Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

Protests hammer u. S. Cities nationwide for a seventh straight night. President trump threatens to deploy the military to end what he calls the lawlessness in the streets. U. S. Futures slipped as new york goes under curfew for the first time in over 70 years. As we pointing higher said. The u. K. Virus infection rate falling to its lowest since march. And a second wave of stimulus cannot hurt. Angela merkel looks to broker a deal on a stimulus package with 100 billion euros here as the u. K. Chancellor plans to prepares plans to bolster growth after Emergency Support is withdrawn there. We are just under one hour away from the cash equity trade here across europe. Lets take a look at futures, keeping in mind that the german dax was closed yesterday. It is up about. 5 in terms of futures. Euro stoxx 50 futures, the 6 . Chmark up. Ftse futures up. 4 . They have been positive just about one hour ago, at least partially. Now mastec futures are still keeping their heads above water. We are seeing s p and dow futures down. 1 2. 2 . Tot are we seeing. 1 . 2 . What are we seeing . Anna strength coming through in the asian session. We see catchup being played by some of the markets that were closed yesterday. The indonesian assets jumped to the top of the gmm today but that was because a lot of those were out of action. We see some catch up there. Some strength coming through on the equity session. Asian equities up by. 8 . Futures a little bit of weakness come through. Concern perhaps about what that will do to the recovery picture for the u. S. Economy, what will it do to the civil unrest if we see u. S. Military on the streets . That is increasingly entering into the mindset of u. S. Based investors right now. Theres a lot of ifs still as to whether we see the military on the streets. President trump saying if states do not act. We are having better data coming through, albeit from a very low base. The pmi numbers of yesterday, all that adding up to a picture of least recovery. All of those things we knew to be true. It is good to see it coming through in the data, i guess. Manus take a look at the bloomberg first word news. These are todays top stories from the bloomberg terminal. Another night of unrest in cities across the u. S. President donald trump is threatening to deploy the military and calling on governments to dominate the streets. During his rose garden address, federal officers used teargas to disperse Peaceful Protesters just outside the white house gates. Pres. Trump if the city or state refuses to take the actions that are necessary to defend the life and property of their residence, then i will deploy the United States military and quickly solve the problem for them. New york is also extending its curfew to a second night amid looting in midtown manhattan. First time for new york city in 70 years. And hong kong leader carrie lam has blasted the u. S. For double standards. She is criticizing the Trump Administration for cracking down hard on demonstrators after it supported unrest in the Asian Financial hub. She also spoke out against plans to strip hong kong of its special trading status. There is simply no justification whatsoever for any government, any economy, to impose sanctions on hong kong as a result of a very legitimate process of the Central Government the central authorities taking this position to enact laws for hong kong to better protect national security. Time,and for the first hong kong has banned the june 4 gathering to commemorate the crackdown in tiananmen square. 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 where u. S. Politics and demonstrations meet with markets. U. S. Futures slipping as investors assess prospects for the deployment of u. S. Military to quell social unrest in the United States. That is after President Donald Trump promised to deploy large numbers of troops if cities and states do not act to contain violence from protests over police brutality. Lets get more on the markets and the reaction to this, where we are seeing that, with mark cudmore, our managing editor in singapore. Good morning to you once again. In terms of the big picture here, what does it take for this to really filter into the market narrative, if you like . Troopsse imagery of u. S. On u. S. Streets clamping down on u. S. Citizens, that might go some way towards that, if indeed we do get there. Mark i think it is a very emotional story, very upsetting story from a humanitarian side, but it is not yet that big of a market story. There is an extra risk premium, like we saw yesterday morning on the show, the fact that it is generally a very riskon day but u. S. Futures are the asset class that is lacking. The dollar is slightly weaker as well. It is feeding into markets, the margin, but it is not considered a global issue. It is considered a u. S. Issue. It will slow the economic recovery and cause more problems. Whether it becomes a much bigger risk event, i think, if martial law is actually declared, which nobody really sees as a viable possibility at the moment, it just seems so beyond what is expected in the u. S. , and i do think there is a risk of innocent bystanders, if they start getting caught up in this at some point. I think there is a chance for this to escalate still, but at the moment, it is perceived as very much a u. S. Focused problem. It is going to pull back u. S. Assets but it is not a global issue. Matt we still have seen an incredible recovery in the s p until now, mark. From the coronavirus crash. Your question of the day, does or 28. 5000 go to 32. 50 first . What are you hearing . Mark more and more people are coming into the optimistic camp. I think the overall backdrop picture is that we see the Retail Investor that has been correctly trained it seems to buy the dip over the last decades and they did indeed buy the dip in march. It is one of the first times in a crisis that i remember in the past 20 years or even in a major risk aversion event, that the Retail Investor seems to have outsmarted the investor. In fact, what we have seen in recovery is that the financial investor, the hedge funds, have been the ones who have been short. Though they are short against a core cash long is unclear at this moment, but generally, it is the hedge sector which is the least under position to this rally. It is much more likely we see more topside ahead. Eitherly only is 6 in direction so it is something that we could be seeing on a very dramatic headline, negative headline, in u. S. And china. We could get that dip. Overall, the momentum is for higher prices. Stimulus has broken the connection with the economy and we should expect markets to continue to recover but i think the s p will continue to be the laggard in the overall Global Recovery scene. Anna and you mentioned there that theres the possibility, if theres negative u. S. China news flow, that we could see downside. The markets do seem to shrug off headlines that came through in yesterdays session around china not wanting to buy u. S. Farm goods. Sensible . Seem this seems Like Movement at the edge of the story rather than the meat of it. Mark i think that is exactly the right way to frame this. I think this is something to continue to watch, but china has made these threats before. During the trade conflict, they did say they are going to stop buying. It is part of the negotiation tactic. More. S. Has threatened tariffs in terms that china has not normally been the first to escalate on the trade front. My guess is the hong kong situation is serious enough for them that they see the u. S. As perhaps vulnerable at this time