Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

Americas grim reality, new virus cases hit daily records in florida, california, and texas. The imf sees a deeper global recession than it predicted two months ago. Lufthansa biggest shareholder says he will back a 9 billion euro government bailout, getting the rescue plan a shot of momentum ahead of a crunch about later today. A bid for closure, the chemical giant spent more than 12 billion to settle thousands of roundup cases and other u. S. Losses. A significant number of cancer cases claims remains unresolved. Just enter an hour from cash equity trading in europe, and we have a mixed picture. But the futures are trading 0. 2 . Down dax futures are trading higher in frankfurt. We are looking at Different Directions depending on the regional indexes. What you see on the gmm . Anna i will get to that in a moment. Picture around the spread of the virus in the United States, capturing the markets attention, and sending Risk Appetite lower. Getting numbers at of royal mail, this is interesting because we saw a change in the picture around the spread of the virus in the United States, capturing the ceo. Interesting to get the latest guidance, they see their parcels division in 2021. The International Presence is important. Management restructuring will impact 2000 roles, with job cuts coming at royal mail. We should keep focusing on the big picture. The markets seem to be coming to ceo. Grips with a second wave, or continuations of the first wave in the United States. Equity markets substantially in the red. The Australian Market down more than 2 . Asian markets down 0. 9 . Lets talk about the virus. California, florida posting the largest jumps in case counts ever. To of these headlines add up grim realities, and questions how the state deal with this. We had seen the dollar post some gains. The gains in the dollar this morning not substantial, up around 0. 1 . Forgrade from the imf global growth, and the possibility of renewed trade tensions between the u. S. And europe. U. S. Equity futures retreat on worries of a surge in multiple u. S. States. The appetite for risky assets. The potential for trade tensions resurface between the European Union and the United States. Lets talk about where we are on these markets. Kristine aquino, leads the mliv team in europe. Do you sense the longer these riskaverse days of second wave concerns, more frequently they come back and there is questioning whether they have been too quick. Absolutely,s, especially because this is a crucial time of the year. We are not only thing signs of a second wave researching, but other things are going on as well. We see more data that covers the lockdown period, that does not show good things. We are at the part of the year where we come to the runup to second earnings. That is a crucial time because that is when investors are looking to see whether the impact of the virus will be lasting beyond the first and Second Quarter reporting periods. Have tradewe also tensions as well. It is a combination of the risks on top of the signs of a second wave that should be worrying investors. We are seeing signs of that. It is not a repeat of the early days of june and may when there was a record for most indexes, tech in particular. It seems. Ry day we are not seeing that now. And in other corners of the markets, were seeing signs of caution, they are taking a breather and taking stock. Matt we see dollar weakness, and there is a bandwagon to jump on if you think that will continue. The euro has gained strength against the greenback, trading around 112, 113. Do you see the european currency continuing to strengthen . Kristine yes, the eurozone is interesting. There were signs of marginal improvement in europe when it comes to data, highfrequency indicators show there is pentup demand waiting to be unleashed in europe once lockdowns are eased fully. That also coincide with certain signs of a second wave in europe, less so in the u. S. The signs are there in germany, a bit of an uptick in virus metrics that coincide with the easing of restrictions. This fear in the back of investors minds that maybe this has come too soon, and they will have to scale it back. It will be interesting to see whether the euro does have enough momentum to breakthrough those formidable resistance levels at the top. It enjoys a little higher here because of dollar weakness and improved sentiment in europe. Whether that continues is the big question. Anna let me ask about gold prices and what we have seen. Colleagues are writing about whether gold continues to go to higher levels. We have seen it we have seen great volatility since march, but it is gradually gaining. Given the risk aversion we have seen, or the concerns from investors. Kristine yes, it is a repeat of the 2008 playbook. We saw gold and risk assets rising in tandem. That has to do with the central bank reaction. And annetary policy easier stance from Central Banks gold and riskelp assets. That is what we are seeing now. Markets live in general seems to be optimistic that gold will march higher. To make apecting it move higher in 2020 at the end of last year, that exceeded our expectations and then some. There are a lot of reasons for it to march higher are there so long as Central Banks get even easier from here. Matt thank you very much, kristine aquino, leads our mliv team in europe. I want to give you an update on deutsche lift on the, the shares rising 23 versus the close yesterday. We learned last night that the biggest shareholder in lufthansa will support the bailout. Without his support, it would not have passed the vote today. Though shares which have fallen 45 year to date look like they will trade up 23 . Coming up, texas, florida, and california registered daily records for new infections. More on the market impact. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 50 minutes into the start of cash equity trading. European stock futures look flat to negative. U. S. Futures look more negative, thisthere. 2 to 0. 