Transcripts For BLOOMBERG Bloomberg Markets European Open 20240712

Biggest rally since april. Zoom and tesla lead the balance for the electric carmaker jumping over 10 . Lawmakers become lawbreakers. The e. U. Considers legal action over the u. K. s plan to breach the brexit deal. The two sides hold an emergency meeting today. Class growing confit plus growing confidence. Hold ass set to stay on bloomberg learns some officials now see a reduced need for further stimulus down the line. As i said, just under one hour away from the start of cash equity trading in europe. Lets take a look at futures first. We do see gains on dax futures up about. 4 right now. Also, euro stocks futures are up. But you do see ftse futures down this morning so keep your eye on that divergence. In terms of u. S. Futuress, after the gains yesterday, we see continued gains in futures with dow and s p many contracts up. 2 . Anna . Talk about whats going on in the Asian Session in terms of the gmm. We have had a day where we have seen real resurgence as you mentioned in stocks, and now, asian equity markets just reflecting that essentially, up by. 9 on the asiapacific. We build towards the ecb meeting and that is partly why the futures for europe looks little less inspiring, a little less convinced in either direction. Futures in europe fairly flat as we wait for the ecbs meeting. Expectations for them to actually do anything seems incredibly low, but in terms of the language used around the that is key and something Christine Lagarde will be pressed on. We have a big move in indonesia. Art of this is a reminder of what can happen when you reimpose any restrictions or movements around coronavirus and that is part of the story in indonesia so the stock market is down by 4. 9 . Elsewhere, fairly mixed picture. As we move into the european trading session, perhaps a little bit of a Holding Pattern, waiting for the ecb. Here is laura wright. Is considering legal action over the u. K. s intention to breach the brexit withdrawal agreement. That is according to a document seen by bloomberg. The initial analysis suggests it may have a case even before Boris Johnson controversial plan is written into domestic law. The Prime Ministers threat to enege has prompted a warning from across the atlantic. House Speaker Nancy Pelosi said they would be absolutely no chance of a trade agreement with the u. S. If johnsons actions threatened piece in northern peace in northern ireland. Donald trump has defended comments in which he intentionally downplayed the severity of the coronavirus. In march, the president told bob woodward he liked playing down concerns to avoid causing panic or price spikes. Democratic president ial nominee joe biden said trump failed to do his job and is responsible for tens of thousands of deaths for not giving adequate warning about the dangers of the virus. One in five u. K. Companies is a socalled zombie with profits only just covering debt Interest Payments according to the conservative think tank onward. It is calling for the chancellor to relax the rules on virus loan repayments, morning the recovery will be hampered by crippling levels of corporate debt. It says borrowings since lockdown began threatens to Push Companies employing 2 Million People into technical insolvency. The worlds animal population has fallen by more than two thirds in the last 50 years. Thats according to a study of more than 4000 species by a Conservation Group, wwf. It found the biggest drops had occurred in latin america and the caribbean, where populations fell by 94 . Agriculture and landuse change were a key driver as Natural Habitats were converted into farmland, but Climate Change has also been a factor. 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. This is bloomberg. Anna, matt. Anna thanks very much. Laura wright in london. The rebound in global stocks seems to have fizzled out after the excitement of yesterday with u. S. And european futures edging lower and asian equities retreating from session highs even though in aggregate, they remain in positive territory. Thats after u. S. Shares snapped a threeday rout as dip buyers came into shares. Lets get into the markets with laura cooper. I guess a lot of people are still asking is it safe to come out from underneath the bed if that is where you have been hiding from the tech rout . We had three or four days of it and we saw something very different yesterday. The nasdaq doing fairly nicely. Actually, if you look at where we have been on the nasdaq yeartodate, it was always going to look like a positive performance, even with the extent of the selling we have seen. We are up 24 on the nasdaq yeartodate. Laura c. absolutely. Im still seeing signs of frost in the nasdaq, even after the threeday correction, and that suggests we need to see a greater selloff in order to really spook the key driver of that and those are the Retail Investors. If you look at the price action yesterday, it does suggest that these animal spirits are coming back, the fact that tesla was one of the stronger top performers and that nasdaq had sincerongest bounce april. Going forward, we may not see the pace of exceptional gains given the fact that stocks face a wall of worry. September is not a great month for equities. And then we also have the fed next week and potential fines could see them deleveraging from risk assets. For now, it does look to be the case that we are still seeing stocks likely to grind higher. Matt what are you looking for from the ecb today . What do we expect from Christine Lagarde . Laura c. the hype heading into the meeting has been around euro strength and whether they will continue to talk that down. There certainly going to be this balancing of Market Expectations where its going to be all talk and very little action. When it comes to the euro, they are unlikely to actually allude to it in the opening statements. That is extremely rare. Its likely to be pressed on it in the press conference. Its likely to be the case, which is going to pin any kind of concern for the currency strength to inflation. We saw core inflation print a record low and that is perceived as true by the stronger currency. Its likely not going to talk down the currency outright. Any mixed messages on that front could see things gaining further ground if they strike a less dovish tone. The of course, eurodollar, its partly the euro story and its partly the dollar story. What are your expectations for the greenback as we head into what could be a very volatile election in that period . Laura c. certainly the fact that we have seen this rebound in the bloomberg dollar spot index over the past number of days. I closed below a key technical level earlier this week and it is testing a trendline that has been in place since march. Its able to break through that. It suggests nearterm upside. Part of that reflects the fact that we do have these extended dollars short conditions on. Risk is strength on the off environment. It could spur the dollar further. Ultimately, the dollar is on pace to have the further decline over the medium term, but in this riskoff environment around this election uncertainty, should that prevail and dominate, i would expect the dollar to catch a big. Matt thanks very much for joining us. Laura cooper, the bloomberg mliv macro strategist. You can check out her work and the work of her colleagues by typing in mliv on your bloomberg terminal. Coming up, it is decision day for the ecb with policy likely to stay