Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

Jackson hole goes virtual. Jerome powell gives an update on the central Bank Framework review. We hear from bank of england governor Andrew Bailey and ecb philip lane. No more lockdowns here. Italy joined france and spain and rolling out another nationwide shutdown. Despite rising cases in all three countries. Global infections past 24 million. The eu trade chief phil hogan quit after growing criticism that he broke my wrist rules by going to a golf dinner. Just under an hour away from the start of cash equity trading in europe as hurricane laura makes landfall in cameron, louisiana. See european futures swinging back and forth between gains and losses. Right now, dax futures up about 1 10 of 1 . The futures doing a lot of nothing. A bit of a stall after global stocks really had an alltime high again yesterday. I want to bring you some breaking news on wpp. The second quarter, organic sales at the advertising behemoth down 15. 1 . This sales hit was something that investors were focused on. Its not as bad as analysts had anticipated. 19. 2 had beenf the estimate. The sales drop was actually 15. 1 . Still bad but a little bit better than expected. Wpp booking 2. 7 billion pounds of impairments in the first half as well. The company says its buyback is still under review. Its also reviewing its dividend policy. If you are invested in those shares for income, watch out for headlines on that. Its costny also says savings are on track for the upper end of the range it had been a 700 Million Pound date hundred Million Pounds target. Cost reduction progress was also a big focus for investors. Lets talk about another country that is breaking news. Rollsroyce. Weve got an update coming through from them. Really interesting. They say they are reviewing options to strengthen their balance sheet. There had been talk about whether they would try to raise money coming to ask investors to put more money in. This is a business that makes money or doesnt based on how many engines they sell and how many hours their engines are in the air. They are reviewing those options. First half adjusted operating loss comes in at 1. 6 7 billion pounds. 191 million. This is worse then was anticipated in terms of the underlying loss number. They are talking about the potential disposal that they had for those number. They are reviewing that right now. Thats one of the lines we are hearing from the businesses morning. Targeting disposals to raise 2 billion pounds is one of the lines we are getting. Also, headcount. Headcount4000 reduction by the 27th of august. The fundamental restructuring of their Civil Aerospace is something they are tackling. We believe that there for now. Rollsroyce giving us an update on their performance. Interesting. Targeting disposals to raise 2 billion pounds including itp arrows. , the latesto matt on the hurricane. Hurricane laura making landfall near cameron, louisiana. A category four hurricane. We were being warned that this was dangerously close to becoming category 5. It could be. It still could be the most powerful hurricane to hit louisiana, bringing with it deadly storm surges, flash floods, high wind. Winds gusting as high as 150 Miles Per Hour overnight. Those kind of speeds make it a rival to the lost island hurricane. 1856 is the last time we saw when speeds of that nature. A real focus is on any loss of life that might happen here. Industry and other parts of the Energy Taking precautions ahead of the arrival of hurricane laura. Lets get a bloomberg first word news headlight update. A 17yearold was arrested after two people were fatally shot in kenosha, wisconsin. They came during clashes between protesters, counterprotesters, and the police. It stays after another black man was shot seven times in the back by police. The wisconsin governor has doubled the number of National Guard members available. China says it offered to let u. S. Regulators audit companies. It is hoping to diffuse a spat that could see its firms on american exchanges delisted. The vice chairman says beijing is sincere in wanting to pause the state of standoff. For all the u. S. Investors who have invested in these Chinese Companies, they have made a lot more money than the average market in return. Its good for the Chinese Companies as well. They have access to International Capital and listing in new york also helps. Its mutually beneficial. I hope there will not be a decoupling. The European Union trade chief has stepped down after growing criticism he broke virus regulation. He attended a golf dinner in ireland last week, an event that is under police investigation. The eu will have to move quickly to fill the post. And has a key role in trade discussions with the u. S. , u. K. , and others. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Matt thanks very much. Rally has stocks stalled out a bit as Traders Await details on the feds new policy framework from Jerome Powell in the virtual jackson hole speech. Making landfall in cameron, louisiana. Lets bring in laura cooper from the mliv team. Both of these things, it seems hurricane laura. Im confused. You have the same name. Everyone seems to be named laura today. Hurricane laura hitting with very dangerous winds and camera, louisiana. The jackson hole speech. They are equally halting the dollar right now. Tell us how those things affect the currencies move. This point, we are seeing this risk off tone. Fed, it will the likely be hard for the fed to actually out of the markets today. Markets appear primed for some confirmation that the fed is going to be open to this inflation overshoot and this aggressive stance. If this is confirmed, we would expect to see the dollar come under more pressure, adding to these underlying fundamentals. Theres a real risk that we could see the dollar catch a bid, should the fed disappoint and not provide details. That is something we saw post fomc meetings last week. We did not see hence of this imminent shift. It does set up the potential for Dollar Strength today. Anna good morning to you. Its interesting to see the asiapacific stocks down, 1 10 of 1 . Consider some of the latest geopolitical tension between the u. S. And china. Maybe thats an achievement. They are testing missiles. The Trump Administration putting trade visa restrictions on some chinese officials. All of that could have led to something more of a selloff. I suppose we are all waiting for jackson hole. Laura c. that is the case. U. S. China tensions have been trump has made it clear that a tougher stance on china is a key element of his election campaign. Despite the progress that he wants on those the phase one trade deal. Its all about powell. We have this hurricane as well. Those two are quite negative catalyst for stocks heading into the session today. Matt we could see as much as 25 billion in damages from this hurricane. Thats if it holds that a category four. Ask theo quickly question of the day. You are asking on the mliv blog today. What would a trump when mean for assets . You previously asked about biden. What are you hearing from clients . Laura c. we are seeing the fact , the conflicting potential sources of stress for the market. One is that a Trump Presidency could be seen as more cash friendly, less regulatory. That could actually support this rotation into cyclicals, the financial sector. At the same time, we also have escalating tensions around trade. We could actually potentially see an extension of more trade tariffs, geopolitical tensions in general. That is unlikely to be the case under a biden presidency. At this stage, it is hard to determine which of those factors will win out and be an upside or downside to stocks. 