Speaker pelosi under huge pressure to jumpstart the stimulus talks. A lot of people saying that. Francine that will filter onto the markets. Lets get straight to bloomberg first word news. Ritika good morning. Republicans are pushing back against Donald Trumps refusal to commit to a peaceful transfer of power. Mitch mcconnell tweeted the process will be orderly, just as it has been every four. Years since 1792 also every four years since 1792. The senate also committed to a peaceful transfer of power. Democrats have started drafting a new stimulus proposal that could get past the house next week. Smaller than the package the house passed in may, it is still larger than Senate Republicans say they can expect. President trump said he will go as high as 1. 5 trillion. In the u. K. , rebel members of the conservative party are threatening to seize the parliament to block new coronavirus rules. At least 40 tories have put their name to an amendment wiping out the government majority on the issue. It comes as the commons is due to review the pandemic legislation six months after it was enacted. The move would still need opposition backing. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. Francine . Tom . Tom currencies and commodities a bit of the disorder. We are not a correction level in the s p 500. We are just beneath it. 9. 6 depending on what mark you take. Yields going nowhere. What is interesting me in foreignexchange, safe haven ebbs away with euro gyrations from a 1. 07 to a 1. 0805. That is a little bit of note. Can you tell i am struggling . Im just not getting it done. Francine it is a friday feeling. There is so much news and market seem to be a bit all over the place. Today we just seem to be taking stock about what is going on. You see the dollar slipping. They are moving sideways. Investors weighing the week process of this american stimulus to counter the global uptick in coronavirus cases. That encapsulates the struggle for a lot of these markets. Talking about the markets, the is Christian Miller christian muellerglissmann, Goldman Sachs are we going to see markets range bound until the u. S. Election . Christian you might remember last time we spoke we said entering the summer that we might be stuck in a bit of a flat range we called it at the time. I think that has been pretty much the case. Clearly the u. S. Had a phenomenal summer, but part of that has unwound. Do your earlier comments, the s p is entering correction territory, but if you look the stoxx 600, only down 4. 5 from june. The u. S. Has been a bit of an outlier because of the tech rally in august. Netnet you have been flat. I think it is unlikely you will break out of this range until the market is embracing the transition from policy support to actual growth recovery. The problem is the transition is very difficult because not only are using a second wave of the virus in europe and also the vaccine news flow is getting more challenging, but you have the fiscal and monetary stimulus disappointing. You have the fiscal side disappointing. You have the fed at the margin disappointing. On top of that you have the u. S. Election, which a lot of people are worried about, not necessarily with regard to who wins but with regard to it becoming a process that further delays the potential for decisive stimulus. All of that means that nearterm you could continue to have a volatile range. We would be surprised if we get to a bear market type correction territory considering that at the margin, the type of shocks and uncertainties we are dealing with are much lower than what we had at the beginning of the year. Francine so what does that mean . Even if we have a stimulus between the democrats and republicans right now, unless it is a big figure it will not move the markets so much . Christian i think it would definitely move the market in the sense it has contributed to concerns. The way i think about it is the vix is at 30, not only for the elections, it is at 30 going into next year, which means there is a lot of uncertainty risk premium break into equities and possibly other markets, and as a result of that, any type of reduction of uncertainty can help the market. There is no complacency. Markets are in a cautious mood. Fiscal stimulus can get that risk premium down, but it is unlikely to be the trigger of that more sustained and more powerful rotation with growth across assets. That requires a vaccine announcement and more clarity on the timing and availability on a vaccine, and related to that, it requires the election outcome, because people want to fade that. It gives a lot of sense of the type of fiscal stimulus beyond the near term. Tom i have like eight questions on a friday to reset into q4. On Asset Allocation and derivatives and correlation, i need to say how do you handle the nominal bond yield . The yield is solo, what is the strategy forward in full faith and credit bonds . Christian it is the big soulsearching exercise the industry is going through because we have all benefited from the treasury as a safe asset, and even the european and japanese and asian funds were using treasury yields and gold, because gold is correlated with treasury yields, especially real yield. It seems like this diversification benefits, it is almost like a free lunch. Diversification is one of the only free lunches in finance. What we are seeing in conversations two directions are emerging. One of them is where people say over the next cycle, in my multiasset portfolio, i probably need to own more equity. That means more risk. Either i manage that market timing more aggressively that is one direction we are going, more aggressive equity allocation. Many clients are not sick steve craft are not 60 40. In the market you see a shift towards strategic allocation. We also see a completely other direction from some clients where they say the new 60 40 50 30 20. 