Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

Results, saying the missing 2. 1 billion euros on its Balance Sheet probably doesnt exist. Shift, the bank of england governor saying he gave officials more firepower in future cases. And no holds barred. Slam hongrass set to kongs National Security law when they hold talks today. We are live in brussels. Just over an hour away from cash trading. Arrows inking at red europe, more than one person , ftse futurescks a little down and dax futures off about 1. 5 . U. S. Futures are pointing higher. We see some slight gains, little gain, really unchanged. S p futures up to tens of 1 and nasdaq almost 3 10 of 1 . Gmm . Have you got on the its interesting we see the divergence in u. S. Futures and european futures, a little bit of catchup and European Equity markets. On a fairly flat session for asian markets, at least overall. Some weakness coming through in hong kong as a result of the security law, some more detail on that from china. A bit of weakness in the hong kong market. Broadly, flat across the asian session. As you pointed out, u. S. Futures point higher and european futures a little lower, having to catch up from friday still to do. There are concerns about a continuation of the first wave or a second wave of coronavirus cases and infections, but they are putting that aside and focusing elsewhere, perhaps on what Central Banks are doing. With that in mind, lets talk about what we heard from the bank of england today. An opinionon with piece written by the governor of the bank of england, who signaled a major shift in the bank of england strategy for removing emergency stimulus. The shift is to remove the stimulus once the time comes. Andrew bailey stressed the need to reduce the institutions Balance Sheet, which has swelled over us almost 700 billion howds, giving a sense of the policy would be enacted. Lets get more details on this with david goodman, who has been looking at the details here. Us, what do these comments mean for policy and do they tell us anything about the shortterm . You have bailey talking about healthy exit would be enacted but he doesnt think the time to do it is now. David thats right. Were at the point where the bank is talking about more stimulus before they start to wind down. Into whereinsight they think firepower for the future currency does lay. The current round of qe completed, and this is really going to get when the time comes. There are a lot of things on the Balance Sheet, qe terms, lending terms. There are a lot of things that they can do there. I think in the past, mark carney always said they would not set up qe until rates hit a certain level. I guess one of the takeaways is this means we can probably expect rates to stay low for some time to come. Bankers are independent as cover for making moves like this, even if they are not politically popular, and bailey says it is important to keep that independence, right . David exactly. Case, the policy has helped the u. K. Government. It has helped the government keep costs low. It is ongoing because of the pandemic. Theyve lost almost 12 million jobs of the stage and there is a huge amount of borrowing to support that. Thegovernment benefits from boe package, but i think the point is that doesnt really matter. Its not like it compromises independence. Casts the government as just one borrower who would benefit from lower Interest Rates. Let me ask you about money market funds, that seems interesting. He says the proper functioning of Financial Markets, he calls for more analysis, i suppose. David yes. This goes along with what other policymakers have said. Markets as a source of vulnerability during the crisis and we saw huge swings in the prices. Markets aree money a key source of liquidity right now, and if not, they need to step in. I think he saying we need to examine this and see what else will happen in the future. David, thank you for joining us. Economyodman, our u. K. Reporter, who wrote a story on this. You can check it out on top. Lets get the first word news. Here are your top stories from the terminal. Disappointing crowds for president Donald Trumps First Campaign rally since the coronaVirus Outbreak. The event in downtown tulsa, oklahoma attracted far fewer supporters than the white house had touted. It was overshadowed by continued criticism of the president s response to the pandemic and his reaction to protests against police brutality. Worriers warriors. Thank you, we had some very bad people outside. We had some bad people outside doing bad things. I sit before you today to declare the silent majority is stronger than ever before. China has confirmed its proposed National Security law would allow beijing to override hong kongs legal system. The announcement sheds new light on a move that threatens the citys status as a top financial center. State media says the proposal will give the Central Government jurisdiction over an extremely small number of National Security cases. Looking at widening its budget deficit again in the wake of the coronavirus. The government plans to focus on Infrastructure Projects such as highspeed rail. It may approve a cut to b. A. T. To stem the pandemic impacts. They are drawing up an ambitious reform plan to lobby the European Union for financial help. Onbal news 24 hours a day air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in 120 countries. Worries,coronavirus stocks mixed as investors keep an eye on rising cases from the u. S. To australia. Gold drives to the highest level since 2002 on concerns over a second wave. This is bloomberg. Anna welcome back to European Market open. European equity market futures, some 50 minutes until equity trades, suggesting weakness for the markets. That contrasts with u. S. Futures, a touch higher. We have a little bit of catchup for european equities. Lets get some Corporate News stories this morning. In germany, two huge stories brewing. We will be covering them throughout the show. The first we talked about in our headlines, the Company Share price could be set to drop by another 50 today after wirecard admitted the nearly 2 billion euros missing from its account probably didnt exist. Stock setansa, the for decimation after opposition to the bailout from a major shareholder and a low sign up to its egm later this week. The lower sign up gives the shareholder more influence over what is happening. More on those corporate stories through the program. Matt some huge corporate stories here. In the u. S. , cases of covid19 are approaching 2. 3 million after a daily increase of 1. 