Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

And here are your top headlines. Angela merkel and president Emmanuel Macron back a 500 billion Euro Recovery Fund for the European Union. The deal needs the support of all 27 eu members, but the two countries of the biggest payers. President trump called the World Health Organization a puppet of china and promise to pull u. S. Funding. Stocks and futures shake off tensions and push higher. After eights potential vaccine for coronavirus. It is raising 1. 3 billion to fund the development. Just under one hour from the start of cash equity trading in europe. We kick off this program with a relatively dire number, european car sales are down 78 in april as demand evaporates. You expect that if you cannot leave the house. Stock futures are barely higher now. Just above unchanged. Dax and ftse futures up about 0. 1 . We have breaking news from the u. K. In terms of the regime that will apply from january 1. Earlier this place year, but we are in this transition phase until the end of december. Apply, we areiffs getting a new schedule. It will maintain a 10 tariff on cars. Ase of these are the same have been previously in place. The you cable keep tariffs on Agricultural Products such as beef. We also understand the u. K. Announced 30 billion pounds of tariff cuts. Some tariffs are staying the same as far as beef and Agricultural Products and cars, but some are changing. Marketst into the conversation. Our managing editor in singapore joins us. It is a buoyant market in the last 24 hours in the asian session. Is it very much to do with jay powells statement ahead of testimony he will give later today with Forward Guidance included . Markets see around potential vaccine successes . Mark absolutely. The single biggest thing was the fact we have finally got a debt package in europe, a support package fund talking about sharing the debt burden. That has opened the door in europe that has long been missing in such a mess of president. The eu has been lagging in coordinated action. The bigger story was the message delivered by merkel and macron. There was the vaccine news. Message was a reiteration of what we have known before, there is plenty of ammunition left. The vaccine news was positive, but marginal. Europe was the driver of the big story. Theret do you make are a lot of people and countries to vote on this. A lot are against mutual eyes the, and especially northern countries about paying grants to the southern countries without any conditions attached. Can this get through or is it a pipe dream as much as the previous 2 trillion euro plan . Mark there is much more optimism, there were details to be worked out. The fact that merkel and macron showed coordinated leadership is very important. This pandemic has, in the leadership vacuum we have seen, we are seeing the u. S. And ina tonsil for that t tustle. Canpe has shown they coordinate across the continent, and speaking for the broader benefit rather than everyone fighting on the road. The message merkel and macron made is that they want to take the lead driving the greater good of europe. That was a positive message for europe and markets. Anna we are getting some u. K. Employment numbers, jobs market numbers. 200oyment rising, 20 10,000. Stronger than anticipated. The Unemployment Rate is better than anticipated. The estimate was 4. 3 . The u. K. Locked down on march 23, so these are for the First Quarter and only take into account a short period. When the economist came up with these estimates, you wonder if the measures taken might cushion the u. K. From the worst labor market effects . Mark that is a fair perspective. You make a valid point that economist knew this captured a tiny sliver in the u. K. , therefore that should be taken into account. I do not think economists have come out of this crisis with a change in forecast shining. It is a different situation and unprecedented, almost impossible to predict. I have sympathy that the forecasts have not always been close. It is marginal positive news, especially since sterling has been down in recent days. I do not think this will change the broader backdrop for the u. K. And sterling. Not only do they have struggles with the pandemic crisis, but people are getting negative on brexit. Brexit is becoming the bigger driver of u. K. Assets. Also with that data came the april jobless claims change. That does take into account the 856,500. And that was the First Quarter numbers do not look so bad because the shutdown does not happen until the end of march in the u. K. In april you see an extra million jobless claims. That is where the damage is done. , although interesting that data is backwards looking, it will be interesting to see more data from the april jobs picture into the beginning of may. Thank you mark cudmore, mliv managing editor. You can join the debate on todays question of the day. It see the question, go to mliv. There is the question, how do you trade the transition to wfh . If you do not know the lingo of the kids, that is work from home. That transition has already happened. How did you traded what happened . Todays top stories, President Trump is escalating his threats against the World Health Organization. He is unhappy over the whos handling of the coronavirus pandemic. He said he may permanently cut u. S. Funding if it does not make sweeping reforms. He is concerned the agency is too close to china. Who. Hinese are behind the the u. S. , for now and the white house, is not. In the u. K. Pressure is mounting on Prime Minister Boris Johnson to be more open about his coronavirus strategy. A panel of mps is calling on the government to publish the scientific advice behind the response to the pandemic. This comes that number tends relaxation of the lockdown leads to conclusion leads to confusion about what people should or should not be doing. The u. S. Will have to suffer virus casesike in according to Lloyd Blankfein of Goldman Sachs. He says the stimulus cannot go on forever and policymakers cannot wait to afford for a vaccine to reopen the economy. Blankfein says do not worry so much about the banks. Most critics of the banks they arecknowledge liquid and safe. Goes contemplate something on so long that there is a huge and massive default . I would say on a list of 10 or 25 things to worry about, that should not be on the list at all. Matt that is your global news. 