Confusion as to what the boe is doing. Are they dovish or hawkish . Cannot tell. Guy, we will be speaking to the iea executive director and also at Columbia University visiting professor and former citi chief economist. Guy also formally of the bank of england. We will just what exactly we have been learning from the bank of england. A lot to digest and hard to fathom. Hour we last half an have seen news from the press briefing. A teleconference briefing with reporters after the policy decision. He did not discuss negative rates, and did not discuss neil yield control. But there will be some degree of flexibility with the pace of qe, which looks like it is going to slow down. Economist joins us to give us his take. What we got from the bank today seems to be slightly hawkish inasmuch as the chief economist is dissenting, saying that he feels the economy is picking up faster than anticipated, and he did not see the need for extra qe, in the rate of qe will be blowing down. Am i right to be painting this as more hawkish than anticipated . You are not far off. I would probably describe it as less dovish than people anticipated. Hasrly the bank of england was policy. What is interesting is how the bank has shifted from pleasure of last resort liquidity management function preventative financial crisis, which it seems to have done in the last two months to more of a face for demand management is trying to boost inflation. The bank doesnt need to do as much so quickly. We had all of those big bazookas back in march slashing Interest Rates from huge amounts of quantitative easing. Now they are giving quantitative easing going at a slower pace. You try to save up financial crises and you go fast. Save up for financial crises and you go big and go fast. Alix breaking news the Supreme Court stopping President Trump from canceling president obamas daca program. It is the u. S. Immigration policy that some people who shouldnt be in the united the country asto children to receive some benefits, etc. A huge deal for immigration policy. Two times this week the Supreme Court has blocked initiatives by president that would have been seen as more conservative, and the courts conservativewinning. The fact that you have thisconservativeleaning. The fact that you have this year as well as the lgbtq not being able to be fired from any job, both of those on the leftist agenda, positive, confusing because the court is still conservative. Dacall get into these headlines throughout the show. Guy we have got a great just coming up who we will talk more about that with in the next block. A huge story. Lets carry out the conversation for now on what is happening with the bank of england. We are still with paul dales, Capital Economics chief u. K. Economist. Less dovish, that is how you describe the announcement. Lets talk about how the policy is likely to go. There is growing expectation that the bank is going to consider negative rates or could consider some sort of funding that would reduce rates for banks but not the overall Headline Bank rate. Given the kind of less dovish tilth we now have, do you think the bank will go in any of those directions . Paul i think it is certainly possible, and i were not ruling out happening in six months or a year or two years time, depending on where the economy is after that point. It is quite clear that the bank of england does not seem to be signaling it is going down those routes anytime soon. Instead, it is comfortable with using quantitative easing or by more acids as it assets as its goto policy option. The bank has signaled it thinks it has done enough. When it comes to economics, we think it will have to do more, but we think over the course of the next year or 18 months it will increase quantitative easing by a further 250 billion pounds. That is much more than the market is currently expected, and his by the less dovish signals coming out today. Alix i guess what i dont understand is why today come across as more positive than we would have thought. We have seen this before from the boe. What are the data points everyone is looking at that has ever runeveryone so confused . Paul the issue here is that we have not had much official data on how Economic Activity has recovered when the lockdown starts to be eased in the middle of may. This friday we get the first week on official retail sales. But the bank is looking at other measures that have shown that the economy did improve in may and probably has improved further in june. That suggests that the scenario where the low point was perhaps being made might have been a bit too bearish. Ishink what is really key the bank feels like it has done its job on preventing a financial crisis and it is moving to thinking about how we support the economy further out. That means you dont think you you dont need to do as much policy action as quickly. We are going into a phase where the policy will be changed much more slowly and in smaller magnitudes over the next year or so. Guy are you surprised that and he decided to vote against more qe now . Andy has a reputation for being slightly more in the weeds when it comes to the Realtime Data we are seeing out of the economy. Do you think he is seeing something that other members are not . Paul i was a little bit surprised, yes because we listen to pretty much every communication, every speech, every webcast that the bank of england and its members do. Pickedhe may reports, i a very strong signal he has been increasingly concerned about