Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Bloomberg surveillance, im Francine Lacqua in london. There is movement on the pound because what we heard from the boe. It has been absolutely amazing trying to figure out exactly the premise at which mr. Bailey is expecting the economy to do. We understand the bank of england is expanding stimulus as soon as next month to help the battered u. K. Economy. He once again reiterated that there is an unwavering pledge, which basically means that the market is taking it as further boe action possibly being imminent. Set and of england will asked if necessary to deliver the monetary and Financial Stability to deliver longterm Financial Stability. We are speaking to governor bailey later on. Know whether that means we have negative rates next, but certainly to have an impact on euro. I thing we have a data board for you. Is an actionfilled Currency Central Bank kind of day as we also heard of a lowered benchmark rate from norges bank. Lets get straight to the bloomberg first word news. Top trade negotiators from the u. S. And china will speak next week on progress in implementing a phase one deal. President trump has threatened to terminate the deal. It will be the first time the chinese vice premier and u. S. Trade representative Robert Lighthizer have spoken since january. The World Health Organization is considering a new mission to seek the source of the coronavirus outbreak in china. They are calling for a trip to uncover the animal origins of the pandemic. It comes as the white house says there is evidence the virus came from a lab in wuhan. Intelligence agencies are casting doubt on that theory and china has repeatedly denied the claim. A stark message for investors from larry fink, things are likely to get worse. In a call this week, he set out a grim outlook for Corporate America that includes mass bankruptcies and an increase in the Corporate Tax rate to as high as 29 . Larry fink says there is a risk the outbreak will be severe enough to live a long Lasting Impact on the american psyche. Relieve partst to of its nationwide lockdown. There will be a full statement on sunday from boris johnson, under pressure to get British Business moving again without causing another surge in virus cases. Countries companies are warning that any continuation of social distancing will hurt recovery. Benjamin netanyahu can form a government despite the charges against him, the ruling of the countrys highest court. The controversial decision paves the way for the ending of a year of political stalemate and forming the first stable government since 2018. The start of netanyahus criminal trial is set for late may. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thank you so much. The bank of england is signaling it may need to do more to combat the coronavirus slump after lawmakers voted to keep the benchmark Interest Rate unchanged at a record low 0. 1 and said the u. K. Economy could contract as much as 14 this year. Joining us now is the head of u. K. And european rates strategy at ubs. Thank you so much for coming on. Why wait until june and not act now . Well, i mean that is a very good question. We always thought it probably made sense. Frankly because the outlook is so uncertain. See them coming up with scenarios rather than specific forecasts. Acknowledging that the outlook has never been so clear. More purchases, which will run for another three month, investors that the bank of england is suggesting by july. That seems to be the right time to make a decision. The majority of members essentially agreed with that view. Francine john, what are the chances that the u. K. Goes into negative rates at this point . John pretty slim at this point. They did not talk in detail about bankrates and the new report. In their forecast, they had the rates staying at 10 basis points right through to the end of 2021 and beyond. They have always said in the u. K. That a rate close to, but above zero, and other words where we are now, was essentially a hard floor for policy rates in the u. K. And negative rates would be counterproductive to a degree because it simply squeezes banks margins. [indiscernible] margins andreasing fees elsewhere to protect margins. They still seem to have that view. 10 basis points is where we stay on bankrates. We dont think for the moment there is much possibility of rates moving for the foreseeable future. Francine what do you see at the biggest unknown . If you look at the forecast of the bank of england, down 14 for gdp, but then he recovery in 2021 are they more optimistic than the ecb, are they too optimistic . John i think they would probably be the first to say or indeed they do to a degree in these forecasts that they are scenarios. Thatnk it is fair to say the sooner things bounceback, the greater the likelihood they do so after a horrible second quarter. Time, if thats of has transpired, we will be looking back on a situation where there has been a huge, but very temporary economic shock. In that environment and if the policies further employees and give the companys grieving space to get through this, you could expect significant rebound. Clearly, the longer it goes on, the more the risk that they can rebound and the