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. Anna coming up, a breakthrough plan perhaps. Angela merkel and Emmanuel Macron with a 500 billion Euro Recovery Fund. We will discuss that next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. Futures suggest a little upside at the start of trading. Lets turn our attention to of thements in terms european fiscal support package. Angela merkel and Emmanuel Macron have offered a breakthrough deal to shield the eu from the worst of the virus fallout. Together. Must stick this is about rapid economic recovery, therefore we want to 500up a temporary fund of billion euros, which would be from the eu budget. Not a credit but an expenditure provided for the most affected sectors and regions. Bya we are joined now graham secker, chief European Equity strategist, Morgan Stanley. Great to get you on the program. Is this something that would be supported for european stocks . This show of support and solidarity between the north and south, or between germany and in the battles against the economic fallout from the coronavirus . Graham yes, it definitely is. Back over the long run over the past decade, the something ofbeen an unfinished project. It was created at the beginning with integrated monetary policy, but we have had fiscal policy run by the individual nationstates. Structure, there has always been elevated risk associated with eurozone assets because the fragility of the structure. If we push forward with the funds, as seems to be the case based on the information yesterday, then i think it has the potential to strengthen the. Eakest link in the eurozone we see someact liability sharing, and the disbursements look like they might be grants rather than loans, one of the things for Global Investors are asking for , leavingfew years Everything Else to one side, it should definitely be reviewed is a positive. Matt what do you think about the price gap between the two . We were highlighting european stocks which have not performed as well as u. S. Stocks. In terms of stocks, they are looking at the s p 500, but that leads me to believe there is more room to run for european stocks. Gain only seen an 18 compared to 30 from the lows for u. S. Stocks. Should investors they were the eu now . Graham there are a couple of things to think about, the s p rally has been heavily led by the tech names. , i ranng we look at numbers last week, and we showed in europe it had underperformed. He u. S. By 2 when you look at it like that, it is more modest. Europe does struggle in some respects because of the lack of tech. , it is positive yesterday for the valuation side of this. Where we have more of an underperformance in europe is around the earnings environment. In the u. S. We see s p earnings falling 20 . Period, down only 4 . In europe, down 45 . When you do that math, in two years you see earnings 20 lower. That means to get upside from european equities, you have to drive the valuation because you will not get the earnings support. Why look at the package yesterday, it looks positive for the valuation parameters. Will it give us an upside, Economic Growth and corporate Profit Growth . We will need to see. Our thinking going into this is european equities looked fully valued for the profit recovery that we saw. Now the challenge for us is to factor in pushing the valuation to our baseposed case. From we will get more graham secker, chief European Equity strategist, Morgan Stanley. Signs on theng vaccine front. Modernas early success in a vaccine trial sent the stock up to a 400 gain. We will talk about the opportunities in biotech. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are under 40 minutes away from the start of cash trading. Chers rising a little more futures rising a little more. A drug from moderna is showing promise in early testing. Positive signs it can create an immune response to fight off the coronavirus. The biotech firm is looking to raise 1. 3 billion to fund the vaccine. Considering the stock has quadrupled this year, that may be too much for investors. Graham secker, chief European Equity strategist, Morgan Stanley is still with us. I want to focus on your strategy, a little more on the esg and these med tech drugs. Do you think investors have missed the boat here . Graham i think it depends. Move, youave a sharp look over the past few weeks, the markets have been rising. You get positive data and an initial leg up, but other than shortterm trading, you find the good news is already priced in. Of the med tech side of things, looking at orthopedics,ike hearing aids, lenses. There is nothing about health services. Do you see a disruption in , doth care in recent weeks they not exist in europe yet . Graham i saw an interesting report last week, the med tech in europe has interesting sub sectors to it. Orthopedics is where it comes through. In terms of equipment and , the business selling to hospitals, those will come through a little bit later. But orthopedics comes back first, then hearing aids and corrective lenses as well. Matt esg is your top pick and your focus here. Do you think this pandemic will cement the trends we have seen growing . Graham yes, i think so. Precovidy in the world, i have not seen anything changed my mind. I am more confident about that. In terms of performance and flows, which is important. I look at forward, fiscal policy initiatives coming ,hrough around the world definitely strong around them. Anna thank you very much for your time. Graham secker, chief European Equity strategist, Morgan Stanley. Up next, we will get more on the eu breakthrough. Angela merkel and Emmanuel Macron agreeing on a 500 billion euro package. Raby fromterview jean natixis. We will get his thoughts on consolidation within the Investment Management space. This is bloomberg. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Matt 30 minutes away from the start of cash equity trading. Futures higher on optimism around a lot of things, including the vaccine development, but also an agreement yesterday among europes most powerful leaders. They backed a breakthrough to help the eu recover from the pandemic. Angela merkel and Emmanuel Macron agreed to a fund that would make grants to the hardest hit Member States and be paid for by the eu collectively, basically, of course, germany would end up shouldering most of the cost, but the idea is this is a shared burden that would go not in terms of loans, but be given to the neediest nations, i. E. Italy and spain. Us,ks so much for joining great to get some time with you this morning. Let me first ask your take on europe given yesterdays agreement. Good morning to you. It is part of the continuing cocktail of pressures measures governments are taking to address the situation. We have seen the Central Banks intervene on a massive scale and government act. Measures throughout the economy in this critical moment. Matt anna how crucial was this ,articular move, more towards even if it comes in a different project . The eu how important to the eu project is this . I am not sure. The eurozone will converge over time with ups and downs. We saw the those, a bit of stress. What i see in this is a continuation of the political project that is the euro, some solidarity still to be warranted. Let us face it. 500 billion in the