Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Disinformation and propaganda, President Trumps rhetorical assault on beijing steps up a gear. The u. S. Senate passes a bill to the last Chinese Companies on european and delist Chinese Companies on european indexes. The bank of england president said get of rates are not being ruled out. Plus, cut to junk. Angela merkel says a decision on the lufthansa bailout should be expected shortly after the German Airline becomes the latest to lose its Investment Grade status on the s p. Take a look at futures this morning. We do see losses in futures. Euro stoxx 50 futures down a little bit more than 1 . 0. 6 6 . Ures falling we see drops on u. S. Futures, as well. S p, and nasdaq futures all down by more than 0. 5 . Anna, the gmm . Anna lets have a look at the gmm. Quite a mixed picture in the Asian Session after some gains in europe and the u. S. Yesterday. Lifted in part by some better corporate reporting in the u. S. We see a little bit of nervousness around geopolitics and the ongoing tensions between china and the United States. The bill passing in the senate yesterday is one of the factors in the mix in terms of making a harder for Chinese Companies to mix just list in the u. S. Some of the moves to the upside , but what is gmm clear is we do see strengths to the dollar. The aussie dollar is weaker. Norwegian krone, a host of currencies are weaker this morning to the benefit of the u. S. Dollar and that really reflects that underlying sentiment we are talking about. Very cool stuff. Lets get the first word news from the bloomberg terminal. The Spanish Parliament voted to extended state of emergency by two weeks. The Prime Minister backed down from his earlier plan of a onemonth extension as he did not have the backing to pass the measure. Spain has suffered europes most secondmost extensive outbreak from the coronavirus, reporting over 230,000 cases with 28,000 deaths. Chinese Companies Listed in the u. S. Are facing tougher scrutiny on their finances. The senate has passed legislation that could bar chinese firms on raising money from u. S. Investors. The bill accuses the communist party of cheating stock exchanges. Carson block from muddy waters says a certain level of fraud as expected when doing business in china. That in china,is a company that invents 30 of its revenue is considered real. If you are taking other peoples money in china, there is an expectation that there is some level of graft and fraud. News 24 hours per day on air as well as on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Anna we are getting a few news lines from various European Companies this morning it being 7 00. Lets get to the bigger picture. Futures european retreated. Asian futures were mixed. Halting this weeks rally for global equities. U. S. China tensions continue to linger. Lets get into that conversation now. Macrour bloomberg mliv strategist to joins us in london. Good to speak with you. Tensions once again to the fore. Even if that leaves us with a fairly mixed, uncertain pictures for equities, fx traders seem pretty certain what is going on here. We are seeing the dollar push higher on account of this risk sentiment. We are seeing this tugofwar between. That is really keeping this as a range bound trade. It is hard to see with the catalyst could be for a severe market selloff or if that would prompt the Dollar Strength being sustained. ,t is too soon to declare this but certainly it is a sort of market stress. What are you watching for today in terms of pmi . Importantly, these are coming off record lows. Most european economies lifted lockdown in early may, so these surveys for the middle of the month, so this would reflect some of the recovery in terms of output. At the same time, it is really too soon to draw any conclusions on an upbeat recovery because it stagese tentative early of the lockdown. They dont capture the magnitude of changes, but the pickup avenue activity. It ultimately depends on the consumer supporting the recovery. Consumer confidence remains quite depressed. Not a lot of positive to take in terms of the recovery. Anna interesting to see how long it takes Consumer Confidence to get back. The u. K. Leisure business issuing equity this morning. They are asking existing shareholders to give them a little bit more money. This is really the son of a trend. We are seeing u. K. Companies and others across to dip into their pockets. They havent always got a positive story to tell. This is a very challenged after. Anybody who works in pubs and coffee and hotels, this is going to be any difficult straits. I think certainly the conditions we are seeing right now is that companies are taking advantage of these alter accommodative conditions. The appetite is therefore buyers to try to want to take hold of these companies. I think that is something we are going to see going forward. Corporate debt levels continue to increase. In an environment where we wont have to see financial conditions tight, what the impact will be over the medium term for these economies. Certainly, these conditions do warrant the type of action we are seeing because the demand is there. Right, thanks very much for joining us, laura cooper, our bloomberg mliv macro strategist out of london, talking to us about the markets. By the way, the mliv question of the day today is a fascinating one. Who is right on negative benchmark rates . Gift, asive rates a President Trump says . Certainly in the u. K. Economy, kit jukes says i cant think of an economy more negative rates are a worse idea in the u. K. Give us your idea. Coming up, war of words. U. S. China tensions flare up as President Trump points the finger at xi jinping. We have all the details for you next. The juicy gossip on this relationship. This is bloomberg. Matt welcome back to Bloomberg Markets, this is the european open. Lets get the Bloomberg Business flash. The top corporate stories. The isto bailout lift in close. It provides hope for a quick rescue package as the Airline Management warns of the urgent the. Ongoingays talks are and the European Commission would need to approve any deal. Merkel said, wait for the talks to end. Easyjet is planning to resume flights. Initially, that will comprise as airlines around the world resume operations. Wall streets post lockdown era is starting to take shape. Jp morgan plans to keep its offices halffull for the foreseeable future. Goldman sachs is reopening its paris office. City is looking at leasing offices in the summer. Your business flash. President donald trump escalates his rhetoric against china. Ishas suggested xi jinping behind a disinformation and Propaganda Campaign against the United States and europe. He says it all comes from the top. They are ratcheting up efforts to paint china as the villain. The senate has approved legislation that could bar some Chinese Companies from being listed on u. S. Stock exchanges. We are joined by our guest. David, what is the investors take on china . Does any of this change the outlook for china as an investable asset . Well, i mean, clearly it will have potentially some impact. It is a concern. The rhetoric is continuing to escalate. I do think that these soda trade war concerns are going to start weighing on global assets more globally. This is going to have significant mediumterm implications. To track the chinese recovery. The broader recovery. Anna good morning to you. You say that Investment Grade credit is the place you want to be versus equity. You say it is less exposed than equity at this point. Do you think that we see a point where the geopolitical tensions start to pose more risk to the equity story than the virus or even to