2016,f we look back in the first few months after the inauguration were quite negative for stocks. We had a strong uplift. That came partly on the back of the fed and sweeping tax cuts. They could have that same reaction again. That is something worth considering. Anna with culture wars dominating, a focus on policy, it seems sensible to protect the unpredictable. Thats the latest on the markets. We mentioned Jerome Powell and jackson hole. We will get more of that. Jerome powell headlines this years jackson hole symposium. We will look ahead to his highly anticipated speech. Thats next. This is bloomberg. Anna welcome back to the European Market open. 45 minutes to go until the start of the equity trading session. Features dont tell us much about where we will head through the european session. Mixed for European Equity markets as we wait for jay powell at jackson hole. Jackson hole 2020 kicks off today with the fed chair. He will be headlining. This year will be like no other. The event will be held virtually for the first time ever. The public will be able to watch. Traders are expecting details on the feds new policy framework with the fomc holding shortterm Interest Rates. Symposium will also address the challenges facing policymakers as a result of the pandemic. About theo the Central Bank Inflation target. I never thought of 2 is a ceiling. Stay focused on what anchors Inflation Expectations in the economy. From a communications standpoint, i think we will be talking about the kinds of things that help us do a better job of achieving our objective. Lets head to andrew jackson, head of fixed income at federated hermes international. How high should our expectations be if we want to protect ourselves as we head into jackson hole . What are we likely to hear . Andrew i dont think we are likely to hear anything urgent. You spoke to laura about jackson hole and hurricane laura. What laura was focused on is what will happen here in the next day or two. What we are really interested in is what happens a long way away from here. As much as focusing on spot risk, risks over the next couple of days, i think we are all very focused on what happens in the long way. Deflation, lot of does the policy framework change sufficiently to be able to stimulate the economy there and get inflation back in . A reminder from Jerome Powell of how powerful they can be to fight inflation is inflation gets out of the bag, if we get that 2 . Most policymakers and central bankers are hoping we get there at some stage. It may take some ideas to get us there. Matt what are the unused tools . What have they not reached for yet that is still at their disposal . Andrew more formal guidance. They can go as far as japan and think about targeting yields. I think negative Interest Rates is one which they have struggled to come to terms with from an Operational Risk perspective. We see that in europe. That is something that you hope they are discussing just in case we get a major impact on the Global Economy or the u. S. Economy and if the virus were pernicious over the next 12 months. Shape do you think the yield curve would look like if the fed in the fed dream scenario . If they could do whatever they wanted to assist the u. S. Economy to recover from covid19, what shape would they give to the curve . Andrew they wanted to normalize. The kind of curve we are used to seeing. Where to tens are not acutely flat. They want people to value shortterm over longterm. Getting anything close to normalization gives them more power to fight inflation. They want to be able to move the yield curve, twisted if inflation starts. At the moment, they are mostly worried about getting inflation back. They will not be focused on what the yield curve looks like. They would be more comfortable if it looks steeper than it does now so they can do something about it. And attack inflation. They want to get their weapons back. That is their secondary concern. The primary concern is getting back to normal. Matt its interesting to me that we are talking about extreme, extremely dovish, emergency dovish measures. Possibly even reaching for negative Interest Rates in this economic collapse. At the same time, equities are at alltime highs. The s p 500 is trading for 27 times future earnings. How do you square that circle . How do you make that work for you . The equity market is betting on a bang up thirdquarter recovery. Chairman powell is doing anything he can to save the economy. Andrew you are basing the fixed income guide to be bearish. You are right to do it. I worry a lot about that. The dislocation between the markets and the underlying economy are stark right now. Odd, that wel very are at those kinds of levels. We are at those levels partly because of what Central Banks have been doing and the impact that that has on investors. It forces investors to do stuff that they wouldnt do. The momentum is very strong. You commented earlier about how asian futures are doing better than they you thought they would do this morning, given everything in terms of trade tensions. The fact that todays jackson hole. Momentum continues to be positive. It is tough to be bearish now. In the meantime, when i looked at fixed income markets, theres a ton to do. You a more bearish tone, get a fixed income guide to be bearish stories. There are corporate that are really struggling. Not just individual borrowers. Veryis a time to be focused on your analysis, your credit analysis, your equity al assist. There will be bubbles on the upside. There will be those that will probably go into bankruptcy at some stage over the next six months. We dont see that amazing thirdquarter performance. Matt fascinating stuff. Great to get a fixed income guide on when we are looking at alltime highs on the equity side. Someone call you the smart money. Thats what we would call you. Head of fixed income at federated hermes international. Thanks for joining us. Up next, hurricane laura makes landfall. The category four hurricane hits cameron, louisiana, causing extreme wind and flash flooding throughout the entire state. We will bring you the details, next. This is bloomberg. Matt this is the european open. We are 38 minutes away from the start of cash equity trading. 36 minutes away from the start of the cash trade. Futures have turned slightly red. We were bouncing back and forth between gains and losses. We are coming off of record highs. We did hit record highs once again yesterday. Indexes,of different from the s p 500 to the ms ci world index. We are up at pretty lofty heights. This ahead of the fed speech at jackson hole. We will hear from chairman powell later on today. Also was hurricane laura crashes into the louisiana. Weve heard reports that wind is up to 150 Miles Per Hour. Thats about 240 kilometers per hour. That causes massive flooding across the state of louisiana. Its a category four hurricane now. Nearing category 5. Threatening what forecasters have described as unsurvivable damage. You are seeing live pictures of texas. Cameron is where the hurricane hit. Reporter. Is our you, whatet me ask are the chances of has everyone evacuated . Human life is the most important issue. Where does it stand . Stephen authorities have said they have evacuated nearly everyone. That is the highest priority at the moment. People a report that 150 to decide to stay in their houses. Its an emergency. Everyone should be evacuating. The government is doing all they can to get folks