Kind of rally. Eurodollar on the high, up by. 3 . We will break this down over the next hour, particularly in regard to earnings. We talked to cocacola ceo James Quincey. Francine and what they do in terms of innovation Going Forward if they are looking at football or cricket with a sip of coke, i wonder if they will change to try to get people more drinking at home to the cocacola products. 750 euro stimulus. What she said was that it was quite hopeful for the future because it shows cohesion for europe. Joining us from brussels is maria. We were expecting a deal and then we worked and that we werent, and then we were. We finally have a deal is it a good deal . Overall, whene, you look at the numbers, you can say it was not as ambitious as the initial program. If you look at the allocation for a country like italy or spain, badly hit by the coronavirus, they are taking home 82 and 72 billion euros, this is money they will essentially not have to pay back. This is not extra debt will have to take on. That was a crucial redline. When you look at Angela Merkel , they saidl macron it had to be mutual. They did get a bigger rebate, but overall, if you think that just a few wakes go we were talking about a late bailout cash for reform, you could say the european periphery, like france and pushing for deeper integration, they had a good deal and a deal they can live with it. Alix i wonder how fast it gets into peoples pockets. What is the process like someone like italy getting the money . Maria it is Crystal Clear the money is not going to come overnight and will not be paid out this year. It will be frontloaded from 2021 to 2022. I would say i had a conversation with an official from a government and he told me this is not a bad thing, because the and wen central bank know the funding is well anchored and they will have to come up with a plan. It is hard for a country to observe billions of euros overnight. Billionshere absorb of euros overnight. Italy and spain will have to show that they actually have a plan. It is not a plan for shortterm, a plan for the future to deal with structural problems like a country like italy has had for years, like low productivity. Alix great reporting. Joining us is ian harnett absolute strategy chief strategist. Does this make you want to go by the euro, by european equities . Ian i think that is certainly where we are. We are looking at a situation where having been very cautious in the euro zone relative to the u. S. For the last three and a half years, we overweight the currency and the equity margaret. We see this very much as if you remember mario draghi with his whatever it takes moment in the euro zone crisis this is the fiscal whatever it takes moment, from our went of view. Even if the u. S. Manages to put together their fiscal package, the big shift is we have seen countries like germany shift to being a providing fiscal stimulus for the rest of the euro zone. Fiscal transfer is taking place from germany and france to the peripheral countries, and that is the big shift we are looking at. In. i just want to jump we have a headline relating to europe. The u. S. Is now accusing to chinese hackers of stealing covid trade secrets. This is very much similar to thatwe heard from the u. K. This is now proprietary and national property. Russia desperate for some type of vaccine and information and supposedly coming in and stealing secrets. Now the u. S. Is accusing china of stealing trade secrets as well. Francine this is something we heard over the last three to four weeks, if not longer, but we did here in the u. K. First hacking was closing a threat to proprietary things with covid19. I dont know if this starts a wars forve of trade retaliation, but definitely something that could move the markets. I want to go back quickly to the eu deal before the chinese hackers. If you look at the deal, they basically gave up three important parts that parliament wanted. They agreed to rebates. The portion for Climate Change was lower than expected. Finally, the rule of law is not linked to any kind of budget in the future. Was it worth some 0. 7 of fiscal transfer . A lot of people say this is an amazing deal. But in terms of money, what it really represents, it is not that much. Ian it is around 3 of gdp over four years. It is a slow feed. For us, it is more a symbolic move that you got. That is the critical shift here. Weuntil the last few weeks, have been very reliant on monetary policy. Those of us who have been looking at europe for 20 to 30 years, the idea that germany was doing doubledigit fiscal expansion, supporting neutralization of debt these are big shifts we are seeing in policy. The around the edges and we have to accept that. Lets recognize there have been major shifts and changes. That will be a key driver. Besides some of the underlying economics, like the euro zone Covid Response relative to the u. S. Covid response. That is another reason for us to be more positive on the euro and also on equity. Alix 100 . It deals with labor in which one has it better of getting out of this. Accusingk to the u. S. To