0 3020 you scale down bonds, you invest in something completely new, real estate, risk assets, and they try to go down that road. As of now, there is no answer. I think we have seen 30 years of portfolios andce it is unlikely from the current starting point we are able to repeat that. You march down your q4. Where is nominal gdp and the expected equity return given the new realities of q4, q1, and q2 growth next year. The bottom line is we are ratcheting down nominal gdp. We need to ratchet down our expected return . Christian the team downgraded the Fourth Quarter from 6 to 3 and next year came down a bit. We are still significantly above concern coming into next year. Equities are forwardlooking. There can be a significant disconnect where growth in the Fourth Quarter might disappoint, but equities will look towards next year and this growth acceleration which you might see. What is important, which we have highlighted a few times, is that in this flat period since june, cyclical assets have not priced in the improvement in the data so far. In other words, we have the ism and 56. It might tip, but in the margin, the last months, most cyclical assets have not priced that increased to 56. There is a cushion for doubledip in the data. The question is how deep the dip will be and how much the market would be willing to shrug that off and focus on next year, where i think most people agree the vaccine is likely to come. The question is the timing and availability People Struggle with. Tom thanks francine thanks so much. Christian muellerglissmann of Goldman Sachs stay with us. Coming up, atlantic senior advisor. That is coming up at 6 00 in new york. This is bloomberg. About 11 million jobs have returned, but there is still a deep hole. We could start to approach an unemployment rate, certainly below 4 . I think it is likely more fiscal support will be needed. Additional fiscal support will likely be needed. I think Small Businesses would benefit from more support. A lot of that will depend on how well we manage this virus and a whole range of other decisions. I do not think there is much of an area about a new fiscal package as there mightve been in july. Sot together . Hat a little snarky. Fiscal support will be needed, fiscal support will be needed. That seems to be the message from our good public servants. We thank the vice chairman for up. We think the vice chairman for appearing on bloomberg surveillance. ,hristian muellerglissmann quite good math work as well across Asset Allocation. I want to talk about the correlations in the market. Are they normal . Christian i think right now you are with much more risk in your portfolio than normal. You might have noticed in the last selloff in the last few days, cold sold off alongside the s p and alongside tech. I think that is a new situation we have dealt with since the summer, where real yields are moving much more cyclical than they used to, because the breakeven Inflation Expectations are currently one of the most correlated parts with growth expectations. That is quite unusual that breakeven inflations would be as closely linked with growth, whereas the nominal yields are not moving, which means the real yields becomes the pluck. With declines in Inflation Expectations, you push up real rates. Tom does that really what has shifted, given what we just heard from fed officials, that there is a new shifted down to lower aggregate demand, slower economies, and the fact we have to do with it in 2021 . Christian i think that is it. You have seen the breakeven tolation decline from 1. 8 1. 6 so. You have this period of extreme with thearound the fed average inflation targeting in the summer. And is unwinding right now, partially it is because there is a realization that the aggregate demand picture remains structurally very challenged. This decline in Inflation Expectation pushes up against the real yield, and that unwinds some of the Strong Performance of assets that are linked, which are tech and gold. Every asset suffers from higher real rates, especially if they come without growth. That means right now the higher real rates are the biggest threat to your portfolio. If you get a continued increase in those, you will have most assets do quite poorly. One of the only assets which does well is the dollar, because it is an unwind of some of the dollar week, which is closely linked to real yields. Francine what does the dollar to after the election, depending on who wins . Christian it depends a lot on who wins. One of the most important things coming out of the election will probably be uncertainty reduction and clarity. Markets are very volatile. It will not immediately drive uncertainty, but ultimately it will. That should