Bad reaction. Astrazeneca slams the brakes on a phase 3 vaccine trial after one test patient contracted an unexplained illness. Watch the vaccinemakers at the open tomorrow. The rout resumes. Asian equities post losses after more devastation for u. S. Tech investors. Slumps ses 7 but tesla by a stock record 21 in yesterdays u. S. Session. England prepares to reimpose coronavirus restrictions on the public. Starting next monday, gatherings of more than six people will be banned. Youve been warned. Just under an hour away from the start of cash equity trading in europe. Lets look at the futures picture right now after, you know, the major u. S. Equity benchmarks dropped more than 2 . The nasdaq more than 4 . Now were seeing red arrows once again for european futures. Yesterday was a down day for european stocks as well. Take a look at u. S. Future this is morning after the big drops that we experienced yesterday. Remember yesterday was the first day of trading for u. S. Stocks. They were closed on monday for the labor day holiday. We do see nasdaq futures up, almost one full percent now as the more, i guess, plain vanilla benchmarks rise a little bit as well. Maybe we get a move to the upside and maybe that influences u. S. , european stocks at the open as well. Anna absolutely. Lets see how the futures picture developers in u. S. That future has been volatile over the last few mornings, hasnt it, matt . Lets see where we are. A picture of the Asian Session or the negativity in it. The us a trailiar asx 200 down by 2. 2 . All in all down by just over 1 on the asia pacific. Reaction to the selloffs we saw of course in the United States. Yesterday. Really interesting to see how the vaccine news plays into all of this. The tech rout created headlines, astrazeneca pausing their testing. It will probably be seen as a risk off event i expect by astrazeneca news. Its interesting to think about what tech does. If this means quarantines for longer, longer to get a vaccine, does that actually play into some of the more defensive arguments to own tech . Thats something well explore with our guest as we go through the program. Keep an eye on commodities as well. I want to flag the oil price. It now has a 39 handle. Weve dropped below 40 a barrel. It seems the cut price saudi oil not generating enough demand to satisfy the bulls. Let us get into the tech story a little bit more then. Follow up on this big rout we saw in the United States. Selloff in u. S. Tech shares is picking up steam. Futures have regained future this is morning. Investors fled the highs yesterday for the third consecutive session adding to the turning sentiment, a report that astrazenecas vaccine trial has been halted, well see how that plays into the mix. For rarkt reaction heres danny dani. That long weekend in the u. S. Did nothing to soothe sentiment. We saw the biggest three of h of day deline for ethe nasdaq since march. For the s p the biggest decline since june. You can see that tech was the big leader to the downside. Ive also included tesla which almost makes the 7 and 11 threeday decline look like nothing because it was such a massive selloff in tesla. This shows how the concentration in u. S. Equity has brought the whole market lower. Tesla not included in the s p 500. Thats part of the reason it sold off. Also has to d with g. M. Investing in one of the rivals, electric trucks theyre aiming to make with the company. It is included in the nasdaq, included in the nasdaq part of the tech stocks. One analyst said he sees it continuing to go down but fundamentals remain intact. One of the things about fridays selloff in the u. S. , we talked about maybe its a techinduced selloff. We saw the havens react. Dollar here getting a bit, u. S. 10year yield moves lower. A bid for the bonds. U. S. Futures, this right here, they are getting a bid this morning. So maybe its buying happening throughout the Asian Session. This shows that tchand concerns still moving around in the market with that astrazeneca vaccine trial pause. Matt . Anna . Matt thanks very much. Dani berger looking at the big rout we see continuing in the u. S. Futures now there, u. S. Futures, on the rise. But the optimism didnt feed into the Asian Session. Shares are declining there across the region and of course we have futures here in europe falling ahead of the open. Joining us now is simon flynn. Bloombergs emerging markets strategist. Simon what was the is this just follow through from the drop we saw in u. S. Stocks . Simon yeah, abslew absolutely. Its just follow through. The market overall seems to be taking the view that what happened overnight is really ust a healthy correction and citing three things in support of that first of all the share decline itself has been quite narrow as you guys have been saying. Its really the major tech names making up most of the losses. Secondly, as your proves guest was saying, moft markets are really not showing that much stress. Treasury neeleds didnt really fall that far. The dollar bid wasnt that significant. And third and finally, i think people think there are decent reasoners in rally to continue again. Economists generally lining up the g. D. P. Growth forecast and Global Market policy remains extremely kay acome dative. People are reasonably sanguine i think in asia. Let me ask you a little more on the tech reaction were seeing here. The question of the day, i know the market live stream has been throwing around. Is it a healthy correction or a rout . What reaction have you been getting to that, simon . Simon make 6040 toward healthy correction. Which as i suggested, i kind of agree with. Some people introducing idea that the fed meeting over 15th and 16th could be important and that any further recovery is going to be contingent on what the fed says. So people seem to be expecting the state to build on their framework review. Number one, introduce clear guidance, an outcome based Forward Guidance as opposed to forecast based. Secondly also confirmation that their Asset Purchase Program is targeting economic jut comes and not Financial Stability goals. People do seem to be placing some reliance on the fed or as they say the predominant argument. His is a healthy correction. Matt simonning thanks for joining us. Simon flint, emerging market strategist. Check out the mlive blog. Question of the day is the tech drop a healthy correction or a rout . This is, i think, one of the most hotly debated questions out there right now. Reach out to us. Just type ib plus tv go on your bloomberg terminal. Coming up, astrazeneca taps the brakes on its vaccine trial. Researchers reviewing safety data after a participant became ill. More on that story next. What to watch for this morning. This is bloomberg. Matt welcome back to Bloomberg Markets, this is the european open. We are 49 minutes away from the cash equity trade. Youre looking at red arrows in terms of european futures. Lets get to bloomberg first word news, we go to laura wright in london. Laura thanks, matt. Astrazeneca has paused a late stage trial of its Coronavirus Vaccine after a participant became ill. The drugmaker said the decision was a routine action intended to allow researchers to examine safely data. It could delay or derail efforts to deliver the socalled oxford vaccine, which is seen as one of the leading candidates to provide immunization against covid19. High yield bond defaults could struggle, according to jeffrey goodlatte who criticized the feds actions, accusing them of uh unsustainable corporate brings. Deutsche bank said the best run of stocks and bonds in 100 years is coming to an end. They cite big shifts in political economy from worsening social equality to