Meantime, lets talk about the headlines. Brexit, Prime Minister Boris Johnson and the had a callmmission earlier on in the group agreed to hold two months of talks to talk about a postbrexit trade deal. Boris johnson said there is no reason why they shouldnt get a brexit deal done in july. However, u. K. Has ruled out an extension. We have a political economist joining us, what is your sense of what is going on here . Degree, is there any surprise in the idea that an extension is not forthcoming . I dont think so. What we are seeing is pretty much the same old story, different day. It feels like its 2020 but it feels like its 2018 all over again. The same issues are coming out. You can see that from the eu which is saying we wanted an agreement but not at any price. Both want an agreement but there are stipulations and as we have seen for the last few years and we will continue to see for the next while, there are red lines that are still sticking points that will ultimately they will have to compromise on. Eu andt sounds like the on the u. K. Are not that far apart in trade talks. I literally dont know what that means anymore. Can you help me with that . Honestly, its the political tone. Its been better in recent weeks. Previously, we were told the full range of negotiations didnt come to anything, the positive tone is kind of what people are getting at but the concrete issues that remain are how much access does the u. K. Get to the eu market and how much Regulatory Oversight to they have to take in order to pay for that . The europeans are trying to play by their level Playing Field rules. There are pernicious issues like fisheries. These are issues that have still not been solved. Yes, youre getting positive political tone but are you getting changes on the defining issues . Its not clear yet. What im reading into the situation is that the brexit situation and the covid situation are beginning to overlap. Inside downingm street and westminster is that the government is struggling. It needs to get kids back to school, it needs to figure out a way of getting social distancing to work to allow the economy not to completely fall apart. The government is really struggling with all of these key decisions. How does that impact ultimately the brexit story . Is it cover for the brexit story jacket does it mean Boris Johnson needs to take a different tact because that part is evolving rather quickly. Important thats an there are probably two key points. The first is just covid19 and the fallout from it have been a massive source of energy for the government, trying to deal with what is an incredibly complex human and economic crisis. Weve lost time in the negotiations but also, the attention wouldve been later focused on brexit and has been dropped. However, in terms of the challenges in the next six months, there is this idea certainly in conservative circles and there were some people in the cabin and may hold damagew that what is the covid and that provides cover to have a harder brexit. Who will notice the delta when youve already had such a terrible economic crisis . Toont think when we get septemberoctober, thats how the opposition parties will feel. For businesses, theyre just trying to recover and just starting to see the light at the end of the tunnel. If you are seeing things like two meters going down to one meter, those things you would expect near the end of the summer, thats precisely the time when you want to see progress on brexit. In a way, it might help matters will haveuse they company saying we need to get a deal because we have been this through this horrendous crisis and there is uncertainty coming our way. Have learned is that governments all over the world are willing to step in and throw money at covid and throw money at companies and employers. Who is to say that they wouldnt do that was Something Like a hard brexit . I think you can to a degree but for a normal company, you can get massive amounts of state aid but that doesnt change the fact that your major export market is the European Union and there is a huge queue to get into france in calais because you cannot get through because there are barriers. Whenis whats often missed we talk about brexit. It has questions to do with how speedy you can get through a light touch administration. With the absence of a trade agreement, that goes off the table so there is only so much the u. K. Government can do to who areu. K. Companies heavily reliant on the u. K. Market on the eu market. You hear about where the center of gravity is in terms of who is making the decisions . The Prime Ministers key advisors star has fallen but do you get a sense that others are making more of an impact inter in terms of the Prime Ministers decisionmaking . Does that change the equation as to how he ultimately deals with brexit . The advisor is the hard brexiteer. If others are being listened to, that may dilute that story. There is a brexit sympathetic cabinet in general. Its always hard to call whats happening inside the walls of 10 downing street. We spent a lot of physical dominicpreserving cummings as a key advisor. Controversy over cummings allegedly breaking off and johnson came under fire. Was asked to step down and did not step down and continued to back him and that tells us he is still a key figure in that administration, otherwise why spend all that capital . Just asking to step down. Guy im trying to understand how to handicap the chances of a hard brexit toward the end of this year. That now the rating certainty gretchen . The backing of dominic cummings, the decision not to go to transition, i agree, none of it is particularly new. But the market at the moment is in a situation where its a bigger anding bigger discount to u. K. Assets. Is that the correct decision . We have recently looked at the issue again. Think a deal is in their interest. You have to have the drama and the