Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Features in the europe in europe and the u. S. Keep rising as the European Commission presents its Recovery Plan today. Jamie dimon places himself among the optimists who see a quick economic bounceback. Plus, stock deluge. More than 4 billion worth of equity offerings were announced just here in europe yesterday within 30 minutes of the closing bell. 2. 8llion dollars billion offering and is eager is the largest sofar this year. We are just under an hour away from the start of cash equity trading in europe and in the u. K. Lets take a look now at futures. We are seeing once again green arrows after the big rallies that we saw the last couple of days. It looks like the risk on mood is set to continue. Dax futures up 0. 4 . The dax index here in frankfurt closed up yesterday more than 100 points. It closed up on monday more than 300 points, bringing it to over 11,500. Take a look at u. S. Futures as well. We are also looking at gains in u. S. Futures right now after the u. S. Equity indexes had a pretty great day yesterday. The Dow Jones Industrial average was up about 500 points yesterday. Playing a bit of catchup after the memorial day holiday. Lets take a look at the bloomberg first word news. They u. S. Is considering a range of sanctions to punish chinas crackdown on hong kong. Sources tell us options on the table include asset freezes or visa restrictions on chinese officials. [audio drop] voting has fact check label added to them. That takes readers to a page of reports about the claims, including one by twitter staff. The president says the social network is stifling free speech and interfering in the 2020 election. President Emmanuel Macron has unveiled a raft of measures aimed at reviving the car industry. The plan includes incentives to buy electric cars and cash for clunkers to encourage consumers to trade in older models. The total of roughly 8 billion euros also includes state backed loans, 5 billion of which are slated for renault. Global news 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Lets get to the mliv blog. Has slipped to the lowest in about eight months in the wake of the latest flareup. Lets get live to mark cudmore. Is the market finally starting to price in these tensions . Isk i think that there clearly worries about what is happening in hong kong. The hang seng index is a notable underperformance today. Obviously, there is under performer today. The pboc gave a stronger yuan fix today, which may have been a positive sign that we are not trying to depreciate the yuan. In fact, we are fighting back against market pressure. Yet, the market completely ignored that and pushed yuan lower again. They are in a very risk positive mode at the moment. Equities want to go higher across the board. The concerns are the yuan and the situation around hong kong. The situation in hong kong is going to stay heightened until at least tomorrow, when the security bill is expected to be passed. Matt i saw that you were also talking about the european fact thatlan, and the it really could be a game changer. Tell us your views. Rk any kind of debt bearing debt sharing burden in the eu, if that is agreed, it is the biggest thing that has happened in 30 years in europe. The hope of the 2000s was that , the euro zone eventually be forced to do a fiscal union. But we, it survived, never solved that problem. Heightened in be the recent years with the debt crisis and the german legal verdict. Suddenly, we have a proposal for debt sharing. I know there are many hurdles, the money will not come through until next year. I think that is all irrelevant. One of the most stereotypically and traditionally fiscally conservative nations is finally acknowledging that we need some debt sharing debt burden sharing. It might be a watered down deal. As long as a bill passes that doesnt share the debt burden, that is just a massive game changer for europe. Suddenly, it will be reconsidered in an optimistic way as a real challenger to the dollar. I think in the next few years, we will see eurodollar back above 1. 30. Matt a longerterm call from you. Let me finally asked what you are hearing about the question of the day. Today, youre asking on the mliv blog, why are real and financial world the virgin worlds diverging . Yesterday, bob schuler says it takes back him to the takes him back to the great depression. What are you hearing from clients . The real and financial worlds are diverging because that has been the plan of policymakers. They could not solve the Health Crisis. It is still to be decided how that will pan out. Certainly, they were like him a lets not make the Health Crisis like, lets not make the Health Crisis turn into a financial crisis. They have successfully disconnected markets from the real economy. Therefore, markets are trading on a story of stimulus. They no longer trade on the economy. It is just about whether how much more stimulus we are going to get. That will not be permanent but that is the Current Situation at the moment. Thats when markets are trading very positively. At some point in the future, it will reconnect. It makes sense to me that markets are going, you know what . We dont care about the real economy. If there is a bigger problem there, we will just get more and more stimulus. This is not sustainable but it is certainly sustainable for a long time. Markets and investors know that the breakdown point is not that close. Matt thanks very much. Mark cudmore there, bloomberg mliv managing editor coming to us out of singapore. You can join the debate on todays question of the day. If you want to take part in that conversation, reach out to us in the and the mliv team. Up next, European Central Bank Vice President says policymakers are committed to addressing fragmentation in sovereign bond markets. We will hear from her interview next. This is bloomberg. The pandemicct to Emergency Program, what they have to say is that it is going to be an Emergency Program and it is going to be temporary. We are going to use all the flexibility. So far, you have seen the evolution of markets has been positive. So far, so far. Are you open to abolishing capsule king test capsule keep . Key . Simultaneously, we have flexibility. And we have flexibility in the shortterm, not only in terms of the assets we purchase, but as low in terms of the timing of the purchases as well in terms of the timing of the purchases. Markets much more quiet and calm. There is always the chance of a surprise, a shock. One thing you have not yet announced to the public is reinvestments. This is something i think a lot of people in the market expected. Does it have to happen . Theoretically, the program lasts until year end. Afterwards, we will see. We have not decided anything on that yet. I suppose that [indiscernible] it cant possibly end december 31, can it . We dont know if there will be a second wave in the winter. There is a variable, the evolution of the pandemic. If you look at the evolution of markets, the sentiment of the market is much better than it was only one month ago. I think that has to do with the evolution of the pandemic, you know, that the flattening of the infection curve. I dont know whats going to happen with the potential second wave. My view is that markets are and theire recovery of the