is there maybe some loans, some purchases that we will regret later, but we will regret not safeguarding the Financial System more, so they took a risk on the upside of doing too much. So the fed, there was a point a few weeks back when it was really looking like 2000 eight, you can see that liquidity was drying up, and markets were starting to freeze, and the fed just threw an incredible amount of money, trillions of dollars at it, which was the right thing to do. That we at one thing least appear to have avoided is a Financial Sector crisis fallout from this. Everything else is kind of going to hell, because we are not getting money out the door fast enough, but the fed is getting its kind of money out fast enough. Francine paul krugman speaking to our joe weisenthal. Lets get back to Burkhard Varnholt from credit suisse. Burkhard, there are a lot of questions about the fed come of course about the senate, with about with the u. S. Is doing, europe, whether leaders can actually find an agreement on how to help each other out. You have the u. K. With, you know, the possible testing starting tomorrow. Where do you see the most value . I think paul well, krugman has a point in that, you know, in the united states, that stimulus, it is not about the volume, it is about the targeting, and i think investors most increasingly classify the companies that they are holding, across all sectors, really in three categories the losers, the survivors, and the thrivers and should seek to move as much as you can into the survivors and the thrivers. In the united states, as paul krugman pointed out, unfortunately, like it or not, the odds are tilted in favor of big business. And clearly in favor of the digital economy. That is where you will find more survivors and drivers. Thrivers. In europe, there are ways of targeting these programs. Switzerland, and my view, gets the highest rate of targeting Small Businesses, extremely rapidly, by involving all of the one hundred 20 banks in switzerland and getting money out of door from the federation to Small Business owners within less than 48 hours through the banks. That was highly targeted, efficient support to the backbone, to the economy. So i think investors should look at every country. It is not a matter of theres too little money to go to the economy, theres more than and government will be happy to open it further. Other than qe. Paul provegeting, as pointed out francine where do you put your money . Your topic on where you want to invest . Pick on where you want to invest . Dr. Varnholt in the equity markets, it is clearly the flying thriver, is clearly, but you will find survivors and thrivers even in the worst of times. Take the oil market, which is going through dreadful times, as you have pointed out right in the beginning. For sure, not the entire oil industry is going down under. For sure this is going to give opportunities of the decade to some of those large, integrated, capital and cash flowbridge nationals flowrich nationals who will lead, and even if they do not thrive now, a year or two from today, they will likely. Francine burkhard, thank you so much. Burkhard varnholt there from credit suisse. Coming up, we have a full roundup of your pharma news. We will also speak with the roche chief executive and find that when a vaccine may be ready. This is bloomberg. Francine welcome back to bloomberg surveillance. I am Francine Lacqua here in london. Lets talk about pharmaceutical companies and of course the race to find the vaccine against covid19. Roche has developed an Antibody Test that should go on sale next month. Meanwhile, in the u. K. , Health Secretary matt hancock says they will begin u. N. Charter the Coronavirus Vaccine tomorrow. Joining us is our senior pharmaceutical analyst, sans is m. Sam, great to have you on the program. What is realistic in terms of when we can expect a vaccine in the real term, and what are the main risks here . Sam good morning, francine. I mean, at the end of the day, it is possible, if absolutely goes perfectly well, with no , to get aatsoever candidate vaccine that shows an ability to induce an immune response. That is the first thing we will find out, whether it is going to or putrd or from china turnout, glaxo, obviously glaxo, obviously some of these companies are ahead of others. Can they produce immunities and officials that can then be extrapolated into being protective . So when we say a vaccine, in a normal world, in a normal, typical world, because you are giving vaccines to essentially Healthy People who have no disease, you have to be absolutely sure that it does not cause a side effect, and we had a situation like that just vaccine,with a dhengi who actually come and some patients, made things worse, and that did not show it when they tend to years they were developing it, so what does it mean when the vaccine is ready . Francine and if you look at trials, i mean, how long are we thinking, sam, that we could take, from actually finding the vaccine to making sure it is safe enough and then distributed to a Wider Population . Want to get absolute clarity on broad safety, it will take you quite a while. So you can try to do a lot of the work in parallel, and that 12 to 18month timeframe that people talk about, you do a lot of the work in parallel and then hope that the safety signals that are clean, hopefully, that you see in a shortterm, in a small group of people, are of millions of people, and you wont know about the diseaseworsening risk of a vaccine until you have been in a broad number of patients. Is, in the 12 to 18 months, that is possible, but that is really every single star aligning. Academia sam, is working together with big pharma . I know there is a race and speculation on trials out there. Are people working together to try to find the common solution, or is it each on their own . The best example of this, gsk agreeing to work together, these arrival companies, they sell flu