2 on sunday. There are worries of a possible resurgence of the violence in the sun belt states. Onlyhile, beijing has reported nine new infections and assigned that a recent outbreak is coming under control. But we are looking at accelerating concerns in brazil. Here in germany as well. Joining us is Barclays Wealth management cio. I want to start with asking you about the second wave and what it means for investors. I think the interesting thing about this is there seems to be no clear message from how you look at the outbreaks and how they progress, and trying to correlate that between mobility and reopening. Is still being analyzing it is still being analyzed. Beijing is kind of a template for how to deal with it without resorting to a full lockdown. I think thats what everyone is worried about. Anna good morning, well. Will. From investor perspective, do you assume that the bar of a full lockdown is really high and another return to full lockdown is not likely to happen . Will the first thing, governments will feel a little more comfortable with their preparations this time around. Ppeth care capacity, storage better, Testing Capacity is not so significantly lacking. Know howso now economically painful to full lockdown is. So governments will be extremely reluctant to go into a full lockdown again. It is tempting to try and manage the outbreaks in a way that china is managing them and korea and taiwan. Expect economies to slowly start to come back online . Will the Central Banks to every thing they can to support them . Yeah, i think there are number of things that we will see this week no doubt, that people have been following closely. Consumption, other things. Seems to be up and data is telling us the recession ,ot be as sharp as we thought not as dramatic in the historical context. [indiscernible] they jumped 10 from last weeks retail sales. The recession looks shallower in some sense, but the data is telling us the recovery is a little sharper. We also need to be prepared for the fact that we will be running a less efficient economy in the absence of a vaccine. We just have to work out how much economic muscle to divert toward virus spread mitigation, and that will define how efficient the economy is going to be and how far we can recover. That is where a lot of Technology Comes in. It seems plausible to me that you will have a low point to recover to even if you have a sharp retreat. Yes, efficiencies to watch. An interesting way to look at things. What about Central Banks taking japanr example, australian, yield curve buying. Durations along the curve to control Interest Rates at certain duration along the curve , what will that do to Investment Strategy if we see Central Banks in the u. S. Perhaps or u. K. Deciding to target specific Interest Rates . Certainly one of the things to consider in the future. In now, markets are around u. S. In u. K. Certainly a policy consideration but not necessarily top of the policy toolkit at the moment. Duration is not we are underway duration underweight duration. We dont think you will see Interest Rates going that much lower. Matt thank you for joining us today. We want to apologize to viewers, or having some sound issues there which we will try to work on in the future. Will, its been great to get some time with you, the cio of Barclays Wealth management. Coming up, we will talk about another huge drop in wirecard. The shares are indicated open down as much as 50 after the company says the 2. 1 billion it cannot find may not be there at all. We will discuss the once rising star of the german fintech scene. This is bloomberg. Welcome back to the European Market open. We have 40 minutes until the start of the cash equity tradings day. European equity will have to play some catch up to u. S. Counterparts, europe a touch to the downside. Lets get a business flash for you. Lindy of corporate stories plenty of corporate stories. Wirecard says its missing 1. 9 billion euros probably doesnt exist. Its withdrawing its fiscal results for 2019 and 2020. It says it is renegotiating terms for its debt. The scandal has already seen wildcard wirecard shares collapse. Says its aa ceo deal may not pass. Only 30 of shareholders are registered to vote at the meeting taking place on thursday. Needs two the company thirds, and if 50 registered it would only need a simple majority. It could push europes Biggest Airline toward collapse. Pg e has one final approval for its bankruptcy plan, including billions of dollars in damage claims stemming from catastrophic wildfires linked to their equipment. They need a judge to sign off on the plan before the in of the month to qualify for estate wildfire insurance fund. That will help it cover damage claims for future blazes. That is a bloomberg is this flash. Sovereign wealth fund may add to its equity holdings. Holdings if there is another shock in Global Markets because of coronavirus infections. The manager sees opportunity and value in the market pose pandemic. Post pandemic. Even the high equity valuation, we think there might be some limits for the market. To be inbe better another market location for the time being. We are more cautious. In the long run, we think the market will come back but for the time being, we have a waitandsee position. What do you think the next downturn or uptick in this market will be driven by . Obviously most markets will be affected, maybe the second a if we can prevent second wave of the virus, if it is prevented by a vaccine, then markett prevent a second but i believe due to the policies, we can we dont know when the right time is that we are happy about current market changes. You made major changes to your investor strategy since the start of the pandemic . Overweight equities compared to fixed income that is our strategy. If there is a second wave, obviously we would consider our allocation. If there is another market shock , there might be for the rebalancing with equities. You might see other potential in the equity markets. That was the chairman of Korea Investment corp. Talking to bloomberg earlier. Coming out, the vanishing billions. Wirecard offers a new exclamation on the money missing from its Balance Sheet. We will discuss the latest developments in a scandal that has devastated the german dock long under a dark cloud. The stock is slumping premarket in thealready wiped out last few days of trading. This is bloomberg. Matt welcome back to this is bloomberg. Welcome back to bloomberg market the european open. Futures are down in europe, more than 1 . Partly because, the wirecard scandal has taken a new turn. The company is saying the 2. 1 billion missing from its Balance Sheets may not exist. It is the latest in a dramatic fall from grace for the firm, which was once considered the fintech, though it has been under a dark cloud of scandal for a year. For more, bloombergs tech reporter joins us on the phone. So, the missing money they say probably doesnt exist. What happened to it . That is the milliondollar question. This story gets crazier and crazier by the day. The Payments Firm said overnight shat the 1. 9 billion euro doesnt exist so they have to go around looking through the orders to see exactly what happened but there are bigger problems the company is facing right now. It has withdrawn its recent results and said previous protested the transactions on wirecards behalf were not correct, so shares in bonds have collapsed. The cheek and chief executive has departed, leaving a massive to do list to the interim ceo. Anna good morning to you. Lets talk about who leads the business because james was made interim ceo after the resignation. What is on his to do list . How honor does he get control here . Sarah there was a statement the wirecard talking about news that had been coming out of the last few days and the latest executive member of the executive board, further to become interim ceo but his to do it iss very strong, extensive, but he does have some relevant experience. That his First Priority would be to work with the companys lenders to demand more clarity and return to the extension of almost 2 billion wirecarding after breached terms on the loan. Negotiations about the next steps and wirecard said it is in constructive talks with lenders. Matt ive noticed since i moved over here the big state regulators really like to ban shortselling. They dont feel it is helpful in the markets and he did just that, specifically with wirecard when journalists at the Financial Times started to scandal. Has that helps to hurt investors