economy once the worst of the pandemic is over. I think this will be extremely important for everything. You note in the Financial Stability review that low Interest Rates are a burden on banks and insurers. You said this in the previous Financial Stability review as well. Now, we will probably have low rates for longer. It threatens the solvency of some insurers, as you said. Does that suggest in terms of Monetary Policy, you want to stay away from any more interestrate cuts, focus everything on bond purchases instead . Our approach with respect to the impact of low for longer in terms of Interest Rates is that the real cost and the real drivers of the low profitability of the banks is not our Monetary Policy. It is more structural reasons ratio, cost to income even when you look at the pros and cons of our Monetary Policy, our Monetary Policy was positive in terms of using prohibition for the banks. Provision for the banks. When you put that together in a balanced weight, the pros and cons of our Monetary Policy, but you can see and you can regard ay, thethe end of the d Monetary Policy is not the real cost. It is acknowledged that the longer those low rates last, the bigger problems the bigger the problems become. Ight now, there is no alternative to this Monetary Policy we are delivering in terms of our programs qamar purchase programs, in terms of programs,ity purchase programs. Thats not the approach that we are that we have now. You know, we are focused on deliver delivery of liquidity to the banks. Impact on market conditions. Matt that was they european president nk vice speaking with paul gordon at the ecb headquarters in frankfurt. We are joined now by john wraith, head of u. K. And european rates strategy at ubs. He adds to a number of ecb voices over the last 24 hours that are reassuring markets they will be ready with the tools necessary in order to keep spreads and check, in order to support in check, in order to support the economy. What do you read from their messaging . John reassurance, i think, in a word. As biagi knowledge, there is so much as we all acknowledge, there is so much uncertainty coming from a range of issues, primarily how the trajectory of the coronavirus outbreak is going to evolve from here. , all of Central Banks, the best they can do is continue to reassure markets that they would do anything and everything they can to try and ensure that the structural support underpinning economies and markets remains robust, remains healthy, and that any potential weaknesses are immediately addressed. Clearly, that is very difficult for them but they are doing their best, certainly through communication and action where needed to provide that reassurance. Matt they do seemingly have more ammunition then they have used more ammunition maybe than we would have previously expected. How much do you think they have got left . John this runs into the issues we have seen around the german court. They are clearly venturing into territory, as you say, that was not anticipated or forcing fore because four foreseen before. I dont think we have any real clarity around what the limits might be. We are expecting to expand the not next week but in the middle of july. Clearly if there is a second wave, if the infection rate spikes up again, they may just have to do more and hope that the both of the markets from the point of view of their response to the actions, and also courts around europe and other governments and fiscal policy makers enable them to do that. So far, there is some relief that we have not seen those limits reached. Any time we think we are getting close to them, they have managed to find another way. Clearly, the worse things get, the bigger the risk they start to run into more problems. Matt you know, Angela Merkel reacted to the german court what some people are seeing as a monument tos decision monumental decision. It is a bit of a creeper. This could be the Alexander Hamilton moment or the biggest political shift in 30 years for europe. What do you think about the acron decision on a european Recovery Plan proposal . John it certainly takes them further in that sort of direction than we have seen before. You could point that out as a direct response to what the german court was essentially saying about Monetary Policy overspending is limits. Therefore, governments and fiscal policy needed to step into the breach. Ultimately, it suggests that governments, even in germany, are prepared to do whatever is needed to try and protect their underlying economies and protect the fabric of the euro and eurozone. We have been a bit more cautious about suggesting that this is a green light towards something that will end up with a full fiscal union. I think it was done because of the situation we are in and because of the german court ruling. Clearly, it was needed at the time and provided a great deal of relief from the markets, as you can see from things like peripheral spreads. I watch this space as to whether it leads to a development of further measures in that direction or proves a bit of a oneoff because of how extreme the circumstances are. Matt john, we are going to keep you with us. John wraith there from ubs. We have a lot more to talk about in his wheelhouse. Coming up, we will discuss bank of england chief economist saying that rates will not go negative soon. Are their merit to joining the subzero club . That is a debate we will have next with john wraith. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Right now, we are 37 minutes away from the start of cash Equities Trading and we could see a third day in a row for this rally, at least for the dax and cac. The ftse was closed on monday for a bank holiday. It played some serious catchup yesterday and we are seeing positive futures today. Speaking of england, the central tok in the u. K. Is not close implementing negative rates, at least not according to the Central Banks chief economist. Clarifying an earlier remark that the policy is being assessed, he said officials are simply not ruling out any options as a matter of principle. John wraith from ubs is still with us. Would makeesting, it sense that you would not want to rule out a major option. Where do you fall in the debate on whether or not negative rates have been helpful for those regions that have used them or harmful . Agree, iflutely we you are asked the question when you have rates at almost zero as to whether there is any possibility they may go negative, as a central banker, especially given how uncertain the outlook is, i think you are bound to say it is under consideration. Why would you rule it out . Rates come with a lot of pros and cons and there are a lot of cons. It is not as simple as lowering rates from 1 to. 5 or below zero. Once you go below zero, you bring in all sorts of consequences for banks. It can have counterproductive implications which tightened monetary conditions. Clearly, there are circumstances as other central bank have determined where the pros effectively outweigh the cons. , think especially in the u. K. Given that the nature of lending focusedch of the banks on shortterm rates, that forcing them to lower their lending rates when they cant lower deposit rates anymore is a bigger problem than it might be in other economies. We think the bank of england is right to be ultracautious