Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

And we expect a normalization of that. But you need to remember as well that in our case, we have been working to stabilize, grow the franchise, recover some market share, so what we are pleased to see is that underneath that sort of outperformance in the market environment that we have been in, we have seen really good franchise stabilization traction , client engagement, improvement in clients. We think that bodes well for the future. You are expecting slightly higher revenue for the full year. Not too conservative now given what we have seen in the first half . It it would be james would be a normalization but i think an improvement on last years second half. Again, especially in our businesses, where a year ago, we were going through a restructuring and there was some uncertainty around our people and franchise, so with that now behind us, we see momentum in the core business, and we would like to see a secondhalf performance well ahead of last years second half, but we will see how the condition evolve. In a period of real uncertainty and while that has led to revenue opportunities, it can also lead to more muted markets. Year,you look at the full again, you have come out with a Second Quarter pretext in net profit, and the First Quarter has been profitable as well. You said in the past that it is going to be more difficult to achieve the target for a pretax profit in the full year. Now, after the Second Quarter, have you become more confident that this target is still achievable . Every day that goes by, we are working to preserve what had been our objective of a pretax profit. Remember that we are going through a restructuring. There is a drag on our profitability from the capital release unit. So what we are seeing now, two quarters in a row, is quite strong year on year performance in the corpbanca, so you see real improvements in core Bank Profitability offset by those drags. We work towards and we will continue to do that in terms of our management of the company in the third and Fourth Quarters to try and remain breakeven despite all of the pressures that we have been going through. But of course, it depends on some things that are out of our control, notably the revenue environment, as we were talking about. The intent to remain disciplined as we have proven over a number of quarters on expenses. We arein, remember, still incurring relatively significant restructuring and severance charges as we did this quarter. So this could still mean that you are not going to reach a target. James i dont want to make any bold statements but i would reiterate we are continuing to work towards a pretax rake even year as we have proved two quarters in a row and despite the challenges the coronavirus environment has thrown up. It remains our objective and we are controlling all the things within our control while, and i think this is important, continuing to advance our agenda in terms of the transformation steps we are taking, so we are not sort of slowing down transformation. We are not going down the deleveraging that the capital release unit is doing for us. We are managing through against all of our milestones and targets, notwithstanding the challenges of this environment, but of course, the Investment Bank outperformance in the first half essentially finance the corona related impact, notably the provisions for loan losses which are elevated compared to what we came into the year thinking. Have we seen the pico stats the peak of stats . James you will see the numbers 760 million in the quarter, pretty close to the 800 million we guided four. We guided that expectation of the Second Quarter would be the high point in the year, and we reaffirmed our guidance for credit lossclps, provisions. We think we are on track to that guidance. We do think a degree of normalization within that. Naturally, in a credit cycle, you will see more socalled stage iii events, so Loan Loss Provisions associated with actual default, and that is natural, and again, entirely in line with the expectations we have had for this year. James von moltke, the cfo of deutsche bank, speaking to bloombergs germany euro chief, daniel schaefer. 800bank setting aside Million Euros, 760 Million Euros for bad loans. Barclays coming out now with more than twice that in Loan Loss Provisions. 1. 6 2 billion euros, over 2 billion for bad loans. Annmarie those barclays Second Quarter provisions are coming in bigger than what the market estimated for barclays. They see the secondhalf impairment below the first half, and of course, we will be speaking to jes staley about all of this. Staying with the banking sector, we want to get to santander. They report a huge quarterly loss after taking a 12. 6 billion euro impairment charge. Several of its global businesses, because of the pandemic. Joining us now for his first interview of the day is the santander cfo. This impairment drove earnings to a huge quarterly loss. Santander has the highest provisions of any European Bank, even before the pandemic. Have they peaked in the Second Quarter and do you now have better visibility Going Forward . Jose good morning and thank you for having me. Impairment is a noncapital, noncash accounting charge. We have to review our acquisitions for the year due to the pandemic and longer rates and higher volatility. We decided to make the impairment. The underlying profitability in the quarter was really strong. We were able to extend Financial Support to our customers with a strong operating performance the highly challenging environment. More importantly, the more we are into this pandemic, we cannot confirm our expectation for cost of risk in the region of 1. 4 to 1. 5 are confirmed. Important point in the quarter is for capital that went up significantly, reaching 11 to 12 ering targets. The underlying performance in the quarter was really strong given the pandemic and the impact of the macroeconomic impact of the covid. Matt nonetheless, you are basically looking at a 13 billion loss in the quarter. Not,lying performance or the headline figure is shockingly large. In march, you estimated that the virus would shave about 5 off of your yearend earnings. You can see these impairments have been supercharged by the coronavirus. Do you continue to have that outlook that this is going to, by the yearend, only shave 5 off of earnings . Jose again, this is a noncash, noncapital accounting charge. Historical investments. So i think the important thing is to look at the underlying profits. In the first half, we almost made 2 billion of underlying profits, so we would expect to a pretty decent return, a good return on equity for the year as a whole. Definitely. Annmarie the ecb yesterday coming out, urging banks to halt dividends for the rest of the year. Whatou going to respect the ecb is asking for, and did you think other banks will do so as well . Jose of course. We have made two announcements. Following our quarterly results. One is that the board will propose a script dividend in october. Accruing in our capital six basis points of capital for future Dividend Payments because the ecb is basically holding Dividend Payments until january 1 of next year. Given the underlying performance of our business, we are quite confident that it will be these numbers that are confirmed for the year as a whole following regulatory recommendations. We will be able to pay a dividend next year on the profits. Pay awill you be able to bonus next year on this years profits . The ecb request was for bonuses paid out. The payments of this year, not for the 2020 bonuses paid out next year. Do you think you are going to take a more conservative approach to bonuses to be paid out next year as a consequence of the ecbs request . Jose i was referring to dividends. Bonuses come already, the bank announced at the beginning of the pandemic that