vaccines into the same market, so you see quite a lot of collaboration between large pharma and small biotech, and, you know, developments, so there has to be some collaboration going on. And at the end of the day, you meet someone out there who has got the manufacturing capability and the supply chain capability to be able to deliver this and get it to the patients and individuals, so you are going to have to end up working with one of the larger pharmaceutical companies, which is what is basically going on, with regard to the various collaborations that are happening. Francine sam, thank you so much, sam fazeli there of bloomberg intelligence, senior pharmaceutical analyst, with great insight into what could happen next. Coming up, a conversation you do not want to miss, speak with nancy pelosi, House Speaker, as 5 00 p. M. London time. This is bloomberg. Rg. W . W . Uhiono francine this is bloomberg surveillance. Im Francine Lacqua. Theres a lot going on in the oil market and weve been talking about it the last few days. The alarm has been sounded on crude. Prices can tumble back to negative territory. Trade on high volumes. Theres only 6. 6 Million Barrels traded at negative prices so not much balance from that. But it can turn negative. The prices have been staying a bit too high for too long. Theyve been lower in history but have been propped up by cuts of opec and by retail oney going into oil a. T. S. And i dont know, maybe the fed is buying as well, who knows. But the fact is if people buy futures and keep them extraordinarily high for some time the financials get worse and the market doesnt get the signal fast enough and theres a difference between Financial Assets with equities and bonds and oil. They can pop up equities and Central Banks can prop up equities and bonds but if it tried to prop up oil it makes things worse and we go to negative prices. It is what it is. We need large shipments like were seeing and then things will get better. But we cannot ask opec plus to do all the work and its not enough a month from now. It has to happen now. Oil cannot move. Where do you see demand right now . How off are we . Pierre demand is probably down 25 Million Barrels a day. When you look at whats been billed the month of april, its simpler. Say demand is down 25 Million Barrels a day and supply was up four we get 29 million barrel as day, thats 900 Million Barrels being built over one month. Than theyre running out of space now. Eventually we have a demand and demand will go up, dont know how fast and the market is forecast on the vshaped recovery but dont think well have a vshaped recovery until we have a vaccine. As soon as people will start coming out, the number of cases and death tolls is going to go up and then well have to be shut down again. I think its going to be well be able to come out a bit and then go back in, its going to be like this so i dont believe in a vshape, it will be tricky but demand will probably be weaker on prices and supply will go down but the question is, can it go can supply go down fast enough and demand go down fast enough to avoid seeing negative prices again. Thats the question. I wouldnt bet against seeing the negative prices again. Why not . It could happen again. Be think, you know, should very careful what to buy or not to buy, either e. T. F. , it can be wiped out. Its not a good market to trade in right now. The u. S. Oil e. T. F. They had to halt that and waiting for the approval of four billion shares. You think the e. T. F. Positions should be closed out, what does it do to the price . There would be no other choice. You shut off e. T. F. Works well when there is 50 oil and theres an additional amount to be charged so the e. T. F. Can buy oil futures and put dollars in the margin and then allow in bonds or anything, so that works well at 50 but now were at 17 and initial margin will be at 15 probably because of the increased volatility, then the e. T. F. Cannot actually buy, you know, 100 Million Dollars worth of marginal future with 100 million of cash. They need more cash and means hey cannot replicate the moves of the w. T. A. Future anymore. I think thats wise as high productivity will have to be closed because they cannot do the things theyll be able to do. The solution would be for it to eventually be closed and allow some oil e. T. F. s to be open and have a different contract in december of 2021 because by then the market should be functioning normally again but if anyone invest in two months it would not be well for the investors. Francine that was pierre andurand. In the last couple minutes we have an update on the demand for a number of orders for spain new 10year bond and was at a record 66 billion euros in terms of the orders. If we look at the yield for the 10year, well bring it up in a second. Now lets get to david, head of Market Strategy at jp morgan private bank. Thanks so much for coming on. What do you make of the spanish headline, a record 66 billion euros. I guess there is appetite for certain people to either help the economy or certainly upport european countries. David good morning, francine. Pleasure to be with you. I think thats part of it. I also think that any incremental yield or spread in an environment of negative rates in many parts of the fixed income space is just designed for investors and think it shows a confidence in e. C. B. Programs. Right now we have obviously aggressive Monetary Policy in europe aimed to contain spreads at supporting these countries through the heavy amount of debt issuance theyre going to have to go through because of the huge fiscal hold were seeing. Danger comes if investors start o question the scale of that response and Long Term Debt balance for the european periphery. I dont think well get that any time soon because crisis programs will be in place. Obviously we have the meeting tomorrow which is a very big one in terms of them discussing risk sharing. My concern of