on hold. Attention is on commentary around the euro areas, slowing recovery, and the strength of the common currency. This is bloomberg. Anna welcome back to the European Market open. A European Equity markets in a bit of a Holding Pattern perhaps at the start of trade. It is still 50 minutes to go until we see the start of the cash Equities Trading session. The ecbs meeting is the big thing today. Lets get a Bloomberg Business flash. Its more right. Laura lvmh chairman Bernard Arnault asked the french government to pull out of a deal to buy tiffany. Franss richest man was directly involved in the decision to call off the 16 billion purchase. Tiffany has accused lvmh of trying to leverage protests against Police Brutality and the covid19 pandemic to seek a lowerpriced but they have denied exerting any type of pressure as he said the french government requested a delay for reasons related to the trade dispute with the u. S. Forcuts make more woes the german car industry. They are eliminating more than 5 of its workforce. They are selling several plants in the home market as the impact of the pandemic bites. The announcement follows a plan laid out last week by continental to slash its workforce by 13 . Barclays is considering replacing its u. S. Headquarters in times square. Sources say the bank is looking for. 5 million square feet of space. The development had reshaped manhattans west side. In new york has slumped this year with many corporate employees working from home. That is your Bloomberg Business flash. Matt, and i. Anna. Anna thanks very much. More business lose. The unlisted lloyds of london, the insurance market, getting updates from that company around their profitability or loss. Lloyds of london reports a loss of 0. 4 billion pounds in the first half of the year. Pay 5aying they expect to billion pounds for covid customer claims. Interesting because we have seen such a lot of conversations in recent weeks about the extent to which there was validity of insurance policies around covid19 and pandemics. You have other breaking news. Matt it is interesting in so many ways. This is the famous Trading Floor that rings a bell whenever a ship goes down. I want to talk quickly about reliance. That company is said to offer 20 billion for a stake in a retail arm to amazon, so amazon is holding talks about an inestment or investing Reliance Retail and reliance is mulling, which is letting it simmer i guess in their brains, up to 40 retail arm stake sale to amazon. A source says amazon has no final decision on Reliance Retail. Keep that in mind. We will continue to bring you any breaking news on this big deal involving amazon. Now, the mood music will be key at todays ecb meeting. Policy is likely to stay on hold but officials will have to confront a slowdown in the euro areas recovery as well as a stronger share currency. The euro itself yesterday gained after sources told brexit and policymakers have become more confident in their forecasts, potentially reducing the need for more stimulus down the line. We are joined by the chief economist for europe at ubs. Reinhardt, good morning. Thanks for joining sp at what do you expect today . What are you looking forward to for the ecb meeting . Good morning. As you said, today, its probably not the day where we would see big policy decisions from the ecb. Instead, the ecb will take todays meeting as an opportunity to take stock of the Economic Performance over the summer based on a new set of macroeconomic projections. We think that the ecb will probably increase the growth forecast for this year a bit because the Second Quarter gdp numbers were a bit better than expected, likely to keep the outlook for 2021, 2022 unchanged. In terms of inflation, although everyone is speaking about the strong euro, we think that in fact the ecb could increase the inflation forecast for next year and 2022 because oil prices have actually increased and they might well overcompensate the strength of the euro and its impact. Anna that is interesting to good morning. The reason people worry about the strength of the euro is for exports but it also makes the ecbs job of reaching its inflation target more difficult because a stronger euro is disinflationary but you do not think we are in a problem where we need to worry about that too much or just think the oil price in this particular instance offset that . Reinhard in this particular instance it as always, the ecb has to worry about the strong euro. I think what we are likely to hear from the ecb today is that they do not target the Exchange Rate. They do target inflation. But of course, the Exchange Rate does matter to the ecb because it affects growth, and through that inflation through that, inflation. At these levels, the Exchange Rate is not an outright concern. The issue is more if the Exchange Rate were to appreciate further, it would become an issue. Christine lagarde needs to nce her words mic carefully. Make it clear if the currency were to increase a lot further, it would become a problem. I think she also has to acknowledge that the euro appreciates partly for good reasons. One of the reasons is the recovery in confidence and a reversal of safe haven flows over the last couple of weeks. The other is that also, with the Recovery Fund, strong fiscal policy interventions from national governments, i think the Economic Policy response in the euro area has been a lot better than many people expected at the beginning, so these are good reasons, not bad reasons, for currency appreciation. Matt does the ecb need to do more in the future . I mean, we are hearing comments that suggest they are more confident in the recovery. On the other hand, we see, you know, furlough schemes coming to an end. We hear concerns in the u. K. That one in five companies uses all of its profits to pay, you know, make its Interest Payments, and Zombie Companies are really a concern across the continent. I mean, after consumers, companies, and countries have loaded up on debt, isnt there a reckoning down the road . Reinhard indeed. At ubs, we maintain a cautious stance on the outlook. We think that you rightly refer to this that the infection rates, if they were to increase further over the next couple of weeks and months, they remain a key risk. The fact that unemployment is well likely to increase further if and when the furlough schemes are going to come to an end and more and more corporates face and proxies and layoffs. Against this background, while we are confident that the ecb will not do will not take any concrete policy decisions today and not in october, we think that by december, december 10, the time will come for the ecb pandemicledge that the Asset Purchase Program will have to be extended by another six months from the end of june 2021 to the end of 2021 and that would then go along with the decision to also increase the envelope of this program again from 1. 3 5 trillion so theres more for the ecb to do because the inflation outlook, it will not recover back to the precovid19 set up for quite some time. Thanks very much. Stay with us. Reinhard cluse, chief economist for europe at ubs. He will stay with us on the program. 