the chair and foregoing bonus payments for the year, and the Remunerations Committee will analyze what to do for the rest of management. This is a decision to be taken by the end of the year. Obviously, we always follow regulatory recommendations to be these timese so at with regards to distributions. Annmarie spain is back in the headlines when it comes to the resurgence of covid19, even prompting the u. K. Government to tell british travelers when you arrive back from spain, you have to selfisolate. How painful do you think this will be for spains Tourism Industry . Jose i am not an epidemiologist, but it seems that when confinement was lifted, it was foreseeable there could be an increasing in cases. However, spain remains very safe for tourism. Regionsits more popular are doing much better than some european countries. For instance, just to give you cases, in in terms of the last 14 days, out of 100,000 inhabitants, these are the most touristic areas of spain. Compared with the u. K. Of 13, france up 12, portugal, up 33. Spain remains a very safe place for tourists to come. Matt i just spent a week there last week. There were only one or two infections in the entire region. I wonder about how much cost cutting and unloading of assets you are going to be able to do, jose garcia, after this virus. Units opened your eyes to you think you can divest . Jose i think the pandemic clearly is making everybody not only us banks but all companies to rethink their business and operating loans. I think we are at that evaluation phase. One could imagine there will be changes in the operating models and business models. Right now, obviously, our focus is to help witnesses and families, which is what we did. Almost 20 billion euros. And smes. Families definitely, we think that as the economies recover, we can continue operating and keeping profitability at the levels that we had. Previously, we think we could get back to the 13 to 15 in the medium term. Annmarie jose Garcia Jose Garcia cantera, thank you so much for joining a spare up next, which assets will suffer without said help fed help . This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are about 44 minutes away from the start of cash trading and we see a little bit of a mixed picture in terms of futures. Dax futures down. 5 . Cap futures trading cac futures treading water right now. Struggling for direction as we saw in asia as investors await the conclusion of the fomc meeting after the fed extended seven of its nine emergency lending programs by three months to the end of the year in its latest effort to boost the economy or at least keep it on track for the kind of recovery it wants to see. Joining us now is kristine aquino. Markets struggling again today for direction. What do you expect to tip the balance . Kristine certainly, the fed today would be a good panelist. That is what everyone is waiting for today. It seems we are pretty directionless and markets. Investors ares waiting for an indication of what they are going to be doing impact help mitigate the of the crisis. Another catalyst that investors are waiting on would be on the fiscal side of things and the conclusion of the u. S. Stimulus stocks. I know we reached a dividend impasse yesterday between the gop and democrats, so key is resolution. The important thing to stress is it is not just Central Banks that matter anymore for investors. They are looking for more in fiscal solutions. That would be the added bonus here for most investors. I am wondering today if powell at any moment will try to nudge forward those discussions in d. C. What should we watch . Which assets will suffer without the fed help . Kristine the short answer is all of them. On the say probably riskier side of the spectrum, i would say stocks and credit would be particularly vulnerable, just because of the level of valuations we have seen in those markets and the rally we have seen, despite the fact that, for instance, in credit, we are seeing a slew of downgrades, and there is still an expected wave of bankruptcies to come which would very adversely affect credit spreads in just the index levels there. Story as we all know, the has been really high valuations with not much in the way of fundamentals supporting that. These assets in particular would probably be vulnerable if for whatever reason theres some indication that the fed may be anding its hand and waiting seeing before it makes its decisive move. These assets would be particularly vulnerable in that case just because of how much valuations have risen in the meantime. Matt thanks very much for joining us. Kristine aquino leads our mliv team in europe. You can get her work on the work of her colleagues by typing mliv on your bloomberg terminal. Stay with bloomberg tv today for full coverage of that fed decision. We have a special report at 7 00 p. M. London time, so definitely, tune in for that. 1. 6 2t, barclays books billion pounds of Loan Loss Provisions for the quarter. That was slightly more than anticipated. We will talk earnings, next, with the ceo of barclays, jes staley. This is bloomberg. Matt welcome back to bloomberg daybreak europe. We are looking at 37 minutes to go until the start of cash equity trading across europe and in the u. K. You can see a mixed picture with dax futures down. 4 , and cac 40 futuresres cac at 1 . Missing analyst estimates just slightly more than had been anticipated. Nothing compared to the hit that santander took. We are joined by the ceo of barclays, jes staley come out of london. Thank you for your time. Talk to me first about the Loan Loss Provisions and the hit that you have taken due to covid for the quarter. You know, first, our preprovision profits were 5 billion pounds, which is 27 over what we earned last year. As you look at the economic response to the covid19 pandemic, clearly, theres been an extraordinary Economic Contraction globally. Inticularly in the u. S. And the u. K. , our two principal markets. We have taken a sizable impairment reserve, three point 6 billion pounds for the first half, including the 1. 6 billion pounds in the Second Quarter. The vast majority of that are derived by our risk models where we put Economic Forecasts into those models. Future unemployment rates, future gdp rates, spend growth, etc. Those models produce those impairment numbers. We think we have been conservative. Proper impairment reserves. Lets see how the economies, particularly in the u. K. And the u. S. , unfold in the next couple of quarters. We like the comfort of having strong impairment numbers. Yet at the same time, maintaining profitability for the bank. Annmarie good morning. I am looking at your Investment Banking business. Absolute massive beats across the board. Fixed income up 60 . The estimate was 30 . Estimate was 3 . The question is, could barclays keep it up . Had iou know, we have think very good performance in our markets business over the last couple of years, including the last couple of quarters. I think like all the banks that have reported thus far, the volatility in the first two quarters were quite exceptional this year. Athink people are expecting degree of normalization. But as you mentioned, with our fixed Income Credit and currencies trading up 60 for the Second Quarter and up 80 for the first half here overall, i think we are getting market share. We want to stay open and clients forr our insurance companies, Pension Funds, that underscore the capital market, but i also say that i think what we are seeing of a lott the result of regulatory changes over the last decade. If you go back to the crisis of 20082 thousand nine, it was based on Bank Balance Sheets getting into trouble. They have really moved the focus of financing Economic Growth from banks to the Capital Markets, to Companies Issuing to petroluity and funds and buying those securities. That is really the story i think of the