Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

The bloomberg terminal back to work. Italy starts seeing its lockdown ease, france follow suit. Boris johnson returns to his post today. Adidas revenue slumps 19 in the First Quarter, but bayer catches oost with adjusted epic. Ebita. Surprise. Ish Deutsche Bank says that expects to post a profit for the First Quarter, but as it is unlikely to meet its leverage ratio in 2020. We are just under an hour away from the start of cash equity trading in europe. Let us take a look at futures as they trade across europe this morning. Looking at gains on futures of 2. 3 for the euro stoxx 50 bluechip european benchmark index. Ftse futures up 1. 5 . They have risen a full percent in the last hour. Dax futures are also up. In terms of the u. S. We see 1 gains across the major equity indexes in terms of futures. S p futures, dow jones, and nasdaq futures. Let us get the bloomberg first word news. In place a plan to start easing lockdown measures on may 4. Manufacturing and construction set to restart next week. Prime minister Giuseppe Conte is morning and second wave of infections would cause a resurgence in deaths, doing, quote, he reversible damage to the economy. Eusu is recovering the Recovery Fund should be worth 1. 5 trillion euros according to the former italian Prime Minister. He says the funds will need to be available by midseptember. Eu leaders are inching toward a deal. Yesterday, new yorks coronavirus deaths dropped to the lowest in a month. Setting andrew cuomo is a phase three opening to begin with disruption in manufacturing. It could start as soon as may 15 and probably will begin in upstate new york before moving to the city. Cuomo says as long as we act prudently, the worst should be over. In the u. K. , Boris Johnson is set to return to work today. Fter two weeks recuperating the Prime Ministers official country house. He plans to chair the government s monday morning meeting to coordinate efforts to tackle the virus with talk of easing , heswn and other nations under pressure to explain the next steps for britain. Global news 24 hours a day on air and at quicktake on twitter. Anna lets talk about markets this morning. We have global stocks in weekly gains. Bankidual stocks, deutsche calls a significantly higher at the start of the trading day with europe. Amid signs of positive development in the fight against coronavirus and a boost to stimulus measures from the bank of japan. Deutsche bank and lufthansa expected to go higher. U. S. Futures reversed earlier losses. European contract pushing up. Bring into the conversation our markets life managing editor from singapore, who is mark cudmore. Good to speak to you. How much is the strength we are seeing in the Asian Session to do with the boj . Is that all about the underlying debt data coming out of europe and new york . I think it is more about the positive perception on the virus rather than the boj. Everything about the boj is expected. Dollaryen is lower today, which shows despite the fact the boj brought out the bazooka, of course it helps sentiment. Japan, a country with externally mulus, was still governments and Central Banks and policymakers are not at the limit of what they can do. Fact italy washe not downgraded. Really the message, some economies are trying to reopen. Australia is looking to reopen. These stories are driving positivity at the moment. The price action is positive given that we started today a little bit negative. Matt we are getting breaking headlines right now from volkswagen. He ceo speaking they are reopening factories all over the place. He says a swift decision is needed to bring back demand. Hes talking about basically a cash for clunkers redux. Hes calling for state backed incentives to buy the car sales. It has been a common theme over the last week or so in germany. Do you think we are going to see cash for clunkers here or globally in order to bring back car sales . To them not as close german issue as you would be. I will say we cannot rule out any action in this environment. A month or so ago, the idea of the fed would support the bond market were crazy. Here we have the example of capital markets, free markets, and we have no sense of free markets at all. The Central Banks, in america, they have no limits to what they will do. There is no idea anything is sank or saint. Sacrosanct. Central banks will do what they can to manipulate these markets higher. Whether they will go to cash for clunkers, i expect some form will be the case. So we cant take anything off the table, not even inflation, it would seem. It seems phenomenal given the oil prices we have been talking about and the negative oil prices. We still see inflation references, looking at the pboc talking about how to aggressive macro stimulus may bring inflation risk. I know that on the markets life team markets live team you have been asking the question, how long before inflation hurts assets . Why the focus on inflation despite what we are seeing . Hard one. S a really the much bigger threat is deflation. Or is it really inflation . Many companies are gaining Pricing Power. One of the dynamics of this crisis, the banks that survive will have Pricing Power at a time when consumers will have pentup demand and savings. When we come out of this crisis, we are not expecting many of these businesses that might be struggling right now to offer discounts. A good example is in the Airline Industries or Restaurant Industries or shops. It is unlikely they are going to offer discounts when they have such massive Pricing Power with a consumer that not only has extra savings, has mass stimulus coming through. That implies inflation might be a risk. Of course you have policymakers doing so much to stimulate the economy, so much money pumped into the system. That is a traditional spear point for inflation. Hyperinflation is the big worry. Its why gold started that massive move. We are seeing fiat currencies undermined. I think actually inflation is more of a risk than it was in 2009. I never believed in inflation risk than. Im still suspicious now, but i think the argument, the risk of severe inflation, for the first time in the last 10, 12 years, finally there are valid risks. The pricing given power and liquidity in the system. Matt i can understand you know, the theory is clear and that is something that would be something of an assumption, but if you look at the gl seo, the global commodity prices, we are seeing 30 yeartodate drops in sugar, 30 in cattle. 