How oil fits into the microeconomics of this great contraction. It is remarkable, francine, to see how the markets churn yesterday after you and i were justen we saw the fed simply come to the rescue. There is no other way to put it. Francine and the markets keep saying dont fight the fed. That was a Good Opportunity for market participants. Expecting a 60 figure, better than expected. Bloomberg first word news in new york city. Here is ritika gupta. Ritika good morning. President trump is weighing an infrastructure proposal worth nearly a trillion dollars to spur the u. S. Economy, according to bloomberg sources. The plan would reserve most of the cash for traditional work such as roads and bridges, what funds would also go to 5g wireless and broadband. Existing funding is up for renewal at the end of september. It is one of the largest of occasions north korea has made to south korea in years. Grownnguns regime has that blown up an entry Korean Liaison Office on the side of its border. In recent weeks north korea has issued an escalating series of threats against the south. He is unhappy that south korea backs the u. S. Led sanctions campaign. Fed chairman Jerome Powell is expected to give another downbeat view of the u. S. Economy today. He begins two days of hearings on capitol hill with an appearance before the Senate Banking committee, at 10 00 a. M. New york time last week rates were held near zero. And they will stay there until 2022. The u. K. At European Union believe they are a step closer to a brexit deal. They say a video call between Boris Johnson and the e. U. Leadership has injected momentum into deadlocked negotiations. The you inferred johnson is willing to soften his position. European officials said they are willing to do the same. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, ritika gupta. This is bloomberg. Francine . Tom . Tom thank you so much. We are going to look at equities, bonds, currencies, commodities. I will let francine quote on brent, nudging just above 30 a barrel. We have moved 10 big figures in the vix from the gloom of about 24 hours ago. 34, even with4 to a 33 handle right now. That is extraordinary. 426,000, just a remarkable equity turnaround and riskon the cross other data points as well. Francine overall stocks are advancing. I am looking at the american stimulus, and it is reviving investor sentiment. Also in europe i am looking at the dollar weakening against almost all of its major peers. There is hope that a deal could be reached in july. I also wanted to show you the price of oil. I put it in my latest data check but i will send it again. Oil will not fully recover until 2022, according to the iea. That is a significant headline. What we found out today from the International Energy agency, it warns that fuel usage will remain 2. 5 lower next year than in 2019 due to the dire situation of the aviation sector. We are delighted to be joined by fatty be role, the by fatih birol. We are all with our we already seeing global oil indices starting to drop . Gettinge seeing demand stronger. Wasess weaker than it before. Mainly driven by china. Chinas oil demand come as we , is basically equal to what they had before the crisis. Are gettingountries out of the lockdown, and what we are seeing is demand is getting stronger, and if you put aviation aside for moment, we believe that mid next year, equal oil demand will be to what we had before the crisis. Aviation put aside. Is a different context. Consumption is about 7 of the total oil consumption. There are two uncertainties here. The economic rebounds and also there will be a second wave of coronavirus or not, but in the absence of the second wave, with a decent economic rebound, we aside,l see aviation put 2021 come in mid next year, oil demand comes to the same level as it was before the crisis. Francine i was going to ask you, how dependent is that on Economic Activity not being stocks because of a second wave . Is there worry that your forecast could change quite quickly . Can change. It two things can change our focus very quickly. Economic rebound as foreseen by all the major Financial Institutions. If it does not take place. The second thing, if there is a second wave of coronavirus globally, a major one. This puts of course demand rebound numbers in question, but of course it is out of our with the coronavirus wave. We hope not. But one thing is clear. Demand is coming back. A strong rebound. 2021, well see next year, our focus shows that next year Global Oil Demand may increase 5. 7 Million Barrels per day, which could be the largest increase in recorded oil history. In Million Barrels per day 2021. Tom good morning from new york. This is tom keene. Could you give us an update . You are one of the most wired people i know in the global oil market. Could you give us an update on the tensions between saudi arabia and russia . Countries are the doing a good job in terms of bringing the opecplus countries saudier, especially leading a group. Pushing fortime, additional cuts, rebalancing the markets. But this is all the credit is to opec plus. They are doing a good job, led by saudi arabia and russia and others, but also other states, canada, those countries also had to rebalance the markets. The opecplus agreement, very important. U. S. Canada, very important. But also rebound