7 20 in london. Coming up on the European Market open, the e. U. Considers suing the u. K. Boris johnsons plans to breach the brexit divorced deal have rattled leaders in brussels. We are live in the belgian capital. Thats next. This is bloomberg. Anna welcome back to the European Market open. 40 minutes to go until the start of the European Equity trading day. The European Union is considering legal action against the u. K. Over plans to breach the brexit withdrawal agreement. According to a document seen by bloomberg, the e. U. Believes it may have a case even before the u. K. s internal market bill is written into domestic u. K. Law. Lets discuss with our guests, reinhard cluse, at ubs. When you look at the conversations that are taking place across the channel, trying to get to a trade deal before the end of this year, if not before, what are the percentage chances you put on certain outcomes . What are you assuming when you look at the u. K. Economy in terms of getting a deal or not . Reinhard based on the news flow, i think its very difficult to say at the moment what the chances of a breakthrough are. I think its obvious that the chances have certainly decreased over the last couple of days given the news flow. I mean, therefore, i would be hesitant to come up with a definite answer to your question. Obviously, the Economic Outlook is not favorable. We are expecting a contraction in gdp of 9. 4 this year followed by a recovery of 5. 5 next year. And in this environment, we are of course hoping very strongly that we will not get additional burdens from eight to factor nodeal outcome of these negotiations. So that would be very unwelcome. Matt you noted that the strengthen the euro is in some ways for good reason. You have got this recovery package. You have got this unity among European Union nationse. U. K. Of course 1. 30 seems pretty bullish to me if we are looking in the face of a nodeal brexit. Reinhard one explanation could be that the markets do expect that we will get a decent outcome. Part of the new flow we have seen in recent days is reisman ship. That would be overcome brinksmanship. That would be overcome. Various players from europe are getting involved, trying to gain influence on decisions in london and westminster. So overall, may be markets believe that this is not the final work. If we work to see elements of a heart exit towards the yearend, the currency might well be exposed to further risk to the downside. Just and what would the briefly i know the ecb has been assessing their negative Interest Rate policy. What have we learned from that that might be important to remember for other Central Banks such as the bank of england . The impact ofink negative rates on the economy might well have been beneficial because it brought down the yield curve. It stimulated credit. So with regard to the shortterm impact on the economy, it is probably positive, but the impact on the Financial Sector and money markets, insurance companies, pension funds, were significantly negative, so there is a significant trade up. I think the ecb acknowledges all of this, and in a speech, one of the executive Board Members gave a couple of weeks ago on the matter of negative Interest Rates, she said that you also need to differentiate whether you do negative Interest Rates for a short period of time, during which all of this is very well acceptable, or for the longterm, and that negative rates over the longterm might actually be more negative than just over the short period of time, so we do not want to see negative rates become a permanent element of monetary policy. That is what the ecb acknowledges. Matt reinhard cluse, thank you so much for joining us, chief economist for europe at ubs. Welcome back to the European Market open. 30 minutes ago until the start of the cash equity session and european stock features look positive. Well look to see if we get that mixed outcome. Juliette sarley joins us now. Juliette, what are you seeing in Options Market . The volume in Options Market perhaps signaling investors were not scared by what is it, three days of drops . July yet certainly the reversal that we saw in tech stocks giving a little bit of a boost, and matt maile the chief mact strategist saying there is still plenty of firsts in the market. To look at that, you not only have to look at the rebound in the sheer prices that we saw in apple and tesla and the volume particularly in these calls and whats happening with apple. We saw shares of am jump during the wednesday session butt. The most actively traded sessions were coal contracts dates. Arterm expiration it saw its volume exceed 178,000. Matt maile saying that its not normally the first loss that you see in coming through the first bounce, i should say. Longterm investors know you have to hold on for the ride here. Hes saying there is plenty more for us in these markets, matt. Matt you are looking at a bank of a america call on the euro. What do you got . Theres not so much that the e. C. B. Can do. Its y will have to say going to have to be some kind of verbal intervention to move the euro. It is remaining below what bank equal ca sees as their of 1. 21. Its all going to have to be in the commentary. Anna and matt. Anna juliette, thanks very much. You can get the latest stories by going to ties bloomberg. Well have full coverage of events later on. Lets get an update. Heres laura wright. Laura the e. U. Is considering o breach the brexit withdrawal agreement. It may have a case even before Boris Johnsons controversial plan is written into domestic law. The Prime Minister threat to renege on it has prompted a warping from the atlantic. Warming from the atlantic. He said there would be no chance the u. S. Ifons with here was trouble with ireland. Democratic president ial nominee joe biden said trump filed do his job and is responsible for tens of thousands of deaths for not giving adequate warnings about the dangers of the virus. The worlds animal population has fallen by more than 2 3. Thats according to a study of more than 4,000 species by the Conservation Group w. W. S. It found the drops were in latin caribbean. The Natural Habitats has converted into farmland but Climate Change as also played a part. This is bloomberg. Anna, matt. Matt laura, thanks very much. Laura right there in london with your first word news. Craft beer maker brew dog is tapping Retail Investors once again, kind of. The company is hoping to raise 50 Million Pounds to cut emissions from beer operations to zero in the next two years. And were joined now for an clusive interview with james watt. I say kind of. Youre not doing a Public Offering on markets. Were talking about punk equity raise. I full disclosure took part at one of your bars because the waiter told me i could get 5 off for life. Whats the story . How many shareholders do you have . And what can be done with this punk equity that i have . We are quite unique as a business. Were part owned by a community of 150,000. We call them equity punks all over the planet. Theyre investors but also the heart and soul of our missionful of our mission. Were the first carbon negative beer. We take twice the carbon that we emmit. Every time someone has one of our beers our planet gets less carbon. And we want to take more than take our community with us on this sustainbility journey. We are launching equity for punks tomorrow, where every single penny that is invested goes towards that into sustainability and the mission is to be more sustainable as a business and to help reduce the Carbon Emissions that we have. Anna so thats why youre doing it. Thats why youre raising the money. What about the underlying business. Weve had this new rule of six. So no gatherings of more than six. Pubs at the moment can still stay open. But are you concerned that the pubs will have