15 in copper and aluminum. Obviously you have the oil crash. Things like zinc, platinum, palladium. They have all taken a huge step down. Wouldnt that make inflation difficult if all of these Raw Materials drive prices so low . The only thing i can see higher is gold, frankly, on the screen. Mark that is a very valid argument. It is why the idea of inflation is not definite, it is a risk. The reason not to read into those prices now is the fact that what we are seeing is no one wants food. The lower demand for food, the lower demand for metals, the lower demand for every hard commodity of the moment, at some point, when we get a natural disaster, we will resume normal Economic Activity again and demand will come back south. In the interim we will not have new mines. People will not plant new crops. We know oil wells are being shut. What we are seeing at the moment is a very very large supply destruction. We are also seeing demand destruction. The supply destruction is short term, which is why we see prices come down. The demand will come back and that quickly. In the future we are going to see a higher commodity prices. That does not mean it feeds threw two and cpi. The difference in the Consumer Price inflation basket is not a straight link, but there is a valid risk inflation may be a threat. Maybe it is early next year, not soon, though. Anna thanks as always. Mark cudmore from our markets live team. You can get involved on the what you think about inflation and what we are seeing in commodities. Bloomberg. On your get in touch with us. Next, we will dive further into that central banking decision and ask what other Central Banks we will hear from this week. More on central banking next. Bloombergome back to markets. This is the european open. We are 45 minutes from the start of cash equities trading. Futures are pointing higher. Investors are buying bonds in italy. We see italian bonds rising right now, pushing the yield down nine basis points because of the ratings affirmation. Italy was not downgraded to junk over theed at triple b weekend. As a result of ecb action, italy gets a little bit of a save savings in ratings and investors by those bonds. Lets get the Bloomberg Business flash. Here are todays top corporate stories off the terminal. Deutsche bank generated more revenue than expected this First Quarter. The german lender posted a surprise profit of just over 200 million euros, but says it will temporarily slip below a key target for financial strength. Ratio. Its cte1 the bank may have benefited from a surge of client trading amid market volatility. Airbus is warning employees the plane maker is bleeding cash. Their chief executive says it needs to quickly cut costs to adapt to a radical shrinking radically shrinking Aerospace Industry Airline Customers fighting to survive and unable to accept new deliveries. Airbus is reassessing its has planned to slash production by a third may not be the worst case scenario. That is your Bloomberg Business flash. It is a big week for Central Banks. Let us talk about what we have seen today, what is delta come. The boj ramped up its Stimulus Program, lifting the cap on corporate holdings. On wednesday, the fed kicks off its Monetary Policy meeting. On holde seen staying after emergency cuts last month. On thursday, the ecb is not expecting to move either, but Christine Lagarde could step up the Asset Purchase Program from the European Central bank. Chiefg us now, we have economist at ubs. We will talk about fiscal plans, but starting with the monetary side of things, how did these measures the boj has taken can the boj move the dial here for is the market expectation really more of a fiscal nature . I dont think it moves the dial. Under yield curve control, they effectively have commitment to buy an unlimited amount to the yield curve target. They would have to buy substantially less because they are so much of the market. Much, ity have done so is difficult through Forward Guidance to really get the market to move even more. Obviously this does not hurt. It aligns them with other Central Banks, but i do not think it matters. Matt what do you expect from the ecb and the fed coming up . Are they going to do more or is it now time to really allow fiscal action to take hold . Ecb, the possibility we get a tweak on their tie ring mechanism because they have been increasing texas liquidity, so they may accept more deposits from their threshold. Thats possible at this meeting. It is also possible they delayed until june, but that is possible. Other than that, there is not much to expect. The focus of the ecb is going to be around Christine Lagardes comments about the growth rate for europe, which is worse than anybody is forecasting. That is relatively uneventful. The fed likewise is still in emergency mode. Theyre going to make some significant changes, probably at the june meeting, where they moved to the form of yield curve control as well, they change the Community Program and roll out some new Forward Guidance, but i think it is early for that. This meeting is focused on dramatically changing the statement. You recall the last statement of the labor market was in good shape. That is no longer the case. The press conference and the meeting will focus on what they have done. Explaining it. Anna what do you expect from Unemployment Rates in europe . The preexisting protections are working differently in parts of the euro zone than the united states. Do you expect Unemployment Rates in europe to get as high as the u. S. . What is your expectation . Nothing like that. We think the european Unemployment Rate maybe goes up like 10. 5 . A 2. 5 percentage point increase. In the u. S. We think we are going to peak at 16. 7. Completely different employment outlooks. What that is reflecting is the Job Retention scheme, which in europe seems to be working. Just for germany, france, and spain, we have 28 million workers in those shortterm schemes, the furlough schemes in the u. K. , which are not part of that, but it is like that. There are more people to have entered those schemes that have been laid off in the u. S. I think that is positive on a relative basis, at least, for the european employment outlook. We are going to keep you with us. We have more talk about with the chief economist at ubs, Arend Kapteyn stays with us. Coming up, whether governments are doing enough to protect the economy. Some research on this with interesting conclusions. This is bloomberg. Anna 35 minutes until the start of european trading day. It looks like it will be positive. Inter news on death rates europe and new york. Forook to a better session european equities as well. Governments around the world are dedicating more than 8 trillion to fighting the coronavirus pandemic. In the u. S. , stimulus spending has been 3 trillion after President Trump signed the latest package to help Small Businesses on friday. In europe, countries like germany and italy have allocated more than 30 of gdp to direct spending, bank guarantees, and loan injections, before eu members reached an agreement on a block wide Stimulus Program in the future. Arend kapteyns chief economist at ubs and is still with us. Stimulus is probably not the right word. Protection is more apt given the makeup of the Government Spending we are seeing at the moment. I think thats right. And incomeacement edition. A lot of what is happening is Job Retention schemes. Governments are trying to. Eplace income it is not traditional quote unquote fiscal stimulus. There is almost no public investment, infrastructure spending. There is very little in the way of tax cuts. In 2008, a third of stimulus was public spending. Now it is 5 . The nature is very different, very focused on q2, focused on liquidity lines to keep firms afloat and avoid the on employment spike. We will have to see if it works. Matt is europe doing better at avoiding the unemployment spike then the u. S. . All i hear on this side of the atlantic is how well the programs around the continent are working. What i hear from my friends and colleagues in the u. S. Is that no small and Medium Enterprises are able to access loans because the funds just disappear instantly. The europeank schemes clearly are working. They are going to have unemployment increase of a couple hundred basis points, but for spain, france, and germany, we think we have 27 Million People or so in shortterm schemes. That is more people than the u. S. Has managed to