Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

U. S. For tallys from the coronavirus top 75,000. The u. K. And france prepare for some easing measures from next week. Playing ball. China and the u. S. Agreed to cooperate on implementing their trade deal, despite a blame game over the coronavirus. Welcome to bloomberg surveillance. Im nejra cehic in london. We are seeing a clear risk on tone ahead of the payrolls report. , one of theg adjectives being described what we could see, the job losses to gains. T a decade of job what we heard on the u. S. China trade talks perhaps giving assets a lift. You are seeing green on the screen in terms of u. S. Futures and european equities. The nasdaq has also wiped out its losses for 2020. Yesterday, the two year yield hit a record low, along with the five year yield. Oil catching a bid, heading for a second weekly gain. Lets get the bloomberg first renews now. China and the u. S. Have agreed to cooperate and work toward implementing their phase i trade deal. Chinese vice premier talked with the u. S. Trade chief, robert lighthizer, and treasury secretary steven mnuchin. The u. S. That both countries fully expect to meet their obligations under the deal. The most unprecedented economic crisis in peacetime, thats what we are living through, according to the European Central Bank President , christine lagarde. She says policymakers will do whatever it takes to help the economy weather the shock. She spoke on a webinar organized by bloomberg. We have to go beyond the normal and conventional tools to use things that are of an exceptional nature. That has to be designed, calibrated with the appropriate level of deviation and room to maneuver in order to deliver on the mandate. The u. K. Government is playing down expectations the lockdown will be significantly roll back. Scientists warned the countrys infection rate has crept a backup in recent days. Boris johnson plans to address the nation on sunday with a plan for the way forward. Sources tell us the rules may not change significantly until june. The u. S. Justice department has taking the unusual step of dropping its case against michael flynn. President donald trump had put pressure on officials to stop the prosecution of his First National security advisor, despite flynn pleading guilty to lying to fbi agents. Global news 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. Lets get to our top story. We get aprils jobs report in the u. S. Today and historic job losses are expected. 22 million americans are forecast to have lost their jobs in april, with the Unemployment Rate rising to 60 . Joining us now is 16 . Joining us now is fiona frick, Oil Markets Many times, they seem to be looking through the underlying economic data, including the initial jobless claims number north of 3 million that we got yesterday. Bond markets perhaps telling a different story. Fed futures starting to price negative rates in 2021. That dropped the two and five year yield to record lows yesterday. Which Asset Classes are you taking your cue from, fiona . Fiona so i agree that the bond market, the gold market, the u. S. Currency is telling us. What we call risky assets. We agree that the macroeconomic environment is very tough and we recession that is exceptional and different from 2008. The one that we have in 2020 is violent. The response of Central Banks and the response of fiscal policy is also very high and exceptional. We think that part of the recession will be mitigated by what the. We see also that the market sentiment, which was very bad in march, has started to get a bit better. The volatility is normalizing. Liquidity is getting a bit better. I would say that we think there will be volatility Going Forward , because there is a lot of uncertainty in regards to the covid and economic backdrop. But we are not negative on growth. We are more neutral but with selected buyers. We like a credit and some equities. Nejra fiona, i take your point that growth assets do seem to be looking through the data because they are looking to that exceptional stimulus on the other side. But are these markets growth assets markets, growth assets, actually pricing in negative rates from the fed . Or is it more about the stimulus in terms of supporting the credit market on the fiscal stimulus as well. Are negative rates something that investors are actually as well . Are negative rates something that investors are actually expecting from the fed . Fiona the Central Banks are doing things to make sure we as recession that is possible. It is quite normal that there is negative rates. If you see everything that the Central Banks are doing and buy into it. These negative rates, plus the fact that Central Banks are buying credit and all sort of other instruments, means that the discount rate for equities is very cheap today. Nejra ok, makes sense. If we look at the jobs data as well, fiona, the devil is going to be in the detail in terms of trying to assess whether the job losses are broadbased across industries and whether those losses are going to be prolonged or shortlived. If the report today suggests that we could see prolonged, broadbased job losses, will the market mindset shift at all . Fiona it depends. The market mindset in equity has changed. The rally that we had in april was around a few stocks, mainly around a few technological stocks, which as you can see, the nasdaq and ftse are down for the year. A light of the rest of the equity market is not as positive rest of a lot of the the equity market is not as positive as that. We have an increase in jobless claims in the u. S. , which we have never seen, because now 16 of all workers are unemployed, compared to 4. 