given the domestic problems. I think this is a negotiation tactic we have seen before. The backdrop is that the hong kong Bigger Picture hong kong story of china taking more authority is a longrunning story. It has been going on for a long period of time. It escalated last year. The most recent escalation was an intensification of a longrunning story. We saw on friday that trump chose not to escalate it yet once again and this may be the theme of the pboc supporting a stronger yuan, again trying to dial down tensions, so i think that overall, the market is going, you know what . We are going to move on from this. The u. S. Has other domestic issues. It will not want to block the trade deal. I think investors are thinking this will die down soon. A little bit nervously, but that is the general base case, and they are probably correct in that view. Matt thanks very much. Mark cudmore, bloomberg mliv managing editor, coming to us out of singapore. We member, you can join todays debate on the question of the day. Is the s p 500 going to reach out to us on the mliv team. Share your views by typing i. B. Plus tv on the bloomberg. Me, as youjust email do. Up next, spending through a crisis. Both the you can germany plan more stimulus to get them the e. U. And germany plan more stimulus to get them through the pandemic economic issues. We will take a look at those plans, next. This is bloomberg. Matt welcome back to bloomberg daybreak europe. Bloomberg markets european open. We are over 45 minutes away from the start of cash equity trading across european indexes and it looks like we could see gains at least at the open this morning. Efforts are being made to support economies still struggling as the results of the pandemic. Midst the in the u. K. , amid forecasts of the worst recession in 300 years, the prime minister, boris johnson, is planning to reset the governments agenda with a major speech and Financial Statement later this month. The chancellor is said to be drying up options to bolster the economy after the government withdraws its package of financial support. Here in germany, chancellor Angela Merkel is seeking to broker a compromise on a second stimulus package and will host officials from her Ruling Coalition, the cdu and the spd. Here in berlin later today, and she is said to be working on a deal worth between 50 billion euros and 100 billion euros. We are joined by the European Equity Portfolio Manager at allianz global investors. Thank you for joining us on the program this morning. What do you think about the stimulus that we are seeing . Of course, we have all been expecting the market has been expecting stimulus post pandemic in order to revive the economy. It is what you are seeing enough so far . Elements ineen two stages of the economy in equity markets are the first part of the recovery was driven by a reduction in this tale risks and the ongoing stimulus we have seen from governments across the board, here in europe and also in the u. S. What is much more important is what we are beginning to see now and we have seen with the rotation in the last couple of weeks. Investors have moved into cyclicals. It is actually the Economic Impact that lifting the lockdown has across the states, and that is what will create a much more sustainable economic recovery if and when that materializes and we can keep the reinfection rates low. Good morning to you. Do you think we are going to see any structural changes to the european economy or that kind of conversation gaining pace . When in the u. K. Yesterday a cabinet minister was asked about the economy changing, and he said the economy is going to have to change. And i wonder if that is just referencing stimulus, which it might be, or whether this is going to be something more structural, with change being directed at the top . We talked about Angela Merkel and her vision for the role of the German Government in the german economy. A period of more interventionist state pushing economies in certain directions. Marcus absolutely. I think coronavirus will prove to be a once in a generation event and substantially alter the way that we live and work on a daytoday basis for generations to come. You will see a much larger status as a result of that. We will also see economies and sectors changing significantly as well. The exciting part for us as investors is that it creates both risks and opportunity. What we have seen is an acceleration of the trends towards disruption and digitalization. It has been going on in the background for a number of years. A far greater pace than ever before. Likeu look at two sectors ecommerce or the payment sector, many of the companies we have been speaking to hear are describing penetration growth in a matter of weeks alone. This is something very exciting. What is unique about coronavirus is it is bringing a new cohort of consumers to the Digital World that probably otherwise would not have been attractive without the lockdown. Know, we hear j. P. Morgan has done some math asently and figured out that investment banks typically do after these drops, theres so much cash on the sidelines, and they provide big numbers that go far into the trillions, saying that, you know, investors are only 40 in stocks, and they expect them to be 50 in stocks, and that will help to fuel a rally higher. Where do you think that money is going to go if you do buy into that . As you rightly say, there is a huge amount of money on the sidelines already. We have already begun to see Retail Investor is buying the tip. That is one of the aspects that has fueled this amazing recovery we have seen in the last couple of months. Think the bigger issue is less the amount of stimulus but more whether we can keep the infection rate down and the shape of the economic recovery that we start seeing. See i think what is most interesting for us as investors is the commentary we see off the back of those results for many of the corporates when they start speaking in july and early august. Thank you very much for joining us. Stay with us. Marcus morriseyton stays with us. We will talk about the easing of the lockdown and indeed the risk of second wave infection. Countries start to emerge from lockdown. What sort of companies are best placed to benefit from the structural changes that coronavirus will bring . This is bloomberg. Anna welcome back to the European Market open. 40 minutes until the start of the equity trading session. The first trading session of the week for the German Market, of course, but elsewhere, the second. European stock futures pointing to the upside, up by. 4 . Less features point to little bit lower. Lets get to some of the new slow this morning. Countries starting to emerge from lockdown, particularly in europe. What sort of companies are best placed to benefit from the structural changes coronavirus will bring in the mediumterm . Marcus morriseyton is still with us. Anything to do with digitalization is going to be top of your list. Which of the Technology Business models that we are really drawn to . Marcus the Technology Sector is the most interesting place the most obvious example of where companies are benefiting from this transformation. You can access that through the software. Those with differentiated software. We have clearly seen the acceleration in the subscription and Digital Software or hardware as many of us like you and i are working from home, but also the i. T. Services companies that are enabling that digitalization. Interestingly, the survey was out recently and indicated that cfos not believe that 75 75 of cfos believe more than 5 or more of their employees will be working from home