Transcripts For BLOOMBERG Bloomberg Markets 20240712

Poisoning. Lets get to the first word news with leighann gerrans. Shows joe a new poll biden has a doubledigit lead over President Trump. Ae democratic nominee has 5242 advantage. Meanwhile, the survey also says in theden has a 6 lead battleground state wisconsin. In germany, chancellor Angela Merkel is now ready to link the nord stream 2 gas pipeline the poisoning of a russian dissident. Merkel, whoift for said that the russian backed pipeline should be completed and remains a separate issue. The kremlin has said it sees no issue that germany will block nordstrom. Moscow has denied any involvement in the poisoning. Now in hong kong, protests have resumed after weeks of calm. Police arrested hundreds of people. Among other things, demonstrators were protesting the decision to delay Legislative Council relaxants for a year Council Elections for a year because of coronavirus. India has surpassed brazil as the second worst hit country. India reported more than 19,000 cases more than 90,000 cases for the second day in a row. Indias case growth is still accelerating. 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. Im leighann gerrans. This is bloomberg. Matt thanks very much that. Lets get a quick check on what is going on in the markets this afternoon. We are looking at gains on the broader european benchmark index. The stoxx 600 at the top of your screen up 1. 1 . We are still looking at losses on nasdaq futures. The u. S. Cash trade is closed for the labor day holiday, but the futures contracts are down 0. 8 . The pound is also down against , i guess you, on could say, concerns that the brits are ready to walk away emptyhanded. Gold futures little changed, but you can see that although we had a risk off mood over the last two trading sessions, they havent really gained much. 1933. 70 is what you pay an ounce for the precious metal. The u. K. Is planning new legislation that would override key parts of the withdrawal agreement. They warned the British Government wont accept positions on fisheries on state on fisheries or state aid. Weve got to a position where theres only two points really holding us back, but we cant except that the eu will control our laws. Matt two a nest now is peter kinsella, joining us now is peter kinsella, union bank are peter kinsella, privee. Ncaire peter you are seeing small profit taking from people who are short dollar. This is the first step we have seen in terms of the u. K. Side trying to determine the course of negotiations. It is profit taking and using the excuse from todays develop mistake some of their long sterling positions off. Broadly it might take on the price action today. Matt against the dollar, we have seen sterling so strong sense the bottom right at the beginning of the coronavirus pandemic in march. That is a oneday chart, but if you look at the year to date, we were down below 1. 15, and almost back up to 1. 35. How much is the pound worth if we get a no deal brexit . Guy i could see us going back to levels of 1. 20 in cable. Anything below that is probably unlikely, may be on the basis that we have now entered a bear market for the dollar. So in order to see cable an awful lot lower, you would have to see tradeweighted dollar appreciation, and i think that is going to be a big ask. Certainly a move back towards the low 1. 20s is doable. We will have to see how it goes. I make the analogy that it is no deal from now, but the scale of trade between the two blocks, the u. K. And the eu, is such that we might not have a deal now, but we will eventually get one. U. K. Or depend on the the eu, but even if we dont get one now, we will get one in the future. The nature of extended trade will determine that. Matt i was talking to to rez rafael,a two therese an opinion contributor on bloomberg radio, and she said you have to be willing to walk away from the deal in this kind of negotiation. But a deal isnt really that far off at this point. What do you think they could possibly squeeze out of the eu . Peter not an awful lot. The u. K. Doesnt have a lot of leverage, and consequently when it comes to making a deal, i would anticipate they will only do something towards the end of september, early october. Early, itmpromise too basically means they will look for more compromises. Even if you look at the state aid story, the eu is now implicitly accepting that the u. K. Will not follow state aid rules. The eu wants to see what the u. K. Is actually proposing in terms of its state aid policy. Once they know that, then and thereafter will they proceed until a broader trade agreement. So it is for the u. K. To decide what kind of state aid regime they want, and the you will work around that. Certainly the tone of the negotiation does suggest they are willing to do a deal. They just need to see what the u. K. Wants. Little changedis at about 1. 18. The ecb meeting thursday, we are not expecting any change in terms of rates, but what do you want to hear from Christine Lagarde, or what do you think she might say that could move markets . Peter not an awful lot. What would move markets a bit is the latest ecb projections on growth and inflation. Think we will be looking very carefully at what the inflation data and what their expectations for inflation are, and that is going to be quite interesting because it will determine whether or not the recent appreciation of the euro has had a Significant Impact on the inflation projections. If the inflation projections for core cpi are much lower, than the ecb might indicate that they will continue easing for a longer period, but they are definitely not coming to move on rates at this point. It is really hard to say what they are actually going to do, apart from trying to talked on trying to talk down the currency. Matt let me ask you about the russian situation, since Angela Merkel and the eu are trying to figure out what to do with Vladimir Putin after alleging that his main opposition in russia was poisoned. We have seen the ruble go from 73 to 76 over the course of a few trading sessions. Is that weakness related to the situation . Does that play in fx markets . Peter it does in the context that this is something where, when we saw the attacks in salisbury last year, that h ad a notable impact on how people viewed russian assets. Andaw a further sanctions further deterioration in relations. Aref the eu and others pretty exercised about it, it could have an impact on the ruble. Certainly it is a development with watching. The oilt we also have price coming a little bit lower, it is not really in a great spot. Certainly the real interestrate profile which the ruble previously had at around 3. 5 is now likely to be 1. 5 . Whether investors feel that is enough to hold rubledenominated assets, that is a big question for investors. Matt brent crude is off more than 1 today at 42 a barrel, and trending lower. If we see that continue and if says nord stream 2 is off, we cant do this deal with the russians, how bad is that for the currency . Guy i would doubt nord stream 2 peter i would doubt nord stream 2 is off. The to have invested enormous sums in terms of getting the project off the ground. It might be postponed or Something Like that. That is the bigger issue. But certainly ruble can weaken a bit more. I dont think aggressively from current levels. It might go to 78 in dollar ruble. Peter that is good insight matt that is good insight to get from you because it is a hot issue here in berlin for sure. Let me move south to ankara and ask you what you think about the turkish lira. We are at record lows against the u. S. Dollar once again. What can the central bank, what can erdogan do right now . Or is this not something that particularly bothers them, it is really inflation that is the problem . Peter with turkey, it is the same old story. The interestrate profile is too low. Youve got a central bank which has lost a significant portion of its independence. If you look at the currency, what tends to happen is they allowed to currency to weaken aggressively and it goes to a kind of crisis or panic level, and then they intervened by 400 or 500 basis points. We see not for our five times in the last decade. If you look at the 12 month implied yields on turkish forwards, they are trading at levels of around 17 . So the market has started to price in aggressive rate hikes in order to stabilize the currency. The problem for the central bank is that they always leave it too late. Lirald easily see dollar at 7. 670, so i think there will lirare lire week more weakness at this point. Matt i think it was great to get your insight on those things. Peter kinsella of union bancair privee, talking with us about fx. Coming up in the next hour, chris turner joins us at 8 00 a. M. New york time, what 00 p. M. In london, 2 00 here in berlin and across the continent. Right now we are looking at continental indexes that are rallying, and really the ftse is up, too. Youve got the dax up probably the most right now, 1. 4 . The ftse up 1. 7 . Here on the screen, the broader European Equity index of stoxx 600 gaining 1. 2 right now. Also interesting on this labor day, as markets are closed for the holiday in the u. S. , nasdaq continued to come down. Those tech heavy stocks continued to get hit, or would if the cash trade were open. This is bloomberg. Leighann time for the Bloomberg Business flash. Im leighann gerrans. A victory for samsung. In order to provide 5g Wireless Solutions to verizon in the u. S. It is one of samsungs biggest 5g contracts ever. They have been pushing hard to compete with players like nokia and ericsson in providing telecom equipment. Shares of softbank fell in tokyo. There was news that the conglomerate made substantial bets on Technology Stocks using equity derivatives, leading to concerns that the founder Masayoshi Son is engaging in risky behavior that could lead to big losses. Suez hasf frances rebuffed a takeover approach, saying the bed overvalued his company and could run into antitrust obstacles. They offered to buy a 30 stake in suez, the first step to create a water and Waste Management giant. Matt thanks very much. Merkel is angela backing her foreign minister and other lawmakers and putting the nord stream 2 gas pipeline probably pipeline project on the table in the response to the alleged poisoning of a russian opposition figure. Going us with the latest is Bloomberg Government editor is our its Bloomberg Government editor. We havent done a full 180 yet, but merkel, who previously said she wanted to keep the commercial aspect of the nord stream 2 pipeline separate from the political aspect of this alleged poisoning, she says now they can affect each other. Reporter thats right. At least publicly, it is an aboutface. And what a piece of irony as well. Theuple of weeks ago, germans were pointing the finger at the americans. The u. S. Administration saying at theish this americans, the u. S. Administration, saying let us finesse this pipeline. I am not convinced this is a done deal yet, though, that they have decided to pull the plug. A lot is at stake here. A lot of money has been infected has been invested from both sides. Buyer, the other one is a seller. They wouldnt have done this deal had it not been good for both sides. Germany needs the gas. Pressure needs to get rid of it. So i think we are public russia needs to get rid of it. So i think we are probably ,ooking at a moratorium although my filing although miles ofng hundreds of pipeline under the ocean is a big task as well. Matt they have invested billions, right . I think almost 10 billion so far, and they are almost finished with this thing. You can understand why everyone in the west is against the germans funding russian president Vladimir Putin in things like the annexation of crimea. On the other hand, the germans really want to keep this avenue up and in case they have any energy problems. Gas ifally need a lot of they are going to cut down their coal use and after they close nuclear. Raymond maybe not in the short term, especially given the pandemic and the reduced usage of energy, but looking forward, definitely germany will require that energy. The business lobby just came out with a statement saying that it would be a mistake to shut down nord stream, and they know why. The prices could be affected. At the same time, we are at a moment where europe is trying to be more proactive in foreign policy. They want to stand up to the u. S. And china, to moscow. They dont want to be pushed into a corner and let things like this slip by. My gut feeling tells me it is still happening. We will just have to see. What kind of Response Team expect from the russians now . Raymond i dont see them changing position right now. Theyve already said we have nothing to do with this. Said we havent even formally been informed yet preemptivelys, but they have already said we have nothing to do with this. I dont see that changing, and frankly, the germans have already started talking with their european allies on a strategy. They are not going to wait until moscow says something. The spokesman for the Foreign Ministry office already said that today. So it may be a couple of days, but it wont be weeks or months. Matt great to get your take with your experience covering the German Government here. Raymond called it Raymond Colitt talking to us about one of the hottest news issues in berlin. One of the issues in the market is the softbank trade. The Company Reportedly bidding on 4 billion worth of paper toes to paper tied highflying tech stocks. Those gains may not look so great anymore, and as a result, softbank shares plunged as much as 8 in trading. Here with the details is bloombergs dani burger. Dani thats right. Softbank spent billions of dollars building up positions where they were betting on call options tied to u. S. Tech, so that 4 billion clearly paid off, but softbank is going to have to unwind that position somewhat weekly because of this market action. That means those gains softbank had seen will continue to get eaten away as we see this turmoil. We see reports of people within the company also have concerns, so that is part of the reason why we are seeing softbank tumble the most in for months during todays tokyo session. Whether the softbank story has an impact on the underlying market, we can see in the next chart that certainly there has been an effect on call volume. Call options in the u. S. Have seen their volume explode since the march lows. Commentary suggests that retail alone cant contribute to this. We see this big ramp up over the past two weeks. Goldman sachs says 330 billion options,e and call three times the average from 2017 to 2019, so it is likely that softbanks been the big whale in this market. Matt thanks so much. Dani burger talking us for one of the biggest stories in markets, for sure. Coming up next, peter garnry from saxo bank, the head of equity strategy, talks to us about what is going on as we fly. Tech stocks this is bloomberg. Berlin, im matt miller. This is Bloomberg Markets. Lets check in on the bloomberg first word news. For that we go to leighann gerrans. Leighann joe biden holds a 10 point lead over President Trump, according to a new poll from cbs news. Fourole also found that out of 10 democrats say that biden isnt campaigning enough. The top issue for voters is still the economy, followed by health care, the coronavirus outbreak, and recent protests. Authorities in Southern California have pinpointed because of a fire that has spurred more that has burned more than 7000 acres. They say it started by a pyrotechnic device used at a gender reveal party. There are 23 major fires now burning in the state. China exports capex spending in august. They rosen exports kept expanding in august. And chinas trade surplus with the u. S. Was highest since november 2018. In the u. K. , british Prime Minister Boris Johnson is gambling on a no deal brexit. Johnson will tell the European Union he is willing to walk away and now thepromise, big Sticking Point is the issue of Northern Ireland. 