4 before the crisis. It was a very violent move. We expect that at one point it will start to get better. We see another deterioration in may. But probably things will start to get better in june. We dont think that all jobs will be recuperated, because some of the companies, some of the jobs will have to disappear. Nejra ok. Something that gets better from june. Does that mean you said a moment ago that you are sort of neutron growth assets. Does that mean in terms of your skew, you are more likely to add to risk rather than take away . Or is it too hard to judge right now . Fiona we like some kind of equities. One thing that says quite well ,hat we think in equities resilience in what becomes important when you look at equity today is a quality of the company, balance sheet. We like quality growth companies, because they are face ant and they can recession perhaps longer than other countries. We dont like the cyclical companies. Creative destruction. The stronger will become stronger and some of the weakest will disappear. We still remain positive on technology. We also like emerging markets, especially asia. The crisis seems to be managed and these countries are getting out of lockdown and Economic Activity is starting to pick up. Nejra ok, so that is the risk assets, fiona. Where is the protection in the portfolio . Treasuries, gold, cash . Fiona gold, i would say. Having a bit more dollars is a nice protection. Strategy between risky assets and some defensive assets, like gold and dollars. Nejra great to have you with us. Fiona frick, ceo of unigestion. Coming up, for reaction to that jobs report, we will be talking to larry kudlow. Dont miss that interview after 2 30 p. M. London time. With the euro group set to meet later today, we will speak to euro Group President and portuguese finance minister mario centeno. Dont miss that exclusive interview next. This is bloomberg. Nejra economics, finance, politics, this is bloomberg surveillance. The euro group meets virtually today to discuss the euro area economy, as efforts to tackle the Coronavirus Crisis continue. It comes after the European Commissions spring forecast, which predicted a deep and uneven recession. Joining us now is mario centeno, president of the euro group. Thank you so much for joining. Europe has come under quite a bit of criticism in terms of coming together to fight the crisis. On the planned Recovery Fund, that has been one of the key points of discussion, a sticking point, if you will. There is discussion on how to distributed, whether it should be loans, grants, or both. If part of it is distributed as loans, what maturity should be applied . Mario thank you for having me. Fast,e been quite flexible in the response to this crisis. I think we are the Recovery Fund needs to follow these guidelines. I think it must be sizable. We are creating shortfalls and gaps, both on investment and income, because of job losses firms inbad news for terms of their profits. We need to make up for all these losses during the recession. Suited to the situation, which means the accumulation of that requires this fund to be able to spread the cost of the crisis over time. We need long maturities definitely. We need a common approach by all european countries. Nejra ok. You need long maturities come interesting. I wonder then maturities, interesting. I wonder then whether perpetual debt is a possibility are maturities close to 100 years, if possible. Mario well, we are waiting for the commission to present its proposal. Need to godefinitely altogether, all the european countries. Ab for every country. The response has b countries. The european instruments must be there to fill in these gaps in responses across countries. I dont know if 100 years is the right number. I just think it is important for us to be able to set up a common answers the very important question on spreading the cost over time. We cannot risk having a second crisis this very deep when we recover. This is my take at this moment. About mario, you talk asymmetric responses from countries, which of course, is to be expected. How quickly do you think you can come to a consensus on a common instrument . That is what the market is waiting for. Mario yes. We have already started our common response. We have the three backstops that the euro group agreed. According to the european council, it will be made available until june 1. These three backstops take care of workers, businesses, and sovereigns. These are insurance that are very important for all