more that it will be anemic. That is what the bank of england and policymakers everywhere are throwing everything they have at this in the hopes that that helps it in terms of it being temporary and helps the rebound. Time will tell whether that will be successful or not. Francine what does this all mean for guilt gilt . John for us, it means that yields will stay exactly where they are. It will not move materially in either direction. Further down the curve, we think they have made a pretty clear essentially today that the economy is still struggling in six weeks and they will do more qe. Against that, we are getting a lot of supply, as well. Essentially, what is the bank of england focusing its purchases much more on the longer end. For us, it means the curve will continue to flatten, yields will continue to stay low and be , ford lower and volatility both issuers and the bank of england, volatility should stay relatively low and contained. We think thats what the bank of england would like to see. Isncine the bank of england expecting a huge slump this year. A lower for gdp and than massive pickup in 2021. What if this year is not down as bad as 14 , but we have a second lockdown and we are much worse in 2021 . Does that change your perspective completely . John it would do, yes. If we go back to what we were talking about in terms of the subsequent direction of trouble to the economy, if we talk about a less severe slump, a more protracted one, i think it achieves the risks of a subsequent rapid rio acceleration re reacceleration, some jobs just will not come back after a more prolonged slowdown. It also explains why they are feeling their way almost sort of quarter by quarter rather than precommitting for the longer part. We just dont know how things will play out. In that scenario where growth is not hit as hard, but it for longer, it suggests the policy response will have to go on for longer, even though it may not be quite as emphatic, but they are trying as hard as they can to calibrate with the nature of the economic slowdown, clearly doing that realtime is extremely difficult to put it mildly and that is why they are setting their policy really in the very shortterm horizon and sending up every clear signals that they are ready to move in either direction. I think that is the best that we can hope for them to do, really, for the foreseeable future. Francine john, thank you so much. Stays with wraith us. A few minutes ago, we had norges bank revising its rate to zero. The decision was not expected. It was only seen by two out of 21 economists in the bloomberg survey. We will have plenty more on that. In the fallout from covid19. Currency. Ian coming up, the interview you dont want to miss, the bank of england governor andrew bailey. You can catch that interview at noon today. This is bloomberg. Finance, economics, politics, this is bloomberg surveillance. Im Francine Lacqua in london. Lets get straight to the Bloomberg Business flash. Telefonica and Liberty Global have agreed to combine their u. K. Businesses. O2 and virgin media. The deal values the company at 31 billion pounds. It will create a fully fledged competitor. British airways Parent Company is working to help its liquidity. Flying ino return to july, but fullyear capacity will only be half the usual level. The airline is already trimming down for the future. British airways plans to cut 12,000 jobs, about 30 of its workforce. A bailout for lift onset is being slow down but lufthansa is being slowed down in berlin. It wants 25 stake, plus one vote to have veto power. Some are arguing this would give the government too much power. That is the Bloomberg Business flash, francine. Francine thanks so much. Employment in the u. S. Plummeted in april by 21. 2 million according to adp data as coronavirus mitigation efforts broad Business Activity to a standstill. This ahead of the april jobs report tomorrow. The Labor Department figures are expected to show a record 21 million decline in total nonfarm payrolls and the jobless rate surging to 16 . Still with us, john wraith from ubs. What do you make of what the u. S. Is going through . Should we worry about inflation . John . At think weve lost john. We will get back to john very shortly. A lock coming your way. We have a full data check. The interview also of the day. We speak with the bank of england governor andrew bailey. Let me just recap a little bit of what we heard so far from the bank of england, but also data overall. First of all, european stocks of rising. Investors sifting through the latest company remains. That will show the extent of the fallout from the coronavirus. The pound has gained. This is treasuries are drifting. They also reported the surprise gain in exports. Then norges bank with the Interest Rate now in zero. Coming up, we have plenty more, the bank of england, we will look at giltm we will look at market movements, and we have a full update on covid19. This is bloomberg. This is bloomberg surveillance. Still with us, john wraith from ubs. I want to get your thoughts on the u. S. How concerning is u. S. Debt . Will we see it hitting treasuries or is that not the right angle right now . John i dont think it is necessarily certainly if you look