to stay closed into the winter . Its been a topsyturvy year for our business. And its been challenging for all businesses. But so far were coming slightly better than we anticipated. Our sales at our supermarks and stores has been fantastic. Our ecommerce business has been bigger than it was last year. And the bounceback is slightly better than we had expected. Theres a lot of unknown at the moment. Theres talk of second waves. But our business has been in very good shape considering all of the challenge this year. Matt you know, i spend being that im from columbus, ohio and i live here in berlin, both places where you have breweries and bars i spend a lot of time in your establishments. I heard that you are going to start franchising these bars which worries me a little because i like the way they are now. How do you insure tell me about the franchise plan. And second, how do you insure that they remain sort of the same standard of quality . So we have 102 fantastic retail low cases all over the planet. And our mission as a company is to make everybodys passionate to make fantastic beer as we are in the bars are a fantastic way to do that and introduce people into this amazing journey with us. About 10 of our locations are franchise. And we work so hard to make sure theyre focused on the things that are so valuable to us. Beer. Focused on amazing and we want to make sure that we aintain that standard. We feel that there should be no difference at all. Anna you confidence in that franchise model. James, i mentioned that this new rule of six, only six people allowed to gather in engelland certainly from monday. Weve also had this week its been a very newsy week. The government admitting they plan to break International Law with part of what theyre doing with brexit and northern ireland. I wonder if this has triggered your creativity and should we expect any newly named beers named after some of these events this week . Chip with had a few a beer called barnhart castle eye test that we made after the upheaval caused by dominic cummings. And we love to do wear our heart on our shreve and take a stand for the things that we believe in as a company. And were not scared to speak out. At the moment were completely focused on the environment and focused on sustainable. The science is clear. Were facing a climate crisis. Huge change is needed right now. Governments are not doing enough. Businesses are not doing enough. And if were going to get off path at the, i think its down to the success of businesses to lead the way. And we want to be a capital itself for that change according to the United Nations Climate Committee the next 10 years are make or break furs. And we want to nail our colors to the matt. We want to put everything on the line in what we believe in. And we want to show the world what it looks like when a company genuinely cares about the planet. Matt you are opening more breweries outside of the u. K. , which i have to wonder if this has anything to do with brexit. You redebtly picked up the dog tap in berlin. And youve got plans to open up a new brewery in france. Is that because you want to make sure that youre brewing enough beer outside of the u. K. For brexit . Thats a good question. And theres kind of two parts of the international. First of all, we want to it closer. We made beer in the u. K. , germany, columbus, ohio, australia. That means were shipping them. Its better for the planet. It costs less with the customer. And also its what weve done in berlin, what were looking to do in france. There are so much uncertainty in europe at the moment. So much of our business is there. And well be able to make beer in france because its fairly uncertain whats going to appen. Thanks very much. James. Good to speak to you. Thanks for joining us to tell us what youre your going to spend that money on. James waut, founder of brewdog. B. H. P. Big mining giant setting out some Climate Change giant for reducing Greenhouse Gas emissions. Were expecting to hear today rom b. H. P. B. H. P. Supports the aim and effort to limit warming to one and a half degrees sells you. They said that and the mines are going to move to 100 renewable energy. So these lines continuing to. Aw as by track up next on the program, leverage finance get off to a slower start than normal. The head of the mere Leverage Bank at j. P. Morgan joins us next. This is bloomberg. Anna welcome back to the European Market open. Were waiting here in europe for later. B. A little bit on. Features are down in london. Central banks stimulus are putting debt market into suspended animation. The money pumped in to combat pandemic itfrom the ill have an affect on to the data. P. E. Firms are pushing aggressive deals in order to shareholder dividends. We are joined by ben from j. P. Morgan. Im not sure if thats a physical event oar virtual one. But welcome to the program from that event anyway. Let me ask you about what youre seeing in terms of issuance. Theres a lot of news you in terms of leverage finance. Maybe we got off to a slower start for september. How would you expect that to develop throughout the rest of the year . Ben sure and thanks a lot for having us on the program. Here at the conference, yesterday was on day one. Pleased to say were off to a great start. 100 ishish shooer shoers. Were in day two. And well wrap up tomorrow. But to your point. We are a bit off to a slower start here. As we come into september, we had a torrid june and july in terms of issuance here inee europe and a robust august in the u. S. Market. We are coming into september, slightly slower, at least in europe and the u. S. Its a very robust level of activity this week with over 10 billion pricing already this week in the u. S. High yield market alone. In europe as we look forward to the calendar that were tracking of either refinancing or transactions that we are involved that had nonbeen announced, were only tracking 20 billion euros. Our strategists are calls for about double that number to be issued between now and the end of the year and socalled plus or minus 40 billion across leverage loans and high yield bonds. It is a very sustainable and digestable mark if you benchmark whats been done in europe plus or minus to 110 euros has been issued across the high yield bonds. Were tracking roughly the same volumes. Matt ben, why the discrepancy between the european and the u. S. Leverage loan market . What have they got that we dont . Whats the difference . Theyve got more money is the short answer. Its a great question. And and those of us in europe have a little bit of market envy about whats progressing in the u. S. If you again to sort of level set the bid the markets in the u. S. Are between four and five times as large in terms of the amount of debt outstanding in the leverage market acron loans and, or bonds. We you would expect that were running it at a slightly slower pace sort of in keeping with that differential and size. There are a number of factors that have played into that as we try to pick apart why we are a little less robust in terms of issuance. Part of that is down you to just a different mentality in the u. S. Market. It is, as i mentioned, a much deeper, more lid market. Youre liquid market. 1. 