countries to generate a level playing field. The same thing must apply to the Recovery Fund. Recall that if you add automatic stabilizers, state warranties and discretionary fiscal measures to the European Union head up forgether 4 trillion euros in response. This is a very large number. Now we have to allow for a swift. We are expecting the European Commission at any moment in time to come up with a proposal. That proposal will be within the mf, so within the next seven years budget for the union. We expect it to be frontloaded and available already this year. Esm credit on the lines, you have already said that the maturity should be long. Can you give us a more precise idea in terms of a range of years for those . Mario we are having a meeting today, asopean union you referred in your introduction. Esm. S precisely on the i dont want to advance precise numbers. But we are talking on maturity that can be up to 10 years. Periodeally think that will be suitable for what we intend to do with this instrument. I think it will be long. Nejra you think it will be long. Ok. In terms of the concerns about conditionality associated to the credit lines, have those concerns been overcome . Mario i think so. The decision that will be finalized next week and the esmd of governors of the will make it very clear that the conditionality is on the covid. Which means this line must be drawn in expenditures which are related with this covid period. This is the only conditionality that will be in the line. After that, countries must continue his pledge to meet the criteria of the stability and growth pact, which we already have to do currently. Nejra yeah. Ok. Several countries in europe now have started easing the lockdowns. There is all kinds of different predictions, in terms of where we go from here on the eurozone economy. What kind of recovery do you see . Shape starting in the second half of the year or something more protracted in terms of a recession . Mario that is precisely where all of our uncertainty is. Theont know how epidemiological curve will behave in the future. But we are preparing for that. The first step of course is easing the lockdown restrictions. In ae going stepbystep very coordinated way. Of course, each country is in a theerent position visavis curve, but the lockdown measures are being coordinated in all countries. All of the european economies understand how important the Single Market is. Are quiter countries dependent on exports to the euro area and European Union countries. We really want to coordinate this. That is the biggest uncertainty that i mentioned. Remember that these prices was not about the economy. This is a scent this crisis was not about the economy. This is a sanitary crisis. The european economy was growing for 25 consecutive quarters. Large amounts of employment created. This is not about the economy. This time, it was generated by the sanitary crisis. Thats where all uncertainty is right now. Nejra i need an answer from you, yes or no. Does the fragmentation of the economic recession between the south and north put the euro at risk, yes or no . Mario we are going to avoid that. We are doing whatever it takes to do it so my answer is no. Nejra mario centeno, euro Group President , much appreciated. Thank you so much. This is bloomberg. Nejra this is bloomberg surveillance. Coming up, we speak about the state of emerging markets with the veteran investor mark mobius, the founder of mobius capital partners. This as the imf sees developing nations needing more than 3. 5 trillion in external fines and external financing. Dollar. Bit of a weaker the u. S. Jobs number in focus later today. This is bloomberg. We are all going to be permanently scarred by having lived through this pandemic. This is my first pandemic. I dont really know what i am doing, you know . I am trying to figure this out as i go. How soon will anybody get on an airplane . Andhe qantas of 20 2022 the qantas of 2021 and 2022 will be quite different from that of 2019. How soon will anybody stay in a hotel . Its going to take a while. I think what will come back first is domestic businesses. How soon will anybody go to a mall . We plan to reopen over 90 of our Starbucks Stores by early june. The fact that these spaces may be open does not necessarily mean that they will be doing business. Nejra that was investors and ceos discussing the challenges of reopening amidst the coronavirus pandemic. Lets get the bloomberg first word news. The number of americans filing for Unemployment Benefits has topped 3 million for a seventh straight week. It is a sign there is little relief in sight for an economy reeling from the coronavirus pandemic. It brings the sevenweek total of jobless claims to over 33 million among which also points to potentially unprecedented job losses in the payrolls report out later today. Traders are now pricing in the possibility that the Federal Reserve will cut its policy rate below zero. Feds fund futures extended their rally with prices surging above 100 for early next year. Has consistently pushed back against the idea of negative rates. In the