first and Second Quarter is the resurgence of the Capital Markets led by massive amounts of liquidity provided by Central Banks. I think that has proved to be a fairly constructive response to the pandemic and the consequential economic crisis. Claudiawas talking with last week from the fsb. They put together the too big to fail recommendations. At least in one sense, they have saved the Global Financial system because you do not see the weakness this time that you did a decade ago. That, which i think is especially amazing, with most of your employees working from home, how is that going . You hand in these incredible Investment Bank results with a lot of your women and men working from home. How is that going and how long will that continue . If you can do this well with everyone working from home, you may as well sell that office. Jes first, let me say, to your point about the strength of banks, and barclays in particular, to your point, given the adjustments that the financial industry has made since the crisis and the strength of the positions we had coming into this crisis, we printed the highest level of capital to riskweighted assets by the end of june in the history of the bank. That enables someone like barclays to become a firewall in this crisis of 2020 as opposed to part of the problem 10 years ago. In terms of people working from home, it is extraordinary. We have some 60,000 people working from their kitchen tables. We have the technology, the systems, the controls, the compliance to do all that. It is quite something. Should also add we have 20,000 people in the u. K. And they are actually working from offices, working from our branches, call centers, and we expect and want to get, in a prudent time scheduled, taking care of the health and wellbeing of our employees. It is important to get people back together in physical concentrations. We need to do it considering the pandemic, but we also have a responsibility to places like canary wharf, like manchester, like lascaux, so we have learned a lot through this dynamic work environment. I am sure we will use a lot of the things that we have learned Going Forward, but also, we want our people back together, make sure we ensure the evolution of our culture and our controls, and i think that will happen over time. Speaking of culture annmarie speaking of culture, a lot of companies are talking about how they will be more inclusive and diverse, especially as corporations in america really start to look at systemic racism. Moodys says lloyds plan is credit positive. They are reading the banks based on that plan. What have you learned in these recent times, and what are barclays plans . A veryu know, we made significant statement at the end of the year around our approach to climate change, commitments by the bank to be met zero clearly we have clearly elevated the social agenda. I think like all of us, quite hit by the race challenges in the u. S. In particular over the last couple of months. In the program of inclusion and diversity, we have to take a special look at race. The challenge of our black professionals around the world is something we need to be keenly focused on. We need to move away from statements and get into constructive measures Going Forward and that is what we are committed and dedicated to do. We made a number of organizational changes and set out a number of programs to move the race issue forward at barclays. We were all really shocked by what happened and i do think Society Needs to respond robustly. Matt i actually have to say that you have been on the forefront you were one of the first Bank Executives i heard talking about diversity and inclusion at your previous employer maybe 10 years ago on wall street. A lot of people talk about this issue without giving metrics, without giving us numbers to look at here in terms of ways to measure progress. Do you have any goals set out in terms of, for example, boosting your black and brown employment and pay levels . Metrics,learly have particularly in the u. K. You have to publish quite a lot of your numbers around pay gaps for gender, pay gaps for at the city. Ethnicity. There are numbers and goals we set for ourselves. But also i think what we really have to do is make sure we are focused on the culture and values of the bank and on our efforts to make our employees as safe and comfortable and welcome inside the walls of barclays. That is what we are committed to do. I think there is a special challenge we have for black professionals and dealing with racism overall and that is what we want to rededicate ourselves to Going Forward. Annmarie yes, we certainly will be looking out for anything you put out regarding diversity at the company. I wanted to ask about the dividend. I know the report says you will have discussions about it toward the end of the year. Are you talking to the regulator about bringing the dividend back . Jes i think what we have all settled on and i think the decision around the dividend early on in this year, given the in normas Economic Uncertainty we all faced Enormous Economic underserved uncertainty we all faced is understandable. Program to current move out to the Fourth Quarter of 2020 discussions about Dividend Payments in 2021 is prudent. Discussions those with our board first and foremost, but then with our regulators. I think we will leave it toward the end of the year to try to make a determination as to reinstating our dividends next year or not. Let me finally ask you about the future of Retail Banking in the u. K. What changes do you see given the tectonic shift of the pandemic . How does Retail Banking in the u. K. Look with such an unprofitable future . So, one of the things i think we need to remind ourselves, at this time last in theur Consumer Bank u. K. Was on its way to generating a 17 return on in 2019. Hich it did we have been hit by an extraordinary pandemic, and Economic Contraction. We have given payment holidays to 600,000 consumers across the u. K. , we have waived overdraft interest for all of our consumers and Small Businesses. We have done a lot to help the consumer. We have passed through 21 billion pounds of credit supported by the government to Small Businesses and to midcorporate. We are doing our part to help the economy recover. I would say i think this has accelerated the move to digital finance. People are using much less cash. They are much more focused on using their debit card and credit card. That is a positive evolution for the Retail Banking industry in the u. K. 50 of the Adult Population in the u. K. It is a critically important business for us. Lets get through the pandemic and the economic crisis. We need to remember that fundamentally going into this crisis, this was quite a profitable business. Annmarie jes staley, thank you for joining us. The ceo of barclays, jes staley. Results covering the bulk of the covid19 lockdown when most Economic Activity was suppressed and businesses were shot and jobs were placed at risk or lost. Go for a sent market reaction. Coming up, dws sees that cash influx in the Second Quarter driven by the passive fund. The earnings conversation continues with the cfo at dws and that is next. This is bloomberg. To bloombergback markets, this is the european open. 20 minutes to go until cash trading starts. Instill see a mixed picture terms of futures. Very little change. Struggling for direction. Estimatesger dws beat into its fund and the Second Quarter. The influx of new money signals confidence is returning after the company saw outflows of 2. 5 billion euros in the first three months of the year. We are joined by claire peel, the cfo of dws. Thanks so much for joining us. Talk to me about the rebound we have seen in the Second Quarter. What was behind these massive inflows . Yes, indeed. Good morning. Ofhave seen a Second Quarter 8. 