at where yields are and how supply is being digested by all of these major markets, it suggests there are bigger focuses for the market. Think as much as you can gauge these things, they see this as proportionate to the shop that shock that economies are dealing with. Clearly key with regard to that sort of thing will be how we come out of this in terms of whether the policy response continues to seem proportionate. Then there is the bigger question is how do you address the debt burden . Those will all be conversations and assessments for the market to make and give governments all sorts of different headaches in terms of time, but for now i think the focus is on the realtime crisis and the debt that is being raised in response is an inevitable consequence of that. Do you worry much about inflation . John here and again for the coming months, not much. Offset,going on is an it seems to be a proportional offset to the economic damage that is being caused. It is extraordinary settings. Source ofhe right support for the scale of the shock. Inflation over the coming months is likely to decline because oil will continueces in the coming months and years, it will be about how policymakers calibrate their response to the evolving crisis. Time we are months seeing a tailing off or an end to the coronavirus as an economic influence, then policymakers will obviously need to slow and reduce the amount of stimulus they are providing. If they do that in a timely way, inflation should stay relatively stable over time. If they misjudge it either by to stimulate for too long, you will see inflation accelerate. If they take the stimulus a way quickly, you will see a decline. John, are we underestimating the longLasting Impact of the virus longerterm . It is a huge number of job losses, it is a huge gdp shock, but can it actually shift the way we look at governments and what does that do to treasuries, but also european bonds . John one of the interesting aspects of all of this is obviously how the crisis itself evolves, but also what impact it has had on consumer and business behavior and Going Forward . It was interesting in the boe comments made this morning, although they are hoping for a fairly nearterm improvement in economic circumstances and reacceleration, they did make the point that they expect there termsconsistent impact in of cautious behavior by consumers and businesses. In other words, that this crisis will leave a sort of lasting legacy. There was also the wider question of whether people change their behavior in terms of how they travel, how they behave. With regard to consumption, how businesses behave and so on. Those things will only become clearer over time and that is why policymakers, to return to what i was saying before, are right to base their response on a shortterm outlook because they cant have confidence in the months and years ahead of how any of this will evolve to the levels that they would ordinarily expect to have confidence. Francine john, think is so much for joining us. John wraith, ubs. They do not see a Significant Impact from the coronavirus crisis. Ceo oferview with the the italian power giant is next. The interview you dont want to miss is with the bank of england governor andrew bailey. Two out of the nine policymakers at the bank of england wanted to increase bond purchases. It seems now they are saying they may expand monetary stimulus as soon as next month to help the battered u. K. Economy. We have a lot of questions for governor bailey. Im going to head over to the bank of england now. In the meantime, i will leave you in the capable hands of nejra chehic. These days staying connected is more important than ever. So were working 24 7 to maintain a reliable network, to meet your growing internet needs. Were helping customers who are experiencing Financial Difficulties stay connected. Were increasing internet speeds for low income families in our internet essentials program. And delivering selfinstall kits to your door. Nos comprometemos a mantenerte conectado. Were committed to keeping you connected. For more information on how you can stay connected, visit xfinity. Com prepare. Nejra economics, finance, politics. Francine lacqua has stepped away to do an interview with the bank, the governor, andrew bailey. We are seeing a bit of a riskon tone in markets. Lets go to first word news with ritika gupta. Ritika the bank of england is signaling it may need to do more to combat the coronavirus slump after policymakers agreed unanimously keep their benchmark it record low at 0. 1 . A 100 billion bond 100 billion by pound increase in bond buying. Described thep resolution with iran insulting. It would have required congressional approval for engaging in hostilities with tehran. Accelerated plans to reopen more of its economy, echoing moves elsewhere in europe. Amid signs the coronavirus outbreak is coming under control. Germany is planning to ease restrictions even further and restart. Spain is getting to relax more getting ready to relax more restrictions but has also extended his state of emergency jim may 23. To make 23rd. 