lay off the past five weeks. It is clear they are working. In the u. K. , we will see. We are confident that relief is working. Scheme isthe ppp bigger now that it has been scaled up than any of the european programs, and i think there is some evidence it is starting to work. You cannot see that in the initial claims data, but you can see it in continuing claims data, which has started to deviate from the initial base data. There is some sign that because these schemes are retroactive, some people who were laid off are starting to be pulled back into the labor force. The reason it was not initially effective is partly it was a bit circumscribed to very small firms. It partly was not big enough. It was a new scheme. It was slow to get off the ground. It came a little too late to avoid the initial spike, but even in the u. S. There is so much money being spent. It should have an impact. Matt we will have to end on that optimistic note. Really appreciate you joining us. Anna welcome back to the European Market open. Half an hour to go. Futures suggest it could be up to percent on some European Equity markets. Tos look ahead to what expect from this week. Its going to be busy. The European Bank earnings season gets into full swing tuesday. Hsbc and ubs are the first to report results for the First Quarter in the european region. On wednesday, the return of automakers. Earnings from volkswagen, daimler, and tesla will show the extent of the damage from the pandemic and how it is shaping their plans. Wednesday is also a big day on the economic front. U. S. Ll get a reading of firstquarter gdp, expected to drop for the first time in six years and on the same day the fed will hold its first Monetary Policy meeting since january. Europet our attention to , where the ecb will announce its latest policy decision. Is expected to leave rates on hold, it could boost its bond buying program. Matt Deutsche Bank says its firstquarter results will beat analyst expectations. The lender announce parliament refigures overnight, posting surprise profit for the first three months of the year. Ouring us now for more is german banks reporter on the phone from frankfurt. Talk me through the biggest surprises here. The biggest surprises certainly a very Strong Revenue reporting. They did not say with the are, but fixed income trading is probably anna so fixed income trading, looking for positives there. When we look at what u. S. Banks have told us, the bad debt story, the provisions they make for bad debt will be crucial. Any suggestion that will be the story out of Deutsche Bank . Absolutely. They said they expect credit provisions for the First Quarter to be in europe, above analyst estimates. It is a lesser estimate then we saw in u. S. Banks. They did not say how this may impact the future, but it is something to keep in mind when thinking about the outlook. Did they give any indication they are going to need help, or are they urging the government to give more help to clients . Banks, it looks like the are doing well without government intervention. That is right. They are making the Balance Sheet available to companies that want to increase loans and therefore be part of the solution this time around. Say if they will wind anything up. They put a question mark over their leverage ratio, another metric of financial strength. They said they will not hit their metric for 2020 unless there is more relief, which has been forthcoming a lot recently. I dont know if they are suggesting more to come, but this is another thing we could keep an eye on. We had already heard from the bank about their costsaving measures and the measures that will not take right now. Any update or new information around job cuts at the bank . There have been plans to bring about, and they have been put on hold. What they have put on hold as the firing. Handing anyone pink slips at the moment. They said it would be unduly harsh during the crisis, but they did reaffirm their costcutting targets even for 2020, so it seems like they are confident they will hit those job cuts targets despite the crisis right now. Matt thanks very much for joining us. On the phone for frankfurt after Deutsche Bank confirms it is going to beat targets we were watching in its Earnings Release just a couple days from now. We are going to speak to the chief Financial Officer live on this program, so do not miss that. Lets get the bloomberg first word news. Isay, the bank of japan vowing to buy as many Government Bonds as needed. It is removing the cap on the amount of sovereign debt it can by, but economists are casting doubt on the impact of the measure. The central bank has not bought that level in recent years. The boj is lifting its cap on corporate debt. Crude stockpiles are making it more difficult to balance the market without cuts. The massive glut is taking tanks close to capacity around the world despite saudi arabia beginning to curb output ahead of the start date for opecplus production. It is starting to cut from 12 Million Barrels a day to 8. 5 billion barrels a day before the may 1 target. According to the Financial Times , the coronavirus death toll may be almost 60 higher than the official tally. Reports tallies in other countries show more deaths than usual, and if the same level of underreporting is true worldwide, the death toll could koreantion about north leader kim jonguns health intensifies after unverified reports about a visit by a Chinese Medical Team and the movements of the leaders train. Fuelingnce is speculation, but south korean officials have rejected the idea he is dead or dying. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Anna coming up on the European Market open, revenue slumping in the First Quarter. A significant amount of cash burn as well. About the speaking store closures. We have to reach out for help. We will talk about that with the ceo of adidas. Bloombergome back to markets. This is the european open. The boj saying uncertainties are high on the timing of the virus, and that is one pretty much anybody can tell you right now. He is paying utmost attention to the virus impact, which is great , but i guess a given for the head of one of the major Central Banks in the world. He saying theres no change in the bank of japan stance to achieve its price target. Todays outlook is largely in line with the imf view according to the boj export and productions are falling. Telling us fairly obvious things, but it is important because he is the head of the boj. Less than 20 minutes until the start of the european open. Let us talk about the stocks we are watching. Corporate reporting coming through from germany. We talked about Deutsche Bank. Dani burger joins us to run through others. Anza a left lufthansa has jumped. Lift anza running low on warned it will not be able to survive without state aid. We heard from government officials. Lufthansa is systemically important and they will not allow it to fail. They are negotiating for an aid package. The details need to get figured out. Confident thetors German Government will not allow fthansa to fail. Matt bayer reported earnings. What is the story . Bayer says they are heading toward a potential liquidity crunch. Already they are dealing with economic crisis brought on by coronavirus. It has been dealing with litigation from a case in the u. S. , that roundup the weed killer cancer. The question remains, but in the meantime, its going to face a considerable liquidity crunch. At the same time, the