context of all the stimulus measures that have taken place, in terms of centraltimulus, all the bank is already doing, it is one in thent that cocktail of measures taken to address the situation. Matt so what is the keystone here . We were talking earlier about european stocks, and they are trading near a record low in terms of evaluation versus their u. S. Peers. We have seen a decent rally from the lows here, but nothing like what you have seen in the u. S. Is there some keystone piece necessary for europe to make of that shortfall for investors . It was basically october 2019. We would see major portions of the worlds economy being shut down deliberately to address the situation. I would have said very unlikely. Of the s plection 500 at a high level. You have to recognize that in the current situation, u. S. Leadership in terms of technology has a leg up. No question about it. Between too big a gap the u. S. And europe . Will it disappear . Probably not. Will it shrink . I would like it to be so. Morerequires probably advancement in the european project. What we saw yesterday is one element. It is one step toward integration. Us not forget a the european story then sorry, i was going to ask you, when you look at the contrast perhaps between where stockmarkets are and where the real economy seems to be heading , that contrast makes sense to you, do you see a contrast between the real economy and what the stock markets are telling us . It does not make sense to me. I try to understand it. Real economy when you have asset prices where they are today. Of Central Bank Liquidity and intervention. A key question is, will the fed be perceived as running out of ammunition . The fed is in the sovereign bond market, not necessarily in credit. In part because the fed is perceived as having the ability and the will to intervene. When i think about where markets go, you talk about the announcement in europe, but the markets are reacting quite strongly to the news about a potential breakthrough with the vaccine. To react toikes news positively, and yet, the therlying economy, anecdotal evidence from , the comments i have the past 10 days from Corporate Leaders indicate maybe the downturn has not been as bad as people feared. Maybe that gives credence to the expect a markets can faster recovery. Some damage done for a foreseeable future. Positive note to leave this part of the conversation on. Stay with us. Raby stays with us a little bit longer. Coming up, we will talk about opportunities for consolidation within the Asset Management space. The damage done to the economy. This is bloomberg. U. S. And european futures point to a slight move to the upside at the start of the european trading day. Hey consolidation conversation is back on the list. The Asset Management industry as the Coronavirus Crisis stress tests smaller businesses. Let us talk about that and the future of Investment Management with jean raby. Do you see consolidation opportunities . Each time there is a dislocation moment, everybody the world after being very different. Expect consolidation of the Asset Management space. Consolidation in the Asset Management space is always something people predict that does not happen that often as people would like to believe. Parallel with the gfci mende happening throughout 18 months after the dislocation in 2021, probably, possibly. Model, i particular would expect that. Industry, when we talk about consolidation, it is largescale consolidation. Managersarge asset like us will be continuing to resiliency and diversification. That can occur through largescale consolidation with other market participants. The environment will be more , given the longterm liabilities. That will be part of it. Always easier said than done, particularly when you are sitting from the Vantage Point of the middle of a storm like we are experiencing right now. You mentioned in the fixed income space particularly, do you see more action there, especially for active Asset Managers that you work with . What do you think about the active versus passive . The trend into the pandemic was investors moving out of active capacity. Is that going to stay the same or change . I will make two observations. On fixed income, we are very active. With scale,agement o ache highquality a highquality fixed income and obligations in incomedelivering commitment to their clients. , thereven the situation will be winners and losers. There will be winners and losers in therefore i do believe to benefit context, this new area we are entering into come up postcovid crisis. Anna we talked a bit about m a opportunities. To overstatet those as you say, but if you did want to think about types of Asset Management business you might be missing, that you want to add on, is there somewhere that springs to mind . A fair bit cover of the asset classes, from traditional fixed income to specialized fixed income to private assets. Income generating solutions, given where interests are and are likely to be for a while. I would also like to believe geographically, certain areas we can share, that is notably asia. When i think about us, we are more than the sum of our parts. We have a lot of parts already. Andant to capitalize generate scale. Be for potential opportunities. Matt i want to ask you about something different. There has been talk in the past few months and years, even, but has accelerated lately. Natixis said it wants to stop financing projects related to shale oil and gas. This i find interesting as so many are protesting the ecbs brown Bond Investments here. Do you think the Investment Management business will be looking at similar initiatives . Decision and that how you think you could expand upon it. A lot of people say the was going to be a defining moment. We always think the world after will be very different. Lot moreee a connection to other parts of esg than we had before, notably social issues and governance. These are things we referred to in september. We highlighted the fact a lot has been said about the environment. I think it will become mainstream because our clients are really focused on that criteria. I do believe also going back to [inaudible] about what esg is ablebout, it is also being to walk by, and that is not a characteristic we will see in most Asset Managers are most asset products. To believe the activetion of esg and an manager can play to our strengths. We have rated nonfinancial criteria. We have Asset Managers very active in that space. Adoptionccelerate the of that narrative into the united states. Europe has been a leader. Increasingly the u. S. Is focused on it and also asia. Anna that is interesting. Interesting it might take this might comesis and it out stronger in the u. S. Thank you. Raby joining us on the European Market open. Futures suggest open at this we will be focusing on a number thyssenkrupp considering selling off its steel and summering unit. We have asked the question repeatedly. We welcome comments this morning. Why is it the german and french governments who keep telling ariba you must obey the rules are the biggest in all of this . Are not bailing out there airlines because we do not need those bailouts. Ceo of ryanairhe Michael Oleary expressing his concerns about eu aid and welcoming comments about the differences between eu countries coronavirus aid packages. We are going to speak this morning to the executive Vice President of the European Commission. That exclusive interview shortly after 8 30 a. M. U. K. Time, 9 30 on the continent. 