permanent scarring on the economy from this crisis, by which i mean the potential that the Unemployment Rate could rise and stay higher for longer. I had the impression that he was getting more concerned. But it does seem like the signs that the economy has picked a little bit in may and june has eased his concerns, and that seems to be a recent change in the last week or two. It was a little bit of a surprise, actually. But i still think underneath it all, we have Seven Members who are very happy to extend quantitative easing and that is a majority, and it remains to be seen whether indeed the economy does pick up and improve as much as he seems to be hoping for. Alix Andrew Bailey said in that closeddoor press q a that negative rates not being used as a tool for active policy discussion, etc. Guy mentioned that earlier. When you hire on brexit, the Economic Data that has been truly terrible, plus the uncertainty over the virus on a macro level, how can they take negative rates off the table at this point . Paul well, i think you are right to point out the one thing that stands the u. K. Out from every other country at the moment, the brexit issue. Economy the world is going to be recovering from a coronavirus crash. The problem with the uks that brexit, whatever happens, is going to be an extra handbrake on the recovery. Recover economy the u. K. Economy recovers lower from the brexit coming crash than the rest and china but maybe other countries that were hit just as hard, and that is because of uncertainties related to brexit. In terms of what policy action is required, the bank of england is very comfortable with qe. He knows how it operates Company Knows how effective it is when you get into negative interest it the Bank Inspector would mean that the banks dont lend. They contract credit, the exact opposite of what you want. It is really tricky to work out how effective negative Interest Rates are going to be. I feel that the message the bank is sending is that we have plenty of policy ammunition with qe if we want to use it so we dont need to resort to negative Interest Rates right now. Line, ifsaid, down the you need to do more, that is when you consider your alternative or less different actions. Alix thanks so much. I appreciate you joining us. Paul dales, Capital Economics chief u. K. Economist. Want to get back to the breaking, the Supreme Court stopping President Trump from canceling president obamas daca program. It protects dreamers, those brought into the u. S. May be legally as kids but have committed no criminal offense and have completed high school and can apply every two years to stay in the u. S. President trump trying to block that and Supreme Court has tried to block President Trumps attempts to do so. We will break that down with a senior policy analyst coming up next. This is bloomberg. Ritika lets check in on first word news. Im ritika gupta. The Supreme Court has stopped President Trump from ending a program that shields undocumented immigrants from deportation. The justices said that the Trump Administration did not give an adequate justification for rescinding the deferred action for childhood arrivals program, daca as it is known, protecting those brought into the country illegally as children. Former National Security advisor john bolton says President Trump is not fit for office. Lacksd abc the president confidence and is solely focused on his political fortunes. The president calls bolton a liar and says he is broken the law. Administration is asked a federal judge to stop publication of the book it in china, said to begin talks about the controversial new security law for hong kong. Arn that it would threaten the Center Unique freedom. Sa new coronavirus outbreak in beijing has been contained, according to the chinese Disease Control center. More than 150 cases of the disease were discovered. That prompted beijing to shut down schools and cancel hundreds of airline flights. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. Alix the high court stopping President Trump from canceling the daca program. Isaac boltansky joins us. You are on about the bolton book, it obviously this breaking now. What is significant about this daca position from the Supreme Court . Isaac two takeaways. The first is that this is what can be described in no other way than a significant loss for the Trump Administration. This is a policy proposal that was important for President Trump himself and Steven Miller miller, the president s advisor. President trump has tried to breaktried brick by brick to undo president obamas policies. This is a significant loss for the Trump Administration. Secondly, and this is a more important point as we move into true election season, i think immigration was always going to be a theme on the campaign trail, just given President Trumps background and the importance of the topic. But the surprise decision from the Supreme Court really elevates the issue of Immigration Reform as we head into the campaign trail. How does President Trump respond, do you think . Will it be symmetrical, asymmetrical . He obviously has to do with the bolton book, which we will talk about in more detail. This is the second time that the president has had an issue with the Supreme Court just inside a week. What do you think the white house is going to do . How internally problematic is this going to be for the president . Isaac i think it is going to anger him personally, and all of us inside the beltway are going to be