effects of covid are impossible to assess. They said they will not be able to give a reliable earnings forecast until later in the year. Analysts are more optimistic. The Consumer Care unit has aturned, so it should be bounce in todays session. Thanks very much. Dani burger on the phone with stocks to watch this morning. We will be speaking with the ceo of bayer later this morning. Joining us shortly after 8 00 a. M. U. K. Time. Coming up, adidas revenue fall 20 actually, in the First Quarter amid impact from closed stores due to the coronavirus. We are going to get more details. That interview next. Matt this is the European Market open. 15 minutes from the start of cash equities trading. Higher are pointing to a open this monday. Deutsche bank generated more revenue than expected in the First Quarter. The german lender posting a surprise profit of over 200 million euros. The bank says it will temporarily slip below a key target for financial strength. Ratio, though it has beaten that previously. The report suggests the bank may have benefited from certain client trading amid market volatility. Airbus is warning employees the plane maker is bleeding cash. The chief executive says it needs to quickly cut costs to adapt to a radically stringing shrinking Aerospace Industry with customers unable to accept new deliveries. Plans to cutt production by a third. That may not even be the worst case scenario. Bayer says it may face considerable liquidity challenges as it tries to resolve the mountain of litigation it faces over claims its roundup weedkiller causes cancer. The number of plaintiffs is now 52,500. Point 5000 that is your blumberg business flash. Anna lets talk about other things coming up. Central banking in focus. Its going to be a big week for that. We have heard from the bank of japan. Governor kuroda giving that press conference. Up stimulusj ramps promising unlimited bond buying, a number of other lines in terms of what they are looking at. The Downside Risks to the japanese economy, the things they are not changing in regards to inflation targets. Is up for that moving debate. Mark cudmore saying it was not particularly that. The move from the boj in the Asian Session was some of the best news, the tragic death toll around coronavirus. Tomorrow we will hear from the riksbank. Wednesday, the fed kicks off its first scheduled Monetary Policy meeting since january. After twoold emergency cuts last week. The ecb is not inspected to move either. Christine lagarde could step up the asset purchasing. Adidas forecasting a loss in the Second Quarter as revenues slump because more than two thirds of the german athletic companys stores are closed, due to the covid19 pandemic. Thank you very much for joining per. Kas i want to talk about the rate you are getting through cash. First quarter you got through 1. 4 billion euros of cash. Do you expect things to worsen in the Second Quarter . How much will you need . On our Balance Sheet we have close to we dont believe we will have a cash crunch moving forward. The question everyone is asking is how quick will the recovery come. ,hina has been a good indicator particularly in the month of march on retail. Standpoint, it will be a very difficult year. You told us previously in our last interview your Balance Sheet looks good as well. The work youdue to have been doing on it and that you did last year. Is there any reason you would need to tap state loan programs for help . We did that as you saw by the end of march. The frontrunner was unicredit. Closed in the month of april. We could not foresee that when we had the conversation in march. We are seeing a very slow opening and that means we need a different Balance Sheet with a closed down world. I think what we have done is make certain we have a healthy Balance Sheet. You say things have changed in the last five weeks or so. You had insight into what was coming because of what you had seen in china already. Would it be safe to say you have been caught by surprise in terms of how bad things have become for europe as a Global Business . That would be a gross misstatement if you were to say that. March,e third weekend of i dont think anybody would have expected the world shut down. What we did see were early indicators. That the world would close down over three days, we did not foresee and i dont think anybody else would foresee. What we have done matt i have to i have to disagree. I had a flight back home march 15 that i knew the week previous i was going to have to cancel because i was afraid i would not be able to get back to germany. You were still buying back shares at that point and that has made a lot of germans pretty angry. You are buying back shares into march when we knew the world was going to shut down and then you are borrowing money from the government, from Government Programs the next month. That is a real concern for germans and i think for shareholders as well. We stopped our Share Buyback on march 16. That was the week the world close down. That is also a fact. Our we have done industry is hit much harder because we are retail. When the retail store closes down we dont have any revenue. Frankly, i think right now the world has been surprised about the speed and the rapid and the rapid is the world close down. Ith anna what are you going to be doing now to shore up your cash reserves and the Balance Sheet . Are you going to be trying to take on debt to repay that government loan . There had been suggestions that might be in the plan. Kasper first and foremost we need to get the business back on track. In the firstowth quarter, 55 in march, increasing also moving into april. On the operational side, then oure are torn it if alternative financial vehicles. First, the operational business has to get back on track. The primary vehicle in the shortterm is online business. You have not had discussions about raising money with private debt in the coming months . Frankly these are internal matters i would not put in a press interview. We have every intent to repair state backed loans. Very very natural. I dont think it would be appropriate to discuss our Balance Sheet strategy in an interview. Anna you mentioned the first line of defense to get the business back up and running. How quickly can you go digital . What kind of for placement can digital become in this era where you have 70 of your shops closed . What we are seeing is 35 percent growth in the First Quarter and 55 in the last month. We are reallocating resources across the board into digital channels. We are reallocating products. We are increasing our investments and building infrastructures. That will not be enough in the short term to replace of course the physical stores, but we assume markets will start opening up. In smaller markets across europe you are seeing germany take the first small steps and the rest of the world will be looking on germany area on germany. We are seeing strong recovery in korea. Our guidance for the Second Quarter is the result of an entire month being close down. Lufthansa doesnt see full demand coming back until 2023. Do you expect it to come back sooner for adidas then for the airline . Expect we would normalization before than. Have beeneople who locked in to apartments and houses in many places in the world want to go out and move and exercise and walk or run. Being locked up. The underlying trends for the sporting industry with the focus of health and wellness has only been strengthened. In the mediumterm in the shortterm it is very difficult to make the call. Nobody knows the speed of opening. Matt thanks very much for joining us. Kasper rorsted, ceo of adidas. Anna a minute to go until the start of cash equity trading for this monday morning. Back to work. Italy starts to ease its lockdown in france aims to follow suit on may 11. Boris johnson returns to his post today. Adidas jumps 19 in the quarter. We will speak to the chemical makers ceo this hour, bayer. And Deutsche Bank says it expects a profit for the First Quarter. It is unlikely to meet its leveraged ratio for 2020. Matt we have futures pointing to a much higher open this morning after a lot of those earning surprises the positive surprise by Deutsche Bank. But as we heard earlier from due cudmore, it may be more to the slowing of coronavirus cases. Futures pointing to gains of about 2 across the major equity indexes. Markets are opening as we speak. Take a look at the initial indexes to start trading. Ftse 100 typically starts trading first and we can see the londonhey are on the index. Of more than 1 . Spains ibex, gaining 2. 