make the market more confident to embrace a more procyclical view and that should generally be consistent with a continuation of dollar weakness in line with the trends we discussed. That should also push down real yields and push up breakevens again. I think the election, irrespective of who wins, should be uncertainty reducing. Our rates team has said that at the margin, if you do get a democratic sweep, that could push up rates a bit more because of the expectation they could push through more fiscal stimulus. At the margin, a democratic sweep has the potential to drive more procyclical rotation than the other outcomes. When you look at some of the unknowns and the lockdowns, is there a danger inflation surprises us 18 months from now . Christian 18 months from now is quite far out. Certainly the probability distribution around inflation has widened materially in this crisis because we have all of this fiscal and monetary stimulus, but also a lot of supply destruction, a lot of deglobalization trends. The further out you look the more uncertain the inflation picture gets. We have so many disinflationary forces it is not easy to be worried about realized inflation picking up. Next year there are two things worth watching. The first is oil price, and our team thinks 65 is the level we might get to. That normally has a quite inflationary impact and knock on effects to other things in the basket. The other thing worth watching is specific supply bottlenecks. You know in the core cpi print in the u. S. You have the used cars driving upset surprise. It is possible you get more of that. The good news about that is it should be not a global phenomenon, it should be quite local. That means it should be diversify a in the portfolio. What investors are always worried about is the idea inflation accelerates on a broad global basis and cannot be gotten under control, and that hits the portfolio. That risk as of now does not seem that high. Tom the money question on the great unknown International Equities is do you go diversify apple over International Equities were to they finally pop and go . Christian i think that is exactly what worked in the 1970s. People look at the 1970s as a nightmare scenario where you had stagflation, high inflation. Tom disco was the nightmare scenario. Christian [laughter] what you out also found was in the 1970s is u. S. And european equities were terrible but japan and em delivered ok returns. If you worried about inflation in the long run, shifting more international and more diversified across sectors, countries, makes a lot of sense. Certain styles are more exposed to inflation. Growth stocks and their linkage to rates makes them more vulnerable to significant increases in inflation. Generally the message we are given his diversification will get more important. Tom thank you so much. Great on a friday to get you into q4. Can you believe that . We are talking about q4 on this friday. Where did this very difficult year go . Christian muellerglissmann of Goldman Sachs. The chief economist for Goldman Sachs will be with us as well. What is an important is a real markdown, a tough call on where we are into december and into 2021. This is bloomberg. Futures flat. Ritika this is bloomberg surveillance. The judge has ordered the u. S. To postpone its ban on tiktok or to respond in court later today. It comes as bytedance is seeking an injunction to temporary block the band as it continues to pursue a deal with oracle and walmart. To take effect just before midnight on sunday. Amazon is diving into the new and hotly contested market for streaming video games. Its service will cost 5. 99 a month and let gamers play without selling out for expensive consuls. Amazon also introduced new models of the echo and echo dot speakers. That is her latest Bloomberg Business flash. Francine lets see what stocks are doing at the moment. They are rising on hopes of stimulus in the u. S. , now they have turned. If you look at what investors are looking at, a lot is the weak prospects for new stimulus, and that is coming into question that could counter the global uptick in coronavirus cases. Tom on the data, im looking at the swiss franc weaker. On a friday it is typical have a casequa will delivered to Queen Victoria in and shipping it coming up, an important discussion. Lvmh is the soul of the company. Really looking forward to this within a pandemic. This is bloomberg. Good morning. I know people are anxious and afraid and exhausted at the prospect of further restrictions on our economic and social freedoms. For at least the next six months , the virus and restrictions are going to be a fact of our lives. I cannot save every business. I cannot save every job. No chon slur could. Novernment will chancellor could. Of keeping in a job shorter hours rather than reduction. These are radical innovations in the u. K. Labor market, policies weve never tried before. We have so often spoken about the virus in terms of lives lost , but the price our country is paying is wider than that. Francine that was the u. K. Chancellor of the exchequer announcing measures to help businesses survive the winter. He warned an unemployment tragedy is underway as the second wave of coronavirus hits the u. K. Talk about this and some of the bysures, we are joined Bloomberg