even more than they would have been . Sarah the story really is astonishing. There is a real negligence on behalf of germany across many different levels. That comes from the regulators. Theyve from often targeted management, it targeted the journalists behind the critical reports from the Financial Times and unnamed hedge funds. Conspiracy theorists went crazy during this period. It had done nothing to take or do dueegulate diligence with the company at a lot of that has to do with germany being so keen for so long to create further tech u. S. , tomilar to the facebook. The longer standing tech business they have, i think they were finally excited there was a Financial Technology institution that was going to put germany on the map, but thefacebook. The longer standing tech business they negligence did not just come from the regulator. It came from politicians, the media, analysts. I think there is a real failure on the part of many levels in germanys system. Matt yeah, the case could be made it goes beyond negligence because they disallowed shortsellers to accurately price the shares. This is the point of having shortsellers in the market, right . Happens. See what the stock can collapse 50 , 70 in one day. Is there someone looking in now regulator as to why it was doing this . . Hat are the connections sarah i cant say for sure, but i think it is something that is probably being discussed somewhere. Sure, will be taking a close look at itself and the way it has conducted itself in the wirecard situation, but i think serious questions need to be answered about germanys banking regulator and the rolet had to play in cash roll it had to play in pandering to this tech giant. , bloombergsyed tech reporter for europe with the latest on a fascinating goingson at wirecard. Ofminutes until the start the trading day and we look to see what kind of loss in sure price we will get this week and in todays session after 90 losses last week. Europes concern, a new security law is likely to be the center of contention at the digitally euchina summit taking place today. We will get the latest next from brussels. This is bloomberg. This is bloomberg. Matt welcome back to bloomberg market the european open. From the minutes away start of cash trading across europe and in the u. K. Futures are pointing lower by more than 1 . Lets get the first word news. You are todays top stories for you at the terminal. Disappointing crowds for President Trumps First Campaign rally since the coronaVirus Outbreak. The events in downtown tulsa, oklahoma attracted fewer supporters then the white house had touted. It was overshadowed by continued criticism of the president s response to the pandemic and his reaction to protests against police brutality. Californias new cases of corunna values coronavirus is adding fears of a second wave in parts of the u. S. The u. S. World Health Organization says Americas Region accounts for 63 of new cases, led by brazil which sunday reported over 54,000 new infections. Italy is looking at widening its budget deficit again in the wake of the virus. The government plans to focus on Infrastructure Projects such as highspeed rail. It may approve a cut to value added taxes to stem the impact on the economy. The news comes as the Prime Minister is drawing up a reform plan to lobby the European Union for financial help. A stabbing attack in writing is being investigated as an act of terrorism. Eyewitnesses saying and approached a group of people in the town west of london and stabbed them. Three people died in the incident. A 25yearold local man has been arrested on suspicion of murder. Prime minister johnson says he is appalled and sickened by what happened. 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 talk geopolitics. AreEuropean Union and china set to spar over geopolitics and economics in a Virtual Summit to take place later today between europes top officials led by the Commission President and chinas xi jinping. Ational Security Member measure for hong kong and concerns over unfair subsidies and dumping have soured relations between the two sides. Lets be to our moral reporter maria tadeo on the ground in brussels. What is the significance of the meeting and what can we expect to come from it . Maria when ursula von der leyen took on the job, she said this was going to be a Geopolitical Commission she would not shy away from the big global issues and today is her first test to show she is able to handle china and she is able to deal with the Chinese Administration when it and some ofping their Business Practices in europe. It is a big test for ursula gonder lion and it is happening in a week where there has been so much pushback from brussels to the chinese. The European Commission say they worry about the use of subsidies, weve heard from Emmanuel Macron repeating this idea europe needs to become more self sufficient and it has relied too much on other countries and we have the European Parliament condemning china over hong kong, which has infuriated chinese authorities in brussels who see this as an butrnal matter for china, members of the European Parliament dont see it that way and worry democracy is being crushed. All of this really means the tone is different. The chinese are aware of this and last week when we spoke to the ambassador to the eu, he investment, for chinese money, they are aware the tone and the mood has changed in europe and that means perhaps we may not want to invest that much in europe. Whether you take that as a threat or warning, it is clear the tone is different. If europe does take a tougher approach when it comes to china, concerns that the National Security law would end up putting opponents of democracy in hong kong in jail, how does beijing then respond to that . Maria yes, and you can see why for the European Union, this is such a complicated issue because they feel the one nation, to system is being undermined. The European Parliament has taken a tough approach on this which is not legally binding. It doesnt mean there will be a resolution, but it sets the tone european institutions are seeing something happening here and worry about the direction this has taken. For the chinese, they like to play this both ways and say the European Union is a big partner, place theo take that u. S. Has taken, but they say if you are not that welcoming, the relationship may change and by the way, you europeans, including germany, have profited from this relationship for many years and that could perhaps change and would not be good for the european economy. Interesting to think how alone in europe might feel at this point, pushing ahead or atking about globalization a time when the rest of the world may be pulling back. Is that talks about in brussels . Maria it is, and this is something weve heard repeatedly in which the European Union is pushing for more multilateral trade. Wto, the institution, but the problem is the u. S. Is retrenching and europe wants to get tough versus china. It has said repeatedly we should not be naive, we should look at china as an ally and Strategic Partner going forward, but it is clear they dont do business the way we like to and if we dont get the kind of access into the Chinese Market we would like to we for our own companies, have heard repeatedly the idea that they eu doesnt want to get caught up in a cold war between the u. S. And china, but they dont want to be an instrument by either side. Maria, i wonder what you hear when you are talking to your contacts in brussels not to change the subject to much, but about the