Good morning and welcome to bloomberg survellance. Francine lacqua here in london. The interview of the day is when we have a conversation for the Vice President from facebook emea. That we also heard from ursula von der leyen, the president of the European Commission. 225 billionlanned euros in green bonds that may have an impact on markets. Later on we look at etf. Stocks are actually rising ahead of the Federal Reserve meeting. Treasuries and the dollar pretty much steady. Crude oil extending gains. Lets get straight to the bloomberg first word news. Ruled the u. S. Violated International Rules by imposing tariffs on china. It is unlikely to lead to changes in washington. The white house can veto the decision by appealing. It has paralyzed the wto by blocking new appointments. President trumps controversial pick for the Federal Reserve senateoes not have the support needed to win confirmation, according to the number two republican in the chamber, senator john thune. Received criticism for monetary policy. Will not backs kirk, and others are on the fence. Fires continue to rage from california into washington state. More than 5 million acres have burned killing dozens of people. Air quality remains poor, and breathing in some areas is hazardous. Some impact has made its way to the northeast. Skies over new york have been a milky gray due to the jet stream carrying smoke across the country. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Francine ursula von der leyens state of the union speech is going on now. Is in brussels. What can you tell us about the green bonds . Saying, as we knew , she will ask to cut emissions by 55 by 2030, and that is when the green bonds would come into play. To finance these projects, she is and the European Commission wants to commit 30 of the recovery package. You are looking at 225 billion euros of new bonds that would be green entering the market. You would think these are aaa bonds. We will see more issuance from the commission and tapping into the est space esg space. Add there is an interesting line, saying there is a clear warning for the european industry. They have to work with the commission and what is good for climate has to be good for business, no excuse Going Forward on not complying. Francine thank you so much, maria tadeo in brussels. She will continue to monitor that speech for us. Lets look at the other key events. An Economic Forecast for g20 economies. The british Prime Minister will be questioned by u. K. Parliament liaison committee. And the fed holding his last meeting before the president ial election will publish its decision. Investors are hoping for guidance on what policymakers do before raising interest rates. Us, goinger joins check out mliv for great content. Thank you for joining us. When you look at what markets are looking for, what are they anxious to hear about from the fed . Laura i think markets are eager to find out more clarity about this new operating framework. Spur price expect to pressures given we have not seen that for a number of years. And how hot is hot inflation, and how long will they allow inflation to run above the 2 target is achieved . Markets are looking for other nuggets of information. We see a shift to outcome based guidance, that is a muppet happen today, but off the radar. And in terms of quantitative easing, the bond purchasing program, the need to ensure markets are properly functioning. That is clearly not an issue currently, so we do not expect to see essentially the fed signaling a shift further in terms of those purchases. That is to ensure they are able to offset what is expected to be a flood of issuance from the treasury for the widening deficit. So much, thank you laura cooper from our mliv team. We will have coverage of the fed meeting through the day, and do not miss our special. Up, an exclusive conversation with the facebook Vice President for europe, nicola sharon mendelsohn. That is next. This is bloomberg. Francine economics, finance, politics. This is bloomberg survellance. An austrian politician is proposing sweeping law on hate speech, and they would join germany with its own laws in this area. Kardashian says she will be freezing her facebook and instagram accounts on wednesday, and asked others to do the same. She says she cannot sit by and stay silent while the social platform lets hate, propaganda and misinformation spread. She has 188 million followers. Joining us for an exclusive conversation is nicola sharon mendelsohn, vp, emea, facebook. Buildk also launched brilliant brands, and she says there has never been a more pressing time for businesses to think of the major shifts we are seeing from the pandemic to the shifts in social consciousness. Always great to speak to you. That start on the things have come in terms of misinformation, and people putting more pressure on facebook to get a handle on it. The way facebook operates will change because of these pressures in the next 18 months . Nicola i think if you look back 18 months, we have made large changes in this area. On the area of misinformation, we publish quarterly, and a big increase in the amount we are taking down due to the billions of dollars of investment we have made in artificial intelligence. It also on the content moderators, we have 35,000 people working in this area. Change, youinue to can see we are taking more things down, we are not catching everything. It is our intention to keep moving to get as much off the platform as possible. Francine you are using ai to find hate speech. Is the type of hate speech evolving question mark and is the colts revolves, there are new things people hate . Nicola language changes, and the way things are referenced changes and evolves. We have a centrals, commit we had we have a set of her that he evolves. We