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, nejra thank you so much. N. L. Says it does not see a Significant Impact from the coronavirus crisis. Eporting in adjusted ebitda now is the ceo. Francesca, delighted to have you on the program. Thank you for joining us this morning. As well as not seeing a sick impact from covid, you have confirmed your goals. Can you give us more detail around that . Thank you, sure. Well, we have had a major lockdown in both spain and italy which are big countries for us. But, you know, the Energy Sector , if you want anticyclical, we have had a big change in which energy is being consumed, so a drop on the demand on the industrial side and a surge on the domestic market, which basically evened out, or perhaps a bit complicated to explain in a few minutes, but that is the bottom line. We are concerned we were very successful in putting everybody in a safe mode at home working there, and we have today 37,000 people working from home. Withhas enabled us to cope the first covid19 parts of the crisis. Then it remains to be seen what will be from now on on the subsequent which is just starting now in both countries, italy and spain. As the rest of the world in which we are present, the u. S. And america, are still in phase one. So we are writing this covid crisis at different time zones crisis atriding this differen different time zones. Me more about the impact the coronavirus might have on financing new renewables projects. How much more expensive is it going to be to finance wind and solar farms now . Frankly, we dont see an impact on the negative. End toer see a positive this. We see the covid19 in general is a big accelerator of trends that where that were already underway. If you look at what the European Union is doing in terms of recovery package, the green deal on theitical aim recovery package. Coupled with a digital content, it is going to be discriminating criteria on where to locate funds. We believe that covid19 and the recession that is underway will be probably best tackled on accelerating investments in the Renewable Energy front. We already knew we had to change. Or rather we use this as an opportunity to directly get to the state we wanted to reach. As we talked, we see a big movement and trying to go in that direction. Back, dont expect a push rather an acceleration in the direction of funding on green energy and Renewable Energy installations. Right, i suppose the flipside to that argument, francesco, is that while a lot of economies and companies around the world are so focused on mitigating the impact on covid19, things like climate goals might take a little bit more of a backseat. Are you not concerned about the impact of that, despite the fact you are showing optimism . Francesco when you look at the amount of money that the world withtting at play to cope this recovery and to stimulate the recovery, we are talking trillion. 5 then you have to ask yourself, what is the way in which this money can reach the real economy . Only one, butthe one important way is to accelerate infrastructure investments. In this sense, i think utilities are a big tool, and they can be used in a big way to really move economy, and utilities all utilities, invariably know that one of the best ways to invest money Going Forward is to push on the Renewable Energy platform, and the transformation of networks in digital enabled distribution networks. But these two fronts are very large investment areas where that money, part of that money can be channeled. Nejra yeah. Subsidies are an important part of the picture as well, francesco. A subsidy free our subsidy free Renewable Power projects still attractive at these price levels . Francesco can you repeat the question . I did not hear very well. It came through garbled. Free are subsidy Renewable Power projects are they still attractive with power prices at these levels, given the importance of subsidies in this whole conversation . Prices to we expected reach the level that we have seen today a few years from now. In that sense, this is a confirmation that this covid19 crisis is just a compression of time, but not a change in direction. Our view is that wholesale Energy Prices will keep going down as more and more renewable plans are coming into the mix. Just happening faster, but it is not something that keeps us that surprises us at all. We have a view that in a timeframe of 10, 15 years, most of the energy mixes in europe and the rest of the world, we have extremely low prices of energy when compared to now. That is why we want to rush and formation of this sector and be the first to do it. The more Renewable Energy content you have in the mix, the the more price, and electricity is getting into society and into the economy. Ultimately, this and large is the market. Thank you so much for joining us today, francesco starace, ceo of and now of enel. Coming up, when will we have a vaccine for coronavirus . We will ask a ceo. This is bloomberg. Nejra this is bloomberg surveillance pickup lets get the Bloomberg Business flash with ritika gupta in new york. Ritika apple has been maintaining its lead in the aart watch market, despite slump in the global sales. In ovalng a 20 rise shipments. The apple watch is seen as a key driver of growth for the tech giant. Is raising its forecast to continue demand as people are home working out. The