the Investment Grade credit market . How significant are the geopolitical risks and have significant today become . I think the geopolitical risks are meaningful. The economicows hit from the virus is historic. And so it is really looking through the very weak earnings we are seeing from corporate and the very big declines in economic data. Ands looking through that in terms of the equity market in particular the s p, it is really treating this as a natural disaster, very severe, but it is shortlived and you get a relatively strong recovery and limited permanent economic image. But one thing which upsets that narrative would be a reescalation in trade tensions between the worlds two largest economies. I think it has been interesting that the market has reacted to that as news more than it has reacted to yet another tragic that what is record in terms of weekly jobless claims. I think it is something which is a concern for the market. Is a concern for weakness and a correction. You think markets looking through the jobless claims belies a stronger connection between the s p and the economy . Do you think those two are detached in some senses . David i think in some respects if you look at the broader probably000, which is a better measure of the investor assessment of the outlook for the real economy in the u. S. , think a more relevant benchmark for those investors in credit, particularly for those in highyield space, we have seen them perform underperform during the broader rally. Hasink part of the story been the composition and the fact that the rally has been narrow. Think that it is an interesting contrast we have right now that we have a bond Market Pricing and negative Interest Rates being extended to the u. K. And potentially the yields beinge real priced for a long period of time. Yet, we are seeing the equity Market Pricing in quite a strong second half recovery. Anna indeed. A different view looking at different asset classes. We will talk more about negative Interest Rates in the next conversation, david. In terms of the Investment Grade credit, what you do prefer to equities, what do you make of the large amounts of supply we have seen coming to the market and the markets appetite to absorb that supply . Do you see that continuing . David i think in terms of Investment Grade, it has been notable. As you say, we have a record amount of supply being issued, particularly again in the u. S. I think that supplies going to continue to come through. What is happening is this collapse in cash flows for the corporate sector is being capitalized on their Balance Sheets through borrowing. This is not just Companies Taking the opportunity to lock in a lower cost of funding. They need this finance in order to fill the cash flow hole that has been created by this crisis. But despite that huge amount of , i think there have been two reasons for that. One is you have Central Banks buying those bonds, but also we are still in a broadly speaking low yield world in terms of Government Bond yields. I think the current spreads and valuations, and a lot of investors are moving into Investment Grade credit because they see it as a relatively safe sort of income. With the cuts in policy rates and from an fx hedge basis, we are also seeing more inflows coming in from asia into global Investment Grade, particularly again into the u. S. Market. Good yes, well, if it is enough for the fed to be buying. David, thank you very much. David riley stays with us on the program. You mentioned negative Interest Rates. We will get to that conversation next. Just look at how low they go. The bank of england is not ruling out negative Interest Rates, keeping that subject under review. But is it a good policy . This is bloomberg. Anna welcome back to the european open. Futures do suggest weakness to the start of the european session and into the u. S. Session, as well. Andrew bailey is not ruling out negative Interest Rates in britain. The bank of england is studying how low Interest Rates can be cut amid the coronavirus. The debate over policy intensified after inflation slowed to its lowest level in the u. K. Sold that with a subzero yield. David riley we still with us. How significant was it that we u. K. Debteek the Management Office issuing or selling debt with a subzero yield on average for the first time . David well, it is significant in terms of what it says about assets,nd for safe including guilt gilt, particularly at the shorter end. As a former treasury official, it should be taken quite positively within the u. K. Government because obviously they are hoping to have savings as low as Interest Service costs that they possibly can. I think it also pushes back within the fiscal hawks government and treasury who say one has to be very careful because the size of the deficit, bond yields could be driven up. There is no signed a bond vigilantes. No sign of bond vigilantes. Matt kit jukes had a great quote on the potential negative rates in the u. K. Because of the side effects, they would probably weaken the pound, which is already in trouble and export, while they would typically get a boost, the impact of the pandemic on trade, that seems less likely. He says, i cant think of an economy where negative rates are a worse idea in the u. K. How on earth does it make sense to even consider adding negative rates in the mix . Do you think he has a point to mark point . David i think it is interesting if you listen to it Andrew Bailey said yesterday. He actually was very neutral, i thought. He said, we dont rule out any options and policy tools. That would include negative Interest Rates, but we are not ruling anything in, either. What i do agree with his i dont think it is going to be the for the bank of england. I dont think they are going to go to negative rates. I think it is less a concern necessarily about sterling and more in terms of the impact that would have in terms of the banking sector. What we have seen elsewhere in the world is if you combine substantial quantitative easing bond buying with the negative rates, you end up with a flattening of the curve, an extension of negative yields across the curve, and it is very negative for the banking sector. I think that would, in turn, potentially lead to some tightening in credit conditions, which is the complete opposite to what the bank of england is trying to achieve. Just very briefly, it is also a communication issue. Which enter bailey referred to, as well. What is the signal that is sending to the broader, general public . You could have the reverse effect on negative Interest Rates increasing precautionary saving by the public rather than reducing it. Matt all right, david, thanks very much. Pleasure getting some time with you today. Investment, chief strategist at bluebay asset management. Up next, kate and lyle reported sales that beat the street estimate. We will speak to the ceo next. About the business and the impact of course of the Coronavirus Crisis. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are 30 minutes from the start of cash equity trading and looking at futures that have been steadily moving down throughout the session. Now, basically 1 drops on futures on the major continental index and the ftse futures down 0. 