6 at point. The pandemic is racing through the United States, with the byduction of 180,000 deaths october. The u. S. Is approaching its alltime high for new cases. The virus is spreading rapidly in some states that were slowed with lockdowns. Texas was one of the states that were quick to reopen the economy. Governor greg abbott says the Lone Star State is experiencing a massive outbreak. It posted its worst day so far of new cases. Hospital systems in the states biggest cities are starting to handle the influx of patients. We are joined now by peter toogood, cio, embark group. We are focused on the u. S. , but across the globe we are seeing second wave looks. What does this mean for markets which have risen so sharply since the end of march . Peter it is interesting everyone talks about the second wave and we have not left the first. There are increases every day. Happen to be insider comedy together without social distancing, you will have flareups. It goes back to the idea of what we experience, and it is not the recovery rebound, which is different from a recovery. At the end of expansion before the covid arrived. We did have corporate debt in the u. S. At an alltime high before covid. Off things i was nervous before have been reinforced in this marketplace. The rebound we have seen the standard bear market practice. Is we have had a strong rebound, you could make thatg statements in march asia, the u. K. In europe were so the longterm value is not the same for the u. S. , and the u. S. Is not far off previous highs against the outlook of a recessionary outlook. Do you see in the disconnect between bond markets and equity markets are doing now . As you describe a rebound in equity markets from those march lows, bond markets did not seem to be playing the same game. What does that tell you . The u. K. Islls me trying now. The bond market is another fixed market if you look at the Federal Reserve balance the. Federal reserve balance sheet. Nearost of capital is zero. Productivity will failed to shine. Ultimately tech is what you want. That is a longerterm worry for investors in the u. S. It is inevitable that things have been salvaged at this point with a forced shutdown of the Global Economy. The harsh reality in the mediumterm keeping everything alive, it is not good for Equity Investors which thrive on profits and earnings. Matt it is hard not to be bearish when we look at the imf forecast for global contraction. Now almost 5 . 20 toback over the last 40 years, we have not seen global contractions, even the great financial crisis, or the Global Financial crisis looks like Nothing Happened compared to a 5 drop. On the other hand, we were showing the nasdaq. There must be companies that will continue to make money, and make even more money during a new covid world. Are those companies, google, facebook, amazon, netflix, are those Companies Going to continue to do well . We do not have any near that price point. Many of the changes as you highlight, is it more stayathome, more internet . It looks a little like that, but not the same proportions. My argument in reverse is, we need to get to the point we target gdp rather than more loans. We will spend the next 12 months didnt closer to that, whether it is the magic money tree or governments recognizing they will do more fiscal spending. If that is the case, you will want to broaden your exposures. The pandemic will not last for eternity. Although one can be bearish for the next 12 months, in reality for the economic environment, this will not hopefully be a permanent state, or we will learn to adjust through it through time. It, and an used to acceptance of that reality, the new normal allows other parts of the market to rebound. We value growth trade. Is a higher nominal level of gdp. That will not be delivered by more loans and debt. The man on the street as opposed to wall street. Anna thank you so much. Peter toogood, cio, embark group stays with us, and we will talk about strategy when we return. Breaking news coming through from japan, Softbank Group buyback 5 of shares for 500 billion ¥. Some other announcements coming through around personnel changes at softbank and its buy back. Could gold gains be set to continue . This is bloomberg. It is so important, somebody people want to start at the bottom of the organization. We started at the top. To set aspirational goals, you have to hold people accountable. We have been making progress, but we have a long way to go. We need to understand, listen, understand the concerns about black communities in particular, and other minority colleagues. You have to think about who you partner with and do business with. In short review, you look at your providers, the firms you work with, the vendors, and if there is no diversity among them in terms of ownership of those businesses and in terms of the employee profile, then you need to think about how you spend your dollar differently. Begin moving away from the ills of the past and behavior of the past, and start converging on a positive vision for the future. Leaders like myself need to spend more time listening, trying to understand, then actually taking steps that in the medium and longterm will move us more quickly to create more opportunity in fairness. Guestsome of our top executiveserg on how and Business Leaders can drive diversity and inclusion in the work base. Lets talk about strategy. Peter toogood, cio, embark group. Have you changed over this threemonth rally we have seen, now heading into a period when the market seems to have gotten ahead of its feet . What is new now . Deal. Not a great , you need allocating had thethe u. S. , it has walls. It has had the wobbles. The value argument to a degree. Relative opportunity within equities. Credit underpinned and underscored by the Federal Reserve offering itself as a. Uyer of losses within bounds, the credit market has life support that implies a ree of they will accelerate. Avoiding the worst of credits will be the position. Anna how do you navigate the tiny and credit markets . How do you navigate the timing in credit markets . Companies in the u. S. Look to shore up Balance Sheets. I do not know if to take that is a positive or a negative. It is great they can get money when they need it. What you think of the highyield market . Peter i think the Investment Grade part of the marketplace [laughter] market isyield interesting because of their need for finance, they will die within the first. It goes back to the point, the support from the authorities. Mnuchin has not spent his 500 billion yet, he has spent 40 of it in terms of Corporate Bond buying. That idea do not like of price discovery markets, if one is going to invest, the bond markets globally. The rest of the world is in the same position. They do not have such a degree of damage arguably in terms of the largescale of outstanding debt. Anna there might not be price discovery, but you will be buying. Thank you very much, peter toogood, cio, embark group. Coming up, german corporate making headlines, and more on lufthansa. They will back the 9 billion euro government bailout. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 30 minutes into the start of cash equity trading. European equity futures showing a little bit of weakness. Bearish downpretty between 0. 3 and 0. 6 . Ftse futures down 0. 1 . What you should watch out for today, it is a busy day in Corporate News. Lufthansa, shareholders will vote on a 9 billion euro bailout. 