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. Gerrans. Ann this is bloomberg. Matt thanks very much for that. U. S. Stock futures continued to slide before trading reopens tuesday, following a big tech selloff last week. Valuation remains can remains a concern, but investors are not surprised by the movement. Landscape hasogy gotten to some pretty extraordinary levels, so i think it is not a surprise. Devaluation discrepancy between growth and value stocks has been on the table for a while, so value names havent seemed to be able to hold a significant lead where they stay in favor. Techsstock prices in continue to go up, their volatility goes up, too, which is not a normal relationship. Is usually inverse. The fact that we upended that, that may be nervous. The craziness in this 2020 summer of love for investors is getting out of hand, and of course theres the robinhood shenanigans going on, so it wasnt really a surprise. If you have too Much Technology in your portfolio, this is the time to start taking it off. It is not surprising that tech has got more of an outsized downside move here. It is a blast from the past, if you will, but we are looking at pc stocks. It is the beginning of a healthy correction. We havent really seen a germanic pullback. A dramatic pullback. Matt going is now is peter garnry, Saxo Bank Head of equity strategy. Let me first ask you how you expect this to continue. Weve had a couple of down days. Futures are lower for nasdaq futures. But youve got some really big google, facebook, amazon, netflix, apple, a lot of them that have a ton of cash, also a lot of them profit off of the stayathome vibe, working from home, etc. It seems like they are perfectly placed to be almost as defensive as they are growth oriented. Peter i agree with that statement. A lot of these Software Companies have shown remarkably defensive characteristics if we exclude the last couple of trading sessions. Marketve a very robust positioning in their industries. A lot of these have a quasimonopoly status. Theres a very high degree of protect ability for earnings and the ability to return on investment capital. I think they will continue to attract investor attention. We are moving into bigger and economy, andl those companies will take bigger and bigger share. Compare that with a lot of investmentgrade Corporate Bonds with the same maturity profile, duration profile. I dont think that a lot of these companies are that overvalued, but there are certainly segments that are extremely overvalued. I think a large portion of the mega caps are not that overvalued, actually. Matt i want to ask you about tesla, not as an investment , aicle, but as a member potential member of the s p 500. Did it surprise you they didnt bring tesla into the broader u. S. Benchmark . Do you think, looking back in five to 10 years, they will feel like they made a mistake . Peter it is a very good question. I think the s p 500 Index Commission has shortterm made the right decision because theres a lot of earnings volatility around tesla. I think theres a lot of questions whether they continue to be profitable in general accounting terms. They have these credits they are getting from the u. S. Government. I think eventually, tesla will be included in the s p 500. I think not putting them into the index this time was the right decision. I think in the market, if we exclude the euphoria in u. S. Technology stocks, i think tesla is being priced to become one of the most dominant carmakers in the future. That is the signal we are getting. I think tesla also did the right thing making that capital right accelerate. Matt ive never seen a 400 billion market cap, and ive been covering cars for 20 years. If you dont mind, i will just hang out in this space for a moment, peter. Tesla especially, but also other companies that are working on Esg Solutions to climate change, are they all getting bid up right now . Our governments using stimulus bills to try to speed up the esg part of the economic boost . Peter absolutely. I think the most important component in esg is the e. That is what investors are really bang into really buying into. The last component is the green transformation, which is being fueled and subsidized by governments. It is a trend over the next three to four decades. I think the climate and the environment is changing into a far bigger risk to Financial Markets and the economy and society then covid19, which is in imminent risk, but i think the green transformation will continue. We need to have exposure towards this segment over the coming decades in your portfolio. It does come was very high valuations and some of the segments, but i think that is part of the game. This is not the segment you should have the most exposure to. In the shortterm, we prefer the automation and the digital economy, and the Green Economy i think will be a setback where investors will be able to come in again at better valuations. , it i want to show you always look at this chart on the bloomberg, and ive actually ,aved it with a command basically it just looks at the forward pe of the s p 500 in the u. S. , the stoxx 600 here in the mx esd then index. May be have got too many years that but it tells you still, regardless of the correction over the last couple of sessions, we are looking at forward pes of more than 26 in the u. S. And 22. 4 here in europe. Is europe going to catch up at all with the u. S. . We were so penalized for not being tech heavy during the runup that shortly if tech stocks are the problem right now, europe has to make up a little bit of that delta. Peter i will enter into parts. The short term answer is that europe will not catch up because when you push Interest Rates close to zero, you get some mathematically very crazy reaction functions in valuations. The missing piece is the earnings and unpredictability. 500 has a much larger cluster of companies with a high degree of earnings predict ability. When you have earnings predictability, you can get bond valuation. You cant get that in the equity market because it is much more cyclical. , and weimply lacking dont have that earnings predict ability. Greensaid, the transformation i think has a leg up against the u. S. , specifically in Green Technology playing its cards the right way. Having technology with more green energy, i think it is a potential game changer for europe if we can get it right. Matt if you look at the ecb meeting on thursday, and i know you are an equity strategist, surely youve got to be watching the euro very closely, right . People had been forecasting even more appreciation after the rescue package came together in the dollar weakness that is expected. What do you expect from the currency, and you think Christine Lagarde is going to address it . Guy peter they dont like addressing it directly, although the ecb was indirectly addressing it when we had that 1. 20, and the remarks really pushed down the eurodollar. The ecb will do everything they can to provide dovish language. I dont think they really have now in tools right terms of easing their Monetary Policy even further from current levels. I think they have made it pretty clear that it is the job of the fiscal side in europe, and the rescue done recently is a move in the right direction. It is the fiscal side that really needs to make a difference. Interesting enough, we talk isut it as something that negative, and also as you translate foreign profits into your account statements. That is obviously a shortterm bad thing. But historically, whenever the euro has been strong, European Companies have to and quite have done quite well in the European Equity markets. I would interpret a strong currency as a positive signal that tells you about the flows from global investors. So i wouldnt be that negative on a strong euro, actually. Matt excellent point. Peter garnry, thanks so much for joining us. Great to get saxo banks take on all of this. Coming up on our interview with the former National Security advisor john bolton, we get his take on President Trumps chances for reelection, which should be fascinating. Also on brexit right now, we are seeing a lot of headlines come through from slack that theres a u. K. Bill aiming to avoid damaging the british Northern Ireland tariffs, and that the eu , the u. K. Hopes the eu is ready to rethink its current positions. Of course, these are how the negotiations go until they get down to the wire typically. You dont get any kind of agreement. In any case, it is weighing pretty heavily on the pound today, trading at 1. 3164 in dollar terms. Right now, stocks up across the board in europe. Nasdaq futures trade down. This is bloomberg. Leighann its time for the Bloomberg Business flash, a look at some of the biggest business stories in the news right now. Im leighann gerrans. It is a sign the Worlds Largest oil exporter sees demand for oil wavering. Keyi aramco reduced its lights grade by more than expected for customers. China plans to cap interest to charge borrowers on quick consumer loans. That is a move that could curb the financial tech giants biggest revenue driver. Chinas likely to make the highest rate 15. 4 , and is preparing for what could be a recordsetting ipo. Chinas semiconductor levelcturing fell. Shares plunged as much as much is 21 in hong kong, putting the company on a blacklist that would force american suppliers to seek a special license before shipping it. That is your Bloomberg Business flash. Matt. Matt thanks very much. Leighann gerrans there with your business flash. U. S. President donald denying a report that claims he referred to soldiers killed in world war i as losers. His former National Security advisor john bolton spoke to bloomberg radio. I was there for the discussion on whether the president should go out to the battlefield and cemetery. It took place in the u. S. Ambassadors residence in paris. I write about in the book. Herwas a straight weat call. I didnt hear him say those things. Did he say those things to other people . It is possible. But the things he said about inn mccain i do took about the book, and he did say very similar things. But about this visit to the cemetery, no, i did not hear those things. If i did, they probably would have been in the book. It is pretty clear theres been a lot of evidence that President Trump doesnt necessarily hold senior military officials in the highest regard. Do you think that extends down to the rankandfile . He really holds anybody in high regard except his family. I think he thinks he is the sole decisionmaker, and it is his gut that tells whether decisions are correct or not, not the advice that he gets from his advisors. I think he is very transactional. I dont think he understands what it means to serve in the military. You know, people who say he made those remarks, i wrote a 500 page book that i put my name on the cover of with a lot of quotations from donald trump, and ill take the heat thats associated with that, that proves what i think of him, his character to hold the office or lack thereof. So i think at this point, i went on the record. Let them go on the record, too. President trumps base includes lots of people that come from military families. Do comments like this resonate with them enough that they would change allegiance . I think it is entirely possible. These comments are despicable. If he made them, they are despicable. Theres no excuse for them, especially not from the commanderinchief. So theres no surprise that trump went out of his way last night here in the u. S. To deny that he had said it. But his credibility is pretty thin in my view. This is a he said, she said at this point. But i think the people who told the author of that article that they heard those comments, if they are serious about it, if they are concerned about the country, now is the time to stand out in the sunshine and say, i heard him say it. I was there. Weve now had the National Conventions for both the republicans and democrats. What do you think former Vice President joe biden needs to do between now and election day . Issue beforee big november 3 is how the two candidates do in the three president ial debates. Trump is going to make an issue of bidens mental health, and biden is going to have to show that those claims are false. This is typical trump character assassination style. Biden needs to performing those debates needs to perform in those debates. In that sense, it is no different than 1984, when the democrats were saying that Ronald Reagan was basically senile. In the first debate with walter mondale, he did not perform as well as people hoped. He came back in the second debate and said he didnt think age should be an issue in the campaign because he didnt want to take advantage of his opponents you send an experience, and that issue was gone opponents youth and inexperience, and that issue was gone. As of now, the polls would indicate he would win, but it is a long time to november 3. Matt that was the former u. S. National security advisor john bolton talking about President Trump. Lets go to bloombergs dani burger with a look at what is going on in markets this afternoon. Dani some broad gains we are seeing in european equities, up 1. 4 . Part of this might have to do with the fact that europe is insulated from some of the pain in the tech turnaround. You can notice that by what is happening in u. S. Futures. The cash market closed today for the holiday, but the s p staying somewhat flat at just 0. 1 gains. Nasdaq futures still moving lower by 0. 5 . It is that fear over frothiness in the tech market, and some of the options action going on with softbank that we will talk about all day, shortly weighing on investors minds as well. We can also see that the pound continues to slide. Cable falling for its fourth consecutive day. Part of the reason the pound has been falling here, down 0. 8 versus the dollar, is because increasingly no deal rhetoric when it comes to brexit negotiations, and Boris Johnson saying he is unwilling to compromise on certain key issues. Dollar certainly exhibiting some strength today. That might be a little bit of jitters in the equity markets, a little bit of haven buying. We also have an ecb meeting later this week. There are concerns about the strength of the currency, so certainly investors have pulled back. Finally, of uti under 40 a barrel in new york, down 1. 5 . That follows saudi arabia. Utting prices for october oil i want to stick with commodities and check out what a key commodity has been doing today. We can see that in copper. Copper now trading at a twoyear high over optimism of demand from Data Companies from china, both in support both import and export data. Matt if you want to look at a gauge for the economy, copper is supposed to be one of them, and right now. It is rising higher. This is bloomberg and right now it is rising higher. This is bloomberg. Matt risky business. Softbank plummets unreported made big bets links to u. S. Tech. The nasdaq. Selloff looks to continue. U. S. Stocks are shut for the labor day holiday. U. K. Officials say britain is not scared of walking away from brexit negotiations md handed. Talks restart negotiations emptyhanded. Talks restart this week. And german chancellor Angela Merkel says she is now ready to link nord stream 2s fate to the russianpoisoning of Opposition Leader Alexey Navalny. Welcome to Bloomberg Markets. Im matt miller in berlin. It is 2 00 in the afternoon here, 1 00 in london. Lets check in on bloombergs first word news. For that we go to leighann gerrans. Leighann a new poll shows joe biden holds a doubledigit lead over President Trump. According to the cbs news survey, the democratic nominee advantage. 