work with different organizations around the world. Top of sure we stay on the current changes in language. We are seeing a big shift in hate speech. If i look back several years, we were only taking 25 of that down. In the most recent report, we are able to take 95 . We often get it down before it goes on the platforms so nobody gets to see it. That is what we want. Some feel we profit from having hate speech on our platform. The investments we are making show how clear we take this issue. Francine why do we have celebrities like Kim Kardashian boycotting . Is an unusual thing. When someone is boycotting Something Else it is because you disagree. We do not disagree. We share the same views, we do not want hate speech on our platform. You see the efforts we are making that we have come a huge way, and we take our responsibility clearly to get it off the platform. We are talking to civil rights organizations who say we are not doing a good job, and just last month the Eu Commission put out and a valuation and said that facebook of all the platforms takes it down the quickest, and is taking the most down. We are not satisfied, there is more we need to do, and we will make the investments to get that off our platform. Francine some of the big brands who have boycotted facebook, have they come back . Nicola a lot of advertisers have come back. They see the efforts we are making, and that we are coming together and listening. I number of advertisers have ofe together a number advertisers have come together in responsible media. Up to them, and are working through that organization to make sure we listen and address those advertisers. Francine what responsibility to Mental Health does social media pop froms have . Nicola we have a huge responsibility. I am personal basis grateful to jump on instagram or to be a support for my friends and family as they support me. We are talking about difficult areas. Of peopleajority coming on our platforms are coming because they are able to connect with friends, family, the brands, the celebrities that matter to them. That is part of the service we are providing every day. Francine a lot of regulators are looking at how you use data, and why you send it back to the u. S. Why doesnt facebook just keep the data in the countries where the users are . Nicola this comes to how data is organized when it comes to a social media platforms like ours. In america and i live here, where said that data reside . It would have to reside in both places. Moment a way to transferred data across the atlantic under the rules and regulations. Do you think sometimes you are trying to explain, but facebook has changed and people do not realize du believe facebook will be a force for future . The Nicola Facebook is evolving. I have been with the company for seven years. It is a Different Company from when i joined. [indiscernible] this is a book that has been published and it comes from facebook. It is from a council i set up six years ago that brings together leading Business People from the worlds biggest firms, traditional businesses and new businesses started online, and advertising agencies. The world of marketing is reflecting where attitudes are. The last six months has shown us that the world is changing at an unprecedented rate. This book is a collection of 22 essays from leaders in the industry talking about things they think of change, rings that should stake things that should stay constant. At the heart of it, it is about business growth. If you want to communicate to your customers and sell things, depending on your business, you need to do it in a way that can engage customers and consumers. , and ifk is for anybody you want to learn were marketing is today and learn from the best and Brilliant Minds in advertising and marketing. Francine it is timely because of the lockdown. Small businesses will want to advertise through social media platforms to grow their business and make up for business lost elsewhere. How do you think the lockdown will transform social media . In the past you have been called the publisher. Will it enable businesses to flourish more . Nicola we are already seeing that. The data from numerous sources talks about the fact that in the first three months of the lockdown, business is moving , what would have taken 10 years took place in days. Shows is 46 of Small Businesses that are open, 50 of their sales are coming online. That is a huge number and a big shift. We are also seeing 39 of businesses that are thinking how they can move their business online. We are seeing that on a personal basis. The personal trainers offering online classes, or restaurants, or shops going virtual because they cannot have people visit their shops. It is a big shift in a short time. Francine is working at home u. S. Were staff can stay home until 2021 . Nicola it is exactly the same something we have looked at globally. We want people to have the option to work from home. Offices are closed around the world for a handful of people. That can be done from home, we want to make sure we are looking after and protecting people at this time. The different ways people might work in the future. We are looking for people that might want to join us from remote locations. I am not sure we would have thought about that if we had not gone through this experience. People are starting to work for us who will never have the intention of working in an office. Are you expecting Mark Zuckerberg to come and testify in the u. K. . Nicola not many people are traveling anywhere, and that is one of the things we are looking at from a company basis. We are not suggesting people go out and travel at this time. Francine something that caught my eye, in your section you talk about the Seismic Shift the industry will go through in 2020. What