12 30 the june meeting, when the council expanded the Bond Buying Program further than expected. The german against court ruling. Later we will get Interest Rate decisions from mexico, the mexican central bank. They are pushing the key policy rate 5 . The fed will see results from its stress test. A monkey questions, whether the Capital Requirements forced u. S. Banks to reduce future dividends. Given how stressed the real world looks now, you wonder whether it will be tough enough . Matt absolutely, that is always a question with these tests. Lets get to one of those stories, left on the, lufthansa, at the beginning of the week said they would not vote for the 9 billion euro government bailout. His shares were enough to stop the action. Now he says he will. Joining us to discuss is bloomberg Senior Editor benedikt kammel. What a difference a few days in the visit from government ministers will make in your strategy. What changed his mind here . Enedikt we do not know. Then beginning of the week, will he or wont he . The stakes are high for lufthansa. Had he opposed the votes today as in effect, it would have wiped him out as an equity investor. He knew this forehand, he is not naive. He did not just find out yesterday he would lose a lot of money. That is the big question. Did the government pile pressure on him . Was he trying to gamble to see if he could get a sweetener out of it from the government . When he realized he could not, he said, all right, i will fall in line. He never really opposed the deal. Highstakes gamble that looks as if the government got its way and the vote will go through today. Anna this has been a longrunning saga. Announced, does that give the ceo time to regain footing, or will he be forever bound to the purchase of monsanto that has given bayer such a headache . Benedikt he assumed the connected to this deal, it was his deal, his baby and he took it from the home. Investors are deeply unhappy with this purchase. The deal closed in 2018. 90,000 deals or settlements, and there are about the00, a quarter of litigation is outstanding. They are not out of the woods yet. That is what investors are concerned about. They put a lot of money on the table, almost 11 million to resolve these cases, but the question is will they have to put similar money on the table for the next round . These are the cases of 30,000 have failed to settle. They will be tougher to convince. Possibly this will become harder for bayer to resolve the rest. A headache for the ceo, but worse for the victims. Following up on the wirecard story, we know the crucial role falls to the creditor banks. Are they going to extend the credit line . If so, for how long . What do they need to see to keep the Company Alive . Benedikt we need to see if the company is viable and worth saving. The crucial role for the , visa andty mastercard, if they extend a helping hand and stay with wirecard, there is a business to save. If they jumped ship, wirecard does not have a business. We have heard from the bank of china saying they might not extend the credit line. Whether others will follow suit, that is an open question. They are willing to give wirecard a little time to regain its footing if that is possible. And in effect get a sense of what the damages for them. They cannot do this forever. They do not want to delay a solvency, which is a real threat. Doing that is illegal in germany. We are talking about days, but not much longer. Matt thank you for joining us, benedikt kammel in berlin, talking about the biggest stories in europe. Up next, the fed announces the result of its annual stress test. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are about 20 minutes away from the start of cash equity trading. We are looking at a mixed picture with dax futures slightly higher, but the futures down 0. 4 . These are todays top corporate stories from the bloomberg terminal. As we were discussing, bayer has than 12 spend more billion to put its monsanto liabilities behind them. The deal settled 75 of roundup suit, around 95,000 cases. It sets up a fund for future claims. The German Chemicals firm has resolved litigation over its herbicide, and claims of toxic pollution as well. Jobs aslans to cut 6000 the coronavirus continues to hit carriers around the world. 15,000 staff will remain for load. Particularly those time to international operations. Want to says its entire fleet qantas says its entire fleet will remain grounded for at least three years. Asian business magnates, jack ma, is parting ways. Endedareholder meeting with him saying he will step down. He says the departure should not be interpreted as a disagreement, even though Alibabas Jack Ma is quitting softbank at the same time. , quote,sions were perfectly amicable. Anna the fed announces the results of its stress test today. For the first time it will take a Sensitivity Analysis to gauge how will banks can navigate an economy shattered by the pandemic. That the stress test will result in scrapping dividends . The consensus coming out seems to be it will not be a material cut dividends. That is what Bloomberg Intelligence thinks, along with other strategists. The u. S. Regulators could have gone on when the pandemic started and told next to scrap their dividend like european regulars did, but they opted to wait for the stress test. U. S. Banks say the earnings power is high enough to keep the dividends. Selfregulation in terms of scrapping their buybacks at this point. This time around, frustratingly, we will not know after today if these banks will scrap their dividends because the Sensitivity Analysis, which is the basis for what policymakers decide, it will only be released on an aggregate level, so we cannot calculate what will happen to each bank, and banks do not have to give the plans until the 29th. It will be a few days before we know if dividends survived the stress test. Matt i was wonder if stress tests are tough enough. Wouldr considered the fed stress tests banks when the entire Global Economy shuts down at once. What do you think about this round . Dani it is telling in itself that the feds prior stress test did not match what we have seen during this pandemic. That might be why we have seen people come out during the last crisis saying the fed is and cannot make a judgment independent of what the banks are asking for. It is not clear if this news Sensitivity Analysis will go into factoring what the Capital Buffers will be. It might be a policy tool for determining dividends. Is onlyitivity analysis taking into account loan losses, not market stress. We have seen a lot of market stress. At is probably good news for Goldman Sachs, and the likelihood of harsh judgment and slashing dividend will likely not come into fruition because of this. There is that troubling sense the fed did not take action right away, so the bias is toward banks now. Lending is an important part of the economy as we tried to recover from the pandemic. Matt thank you for joining us, dani burger on stress tests. Citigroup president jane fraser is worried is about signs the bank is seen in Consumer Behavior in asia as it weighs what a potential recovery could look like in the u. S. She spoke with bloomberg in an exclusive interview. , wee have been surprised had about 2 million customers who signed up for relief programs in the state. A large number of them carried on making payments. As we see in the enrollment rates, down in the singledigit percentages from the previous and relieves. Previous enrollees. At the moment, it is anyones guess. We saw a significant government stimulus in the first part of this crisis. 