37 minutes from now. We are minutes away from the open of cash equity trading across europe and the u. K. Dani burger on todays stocks to watch. What do you have your eye on . We have to talk about car sales. They basically stopped in april. In europe and u. K. , registration stopped by 78 . That is the biggest decline on record. Less than 300,000 cars were sold. That is a record low. A lot of this is already priced into the shares. It shows what a steep hill they have to climb to regain the levels they were precoronavirus. Factories are starting to open throughout europe. We do not know how it has changed. Strategyhave had a which one broker describes as a risky play from thyssenkrupp. What are the takeaways . The big story, dissing crop, there need thyssenkrupp, their need for cash. They said they are looking at a consolidation, a sale of its steel and submarine units. Basically wants to offload its noncore businesses, focus on everything that is high margins. It also said it is looking at dropping a group of lossmaking businesses as well. Matt looking at julius baer, what is the story there . Peers, juliusts baer seeing a boom in trading revenue. Increase trading during the market turmoil. It has become clear julius baer is in a better position than its peers because it focused on wealth management. It is not as exposed to consumer and corporate default. It is a similar story to ubs as well. Julius baer unable to give a 2020 outlook. You see a time and time again with companies as the uncertainty of traders assessing companies for the future to come. Anna thank you very much. Dani burger with some of the stocks you should be watching. A catering business in a time when there is not a lot of catering going on. Interesting to see that. Watch that stock at the open. We have news around europe. Some of that came yesterday. Suggest stock futures quite a bit of upside at the start of the trading day. Quite a bit more than they did just half an hour ago. U. S. Futures point to the upside. Better politics in europe. This is bloomberg. Anna a minute until the start of the european trading day this tuesday. Chancellor merkel and president macron back a 500 billion Euro Recovery Fund for the European Union, but the deal needs the support of all Member States. We will speak to the eu Vice President. President trump calls the World Health Organization a pundit of china, threatening to pull funds unless the reforms. The u. S. Drugmaker moderna soars after positive results on a potential vaccine. Shares to fund the development. Futures looking more positive in the past half hour. Matt as we started the program 50 minutes ago, they were unchanged and now, we are seeing gains of more than 1 . Looks like the optimism from yesterday coming back to European Markets. U. S. Futures are gaining almost 1 . They recovered from losses in our go when we list last look at the. The lithe equity trade out of the ftse and ibex typically the two first to open up. The ftse up. 8 in london, the ibex up. 9 in madrid. Interesting to see futures turning so positive, not just across the continent, but across the ocean, as well in the u. S. We are still seeing these equity indexes open up much higher, even with gains in the euro against the dollar, gains in the pound against the dollar, you still see big, strong s across cacpean indexes, the up. 8 , the german dax opening up more than 1 . Gains across europe. Optimisms not only on for the possibility of a Coronavirus Vaccine, but also Angela Merkel and Emmanuel Macron agreed to a 500 billion euro aid package to help the you recover from the pandemic. Essentially, it looks like germany, as the payer of the line in share, has agreed to take on mutual debt of some sort. The eu would borrow this in their budget, and pay it as grants. Not as loans, but give it to the countries that needed. Tell me what your assessment is of yesterdays agreement. Have i got it right, that merkel has agreed to now hand off money to italy, essentially . Daniel well, not really. Good morning to everyone. I think the agreement is certainly something that is going to provide some relief, but if you look at the wording, it is quite interesting because it is definitely binding and in the wording, it also says specifically that it is subject to Member States implementing important structural reforms, so the idea that we are going to see money for nothing is very, very difficult to believe. Need to see how other countries react to the agreement in a much more detailed level of the itemized points of the agreement, but if we look at the joint memorandum that france and germany have published, it is evident that it is less strict than it could happen imagined, but includes conditionality and binding repayment schemes. Anna good morning. Does this give fiscal space to countries that dont have so much fiscal space in europe . Daniel yes, absolutely. That it alsoting andeted not just countries programs,ral spending it is targeting regions and sectors. It was critical in order for it to have some form of impact because if this aid is not directed to the sectors that are bleeding as we speak today, we saw new car registrations completely abysmal in the European Union, etc. If it is not targeted specifically to the sectors and regions that have suffered most, it simply very dilutes the funds into the general spending of government and it becomes almost a negative itact, actually, because finances current spending and does not improve the recovery opportunity of those countries and regions. Matt what about the debt to gdp figures that we are looking at . Marching we see them toward 160 , roughly 100 more than we have here in germany. How does that get salt, daniel . Daniel it is very difficult to get it solved with policies that incentivize spending. It is impossible really. In the European Union, with learned revenue measures dont work because when revenues go up and the economy is growing, most governments continue to spend as much as you did they did in the downturn. Furthermore, the problem is the level of current spending that is untouchable entitlements, etc. , is growing because of the aging of the population, the structural levels of unemployment that