chinese officials of stealing trade secrets. How do you read these headlines, u. S. , china . How do you think about that . Ian we look at this with things we have said all along is that trade wars are the same as tech wars, and this will eventually become capital wars between america and china. Russia is also in the mix as well. The level of uncertainty remains elevated. These markets are pushing forward. We think they are overdone. People are not demanding a high enough risk premium, to ability europeanrelativity equity. We think that is just way out of line. We think the level of geopolitical risk between the u. S. And china creates problems for both those markets and in many ways, europe gets left in the middle. Europe will be able to trade both ways and perhaps getting a big trade advantage from that lost america and china being at odds with each other. Francine the latest headline is the u. S. Saying china hackers looking at u. K. And germany countries as well. To enter a second phase of trade war . Targetedow much more after the general chat over last month . Doesnt want another, bigger trade war between the u. S. And china and possibly the eu and china . Ian i think we have seen a continued level of hostility over a range of subject issues that is very much bipartisan in the United States towards china. One of the see reasons for our caution is the belief that you are seeing a lack of a coordinated response at a global level, for which this is one of the symptoms. It limits the Global Economy to recover rapidly and justify optimism around earnings and getting everything back on track again. We see this as a symptom of ongoing problems and looking for those countries that are going to be least effective versus most affected. From that point of view, partly because it is very much in the tech space as well. Remember, that is where europes lack of tech in the equity a benefit rather than a constraint. Alix that is a good point that you make. So what do you do with tap . Tech . If you dont own amazon, you missed out. I am not saying they are hacking amazon, but how do you view that in terms of portfolio strategy . Thati think we feel technology is very exposed at this point. You pay for this fiscal we are seeing in the euro zone, we will bring tech to the forefront. Every country in the world, as a result of covid, will have a big debt. Who are you going to tax . Programabout the biden are you really going to capture domestic consumers you have just given money to, Domestic Companies you just try to bail out . What you are going to tax is Global Corporates that have avoided paying tax on a global basis. There will be a coalition of the willing to target the tax payment of Global Corporate and that tech space that have used the digital framework to minimize their tax payments. I think that will be one of the big changes. T is just not Regulatory Risk the size of these companies, but also the tax payments that come under scrutiny as well at this stage, we would argue. Are assumingons there is no or very little hit to consumer earnings. That is where we worry if it comes a more protracted slowdown, then some of that appetizing revenue that supports the tech stock will come under pressure. Francine thank you for joining us. Ian harnett of absolute strategy. We talked to the cocacola executive who says the worst quarter is over. We will see exactly where they see a pickup and how much time. We will sing speak to james ceo of cocacola. Alix live from new york, im alix steel. Risingof cocacola despite a 28 drop in revenue in the second order. Company says it will get better from here. Cey. Ing us is james quin good to catch up with us. You said this is worst it is going to get in the second quarter. I look at your stock and it looks like an l. Where is the w . How do you look at it . The way i think about it is they are so much ahead of us and there are unknowns, whether it is the buyers are the reopeningftermath and behind government support, whether unemployment or furlough. It is very difficult to tell the exact shape of the recovery, how quick or slow, or, in fact, not all companies will be the same. We are focusing on accelerating the information of our , staying focused so we can respond if things go quicker or slower Going Forward. When can, Eastern Company this all ends. Francine what does that come out a Strong Company when this ends. Francine what does that mean . Are you going to try to sell to consumers at home more, when we are in the lockouts or if we dont know if restaurants will open in the next 12 months . To drive are going getting out the growth rate. We see an opportunity to take not workingat are and focus resources on the best brands and categories to strengthen the portfolio to help it come out stronger. We know thereng is growth, whether that be in , taking awayeliver from restaurants or selling to the window or drivethru. There are channels in different channels that are growing in responding. Zero sugar is still growing. Pruning where we dont see things are working faster than we normally would so we can invest