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Paul romer, Nobel Laureate may nyu start professor of economics. Cfo as wen johnson push ahead to a vaccine. Memsic own at present will stay or lower levels until the inflation pool is near. Slack in the economy because of the buyers. Improvedic activity significantly in may and june april,s trough in alongside the ongoing containment of the virus and the associated easing of lockdown measures. At the same time, Economic Indicators remain well below the levels recorded before the pandemic. Alix joining us is michael mckeen. Give us some highlights that set out in pushing forward. It is a reversal of roles. The ecb stepping back from its role as firefighter, getting into a more maintenance mode. Christine lagarde urges the fiscal authorities and the eurozone to step up and take action, approve the 750 billion rescue package they are talking about. She said she assumes they will do that. She says that is critical. The ecb itself not doing anything. Leaving its main deposit rate at 50 basis points. No change in how Bank Deposits are subject to the negative rate. They said they did not discuss that. There is no change in additional bond buying under the emergency purchase program. 20 billion euros a month. They say they will use that up. They are not going to worry about the capital key, in other words, the ecb is supposed to buy bonds from any individual country in proportion to the size of that countrys economy. But, theyre going to buy what they need. At some point, it will all converge. As for the economic forecast, the euro zone bottomed out, lagarde said, in april. Way ahead of us in the u. S. Retail sales and Industrial Production yield numbers seems to show that. She says,come losses, are waiting on consumer spending. While the outlook remains uncertain, risks remain the downside. With weaker demand, inflation is likely to come in lower. They will leave rates at hor below current levels until inflation approaches their 2 target. Guy thank you much indeed. Make mckeen covering the ecb. You wonder what happens for Monetary Policy if we do see the authorities not delivering. Listen to what is happening in the banking sector. Morgan stanley wrapping up a week of wins for wall street. Fixed income trading almost triple, 73 jump in total trading. Bloomberg spoke to Morgan Stanleys ceo on the Economic Outlook. The economy, it is hard to tell. It depends on how quickly the covid outbreak we have seen across the south and southwest subsides. How will people coming back to their place of work functions. Continued liquidity and stability in the markets. It is too early to tell. , u. S. Unius, david george Banks Research analyst. What i thought was interesting was bank of america and the provisioning it delivered was below what we saw elsewhere on wall street. Can you tell can you sort of tease out what we have learned from the different banks on their view on what is happening with the economy . They can america sounded a little more optimistic than others. Bank of america sounded more optimistic than others. I appreciate you having me. In terms of provisioning, there is some element of subjectivity and interpretation by each together management team. America,se of bank of it is not surprising the provision was lower. I think it is notable to consider the risk of the b of a loan book, from our perspective is much lower than its peers. That is afflicted in its debt interest margin which is less than 2 , among the lowest in our coverage universe. I think it is important to note that while the provision is lower, yields were lower. As a result, risk should be lower. Alix would you take a look at the allowance for loan loss and the share of total loans, bank of america under 2 . They say it is because they are focused on higher quality, super prime borrowers, etc. Do they need to loosen that up . A likes to think about risk and return collectively. Make sense from a risk perspective, they are open to that. Since brian has taken over the motto has been taking responsible risk. That is evident in their credit performance over the last several years. It would be surprising to see them go out on the risk curve, given where we are in this pandemic and uncertainty. I do not envision them adding a ton of risk. They are probably left more exposed to real estate than other peer groups. Were in the phase where trading is great. The banks are provisioning. When do the credit losses start to pick up . Lender be see the need for this seeisioning when do be the need for provisioning becoming a reality . In terms of credit losses, you are right. The provisions have been hired because of this new accounting standard, the actual losses have been manageable relative to history. To grindexpect losses higher as we go to the balance of the year. If the Economic Outlook gets better, which is what the driver of the provision is, this is true for bfa of a, jp morgan entire industry. Peaking provisions are this quarter and you will see provisions come down in the balance of 2020. Alix does that mean the upside is that someone like citigroup versus bank of america because they have loan loss provisions, or not because of the makeup of what those loans are . Citi do not formally cover. In terms