75 . Turkeys central bank set to publish its latest rate decision. Is expected to cut the rate for a ninth consecutive time. It is a big day for releases of u. S. Data, as well. At 1 30 p. M. , we will be getting the latest jobless claims report and a reading of mays pmi data is expected. Jerome powell is expected to speak at a virtual fed listens event on how covid19 is affecting u. S. Communities. That will be 7 30 p. M. London time, 2 30 in new york. Anna . Anna lets talk about the earnings story and what we know and dont know about the path ahead. Tate lyle reported sales that beat estimates. The Ingredients Company maintained its dividend but will not issue guidance for the next financial year. Lets speak now to the ceo of tate lyle. That is nick hampton, who joins us on the line. You said you cannot give any guidance right now. What is the biggest missing part of that guidance formula for you at the mom . Is it sort of at the moment . Is it sort of Consumer Behavior or when restaurants reopen . Whats the missing part of the puzzle . Nick there are two. Things we are not clear how long this pandemic is going to last, and therefore, how long there is in northbe a lockdown, america especially, which is the biggest part of our business. Will unclear how things evolve out of home consumption. We have decided not to issue guidance at this date. We will give an update to the market in july, when things are more clear. Matt you say you see good in home consumption. I am buying a lot more food and eating a lot more, obviously. Going to the grocery is one of the only things i was allowed to do on lockdown. Cooking is becoming more fun than watching sitcoms. Is that a trend that you are seeing around the world . Or is that just me and anna . Nick it would be fair to say that we are seeing strong in home consumption. That is fueling our food and Beverage Solutions business globally. We are seeing less out of home consumption as people go through lockdown. You are pretty typical. Youre starting to see a resumption of out of home activity in asia. Anna what difference does it make for margins . The inhome versus out of home consumption for you . Factorhat is less of a to be honest. Primary products business is more affected by out of home and is suffering more. What is more important is the mix of products we are selling. You mentioned, by the way, asia. Your take away on how lockdowns in the west are going to end, given your experience in how the chinese lockdown ended . Are people going to go back to restaurants . Are you encouraged by what you see in chinese businesses . Nick i think there will be a cautious return. When you look at out of home, there is more takeout than eating instore in asia currently. I suspect we will see something similar in the west. Inevitably, each country will look a little bit different because government responses have been different all over the world. Anna let me ask you about the oil price and what that might do return,ol and then in corn syrup. There is a chance that ethanol capacity could be shifted to corn syrup. What kind of insight do you see into that tradeoff . Come on ethanol, we have a very low exposure to it first, on ethanol, we have a very low exposure to it. Put it into seven ties or to help with the sanitizeronse or to help with sanitizer to help with the covid19 response. At the moment, we are really focused on serving our customers well and helping them get through this. , when you are starting to move past that, you have a very strong balance sheet. Your business is doing better than the street expected. There are some with the weaker Balance Sheets, there are some not faring quite as well. Do you see any takeover candidates out there . Do you see any pricing that you think will be advantageous to tate lyle . Look, if the fundamentals of our business remains strong, we are confident we can emerge from the stronger. I have always said that m a will be part of our strategy. I am sure there will be opportunities going forward. When you look at those opportunities, the key thing is to make sure they are the right thing for business strategically. I suspect pricing might be more favorable. Ultimately, as to be right for the strategy of the business it has to be right for the strategy of the business. Matt nick hampton there, the ceo of tate lyle, talking to us about business amid the Coronavirus Crisis. The u. S. Escalates its antichina rhetoric. Donald trump pointing the finger at xi jinping. The Senate Passes a bill that could delist Chinese Companies. All the details on that relationship from new york next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are just about 20 minutes away from the start of trading. The focus, we are going to focus now on about chinau. S. Relationship. President trump is escalating his rhetoric against china. He has suggested that xi jinping is behind a disinformation and propaganda attack on the United States and europe. Trump says that it all comes from the top. This is a series of tweets from the president. Other republicans ratchet up efforts to pin china as the villain as well. Joining us from new york is annmarie hordern. How does President Trumps tweet storm play into u. S. China relations . There were a lot of things that happened yesterday between the Senate Chamber and white house. The real escalation is this tweet from President Donald Trump. He is suggesting that it is xi jinping that is behind what he is calling this disinformation and propaganda attack against the u. S. And europe. He says it all comes from the top. President trump, we have seen him take a strong game against the beijing government. He has always balanced that with kind of putting out a hand to xi jinping personally, even in the past speaking glowingly of xi jinping. He did not do that yesterday. It came after the white house released a report to congress from the National Security agency. This report outlines a familiar criticisms we have heard from the u. S. Government towards china in the past, intellectual property theft, economic protectionism, human rights abuses. It did not give any action of what the u. S. Would do. One of our white house reporters who wrote the story was saying that it is a careful read citation of the real problem. It was clear after this document, President Donald Trump really upped that rhetoric with his tweet, pointing the finger more closely at xi jinping. Anna good morning. Billenate also passing a that could see u. S. Listed Chinese Companies delisted. How significant is this piece of legislation . Pretty significant. The fact is, also, it was voted overwhelmingly, really a bipartisan vote on this bill. Any company has to certify that they are not under control of a foreign government. That is why everybody is talking about these Chinese Companies, most notably, alibaba and baidu and the potential that they could be barred from listing on u. S. Stock exchanges. We have heard a lot of this before, u. S. Lawmakers raising flags about billions of dollars being poured into these companies and the worry that american money is bankrolling these companies, that these companies are going to end up becoming the top in whatever field they are in. One of the senators that introduced this bill, john kennedy, he said i dont want to get into a cold war with china, but i wanted to be an equal playing field. Clearly, the rhetoric is really being amped up. There is an escalation of tensions between beijing and d. C. We are in full swing election mode until november. Anna indeed. We are getting closer to november. Annmarie hordern joining us from new york with the latest on the u. S. Political story. If you want to stay up to date with u. S. Policy, later today, we are speaking to the house speaker, nancy pelosi. It will be interesting to get her perspective. Dont miss that exclusive interview. Dallasg with the u. S. , fed president Robert Kaplan says more pervasive Virus Testing and further fiscal stimulus is likely to be needed to revise Consumer Confidence. Here is our interview. With businesses reopening, i think you can see a good, slow, steady recovery in the third and Fourth