disagreements because thats what allows everyone to move forward. Eu trade negotiations can be laborious and take time and thats clearly a risk with this process. Dominic cummings being so wellpreserved preserved in the process, we have ticked off the risk of a no deal exit that is more likely than it was. Thingnk the most likely is a limited trade agreement. Sometimes investors gloss over them that but im limited trade agreement will give you very little and creates additional customs. Ae next six months will be realization not only of the risk but not the usual brexit roller coaster. For the markets to react to that but you have to ride that roller coaster to get to the deal but there also has to be an increased Awareness Among investors about the differential impact this will have on Different Companies in different sectors. There may be less exposure even if a deal is done. Alix thank you so much. Also, breaking news amazon reportedly telling congress that jeff bezos will testify in a probe over amazons dominance in the digital space. There had been a real standoff with amazon saying they would only let certain executives or appropriate executives testify. It seems jeff bezos will be testifying in front of the house and makingommittee the appropriate executive available to testify. Coming up, short but sweet or unsweet, thats the kind of recession that is forecasting. Chiefl talk with the economist at Morgan Stanley. This is bloomberg. Alix live from new york, im alix steel with guy johnson in london on the european close. Risk assets are under pressure off the lows of the session but investors understand the potential second wave of Coronavirus Infections and potentially more lockdowns. The Morgan Stanley chief Economist Says he has more confidence in his call for a v shape recovery on a global scale . Primary indicator that justifies that view . In terms of the forecast, we are expecting global output to return to precovid levels by the Fourth Quarter of this year and we expect that to happen in the Fourth Quarter for dm next year. This would be four and eight quarters in the cycle versus six and 14 quarters we had seen it should be a sharp but short recession. The reason why we are making this prediction is that this time, there is protection from the fact that this is an egg to lodge and us this is an exogenous shock. Response has been swift and coordinated. [indiscernible] announce qee fed to of 6. 2 trillion dollars by the end of 2021 which is 30 of gdp that will be 1. 5 combined by the fed [indiscernible] on the fiscal front, we expect the fiscal deficit to be [indiscernible] of gdp. Lets talk about what you are expecting on the virus front. To hear you song i will lay this out. There is a sense that we will get a second wave. The big question around that whether or is not economies get shut down. Are you assuming a second wave and what are you assuming when it comes to the potential for shutdowns . We are expecting a second wave to occur. We are seeing some rising new cases. We think there has been progress achieved on the medical front. There is increased capacity on tracing. Nd contact dont think we will see the shutdown we have seen in the past. Andill see shutdowns smaller localities, if at all. That this assuming second wave will take down world trade, regular basis. [indiscernible] because we are assuming the vaccine will be available for 2021, we have a react sellers and growth again but we dont q decline because of second wave. How can you trust your forecast . Economists forecasting have been wrong. Its hard to understand the data. You dontto know when have clarity on the vaccine. How do you trust it . We have to be humble about this. There is a lot of stuff regarding this virus that we dont know. What we are taking comfort from is the fact that we have the evidence of how the situation has evolved so far in the last few weeks. [indiscernible] the problem has not been completely gone. We are seeing politicians trying to manage the virus and the economy and that gives you an indication that Economic Activity will pick up. You have the evidence in the hard data. If you look at the u. S. Consumption, Small Business transactions are up by over 20 versus march. [indiscernible] we have seen actual data supporting this improvement. We have to keep in mind that the policy response, because this is as this is an exhaustion us shock and i highlighted in my initial remarks, the scale [indiscernible] those of the two things that make us feel this will be a v shape recovery. Reportsead a couple of that may be the selloff we have seen in the last few days have a political derivation. The market has started to look at the polling in the United States and started to increasingly factor in the possibility that the democrats may do well in november. What have you got built into your model in terms of a change of leadership in washington and what that could due to the economic trajectory in the United States on the world . Terms of the recent move in the markets, our strategy thisare basically reading is a mock run up and then there is a correction. We are not advocating [indiscernible] but what exactly do we have in our forecast . We are not making any assumption on the Political Party position. Thate making an assumption the economic expansion will continue into 2021. Whichever party, there is an unlikely mist that we will see [indiscernible] investors would care about the outcome. We dont think there will be fiscal tightening so thats where we are now in terms of assuming the political forecast. Guess the delta in terms of the numbers on the polling that may have caused some people to react. Thanks very much indeed. This is bloomberg. Alix its time for the bloombg business flash. Forces withoining shop a fight to expand its thirdparty marketplace site. They plan to add 1200 shop a opify sites. Shares of bankrupt Car Rental Company hertz as