1. 1859. Bond markets also turned around. Higher in moving terms of the yield lower in terms of price. That is reflecting what is happening on the bond market as well and by the equity market. Alix, things are turning around a little bit here. Slightlyut to be a more bumpy end of the week than anticipated. Alix watching quadruple witching as me head to the close here in the u. S. The London Stock Exchange is in talks to sell boris teliana to euronext and two institutions. Joining us now from paris is the ceo of euronext, stephane boujnah. We have learned and there were other bids higher than yours but won. Can you give me insight about how that deal came about, and why . I dont know the levels of the bids, and i dont have information on the computing bids. What i know is that the board of directions decided to enter two different positions with us following the process which was run efficiently. Finalizew trying to the signing of this transaction as soon as practical. An options process without outcome that reflects the price of the transaction. Control much input, will this transaction give the italians in the process going forward. How much control will this give. Hem in euronext i wonder how this changes the balance of power . The partners have accepted finding their place. We are not creating something new. Withust welcoming the federal governors, within the board, managing board, where youd ceo is part of the managing of the company. [indiscernible] may be the big difference is the size. We would represent the largest contribution to euronext. This is the first time we are this on the european continent. [indiscernible] it is a great group. It is a large group. For example, a partner will join euronext at the top level. We are totally in line with all of the shareholders. [indiscernible] an extension of the euronext contract. The new chairman of the will be an Group Italian in the coming months. Alix maybe i missed it but i dont have clarity on how much you are expecting to own of this versus the other italians to shins institutions. Stephane the institutions that will join will be at the level of the largest shareholders of euronext. [indiscernible] a little bit more than 2 . The idea to put all italian partners, welcome them at the level of the group. In the framework of the organization. You are getting a clearinghouse as part of the transaction. On curious what that means in terms of the business, the impact that will have on the financials of this deal as well. I am wondering what the synergies look like, what kind of synergies can you extract from this deal . This stage, the deal is not even done, so i dont want to enter into the numbers. What i can tell you is that this transaction will be beneficial for all of the players. The Single Technology platform will be much bigger. [indiscernible] the portuguese exchange. This will create the largest Liquidity Pool in europe. This could aggregate Capital Valuations of 5 trillion. [indiscernible] situation where roughly 25 of trading in europe will be in these euronext platforms. [indiscernible] we are the only exchange. [indiscernible] it will have a transformational impact on the group. And they will be released in the context of the full picture of the financial profile of the company. As far as the financing of the transaction is concerned, it will be cash plus debt, plus equity raised. Just to circle back, what is your level of confidence that you will have to cut jobs . Are you going to cut them . Will you cut jobs . Stephane i dont understand the question. Alix when will you have to cut jobs in order to have this synergy . Stephane it is not a discussion of cutting jobs. We will have a fully organization. There are some areas where there will be synergies. Those will be implemented across the group. It is not the question of cutting jobs. A significant part of the synergies that we have in mind. Mean for does this europe, what does this mean for the Capital Markets that our leaders talk about so much . Stephane i think we are market, wee capital are creating a single large Liquidity Pool, in the middle of the euro zone plus norway. We have a very large platform that will have more than 1800 custom use companies. [indiscernible] cuda raise equity, especially in the environment where access to equity is very important. We will have a very powerful integrated platform to boost the financing. Rules, you change need to change. That is what the commission is doing with a great deal of effectiveness. Market infrastructures are also critical, to make it happen for real. Europe not to be a territory of finance takers but also a continent of finance makers. For many players on the planet, the revenue in this part of europe is africa. That is why we are building strong market structures with partners from all over the european union. Your time, we for greatly appreciate it. Coming up next, getting back to the markets. Aberdeen asset management, senior investor there. He will be joining us next. This is bloomberg. Guy live from london, im guy johnson. Virus cases surging in europe, france, cases are rising to their highest level in may while the u. K. Is considering a new lockdown in october. Joining us now is james athey of aberdeen asset. Second lockdown across europe, what is the right trade . James good afternoon. I dont really think the market