1200 checks given to americans. You think when the stimulus starts to wear off, it is a distinct possibility, and we have seen people come out of programs and go back to paying credit cards in full. Be how question will much of this is from the Stimulus Program and how much is it people going back to work again . All of them want to. At the moment is looking as optimistic, but the Health Situation will drive what really the v endshow strong up being. Asia has been very sluggish in the return of the economy in many sectors, the consumer is more cautious about spending. , the consumeract is far from firing on all cylinders in asia. That is a concern in america. The consumer is becoming such a big part of what Economic Growth rates could look like moving forward, can you hold in on your biggest concerns, where we may see the most pain points moving forward . If you look from the consumer perspective, unfortunately the youth were hit hardest, the minorities, low income. Many individuals who were able to work remotely and from home tended to be in the higherpaying roles. For thediate hit were more vulnerable parts of the population anyway. The Health Crisis hit the elderly, whereas the Economic Impact will hammer minorities. That is a point of real concern. We have to think about how to help them recover. The other question, which of the different corporate sectors will need to restructure because the demand does not recover, and we do not have the capacity we had, and what that means on corporate layoffs in the sectors hit hardest. Or maybe hit by a longerterm macro slowdown. Acts ine additional this play to come. I am hoping there are only two of them, but it could be several. That was citigroup president , jane fraser. Minutes away from the start of equity trading, 13 minutes to go until thursdays session. We will talk about stocks in focus, and get back to the bias the end of the road of that legal question hanging over the business. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 11 minutes from the start of the cash equity trading day for thursday. The European Equity market futures suggest weakness, and u. S. Futures look weaker as well. Down 0. 6 on 50 futures, that seems the maximum out down 0. 6 for ftse futures, that seems the maximum amount. The pandemic is continuing to spread across the United States with california, florida, and texas in a Record Number of case. Now predicting one hundred 80,000 will die by october, according to john hopkins. 120,000 have died so far. Officials in houston say hospitals may exceed intensive care capacity. 20 chinese firms controlled by the chinese military, opens the companys up for the potential of u. S. Sanctions. This includes huawei. The move comes as relations between the superpowers continues to deteriorate. China sees it as a key Campaign Issue in the 2020 election. President trump says democrats voted down a Police Reform bill it would limit the use of chokeholds and encourage body cams. Democrats say it does not go far enough and does not have federal restrictions on the use of lethal force. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Matt eight minutes from the start of cash equity trading. Stocks to watch right now, joining us is our German Bureau chief. Most of the biggest stories our german. Lufthansa has to be one of the most interesting. The beginning of this week we thought there billionaire shareholder was not going to back the bailout. He has met with Big Government heavyweights, and he has changed his tune. Will this past today . Likely thatinitely this will pass today. Enough theyot needed a two thirds majority for it, there is a view most shareholders will agree to it. The alternative is not in their interest, because the alternative would likely be creditor protection for lufthansa. Sharesuld wipe out the for most shareholders. The expectation is there will be a yes vote today, and the Share Price Movement this morning, 23 rise shows this is the expectation. Matt they do not want to go through an insolvency procedure and fire thousands more that will already be fired. It looks like government pressure turned out heavier than the billionaires resolve. Anna i was going to move on to bayer. We have heard from bayer after hours yesterday, they agreed to spend 12 billion to resolve thousands of u. S. Lawsuits. This is not the end of the story. Isnt. No, it shareholders have reacted positively because they are happy that a part of the issue is resolved. It is not the end of it. Is facing bayer 30,000 unresolved claims. This is going to continue to be a headache Going Forward for them. There are new cases and new lawsuits popping up all the time. This is definitely not over for them. It can usually go on for many years. Shareholders, there is still relief in the market because obviously the biggest chunk of these losses have been resolved now. Us, thank you for joining daniel schaefer. We had easyjet raising 419 million pounds. They are trying to philipp fill up the coffers and are gearing up for more flights wells europe, but remain below previous capacity. This is britains largest discount airline, among one of the first european carriers to build up its services again. Coming up, the market open. Futures are pointing to a negative session in europe. Euro stoxx 50 futures down 0. 5 . Better for the dax. Perhaps because of some of the corporate stories we talked about. The open is next. This is bloomberg. Anna a minute to go until the opening of cash equities trading. Reality, newm virus cases hit daily records in florida, california, and texas. The imf sees a deeper global recession than it predicted. Lufthansa gets a lift. The biggest shareholder says he will back a 9 billion euro bailout, giving the rescue plan a shot of momentum. They are seeks closure bayer seeks closure. They settle thousands of round of cases. The significant number of claims remain unresolved. Take a look at european futures. We have a mixed picture with german futures up 0. 5 and ftse futures, little changed. That has shifted to the downside, ftse futures off and dax futures pulled under as well. The cash trade is open. Lets look at the global macro movers screen. You can watch as equity indexes open up. The ftse is typically the first out of the gate, down 0. 25 . The ibex down 0. 4 . The ftse falls further down 0. 5 . The bluechip mark index opened, little changed, but it will move as other National Indexes open and contribute. The cac in france down 0. 25 . It does not look like the ftse is falling much further. Own 0. 