a reversal in globalization heralding what they call a new age of kiss order. Combined equity and debt prices across 15 developed marks hit their highest level since at least the 1860s this year. Global news 24 hours a day on air and at bloomberg quick pick powered by more than 2,700 journalists and analysts analysts in 120 countries, this is bloomberg. Anna, matt . Anna thanks very much. Prime minister Boris Johnson is set to ban all social gatherings f more than six people, as covid19 cases are rising rapidly once again. Meanwhile meanwhile, astrazeneca paused its vaccine trial after one participant developed an unexplained illness. They say the move is intended to give researchers time to examine safety data but it could delay or derail effort for immunization against the covid19 virus. The shares are sliding on the trade gate exchange. Im pleased to say were joined this morning by justin, head of retail multiasset funds. Good to have you with us. Nice to speak to you. In terms of i wonder how we respond to this retreat into a type of lockdown, not full lockdown but certainly restrictions on our ability to gather socially in the u. K. , this news, i suppose, how does that fit against what you think the market is assuming in terms of lockdowns over the summer for europe . Our overall view is youre always going to see many types of lockdowns throughout europe as the virus kind of spikes in certain areas. I have to say the recent spikes have concerned us but it does seem that it is concentrated in younger cohorts, for example, and we do know a lot more about the virus and how to keep it under control. So while well see these mini type of localized lockdowns or smaller kind of restrictions, i think its unlikely well go back to what we saw in march, april, which i think is a ositive. Matt isnt this to be expected that we see occasional hiccups in testing . You dont expect us to have a favorite, the first one we ever heard of, to sail through this with flying colors, right . Thats why we have is so many different incredibly intelligent, incredibly well funded Companies Working on it. Exactly. So its clear that the vaccines and the approval of vaccines will keep will continue to have, you know, kind of the ups and down as we go through testing. This is particularly at a time when the market is quite volatile. So we do expect some sort of reaction in market. This is just par for testing and getting a vaccine ready for approval that you wont go through kind of the ups and downs. Weve got a lot of vack teens vaccines and thats our phase 3. So it looks likely that at least ne of them will get through. Anna it might be a short term stumble, well see. What about as we wait for one of these many vaccine candidates to be successful, fingers crossed, what is your do you get into the bopped market . Is that where you seek haven status . So yeah, across bonds we were moving away from the traditional developed market bonds, more into areas like australia, south korea, where youve got kind of higher level of yields that mean if you do head into a tricky time in terms of market, a tricky time in terms of economy that we do have some protection and cushion from those from those bonds. More interestingly weve been moved into the equity more recently, value starting to build a base there infrastructure as well where the aluation case is strong. Matt justin, what do you think about the possibility that europe does plays a little bit of catch up with the u. S. As tech stocks get hit so hard and you know thats always been the wind in their sails or at least our anchor. Does it help that in this time period that europe maybe isnt as tech heavy as the u. S. . I think it does. I think youve seen the differential between the u. S. And the rest of the world, particularly since march. But also you know, as markets fell from the under february and outperformed on the downside, jut performed on theup side. More recently were seeing it come out of the market overall. The big challenge i think is that the tech stops as a precaution of the overall market are clearly greater. When tech stocks become volatile, when you see the selloffs they are risk will spill over to other stocks, other sectors, its clearly higher. This concentration con undrum ive spoken about before as investors that we have with tech stocks dominating indy cease globally is a real challenge. By spreading across different regions, and diversifying your equity exposure we do think that should be beneficial over the long term. Anna justin, thanks so much. More from him coming up shortly. Well continue to this conversation around tech, specifically focused from tesla as it tanks. The carmakers shares have their worst oneday slump ever up next we talk tech and stocks that defygraph fi. This is healthy,le of the correction is concentrated, those two happen to have accounted for more than 100 of the gain for the s p so far this year. Youll have these pull backs, especially with White Knuckle headline risk numbers. Ultimately to me, as we the fundamentals for the next few quarters. We still think large cap Tech Leadership is sort of the way to be positioned. And this is probably a shorter term disruption for the market. We are just smack in the middle of some indigestion, i would say, for the street in terms of how theyre processing the different options that we have seen from large Institutional Investor bus also from the retail community. Were advising investors to look at other types of factors like industrials or health care. And to just not sell the market off altogether but just be a little more pragmatic. Were headed into a period of petty significant volatility in the markets. A selection of the voices. Top bloomberg guests talking about the u. S. Stock and how to trade it. Justin is still with us. On the subject of tech, i know youve been looking at valuations here. How useful are the tried and tested age old metrics like price earnings at this stage . When you look at the top performers in the tech sector what do they tell you . Justin valuations clearly if you look at traditional valuations they look very tough before the tech sector. I think youve got to look past this years earnings, next years earnings. And really take a view on whether you have seen a growth mind set shift for tech stocks over the long term. If you do think that then i think tech still makes sense given that youre moving toward utilization and benefit from a Long Duration growth up there, likely to be able to adjust their earning through cost cutting buybacks and increasing dividends. Overall tech from a fundamental perspective is attractive but from a valuation perspective i think it does make sense for investors to evaluate where they are relative to other sectors. You know, when you hear people comparing, justin, the tech bubble to now, whats your response . Our mlive team writes that revenue in the tech sector is growing exponentially which maybe wasnt happening then but it was a profit problem at the time that burst the bubble, right . So do we see Something Different this time . Justin i think the big risk isnt just isnt around necessarily just around earnings. I think its around the concentration that tech stocks are taking up in our end cease. So we know that index investing has grown and if you look at now the size of the top five, top six tech stocks relative to the rest of the market, relative to the rest of the world, i think that poses significant problems of the challenges for investors. Particularly if you just invest in an index way globally or in the u. S. So i do think thats worth looking at because, you know, clearly it becomes a larger and larger proportion of the end cease. If you see volatility in the tech sector thats likely now more to spill over to other sectors. I do think from a part foal yow perspective, spreading that risk. Nape we talk a lot about Retail Investors in the u. S. , what do you see in the u. K. . Justin we are seeing this move toward cost effectiveness. Regulation, whether its in 2013 or recent regulations, we have seen this move toward cost effectiveness. What does this mean . It means that Retail Investors are using index funds more and more. Weve gone from 6 of total a. U. M. To 8 of a. U. M. For index exposure overall. The second thing were seeing is we are seeing a growth of e. S. G. E. S. G. Investing. Ly 2. 