about this. We dont think they will take rates negative. We think there are other policies that would be more effective in easing monetary conditions and come with less damaging side effects. We think they will continue to be open to the possibility. Matt i have only got 30 seconds, john. What would your prescription be for ubs . John more qe from ubs . Possiblye qe and lowering the margins on the funding schemes so banks can lend more competitively at lower rates without being squeezed on their margins in a way that cutting two negative territory would do. The frontend looks after itself. Pathim more at the longer yield curve and we think that is what they would do. Matt thanks so much for spending some time with us this morning. Great to get your insight. John wraith is the head of u. K. And european rate strategy at ubs. Drilling keeps its 2020 forecast after lowering it twice in two months. We will hear more from the ceo. Dont miss that interview next. This is bloomberg. W . W . Uhiono welcome back to Bloomberg Markets. This is the european open, from the away start of cash trading in europe and the uk. Futures right to 1 3 to. 5 . Lets take a look at stories for ight want to watch today at 8 30 a. M. London time. Have an online q a event hosted by European Youth. Later in the morning the European Commission unveiled its proposal for a jointly response to the recession caused by the pandemic. Day oil t the majors including bp, exxon host evron with all their annual general meetings and investors will be looking for answers after the unprecedented market slump in the price and emand for oil and now in production as well. Finally at 9 30 p. M. , uk is scheduled to first flight with two nasa astronauts onboard. Fascinating to watch. Keeping the 2020 forecast after lowering twice in two months, Company Reported First Quarter revenue below estimates, but maybe the getting a is little bit better. The joined now by c. E. O. Thanks so much for coming on first. Rg let me ask how the outlook is right now because it if youre getting a handle on things in terms least you at havent cut your forecast again. Is o, the First Quarter more or less in line with the expectations that we laid out in the beginning of and now we have a forecast for the rest of the ear that builds on that well not have any more new ontracts with Financial Impact in 2020. So the forecast that we put in our Trading Statement this morning, is based on that. Visibility for 2020 for me is quite clear. When we come to still await more news from what the outcolumn be from the oil companies. Do you feel like the worst is behind you, though . I mean, we were in free fall there for a while and now it looks like a recovery, a put in. S been do you see it that way . Could be what were seeing. However, i think its very say. Y to i twar still in the midst of the pandemic. See a secondto wave in the second half of the year . Who knows. I think what we will see what t regardless of happens, whether this will mean that well have more Green Technologies coming slower, oil and gas is still going to be a energy mix the for many years to go. Good way of getting it. Cost per barreles in the region that were working in. Risk, you the mentioned you dont see any new financial contracts this year, how many more contracts will be terminated renegotiated . Do you have a handle on that . Yeah, we think were well we have a good handle on that for now and what we reflect on our guidance that we within ats well control. We have a good view on our ustomers who actually want to finish those properties that they are working on now. Comparatively low gearing. Analysts have pointed out that your company is one of in the sol mrarsd risk ss but you still breaching loan covenants. Talking to rted creditors . Were still in a good it comes to the covenants. In ere not engaged that. Analysis. N those we will, of course, as any prudent company were following that but were not situation. Were well capitalized. A very strong liquidity, so having positive operating cash year so were in a good spot, i think. All right. Then from the other perspective, jorn, what about the picture, were in lot of hen a ompanies will be drastically weakened, and ossible prey, to use that hunting analogy, you were a suitor beforehand looking for deals. That way ll feel and do you think there is anything out there for you . I think it has served us well that weve been patient. I dont think there have transactions that when we made from were informed last year in what the seller is asking, the spread of the too big. Ay a number of companies will go into restructuring, and i foresee that the lenders will not go and do couple y did just a of years back and recapitalize the Companies Take out the debt and onvert it to shares, and then let the Companies Run with a cash burn. Them t i would expect to do is to start cleaning up on the asset side as well that the ure industry comes into a much more balanced situation, hen it comes to supply and demand. Let me finally ask you about the outlook, then, for payouts, previously you had said, you know, within a its possible that you would be paying a dividend. Now . Oes that look well, again, we still to evaluate what comes out of the messaging from on how 2021 company is going to be looked at. Before then, its too early. Well be focusing on, as the main said, focus will be on keeping the Company Running before we dividends ng at or transactions for that matter. Absolutely. Jorn, thanks so much for nswering all of our questions. Its been a pleasure having on earnings. Joining to us talk about the industry. There is a lot more Industry News coming up. Remember, were still going to get earnings today from bp, exxon and others. Coming up well talk about additional stimulus for carmakers. Well get the latest on a rash of measures unveiled by president manuel macron to help revive a struggling industry. Thats next. This is bloomberg. Thats next. This is bloomberg. Welcome back to the Bloomberg Markets european open. Ight now were 20 minutes away from cash trading. Futures pointing higher acrosse another risk the continent and in the uk. Airline economic troubles continue in europe. We spoke earlier with Michael Oleary who plans to a german bailout aying it would distort the entire market. Wait until the european approves the german y the government, also the swiss they are running around europe like a drunken uncle at the end of a wedding. Opposing all of we consider elite measures. Thanl compete with lou is a in german markets. We cant really justify it. Allows them being able to sell below cost sticker for the next five or six years or to buy up even more competitors in the next market for the five or six years with state subsidies. It want to point out that with a touch spokesman this morning and he wrote well not comment the earlier statements so comments from luth wont even defend. They are too embarrassed to e hovering over all of these state subsidies. Ill make an interpretation but im very appy to see you like doing so. Are you reworking your plans for germany, michael in late bailout . Would you, for example, take on extra flights or will you out of germany completely . Big bases. We continue to compete with luthsania. They are trying to compete german market. We dont receive state aid or bailouts every time