8 trillion issued in terms of high yield outstanding. So its a very deep market. But part of it is, i think the issue and borrower base in the u. S. Is more comfortable accessing Market Solutions when they need liquidity as they did in the marchapril period. Whereas in europe the first line of defense is to go back to your commercial banking relationships so you can squeeze more money out of them. And also europe has done frankly a fairly good job in providing governmental su port earlier, sooner and more robustly than what happened in the u. S. For that reason more people went to the u. S. Market quickly. Ana another thing weve seen in the united states, and i wonder if it comes to your as weapon. In the europe weve seen loan to pay private equity. Do you see that in europe . I do. Were starting to see a little bit of that activity. Whether its been a small number of transactions that have been putt on the table. But if you look at the level of dialogue that were having around those types of solutions. I do think well see some of that playing in europe. Europe is a conservative market in terms of its leverage finance and youll see that across all kinds of different metrics including the cond cease here in high yield tending dispute toward the noninvestment grade market. But there is there is enough risk tolerance to facilitate those. But i do think it will be done on a fairly selective basis and probably we wont see that as a major source of supply between now and the end of the year. But in certain instances where companies have performed and leverage has come down, i think the market will be receptive to new issuance thats coming for that use of proceeds. Matt thanks so much for joining us. Ben thompson as the head of emea everaged finance, head of j. P. Morgan. We are minutes away from the open of stocks. Ere going to look at i. A. G. Publishing details of a key 2. 7 billion rescue Rights Offering. This is bloomberg. Ana welcome back to the European Market open. Eight minutes into the equity trading session that could be mixed as we wait for the e. C. B. Minutes to go until we start trading. Lets get to our stocks to watch. Danny joins us. At the bell, we talked about this business and how resilient its proving to be from the crisis. What are we hearing . We have a preview of the Third Quarter earnings which hey announced by the 21st. They see revenues thats basically as what they saw last year, so no real impact from the coronavirus. They see sales are especially strong in europe and south america. Its part of this d. I. Y. Theme thats gotten bigger throughout the virus. It seems to be one of those businesses that not necessarily benefits but is able to weather the storm relatively well. Four two drop in capacity. A lot bigger. They saw 42 . Thats something they did announce in july was a Rights Offering raises funds to help them whether the pandemic we also have more details on what thats going to look like. Ts 2. 7 bill euro selling the shares at 92 cent a piece. This is a 36 discount from what the shares are projected. We had iada headlines saying that the u. K. Industry needs Government Support to continue on as well. So a lot of negative headlines coming out for British Airways parent today. Ana weve seen other airlines trying to raise money to shore themselves, havent we . What about job losses in various businesses around europe . I. A. G. Has been trying to fight making job losses. What about schafler, the job losses there . Theyve announced yesterday over 4,000 drops they sold off a lot on the news. We may see the stock come back perhaps getting oversold because berenberg are serious about cost cuts. Matt, anna . Matt thanks very much. A look at some of the possible movers. A lot going on. And really the broader market. We had had a redemption of the rally after we saw a threeday text slump for the u. S. Now futures are higher here with the exception of the foot si on brexit concerns, this is bloomberg. 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. Anna a minute to go into the cash Equities Trading. Good morning. Here are your headlines. Tech turnaround the biggest rally. Bounds tesla lead the with tesla jumping over 10 . The two sides hold an emergency meeting today. Class growing confidence. The euro gains ahead of todays e. C. B. Meeting. Policy is set to stay on hold as bloomberg learns there is a reduce need town the line. Matt take a look at futures right now we saw gains we see ains on the con innocent about. 2 . Futsi futures are falling however. The European Markets open up live. Lets go ahead and take a look at the global macro movers screen. You see a range of Asset Classes here across the columns. The far left side column is here the futsi is opening you. Very little change up at the there a little change. Although down at the open just slightly. And we expect to see in terms of the continental indexes, certainly in terms of the dax a small gain. The dax will take longer to open than any other. Very little change. So it does look like these equity indexes are searching for direction with the exception of e futsi which is falling further. About. 2 of 1 . Other indexes basically unchanged the stockholm is down but just slightly as well. So European Markets are pretty flat as investors wait for todays e. C. B. Decision policy is likely to stay on hold. But officials have to confront a slowdown and a perceived slowdown in the recovery. Europe over 1. 18. Joining us now is Toronto Dominion bank, race strategist, fuja. What do you expect from Christine Lagarde today . So yes, as you mentioned, given the fact thack e. C. B. Stores are pretty much all up and running. We have the cue wi that theres still a lot of room in it. So i think this meeting markets are not going into it was much expectations in ferms of terms of actual deliverable. As well as the strength of the currency. I think in this week, you see you will be providing us with the updated growth. I think from all perspective, youre not looking for changes in terms of it. Because most of the data has been in line with e. C. B. s forecast in june. So i think its all about how well lagarde can actually in that could actually support you here. Which way do you expect the next move from the e. C. B. To be in the future . Do you expect inner of the action over the windor as we copt to deal with the global pandemic. O you think that that wont be necessary . So i think lagarde had tually specified to the door matt. One is protecting the family and second is the inflation man day. They have done pretty good in terms of the financial experiment and mark. If you see how hes using that and it triggered the tightest level that we could have seen join the crisis. So i think theyre not worried. But i think for them the key is how well the markets remain and terms of patient expectation. Now, even if they look at the ne forecast, were looking at inflation. And thats clearly not close to the inflation mandate. So i think what they will need do is definitely add something more or at least try to provide markets with some more changes in the composition. So obviously kiss is if best way interest he fact that rates are at c minus. It have provided us with which o thats basically as of so i dont think that stage another one would be as effective. I think we should also not forget the fact that at this meeting the recovery which was not the proof. So i think im slightly more optimistic about the way he put one out. He supports whichside is going to report on this during the crisis . Matt its i mean, we just saw the grow. Your theyre quite low. Not getting much further over 100 . For inflation on 2022 and the returned 2 et present. Would it help them on the weak front inflation and growth . Yes, indeed. Most