behind the channels and activities that are growing and will be growing long after this crisis has ended. Alix pepsi has gotten into the energy drink sector, so competing with you, but the business did really well and snacks and you dont have a snap business like that. How do you try to get market share in another area . James we are in the beverage business. That is what we know how to do. We think that will be the epicenter of our opportunities for a long time to come. Have a greate brand around beverage. What we are focused on in the shortterm is where the world is in winning in the channels that are open. Our focus is saying, whatever channels are open, lets win share their today and during the crisis, so that when it ends, we will be stronger in those channels. A muchn we will be in stronger position. We gain share in the athome channels in the second quarter. That will be our focus, particularly for the next two quarters, and then we want to win in the reopening in. Ifferent arts of the world one being categorization and open as effectively as possible and we will put the cocacola business and the best position to thrive. Question to the good am i going to need more snacks . Is that where you want to grow . Am i going to buy things different and get more Energy Drinks . How do you see see things changing because of covid19 . James i think there will be two phases. Clearly there is a set of consumer behaviors that we see in lockdown and in reopening. Eventually, there will be some new reality. It will not be exactly the same as it was before, but many things will come back. We are ultimately social creatures. In the lockdowns, everyone was forced to stay home, in the end we want to go out and about and do different things. So those channels will come back. There may be an enduring highlevel of ecommerce and certainly an enduring highlevel of digitization of shopping. Some of these underlying shifting categories will reemerge postcrisis. Many of us have been forced to stayathome in lockdowns. Many people are having breakfast at home and that creates a big change in category, more orange juice, more milk. We see that in our business. Ofr time, a certain degree normalcy will creep back in. A return of a way from home in the future. Alix i wonder how that affects your workforce in terms of who you are hiring, how you retool them, and how you pay them. Biggestrobably the question around the workforce is the degree of coming back to the office. Obviously, we are still dominantly in the lockdown and supply chain workers are in the back of the distribution system. Those that are more officebased are largely working remotely at the moment. I dont think the office has gone away. We are in the business of innovation that is effective when people come together. It is very hard to do remotely. We will see a return to location based work. We will see more flexibility. Workforce,ring the at will become the new normal is a more Flexible Working pattern. What we have seen from our employees at all generations have handled that very well. I see more of a mixed future ahead of us. Francine i know you have to do have had to cut costs come when do you expect advertising dollars to pick up at cocacola . James we expect to invest more in the second half. We cut back because we thought the investing wouldnt have the return and it was probably best to do so in the second quarter. We focused on protecting the safety of our people, ensuring continuity of supply to our customers, and making investments in supporting community programs. As the reopening soaker, we will reinvest more marketing as the reopenings occur, we will reinvest more in marketing. Alix give us insight into areas that have been delayed because the pandemic, like the coffee cafes in europe and what are you doing with those now . Think the cafe is interesting. In the u. K. , there was a survey done on what was the most missed occasion, it was the coffee shop in the most missed brand in the lockdown was costa. We are company confident that will come back. In the second quarter, we delay the implementation of strategies around installing a digital cafe, automatic vending machines around the world. There were a number of initiatives, particularly those that require physical installation of pieces of all got delayed in the second quarter. We are now seeing the energy come back into those initiatives, and we will be pushing to pick up the pace in the second half. Francine i know it is cocacola and i know you are on the board of pfizer. Are you confident we will get some kind of vaccine in the next 12 months . James i think they should speak for themselves. Obviously, i have just joined this year in february, so a very exciting year to be in the pharmaceutical industry. Pfizer is one of the leading contenders. The initial results they published were very encouraging, havee vaccine seems to antibodies. Francine a gracious response from James Quincey , the chief executive officer of cocacola. The market likes what we saw in brussels with the european leaders finally finding an agreement. Stocks are