something goes wrong but unfair under the european rules that we competition for the years ve or six i mean, isnt there a tacit understanding, rules , that those arent seriously in existence to create a level field, you know, level competition . This isnt that kind of right . Y, otherwise, you wouldnt oronavirus a deutsche lufthansa, a British Airways a iberia. They need it for economic reasons and employment reasons. But s a good point completely untrue. Y are not [inaudible] through survive this. We dont need to have ultibillion subsidies showered upon us. I think there is a bigger issue. Here you have the German Government bailing out lufthansa and other bailouts to the tune of 10 billion. R 12 they are good Northern European countries. The German Government ho lectures the e. U. Complying with the rules. There is enough all the people are flying in carriers, easy jets others, its probably wice the size [inaudible] us that Michael Oleary, adlib uick programming note. Am coanchoring the European Market close with bonnie quinn all week and we do a pretty fantastic job so tuning in ommend for that. Now, lets get back to the stimulus effort across the continent. French president macron has unveiled measures aimed at countrys s industry. G car drawing manufacturing back to local factories. He called the 8 billion package a historic plan to confront a historic situation. By oure were joined reporter. Vernment tell us the details gents has been getting pretty excited for the possibility cash for clunkers, and now weve got it. Exactly. Were talking about around one billion euros in and subsidies. Nd other known measures, bank loans, investments to help supplies with greater production, for example, building robots. Key measure is increased cash. Basically you get good money if you scrap your old clunker for an electric hybrid vehicle. How do you say cash for french . In here would you say [speaking in french] you get a conversion bonus. Very cool. We learn something new every day here. Very international program. Is this enough for an has try in france that seen well, for an industry globally, thats incredible drop in demand . Will this be able to get in a solvent way . This should help the carmakers detox some of the vehicles that were not sold stuck ustomers were at home during the lockdown. And the big loan i just for renault should over t going year year. Closures andpe the e. U. s Recovery Fund set year. Macron last if adopted, they will have in the long run. Thanks very much. Tanya talking to us from about the latest, i of ld say, stimulus out europe. Luftansias on the bailout and well now start this news on the french car industry a lout, which includes cash for Clunkers Program as well as a 5 billion euro statebacked loan to renault. Were minutes away from the open. Up next, well bring you the fresh wave protests in hong kong. Ould washington slap sanctions on chinese officials in response . Well discuss. This is bloomberg. Well discuss. This is bloomberg. To the e. U. Ck open. Were 10 minutes away from right now. Indices, the renew spat between the u. S. And china. Washington is considering range of sanctions to punish beijing for its crackdown on hong kong. Sources say the Trump Administration may declare the former colony has lost autonomy. Thats as hundreds of protestors hit the streets oppose increasing chinese control. Of ing us is anchor Bloomberg Markets. Pro democracy advocates calling for a general strike today. Of turnout has there been . Eve been looking at live pictures on the screen lately. Yeah, absolutely. They were trying to do to call the birthday. The break is not quite the word. Trade groups and unions calling for the that china pose Bank Legislation security. They National Security measures. Is a bit more home grown bill that would criminalize elements. There are hundreds of people demonstrating in the business district, central and shopping area. Pray firing pepper projectiles, just a few hundred meters away. Gas as well. Unrest weve seen this year. That was due to the lockdown covid19. Independence. This egislation marks the end of the one two systems and also what some believe is the end it. Hong kong as we know now, weve had a defense here, of course, being put up and perhaps thats why numbers are a little bit ower than had been expected. Matt . I wonder if that defense has had an impact. This is something thats constitution. Its been expected for decades now. It just has never been able get past the legislature, right . So when the chief executive carrie lam gives a defense how is requirement that met . The thing is, the ational security legislation was first they tried to implement it in 2003. Of reds of thousands people took to the streets shelved at that point. What they are trying to do it into is work circumventing it. Many believe it was measure at the new would ban street protests. Being all freedoms would preserved. Wavering on the issue and thought pro democracy. Address International Concerns that the people probably [inaudible] impact has this had n the already fraught relationship between the china . Nd the blame game began when coronavirus started. Between the two sides and legislation in the its punishing china for treatment of the weaker province. N in a the u. S. Are considering sanctions, were hearing, for this move by beijing. Dont want to be named. On top of that the trump waiting to on declare whether the former lost its autonomy. Maintaining special territory f the technology. Ive he they could enact the hong kong democracy act. Special treatment. Could render just the same. Were waiting for the next move here by the u. S. How that would be met by the chinese. Matt . So much for ks joining us. Anchor of Bloomberg Markets to us out of hong kong. Ill quickly bring you some headlines. This is definitely something to watch at the open after the french bailout plan, a 5ny is going to get billion euro state backed loan. Renault is now saying it its model and tment by up to 40 strengthen its alliance with partner nissan. Will stick to its individual region that. Will allow it to cut its capx substantially. Cut its capx substantially. 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. Welcome back to Bloomberg Markets. This is the european open. Right now, were looking at that are gaining across the board. Give you your top headlines. The top news that were today. G out for from the bloomberg terminal. Off with rt bailout. Were looking at french flooding into the auto sector. Billion euro state backed loan going to renault which moments ago they said they model ut their investment by up to 40 , with nissan. Also youve got the u. S. China relationship to today. Ut for obviously, were preparing for protests in hong kong. You liven bringing shots of that. I just talked with a guest about it as well. The question is, does the further breakdown of the u. S. China relationship get markets . To lets take a look at detect indexes as they open up. Right now, ftse and ibax are the only ones out. And the ftse gain, i think, is especially interesting. Had a big rip higher in the pound, in the we still ar, and saw great gains on the ftse. Today the pound dollar, the back down again but the ftse the foot fe holding up half a percent. The d. A. X. Is up. Stocks e european basically higher across the now. D right European