News Senior Executive editor. You live in london. The Prime Minister said he had to announce restrictions that could be in place for six months. How does the chancellor try to save this economy from ruin . A very difficult situation they find themselves in. At least six months, as you heard, is what the chancellor predicted yesterday. You only have to walk through the center of london or around the city or the Bloomberg Office to see the effect these restrictions are having. Restaurants are starting to get back on their feet in parts of the city and now they are faced with these added restrictions. Many now saying they are throwing in the towel and they cannot survive for six months, they will have to give up. This is little bit of what we were talking about yesterday, the government no longer agreeing to pay all of the wages of those that have been impacted, and they the ones where people can do some work. That is a huge pivot. The sense of more Creative Destruction the government is , the impacto happen from the pandemic will now be permanent. Therefore the government will have to change tack. Therell be a lot of adjustment in the coming months. Francine there were a lot of questions on how the Prime Minister and the government handled the pandemic in march. Testing got better, they had a tracking system that was not always up to scratch but better. What are people saying now . There is a shortage of tests that we are still testing the u. K. More than any other european country. David that is this just a sick that is the statistic the Prime Minister likes to roll out. There is a lot on how difficult it is to get a test and demand is outstripping supply since schools and universities returned. Lots of people getting symptoms, and the weather is getting cold and damp, people are starting to get cold and want to get the test and cannot do it. Nwhile the number of cases a Record Number of cases, the whole pandemic yesterday in the u. K. , more than 6000 cases. The the numbers get so high tray system starts to creek at the seams, it is difficult for it to cope. Yesterday the government idly launched its tracing app that was well delayed. Finally launched its tracing app. It is finally out. Lots of expectations that will not be able to cope with the surgeon demand when the pandemic is surging back and people cannot get tests. Lots of people Walking Around who have no idea they are spreading this. That is the fear that this starts to take off in the winter has only just begun. A stark difference between the scope, the scale, there is a mix of the economy of america versus great britain. Is this the final effort . Is the basic feeling this stimulus and assistance plan taps out the government . Are theyfragile at eight fragile fisc are they at a fragile fiscal point . David they are definitely a fragile point. Money the government is having to pump into the economy to keep it going. Yet the Economic Impact on jobs is the clear thing. Even though the support package yesterday, unemployment will spike in a major way. I talked about restaurants. A lot of the Service Sector, the Service Sector is the biggest part of the british economy. That is why this economy has suffered so badly with social distancing. Manufacturing not such a big part, where countries like germany are able to weather the storm a bit more. It is exposing the structural nature of the british economy and the recession is deeper here than other places. The governor is having to the government is having to borrow more money, and the recovery will be harder. Tom what is the response to the initiatives, particularly outside london to the north . David i thought yesterday when the chancellor presented his of then amazing image leader of the chamber british commerce, and the trade unions. Broad managed to get support from both ends of the spectrum, from the business lobby and the trade unions, no one is expecting him to be able to continue paying full raises for every job in perpetuity. There has to be a balance, and the debate today across the country is it enough to stop unemployment spiking without, but also letting the economy freeze and rebalance itself. There does need to be this repointing of businesses, where in the country will that hit hardest . That is a big question. The tories are keen to shore up their support in the northern constituencies that voted them in in huge numbers before christmas. This wave of unemployment is coming. No one seems to be doubting that. Theres a lot more pain, a lot more job losses, a lot more economic insecurity. Will it fall heavier on london or in the north . We will see. Francine howard david merrick, Bloomberg News Senior Executive editor joining us. Now lets get straight to the first word news. Ritika the official global death toll for covid19 is nearing one million, but the real tally may be much higher. Public Health Experts believe it may be closer to 1. 