they announced an agreement with jeffries before the bell to sell up to 500 million of stock. The shares have gained more than 400 on from its low on may 21. Investors were betting on a potential rebound and travel. Hearst warns the investors they are all but certain to be wiped out. There is a Strong Demand away from the home market and the discount carrier tells bloomberg the British Government is standing in the way of many wouldbe flyers. We see there is a good demand coming in outside the u. K. I think the demand is dampened by the quarantine that the u. K. Government has put in place last week. Be replacedhat will by Something Else and we will see things picking up and pricing levels to be relatively normal. Arriving on easyjet are subject to a 14 day quarantine. Alix thank you. The markets are well off the lows of the session for the s p but as we reopen especially here in the u. S. And you have threats of pockets of lockdown and how you handle the 28 volatility in the market and we are very close and the twoway volatility in the market. There is a lot of pressure building. Waiting for the fed. Lets see what jay powell says. Maybe he will talk about shock and all continuing at the central bank. The market is rotating out of some of the bestperforming names youve ever noticed. The typical trade is continuing to unwind in the market internals, we come back a little bit but not fantastically positive. In europe. Closed we will be back in a moment. This is bloomberg. Save hundreds on your wireless bill without even leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, youll only have to pay for the data you need starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. Its the most reliable wireless network. And it could save you hundreds. Xfinity mobile. 30 seconds until the end of regular 30 seconds until the enf regular trading. Basically we climb back ever since. There was little bit of a downdraft as the u. S. Markets. We have come back since then. To be honest the stoxx 600 is basically flat. Certainly relative to where it was in the back end of last week , where we did see volume picking up. The other thing is that volatility is coming down. It is basically round tripping to where we were midday friday. Spiking wednesday, thursday, friday. Await theres been a bit of weight added to the ftse 100. Muted session. A pretty sordid session. We did cap lower. The ftse 100 does have the banks and the oil stocks weighing on it money rotating back in to some of the names. We have not seen the same kind of retail performance story in the United States. To some of the names. It speaks to the fact that maybe the market is little bit more nervous. Judging by that rotation, which is worth paying attention to. , which is worth paying attention to. I made a mistake. Autos are up. 7 . Basic resources down on retail and auto. Food and beverages not doing that well. A much more mixed up story we are getting. That market does not feel as gung ho as it did this time last week. The single some of stock names we are the single stock names we are watching, lets take a look at what is going on. We have been watching bp today. The story out of bp is one we have not fully understood and i think there is Balance Sheet stress the market is trying to calculate if we are going to be seeing a downgrade on assets. Presumably that will put the Balance Sheet stress. Ep down to 2. 75 . Easyjet down 4. 89 . There isthere is a wider travel downgrade today. That is probably affecting lvmh as well, which is down 1. 9 . In terms of some of the corporate stories we are watching, on a more granular we are watching what is happening in the vaccine business. Germany announced it is going to invest a chunk of money and buy in a Biotech Company. Developing aeen vaccine for coronavirus. It is an rna vaccine. The company also claims it plans to go for an ipo on the nasdaq in july. There has been u. S. Interest in the company, which the German Economy minister had this to say. Germany is not for sale. We are not selling the family silver. Im a strong supporter of the Global Market economy and of the opinion we need to be a very open country. This is also with regard to investment. And what is needed worldwide in other countries. There are certain areas where our position needs to be strict. That was the german economic minister earlier on. The curevac ceo joins us now on the line. Thank you for joining us. Is German Government the German Government investing in your company a good thing and company a good thing and what advantage does it bring . Good morning, everybody. Thanks for the time of the questions. It is a good thing to have access to more liquidity if any Biotech Company is looking for custom financing. Having a stable longterm shareholder is important to us, and importantly we keep our entrepreneurial governance moving forward. Alix doesnt mean you have to give the vaccine first germany does it mean you have to give the vaccine first to germany . There are no strings attached. This is an Equity Investment where the German Government is buying shares in the company. Every shareholder has voting rights. That is it, basically. Guy how did the conversation start . Did they come to you or did you go to them . There was quite a lot of consternation around the fact that the americans were interested and there may have been a conversation with the white house. How did the process unfold that berlin ends up taking a stake in your company . It is difficult for me to tie a ruler between the situation that took place a month ago and a situation now. Any Health Care Company is close to the regulatory authorities in terms of Clinical Trials or the political authorities. We have been constantly speaking with the different arms of the government over the years and a little bit more so recently in the covid situation. Alix i think the reason we are bringing this up is because there has