Quarters. What i am worried about is, despite what the government may say or what the guidelines are, there are certain behaviors that consumers are going to be reluctant to engage in, whether it is shopping, going to entertainment, arts, or anything where people are gathered. Me, whatn example, for the feds have done on our lending programs has helped stabilize markets. The fiscal policy is key. I think at this stage, to recover faster, the Health Care Policies are central. What do i mean by that . Ubiquitous testing, contact tracing, good procedures. I am one that is a little concerned we are doing more testing in texas, but i would love to see a National Initiative Manhattan Project to really emphasize testing and quick testing in front of stores, restaurants, other facilities so people have more ,onfidence that when they go in they are not walking into a situation where they could be at risk. I think until we have that, my concern is there will be limits to how fast we can recover. And that we will recover, but without certain types of activities fully recovered, it would just limit gdp growth. It will mean the Unemployment Rate will be more elevated than it would be otherwise. I cant let you go without asking you about the oil patch here in the center. You might as well be in the Federal Reserve bank of oil, as far as most people are concerned. Do you have any kind of forecast for where the industry goes, how Many Companies might go bankrupt if oil stays below 40 . Is 40 bankruptcy rate realistic . It might be. We are seeing here in texas and we are seeing it globally, lots of drillers shutting in. Meaning, it is not economic to drill and they are just shutting down. Think totaleve, we u. S. Production will go from say the Fourth Quarter of last year, 12. 8 Million Barrels per day, it will end this year closer to 10. 8 Million Barrels per day. The Permian Basin may shrink by as much as one Million Barrels per day. You will see bank bankruptcies, and failures, not only in drillers, but those who service them. It is our own view that as demand returns, people begin to drive, activity resumes, which it must. We will work off the excess as early as sometime in the second half of 2021 or early 2022, depending on the rate of growth. We actually think that you could see, and its not surprising to us, you are seeing a firming in the price of oil. In the meantime, this year, you are going to see lots of pain and restructurings and bankruptcies and challenges. If that continues, how quickly do the people who shot in those wells turn them back on . Guess what the price goes to guess what the price goes to. Once you shot in a well, it takes some time to unshut it in. My guess is the magic price starts to be in the neighborhood of the high 30s or in the 40s, you will see people resume. It is our own forecast at the dallas fed, even with that reduction of u. S. Production, the actual daily production that is going on right now is much less than that. We even have if we even have a further reduction, some of those shut ins welcome back by the Fourth Quarter. Ins in thee shut United States may be right now at their peak. We think some of that, a lot of that will come back. Why will u. S. Production decline . Because of the decline curve. Even if you start drilling again , even without a lot of new drilling, you will have a natural reduction in output because you need to drill a lot more new wells to replace the rapid decline curve of shale. A lot of those shut ins will come back by the end of the year. Matt that was dallas fed president Robert Kaplan speaking with our very own mike mckee. It ist, lufthansa said close to a multibillion euro bailout deal that would see the state become its biggest shareholder. Thats really the problem. We will discuss next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We areminutes away from cash trading , just about 10 minutes to go until the star across europe under u. K. Lets get the Bloomberg Business flash. Astrazeneca has received more than 1 billion in u. S. Funding to develop a Coronavirus Vaccine from the university of oxford. The u. K. Drugmaker has agreed to that has agreements to supply 400 million doses has agreements to supply 400 million doses and capacity to produce over a billion. Astrazeneca says it expects to start supplying doses this september. Easyjet is planning to resume flights from june 15. Their line says a small number will restart on routes where there is demand for them. Initially, it will comprise of domestic flying in the u. K. In france. It comes as Airlines Across the world are trying to resume operations amid the collapse in demand. Chinese Companies Listed in the u. S. Are facing tougher scrutiny on their finances. The senate has passed legislation that could bar chinese firms from raising money out of u. S. Investors. The bill accuses the communist party of cheating stocking changes and carson block from muddy waters it says when doing business in china, a certain level of fraud is actually expected. In china, a company that invents invests 30 of its revenue is considered real invents 30 of its revenue is considered real. If you are taking other peoples money in china, there is an expectation that there is some level of graft and fraud. Matt that is your Bloomberg Business flash. Anna . About anotherlk company that is very much in focus today and that is lufthansa. The company said it is close to a multibillion euro bailout deal that would see the state become its biggest shareholder. That is after the coronavirus punctured a decades long boom in air travel. We know the backstory well. Berlin says talks are ongoing with the company and the European Commission, of worse, which would need to of course, which would need to approve a deal. Bloombergsow is reporter william wilkes, who has the latest on this. What is the latest on this lufthansa bailout saga, william . We got confirmation that the stage stage. It looks like the talks are now at the highest level and we are reaching a conclusion. You have the German Government talking to the company and the European Commission. They are waiting for a triangulation of deposition and then we should have of that position and then we should have a deal. Matt is lufthansa going to be happy about this deal . They are trying to avoid, as i have been reading in local media over the last couple of weeks, giving the government a blocking minority. Is that going to be a pill they have to swallow . William it looks like in some form, it is a pill they will have to swallow. Parts of the government have been pushing for a full 25 stake, plus one share stake. This is not usually different. The government would get a 20 stake and 5 convertible bond, which would give the government a veto right over company policy. They say it is about stopping hostile takeovers, but this also gives the government a say over executive renumeration and other parts of company policy. Lufthansas chief executive im sure wanted maximum freedom. That ifome away with this is the deal . Not really. What choice did lufthansa have . The company is only carrying 1 of its passengers. It has already said it cannot borrow anymore from capital markets. There was no choice other than a state bailout. If the government is spending 9 billion euros, they will largely call the shots. Matt thanks very much for joining us. Wilkesrgs reporter will talking to us about the deal. I guess it is imminently expected, although, a reminder that today is a holiday in germany. It is ascension day. Most people are not going to work. Coming up, it is the market open. Futures are pointing lower this morning across europe and in the u. S. As well. Looking at drops of about 1 , with the exception of ftse futures, down about 0. 