possibility of a lufthansa bailout being voted down. We will talk about this throughout the program and i think it will play a part in markets today. It is possible shareholders dont accept the bailout in germany will have to make some concessions, maybe putting it back at odds with the eu and ec. Maria i think what we are almost ist changing because the state has taken a bigger result as the result of the coronavirus, pumping money to every sector. That is going to change Business Practices and that creates tension between the government providing the money and the company that perhaps is not used to that type of intervention, so not just in germany, but across europe as a result of the pandemic. It also tests some of the rules and limitations we have seen from brussels and the European Commission at this point in which they say we want to be flexible, more flexible than ever because we want to protect our companies and what we do now is strategic for the strategy, but with lufthansa, it is difficult to square the state of the company and the regulator that has to sign off the deal. Anna thanks very much, maria tadeo. Lots to talk about on the phone from brussels. We look ahead to the euchina summit. , westory around lufthansa will focus on that shortly. Minutes from the start of European Equity trading. Flying too close to the sun perhaps. Lufthansas shareholder threats to block its package, pushing airlines toward collapse. We have the meeting taking place this week and the fact we have seen such low sign up of shareholders to attend that meeting even virtually could give a lot of power to the biggest shareholder in that he doesnt seem to like what the government suggests they will be doing here. This is bloomberg. Anna welcome back to the european open. 10 minutes until the start of the European Equity trading day and it seems we have catch up to play in europe. Down inxx 50 futures contrast to modest gains suggested by u. S. Futures. We will see if we have the catch up to play in europe. Lets get a business flash of top corporate stories we are covering. Wirecard says it is missing 1. 9 billion euros, probably doesnt exist. The firm is withdrawing resort results for 2019 and the First Quarter of 2020. The company is in constructive discussions about renegotiating terms of debt. The scandal has seen wire shark wirecard shares collapse and the chief executive depart. Pg e has won approval for its bankruptcy plan including aliens in damage claims, stemming from wildfires linked to the companys equipment. It needed the judge to sign off before the end of the month to qualify for a state welfare insurance fund. That will help it cover damage claims from future blazes. American airlines is planning 3. 5 billion in new financing. It is a move away from its reliance on federalaid. The carrier is selling shares comfortable to Senior Secured Notes and is entering into a 500 Million Term Loan facility. A full recovery for the Airline Industry is expected to take years. That is your Bloomberg Business flash. Heading intosa is one of the most critical weeks in its history. The airlines biggest shareholder is threatening to bailout9 billion euro pushing the incumbent to collapse. Talking about a shareholder here that doesnt like the terms of the deal the government has offered lufthansa. What are his biggest problems with the bailout and what do you think he can get . William this key problem with the bailout is he doesnt like conditions the German Government included which would see the government take a 20 stake in bloomberg market the european open in lufthansa for the nominal share. This is the part of the deal to ensure the state could recover from often from any recovery in lufthansa, the finance ministry wanted after problems with the banking bailouts where the taxpayer made a loss. What he can do about it is not clear. German government has said the deal is not a prudent negotiation, but hes not a stupid guy. Hee he has a plan for how will approach this. Anna he says the federal government should confine itself to the Financial Aid packages that are fundamentally positive and should not grow into the role of a return oriented investor. It seems he is conceptually opposed to the idea of government taking stakes. He has quite a lot of influence because of the low percentage turnout from shareholders expected at the egm. That means somebody with a stake as large as his, if he shows up, which is likely, he has some outsized influence. Edward indeed. William indeed. He has enough votes to block the deal given the turnout. Lufthansa needs two thirds majority to pass the deal. Whether how he will deploy the vote, we dont know. Hes a very secretive man. We might found out more later in the week. They might keep the regulators sweating until the vote itself takes place. Matt what the possibility of lufthansa actually going bust and ceasing operations . At the end of the day, this is pretty much the only choice for germans who want to execute domestic air travel. Doesnt the government have to keep this company in some shape or form operating . Indeed, its, and does have to do that. Lufthansa is not only for Domestic Travel and International Travel for germans, it is the airline that connects germany to the markets in china and the rest of asia. The government has said it will all cost,ansa at which might be what he is betting he contest. Germanys economy minister has said germany has to save lufthansa. Maybe he thinks it will test what that means and if he can himself. R deals for anna we will see what his strategy is, which outcome he would prefer. Thanks for joining us. William wilkes in frankfurt. Plenty to watch in german corporate. We will keep an eye on wirecard and lufthansa. In terms of the broader picture, european futures pointing to the downside. Zero stoxx 50 futures down 1. 3 , ftse 100 futures down around 1 futures. C and dax u. S. Equities lost steam at the latter part of friday. U. S. Futures, pointing higher between. 4 and. 6 in major indexes. This is bloomberg. Anna a minute to go to the start up cash equities trading. Its monday morning. Here are your headlines. Threatening to scatter its 9 billion euro bailout is a key version of at a key Shareholder Meeting thursday. Slamus top brass set to hong kongs National Security law when they hold virtual talks with china today. Matt we are likely to see equity indexes open down. Were looking at futures down about 1 or more. Ftse futures down a little bit less than 1 this morning. , 1 1. 2 , 1. 25 percent there. Lets take a look. The market is open as we speak. Lets pull up the terminal and take a look at the lefthand column. Thats where the equity index will open up. Now opens up, also down. 7 . You can expect to see continued red arrows. Open. E pack the cac is of are going to see losses similar size throughout europe, may be bigger in germany on the dax because weve got the well, lufthansa is actually out of the dax today, so even if lufthansa loses 10 , thats not going to hit the index as hard. To be honest, wirecard, even if it falls 50 at the open, its already worth so much less than it was last wednesday, that its going to have a much lighter waiting on the dax. Right now, wirecard is well, it closed on friday at 25. 