40 meanwhile, the survey also says that biden has a six percentage point lead in the battleground state of wisconsin. Angelaany, chancellor merkel is now ready to link the nord stream 2 gas pipeline with the poisoning of russian dissident Alexey Navalny. That is a shift for merkel, who has said the russian backed pipeline should be completed and remain a separate issue from navalny. Moscow has denied any involvement in navalnys poisoning. Hong kong protests have resumed after weeks of calm. Police a Message Police arrested hundreds. Among those were key activists. They were processing they were protesting the decision to delay Legislative Council elections for a year. India has become the worlds new coronavirus epicenter, and has passed brazil as the second highest rate. Nds case growth is still accelerating indias case growth is still accelerating. 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. Im leighann gerrans. This is bloomberg. Matt thanks very much. Lets get a quick check on what is going on in the markets right now. In terms of equities here in germany and france, and london, we are looking at gains across the board. The top of the screen is the broader stoxx 600 index. You can see it is up 1. 5 right now. Every Industry Group is gaining. A rising tide seems to lift all boats. Tech stocks in the u. S. , or at least nasdaq futures, are still down. They have been down more, they have been down less. The cash trade is closed, but investors are pointing to more losses. The pound is also slumping, down terms on3757 in dollar concern we could. See a no deal brexit. Gold is little change we could see a no deal brexit. At 1935olding lower. 40 an ounce. The u. K. Is planning legislation that would overrule key parts of the brexit agreement. He warned that the British Government will not accept the conditions on fisheries or state aid. Theres only two points really holding us back, but we cant accept that the year you rules. Our it would goes into a trade negotiation with anyone on that basis. Matt Boris Johnson, the u. K. P. M. , has put out a statement be ang there needs to agreement by october 15. Johnson says in australia type outcome would be good for the u. K. , and says there is still an agreement to be had. But again, Boris Johnson says that has to be done by october 15. Chris turner, ing Research Global head of markets, joins us now. Brexit, the idea of a no deal brexit was terrifying, and now even people on the left are saying a no deal brexit isnt really that far away from the best deal they could get at this point. What outcome do you expect . Economist look at this closely in depth. It really is 5050 in terms of whether we get a deal or not. Today. G is off about 1 may be a year ago, it might have. Allen kind of hard but with brexit this year but with covid to this year, brexit oft the sole driver markets. We will see what happens with this internal memo on wednesday. Matt sterling has been on an incredible run, or the dollar has been on an incredible drop, depending on how you look at it, since the beginning of the coronavirus crisis. We have seen sterling rally from about one dollar 15 cents to almost 1. 35. It still seems pretty steep to me, given the possibility of a. O deal brexit where do you think we see sterling and a no deal world . Chris we put out a piece today, my colleague scented out this morning. Just in the runup to october 15 sterlingk quite easily drops 4 . What is a true deadline . Deadlines can get extended, as we have always seen, and threats are made right up until the last moment. If werisk a 5 correction were to get to the end of this year without a deal, i think eurosterling could be quite close to parity. Matt thats a big call. What do using the likelihood of that is . Is that 50 as well that we get back down to the dollar . Chris that is eurosterling we are talking about, sorry. Not cable. Matt sorry. Probably an 8 move from here. It is a look at a probabilistic outcome, to say theres a 50 risk of that happening now. I think our call message we have put up to customers is the extent of complacency after everything that is going to youen over the summer, and shouldnt be relaxed in sterling. You should look to hedge where appropriate. Matt i can understand a year sterling call like best a eurosterling call like that, especially after it seems the eu has crossed the rubicon in terms of shared debt with her 750 billion euro sq package. Where do you see eurodollar heading . Chris really good point chris we should also point recently story iseen the big all about negative real yields, so we are down to these levels back from 2012 or 2013 that eurodollar couldnt take advantage of. This time around, it has been with the eu recovery fund, so we think the e. U. Should be quite wellpositioned. In general, we have seen euro staying close to 1. 20, and perhaps pushing ahead to 1. 25 once the dust settles on the u. S. Elections. What does that mean matt what does that mean for european stocks . It is patchy, the recovery from covid, but the economic recovery looks pretty decent. Here in europe, we had these social safety nets already in place, so we didnt have to shell out a ton for that, and they worked fairly well, certainly here in germany. So it looks like the earnings could come back. What does that mean for european stocks that we are going to be looking at a strong currency . Iy i dont think chris dont think the amount of euro appreciation is going to have to deal where you going to have to derail a recovery. Youve got this meeting thursday where they will look at what a strong euro means for the inflation profile, but central bankers around the world are trying to put in place a reflationary policy, good for inflation meant asset for inflation linked asset markets. If there are corrections we see for whatever reason over the coming months, policymakers understand there will be a reach for yield probably well into 2021. We think investors would be look to be buying on dips. Matt thats a great point. Someone used to say i dont really care about the level, i just care about the speed at which we are moving between those levels. I guess if we creeped up to 1. 20, one dollar 25 cents, that would not hit the amount of mercedesbenz cars that americans want to buy. I was it dengler i was at daimler last week, looking at their new s class. What will we see like that, in terms of Household Goods . A lot of those things are produced in germany, and it is important to the economy that we get a rebound in global demand. Are we going to see that . Chris i think it is interesting, the comments last week from the ecb about one was not in the camp of being a big problem with the euro. She was actually saying one of the reasons the euro is up is that the dollar is weaker, and weaker dollar is good for global trade volume. So the weaker dollar, if you looseas well, it exports Monetary Policy around the world, including europe. Perhaps the ecb might deliver looser policy because the euro is very strong. I think there are offsetting factors, so if trade volumes do pick up into 2021, that should be good. The narrative last week was a rotation from the big Growth Stocks into cyclicals. Do you buy that . Was set a blip, or is there something to it . Chris across all asset classes, you are seeing a cyclical story coming through. The sort of vshaped hopes embedded in your expectations around the world, and that is key for policymakers, so trying to keep those vshaped hope alive. It will be weeks or months where there is a disconnect if we get some disappointing news coming comingell i through, whether policymakers can restore those vshaped hopes. But i think the inflation story should really dominate through 2021. Matt thanks very much for spending some time with us today. Great to get your take on markets. Chris turner is the head of Global Markets for ing research. Talk with we wil stephen barrow, standard advisory head of g10 strategy. That is at 3 00 in london, 4 00 in berlin. On a day when we are seeing stocks rise, after the slump we saw thursday camus celli green saw thursday, we we are seeing green errors today. U. S. Markets closed for the holiday. This is bloomberg. Leighann its time for the Bloomberg Business flash, a look at some of the biggest business stories in the news right now. A big victory for samsung. Won a 6. 6 billion orders to provide 5g equipment to verizon in the u. S. The company has been pushing hard to compete with Companies Like nokia and ericsson to provide telecom equipment. There are reports that softbank made substantial bets on Technology Stocks using equity derivatives. That has led to concerns that softbanks billionaire founder Masayoshi Son is engaging in risky behavior that could lead to big losses. Suez hasf frances rebuffed a takeover approach by veolia, saying it could run into antitrust obstacles. It is the First Step Towards a full takeover to create a water and Waste Management giant. That is your Bloomberg Business flash. Matt. Matt thanks very much for that. Leighann gerrans there with your Bloomberg Business flash. Lets talk a little bit about covid and the ramifications. India has surpassed brazil as the country with the secondmost coronavirus cases in the world. Infections are rising at a record pace of more than 90,000 a day. The u. S. , which is the world india andcovid cases, brazil account for more than half of all cases. Joining us is bloombergs pharmaceutical analyst. It is not surprising that countries like india or the u. S. Evident of cases. They have a ton of people, although they have way more than america does. Are we going to see it surpassed the u. S. Quickly . ; obviously if you look at the sam obviously if you look at the trajectory, is very possible that would. You have to think about how you compare the number of tests being done in each area versus the other territory. Frankly, across the United States, youve got a range from 1000 half a test per population to about eight tests per 1000 and some states. Even then, there is massive diversity. A possibilityinly that if they carry on the current trajectory, they will surpass. Matt what do they need to do to put a stop to it . Is it just lucked down,istancing just lockdown masks, distancing . Is there anything more to put an end to this kind of spread . Sam our measures are the same. Theres nothing new there. The problem is when you look at the states, you find that in areas which have slightly lower economic lets put it this way, lower income areas where be in are more likely to cramped, closer accommodation, the rates of infection are higher, which is not a surprise because that means it is more difficult for people to keep social distancing. You take that to india, where there is already massive density of population, and take it to the less privileged areas of india, and you find that youve got that risk. It is not just about social distancing. Youve also got data that suggests you can pass it through even potentially in highrises through the toilet flushing system. So you put all of that together, it doesnt add up to social highrises, where you will get higher rates of infection. Matt a vaccine would be great, before we even get into the complicated discussion of whether or not the public would accept it and take it. Are we seeing anybody make real headway towards one that works . Works sam the one that is the question i cant answer yet. Bignow the ones from the Pharma Companies seem to suggest that they are at least active in your immune system. Whether they are protective or not is what we do phase 3 for. When you look at the trials that are ongoing, the best transparency comes from pfizer. They have given us four different data points so far with regard to enrollment in the trial, and there phase 3 as of september 5 was at 25,000 subjects recruited. It is possible if you wait for the phone number that you could see data from about the second week of october. There, though. Ts matt thanks for joining us. Sam fazeli there. Lets get over to dani burger right now for a market check. Dani we are seeing big divergence between u. S. Futures and european equities. I think it is really notable, we have very broad gains in the european index, up nearly 1. 5 , and we are seeing most regions, most sectors driving those gains higher. Some more high beta names like autos and real estate. Part of the reason it might be rallying is because we dont have tech weighing down on it. When you look at the difference between nasdaq and s p 500 futures, s p 500 futures barely changed at this point. Nasdaq futures are down by more than 0. 5 . It was down nearly 1 earlier, but still, some of the concerns over the froth in the market over the past couple of days still lingering over the labor day holiday. When we look at what currencies are doing, sterling declining against the dollar for its fourth consecutive day, trading at 1. 31. This is its longest klein since june. Boris johnson saying he wont compromise on what he sees as key issues in brexit negotiations. We are looking at the euro falling. All eyes are on the ecb meeting coming thursday, where the bank is unlikely to change its policy. Finally, crude moving lower by 1. 5 . Theres some demand concern after saudi arabia cut its prices for october oil. Are we surprised that tesla didnt get a spot in the s p 500 . Dani this is something i feel like people always forget, that the s p 500 is decided by committee. Gets to athat once it certain market cap, it will be added to the s p 500. Included. Did not get part of that might be concerns over its profitability metric. We have that selloff over the past three days in the u. S. And on friday. It does selloff post market and comes back basically unchanged. Matt they make money. They have posted profits, and their trailing pe is only 897. So theres that. Thank you for that. Up next, we talk u. S. Politics. Give you my world how can i, when you wont take it from me you can go your own way go your own way your wireless. Your rules. Only with xfinity mobile. Matt live from berlin, i am matt miller. This is Bloomberg Markets. I want to check in on the first word news. For that we go to leighann gerrans. Over in leighann the u. S. , joe biden holds a 10 point lead over donald trump according to a new poll from cbs news. Say joe of 10 democrats biden is not campaigning enough. The top issue for voters is the economy, followed by health care, the coronavirus outbreak, the recent protests. Authorities in Southern California have pinpointed the cause of a fire that has burned more than 7000 acres. They say it was started by a pyrotechnic device used edit gender reveal party. The blaze was one of 23 major fires burning in the state. In china, exports kept expanding in august. They rose 9. 5 to the third highest level on record. Imports unexpectedly dropped down more than 2 and chinas trade surplus with the u. S. Was the highest since november 2018. The European Union is warning Boris Johnson against tearing up parts of the brexit deal he signed a year ago. Johnson has been ramping up his threat to leave the eu without a trade deal. He will tell the European Union today he is willing to walk away rather than compromise over what he sees as the Core Principles of leaving the block. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am leighann gerrans. This is bloomberg. Matt . Matt thanks very much. Leighann gerrans with your first word news. Polliden in the latest cbs is leading President Donald Trump by 10 points. The Trump Campaign is pouring money into minnesota, which is a historically Democratic State that he lost narrowly, but still lost nonetheless four years ago. Because they are counting on public opposition to the black lives matter protest and the violence surrounding those. Joining us to talk about the u. S. Political situation is thomas kim, director of the ucl center on u. S. Politics. What do you think about this idea that the Trump Campaign i do not want to misspeak, but can capitalize on the virus around these protests and ride again in the polls . Observationa great and it is no secret donald trump is trying to brand himself the law and order president. He thinks a message will resonate with predominantly white voters. It is a strategy many have late to Richard Nixon in 1968. The president wants to present himself as the only firewall between unrest on the one hand in safety and security on the other. One of the challenges for trump is he is the president right now and the social unrest we see in the news is happening on his watch. Because he is the incumbent, it makes it harder for trump to insist he is the unique remedy for some of these problems. Moreover, if you look at the voters say4 of crime and violence are the countriess number one problem. Much higher are the coronavirus, the economy in general come in leadership. It is possible trump thinks the issue is more salient than it is. Have anys biden weakness on the law and order side . Been veryistorically supportive of police and firemen. He drives a corvette. He picked Kamala Harris as his running mate. She is about as law order as it gets. Thomas exactly. I think this accusation trump is levying against joe biden is a much tougher sell than if he was running against another candidate, someone who was more progressive. It is certainly the case trump is trying to brand joe biden as either wittingly or unwittingly captive to the farleft element of the democratic party, those who would want to support defunding the police. Joe biden has come out fairly recently inst pittsburgh making it clear he supports the police and supports the work they are doing, and what he is trying to do is ensure there is accountability when some of these events happen. It is a much harder sell with joe biden than it would be with some other candidates. Coronavirus is a big issue for voters right now. I am guessing that the split on these polls is pretty much the split of people who want to wear masks in the u. S. What kind of success can donald trump run on in terms of fighting the virus . Thomas if you just look at the polls, most americans are skeptical of the job he has done with managing the pandemic. He has talked a lot about the possibility of an imminent vaccine. If he could announce Something Like that, i think it would reshape the election in a not insignificant way. That is assuming it is verifiable, theyre not questions about the timing of the announcement at the 11th hour, but most importantly that would shift the conversation away from some of trumps perceived mishandling of the pandemic. That does not mean it would minimize the complaints many voters have about how trump has managed the nicest, but it would change the narrative to make it more forwardlooking rather than backward looking, and trump would certainly use that as an opportunity to remind voters of the state of the economy before the coronavirus. That case would probably be bolstered by the fact that any announcement of vaccine would provide a positive shock to wall street. Precisely because any announcement would be seen as an uncle on as an unequivocal itor trumps political would be questioned whether this was politicized, so that is why officials would have to rely on guidance from Public Health officials about the state of the vaccine. Voterso you think trump keep their opinions closer to the vest when the pollsters come around . Biden, we just showed a 10 point lead, ive seen as high as a 15 point lead, but the bedding markets have them connect and sometimes art have them neck and neck and are sometimes putting trump on top. In 2016 we saw clinton with this kind of lead, but when it came to the votes donald trump won. At least when it came to the electoral college. Is that going to happen again . Thomas one cap yacht about the 2016 polls as they were much more accurate national they were on a statebystate basis. Most polls predicted clinton would win the popular vote in 2016 and they were right about that. That is important to keep in mind. At the same time there is a lot of handwringing about why the pollsters got it wrong in the swing states, and whether the same error could happen in 2020. Some of those issues are technical. They deal with how to predict the actual turnout of key demographics like citizens without a college degree. Part of the challenge this year is the election is happening against the backdrop of extremely rare and virtually unprecedented events. The coronavirus and the deliberate shuttering of large sections of the economy. That is going to invariably increase the uncertainty of the estimates. Trump is also such an unconventional candidate and a polarizing candidate that it is hard to build in whether there might be some of these socalled secret trump voters. Citizens who will not admit they are supporting the president in surveys, but who will nevertheless turn out to vote for him on november 3. That is a real issue, and it is hard for pollsters to encapsulate that. Matt thanks so much for giving us a little bit of an update on this. Thomas gift, director of the ucl center on u. S. Politics talking to us about the election. Argentina has to reduce its bond yields as it will take time for the government to return to capital markets. The economy minister told alix on the dayuy johnson the country concluded a 65 billion debt restructuring. It is important to reach this deal with 99 of our creditors. The remaining 1 will continue working. It was mostly a technical issue. Bondholdersome registered in europe that did not get a chance to vote. We do not see that as a problem. We continue working to resolve 99 we consider a massive acceptance. Guy still in a very difficult place. Reade going to see bonds trading. I am wondering at what level you expect them to be trading and what kind of single we can take away from that. The new bonds will start trading next week. What yield are you hoping for . Minister guzman that is a massive motive for bondholders. We know stabilizing the economy is a process. It cannot be done from one day to another. Argentina was already suffering a deep macro you might a deep Macro Economic crisis when covid19 hit. Investorsr expectations this will take time and it will be a process. Expect relatively higher yields than in a few months from today. Question iseld important because you need a high enough yield to attract National Investors and foreign capital, but not high enough where it will hurt you down the line. Some analysts are looking at 12 . What is one you can manage that does both . 12 , thatuzman at would not be sustainable. The good part of this deal is argentina would not need the government to Access International trade markets. 12 from the viewpoint of the government is highyield for the process of accessing International Credit markets. It should be lower than that, but we are aware that would take time. Investors were aware that was going to take time and that is why there will be no capital monetization payments for the first five years. We need to work on consistent Macro Economic management go increase the yield to levels we consider acceptable and that will take time. Uy clearly there will have to be a conversation with the imf. When do formal talks start with the imf and what kind of deal are you looking for . Is it a standby arrangement . Are you looking at extended fund facility, what is your objective . Minister guzman the first objective is a program that argentina that stabilizes its economy. All modalities are on the table. We did not clarify when we requested the table what the modality would be. The program is based on different premises from Macro Economic management and Macro Economic policies. Then the package of fiscal policy and Monetary Policy on which the sba and 2018 was based. In the context of a recession, that program deep in the recession. Now we are moving forward. A very constructive engagement with the imf and it will be a complex process. The program has to have legitimacy in the society. We announced we would set a program to the natural caught to the National Congress to be approved. , italysll ahead finance minister tells bloomberg the economy will rebound faster than had previously been anticipated. Well bring you more from our exclusive interview, next. Right now, we are looking at gains across European Equity indexes, including the index in italy, the ftse med that trades in milan. Up 1. 6 . 1. 75 x and the cac 40 up and the ftse gains 2 . This is bloomberg. Leighann it is time for the Bloomberg Business flash. A look at some of the biggest business stories in the news. It is a sign the Worlds Largest oil exporter sees demand wavering. Saudi arabia cut prices for sales in october. Saudi aramco reduced key arab light grade by more than expected for asian customers. U. S. Oil buyers will also get a break. China plans to cap the Interest Rate that groups can charge borrowers on quick consumer loans. That is a move that could curve the financial tech giants biggest revenue driver. Bloomberg has learned china is likely to make the highest rate, 15. 4 and is preparing for what could be a recordsetting ipo. Chinas Semiconductor Manufacturing international fell the most in several weeks. There is a report from reuters the Trump Administration may at the chipmaker to a blacklist. Shares plunged as much as 21 in hong kong, putting the company on a blacklist would cause american suppliers to seek a special license before shipping it. That is your business flash. Matt thanks very much. Leighann gerrans with your business flash. After suffering one of europes toughest lockdown, italys economy will rebound faster than had been anticipated in the Third Quarter according to the finance minister roberto gualtieri. He spoke exclusively with bloomberg at the rossetti forum. Measuresgualtieri the we have taken so far have been in containing the Economic Impact of the crisis and preserving our productive capacity and jobs. The recovery and resilience plan would be oriented to the future transformation of the Italian Economy on the line of , andation, sustainability social and territorial cohesion. We will focus the plan on aimedment, and investment at enhancing our Growth Potential. It would be investment in innovation light cloud, supercomputing, european project likemmon interest factories, microelectronics. We would support the private sector to invest more in innovation and to support the process of reduction of carbon and boost our infrastructure achievement and material infrastructure, but also material infrastructure, and we will invest a lot in human capital, education, research. Concernan debt is a big for investors in foreign markets. You mentioned in your speech at the forum a new mechanism to inuce the debt to gdp ratio a solid way. Could you give us details on how much you think it could lead to as a reduction . Minister gualtieri we will document,r fiscal which will have not only the threeyear horizon, but also a longerterm horizon where we will define the trajectory or reduction of our debt to gdp ratio. That would be significant and sustainable. We have the opportunity to do that via mediumterm fiscal have an, and those impact on the Growth Potential of productive investment we would deploy with our next generation. Your government has mentioned a 6. 8 estimate for gdp contraction this year. What you think that your number will be . Between eight and 10 . Minister gualtieri the 8 ecast was a forecast done as we said, it will be revised downward. S thatry to other forecast have predicted a significant. Ecrease of gdp thanks to the positive rebound we are seeing, our downward revision will be limited and we expect a one figure reduction of gdp for 2020. And for next year . Minister gualtieri next year we will have a positive increase. We have not yet defined our forecast. You will see soon. In 2022 will be able to arrive to our precrisis gdp levels. Italys finances have taken a hit with covid and the national lockdown. Are italysnt public finances today and will sustainable only because of the current support from the European Central bank . Minister gualtieri the Monetary Policy of ecb is extremely positive, but it has to be taken into account the structural demands of the Italian Economy that make our debt fully sustainable. Seeing,o say we are even in this difficult moment of , since the government entering into force, also a positive trend of fiscal revenue. As you know, we had a fairly significant downward revision of our deficit for 2019, and one of that are making us tax our forecast revenues which are positive. We have a number of elements which make us define our trajectory that will further improve our public debt. The sustainability of our public debt. Matt that was the finance minister of elderly that was the finance minister of bitterly that was the finance minister of italy. The absence of explicit currency targeting shifting the spotlight to the euro ahead of currency meeting. Bloombergs dani burger joins us with more. Central bankers do not typically like to give any indication they are trying to push the curves year round and they may not care that much of it move slowly, right . Dani that is certainly right. Hearing from the ecb that the euro strength was a concern for somewhat countries was of a surprising, and one of the first indications the central bank does care a lot about the strength of the euro. They are unlikely to address it at their meeting thursday. One of the messages we are likely to hear is the risk to the downside have begun to pile up. That does not mean they will just policy. All indications are they will not. There is not a much data to support that. Last time we heard from Christine Lagarde was in july. She was cautiously optimistic. This time around there more coronavirus cases. The recovery has slowed down. We are likely to hear more pessimism setting the stage for cutting before the end of the year. Matt thanks very much. Dani burger talking to us about what to expect. On thursday we will broadcast that for you as it happens. Coming up, more on Bloomberg Markets with chris bailey. Look here, its your very own allinone Entertainment Experience xfinity x1. Its the easiest way to watch live tv and all your favorite streaming apps. Plus, x1 also includes peacock premium at no extra cost. This baby is the total package. It streams exclusive originals, the full peacock movie library, complete collections of iconic tv shows, and more. Yup, the best really did get better. Magnificent. Xfinity x1 just got even better, with peacock premium included at no additional cost. No strings attached. Guy 3 00 in london. I am guy johnson. Welcome to Bloomberg Markets. Labor day the United States. Markets a little quieter than normal. The stoxx 600 is significantly higher today. We are seeing a very positive session developing in europe. Will that be a positive tail wind for the United States tomorrow . We will wait and see. For the moment, it looks like we are going to see a negative open for the nasdaq. Every single sector is in positive territory. I have 540 three stocks higher on the stoxx 600. In terms of what else we are watching, the pound is lower. Keep that in mind during our next conversation. We are repricing risk around brexit. The chinese session very negative towards the end. Big tech was where we saw the selling and that is not a great tailwind for the u. S. Session tomorrow. We also see weakness in the russian ruble as Angela Merkel puts nord stream 2 firmly in the firing line as a result