its not a at the valuable level that they want right now. Its 10 higher than the june forecast. But i think where we stand, think if you look at the kind of people that e. C. B. Has written, theres no other currency or inflation mandate because if you see the youth strength and it ows that they did have the e. C. B. Members suggesting that one of the featurers. Nebraskas have not seen of how backed inflation. But i do think we need respect. When they look at u. S. C. , we have one that is basically trying to do everything to these kids. The economy, and we are heading to towards election. Were e. C. B. Will find it hard to find it especially given the fact that they do have limited tools and they have a limited rule set right now. Ana we look at a great deal to what the fiscal side does. And with that in mind, weve upri. He Recovery Fund d what do we know when and how its going to be issued by the e. U. And how much is that the e. C. B. Is going to buy . Yeah, i think that is one of the big hot topic right now. O he supported the Sharp Program as well as the recovery one. In terms of issuance. I will stewart this supplier in 2020. So it could have started next week as well. No one knows. Its some people cant believe the years. N here for so and you were never issued even in the mom. So i think thats a lot of supply thats coming in the market. And i think if theres so much issuance e. C. B. Needs to communicate thats them. Markets have to look soft in this issuance. In terms of the house. They superb. They have 10 in their entire Public Sector buying program of buying supressed. I think its too small to actually cover the supply thats coming in. For example, if you keep our bases off. Theyll be buying some 17 in the. Cog. She changes the competition of bppi. They could actually increase. How much can they buy off of you, dad . Its something flawed so that they can come up in 20 02021 which does focus on Climate Change. I think this would come next will support ey this fiscal bazooka that has been listed. Oh, yeah. Were going to keep you with us for more. And the Toronto Dominion rate strategist. It is e. C. B. Day. Also coming up, todays vote on the u. S. Stimulus bill is set to test republican unity which is two months to go until the election. This is bloomberg. Matt welcome back to bloomberg markets. This is the europe open. We are 11 minutes into the session. We are looking at a gain on the d after k about a quarter of 1 . Really feeling a surge for correction. 2 of 1 . Lets get the Bloomberg Business dash. The french government to help pull out of a deal by tiffany. Sources say the french businessman was influenced him. Tiffany has accused of trying to leverage protest against Police Brutality and the covid19 pandemic to seek a lower price. But they are formerly denied exactly any kind of pressure. They had reasons to have trade disputes with u. S. More woe. Theyre eliminating 4,400 rolls. Clothing were crelling several pants. The announcement follows a plan laid out last week. To slash its work by as much as 13 . Barclays is considering replacing the headquarters in times square. Theyre looking about half a million square feet of space. The high profile, financial and Tech Companies to offer office towers. But it was many employees still working from home. Thats your Bloomberg Business flash. Matt, anna. Anna laura, thanks very much. Laura wright here in london. Todays u. S. Stimulus vote is set to test republican unity. He the party facing pressure. The democrats expect it to cost between 500 billion and 700 billion. The european rate strategist is still with us. Your focus in your. I know you you cast your eye across the atlantic. What do you expect to see furrer fiscal stimulus as we head into the winter coming through from the u. S. . Thank you. So yes, i mean, this entire fiscal deal has been talked about since a couple of months. Weve had these hard numbers varying from 1 trillion, to 3 trillion. Theyre looking from 1. 5 to 2. Given the it makes it harder to bring forward effectively right now. But you then like you said 500,000 billion deal coming to the market. And thats why its easier to get through. Ill provide the entire fiscal stimulus. Which means it makes the job for fed as hard. The economy given the fact that it wont be that if you took part in the market so quickly in the market. Matt we have a story on the bloomberg about private equity sloweding on their purchases with leverage loans in order to reap a payout. The concerns is that these are quite weekly rated loans. Not just these but triple cs nd the like. Is that going to be a problem . During the crisis, like for example, they will be in the buybacks program. They have eased their conditions jump off the paper by reducing haircuts. And they will support any such blowup in the market. I think thats why you can see why you can trace more e most of it that we had seen during the crisis. I do know they will need to reduce it. And especially the last part of it, it will become critical when we could see potential downgrades coming for companies. At this stage, i think there would be a possibility that they would need to consider it in their Buyback Program if its too intense. Whatever we see the entire economy seems to be in the crutch of the stimulus package that is provided. Thats why you buy your market markets are buying junk paper because they are the supporter for it. Anna thanks very much. Senior european rate strategist. She will be continuing our conversation with us on bloomberg. Coming up on the program, british zombies, a conservative think tank says that 15 u. K. U. K. Can barely cover payments. This is bloomberg. Welcome back to the European Market open. We are 20 minutes into the European Equity market session, which show as flat performance on the stocks 600 as a whole. Elsewhere we see gains. The dak up 3 . Back into positive territory during the first 30 minutes of todays session. 15 companies in the u. K. Are zombies. Thats a cording to an american think tank which says the economic recovery will be capturedly crippling level of corporate debt. Joining us now is miles celic. Miles, very good to speak to you. We have idea of how he sold his debt problem. You would set up a recapitalization group. What are is the aim behind the group . So very simply and similar to the analysis that on ward has got gone. It recognizes an unsustainable death burden. Difficult to o be capitalize equity based lutions. They tend to rely much more on death. Theres a regional dimension. Hits them much much more. It tends to be gross capital rather than Distressed Capital about 2 of the capital deploy into c. M. E. s investment last year was growth and distress capital. So those are huge issues. The british chains of commerce tow together with t. S. B. Also sede those report. They suggested 110 companies gould under and 2 3 of companies who take on these sorts of government loans may find it difficult. This may sort of drag it for them in the months ahead. What do you think of the idea of the government, you know, taking an equity stake in these ompanies for forgiving the debt . Does that make sense . Thats not the propose sale proposal that we put forward. Typically governments larfully the u. K. Do not like to take equity stakes in company. Hat you need is a sweep of options that will work. One of things that we talked about is the Covid Business per payment plan, which is in essence a contingent tax liable. So you create an obligation that is administered