is particularly perturbed by the threat of further lockdown measures. The disconnect between risky assets and what is going on in the world at large driven by expectations, policy in various forms will be supported and will get supportive. It doesnt feel like investors are on tenterhooks think they need to switch their strategy because we may or may not have more ciccone lockdowns coming. Thatket is comfortable policy is supporting asset prices for now. There were probably some sort of vaccine in the next six months, and that will take away some of the longterm potential threat. Noise aroundrm lockdowns, shortterm economic disruption does not seem to be weighing heavily on peoples minds. Same, the strategy is the you want to be owning duration because it is asymmetric to do so. Every central banker comes out and pushes for more fiscal stimulus. Here in the u. S. , 1. 5 trillion but that doesnt seem to be going anywhere, their Furlough Program in the u. K. Will be ending in october. Europe is having similar issues on supporting workers. If we dont get Something Else fiscal and it all depends on monetary policy, does your thesis change . Changes onefinitely the economy. I would not want to be positioned prove risk if i was staring down the barrel of that. But i dont want to be positioned that way anyway. Monetary policy can ease her concerns. Theironomy is off doing own thing, Financial Markets are doing their own thing. I would like to think there is a point where markets have to face up to this reality. Maybe it is when we start to see a more mediumterm trajectory of disappointing earnings numbers. At the moment, the market is saying 2021, things will not be that bad. Maybe as we get closer, we see earnings not recovering and may be getting worse. Ks the marketic bubble. I would like to agree with you and say we should be much more concerned, more defensively position, but the market keeps telling me that i wrong about that. Guy are we going to see rate cuts or more qe . James depending on which central bank you analyze, there is definitely ranging thoughts about that. National bank, bod are already there. You have the bank of england who has been keener. The fed pushing back on it. To me that story is about headline inflation, and if we start to see really negative numbers there, i think that may force some of the Central Banks hands. Right now they prefer qe. The next step in my mind would be qe. Alix in terms of the u. K. , the wildcard is brexit that would throw everything off. What is your base case . Feels increasingly it like the consensus is shifting toward a no deal, or a very narrow deal that does not encompass a whole lot and is possibly a political loss to the conservative party. They get the disruptive economic outcome and they dont get the win. In terms of what the market is pricing, they dont move. Priced atay sterling 1. 4. The most terrifying outcome is that we leave the eu with nothing in place. For me, we are short sterling, swiss franc because we think the market has not been focusing, and should be focusing more. Sterling is a place to express concerns around shortterm disruptions, no deal brexit. Guy lets talk about the ecb. How big of a problem would eurodollar at 1. 30 be . James i think it is a big problem. In0 is above where we got to 2017, everyone was growing, europe was outperforming. The economy could not cope with it then. In this environment where everyone is struggling, european issues are laid bare, 1. 30 is a massive problem for growth, competitiveness, and for the disinflation story. I think the ecb is already more uncomfortable than they are letting on. They dont want to be trapped i markets. In this environment, already a big problem, further complicated. I dont think they will be comfortable at all. Towardaw the euro get 1. 25, first and foremost, the jawboning will get more frequent and robust. Ultimately, they will look to act, and that may include rate cuts. Alix does the ecb follow in the feds footsteps with their strategy review, target does above 2 inflation, which may never happen, which may mean low rates forever . Is this what we will be talking about for the next three years . James possibly. It seems that way. Without getting into it too much, i am so skeptical about what all of these strategy reviews mean. You cannot create inflation when your foot is on the floor, monetary easing, unemployment is falling. We might let it run a few tenths hot. There seems to be a belief among academics that there is value in shifting the target higher because of the expectations. I am skeptical of that. Strains of playing it fast and loose, you do have more inflation hawks embedded in that european banking, central banking structure. Guy what does get Inflation Higher . Monetary policy seems to be failing abysmally. What takes Inflation Higher from here . What gets inflation back to the central bank targets . James i think Central Banks have been contributing to their own messes force some time, doing so much damage to the normal economic processes, discouraging productive investment in the real economy at the expense of speculation in Financial Markets. Purposes,tents and they are feeding off of their own policy mistakes of the past. What can create inflation . A few things which would be more dramatic and probably less welcome, you could have this fiscal dominance