are much higher than in the united so it istc. , impossible to solve it with revenue measures and it is also very, very difficult to solve it with growth measures because it is by now pretty evident that the eurozone, in growth terms, does not achieve the levels of productivity growth, of earnings, and of gdp growth of comparable economies, so this is almost like an ongoing problem that continues to make those countries like italy, like spain, they are hugely indebted they continue to be very indebted evening growth periods, and when things get bad, the debt goes further up. To European Union needs change a lot of its policies in order to foment a recovery that is based on the private sector and growth of productivity, because if everything is based on maintaining the level of excessive Government Spending at any cost, what happens is the burdens to job creation make growth lower, debt higher, and spending almost untouched. Daniel, thank you. Daniel lacalle, chief economist at tressis gestion stays with us. We will talk about his latest book and see if that gives us any clues as to how we move forward. Freedom or prosperity. Also on the open, Lloyd Blankfein says the u. S. Will have a spike in cases as the economy reopens. Stimulus measures cant go on indefinitely. We will hear what the former ceo of Goldman Sachs had to say. This is bloomberg. To some degree, if a vaccine appears and i know there was positive news today, but it has to go through trials we have to make sure it doesnt kill people, it is effective, it has distributed. Tured, the country cant be on welfare, even if that was magical. Theye postponing it, but are learning things about treating viruses, there are treatments people are aware of so there is some benefit to it, but not as huge as if there were an ultimate vaccine that would make people comfortable. To a greater extent, we are postponing peoples exposure to it and to some extent, we are eliminating the risk that would happen if the Health Care System was overwhelmed while people had it. In the long run, we have to contemplate that people will go back to work. No matter when you do it, look at the Asian Countries were they are highfiving because the new exposures were way, way down and notwithstanding that, the second we go back to work, a spike up again. That will be an expectation of matter when you do it. When we go forward and look at this sometime in the future, if we are going to go through that anyway, people will be critical if the official sector sacrificed more of the economy that they needed to because at the end of the day, exposures will be almost the same. We heard a fair amount, both President Trump and the Federal Reserve, particularly the chair, it seems from chair powell, we are hearing the fed will do whatever it cant, whatever it needs to to support the economy, but on the other hand, a lot of caution this might take longer than we think and be more difficult than we think and the possibility of longterm damage. How do you assess the damage to the u. S. Economy over the longterm . Obviously it depends on how and you haves on certain businesses that come into contact with the public that will go away that were operating a tight margins anyway. To wait untilord they reopen and some businesses that will be open at such a reduced level that they wont be possible that profitable so they wont reopen. Sadly, those will go out of business and people will find other jobs. The economy is resilient so it will take time, but it will take time. The economy will be changed, but resilient. It will come back. One of the things to consider is how long this goes on. Think the chairman and the Federal Reserve board have done an extraordinary job at i stimulus as replace a substitute for what people would have earned to keep it going, but one of the things on my mind is how long can you sustain that . Grant,e a 3 trillion im talking about the fed and congresses grants and loans. How can can we have another 3 trillion round in 10 weeks, another 3 trillion after that . At some point, even if we wanted to do that, outside investors and Central Banks around the world continue to fund compounding deficit the arm we are mounting . Everything they can, we should, i applaud them in the fog of war to be so coherent, but i think it cant go on forever. David it raises the question of whether there could be risk to the Financial System itself. That was the problem in 2008 and 2009. Thus far, it hasnt but the fed is worrying about commercial real estate. Do you see risk on the horizon for the Financial System . Lloyd anybody who says there is no risk on the horizon is crazy and blind. I would say the financial im not talking about as an insider, but as a pretty alert and attentive observer, i know that the Balance Sheets and the weredity, banks extraordinary and i dont mean that as a complement to the people who have been and are running the banks. I think the legislation post the financial crisis and the way in which the Federal Reserve tests for liquidity and safety and solvency have been extraordinary. Banks have been on their toes, they have been wellcapitalized. Anna that was Lloyd Blankfein, interesting conversation, the senior chairman of Goldman Sachs speaking with david westin about the told the coronavirus will have on the economy and the things we should and should not worry about right now. Banks in thee top 10. ,aniel lacalle is at tressis phd, and author. I want to pick up on your book freedom or equality the key to prosperity through social capitalism. I read about that had thought of the crisis were in now. I thought is daniel mean we need more governance . You mean we need companies to take on a social agenda. Daniel absolutely. If we think about the challenges we are facing and how difficult for governments to manage and prevent crises like this, we can understand precisely from an environment like the one we live in right now is what we need more cooperation between companies, businesses, more competition, and a better fabric of companies that can invest in those areas that are so needed right now. The same way that we have been seeing incredible surge in socially responsible investment from businesses all over the world, i think we can go the next step further and look at opportunities where companies can actually take the place that governments are unable to have in the challenges we face, and invest more in health care, more in education, invest more like they have been doing on the environment, which has been working very well because it prevents the politically driven topdown decision of where and how to spend, and uses resources in a more diversified and also more efficient way. Matt so you are arguing for Market Solution to the issues that we face and today, arent we getting exactly the opposite of that . Arent the nations of the world of europe