4 . Is up 1. 6 . Msterdam and the tax is up 1. 2 and the cac is up 1. 2 . Opening highers amidst signs of positive developments in the fight against the coronavirus. Let us go ahead and get over to our guest right now, bill dinning from Waverton Investment, the cio. L, even with a positive signs in terms of coronavirus, new cases and still have you incredibly high equity valuations. At one point, we were looking at almost 20 times forward earnings for u. S. Stocks last week. Does this make sense to you . It iswell, i think certainly a challenge in terms of trying to figure out how to invest around it. A lot of the good news about the q1overy we are getting earnings and more visibility from that. But it is q2 where the biggest so it is still unclear about how big the hole the is bbeing dug by cessation of activity. We dont know how steep the downturn will be. We are skeptical because there is a lot of liquidity being thrown at this. That is the path keeping investors feeling constructive. Is some ofand it those thought process is going into a setting oil. Good morning. Checking the price of oil. 14 on wti. To 20 ade down 5. 5 barrel. E have been lower than that and all of the turmoil of last week. And yet you have chevron and shall as stocks that and shell that you are holding as stocks at the moment. Why do you have confidence . I think it is an industry that lets face it, a lot of people have challenges with it but it is still the very foundation of the modern economies. It is the base of the value chain. There are huge challenges at the moment. But if i were to talk the logic , we would expect a recovery and the demand for oil. Things on think about a longerterm basis. And certainly, it is quite clear companies r oil their dividends are attractive optically. Even if they have to reduce them. They are still attractive. You about a portfolio and up having to take a view that there is enough valuations to suggest longterm ownership of some of those companies is still justified. You expect Oil Producers to continue paying dividends, bill . Bill well, [laughter] it is rather different from companies that have had to take government support. We will have to see. One of thei think issues for the oil industry is a backdrop of the collapse in demand. It is such that it is very much at the forefront of that cyclical collapse. Is integral toy the Global Economy. So at the moment, things could. Ot be any worse hopefully, we will get some sort of recovery and than the demand for oil will go back up pretty weekly. If that happens, this is a sector that nobody likes and it is possible that it might turn out to have some longerterm value in it. Another sector that will perhaps suffer longterm damage as a result of the coronavirus outbreak is the real estate sector. Office buildings. You have some concerns around exposure to real estate from Pension Funds. There will still be demand for Residential Property one assumes. Is there an opportunity there to switch . The Pension Funds and other Institutional Investors have become more involved in residential. I am thinking slightly parochial he about the u. K. Parochially about the u. K. Tax changes made it very unattractive but investors have gone back into residential with the private rental sector in particular. There is a question mark about the office sector. The commercial property portfolios have already had some issues around retail which is likely to be more challenged after this. The big question is the office sector. How will this change working patterns . We are all working from home. Will there be a secular shift in terms of demand for Office Property . Will people want to carry on working from home . Will not companies have to have the same footprint. And there is an interesting story about what the big global banks and brokers are thinking about in terms of getting people back to work in skyscrapers. These are structural challenges and one of the big holders of u. K. Property is the pension fund holders. Area that is another where the potential strain is flow isnd on the cash an issue. That is another challenge. But it is probably not as big a worry as the others. Matt companies will be thinking about the overhead they spend a lot of Companies Regarding offices when many employees can work from home. I think society will maybe think big push in terms of population density. People stuck or living in tenements cannot be very happy about that now. Bill dinning will stay with us, cio of Waverton Investment. There is a lot going on in the markets especially in terms of german movers. Look at the biggest corporate stories including bayer looking for a little help or hoping for a little more optimism on the monsanto cases. Deutsche bank coming out with surprise earnings preview overnight which shows it is going to beat expectations. I think the official Earnings Release is wednesday. Adidas is saying revenue fell almost 20 . You can see adidas shares right now down 3 . Stores, their retail 70 80 are closed right now. Ask risk. European stocks gained as the continental lays out reopening plans and italy avoids a downgrade over the weekend. We will discuss this next. This is bloomberg. Anna welcome back to the European Market open. Just over 10 minutes in to the trading day for European Equity markets and we are seeing a little return of optimism. Let us talk about what is going on in the Asian Session. Kuroda giving a press conference. Are among extra options if needed according to him and he also said he will not let the 10 year bond yields rise for the time being. The group ofof tools we know that the boj uses. Could that be taken up by a central bank . Are still on rates the table and they are among the extra options if needed. We heard more from them in terms of the Government Bond buying program. Let us return to our conversation with bill dinning from Waverton Investment management. We have had european equities rising today with italy dodging a downgrade and europe focusing on reopening plans. Sliding this morning and we see more appetite for risk. Bill, do you believe that europe has managed to do up theough to shore eurozone at economy to avoid fragmentation . Be what theeems to market is saying. And the spread on italian Government Bonds and German Government bonds have widened out. They are not at crisis levels. And the avoidance of the downgrade for italy is probably helpful. There is