7 billion of inflows across our platform. Across etf possible leading the way with cash, but also with active equity. A really strong rebound in net flows compared to the prior quarter. I should point out that january and february was also very wrong. It was march where we saw the extreme downturn. There seeing that revert in Second Quarter. What is driving the 6. 5 billion, we have seen extraction exceptionally strong flows in europe. Flowsin terms of equity in etfs. I think the etfs are also demanding interest in addition to fixed income and also in the u. S. Market. I should also point out that esg is a very strong team. Esg inflows contributing half of our inflows overall in the First Quarter. A large portion of that is across etfs. Tohink it is very positive see the trend shifting away not only from cash which continues to be a safe haven, but etfs and also some of our active retail funds in wooding at the. Annmarie i wanted to ask you retailhe reaction of investors and institutional investors. Has there been a pronounced difference between the two . Certainly beenas some different behavior. On the institutional side there has been some discrete decisions to redeem some mandates. By threeiven institutional mandate decisions to in source assets. There is demand from institutions and retail clients to invest in funds and regain yields. We are seeing that across the Asset Classes we have seen in our q2 results. Matt you mentioned active investment has picked up is what you are saying, claire . That,st quarter before passive was winning the day for sure. I always think it is fascinating to see how that battle is playing out. Are your clients really coming back to active investment in force . Certainlyll, i think passive and etfs is leading the way in this quarter. No question. Passive is leading. There is Strong Demand from clients. That is demonstrating results. If you look within the active Asset Classes that can deliver good returns, good product performance, and a good return on investment, when you peel the onion a little bit, we have been multiasset, we have been equity. We are seeing across all of those areas client interest being made. I should point to alternatives, which is another asset class which continues to have interests. That is also performing strongly. I think clients want to see returns, they want to see product performance, and that is what we are delivering. The esg team is also very strong and that is what we are delivering for our client this quarter. Annmarie it has been a tough year for asset managers. You have rebounded more clear from the selloff than others. What is the biggest risk to reading your financial goals this year . Seene certainly, we have a strong rebound in the markets in the Second Quarter. Thirds made up about two of what we lost in the First Quarter. Stand at 745 billion now. Certainly as strong rebound. We are constructive and our outlook for the second half of the year. We can see some more upside. Of course, we are cautious in terms of what is ahead of us. Given that, we are focusing not only on the top line, but we are focusing on efficiencies. We are focusing on shareholder value and profit overall. That is why given the volatility that could be in front of us in the markets, we will continue to be very focused on cost efficiencies and costs. Matt got to ask about wirecard. Massive story here. Had been under suspicion for years all of a sudden says we cant find 2 billion euros. Crazy that people did not see more smoke around this fire. Are you suing in this instance . Wirecard is certainly a really exceptional case of fraud. Indeed, where we have a fiduciary obligation to bring legal proceedings, we will indeed do so. Annmarie thank you so much for joining us. Oh, go matt. Matt no no, because you were a big shareholder, i was wondering what kind of return you think you could get. What can you get back . Claire well, i think if we focus on what we are, we are an investment manager. We do take active investments and that is the case of what we do in this particular case. This is obviously an exceptional situation and we will be monitoring the situation very closely to ensure that we do meet our fiduciary obligation, but no specifics i can of course comment on. Matt thanks very much for your time. Claire peel is the cfo of dws. Appreciate you joining us this morning. Up next, it just continues with the big Company Earnings and big interviews here on bloomberg television. Supplying the u. K. With up to 60 theion doses of experimental coronavirus vaccine. The latest. This is bloomberg. Annmarie welcome back to the open. Just about 12 minutes from the cash open. Under pressure for the ftse and the dax. This morning, sanofi and glaxo have agreed to supply the u. K. With 60 million doses of their experimental coronavirus vaccine. This comes as governments around the world race to gain access to a potential cure. Joining us now is bloomberg intelligences Senior Pharmaceuticals analyst. Sanofi raised their guidance. What else can you tell us about the takeaways from the results this morning . Good morning. Illusory ttle bit i mean it is real, but the raise is actually less than the game they made on the sale of shares they own in an equity state. Away, they that actually missed for the Second Quarter on etfs and also the guidance raise is not even as theyis the 10 euro cents earned on the equity stake sales. It is not as rosy as it looks. There is a little bit of a headwind and currency. That is probably responsible for a half or so of that mists. As still, it is not as good it looks on first glance. Matt what about glaxo . Those earnings do later today. What should we be expecting for gsk . Went into the earnings after Johnson Johnson reported. We thought maybe things are not as bad for most companies. The ones we were worried about were folks like novartis, where we felt that they were too optimistic for the pace at which they thought the Second Quarter would reverse. Now we have had three Companies Report and in contrast to the been they have all relatively lackluster or weak relative to consensus. Glaxo will hit consensus today. They do have a great vaccine. It has outdone everyones expectations. Their capacity constraint. Because vaccines require you to go into a Doctors Office to get your booster, they all fell off a cliff. That is a key variable that is tough to follow. Annmarie thanks for joining us. We are going to have to get you back on to talk about some of these other headlines coming out of the pharma space, saying that vaccine protects monkeys. Humans up next. Coming up, stocks to watch. The gucci owner says it is now seeing signs of recovery. A lot of decent returns in terms of online sales. Details next. This is bloomberg. Annmarie good morning. Less than 10 minutes away from the European Market open. A slew of earnings out today. Dani burger, run us through what we need to know. Dani a lot of banks today and a lot of contrasts between banks. Santander, a 13 billion quarterly loss. The most out of any European Bank. Piling up Loan Loss Provisions. They already had the most of any European Bank. That is due to their em exposure. Deutsche bank up by 2. 5 . The outlook more rosy because of their huge fixed income trading revenue. That is helping offset some of the losses in asset and Wealth Management units. Kering looking at a possible rally in shares. Their call is up about 3 . Huge growth in online sales. About 72 in the quarter. Still only about 13 of their overall sales. Clear they still have some way to go. The trend is promising versus someone like lvmh, where the earnings were pretty gloomy without the online boost. Results wizz air, beating estimates to a pretty significant degree here. Coming in at 91 Million Euros. The estimate for revenue had been 60 Million Euros. They said that their capacity rampup plan has been working well along with cost savings. Perhaps that is where the revenue boost comes in. They are still unable to give their 2021 outlook. So a lot of uncertainty still for airlines. All right, thanks very much. Dani burger looking at some of the stocks to watch. Coming up, it is the market open on a day at future earnings, but not a day of big moves for futures. We see kind of a mixed future picture. The open is up next. This is bloomberg. Hike Simon Pagenaud takes the lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. Touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. 