the spread is really late next year and into 2022. Once the crisis is over and focus turns on the Structural Dynamics of debt ability in this country. Francine whats your take on oil, david, right now . We saw some pretty big market dislocation, are we going to see many others . David yes, francine. I absolutely think we will. The front end, as your previous guest was saying, is really going to be a very dangerous place to play for investors going forward. There is simply no way to square the difference between the amount of supplies the next couple months without major supply disruption and destruction. We have the prospect of Storage Capacity getting close to running out. The Oil Companies are very, very creative in finding new places to store oil but whenever you get to that point in the oil market, whenever there is a prospect, even if it doesnt get realized, literally nowhere to store oil, then the possible funding into negative prices as weve already seen gets raised. Its a very difficult market to play at the moment because of futures curve. We are looking at the Oil Companies that should survive this brutal shakeout and obviously will have a less competitive environment when they do emerge but for that you need a very, very strong balance sheet, greatly quidity and long and proven track record of paying dividends and a more diversified set of revenue than just early expiration. I think it will be a really wild ride with a lot of disruption in the next couple weeks and months but i think it necessary because we have been dealing with a market that arguably had been supported a number of years and the reality is that the Central Banks and finance ministries cant get the economy back up and running quick enough to deal with the supply on its own and has to come from supplies shutting down and the only way that will happen is these low prices weve seen for a while. Francine is there a danger that too Many Companies actually go bust and that somehow this is a systemic problem especially if it is shale in the u. S. . David snirkse david theres a danger we see a bigger hit to the credit markets and the banks in america than some people believe is possible if the situation is allowed to really get out of hand with the prices at or below 10 a barrel for months, not weeks, then obviously youd see a really major shakeout in terms of credit and employment in some parts of america with only associated damages to the financial side, as we obviously saw yesterday the president and a number of policymakers come out and say they werent going to let that happen and provide support somehow and i do think given the importance of it in key parts of america, you will see absolutely further support to try and help the industry get through this. But you already see a very, very large spread on oil high yield. Its there for a reason because its very risky. Im sure there are some bonds in there that will be a fantastic return for investors and im sure major losses will come. And youve already seen in the banks during earning season, the increase in the reserves set aside for potential credit losses. Some of that is down to the consumer and the credit card outlook but also some of it is down to oil. I dont think that risk is too great but we already know it is causing some pain in the parts f financial markets. Francine david, thanks so much. David stubs, at jp morgan private bank. Coming up, well have plenty more on the debt debate and well talk about europe and leaders and well talk about the u. S. This is bloomberg. Francine this is blurring surveillance. Francine this is bloomberg surveillance. What is your biggest concern about europe. I know theres been a fight with the south and the north about corona bond and debtfree forgiveness and we heard about the e. C. B. Probably taking junk bonds as collateral. Is there enough solidarity or do you think were at breaking point in europe . David i think both of those things are true, that not enough solidarity for my liking for a grand project, the ambition of the euro and the incredible differences between some of the economies within it. I still think were a very long way from a true breaking point and the real pricing in of breakout risk weve seen obviously in the early 2010s and again, around the greece issues in 2015. I think that we have significant enough programs from the Monetary Policy authority to control the situation and the european periphery during this prize. And yet you have enough fiscal support coming into at least a healthy economy get through the major part of the shutdown. The issue i think will come later, maybe next year and 2022 when the debt burdens and the share of g. D. P. In the periphery will be very high, the structural growth of those economies, especially on a per capita basis seems to be very, very low and there will be questions over debt sustainability there and the choice will be how do you recover from a very big economic hit with high unemployment while arguably being at your debt capacity. And will the market require extra compensation for that risk . I doubt were going to get through burden sharing at the meeting tomorrow. I would expect we would get further, additional measures on the side which will be helpful and well have several of these meetings the next couple years. At some point, francine, i do, unfortunately, feel that the market will start to test the will of the european leaders over the sustainability of the currency. I think potentially that is the story a couple years from now. Francine do you also worry at some point the markets will latch on to the excessive debt out there and will we ever talk about Debt Forgiveness or at least putting the covid debt compared to Everything Else or is this a little bit far teached . David i think its farfetched at the moment but then, francine, weve seen monetary and fiscal policy go to very new places very quickly in the last few weeks and couple of months and i