once this is all over. The companies are now having to realize that they need to either invest in their Digital Infrastructure or are likely to fail. Data is being created at a rate of 50 quicker than previous. So all companies are now having to invest in this Digital Infrastructure. The challenge for us is whichfying those trends will fade once the lockdown is over. You know, marcus, if i would try and guess off the top of my head which sectors have been hit the hardest, i would guess it is the airlines, travel and leisure. I would guess it is oil because of the incredible drop. If i did not have a bloomberg terminal in front of me, i would realize it has been the banks. They are down 36 , at least here in europe. The biggest losing Industry Group on the stoxx 600. What do you think about the banks right now . Say,s once again, as you the banks have been a difficult place to be. Bang for the last 13 years and structural pressures are likely to persist. We have a weak economic environment. At zerointerest rates in most places and drop arguably dropping lower in other places. Structuralny of the pressures of banks running legacy Business Models in a world that is being digitalized. It is an area that despite the low valuations we have decided to stay clear of in favor of other sectors where the growth path is much clearer over the long term. Anna we see lufthansa with the stabilization package. Expect to see a bounce in stock today as a result of that. You see consolidation in this sector. Maybe between lowcost airlines, do you really think that flag carriers are going to be bought or go under as a result of this or will we look at another sector which is the beneficiary or the victim of a lot more state intervention . Marcus the winners will certainly be beneficiaries. We see huge consolidation. As you rightly say, we have seen a number of either government bailouts or on a smaller scale, a few bankruptcies, but actually, almost all airlines, which have structurally changed balance sheets, are having to shrink to survive and that will create opportunities for those wellcapitalized airlines with differentiated Business Models and lowest in class unit costs so we are strongly of the view that the likes of ryanair will emerge from this crisis at a much stronger Competitive Position than their peers. What the wider sector looks like and that is a credible argument that we may have seen peak travel in parts of europe. I am of the view that the Corporate Travel is likely to significantly decline post coronavirus. Many of us have realized actually a lot of meetings can be done equally well to resume, and we dont get to travel across the world. Well. In interviews as marcus, thank you so much for joining us. Marcus morriseyton, European Equity Portfolio Manager at allie ons global investors. Thank you for joining. An hour to go before the start of the European Equity trading day. U. S. Futures looking a little bit less by the hour. Lets take a look at some of the events coming up this week. More brexit talk its underway today. Still some sticking points around fish and the role of the ecj. Certain elements about u. K. Policy. Tomorrow, alphabet holds its annual general meeting. On thursday, the ecb will release its latest decision around interestrate and a stimulus package. Anticipated that it will emerge. We will be looking out for the u. S. Unemployment rate. Employers cut millions more jobs. Lets get more on our top story. Threatenedrump has to deploy the u. S. Military, combat troops, and what he calls riot and lawlessness across the country. New york and washington dc were among cities imposing nighttime curfews. Over thentinued killing of george floyd. In a moment we will get live to san francisco. But first, some reaction to the event. I think protesting is only a beginning to allow us to express our pain over the years. It is our calling out to have something done. You cannot legislate away racism. The focus should be on qualityoflife. Education and safety. A badre should never be cop on any Police Department in the world. If someone is bad, they do not deserve to be a cop. These examples tell us that training has to be improved. More comprehensive. We have a crisis on a crisis. We have to continue to extend a hand of help. And say we are going to get to the other side. Lets get the latest from the west coast. Tell us more about what the president said and how the situation looks across the country. The main takeaway was the president s preparedness to deploy military personnel. Theid not really explain authority under which he could deploy troops domestically in the u. S. The president is considering using the insurrection act, which would authorize him to deploy personnel within u. S. Soil to deal with civil disorder. That is an old law. It has not been used since 1992 in los angeles. That occasion was also an issue of riots. The states governor appealed for help. We are still waiting to see confirmation on which authority the president could do that. National guard is being sent into washington. Unit is an active duty that is being moved. What the president reinforced was a message we had given state governors during the day that he wants them to deep the use of the National Guard. It would be in response to an action or inadequate action by the states. Anna that is certainly something we were watching for developments on. Does all of this interplay with plans to reopen the u. S. Economy after the coronavirus shutdown . Week. S was a key we were waiting for cities and states across the country to earmark the next 10 days to start reopening. Chicago on wednesday would start reopening retail and allowing offices to reopen and allowing dining at restaurants under limited circumstances. Now that has been put into question. There is a cost to all of these protests, the damage, the additional policing. State municipal budgets were already under strain because of the pandemic. Therevenues dried up in month of april and march. Finances and budgets are already under strain. Cost ofhave the additional policing. For shopstial delay that had planned to reopen slowly. What impact will this have on the economy . What kind of predictions or forecasts are you hearing . The biggest focused on the next few days will be the unemployment numbers. They are already pretty dire. I have beenstries covering closely are at the retail industry. In the case of restaurants, even those who were able to adapt to restrictions of covid19 measures like take out only or delivery, most are operating at about 10 of normal revenue. On up to 100t billion in revenue. On the retail side, we have seen the biggest drop in retail sales on record. There is a lot of catching up to do. The hope was that could start this week. The risk of a further outbreak protestersoximity of , there is an incubation rate of two weeks. You had city and state individuals talking about a new outbreak. That would slow the process of rehabilitating the economy. And it would put more strain on medical services. Thank you very much. The latest on what is happening across the u. S. Up next, we will focus in on the real estate Europe Market in europe. As the world starts to normalize just a little bit, what does it look like . This is bloomberg. Matt welcome back. We are 20 minutes away from the start of cash equity trading in europe and the u. K. Lets get some first word news. Todays top corporate stories. Facebook employees are increasingly unhappy with their firmss lack of action against controversial comments from the president. After twitter obscured one of its posts, saying a glorified violence. Facebook opted against a similar move. Boris johnson plans to reset his governments agenda. The key speech is expected at the end of june. The bank of china says it will temporarily purchase loans. The pboc is using around 56 billion. Australias central bank has kept its key rate annual target unchanged. While the outbreak has improved, upcoming data is likely to show the full worth of the shutdown. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Anna what will the new normal of homework and Office Working look like . We are starting to see Financial Services Companies Bringing people back to the office. People can probably work less effectively from their homes. I wonder if you can give us your initial thoughts on working from home as opposed to working from the office. We talked about how much people will work from home. Some people are inevitably going back to offices. Good morning. Thank you for having me on. I think the outlook is still uncertain. That theyhave proved can work from home. I stink it will not be 2020 before we have everybody back working in the office. There will still be a fair number of people who will be able to work from home for the next little bit here. What do you think of the moves we are seeing now, especially with financial firms. Theyre starting to get clients back to offices. Do you think banks will want to put everyone back there . Or will they leave substantial amount of their staff at home for good . A couple of incidences on that decision. Business perspective, what is their preference . Potentially be more people working from home on a more permanent basis. With the social distancing measures required, if you are in a building, you will not be able to have your entire team back. While still maintaining the social distancing that is required. I was thinking about the price of commercial real estate right now. Looking for some positive. When you can easily see is very low interest for perhaps a very long time. Are you helping clients refinance some of the debt . Yes, the whole restructuring of debt has not started yet. What we are seeing is people starting to prepare for that. Potentially in the Retail Sector or leisure and hospitality sector. That means they are unable to sustain it. Oer the banks are offering them interest payments. And covenant waivers. At the moment, it is more of a pause. Of lockdown and perhaps we get a better idea of what the normal income looks like for those properties. At that point, we are expecting to see more debt restructuring. For the moment, it is perhaps deferring the capital. And see what the june outlook looks like. Do you expect to see a lot for supply of Office Space Lease or Office Buildings for sale . We dont think there will be a lot of transactions this summer. No one is going to want to put anything up for sale in this environment. Values aresset clear. Side, it is hard to gauge. Especially, at least lengths are still relatively long. There is demand for less office space. It will not happen in the space of a few months. Landlords will be tied in. Be 10 years where they are committed to that space. It is a fairly long time before we start to see any of that shift in demand. By then, hopefully we will have a better idea. That will cause an increased demand for space. Matt thank you so much for joining us. On a topic we are all playing paying close attention to right now. The stock rally may look excessive in the middle of an economy frozen by shutdowns. According to jp morgan, it is just getting started. We have the details next. This is bloomberg. Matt welcome back. Less than 10 minutes away from the start of cash equity trading in europe. Lets get the Bloomberg Business flash. The top corporate stories. U. K. Stock Market Participants want a reduction in the worlds longest trading hours. They favor a trading day of 9 00 a. M. To 4 00 p. M. According to a survey by the london stock exchange. In light of that, they are waiting on surveys from other sources before making a decision. Western union is looking to acquire money gram. Bloomberg has learned about the potential deal that could bring together two of the largest u. S. Providers of Money Transfer services. The businesses have been in decline for a number of years. From eitheryet company. Delta is in talks with its private union pilot union to avoid layoffs. They are discussing ways to blunt the impact. Passenger counts remain about 88 below last years level. As we work our way up to the start of european equities, over the past week, most shares have been roy back, apparently at the expense of market leaders on technology. Some hedge funds are now calling it the greatest opportunity ever for value. Are we finally seeing a rotation into value shares . We definitely have. People are always hoping for this to happen. Been betting on value, it has been a tough pill to swallow. Hasfor the past week it been an outgrowth to a significant amount. Not thethis is sustained rotation that people are hoping where. We need a revival of the inflation trade of expectations for inflation. We are not seeing that. Perhaps what is happening here is this is investors hoping to keep this rally going. It really defies expectations of an economy that is not up to full speed. Cheap atstill very this point compared to the rest of the market. A professor said this was the best opportunity ever for value because it is so cheap right now. At some point we are going to get that mean reversion. Matt i have been hearing people say that for quite a long time. Is this resurgence a sign that the equity market has further to run . Is a true rotation, it could be. It could mean that growth is coming back. We have this one corner of equity markets that has not caught up to the price to equity ratio. According to jp morgan, we could see the rally go further. There is so much cash on the sideline. They say it is just momentum traders right now that are spitting up the market. Money market funds have a lot of cash. Andle could really step in take this market higher despite many looking at it and saying there is a disconnect between the Economic Data we are seeing and the market. There is money there that could be put to work. Matt thank you very much for that. Coming up, futures are pointing higher, maybe for some of those reasons we just mentioned. We are seeing gains in europe. Losses in u. S. Futures. Andcan see the euro stocks cash futures pointing higher. Nothing to sneeze at. Down. Utures pointing much recovery has been stronger than the one we have seen in europe. They have massive protests on the streets across the country. This is bloomberg. Anna when minute until the start of cash equity trading. Protests hammer u. S. Cities nationwide for a seventh night. President trump threatens to deploy the military to and what he calls lawlessness. New york goesp as under curfew for the first time in 70 years. The u. K. Virus infection rate falls to the lowest since march. Stimulus,ave of Angela Merkel looks to broker a deal worth 100 billion euros and the yo u. K. Chancellor plans to bolster support. Futures in europe point higher. Up. we are seeing futures today is the first trading day for germany had yesterday off for with monday. You have futures up across europe as well as use u. S. Futures point lower this morning. Take a look at the gains you see right off the bat. Screen gmmand screen. You can see the equity indexes open up, the ftse going through week gains weak gains,. 