of the poisoning. We will talk more about that a little bit later. Lets get back and talk more about the u. K. The u. K. Stepping up preparations for brexit trade talks to fail and is planning a new round of legislation that could override key parts of its withdrawal agreements. The u. K. Foreign secretary calls the talk so moment of reckoning. The talks start tomorrow again. It is a wakeup call for the eu side. We have built a position where their only two holding us back. We cannot accept the eu controls our laws. That is the reason we are leaving. No other country goes ending negotiations with the eu on that basis. Guy Boris Johnson putting out a note earlier on in email suggesting that midoctober is the key deadline for getting talks done. If we do not see a deal by then, we will walk away and get on with it. Joining us is bloombergs brexit reporter. His Boris Johnson happy . Is he ok with what is happening . Is he on board with the idea the u. K. Could be heading for, not in australia style arrangement four, lets call it australia style arrangement with the eu. We are at the crunch moments of the talks and now Boris Johnson is saying he would be happy with no trade deal with the eu. He is generally happy with that scenarios because it gives the u. K. A benefit of brexit, signal market. You can see why that is a belief of his spirit significant guy what are the Political Risks of doing this . Joe the risks might be significantly less the last time Boris Johnson had to try to do a deal with the eu. There was a big impact in parliament. It was strongly imperative or Boris Johnson to get the deal. It is now scenario where conservatives have the majority. Brexit is not so much of a Political Risk for him as it was before. Guy Boris Johnsons email earlier on talking about october 15. Why october 15 . Why is that the cutoff date . There are various practical issues that have to be resolved with the final text agreement, the fact it has to translate the document into the languages of 27 member states. Ratification has to happen with the member states. There is a real necessity for a deal to be done by october 15. Guy thank you very much, indeed. Joe mayes, Bloomberg Brexit reporter. Lets bring another voice to the conversation. Lou kate moore, investment director at aberdeen standard investors joins us on the line. Luke, do you think Boris Johnson is serious, what does it mean for u. K. Assets . Ke he is serious and he has made this point all the way through. We have a lot of risks around brexit. However, i think there is a 60 chance a deal gets done and we get a lot of shading this week and next week before we can sit down and get on with that. In terms of impact on the choices investors will make, i struggle to get my head around i think he can be really small. The risk of brexit has been with us for four years now. That has not changed. A lot of companies prepared for a hard brexit all the way through this, and right now we have bigger problems. Recovering from covid19, then we have on what could be a. 5 decrease in structural gdp growth for a number of years. Do you know what, that is nothing compared to where we are with all the other problems we are facing right now. Guy you think that is the Boris Johnson strategy given the magnitude of Everything Else that is going on, you can always bury the news under the virus. Luke i am sure he would love to. The support he has come of the 80 seat majority he has got relies on getting brexit done and getting it done so people are broadly happy on the euro skeptic side of the party. If we if he can brush it under the carpet because he has bigger things to worry about, i am sure he would do that. Still the scottish question to worry about. A hard brexit makes the push for independence in edinburgh considerably harder. Does it change the arithmetic in terms of the gilt market . As you say, we have seen significant issuance as a result of what is been going on with the virus. Is there going to be extra issuance if we get a hard brexit . Probably not. Therefore in terms of where we are pricing right now, is everything in the price . Luke the currency could easily react. , 89 and a half, we could pop up into the mid90s as people get behind a hard brexit. I think that is the point. Any impact we have is likely to be shortlived and centered around the 15th or 16th of october. I think the market will be moving along in thinking about q. Week and what can the central bank do. How many more guilds can they buy. Outweigh a lot of the concerns by brexit in the short term. Longer term we can short through the mess we are in any way and maybe we will become more worried about the banks, one area of the economy to focus on. I do struggle with this. We have bigger things to worry about right now than brexit. The the other side guy other side of the channel. Any impact there . German autos are having a strong would there be any degradation in terms of the economic trajectory in the euro zone, which as you have already indicated is suffering significantly as a result of the virus just on the of the channel . Luke it will be difficult. The dutch flower sellers will struggle to get their shipments over here in a timely fashion. Auto travel and champagne from ,rance, all of these markets but it is amazing how images to companies can get by dealing with regulations. We will get disruption. It may last three months or six months, but that will pass. If we can get back to worrying about recovering the economy here and from the continent, that would be the major factor for politicians going forward. I am sure they would love to get the 15th or 16th of october, getting a deal done, focus on the domestic priorities which are built to be at the forefront of their mind. State is the u. K. Economy in . The data are not good. We are likely to see a pickup in unemployments once the furlough scheme comes off. Is there a danger we end up with a pickup in unemployment . The data turns south around october. A narrative can turn on a dime if you get an amalgamation of factors maybe brexit has a bigger effects than you are talking about . Luke that is entirely fair. We will see a pickup in unemployment, and if it is anything like the u. S. Is a shift in employment from permit jobs to more parttime jobs as companies try to control their cost base and make sure they are is as flexible as possible with their cost base as we go through the autumn and into the winter new year. It could feed into the narrative. Brexit could be the spark that worries the market, but the underlying factors, the weak growth, uncertain outcome in terms of bought the virus, rising unemployment, that will not change and it will keep little yields, which from an equity market perspective helps. If yields keeps abreast, what other choice do you have if yields keep suppressed, what other choices do you have . There is no alternative. You will find risk assets strangely supported through this tough economic environment. Guy we will talk about that next. Thank you very much for your time. Luke hickmore of aberdeen standard staying with us. Lets check it on bloomberg first word news. Anew poll shows joe biden at doubledigit lead over President Donald Trump according to the cbs news survey. Ae democratic nominee holds 52 42 advantage. It also found support for each candidate is getting more solid as voting day approaches. The survey also says joe biden has a 6 lead in a battleground state, which is an important one right now, wisconsin. Nowermany, Angela Merkel is ready to link the nord stream 2 pipeline with the poisoning of the russian dissident. That is a shift for merkel, who has said the russian backed pipeline should be completed and remains a separate issue. The kremlin has said it sees no rest germany will drop nord stream 2. Moscow has denied any involvement in the poisoning. Hong kong protests have resumed. Police arrested hundreds of people. Among those, key activists. Among other things, protesters were protesting the decision to delay Legislative Council election for a year because of the coronavirus. That is your bloomberg first word news. Coming up, europes Biggest Airline ready for a rare bond sale. Takeyanair is looking to advantage of record low cost for air for a potential second wave of coronavirus. That is coming up. This is bloomberg. Guy welcome back. This is Bloomberg Markets. Headlines coming out of germany. The german clinic treating the russian dissident says the artificial, in which he was placed as a result of being poisoned has been ended. Consequencescating are still possible. They are saying the state of his health has improved, but nevertheless i would imagine he is still in a very difficult place from a health point of view. We saw the consequences of the poisoning in the u. K. As a result of what took place in salisbury a few years back, and the longterm consequences can be significant. This leads us onto the geopolitical implications of all of this, with it now looking increasingly likely germany will link what happened to Alexey Navalny on that flight at that airport in siberia and the nord stream 2 pipeline. This is something the kremlin is saying it thinks berlin will not do, but that appears to be changing quite fast in berlin. We see Angela Merkel speaking again tomorrow. This story could have significant geopolitical implications. It is already having implications for the ruble, which is down quite sharply. Lets turn our attention to the credit markets from an Airline Point of view. Ryanair, europes Largest Airline is getting ready for a rare appearance in the primary credit market. Last week, the company which is sold 400 Million Euros of new stock. Now it is looking to raise at least 500 million euro by a five year bond. Still with us is luke hickmore, investing director of aberdeen standard investment. You are on the call earlier. Walk me through what you learned on that call and walk me through what is happening in the credit space for airlines. We did see finnair to the market a few weeks back but it has pretty much been the only one in europe. Luke lets not forget, finnair a lot of state ownership involved. This is not the launch into the blue ryanair is doing, which is for me the first real airline issuance in the debt market in europe since covid. In terms of what we learn from ryanair, we learned they are rocksolid on the ratings, they bbb, they get the risks, and i think they have done a good job of raising 400 million in equity. All of which shores up the Balance Sheet and removes any concerns investors are bound to have in the short term. It probably does not change but i think we, could bring a few more investors on board with this deal for ryanair. Guy why have European Airlines taken a different tack to u. S. Airlines . U. S. Airlines, i understand the price paid is high. U. S. Airlines have gone to the credit market and raise money. Partly the big operators in europe are generally a better Balance Sheet in the first place. They have more planes under their own ownership then was the case in the u. S. Do not forget the u. S. Has gone through a lot of consolidation over last 10 to 15 years, leaving those key players at the forefront, a massive drop in Domestic Travel and needing to shore up the balances quickly, and a lot more state aid in europe then we have seen in america, where they have had some, but nothing compared to what we saw with lufthansa or norwegian. Oleary, i think we talking to him on wednesday, has tiptoed into the m a space. The acquisition of louder significant. It rot the idea of a mixed fleet to ryanair. Do you think he will want to do more of that . There is a lot of stress within this space. Any hints of that being up at an opportunity of that being an opportunity . Luke for sure. They have stuck with the call today. One of the maze one of the ways they could get that is stepping up some of the airlines that are struggling, soaking up some of the capacity into ryanair. For them they got the Balance Sheet of what they were doing. Planes,could get more they could get decent cash through the door which would backup the consolidation effort they used. I think the market is right for it. Guy lets talk more broadly in the final few minutes about what is happening in the credit markets. Clearly there has been an elseent, there is nothing you want to be held to buy, particularly in a low Interest Rate world. Across Balance Sheets, a couple of issues that have raised money in the current markets have an awful lot right now. Goingappens to that money forward from here . Will that be buybacks are supportive of credit . What is your broader rollbacks for the credit space . Luke we were talking about this at the beginning of the crisis that you can find companies coming out of the crisis with better Balance Sheets than they went in. That is the case right now. The firstorder business with the Companies Holding a lot more cash than they need about by some debt back, can split and get the sheet into sensible shape. I think governments will be pressing companies. You improve your Balance Sheet because we fail to act massively through this crisis and we are not going to do it again to the same degree. You will improve your Balance Sheet in the meantime. That pressure it will be on companies for the next six months to four years as governments go back and fix the last crisis as they always do. I not concerned from a credit risk standpoint guy go on. There, butleave it it is interesting what you said about not being concerned with the credit risk. Time beats us. Luke hickmore, investment director of aberdeen standard investment joining us from scotland. Up next, softbanks foray into options trading runs into a few problems. The Japanese Investment company get smashed by the selloff intact. We will talk about that next. The selloff in tech. It will about that next. This is bloomberg. Guy 23 minutes past the hour. This is Bloomberg Markets. Happy labor day. Lets talk about what is happening in markets despite the absence of our american friends, here is dani burger. Dani plenty of action. Cable dropping. The catalyst for today, falling about 1 versus the dollar is more rhetoric coming from the u. K. Government over no deal brexit. Boris johnson saying he is not willing to compromise on what he sees as key components of the brexit negotiations. We are also seeing the euro fall in todays trading as well. Some strength coming from the dollar. That might be some of the weakness in the tech shares spilling over into the dollar. We also have the ecb decision. We have heard more ecb members speaking about concerns over the strength of the euro. A lot of these eurodollar bowls pulling off the gas pedal and taking some of the froth out of the market. One of the clear stories is u. S. Cash markets might be closed for the holidays, but there is a clear diversions between u. S. Futures and european trading. Europe has very broad gains, basically every region gaining, most sectors getting 1. 