Michael its been a while since ive been able to give good news, so i will take as much time as i can hear. It doesnt happen very often, but it did happen in july. Manufacturing data betterthanexpected, particularly in europe with of increase for most major economy. Spain leading the way at 53 point five. Italy at 51. 9, france, 52. 4. The euro zone as a whole comes in at 51. 8. All of those numbers for the most part above what they had been in june. These are sentiment indexes that suggest that look at the comparison between june and july. We dont know whether they really incorporate the rebound in cases. In the states, we saw a much better than expected ism unemployment number of 54. 2, which suggests that maybe it did not capture it, or manufacturers managed to keep going through the covid outbreak. We are just now seeing covid start to show up more in europe again. That is something to keep an eye on. Several surveys show that while overall moment to miss revving up, momentum is revving german factories not adding people. Still in contraction territory. Same story in the United States. We are going to wait and see what happens. China, good news there. Their economy continues to kaichennd we saw the manufacturing pmi rose more than forecast, the highest level since january 2011 area the asian markets picking up a little bit. The european markets picking up a little bit. Even the United States picking up a little bit, even though we are seeing more cobit around the country. Around the world, actually. End that little bit at the and just go with the good numbers. Alix clearly. Also point out, euronet longs were at a record. Had a huge move against the dollar in the last month. But will that actually last . Going me now is Holger Schmieding, berenberg chief economist. You heard mike and i talk about the dot dot dot. Are we off to a solid v, or more of a w shaped recovery . David i dont get is going to be a v david i dont think it is going to be a v. I dont get is going to be a w. It is likely to flatten off over the course of time, and with the resurgence of cases in the u. S. And in spain over the balance of the third quarter, we could see some significant flattening in consumer spending. Having said that, unless the virus really gets badly out of track fore are on this. Alix there was an interesting note from kit juckes of socgen. The rhetoric has clearly been europe is handling everything coming out of the recovery, so go ahead and invest in europe. He says if u. S. Infection rates slow down from here, europe is set for europes outperformance may actually be question. David the data is telling me the u. S. Had less of a lockdown in the Second Quarter, and u. S. Gdp fell less in the Second Quarter then in the euro zone, not annualized. Lower phase of the euro zone, it is highly likely that in the third order, the increase in the euro zone will be higher than that in the u. S. Is basically all in all with the u. S. Likely to get even bigger fiscal stimulus then europe, probably subtracting from the issues i mentioned area the u. S. Will maintain a slight advantage over the eurozone is the u. S. Is lightly to discontinue spending even more than europe. The heros that mean dollar rally we have seen is overdone . David it has gone a little farther on trend. Europe does have significant good fundamentals. The euro is undervalued relative to the u. S. Dollar. In currencyhe euro markets may have been a little overdone in july the trend is. Owards a more normal europe that trend i think will be impacted area will be impacted. Alix what about what happens in the u. K. . The rhetoric out of u. K. Banks has been pretty terrible. What does the situation look like there as compared to the rest of europe . Thed the u. K. Holger u. K. Was a bit late battling the virus. The u. K. Has been coming out of this slower than much of the rest of europe. But the u. K. Is now, in terms of the economy, on the right track. The Second Quarter, the economy was probably behind the euro zone, but in the third order, the u. K. Should be able to recover somewhat, probably at least as much as the euro zone, and then of course, the big question is it comes to brexit. If the u. K. Manages to get at bit then the u. K. May be doing ok and sterling would not have to fall. Alix how does that stuck up for the boe thursday . It feels like everyone agrees things are not great, but that does not suck up into everyone agreeing. Holger i think it would be good to just wait probably until november to see what really happens. The uncertainty is pretty bad. The virus is receding somewhat, but there is significant uncertainty. Little about the outcome of brexit negotiations, and it is probably better for the bank of atlanta stay put now and say that if need be, they would probably in november add to the stimulus. Alix how would you look at a targeted shutdown . In the u. K. , there has been conversation about london being shut down. Do you look at that as a good or bad thing . Good, as in if you do it quickly and fast like you didnt do it before, who could really nip it in the