by an arms length body and repaid through the tax system. You can say its a bit like a student loan. So repayment is dest based on the ability to afford those repayments. So once you reach a certain amount of revenue, you can then start to repay. And there are other options as well. Equity states tend not to work well. And also for a lot o these companies are small, family owned. Theyre reluctant to go down the equity state basis. Ana you talk about contingent repayment. Changing the terms so that you only pay back money once your profitable. Some versions of similar things. How much appetite is there for thes to get swrolved this. And why does it take the governments to act here, miles if there are so many private Solutions Coming forwards. What is the role for government . What do you need the treasury to do . Excuses k one of the that this is not stress capital. Theres the ability to get that money into those companies. And its going to be an important part not at least because the government loan screams theyre a large part of the debt that theyve taken on. Weve got companys that were economic viable. And after the crisis. But at the urging of the authorities theyve taken on this additional debt. So there is a role here for government working with the private sector to unlock the money that is available. I think one of the big challenges is going to be making sure that this is something that fwrorks the point of view of the taxpayer. Because ultimately, the risk if they go under is on the hook there. The guarantee is 100 from the taxpayer. Im having a solution from the private sector. Save the taxpayer of the guarantees. And saves the cost later on. Theres a natural complimentary to help solve this. Matt thanks so for joining us. Its one of the most stories concern that 15 companies in the u. K. Can barely pay its debt interest costs. Now, speaking of Companies Making changes, job cuts at scheffler spelled more whoas for the german car industry. Speaking with clause rosenberg next. This is bloomberg. Welcome back to the European Market open. 30 minutes into the trading session thats quite flat. Eurostoxx 50 flat lining. The dak, just turning negative. It had just about erased the losses for the year. The year to date number had turned positive but now that is that is that is reversed if you like. Lets go get the stocks that are on the move, all the sectors that are on the move this morning. If you look at anywhere where those limited gains might be coming from, you see them doing well. 8 of a percent. Matt all right. Lets talk about one of those sectors. One thats doing quite well. In fact, first lets go to laura wright in london. And then lets get to one of my favorite topics the automakers. Laura the e. U. Is considering legal action to withdrawal the brexit agreement. The blocks initial analysis suggests it may have a case before Boris Johnsons controversial plan is written into dough mystic law. The threat prompted a warping from across the atlantaing. Nancy pelosi said there would be no chance of a trade agreement with the u. S. If johnsons action threatens peace in northern ireland. Donald trump intentionally down played the severity of the coronavirus in march he told the journalist he down played it to avoid price spikes. Joe biden said trump failed to do his job and is responsible for tens of thousands of deaths for not giving adequate warning bout the cry vie russ about the virus. A study of more than 4,000 species found the biggest drop in animals dropped where populations fell by 94 . Ing a cultural and land use are a key driver and converted into farmland. But Climate Change has also been a factor. Powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Ana, matt . Matt laura, thanks very much. Laura in london with your first word news. Now on to automakers, parts maker especially job cuts fell more woes for the german car industry. The supplier is eliminating 4400 jobs more than 5 of its workforce and closing or selling several plants in the home market as the impact of this pandemic bites. Joining us is clause rosenfeld. Thanks for coming on to program. Talk to me first about what kind of recovery youre seeing because you are indeed seeing a recovery. Youre saying, youre not going , do get back to 2019 levels maybe for five years. Matt, good morning. Yes, were seeing a slight improvement. The measures we have announced are not temporary theyre structural measures. We know were going through a transformation. We have to reduce our dependency from the come bust onengine. And we have to amplify what we did in the past and speeding up ur transformation. Anna sorry, go ahead matt. Matt i want to talk to you health e possibility of and aid. Miracle has resisted calls for more state aid for auto parts maker. But do you think its necessary . Effler is aaklaus well, scha bigger supplier. Madam chancellor Angela Merkel has done a lot here. There were problems a month ago. , wear, we at schaeffler have always decided to go for selfhelp, and that is what is behind these measures. It is now important that we execute them. About 8000 ton, 200 50 jobs, another problem that has been intoviewed into last year, the selfhelp attitude. Have the selfhelp attitude good morning, klaus but are you concerned about what more they can do for the sector . Are partll, clearly we of a group that is in constant discussions with our bavarian government, our german government, and we participated in the summit. The overall transformation of the industry is important. We need to look into the future. We need to look forward to the future, and that is what we need to do at schaeffler. Anna how much would you attribute to coronavirus and the slowdown, and how much would you contribute to the structure of the electric engine . Two is the balance of those factors when you decide to make these redundancies . Klaus well, that is a little bit difficult. This is targeting germany and europe. Lothe past, we have done a outside europe, and now it is important to optimize our footprint to slimmeddown overhead and also think into the future and think in terms of investment. It is clearly paying attention to the structure shift. We need to focus at the schaeffler group, and it has been agitated by the more difficult environment. We are losing 20 million cars this year. How fast it will recover remains to be seen, but i dont think recover worry will be recovery will be vshaped, at least not in the auto industry, and we need to prepare for the future. Are raising 1. 