and the u. S. Moving back toward bigger government and Funding Companies that would otherwise be going insolvent . Daniel absolutely, and i think that is a mistake. I think that the average person that is watching this right now can understand that we are going through a very severe crisis that has been the result of very poor prevention measures, very poor management from government, and also there understanding of the real problems and real challenges of the fabric of businesses and the experiment of locking down an entire economy, which has been disastrous. We understand that. The worst thing we can do is give a lot more power to those that dontments suffer any of the negatives of things they have done incorrectly. Government plays a role, nothing bad about that, but government cant play every role, at least the role of deciding winners and losers in terms of which theanies are going to drive sectors, are going to be thriving, etc. It is the interaction between economics, between not an agency. Anna maybe we do want the decision of the committee or society when it comes to allocating resources for health care. If it is done by the private sector, maybe you dont get something that works for everybody, including those who find it difficult to pay. Daniel hence the importance of having in health care the carburetion between the public and private sector. I think that is critical, so you can achieve the best possible health care to everyone without incurring an economic and social problem, at the same time by having a completely inefficient burden that, on top of it, doesnt work. Think about, for example, how the eurozone and fed with massive levels of expenditure in terms of deaths per million in countries like belgium or spain that have very high levels of government expenditure. Collaboration between the public and private sector is going to be more necessary than ever and managing Financial Resources is going to be more necessary than ever. We cannot just expect the government budget to simply go through the roof and monetize the entire thing, which is going to lead to destruction of real wages, reduction of growth, productivity, etc. No, we need to look at solutions in which we find the most efficient way of managing those resources and that is with public and private collaboration. Matt daniel, thank you for joining us. We appreciate getting time with you. Daniel lacalles chief economist at tressis and author of freedom or equality. China is pledging to make any Coronavirus Vaccine available to all people. We will discuss that next. This is bloomberg. Anna welcome back to the European Market open. We are 33 minutes into a fairly positive session, up. 8 on the euro stoxx 50 right now. Lets turn to the conversation around health and the who. China is pledging to make any Coronavirus Vaccine available to all in an effort to defuse criticism of its handling of the pandemic. Sident xi shanking address xi jinping call for greater cooperation to fight the virus. Annmarie hordern is in new york for us and has been following the conversation that went on for many hours, hours after xis message, President Trump released a letter to the who on twitter. What are the details of what the president is saying . Annmarie more drama between washington and the World Health Organization, just after xi jinping talked to the world assembly, donald trump took aim at the who and china, in a fourpage letter and it listed a bunch of grievances the administration has with the handling of the World Health Organization, in particularly of the outbreak in china and really, the end of all of these grievances, the main thing to really focus on this morning is when they say when is it an trump says if the World Health Organization does not commit to substantiv improvements, ie will make my temporary freeze of u. S. Funding to the who permanent and reconsider our membership to the organization. That is taking that freeze into a permanent status and already, there is divisiveness within the administration and there is a disagreement on whether this is the right move in the middle of a pandemic to cut off funding from the who. Another line after that is President Trump talks about how he cannot allow american taxpayer dollars to continue to finance this organization and that is a nod to the reelection. Matt he is implying that the who is just a tool of the chinese economist Chinese Communist party, not necessarily the savior of the world during the pandemic. Annmarie hordern, talking about the latest escalation from donald trump and the who. Next, the u. K. Sets out its plan for tariffs when it fully leaves the eu. Remember, brexit is still planned for the end of this year. 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. Anna welcome back to the European Market open, half an hour into the trading session. Degrom quite strongly at the start of the trading day for european equities, but now off those highs. Dropping into negative territory, just until the flatline on the stoxx 600. Still some strength on the German Market and the london market, but elsewhere, weakness in particular in paris. Lets look at where we are in terms of the sectors and the grr tells me we have a handful of them in positive territory. Travel and leisure, insurance, and banks have been bouncing toongly this morning, and the downside, construction and Material Health care real estate, more defensive sectors. Lets get the bloomberg first word news in your top stories now on the terminal. President trump is escalating his threats against the World Health Organization. Hes unhappy over the handling of the coronavirus pandemic and says he may personally cut u. S. Funding if the who doesnt make sweeping reforms. Trump is confirmed concerned that agency is too close to china. Xi givey, president them his full backing. The eu is closer to a rescue package. Angela merkel and Emmanuel Macron have agreed to a 500 billion euro plan that includes controversial joint eu borrowing, budget borrowing that germany has in the past shied away from. The plan is still only a proposal. A final plan needs to be 27, and backeday by all 27 eu Member States. The Federal Reserve is ready to leave the lending rate news zero until the economy is back on track. The chairman jay powell said the comments coming in testimony prepared for a Virtual Senate hearing later on today. He says the central bank will use the full range of tools available to support the economy at this challenging time. 