idea where monetization, just keep throwing money into the economy funded by printing until you see that have traction. Is a dangerous and terrifying place to go. There are some secular disinflation every trends that we have all talked about recently which we may see reverse, and we could see more natural upward pressure on inflation. To me, there is a cautionary tale here. If wages do not move higher, inflation is not what we need right now because that reduces bending power. Of inflating your debt is great, as long as wages rise. If that doesnt happen, the problem that we are seeing with economy, income inequality, it will only get worse. Alix stay with us. James athey will be sticking with us. This is bloomberg. It is time for the Bloomberg Business flash, a look at some of the biggest business stories in the news right now. And Trump Administration is cracking down on Chinas Wechat and tiktok. Starting sunday, the u. S. While dan some transactions over we chat. Tiktoks app will be frozen entirely. They have until november 12 to resolve some security concerns and that could result in the order being reversed. Bytedance has been negotiating with oracle to take a stake in a reconfigured tiktok. European travel stocks fell today. Local governments across the restrict because of the coronavirus. European tourism trade organizations are pushing the eu to set up common standards for any business restrictions to fight the pandemic. That is your latest business flash. Alix thank you so much. Apparently, part of the problem is that there is not one rule for travel, as you have airlines and hotels and Restaurant Companies teaming up and saying, can you give us one set of rules with him he can follow it . Guy it is not apparently, this is the problem. I had a conversation with one airline ceo. This is what they are telling me. First thing that comes out of their mouth every time is we cannot cope with this uncertainty. There needs to be commonality, coordination. We need a Testing Program that works across europe in particular. We need to figure out a way to make the corridors work. This is a National Prerogative rather than an eu prerogative. The eu seems to be backing off, and that is why you are seeing the share price reacting as it is today. Easyjet down 9 . These are the big losers today in the european session. The close is next. This is bloomberg. Guy is friday. We are wrapping up in europe. 30 seconds until the end of regular trading on the friday session. We are down. 5 . Fading into the close. Watching what is happening stateside. Lets take a look at where we are on the week. This is the story in europe great i would say a tight range weve been occupying. Down over five days 5. 4 . If you were to expand lower, by. 4 . If you are to expand the chart you would see a tight range. Breake finding it hard to out of recent trading channels. Lets take a look at where we sit with the individual markets. The ftse, the cac 40, and the dax. Currency markets have had an effect. The ftse, the dax, and the cac 40 trading similar amounts to the downside, a little bit of wiggle room through the dax and the cac 40. The cac 40 down. 9 . Travel and leisure has been a major theme to the downside. The rising virus cap we are seeing in europe pouring cold water on any hopes of a winter recovery. Lossmaking this year will be difficult. We have seen cash rages from a number cash raises from a number of different companies. The continental carriers have pushed back on that front at the moment. Lets look at the grr function and show you what is happening from a sector point of view. At the bottom you have the travel and leisure sector down considerably. Banks are also down. We can talk about what is happening in the banking sector. The car sector is down. He of the health care sector, financial services, the miners are up, technology also rising. Those are the only sectors in positive territory. Iberia,lk about the iag down 13. 44 , a tough session, but easyjet is down, ryanair is down. Talked about the transactions he is looking to conduct with the London Stock Exchange. The London Stock Exchange is dropping the milan border, defensive transaction. Investor of, this is an interesting transaction, the stop down today. There was talk about apollo deal , people becoming more cautious on that. We will see whether the company does get taken out. This is the kind of classic story a lot of people are talking about industrial stocks being taken out by private basically companies being taken private across the board. This could be one example of that. Theyre going to be plenty of others. Indeed,ndeed alix lots of m a happening in europe as well as the u. S. Well wrap it up with a deal between the spanish bank and a funky a. And ivankia. This will create the biggest lender in spain. Shares of both banks are down on the news. Joining us is charlie devereaux. Wanted, why did the market not take this as well . Charlie both banks have risen significantly during the timescale of the negotiations in the last couple of weeks, but i think there was disappointment about the premiums bankia was seeing, i think the markets were expecting something higher. There were eyebrows raised about the restructuring costs. Theyre going to cost 2 billion euros, which will translate to about 750 euros a year in the course of five years. Doubts creeping in