5 billion. How far does this go into restructuring, and do you have further Capital Needs beyond this . Klaus let me clarify that we are not raising capital, we have asked for an authorization, and an authorization is not an issue that is important to understand that is a big difference. The authorization has been announced some weeks ago, and it is they are to complete our toolbox on the financial side, but it has nothing to do with the restructuring. Let me say this very loud and clear we have no intention to finance restructuring costs through the capital rates. These are two different things. One thing is for the toolbox, the other thing is to accelerate the transformation. Matt matt so does that mean you dont intend to raise capital, you dont need to raise capital any time the foreseeable future . Klaus again, theres no need to increase capital with respect to this restructuring program. Schaeffler has always been a cash flow bond company, and we will continue to focus on our cash flow generation power, so once again, we are not going to refinance restructuring costs out of the capital increase. All right, clouse, i have one klaus, i have one final ins,tion about supply chani because there were questions about Companies Want to bring their supply chains home, and obviously automakers are right next door to you. Do you feel like you have an edge over competition, even if the recovery is not vshaped, do you see more european carmakers doing what they can to bring a supply chain back closer to home, or is the industry still global that it will not make that much of a difference . Klaus i think the Real Advantage we have is that we are more diversified. We are a Global Automotive supplier. We have a Strong Industrial business that should never be overlooked. We are an automotive and industrial supplier. That gives us more stability and also more optionality Going Forward in making schaeffler stronger. In terms of the supply chain, so far, the supply chains have kept up so far well. Yes, we are monitoring very carefully. That is what we are doing. I think that here, it is important that the risk that may still sit in the supply chain becomes more understandable. We see, at the moment, that all of our suppliers at schaeffler hold, and we are in constant talks to make sure that this also continues into the future. Anna thanks very much for joining us, klaus, klaus rosenfeld, the schaeffler ceo. Coming up, the eu considers suing the u. K. Boris johnsons plan to breach the brexit divorce deal. We are live in the belgian capital next. This is bloomberg. Anna welcome back to the European Equity markets increasingly negative as we going through this mornings down to u. S. Futures the downside. The European Union is considering action against the brexit it approaches agreements. The eu believes it may have a case even before the uks internal market failings within domestic law. For more, maria tadeo joins us from brussels. Maria, what kind of legal action is the eu pursuing . Anna, this is information we have on the terminal, it is a bloomberg scoop, and they are looking at whether there is already a breach. Any still believe in International Agreement that has to be respected. To what they are looking into is whether or not there is a case to be made to potentially sue the u. K. , and of course that would open up a whole debate as to whether there is some type of a financial compensation here. But what it does on a more political basis is to really highlight how the negotiation has taken a much more aggressive tone over the last ornate hours. An unwind elements that the European Union still insists and they continue to highlight has to be respected. This is an agreement, the product of three years of work. They still believe this is an obligation that has to be respected, respectively, and has to be done in a way that is different to the trade deal, whether or not there is a trade deal, the exit has to be respected. Maria,ow much of this, is about negotiating tactics, and how much of it is, you know, risking the possibility of no deal . Maria yes, matt, there is a lot of speculation happening today in brussels. The optics, tactics, you have to play the part, always going to be a difficult negotiation, and what was around is this is almost a u. K. Reciprocating a crisis, triggering a crisis early on when negotiations have stalled. Theyhave been arguing that are locking the talks, something now for eu leaders to step in and get more involved, and that this, you know, this new crisis could serve to get the attention of european leaders when they come here in two weeks time, a brussels brexit, once again, they cant stop the agenda. This is something we hear, it perhaps in a very machiavellian way, intentional. What i would highlight is the move from the institution is that they are worried about this, and it is not a good way to negotiate something that is forwardlooking, if you cannot trust that everything has been agreed. Matt all right, maria, thank you very much, maria tadeo, brusselss there out of on the latest in brexit. Wealthy investors are getting increasingly nervous about the stock market fragility, and to cope, they are turning to an industry that has fallen out of favor in recent years hedge funds. We are going to talk about that with bloombergs dani burger. What about investors reversing course here . Dani the death of the hedge fund is too premature come a lot of calls there, but the highlight that the firm are increasingly putting their money behind hedge funds. Other investors like george soros family fund, putting their money into hedge funds. Investors are getting more complicated at this stage. The fragility that was really illustrated by the recent selloff. It also has to do with the affluent,among the that depending who comes into office, be at the presidency and congress in the u. S. , there could be changes to the Capital Gains tax law, so they are putting their money into hedge funds, hoping to avoid some of those costs that might come, if there is a change in leadership. Dani,on another subject, and the most recent selloff, there has been a lot of blame placed at the Options Market door, but there is a question of how big a role the Options Market really plays. Yeah, the idea is there have been a lot of call markets, so that has prompted some of the rallies, the selling of which prompts some of the fall we have seen in recent days, but according to the securities, yes, it has been a big feature, but it is not the only reason. He says that there are a lot of things bearing down on stocks and really says it could be a simple as the 80 runoff we have in stocks. S matt there is also news in the market space, private equity firms, rushing to the leverage loan market to fund their own payouts. How risky is this . Dani certainly some risk here, matt. Are putting you more leverage at the company in order to fund payouts, higher default risk. This is not new or novel to the finance industry as a whole. You know, they are concerned about liquidity in the current environment, m a, ipos. Those sorts of exits are becoming more rare, more complicated as it stands, so this is a way of getting more return from the folio companies in the current environment. Interest rates are so low that it is no wonder leverage loans are becoming more popular. And the kind of deals we have seen, they have been in more companies, like packaged goods, for example. This is not Something Like just stacking that onto a company. There doesnt seem to be a fair amount of due diligence. Market seemsloan to increasingly be more taken out by these types of deals, matt, anna. Matt dani, thank you. Anna dani burger, discussing some of the stories we are watching this morning. Matt [laughs] sorry, anna. Anna [laughs] coming up, we will discuss the outlook for the currency with the market live. Anna welcome back to the European Market open. European stocks to the downside, now. 3 . We are awaiting of course for the ecb. It is efficient day for the ecb, though not many people are expecting much action to take place. The lessee will stay on hold, but officials have to affect a stronger side. With ben. Now the spotlight shifts to the euro. How much spotlight will be on the euro, do you think . Ben good morning, anna. I think all of the spotlight will be on the euro. They are not expected to do itthing on the baseline, and is also expected to stay as it is, so pretty much all of the the jobt, particularly running of the currency,