4 , holding that level when we see big drops, they accelerate quickly in the first few seconds, but it looks like the ftse losses are holding at around 0. 5 at 6100. Italy opened down 0. 25 . The dax, typically one of the last to open, so you will wait a little while before the german equity index opens. European markets have opened on the back foot. Not huge losses, but giving up a with half percent drops on the ibex and ftse. Anna yes, i am waiting for the dax to open. It is an ongoing story. Looking for a price on lufthansa as well. Bayer is up 2. 6 . We are waiting for the gaps to be filled on equity market. It is increasingly taking the risk off. Continual infections in the u. S. Taking from the rebound from the march lows. Many wondering if there was a disconnect between the virus economic a knock on story in the United States, and that is why it sent risk assets up so much. And on an ongoing basis, the reinjection of trade tensions between the u. S. And europe with the white house considering further tariffs on european produced goods. Adding another layer of risk for investors as we head into the summer. Matt we are seeing some of the other stocks open up. Now we have lufthansa opening up, gaining about 2 sorry, 20 . This stock has gotten crushed year to date, down 45 . Gaining a little bit of that back this morning. Wirecard, down more than 5 to 1160. Some of the biggest stories we have been talking about centered on the german story, bayer, wirecard, lufthansa. A mixed picture, but mostly to the upside if you look at the big jumps in bayer and lufthansa. Lets look at the dax and see if that index has opened in its entirety. The dax is open and unchanged at 1291 now. Some are up and some are down, but it is evening out. Of ansomething outperformance to be unchanged on a day when markets lose half a percent in European Equity market. Significant losses in europe, more than 3 in some markets yesterday. Lets go to an important conversation, corporations all of the world responding to racial issues as a result of any quality sparked by the murder of george floyd. Goldman sachs ceo David Solomon spoke at a summit about how the company is focusing on any quality. He was speaking to john micklethwait. We bring you that conversation now. David we had Goldman Sachs have a lot more to do, and we are focused on it. The industry has a lot more to do, but so does journalism, and so does the industry broadly. There are fundamental racial equality issues that are deeply rooted in our society. Wherea moment in time leaders like myself need to spend more time listening, trying to understand, and actually taking steps that in the medium and longterm will move us along more quickly and create more opportunity and fairness. It is not a question of just Goldman Sachs but across society more broadly. That is something i believe in and i will continue to try in her own way to make a difference and contribute to. There is a lot of work to do in improving education, economic opportunity, and fundamentally finding ways to make our system more fair. When it comes to diversity and inclusion, it is a broad set of issues. A lot focus a properly on the black community, but there are issues with gender, with other populations that require additional focus. We will try to do things, you are aware back in january we made a statement that we would not take a Company Public in the u. S. Or europe without one diverse member of the board, two diverse members of the board in 2021. That is having tangible results. You might have seen the talent tier announced, they added a diverse candidate. I am not sure that would have happened had we not taken a step. I see it across private equity more broadly. Diversity is being brought into the boards, that is a good thing. We have to find ways of their platforms to make a difference, but it takes time, commitment, and we cannot let this moment pass without being committed to do more. John do you think wall street is behind on race but ahead on gender . Wall street is pushing more for the past few years. Is there anything you can learn from that . I absolutely agree we are behind on race, society is behind on race. They are deeply rooted inequalities that exist that come from longterm policies and an awful lot of history that we will need to work robustly as a society work purposely as a society to unwind, change, and it will take quite some time. Sachs,learned at goldman having purposeful goals, creating metrics to my creating accountability, shining a light on that, and Holding People accountable makes a difference. While it is slower than we would like it, i do not know any other way to advance the ball other than to be purposeful, thoughtful and metric in your approach. That is something we are trying to do, and that is something in the gender work. We are trying to apply it more broadly. A lot more work to do. John i saw that jamie dimon had taken a knee as a symbolic gesture. Would you do the same thing . David i saw the picture of jamie. I do not know what the context was. Somebody put the picture in front of me. I stand with the black community at Goldman Sachs and more broadly to do my small part to listen, be better educated, better understand, and give a position of influence to make a difference to move things forward. Come from is going to doing what i can do to help advance, and that starts from trying to have a difficult conversation, by doing a lot of listening, and trying to learn to become better educated. I am not in his shoes. I do not have the experience of a black colleague or someone who is black in society. I need to learn more, listen more, and see how i can use my plant to advance those positions. Use my platform to advance those positions. Matt that was David Solomon speaking to john micklethwait. Coming up, daily records for new infections, more on the market impact. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Minutes into the trading day of looking at drops of 1 on the ftse and cac. Better,doing a little down 0. 