a question on an ongoing basis given at the deep decline in the economy and there does not seem to be as much help being provided by the fiscal side in the eurozone as there has been here in the u. K. Or the u. S. Be a questions to about the strength of growth within the eurozone economy. That, the stock market is probably more about the strength of the Global Economy versus the domestic economy. Matt do you think we will see uneven recovery throughout europe . And for the time being, i will include u. K. By my definition of europe, so far they are still in it. In an unintentional way seem to have really bumbled the epidemic as opposed to the way the germans have handled it. Wey are still open where as are Opening Stores here in berlin already. Will there be an uneven recovery from this . Bill that is a good question. I think we would not disagree with the fact that the way that certain countries on the continent handle that in the early days was better than how we manage to eight here although there are some signs that we might be catching up a little bit. And there is obviously a lot of talk about the u. K. Reducing the lockdown. Although we are about two weeks behind some countries, it is possible we may try to reduce the lockdown a little bit earlier. That will then there is a tradeoff in terms of the health risk which we dont know yet. We dont know how much we are risking yet coming back again but in terms of the economy, there has been a lot of support provided here. There are probably a lot of questions about the execution or delivery of that support to , thatsses but over time will probably improve as well. The economic hit in the u. K. Might be a bit less than in some places in europe complete because there has in a bit more thrown at it. But we will have to see. But certainly we would except that it does look like some parts of europe will be opening up the are and that will be interesting to see what that does to economic act pretty. Economic activity. Will people go back to the way they were . Matt it is certainly true that the bank of england and this government have done a heck of a lot in order to bridge this eriod and then to boost recovery on the other side. And of course we hope for the best. Bill dinning, cio of Waverton Investment anagen it on a day when aptly Boris Johnson goes back to work at 10 downing street. We assume he is already sitting at his desk. Coming up next, we will speak to the ceo of bayer. Berner baughman. Shares and that company are mayng in the First Quarter be based on some optimism regarding roundup relief. This is bloomberg. Matt welcome back to the european open. We are 20 minutes into the trading day. Across at some gains equity indexes in europe. The ftse is up 1. 5 . The dax, 2. 25 . Contributing factors there are. He gains in shares for bayer the liquidity challenges as the pandemic continues as it tries to resolve the mountain of roundup litigation in the u. S. It adds that it is impossible to assess the impact of covid19 now that a reliable earnings forecast will be possible until later in the year but investors were impressed with firstquarter numbers. Joining us now is the man responsible for that, werner baumann, the ceo. About the success you had in the First Quarter and how your previous work and prepare you for the uncertainty ahead. Werner first of all, good morning and thank you for having me. Indeed, we had a very good First Quarter. Partially driven by increased demand due to the covid1 crisi. The biggest challenge has been ourinuing to run operations. Our people has done a marvelous job keeping the company of float and showing resilience in terms of our Production Network which has allowed us to respond flexibly to a highly volatile demand. That has yielded a 10 increase 6 increase in topline for the quarter and a 10 increase ita and to our earnings per share. We do not know exactly how the restart and the unraveling of the current lockdown around the world will work. And hence, we have said it is too early based on the First Quarter to have a perspective on the remainder of the year. Anna good morning to you. Do you expect the Management Board to get the support of shareholders this week . Will you get more support than last time and what kind of percentage would mean success . Actually, talking about quarter one, 2020 if i look back at 2019, i would say we have delivered. Operationally, strategically. We have significantly stepped up our engagement with shareholders around the world with more than 500 shareholders representing 60 of our equity in the company. Feedback during these discussions has been a appreciative. We have delivered on all of our portfolio measures with strong outcomes. Strong outcomes for the company and our shareholders. We are looking at a hm tomorrow that will be characterized by it being the first one ever of a Dutch Company to go online as an agm. But i cannotered speculate on the voting of our shareholders. Matt i think everyone understands the covid19 uncertainty. The roundup uncertainty is far more of a concern to your shareholders. What are you expecting as far as an Approval Rating . 90 cally, german ceos get or more. This will be more difficult for you. Would you consider 70 a success tomorrow . Welcome again, we are very happy with the performance of the company, our entire organization has done a marvelous job in 2019. We are looking with confidence and optimism forward to the agm tomorrow. Covid is a concern. I think we have coped with it very well in the First Quarter. Ghen it comes to the life i litigation, we have been clear on our position. It has not changed. We are doing it in the best interest of the company and the shareholders and i am it has been appreciated. Producevid19 you chloroquine, in malaria drug. Do you have a timescale on when you might know when it is safe . You have an expectation it could be useful . Werner we invented chloroquine more than 80 years ago. It is a well understood malaria drugs. It is not indicated for covid19. It is indicated for malaria. Fromve anecdotal evidence some treatments in china that it thet work and help smoothen trajectory of the disease if given early and in combination with an antibiotic. We hope to have a readout and the next weeks and then we can see whether it really works and can actually provide significant relief to many, many people around the world. We are increasing and restarting our Manufacturing Activities in europe. We have secured significant Raw Materials to do so and produce millions of doses. Once approved and proven that it works, we will donate all of that to as part of our humanitarian efforts to help people all around the world. Anna werner, thank you for joining us. Werner baumann, ceo of bayer. Governor cuomo of new york is setting out plans to reopen the city with careful caveats. This is bloomberg. Save hundreds on your wireless bill without even leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, youll only have to pay for the data you need starting at just 12 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. Its the most reliable wireless network. And it could save you hundreds. Xfinity mobile. Anna welcome back to the European Market open. A halfhour into the first trading day of the week. A strong session in europe. The ftse 100 is a bit of a laggard but still up by 1. 