66 . 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. A minute to go onto the start of the cash equities session here in europe on this thursday morning. Disinformation and propaganda. President trumps rhetorical assault on beijing steps up a get. Passes a bill to do list Chinese Companies on american indexes. Bank of england governor Andrew Bailey says a negative rates are not being rolled on the u. K. Today sees rate decisions from Central Banks in south africa and turkey. Cut to junk. Angela merkel says a decision on can besas bailout expected shortly after the airline becomes the latest to lose Investment Grade status at s p. Futures look sluggish. Matt yes, futures down about 1 as far as European Equity indexes are concerned. You do see the ftse futures down ess but still a drop of 0. 7 so expect that index to be down. Markets are opening right now. Lets take a look at the gmm. You will see on the far left column of your screen, the ftse opening up down. The ibex pops out of the gate point. E 1. 3 spain has extended its lockdown one pointer percent 1. 3 . Spain has extended its locked on another two weeks its lockdown another two weeks its lockdown another two weeks. The benchmark index in paris also down. We are still waiting on the dax opens up. , if the dax it is ascension day today so im not sure if the dax will trade. I did see it listed on holidays. It should open up for trading, even though most people will not go into work today. We do see, in terms of bonds right now, investors buying the dip. That pushes the yield down and you can see u. K. Two years, german 30 years and french 30 years are moving the most compared to how they normally do. It does look like a risk obsession this morning. European markets lower. That is as u. S. And china tensions weigh on stocks. The door to negative rates was kept open by Andrew Bailey in the u. K. Rather, he said he is not ruling anything out because it would be silly. Credit to the man. Behind your back if you dont have to . Joining us now is karen ward from j. P. Morgan asset management. Is this u. S. China spat, in your opinion, a great concern grave concern after we are starting to see lockdowns lifted . Karen i certainly think it is another aspect that could hinder the recovery. My main concern is as we come out of this, many businesses in particular would have taken on a lot more debt. That alone is going to cause some reticence with regards to investors spending and hiring. I think anything that adds to uncertainty, that reduces Business Confidence is only going to be a further hindrance in that bounceback. Involved do you think we should get in this conversation about negative Interest Rates, karen . It is not just the u. K. It is the u. S. , the market, the Investment Community seemingly pushing Central Banks in that direction. Do you think that Central Banks are going to be forced into negative Interest Rates in the u. K. Or u. S. . Karen i think it is certainly something that investors should take seriously, this move in this direction. If i may come i think there is a lot of confusion about negative may, it rates if i think there is a lot of confusion about negative Interest Rates and what they are supposed to do. Let me explain. How they talk about is negative Interest Rates may encourage spending, may encourage loan growth. We know the evidence on that is fairly sketchy. What it tends to do is damage bank profitability. Otherr, there are two mechanisms by which negative Interest Rates are highly effective. It makes your Government Debt incredibly easy to finance at a very cheap rate. We saw that yesterday. The bank of england already sniffing around the idea of negative Interest Rates. The u. K. Government had its first insurance yesterday on First Issuance yesterday on two year gilts negative Interest Rates. This is a currency to. This is about tool. This is about trying to depress your currencies. The Central Banks dont talk about currencies. But i think thats where this is from. This is an environment where everybody is going to be wanting to protect of their economy, protector their trade. That is where i think we should really contemplate move in this direction. Matt i absolutely love how you put these things. It is not very neighborly. Areously, we all know they thinking about the value of their currencies, especially in the u. K. , not only within the Coronavirus Crisis but on the verge of what looks like it could be a hard brexit. Do you think they want to keep people ready the to the tool ready to weaken the currency . Is that a concern for you, a hard brexit . Karen so with regards to where we are going on brexit, i think at the moment, we are still in flavor rationing stage, which has been a key feature of periods within the negotiation. I think we will see some kind of compromise on both sides and therefore, i still do not think we are looking at a hard brexit. However, if that is the direction of travel, we have always said the key tool which will mitigate the effect or help the u. K. Economy deal with the trade barriers is a weaker currency. With that regard, yes. Talking about currency moves, we see the dollar gaining some strength through the Asian Session. There has been an uptick in geopolitical tensions around china. Do you see a stronger dollar around that nervousness . A stronger dollar around virus nervousness. There seem to be a lot of reasons to buy the dollar at the moment. Nick yes, karen yes, but that takes us back to come how does the fed pushback us back to, how does the fed push back . They are constantly saying, my neighbor has done this so i can beat them and i have a bigger asset purchase and i will take rates even more deeply negative. I think we should be aware of that and then not only how that feeds the currency movements, but of course whats happening in that currency war is Central Banks are adding more and more aggregate stimulus. We see that feeding into broader asset price inflation. Anna thanks very much. Stay with us. Karen ward, chief market at j. P. St for emea morgan asset management. We will get further thoughts from her. The opposition to merkel and acrons stimulus plan grows louder. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Into the, 10 minutes session and we are looking at drops of 1 or more on the continental, the dax trading on ascension date, down 1. 25 . We see the ftse down 41 points. Lets get you the Bloomberg Business flash. Here are todays top corporate stories. Astrazeneca has received more u. S. Fundingon in to develop a Coronavirus Vaccine from the university of oxford. The u. K. Drugmaker has agreements to supply 400 million doses and capacity to make over one billion. The oxford vaccine is one of the moving andtest astrazeneca says it expects to start supplying doses this september, so in just a few months from now. Chancellor Angela Merkel in berlin says a deal to bailout lufthansa is close. It provides hope for a quick rescue package, as the Airlines Management warns employees of the urgency in a dramatic letter. Berlin says talks are ongoing with the company and the European Commission as well, which would need to approve any deal. Merkel says if you want to know what it looks like come away for the talks to end. Easyjet is planning to resume flights from june 15. The airline says a small number of roots will restart where there is demand for flights. Initially, that will comprise of domestic flying in the u. K. And france. It comes as airlines around the world are trying to resume operations. And that is your Bloomberg Business flash. Anna . Zone,matt, in the euro the frugal four appear to be fighting back. 4 governments