is the one thing people underestimate about what covid19 has done for Small Businesses . Nicola one of the things they underestimated is the fact that Small Businesses, how much they can achieve online, and can communicate. What we have our platforms is the opportunity to replicate what it is when you are in a shop and see something that catches your right. Catches your eye. We have gone from a world where you type in, this is what i want, but some of these popped up in my infeed. They attracted me, so i thought, i will go out and buy that. Thingk that is the new and something that can drive business growth, which is so crucial at this time, given the challenges. Francine thank you for joining us. Nicola sharon mendelsohn, vp, emea, facebook,. We also heard from ursula von der leyen, president of the European Commission. This is part of a new climate goal. You executives are proposing eight toughening a toughening of the claimant target. This is bloomberg. Francine this is bloomberg survellance. Im Francine Lacqua in london. We just heard trump ursula von der leyen we just heard from ursula von der leyen. She said the endeavor to reach the tax deal is close, and on brexit a timely Brexit Agreement is starting to fade. I do not know if it is having an impact on stocks, but markets are still up. We also heard that the eu wants a massive economic overhaul. We will have plenty more on that. As traders rush to buy the dip, we talked to etf. This is bloomberg. 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A. At of ishares e. M. Blackrock. Im so impressed with your credentials. Talk to me a little bit about what you are most excited in the etf market right now. I Asset Allocation trends, they are coming through. Pronounced. Number one is the really going out of the traditional areas, so diversify the diversifiers, and here we have seen a greater rotation to inflation exposures out of rates, and the news comes become so low, it could go lower even at times of volatility. Income goingseen into superdrive. We are going to be at this zero rate environment for an extended period of time. If we think that this comes with it has become so much more. Ire now on bothscoring high metrics. So far this year, that is with the China Bond Fund it is the Fastest Growing asset gathering ishares we have seen in recent years because of the trend. Is e francine give me a sense of what we could see now until the end of the year. We have seen to a activity coming into december in terms of market volatility, and looking at what could derail market momentum from now until the end of the year, volatility will be here to stay, and the activities will be here to stay as well. You talk about activities in the Technology Sector influencing exposures outlook into Technology Sectors last week, some of the funds saw the biggest outflows in decades. There is a lot of twoway activity. Have strategic portfolio resilient and mine as we look at longterm Asset Allocation. Francine give me a sense of how the European Market is catching up with the u. S. , if at all. Are we going to see a much more mature market in the next couple of quarters . Well, the etf industry is catching up with the u. S. Arket very quickly it has definitely helped with the kind of transparency, in terms of liquidity on exchange, and also with greater adoptions by all client segments from for european etf industry is long, and you also have come a long way as well. Have seen a light of a lot of Exciting Development as well with products. Europe is leading globally and also funds in the pipeline and also very much playing to the fact that investors want to popular, themes are and also want to go beyond the lows of economic cycles and really want to have that thematic longterm exposure in their portfolios. Those products of the latest ones we have. Francine wei li from blackrock stays with us. We are taking a look at which countries and sectors are attracting the money. Dani burger has been analyzing the numbers. Dani this is a look at european tracking etfs, and overall the region in terms of things that attract it, we saw a net flows of 15 million. By one to pick up on the conversation you and wei li had on the maturity of the European Market. Often in the u. S. Market we can look at these lows and get a good idea of sentiment over the past week. This is the past five trading days. If you look at the number one flow getters, switzerland with 80 million of inflows, two of the big products that received them were ubs ones. These were institutional products. It is hard to look at the top inflow getter and say this is a big play toward switzerland. I should say if we are seeing any play toward switzerland, it does have a lot of quality cyclical names which are more attractive as we enter this period after a bit of a rocky week last week. Looking at france, this is an interesting one as well. 14 million net inflows over the past five days despite the fact that they have had a rising coronavirus case count. We are seeing spain near the bottom of the list, spain of course another one of these European Countries that started to see a greater outbreak. When it comes to the united kingdom, there are a lot of etf plays you could do with the u. K. If you are concerned about a hard brexit or just want to play the volatility that comes with that. You have currency tracking etfs, pound hedging etfs. Investors staying on the sidelines over the past week, perhaps scared to dip income or rather just holding on to what they already have. Perhaps people were ready for the recent changes. Looking at the bottom of the list, we have sweden. There is some concern in sweden in terms of valuation, looking at priced equity ratios. It is one of the more expensive regions, so perhaps more of these concerns over valuations