6 of the market, one quarter of net flows last quarter which i think is incredible. Anna justin, thanks for joining s. Its 7 26 here in london, 26 if youre in paris or behr lib. Coming up we talk about aviation. Ryanair caps the market. The future of aviation, we talk with Michael Oleary. This is bloomberg. Matt welcome to the european open. You see red arrows on equity index futures, down about half a percent. U. S. Equity futures rising after around yesterday that tech rout yesterday. Aslines have been hardhit travel restrictions have ground them to a halt. Ryanair for its first euro bond sale since 2017. We are joined by Michael Oleary , the ceo of ryanair. People were saying investors do not want to touch airline bonds, but your issue was like five times oversubscribed, right . Michael good morning. At, price is eventually 2. 8 . What j think is a very Strong Performance which i think is a very Strong Performance. It reflects i think the fact that they ryanair Balance Sheet is strong. Performing well even during the covid crisis. We will emerge out of this crisis as one of europes strongest and most profitable airlines. Anna you said, when you raised equity last week, that you wanted to have the money to add flights. You said that last week. Is it really about that or is it about shoring up the Balance Sheet for what could be a difficult winter . Michael there is no question this winter will be difficult. Off ouroday, 50 flights in september, october, and november. I think we were conscious of shoring up the Balance Sheet. Milliono repay 600 loans to the u. K. Government. Year, butarket this in place refinancing for both of those debt instruments. Nextind of casual for the aul for the of cash h next two years. Slashing prices , maintaining customer demand. It is challenging because european governments, most notably the british, keep changing coronavirus restrictions at a time when other European Countries have had much lower covid rates but have allowed international travel. Why do you think that is . That theke up and saw British Government wanted to narrow gatherings down to six lockdown, thehe easing has been constant and we have no turning back. The eu response seems so choppy. Dont,lose, go to work, back to school. Why this indecision in london . Michael there is a focus in london and in dublin here on daily covid case rates. Hospital numbers, icus are essentially empty. I think they are monitoring the wrong number. Be test and trace is the way to deal with this without disrupting our daily lives. Adequatenot providing test entries. The italians are testing people on arrival at the airport. The british and irish are still not doing it. I think there is mismanagement. The politicians are getting surround getting bounced around by daily case numbers. Can cope at the moment. Most of them are empty. Politicians can bounce around. Restrictions during most of august. Wherencluded islands there were almost no covid cases. Morenk we need much mandatory face mask wearing in private and public settings and much more effective test entries in. Anna from the u. K. , the response is more regional and islandbased. What about the lobbying that the Aviation Industry has been doing to get more testing at airports . The u. K. Response has often been you it is difficult because test people but a day later they might show the symptoms. Is that battle still to be font or have you lost that one . Michael i dont think it is a matter of winning it. Making the case for testing at airports, it is not 100 effectiveness but it will give you 99 effectiveness. We were criticized in july, calling for mandatory face masks. Three months later, everybody whouding the wj joe the recommending mandatory face masks. Politicians are not only mismanaging, they are failing to read correctly. More testing is needed. Movementuld be free within the European Union and u. K. Within those countries. I think we would be more concerned about longhaul travel from india, brazil, and the u. S. Case rates are low. The hospitals are not being overrun. We need a much more effective strategy that is not abound locking down all countries. The british will lockdown their own internal region. When it comes to other countries, they then lockdown other countries. September,allenge, businesses toed start moving again. If they cannot move, you cannot resume business travel. The threat of a 14 day quarantine could be imposed after 24 hours notice. Customers i think will be willing to submit to testing when traveling and on arrival. That way we can get back to some rational Economic Activity while still combating the spread of the covid virus. Matt Everyone Wants to get to that place. Right now, when i talk to older people, they are determined not to travel. I noticed younger people have an easier time doing that. Younger . Assengers skew matt we see no reluctance. I think they are very conscious. Mandatory mask wearing at the airport, onboard board the aircraft. Are lots of people traveling, mainly for family reasons. Weddings, deaths, funerals. They are traveling. There is a degree of nervousness. That is what we need government to address. We need for example the British Government to stop this stupid 24 hours notice restriction and upgrade testing. The government has got to come up with some measures. The industry has been calling taxes, road bank of the 15 and 20 euros or pounds per ticket. It flying again particularly this winter. Without flight, your Tourism Industry collapses. Business collapses. The world cannot succeed on zoom calls. We have to get back to work and selling something. Anna can i ask you briefly about pay . You have been negotiating some pay cuts for some staff, trying to lose fewer of them. , hasu have been doing that it been increasingly difficult to justify executive pay and bonuses at ryanair . Michael i dont think so. Cut lastken a 50 pay year and another 50 of my base pay this year. Reduced 50 . Was myself and the Senior Management team have taken deeper pay cuts and bigger reductions in bonuses that any requests from our pilots and cabin crew. About 20 pay cut for the captain, down to about 10 for the cabin crew, and i have taken a 50 pay cut. Firms have proxy taken the kind of pay cuts i have over the past two years so frankly i dont pay too much attention. Anna good to hear from you. Thank you very much. Ofminutes until the start European Equity trading. Keep an eye on u. S. Equity futures. Nasdaq futures just into the green now. Coming up, we will talk about germany. Germany needs to take on significant debt in 2021 according to the finance minister. This is bloomberg. We will find a solution. Taking straw after activities this year and big size this year, it is necessary that we will continue the next year. Also, for europe, i hope that we will come back to something that is more similar to the normal from 2022 on. There will be a lot of straw activities. If youlook at look at what is needed in terms of the stimulus, do you need a recovery to be fully in