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. A closer lookke at the u. K. Economy right now because we have some data out an hour and a half ago in terms of the jobless story. Jobless claims rose by a record 856,500 for the month of april as the coronavirus lockdown smashed into the economy. European car sales stopped the same month. The u. K. Set out its tariffs plan for when it fully leaves on eu, cutting import duties many products while protecting Industries Like automotive and agricultural. Dishwashers, freezers, and Christmas Trees will be able to free as of. K. Tariff january 1, 2021. Tariff will be maintained on Agricultural Products like beef, lamb, and poultry, a 10 tariff on cars remains. A percent will come in tariff free as opposed to 47 currently. That was a rundown of what we are seeing on the tariff side of things, but we started that with the jobless numbers for april. How significant, this big jump in claims for the month of april. The january to march unemployment numbers looking a little backward, but maybe april number gives us a bit better idea of what to expect for the second quarter. Unfortunately, the u. K. Unemployment numbers on the face of it look quite good, it points to a star good start for the three weeks before we before we locked down. Is we had thetant Job Retention scheme and are hoping that will prevent a huge spike in unemployment likely seen elsewhere, but this increase in claims tells us not tory employer has decided furloughed workers. Some employers have decided to let people go instead and that can increase over time as stresses on Companies Increase and the lockdown persists, so it is worrying. A fallback in pay growth can only intensify given the Job Retention scheme means even if you are employed, chances are youve taken a pay cut. 80 of normal pay. Matt in germany, i think it is 65 . Your social safety net is stronger than ours. Looks like this conservative government seems to be doing a lot in terms of social safety nets. Is there more that you think this government can do right now . Liz it is tough. I think you are right, the pitchers have been generous and some ofthey will them had a slow start, but they are starting to come through. In terms of what more needs to be done, it is hard because we are in this suspended animation right now. Economies are shut down and we dont know when we take the brakes off. Perhaps that is the time when you need further action, when we see how the economy response to lockdown being lifted. Is there going to be a slump in demand . Ym or gople rejoin the g back to restaurants or return to their normal lives . If that is the case, that is perhaps when the government does need to come in, if it is safe to encourage people back out and the economy spending money, maybe they do need to do more at that point, but we just dont this suspended animation, perhaps the government will wait because the measures they have announced, really expensive. We expect the deficit to be 13 of gdp this year, so to announce more now when the goal is not to get people out spending money might be premature. Anna let me ask you about where unemployment peaks then, because there has been talk in the u. S. Of a 2025 45 Unemployment Rate. Before these numbers came out 25 Unemployment Rate. Before these numbers came out, we were seeing 7 , 10 . That is a big difference. What do you think will be the peak Unemployment Rate for the u. K. . Liz we are in that camp. We think we have a peak of 7. 2 at the end of the year. It comes down to classification. The Job Retention scheme and the u. K. , if you are for loaded, you are counted as employed. In the u. S. , i think you would be counted as temporarily laid off. That makes a difference for the numbers and the chart wont look as dramatic as the u. S. One even though it is indicating something similar going on underneath. 7. 2 is on the low end of the range of estimates. The bank of england in their scenario i think had 9 . The worry is, we come out of lockdown and Job Retention scheme expires, and companies cannot keep people on and you get the spike and at that point, 7. 2 starts to look optimistic. Matt liz, thanks for joining us. We appreciate your time today. Liz martins, senior economist at hsbc. He will continue the conversation on Bloomberg Radio in just about 10 minutes so go ahead and tune in wait, am i going to ask you to flip away from our Television Program and tune in to radio . I guess if you want, you can do that. It is all the same company. We are on london dab digital in the city. Next, you breakthrough. Merkel and macron agreed to a 500 billion euro 80 package to help the bloc recover from the pandemic. We will bring you an exclusive interview with the European Commission executive Vice President Margrethe Vestager next. This is bloomberg. Matt wellconnected european open. We are 41 minutes into the session and we see now a mixed market after a strong open. We see the ftse and the dax back to little changed, the cac iran now fallen. There was optimism after the agreement yesterday. Europes most powerful leaders backed a breakthrough deal to help the eu recover from the coronavirus pandemic. Angela merkel and emmanuel agreed to a 500 billion euro fund that would make grants to the hardest hit members, but it still needs a sign off from the rest of the bloc, so can it pass and is it the right step . Joining us now is margrethe , European Commission executive Vice President , so commissioner, thank you for joining us. I want to ask what you think about this stuff. The commission had floated a 2 trillion plan, it had about 300 20 billion euros 320 billion euros budget borrowing that would be given his grants or loans. This is 500 billion euros of budget borrowing that will begin out as grants. Is it a more progressive step in your opinion . Commissioner vestager i find it is a very good step. It is very good, very strong that france and germany come together and to do that at this time, because it is important that we recover fast and that we recover strong. The thing is, this is one step and there are 27 members that have to come together, so of course, i hope that others will be included in the conversation about how to make a european recovery, because we will recover stronger if we do that together. Anna good morning to you, commissioner. Are you confident that countries who have been less keen, the netherlands, maybe denmark will say yes to this kind of plan . I dontoner vestager think you can just expect people to say yes, of course. This is a union of Mutual Respect and involvement so of course, it is important that other members, the rest of the members of the union are as involved. The on substance, because important thing is that now, while we pursue our strategic on the european continent and using Digital Technology as far as possible, all Member States are on board on the substance of this plan. It could look like germany is a green agreeing to go along with a shared debt plan in order to take some of the focus away from its own state aid. Weve gotten complaints, for example, from Michael Oleary, whos voiced his complaints very often about the state aid for the funds are, for example. Lufthansa. D are you concerned about the