at play. Germany had been in favor the week prior. This is more of a cyclical play that we are seeing. Germany having pretty strong price momentum as well, what it looks like the etf market is taking some profits. However, e wg it is an ishares product. It is listed in the u. S. This is the question of maturity. Perhaps some of that sentiment we are seeing in the u. S. Listed etfs, if germany is a good play with more cyclicals as well. The really a divided week across the board, but still im pretty interested that the growing coronavirus case count isnt showing up in sentiment three etfs. Francine dani burger, thank you so much. That is a very good point we will have to export further. Still with us, wei li from blackrock. When you look at which countries will outperform, it was interesting to see some of the trends. Do you see a big disparity between the French Market and the German Market . Seeing are increasingly differentiation in the performance at how investors like to play their Asset Allocations on a country level and a sector level as well. European equities have seen competitive inflows for three months now, when u. S. Equities are dropping with the allocation trends. A bit more are differentiated, given the fact that not all European Markets would fare equally, in terms of kind of the covid containment measures and also in terms of how exposed they are, how susceptible they are to the stress of the euro, where we are seeing it increasingly come to us. We want to allocate europe but we want to acknowledge that lot, and strengthened a which sectors will be more resilient as we build up our european Asset Allocations. Globalctor level, yesterday, sector inflows are at an alltime high. We definitely see investors recognizing that at this point in the comic cycle, it is no longer a situation where this point in the cycle, it is no longer a situation where, we are seeing increasingly sectors being selected by etfs. Francine coming up, a survey of executive sectors in europe we will ask the region that we will ask why the region is behind the curve, and that is coming up shortly, and this is bloomberg. Francine this is bloomberg etf iq europe, everything you need to know about the funds in the flows. How will the etf market grow over the next two or three years . The Exchange Traded funds have been built on lowcost products. According to a survey of etf investors by j. P. Morgan asset management, by 2023, active managed products will makeup 23 Asset Allocations. That is up from 18 today. Lets get more with a reporter. Why do investors expect active etfs to become more popular in the next few years . Great question. The recent approval of nontransparent etfs will have a lot to do with that. It will be a big driver for the etf launches and this will allow Fund Managers to finally shield their strategy and competition of etfs from copycats. In europe, it has not yet been approved but there is a Love Interest for it and there is a lot of speculation that european follow the sect in the next the sec in the next few years. Growthe where will becoming from in the next few years . Esg thematic and experienceetfs to growth over the next few years. Esg has been a popular topic in europe this year, and according to citigroup, about 50 of all new etf lunches in 2020 were launches in 2020 were esg related. They were leading almost every month of this year leading to 13. 9 billion euros in this year alone. It has always been a popular theme in europe. It is a product that europe is leading compared to the u. S. Etfs market, and esg topic is expected to continue to remain popular. Somethingis there that will actually accelerate this move into etfs even further . With the recent events we have been seeing with Climate Change and protest in the u. S. , this has also been accelerating this topic. Obviously one some major issuers as blackrock make it a major theme of their focus of their strategy and they are trying to revamp the etf holdings based on esg, all of these factors are really driving the flows into esg, and as Northern Trust has earlyn early 20 connie 2020, we expect this decade to be the esg decade. Francine thank you for all of the insight. Lets discuss some of the threats to growth and opportunities for expansion of europes etf market. The with us, wei li from blackrock. When you look at this report saying active managers are coming for a quarter of etfs portfolios, is that really the case . Is that something youre looking at . I would say there is not a clear distinction between the active part of the portfolio and the etf part of the portfolio. Measures are being very active now Asset Allocation and you talked about the turnaround, active beingsg and looked into as part of that as well. More recently blackrock launched a multiasset esg etfs and it very much is a allocation piece within the record itself. That in itself is another innovation that brings you angles that investors are opting for in a neat package. I would say the line between access and etfs are increasingly blurred. They are looking into that. Francine thank you so much, wei li from blackrock. She stays with us. Coming up, how will the Coronavirus Crisis affect where we live and work. We focus on an investment that targets growth cities. That is coming up shortly, and this is bloomberg. Francine this is bloomberg etf iq europe, everything you need to know about the funds and the flows. Im Francine Lacqua. With day traders rushing to buy the dip, the nasdaq has notched up his best in creek in checking 1. 