of the industry overall, i think you would see a similar hockey stick the extent that the Economic Outlook looks better, you will see a significant drop in provisions over the next quarters. I think we are seeing the worst of that here in the Second Quarter. Guy ok. Heres the big question. Are overt, and if they and if the economic risk is not that great, may regulatory requirements for stem force them to produce when buybacks restart, what is the sentiment amongst management on what date they can start paying back shareholders . It is an open question. Completely ao be function of visibility in the Economic Outlook. From my perspective, how we are thinking about capital return, i think you are three to four quarters away from getting back to where we were in terms of capital return. The industry is in good shape from a capital perspective and liquidity perspective. Waiting another two or four quarters i do not think is a meaningful negative. Capital will build as Companies Make money. They will be in position to return capital over the next 12 to 18 months. Guy thank you for sharing your time with us. David george, thank you indeed. Coming up, we are going to speak to one of the key voices on credit. Is going to be joining us. Looking forward to that. This is bloomberg. In on thes check world news. U. S. Unemployment benefits posted the smallest weekly decline since march. That can be a reflection of reopenings being paused. Initial jobless claims total 1. 3 million last week. In decrease of 10,000. If you factor out seasonal adjustments, claims actually rose by more than 100,000. Retail sales in the u. S. Rose better than expected. 7. 85 in june. The unemployed have more money to spend thanks to expanded jobless benefits. A resurgence in coronavirus has caused some states to backpedal reopening. Economists say fears of the coronavirus play a bigger role in hurting the economy than government policy. That is the key finding in a series of studies. A study found customer. Isits to businesses fell 60 legal restrictions explained only 1 10. U. K. Accuses russian intelligence of trying to steal vaccine research. According to the science and security center, vaccines in multiple countries have been targeted. British Authorities Say responsible for the hacking is known as cozy bear. 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. , this iska gupta bloomberg. Alix debt and equity underwriting two huge bright spots for banks. For the first half, they see they saw 1. 3 trillion dollars. This month alone, 30 billion in Investment Grade bond pricing. What is next for the credit market . Joining me is susie scher, Goldman Sachs cohead of financing group. It was a killer quarter. Susie, if there was one thing you could point to, what led your outperformance and what is the catalyst Going Forward . Susie good morning. Goldmansing that led outperformance is our client relationships. I have been at goldman for 23 years and we have seen this again and again during many crises we have lived through. During a crisis, our clients come to us for not just execution, but the best advice. The second thing i would say about our advice, and i want to go to the debt and Equity Capital markets business, a a lot of companies in crisis raised both debt and equity at the same time. The way we are set up with the global financing group, which i cohead with dennis goldman, we are able to give integrated advice along with our classic Industry Group bankers. The primary cause of our outperformance in debt and equity. Alix Going Forward, can we see the kind of issuance, equity races in the back half of the year . Susie i will start with equity. The equity markets have gone through a series of phases that caused elevated volumes. The first was crisis capital. Companiesargely for in travel and leisure space, retail space, airlines, cruise moved out of we crisis capital in the common market, and sometimes the private market, we moved into of phases or companies started to raise play offense capital. These are companies that said eventually we are going to come out of this. When we recover, we want to be in the best position. We want to be better capitalized, whether that is for m and a, or going businesses organically. The third phase is why we see level levels of assurances the ipo phase. If you had told me at the beginning of this crisis that the ipo market would reopen, stay opened and accelerate, i would have told you youre wrong. Last night, i was talking to one of my partners who had an ipo slated to come this fall. Intoompany is accelerating august because the markets are in such good shape. The other increase in volume we companiesill be monetizing those if the markets stay robust. One last thing we may see is a return to the markets, perhaps equity, perhaps debt depending on how long leave how long the viruses around and what things look like from a vaccine perspective. Bedo not expect issuance to quite as robust as it was in the first half of the year come over the first part of the crisis. We do think issuance remains robust. Perhaps a slowdown as we move toward the election. Good morning, it is guy. To groupe you back two, the offensive Capital Raise . Capitalized are these companies . What would be the catalyst for them deploying