5 . Look what is going on in the u. S. Without the tech shares, you can see there is more demand for europe, more value. Tech continues to move lower, down. 8 with some of the froth coming out in that market as well. Part of the story has been the call options building for retail traders. We also have evidence institutional traders are buying call options as well. Nearlyn softbank spent billions of u. S. Dollars buying u. S. Equity derivatives. Because of that, we have seen their shares move lower by about 7 in japanese trading because those raises were tied to u. S. Tax, there gains are not realized, which means a lot of the decline in tech shares might be eroding. Also the fact they are acting more like a hedge fund. Guy it does make you wonder why you would want to own softbank if this is what they are doing with the money you are giving them. A lot of people may argue i can do that. Dani, thank you very much indeed. Worth bearing in mind the ftse is in a selloff and the chinese market, the last hour and hour and a half, real selling in tech. That may not add something to the u. S. Start of trading tomorrow. Bear that in mind. Still ahead, we will talk about what is happening in germany. German officials putting pressure on moscow, calling into question the nord stream 2 priceline pipeline. Chris bailey joining us from raymond james. Guy happy labor day. Lets talk about what is happening in germany russia. Angela merkel rethinking her state support for the russian led nord stream 2 two gas pipeline as a potential response to the poisoning of the russian opposition figure Alexey Navalny. Earlier it was reported that the german clinic treating him ended the artificial, as his health showed signs of improvement. Joining us is bloomberg raymond collins. We were anticipating nord stream 2 could be linked to this poisoning. I think a lot of people have been surprised how quickly Angela Merkel, that usually conducts a fairly mercantile foreign policy, has been convinced of the benefits of that. Raymond that is true. She changed positions from last week when she said the two should not be mixed. Towards the end of the week, pressure has been building within her own coalition, her own party, and the opposition as well. Having said that. I am not quite sure she has decided to let it go, to pull the plug entirely. We are talking about seeking more than yacht more than 9 billion euros at the bottom of the ocean. Hundreds of European Companies are involved in the project. I have a feeling there may be an intermediary type of solution. Rather than try to down entirely, perhaps a moratorium to send the signal this is serious, they cannot take that type of action the russians have taken with the poisoning. Lets not forget it has been paralyzed for a while. A couple of months more, maybe 12 months. Guy such news would may be please washington. When you say a moratorium, are you talking about completing it and then not using it . What would happen . Raymond there are different proposals on the table from different members of her party. That is one, finishing it and not using it, which does sound odd. The other is to not finish it at all. There are different ways of doing this, all of them a bit odd. The worst solution would be not doing anything at all and having all of the steel and money wasted. How damaged have relations between berlin and moscow become as a result of this . It was increasingly clear Angela Merkel was growing frustrated with her inability to change policy and moscow. Straws the very large that has broken the camels back . Raymond it is quite serious. It is not an isolated event. There has been a string of events over the last couple of years. There was the cyberattack, the killing in a berlin park of hs sheehan citizen of a chechnya and citizen. We are feeling we are hearing from merkel how frustrated she is. Her spokesperson says theyve not spoken about this at all, Angela Merkel and Vladimir Putin. You can see how cold things have become between the countries. Guy we will leave it there. Raymond colitt joining us on what is happening in berlin. The decisionmaking process visavis the Alexey Navalny poisoning. Lets turn to european markets. As we heard just a moment ago from dani burger, we are seeing big gains today in european stocks and it is broad. Are the markets going to be resilient for the u. S. Tech selloff . Lets talk about that with chris bailey, european strategist at raymond james. Weve been hearing news of a spat between moscow and berlin. The european story is becoming less attractive right now. We have seen week data out of germany. We have a euro that has strengthened. Bet europe look like a good if we are seeing a tech selloff in the United States . Think that is the case. Europe benefits from rotation. Combination at the of indices across europe, we have a lot less technologies than covid beneficiaries in our industries. If you think market rotation, you should expect the European Industry to benefit. The second leg has to come through the Exchange Rate and through what a strengthening euro and a strengthening pound, what that represents, which would be greater risk preferences at a global level. In appreciation there is a physical story and not some kind of covid sense of structural change story and the broader Financial Markets. Guy are we going to see that . Chris i think we are. The Great Barrier at the moment is uncertainty over the disastrous and horrible coronavirus. World is learning through classic human ingenuity, but also through policy how to deal with this challenge. We are all hopeful there will be good news on a vaccine. We cannot bet on that. I heard one of your previous guests talk about how companies have an incentive to five work to find solutions to this. My feeling is over the next six to 12 months, there will be a greater appreciation or a rebound story, and that will benefit europe. You mixing with that, i think the rotation within markets, and you put together a good equity story. Certainly from my perspective, the greatest opportunities in the world for interNational Investors lay with u. S. Equities. That is our topic at the moment. And it interesting thursday friday, some of the upper formers for the most beaten up stocks we have seen of late. It is the travel stocks that have bounced back. There are those that suggested what we saw last week was a shift in the market mentality towards this kind of post covid world, towards opposed vaccine world, and as a result what you do is start selling the big momentum trade, the tech trade, and you start shifting into other areas of the market. That follows good news from the vaccine producers. Are we starting to move into that kind of narrative . The earlyare at stages of it. We have not reached near full fruition. You see the euro zone and the u. K. And emerging markets at the top of the list and youre not seeing that at the moment. You are still seeing an overall preference for cash in the United States. There are still couple of legs to go, but youre right. We have started to see a shift. This is where fx is critical. If you want to track this, watching the euro dollar Exchange Rate is a good one stop shop in terms of that broader risk dynamic. There is appreciation of whether we will have not only some kind of cyclical rebound, but a theainable rebound based on other side of the great crisis. Clear,at has been made it will be interesting what Christine Lagarde has to say about this thursday, is the ecb is not happy with the signal currency north of 1. 20. The indication seems to be, judging by the comments, that the ecb does have a problem at 1. 20. Are you suggesting if we go beyond 1. 20 that is a positive side, and why doesnt the ecb see it that way . Chris nobody likes a strong currency. It makes you a little less competitive in global trade europe isnd we know , very dependent on the global system. My personal view is if you look parity, ifng power you look at a measure of where currency should be, you should not be worried at 1. 20. My feeling is the ecb will not want to get involved in the fx area. I doubt whether they will say too much of great interest at Thursdays Press Conference as a wave can try to talk the currency down. My feeling is the focus will still be on what our National Governments doing and the broader paneuropean counsel is doing to supplement and complement the ecb Monetary Policy asset. I think that will be the focus of lagardes comment. Guy where is the story surrounding u. K. Assets . The ftse 100 has been a massive underperformer. Outperforming is the pound goes down. We have brexit to contend with. There is still an issue of unemployment that will ride significantly. Debt remains high. Taxing your way out of that remains difficult. Where u. K. Assets go next . Chris you are absently right. This willr way out of not be easy. What you have to try to encourage his risktaking preferences and behavior much more. In terms of u. K. Assets, they are geared to this overall story. The u. K. Is an open economy. You have the added excitement or uncertainty of brexit, but clearly we are moving towards some kind of end game, although i still believe therell be an ultimate compromise. If you look at the composition of the u. K. Markets, you have even less in covid ready sectors than the European Forces have. I believe it is even more geared toward a global cyclical recovery. I think the u. K. Is a good play on a number of factors, but as a consequence given my overall view we will see a brexit compromise and also some kind of led recovery in Global Markets, i think the outlook for u. K. From a stockpicking perspective, the u. K. Market is one of the most interesting large markets in the world today. Guy from a stockpicking perspective, where are you looking . I will not ask you to go and individual names, but give us broad sectors. Chris you have to look outside of areas which have been beneficiaries of last two months. If you look outside of consumer , and you look more towards industrials. Financials,ook at which are always double geared because the nation of their business is prudent in the economy. The u. K. Markets got decent exposure to those areas. We also expect companies to catch more of a bid. We are also seeing differentiated movement. The mining stocks have been doing better than the energy stocks, but you would expect both groups to shown appreciative value. Getting something the u. K. Market has a particular overweight in. That will interest global investors. Guy we will leave it there. Thank you for your time. Chris bailey, strategist at raymond james, wrapping things up on where should be looking in the u. K. Market. We will talk more about the banks from a different angle. The future of work for financiers. We will dive in unopposed pandemic on one of post Pandemic Workplace looks like for bankers, next. This is bloomberg. Guy live from london, im guy johnson. This is Bloomberg Markets. Happy labor day. Lets talk about what is happening in the banking world. Whether or not we will be going back to work soon. More than 3000 employees in six of europes biggest banks are working from home. According to a recent survey by morgan stanley, 27 percent of employees across a variety of industries would be happy to continue working remotely. Joining us with a look at what the finance industry will look like post pandemic and what the work world will look like as well, heres bloomberg u. K. Finance leader tom metcalf. I get a training every morning i get a train every morning. It is usually thick with people working in the city of london. Right now i get into that train, i am the only one in it. When will that change . Is a ghost town at the moment. We are getting a sense of what the next few weeks will look like. I think you will be looking at a middle ground. Right now it is very low. 5 or 10 in the city. , but we aresee 100 seeing in the banks there are clearly roles that will have to come back. You look at the trading arms, you look at risk compliance, the message being sent out by these institutions are these are the folks who need to come back. While it will be a more flexible kind of work, it will not be coming from one day a week. It will be more like four days a week. Be . How flexible will it you talk about the fact that it will be one day a week . How much have you learned from the covid experience in terms of peoples abilities even in those roles to be able to do what they have to do, but from somewhere else . Is certainly feasible in terms of Internet Connection point of view, trading will be done. We are hearing from executives at the bank that it does not theve the concerns around idea that trading teams need to work together. What the flexibilities will probably look like is maybe one day a week you were not coming in or perhaps you are doing a rotation one week in and when we cap going and one week out. Jp morgan is asking half of its Investment Bankers to come in for a week and the other half in the subsequent week. You can compare and contrast with that with their trading arm. Differences across job roles and titles. Interesting nuances. You will probably see more senior managers coming in and more junior people. In the middle is more flexibility for people who have already established themselves at the firm and could do more from home. Presumably a lot of this has to do with corporate culture. Tom exactly. You think about how tough it is for someone just joining a firm straight out of university. Has time to assess these folks, and also how can they build their networks and stand out from the crowd when theyre all behind a webcam . That is the kind of sentiment. Those are the people who we are hearing are clamoring to come in, at least in more normal environments. No one wants to come into an empty office. There seems to be appetite for that. Guy what does this mean, medium to longterm for the buildings all of people occupied . Will the footprint be smaller . Tom that is all very much up in the air. What you can see already is some banks are being a bit more flexible in terms of what constitutes an office. It will not just be the skyscraper and canary wharf, which see our markets famously said longer the future, but rather perhaps you spread your staff out over Bank Branches with a large retail network, or perhaps you have multiple sites which are not 60 floors high by three or four floors less need for elevation and spread in different regions, not perhaps all concentrated in london or new york. For now no one knows. We are still feeling our way what Work Environment will be like. Guy i look forward to tom being on my train. Tom metcalf, thanks very much indeed, on working from home or not. Still ahead, optimism from italy. The finance ministers eases country rebounding more powerfully in the Third Quarter. More from our exclusive conversation, next. This is bloomberg. Guy italys finance minister he expects a powerful Third Quarter rebound. He spoke exclusively to bloomberg. Minister gualtieri the measures we have taken so far have been containing the Economic Impact of the crisis and preserving our productive jobs, but the recovery and resilience plan is oriented to the future. On the line of innovation, sustainability, and social and territorial cohesion. Investment andn investment aimed at enhancing our Growth Potential. Innovation life cloud, supercomputing like cloud, supercomputing, common interests like factories, microelectronics. We would support the private sector to invest more in innovation and to support the process of reduction of carbon emissions, to boost our ,nfrastructure achievements immaterial infrastructure and also material infrastructure, and we will invest a lot in human capital. Education, research. Concernan debt is a big for investors and foreign markets. You mentioned in your speech a new mechanism to reduce the debt to gdp ratio and a solid and sustainable way. Could you give us some details on how much you think it could be there as a reduction. We will gualtieri present our fiscal document, which will have not only a threeyear horizon, but also a longerterm horizon where we ,ill define the trajectory reduction of our debt to gdp ratio. That would be significant and sustainable. We have the opportunity to do that by mediumterm fiscal and the impact on growth and Growth Potential on the productive measures we would employ it with our next generation. Your government has mentioned an 8 estimate for gdp contraction this year. Now what do you think that you number will be . 