4 . Less than half the drops we are seeing in the u. K. And france. Joining us now is sharon bell, cohead emea Global Investment Research Equity strategist, Goldman Sachs international. Let me ask you your thoughts on the market right now, oridering the second wave hotspot expansions we are seeing in places like the u. S. And brazil. Also in places like beijing and germany. Is it concerning you as an investor . Sharon it is concerning because high,s and valuations are if i look at key ratios, going back to 20 21 earnings, valuations are as high as any time since the tech bubble. Wave,ry about a second starting to see some of it come through. Governments will be better dealing with it over time. The markets are vulnerable. They have not opened so much. Anna how do you build a European Equity portfolio reflecting nervousness around a second wave or continuation of the first . Which sectors are in focus . Europe pretty defensive, another setback in european equities. The sectors we like include health care. It trades higher than the rest andhe market, stable growth more defense of earnings. Well. Tocks as [indiscernible] the other potential wonder look at with the green deal coming through in europe, additional spending should help companies. Some are more cyclical but in the medium term should do well. You mentioned health care stocks, the valuations for European Companies versus u. S. Companies. Is that true across the market . Trades ats, europe about 20 of the u. S. Beenroblem is europe has in the value stocks and low growth stocks. The u. S. Is dominated by tech companies, and europe is not. It has more banks. Just discussing the green deal,ealth care is a bigger sector telecoms. Europe is changing over time. Sectors int all europe [indiscernible] it is not because the u. S. Has better sectors. It looks a little cheaper than in the u. S. An interesting question from a viewer which takes what you said and asks around the second wave of the virus and where we are seeing the big outbreak in the United States in the sun belt . One viewer asks if the resurgence suggest u. S. Equities might underperform global or european shares . Hastold us why europe maybe underperformed earlier in the crisis. Does that continue . Sharon yes. Midmay europe was a sharp underperformer because it borrowed earlier, lockdowns were severe, the Economic Growth impact was large. It will have a bigger impact on gdp than in the u. S. We do like europe more. Because of those harsh lockdowns early on, there is potential for europe to recover a little after. [indiscernible] generally that has been wellcontrolled. Data, theyt recent were improving sharply. A clear improvement in the data. And the policy response in europe has been helpful too. [indiscernible] there are concerns about the resurgence of the virus, wherever that might be. Anna thank you very much, sharon bell, cohead emea Global Investment Research Equity strategist, Goldman Sachs international. Bloomberg,cross the u. K. Fiveyear gilt yields dropping to a low. Going into the last ecb meeting whether there would be yield curve control, after the fiveyear horizon. As a result of the risk off we are seeing in assets, money coming out of equities and going into fixed income not just in the u. K. , but treasuries so yields are generally coming down. Coming up, the ecb will probably see a count of his june meeting later today. We discuss what to expect. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 22 minutes into the trading day. ,e see significant downside losses more than 3 on some of these markets yesterday, we are now down more than 1 . Concerns around the virus and continued spread in the southwest states of the United States. Lets talk about the European Response to the virus. Ecb counts as june meeting today, policymakers expand the pandemic Bond Buying Program the on market expectations. Investors will be on the lookout for dissenting voices, wary of extending support to the eurozones most vulnerable economies. Sharon bell, cohead emea Global Investment Research Equity strategist, Goldman Sachs international is still with us. Interesting to see with these minutes from the ecb, if we get pushed back, or clues about how the ecb fights back against german court rulings. Some think this will tie the hands of the ecb and its ability to support markets in the future. What do you see . I do not think we will be tied to the ecb too much. The ecb needs to provide more evidence, and they have not provided enough for the program they are doing. They need to come up with a reasonable amount of evidence. I think the response has been proportionate, wellreceived by markets, and they could come up with good evidence. It might tied her hands in the future if inflation starts to but that is not something we see likely in the next few months. Perhaps later on in the cycle, but right now their response has been a portion it. On the imfve a chart story yesterday that was shocking, it showed 40 years of global growth. Only discounting 2009, which was unchanged. Then a forecast of 5 drop. Fact wes to life the have not seen a global contraction. This will be something we have not seen in our lifetimes. Do you think Central Banks and governments will be able to keep their foot on the pedal long enough in terms of stimulus, support . Or do you think they will bailout too early as it becomes more popular . One. N it is a tricky the initial response to the hindsight,aps with was quite straightforward. A lot of policy stimulus at the start, and locking down hard. Then as things progress and move on, you have to think about what , and thoseroducing things are trickier and require a lot of decisions. For the time being, coming back to inflation, it really does look as if it has come down. We found this with pandemics in the past, not anything as significant as this is impacting gdp, but in the past they tend to be disinflationary in the early stages. From china and the data in the. , i think u. K. Inflation it means Central Banks can keep their feet on the accelerator for a long time. Years, asst 20 to 30 long as that remains low, we will be able to. , it will allowc governments to stimulate their economy with debt that they can afford with lower rate. Matt absolutely. Thank you for joining us. Sharon bell, cohead emea Global Investment Research Equity strategist, Goldman Sachs international. Coming up, texas, florida, and california registered daily records. More on the market impact, next. This is bloomberg. Welcome back to Bloomberg Markets, this is the european open. Session thiso the morning. Looking at European Equity indexes, red arrows here. 600 on benchmark stoxx your screen right now down 0. 92 . It had fallen a little further earlier and has now paired some of those losses. Screen a look at the grr on the stoxx 600 index. We can see the Industry Groups that are making these moves. This is your group rank return screen. Travel and leisure stocks taking the biggest hit today. Thanks, oil and gas right behind them. Concerns about a second wave or about continued growth in infections of the coronavirus really hitting the sector that has taken it on the chin the most, the hardest today. Anna . Anna interesting to see in the travel and leisure sector. More than 11 to the upside. Lets get the bloomberg first word news update for you. Are of the top stories we covering up bloomberg. The International Monetary fund has downgraded its outlook for the Global Economy, projecting a significantly deeper recession and slower recovery. It sees global gdp shrinking 4. 9 this year, more than the 3 slump it predicted earlier this year. If the virus continues to surge, it could get even worse. We have simulated a second wave would generate basically zero growth in 2021 as compared to 5. 