amount of state aid germany is getting out to countries . Commissioner vestager the worry here is the on leveling of the Playing Field because what germany can do is completely justified. They cannot overcompensate. They do what is needed, but many other Member States do not have the same opportunities or capabilities, and this is why it is so important to have a strong soopean approach, as well, what the individual Member States can do and germany in particular is being matched with what we do together, because the European Value chains, they are so integrated. That makes sure the entire ecosystem benefits from it, but it also requires that we do something together because otherwise, we will not have the fast recovery that will save jobs as we would want to. Fund does this overnight that has gotten support of macron and merkel, do you think this will help redress the balance as to which companies are saved . Thinksioner vestager i it is a very important step, because if we can make a plan so that substance and funding eachtence compliments other, we can push very far and of the essence is speed. Now that we see from a problem of liquidity also comes problems of solvency and when you open for recapitalization within each member state, it is important there is also a European Response and that we get it because weast, should save valuable, well driven, valuable companies. Note were so many that were in trouble for any reasons except for this fundamental one, that we have had to lock down our economies because of the covid19. I think it is important we shall all of these businesses, all of the people working, people who have invested decades of their lives in building a business that there is a European Response in order for them to do what they want to do, do business. It does have be a viable concern, right . In the case of the airlines, is there another reason that you would allow states to fund these companies, even if they are not really viable, ongoing concerns . Is it fair for states like france to support air france and allow it to sell tickets at lossmaking prices to better compete . Commissioner vestager if a company is in difficulty, as we define it in our set of rules by the first of january, they can get compensation for the damages that come from the lockdown, and police, do our best to but there will be differences among airlines because Member States have a different approach also within the rules. Sweden has made a scheme that benefits everyone registered in sweden. Other Member States have made deals,lective individual that sort of deal with the individual company. That is fully justified. One of the things that is important to note in the deal the french government made with air france and that we could enable was they made conditionality for the funds going into the company. I find that important, that Member States follow up on their obligations and what they say butt the european economy, doing that with a lot of funds for an individual company. Matt state backed airlines are constantly going bankrupt. This isnt the onetime pandemic link issue, and states constantly bail them out. Not just in europe, but the u. S. , and airlines cant really be green. They are the biggest polluters in the world, so is there another reason that you approve aid to these companies that dont make money and destroy, you know, the world in which we live . Well,sioner vestager some of them do make money because you can make money, but it takes a lot of capital to be able to do that, and airlines can be greener. They may not be as green as they can beut greener and there is a trajectory to do that. After the covid19 crisis, we will not fly as much as we did, but i still think we will be flying and i also think there is a future where we will greenest is the possible way and technology will keep helping us in making also flying a thing that we can do, also with a good, green conscience. Do you think there needs to be more conditionality, whether that is around Climate Change or something else, when it comes to the bailout of lufthansa . From thener Vestager Commission side with the legal basis we have, it is not for us to do that but we encourage Member States who are dealing with the company in question to say, well, of course the fundamentals will have to be right. If taxpayers step in, they will have to be re8 it. Kim renumerateed. Not getnt should bonuses, shareholders should not get dividends, no dividend Share Buyback issues, but there will be other Countries Companies who cannot or will not be aided, what is a point in saying would be the next steps in greening this company and if you are a large company, to report about what you do, that you take upon you this Strategic Plan to green the continent. Anna briefly, do you think more needs to be done to stop the european businesses from being bought by Chinese Companies previously than they previously would have been after this crisis before the crisis . Commissioner vestager yes, i think so. I think it is very important to areigilant, that we assertive about what is our strategic interest and i also think it is important to strengthen the tool that we have for screening of foreign direct investment. For business, obviously, but people who come here should come here for the right reasons to do business, not to come in with subsidies from third countries or to just take technology out of the company they acquire. I think it is important to be vigilant, especially in the situation where they may be a staggered recovery, where some parts of the world recover faster than others. Matt commissioner, thank you for joining us. We appreciate your time this morning. Tressis, Margrethe Vestager, European Commission Vice President. Next, some of your stock movers including thyssenkrupp. The Company Fights for survival. This is bloomberg. Anna welcome back to the European Equity market open. Day and to the trading equity markets, dragged down by the French Market and sovereign southern European Market, a few stock specifics to the upside, iag, a travel stop doing well on the back of news that the company is working on these air corridors, a deal could be done between various governments, meaning no quarantine is necessary. Thyssenkrupp trades higher in the light of its submarine sales. Matt that is some of the movers today in this changing market. Interesting that we have seen gains of 1 and now we are looking at losses of 1 on some indexes. Bloomberg television. Next is surveillance. Im headed to radio. Tune in on london dab digital or find Bloomberg Radio on the internet. This is bloomberg. Andcine chancellor merkel president macron back with a deal for the european countries. Positive results in a potential vaccine raising a 1. 3 billion per share cell. Powell prepared use the full , they willhe economy have negative by yearend. This is bloomb