bud, versus a lockdown is still bad for economic activity. Holger of course, a lockdown is , and weconomic activity do not have anything like we had in march and april. Moree now imposing regional, targeted measures. The numbers in europe are not so require they would lockdown. What i expect is here and there, the pace of the recovery does not really interrupt the recovery or causing you downturn, as was the case in march and april. Alix really appreciate it, Holger Schmieding of berenberg. Coming up on the program, august is historically a pretty bad month for risk assets. We will have more, plus european earnings with Daniel Morris, bnp paribas Senior Investment strategist. This is bloomberg. Ritika it is time for the Bloomberg Business . Im ready could ash business flash Bloomberg Business flash. Im ritika gupta. The white house has given microsoft and tiktok 45 days to work out a deal to buy the u. S. Operation of the wildly popular chinese maker of wildly popular music videos. The president floated the idea of banning the platform out right on National Security grounds. Hsbc is warning that loan losses this year could hit 13 billion. Europes largest lender posted secondquarter profit that fell by more than half. Hsbc retailmped at and corporate backing businesses. It is the worst quarter for socgen since a rogue traders record lost more than 12 years ago. Almoststed net loss of 4. 5 billion and took a large tax charge. That puts more pressure on the embattled ceo, trying to turn socgen around after a 60 slump in stock price this year. It is the biggest medical acquisition of the year. Siemens has agreed to buy Varian Medical Systems for 14 billion in cash. That were prisons about a 20 premium to varian Closing Price friday. Alix thanks so much. Lets stay with european earnings. We just heard hsbc today and socgen, and energy names later this week. Morris,me now is daniel bnp paribas Senior Investment strategist. Do you think that the bull lackt in europe, does it conviction, or do you feel confident in it . Daniel we are currently overweight european equities, so we believe it does have more room to run. I believe if you look at the macroeconomic background, you generally feel more confident about the ability of eu countries to recover from dependent to the u. S. A we know, valuations for long time remain more attractive in europe than in the u. S. , so that if the underlying reason for our expectation that europe is going to outperform the u. S. Over the next week is the next three to six months. Alix does that going to different sectors . Tos it count if youre going go value, energy, or banking . Daniel certainly it can. A lot of times, especially if you talk about energy, you need to distinguish between the u. K. And the rest of the irket, but broadly speaking, think that is a true statement, with the obvious exception if youre thinking about value versus growth and you have technology being a big are the growth a big part of the growth indices, and a lack of that in europe. Alix overall, do you like u. K. Better than europe, or just certain sectors better in u. K. . Daniel i think it is probably more of a sector bet. In general, commodities should be doing well. Overall for equities in general, we have seen them all moving together. It was all on virus, microspheres, etc. Fears,us, macro etc. Daniel if you had some sectors which really did have a bigger level of earnings surprises than you would expect outperform, we havent really seen that. It has been more broadbased support. Sectors, being able to be those expectations. Buy i feel like the one to europe value trade has been the off trade for years. If we start to see u. S. Virus cases slow a bit in certain areas of europe having to lockdown again what we saw in spain, do you change your thesis right away, or do you think it is stickier . Daniel certainly that is the main risk for this type of scenario. Essentially, if we believe that ultimately, everyone has to learn to live with the virus until we get a vaccine, the question would be is the u. S. At that level already, in terms of level of infections and someone, or does it need to go higher, in which case the markets would take price. Ultimately, because of the higher severity of the lockdowns, they were able to get the number of infections slower than you ever got in the u. S. , but now as they slowly come out of them, especially as the tourism season tries to pick up for august, we are seeing the end of edible rising. I think that is really the valuation we are making everyday to see if this really holds are not. Alix i was talking with an economist about has the euro run too much. When does a stronger euro wind up hurting earnings . Daniel on one hand, if you look at the export exposure, using of germany from the stronger euro, but to the degree that responds with a recovery in economic growth, european equities dont necessarily underperform. If you look at where the euro is now, compared to the average over the last four years, it is only about 4 above net average. That is a different conversation, but we dont