place to balance the books . Is it much longer than one year, two years . We are working on the transition of our economy. We are working to create an economy for 2050. This means that a lot of decisions are related to future questions. For instance, in the question of energies. The electrifying of our mobility. The use of hydrogen. This is part of the package we decided on and developing our economy. Just compare it to the situation after the last crisis of 2008 of 2009, the bankruptcy lehman brothers. Able to increase our two upp ratio of to 80 at that time and we moved it down to 60 when this crisis started again. It is reasonable to think we will be back on 60 is sometime. If british authorities have not figured out the situation around the president of around the poisoning of alexey navalny, which of the German Government do . Poisoned, that is clear. It is something that is impossible there is always the necessity to having the chance to oppose your own leaders. It is the way democracy should be run. You could imagine that anyone of us is absolutely sad about this situation. We are happy that we have hopefully helped him to recover. We hope this will be successful. We are working very hard to discuss about the consequences. This is why we asked the russian government to cooperate in understanding why this happened, to find out what happened, and discuss the outcomes of the Research Together with our partners in the European Union and nato. For thet the part, European Union, it is europe that has to understand what is necessary now. You, if you did not have the unsatisfactory answers from russia . There are a lot of governments that are not following the ideals of freedom and democracy we are following. We have to act within this tomework, supporting those fight for the right to be free. Lacquahat was francine speaking exclusively with the german finance minister olaf scholz. Itsazeneca has paused vaccine trial after one study participant develop an illness. The drugmaker said the decision was a routine action intended to allow researchers to examine safely data. It could delay or derail efforts to deliver a vaccine for the coronavirus. I guess it is kind of dramatic. I dont mean it could derail efforts for any vaccine. You will occasionally have these issues pop up in trials. At the end of the day, this is what i think we have been talking about all along. With pressure to get this vaccine on the line by a certain date, being nonsense. Do thesehy you have to larger trials. It shines a light on the development of a brandnew product, especially that it goes into healthy people. Anna as we wait to find out what it is that makes a person ill, and it will be interesting to find out and how linked or not it is to the vaccine, how concerned are you about the political pressure . We saw a number of pharmaceutical companies coming together to push back against pressure and say they will take their time to get this right. Little light on detail. There are some things you would like to see, like you would not push the vaccine through until the phase three trial. Astra started recruiting for this trial that they just had a side effect in back in june. It has taken this long for something to show up. That is the point. Companies should get on and do their trials and wait until the end. What else are companies supposed to do . Three or four other things. Aboutt necessarily talk share prices in any detail. But if you look at the story, share price is around where it was before all the discussion about vaccines with oxford. From a company perspective, there is really no readthrough. Nobody has put anything in their numbers. It is all sentiment. This sentiment will likely make people actually say, president , prime minister, list of slowdown and do their job and let them find the data. Get yourays great to voice on these issues. Sometimes trials get halted. Not all trials pass with flying colors. Bloomberg intelligence senior pharmaceutical analyst. We are just minutes away from the open. Of next, your stocks to watch. Airbus, avoiding order cancellations. This is bloomberg. Anna welcome back. Lets get to our stock to watch. Is going to beca one of the main stocks to look at today. It fell 6 in afterhours u. S. Trading. We should also look at the other drugmakers. Rivalsnecas u. S. Performed better in the aftermarket trading. Asis really sentiment driven we were talking about. Gsk alsorugmakers like developing vaccines. The spanish consolidation story continues the banking sector. Exploring possible options including a merger, a sale, and even buying smaller companies. Discount,r a bigger 15 , in their premiums. Those two possibly moving to the upside. With a look ater the stocks. The open is next. Futures in europe still pointing down. Futures in the u. S. Turning lower as well. This is bloomberg. Minute to go until the start of cash Equities Trading in europe. Here are your headlines. Battery action. Astrazeneca slams the brakes on its phase 3 vaccine trial after one patient contracts an unexplained illness. Watch the vaccine maker at the open. The route resumes rout resumes. Asian equities close losses. Apple loses nearly 7 . Tesla slumps by a stock record of 21 in tuesdays session. England prepares to reimpose coronavirus restrictions on the public. Starting next monday, gathers a more than six people will be banned. What do future say . Matt futures are down. European futures have been down since we kicked off the program. They are doing better than they were at the top of the hour. U. S. Futures are turning a little bit lower as well. Is this market getting a little more risk off . The live cash trade starts now. Lets take a look at the global macro movers screen. You can see each column holds a different risk asset. Livendex future equity indexes are on the lefthand column. The ftse opening down a little bit. I would call that unchanged for the u. K. Index. 0. 07 . Ex down about we see the dax up also 0. 2 . Up almost 0. 2 . Interesting stuff. The futures dissipated. They were down half a percent at the top of the hour. 60 minutes later, they were getting back to zero. Now, we are seeing equity indexes open slightly in the red and bounce a little bit higher. Difficult time finding direction but it is not definitively read right now red right now. That is after a big tex selloff in the u. S. The nasdaq sank more than 4 yesterday. Tesla wiped out 21 of its market cap, 82 billion. That is a bigger market cap drop for tesla, the drop alone, than the total value of forward and general ford and General Motors combined. Apple lost 7 . Sentiment took a knock from astrazenecas vaccine trial, which was halted after one participant developed an unexplained illness. Joining us now is piers hillier, Royal London Asset management ceo. What do you think about this text selloff . Four tech selloff . For a moment, we thought it was a blip. Now, it is starting to look like a sustained rout. Piers good morning. It has been fascinating. A lot of people have wanted to call the top been in the bin in the tech sector throughout this year. There was concern that we were overstretched. The earnings really did justify the growth we saw earlier in the year. I think the thing that has changed for me in the last month or so is that the final boost we had, technology companies, was the reduction of discount rate. Long bond yields fell as we have had covert impacts character covid impacts kick through. That caused a rereading of the sector rerating of the sector. Markets is peak in really driven by multiple expansion and significant liquidity. That is really the characteristics you are seeing most recently. Upther it is a healthy blow at