82 and is expected to open about 50 down after a 35 drop friday and a 62 drop on thursday. Inopean markets, though, general opening to the downside as investors continue to balance fresh virus concerns with a by everything impetus from central bank support. Newton Investment Global management portfolios Global Global manager joins us now. Im sure you have felt that push and pull. What do you think wins out . Does the central does a second wave take us down . If you use a kind of footballing or soccer analogy, you could say it may be a game of two halves in a sense that we have come a long way from the bottom, and the s p, for example, now is not too far off the start of the year, only marginally negative, so investors have had the opportunity to step back and think about the longerterm how the world will look after all this is done, so what we are kind of back to, one feels, is a newet driven primarily cases of covid19, around the possibility for a vaccine, the way that lockdowns are being lifted. Other news is coming to play as well. We have had some political volatility in the u. S. There was a very unfortunate incident of terrorist violence here in the u. K. Over the weekend. We have had big pieces of Corporate News out of germany, which you just mentioned. Overall market have a lot to think about, and having rallied bottom, it feels like a period of recovery could be coming for us at this stage. The whats your view of things banks will do or the lens they will go through . A lot of talk about if central target particular yields at particular durations along the curve. What does that do to your Investment Strategy . Everything is on the table at the moment. Wemet this morning as heard this morning from the bank of england, there have been new thoughts about Balance Sheet management at Central Banks. We have already seen a huge amount of stimulus, and both governments and Central Banks entering into fiscal monetary stimulus will want to see work before they go even further, but it does sound as if, forex apple, the u. K. Chancellor talking about potential fall further cuts, they are prepared to go a little bit further. One would have to imagine that in the nearer term, that lower Interest Rates, if that was the result of any centralbank action, as you mentioned, would be beneficial for those growth stocks, which have done well over the last several years because they have been the ones which reacted more. On a longterm basis, unless we start to see economies reshape themselves and go into a Recovery Scenario into 2021, it could be the combination of that very aggressive Monetary Policy particularly is left in place longer than necessary, particularly with the fact there is fiscal stimulus already on the table, could mean we start seeing something of reflationary stimulus come back into economies, and that would flavor much more those kind of value cyclical stocks which have been underperformers for a long time. I think the desire to bring inflation back into the system, in particular on the part of National Governments to get rid of some of the debt to flick away some of the debt they have incurred, so that could be good for value stocks on a mediumterm basis, but in the near term, very aggressive cuts in rates, may well focus market. Ension on some of those areas matt i just want to quickly point out step aside from this conversation for a moment and point out what is going on with wirecard. We had the price action up on the screen for a little while, and, to be honest, it looks like is haltedcontinually for volatility interruption, even though we are only six minutes into this session. Wirecard, basically, though, losing another half of its value 13. 09, asing around you can see now. Thanstock has lost more three quarters of its value over the last few days. Was saying, as i earlier, it closed at 25. 82 on friday. Closed at 104 dollars 50 cents on wednesday. That has beenk absolutely destroyed, clearly, as the company says, it set aside 2. 1 billion that now is not there. Maybe it never set it aside in the first place. Who knows what actually happened to the money . The ceo certainly could not explain it or would not explain it and stepped down last week and now he has had to start to liquidate some of his shares. We will continue to follow this wirecard story for you. I will get back to the now. Rsation with you leaving wirecard completely aside, and just ask what you think about a rotation back to value stocks. You were talking about the possibility of a reflation trade going into 2021. What about the value stocks that have been unloved for so long . Thees, its very true that value names are ones that would benefit most. Of course, the valuation gap between value and growth is very wide, and many investors have been taking shelter, if you like, in the growth and quality side of the market. There has been a decadelong underperformance on those kind of value segments and they will be the beneficiaries of that kind of value trade. I think there is probably some way to travel in that stage. It may be that when that final longer value rally and more if youable value rally, like, it may not be the first attempt the market has had in doing that. The meantime, we may have the idea is we could have a v or u or any style of letters style recovery, but what we do know if there is a second wave, politicians in most countries would like to do with that in a slightly different way, so you will find that lessons hopefully were being learned, that applications of up downs will be different, and the Economic Impact will be less, but nonetheless the market will continue to be concerned, and that will give the market the opportunity to buy extra potential exposure as markets have probably a little bit of a contemplation phase in the near term. When we come back, we will talk about if inflation could possibly loom on the horizon. Might that help in inflating our way out of some of the debt that has accumulated globally . A result of Manufacturing Activities into the markets . Trading in viacom today rently halted, in just currently halted and is down 47 in just todays session trading in wirecard currently halted and is down 47 in just todays session. Matt welcome back to bloomberg markets. This is the european open. We are 12 minutes into the trading session looking at losses of about 1 across the continental indexes, almost. 9 in london. Top corporates stories from the bloomberg terminal. Wirecard says it is missing 1. 9 billion euros. Probably does not exist. The Payments Firm is withdrawing its result for fiscal 2019 and the First Quarter of 2020. The company says it is in constructive discussions with lenders about renegotiating terms of its debt. The scandal has already seen wirecard shares collapse and its chief executive depart after running it for almost two decades. Lufthansas ceo says its bailout deal may not pass. The carriers biggest shareholder is threatening to block the plan, which would dilute its holdings. It adds to doubt over the 5 million euro plan to rescue the airline in the first place. The sides are holding emergency talks before a virtual Shareholder Meeting on thursday. Approving final approval for its bankruptcy plan including billions of dollars in damage claims stemming from catastrophic wildfires linked to the companys equipment. It needed the judge to sign off on the plan before the end of statenth to qualify for a wildfire insurance fund. That will help it cover damage claims from any future blazes, and that is your Bloomberg Business flash. Anna lets go back to paul markham. Lets talk about inflation a little bit and if you really see it on the horizon. Many guests say deflation or disinflation is more the theme at the moment, but could you see inflation because of reassuring activities away from emerging markets to develop markets, and could it be something that