we are there yet. Alix when you are looking at value, what kind of distinction do you make of those companies that have exposure overseas, like china, versus those with more domestic exposure . Daniel in general, domestic exposure is going to be key, particularly with the collapse of gdp. It was essentially all driven by the collapse in consumer demand. So if we anticipate the economy is getting anywhere near where we were before the pandemic, it is going to be the recovery in domestic demand that is going to drive it. It hasnt been a swing in at exports. In net exports. It hasnt been a swing in business demand. I think it is going to be the more domestic oriented segments that have the potential to really recover. Alix based on that regionally, do you want to be playing countries that have more exposure to the european recovery, like italy . We dont do very often country exposures, especially across europe. I think it is more the sector dynamic than the country dynamics, particularly for the largecap stocks, that we are not really looking at that particular angle yet. If you did see renewal in any sense of the euro zone crisis and a selloff in the periphery, then you would start looking at that dynamic again. But i think that particular trait certainly post the next generation eu deal, you can see that already and italy ended spain. Alix good point. 1 is where we are on the italian 10 year. Great to catch up with you, Daniel Morris of bnp paribas. This is bloomberg. If we were to lock down really hard, i hate to even suggest it, but if we were to lockdown hard for a month or six weeks, we could get the count down so that are testing in Contact Tracing was enough to control it. Alix that was neel kashkari, minneapolis fed president , speaking earlier this week, suggesting a fresh u. S. Lockdown would control the virus. At the same time, the u. K. Is looking at all options to tackle a flareup of the virus. One, maybe shutting down l ondon. Joiningfor sally me is sam for sally is sam fazelli. Sam we know that lockdowns work, but we also know that putting a cloth on your face, which is a very political subject, and keeping your distance also works. It all depends on how bad the situation is. The numbers in london dont look to kennerly out of dont look particularly out of place. There are some areas of europe that look a bit more worrying. Is an option. At we know they work, but it is a pretty drastic option. Alix eli lilly came out with some information talking about testing and some of their antibody responses. Thats a very interesting set up. All we have done so far is talk about vaccine that you inject to bring them up with an immune response. What these things are, the one using, you give them a readymade vaccine straightaway that kills the antibodies or helps the body clear the virus. It has gone into nursing homes, into elderly populations. That is an interesting aspect already. It is a phase 3, the latest stage, to try to see if they can reduce the rate of disease. Ist it tells me is lilly seeing evidence that its antibody is safe in this kind of population. That is already a good step forward. Alix what is it like to try to find people who want to part is a paid in these experiments you want to participate in these experience . People and can show inform them genuinely of the safety of a thing of course, you can never be 100 sure think folks will understand, especially if you go into a nursing home where it might help in the longer run by getting a shot every three months to protect people. We have many antibodies on the market for different diseases. They are relatively safe. The safety issue tends to come with what they interact within the body. Here, what they direct with is a foreign body, so it should be pretty safe. But time will have to tell, obviously. Alix what we have learned is if you go to the vaccine front, we are having more and more data come out, more phase 3, more trials. Do we know yet what vaccine is best . No, because there are two ways to answer that question. One is is your vaccine the most protective one, and how long does it protect you for. The first question, we get at the end of the year for several vaccines. We had a flurry of data last week from the tests of some of the big vaccines in nonhuman primates, and when you look at that data, you see that perhaps in the measure of can you stop the virus multiplying in your lungs, astrazeneca and Johnson Johnsons vaccine seenmed the best in that model. Alix ive been reading a lot the last few weeks about how and who distributes the vaccine first, and who gets what, and how wealthier countries are going to outbid poorer countries. What is your outlook on that . Sam thats kind of happened already. All the news you see is the u. K. Signing a deal, the European Union signing a deal, the u. S. Signing a deal, japan signing a deal. At the end of the day, that is happening. It is up to the government, up to the broader nonprofit organizations perhaps going across the full interview business is to try and make sure that these vaccines are delivered also to