Markets holding up s investors buy sovereign debt. You can see green bear rose n the middle column here pushing down the yield on british two years, french five years, german five swiss 30 years, thats an interesting there. St still equity indexes are opening higher again today. Day in a row for gains on the continent s the European Unions coronavirus Recovery Plan is announced in brussels, an executive board member says the ecb could stimulus if the outlook warrants. A Vice President told central bank flexibility. Ng we n assure you have flexibility, in the short term. Of the in terms assets we purchased, we buy, purchases. Of the ometimes its much more relevant. Joining us now is chief economist. Simon, we heard from isabel, a number from central bank voices coming out and reassuring markets. Working . Ink its i think its working. Lets take this the political decision was taken, all of the countries and the into n part of europe the eurozone, they need to tick to what they decided at the time. I think the European Central bank will follow. It will follow the treatly, in place, if the eurozone it. Yes, i think it will continue. Emanuel think the acron agreement is a game changer as our editor mark said. A lot of people have been moment ate hamilton for the European Union . I think its game change from the point of view that move on to the next step of union. Not European Union but union. I think this is a very important part of the whole process. Back just a k few years ago, many people marked it doing what it is today, including so i think rs, essentially its a changing moment and well see more of moments as we move ahead in the next 12 to months through this coronavirus epidemic. Lets face it. The European Union is the body thats reacted to the virus as a whole although that hasnt een fully in place elsewhere in the world. Weve had a complete collapse of global coordination. Much more nationalistic, approach. Expect that approach to continue . Well, as you were saying it does seem that. S. And china are path. Uing that we have a situation where we were situation where going back exactly to what we were before this whole pandemic set on, the trade tension between the United States and china. To ink politicians need knock their Heads Together their act together everywhere. We, taxpayers, need to tell the governments that we need to cut out this mess and that were in a serious situation here. Around on sing the geopolitical scale. Have you do you see priced in here, simon . And what do you think how doll react you think markets will react worsens . I think, as you say, markets definitely will react. Be the equities reacting on the downside if we seed more tension in hong kong, for example, and obviously reaction with any sanctions from the United States. Or any type of sanctions. But then the realization some stage at that we just cannot afford a s single state to have lobal geopolitical message coming out because Global Economy and individual still very e weak and were getting out of the pandemic. Reaction negative. If you want to have a political hedge, for example, buying fiveyear cd from china, for example, or in brazil because of the eaction to the pandemic, these are the sort of things that were going to see, i think. Simon, well keep you little longer. Chief economist stays with us. Weve got more to talk about congestionraffic patterns and how you can read them. Oming up, european stocks and u. S. Futures continue to shrug off tensions between washington and beijing. Continue to see gains right now across european open. Y indexes at the the third day in a row of rising asset prices. Risk asset prices even as hong kong gears up for protests. Showing you live pictures of that right now. This is bloomberg. Ight now. This is bloomberg. Welcome back to the european open. Minutes into the trading day. Almost 10 minutes into the day. Ing still looking at gains. It may be optimism for a recovery. We had numbers over the memorial day Holiday Weekend in the u. S. That were bouncing back already to early march levels. Ore than 300,000 manges flew in the u. S. Over the weekend. Thats only 12 of the samet that flew in the weekend last year. Ut its better than nothing, right . A chief economist is still with us. Mentioned travel numbers because youve been looking t the bounceback to some extent in traffic patterns, in berlin and vienna. Tell me about that. This is actually data announced its on a daily basis. Its a very good leading indicator. Tells you what is happening physically on the ground and if we look at shanghai, e beijing, berlin and vienna, we can see the traffic congestion. Daily traffic congestions at peak times are actually higher than they were at or the e last year 2019 average. So this is showing essentially that there is pent up demand. Want to get out there. We all want to go out and again. He life at least to see something. There is also the usage of the automobile, social distancing, and you will see move ahead. For me, very interesting to ask at berlin and vienna the benchmark for what will happen in the rest of europe in the United States. See hillary quickly threw together a auto t chinese traffic. Bouncing back there through the end of april. It n, as you mentioned, culls all the way back into march. His is not great, obviously. We dont all want to see traffic, i certainly dont ike to have to dodge cars constantly on my motorcycle on the way to work, but what about an tell you economic recovery, what can e expect in the west through the end of 2020 . I think as we move ahead a quicker reaction on the most people expect. Markets have been quite negative and youre still coming egative data out for april. I think when the data comes in may, first of june, what were getting across well ing markets, see a quick pickup and maybe some revision of the data western europe. The message is to be more optimistic. Lets think positive. Obviously, the big history is the unemployment data but fortunately, fiscal authorities were very graphic this time around with the lending schemes there are across Different Countries and europe, and in the United States. To think this is going be something positive and when people it all has to do with psychology now. Does anybody want to go out . Will they go out with masks . What is the governments advice . Think we need to positive. I spoke to the leading and n psychology economics a little bit earlier. Economics of professor and noble laureate hisschiller, he told me view, or his answer to the day, were the asking, is reality diverging from the Financial Markets right now. What he had to say. Its always had a tenuous elationship to the underlying economy. I thought you were going to bring up the great depression. According to franklin roosevelt, there was no locusts. Thats his word. So there wasnt any real shock. Markets seem to have a life of their own. Thats been a reality for history. The excess volatility, as i rgued how many years ago was it, decades ago, because of speculative motives. So were in a speculative situation, where people see undamental changes coming, and they dont know what they mean. We may be, as i was saying at home orking more. We may see venerable have to make fundamental changes, and these fundamental changes market valuehe of these in ways that are hard to foresee. So it doesnt surprise