starts to inform where Central Banks take us . Clearly, there is so much debt hanging over governments reflation would help a little. Certainly in the shortterm, we would not expect to see any significant issue with inflation, and as you say, downward pressure on pricing is more likely, particularly because there is more unemployment, demand has fallen, and so on, but the history of having dual fiscal and Monetary Policy concurrently has always ended in an inflationary outcome. As you say, something from a political standpoint may be desirable because they would like to see some of that debt inflated away. Also, as well as that kind of sheer monetary and fiscal stimulus pushing potential for money to go somewhere and find its way into the economy, i would also say as you mentioned, there could be quite a significant change in the way countries manufacture things in particular. What we have seen in terms of the covid19 crisis has been some issues arising with goods coming into the developed world from emerging market partners. Stories of manufacturing in some cases breaking down a little bit. It would be quite desirable to bring some of that manufacturing back, but of course, that takes a little while to happen because you have to, first of all, effectively persuade members of the labor force to go back into some of those sectors where they have not worked for some decades. Is something which will result in some goods being at a higher price point because of the fact that they are not being made in those lower cost emerging markets. Where not talking this year and it may not even be evident at the beginning of 2021, but we could start to see inflation takeoff. Me ifthat makes sense to you actually see it happening, supply chains moving back home to first world western countries that we are focused on. What effect does that have on the emerging markets that have lost that production then . Of course, theres another leg of growth which they could potentially benefit from in that situation, and that is that you would see a reflation environment for commodities, so some of those emerging markets which historically have been the beneficiaries of commodities, including places such as brazil, indonesia, and south africa, could benefit from that. The chinesey find may start to go back into some of those infrastructure style projects which they backed away from to some extent, but it may well be quite useful for them to stimulate their own economy by not only trying to push all of their new demands into the consumer areas but also to revise some of that commodity space as well through infrastructure build. That will benefit the metals and mining spots. On the other site, emerging markets which have been less well blessed with commodities, and they would include india, turkey, and south korea, for example, might find that less advantageous to market conditions. In the example of india, you have a market which is very much a growth kind of market, so it may not suit that economy as well in that kind of environment. It is certainly something which would mean some of that offshore benefit would go away, but most has really accrued manufacturing authorities. Anna let me ask you about u. K. Assets at the moment. Are you overly exposed to u. K. Assets . Is it more about a global play . Most of the large cap names in the u. K. , with the exception, really, of the financial sector, one been much more focused Global Markets, so there tends to be a strong pharmaceutical Consumer Products sector, and that has been court has been the biggest driver of returns on the ftse hundred. The 250 is more exposed to the domestic side of things. It certainly seems that this point with some questions around the way bank of england will manage its exit together with the fact that the brexit negotiations are ongoing and at this stage seemed to be reaching a bit of an impasse, maybe sterling weakness is a result of that. Particularly some of the areas seen as quite quality growthstyle areas. As we go forward, the u. K. And sterling both seem to be quite cyclical on the domestic side of things, and that is certainly something which will benefit more domestic names going forward, and that kind of inflationary trade weve been discussing would benefit those kind of dangers as well as the facts, so that would certainly be something to watch out for on a longerterm basis. It would seem over the next few months that maybe those global lower volatility, lower beta names with exposure to sterling as a base currency would be more attractive. Matt thanks so much for joining us today. Newton Investment Management manager. Uity portfolio paul will be continuing the conversation with us on Bloomberg Radio at 9 00 a. M. U. K. Time. Definitely join us for that. Coming up, fall from grace. Wirecard shares continue to get slammed as the scandal over the missing billions deepens. Whats next for the company that was once that was once seen as the future of german finance . That conversation next. This is bloomberg. To bloombergback markets. This is the european open. 23 minutes into the trading day and looking at losses of a little bit less than 1 . It looks like the losses are not quite as bad as they were at the top of the section for the equity indexes. They are still very bad for individual shares of wirecard. They continue to absolutely crash as the scandal that docs the Company Takes a new turn. It says the missing 2. 1 billion for its Balance Sheet probably does not exist and has withdrawn the latest set of financial results. For more, bloombergs Technology Reporter for europe joins us. This is a huge problem, obviously, for investors and for creditors, but also in one sense, for the ceo who resigned last week. He is going to take a huge personal hit here. Yeah, we dont know what it is going to do for his personal wealth. Bloomberg news broke the story over the weekend, and he has been unwinding a lot of the shares he owns. About seven percent of wirecards shares and ranked as the companys biggest shareholder. He funded that through a margin zone secured by the value the underlying value of the stock. You see on twitter you have a number of shortsellers and shareholders very disgruntled with the amount of money they have lost. Anna what is the role of the regulator in all of this . What have they been saying . I think that is what most people want to know, what have they been doing . There is, and rightly so, a massive amount of criticism being lobbed their way for ultimately looking the other way in return or basically at the excitement of this new fintech champion that was growing in germany, and instead of looking into allegations of fraud against the company, they at sourcestake aim from the Financial Times who were uncovering allegations of fraud instead of focusing its time and doing its diligence on the business. Anna thanks very much. For theu very much update. When we come back, we will talk about euchina relations some more. Matt welcome back to bloomberg markets. This is the european open. 30 minutes into the trading day and we are seeing losses across European Equity indexes, but they are not quite as bad as they were at the start of the session. Indexn see the stoxx 600 climbing back, now down only about. 