about whether they can execute this. Start of as the wider set of transactions . I am curious as to why it was so tough to get this done, the limited potential for cost cuts to come through. What message is this sending to the rest of europe . Everybody hoping we see around of consolidation, many argue europe remains overbank. What impact will this have do you think . Charlie it certainly started spain it ising, in pretty certain we will see more consolidation, especially amongst the smaller banks. Abandonedks last year , we may see those start up again. , a small bank in spain, have been exploring options with goldman sachs, and we are also seeing that with ubs , andredit suisse rumors possible at a National Level we might see this happen. The big question is can that translate into transnational, at the impression i get it is still too soon for that. There is still legislature that needs to happen. Alix which i also feel like how these are executed becomes even more important. What does this mean in terms of job cuts versus synergy because labor laws are such that stung making a lot of job cuts for banking mergers in europe will be tough unlike in the u. S. Charlie there is a massive gulf in those costs. Ixa bank is a perfect example. I was looking at the 2. 2 billion euros in looking at the job cuts they have done in the past. Once you get here to early retirement minute 2017 caixa bank cost an average of 207 euros per employee to let them go. Certainly in spain and other countries that have labor laws, it makes it more difficult to do. That is why it is difficult to do these transnational deals. Guy is this a covid transaction . Is this something that has been accelerated by covid . Charlie that is certainly what they said. Today said this is a disrupted moment and in disrupted moments you need to act. That is certainly what they have done. The speed at which it was done, they said the two boards first began meeting on the 20th of august and they have wrapped it up in three weeks. It suggests there is a sense of urgency. Guy thanks very much. Charlie devereaux joining us on the caixa bankia transaction. For more on the challenges facing european banks, james haverty. James aberdeen. We are starting to see Bank Consolidation in europe. If this continues it appears to be a National Story rather than a paneuropean story, does this provide incentive to get more involved in European Assets . James i do not think so. I see it as papering over the cracks. The conversation you have had does highlight some of the problems not just with european banking. For me the quality of the assets and the impairment of assets is a bigger problem for the european Banking System than just the notion of being over broke. What youre talking about is structural impediments to a modern open economy, and that has an impact when youre trying to do a deal such as this because you cannot is easily cut staff cost, you cannot cheaply cut staff costs. That is part of the reason the economy is not healthy and able to generate acceptable rates of growth and inflation in the first place. The whole thing is feeding off itself. Consolidation of banks from an investor perspective, if you say we can cut costs and have slightly better margins by making a big institution, i can understand the investment thesis behind that. You roll the clock forward and what you have done is you let less competition and the Banking System. Youre still talking about low negative rates, flat yield curves, lack of viable investment opportunities. What is the banks Business Model . Where is it earning its money from . These are problems not related to the state of the Banking System. They are inherently linked to the state of the economy. Unfortunately, the low solution for that is not structural reform, not dealing with the problems, it is throwing money at the problems, giving cheap loans to banks and hoping time will resolve the issues. It will not. Alix how do you fix that . It is a demand situation. One in four european banks are reining in the lending. There is not the demand and there is a loan default problem. How is that fixed and whose job is that . James how do we fix it . Alix i said it all. James there is an old irish adage, and anecdote that somebody asks the directions and they say i would not start from here. That is the situation we find ourselves in. Want to resolve the circumstance starting from here because every option you will be successful as a real problem in the short term. You create very unhappy conditions for firms, for banks, for people, for the economy. The government Balance Sheet is the answer. That is essentially the journey we are on. It, theydid recapitalize their Banking System in the last crisis and they did it quickly and banks were able to get back to doing more healthy things. A different Banking System, more market funding relative to bilateral lending, but the europeans were not able to do that. The structure of the Monetary Union is a gigantic straight action to dealing with this and the Banking Union does not solve that, because if you have competitive issues, you have different economies, different structures. At some stage you will have to deal with the bad asset problem. Is it easy to deal with if those assets are aggregated . The ecb is clearly worried about the transmission mechanism. It is worried we are not