out at the moment. I know that the oil industry will be ready for this. What kind of aside from the tragic loss of life that might result, what kind of financial damage are we expecting to see . Stephen this will be in the range of tens of billions of dollars of damage across the board, not just to the oil and gas industry. Also to infrastructure in the region. The Louisiana Tech suncoast right there is home to about 25 of u. S. Refining. You are already seeing facilities get shut in, they are not producing. Thats affecting the price of gasoline. It is the home of two of the largest lng export facilities in the united states. They are both shut. They have evacuated both all staff. Evacuated everyone. Anna thanks so much. Is bloomberg. Businesses are starting to bounce back. But what if you could do better than that . Like adapt. Discover. Deliver. In new ways. To new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back. But bounce forward. Thats why were helping you stay ahead and adapt with a network you can count on, 24 7 support and Flexible Solutions that work wherever you are. Call or go online today. Welcome back to the European Market open, 30 minutes away from the start of cash Equities Trading this thursday morning. Futures suggest a fairly lackluster start, and also watching what is happening with hurricane laura in louisiana. Lets take a look at some of the events worth watching out for. The 2020 final day of Republican National convention. President trump is expected to deliver his president ial acceptance speech. Angela merkel to discuss the strategy to contain the coronavirus. We will get a further update on the spread of the virus a little later in the program. And jay powell will speak at a Virtual Event to discuss the Monetary Policy framework. We will look about inflation targeting, and per limiter estimates shows u. S. Gdp contracted by the most ever in the second quarter. We will get a reading today alongside u. S. Weekly jobless claims. They drop at 1 30 pm, always a focus for the markets. Matt . Matt yes, absolutely. So a lot to look ahead to today, and there is some news out of delivery hero, as well. The best performing stock on the german dax is buying the Online Grocery store, insta shop, 270 million as delivery hero reported their first earnings since the company entered the dax, and that was just this last monday, actually. It is germanbased but delivers Food Services around the world. They expect continuous growth in the second half of 2020 based on Strong Performance in the First Six Months of the year. His berlinns us from headquarters. Thank you for your time this morning. I guess the main question investors want the answer to, and so far, they must have come up with a resounding yes, because your stock is up like 35 year to date. Can you continue with the strong results into next year . Is the top that we have seen during the covid prices for the delivery hero business sticky enough to hold on into 2021 . Ceo with our service, i believe we will continue growth momentum for many years to come. Of course, we have some growth to some regions in our business, and we will see how much that will last. The behavior might change back a little bit too normal, but we have got a new Customer Base that loves the service, so i expect a good result. Good morning to you, niklas. You just did the deal with instashop. Doing deals. Where are you going to be filling holes . Klas we are taking a different approach. We have not been participating in some deals. Whereld rather do things we have certain capabilities. New capabilities when it comes to quick commerce. This being a business growing profitable, and a good addition to our company. It is interesting. I always find it interesting you are based here, but i cannot order food from you here. Is this market not important to , because it is a good place for your headquarters, but i guess you do your biggest business in asia. Niklas yes, i am a little sad, too, that i cannot order to work. But yes, the Customer Behavior was better in other markets, and therefore, we decided to doubled down in asia and latin america and the middle east. And also, part of europe. Can hurt a little bit, not to order from your own service, but it was a business decision. Las, you do seem to be growing weakly, not yet profitable. Is there any limit to how much you can grow before making a profit . S well, with growth and with size comes profitability, so the key focus is to continue to grow. As long as we have a good profit contribution on every single order, as we see now, and we start increasing that profit contribution per order as the same time we keep on growing, so that has the double effect on profitability, but it is all about growing the size, and with that comes profitability, so we will have to see when we reach the size if we can also turn a profit. Klas, what is your vision for delivery hero . Right now, you are an 18 billion company, 19 billion company that delivers food around the world. Is that the ultimate goal, or do you want delivery hero to be Something Else in logistics . Niklas yes. We see ourselves as delivery of anything, and that is groceries, if that is food, if that is electronics, whatever that is, anything that you need urgently to your home or office, that is what we are, and i think that is an enormous market, and we want to have a service that people love, and that is really what we care for, and i think of people love your service, you will also make money. But folks, the Customer Experience is key for us. Niklas, i want to make a comparison, which may be ill advised, to amazon. There are many businesses that deliver to my door, but there is only one that has the have to that it has in the homedelivery space. The only one that has the heft in the homedelivery space. Is there room for all of you, or is it just one . There are so many players in this market right now. Yes, there are a lot of players, and i think there will always be a lot of competition in this place, and we will continue to have that with uber and alibaba and you name it. They want to own the space of the tech, and we would like to own a little bit of that or be a player, and our core competence is to make sure people can get things really, really fast, so while maybe same can deliver the same day, we can do 20 minutes. Than 15o some in less minutes, and that is where we make a difference. Forif you really want to go the biggest variety, then i think amazon would still be a very good choice, shipping from china to the central warehouse, but we are supporting that local ecosystem, those local shops, and that is what we do really, really well. Anna ok, thanks so much for joining us, the delivery hero ostberg. As lets get some first word news, and we go to laura. Protestscial justice, bond third brought by the shooting of jacob blake. It will have intermediate impact on sports companies. The white house is defending a shift in guidance from the cdc. It says people who came into close contact but do not have symptoms may not need tests. That has alarmed many health experts, saying it could limit how many tests are performed. New York Governor Andrew Cuomo says the move is political. Union trade chief, phil hogan, has stepped down after allegedly breaking coronavirus restrictions at an event that is now under police investigation. They will have to quickly fill the position, as they are in key negotiations. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Anna . Matt . Matt laura, thanks very much there, in london, with your first word news. Up next, jackson hole going virtual, pretty much like everything else. Fed chair Jerome Powell gives an update on the Central Banks framework. It does not matter if he doesnt online or in the mountains. We still care, and we will tell you what to expect, it does not matter if he does it online or in the mountains. We still care, and we will tell you what to expect. This is bloomberg. I think we have to act as appropriate when we see the economy having shot. I do not see that right now, so i do not think we need to act right now. Thehen i look at where economy is, it is not yet time. I am not ready to provide more accommodation to the economy without seeing information that it is getting weaker. In. Ou see the data coming Consumer Spending is solid. Spending is slowing, weighed down by uncertainty, of course, but it is not negative investing. We still have growth. Not Monetary Policy. Trade uncertainty. Probably immigration policy to some extent. There is a reason to believe Interest Rates will be lower Going Forward than they were in the past. That is what policymakers were saying this time last year. It would be very nice to see the jackson hole. Policymakers will be kicking off this years jackson hole conference today, albeit in virtual form. Said chairman jay powell is expect to speak. Powell isairman jay expected to speak. Air jay powell is said to be speaking. What will be taking place in the next few days . The coronavirus, we have seen a very aggressive response from the fed, buying bonds of sorts and cutting Interest Rates, but i think today will be a focus. While everyone is always looking for what you might find at the meeting and whether there are new ways of locking in rates through communications, but there is this idea that we will be talking about the medium and longterm term goals of Federal Reserve policy, and may be a tweak in those. Of thea listening tour inflation mandate and how it interprets that. The expectations are that Jerome Powell will detail that ahead of a bigger meeting in september. Although this meeting is pretty darn big, as well. This speech is big ahead of that meeting. Simon, what are the questions he is going to address and the state of the economy . He will be, i think mainly talking about the inflation target, the 2 inflation target, grounding in the future. Moreentral bank may be willing to let inflation rise a bit to make up for the session. All right, simon, thanks so much for joining us. Everyone, of course, looking forward to this for a long time, and it is finally coming. Simon kennedy talking to us about the virtual jackson hole. Before the event, we caught up fed the kansas city president , esther george. George depending on how the economy unfolds, watching to see how jobs recover will be a very important component of this, so in the months ahead, i think watching the data, watching to see what sectors respond, and i think, most important, we are really focused on things of what is the endgame for this virus. Until we know that, that is really fundamental to how the economy unfolds, so beyond that is really just speculating and thinking about various scenarios that could affect our outlook. One more on inflation, and that is all of the stimulus the fed has put into the market is contributed to asset price inflation. Do you have any worries that a bubble might be forming . I think you know that one of the things i have long paid attention to is Financial Stability and whether or not in balances could be building, and that is the nature of Monetary Policy stimulus. Borrowing. He cost of it can create incentives for reaching for yields. The focusurse, today, is different, but i think as we watch how this unfolds, it remains as important as ever to keep an eye on what the Financial Stability state of affairs is for our economy. Cooperman notes the National Debt is rising faster than growth and that will cause problems for the economy down the road. Do you agree with that . Think at when we look at what role policy has played, it has played an important role. Monetary policy, fiscal policy to this point has been quick. It has been aggressive, and i think the outcomes we are observing show households have benefited from that, and so have businesses to a great degree. So thinking ahead to preserving the ability of the economy to be able to come back online i think has to be the focused. The consequences down the road are ones that policymakers will have to face eventually, and for now, i am going to stay focused on the part i play, Monetary Policy. People in different parts of the country have suggested that the rise of the virus again during the summer months and the end of that 600 stimulus put the economy in something of a holding pattern. Has that been your experience . So i think what we saw this summer is that it is clear the path of the virus certainly affects the path of the economy, and we see that. Where economies have opened up only to experience some kind of resurgence in the virus, they have had to pull back, and, of course, individuals pull back and businesses as a result of that, so it is clear a foundation to a solid recovery will depend on addressing the virus first and then, of course, Monetary Policy as one of the supports to the economy Going Forward. Let mere i let you go, ask you about the fed lending programs, because for many of them, there has not been a lot of take up. Have people been able to get the money they need, or is it that they just do not want it at this point . Ms. George i think you are referring to the main street Credit Facility, which would be one used in this region, where you have Small Businesses, small think is going i to be an important Credit Facility Going Forward, and i will tell you why. First of all, it came online just last month. We are seeing a number of lenders register for that program and begin to extend credit under that program. So when you think about the pressures that Small Business may be under in the months ahead, i think this could prove to be one of the options that they turn to. Community banks are very focused on how they are going to support Small Businesses and other customers in their portfolio, and with that kind of backstop, we may see things start to rise. How about the municipal Lending Facility . Ms. George i think some of those other facilities, the municipal and Corporate Bond facilities, the fact that they are larger markets where pricing takes place, i think the effect has been by and large that the fed has that facility as a backstop, and it ends up influencing pricing. In some respects, it has done its job in an indirect way by making financing conditions easier without actually making the extension of credit. But, again, as we see how the economy unfolds, those facilities also may have a different level of takeup in the months ahead. That was the Federal Reserve bank of kansas city president , esther george, speaking with bloombergs michael mckee. Minutes to go before the start withuity trading, suggestions it will be flat. We will bring you some stocks to watch in the meantime. We have had numbers out from rollsroyce, with a loss that was worse than anticipated, and the ceo is currently speaking on a conference call, talking about the devastating impact the virus has had on the business. More on that next. This is bloomberg. Back to bloomberg markets. This is the european open. We have got seven minutes to go until the kick off, and we are looking at a swing between red and green arrows in terms of futures. Stocks to watch, joining us is annemarie. Dan marie gore Annmarie Hordern. Cash,ie raising some