4 loss in 21 which we are projecting. That is the classic lshaped nonrecovery. That would be a really dire outcome. We are getting closer to depression levels. The pentagon has named 20 chinese firms it says are confirmed by the chinese military. It opens them up to more u. S. Sanctions. The move comes as relations between the superpowers continue to deteriorate. To be a keyely in the 2020ue election. South africa is facing debt levels. ,s a middle income country south africa does not have access to many debt relief programs available to other african nations. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Matt . Matt the coronavirus pandemic is racing through the United States with a new model bydicting 180,000 deaths october. The u. S. Is approaching its alltime high for daily new cases. The virus is spreading rapidly in some states that were slow to set lockdowns are quick to lift them. , thanksus to talk more for your time this morning. Let me ask first what this changes. We have been talking to people about whether you should be bullish or bearish, whether the market has gotten ahead of the underlying economy, but if you are really looking at your portfolio and trying to mold it, what are the biggest changes that you see here due to this new world we are living in . Our view is that it has accelerated a lot of the trends already in place, things like Retail Company suffering and Technology Companies getting ground. We also think that companies that are the biggest and the most dominant will consolidate their positions thanks to having stronger balance, being able to weather the crisis better. At trends likek travel and aerospace. Those things have shifted over the past month. We think the economy, we have gone out of the despair phase and we are firmly moving into the phase of repair and things getting better. Think full lockdowns may be quite high bars, but you will see things flareup from time to time. We are not out of the woods yet, but we think things are getting better. Anna good morning to you. If we are in a repair phase as you put it, and number of companies are taking selfhelp to try to repair Balance Sheets or try to shore. P depleted there have been plenty coming of companies coming to the market and asking shareholders to put their hands in their pockets. Do you see any difference in the amount of equity that companies are raising or the amount of enthusiasm to participate from shareholders . It will depend on the company and the future prospects. If you have sectors like travel, that might be a bit of a harder sell. If you have companies that have a cleaver way to adapt, than it is easier. One of the things we talk about in our midyear outlook that we published as part of being with the Quintet Group is that we think there is going to be a multi speed recovery. Unlike previous recessions where everything comes back at once and Economic Activity comes back , you probably have some sectors that can go back to very quickly and other sectors could remain challenged for years. It means we have to look at investing a bit differently rather than simply looking at all cyclicals coming back, because there will be very different trends within cyclicals and value. Aboutwhat do you think the chances for a comeback in those Cyclical Industries that build cars, buses, trucks . Are they facing a change that is going to be too difficult to recover from . Shanti i think it is too early to tell. There are competing dynamics. There is the idea that perhaps people live further away and they dont live in big cities as much and therefore there is more demand for autos. Versus the tradeoff of perhaps less money and spare cash to spend, so i think it is a bit too early to say on some of those industries. The Auto Industry was already under siege in terms of things like they just build better cars and they last longer and their replacement rates are lower. Sector will continue to have a difficult road ahead. On the other hand, if you look at Something Like semi conductors, that probably can bounce back very quickly and does not have all the structural headwinds the Auto Industry was facing. Anna what do you see for the dollar ahead . Off tradeee risk dominating, u. S. Futures weaker, european stocks weaker. Very modest gains only. Where do you see that heading . Shanti that is something we do talk about in our outlook. We think the dollar is going to gradually weaken. Part of that is it has been overvalued for a while, but we think you are going to have the oil price slowly rising into the end of the year. That should put more petrodollars back into the economy and reduce the demand for dollar that we have seen over the past months. Secondly because of the massive amounts of quantitative easing we have, we think that also will put more dollars into the system and reduce demand. We areback of that you, long emergingmarket equities and we are also long hard currency emergingmarket debt. Those are things that tend to benefit from having some dollar weakness. A lot of those Companies Borrow in dollars. When the dollar weakens, it becomes a bit easier for them to service that debt. Thanks very much for your time this morning. Shanti kelemen, from brown shipley. Moreg up on the program, on that loose dons up story. The Airline Biggest shareholder says he will back in 9 billion euro government bailout. It has also been given european clearance. We will get the latest on that lufthansa story next. This is bloomberg. Welcome back to Bloomberg Markets, this is the european open. 42 minutes into the session and looking at it 1 loss on the ftse. Lesser losses across other European Equity indexes, but they are all down as well. Lets get the Bloomberg Business flash, todays top corporate stories from the bloomberg terminal. Bayer has agreed to spend more than 12 billion to put its month santa behind it. Roundup settle 75 of suits. Around 95,000 in total. It sets up a fund for future claims. The German Chemicals firm has resolved its litigation over its herbicide as well as claims of toxic pollution. Qantas plans to cut at least 6000 jobs as the coronavirus continues to hit carriers around the world. Around 15,000 staff will remain furloughed, particularly those tied to international operations. Qantas says in terms of its international fleets of superjumbos, they will remain grounded for at least three years. Asian business magnate Masayoshi Son and jack ma are parting ways. Softbank founder son ended his Shareholder Meeting by announcing he is stepping down from the alibaba board. He said it should not be interpreted as a disagreement, even though jack ma is quitting softbank at the same time. Son says the decisions were perfectly amicable. That is your Bloomberg Business flash. Anna . Now back to Corporate News and wirecards stock may have collapsed, but that does not mean all the shortselling is making money. Shares have tumbled 88 since the company said nearly 2 billion euros have gone missing last week. The drama continues and so did the bearish trades, but is it getting more expensive . Dani burger is here to explain. Ani it is hard to be a bear even for a company like wirecard. Bloomberg spoke to john henson of bronte capital, where he said his wirecard short was one of the biggest losing positions he has had. That is because he was not wrong, he was just early. He took the position in 2010 and you can see how painful that would have been in the ramp up to 2017 and 2018. Even if you have come around to this bearish thesis more rapidly , your timing has to be impeccable because it has become so expensive to short wirecard. You can see what has happened over the past couple of days. This has left up to 50 from just around 2. 