coronavirus pandemic could delay heathrows expansion by five years or more, according to the airports chief executive. A third runway will now be needed in around 10 to 15 years time. The Landing Strip had been do to open by 2029, at that was already in doubt after a court ru ruling on environmental grounds in february. Nejra when will we have a vaccine for coronavirus, and how quickly will we have enough doses . According to the milliken institutes tracker, there are currently 120 three vaccines in developing. My next guests. The research and pipeline of one of the biggest cu companies. Welcome to bloomberg, paul, and thank you so much for joining us today. We understand that you said that you have hundreds of millions of doses ready in early 2021. Can you clarify for our viewers when you actually intend to begin manufacturing the vaccine, and is it in line with operation work speed. We are already starting to prepare manufacturing, and that is going in with development. We are building out new facilities where we can produce a massive amount of vaccines, as well as fill them. So you need to fill them in vials to be able to bring them to people. And that is unprecedented, never in history has that been done, doing that in a year, to get to a billion vaccines, but it is all underway. We have already two manufacturing sites in full preparation, and we are starting a third and fourth one in the next few weeks. Those will be able to produce a billion vaccines in the course of next year. Nejra you mentioned vials as well there. What are you going to do to mitigate the potential for violent and stopper shortage issues, particularly if you suddenly get demand for billions of doses for this vaccine . Have already 250 million vials, which are in the making and produced, so we have very early on, a few months ago when we started this project, we looked into all of the supplies, which were going to be needed for making a billion vaccines. Teams around the world, they made sure we had the right order, the right manufacturer already mobilized to make everything we need. On a monthly basis we review where we are, so we have taken all the measures to be prepared. But also we have to change certain things in the system. We probably are going to put five vaccines in one vial, so that we can save on vials and on stoppers, and then people would have to be vaccinated five at a time. But i think in these times with corona, that is possible to organize that in pharmacies and in doctors offices to make sure that we can get a vaccine by are you ready, and then five at a time should be a possibility for making it happen operationally. Yes, i haveutely, heard about the fivedoes vial that you are working on, paul. Not to belabor the point, but i sure im sure you can appreciate it is a major concern. If the fivedose vial does not necessarily work, what other rp ands are there to ensure there are enough vials and stoppers out there . Paul it is all starting manufacturing now, and that is the big message in this covid19 we are doinge development at the moment. We start Clinical Trials in september. We know whether the vaccine works by the end of the year, but all the work to make the vaccine is done at risk, so building the manufacturing plants, ordering the supplies, preparing the filling, everything is done at risk so that by the time the vaccine is available, by the time the data are available, we can deliver the first batches of vaccines, as well as be ready to form massive upscaling. We are not waiting for anything at the moment to do that, and everything we do is at risk. Nejra sure. To that point as well, paul, what are you doing to prepare for the possibility that this virus could mutate, making any vaccine that is developed irrelevant . Paul we are of course measuring that very, very carefully, and there are some reports on mutations which we have looked already at, and at the moment we have not yet a mutation, which makes the vaccine in developing not usable. If that would happen, we have to quickly start on a second vaccine, which would solve this. But i think that is for the future. The chance that it will be like an influenza vaccine, we think is much lower. There will be mutations because every virus mutates, but not to the extent that we need a totally new vaccine every year. Hopefully not. What we might need is because people need to be protected for longerterm, this virus is not going to disappear in the next one to two years, we need to have boosting probably a year later or two years later to make sure people are protected for the period the viruses around in the world. So it is not going to be over after one vaccination. I think we will have to boost people to be protected longerterm. Nejra right, so in that case, paul, what is the sort of guidance that you are getting from Johnson Johnson generally in terms of, if you do need to look at new vaccines not every year, but certainly more than once, is the guidance that you have all the resources at your disposal to do this regardless of the cost, or is profit actually important in this equation . Paul know, in this equation we no, inhe agreement an this equation we have the agreement and the guidance to get this done. Profit is not important here. We