the developing countries. Remember, most of the companies are very clear about this, they are not going to try and make a profit everywhere. I think it is here for the richer nations to pay enough back to the companies that developed the vaccine, at least at some point. But in developing countries, i think everyone is very clear they are not going to try to make a profit. Alix sam, so great to catch up with you. Sam fazeli of Bloomberg Intelligence, thank you very much. European markets trading on the highs of the session as we had to the close that we ha as we head to the close. This is bloomberg. [inaudible] [inaudible] betterome breaking the some breaking news for you. The secondlargest shareholder seems to be against vetter as the chairman. They have been pushed out to accommodate new blood in the company. Cerberus has been very much question. Ehind that it is interesting vetter has become chairman. Vetter emerged last week to become the leading candidate after Supervisory Board members led by one of the two government representatives on the board put him forward. It seems he did succeed despite cerberus objections. We are settling out here. It is green across your screen. Ftse, allthe cac, the higher on the day. It was industrials, materials, industry that all lead the way. You can see what is playing out there. Thequestion for me is dollar having a better day today . Or is it a pause . Down 3 10 ofdollar 1 . The aussie dollar is down 5 10 of 1 . You are betting on the aussie dollar are you going to take that off the table now if parts of the country wind up being shut down . Selling a little bit as risk on fell off. 1972. Gh still trading at it will be hard to think about getting bullish if you still have something about that doesnt make sense. Scarlet fu joins me now for individual information. Today. S one narrative individual sectors not really because you have all 19 groups fire and it 600 on is on the positive pmi data that came out. July it is thein best level since february 2018. You have auto parts, construction all doing well. Performer he under performer is real estate. They finish out in the green but just barely. Within the auto sector there are encouraging car sale numbers from france and spain. Ferrari said that orders recovered in june and july. Banks finished in the green as well despite highprofile laggards. Rode on the value of its trading business. Sent paolo vw named a new chief for the skoda unit. I wanted to highlight that. Siemens Health Care Union far dollarspoint million to 16. 4 million the u. K. Accounting for the bulk of those provisions it is speeding up restructuring to focus on growth in asia rather than on in europe and asia where things are slower. Somell miss its target, so pain head. Some pain ahead. About the are warning difficult outlook for the u. K. We are taking a look at the cfos. Spoke to bloomberg tv earlier. This is what he had to say. Under 7 billion of credit losses in the first half. Businesses most impacted in the lost we had 1. 5 billion in commercial banking amongst just over 2 billion of expected credit losses. The big driver in the second a negative curb in terms of the Economic Outlook in 2020. But not enough1, to offset the sharper recession everyone is expecting this year. You are expecting 500 million in cost savings in the second half. Will that be accelerated moving forward . Bel the targeted cuts changed . Does that need to be increased . We went into the start of the year anticipating costs would be flat. We are now signaling we expected them to be down 3 this year. We had a 7 reduction in the Second Quarter. It was flattened somewhat very subdued activity in the bank on things like travel and head office costs. We are on track to deliver what we announced in february, which was a substantial Cost Reduction program over the next three years. We are pleased with the progress we have managed to achieve in the first three months. Headlined that banner 35,000 jobs to go. Is there a reality moment that we need to face that reorganization is going to mean more than the 35,000 . Will it mean something more substantial . It was never a goal in terms of headcount. We have had just under 4000 employees and cut contractors leave the bank in the first half of the year. We did what we thought was the appropriate thing to do in march and establish a redundancy program. A month or so ago speculation as to how many people were involved we do need to take costs down given revenue pressures we are seeing in the bank as a result of covid. Much of your guidance depends on a variety of scenarios depending on where the economic recovery goes from here. Data,ou have seen in the what are the next three months going to look like . There is a substantial amount of uncertainty out there whether it be brexit, covid. Over the next three to six months, it will be important to see the impact of second and third waves and what impact that has on various economies around the world and what the pathways to a viable vaccine sometime in 2021. We will learn a lot over the next six months or so as we