u. K. , the government is playing down expectations the lockdown will be significantly rolled back. That is as scientists warned the infection rate has crept back up in recent days. Prime minister Boris Johnson plans to address the nation on sunday with a plan for the way forward. Sources say the roles may not change significantly until june. France will start rolling back its lockdown measures. Strict controls will remain on public transport in paris, where infection rates are still high. Looser restrictions on businesses and stores will start coming into effect on monday. Global news 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. The International Monetary fund said that the Global Economic outlook has worsened since its latest forecast three weeks ago. The world can expect more Financial Market turbulence. External financing needs will probably be above the number previously projected by the imf. It isnt being shy about telling countries how much support is needed. Joining us now to talk about emerging markets is mark mobius, Founding Partner at mobius capital partners. Great to have you with us. Thank you so much for joining us today. Emergingmarket equities had their biggest monthly gain in 4 years in april. Investors, strategists, traders that bloomberg have spoken to think that the next selling frenzy in stocks will break out by september, but then we see a recovery by yearend. What trajectory do you see for emergingmarket equities into yearend . Mark i think emergingmarket equities will probably for therm other markets simple reason that, first of all, they more than developed markets to a great degree. That thethe fact increasing correlation taking place between these various markets around the world, including emerging markets, means that when there is a recovery in the United States in particular, you see these emerging markets reacting much more forcefully. , we still have the phenomenon of emerging markets of highgrowth. A combination of all these factors makes me believe that we will probably see outperformance in emerging markets. Nejra interesting. Outperformance. Because this survey that we did actually saw people respond and say that emerging markets would underperform developed markets. It is interesting that you see that differently, mark. In terms of the regional variations, what area of emerging markets do you expect to outperform the most . Course it would be asia. Simply because you see that despite this shutdown and all the problems with covid19, we are seeing higher growth in asia. That was the case before the crisis and i think will continue after crisis. China will recover. As you know, china is one of the early recovery points. Certain parts of china are seeing relapse, but generally speaking, they are seeing recovery. And then countries like vietnam, even india, despite the shutdown, i believe is going to recover very nicely. Definitely asia would be the place. Nejra ok. Have you been making changes to terms ofolio then in allocating more to asia and perhaps specifically china and away from places like latin america, for example . Mark not really. Because what we have done is look at all these holdings that we had before the crisis and looked at those stocks that were looking very attractive at that time before the crisis but were very expensive. We are going into those stocks that were very attractive but have now come down in the crisis. It means that we are investing in brazil. In turkey. Sting [audio drop] places like korea, china. Nejra Central Banks to try finance budget deficits, monetary financing, in other words. If we see more of that and i know there are distinctions to be made between specific markets and emerging markets, but do you think we will see capital flight as a result of that . Mark no, i dont think so. Laps over into these emerging countries and in fact, we may even see a weakening of the dollar because of the tremendous flow of dollars in all these other countries, thereby strengthening some of the currencies in these other countries outside the u. S. So at the end of the date, this quantitative easing will be a boon to many of these emerging countries. Nejra will it be highly inflationary . If it is, is that a bad thing . That there is no question you are going to see inflation that will show some inflation. We are in a very strange situation these days. We are in sort of a deflationary environment because of technology pushing into the areas that you normally would not expect. Countries be some with slightly higher inflation but i believe overall, on a global basis, we are in a deflationary environment because of technological changes. Nejra mhm. I spoke to a guest this week that said beware of companies in emerging markets, for example, that have to do social service at the end of all this, such as banks, particularly public banks. That was her view. If you look at sectors, are there any trends you are picking up as a result of coronavirus, buy ors of things to avoid . Mark there is no question that companies with strong Balance Sheets are essential. Any company with weak Balance Sheets we are