3 . It did at one point lose more than 1 this morning as we saw bigger losses across continental european indexes. For example, the dax here in germany. Lets take a look at the sectors that are on the move this morning. Take a look at the grr screen. I will break it down for you, groupranked returns. Oil and gas stocks are doing the worst this morning followed by telecom and then travel and leisure stocks. Best. Care is doing the it is still down. All of the equity index groups here are down Industry Groups ,re down across the stoxx 600 but they are not losing as much as they were 30 minutes ago. Anna lets get a bloomberg first word news update. A major shift for the bank of india. Governor Andrew Bailey stressing the need to reduce the Balance Sheet before hiking Interest Rates. Would says such a plan give officials more firepower in future crises. The Balance Sheet has already grown to almost 700 billion pounds and is set to get much larger due to the banks bond buying program. Disappointing crowds for President Trumps First Campaign rally since the coronaVirus Outbreak. The event in downtown tulsa, oklahoma, attracted far few audience members than the white house had touted. You are warriors. Thank you. We had some very bad people outside. And applause] we had some very bad people outside. They were doing bad things. I stand before you today to declare the silent majority is stronger than ever before. Anna a stabbing attack in redding is being investigated as an act of terrorism. Eyewitnesses say a manner grow cheaper but people in the town west of london and stabbed them. Three people died in the incident. The 25yearold man has been arrested on suspicion of murder. Prime minister Boris Johnson says he is appalled and sickened by what happened. Global news 24 hours a day on air and at quicktake by bloomberg powered by more than 2700 journalists and analysts in more than 120 countries. European parliament has urged governments in europe to consider taking china to the International Court of justice National Security law for hong kong. The eu a simile called the chinese plan regarding the former u. K. Colony a comprehensive assault on the citys autonomy, rule of law, and fundamental freedoms. China and europes leaders are set to spar over the issue in a Virtual Summit due to take place later today. Statements are expected from xi jinping and Ursula Vonda Lyon ulazula underlying urszul von der leyen. Thank you for coming on the program. What do you think first of all about this draft law . It seems xi jinping is willing independent financial status of hong kong. Taking, i think he is bets that he and china probably can maintain as much as possible opinion elatively relatively opinion theft of hong kong going forward. They want to increase their grip on the city but at the same time make sure that the financial industry will not be hit hard by it, and indeed, that is a challenging task that he has set up. Anna good morning. We understand that president xi will be joining the call between the eu and china today. Perhaps a late addition to the lineup. It is a signal to the European Union that xi jinping and chinas leadership is taking europe a bit more seriously these days. This has not been the case over the past two years. Major leaders have not shown up for negotiations, etc. , but i think under the pressure they are in, they certainly do not want to lose europe, so it is a sign of, i think, attention by thateadership in beijing they want to send to europe and brussels. Matt what role do you expect the u. S. To play here . Obviously, there has been a little bit of a backandforth over the past week between President Trump and china in terms of news stories about him and the bill that he has signed. Obviously, the u. S. China conflict is playing a major role in the background. You have seen leaders from germany, from brussels highlighting the strong transatlantic relationship in the background of our china policy. Whenvertones, i think, european leaders talk about china. Clearly, the role of the united states, the role of the g7, europe of all partners has is incredibly important. I think it is good for european leaders to take this into account and also look at the outcome of u. S. Elections in november. Anna how much does chinas Climate Policy influence or stand in the way of relations between the eu and china . The eu, of course, making great play of how they want to invest in a cleaner climate. How much is this dividing the . Wo blocs what was on the agenda was an Investment Agreement and cooperation on climate. On the two first items, the Investment Agreement and on climate, europe has not been able to strike the big bargain or indeed make a lot of progress with the chinese side, and that is at the heart of that disappointment and at the heart of the difficulties that this fight that this bilateral relationship is facing at the moment. Matt i want to ask about huawei. Its a huge issue here in berlin as well as in the u. S. And across the rest of europe. How do you think germany stands to china is shaping up . Will huawei be ruled out of this 5g network . Honestly, no one knows, really. It has been clear that chancellor merkel has been trying to delay that decision, also pass a possible summit done leipzig. Summit is not taking place, and with that, i think the pressure is going to be increasing for her to take a stand and with that, also lead europe toward a common position. This had not been the case so far, but you could expect depending on how relationships in china go forward, we might see a position taken here and also in berlin which might make life more difficult for huawei going forward. Have seen berlin taking action to protect German Companies that might be vulnerable right now to take over and possibly with china in mind there. We have seen other countries talking about doing things about this as well. Is it something that is going to be a substantial new development, or does that just have an impact on the margin . No, it is important, but mind you, its not about really blocking takeovers. Its not the u. S. Approach. Its much more rational, much more also lowkey development. Theres a european framework for investment spending that comes into play in october with Member States actually Still Holding the cards in their hand. This is meant to be a rational with regards to National Security risks. Its not about economic competitiveness, and with that, i think europe is still open for business, including with china, but a lot really depends on the next moves that china is taking. So much for joining us. Chinaor institute for studies executive director talking to us about the summit thats going to happen later this afternoon. No doubt we will get a lot of headlines from that with xi jinping deciding seemingly lastminute to join up and ulaula vonda lyon urs von der leyen as well. Up next, the pandemic pushing europes Biggest Airline closer to collapse. We discuss that next. This is bloomberg. Matt welcome back to the european open. We are 43 minutes into the trading day, and we are looking at subdued losses. Stockssly we have seen or equity indexes falling more than 1 , certainly on the continent now, they are getting a little better, paring losses as we get in as we get further into the session. These are todays top corporate stories. Wirecard says it is missing 1. 9 billion euros, and that money probably does not exist. The Payments Firm is withdrawing its results for fiscal 2019 and the First Quarter of 2020. The company says it is in constructive discussions with lenders about renegotiating terms for its debt. A scandal has already seen shares collapse and its chief executive depart. Pg e has won, approval for its bankruptcy plan. That includes billions of dollars in damage claims stemming from the catastrophic wildfires linked to the companys equipment. Pg e needed a judge to sign off on the plan before the end of the month to qualify for a state wildfire insurance fund. That will help cover any damage claims from any future blazes. American airlines is planning 3. 