the moment are we are starting to see some kind of normalization, i do not think it is an unhealthy backdrop that we see. When we get to q3 earnings, are we seeing the compounded growth that we saw through the first half of this year . Anna specifically, good morning to you. Good to see you on the program. Youve mentioned tesla in your notes ahead of this conversation. I wonder if you want to give us your thoughts on a company that we sometimes talk of has a tech company, sometimes we talk about it as an auto . How would you play autos . Piers there is an interesting, significant transitional change in autos at the moment as we move from carbonbased auto manufacturing to electrical and Technology Driven auto manufacturing. Tesla is being driven not only just by its auto component, but transport,ization of and the ability to move to an intermodal movement driven by computers where we dont actually need to physically drive cars. You expected that is going to be a longterm structural growth opportunity. Often, you will pay up to enjoy that potential growth factor. I think what investors are looking at now is a number of the classic oems are starting to catch up from an electrical car perspective. At this stage, i reflect slightly that it is a little bit like the gold rush. You are most rewarded by buying the picks and shovels, manufacturers, than the gold prospectors themselves. I am not saying that tesla is that, per se. The gap and innovation that tesla established is quickly being competed away. The real question is whether they can keep that lead in terms of the Technology Side and intermodal movement. If they do that, you can start to see why people are very enthusiastic about it from a Technology Perspective rather than an auto perspective. Matt you can start to see that with the designs, right . These new offerings come out, you wonder if tesla can keep up. Although, it was over a 400 billion company for a while. That is pretty impressive, a pretty impressive vote of confidence from investors. Apple, over 2 trillion in market cap, lost 7 of its value yesterday. This is not a company that really has any competition worries, is it . What is the problem with apple . Piers no. I think it comes back to this multiple expansion point i talked about. These companies are growing doubledigit. They justify a higher rating then the markets because than the markets because of that ability to grow. I am sitting here talking to you from my ipad. We are using more digital tools. They have been a massive beneficiary of the. The problem is, the markets have a tendency of extrapolating growth and exhuming assuming that continues in perpetuity. Can these growth rates really continue . If we are to see any form of normalization or return to work, the massive premium multiple will apply to tech and digitization of the workplace, then perhaps some of the froth comes off in terms of the multiple expansion side of things. Coming back to tesla itself, the thing that worries me really, mentioned, it fell by the value of General Motors and ford. When you have one company that equates to the value of the whole of the rest of the competitive sector, you kind of feel that we have got a little bit overenthusiastic about it. Tesla has really driven our desire to move to the electrification of cars. As we see ourselves as investors, enhancing the backdrop of the environment, decarbonization, they were right at the forefront of that theme. My issue is that i think there are lots of people chasing their heels. They have to continue to innovate and justify the growth multiple that is being applied to their shares today. Anna thank you. Effectiveait for an charging network near where i live. Piers hillier stays with us on the program. It is just coming up to seven minutes past 8 00 in london. We will talk about what is going on in the u. S. And the fiscal stimulus conversation. U. S. Congressional leaders harden their stance on stimulus. The republicans introduce a slimmeddown, skinny bill, and ocrats call it this is bloomberg. Welcome back to Bloomberg Markets european open. Nasdaq futures are certainly very volatile. That seems to be leading European Equity markets around a little bit. We have got stocks in europe up by 0. 1 through the early part of this morning. Nasdaq futures volatile, up now 0. 7 . They were negative for a while. U. S. Congressional leaders are hardening their stance on additional fiscal stimulus. Mitch mcconnell introduced a proposal for a slimmeddown package expected to cost between 500 billion and 700 billion. That is a far cry from the 2. 2 trillion of relief that democrats want. Speaker pelosi what they have is so meager that it insults the intelligence of the american people, does not solve the problem, and it is not, again, we know that we have to compromise. We know that we have to negotiate in order to reach an agreement. We all want an agreement, make no mistake about that. But get serious, get real, Mitch Mcconnell. Anna piers hillier is still with us, Royal London Asset management ceo. How do you prefer to think about whether stimulus is necessary in the u. S. . Is it necessary for the u. S. Economy . Is it necessary for risk assets to go higher . Depending on what question you prefer, how much do we need to see to get us through the winter . Piers so i definitely think it is still required. Wass interesting, i reflecting back when i last was in the studio sitting next to matt. We were talking about the longterm impacts of covid. The shortening of supply lines is a point i made in february. I think that is really the challenge. The u. S. Economy needs to see more of that onshoring that it started two years ago. You need that stimulus package to drive forward the u. S. Economy. The monetary side of things, you know, there is abundant cash in the u. S. System. M1 growth is as high as it has been in over a decade. It is not about liquidity within the financial system. It is not actually being transmitted into the economy. That is where the fiscal side of things is really important, in terms of encouraging longterm growth investment. As a regular visitor to the u. S. Over the years, one thing that always stands out to me is a lot of the major cities got significant underinvestment in infrastructure and intermodal transport. This is a great opportunity, in some ways, to actually upgrade some of the capabilities and infrastructure requirements. I think more broadly, how do you create job formation . How do you bring innovation that the u. S. Exported through globalization back into the u. S. . Not a dissimilar picture in the u. K. , to be honest. With the brexit conversation going on this week, there is a need for us to have a fiscal stimulus package here. [audio drop] which impacted the broader economy. In order to bring ourselves out of that, you needed a fiscal stimulus package that works. That is why there is so much negotiation in congress. You are two months away from the president ial election, Congressional Elections coming up. Everybody is very cautious about how much Political Capital they give to the other side. I think they will find a way forward in terms of a stimulus package and it will be somewhere between where Mitch Mcconnell and somewhere between where nancy pelosi wants it. I think on balance, they will get a stimulus package that will help the u. S. Economy into 2021. Matt you know, just good luck gundlach jeff yesterday had one of his famous webcasts. It was packed with nuggets. He is not happy about what the fed has done. Governments Distance Program was too much or for too long. He said he is betting against tips right now, which have had massive inflows. It makes sense to think that