rising. The tech rally seems to be taking a bit of a breather. In the u. S. , congress ago negotiating a relief package. A bit of hope for Infrastructure Spending across the world. This is bloomberg. Hey, kids welcome to camp tonsafun on xfinity its summer camp, but in your living room. Learn how to draw with a minions expert. How to build an indoor Obstacle Course plus. Whatever shes doing. And me, jade cattapreta. The host of es the soup camp tonsafun. Its like summer camp, but minus the poison ivy. Unless you own poison ivy. In which case, why . Just say summer camp into your xfinity voice remote to join. Marketsis is bloomberg the european close. We are finishing up trading in europe. Of european deal and a lot optimism the equity markets. The dax up almost 1 , trying to get positive but not quite making it. It is a risk on rally in the currency market. At one point touching the highest level in the year. Take a look at what is happening in the bond market, particularly focusing on the bdp boone spread, but the the btp bund spread. Yields down three basis points. Cannot continue. How much juice will you can that continue . How much juice will you get from the your group fund . Markets are receiving a vote of confidence in the 750 billion euros stimulus package. If you look at the german ities, they erase losses the other thing i want to tell you about is looking at some of these we did see that spread between italy and germany narrowing. There is one stock that caught my attention. I do not even know how to pronounce it. When you look at the package, it is good. A lot of people say it is good because we have a deal and it was a done deal and the arguments we have seen over the last four days. Is it really a good deal . It lacked some kind of link to the rule of law it also agreed to these budget rulings . , i think itt of all is a key milestone because fundamentally it is another step in the right direction for the european project. Crossed. Nes have been the first was no significant issuance of joint debt. , if the history of the eu we think about it 10 times more than has been done in history. Wassecond socalled redline not a contractor on a temporary basis. Here we have had 90 billion in fiscal transfer. Size, stepsould say , crossing redlines in order to answer a pandemic risk have been very positive. You want to take what has to be proven, it is this money will ,ave to be spent, and secondly some states who were net contributor are now becoming net receivers. Basically a change in leadership across the eu. Does that mean we are going to have a more integrated European Union or is this just a step in the right direction . It is. 7 of gdp. It is better than no deal. How Game Changing is it . Overall, 5 of european gdp. It is a significant number. 12 trillion is a significant number. It is a significant step. Overall, the factors are being discussed in it is good it took three to four days. A process. The commission put lots of effort into it. Overall there has been a slight tweak. [indiscernible] any liability shortterm people might see. Alix how do you look at it in relation to the u. S. . The u. S. Is in some ways deadlock, but if they do get a stimulus it could be over 1 trillion. The dispersal of these funds might take months. The narrative is go to europe, go to europe as a safe haven, by european equities. Is the right take away from a market perspective . Davide from a market perspective europe has been underinvested. If you take the average u. S. Investor, they have less than 2 to 3 located to european equities, less than emerging markets, and right now is the wrong position to be in. Equitiesrly european in europe we need less shortened fiscal stimulus because our social welfare platform is strong anyway. We do not need anyone to get short on subsidy because they lost jobs. Congress does not have to pass us theecause for same for health care. Health care is free to everyone. In order to fight the pandemic, europe is better equipped. If we see brexit with no deal . We seem to forget there is still this thing moving and it does not seem to be a way forward. What does that do to european equities . To be clear, this deal was possible thanks to brexit. This deal, at a Commission Level into statelevel is the first positive sign of actual brexit. Finally, the last of the continent the rest of the continent did each other and said this is who we are, this is our values. Like any good family, we might have a few arguments. We are ready to discuss at length. Netnet, this is who we are, and they are moving in the right direction. The rest of europe has given up on brexit. They see from the political perspective, it is not near in the 10 point in the agenda. It does not matter. The u. K. Is happy to negotiate and be at the table. If it leads to a no deal brexit, it is unfortunate, but it is now history. Alix i wonder if it made the european stronger in that sense. Davide serra will be staying with us. Here is ritika gupta with your first word news. Ritika the Justice Department accuses two chinese hackers of stealing covid19 trade that