me that there is a separate of the stock market and the economy. Seen that many times before. Simon, bob shiller there, talking about the that ental changes people are starting to forecast now. He mentions one possibility lot. We talk about a the change to working from home. What kind of fundamental changes do you see . Fundamental changes do you think will be he most interesting and most important to the economy ahead . Think, as you say, if you look at all the surveys s different c. E. O. Globally, you will see the first sector to be hit was hospitality, restaurants, hotels, and its come to fruition unfortunately. So i think there will be a very big change there as we move ahead. Working from home will be a big issue and big usly this has a implication for commercial real estate. It also has a big mplication for hospitality places where people work. Take london, for example, where most of us commute in town. And eat so this is having a big implication there. Any people who work in these restaurants and bars rest of e from the the European Union as it was before the united kingdom. Have to see what happens there as far as immigration, perhaps is concerned. Say working from home also will affect traveling. Ouve seen the fact that zoom has picked up massively, and i think this case in the future. So what the pandemic has ctually done is accelerate a whole load of transit we were already seeing before. We have high street shopping, increase in orking from home patterns, using the internet, electrical vehicle production, as were seeing the ance, china is biggest producer now, so all patterns well see moving ahead but well also see positive innovation out of this as well. Thank you for joining us. Have someasure to time with you. Jim corps capitals chief economist. Hell be continuing the us on ation with Bloomberg Radio at 9 00 a. M. Uk time as well. In for that. Simon, ill ask you when we ask you io, ill the question of the day. Why is real and financial world diverging . I have is it assumes that you believe real and financial worlds are diverging. Its a y i think twopart question. In any case, prep for that. About , well talk the Green Recovery the e. U. Earmark tens of billions of euros for Clean Technology as part of its stimulus program. You just saw the french are encouraging people with 7,000 euros a piece to buy electric cars. About renewables. This is bloomberg. Ut renewables. This is bloomberg. Welcome back to Bloomberg Markets. This is the european open. Into the session and were still seeing gains. The ftse has turned lower milan but the cac and d. A. X. Is still up a a percent and the 1 8 of a percent even after the cable rate rose up. Ftse see the yesterday doing quite well. It was closed for the monday bank holiday. 1. 25 yesterday. Up 3 4 of a percent now. Continent, he the union, i should say is emissionsfree electricity package in its economic recovery stimulus. Is European Commission set to announce tens of billions of euros for clean infrastructure, e. U. s economic recovery lan may well be the most ambitious stimulus package to date. Oining us to discuss further, jonathan cole, with Renewables Offshore wind director. Jonathan, let me ask first hat you take from the recovery packages, what youre hopeful for and what out ofnk you can get it . Hi, matt. Were going to see today is probably the ongest Recovery Plan in european history. A veryhas always had proud record on setting ambitious clean goal targets. See at we expect to today is the renewable opportunity to be the real engine for driving economic in europe. And, you know, we would expect that youre going to talk about more investment in renewable in smart a more integrate active approach in transport, n heating and cooling and probably also some announcements about resets funding for t things like hydrogen. Important for fighting against climate and also addressing the covid economic cases. If you get those two things what you can actually do is help to create a much fairer, much more Sustainable Society as well as stimulating economic europe. Y in so weve got the people, weve got the capital, weve got the project to play a this Recovery Plan, so were looking forward to seeing what comes out today then Getting Started on in ing to play a part recovery. Renewables the industry has done a better job coping through the pandemic than most. I wonder how your experience has been . Delaysu had covid19 in putting up new installations . Is it difficult for you to employees at a time like this . Actually, i think over this period weve managed to demonstrate just how and robust the is. Iness model what we did have to do is the public but once weve done that weve been able to on with the essential services we provide pretty quickly and if you look at the of ational performance our assets, the wind farms generating. Transmission and distribution lanes continue performing, you can see we missed a step over the period. Addition, weve had some really important Construction Projects that were working on so during this crisis we completed construction of plants largest solar in spain, and weve also completed construction of largest e worlds offduty shore wind farms in uk, so were showing actually that its been a robust one and weve been able to keep going in the face of crisis. It means were still essential he services to the hospitals and the care homes and other parts of the front line against the covid crisis. Of ou mentioned a lot the english have had issues with the wind farms saying wildlife, turb disturb their rural way of life there. Fight this opposition because its something that the wind industry has had to put up i know, here in germany as well, and now in the uk . Look, i think its interesting actually, if you polling data in the uk, the vast majority of in the uk are very positive about renewable taking nd about action on climate change. You turn gh, if the tables and ask you we to think in the minority so what that is telling you is those who are climate about the change agenda and Renewable Energy seem to be doing a pr front r on the but actually Renewable Energy is very well supported in the uk. I would say, a particular Success Story in renewables is offshore wind. 10 moved in the past years from a standing start power for eight million homes in the uk. Weve seen massive Cost Reduction and tens of jobs being w created so when you look at acts like that its very easy to get support from the British Public for the sector. Le jonathan, thanks so much for joining thus morning. There. An cole the head of offshore wind, us about the massive stimulus package oming out of the e. U. And how that will further the green agenda. On a t the latest fresh wave protests in hong kong. Could washington slap on beijing in response to the chinese crackdown on the autonomous city of hong kong . This is bloomberg. 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. Matt welcome back to Bloomberg Markets european open. 30 minutes into the trading day and we are still seeing equity indexes gain, for the most part, across europe right now. The dax index up 0. 5 , the ibex up more than 1 . Mibsee drops on the ftse and aex. Euro stoxx 600 up a little more than 0. 