the impact of the pandemic or to think that the fed is going to somehow be able to bring about inflation, i dont understand that. This pandemic looks so deflationary. What do you think we are going to see in terms of prices . Is the genieion that has never really come out of the bottle. C, everybodyut of gf telling me about this massive stimulus that is going to be hugely inflationary. That is the issue that never really took place. I am kind of of that the at the moment view at the moment. I cannot see significant Inflationary Pressure outdoor. Inflation is normally driven by a supplydemand imbalance. In the early 1990s, china was putting a massive demand in for commodities to support the Olympic Games campaign. That ran out of juice pretty quickly in 2007. Price has fallen dramatically pretty much from top left to bottom right since. Is there a supplydemand imbalance . I dont see that at the moment. Coming back to early points about globalization, if we start to see more on shoring, more Capital Investment that goes into do that and supply line reduction, it probably means on shoring is a little bit inflationary, because labor force costs are higher in developed markets than emerging markets. But i dont see that has been significant. It is interesting to me, if you try to buy significant, large Household Goods recently, there is a massive shortage of supply chain capacity. A lot of business is really reduced capacity as we went into lockdown, etc. Looking at ism and things like those lead indicators, they are really important at this point in time to see, are we starting to see that we are getting some of that stock rebuild . I dont see an inflationary shock out there. That is the nice thing that provides a sort of a driver in addressing the debt burden we are carrying. I think bond markets are telling the government, look, you are free to actually borrow more and in particular, borrow longer and invest. Anna thank you very much for joining us. Piers hillier, royal london heet management ceo, and will be continuing his conversation with us as matt and i move over to radio at 9 00 a. M. U. K. Time. Coming up, energizing the electric vehicle market. We talked about tesla. What about nicola . It secures a deal with General Motors. Our conversation with the startup chairman and founder, thats next. This is bloomberg. Anna welcome back to Bloomberg Markets european open this wednesday morning, 21 minutes into a session that sees European Equity markets up by zero point percent, despite fears 0. 5 . Tesla suffered its biggest oneday drop ever after the carmaker missed out on being included in the s p 500 index. , shavingose down 21 82 billion from its valuation. We have investor response to that on the program. Declines worsened when General Motors announced it is taking a 2 billion equity stake in electric truck maker nikola. The no job broadens gms bet on alternative Energy Vehicles while providing nikola with a muchneeded dose of credibility. The startups founder spoke to bloomberg. Its actually a really great deal for both parties. We were able to get an oem with some of the best supply chains in the world that can instantly build our nikola badger with the factors that already exist. It takes billions to build a factory and decades to learn the supply chains the right way. The second thing that they bring to us is the ability to leverage their batteries and other parts bin. So that would be like their parts supply. Batteries alone are going to take nikola over 4 billion over the life of this agreement with us. Just from the batteries alone, we have already doubled what we exchanged in inkind services. We gained over in savings on the batteries alone. There, huge advantage along with the access of everything else. Imagine having one of the best teams in the world to do manufacturing of your truck for you. I could not wish for anything better. A lot of comparisons are drawn between your company and tesla, obviously because of the name and you are in the electric vehicle industry. Your approach to manufacturing is obviously a lot different then the approach tesla than the approach tesla took. And you have these and ciliary lliarysses anci businesses. Will this Partnership Help you avoid some of the pitfalls of tesla . We took a different approach tha tesla didn. They can kind of do things on their own. We knew going into this that there was no way to raise that kind of capital immediately. It was important for us to build these relationships. For our big semi trucks, thats where our company came from. Inhave got over 10 billion preorders for those trucks that are waiting to be built. Margins are huge, really good. We knew we could not do it alone. We partnered up to do it. With the badger, we did the same thing with gm. It allows us to say billion on the factory, get to market fast, enter a supply chain that already exists. And allows us to be competitive against everybody in the world. We are going to have a truck out in a year and a half in production. With regard to potential sales down the road, what types of volumes are you hoping to sort of reach in the shortterm, say within the first year or so of production . I think we have to be careful not to run too fast. I used tesla as a good understanding because they have been through a lot of problems and have learned from them. When the model y came out, there was a tremendous amount of problems with paint and having issues coming off the factory line. We can build as many trucks as we want. Can you service them, warranty them, make customers happy . We are not looking to build half a million trucks a year. We want to focus on a small quantity that is very profitable and make it an item that everybody wants and there might not be enough supply of it. How about sales and servicing . Will that be owned by nikola or something driven by gm . Directly through nikola. We dont think the existing way of doing things is the right way. Tesla does everything themselves. We dont do everything, we just do some of it. We think that direct to consumer for the sales definitely is important for us. We have that right. We are in charge of that. We are probably going to partner with someone on warranty. Or someone else. , what about states like texas where you cannot do direct to consumer in that way . There is a lot of ways to handle that. They have already figured that out, tesla has a ready figured a lot of those out. We believe that texas and these other states are going to ultimately allow you to, if you are doing service with them, we believe they are going to allow you to work with them. It is a little bit of legislation and in the next year and a half, we will have that figured out. Matt that was the founder of nikola speaking with bloomberg. Anna welcome back to Bloomberg Markets european open 30 minutes into todays trading session. European equity markets up by 0. 5 in the aggregate. We see some of the best performance in germany, up 0. 7 on the dax. There really is one sector that is moving more to the downside than others and that is travel and leisure. It is pretty broadbased. We see ryanair down by 2. 9 , iag down 4. 