seeing bank lending enough. We are seeing this and other countries around the world. As you say, you have to do with the impairments on the Balance Sheet. Is that easy to do as those institutions are larger or smaller . Was just a credit supply problem, i think that is a good argument. If this is all about transmission, if this is about banks not being able to blend because of capital requirements, cans clear the decks, we improve the transmission and get supply back into the economy. Unfortunately i do not think that has been the problem for some time. I think there is probably a bigger demand for credit issue and that comes back to the notion we are dealing with healthy economies limping along using the crotch of monetary stimulus. Both problems need dealing with. Dealing with them simultaneously is incredibly difficult. I think you can help in some circumstances with more scalable institutions, but by longshot that is not the only issue. Guy have a great weekend. Thanks for your time. We appreciate it. James athey of aberdeen standard investment. A quick look at where european stocks have finished. Flat through the auction. A little but of a drop. The cac 40 down 1. 22 . Lets carry on the coverage at the top of the hour. Jon ferro and i taking you through the capable show the cable show on dap Digital Radio on dap Digital Radio on dab Digital Radio. This is bloomberg. Ritika this is of a good Bloomberg Markets this is Bloomberg Markets the european close coming up, john mckay, Whole Foods Market ceo. This is bloomberg. This is Bloomberg Markets. I am ritika gupta. Lets get the latest Bloomberg Business flash. Job cuts at hsbc. Bloomberg has learned the bank is cutting most structure derivative jobs in paris. Most of those jobs will be transferred to asia. Hsbc says it wants to cuts more than a third of the people at its French Investment Bank by early 2022. Walmart is boosting pay for 165,000 hourly workers. The largestof private workforce in the u. S. And it is causing massive reorganization next month. All of walmarts u. S. Supercenter locations will switch to a new Team Based Model retailer has been testing. That is your latest business flash. Alix thank you so much. Lets stay with retail, how companies are navigating their cost amid the pandemic as well as what they do with their labor force. Mackey, wholejohn foods foods ceo and coauthor of the book conscious capitalism. We have tons of things to unpack with you. I want to start with a walmart news from yesterday and how you are dealing with your workforce in terms of pay as we are coming out of the pandemic. Foods has the highest starting wages in the retail food markets of 15 minimum wage, and most people make substantially more than that. We have a great benefit package. We focus on keeping our team members save during the pandemic. We need to recognize the safest Grocery Stores in america during the pandemic. Walmart is making new announcements about taking care of their people. Guy what have you learned during the Coronavirus Crisis . What difference does it make for the business, what has accelerated in the business as a result of it . John clearly the biggest acceleration has been people buying more food online and picking more food up in stores. Our online sales tripled over what they were before this year. I do not think that will be a permanent shift. I think when the pandemic is over and people feel safe again, once of the traffic will come back to the stores. Some will stay online because of convenience. Alix you get the impression those were new people you are able to recruit online that with end of the stores, or are these people that migrated from the stores to online . John there are some that are new. Customersime member from amazon get free delivery at whole foods, we got a lot of new customers or lapsed customers or customers who are occasional customers started shopping. Some are new, some are already existing customers, and summer customer shopping more frequently than they did before because restaurants, many restaurants were shut down, many have not reopened. A lot of people are eating out less and that is helping raise Grocery Sales for everybody. Are you seeing any food place inflation in the supply chain . Food there has been some inflation so far to to supply chain pressure. We expect that post pandemic that will normalize again. There will be other inflationary , thers beyond just food general increase in the money supply may result in higher inflation down the road. Alix how you manage that in terms of pricing . Part of amazons model is lowerpriced, lower price. How do you deal with that . John you deal with it the best way you can which means sometimes you pass the price increases on your customers and sometimes you do not. Whole foods has done three major Price Reductions since the merger with amazon and we are working on our fourth right now. Were doing what we can to keep prices down. What has the amazon transaction done to whole foods . What has been the biggest difference, what if you learn from amazon, what have they brought in, and what impact do you think it is having from a consumer point of view and a financial point of view . John the merger with amazon has been a great thing for whole foods. On one hand they think longterm. That has enabled us to do price cuts and price reduction. You do a price reduction initially and your sales will fall off because you are selling something for a dollar and now you are selling it for . 