8 million and could hit 3 million by the end of the year, even in countries with sophisticated Health System , mortality is difficult to accurately gauge. The u. K. And france have reported a Record Number of coronavirus cases, but comparing the current tally with number six months ago is difficult. Capacity was much lower than. Experts are looking at deaths and hospitalizations as the key indicators cured they are much lower than the first peak of the virus, but they are going up again. A London Police officer has been shot and killed inside a Police Station while detaining a suspect. The incident occurred to the south of the city. The suspect is in critical condition. The metropolitan police has launched a murder investigation. It is rare for Police Officers to be shot and killed in the u. K. , which has strict firearms laws. 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. Am ritika gupta this is bloomberg. Francine and tom . Francine thank you so much. Coming up, we speak to david nabarro, the who special envoy on coronavirus. That is coming up later on today. We will talk about the disease, some of the treatments, and we will talk about vaccines. This is bloomberg. Tom bloomberg surveillance. Good morning. From london, from new york on a friday. Spirited conversations on these markets. A churn to the market. Getting set for the Fourth Quarter. On this friday, as we near the u. S. Election, the single most profound statement of the week, no doubt, came from the Prime Minister of the United Kingdom as he addressed his nation and the world and slammed the pandemic forward to march of 2021. We need to get out the calendar and readjust. Nobody better to do that then worldnabarro, he was the Health Organization special envoy for covid, and with his medical experience we are thrilled he could be with us this morning. The you taken aback by Prime Ministers comments or is this something the pros have known forever, that the pandemic will clearly stretch well into 2021 . Dr. Nabarro i am afraid the pro they are saying it will stretch on into next year and we do not know when things will calm down. I will explain why. Tricky virus and an alarmingly persistent virus. It is not one of the virus that softens overtime like influenza. Coronavirus is generally stick around. Is alsohave seen is it advancing quite slowly across communities, even though the numbers of cases increase rapidly. It is not spreading across the whole nation like wildfire. There is an awful lot of people still to be infected in our more, even though we know than 30 million have been affected. It basically means the virus is here to stay, it will keep moving across the world, it will return to places which have managed to get the number of cases down, and the only way we can deal with it is by learning to live with it as a constant threat, and making sure we get ahead of it and defend ourselves against it. Go to the constant threat right now. The basic threat seems to be to shut down our global economy. The world Health Organization suggests that given the vera luntz of the virus, we have to shut down economies . Dr. Nabarro no. That has never been the position of the world Health Organization. I am sorry that somehow that is how it is presented. We state the following. Countries can live with this virus, provided they put the Defense Mechanisms in place, and as far as we are concerned, living with the virus means continuing with economic and social activity. Therell will be some alterations necessary, but that should not mean shutting down whole economies. Instead we say find the middle path where you control the virus and at the same time you enable Economic Activity to continue. I could describe it to you, it is quick, but i think it is important i get the headline across to you and your listeners. Francine to put the right restrictions in place we need to understand the virus. There is so much about this virus we do not understand. Why are some people asymptomatic while others are not . His mask wearing the only way to protect us and others . David thank you. Of course. This virus is brandnew. We have had eight months or so to study it. There is a huge amount of research underway, there are things we do know. Lets start with how you protect yourself against being infected and how you might be able to reduce the risk you posed to others. Five universal precautions. Physical distancing is number one. Try to stick to the two meter or six feet rule. Secondly, mask wearing. It is particular useful when you are unable to physically distance. We do not know how effective it is, but we do know those who wear masks are less likely to be infected themselves and infect others. Thirdly, hygiene. Etiquette,e, cough and keeping surfaces clean. Fourth, i slitting ourselves when we are sick with the symptoms of the disease and in more general sickness symptoms until we know we do not have the virus. Fifth, we have to make certain those who are most at risk are protected. We call these universal precautions. The director general of the who says do it all. There are people who appeared to be able to transmit this virus even though they do not have symptoms, particularly in the day urso before they start to experience illness. This is a problem, but our general view is it is not an absolutely widespread problem, and it does add to our wish to ask everybody to practice physical distancing, masking, and hygiene as basic activities that should be done by everybody. Francine this is a very important point. How many people are asymptomatic , sick with covid19 but will never show symptoms . Do we have a percentage and do they share the same amount of virus of people who are coughing . David