approach fouryear results. We should get some clarification on the path of brexit as well over that period. We have a large range of expected credit losses this year a billionars dollars. , for jonathan tice Bloomberg Intelligence joins me now. There are four big issues confronting hsbc. The pandemic, the u. K. And theally, relationship between the u. S. And china, the u. K. And china, and how do you be huge global bank if you are not a global bank. What do you think . I think you are spot on their. Billion auple bank that size, they are still not in a position to give us great guidance on revenue. People today were hoping for some positive catalysts which we did not get. The elephant in the room is the u. S. And china. Hsbc depend on hong kong. China was a massive leg of its growth and tensions between china and the hsbc, there are concerns they may not be as positive as they could be. The Global Trade Bank with sanctions risk and all this kind of stuff, the top line is the big unknown. I am not worried about capital. No one is worried about capital. They cannot restart dividends yet. Chinais no answer about and u. S. Relations. Hsbc people are struggling for reasons to buy. The answer isnt because anyones worried. Positivet whether the where the positive capital is and to the bank trapped between a rock and a hard place, china into the u. S. Trade and all the risks that go along with that. Alix it doesnt seem like they are trapped because they have made a wellknown where their priority is. If they will pare down their u. S. Business and continue to grow revenue in asia, it seems they have made their choice. At what point will be stop calling hsbc u. K. Bank . Growth, inn terms of terms of profit they have 60 , their business coming from asia. Look at what they can do with their debit ends. Thats dividends. Thats the u. K. If you are a hong kong shareholder you want dividends, but it cant pay one. They are trapped. Say, completely restructure. To spin off the u. K. Business. Dont forget mark tucker. He was heavenly involved in restructuring. It dependsked on hong kong. , the u. K. Hina fallout regulators into the massive u. K. Business. They said they wont sell the retail part. Alix thats an interesting point. We dont want to dismiss stockton. Much. Ock did not do that it closed on 6 10 of 1 . Heres a little bit of what they had to say. Has been fixed in april until midmay. Ance midmay, we have seen encouraging rebound in all our businesses. Business, which has been the most impacted in the First Quarter is rebounding since midmay today. Alix now is the worst over for socgen . Jonathan i suspect so. The cancellation of dividends across europe and the fact that from halfway through may and june, business picked up. Quite clearly they are retrenching. One of the reasons the market is skeptical is they said they could take out several million but they will only. Ose 250 Million Euros low rates destroying the retail business, so they are struggling there. One of the reasons that didnt follow so badly is because it had underperformed enormously. 30 this year already. To catchalways, great up with you. We appreciate jonathan tyce. Youris ritika gupta with first word news. President trump can act on a virus relief plan without the approval of congress. Is considering extending they have been able to reach any agreement over manufacturing in the u. S. Rose at the largest paste since 2015. Lehner that is according to the ism manufacturing gauge. The industry faces a number of challenges, amongst them high unemployment and a recent pickup in coronavirus cases. Your future risk of dying from heat will be determined in large part by the consequences of todays economic and equality. Paper was researched released by a research consortium. Those in eldercare will die from heat at much higher rates. I amrita could group. This is bloomberg i am ritika gupta. This is bloomberg. Alix risk on was a theme today throughout the market. The ftse, the cac all outperforming. Industrials all leading the way. Also helps by the weaker euro taking a break from its monster rally. See if that can sustain itself. Risk on for this monday. Solid pmis as well. This is bloomberg. Steel. m alix this is the european close on bloomberg markets. The pandemic caused a huge shift in how we are all working with working from home likely to stick around long after the pandemic is over. 82 percent of Business Leaders plan to give employees some remote option all workplaces reopen. ,oining me now is Diane Gherson chief officer at ibm. Ibm has 1000 offices around the world. Basically, a really good window into how your employees feel. We went from a sprint to a marathon with working at home. Where are we now . Diane we are still in the marathon. Its more like him and iron man. Alix when you talk to your employees, do they like get . Do they want to keep working from home . How do you balance what they need with what ibm needs . Them, we wanted to help work with them to help create what we do next. What haseir views and gotten through clearly is employees miss social