avoiding like a plague. The problem with banks, although some of them look very interesting and have a nice history, is that they are their bad Loan Portfolio is increasing at a rapid rate. A lot of these numbers regarding bad loans do not come out immediately, they come out later. We are very cautious about Financial Institutions generally, because there are some opportunities, but we have to be extremely cautious. Inra mark, you are recently south africa were recently in south africa. I wanted to know if you are still looking for opportunities on the continent or if you think that the impact of coronavirus will be so bad that you are rethinking that strategy . Mark yes, we are still investing, particularly in kenya. In south africa, we are investing and looking at some other companies there. In the case of south africa, a dire macroeconomic environment but a lot of these companies are able to survive and even prosper under these conditions. No question, we have not written off africa. I believe that looking forward, the growth in africa is going to be very good in many of these countries. Nejra mark mobius, Founding Partner at mobius capital partners, delighted to have you with us. Thank you so much for your time today. Some news breaking that chinas First Quarter current account deficit has come in at 29. 7 billion. Coming up, all the job losses in every recession dating back to the Second Administration of Dwight Eisenhower concentrated into a single month. Thats the magnitude of what forecasters expect in todays job report. This is bloomberg. Nejra this is bloomberg surveillance. I am nejra cehic in london. San francisco Federal Reserve Bank President mary daly spoke to Michael Mckee in an exclusive interview. She addressed the shape of the recovery and why investors are pricing in a negative feds hundred. Take a listen negative feds fund rate. Take a listen. They are feeling a lot of pain right now because they have had to shelterinplace for public health. They are definitely feeling the pain. In thinking about getting past this, they are doing everything in their power to get their finances in order, take advantage of the programs available to ensure that they can get past this and be ready to reopen but do it safely. No one who i talked to is looking at a vshaped recovery. They really think this will be gradual and it will take time to build confidence back up for both workers and consumers as they reengage in Economic Activity. They are more optimistic than you might think. They are ready to reopen and reengage. I know you want the paycheck Protection Plan to help, but is there some evidence that it doing that . Are Companies Hiring back workers now . The Paycheck Protection Program is really about keeping workers that they have. When the economy reopens, we expect those workers to come back and actually perform work. Right now, most of the country remains in shelterinplace. We are just providing Emergency Support to businesses and employees with Unemployment Insurance so that we can get through this. The main Street Program still not up and running. Is there a chance the fed will get started too late to be of real help . The main Street Program, one of the things with all the fed facilities, there have been these announcement affects that when we say we are going to have a facility, the market starts to function better. We are already seeing that across the board in areas where there were dislocation. I dont think it will be too late to be effective. It is already helping markets do the lending. I dont really want to get into the alphabet business, but you were kind of negative about the idea of any kind of growth this year. You did not see a couple weeks ago any kind of expansion until 2021. Is that still your due . My view is that view . My view is that 2020 as a whole is going to be a negative year and then we will start to see a positive year in 2021. I think that is about as good as forecasting can get right now, this quarterly forecasting. Forecasting is always a tough business. It is so dependent on the evolution of the virus. The markets are seeing things a little bit differently. I am wondering what you think about that and the idea that just a short while ago, the fed funds futures market priced in negative Interest Rates starting in january. I know that is not a policy procedure that you guys are really interested in. What do you think of the Way Investors are looking at it . I think investors are looking at it as, essentially, the coronavirus is with us until we get a vaccine or some nice way to control it, helpful way to control it. They see that as distant and then they price that in. Thats what we are all dealing with. I am an evidencebased optimist. We came into this coronavirus with a strong economic momentum, one of the strongest economies in our lifetime. Businesses are fundamentally entrepreneurial. We are already starting to see them think about, ok, how do we reengage while we live with the coronavirus until we do get a vaccine or some other remediation program. Municipal finances kind of in tatters around the country. What