2 . Broader up. 6 and the euro stoxx 600 index. Dax open up the higher, as well although maybe not the gains we see in france. It looks like the cac up. 8 is showing the biggest gain so far and the euro stoxx index is up about 1 . European stocks, opening higher. European equity markets open higher after the u. S. President donald trump promised to deploy large numbers of troops if states dont act to contain violence from protests over police put. Joining us to discuss where we are in these markets, catherine doyle, Newton Investment management. I know one of your biggest convictions is not around stocks necessarily but around gold. I wonder what you make of the fact we have seen stocks rally from their lows in march and we have seen gold gain a little. What does that tell us investors are buying both stocks and also gold at the same time . Gold has been an interesting one because its correlation has moved around a bit. I think it does show people are still nervous and they are also considering the longerterm and thes for economies fact that this huge wall of money is in the process of hitting economies with potential inflationary pressures further down the line, so one of the properties of gold is an inflation hedge as well as less tail risk hedge. It has a number of different factors working in its favor. Where do you see the cash on the sidelines coming back in, catherine . Do you agree with the theory there is so much cash sloshing around it will flow back into markets . Think people have been very nervous about what has been going on and i think investors are quite spooked by what happened in march. Swanad the double black event of the coronavirus and the oil price shock. There is scopek for a catchup trade is europe, because you are seeing this more stable Growth Companies into some of the more now thatnames, investors are feeling a bit more momentum between behind this market recovery. It is cyclically skewed so it may benefit. You are beginning to see some areas beginning to rally. I wonder what you make of the unemployment story. Im looking at spanish unemployment numbers and i antion it because weve seen incredibly fast move up to 25 unemployment. This is a tragic level of unemployment for any economy, to in the two months prior may, caps on increase of 282000 and 302,000 and in may, we see just 126,000. Perhaps, in that, we find reasons to be at least hopeful at the margins. Catherine yeah, i think things are beginning to turn. You are beginning to see much of the data is slightly improving, albeit from very low levels. And has been a very big hit it is going to be interesting to see some of the in the u. K. , some of the furlough schemes as people start to come off those schemes, how many will actually return to employment and how many will be laid off . Weve been in a strange twilight kind of cant feel the true impact on the real economy because governments and the authorities more broadly have been very supportive, but obviously when we returned to some form of normality, which will make it different, we will see the impact. Matt what kind of longerterm impact do you expect to see, catherine . Catherine i think there will be structural changes. It has been much talked about, but obviously the dominance of digital, the way we work is going to change, the flexibility that is built in that will change. We will see bigger government, so the government is going to be far more dominant in different areas of our lives. The government has been instrumental in bailing out and helping some companies. There will be another side to this deal. Visiblell be a far more and dominant government in many areas of our lives. In terms of your strategy, you said many people talked the initial stages in march and now you say we are in a different phase. Are you looking at companies with great balance sheets, stronger cash positions than the rivals. How are you dissecting those opportunities . Catherine we are still very mindful that this is a difficult environment. You do need to be highly selective about what you invest in and weve always prized attributes like strong pricing power, deep moats, companies that are leaders and have unique positions in their industries, and that is not incompatible with cyclic or exposure as well as stable growth names. It is a question of being stringent about the criteria that you are demanding from the investment, but also taking advantage and looking at what is happening in the backdrop, and the fact that some of the slightly more cyclical names have further to run at this point. It feels like at the beginning, it was more about quality, but we have now moved on to the second phase. Matt catherine, we will keep you with us. More to talk about with catherine doyle, Newton Investment management, investment specialist. Thats a lot of investments. In any case, we are watching shares of the funds lufth ansa, therefore to backing this german bailout finally. It seems berlin won out over brussels and shares in a late chair lha are up more than 6 . Our airlines a safe bet or have they fallen so far so fast . This is bloomberg. Matt welcome back to bloomberg market the european open. 10 minutes into the session and we are seeing the dax up 2. 6 . A lot of that has to do with the factlufthansa and it is playing catchup with yesterday. It was closed yesterday and other equity indexes across europe work opened and higher, so the dax playing catchup, but sharese lufthansa up more than 8 , daimler up 7. 5 on hopes of a cash for clunkers bailout. Let me focus on the airline story. Lufthansass border backing the bailout by the German Government. The package needs to be approved by investors, the latest instance of the government saving and national airline. Germany seems to do it better than anyone else across europe, mainly because it has more fiscal space. Does that make the industry a safe bet . Catherine doyle, Newton Investment Management Investment specialist is still with us. C you have seen airlines get hit hard, travel and leisure the second worstperforming yeartodate after banks. Are they a safe investment now that we are seeing these multibilliondollar bailouts across germany, france, and spain, britain. You have to be quite a brave investor to believe that because frankly, theyve had to make quite a few compromises and deals to get to this place. The sector as a whole has been and supposet, looking at the details, lufthansa has managed to hold on to their daily slots, perhaps, more than expected. It is probably not material damage to its market position, but when you look at even some of the low Cost Carriers who are slashing capacity, they are only filling or at least expecting to fill around 50 of their capacity and they are also having to cut pricing pretty savagely, down as much as 50 on certain destinations, that tells you the industry is certainly in rude health and the big unknown is after we come through this or feel like we are emerging, how deep will the psychological damage be and how willing will people be to jump on a plane and go abroad . And is the big question, think it is quite hard to answer at this point, but it clearly has certain repercussions that might be longerlasting than we initially thought. Aboutwe talked to a guest the possibility of peak air being different in emerging markets versus developed markets. What about the car sector . Exposure to the car sector has been a sector under pressure for size of the and manufacturing space has been changing for a long time. Are there opportunities to make money in that space from an investor perspective . Catherine the interesting part is really got to be the electric vehicle space. The providers, manufacturers, it is interesting in that regard, particularly with the interest in environmental social governance factors from investors. I think the more traditional car Manufacturing Industry is grappling with