8 . Between 8 and 10 . Minister gualtieri the 8 forecast was done in mid april. It will be revised downwards, but contrary to other forecast that have predicted significant decrease in gdp, two figures, thanks to the positive rebound , our downward revision will be limited and we expect a one figure reduction of gdp for 2020. And for next year . Minister gualtieri next year we will have a positive increase. We have not yet defined our forecast. You will see soon. In 2022 will be able to arise to our precrisis gdp level. Guy the italian finance minister speaking. This is bloomberg. Guy 3 00 p. M. In london. Im guy johnson. The u. S. Is out today for labor day. European equity markets on the front foot. It is obviously a continuation of what we saw the back end of last week. We are seeing a decent set of gains here. The ftse is really outperforming. We will talk about the pound in just a moment. In terms of the story coming into the u. S. Session tomorrow, a couple of things are worth paying attention to, one of which is, as i said, u. S. Futures are pointing to a lower open. The shanghai market pushing lower in the last halfhour, and it was tech that really got sold aggressively. Something you may want to Pay Attention to in terms of people getting out of positions in the tech space. The other thing worth bearing in mind, the ruble is under pressure. It does seem as if Angela Merkel is increasingly moving towards some sort of action which may as the nord stream 2 russian dissident comes out of his induced coma. I think it is going to be fascinating to see how u. S. Cash open is tomorrow. Today has been a big a. The pound falling for a fourth straight day as it looks more likely that the u. K. Government will be leaving the eu without a deal in place. Joining us to discuss this is the head of g10 strategy at standard bank. Most people are not anticipating a great deal of progress between the u. K. And the eu in talks taking place this week. The market has shown a degree of nervousness about those talks, and i would think that probably implies a little but if we in sterling. Maybe more so against the dollar. I think the dollar and a shortterm context is going to get a little bit stronger. I dont think these are longerterm trends, but for now, delegates a little bit stronger and sterling gets a little weaker. Lets talk more about the dollar. How much further can the dollar go against the euro . If we get through 1. 18, maybe through 1. 17, where do we go beyond that . Steven not very far in my view. 1. 15 would be a significant stretch at the moment. Any consolidation here is likely to be fairly modest. Obviously the market still seems fairly saturated with long euro positions. Maybe some of those have been under while that have been unwound. I dont see a significant pullback. At these be meeting thursday, i would expect that will sound somewhat dovish, but there wont be any significant policy changes. I dont read anything into the that they are somewhat perturbed by the strength of the euro. I dont think that is an issue for the moment. Maybe a couple of big figures downward for eurosterling eurodollar, sorry, and then strength thereafter. Guy if thats the case, why has philip lane come out and talk to the currency expose it was nowhere . The currency explicitly lower . Steven good question, actually. When you look on a tradeweighted basis, it has been rising, but it is not dramatically strong. If you look at valuation measures of the euro, they are not particularly high. The imf, for instance, doesnt argue that euro is particularly overvalued. Certainseem to suggest isrencies within the euro actually still quite good. Great need for the ecb to try and sway opinion about the euro in one way or another. I dont think theres going to be any sense at all in which the or itsnnels its policies talk to really try and lower the euro over time. I think philip lane probably arguing more correctly that the how thea factor within ecb thinks about things, particularly perhaps in terms of inflation through the Exchange Rate or deflationary pressure through a strong Exchange Rate, but i dont see any real reason why eurodollar should thoroughly because philip lane and maybe others have made the sort of comments. Guy how important is positioning right now . How much is the recent rally hire people squaring positions rally higher just people squaring positions . ,teven if you look at the data we have long euros dollar positions around the 200,000 mark, Something Like that, in terms of contracts. Vastly more than we see in sterling. There does seem to be some discrepancy between the two, and if you look at the last few weeks, maybe even a couple of months, weve seen a decent sterling rally. Yet i wouldnt argue that a lot of the fundamental news out of the u. K. Has been particularly good. Stumbled, to has some extent. The news on brexit even before the Weekend Press has not been great as well. It seems an obvious reason for sterling to get significantly higher, so this catch up have been the case. Just a bit wary perhaps of the euro because of positioning and choosing to buy sterling instead. Steven if we do see the guy if we do see the two sides walking away mid october, what kneejerk reaction sterling, both eurosterling and cable . Steven thats not my view. I do think we are more likely to to get an agreement but not. If the level is at 1. 30 or so, i think you would see quite a significant kneejerk reaction to below the 1. 20s in terms of sterling dollar. As far as eurosterling, we would probably go up to the highs we have been seeing throughout this brexit process, which is up around 93 pence or so. It certainly seems as if the risks in terms of the reaction of the market are asymmetric. If we are trading around the 1. 30s in midoctober and there is no deal, we could be looking at the low to mid 1. 20s. Risk in terms of the extent to which sterling, depending on the outcome. Guy steven, stick around. Still need to talk about the u. S. Election, positioning around that. In the meantime, lets check in with the bloomberg first word news. Saudi arabia has sentenced eight people in the killing of the dissident journalist jamal khashoggi. They have received terms ranging from seven to 20 years. ,he trial was widely criticized and an independent human investigator noted that no one suspected of ordering the killing was found guilty. A new poll shows joe biden holds a doubledigit lead over President Trump, according to the cbs news survey. The democratic nominee holds a 50 40 2 advantage. It also found that support for each candidate is getting more solid as voting day approaches. The survey also said that biden has a 6 lead in the key battleground state of wisconsin. In hong kong, protests have resumed after weeks of calm. Dozens were arrested, including key activists. Demonstrators were protesting the decision to delay Legislative Council elections for a year because of the coronavirus. The European Union has worn british Prime Minister has warned british Prime Minister has warned british Prime Minister Boris Johnson against tearing up parts of the deal signed with the. He will tell the European Union today he is willing to walk away rather than compromise. That is your bloomberg first word news. Coming up, more with steven barrow. We are looking at the u. S. Market, its economy, and its politics. Thats coming up. This is bloomberg. Guy welcome back. Live from london, im guy johnson. This is Bloomberg Markets. Labor day in the United States. Markets closed as a result. The Unemployment Rate fell more than expected, down to a 4 . Still down to 8. 4 . Still a lot of work to be done to get the economy back to where it was prepandemic. Congress expected to resume negotiations for another stimulus package when it returns this week. Barrow stillven with us. How much volatility are you expecting . Steven i think there could be considerable volatility. I think the way to play the islar on a longterm basis from the bare side, so i think eurodollar is heading up to 1. 30, sterling dollar above 1. 40. So if you wanted to maintain a core position through the elections, would still argue that you should be short all are short all are short dollars. At the same time, the market anticipates a Biden Victory and may therefore have a naturally bearish bias perhaps to the dollar. As we saw in 2016, opinion polls could prove incorrect. Trump could win, or alternatively, trump could lose, but dispute the election, creating the room for volatility. Either of those two outcomes could move the dollar quite substantially. For me, if we were to see a surprise election outcome and trump were to win on november 3, i think it would give the dollar some degree of initial support in the market would look to the prospect of tax cuts under President Trump, but i think that would actually peter out. It wouldnt change my view longterm if trump were to win. I wouldnt suddenly turn on a bear on the dollar to a bowl. I also, at the same time dollar to a bull. I also, the same time, wouldnt stay bullish if biden were to win. Guy in terms of the economic damage caused by the virus, if we were to see a flareup and a second wave in the autumn, how would that impact the prospect for the buck . Steven i dont think so. I think in terms of the second wave issue, you could argue that that is what is being experienced, but in terms of cases rather than that rather than deaths. Anyway, for me coronavirus obviously is a huge and dominating issue, but not the issue at all for me that determines where the dollar goes over the longterm. Longterm factors for me or that for me are that we have had strength over developed currencies going back to 2011. That cycle is a long cycle. I think the dollar tends to move in cycles of eight to 10 years at a time. So i think in the up cycle, it has become somewhat overvalued. Coronavirus,f the cuts under President Trump have created a significant problem in the u. S. , and whereas some countries have racked up significant deficits through this crisis like the , the u. S. And japan over time is going to be very reliant on overseas inflows. I think that is going to be for the dollar. Guy presumably the biggest nine for my buck if we do see biggest bang for my buck if we dollar isise in the overseas. Will we see this developing trend outside the g10 . Steven i would think so. Most definitely. But i do you say, we have not really seen any great signs of that that may in part be due to the extent of coronavirus and many of the emerging Market Countries has lagged somewhat behind the developed countries in terms of seeing progress in countries like india or south africa or latin america. Maybe we are not quite at the point where the market can become optimistic about that. You mentioned a previous question about the vaccine issue. Spur told be the key creating more strength in the emergingmarket currencies then perhaps we see in the developed currencies against the dollar. That could be a key point. Obviously we had lots of questions about when or if a vaccine will be developed, but i think if you look at some of the comments weve seen recently from u. K. Health secretary matt hancock, or in australia as well, this kind of period around the end of the year, the early month or two of next year, could when werucial period see optimism about that. If that start of the year could actually coincide with some optimism coming back into emergingmarket currencies, if we had to pick up point at which those currencies might start to really motor against the dollar, it might be more likely in the early part of next year rather than recent, for instance. Guy we are going to leave it there. Thanks for the input. We really appreciate it. Coming up tomorrow, a conversation with european commissioner valdis dombrovskis. That is taking place with alix steel and myself at 4 30 p. M. In london, 11 30 a. M. In new york. He also now wheres the trade commissioner had as well. This is bloomberg. Guy live from london, im guy johnson. This is Bloomberg Markets. It is time now for a Bloomberg Business flash. A big victory for samsung. Its won a 6. 6 billion order to provide fifthgeneration Wireless Solutions to verizon in the United States. It is one of samsungs biggest 5g contract ever. The company has been pushing hard to complete with Global Players like nokia and ericsson in providing telecom equipment. Shares of softbank fell in tokyo today. There were reports that the japanese conglomerate made substantial bets on Technology Names using what he derivatives. That has led to concerns that softbanks founder is engaging in risky behavior that could lead to big losses. Jp morgan is asking 50 of its staff to come back to the office in london. We will see whether the trains are a little busier tomorrow. Lets get back to that softbank story and get some more detail on what has been going on. Bloombergs dani burger is standing by. Softbank spend billions of dollars tilting up a position in u. S. Equity derivatives, but more specifically, bullish options tied to u. S. Technology shares. That did get softbank a paper profit of 4 billion come up a part of the problem is this is just an unrealized profit. We have seen with the nasdaq has done, and tech shares in general. Nasdaq futures are down 0. 7 today, continuing that tumble from last week despite u. S. Cash markets being closed for the labor day holiday. The other issue is that softbank in the eyes of some is engaging in very risky behavior, acting almost more like a hedge fund, which is not the aim of their shareholders. A bit of a shareholder revolt today, down 7 , the biggest loss for softbank in about five months. Whether or not their bets have been what has propelled the tech market higher, that is certainly an area of debate, but we have seen call volume in u. S. Stocks really skyrocket since that march bottom. According to goldman sachs, 335 billion worth of call options have traded hands in the u. S. On average over the last two weeks each day. That is three times the amount in 2017 through 2019. What we might see occur from that is when you have dealers on the other side that need to hedge deposition, they go in and by the underline. That can propel the market higher. We know from evidence from interactive workers that a lot of that volume Interactive Brokers that a lot of that volume is driven by smaller buyers, but we now no softbank is playing in this as well. Should there be more losses, should someone in softbank unlined their bet . Now are so frothy right because of dealers need to hedge those positions. Guy you explain better than i could come up does not an easy thing, i should say. Lets talk about the downside. As you say, they may be forced to wind some of these positions. Shareholders not exactly happy with the speculative this and that been put on here. Walk me through what i potential downside could be for softbank, and how quickly some of this could be unwound. Have we got weekly paper here, monthly paper . Walk me through the positioning. Dani the issue is if softbank has a position that is tens of millions of dollars, it is going to be really difficult for them to unwind that position quickly. Lets say tech continues to fall, as we are seeing today in the futures market. Softbank is going to struggle to quickly realize that 4 billion worth of gains. If theres some nerves in the market as we are seeing some of these retail traders start to pull back because call options have been really popular for them, and names like tesla, apple, a lot of these stocks in a nasdaq, that means that 4 billion starts to disappear. Then not only have they spent all this money on call options, if they all of a sudden on them no longer profitable, then they dont get any of that profit that they currently booked of 4 billion, so it certainly is a risky position. That is why we definitely see shares starting to fall because this isnt a clear game that softbank is going to realize a clear gain that softbank is going to