off the demand is very important. All three together are leading to a rebalancing of the oil market as we see now. What would you predict price will do, given the demand elasticity that you describe . I dont want to quote to the pennies, but give me a sense of what oil does from 40. Higher, lower . I have no idea. There are so many uncertainties, but if the is expectedunds, it by all the Financial Institutions if there is no second wave of coronavirus, i would expect the oil crisis remain at these levels, giving a the shaleven some of producers in the united states. Others, we give a lifeline to several shale producers in the united states. Francine thank you so much for joining us today, thought to be role, the iea director. We talk next about the markets, about covid19. This is bloomberg. Francine this is bloomberg surveillance. Onures firmly higher today infrastructure plans helping to boost sentiment. Despite the latest optimism, investors are bracing for more volatility, the emerging of a possible second virus outbreak. Joining us now, and richards, richards,ways anne who has always made us smarter. When you look at the potential for a vshaped recovery, how difficult is it to gauge it right now, given the possibility of a second wave . What kind of recovery do you respect the world to go through . To 2008, 2u go back thousand nine, the financial crisis, what you had was unconventional Monetary Policy and conventional fiscal policy. We knew that meant a long, slow recovery. What we are looking at today is unconventional Monetary Policy again, but you might argue unconventional fiscal policy and we have this Government Intervention from many countries around the world, which effectively is buying us time, trying to make this quarter of Economic Activity go away in the back on, and it is a big gamble, like unconventional Monetary Policy was back in the financial crisis. I think it is way too early to say that fiscal intervention is enough to generate a rapid vshaped bounceback. That is a bold statement and it has certainly helped a lot, but it is too early to expect we can be confident about a vshaped recovery. Francine this is because we dont know what kind of damage or scarring the covid19 crisis will due to the economy, or because there is a high probability of a second wave . Anne i think actually a second ina secondary effect the first instance, we just dont know. Governments around the world are still paying so many peoples salaries. It is quite hard to see what the underlying economic damage to employers has been. We dont even know the results of the first order effect. Clearly if there is a second wave and we go back into another lockdown situation, that could be a double whammy on top of that. It is not even the second wave risk that makes me less confident about a sharp vshaped recovery, it is more we just have not seen the impact of the first set of economic damage that we have just been through . That is really where i would put this answer. We dont know what the recovery from that will look and feel like . Tom i have been dying to talk to you. I loved your splash at the ft a few days ago. Engineer for us the mathematics of an Emergency Action by the fed to buy corporate bonds. 500 is aard poors correction or so away from record valentines day highs. The philadelphia the fill their lady the Fidelity Bond fund where is the emergency for the fed where they have to go out and compete with you to buy bonds this morning . This it comes back to unconventional world that we are in. We have seen buying equities and etfs, we are seeing by direct corporate bonds, just like government paying wages for individuals, this is all about buying time so that the very deep trough of the v or whatever shape you think the economy is going to be, effectively smooths out. Because bonds ultimately going into the fold, no amount of bond buying is going to help in the long run. The question is, is it enough to smooth over the liquidity crisis . Which means you evolve which means you avoid the solvency crisis and the like. Bondve talked before about markets and qe turning it into a micro issue, not a macro issue. You mentioned that earlier today. I think everything is becoming microeconomics. ,t is about demand and supply buying a lot of stuff, that is where we are. Richards, what she said there, folks, is critical, where you shift from a macro analysis to a microanalysis of supply and demand. Thatrichards, ring microanalysis bring that microanalysis to the equity markets. There is retail, a frenzy, there is the unlocked small and midcap, and then there is the microeconomics of our lovefest with 12 different stocks. Youve ever seen anything like this before . An intenset is like a concentration of all the trends that we have been seeing growth over the last 20 years. The market, Public Markets have been shrunk relative to the total equity. So we are seeing a lot of companies in distress, but that distress being smooth over by government activity. I think the shakedown and the need for fresh capital into the equity market is just the beginning of that. We are not even halfway through that. Equity markets undoubtedly are supported primarily by the confidence injection by that by the time that i mentioned that by that biding time that i mentioned by the Central Banks. That are some companies have