are set to release their own plans to fund the economic recovery in a challenge to a proposal sent out by Angela Merkel and emmanuel macron. Austria, the netherlands, denmark, and sweden will publish their framework later this week or next. The opposition comes that despite the fact, in france and germanys plan, those two nations would be shouldering the largest portion of the cost. Karen ward is still with us. It seems like we had a breakthrough in terms of burden sharing within the euro zone in terms in the shape of the merkelmacron plan. The frugal 4 threatened to change or disrupt that. Is there risk for peripheral bond yields and spreads in the periphery if we dont see their plan gaining momentum . Karen i think it will shift of the pressure back to the ecb. Mean, the good thing about the Recovery Fund was it took some of that pressure of the ecb to provide the regionwide solution. I also think, you know, it is a really good step forward in demonstrating the solidarity, the potential solidarity. I do think it will have an impact on Global Investor confidence with regards to the future of the euro zone. However, i think the voices coming from, as you quoted, the frugal four, i think what will happen is this will be about tweaking the plan rather than stopping it happening. I think that particular area of disagreement as to what extent the payouts should be granted or whether they should be grants or whether they should be loans. I am sure we will go into stages of negotiation. But maybe that is what will change, that it wont be entirely grants, there will be aspects of loans. So i think it will come to fruition, but perhaps in a slightly modified form. As i say, really once again puts the pressure back on the ecb. The ecb on june 4, we expect them to announce an extension to the Asset Purchase Program and may be the implication is that they would have to do more, go bigger. Matt does it relieve the pressure on, for example, spain to relax its lockdown . I was impressed yesterday to see that spain is going to extend for another two weeks. Isthat ok now because it paid for . Going to bed italy propped up by the richard northern nations richer northern nations . Karen it will be a pivotal two weeks for the eurozone. With regards to spain or any of these lockdown decisions, the way ive been thinking about this is we have this narrative develop as if we have either an economic choice or health choice. That, in my mind, isnt right. Is locked down too early and we have a resurgence in the infection rate, people will choose to lockdown. It will be voluntary rather than mandatory and you will still get the economic effects. I think governments that are showing that they are taking, playing the long game, taking the appropriate choices based on their current infection rate, the current situation, the current track and trace, etc. Will be rewarded by investors when they consider the mediumterm best Case Economic recovery. We are just getting french pmi numbers coming through. Pmi rising to 29. 4. Such was the extent of the drop that we had previously seen. The forecast was for 28. Still well below 50. The manufacturing pmi has come in at 40. 3. The forecast was 36 so perhaps quicker recovery in manufacturing than anticipated. That shows the divide we will see. To your point, it will be difficult to convince people to go out and experience in those services, even when they are open. Karen karen yes, absolutely. I am not interested in pmis at the moment. Usually, these are pivotal Economic Indicators for us to focus on. Because of how they are constructed and the nature of this shock, to me, they dont provide much information. All they tell us is whether businesses are doing better or worse. They dont tell us anything about the magnitude, the degree of normality. So my team are putting together for our clients trackers which really give you that gauge of, ok, where are we at . 60 , 80 normality in the sector . Which you can find if you go to our website. I think the traditional Economic Indicators we need to keep our eye on is the unemployment data. Most of the rest of it we can disregard. We know we are broadly shut down. We know we are slowly reopening. The scarring is what we are trying to gauge right now. If people have lost their jobs, and of course, we have not had good information. We are seeing people losing their jobs in the u. S. And even in places like europe. That is going to stop that process of coming back to normality briskly. Pmisk that, for now, the require less scrutiny. Matt of course. There will be longterm effects. Rollsroyce, for instance, firing 9000 people. They cant just go out and get jobs instantly once the lockdown is lifted. Karen ward, chief market a at j. P. T for eme morgan asset management, thanks so much for joining us. Appreciate your insight this morning. Up next, the u. S. Senate passes a bill to delist Chinese Companies on american indexes. We will hear from muddy waters cio carson block on the culture of doing business in china. This is bloomberg. I believe that a substantial ber, i mean, more than lets call it a substantial majority are committing at least some level of fraud. The reality is and it is very hard to explain this to people who have not been ensconced in china, especially the china stock listing world. But the reality is that in china, a company that invents 30 of its revenue is considered real. I mean, that is because if youre taking other peoples money in china, i mean, there is an expectation that there is some level of graft and fraud. Real in china. North of 50 is where they start to say, thats fraud. Gray zone. Kind of a faking profits without really faking a lot of revenue is the Gold Standard in china. If this were a u. S. Company or u. S. Centric Company Listed in the u. S. That was inventing 30 of its revenue, we would not tolerate that. But thats china. Thats the game. At one point, and i know you are aware of this, lichens market cap exceeded 12 billion. What does that tell us about the conventional wisdom that they Chinese Companies are ok, it is the small ones that you need to worry about, they are the dodgy ones . I dont know why anybody would say the big Chinese Companies are ok. One of the thought exercises i am fond of doing with people when we have little debates about china and Chinese Companies is, they will talk about alibaba. Before alibaba went public, it pay. A subsidiary called ali jack ma literally just took alipay without telling any outside shareholders or directors in 2011. Several months after he just took it by transferring legal ownership to himself, the other shareholders discovered it. At that point, he went to the board and said, well, but actually, i dont think it was legal for you guys to have a share of alipay, so thats why i did, which is a total lie. If that were the case, there would have been discussions at a time. After he took it, he said, this is how much i will give you for it. Aboveboardnot an operator. Everybody wants to forget about that and pretend like alibaba is the company that operates or that reports financials the same way that a u. S. Company would or that we would like a u. S. Company to. But thats just not the case. Anna that was carson block, muddy waters ceo, with his fairly outspoken views on china and investing. 