complete answers to that question are not available, at least from me. The various studies that have been done suggest that in the u. K. , the level of the population who have the virus without symptoms is quite small. However, studies in iceland and liner offom a cruise japan suggest over time you can get an increase in a symptomatically and. Some African Studies in asymptomatic transmission. I cannot give you a percent. If i do give you a percent i will end up saying something that will irritate somebody. To you and i are old enough remember the polio vaccine. You and i remember lying up in school with mothers very emotional over the miracle of these drugs. Why are we having so much difficulty explaining to people, when the vaccine shows up, it is basically an active science and god . Dr. Nabarro did you know that even though we have had these wonderful vaccines against polio, despite the most extraordinary effort with money and political backing, we still have not managed to eradicate the polio virus. Really annoying, actually. We also got a wonderful vaccine against measles, which is a pretty nasty disease, especially in children. We have not managed to get even a significant chunk of the worlds children immunized against measles. There is a strange and quite widespread anxiety about vaccines that is not based on anence, it is based on overarching nervousness about the properties to defend people against disease. We are seeing this level of Vaccine Hesitancy climbing in our world day by day, alongside a number of other tricky theories, particular about the coronavirus. Our current view is this is what tends to happen when people are find scared and need to individuals to blame. We are doing everything we can to encourage World Leaders to stop banning to the seeds of these conspiracy theories, because to stop fanning the seeds of these conspiracy theories, because they are not helping at all. Francine we understand why some get sick and some do not . David coupled dr. Nabarro coupled with the virus is it is capable of attacking different parts of the body of any individual, and the way in which individuals defend against this virus is quite varied. That is why i keep having to say to people, it is a coming and nasty virus. ,t is wellknown older people people with diabetes or high blood pressure, are at risk. I am sure you have heard that there are about one in 20 people who do not die as a result of the disease, but they do not recover quickly. I know people who are getting constant fatigue, who are getting shortness of breath, even heart trouble, and often these are active sportspeople. We cannot start saying this is a virus that is trivial. We have to say the virus is nasty for everybody. Lastly, we have to recognize that sometimes the reaction of the body to the virus is what causes illness. Tom we have to leave it there. We are out of time. World Health Organization special envoy david nabarro. Election coverage. On tuesday, debate. This is coming up rapidly. Four days from the first debate at 8 30 in the evening from cleveland, ohio. This is bloomberg. Good morning. Ritika this is bloomberg surveillance. Palantir plans to go public next week and dow jones reports its expected valuation is 22 billion. In 2015 investors valued the company at 20 billion, but this month it was valued at less than half that. The company declined to comment. The Hospitality Management company it is part of the real estate firms shift away from traditional brickandmortar properties. The deal is valued at 2. 8 billion. Hospitality is continuing to struggle due to the pandemic. That is your Bloomberg Business flash. Francine thank you so much. Markets are a bit undecided. Some of them say it is range bound. Certainly we saw a weakening of the tape in europe, now down. Stocks are fluctuating because of the by research and a lot of Market Participants questioning whether there will be further restrictions on some of these european economies, especially the u. K. And france. The dollar steady, heading for its biggest week since april. Tom a bit of the deterioration in the tape. Dow futures 76. 29. 28 on a are relatively elevated vix. What we do at bloomberg surveillance is we look at the mark what we do at bloomberg surveillance is look at markets, but we are thrilled to end the Third Quarter strong. We are thrilled to bring you michael pence michael spence. On the need for growth. This is bloomberg. Good morning. Tom this morning, from 3. 4 trillion to 2. 2 trillion, but counting . Stimulus dollars. Only one number matters, and that is 39. Speaker pelosi wants to help house democrats. Where republicans agree. On the edge of correction, the real yield is left negative. Some will vote early, the president suggests some will vote often. Four days to the first debate. Good morning, everyone. Business bloomberg surveillance this is bloomberg surveillance, tom keene in new york, Francine Lacqua in london. Wrap up the Third Quarter, we will do that, francine, the third time around, but it is pretty good to finish off with columbia, and we will have my expense here in a moment. Francine yeah, it is great to talk about what the economy needs in this very fragile moment, tom. This week was a shock in the u. K. Because of
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