5 . Let us take a look at some of the details. On the grr function with a sector breakdown. Inhave a german theme terms of the sectors. A strong showing from Deutsche Bank as they put out their topline numbers come a glimpse of what they managed to achieve in the First Quarter which is of interest to markets. Travel and leisure and lufthansa a stronger stock there. There are expectations that funds could be shortcoming. Forthcoming. Andhe downside, food beverage. Oil prices continue to drop. Ine upon a time, a 14 drop wti would be a lead story. These kinds of volatile movements in oil seem to be a daily occurrence. Att absolutely we have come to expect them as specially at these levels. Trading like a penny stock. Let us get the bloomberg first word news. Top stories. Italy is putting in place a plan to start using lockdown measures from may 4. Next monday. Manufacturing and construction rstar are set to start next week but the Prime Minister is warning a second wave of infections would cause a resurgence of death and irreversible damage to the economy. The massive glut of oil is close to capacity around the world despite saudi arabia beginning to curb output i had of its start date for the opec reduction. Saudi is cutting production to the agreed level of a. 5 million before the may 1 deadline. Speculation about north korean , his healthjongun has intensified this weekend after unverified reports of a visit by a Chinese Medical Team to north korea and the movements armored train to his favorite summer beach house. His twoweek absence is fueling speculation but south korean officials have rejected the idea that he is dead or dying. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Anna let us talk about the fight against coronavirus in the u. S. New york, the epicenter of the u. S. Outbreak, has outlined a phased reopening plan but not until at least may 15 and only if hospitalizations keep dropping. Are grapplingnks with the logistics of how they can use their offices safely. Something other businesses around the world will no longer relate to. Us nowe hordern joins looking at all sides of the story. Both sides of the atlantic are looking at how to open the economies. Wethis is the first time have heard really detailed plans from Governor Andrew Cuomo about reopening new york state but he says it will be complicated. A lot has to do with the fact that new york city is the epicenter. You have huge transfer hubs to new jersey and long island and connecticut. Be forof will likely upstate new york. He said construction and manufacturing will be the first to reopen. And then they would take two weeks to go through the analysis of the data before other businesses will come back online. And he said those businesses would have to be a essential. It does seem to be an approach that is slow and gradual the pending geography and how essential your business is. Andrew cuomo said that at this point we have gone through the worst but they must act prudently. Similar to what we heard from leaders in europe, primarily ly where the error said where the Prime Minister said that we can reopen businesses as long as people do not fall ill and we can maintain social distancing. Partsbanks are one of the looking to reopen. Normally i would wonder why anyone would need to go into a sok but i guess right now many Small Businesses and consumers are needing to access lines of credit. Are doing whats all these companies are doing which is working from home. But what the banks are talking main wallhese are the street banks, goldman sachs, jp morgan, they are talking to their employees about their plans. We are about some of those plans. One thing is clear it will be a slow and gradual ramp up. All that these manhattan headquarters being filled up all at once . Thething on their radar is logistics around the lobbies and the elevators. On how granular these discussions have been, jp morgan will limit how many people can ride at once. Similar to what andrew cuomo talked about in terms of reimagining how we go to work in terms of temperature checks and masks at the desks. And the reconfiguration of workspaces like cafeterias and coffee rooms. Goldman sachs is looking at a slow ramp up. Coming on employees line. And then 30 and 40 etc. Older, theyat are could potentially work from home for the rest of the year. The planning that is happening suggests it will be a slow process. And these banks have some of the departments around the world so they can really set the tone on how organizations will reopen around the world. Anna we are watching and to ourg from talking colleagues in hong kong and broader china. Thank you, Annmarie Hordern joining us from new york on how they are planning to reopen their. Up next, we will continue the conversation about the Global Economy and how it fares in the face of coronavirus. And we will be speaking to mer an interview coming up next. This is bloomberg. Anna welcome back to the European Market open. Dayinutes into the trading that has been broadly very positive for european equities in particular german once. Let us talk about the Global Economic picture. When it comes to combating the coronavirus outbreak, how much should politicians listen to medical experts . Mervyn king argues the u. K. Government should not be dictated by scientific advice. He writes when assessing the shutdown, the government should not delegate responsibility to scientific and medical advisors to matter how expert. Mervyn king joins us now. Beenu think that there has too much guided by the science in the u. K. . Mervyn it is hard to judge what motives politicians have but what is disturbing is when they claim to be doing what the science tells them they must do. Science never tells politicians what they must do for two science one is the itself is uncertain. Even the best science cannot exactly predict the future. And secondly, that the science itself on the epidemic does not take into account the costs even in terms of lives about the costs of a lockdown. The role of politicians is not to ignore the medical advice at all but to probe and challenge it and recognize that they must take responsibility for the decisions which only governments can take. Have they been doing that do you think to your satisfaction or to the satisfaction of the people . It seems they were a little late even the advice and Prime Minister, the highest Political Office in the country saying he was shaking hands with everybody and not terribly worried about it and then ended up in the hospital a sickly fighting for his life. Mervyn i dont think this is the time to criticize people because all of us were taken by surprise by the severity of the disease, covid19. The important thing is to say well, we are where we are now and where do we go Going Forward . One of the consequences of jumping into such a severe lockdown is that you do that without thinking about how you are going to get out of it. I think the government is now confronted with the need to trialwhat i would call a and error process in which it will need to relax some elements of the lockdown and see how that pans out in terms of the number of cases. And then either withdrawal that measure and try Something Else or go a bit further. I cannot see any alternative now but to move gradually towards an easing of the restrictions and n noticing what happens. Think isr risk i , do we or notn see a significant second wave . Keenly watching that. We heard from the bank of england over the weekend. The governor was talking about how the bank of england measures can prevent longterm harm to the u. K. Economy. In terms of expectations, do you agree with that . Can the