watching twitter to see what he will say next. Furthermore, i imagine he will discuss this in some detail at his first public rally since the coronavirus, which is set for which is upcoming. L i think this guy, fits within the president s electoral narrative to a degree, and that he can push back and staatee is a dep that is still challenging him and he needs four more years to train the swap. Drain the swamp. It is going to frustrate the president and he will lash out with her, but this lines up that flash out on twitter, but this lines of on how important immigration will be on the campaign trail. Alix im curious, to build on guys question, when you have the bolton book and this coming down, if you get an angry President Trump come we have learned a lot of things he lashes out at, and some of those can be policies of the markets Pay Attention to, like u. S. China trade, digital tax, front and center as well. David at Goldman Sachs said today that the u. S. High china sells the political environment, these Companies Face Downside Risk as the u. S. President ial election nears. I wonder if you could help us by the needle through all of those in terms of how markets look at all of this. Alix, i think we are at a stage now where the market needs to rabbits had around the reality wrap its head around the reality that both Major Party Candidates on the campaign trail are going to be attacking china. This is going to be largely rhetorical. But there is going to be a battle on that front over who is more hawkish regarding china, which also has themes relating to the bolton book, which im sure we will discuss in a moment. First and foremost, biden and trump will be duking it out over who will be tougher on china, and that should concern markets. I dont think it is going to be enough to unsettle the phase one agreement, but i think we should be prepared for persistent headline volatility and targeted corporate actions related to chinas unreliable entity list and Americas Technology export restrictions. I think that is where the conversation is going. Guy how do i position myself for this . Vix calls for november and assume in this will be an incredible volatile period . How as a market for dismayed do i determine what is important and notmarket participant do i determine what is important and that important . The bolton book looks like it is not important. It will reinforce preconceptions that already exist. What you focus on in trying to get an idea of that divide, what we focus on and what we should focus on, and how do we position around those . Sure, i think first it is important to start with timing. Client number one question is when will market start to care about the election . I think it will be early to mid august. That is when the first president ial convention is set. The democrats will meet on august 17. At that point we will be through what is the face for built on capitol hill in the market bill onhase four capitol hill and the markets will have a feeling on with the support stimulus from d. C. Will be. Then they will focus on the election. I think that happens early to mid august. Your point is a fair one and one that we have struggled with over the past three and half years at times how do we separate the rhetoric from the reality . Lets tackle the bolton book for one moment. It is wild and salacious and at times deeply concerning. It is going to dominate conversation in washington and probably other capitals for a few days. But i doubt it will be more than a flash in the pan. For come supporters trump supporters, there will be quickly dismissed as little more than lies from disgruntled employee. For detractors, it Services Confirmation of their disdain. That book, while it may be interesting, have no Material Impact on the election. We are going to leave it there. Isaac, thank you thank you very much indeed. The president tweeting that he should have fired bolton over the north korea comment, that he didnt want bolton anywhere near him. You can find the full tweet obviously on twitter. Isaac, thank you very much indeed. Isaac boltansky, we greatly appreciate it. This is bloomberg. 24, 25 minutes into the session. Tesla is trading higher. Stock we are keeping our eye on. The stock has had a rocket of a run and apparently still has a way to go to moe going to jeffries financial group. 1200. Ock could go high as that is the highest rating on the street, and it implies a 21 increase in the stock that has almost quadrupled. It is based on the fact that we know that we appreciate lower emissions as a result of covid19. Alix the is not alone in terms of talking about using covid as a way to facilitate the greenenergy shift, but this contrasts earlier in the week with adam jonas at Morgan Stanley going to the opposite, cutting his price target on tesla because they dont see the demand coming back at all. Plus, the u. S. China relationship and how that plays out. Guy i think also those points are valid, but it has been quite a run, and you want to get in front of a steam train. We are 1000 now. Its a good point. We will talk more about the markets. This is bloomberg. You say that customers make their own rules. Lets talk data. Only Xfinity Mobile lets you switch up your wireless data whenever. I accept 5g everybodys talking about it. How do i get it . Everyone gets 5g with our new data options at no extra cost. Thats good. Next item corner offices for everyone. Just have to make more corners in this building. Chad . Your wireless your rules. Only