5 , some of the hotels down 2 or so. Some concern probably jumping off the potential for delay in a vaccine. Maybe that is weighing on the particular sector. To the upside, we see utilities, personal and Household Goods and some of the more defensive moving higher. Lets get a bloomberg first word news update. Astrazeneca has paused a late stage trial of its Coronavirus Vaccine after a participant became ill. The drugmaker said the decision was a routine action intended to allow researchers to examine safety data. It could delay or derail efforts to deliver the socalled oxford vaccine, which is seen as one of the leading candidates to provide immunization against covid19. Boris johnson is set to tighten lockdown rules in england. All social gatherings of more than six people will be banned. That is down from the current limit of 30. Police will have new powers to disperse and fine any offenders. Hi yields, bond defaults could double as economies struggle with the economic downturn. That is according to jeffrey gundlach. He warned it would be for hardy to think the economic shock ardy to think the economic shock could be killed by one move. Deutsche bank cites big shifts in the political economy from worsening social equality to a rebuttal in globalization, heralding what they call a new age of disorder. Combined equity and debt prices across 15 developed markets hit their highest levels since at least the 1860s this year. Global news 24 hours a day, onair and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna, matt . Matt thanks very much. Laura wright in london with your first burners. Netflix first word news. Netflix has more than 190 million subscribers. Where does the company go next as the streaming wars heat up and the pandemic disrupts production . The cofounder and coceo spoke to bloomberg about those issues, as well as the companys unusual leadership set up. It is really dependent on the two people. It is an unusual situation, but if you think of every family, you know, there are generally two ceos running the family. You just have to be really close. Have been together for more than 20 years. With the two of us, totally confident it will work right. The count the pandemic has played right into netflixs hands in many ways. That said, production is coming to a halt, it is getting a little harder to find something new to watch every night. How do you think the Entertainment Industry looks different when it emerges from this . , it is definitely a challenge from the lack of production particularly in the u. S. And was able to go back to production and so was asia, but in the u. S. , production is more challenging. That will have an effect more next year than this year. Everyone is figuring out how to make it work, just like if there is a Writers Strike or other things that have happened over the last 50 years. Covid longterm, i think is just a little blip and a historical footnote, kind of like the 1918 pandemic that we read about today. You said there is space for many streaming services in the market. I know you have been impressed by what disney has accomplished. Weve just seen hbo max launch a new. How many of these services do you think have the potential to reach 100 million or 500 Million People . Will there be consolidation . And who is left standing . There is a huge difference between disney plus, which has over 60 million subscribers in the first year, and hbo max, which is 3 million or 4 million. One of those is really incredible. I would not have guessed you could get to 60 plus million in the first year. We will see, depending on what the quality of the services are. I do think that over time, there will be additional consolidation, like fox disney, which has proven to be great for disney. There will be some more of that. Onsumers want fewer brands how many years of growth are left before netflix has to think about something new . And what might that be . Would you be open to a big acquisition, video games, social media . You know, we always try to keep an open mind. My first company, we acquired a lot of companies, so ive kind of been through that. I got some good and bad properties. Mostly, we want to make our Service Better. There is at least 5, 10, 15, 20 years of growth really focused on making our Service Better and better. We have always added new types of programming. Seriesmple, starting in and then expanding into film and nonfiction and now animation. We will just continue to expand and what we offer in the service in what we offer in the service. Anna that was the netflix cofounder and coceo. You will hear more from the man behind netflix today at 9 00 p. M. In new york, 7 00 p. M. Tomorrow in hong kong and london. In thes David Rubenstein latest episode of the david eertopeershow p conversations. The pandemic is forcing Central Banks and governments to raise to the rescue. Stimulus plans totaling trillions of dollars across Major Economies have been crafted to prop up businesses and support the swelling ranks of unemployed workers. There are concerns that Zombie Companies could be created. Joining us now with his perspective, bernd spalt, the ceo of erste group. Lots to discuss. I wonder if you could give us your thoughts on whether we are creating Zombie Companies . When you look at the companies that you have lent to or the sector has lent to during these tough times, is this a concern for you . Bernd if we look into our has stronger government and public few countries have been able to get liquidity support during this time. As the economy is falling throughout the world, if you portent liquidity poor in ratios willidity, hit rock bottom. Goodhappened was a response to the crisis and rigid response to the crisis. It is about taking the next steps. How can we save corporate Balance Sheets that are now under pressure . In a context where we have seen economies already picking up it is vitally important that we also create a Capital Market situation where Companies Get access to equity financing. Then i you seen mean, your biggest markets are in central and eastern europe. Have you seen an acceleration of bankruptcies in those markets . Or do you expect us to see that in the last quarter of this year . Bernd we have not seen any kind of increases in insolvency rates. We have not seen yet any kind of increases of delinquencies. This is clear for two reasons. One, the government implemented stimulus. Ly andle chose not to repay they could sort of posit with bond repayments pause with bond repayments. The government guaranteed loans, which are provided, bridge the situation. Do i expect insolvencies to rise this year . Its think all these develop developments will have a lagging impact on corporate Balance Sheets. We will see probably next year insolvencies rise and unemployment becoming more permanent. Those loanu think loss provisions that the bank have peaked then . Do you think Loan Loss Provisions have peaked . I think you thought so the second quarter. Bernd i dont think that what we have done here, we did everything we could to build provisions for the increase in insolvencies, which we expect in 2021. We intended ended front load as much provisions as we could so as not to kick the can down the road. Matt you know, you have said in the past that you think governments should be investing not only in company debt but also in equity, which makes sense. It is something we have not really seen governments really get closer to. What do you think banks like erste can do in that sense . Bernd i think playing a very Important Role in a context where equity needs to be brokered to Companies WhoseBalance Sheet needs to be strengthened. Ishink governments role not only in participating, but in creating an environment where it is attractive to invest into companies. So creating a tax situation which is more attractive for investors and creating a situation where investors find it easier to invest. I think something where the whole Capital Market needs to be strengthened, where Capital Needs to be at a level playing field. Anna can i ask you about dividends . The ecb has put limitations on your ability to pay dividends. Do you think the limits are fair . What would you have paid out for this year if it hadnt been for