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. Minute from are a the open of cash equity trading in europe. Here are your top headlines. Extending lending. Itsfed prolongs seven of nine emergency lending programs until yearend. Stocks trade mixed ahead of todays rate decision. United states stimulus talks stall over Liability Protections for businesses as current measures start to run dry. Trading boost. Deutsche bank posts a small profit after its best trading performance in years. Matt, good morning. Matt good morning to you. We see kind of a mixed picture with futures. We saw a mixed trade in asia, as well. Japan was down, china was up. U. S. Futures getting across the board. Lets take a look at the cash trade with the global macro mover screen. You can see a number of risk assets. The left column is the equity indexes. As the indexes open up with a live trade, you will see them pop up here in blocks. The ibex in spain is opening up 0. 1 higher. Down 0. 01 . They are really struggling for direction. Gaining 0. 4 . Nce when the dax opens up and the german benchmark index typically opens later than most of the others, you will probably see a red arrow. European markets a little bit mixed after the session we saw in asia. Struggling for a bit of direction. Waiting for the fed. Dollarsding toward 1950 an ounce. The markets are going to be focused on the fed policy decision this afternoon. Seven already extended of nine emergency lending programs to the end of the year. Oining us now is our guest paul, lets start with the fed. Is the fed injecting a bit of fear into the u. S. Citing global risk . Reassuring markets that they are prolonging the programs, which they have already put in place. There has been an expectation not least from us that there would not be too much in the news this week. Clearly, there has been some concern. The dollar has been weekend not fairly significantly. There are renewed concerns around the coronavirus. Expect the fedou to do . What do you think the fed should be doing here . Paul it seems to us that the colossal amount which has come monetarily from the fed, but also from the government in the form of fiscal stimulus is very sufficient in many scenarios to help pull the economy through. I think at this stage, the fed will be loath to do too much more. It depends how effective their current measures are. And also to wait and see a little bit about how the current second wave, the resurgence comes through. It feels like we are in the middle of the summer. They have already put a lot in place, but they will probably stand pat this time around with any form of significant action. If we dont see too much improvement before septembers meeting, i suspect we might see something a little bit more radical and aggressive at that stage. Annmarie do you think jay powell can say anything at all without leading to political to nudge forward the stimulus discussions taking place in d. C. . Paul that will certainly be on his mind. Asy do seem to have stalled, you mentioned, but i dont think he will want to get too far into that. It is a very dangerous and strange time. Dangerous because the fed has tried to reseed to the background. We have been in a situation we have not been in before. As much youill do can verbally within the bounds of what is acceptable from a market and economic perspective. I think he will have to try to shy away from staying away from anything that could be seen as politically oriented or biased. Speaking of strange times, and a lot of superlatives over the last couple of trading sessions. The one that i think is the most interesting and possibly the most concerning israel rates u. S. Treasuries have gone more negative than ever before. Even as we see this incredible equity rally. Now 3218. Nt from 2252 in that time, we have seen real rates and i think we have a chart on this, as well. Real rates just continue to come down further and further. What does that mean . Why do we see that fear . Investors stocking up on safe haven bonds as stocks rise . Been historically, it has a much quoted mantra that fixed income markets tend to get it right more often than equity investors. There is a half joking quotation that the markets predicted 10 of the last five recessions and those kind of things. From that point of view, there are two ways of looking at this. Term,only for the near the inflationary outlook is very muted. That we couldk see significant changes in the economy and it could be permanently impaired. Lets not forget that earnings did not grow. That was a significant rerating for equities on expectation or hope of increasing corporate earnings for a better economic outlook. The other side of that of course, there is a very obvious technical side, which the kind of equities that have tended to lead the market in the last decade have been those which i performed an inverse correlation to treasury yields. That tends to be the big tech names. There is some logic to that. What we are seeing in the near term is the treasury markets saying, the whole uncertainty of this outlook continues. The fed has your back. It does not feel as if that potential for reflation, which usually comes around as a result of contemporaneous monetary and fiscal stimulus, it does not feel like that is coming true. We may find that at some stage as we go into the next phase may be after the president ial election going into next year that the start to reverse, but we are seeing the s p come back to be relatively flat for the decided they probably to run for the hills. At some stage, there is the possibility of a sharp bonds selloff. Markham, stay with us. We will get more of your thoughts on earnings next. Coming up, barclays popped at the open, but now it is under pressure, down more than 1 after secondquarter results. They had a plunging spiking sorry, plunging impairments. We will get more from our interview with jes staley next. This is bloomberg. Welcome back to the european open. We are just about 10 minutes into the market trading day. Ftse 100 and the cap both in the green. The dax a little but under pressure this morning. Lets get the Bloomberg Business flash. Thanks. Deutsche bank has reported the biggest gain in fixed income trading in almost eight years. Income from buying and selling Debt Securities rose 39 on the year earlier. It offset weaker revenue in asset and Wealth Management. Sent in their has taken santander there has taken a big hit from the coronavirus, struggling to contain the fallout. The lender expects lower returns. They also expect costs to keep rising this year. Credit suisse set to announce a sweeping overhaul of its business. Sources tell business bloomberg they plan to merge Investment Bank and Capital Markets units. It is part of an overall by the chief executive. The Bank Announces secondquarter results tomorrow. That is your bloomberg is an is flash. Business flash. Matt laura, thank you very much. Barclays traders had a blockbuster secondquarter, offsetting the retail turmoil caused by the pandemic. The Bank Securities division reported a gain in foreign took ae the lender also 1. 6 billion pound charge to anticipate bad loans from the crisis. That was higher than had been expected, bringing the total to 3. 