potentially having to do more of that. I called to the upside, yes. They say the worst of the crisis may be behind them. Business than rivals. Still, profits missed estimates, but they have an optimistic tone. They need to see Consumer Spending continue and also win back customers. Again, revenue fell for the first half, down 15 for the year to date, wpp, but they see a significant return to profitability in the second half. And the dax, i know, matt, anna, you have been watching it, but it has been unchanged year today. Potentially, we can get there today. The producer of this show does not think so, but i am an optimist. Anna thanks very much for that, annmarie. It would not be the first market to do that, some already in positive territory. Interesting nonetheless. It certainly would be the first of the majors. Coming up on the program, we bring you the market open. Flat open toct a european trade. Plenty of individual stocks to watch including rollsroyce and annmarie. Heard from this is bloomberg. Anna one minute to go until the start of cash Equities Trading this thursday morning. Could morning. Your headlines. Jackson hole goes virtual. Jerome powell gives an update. We also hear from the bank of england governor and the ecb. Inly joins france and spain ruling out another nation wide allite rising cases in three countries. Global infections past 24 million. And laura makes landfall. The category four hurricane hits cameron, louisiana, with flooding in the state. Matt . Matt lets take a look at futures. We have seen European Equity futures bouncing back and forth between gains and losses, but they are for the most part green right now with the exception of the ibex 35 in madrid. As the cash equity trade kicks off, lets pull up the global macro movers and check out the lefthand column there. Each index will populate the lefthand column as it goes live, the ftse almost always the first to kick it off, gaining but only three 100ths. Of thekholm, it is one few indexes in your that is actually positive indexes year to date that is positive. Annmarie was just telling us that the dax was up, gaining 1 10 of 1 . Not a lot of movement now, down about three or four tenths of 1 . Meanwhile, most of the other european equities are also opening up a little bit higher, down about 15, 20, 25 yeartodate, so that is why we find that quite interesting. European markets basically flat though on todays trade after the Global Equity rally stalled ahead of the speech from fed chair Jerome Powell. Joining us is the head of macro and geopolitics research. Reason to focus necessarily on the little change in equity indexes today when we see alltime highs for the s p 500, for the nasdaq, for the msci world index. Why after an economic collapse as countries around the world are taking on a record amount of debt and millions and millions of people have lost jobs are we seeing indexes at these record highs . Hi. Yeah, i think the main support channel has come from banks. With the real yields drifting lower again in anticipation of the speech at jackson hole today, so the equity market continues to benefit from low real yields, both in the u. S. And a grant around the world, and they are looking for support from Central Banks going to keep especially rates at record low levels, to keep that in place for equity markets. Viraj, good morning. With the role of Central Banks so in focus, what do you expect to hear from jackson hole . Some are downplaying the significance of this, suggesting it will not be any will not be earth shattering, any new guidance in the suggestions of how they move around inflation targets in the united states. What are you expecting . Do we do think we will see a disappointment because markets are being positioned ahead of it. Yieldsntioned, real lower. That suggests the extent in how they are moving higher in anticipation of the fed shifting the inflation target, so there priced in. Ectation if you look at breakeven, the to 2015 , prior more has been expected today from powell, but i do not think the speech will lead to anything given the lack of consensus we had in the july fomc minutes. I think it might just be enough to keep the average inflation. The market has been pricing it in. I am sure you are quite modest, but you are a chart holder, with economics at the university of cambridge. You worked at the bank of england. You are about as expert as we are going to get on this. Do you think inflation is really a threat in the near or medium term . Reality is hitting the 2 target. That is the biggest concern since 2010. So when we are stuck in this lowflation environment, the only thing the central bank can do is effectively throw in the kitchen sink in terms of Monetary Policy. We have seen that with policy rates, q. E, and now innovation in foreign Forward Guidance to help markets and to bring back but ability to the fed and Central Banks around the world, looking at that 2 target. That is where the next challenge is, restoring credibility on that 2 or various centralbank inflation targets, and that is why we are seeing a huge and some are this, more explicit but have problems with exit strategy. They caned communicate allow inflation to run above the 2 target and get levels back on crisis, that is the key message that the fed has to communicate in the next couple of months to restore some credibility. Anna but that all it sound the fed says, if let the economy run hot, inflation will rise. You cannot drive inflation at 4 unemployment. Would it not be harder with inflation at 10 unemployment . That is all they can do. The central bank does not control the demand. It can only control the monetary side of the economy. So to some extent, all it can do centralbank policy, that is where the discussion will be. The needs to be done on fiscal side across the world, especially in the u. S. And europe. I do not think we are done in terms of fiscal easing. Cons are always pros and when it comes to providing stimulus, but from that perspective, all they can do in the next three to six months is , even ifhe conditions that means not hiking rates. Viraj, do you have any outlier expectations from powell today . Are there any longshot comments you think he might make, you know, surprises he could give the market that you will be watching for . The cuts were ruled out after july. I think there were a few members of the committee that do see merits. That could be the most effective , the most dovish that powell could be today if it is not fully ruled out and that the fed is still strongly considering that. I think we could see yields drift lower. The debate could continue, but that is the dovish end of the spectrum. The ycc brought back to the table. Anna viraj, thank you. And Geopolitical Research, talking about jackson hole. We will get more from him shortly on what is going on with markets. We are keeping it on on what is going on with hurricane laura, making landfall in cameron, louisiana, with flash floods, powerful winds, and it could leave part of the state uninhabitable for weeks and months. Most people surely got out of the way of this. Hopefully, not too much of that, but we will certainly follow the human side of the story. But also keep an eye on the devastation to property, as well. Coming up on the program, we will get back with viraj and talk about fx markets and which are the most resilient. It is not the u. S. Market. We will discuss. This is bloomberg. Welcome back to the european open. We are 11 minutes into the session now. You are looking at red arrows after a slight upwards open, we are seeing a slight drop