grants. Prosecutors say terabytes of data were involved. The hackers targeted companies and 11 nations, including the u. K. And germany. Starting today, President Trump will be the headliner at the governments coronavirus briefing, and attempt to turn around lagging poll numbers against joe biden. President trump largely ended his briefings in april after suggesting injecting toxic disinfectants could help treat coronavirus. Steven mnuchin and nancy pelosi are beginning box on the next virus relief plans. The next phase of relief will be jobs and vaccines. He hopes to have a plan by the end of next week. The new paulines approach already a new poll finds a majority believe American Society is racist. Almost 60 of those surveyed believe black people face discrimination and over half say the same thing about hispanics. That is twice what it was in 2008. Joe biden has unveiled a plan to improve childcare and care for the elderly. It would be paid for i attacks on Real Estate Investors with incomes of more than 440,000. 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. Am ritika gupta this is bloomberg. Alix we are finally settling out within europe. Here is where we finally ended up. The dax closed up by 1 . It is down. 6 overall for the year. European stocks closed higher. 5 . Off the lows of the session. Rolled over into the close. In europe it is energy and industrials that led the way higher. Remy cointreau raising its forecast for the year. We are all drinking more at home. This is bloomberg. Francine live from london, i am Francine Lacqua with alix steel in new york. Close onhe european bloomberg markets. Earlier on we had the ubs result. The chief executive spoke with bloombergs manus cranny and told him they are not ruling out some degree of share buyback. They also spoke about the economic scenario ubs is using for its business model. Scenario isess based on economic contractions in the next two quarters, and with a recovery, although not to the same extent we will see in the slow down in 2021 and then coming into 2022. 30 is a severe recession, and this is the one we need to put in our model. S over the past 24 hours, vaccines and volatility have collided. Good of vaccine deliver the kind in the market in the second half that the dislocation we have seen in the first half . Could the vaccine change the narrative . The vaccine would be a better midterm, not the short term. The short term, maybe there is a but i do think the reality of what we will experience after this crisis is Many Companies will be able to make it and go through and be stronger and wellpositioned for the future, and the ones that were already struggling before the crisis will have a hard time to recover. This is where you will see a second leg of the economic consequences of the crisis being played out. Manus with that scenario, are we under sue ming the level are we under assuming the level of that will come . Fair to say markets remain complacent. Credit,arkets, even ch were good investment now if you look at spreads, spreads have been coming and therefore there is not a lot of room for many negative surprises Going Forward. Jp morgan says as far as the credit markets are concerned we are in and hallucinogenic moment. We are locked in a collective hallucination and credit markets. Does that time for you in europe and the u. S. . It is not very surprising. The amount of liquidity and money is driving this situation. One has to continue to look at the huge diversification and not avoiding concentration do you still think there is mileage and credit . In some areas, maybe, but the name of the game is diversification. On certaindity risk investments and return of higher longterm returns. The ubs ceoas speaking to bloomberg tv earlier today. Still at this is david sarah. Davide serra. Will start toment outperform u. S. Banks . Davide more than outperform, it is a catch up. The narrative has been european banks not make money, they are over fragmented, and the reality is cover the pattern as we have seen in the u. S. , the strong keeps getting stronger. Ubs results are as good as Morgan Stanley result and it shows high quality in europe that deserves to go back what it used to be and not a huge discount to the u. S. This is valid for all of the wealth manager and the European National loansne how you view bad . Is it a testament to the economy . A lot of the banks fill an important function of getting loans to the companies that need it most, where the government is asking it. Do you worry about nonperforming loans in europe but also in the u. S. . Francine overall, the difference of this crisis between the last one is the last , this time banks are the solution. The last time mistakes are made by the banks, this time the governments are guaranteeing loans. The banks of the arm of the government. They will not be on the hook for all of credit they accept. Hence i doept expect banks will keeping profitable, and some of that is worth seeing. So far, extremely profitable despite the pandemic. Alix which ones . Davide in europe you have upside overall in the index. To be pragmatic, it is the european banking index has about 150 euros of book value to share. That is how much cash. Today it creates less than 70. You are paying less than . 