with Xfinity Mobile. Now thats simple easy awesome. Switch and save up to 400 a year on your wireless bill. Plus get 200 off a new Samsung Galaxy s20 ultra. Ritika this is bloomberg markets. I am ritika gupta with first word news. A divided Supreme Court stopped President Trump from ending the dreamers program. It allows undocumented immigrants to work. The court said the administration did not provide adequate justification that daca theects people entering country illegally as children. Law requires President Trump to sanction any officials found guilty of oppression of uighurs and national groups. A book by john bolton says the president encouraged china to build internment camps to house muslims. The will tell us the World Health Organization hopes there will be millions of doses for covid19 vaccine right the end of the year. Several countries including the u. S. , britain, france, and germany, have struck deals with pharmaceutical companies to secure vaccines for their citizens first. The singer who serenaded british troops around the globe during lynn,war ii, dame verya has died. She was known for singing sentimental favorites like well meet again. Prime minister Boris Johnson said she uplifted the country during its darkest hours. Vera lynn was 103 years old. Global news 24 hours a day, on air and on quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I ritika gupta. This is bloomberg. Guy. Guy thank you very much. This on the day that president macron is in london to commemorate the 80th anniversary of general de gaulles radio broadcast his people, this following shortly after the invasion of france by germany. We will you some of those pictures later on. Back to the markets now. Something to savor with the difficult rate of recent weeks starting to unwind. Recovery leadic to sustainable rotation into cloud . Denise chisholm joins us now. The markets have come along way really quickly. Initially the banks led the push and then the crash really kicked in. We are starting to see a few questions around the phenomenon. Where are we now . Do you see us going next . Denise i get that question a lot in terms of people seeing this massive rotation. It is important for investors to understand 2009 must the exception was the exception, not the rule, especially as it relates to technology. 90 of sectors changed. Utperformance in most recessions, only 30 to , andhange their leadership most importantly come in most recessions, one to three sectors outperformed six months before a recession start and six months into the possession and the six months coming out. The expectation that technology has to underperform to allow value is not supported by history, and Technology May be the evergreen sector. When i look at the disconnect between the evaluation and the numbers i see, it has the highest odds to be the evergreen sector through the cycle. Alix based on that, when we hear that small caps are gaining ground on big tex, and you have both at the same time . Denise absolutely you can have both, as it relates to a sector perspective. When i look back at history, that is not a unique phenomenon. What we have seen a little of them if history is any guide, in a traditional recovery you see a broadening of the market, which means the technology outperform is joined by some recovery sectors like consumer discretionary, which we have seen outperformance in, and likely some cyclical leadership like Energy Sector particularly is more interesting right now given performance and the negative demand scenario, which tends to be a contrary positive signal. Guy im sitting here in europe and we have loads of value over here. How do i make sure that it is not a trap . Europe in the past has flattened on some of these trades and turned around a bit on investors. How do we make sure that doesnt happen this time around . Denise europe is interesting most of the time when i look at europe i look at it relative to the u. S. When i look at relative valuation levels, they are at middling levels on a relative basis. They are middling relative to the u. S. , and especially when cap sector. The i dont find evaluations compelling in europe. Whether you want to look at this globally, meaning europe is cheap and that should be the recovery, or from a factor perspective if you look at the 1009, russell 1000 value, you need to be really careful as an investor where you pick your points, and you will need more than valuation on your side. Factorsts talk about as a way of looking at it. All of those factors have moved this year. How do you think that winds up playing out . As we do of volatility over covid cases and earnings and the president ial election, how do the factors move . Denise i translate a lot of my sector map to assess exactly that, and the two that translate easily are defensive sectors and low volatility. They translate very well together. Wvolf the reasons why lo was not as protective as investors stop this cycle, the defense was quite extensive going into the crisis, which is not to say that health care was. , that infringes their performance. Even if we get more volatility, and we likely will through the potential second wave of the covert crisis, or political turmoil, i think investors should think about that critically in terms of whether or not that protection will be there. Catch uplly good to with you. I told guy you were like a human computer when it comes to equities, and you did not disappoint. Coming up, shifting the conversation around Climate