1 billion from the u. S. To develop a vaccine from the university of oxford. The drugmaker has secured capacity to make one billion doses and has supply agreements for 400 billion. Joining us now is the Bloomberg Intelligence senior pharmaceutical analyst. Whenever we see news from the drug sector, anything to do with vaccines come always important to get into the detail of what is new information. This has nothing to do with efficacy of any vaccine at oxford. This is to do with getting money into the program. So what is the significance of this money from the u. S. Government . Good morning. Yes, so obviously a billion dollars is a pretty significant number. In a normal world, that is about the average of what it takes to take a product from Early Development into approval. That should be sufficient cash, which when added to what astrazeneca is putting in and what the u. K. Government has pledged to put in, we will hopefully get this vaccine, give it the best shot to get there, and also manufactured, in case it works well, so that they could just be ready to use it. Matt this will be by september. Isnt that sooner than anyone expected . The . In terms of do you mean that . Would be that they able to deliver 400 million doses by september is what we are reporting. I think we have seen some hopes of some sort of a volumes but certainly, the boeing has gone up because they have done quite a few the volume has gone up because they have done quite a few partnerships with institutions and groups capable of manufacturing this. I think that is sort of the volume we have heard from other vaccines, too. Than we, it is higher had heard before. Than,and it seems sooner you know, people have been talking about 1218 months, maybe two years. Bloomberg intelligence senior pharmaceutical analyst 400 million doses of a proven vaccine. Matt i got you. Its a very good point. Important to point out and anna was pointing that out as well. We will come back and talk about the worlds biggest banks plan to return to office. Anna welcome back to Bloomberg Markets european open. European equity markets are negative today. We are down 0. 8 on the stoxx 600. A little more on that on the cac and dax. More than 1 on those major indexes. On the sector story, i can see we have telecoms, food and beverage and health care are the most resilient, but even those are in negative territory. All of the sectors are lower at least. We have breaking news, french pmi data. What do we have . Matt we have pmi data for what it is worth. The data is awful, so i do not know how important it is, whether it is better or worse than expected. The manufacturing pmi was slightly worse than expected at 36. 8. 39. 4. Rvey was looking for all of these are numbers you never want to see. In terms of the services pmi, better than expected but at a level nobody would wish for, 31. 4. The survey was for 26 even. The previous was 16. 2. These pmis are awful, the surveys are awful. I do not know how much the market is betting on whether or not these pmis will be better or lower than 26. Lets get the bloomberg first are todays top stories. Brexit tensions are boiling over. A spat is forming between britains chief negotiator david frost, and his counterpart in the eu, michel barnier. It shows how little is achieved over the last two weeks. Next weeks key senate will show the division that has not been bridged between the sides. The Spanish Parliament has voted to extend its date of emergency two weeks. They backed down from the onemonth extension because they did not have the backing to extend such a long measure. They are reporting over 200 230,000 cases. The Federal Reserve concerns have turned to financial stability, according to minutes from its april meeting published yesterday. Officials agreed the pandemic is causing an extraordinary amount of uncertainty, and banks could come under greater stress. That reinforces the gloomy assessment for the u. S. Economy. 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 lets talk about how office space is going to be used in the future, and how banks are coping to return to work. The biggest banks are planning how to return to work in a postcovid19 world. They are expected to remain halfempty for the foreseeable future. Other plans being implemented include rotating staff and groups, and shifting offices out of the city. Joining to discuss is a reporter, dani burger. Different banks are taking different stances on a common problem. What is the plan for europe . Dani goldman last week invited workers back to the frankfurt office. Workers are not required to come in. That is a commonality we are seeing between banks. Paris is set to open next week for goldman. For workers who return, life will not be normal. They are required to take a Health Survey before they come in. They have to wear masks coming in and out of the building. Once in the building they have to observe social distancing, two meters apart. If you have a big conference per, that means one person conference room. Don are the days of a big Board Meeting and a large conference room. Of a bigre the days Board Meeting and a large conference room. Matt what is a meter . Tell me what that is in feet. What measures are other banks taking . Dani we are going to see more banks starting to open up. A lot are using the same approach where you take a lot of percussion coming in as workers start to return. Jp morgan think for the foreseeable future they will not have any more than 50 of workers coming back into their offices. They are boxing up everything on everyones desk so they can have shared workspaces. I want to sit at one desk, and you are adding another desk, you can be far away enough, so youll probably will not return to your normal seat. We are hearing that at a lot of banks. Because european offices are in london, it could take who knows how long until it is that 100 capacity. Anna i will take my guidance in feet or meters. Lets look at the broader economy. We listed pmi data and spoke to karen ward earlier. It does not mean much now, numbers you do not want to see. Taking a look at the broader economy, what clues can we look for . Some of the highfrequency data points. Dani highfrequency data is interesting because you can see the Immediate Impact when economies open up. Much like the pmis they are grim, but they are starting to come back. Movement is picking up. Energy usage is picking up. The levels are still low. The google mobility data, this updates with a two week lag. People have cabin fever, but they are going to parks, not shops or workplaces. When it comes to energy data, italy is that bottom white line, they had the worst outbreak in europe, then it starts to recover. Look at the past couple weeks, energy usage drops again. You see that in a lot of countries. You get improvement, but then it drops or starts to stagnate. Energy usage is starting to slow down. This tells us two things, perhaps we are seeing a second wave that is putting people back inside. Or habits have really changed, even if economies are opening up. People are hesitant to get back into the. Enough of things, and that is what this highfrequency data is showing. Matt thank you very much. I will say i am getting fewer emails to tell me what a meter is. I know. I am actually two meters tall. For me it is not much of a problem, but the banks in american cities, jp morgan, goldman, americans do not tend to know. Americans who do not live in berlin, do not know what a meter is. That is why i was saying we need to know the unit conversion. Up next, a little bit more about astrazeneca, a shot in the arm, the Company Getting 1 billion for a vaccine. Does that put america at the front of the queue. We will speak to greg clark, chair, house of Commons Science Committee about this. This is bloomberg. Anna welcome back to Bloomberg Markets european open. European markets under pressure, down 0. 