been a lot of conflict between countries where the Biotech Companies need funding for the vaccine. Look at what happened between france and the u. S. How do you avoid that . How do you avoid the politicalization of the vaccine . Is a good question. We all are running forward to running forward to try to provide vaccine to everybody in the world and we have multiple companies doing that. That is a great thing. Here we are just talking about an Equity Investment into our company which has a platform, a , apany which can do company which can do vaccines, or other therapies. The German Government investment says fear is a Disruptive Technology and wants to make sure the company has the means to reach its goal. It is somewhat disconnected to covid. Messenger rna we do not have a messenger rna vaccine. It has been incredibly tough to get regulatory clearance for a messenger rna vaccine. How much progress are you making . My understanding is you have not started Clinical Trials yet. Can you give me an update in terms of the science as to your expectation of how the messenger rna route is going. Every Company Takes its own trajectory. Weve been working on vaccines weve been working on vaccines for more than 10 years. We have data across a wide array of different vaccine indications. We have decided on the covid identifyingocus on the optimized messenger rna construct that would be the most potent, the immune response, and also the easiest to manufacture. By doing that we hope we have a where you havee where more shots available for subjects. This is the path we are taking. With,k more time to start and hopefully we will come out with a more potent vaccine as we move forward. The plan is to go into the clinic. The news came out you are going to be listing maybe a nasdaq ipo in july. I want to get a sense of how much liquidity you need to make this happen . I am surprised by the comment because i do not think we have ever said we were listing on the nasdaq in july. It is difficult for me to comment. Alix fair. The followup is how much more money do you need . How is the liquidity situation . First we have a big investment from the German Government. We are constantly looking out for diligent or nondiligent financing to move forward. Is likely there is additional financing coming on top of the recent money coming in the company to push the drug and intoical trial larger chemical trials were you need tenant thousand or 20,000 patient we need 10,000 or 20,000 patients. Guy to follow up. There is a report you are planning a nasdaq ipo. Is that wrong . Were you planning an ipo . Has the arrival of the german money dissuaded you . I am curious of the timing of all of this. Has a nasdaq ipo ever been discussed . Youre looking at it in july, is it a historical legacy that predates berlin . Pierre larger Biotech Companies need access to capital, so going public is always part of the history. We certainly have been considering this path. At this stage we have sufficient capital coming in to decide either way. Alix at bay. Ok. L be reading the well be reading the tea leaves into that one. Carevac ceo. We want to get an update on what is making headlines outside the business world. Ritika Supreme Court justices ruled workers not be fired simply because they are gay or transgender. , the court says workers are protected from job discrimination. Justices dealt a blow to a moscow court found a former u. S. Marine guilty of spying and sentenced him to 16 years in prison according to his family. He said he was innocent and was set up iraq and Security Officer who owes him money. Moscow says he was caught redhanded with a computer flash drive containing classified information. In atlanta, prosecutors will decide whether to bring charges against the Police Officer who. Hot and killed a black man the killing outside of a wednesdays lead to a new wave of protests for police brutality. The official orders as brooks died from two gunshot wounds to the back. British Prime Minister Boris Johnson is encouraging consumers to shop with confidence. Stores reopen in england and johnson says the coronavirus restrictions requiring people to say six feet apart could be relaxed. 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. Well bring you that live and in full on dab Digital Radio and the london area and around the world on all of your bloomberg devices. This is bloomberg. I am live from new york, alix steel with guy johnson in london. The recent protests across major cities in the u. S. And the coronavirus pandemic have shown a light on longstanding issues of inequality within the u. S. Dallas fed president robert face theoke to cbs nation on quantifying the cost of racism. Robert a more inclusive economy where everyone has opportunity will mean faster workforce growth, faster productivity growth, and we will grow faster. Alix joining as is vallely , then Valerie Wilson Economic Policy director on the issue of race, ethnicity, and Economic Policy. That statement would come as no surprise for the work you have done detailing the economic results of social inequality. How do we fix it . Valerie i think there is a lot we can do to fix it. It starts by knowledge think Racial Disparities are persistent and large and solvable. These disparities are longstanding vestiges of years of policy in this country that disadvantage black workers and other workers of color while providing an economic advantage to white workers and white americans. In order to undo these things, it is a matter of acknowledging these differences are there, and having an open eye towards how policy improved or worsens those disparities. It strikes me that this comes down to one thing, and that is education. Degree of have a education that allows everybody to participate in the workforce equally. Getting there will require a multitude of factors. How do we make sure, how do we make sure everybody gets access to