25 . This is the third day in a row for gains there. It has been quite a streak for monday,x 600, adding tuesday, and wednesday about 10 points. Lets take a look at the sectors on the move. Carmakers, asd was travel and leisure rising as well as travel and leisure rising. Lets get the bloomberg first word news. These are today is top stories for you. The u. S. Is considering a range of sanctions to punish chinas beijing and chinas crackdown on hong kong. Sources tell us options on the table include asset freezes or visa restrictions on chinese officials. President trump believes that hong kong may lose its status as asias Financial Hub if the government proceeds with its new National Security law, which is looking pretty determined to do it is looking pretty determined to do. Twitter has started Fact Checking President Donald Trump. Yesterday, a pair of tweets from the president had a fact check label added to them. It takes readers to a page of reports about the claims, including one report by twitter staff. The president says the social network is stifling free speech and interfering in the 2020 election. Which he says will be rigged. Jamie dimon sees a good chance of a rapid rebound in the u. S. He says that is thanks to the u. S. Government stimulus and the strength of the american consumer. That pointed to forecasts unemployment will spike to 18 this quarter before falling to 10 or 11 by the end of the year. Jim bullard says unemployment could be below 10 in december. Global news 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Now, ecb president Christine Lagarde is speaking on a afor for European Youth. The European Youth as a group of kids, i take it come on facebook is a group of kids, i take it, on facebook. It will revolve around the coronavirus pandemic, the impact on the economy and what the ecb do can can do to limit the impact. Lets listen. Thank you to those that have been, as has now been famously said come on the front lines. Covid19 said, on the front lines. Covid19 has been a Health Crisis, sanitary crisis by all accounts and pretty much all over the world, spreading rapidly from east to west. It has caused massive casualties. It has hurt people tremendously. It has caused grievances, particularly when you are not in a position to actually accompany those that are passing. Those who have been true heroes are not the central bankers, not the policymakers. We have to do our job and we did. Hose that came to the front line and luckily the spotlight. Usually, they were not talked about much, the doctors, nurses, ambulance drivers, those that have helped in the darkness of those rooms, in the sadness of those places. They have been true heroes. Some of them have actually been the victim as well. I think we should all collectively not only every night at 8 00 p. M. But collectively and always think of those that actually do not necessarily take risk with money , but risk their life in order to save our life. So, you know, lets just start with that, thinking of them and how much they have done for us, and continuing to do on a regular basis whenever we have a Health Crisis or just a health incident. So, a Health Crisis, but that Health Crisis matt that is Christine Lagarde speaking at a Facebook Event for European Youth. They put in their questions and she answers. It will be interesting to hear what she says about her job pertaining to italian bond yields. European Central Bank Vice president says policymakers are committed to addressing fragmentation in sovereign bond markets. He also addressed the issue of continuing quantitative easing without the help of the bundesbank. Heres what he had to say. With respect to the pandemic Emergency Program, what they have to say is that it is going a temporary Emergency Program. So far, you have seen that the evolution of markets has been positive. So far. So far, so far. Are you open to abolishing the capital key . It was discussed in the governing council. Capital key is a reference. , we haveously flexibility and we have it in the shortterm, not only in terms of the assets we purchase but also in terms of the timing of the purchases. I think that sometimes is much more relevant. The evolution of sovereign markets is much more quiet and calm now. It is now but we do not know if we will get a second wave over the summer. There is always the chance of a surprise. One thing you have not yet announced for the public for the pepe is reinvestment. Doesnt have to happen reinvestments. Does it have to happen . Theoretically, the program mass until your end the end lasts until your year end. We have time. It cannot possibly end december 31, can it . Because we dont know if there will be a second wave. There is a variable. That is the evolution of the pandemic. Now, if you look at the evolution of markets, the sentiment of the markets much better than it was only a month ago. I think that has to do with the evolution of the pandemic, the flattening of the infection curve. I dont know whats going to happen with the potential second wave but it would be very detrimental to everything. My view is that markets are going to be driven by the recovery of the economy once the worst of the pandemic is over. I think that this is going to be extremely important for everything. You note in the Financial Stability review that low Interest Rates are a burden on banks and insurers. You said this in the previous Financial Stability review as well. Now, we will probably have low rates for longer. It is more of a burden. It erodes the profitability of banks, threatens the solvency of insurers. In terms of Monetary Policy, you want to stay away from more interestrate cuts, focus everything on bond purchases . Our approach with respect to longeract of the low for in terms of Interest Rates is realthe real cost and the drivers of the low profitability of the banks is not our Monetary Policy. It is much more structural [indiscernible] even when you look at the pros and cons of our Monetary Policy, well, our Monetary Policy was positive in terms of using the provision of the banks. When you put together in a balanced way the pros and cons of our Monetary Policy, but you can see, what you can regard is that at the end of the day, the Monetary Policy is not the real cost. It is acknowledged that the longer those low rates last, the bigger the problem becomes, as offts roloff bank role banks balance sheets, etc. Do you see a case at all for cutting rates more . That is not the approach that we are that we have now. You know, we are focused on delivering the delivery of liquidity to the banks in very conditions with very good pricing. Simultaneously qamar purchase ourram simultaneously, purchase program. Matt that was the European Central Bank Vice President talking to paul gordon ahead of the European Central Bank Coverage in frankfurt. Cb right now,at nie the ecb ticker on the bloomberg terminal. Red headline here. Christine lagarde says the economy is likely between the ecbs medium and severe scenarios. She says it is playing out nine the worst case scenario, but not on the best not on the worst case scenario, but not on the best case scenario, but middleoftheroad. To answerntinues questions from the European Youth on facebook. We will continue to track that for you. Up next, the eu is set to unveil its Recovery Plan later today. The socalled frugal four are opposed to the Franco German proposal. We will get the latest from brussels next. This is bloomberg. And