realize here. Guy thank you very much, indeed. Bloombergs dani burger on what softbank has been up to on those call options. Tomorrow mornings cash open will be fascinating over in the United States. We are trading here this labor day in europe. Lets show you what is happening with market. European stocks generally well bid. All sectors are in positive territory. The autos are having a very solid daytoday. European equities up very solid day today. European equities up. We did see a selloff in china overnight. The pound is lower, the russian ruble lower as well, as we have seen potentially Angela Merkel linking nord stream 2 to the poisoning of Alexey Navalny. Lothar mentel of next. This is bloomberg. Guy welcome back. Live from london, im guy johnson get this is guy johnson. This is Bloomberg Markets. Global trade is under the microscope, facing the threat of china tensions and the uneasy recovery. What are the key challenges the wto faces, and what does it actually do . Annmarie hordern takes a look. Annmarie this year, the wto is 25 years old. Based in geneva, it was with the rules of trade between nations and promote free trade around the globe. Debbie geo has long asked he wto has long been at the center of controversy and political the wto has long been a center of controversy and political wrangling. Some of the trade disputes span decades. The case over government funding to boeing and airbus is now 16 years old. The u. S. Has given the green light to 600 billion of tariffs eu , but recent on the on the eu, but recently the u. S. Hasnt been a fan of the wto. Pres. Trump the wto is the single worst trade deal in history. Annmarie as terms expired, it meant the main for them for settling global trade disputes lost his ability to rule a new cases. Good news for President Trump on the selfproclaimed tariff man. Bad news for free trade. Then the double eto director general decided to rejoin wto ector general decided to the wto director general decided to resign a year early. The stakes couldnt be higher. Joining us now to talk about guy joining us now to talk about what is happening with economy, tatton investment cio those are mental cio lothar mentel. Is the recovery now starting to fade . We saw some german ip data that seems to confirm that maybe we are starting to see things slow down again. I think we arer in some kind of vshaped , ak shaped recovery. There are certain sectors making great recovery progress, and others that are quite slow. So it is not going to continue at the initial recovery pace, which was almost automatic as we came out of luck out of lockdown. Lothar there is an argument guy there is an argument that suggests all of the positive news we have seen on vaccines is starting to impact the investment landscape. I heard an argument late asked week that the price action and the selling we saw intact was actually more to do with the idea that we actually get a vaccine and you want to sell the stocks that have done well, i. E. U. S. Tech, and start buying maybe some of the cyclicals that have not done so well. Are we at that point yet . Lothar im not convinced, but it is certainly an interesting. Erie defective the matter is that eventually, this pandemic is going to be over, and a cyclical rotation towards more cyclical stocks may therefore be overdue. When we look at what sectors are in the u. S. Tech sector, it may be a natural thing to. Ccur guy what do you make of the recent price action in u. S. Tech . Lothar it was really starting to get a bit bonkers, if you like. Increasingly, those earnings started to look like a small proportion relative to the price. The overall stability of markets. I dont think that was a very bad thing, although im glad it didnt morph into anything else of far. You talk about the case shaped recovery and what happens next. What will it take for the jaws of the case to close and for the winners and losers to go on the same trajectory . Social a return to proximity because all of those businesses firmly rely on us getting back together, that is something that we are not seeing it. Bite the young people got a too much back together during the holiday season, but it is costing all of those industries dearly. Once i the this pandemic really peters out, as may be the case, who knows why it is that in spain and france the hospitalization are so much lower than they were, or the vaccine arrives a bit earlier. Han we thought guy is europe a winner from that k closing . If you were to think about where you are going to put money to work next year, is europe on top of the United States the other way around . Lothar certain sectors, certainly. Maybe not the whole thing. If you look at the sectors and compare them between the u. S. And the rest, not that many sectors have outperformed the rest of the world. More sectors globally have outperformed the u. S. It is just the tech and Information Technology sector that has driven the markets higher. Of what you do shortterm versus longterm, are you in any way tempted come tomorrow morning or now to buy the dip . The by the dip mentality hasnt really worked. Nowconditioned now to buy the dip. Lothar if the dip is big enough, we would be tempered to arethe dip because there two certainties. One come of this pandemic is going to end eventually, and we will not have the Collateral Damage that Natural Disaster that has lasted for six months or a war has created, so the economy is still there. People are still there. Therefore, whats not there to have if you then also Central Banks and fiscal policy firmly behind them. If this all happens a bit quicker than perhaps had been foreseen, then theres a lot of stimulus still in the pipeline if you just think about what in europe and the u. S. Government have put in programs to help us on the recovery. Guy using we get more stimulus from here . Do you think that argument continues . Interestingly, at the moment, the liquidity has really slowed that momentum. It is still going, but theres no growth, and at the moment, you could probably explain or justify last week almost from the liquidity side that there has been more stimulus coming through. I think it therefore depends on howthe virus behaves, and our behavior changes or doesnt change area if it is morphing into more of a summer flew with not much more impact than that normally has, as it currently ,ooks like, if that continues then theres certainly not going to be that much more needed, but there will be a lot more needed. Guy people are in cash, a lot of cash generally, despite advice from their investment advisors. People are still reasonably invested in their equities. What do you do in terms of providing protection. Does gold run its course . How would you protect your portfolio right now . Lothar one of the most important points is to point out that theres not that much upside left. It is all in government bonds, and indeed, inflation may be something returning over the next decade, and therefore you really want to protect that part of your portfolio, and therefore inflation linked government bonds are probably the only protection you can currently buy. The other protection for Oil Investors has been really. Therefore, we were very happy not to see investors staying from where they were at the start of the year. Guy going to leave it there on that note. Thank you very much, tatton investment cio lothar mentel. Lets check in on the bloomberg first word news. Joe biden holds a 10 point lead over President Trump, according cbs. New poll from voters areues for byll the economy, followed health care, the coronavirus, and recent protests. Fire in california that has borne more than that has acres wase than 7000 caused by agent to reveal party. In china, exports kept expanding in august. They rose 9. 5 from a year earlier to the third highest level on record. Meanwhile, imports unexpectedly drop more than 2 . Chinas trade surplus with the United States reached the highest since 2018. And yet has become the worlds new coronavirus epicenter and has surpassed brazil at the second worst hit country. Unlike the u. S. And brazil, and he is case growth is still accelerating. Coming up, europes virus s are seeing renewed spikes. We will bring you the latest, next. This is bloomberg. Guy from london, im guy johnson. This is Bloomberg Markets. Happy labor day. Covid hotspots in europe seeing spikes in cases as millions of children return to school and the government encourages people to return to work joining us now is senses ellie return to work. Joining us now is sam fazeli of bloomberg intelligence. , is ittion to you worrying, considering the number of hospitalizations isnt . Sam we know that hospitalization rates have also started timing. We have to be very careful when we look at that number. All of my fingers are crossed that we dont end up in a situation where that number goes up. Lets hope it doesnt. But it is very possible that, given that these red is currently within the younger community, which doesnt necessarily get really bad covid, although there are some worrying signals there too, then they would have to spend some time transmitting that to the older family numbers that theyve got, or friends. Then they have to get hospitalized. About two weeks later, you start seeing a rise in hospitalizations, and then two weeks after that, a rise in deaths because everything is delayed. A crucial number to look at is in the next two, 3, 4 weeks. I know we are all rushing. I want to be back in the office area but at the end of the day, we have to watch out for that particular dynamic laying out. Guy india and particular is seeing a huge number of cases what can we read into that . Sam remember, there are three ways, and now people are talking more and more about two ways. Masking and social distancing, and washing your hands area youve got to be rich enough to be able to do all of those things. You dont have to go to india. If you go to some areas within the United States, the lower income areas where housing is more dense, but people are essentially forced together, somebody put it quite nicely, social distancing is a privilege. Some people just cant afford to have that privilege because of the way their life is set up. The way you have that element, you are going to have higher transmission rates. , and highrises or blocks of apart, you can get virus from the toilets that people use, from the sewage, and that spreads the virus, too. So a lot of things are playing here together that highlight the risk to highly Populated Areas and lings. The president tweeting in the United States within the last hour, talking about the fact that vaccines are going to be coming very quickly. Is he right . Update us on the progress being made. Sam it is based on analysis which has a lot of caveat because theres lots of unknowns. One of the key elements in a vaccine trial is the infection rates. If you dont get infections in your trial, youve got nothing to study area so hopefully with ,0,000 individuals recruiting and pfizer told us that they are at 25,000 already, so my estimate is about, by september will be at 40,000. And then you start measuring data for the whole. If those are right, you could get some evidence in october, but that is really pushing it. It all depends on how high the infection rates are and all of the other nuances at play in a clinical trial. Guy we will leave it there. Thanks for the update area still ahead, i bloomberg extrusive conversation. Franklin templeton. This is Bloomberg Frank and templeton ceo. This is bloomberg. Guy live from london, im guy johnson. Franklin templeton ceo and president Jenny Johnson is the fourth person in her family to lead the firm heard grandfather the firm her grandfather founded. Spokeergs scarlet fu exclusively to johnson and found out how she is trying to work from home and what the goal is. As a mother of five and the daughter of a mom who has seven , i think that moms have to find out how to blend work and home life really well, which means we need a little bit more flexibility. Worklife, youhole can take care of what you need to take care of, so in many ways it will play to the strength of women. I also think that men have been a little bit disadvantaged. I know a lot of men that would tsve to coach their kids spor teams, and yet they thought it wasnt ok in the office, so this will allow more of this integration between home and work. Do you think finance and under it and other industries see this the same way you do . It is interesting, whether. His new work is permanent youve got a Top Performing employee who commutes three hours a day, 90 minutes each way, not unusual in new york city. I think they are all going to and to learn to accommodate create those opportunities. Your the fourth member of your family to serve as ceo of franklin templeton. This is ultimately a family run business. First of all, we are a Public Company. While the family has a Significant Interest in it, we are minority shareholders. We have to run it every day is a Public Company and think about what is right for the long run. I think the difference is when you have founders having concentrated ownership, youre really able to think more longterm as far as investments they make you one of the risks today of Public Companies is ceos have so much pressure that sometimes theres a question about whether they are really making the best longterm decisions for business. I want to talk about what happened with the amy cooper situation. Three months after that incident, i wonder what has changed at your firm area how do you monitor employee behavior and stay on top of what they say and what they do . You have tot is come from the top of the firm, behave in a certain way. Core, i fundamentally believe that the Diverse Workforce is better for us. It will get more views, reflects our Diverse Client base. It is about continuing to rethink how can we ensure greater diversity. Hired prior to the incident in central park chief Diversity Inclusion officer, reporting directly to me. Tot is how important it is franklin templeton. How do you think youre lived experience heightens the perception of what is happening on the diversity front . Obviously,s im a woman see yo, but i grew up in a household where my father celebrated strong women. My mother i think was one of 10 women graduate from stanford medical school. Ive always grown up in this environment where there was just someone who believed in me, and i think that makes a big difference. What do you do when you walk in a room and you know that all of the men are thinking you are not capable or confident . Thankfully ive never walked in a room and thought at. Never let that be in your head. Guy fascinating. Franklin templeton president and ceo Jenny Johnson. What have we got coming up for you . We are going to carry on with the conversation we are having about the price action. Chris watling is going to be joining us. Chris has this view that some of his metrics are starting to flesh Warning Signals about what the price action apply price action looks like. At the moment, it looks like this could continue with the cash open on wall street. European equities are higher. The pound lower, and the ruble lower as well. We will talk about all of that next. Chris watling coming up from longview. This is bloomberg. 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It is labor day in the United States. As a result, we are not seeing the normal level of trading. However, looks like we will see a soft open for the nasdaq. At the moment, european equities are very much on the front foot, near session highs. Every sector is in positive territory. In terms of the number of stocks 5 hundredstock 600, 42, verses 57 that are down 542, versus 57 that are down. Bitcoin softer as well. I could be a useful indicator. In the currency markets, the