5 trillion in the space and just eight days. Leverage products risk wei li from blackrock, what can you tell us about these types of investments . Wei i think it is important to look at the inflows in the context of the broader picture as well, so the inflows into the leveraged tech exposure, but outflows we make the observation that over interest for nasdaq futures is at a fouryear high. So it very much reflects the very positive sentiment out there for the Technology Sector. Moreologies making up for than almost half of the overall sector inflow, so it is a very popular sector, and investors are using a wide range of tools to get exposure to that. Having said that, inflows it is also quite choppy, inflows, outflows. Qqq, the u. S. Asset etf, saw the theest weekly outflow in secondbiggest come actually, in 21 years of history. We are talking about a lot of twoway activities, very much affecting investors with both views on the exposure of meetings and exchange to express their views. Talk a lot about liquidity. Is there a worried that there will not be enough liquidity . How do you stress tested products . Look atould actually various periods of volatility so far this year and point to that as examples of stress tests. One specific exposure that i want to single out is fixed income etfs. For a long time we hear fixed income etfs, they havent experienced as much stress test similar to 2008 Global Financial crisis, but looking at what has happened so far, we would say that it is very much etfs comingofage and particularly fixed income etfs demonstrating that at times of crisis, it is the place where investors look to for price discovery. So this year has been a terrible year, covid crisis and a lot of uncertainty, but it has been a good year for the etf industry because it has provided a few excellent case studies of how reduce the stress of markets and reduce the stress test. Francine wei li, thank you so much. We will get more from blackrocks wei li in a moment. Lets take a pause to dig down into some of the Exchange Traded funds you may not have heard about. Here is dani burger with that. Dani there has been a growing investment style or strategy over the past couple years, and that is this idea of smart cities, that cities are going to become more interconnected, the technology for things like security and transportation are going to advance. There is an etf for that. In october of last year, a monday launched a smart city etf. Blackrock followed behind earlier this year. Undi. Nit t to focus on theres a question as to whether the city centers are going to look the same during this pandemic and after this pandemic. Are we still going to see increased urbanization, which to a large extent is what this etf is betting on . Some of the things it includes, it targets smart mobility, infrastructure, waste management, wireless connectivity. You have to imagine that a lot of those things are just getting accelerated by the Coronavirus Crisis. Things like 5g, smart homes if you are spending more time at home, if youre escaping into your work hall, you one better internet, you want to be better connected. Also transportation on the flipside, there is a question to what investments there will look like. Both these etfs do have an esg tilt to them because the future of cities of course is a sustainable city, and we have seen that trend continue to survive throughout the pandemic. This etf, amundi, has gained 13 this year and it has outperformed. Atperforms well overstock. Com, for example. Hasping online certainly done well. To the downside, it is betting on bigger cities, so it has a lot of forms of entertainment, has gyms, cinemas, and six flag is one of its investments. That six flags is one of its investments. Will smart cities survive . If they do, will this trend have to change . For now this etf performing very well, francine. You so much,nk dani burger. Wei li, when you look at the themes, will this be the etf that gets people excited . Wei i would say thematic etfs rcep citing. Are so exciting. Clients bring them to us, we bring them to clients, and i think so far it is very much accelerating on the thematic platform. Specifically looking at this etf, ishares also has a similar one. At the beginning of the year, we launched a product and clients are excited about that. So how is it devised out of the covid crisis . 5g, greater emphasis around infrastructure spending, transportation, all of these themes, clients want to know how to get exposure to. A value, is a bit of too. So clients are looking to time when could value finally turnaround. This is something that is also. Coring quite well and is somewhat rare for having a bit of a value angle as well. Really exciting thematic platform, and i think this trend is definitely here to stay. Thank you so li, much for all the insight. The head of ishares Investment Strategy at blackrock. That is it for this weeks iq europe. Tf we will be back with more next wednesday, 9 30 a. M. London time. In the meantime, enjoy etfs. This is bloomberg. Francine fed day. Stocks steady as we await clarity from jay powell on the new inflation policy. Ray dalio says fiscal and monetary injections have put the dollar under threat. J. P. Morgan is set to have to send some manhattan traders home after a positive covid test, derailing plans to restaff. Jamie dimon says work from home will cause lasting damages. Plus, facebook versus the ftc. U. S. Authorities are preparing a possible antitrust lawsuit against the social network, meanwhile Kim Kardashian urges her 188 million instagram followers to freeze their accounts. Good morning and welcome to bloomberg surveillance. Im Francine Lacqua in london. Tom keene is in new york. Tom, once again the new slow is pretty terrific, and we are getting some news out of the oecd. I think they have increased their forecast for the Global Economy, so they are now expecting the Global Economy to drop by 4. 5 instead of 6 drop that they were expecting. This would be for the whole of 2020
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