that money . Susie i would not call them over capitalized. I would say wellcapitalized. Signs thatt would be the economy is starting to approach recovery and reopening. I do not think we have to be all the way to a vaccine and full herd immunity, but when we start to see signs that companies dont need to hunker down, we will see spending of capital and mna. Ould see a pick up in alix how would they do mna . What are they looking at . Susie that is a good question. Some of our sponsored clients have been talking about this. How are we going to be able to do mna if you cant travel and kick the tires . Be k people will travel. Some sponsored clients may use private travel. One of our sponsored clients mentioned this last week. I think you may see some assets equityhere private actually owns those assets, or have been close to the industry. The other thing is we have proven we can do so much from home virtually. Up an mnau can pick before we are fully back to traveling the way we used to. We spoke a moment ago about catalysts and getting Business Done is going to get more tricky. Race to get is there a race to get deals done before november . If we were to see a blue wave in the u. S. , rescinding of tax cuts, change in the way wall street is treated and the way ,egulatory environments operate is there a sense within your clients that there is opportunity before november, or are they comfortable managing that risk . Susie i think you would have seen that pickup already. The equity markets are highend rates are low. Companies are comfortable managing that risk. There is a race to take advantage of robust and debt in equity markets. Should we fly further into economic distress, or face a second wave as opposed to the second first wave we are seeing, Companies Want to shore up the Balance Sheet with both capital and liquidity. It robust return to mna until there is certainty. Things about this crisis that has been fascinating and a virtuous circle is that companies from day one did the right thing visavis their Balance Sheets. They got on what might happen in the economy very quickly. That is why you saw almost 1 trillion of issuances in the investmentgrade debt market with even Largecap Companies shoring up their Balance Sheets with liquidity. You saw airlines and cruise lines come into the debt markets to take liquidity out of the market early. I think companies will be a little more about protecting themselves from what may, as opposed to playing offense too quickly. There is still uncertainty. Alix can you give us perspective as we round out on how much risk you feel you can take when you do take on deals . We have seen bankruptcies. Where are you in that spectrum . Balance sheetbank perspective, i think all of the banks are quite prepared to take on a fair amount of risk when priced correctly. Certainly for large cap deals. I think we are starting to see some dialogue around lbos. Most banks have the rest the lbo both i think you could be as prepared to take on risk within reason. That said, we are not near through the bankruptcy cycle at all. You have seen in the highyield market the separation of the have said the havenots. There will be further separation, but this is not a credit crisis. This is a Global Health crisis. This is an economic crisis. There will be credit defaults and some sliding credit on the banks willt folks see that as an opportunity. Very different than the crisis of 2008. Alix always a pleasure to catch up with you. Thank you for your time. Cohead of global financing group. This is bloomberg. [no audio] [indiscernible] alix alix we are having sound issues. Coming up, jobless claims falling the least. They are still seeing a rise in overall claims. We are going to break that down as well as fiscal stimulus with paul romer Nobel Laureate at nyus school of business. Of business. Depends on how quickly the covid outbreak we have seen across the south and southwest subsides. How well people coming back to this place of work functions, continued stability in the markets, so it is too early to tell. Guy that was Morgan Stanleys james gorman. A cautious approach. Romer, andis paul why you paul romer, nyu school of business. Thank you for your time today. We have a high degree ofs uncertainty we have a high degree of uncertainty, watching the sun belt. Looks like we are stabilizing at a fairly high level. What does Congress Need to do, what does washington need to do in terms of the next round of stimulus . What kind of a package would you be looking for . Right tore absolutely focus on the uncertainty. Changes. Nges it any increase in uncertainty will make people thinking about opening business, making an investment, all of those people will hesitate when uncertainty goes up. What Congress Needs to do is reduce the uncertainty. A lot of the uncertainty right now is because of this tension over what to do about unemployment compensation. This is a case where reasonable people can differ. They will have to come to a compromise over these two positions, which it is good to help people when they are in distress, it is good to provide stimulus to the economy but it is not a good idea to pain but it is not a good idea to pay people more when they had a job. They need to do that soon and not add this