7 billion so far this year. Here is what the Ceo Jes Staley had to say about that. There has been an extraordinary Economic Contraction globally, but inticularly in the u. S. And the u. K. , are two principal markets. We have taken a sizable impairment reserve, three point 6 billion pounds for the first half, including the 1. 6 billion pounds in the Second Quarter. The vast majority of that are derived by our risk models, where we put Economic Forecast into those models. Future unemployment rates, future gdp rates, spin growth, etc. The models produce those impairment models. We think we have been conservative. Impairmentoper reserves. Lets see how the economies, particularly in the u. K. And the u. S. Unfold in the next couple of quarters, but we like the comfort of having strong impairment numbers, but yet at the same time maintaining profitability for the bank. Good morning. Im looking at your Investment Banking business. Absolute massive beats across the board. Equities trading up 30 . The question is could barclays keep this up . Had iou know, we have think very good performance at our markets business over the last couple of years and clearly in the last couple of quarters. Banks that have reported so far have commented on the volatility in the first two orders, quite exceptional this year. People are expecting a degree of normalization. Ourou mentioned, with credit and currency trading up 60 for the Second Quarter and up 80 for the first half year overall, i think we are gaining market share. We want to see it stay open and available for our buy side clients. That underscores the Capital Markets. I would also say that what we are seeing is in part the result of a lot of regulatory changes over the last decade. Ofyou go back to the crisis 2008, 2009, it was based on Bank Balance Sheets getting in trouble. I think governments have moved Economic Growth to the Capital Markets, to Companies Issuing debt and to firms like Pension Funds and mutual funds buying those securities. That is really the story of the first and second order, the resurgence of the Capital Markets led by massive amounts by centralo provided banks. That has proved be a fairly constructive response to the pandemic and the economic crisis. Annmarie i wanted to ask about the dividend. The report said you would have discussions about it toward the end of the year, but are you talking about bringing the dividend back . Jes i think but we have all settled on and i think the decision around the dividend earlier in this year, given the and normas Economic Uncertainty we all faced is understandable. We dont know what the second half is ultimately going to mean for the economies and the bank itself. I think the Current Program to move up to the Fourth Quarter of 2020, discussions about Dividend Payments in 2021 is prudent. So we will have those discussions with our board, first and foremost, but then with our regulators, so i think we will leave it toward the end of the year to try to make a determination as to reinstating our dividends next year or not. Annmarie that was jes staley, the ceo of barclays speaking with matt and i a little bit earlier. Paul markham is still with us. The bankou make of all earnings . This is one of the best quarters in market history for wall street. What happens . Does it all kind of go downhill from here given the volatility we had the first half of the year . Paul it is interesting with regard to economic value. From the Investment Bank part of the business being seen by investors is something of a liability. I think you were getting a bit of a flip around. Through at acoming much more even basis. That is something with just mentioned and i think hes absolutely right. Whether or not that can be sustained is a question because to some extent we have seen repositioning by investors which has led to much higher trading volumes and cap securities. I do think that there has been a benefit in ending facilities, may be Market Access to some corporates, particularly on the debt side. That has been very positive for them as well. They will continue to be concerned clearly on the individual and Corporate Banking side of things, particularly as asset qualities are likely to fall. Demand for new loans and new funding has come around the stressed environment, not really businesses getting onto the front foot and investing, which is ideally the way you want to lend as a bank. That continues to put this model under pressure. Matt paul, im looking at a euro that is going for one dollar 17 cents still. What does that do to European Bank earnings . How much further do you expect the dollar to fall . Paul well, i think to take the second question first, the dollar has already come down fairly again late against some currencies. It does feel as it may be it is due a pause. There is certainly a different feel to this week, which is more fundamentally driven, rather than a risk on in the u. S. Dollar, which is different than in recent years. From the point of view of euro banks, clearly a lot of them do have a lot of overseas earnings. That is going to be a headwind for them. It could be hoped that there is a consequent revival in european Economic Activity and a feeling of a bidders a bit of a stronger european domestic economy. But lets not forget that since the crisis, many of those banks have been very keen to diversify away from their domestic revenue bases to look at where they can in the u. S. Somethingat is different for different banks. Goldman is warning about king dollar as the World Reserve currency. Are you worried about dollar debasement . Paul we have this debate come up every now and again. So far, there hasnt been a truly viable alternative. The euro has never really fulfilled that role in the sense that there has never been quite enough clarity around the european institutions. Again, that would need to be a much more market oriented and trendy currency and Monetary Policy for that to continue as well. It feels that the dollar can continue to be the benchmark for the Global Economy even if it is a little by default in a period when it is becoming weaker. There is a chance that once the iserest rate differential wiped out for a period of time, a longer period of time than it has been, then you get a bit of a structural weaker outlook for it. I think the dollar will probably survive and probably thrive. Annmarie survive and thrive. Thank you so much, paul. Continuing the conversation with matt on Bloomberg Radio at 9 00 a. M. U. K. Time. Coming up, it is the antitrust showdown. Techs big four are expected to be grilled by Congress Today. This is bloomberg. Welcome back to Bloomberg Markets, this is the european open. Looking at again in paris of 0. 4 . In london and in frankfurt, we see drops of 0. 1 zero. 2 . Struggling for a little bit of direction as u. S. Futures rise. All eyes will be on of the ceos of four of the biggest u. S. Tech companies as they testify before congress in washington. Apple, amazon, facebook, and alphabet are set for an antitrust showdown with a House Panel Investigating competition issues in the industry. For more, we are joined by bloomberg opinions tech columnist. Alex, what are the key questions that are facing these ceos in Congress Today . Short of breaking it down individually, each of these companies has individual issues. Apple it is about the app store, google probably to do with digital advertising. Facebook probably similar. Amazon, control of the marketplace. Whether it can introduce competing goods. Quite disparate for all of them. I think it will be difficult to get concrete answers for you given the nature of the challenge. Annmarie it is going to be very interesting for jeff bezos, his first time being grilled by congress. What can we expect from the tech world in terms of earnings coming up this week . To see how they have been affected by the virus. In the case of amazon, probably something positive. That might not help when its case when it comes to its case against antitrust. It suggests