are in company with a Solid Foundation existing for a number of years. We have built the technology over the years to do this. Everythingg to do what is needed for the Johnson Johnson site to get this done. Profit is not important. A will do this on notforprofit basis, covering our costs, but thats it. All the effort will be put in, and it is unconditional at the moment what we are doing. Nejra all right, some might be reassured by that. Paul stoffels, chief scientific officer at Johnson Johnson. Really great to have you on the show. Coming up, the ceo of blackrock has a stark message for Corporate America. We will discuss that next. This is bloomberg. Nejra economics, finance, and politics. This is bloomberg surveillance. Early this morning, the nordea cut. Delivered a unexpected it cut to zero, but the outlook is mostly ugly to stay at this level for some time, so perhaps that is most likely to stay at this for some time. A newsernor delivering conference right now. What we have been hearing is that basically the nor just bank remains a potential actor in the currency market. With the drop in oil prices, one of the factors that sees the krona drop of late. Also saying that there is large uncertainty around the unfair the effectiveness of negative rates. We have seen this from norges bank as well. The governor says this can help reduce the impact of downturn and they remain focused on the inflation goal over time. Do not miss our interview with the governor of norges bank later. Everything has a stark message for Corporate America. As bad as angst have been, they are likely to get worse. The blackrock ceo laid out his concern with an audience, everything from taxes to consumer demand. Ning us is to discuss is joining us to discuss his dani burger. Have we learned . Speaks, welarry fink want to hear. Conversation, the private call seems to stem from conversations fink has been having with bankers who warned about cascade of bankruptcies likely to hit the economy. So he wanders so he wonders on the skull when the fed is going to have to step in with even more action, but even in the middle of the second line spare, he things Corporate Tax rates are going to have to go higher to a for some of this really. He puts the figure at 29 . When water down what republicans and president trump, he is one of the crowning achievements over the last couple of years. He says that Corporate America is in for more pain, that Remote Working is going to hurt companys, demand is going to change because the american psyche is going to take a hit. Consumers are less likely to go on airplanes, for example, or go out to a restaurant. He sayseconomic duress could spur nationalism and up and the world order as we know it. We have been looking at a study by the fed in terms of what companies are saying on the ground. Do larry finks concerns match up with what they are experiencing . Dani certainly, and we are looking at u. S. Stocks continuing to rally today, at least futures. But on the ground is finks warning. They lookeda study, at earnings calls from companies, about 600 of them in the u. S. , and the fear is greater than it was in 2008. They looked at all the cuts to payouts, investment cuts, and pulling down on credit lines. Not to mention there was also a study done of small businesses, and more than half the firms said they expect to be out of business in the next six months. That is definitely some stark warnings of what is to come, be it earnings or the small businesses. Bloombergs dani burger, thank you so much. As danny was saying, we have a fair amount of risk in the market. If you look at what u. S. Futures are signaling even ahead of the painful adp report yesterday, the euro is pretty much unchanged, but it is the pound catching attention out of g10, catching a bid after no change to the boes policy, and he did forecast a vshaped recovery terms of growth. Perhaps that is giving the pound in little bit of a lift, the kroner on the move as well, with the decision from norges bank, the 10year healed steady ahead of the jobs report tomorrow come and crude a little higher as well. Though pretty much anchored at 24 a barrel. Bloomberg surveillance continues in the next hour. This is bloomberg. Staying connected your way is easier than ever. Youre just a tap away from personalized support on xfinity. Com. Get faster internet speeds with a click. Order xfi pods to your home in a snap. Or change your Xfinity Services with just a touch. All in one place. Youre only seconds away from all of that on xfinity. Com. Faster than a call. Easy as a tap. Now thats simple, easy, awesome. Tom this morning, it is the worst british economy since 1706, and the war of the spanish succession. The governor and the bank of england will provide a total and unwavering commitment. The government will sell 41year guilt. Meanwhile, in the colonies, another thursday at 3 million additional jobless claims. The president considers depressionera unemployment. Bid. Tocks are bonds offer yields higher after the pandemic after the pandemic, there will be inflation. Good morning, everyone. This is bloomberg surveillance. On a most historic day, tom york, nejra cehic in our office on the river thames. Francine lacqua in in interview with