interaction. They feel isolated. They miss encounters because those are the ones that lead to innovation and a new way of looking at things. Be morewe tend to transactional and is scheduled when we are on video and so forth. They miss the energy, the electricity you get in the room that gives you energy every day. Those are the things they say they mess but pretty sure there were things they liked about yang home. No commutes for example about being home. No commutes, for example. The question becomes when you geared towards performance reviews for example, a common criticism is if you work from home you are not as predict if productive. How do you do that at ibm . Are there different metrics you have to measure up to daca up to . Diane we have always had a percent of our employees working from home. We have been doing this for a while. It is important leaders measure outcomes, not measuring by walking around. Shift, a shift into the future that really accelerated, and that leaders need to be more like future oriented leaders, measure outcomes not input. We have always been in the acquired e have this is just a continuation of that. We are thinking about the office as a different thing. Now that everyone is working at home we realize that we need to actually have an office as a destination for certain things, not just a place to go and get your work done. We all know you can do that at home. So making it a place people want to come to for certain team activities. Analytics tou used measure your employees Mental Health and work state . Working from home is difficult to have the on and off switch. Diane we do a lot of work with that, not the analytics side. We have a lot of Mental Health opportunities for them but we are not watching or anything. It is really important that managers check in with their people, making sure they are checking off. We have check ins once a week between the manager and employee to make sure that happens. Alix how do you hold people accountable if they are not meeting the goals they should . Diane if the manager isnt doing it or if the employee isnt doing that . I dont understand. Alix more so the manager. Where is the accountability there . Diane we ask the employees if they are getting the support they need from their managers and so forth. I am pleased to say we are in the 90 as far as employees is saying they are getting the support they need from their integers. We ask about their Mental Health, how they are doing. We are in the 70s. It dropped a little bit as we went through the george floyd an example. We are monitoring that carefully and looking to see where we have hotspots that we need to go in and do some intervention. Alix there is the question as you mentioned of people interaction that generates a lot of ideas. Is there anything ibm is doing to recreate that digitally . Diane there are fabulous Digital Corporation tools. I dont want to undermine that. We have trained our people on it. Even top leadership are using brainstorming tools. That is all good. The alternative is social distancing and masks. It is a lot easier to do a whiteboard virtually than in a room. That is the situation we are in. It is still not quite the same. The other thing is as time goes on, you realize the network you left the office with is going to change. You have new people joining the team. That bank of trust you built up over time starts to dissipate and you need to build a new it is harder to do virtually and to do really good teamwork and a collaboration, trust is important. Even kobe said there is such a thing as the speed of trust. Imagine beginning a new job remotely. Thats bananas. Diane gherson, chief resources off of officer at ibm. This is blumberg. Bloomberg. Apple and the nasdaq up a 1 and it is a busy week ahead. Jim fuller will be talking speaking later. You have Charlie Evans speaking at 2 00 p. M. You have a disney and activision on wednesday on tuesday. Wednesday, you have more earnings. Humana, madura. The bank of england rates decision is thursday then finally the main event on friday, the u. S. Jobs report. What it means if we dont get a unappointed extension. That wraps it up for me. Coming up next, david westin will be speaking with the ceo of the National Association of manufacturers. 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. He scores stanley cup champions touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. From bloomberg World Headquarters in new york to our audiences worldwide, welcome to balance of power. I am david westin. We start with wall street. What is going on with the markets . It is a risk on kind of day. Radel and doolittle well explained madeline doolittle will explain why. Day rally on friday largely driven by those earnings that came in better than expected for the most part. Microsoft is considering buying tictoc. That seemed to drive an extra leg at the end of the day friday. Apple is at more than 3 , 3 ping the s up more than , helping the s p 500. They confirmed the fact that we have this risk on rally. Natural gas soaring up 16 . Bank of america is bullish on