Change. Iea is unveiling a 3 trillion sustainable Recovery Plan over the next two years. We will talk to the executive director on their call to action. This is bloomberg. Guy live from london, i am guy johnson with alix steel in new york. Lets catch up on news you need to know. Time for a Bloomberg Business flash. Deltakick rings off with airlines can which hopes to reach the breakeven point by next spring. Eo telling bloomberg rising demand is prompting the carried to add more flights. Firms with ties to slavery have apologized and plan to pay reparations. Lloyds of london and green king will make payments to project supporting black and ethnic minorities. That is according to the daily telegraph, royal bank of scotland says it will look at similar moves. The Trump Administration is preparing to unveil a 1 trillion infrastructure proposal as part of a push to revive the economy. The coronavirus pandemic is throwing away the limited resources at the state level that are needed to maintain roads and bridges. Even if Congress Agrees on an infrastructure bill, it will not be enough to compensate for the sustained cap asked were likely to see. T is your number business Bloomberg Business flash. Bloomberg has launched a new vertical called city lab that this is that all things urban and the future of cities. New york city is set to enter phase two of reopening on monday that the question of how public transport across the globe will andifferent remains, alix, something we will all ultimately have to grapple with. We were used to getting on subways and underground trains, packed in like sardines. I guess that is not possible anymore. Alix no, for the question is how do you get around. Anecdotally, i went into the city, and i didnt drive. Usually i drive, and i didnt. It was hard for me to get a cab. It took me 15 minutes to get an uber. And traffic was pretty harsh. Are we all going to be driving . How do you get around . If there are no cabs, how do you get places . I dont know how this will wind up shaking out, particularly as we go to phase two and people have to go to work. Guy it is going to be a massive problem. U. K. Has had a big push on people walking and in particular riding bikes. Ones in london you can use that are touted as ways you can get around. London in particular has bike infrastructure. But it is in no way good enough to take the volume of people that would be required if they came off the underground. , are they anyway down that road, to excuse the pun . Alix funny. There are citi bikes. There is a monthly fee and you can pick them up and drop them off at other locations. Im not doing that. I willde a citi bikes, cause Serious Problems with traffic congestion. You inin an hourcash an hour. More cars on the road means more co2 emissions. We will talk about that and how the stimulus will affect the iea. This is bloomberg. Alix i am alix steel in new york with guy johnson in london. This is bloomberg markets. We have had about 9 trillion in fiscal and monetary action across the globe. How do you use that money . One way is through green stimulus. The International Energy agency talking about what it will take to lock in a drop in omissions, and if you are spending the money, why not spend it on that . Joining us is the author of the report, fatih birol, iea executive director. It is a very comprehensive report. If you are going to spend money, where will you get the best bang for your buck . Fatih ideally if you look around the world today, many governments are about to make hugely consequential decisions if they are preparing stimulus packages, recovery packages. 9to now, there are about trillion, 10 trillion, but more to come. It is important that the governments in the system is packages include Energy Policies in order to create a Better Energy future, cleaner and more Resilient Energy future. The policies we are suggesting additionalng growth, growth to the global economy, and helps to create jobs. Ng touggestions are aimi reach three goals one, boost economic growth. Second, create jobs. Third, to have a clean energy system. This is the reason we made this report with the imf, and we have released this report today, and many governments are looking to realize the support. We are very happy. Alix the way you break it down is in a couple categories, electricity, transport, buildings, industry, different kinds of fuel. When you go around to different economies and you what do they say . What do you tell them, what do they tell you . Fatih first of all, i can tell you there is a big buyin by governments. Those governments but Climate Change on the top of their agenda, but also for those governments, perhaps Climate Change is not necessarily the number one top priority, because of the following. The policies we suggest in terms of Energy Policies, they are themselves creating jobs. For example, renovation of buildings, the improvement of manufacturing sector, they are jobs machine. They are crating a lot of jobs. Or solar energy. Very cheap today. Very is another one, important, building grids, electricity grids. We understood how important electricity is for us bless you must, how essential it is for for the last few months, how essential it is for our social life, economic life. These three are the major policy suggestions we have for the governments. All the governments around the world need these policy choices, i believe. Guy ok. That is a fair point, and as you say, most governments are broadly on board with this. But i have