making sure that possible as much as so that Economic Activity can continue unaffected by financing restrictions. We also have to make sure that is and wasy policy channeled and was transmitted whichhout the euro area, we indeed have a responsibility for. I would say the final thing that we did and then i will go to your questions and questions of those in the audience. The final thing we did was, in cooperation with all the of their large Central Banks of the world, make sure that there was access to the most to the currencies most in demand. Naturally, as we saw what we cash, thereh for is always a dash for dollars because it is currently the International Currency of reference and it is always in those circumstances much in demand. Another currency that was much in demand was the euro, so we also put in place spot lines, repo aligns with those countries which were in need of euros. We had that network of swap lines amongst ourselves, central bankers, to make sure that currencies most in demand would actually be available to the countries that needed them. I think i will stop here. I am sure that i have either taken too much time or wasted your time for questions. I will be quiet. Thank you for your remarks, president lagarde. Ats begin with the q session. Matt we will keep you up today on any answers that we get from Christine Lagarde. The European Youth is putting forward questions to her. Often times, kids ask the best questions. They are not constrained in any way. It will be interesting to see what they ask and what she answers. Lets get over to the eu response right now. Done talking about the ecb. The European Commission will unveil its Recovery Plan later this morning. It could be a significant turning point in the blocs history, as Member States debate the possibility of joint borrowing, of shared debt. Lets get more with maria tadeo in brussels. What do we expect from ursula von der leyen and ecb . Ursula von der leyen, this is her biggest moment since she has taken over the European Commission. There has been a lot speculation about what will be unveiled today. What kind of fiscal stimulus and what kind of joint debt sharing burden are we going to see from european Member States . There are three things to focus on. One will be the size of this. Just how big is the budget going to be and how big will the Recovery Fund be . German and french are pressuring for 500 billion euros. Lookecond factor really to is the compensation of it. Are we going to see mostly grants, as germany and Emmanuel Macron are pushing for, or do we see it as longterm . Ursula von der leyen already entered that we are looking at trillion euros that will be unveiled today. Matt what about the pushback . I have been asking guess about formerkelmacron proposal the last couple of days. Everybody brings up the frugal four. It is a phrase that i think people love to use. But also, there are some countries in the European Union that are famously frugal. Yes. Look, this is something that we were expecting. There are two things that are, to say the least, interesting. The Prime Minister of the netherlands has been very quiet. He used ar is that lot of his Political Capital to be tough on esm, which looks like a drop in the ocean. He has decided to stay quieter until he sees the numbers. The austrian and swedish government dont want to flat out say no. They want to see the numbers before they say anything before they commit to it. What i often hear is the fact that Angela Merkel is now working closely with paris to really change the balance of power here. She removed a little bit of that momentum. The biggest economy in europe is now seen piling on debt on countries that are already fiscally week. She needs a Single Market that is strong to be able to sell exports. Matt its a very good point and a very good reminder, maria. It is important to keep the Single Market in mind, especially if you are a massive exporting matt welcome back to Bloomberg Markets european open. We are keeping tabs on Christine Lagarde. You can see her at a Facebook Event answering questions from a European Youth group, or the European Youth group. Apparently it is called the European Youth. I guess kids across the continents are asking questions. She says it response to a couple of them, there will be no new euro debt crisis after the pandemic. That is interesting. Good to hear also from the leader of the European Central bank. That instills confidence. There will not be a euro debt crisis after the pandemic. She has got that bazooka prepped and ready. By the way, you can watch this event on live go. I think it is all in english. With the biggest against since march are not technology and health care, as you might expect. Comead, the big winners from less loved sectors like automobiles and energy. Is the dominance of big tech in equities just a myth . Here to talk about this is dani burger. Dani one of the factors of this is just, what performs the worst heading into march . We saw energy, material names, autos. It is a bit of a mean reversion that we have seen these stocks do the best coming out of the market. This is a good thing. Of thes the breadth stock market after the lows look better than they did before. It also means that tech just did not do as badly at the start of the. Tech is this anchor the start of the year. Tech is this anchor in the market. This sector stays steadfast. Tech is very much still dominant. What contributed most to the s p 500 based on market cap, you see the reliables, amazon, microsoft, facebook. In europe, only health care has had gains year to date. In the u. S. , it is tech with the biggest gains year to date. Matt what is it going to take to d thrown the Growth Stocks here dethrone the Growth Stocks here . Do we need confirmation of a vaccine or treatment . When is value going to come back . It really has to do with just some visibility on what earnings and the economy does from here. Do we get a vaccine . Do economies open up to full force . You cant really say that value is going to come back until we know what earnings are going to do. Stocks are really cheap. There will be some catalyst that helps their earnings recovery. Often, that is the economy. Any visibilityi on when that is going to happen. And the latest bank of america survey, people think the most andded trade is tech growth. Att thanks very much dani burger talking about one of the hottest threads of the rally that we have seen over the last couple of months. The impact of the coronavirus on the euro area economy is going to be somewhere between the European Central banks medium and severe scenarios, according to Christine Lagarde. She is speaking on this Facebook Webinar in frankfurt. You can listen to it right now on live go on the terminal. It is the European Youth posing questions. She says there will not be another euro debt crisis after the pandemic. 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. Francine controls on transactions and freezing assets on officials. The u. S. Is considering this to punish china for its crackdown on hong kong. Hundreds gather in the city to demonstrate amid a heavy police presence. Jamie dimon says good odds for a rapid u. S. Rebound. The ecb is committed to addressing market fragmentation. A Fact Checking label to tweets from President Donald Trump for the f