90, sales will drop. Over time your volume will increase as people discover prices are better. There can be a significant lag between that. Amazon has the patience for that. Technology. Would whole foods have been able to handle this pandemic from a delivery standpoint without amazons technology . The answer is probably not. That has been helpful. Also the way amazon thinks. They are very datadriven. They ask a lot of questions and they have been helping us to lower our shrink from our , they are tracking your expenses a lot better, and whole foods is shaking is thinking about how we can reduce our cost and amazon has been helpful there. Alix i was going to ask about inventory. How do you manage your inventory due to the pandemic but also since amazon took you over . Not think amazon has had much to do with the change of our inventory practices. During the pandemic, the supply was extremely strained, then switched around so much. I will give you examples. The highestoperates volume restaurants in the united states. When the pandemic happened we had to shut down all of our selfserve salad bars, and we ,aw 75 decrease in our stores partly because so many offices closed and we were not getting lunchtime traffic. Then again, almost every other category exploded. Grocery,meat, seafood, particular animal proteins went through the roof. That has caused a lot of supply chain you have to scramble when you have big shifts in the supply chain demand, it takes a while to raise new cows. You cannot get more meet because the market you cannot get more meat because the market wants it all of the sudden. We have had to scramble on the supply side but i am pretty proud of what our team has done. Guy how does it work in terms of the Delivery Business . Pickers filling baskets and then distributed . Is that a longterm model . Amazon does not operate like that. How you make the advances youve made in ecommerce stick and you think youre doing it right right now . John we are doing it right, and that is also how amazon is operating as they open up amazon fresh stores. They are doing the same. What we have discovered in delivery as people do not want to get food 24 hours or 40 hours later. They want to get it as quick as possible because most people do not plan ahead. Being able to get the food from the Grocery Store in an hour or does two hours or less, that is what the market wants. People will pay more for convenience. Amazon recognizes that. That is a model amazon is adopting. U. S. , you in the cannot have a conversation without happening the election. It seems like either way higher taxes are coming, whether on the appropriation side or the individual side. How are you as ceo of whole foods thinking about that . John i will not talk about politics. The country is so divided on politics, whatever you say 50 of the country will hate you. I will avoid that one. Do i want higher taxes . No, of course not. You are right, they may be coming, and like Everything Else we will adapt to the environment as we find it. Guy really appreciate your time today. Thanks for sharing some of it with us. John mackey, whole foods ceo. This is bloomberg. Alix that wraps it up for me and guy on friday. Taking a look at the markets, we are picking up Downside Potential for the nasdaq, now appointed percent. Cks but alsoell sto sell the recovery trade story. The worst performers within the s p, norwegian cruise, royal caribbean, united airlines. It is a little bit of a text selloff and a little bit of a recovery stock selloff as well. In other asset classes, youre not seeing a lot of movement. The dollar mixed, yields going nowhere. Commodities not getting much of a bid as we head into a potentially moving close in the u. S. Coming up next, you do not want to miss this. An exclusive interview with nancy pelosi, speaker of the house. She joins balance of power with david westin on bluebird television radio. Her thought on Bloomberg Television and radio. So youre a small business, or a big one. You were thriving, but then. Oh. Ah. Okay. Plan, pivot. How do you bounce back . You dont, you bounce forward, with serious and reliable internet. Powered by the largest gig Speed Network in america. But is it secure . Sure its secure. And even if the power goes down, your connection doesnt. So how do i do this . You dont do this. We do this, together. Bounce forward, with comcast business. David from bloombergs World Headquarters in new york to our tv and radio audiences worldwide, i am david westin. Welcome to balance of power, where the world of politics meets the world of business. Earlier today, i spoke with brian moynihan, chairman and ceo of bank of america. His bank has a special Vantage Point on the state of the u. S. Economy with extensive connections with consumers and a full range of businesses small and large. I asked brian what he is seeing. Demand is lending down because final demand is still showing up. You had this panic borrowing, so march and the in panic borrowing, it is basically back to where it was before the crisis and maybe even lower. That Means Companies are ready to go as they start to see opportunities and the supply chain start to work. On a consumer side, it has been interesting. Team is down 4 for the