they have a more dominant position then before and. Google and facebook, the first Thing Companies cut when there is a downturn is marketing. It looks like the name might not be quite as under pressure. Apple is expecting that demand. To resurface later in the year or perhaps next year when people are allowed out again. Matt all right, alex, thanks very much. Alex webb giving us his take or a preview of what to expect today. Definitely check your bloomberg terminal to get alexs take on this tomorrow. I think it is one of my favorite landing pages on the bloomberg terminal. Up next, discount airliner wizz air reports quarterly revenue beating estimates as it adds new routes. We will get all the details from the biggest expert there is on wizz air, the chief executive officer. He joins us next. This is bloomberg. Annmarie welcome back to the european open, 30 minutes into the trading day. Im Annmarie Hordern in london. Lets look at the equity story and what is going on on the stoxx 600. We are down. 2 . , bit of a global mixed picture equity struggling for direction ahead of the fed. The ftse and attacks are lower, but the cac is up nearly 4 . If we look at the sector picture, retail is the shining as kerie up 1. 2 moremped and next is optimistic for the year. Also, financials are up. 2 today. We did hear from a number of banks, deutsche bank, a boost from the trading unit and barclays. Shares are lower. Citi expected more. Matt good morning. Lets look at what is happening today in germany. The economy minister and the finance minister will be questioned by the bundestags finance committee about their roles in the wirecard scandal. A special session which interrupts the summer recess will be held behind closed doors so well have to wait to get commentary from others after the fact. We will get brazils unemployment figures for june at 1 00 p. M. London time today. Country has been very hardhit by the pandemic. A rise in numbers could be a sign of the gradual reopening of the economy. Of amazon, facebook, alphabet, and apple are due to testify before a u. S. Antitrust panel as part of a government probe into the digital composition that competition or lack thereof. Forceos up here together the first time before lawmakers starting at 5 00 p. M. London time. It is decision day for the fed. To keep is expected Interest Rates near zero and repeat guidance they will stay that way until the economy shows it is back on track after this coronavirus, if there is an after. Lets get the first word news with laura wright in london. Laura stimulus talks in the u. S. Are getting bogged down over Liability Protections. Mitch mcconnells plan is to provide a shield from lawsuits to schools and businesses. Nancy pelosi says his insistence on this part of the package remaining as proposed show hes not serious about reaching a deal. The fed has extended most of its emergency lending programs by three months ahead of its policy decision today but signs the recovery may be stalling, the fed is likely to hold policy but investors are on the lookout for specific Forward Guidance on the path of rates. The u. K. Is looking at ways to reduce its quarantine rules after restrictions on trips to faced a backlash from tourists and the government in madrid. One possibility is abandoning blanket restrictions in favor original plans. Another is reducing the times it purse time a person needs to remain in courting. New concerns over hong kongs election after a flurry of media reports the government is considering postponing the vote maybe for a whole year. Hong kongs opposition argues the outbreak is being used as an excuse to push off the pivotal election. 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. This is bloomberg. Laura wright in london. Wizz air seeing an opportunity to expand, reporting a revenue for the quarter that Beat Estimates and now it is adding 200 new routes and redeploying 22 planes for different markets. It hopes to emerge as a structural winner. Jozsef varadi from wizz air. I want to ask how worried are you about the resurgence of cases . We seen the u. K. Asking travelers coming from spain to selfisolate for 14 days. How much could these measures impact the business youve already seen recoup . Jozsef thanks for inviting me. We are seeing a changing situation. We wereto believe fairly into a crisis but there is a recovery coming and we will be seeing more stabilized circumstances. I think it should be expecting things could improve and deteriorate quite quickly. It depends on the markets. We are talking about spain as a good example. Spain did well in controlling the pandemic. The numbers are going in the wrong direction as some actions are taken by other countries like the u. K. To restrict travel and we should expect more and more of this. Having said that, i think europe is getting pandemic more controlled than before. We are seeing european coordination coming into play. It used to be down to the countries to make decisions and those were made in a noncoordinated fashion and that is improving. We are seeing volatility so businesses will have to adjust and be micromanaged, and you need to react to the changes day by day and this is what we are doing. Matt matt miller in berlin. You expect to see more situations like we are seeing between the u. K. And spain. I think sweden also has a 10day quarantine on people coming back from spain. Does that mean youll be reducing flights because youve ramped up pretty quickly . Jozsef thats correct. Last week we were operating 77 of capacity of last year versus the industrys recovery of 40 so we done much better than the thestry, but the issue is situation can change up or down. I think this is required from businesses like ours. You need to take note of those changes and you need to keep shifting capacity in accordance with demand. A few months ago, some countries were locked down now they are doing well, the u. K. Included and some countries that did well a few months ago are now struggling because of the pandemic situation. Shifting andeep businesses have to react to that and adjust accordingly up or down. Your schedule is pretty robust but what about the passenger levels . Your load factor in june was about 53 . Without improvement impassioned passenger levels, can you turn a profit on the year . Jozsef our load factor continues to improve. 65 , 70 as we speak. You have to take note of the fact that this industry is managed for cash under the cash breakeven point ad load is profit. T than as we a cash neutral, speak. You have to manage the business for liquidity. All of the uncertainty but theyng the issue, are managing the business for that. If weng position, even dont operate a single flight in the next three years we are still in business but we are very focused on schedule to come. Matt if we continue to deal closed andors being the quarantines being reenacted, arent you going to want if not cancel some of your order with airbus, at least defer it . Why would you take on so many planes if you have to continue to worry about load factors and getting to capacity . Azsef we took itsjozsef strategic decision. New aircraft is a sort of competitive advantage. We are able to lower our unit cost versus our competitors for aircraft. It is an important issue to us but also, we see the pandemic situation is not a shortterm thing, but looking to the longterm game. Being the lowest cost in the industry, we are looking for growth opportunities. That is the reason why we are reallocating some capacity to new markets to take advantage of the markets, which is happening. Annmarie thanks for joining us this morning. Jozsef varadi, wizz air ceo on earnings day. Diversity and credit worthiness. Moodys calls lloyds race action plan credit positive. This is the first time it is giving this kind of rating to the program. This is bloomberg. Matt welcome back to bloomberg market the