serious pressures. A morert is probably secular decline, although it has clearly a boost with the coronavirus because people are nervous about getting on public transport. Matt are you going are we going to see bigger problems in u. K. Assets because youve got the coronavirus issues, but youve also got what looks increasingly like a hard brexit coming. Has been abrexit real overhang on the u. K. Market it is iteal result of is leading to a lot of uncertainty, a certain amount of volatility and frankly, in our funds that we manage, we dont have to hold u. K. Assets. We can go anywhere so Sector Opportunities elsewhere there have been value opportunities in certain parts of the u. K. Market because with all the uncertainty, the good has been sold off with the bad. Weve been able to pick up some interesting names that are quite domestically focused, but a lot of our exposure in the u. K. Is to global companies. To some extent, it is not really of any great importance where they are quoted. Matt thanks so much for joining us. Catherine doyle from Newton Investment management where she is in investment specialist. She will continue the conversation on Bloomberg Radio about 45 minutes. Definitely tune in for that. Lets get the Bloomberg Business flash. Top corporate stories from the terminal. Most u. K. Stock Market Participants want a reduction in what are now the worlds longest trading hours. Of 9 00or a trading day a. M. To 4 00 p. M. According to a survey by the london a stock exchange. The majority agreed any changes would need a unified approach across europe. In light of that, the lse is awaiting other forces before making a decision. 700lays plans to return staff to offices in the u. K. , the u. S. , and india starting in july. The bank told staff in a memo that goes going back with mostly be traders and others that cant work from home. It is going to amount to less than 1 of the companys global headcount. Liberty has learned the rest will work from home until at least the end of september. Facebook employees are increasingly unhappy with the companys lack of action against controversial comments from the president. After twitter am scared one of ed a post, obscur facebook opted against a similar move. Leading ars are virtual walk out. Mark zuckerberg plans to address situation in the Company Meeting today. That is your Bloomberg Business flash. Anna coming up, spending through a crisis. The equity market in germany, outperforming the rest. Yesterday, but up by 2. 4 . Is that to do with the german political backdrop and the catchup story . Germany, planning more stimulus to get it through the pandemic. We will look at what is to come from germany next. This is bloomberg. Anna welcome back to the European Market open where we have a strong market open underway. European equity markets to the upside, in particularly in germany. The ftse is fairly flat, the cac up. 8 , the that the dax up 2. 4 . The biggest gaining sector in europe is autos. Weve got time learn up more than 7 , bmw up shy of 5 . Bmw and porsche, not far behind. Lets talk about one of the underlying reasons likely behind the huge rally in the dax today. Angela merkel is looking to broker a compromise on a second german stimulus package. Shell host officials from the Ruling Coalition of her party, the cdu, and the social democrats. Junior partners in berlin today. The deal is said to be in the region of 50 to 100 billion euros. It looks like the christian democrats want to take less debt, the spd once to help the economy more. Joining us is our German Government editor in berlin. Thank you for taking away from the stories this morning to give us the download. What are we expecting to get in terms of real euros on the ground to help this economy . We are looking at potentially the biggest amount of government aid flowing in germany since probably the Marshall Plan after world war ii, as much as 100 billion euros. It is not clear how that will be divvied up. The conservatives, the cdu, merkels party wants more money going into bigger bonuses. Ered system by ti which the most efficient, the bigger the bonus. In the draft bloomberg saw late last week, the finance minister didnt mention any car bonuses whatsoever. The differences are still big. They start the meeting at 2 00 p. M. This afternoon but given the wide gap in understanding, this could go well into the night. We see car stocks in anticipation of what you have been talking about, rallying. Daimler a strong mover in this mornings session. Hoping for some of that money. What are other areas of policy we might see addressed . Perhaps something to help the car industry. What else . Raymond the finance minister olaf schulz has proposed a massive Debt Forgiveness program of about 57 billion euros. That would be for municipalities. He is a social democrats, wants to give away money, family subsidies, 300 euros per child but these are also negotiating tactics. He has bargaining chips on the table. In the end, i think everybody expects it would be hard to imagine a Stimulus Program in germany were at least some of the money doesnt go to the car industry. Matt do you expect more stimulus to come after this . Is this just the first piece of the postpandemic stimulus . Raymond i would think so, matt. This goes in phases. Weve seen germany may have fared somewhat better than other countries. We expect a downturn of about 6 , but anecdotal information, things ive heard from companies, especially mid to small size companies, they are struggling. Shutdown is not easy to digest and we may have to come back to this type of negotiation between Coalition Partners again in a couple of months time. Matt thanks very much. Raymond it come our government editor in berlin talking to us about what we expect to be very long negotiations today. I think starting at 2 00 in germany. It is likely to go into the night to get this stimulus package passed. Next, President Trump threatens send in the army to combat and the unrest in the u. S. How will this play into each partys president ial election chances . Next, we will discuss the domestic and foreign political implications with the former British Ambassador to the u. S. This is bloomberg. Positive for European Equity markets. The stoxx 600 up 1 . The German Market was close yesterday, but up 2. 8 . There is optimism around what the German Government could do in terms of stimulus. We are talking to our colleagues in germany about how much the stimulus would focus on the auto sector and other parts of the economy. Stocks seem to be rallying strongly, the biggest gaining sector across europe and the german names lead the pack. Matt absolutely. Germany, doing well and playing a little catchup. Weve got u. S. Futures getting closer positive again. Backwere a couple hours and now they are down. Lets look at sectors on the move in europe. We know that the dax is being powered higher by airlines and automakers. You can see automakers at the top. If you have travel and leisure in the middle of the group, but it is lufthansa more than any other airline doing well today after getting that bailout. Health care stocks are the only as everythingoday else is putting up green arrows. Lets get the bloomberg first word news. Todays top stories from the bloomberg terminal. Boris johnson plans to reset his governments agenda with a major speech. Is also drawing up new plans to bolster the economy amid what is being called the worst recession in 300 years. Sources tell bloomberg the speech is expected at the end of june. Lam haskong, carrie blasted the u. S. For double standards. Shes criticizing the Trump Administration for cracking down hard on demonstrators in the u. S. After it thought back against hong kong cracking down on demonstrators during its protests. She also spoke out against plans to strip hong kong of its special trading status. There is no justification whatsoever for any government, any economy to impose sanctions on hong kong as a result of a very legitimate process of the Central Government, the central authorities taking this position to enact laws for hong kong to better protect national security. Sincefor the first time it happened, hong kong has ba nned the june 4 gathering to mark the crackdown in tiananmen square. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Anna lets return to one of our top stories. Another night of unrest in cities across the United States. President trump is threatening to deploy the military now and calling on governments to dominate streets. During his address, federal officers used tear gas to disperse Peaceful Protesters outside the white house gates. If a city or state refuses to take the actions necessary to ofend the life and property the residents, then i will deploy the United States military and quickly solve the problem for them. Likely democratic president ial nominee joe biden met with black pastors and politicians in delaware and help a live stream conference with the mayors of los angeles, chicago, atlanta, and st. Paul to discuss the problems that triggered the problems average. Peter westmacott, former ambassador to the United States 2012 to 2016. History of the military in the United States. It happens rarely in this fashion. How much of a break with the norm would it be if we saw the president press the button on this . Well, we would be in very different territory. I think im right in saying the last time we saw the military on the streets was in the time of the rioting in 1968 after the death of Martin Luther king. That was a pretty traumatic moment for the United States. It sounds as though a lot of people would much rather this was not handled in that way, with the u. S. Military being set against people who are largely peacefully protesting. That would be a big game changer. Matt thats right. We often go to the example of kent state, the university in ohio, where students were killed protesters were killed by National Guardsmen. President trump is talking about putting actual combat troops on the streets in the u. S. Is this the kind of thing that has happened in britain . Have we seen this happen across europe in recent memory . Just trying to remember. I think not. We have had one or two outbreaks of writing and looting, the last time was in london 15 years ago which was a curious episode of fake information given to the police so they went to the wrong place so organized criminals could trash streets and steal it hasfrom shops, but been a long time. In europe, people generally try to avoid that and optically at a time when the United States is onely taking a Firm Position the suppression of peaceful people in hong kong, to have streets clearing the for what is a photo op, threatening to use the military and talking about Second Amendment rights of the American People to take up arms, that is and nott language something which we have seen, certainly not in European Countries to my knowledge. Matt ambassador, with your experience in your home country and serving in the United States, can you understand why in the u. S. Police kill so many more people than in European Countries and white in the u. S. White police kill black people at such an alarming rate compared to the kind of rates of incidents we see here . Sir westmacott thats a very leading question to put to an observer and close friend of the United States. I would just make couple of comments. To say this,s easy but the fact you have hundreds of millions of weapons in means you have a more gun driven society which means police are more likely to use weapons than they would erwise be intended expected to do so. It means youve got socalled vigilantes, people who take their guns out with no reason and put the law in their own hands. About therious laws private use of weapons in European Countries. I suspect that is part of it. The other part of it, it is hard for a foreigner to comment, but we go back to the origins of the country. A degree of white supremacy, there was a strong sense of the slave culture. I know the united kingdom, britain was back then a part of that but we abolished it fairly early on. It took a long time for slavery to be abolished and alas, it has taken a long time for some of the scars of the civil war to be healed and some of that is still out there. Say iser thing i would social media and the presence of video cameras everywhere we go does mean that individual episodes are seen around the world and give rise to this kind of response. Mean it wasnt happening before, but it means people quickly see in all graphic detail horrors like this when they do happen. You know from your experience of watching u. S. Politics, perhaps looking for things that would inflame the situation or calm it, i wonder if joe biden and his picking of a running mate might change the dynamic at all . Any thoughts on that . Sir westmacott i think it is a very good question. It is possible to say what difference does it make who the running mate is . They vote for the man they wish to be president , but joe biden is a little older and people will be saying, well, who is the person we would like to see take over in the white house in the event, got bit god for bid, something happened to him. He also promised he would choose a woman as a running mate this time around. But narrows the choice, does this mean he will choose someone who is black . Does it mean it is someone from the midwest . He was perhaps thinking about that and it may be more difficult given what has happened in minneapolis. I dont think we know. Im not sure the Vice President himself knows will choose, but i suspect you are right. The eyes of america and maybe the eyes of the world will be more on the choice of running mate this time than they usually are. Thanks, mr. Ambassador. We appreciate your view on these troubles, these troubled times. Peter westmacott, formerly the u. K. Ambassador to the u. S. Coming up, we will bring you more on that story as new york, washington, d. C. , cities around the country impose curfews. We will report live from the u. S. Capitol next. This is bloomberg. Matt welcome back to the european open in the european union. We are 43 minutes into the session right now, looking at gains across the union and in the u. K. Still a member, by the way. They are not out yet. Daxftse is up. 5 and the less than 2. 