5 billion dollars in new financing. It is a move away from reliance carrier aid. The carriers entering into a 500 Million Term Loan facility. The full recovery for the Airline Industry is expected to take years, and that is your Bloomberg Business flash. Anna we are getting a few lines coming in from the german finance minister. We need to look at them in more detail, but he is speaking, saying the eurozone needs to move closer toward a fiscal union and that seems to be the message that has come out of the virus recovery fund. If we see other members of the socalled frugal for picking up those lines and going with it we will see if we get any progress into july. Lets put that aside for the moment and talk about what is going on in the german corporate world. Love anza a is headed into one of the most critical weeks in its history lufthansa. Isning us now from frankfurt bloombergs william wells. He has been following the story. The fact that shareholders are pushing back against substantial in german involvement businesses, do we know do we have another plan . We do not know yet. He is keeping his cards very close to the chest. He probably has a plan and a lot of analysts are talking about scenarios whereby he might block the deal in order to try to get negotiation, so that maybe he had something to push against, but its not clear at this point. Matt the German Government i mean, to me, frank really cannot let the airline stop flying because there would be no other way to get around, to get people and goods around the country or in and out of the country. Has anza lufthansa virtual monopoly on flights. Does he think, this billionaire, this big shareholder, that he can convince germany to give him a sweeter deal in terms of the bailout . That appears to be what he isnks he can do, unless it some other hidden plan that we dont know about that he is working on. One scenario that has been suggested is he may try to with thehe government bailout package. If they have enough money to do that is unclear. We really do not know what hes thinking at this point. Do we know what this could where does this leave the business, essentially . Where how will voting work this thursday . Expected atturnout this meeting thursday, so this is a lot of power in the hands of one shareholder. Yes, indeed. Blocking minority now. He can shoot this deal down. Anza leftleft anza lufthansa has a very desperate share mace airbase now, so it really hangs in the balance now. Matt thanks very much for joining us to cover this story today. Im just looking at the red headline that has flashed through the bloomberg terminal. Bondsnsas 2020 for dropped to the lowest since march 20 5 well, march 25 was not really that long ago, but 4 is a big drop, and we are seeing shares fall about 6 right now. Stocks start the week on the back foot. Not just looked anza not just lufthansa but other equity indexes. We will delve into the market themes to watch with our managing editor, mark cudmore, next. This is bloomberg. Matt welcome bark to welcome back to bloomberg markets. This is the european open. 51 minutes into the trading day, we are still seeing red arrows, but losses of less significance than they were at the start of the hour. The ftse down. 25 . He dax right now down. 1 thepean stocks starting week on the back foot, losing momentum as rising new infections in countries from the u. S. West rail you feel concerned that a second wave of outbreaks will derail an economic recovery. Weve got this narrative playing out, really, over the last few weeks, the possibility of a second wave on the one hand and just Massive Central Bank and fiscal support on the other. Where are we now . Currentlyink we are in a phase where the virus infection is slightly outweighing the stimulus story. I think theres a little bit of a debate if it is really a second wave or uncontrolled first wave. The u. S. , brazil, india, mexico, they never got control of their Virus Outbreak in the first place. New york did, but that is one isolated part of the u. S. Overall, i think we will see more risk aversion as we see the virus story dominate for a little bit in the shortterm, but we will not see the lows from march revisited. Overall, virus fears will become more nuanced. We will see more country differentiation, more sector differentiation, and more single stock differentiation as well. We are going to get more of the localized lockdowns we saw in beijing last week. Much more targeted lockdowns will matter now. About theill see extent of those losses. What about the extensive involvement of Central Banks . The nextve seems to be big talking point. We have seen it introduced in japan and in australia. Will it catch on . Will it be thought necessary in the u. K. And the u. S. . As a realitely see it possibility in both the u. K. And u. S. I think the u. S. Is loathe to go to negative yields for a lot of reasons i understand, and i think its more complicated than a few minutes, but overall, they will go to yield curve control. I think in the u. K. , its a little bit more difficult and they are a little bit more open to go to negative rates. I think they will go for yield curve control first, but it is less certain. They certainly are more desperate for more stimulus. I think the problem with the u. K. When you consider any policy its all about brexit. If somehow a brexit deal pops out of the bag, theres a positive surprise there, the outlook for u. K. Gets more positive. However, if the brexit negotiations fail to achieve anything meaningful in the coming weeks and you know there will be a hard brexit at the end of the year, i think Everything Possible is on the table for bank of england and some stuff we probably have not even considered yet. To ask you about the german finance minister, who is speaking, saying supervisory institutions worked with regards. O wirecard one thing that i think is interesting is the german regulator last year attempted to temporarily ban short positions on wirecard. We have seen governments sometimes been shortselling during crises across the market, out this company and did not allow investors to sell shorts but the Security Firm singled out this company and did not allow investors to sell shorts. It always seems to kind of backfired. Is it ever a necessary move . There are certain circumstances. I think when you are getting to the extreme panic phases of the Financial Markets where you get a flash crash and a broken system, i think you do need to balance shortselling. About 10 years ago, i think the day of the u. K. Election, we saw at flash crash where we saw some stock straight down by 99 and rebound in the space of a minute or so, and i think in those markets where you suddenly a confidence, there can shortterm variance. Its very rarely justifiable for more than a session or so. Anna thank you very much for joining us. European equity markets trade lower this monday morning, down. 1 or so. This is bloomberg. Francine policy shift in an oped from bloomberg opinions, the bank of england governor sestak before raising rates to give officials more firepower in future crisis. President trumps first rally since the pandemic began made headlines due to weak turnout. What does this say about enthusiasm . Wirecard withdraws its latest financial results, saying they are missing 2 billion euros on the Balance Sheet probably doesnt exist. Shares sink