done extraordinarily well as a result of the pandemic. Francine what does it mean for equity markets Going Forward . Times, do we do a correction at some point given all these factors . To predicte trying the absolute direction of markets because as we all know, so much hinges just on the level of confidence that the fed and Central Banks choose to give us by their huge buying programs. Betnst the fed, you dont against the fed. We all know that. I think the degree of subjectivity you need in individual stocks and sectors is huge now, because businesses in the same industry with different Balance Sheets can have a very different set of problems than they are facing right now. Industries appear to be in a growth phase, which appears to be relatively immune to economic downturn. Business models are completely thrown up in the air. You have to be really selective and Balance Sheet and cash flow are key requirements. Tom we have a really extraordinary show for you this morning, folks. Youre listening to Anne Richards of fidelity international. Have an we just conversation with wonderful academics. Be with us. Ill and Kenneth Rogoff. That is a good morning of this is bloomberg. That is a good morning of bloomberg surveillance. Good morning. Ritika this is bloomberg surveillance. Lets get the Bloomberg Business flash. The secondbiggest tmobile shareholder says it is considering the sale of its stake. Softbank says it may sell some shares through a private placement or public offering. Record losses in its investment business. Last month bloomberg learned they would sell 20 billion of its tmobile stocks. Emergencyfice of financing for Virgin Atlantic airways. Bloomberg learned that kempner is now competing with a planned alliance of rival hedge funds and u. K. Investment fund. They will wait to see if the British Government will provide guarantees of a rescue package with hundreds of millions of dollars. It was a tough couple of months of ray dalio, the founder Bridgewater Associates seeing a 15 drop in assets under management during march and april because of heavy losses at the flagships trading strategy. That is the Bloomberg Business flash. Tom . Francine . With stocks are up stocks in europe are up, u. S. Equities are also gaining after looking at corporate desk risks debt risk following the most in two months. The pound climbing as much as 0. 7 after this positive talk around the frexit negotiation seems to have renewed hope that the deal can be reached by july. Tom now the data check has to do with a better equity market, no question about that. Citigroup increased apple price target to 400 a share. Wow is a while a statistic. Stay with us. With Anne Richards of fidelity international, this is bloomberg. Tom for the best in conversation, bloomberg surveillance from london. Later today, after our powell,tions, chairman a queuing day a with the senate. Tomorrow, a q and a with the house. Chairman will avoid being as grim as the tone was in the press conference. Scott Kenneth Rogoff with us. Richards is with us of fidelity international. She has a fabulous acuity about Investment Management and the trends we see in finance. I want to talk to you about the quiet thing out there, it is witnessed in the flatline at the zero bound out two year. Oil demand out two years will suffer. People like you have to recalibrate what we are going to return long term. Are you working at fidelity with an actuary return . What you are going to see is a wide dispersion of returns. We know in this environment, who can predict anything . I am not going to pretend to have the crystal ball. What we are seeing is a greater disparity with among those whove got the cash flow, the Balance Sheets, and those who do not. It is time to bring that to real life. At Insurance Company Balance Sheets right now and you proportion of higheryielding assets that will be on it because of the way the ounting allows them to get high yield equity, for example. The same action has a direct impact on how robust that the bond sheet looks. There is an awful lot on certain sectors within those sectors which makes it tom ok, it is a stock pickers market. I want to go back to longterm responsibilities of investment houses like your work with m and g years ago. Had a california bombshell where we decided we are were going to leverage up 20 to pay retirees. That is not in any of the textbooks . Anne it is not. Some of your other guests this and humbleonomists practitioners like me will have a good insight into the complexity of that. We already knew territory and there is a strong argument that and you can borrow long at practically zero interest rates, you can get a lot of productive capacity out of that. It depends what you put that into. Of thes back to the use s much is the single act of borrowing which will determine returns. Consumptionw how models will be affected by what we have come through. Until we know what job recreation is after this, it is difficult to see how the consumer is going to respond and how the consumer response is going to have a huge impact on where previously on whether previously viable Business Models are still viable. Are viable, then you have the chance to generate liquid returns. Francine talk to me about dividend cuts and how it impacts investor decisionmaking. Cuts thend signaling around dividend cuts