these recommendations from the ecb . What does it mean for the ban in the future . Do you think the ecb should lift the ban . Bernd we have postponed dividends. We also postponed our decision around proposals to pay a dividend. We said at the beginning of the year when the crisis broke out limitedlong as there is coming out of this tragedy we believe there will be more visibility of the recovery shape in the fourth quarter. Atntend to hold our the end of 2020. We have been very profitable in 2019, profitable anin 2020. We see our economies and all of our countries recovering already. I think there is every justification to pay a dividend for both 2019 and 2020. Clearly, we also will not act against the recommendations of the ecb. Matt great to get your take. I dont think we get a look enough at the central and eastern parts of europe. It is really a key part of the economic engine for all of us. Ste,d spalt, ceo of er thanks so much. Programs emergency qe could be undercutting the blocs dream goals. What can the central bank due to incorporate green goals. Tot can the central bank do incorporate Climate Change into its agenda . This is bloomberg. Anna welcome back to Bloomberg Markets european open 46 minutes into a trading day that shares some upside for European Equity markets. Ftse 100 up by more than 1 . Nasdaq futures up by more than 1. 5 . Emergency qe program might be undercutting the blocs climate goes. The purchase goals. The purchase of bonds is feeding into a natural gas frenzy. Joining us now is james purcell, Quintet Private Bank head of esg sustainability and impact investing. It is an interesting question, what Central Banks should be buying, how they should be choosing between one bond from one company and another from another company. Does this go to the heart of one of the Big Questions around yesterday about how to define sustainability and where natural gas fits in there . James i think what we are dealing with here is, what is the mandate of the ecb . It is to maintain market neutrality and ensure the functioning of the financial system. I dont actually believe they should be tilting their focus towards green assets. Green bonds hold the same credit risk as their conventional counterparts. It would not be a great thing to do to actually distort that market. Matt what are you seeing in terms of private investment to help the esg cause . How much has this trend grown . James the trend has really exploded in recent years. It is a reflection of the world outside our window, whether it is Consumer Trends and what people are purchasing more of course some of the climate protests and so forth. I think the big change is about it moving from being that 10 1 5 of the private clients who were true believers and now, we are really engaging the mass middle, as it were, another 70 or so of the population. They are very keen to invest if the rationale is robust and returns are attractive. Anna moving away from preaching to the converted but to the others as well. Let me ask you about the possibility of political change in the United States in a couple of months. What will that bring, do you think, for the esg community . Juliette this is a complete james this is a complete game changer potentially depending on how the election plays out. The Trump Administration has rolled back around 100 pieces of environmental regulation since it came into power. And fairly straightforward, if you see another four years of trump, you will see further deregulation. That will increase shortterm profits and a lot of companies but also potentially increase some of the governments risk as well. The counterpoint is around who benefits from a Trump Victory most of all. It is probably the more marginal producers in carbon intensive industries rather than the mega caps. You take one of the recent examples, you actually had the majors coming out against that, even though that would have been profit positive for them. That is a big sea change in how companies are interacting with the administration. Matt you say that germany could be kind of the Silicon Valley of green technology. Why is that, james . James so when we think about how the green wave has developed, it is really about technology, enablement. If we look across europe, we really have to turn our focus to the region that has reinvented itself many times over multiple decades and really does hold a dominant force in engineering topics. While spiritually, the green momentum has probably been led out of france, i think the Solution Providers are germany. Europe in general missed the last big wave, which was the tech wave. This could be europes opportunity to get on the next wave. Matt james, thanks for joining us. James purcell from Quintet Private Bank, head of esg. I would love to get you back and do more of this. Hopefully, we can make another permit with you. Stocks struggle for traction in the wake of wall streets big selloff. Is the tech drop a healthy correction or a bigger rout . We put that question to our mliv team next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are almost an hour into the session and we are looking now at 1 gains on the ftse, the dax almost up there, the cac gaining as well. European stocks rise up after the drop that we saw yesterday. I want to get into the markets now. I am not sure if i just noticed it or if you have been doing this europe peace in the blog for a while. I saw yesterday, i thought it was a great addition. Great to get you on the program. Thank you. Matt lets kick it off with the question of the day. I am always fascinated to know what bloomberg clients are responding as far as our question. Today you are asking, is this tech drop a healthy correction or a rout . What are you hearing . Thats right. I am more of a bear. This unstoppable rally we have been seeing in Global Technology stocks, i would say it was only a matter of time that we saw some pullback. Most voices i heard this morning were saying that this was a healthy correction. In innovations and the technology industry, bulls are arguing there is still room for upside, given growth prospects. That is one thing to watch out for. Anna interesting. Good morning to you. Interesting to see that is up by 4. 1 . We have not mentioned oil price as much on the program. They have been down below 40 per barrel in Asian Session, now back up. What was behind the drop we saw in asia . I would add to that that oil drop has been one of the reasons why there was some sort of a risk on mood at some point. Oil has been rising. Some priceing after consolidation that we saw earlier. Arew of my colleagues saying demand remains quite weak. It is far from returning to pre pandemic levels. Another thing to note in terms of general risk off is the hold hard exit scenario in the u. K. It is way underpriced in the market. If it was, the pound would be so it is worth noting that. Matt what are some of the other key assets that we should be watching right now . To gauge the sentiment, i would really say it is worth keeping an eye out for bonds and gold. If you see frantic buying of those havens, and if you do start to see those matt i am going to have to wrap you up. Thank you for joining us. 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. If i could, baby id 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. Bad reaction. Astrazeneca slams the brakes on its phase 3 vaccine trial after one of the test patients contracts an unexplained illness. Tech tantrum. Slumps 21 7 , tesla in tuesdays session. England prepares to reimpose coronavirus restrictions on the public, banning gatherings of more than six people. Welcome to bloomberg surveillance. We have had a bit of a wild