7 . Big news out of astrazeneca, they have received 1 billion on the u. S. To develop a vaccine that will help fund the development as production facilities for that vaccine. The drugmaker has the capacity to make a billion doses, and has supply agreements for 100 million. Joining us to talk about this and broader issues around the u. K. Handling of the coronavirus is greg clark, chair, house of Commons Science Committee. And of course former u. K. Business secretary. Good to have you on the program. Astrazeneca suggesting the u. S. Billionnt will give 1 in terms of ramping up capacity for vaccine production, should it be successful. What is your understanding of what u. S. Funding means, because and other circumstances, the u. S. Is pushed up the queue. Tot is your understanding as what that funding would mean . Greg i do not have any visibility on that particular been int the u. K. Has talks, and the work that is being done in oxford is very important. There is a new Manufacturing Center for vaccines being developed at pace in the u. K. There are good working relations between the company and the university and the government. It is right that we should be getting ahead of the need to deploy a vaccine. We must get a Vaccine Networks and is safe a vaccine that works and is safe, then we have to wait until it can be deployed at scale. It is the right thing to be anticipating. Matt are you nonetheless optimistic . We hear from Numerous Companies that they are close to developing and having Production Capacity sorted for a vaccine to stave offe able a second wave of the general public next year. Yes, to a lot of scientists, they are working rightly at pace on the developments of vaccines. We do not know yet which will pass the test and get approval. There is a lot of effort devoted to this. It is right that in anticipation we put the manufacturing there. This is a risk, and some scientists have warned the committee it may not be possible , it may not be a breakthrough, but there are others who are optimistic. It is right given the scale of the importance to the world that we do put in place something in advance. Anna do you think the u. K. Should ease lockdown measures as if we do not have a tracking trace app . Should they be explicitly link . Ed . Greg coming out of the lockdown measures, the lockdown imposed was when the virus was out of control. We did not know if it would overwhelm the health care system. Already we have some easing of the measures, such as people able to go out for exercise, and that reflects what is already apparent, the level of infection is falling. Factorse a number of for the relaxation of measures. Know testing is absolutely foundational, and being able to track and trace is very important. But it is not the only factor. The most important factor is the spread of infection. But it is important, and a letter my Committee Published this week to the Prime Minister, the discussion about vaccines, how important it is to have the ability to have this in advance of need. It is important, but not the only criteria. Matt what do you expect in of the relaxing of the lockdown in the u. K. . It seems even if the government allows it, a lot of people in britain and scotland just do not want to go back to work right now. Yet whatdo not know the experience will be, but obviously from having a period during which the advice was very firm that you needed to stay at home unless you are an essential worker, and we have seen on our tv screens day after day and night after night images of just how bad the experience for many people having this virus is. It is not surprising people would be cautious about it. That is why the need to maintain the confidence for the public as we take measures to ease the lockdown, and in particular emphasize the importance of scientific advice coming into the lockdown. It is very important steps that it takes are evidenced publicly, they show what the advice is to demonstrate the measures that are being taken to come out safe. Anna thank you very much for joining us. Greg clark, chair, house of Commons Science Committee. Right on theis negative benchmark rate . We will put that question to our mliv strategists. This is bloomberg. The annual two sessions of the advisory body bring together 5000 Party Members over 10 days. However, this time they expect a different format, after the convention was postponed amid the coronavirus outbreak. Reports suggest both meetings could run shorter. The number of delegates could be reduced. We could see strict hygiene measures too. China considers the virus to be contained. The agenda may change, including a shifting focus on the economy, heading for its worst performance since the days of chairman mao. Target could be abandoned altogether for a more ambiguous goal. Stimulus measures will be another focus. The pboc pledge a more powerful monetary policy. On the geopolitical front, the ongoing unrest in hong kong will be in the spotlight with beijing looking for a greater role to supervise his politics. ,he u. S. Is delaying its report as the white house awaits for word on the management of the virus. Watchedgress will be especially closely. Matt chinas most important policy meeting is starting tomorrow. Joining us now is bloombergs mliv strategist. Thank you for your time today. What do you expect from china . What do investors need to watch most closely . Obviously they need to be looking for stimulus announcements, and also they need to watch carefully the pboc yuan;. On the you want tarif e china will engineer a gradually , and that is what they have been doing in recently. That is something i would watch for. That is not likely to emerge from the congress itself. That will happen sidebyside with the pboc. Let me ask you about the dollar. We see in the Asian Session that it is the choice. It was in the Bloomberg Markets magazine, different accounts of whether the dollar softening is here to stay or not. What do you think about the dollar from here . This comes up periodically, but in general the death of the dollar has been greatly exaggerated. The u. S. Is running a humongous deficit, we are in an unprecedented crisis. Inmodities are still priced dollars. The systems in the world are hardwired to accept payments in dollars. It is not easy to change the plumbing of the system overnight no matter how dire the situation is. This is where the argument against the dollar falls apart. Whatever we think about whether or not the dollar is rightly priced given the huge deficits the u. S. Is running, we have to live with the strength of the dollar. I can see over time currencies like the yen and the ruble and the euro emerging as alternatives. Having said that, that will not happen overnight. It will not happen through this crisis. It will take a long time to happen. More than 60 of the world still uses the dollar. Matt let me ask you what is your personal take on the efficacy of negative rates . Do they really help grow an economy out of recession . Basically two pieces of evidence. Precedingion rate negative rates for the ecb was twice as much as the five years afterward. They introduced negative rates in 2014, and the swiss franc has appreciated 15 against the euro. There is no proof negative rates are the solution. They may be part of the problem. Matt thank you so much for joining us. Anna that is it for the European Market open. European markets in negative territory today, down by 1 on euro stocks. We will see what the u. S. Session brings in a few hours. Geopolitical tensions are at the fore. 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. Francine the Senate Passes a bill that could delist Chinese Companies from the u. S. Before chinas biggest political gathering. Chancellor merkel says the airline is edging toward a multibilliondollar bailout. Bank of england governor does not rule out negative rates. The fed chair jay powell speaks