bank of england prevent economy . Harm to the immediate need now is for the economy to produce to avoid longterm damage. Especially small and mediumsized economies to companies to go bankrupt. The government will have to weigh in with grants. They have lost income as a direct consequence of the Government Shutdown. The government has to take responsibility for that and that is another reason for wanting gradually to find ways to reopen the economy to allow these businesses to start up again. Boosting the number dotests make that easier to or make it safer to do . Ofvyn boosting the number matt testing. Great everyone talks a deal about testing and in many ways it would be highly desirable to do many more tests. As a think using testing means of enabling a significant reopening of the economy would require an expansion of testing capability way beyond anything which the u. K. Has the ability to do at present. The u. S. Economy has abdicated testing as the vehicle for reopening the economy but in his view come in the united kingdom, we would need the equivalent of andral million tests a day we are struggling to get anywhere near the governments target of 100,000 each day. We are an order of magnitude of away from the test required. To enable that to be a viable strategy. It is not to say it is not a great ambition. And if they might of American Science can find ways to help the u. K. Develop a lowcost and effective method of doing testing, that would be enormously welcome but i cannot see it as something available in the immediate future. Anna on what kind of timescale do we need to see reopening . The formerond, chancellor was saying a couple of days ago that the country cannot afford to wait until a vaccine is developed. The economy simply will not survive that long on these kinds of special measures. What is the timing for reopening from an Economic Perspective . Hammondsshare philip view on that and a vaccine is a long way away in terms of the current timescale. I think what the government needs to do is to set out for the public a clear statement of the difficulties which it confronts having gone down the path it did. And the only way forward now is to start by experimenting whether it is in particular sectors or parts of the country with easing some of the restrictions. Waiting a couple of weeks to see what happens. And then either revising the strategy for reopening or trying some further measures. It is going to be a trial and error process and i really cannot see any way around that given where we start from now, a total shutdown. Spellvernment needs to that approach out sooner rather than later. Matt the u. K. Government and the bank of england have done a heck of a lot certainly relative to other countries in terms of trying to bridge the Government Shutdown here. What about stimulus on the other side . , theard today volkswagen ceo asked the German Government to do a cash for clunkers program, some stimulus to get people buying bigticket items again. Do you think the u. K. Needs to do Something Like . That . Like that . Mervyn i think that is an immediate need now. The treasury has made it clear they would provide any stimulus they judged to be needed but at present, it is not needed because the government told us to go out and spend. They are trying to stop the economy from functioning at the moment. Is onestion of stimulus for further down the road and the bank of england can take whatever measures it feels appropriate very quickly. I dont think that is the immediate issue. The immediate issue is how to prevent businesses from going bust. The reason we should not prejudge at this stage what businesses will need help down the road is it is quite likely that no one can know at this stage that there will be a change in the pattern of spending. Peoples habits and how they choose to spend their money whether it is less on International Travel and restaurants and more on gardening equipment and do it yourself we dont know what will happen but it would be a formistake to lock in now the permanent future a pattern of spending and hence support offered to companies that would guarantee them a longterm future. What we need to do is recognize we have suspended the operations of a market economy. We should suspend bankruptcies in the short term in order to get to a point where we can start to allow the market economy to function again and that will determine which businesses survive and which wont. Front, inso on that terms of supporting businesses through this, we have had the kuroda Business Interruption scheme coming through from the government, do you see design flaws . Mervyn i think the big problem with that scheme simply has been the logistics. Im sure it is possible to design a better scheme and with many more weeks im sure the treasury could of done so. But it is a pretty good scheme. I think the chancellor might well do a good thing to extend the guarantees to 100 . If that breaks the logjam about extende an cautious to the loans. The big problem is going through the Banking System which looks like the sensible way to do it which means we would be subject to the concern of banks to push businesses to other loan schemes , all of this has made it more difficult as a vehicle. I think the government needs to get a grip on this and find a way through it. Things are improving from the unfortunate slow start. It is improving. That i think they will still need to do more. I think the other way of approaching it would have been to have said that many businesses that were viable last on their ownes revenue whether it be income tax or value added tax and we couldve considered reversing the taxes. Allow the revenue to repay those tax payments in the form of a loan which later on couldve become a grant had the government decided to do that but at this stage it is a purely logistical issue rather than worrying too much about the high level design. King, thank you so much for joining us. We appreciate spending time with the former bank of england governor. An author and a Bloomberg Opinion columnist. Continue theill conversation with us on Bloomberg Radio at nymex like am u. K. Time. Two in for that. How long before inflation will hurt assets . We will put that question to lara cooper. This is bloomberg. Matt welcome back to the european open. Minutes into the trading day and looking at gains. F 2. 5 on the dax the ftse 100 trading up 95 points to 5847. Some of the biggest movers are here in germany after a slew of results. By surprise. Coming and some speculation in terms of what is going to happen in terms of deutsche lufthansa. Companies are getting support. Deutsche bank came out with results that beat analyst estimates are ahead of official results due wednesday and adidas is up 4 . It had been falling earlier. It is also getting help from the government loan scheme. Anna . Anna oil prices are not up. We are used to talking about weakness in oil prices but we saw a few days of gains. Wti is down another 13. 5 . 20brent crude priced at down by just shy of 5 . The overall story around the oil glut globally and the race to find storage or the battle to find storage for much of it. The question now with the race in production coming down italy announces a path out of the lockdown and france follow suit as Boris Johnson get back to work. They are report suggested earnings up 10 , we will speak with the chief executives of both companies. Asset managers dealing with the coronavirus challenge. In a few minutes from n