european open. 42 minutes into the trading day and weve now seen markets turn indexes thatuity were down outside paris have turned to gains and of the gains we saw on the cac have increased to. 9 . It is looking more risk on as u. S. Futures rise. Weve got the Bloomberg Business flash with laura wright in london. Laura the gucci owner is seen signs of recovery after online orders jumped in the quarter but this only accounts for a small portion of overall sales which were down 44 . That is a bigger drop then rival lvmh but less than expected. It has weathered what had hoaxes the worse. Ebay has raised its forecast for the year but the new outlook disappointed investors who had hoped the digital marketplace would take a greater advantage of the surge in online spending during the pandemic and there are concerns when lockdowns are lifted, the company could return to sluggish growth. Credit suisse set to announce an overhaul of its business. The swiss lender plans to merge its Investment Bank and Capital Markets unit. The changes are an overhaul by the chief and may be announced when the bank post secondquarter results tomorrow. That is your Bloomberg Business flash. Turn to lets diversity and creditworthiness. Investors require on moodys rely on moodys ratings and the esg are becoming part of those cut relations. Bankss has called floyds race action plan which boosts diversity and increase the number of black appointees to senior positions a credit positive step. Stepsed jes staley the their firm is taking on diversity . We have to take a special look at race. The challenge of our brought black professionals around the world is something we need to be keenly focused on. We need to move away from statements and get into constructive measures Going Forward and that is what we arc dedicated to doing. Weve made organizational changes and set out a number of programs to really move the race issue forward at barclays. Us to topjoining about diversity and creditworthiness for banks is Moodys Investor Services senior analyst. Thanks so much for joining us this morning. This is the first time movies is giving this kind of rating to a program like this. Will you rate more firms based on diversity . Is this the only way to affect change . Thank you. Precise, we didnt assign a specific diversity rating to , nor did we change the rating to lloyds but we provided our comment on a recent announcement lloyd made and lloyds committed to increase in executiven positions. We believe that was credit positive and we think it is Credit Credit positive because it response to enter direct demand from investors, politicians, and regulators for banks to be more socially active , have a more socially active ise and increase diversity therefore positive. This was not the first time lloyds had similar programs. In 2018, it set a target for 2020 for ethnic minorities. Of thearget was 10 overall staff and 8 of Senior Management being made up of ethnic minorities and they are close to those targets now. 7. 3 of Senior Management at lloyds is of an f in minority background ethnic minority background. Within ethnic minorities, blacks remain underrepresented in and this point, 1. 5 of staff at the organizations black and 0. 7 of Senior Management, so they have some specific targets is broadly25, which in line with the black population in great britain. It is not in germany, i dont think it is illegal and tallyk the race the data on different racial makeups of companies. From a lotthat data of companies outside of germany . Do you get a lot of that actual racial data from all of British Companies that you need . Are at theow, we beginning of that and it is a voluntary disclosure. Barclays has been publishing and ethnicity gap report in terms of pay and composition composition over the past couple of years, but it is something that is getting increased interest from investors and banks are complying. The bank of england, which is the main regulator of u. K. Banks , has some targets itself. In 2014, it set 2020 targets and increased those in the meantime. Are 20pecific targets percent of the entire staff being ethnic minority. There were 19 and 13 of Senior Management being ethnic minority by 2022. They are a little behind that at 5 . Should all rating agencies be doing this and can you tell us about some other up a who may end up giving credit positive for credit negative based on their diversity plan . Eduardo this diversity plan is especially targeting blacks and relatively recent. Hsbc three days ago has an internal memo that the bank itself confirmed to the press, they are targeting to double the amount of black staff by 2025. But we dont know the starting point at the moment. Data,ect, as we have more bute able to analyze it, diversity and inclusion is part of our consideration and we risk, in this case, the social part. Annmarie eduardo calandro, moodys, for being with us, talking about the diversity in banking. Which asset will suffer without bank help . This is bloomberg. Matt welcome back to the european open. 52 minutes and the session right now and we are seeing green arrows across the board. In biggest gainer, the cac paris up almost 1 , doing far better than the rest of the benchmark indexes. The ftse, only up. 4 . Kering that askering close to 5. 5 that as kering posts a 5. 5 gain. Joining us is simon flint, bloombergs emerging markets strategist. Today, we are asking the mliv question of the day, which assets will suffer without fed help . We will get the fomc decision later, simon. What do you expect . Euro stoxx 50 simon the answer to your question is without the feds everywhereutely will suffer. The pain will be felt in the lowest assets, the highest yielding, those with the lowest account profile. Africa,erica, south perhaps the indonesian rupiah. Annmarie i have a question about the gold market. And 10 the real yield year treasury closing below its previous record low. Be again for to gold but we are seeing the virgins in what analysts think for gold. Highof america saying as as 3000 while j. P. Morgan says it might be the last to raw. Where do use hoorah. Where do you see it going . Simon it is consolidation time according to our risks expert. The last few weeks, gold has gone pretty crazy and you have a 14 day basis reaching a level we have only seen five times in the last 20 years so in that respect, it looks quite vulnerable. Matt what do you think about the ever falling dollar . How is that going to affect the emerging markets you cover . It should be pretty beneficial. We are in an era where the dollar is kind of soft. Hes got super low real interest far, wed at least so havent seen investors returning insignificant size to either the emergingmarket bond market or e. M. Stock markets, so there is still some scope for flow into those emerging markets, provided the fed doesnt take everything away from us. Thanks to simon flint, bloombergs emerging market strategist. Catch his commentary at mliv and stay with bloomberg tv today. Ejected a fed decision with a special report at 7 00 p. M. London time. European markets, getting a little turnaround this morning. Ftse 100 up nearly. 4 and the eeking out again. Matt Schneider Electric is boosting the cac today but kering and lori l lvmh all doing quite well and helping the french benchmark. Down a littles bit but most European Equity indexes are gaining and u. S. Futures are gaining. Putting up some pretty strong gains. Fintech up. 5 percent coming futures up. 5 as we wait ceos to speak in front of congress. Bloomberg surveillance is up next. Francine extending lending, the until emergency programs yearend to support the economy. Washington stimulus talk stop. Deutsche bank posts a small and the ceo talks about breaking even this year. The british bank warns of a challenging second half. We hear from jes staley. Welcome to bloomberg surveillance. Im Francine Lacqua in london