in the cash trade right now, the ftse down about one quarter of 1 . Lets go to the Bloomberg Business flash with laura. Laura thanks, matt. The u. S. Has accused hsbc of enabling the chinese crackdown of hong kong. They continue to provide help to people sanctioned by the u. S. Access tolocked accounts after the arrest of the founder. No comments from the hsbc. The u. K. May impose restrictions on tiktok, but they are likely restrictions. R it does not pose as big of a security risk, but they may stop tiktok from removing data out of the country. A planned restructuring that could see the loss of another 600 jobs, nearly one quarter of the remaining work as some of the biggest customers abandoned operations at gatwick. That is your Bloomberg Business flash. Matt . Anna . Laura, thank you very much, in london. The dollar is holding its jayday losing streak, with powell in jackson hole, the first time the conference will be held in virtual form. Andhead of macro Geopolitical Research is with us. Research on how resilient someare too currency, and of your concerns around resilience, europe, switzerland, and the eurozone . Index, the swiss and the euro as those seen the greatest risk, facing pushback from further fx strength. I do not believe that this is just a dollar weakness issue. You look at the exchange rate. There is the nominal side of things and the nominal side of things, sixyear highs, and it then stay at these levels, the Effective Exchange rate would be 5 higher on an annual basis. That is something the ecb can afford, given the severe inflation risks already stemming from the covid crisis. So, yes, when we look at these strength, we look at the gdp and the core cpi. It really puts the euro at risk of seeing pushback from officials over fx strength relative to the rest of the g10 space. We saw this last week in the july ecb minutes. Lower than was much it was in july. I think september will be crucial and how the ecb frames talkuro narrative and they about comfort levels about where the euro is right now. Do you think that policymakers here are concerned the common currency could be too strong and hold back the economic recovery . Pricing in a recovery faster than what the central bank wants. Forwardwill be think of guidance and messages like lower rates, they do have an underlying currency attitude, impact. En the fx Central Banks are struggling even with 2 inflation. So i do think that currency plays a big role in the way that Central Banks frame policy rates. We could see risks of either rate cut threats like we saw in new zealand or titfortat increases in Central Bank Balance sheets just to stop currency appreciation. I think that dynamic needs to be factored in. Anna and what clues should we look at . You are someone who has watched Central Banks for a while. The ecb, when it gets concerned out the strength of its currency, if we get to that point, what will be the language that they will use to flag that to the markets . Me, it is the usual unwarranted tightening of conditions. We have seen that before. I do not expect them to talk about the euro, its level, or explicitly about where it thinks but certainly, the hidden messages in the september meeting and the press conference. It will be very important. And if we start seeing more language like there is an unwarranted tightening to stem the economic recovery, that to me is it is an implicit sign that they are not happy with where the euro is. Ask about theo pound, which has also seen some relative strength of late, even though the u. K. Has clearly got problems, bigger problems, then got problems, bigger problems than other countries and with brexit. What do you think about the pound, Going Forward . Viraj the shortterm dynamics are supportive. One, the markets are relatively not seen the have full short squeeze yet manifest itself, so there is room to move higher in the next couple of weeks and months. Secondly, what is really interesting and probably unique to the u. K. Is the extent to which investors have aggressively discounted a rate cut in the u. K. Versus anywhere else in the world, apart from new zealand more recently, so that to me is also suggesting that markets see either the brexit risks or the u. K. Sector economy being a laggard. Potentially negative rate bets in the u. K. And the short squeeze for me. Euro sterling,e potentially towards 87, 88. Anna and when you look at fx which are thej, countries . The ones that do not trade as much as others or do not import as much as others . What is the story . Yes, apart from the u. S. , the economies have a reliance on trade. Really, it is where the Effective Exchange rate has been. With australia, you would expect that to be higher, but it is not , because the aussie has been weakened and actually sits below historic averages. Itrencies like that also might be why we are not seeing too much pushback from the rba on where the aussie dollar is right now. So both currencies as well as the pound and even the yen to some extent on a tradeweighted we do not see much risk of pushback. But as i mentioned, in theory, it is great, but at some point, Central Banks do not take theory into account, as we saw with new zealand, and with the strength of the kiwi, i do not think any central bank right now really will be watching closely on how Central Banks communicate on currencies in the upcoming round. Matt all right, thanks so much for joining us. Appreciate your input. Of macro andhead geopolitics. He will be continuing the conversation with us on Bloomberg Radio at 9 00 a. M. U. K. Time. You can tune into that, or you can google Bloomberg Radio, or co. Ukan go to radioplayer. And probably linked to different movements to Bloomberg Radio. Quits up, phil hogan after growing criticism that he broke virus regulations in his native ireland i going to a golf dinner. We will be live from brussels to discuss the latest. This is bloomberg. Welcome back to bloomberg markets. This is the european open, 24 minutes into the session, and we are looking at the ftse down about one third of 1 here, 16 6,02 the8 cac 40 is down just as much. , and a growing number of coronavirus cases with an outbreak among returning tourists and partygoers continuing to expand. Despite the grim numbers, italy joined neighbors and rejecting the possibility of reintroducing the nationwide lockdown that stalled to the economy. The Italian Health minister ruled out the measure in an interview yesterday. Exclude the possibility of another general lockdown. I believe we are in a new and different phase also with a stronger National Health service. Turning to brussels, the European Union trade chief, phil hogan, has resigned amid the growing backlash after he broke virus regulations in his native ireland at a golf dinner. Our bloomberg is reporter from brussels. Maria, hogan was fighting to , and they said they would keep him after he made an agreement with lighthizer a couple of days ago. What prompted his resignation . Maria that is right. For days, he was saying i am sorry. It was nonessential travel, but i tested negative for covid, and i did not really pose a threat to anyone. Story, thef the Irish Government had said he had to quarantine, that the travel was not even an option, and those are the optics of this. This is a time when european governments, not just the irish, but over all talk about going abroad, how it may not be a good idea, wear a mask, all of these restrictions affecting the everyday lives of people, and you have an official who decides it does not apply to him. The optics, not good. There was a lot of pressure