college . We need to have Free College Tuition . How do we make sure that it kindergarten we do not see children falling behind . How do we make sure the Education System works to solve this problem and is that ultimately what it comes down to . Valerie i would disagree that is ultimately what it comes down to. I think that is an important part of it. I disagree because i know that over the last 40 or 50 years, Educational Attainment as increased significantly among all groups in this country. What we tend to see is less our these persistent economic disparities. Thinking about how our policies influence this, we have to acknowledge no policy is race neutral. Invest in Early Childhood education to make sure all children who attend school expect the kind of resources that would give them the best education. We also need to knowledge and understand the fact that even at every level of education, when you look at labor market statistics, we see a 21 black white unemployment disparity. We see a sizable wage gap at every level of education. Education does not resolve the Racial Disparities we see. Mandates ares full employment and inflation. You have a great chart i wanted to highlight talking about the blackandwhite wage gap and how that gap persists, whether you are in the lower, the medium, or the higher end income, no matter what your education level actually is. It seems to me for the fed to get to that full employment again and actual inflation, we need wage growth coming from the portion of the population. How does that happen . Valerie part of the feds policy to maximize employment is one way of doing that. Decisions about when to raise the federal funds rate should be data driven and based on more than just a single measure, but should have an eye towards what the labor market is doing and how different groups in this economy are faring, as well as keep an eye on wage growth. Think the decision about when to increase the federal funds rate needs to take into account whether wages are rising significantly, in addition to keeping an ion unemployment across different communities. Not just a single number. Guy what is your view on quantitative easing . What impact does that have . Valerie that is one of the tools the fed has at its disposal to influence the economic recovery, to influence Economic Growth, particularly in the current situation, to stimulate growth and recovery. When we are talking about addressing Racial Disparities, i think full employment is a major priority as far as the fed responsibilities are concerned. Passed requires congress fiscal policies that help to get it narrowing those gaps beyond the fed. Alix i am glad you mentioned that because it is a two schools of thought. One says fed policies are exacerbating social inequality. The other school is saying fiscal policy and u. S. Policy is so bad the fed has to make these decisions in order to fix it, which is making things even worse. Can you give me insight into what you see . Valerie i think it is incredibly important that both fiscal policy and Monetary Policy Work Together for the aim of making this economy as strong as it can be for as many people that need tory experience Economic Growth and economic recovery. I would say from the last recession and moving into recovery initially, the number of maces taken with the recovery the number of measures taken with recovery act on the fiscal side were important, but i would say the fed Monetary Policy went much further and that continues to hold Interest Rates at historic lows. That was a significant contributor to historic low rates of unemployment and for what was the longest economic expansion on record. Guy thanks for joining us. If there is an important subject right now that Everybody Needs to focus on, this is it. Valerie wilson of the Economic Policy institute, thank you very much for your time. We appreciate it. Valerie thank you. Guy this is bloomberg. Guy welcome back. What does the rest of the week look like . Issue, thes the big bank of england, and witching friday. Those are the three things i would pull out. Guy alix lots of options will be expiring, so what that means on the retail level. We are heading out of the second quarter, so you will have to have positions wearing from both if you do not take advantage of the recent squaring we had into value. How that plays out will be interesting. Guy the bank of england will be fascinating. The bank is under real pressure bad more to its qe program . Is qe the right solution . I suspect it does not want to go into negative rates, but i think that discussion will be on the table. It will be fascinating to find out where the bank sits on this. There is a review of the zero bound currently underway. Is it prepared to go under it . We will find out. The biggest events of this week i think is jay powell. Alix agreed. That wraps it up for guy and myself in the u. S. Balance of power with david westin is coming up. He will speak to the ceo of one of the largest hospitals in the world, dr. Steven corwin of new york presbyterian. Happy monday. This is bloomberg. David from new york to our tv and radio audiences worldwide, this is balance of power where the world of politics meets the world of business. We start with the markets. Scarlet fu is joining us to take us through the markets. Markets are down but not as bad as they were at one point. we opened lower because there was a lot of carryover of weakness from europe and asia. We have seen cases in recent florida, texas, california, as well as arizona. A new outbreak in beijing at a time data shows things are improving, but not to the extent we will get a vshaped recovery. Gina martin adams of Bloomberg Intelligence says we have a new equity market regime where any index move higher dependent on economic and earnings and leadership is shifting defensively. You see this with the
comparemela.com © 2020. All Rights Reserved.