2 5 . This means if you were to borrow 10 million shares to short, you would be paying about 150,000 euros per day just to keep this trade on. You have to be sure that it is going to decline. Of the most shorted american shares, that fee is only 0. 3 . That shows how popular it is, how much demand there is too short wirecard shares. Matt, anna . Matt thanks very much. Dani burger talking about wirecard shorts. , the airlines biggest shareholder will vote now in favor of a 9 billion euro government bailout. Lufthansa won European Union approval to receive a 6 billion euro recapitalization from the German Government hours before shareholders vote on the rescue package that will dilute their stake. Guest. Us now is our if you arefirst confident that this bailout will pass. On board, itthiele wont not pass, but as everybody else going to get on board . Hi, matt. Absolutely. About 30 8 tion was of all shareholders in lufthansa. They do have a large retail holding. We would have expected them to support the deal. , whoain concern was thiele has given his view last week and he didnt like that the German Government was going to ticket 20 stake in the german business. He did say he would support the deal to german media. It is expected that the deal will not go through. Anna good morning. What do you think will be the future of some of these airlines when it comes to the size and scope . European airlines im talking about. You see the french government talking about wanting to clip the wings of some airlines. To allow other means of transportation to compete. Of these going to be shadows their former selves, these airlines in the future . Think thelutely we stronger will continue to get stronger and the weaker ones as we have seen with easyjet and the rest will have to retrench to some extent. Theylufthansa has said will have to reduce their aircraft fleet by 100 aircraft because obviously carriers dont have the cost base to compete with the fcc market. Reasons to be retrenching is 50 of lufthansas businesses exposed to the Corporate Travel market, as well as 50 long haul. While we have seen a stage to reopening in europe, the opening of the longhaul market is going to be far more progressed toward the end of the year, which is a problem for all the flag carriers. Matt the domestic market i think is interesting because ive never lived in a country where there was only one choice. When i want to fly somewhere inside of germany, it doesnt seem lufthansa has any competition at all. Is this monopoly model a good one . From a competition perspective, for consumers, naturally we say no. Some other airlines having issue with support of the German Government. They only have to give up a small part of the overall slots and it is hard for the others in europe to go within german market. Anyone looking rationally at this, any airline that has a 90 share in the domestic home market, that is naturally your problem. Anna thanks for your time this morning. Nuala mcmahon, goodbody stockbrokers aviation analyst. A gold year for bullion. We will discuss the gold outlet. This is bloomberg. Welcome back to the European Market open. We are 52 minutes into the european trading session. European equity markets. Worse than that for the ftse 100. We have been down more than that. U. S. Futures point to another down day. Lets talk about what is going on with gold price. Joining us now is our markets live editor who has been looking at the gold price. Does the gold rally . Look, i think it does. The best performing asset over the past year. What we are seeing at the moment is support Monetary Policy everywhere and a lot of uncertainty in the world. There is a sense that people want to buy gold. It does well one real rates are lower. As they are right now. As we go toward the end of the year, we are going to hit the significant 1800 levels in the think it pushes on from there. I think it is really possible. Matt is it necessary to believe in inflation to get on board with this rally . Is that a part of it . It is always part of the story with gold. They say different banks are getting things wrong and gold as an inflation hedge, therefore they should buy gold. Gold is more about real rates than about inflation. Ands an inflation hedge and a hedge against other things as well. , therates are higher opportunity for gold is very high. But with the environment we see now, with very low real rate, i think the Inflation Expectations dont matter as much is the expectation of what the fed is going to do. Anna let me ask about what we saw in march around the height of the nervousness around the initial outbreak of coronavirus. We saw gold struggle when equity sold off. That dentist that haven appeal of gold . Is it sometimes a little too liquid for its own good . We saw equities selloff. We saw people getting margin calls. There were even a couple of days where you saw treasuries under pressure at the longer end. You saw liquidation simply because people had to get their to meet their matches and duration. That is what we saw. It has damaged golds reputation somewhat, but the fact that we have seen this massive bounceback confirms what we saw in 2008. I think gold stands strong. As we see gold hovering around these high levels, we see bitcoin hovering around relatively high levels. It is a similar thing happening there . I think with bitcoin what you are seeing really is not so much a correlation with gold, but a correlation with tech stocks. Ive been looking at it quite closely and what has been happening with Bitcoin Bitcoin used to be correlated with absolutely nothing else. It has been correlated with tech stocks, with nasdaq. Whether that is because you are more traders that are accustomed to trading both, i think that might be the case. All right, thanks so much for joining us today. You can check out his work by typing mliv go on the bloomberg terminal. This is bloomberg. Coronavirus cases surgeon america. Florida, california, and texas set daily infection records. Gets a lift. The airlines biggest shareholders that he will back a government bailout, giving sharp momentum ahead of the crunch. The Goldman Sachs ceo says the equity rally is not justified by fundamentals. Good morning and welcome to