coming from the Irish Government, that it undermines the rules they tell people to follow. There was political pressure in his own country. Anna yes, and who replaces him . Thank you very much. This is bloomberg. Welcome back to bloomberg markets. This is the european open, half an hour into the session right now, and we are looking at market so far that are down just slightly. Lets take a look at the broader euro stoxx 600 index, down 2 10 of 1 , so not a huge drop there, but you do not really get as much insight into what is going on unless you look at the grr, so for the group ranked returns, the Industry Groups moving around this morning, lets go ahead and pull that up on the screen and take a look at watch which Industry Groups are moving the most. Here you see travel and leisure and auto parts, automakers and auto parts, also big gainers, so the stocks that got hit the hardest by the coronavirus pandemic are doing well, a little bit of a recovery today. You do see banks doing the worst, as well as real estate, telecom, and oil and gas, so kind of a mixed picture in terms of these groups as well as the overall index. Secretarygeneral is here in berlin today to have a bilateral meeting with german chancellor Angela Merkel. The meeting comes in the midst of two significant elements on europes eastern border, the continue unrest in belarus and the probable poisoning of the russian opposition leader, Alexei Navalny. Joining us as the director for central and Eastern Europe of the German Marshall Fund of the united states. Thanks for your time. Let me first ask you about what you think merkel is going to say to stoltenberg about, you know, Vladimir Putin in terms of backing belarus and in terms of the alleged assassination attempts around the continent . Well, i think she will make it very clear to him that it is pletely unacceptable operation or incidents. I think she will also remind him hashe fact that russia denounced critics in the past, including here in berlin. Thisam pretty sure that will be a point that she makes very clear to him, that it is completely unacceptable that critics of putin in russia and even beyond the borders of russia cannot feel safe. And we are looking for chancellor Angela Merkel and stoltenberg to start speaking, and we will bring you images of that as we at. Let me ask you what russia wants to see in belarus. Do you think it is time for lukashenko to step aside, or is russia convinced it cant assist lukashenko to stay in post . Joerg well, frankly, i do not think we know. I think the kremlin was taken by surprise by these developments. Alexander lukashenko with the presidency, in those elections, if you want to call it that, but they didnt expect him to come out weakened. Now, they have a situation whereby his future in the presidency or in the leadership is in question, and i think to some extent, they are struggling to find a response over the last seeing someweeks ambivalence coming out of the kremlin. There has been very open criticism of how the elections were handled, the Police Brutality that has ensued. At the moment, i have the impression that russia is still defining its response. To elders toe influence on the inside about the situation in the country, but frankly, at the moment, no one knows exactly. I think there is a clear expectation that russia will disappear in the further course. Many are hoping this will be a constructive engagement, perhaps unilateral, but we cannot rule out that they will at unilaterally in a more forceful way. We are looking, by the way, of live pictures of stoltenberg and merkel speaking. Merkel kicked it off, talking about the concerns they have surrounding turkey and greece right now. That is a very worrying topic, probably more worrying and terms of the fireworks we could see more immediately. What do you think we will see if greece aims to extend its borders into the mediterranean, and turkey says, any country messing with us should be worried about their further existence . Theg well, we have seen in last week a lot of unilateral action by both sides. The German Government has been trying to mediate here but apparently to no effect so far. Is obviously a very tense situation, especially in the context of the visit of stoltenberg today, because both are nato members. Both are countries that have an uneasy relationship but do find themselves in the same security alliance. For that reason, i fully understand this is an issue very high up on the agenda today. At the same time, this may completely overshadow what is happening around belarus and on the eastern side. Back tos, and getting the story around pressure, there are many reasons why germany and russia have a tense relationship at the moment, the attempted cyberattack on the bundestag. Why do you think that Alexei Navalny was allowed to leave the country at the insistence of his family and friends for treatment, joerg . The russians could have stopped him leaving, perhaps. One is obviously that the kremlin took to damage control in the situation. Here ofe seen the risk it even more seriously impacting the already Bad Reputation that russia has for its approach to any critic of the kremlin. As i mentioned before, there have been serious incidents pertaining to russian critics and the kremlin in the past. So that is one explanation, simply damage control. Seriouslynot successful attempts at a session nation if, indeed, that was the case. I wonder, after all of this, merkel has confronted prudent about the annexation of crimea, but in the end, germany confronted putin about the annexation of crimea, but in the end, they really did not do anything about it, and then about these attempted assassination attempts, but have not done much about it, and now belarus, and at the end of the day, germany is still essentially, at least partially effortsVladimir Putins or intends to send him money for that pipeline. The germanshink continue to . Is it just the fact that they want to have access to Cheaper Energy . At the end of the day, is it worth allowing russia to do what he does . Energy isiously, important. They have few resources on their own except for renewables. Industryn economy and depends on enough energy imports. Union prior to the soviet had been Reliable Energy suppliers. It was not just german politics but also german business. At the same time, i think german politics completely underestimated how politically charged especially the pipeline is. A pipeline, the first, that was already controversial, and the plan to move ahead with i thinkond pipeline, they completely underestimated how much of a political liability this would be, and it damaged german credibility. It is a contradiction. On the one hand, germany is a strong supporter of the development of the countries like ukraine, and germany has been outspoken in solidarity with the belarusian people, and it bolsterstime, russia as a regional hegemony that reserves a veto in the affairs of countries with ukraine. This is a contradiction. So far, nobody in germany has been able to undo that. Thanks so much. Thanks for your time. Thanks for joining us, the director for central and Eastern Europe. If you are in paris or berlin. Coming up on the program, we will bring you some of the movers, and some moving u. K. Names, the likes of rollsroyce and wpp. More on that. This is bloomberg. Welcome back to the European Market open, 43 minutes into a trading session that is negative, but just down 2 10 of 1 on the stoxx 600, the dax doing its best to keep its head above water, but the markets are under pressure just a little bit as we