are you hearing from cities and states in your district . Well, cities and states in my district are really in trouble, they are struggling. They are trying to do what we are all trying to do, which is figure out where can we cut costs when revenues go down . They are facing tremendous declines in revenue. They are figuring out, where do we keep essential services and what cuts can we make . That was the San Francisco fed president that was San Francisco fed president mary daly speaking to Michael Mckee. We will be speaking to larry kudlow. The ecb president says she has no choice but to go beyond conventional policies. We will bring you more of our exclusive conversation with christine lagarde. That is next. This is bloomberg. Economics, finance, and politics. This is bloomberg surveillance. Christine lagarde said she has go beyondbut to conventional policies to combat the Coronavirus Crisis. Francine lacqua spoke to her yesterday as part of an ongoing discussion. Included, banks, ecb are driven by their mandate. They have the privilege of being independent institutions accountable to, for myself, the european parliament, to which i report back and i am accountable to and i go every three months to tell about our action and our tools and how we measure them and assess them. But we are also mandate driven. Dictates that we do whatever is necessary and whatever is needed in order to actually deliver on our purpose, which will be a factor of circumstances. To give you an example, we are currently and we have all said the same thing going through ptional circumstances. The euro area is facing this unprecedented shock that we could have not imagined. You clearly have to go beyond the normal, including the normal and conventional tools, to use things that are of an exceptional nature, and the have to be designed, calibrated, and with the appropriate level of deviation and room to maneuver in order to actually deliver on that mandate. Whether it is to avoid the tightening of financing condition or to make sure that Monetary Policy is transmitted across all jurisdictions in the euro area. Thats what we need to do. We are actually doing it and we will continue doing so because thats what drives our action. Francine what is on top of your worry list as a central banker . It might surprise you but i fear two w. W number one is war. I think on top of everything that we have at the moment, that would be the most aggravating factor that we could face. Wave,ond w is the second if we ever have a second wave. When we look at analogies, like the spanish flu, unnecessarily called spanish, for that matter, the second wave was even worse than the first. Those are the two things i have on my mind from a humanitarian, as a person. If i look at the economic consequences of all of that, clearly, even without those ws that are my fears, i think that we have the most unprecedented economic crisis that we have seen in peacetime. I have said that before. The damage that it is inflicting on our economies around the is really causing damages to potential output, to thelies, to jobs, to capacity to bounce back. We simply have no real good sense of how badly economies are affected. We are proceeding on the basis of scenarios because we simply dont know. It is all going to be a factor get out of those lockdown measures, at which pace, at which sequence. If we do, we dont know either how fast and how strong the recovery will be. Because it will be a factor, again, of the measures that are taken at this point in time. Thats really the situation that we have. In the face of that, we have to take all possible measures and policies to help with maintaining the situation, sustaining it for as long as necessary to weather this horrible shock and help families, firms, and governments bounce back and move into a recovery phase. Clearly, the nearly 4 Million People affected around the world , a quarter of which are affected in the euro area, is on my mind all the time. I also ventured beyond those borders, because i think of people in the developing world, which clearly is taking a big hit and will continue to take a big hit, despite the fact that Health Systems are not as solid as they are in advanced economies. Nejra that was ecb president christine lagarde. Hashe past hour, the who confirmed that covid19 originated in bats. A briefing about the origin of the virus said that the wuhan wet market played a role but not all patients had contact with the market. We brace for job losses and payrolls data out today. Treasuries steady across the curve after the two year yield hit a record low yesterday. This is bloomberg. This morning, an Unemployment Rate unimaginable amid a safety social net inadequate. This morning, and jobs report dramatically worse than that of september, 1945. It might be the worst economic report in american history. Watchonds and at that, the guessing of when and how far the fed will cut the target rate. Will the market tell chairman powell negative Interest Rates are here to stay . We may allow ourselves a brief period of rejoicing. Winston churchill 75 years ago today on