50 a dollar or sense in the euro for a Banking Sector that will meet its cost of capital. If you think that some of the most challenging banks are rate even or even making a profit, it is extraordinary. The national champions. Santander, the people most in profit and return on equity well accents of the cost of capital, even in a pandemic year. Francine are we finally going to see some kind of consolidation in europe . Davide i think the ecb wants to. The key regulator, the ecb wants regulation, and what we have witnessed around the world is concentration. Being heavily regulated, there are no extra profits. In europe we have too many banks. I think the consolidation has. Tarted premium shows the insider thinks there is real value. It means financially, strategically, it is a winwin. Consolidation, mainly domestically. Ive spent more consolidation in spain, italy, and also in germany. Your more bullish thesis on banks, the expense of u. S. Technology . Think globally what we is u. S. Technology is priced not only for protection, for pay no taxes around the world and for not being challenged as a monopoly. I think the combination of the assumption i just stated will not be valued will not be valid Going Forward. They ought to pair the they ought to pay their fair share of taxes which so far they have not. Prices might come under pressure. Seenitely as an investor, i more value in the bmp and ubs and the santander that i see in amazon or facebook. There is quite a lot of geopolitics going on today. First of all the u. S. Has called on the world to hold a lot of nations accountable for cybercrime after the u. S. Identified chinese hackers that were going to steal some of the research. Thise u. K. We also have threat of russia meddling in the brexit vote. How do you translate that into trade . How do you translate that for the market . Davide two points. From a european perspective, state actively engaging cyber spying. A few years ago Angela Merkel opened the World Economic forum saying ive been told our u. S. Allies are spying on us. I think the u. S. , which built the nsa and has spied on everyone, including their own allies, is the last one to call for cybersecurity. Secondly, as far as brexit is concerned, it is now demonstrated what is obvious to everyone. We had plenty of lords in the house of lords that were on the paycheck of russia. It was obvious that london had become londongrad. Is esult, interference one of the smartest security putin decidedus to sell 10 tanks each year to metal across european elections. His view is the weaker europe, stronger russia. It is rational. What is naive is for the european counterpart to ignore it or deny it. Francine thank you so much for a colorful interview. Davide serra joining us from along. We have will have plenty more on the markets and what the u. S. Is saying company should look carefully at its china ties. This is bloomberg. Alix continuing on the breaking news. The department of justice talking about the hacking, saying hackers targeted intellectual property, they have two chinese hackers charged with though global computer collusion, and they are all looking for the covid19 research. Also saying u. S. Company should look carefully at china ties. This is just days after apple is looking into a deal to acquire to create an ipo unit in china. Companies are doing something very different than what the doj is talking about. An iphone unit in china. Francine this is an uncomfortable conversation because of covid19 and given we are in an election year. President trump even call it the chinese virus to blame them for the pandemic. This adds another layer to the complicated relationships we are seeing across the world. Mike pompeo meeting with his u. K. Counterparts. They talked about china, they talked about huawei and 5g, and we will see pressure from the u. S. And other countries to be tougher on china. Alix the u. S. Signed the u. S. Saying china is giving safe haven to hackers. That wraps it up for fran and myself. David westin on balance of power writing all this down for you. On bloomberg tv and radio. This is bloomberg. David from new york to our television and radio audiences worldwide, welcome to balance of power, where the world of politics meets world of business. Lets check on the markets with abigail doolittle. Yesterday was all about tech, today is all about energy. Abigail it is amazing these big moves we are seeing in all sorts of directions relative to sectors and styles. Yesterday we had the huge monster rally for tech. Out of nowhere last week there was a drop. Today we have tech lower and energy up nearly 6 . We have the s p 500 up. 5 . What is interesting is yesterday up. 8 . Even though only three sectors were higher. Higher,st sectors are but we have a smaller gain because of the weighting of those sectors, energy materials, on down the board. The tech heavy nasdaq is down. 8 . This has everything to do wi