head to the jackson hole symposium. The fallout of the coronavirus pandemic has devastated the Luxury Fashion industry, not least because of government mandated shutdowns keeping Stores Closed for months, but the artistic director at Louis Vuitton is optimistic. He talked to Annmarie Hordern about resilience. Toshopping and line and modernize or update how people can interact with luxury, i found ways to sort of make the Digital Space the new highway to add, you know, impressions and desire. Annemarie do you think this make sense . And from the consumer point of view with the pandemic but also just the idea of sustainability . Well, that is what my last Louis Vuitton collection tackled. I had a show that had an ,nprecedented amount of views and i challenged and modernized and updated this notion of consumption or how we can be more sustainable in our creative approach, and on the runway last week, and it will be in the ecosystem of the retail network, starting in january. Annemarie i am glad you brought up your shanghai show, because i want to ask you about that. It is the second week of august. It is not fashion week. You had the show in shanghai in the middle of a pandemic. Is seasonality a thing of the past . Think there is a modernday epiphany about strict seasons. That model has been added to the fashion calendar and a different ecosystem, and now, we live in a much different world, and i think the nimbleness and the ability to adapt and to understand the timing of clothing being liver to the retail floor, the timing, is a new highway to think of new ideas and modernize, and thankfully, with the opportunity i have been given at Louis Vuitton, i am able to think of ideas. Do you think in the future, Going Forward, where you see strong sales growth is where you might say, all right, lets give ourselves a few months, but lets have a show there . To show your collections . Virgil indeed. A lot of what i was doing was showing in shanghai and showing that ideas have to emanate from europe. They have to emanate from paris. Already, it is a great freedom to say we are a global brand. Operateands that i exist in different ecosystems, and we are celebrating the local sort of parentage by bringing the collection into those places and showing them locally there. Fashionuld you say that weeks are now obsolete . Virgil i would not say that fashion weeks are obsolete. There is a charm. There is a history. That is the epicenter that i love. But now it can be sharing Energy Around the world. Show, ihanghai appreciate this. Instagram. No guest list. More democratic. Thehat sense, do you think pandemic could force the industry to become more inclusive and more welcoming . 100 . i think what we have learned through this year is that there are subtle things that need to change about how we interface with the customer, interface with the world, and i am one to believe that inclusivity is an important trait that i can embed in my work. That is what i have built my career on, and i believe it is the positive way forward. Matt and that was the Louis Vuitton menswear artistic director speaking to bloombergs Annmarie Hordern. Up next, as offices fill up towly, workers return slowly city centers, commercial real estate is stuck in limbo. We will speak to a ceo about the opportunities afforded. This is bloomberg. Welcome back to the european open, 50 minutes into the session, and looking at mixed equity indexes now fixed equity indexes. Commercial real estate, the market is, obviously, in a covid induced limbo. Airbnb has become the latest tech giant to extend its remote work policy through 2021, regardless of whether their offices reopen, and the drafting shift to working from home means even big banks with prime real estate in new york city and london are rethinking their real estate strategies. Detailed plans for socially distanced elevator use means that only 2700 People Per Hour can be shifted into each office to fill the entire capacity, where it would take over three hours, or you can just take the stairs if you are fit. So the Real Estate Company is turning their attention to out of town offices and more Flexible Working environments. Joining us is andrew, the ceo of a Real Estate Company. Thanks for joining us on the program. What is your take . From your business standpoint, how a few seen business affected by covid19 . Well, good morning. I think where offices are concerned, covid19 is going to of two areasa tale of the city. You spoke about the challenges of highrise buildings in Central Business districts. What we specialize in is business parks on the edge of town, and about one third of the space in those business parks is office space, and typically, because those offices are on former industrial states, the buildings are now higher than two or three stories high. You have much higher ceiling heights, much bigger windows. You have a much bigger different environment compared to the challenges you describe in these districts. Andrew, so are you seeing increasing demand for the price of real estate that you offer . And is that coming for more mediumsized businesses or big businesses looking to move into these kinds of locations . Andrew we are seeing more demand, and at the moment, demand from Small Businesses is converting to new leases. We rca bigger demand for agribusinesses, but we have yet to see those businesses sign on the dotted line and take out new leases. But what we are seeing, for example, when we look at Google Analytics and the trends in and around germany, we are seeing a lot more inquiry trends for open areas. For example, both on the edge of city and also in the central city, we are seeing more people look for balcony space, roof space, outside space, and of course, business parks on the edge of town have got more of that. But we can see how people are using offices are changing in terms of what they are looking for. In berlin as in much of europe, you do not see the kind of highrise buildings you see in new york or even in the city, and i have seen some incredibly Creative Solutions to social distancing here. Is berlin a standout for you . Andrew yes, i think berlin is. Berlin is very creative. The workforce in berlin is far more multicultural and international than it is in some german cities, and in berlin areas like leap sick and driest and dreisden, on the edge of town, there is a lot more outside space, open generally, the buildings themselves tend to have higher ceilings, tend to be more spacious. What we are finding is that people are feeling a lot safer in those kinds of environments in a post covid world. Briefly, andrew. You are looking to expand. Where will you be doing that . Andrew we will be expanding in germany. We were looking to expand prior to covid. But we will continue to look for that expansion. And in some ways, covid19 has affected that in as much as the kind of expansion that we will be looking for will be driven very much off of the change in tenant demand that we see as a result of the covid crisis. Anna andrew, thanks so much for your time, andrew, a fascinating story there. Matt, European Equity markets, a bit of a downward move for european stocks but not much. Jackson hole later, also, focusing on hurricane laura, making landfall in cameron, louisiana. This is bloomberg. Anchor hurricane laura makes landfall, one of the most powerful storms to ever hit louisiana. The area could be uninhabitable for months. And fed chair Jerome Powell gives an update on the centralBank Framework. We also hear from the bank of england governor and the ecb. Nba walkout grows. The boy scout