is of a question you bring up the issue with jobs. Do governments thats been the most get the most jobs . Fatih of course, it depends on which part of the sector you are. When you look at the numbers today, in the entire sector, there are 40 Million People employed. What we see, 3 Million People lost their jobs, and 3 million additional jobs exist. With our suggestions, we create each year 9 million additional to beor save them disappearing. This is mainly a job creation machine. The policies were suggesting. Plus, it also gives additional boost to economic growth. but heres the thing this is a tragedy of the commons phenomenon here. If europe, for instance, spend a lot of money and went carbonneutral tomorrow, the impact on the globe would be relatively limited, because there are developing economies around the world that are spending huge amounts of money on coal and will continue to do so. How does europe, which is spending all this money, reap the benefit from it . Does it come in jobs or does it come in other forms . Dv does come in other forms, how does it make sure if it does come in other forms, how does it make sure it capture those benefits . Does it have to impose tariffs on those companies that polluted . Doing isat europe is step in thes good right direction. Europe is becoming a role model for many. But europes emissions are only 8 of the global omissions. To the atmosphere from berlin or jakarta, it has the same effect on everybody. When needs to happen here is that europe, europe makes investments in the European Green deal, should make investments in such technologies that would bring europe and advantage in terms of the industrial policies. Or example, electric cars, hydrogen. Dont forget what im telling you now. In a couple years time you will hear hydrogen will be a Key Technology for europe and many, many countries around the world. Europe made a big mistake, in my view, years ago. Solar power, subsidizes solar energy, but took leadership from europe and exported to the rest of the world. But now perhaps europe learn from the experience with electric cars and they can continue to have leadership. Im glad you brought up hydrogen, because that is a perfect example. It is great but it is very, very expensive. How do you convince a country like india, for example, to spend all this money to build wind farms and solar and invest in hydrogen when they want the cheapest fuel they can, which in some cases will be the dirtiest . How do you do that when the economics still are not there . Fatih first of all, the iea, we dont live in a parallel planet. We know what are the first and foremost priority is for the government and the people. When it comes to the cost of india, it is competitive with coa no question about thatl. Other parts of the world, to get more employment from solar power compared to coalfired power plants. It is the reason we believe the Prime Minister modi but a very ambitious Global Energy target, and i just talked last week with the indian power minister. Even under the circumstances that they are going to reach that target. And now hydrogen is a very important technology. Be behind wants to the curve. Years, going to many meetings at energy summits. There are always different views about different technologies, for nuclear, solar, coal, oil. When it comes to Hydrogen Come all the countries in the world love hydrogen. The problem is it has been extracted with the right policies, taking the stimulus packages on board, we can reduce the cost of hydrogen by manufacturing a lot of new equipment, as we have been for solar in the last 10 years. There is a big opportunity for hydrogen in the years to come. Alix we have about a minute left. Where does this leave Oil Companies . What are they supposed to . Fatih it would be wrong to believe that we will not need oil anymore. We will need oil. This year, next year, the year after. Growth or demand for oil will be not as strong as before. This is for sure. Especially we will need oil for the petrochemical sector, purposes, butr for transportation, especially for cars, we may need less oil in the future. But still we will need oil. Having said that, no oil company will be unaffected from the clean energy transition. It is better to position themselves at the right time in the right way in order to be a part of the transition while at the same time reducing oil because, again, we will need oil many years to come, but also electricity, renewables, this should be in my view part of the companies portfolio. Alix we have to leave it there. Fatih birol, iea executive director, thank you very much. We will be speaking more of the boe as well. This is bloomberg. Alix live new york, i am alix steel with guy johnson in london. Close onhe european bloomberg markets. In the u. S. , off the lows, but i feel like we cannot find the right direction. It is modeled. Guy given the news cycle over the past 24 hours, it is understandable. We have china in terms of the beijing lockdown, but covid cases in the United States are rising at a fast rate. We have the bolton book to digest, the bank of england, the tltros story, so much for the market to digest. I think it has little but of indigestion and is trying to figure out where we go next. These are the numbers we are looking at. We are seeing a more positive picture starting to emerge in u. S. Equities. Still down, copy of idiosyncratic stories a couple of idiosyncratic stories. What is
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