uncertainty. Unemployment the other thing, go ahead. Alix finisher thought. Paul the other thing that will be part of this package will be some liability protection. Lawsuits will not help us during this pandemic. It would be very important to include what both the senate and house has been talking about, which is another 75 billion for testing because this is the way that we can open up schools, open up businesses, and yet not cause more spread of the virus. You just test more people and isolate them once they get infected. We have to get more loans to companies. We have seen a lot of Company Started take these loans and then wind up having to lay off down a road. Banksng to companies and the right way to go . Would it not be more efficient to start cutting more checks to people . Paul it probably is kind of a wash. Keep ay firm sense, they stop firms and that money, they will delay the layoffs. But in the process, you have given out some money. It is sort of the simplicity and probably for the sins of equity, you might as well bypass the firms and give that money directly to the individuals. The alternative is you could make a longterm commitment that government will pay the Employment Costs for all employees for all firms. Some countries have tried to do this, but we are very unlikely to do that in the u. S. Guy paul, have you convince people to spend the money that they get, and not say the savings rate is shooting up, and i was looking at the china data earlier. A country that is been able to clamp down harder than most on the virus, but still struggling. Paul this gets back to uncertainty and fear. If you dont know how bad things are going to get, it is natural to want to hold onto all of your resources just in case you really need them down the road. What would be so helpful is if we had a clear plan that we knew was sustainable, that we could stick to buy the next six to 12 months. Assuming we dont get a vaccine and that time period, but a plan that will protect us from this risk of opening up, and then, the spread of the virus, and then, another round of lockdowns. Alix when you talk about the stimulus, it brings us to the labor market. What we have seen versus other areas are really labor flexibility when it comes to the u. S. Versus europe where we dont have that, but workers tend to stay employed. The thought, if we were going to get a v shape recovery, the u. S. Has done better but that flexibility. What do you think . Paul i think the flexibility of the u. S. Labor market, which shows up in terms of large numbers of people who leave jobs every month, but then large numbers who get new jobs. This is a real asset for the u. S. Economy, and it is very helpful for young workers. It is easier to get a first job. It is easier for lower skilled workers. It is an important part of our economy, so we want to maintain lots of people leaving jobs and lots of people getting jobs. As we think about these issues unemploymentng in compensation, people are correctly thinking about how we protect the churn. Lets switch to rewarding people for getting a new job. That can create bad incentives and it raises questions of fairness. Giving money to the people who got a new job. But people who stayed on the job may feel like, i got left out and some may quit to go get a new job and get that new payment, but this is a route that you are encouraging that flexibility, which is a real asset for our economy. Up an interesting point that takes me toward the compare and contrast with europe. We had Christine Lagarde talking a little earlier on. Lets listen to what she had to say. Coordinatedions and an ambitious and coordinated stance remains critical. The governing Council Urges further, strong, and timely efforts to prepare and support the recovery. It is important for the european on ans to quickly agree ambitious package. Guy paul, is europe out of the curve . We are finally getting a fiscal response. Scheme that has existed for a long time. Europe seems to be manage europe seems to be managing its virus spread a lot about perry you see europe coming out of this do you see europe coming out of this faster and stronger . Paul definitely. They will, out of this faster than the United States, and they may get some structural advantage as a net plus coming out of this. You cannot underestimate how important it is to sequences correctly. We have to deal with the pandemic, with the virus first. There is no way we can get a recovery of the economy until the other virus under control. Justhe problem is not government officials will tell people not to do things. People will not do things as long as they are afraid. They will say, they wont hire, they will not start businesses, so we have to focus on a sustainable plan, or sustainable plan for dealing with the pandemic. Alix do you think the view that europe will come out of this better than the u. S. , is that widely thought currently . We have seen flow start to move into europe. I wonder how much of that is left to transfer . Cost i think the biggest from this pandemic is not yet apparent, but what it will be is a loss of pace and the capacity of governments to make things work. And you know, we had a lot of distrust in government and a lot populist this will be worst. This is