is one of the most challenging things. Dividends have been a large proportion of social returned over the years. Ability to reinvest those dividends. Quite a lot of signaling from companies where they have cut dividends but in the recognition that it is not one and done, there is an expectation that has the broader economic picture normalizes we would turn to some level of dividend growth. Feeling that not all dividend cuts or permanent, but some will be. That comes back to looking at the resilience of the Balance Sheets, the cash that has been raised through equity, the underlying clash flow. Underlying cash flow. As we pulled out together into a portfolio, make sure we are selling our investors products and our investors are buying. Income being paid out through income true income or is there an element of Capital Distribution . When you look at are you sure you understand what you were buying . It is not an easy scenario here. Francine has active management shown is value during the crisis . Anne it has. Generalities are difficult. Of fundseen the types that have a stronger edge to them. With an esgr, funds tilt to the rating unquestionably outperformed on the equity side and interestingly on the debt side. There is a short time period to look at that in. That has been supported by data from other types of index providers. It shows you that active management done the right way can add value. Individual types of mandates you have. A net this year. It is an interesting picture. Francine thank you so much. Aboutl talk a little more esgs. President trump will sign an executive order on police conduct. The nationwide protests over george floyd at the hands of police. The order will urge police to adopt stricter use of force policies. There will be more federal grants for departments that curb the use of chokehold. The Federal Reserve is stepping up its emergency Lending Program. It will now begin buying individual corporate bonds. The fed has only bought Exchange Traded funds. Bonds. Buying begins today. A new coronavirus outbreak shouldnt lead it should lead to another lockdown. Beijing closed another food market after a case linked to the original was discovered. Invard has joined its peers a major shift in college admissions. It wont require standardized testing for classes that begin fall 2021 because coronavirus has restricted access to sat and act. Harvard says the change is temporary. 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. Richter cooper cooper. Tom i appreciate it. Up, david westin and a conversation firm conversation with rick scott. Stay with us. Francine this is bloomberg surveilence. We are having a conversation on investing with and richards. If you look at the social unrest change anw does it investors view on how they look at companies . With a change the way you look at a company in terms of diversity . Anne it is not easy. You look at the journey of the sg investing, particularly the snd g. We looked at it through a simple lens of gender which is relatively straightforward to gather data on although it did take heavy lifting. Diversity inund terms of culture or ethnicity have always been a tough one to get to the bottom of because of data is less clearcut. The conversations around Cultural Diversity or Ethnic Diversity within companies is not entirely new but has been brought into focus by the terrible events we have witnessed live over the last few weeks. Has brought those conversations into focus. It requires management to reach out and different difficult questions. Ourselves to take this to the next level. General, are we going to see a lot of esg investing, or more appetite for esg given the prices we have move us further away from goals because people are worried about the impact the crisis has . Anne there is tension in both directions. Because you have seen better thes at esg stocks, one of reasons has to do with the resilience of the supply chain and Business Models. It has given impetus to the fact tot esg is quite intrinsic underlying Business Models. Boards are able to take that more seriously and to really have an example of what a Sustainable Business model means which is at the heart of the whole esg movement. It is about finding and building sustainable Business Models. There is a whole bunch of Different Things that go into that. I think that we will win out. Initiatives that cost money, but we have been given a unique opportunity to recraft our economic what an successful economic Model Looks Like as we move from just in time to just in case. I think esg absolutely plays into the heart of that and those conversations can help companies build more sustainable Business Models which ultimately will lead to higher returns. That is the winwin. Were is a fighting chance can make our own reality. Richards, have you seen demonstrable investment in esg . We have had these huge swings in the market. Do you observe that esg stocks have done better . Anne yes. We undertook a Big Initiative effectivelyen we went to rate our entire Investment Universe which was 4000 plus stocks. Set, using the same analysts that perform financial analysis, but looking at the esg criteria. We have a clear linkage between the stocks we have seen perform better on esg will perform better in the future and the financial metrics. We have got that data set in a short