9 . [laughs] we are in a transition period, matt. We left at the end of january. Matt i guess you got to work out the deal. , youve left but you are leaving. In any case, lets get the Bloomberg Business flash. These are the top corporate stories from the terminal. Most u. K. Stock Market Participants want a reduction in the worlds trading hours. They favor a trading day of 9 00 a. M. To four cap p. M. According to 4 00 p. M. The agree any changes would need a unified approach across europe, which is weird because they are not even a part of it anymore but in light of that, the lsd is waiting on survey sources before making a decision. , surging this morning after its Supervisory Board back a 9 billion euro rescue deal that paves the way for the airline to receive the lifeline, if investors prove. The Shareholder Meeting is set for june 25 and they face the between accepting the deal, giving the state at large section of the airline, or risking insolvency. On our top story. President trump has threatened to deploy the u. S. Military to end what he calls riots and lawlessness across the country. New york and washington, d. C. Are among the many cities imposing nighttime curfews as unrest continued over the killing of george floyd, an unarmed black man by police by police and it was accompanied by graphic video that actually showed the killing. Lets get an update from bloombergs kathleen hunter. How have officials city officials responded to trumps demands to how they approach these contests . Kathleen it has set up trump as localin opposition to the leaders and that is different from past crises. In places like new york and washington, d. C. , local officials have strong criticism to what President Trump said in the rose garden last night, his actions rock walking across Lafayette Square to st. Johns church. The d. C. Ticism from mayor. When you look at past crises where there was talk about federalizing the National Guard or taking other actions, often what we saw was local officials acting in concert and being supported by federal officials but we are seeing local officials being very critical of what they see as a heavy hand being taken by the white house and the federal government. That really sets up this potential powder keg where you have local officials really not liking federal officials coming in with the military and taking these actions against their citizens. It is certainly dynamic to watch Going Forward. How talking about that, solid is the legal precedent or the president to deploy troops on u. S. Soil . We talked with the former British Ambassador to the u. S. He talked about the late 1960s and los angeles decades ago but even then, it was different circumstances. What is the precedent people are referring to hear . Kathleen absolutely. We are in uncharted territory because as i referenced, in past situations, it was the local governments saying to the federal government, please come help us. That isnt the situation here. We are seeing local governments pleading with the federal government not to act as strongly as they are threatening to act. I think what the white house is looking at by all accounts is an 1807 law called the insurrection act which gives the government some authority to put down unrest that might threaten citizens civil liberties. When that has been invoked in the past, it has been invoked with the support of local officials. This would be open to legal challenges. The president if the president looks to deploy the National Guard and active military, because there is a civil war era law that says the military cant be deployed on u. S. Soil unless there are very special circumstances, so that is where the robe is going to be rub is going to be. Yesterday, we saw republican call for theotton 101st Airborne Division to be deployed to put down protests in minneapolis. If steps like that were taken, that would be unprecedented and probably open to a host of legal challenges. Can bidenbiden make this work for him in the election because the black lives Matter Movement was born under bidens time in the white house as Vice President. The ferguson issue happened on his watch. Yeah, and i think yesterday was a split screen moment in the sense we saw biden talking about the need to deal with Structural Racism that exists in america, talking about the need for unity and calm and where we saw trump by contrast having a different message, talking about the need to act with resolve and potentially deploy troops. There is a difference between the candidates on this issue put in stark relief yesterday. Which appeals to more u. S. Voters . It is making it more of a base election where we could see folks on the right and the left being energized more to come to the polls because of the things that are unfolding in the u. S. Right now, and the question is which side wins out on that . Whether that has more of a benefit to trump and biden, and how independent voters feel in light of all this. This is another weak potentially for people to stay away from the polls. Not only do you have to worry about coronavirus, but there is civil unrest occurring. There five months from election, but it is more of a potential reason for people to stay home. It is hard to tell at this stage which candidate benefits more or whether biden will be able to make this into an issue that works for him, but i think it is emerging as a huge issue in the campaign. Matt kathleen, thanks very much for joining us. Kathleen hunter, one of our politics reporters following this issue and she will follow the election very closely. Does the s p 500 go to 32. 50 up or back down to 28. 50. We put that to the mliv macro strategist laura cooper. This is bloomberg. Anna welcome back to the European Market open. 53 minutes into a trading day that is broadly positive for equities, making gains of more than 1 . Up. 9 . An market, interesting move from Goldman Sachs with regards to its call in europe, raising gas from overweight in neutral. Otto goes from neutral to underweight. Interesting the autos call. Perhaps another reason we are seeing german auto stocks moving higher along with playing catchup from yesterday and the german political news. Lets get to the market conversation. Laura cooper, mliv strategist, is with us. There seems to be expectation around the german stimulus package and what that can deliver . Laura absolutely, the fact we are seeing the dax rise reflects the catchup of this optimism we saw yesterday and this is predicated on the stimulus hopes, not only from the Eu Recovery Fund we saw progress on last week, but a second phase of intolus potentially coming the German Government today and that is beyond mitigating the coronavirus shock. Im looking forward in terms of the Recovery Plan and how we can stabilize and support a recovery Going Forward. Matt what are you hearing in terms of the contributions to the mliv question of the day . We are asking if the s p 500 goes to 3250 first or back down to 2850 . What our clients telling you . Laura in this case, momentum points to the s p 500 grinding higher on account of the massive stimulus efforts and as investors focus on creating reopening economies. Saw the impact of a technical level of a 200 Day Moving Average open the door higher, but there is caution warranted given there are key hurdles ahead for the market. What we are seeing play out now is major cities are delaying their reopening plants is retailers struggle under the weight of growing protests, so that could be a growing rift Going Forward and we are seeing rising bankruptcies in the u. S. , unpaid past 2008. Economiceing destruction in the u. S. And there is the wildcard of the u. S. China tensions. Seeing speculators take on short positions, but ultimately what markets are telling us is the idiosyncratic risks in the u. S. Are building up a risk premium in the u. S. I would expect to see the u. S. To underperform and a rotation toward equities outside of the u. S. , notably in europe given the positive stimulus efforts. Anna interesting topic of conversation. Laura cooper, bloomberg mliv macro strategist. That is it for the european open. European equities push higher, u. S. Equities not moving a great deal. This is bloomberg. Francine protests hammer u. S. Cities nationwide for a seventh straight night. President trump threatened to deploy the military to end what because lawlessness. New york city under curfew for the first time in more than 75 years. Mayor bill de blasio says a second curfew takes effect tonight. Facebook employees become increasingly bold in the criticism of Mark Zuckerberg over his decision not to take action over incendiary comments posted