a place where the europeans are going to have a Real Advantage compared to the United States because there have been a whole series of steps, where throughout the u. S. Government, we have seen just total failures to act. You mentioned automatic stabilizers. This is a very simple idea to give people a sense of confidence because you know exactly what will happen if the unemployment goes up or down. You dont have to have some contentious battle and everybody on the edge of their seats every few months, are we going to do someday about unemployment are not . Counterproductive that we dont have more automatic stabilizers that give people confidence, and we have instead of these little partisan, crisis battles every so often. We were talking earlier about a huge amount of credit issuance there has been as a result of the crisis. It was required out of desperation, some of it was required out of a desire to see opportunities. Government are also having to raise huge amounts of debt as well. Central banks are in a bind. They have to keep rates low. Rates low because of the level of debt. I am assuming it will be inflationary. How do we deal with that potential inflationary environment that could be coming towards us . Paul one of the things i do us part of my job is i keep track of where i was wrong, and what was i thinking . You write it down so you dont remember it incorrectly. I thought we were at risk as something as bad as the great depression. The unemployment numbers have been high, but not is highs the great depression, but the key differences is we have not had a financial panic. The first thing to say is Central Banks are doing a much better job of keeping a shock to the labor market, a shock to Business Activity from translating into a liquidity crisis and a financial panic, on top of the underlying stock. The is a real case in opposite of what i was saying a minute ago. I think Central Banks have done very well in the u. S. And in other parts of the world. Now, as you say though, the success now could turn into a liability in the future. We are borrowing from the future, getting some advantages now that could give us some problems in the future. I dont think inflation should be the biggest concern. Mayuld worry though that we find increasingly amount of debt by rolling over debt from all of the zombielike firms. We are delaying the risk of some kind of financial contraction that has to take place. As long as the Central Banks keep track of that and approach that in a gradual way, i think that is a manageable problem, but it would be good if we could find new ways to provide liquidity to prevent a liquidity crisis, which dont increase our exposure to debt and further patted down the road. Alix paul, always great to catch up with you. An nyu professor. Johnson johnson raising its outlook. E will speak to the cfo this is bloomberg. York, im from new alix steel with guy johnson and london. This is bloomberg markets. Johnson boosting guidance for the year. Johnson johnson boosting guidance for the year. Joining us is joseph wolk, Johnson Johnson cfo. Always great to catch up with you. And no more so in this quarter. Can you give us the best inside of where you are as we are expecting data from your phase one vaccine soon . Joseph pleasure to be with you today. Since we announced our lead candidate for the vaccine on march 30, we have made great progress. In the next few weeks, we will have our preclinical data published in a prestigious scientific journal, but we have so much conviction and confidence based on that data that we able to move into trials for humans starting next week, next wednesday to be specific. People,better than 1000 ranging it will be better than 1000 people. The most vulnerable population. We will be studying it as a single dosegel regimen. We are in discussion with the nih to see of we can be responsibly began our phase three data and trials at the end of september. That would also be ahead of time and measure obviously the vaccines vaccines effectiveness. We are working 20 to address covid19. Guy guy johnson in london. This is a notforprofit basis. Can you explain what that actually means in reality . Joseph we are currently working through our cost structure. Think we have a good handle on that. It will be dependent on the demand that comes through. We have a firm agreement in place with barda in the u. S. , but we are working with the European Union of the gates foundation, other major countries to determine what that notforprofit price will be. The denominator is the unicef going to that cost will be a big driver, but we think it will be very competitive, notforprofit, and we have so much transparency that we are willing to have that audited by one of the major Accounting Firms to make sure that people fully understand what notforprofit means in this case. Alix he mentioned what the cost will be you mentioned what the costs will be. When you are thinking about scaling up. What will cost you the most money . What are the sources you need them most of . An almost 50 50 split in terms of the development costs, the scientific costs to do the research, as well as the additional manufacturing capacity. We have a great facility in the netherlands with a few viral reactors. Withmbined that