wouldnt be surprised if that discussion was being had sooner rather than later. Look, its believed to be part of capitalism and Global Finance for many decades and many proposals, and theyre usually focused on emerging markets but some kind of grand bargain of writing off certain amounts of debts for other changes or other reforms, you know, could be part of the euro zones future. Certainly if yields are going to survive and thrive, it is a need for reforms in both individual countries and in the euro system itself to create more flexibility and higher structural growth rate and that is a very difficult thing to negotiate. It requires trust and so solidarity and also requires countries to get on the same page about what the future of in cratic capitalism is advanced countries, what the right balance between the state and the market and burden sharing and cooperative action and individualism. The nations of europe are on the same page on that front. It makes it hard for them to reform both the individual economies and the monetary plan if ong a inherent they cant get on the same page on that front. Francine david, thanks so much. David stubs, head of Market Strategy and advice at jp morgan private bank. Coming up, an important conversation on funding, small loan businesses but also in general about the u. S. Economy. A conversation with the House Speaker nancy pelosi at 5 00 p. M. London time. And this is bloomberg. Francine welcome back. This is bloomberg surveillance. The roach chief executive spoke to our colleagues this morning and said it would be unlikely there would be a covid19 vaccine my the end of 2021. Also bloomberg was told the company will have Antibody Tests by next month. Here he is. Antibody tests are very important in the fight of this coronavirus pandemic, for two reasons. First, they help us to better understand how infections develop in a certain population and secondly, theres good reason to believe that Antibody Tests show you whether you have developed immunity after you have been infected. As far as roach roche is concerned well host a very reliable test at the beginning of may and the good news is due to this technology, we will be able to ramp up testing very quickly to the height of millions of tests already by june. Im aware many governments have spent money already on Antibody Tests that proved not to work. What sets yours apart. What is different about the roche Antibody Test that means it will be worth buying . Human beings, we all develop different antibiotics for all kind of coronaviruses. So it is very important to pick the right test and then to validate those tests with enough patients. And unfortunately, there is a number of tests already out there in the market which are not reliable simply because they havent been tested sufficiently. That also gives a little bit of time to launch our own tests because we have to find the right Antibody Test and test it and validate it with enough patients but from the date we now know that we are able to bring such a reliable, precise test to the market very soon. With the Molecular Testing there have been bottlenecks that really fouled things up, not enough q tips around, reagents hard to find. Are you going to see or are you concerned about bottlenecks like that holding back, you know, scaling up of these Antibody Tests . For Antibody Tests which is an Important Technology which is vitally adopted, it will be much easier. Molecular diagnostics are much more complicated and indeed the supply is limited. This will be different for Antibody Tests. Over time, im very confident that the industry, not only us but also some of our peers will be able to meet demand. Why is the vaccine taking so long . Now not expected until maybe later in 2021, what is holding back that development . Well, typically the development of a vaccine takes several years. Now companies who are involved development of vaccines, which we are not as a company, we will tell you that it takes at least 1218 months to bring out a vaccine. I personally think this is very ambitious. You not only have to develop the vaccine, you have to test it sufficiently with patients and then importantly, it has to be ramped up. Again, if you compare to how long it took in the past, 1218 months seems a very ambitious time line to me. Francine that was the roche chief executive speaking to us early on when it comes to vaccine and the Antibody Testing a lot of people around the world are waiting for. In the meantime this is what your markets are doing, theyre embracing for another busy week of earnings and trying to pig out figure out the trials what the roche executive was talking about and watching nervously, i would say, what happens to oil. Theyre looking at w. T. I. And what happened two days ago but also now focusing on brent. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york and well talk more oil with the International Energy agency and it would be great to get a take on negative oil. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Francine race to the bottom. Crude hits the lowest price of the century as the demand crush hits the benchmark and opec with calls to commitment but no new action. The Senate Passes pandemic relief funds posing nearly 500 billion. The house is set to vote on the measure tomorrow. And roche sees a profit bond as they work on developing tests for covid19. The chief executive tells us they have Antibody Tests the start of may. Good morning and good evening, everyone, this is bloomberg surveillance. Tom and francine from london and new york. I know well spend a lot of time figuring out what the senate bill means for Smaller Companies in the u. S. But well also spend a lot of time figuring out what happens to brent crude. We saw the devastation when it came to w. T. I. First that may contract and now the june contract and we really focus on exactly what it means for brent and im looking forward to speaking to the head of the