time period. The fact that we have those statements and companies have been through a new experience, they are looking to find ways they dont do that again. Particularly if there is a second wave. We have got to the beginnings of that which is a proponent how to build better. Francine so much. K you fidelity international, you are generous with your time. Toentioned citigroup going 400 price target on apple. His will give the stock pause these are two separate investigations involving apple pay and app store rules. What, europe going after are associated with american tech companies. This is bloomberg. Anies. This is bloomberg. This is bloomberg surveilence. Theres a bit of renewed optimism on a deal with the eu after a video call, brenda joe discussed the chances of an agreement Prime Minister Boris Johnson discussed the chances of an agreement. The tone,call changed but what concessions is each side ready to given give . That is unclear. There are gaps in three big areas, one is whether the u. K. Has to follow the rules Going Forward, have the overarching framework will be organized, and withhappens on this stage the eu is seeking and effectively status quo type relationship. It is hard to see what the compromise on those areas will be. The biggest is going to be the [indiscernible] Boris Johnson also suggested by the end of july. I think this is probably going to run down to the wire. Remember that boris is trying to issue a trade agreement in one of the largest markets in the world. Are skeptical a deal can be francine i dont know whether covid it changes anything for Boris Johnson, he is pretty unpopular. He has lost a lot of popularity when you look at the polls. Does that make him more likely to try to and strike a deal . Remarkable [indiscernible] a willingness to extend the transitional period. It has actually softened the governments position. They committed friday that they are not going to extend the transition, but also it has reinforced the case for no deal. The government wants to intervene massively in the u. K. Economy Going Forward. Corbyn, not Boris Johnson effectively thinking about the theref government and is a worry in the government about the eu being a constraint on their ability to do that, actually increase the argument in cabinets to support new deal. It is shocking how things have changed. So, ine last 12 weeks or terms of this great titanic ballet. What is the coalescence in brussels . What is the organization in brussels given the shocks to the european continent as they speak across the north sea . Great question. Has basically gone into a again where it is primarily focused on an eight an internal cohesion. The single biggest question the eu has been a grappling with over the course of three months has been the collective economic response to the pandemic. Ecb,ve seen action by the at the national level, but there are many countries that are highly indebted that dont have the resources to support their economies through this crisis. Germanyquestion is, is ready to move and can they do something collectively to reinforce the structure . They have delivered on that. Created a vehicle that would allow the commission to borrow up to 750 billion and lend to countries in need. It is less about a trade negotiation. So, lets cut to the chase. It is simple. Is europe does europe procrastinate and kick the can down the road, or they say ok boris, let us get this done . [indiscernible] you think about what is happening with china and the degree of centralization you are seeing there. Putting, this is not a friendly world. That has long been their argument in a universe like this, europe needs to be clear about who its friends and who its enemies are. What they cannot do, and i do not think they will do, is a greed to a deal that ultimately allows u. K. Concerns to undercut european manufacturing. Able to accesse the Single Market, trade on the Single Market in a way that gives it a competitive advantage because it is not following the eu rules and regulations in the same with the french and germans have to. I do think they want an agreement before the geopolitics, but that cannot come at the expense of the Single Market. That is the balancing act europeans are going to try to walk that tight rope. Tom thank you so much. Greatly appreciated. Folks, weia group havent looked at brexit in ages, it was great to get an update from someone as distant as i am. Not only will ken rogoff be with thrilled to bring you adam tooze. He is one of our most transient thinkers about this moment, and indeed the political economy. Adam tooze will join us. 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. Tom this morning, what is the emergency that requires an emergency Lending Program from the fed . 500, a correction below valentines day peak. Maybe they will start buying amazon bonds. Young, there is an infrastructure emergency in america. Here, onelion trillion they are, that is a lot of bridges to rebuild. It must be an election year. Anxiety returns to beijing, it has never left brazil. Me in take two and call the morning, it is no longer reasonable to believe a malaria drug can cure this horrific virus. Good morning, this is bloomberg this is bloomberg surveilence. In mostancing entrance a most interesting tuesday
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