contractors in the u. S. We are excited about, good partnerships and off to a good start. It will be dependent upon the demand that not only the west, but many other countries across the globe tell us they will need in terms of vaccinations. Some that want to go about this and underhanded way. There has been a big story, the u. K. Authorities accused russia of trying to steal details on vaccines from key companies, potentially such as yours. Have you had any problems or issues with security around your Vaccine Development program . News is justthe breaking them as you mentioned. I will speak more generally as opposed to having statement worded statement. We take cybersecurity seriously. It is on the forefront of management teams minds. Alix i think what a natural segue is, Everyone Wants this vaccine now and fast. We have seen different governments teaming up with different pharmaceutical companies. The question is who gets the vaccine first . If you make an agreement with a firm in the European Union as opposed to the u. S. . Joseph we are working through that right now to produce as many vaccines as possible. Todayve heard paul talk on our Earnings Call that we should be in a position to have hundreds of millions of vaccines by the early part of next year. Our abilities in addition to those of some of our competitors think positions the overall global marketplace and a pretty good position and the fact we have many shots from the industry in society. So you also make medical equipment used in elective surgeries. Many of those elective surgeries have been canceled. We are watching what is happening in the sunbelt and the United States. In the United States. How was the uncertainty in regions like florida and texas but into your business . Joseph we are relying on a model and we complement it with our sole source in sole source at the end of march and april. Information from ucla and other prestigious institutions. The most valuable input we get is only talk to customers. Speakingrship team are with Hospital Administration to understand. How they are managing it. What we can do to help . We have a lot of input and we have good inside as to where the future may reside. In the Second Quarter, we saw a 30 to 35 decline and procedures year on year. We thought that would be closer to 60 . As economies open, that was good for Health Care Systems. Alix you have a nice window seat for that. Is the worst over . Joseph and our guidance this morning, we made the statement, much like in april, that we believe the Second Quarter was going to be the worst quarter we would experience. We still have that same assumption today. If you think about where we were at the end of march and early april, and where are today, Health Care Systems are much better equipped. We have 700,000 tests daily in the u. S. Alone. Treatment paradigms are much better and the hospitals. The percentage of someone surviving covid19 after they have been intubated on the ends theres intubated on a ventilator have dropped with respect to death. Are in a much better position, and then, you take on the economic factors. Will we have isolation, it happens with more precision, therefore, we wont see the universal shutdowns. We think that is important as a Health Care Company because there is unintended consequences to differing treatments too long. That is bad for patients longterm health, as well as the cost to Health Care Systems overall. Guy joe, we really appreciate your time. Johnson ohnson joseph wolk, Johnson Johnson, cfo. We will maryland will join us from blackrock. We are building up to a key meeting tomorrow here in europe as european leaders try to figure out exactly how they are going to find the 750 billion euro program and how that money will be distributed. There has been a big announcement on datasharing. The announcement the man responsible for that will be joining us as well. We will get his take on what is happening here. This is bloomberg appearing this is greenberg. Alix want to bring you a headline. Florida posts a record daily covid death among residents at 156 as of yesterday. That increase, guy, i mean, if we want to look at the death rate and hospitalization rate, the mortality rate globally is less than it was as we heard from Johnson Johnson. People can handle it a little bit better. People are that starting to pass it in new york. You wonder what will happen there . I am not at the bar the bar doing shots. Talk more i will about tomorrows meaning. This is bloomberg. This is bloomberg. Alix live from new york, i am alix steel in london with guy johnson. Realasdaq, the underperform her. Everything else seems relatively calm. You have to wonder if that is finally reversing. Guy i think it is interesting on a down day the nasdaq is up. It was not coming into the session when i looked at futures what seems like hours ago. European probably outperforming what is happening in the United States as well, which is what we are bearing in mind. The s p is down by. 5 . 6 . The travel sector is the under performer today. We could be getting some information from astrazeneca at the start of next week. Bear that in mind of terms of what you see in front of you today. Eurodollar not doing much

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