Transcripts For BLOOMBERG Bloomberg Markets European Close 20240712

I want to hear more of the music that was blaring in my ear. Heres where we are. Big out for big outperform are coming through, the s p 500 is up. The pound actually, as you can see now, positive, bouncing around all over the place, getting a negative hit earlier on around the idea that the u. K. Would walk walk away on the 15th. I dont think the market thinks either side will walk away. The eu said earlier on, and this was a report by bloomberg, the eu side is going to call the bluff on this. Britain saying were deftly going to walk away. The market is basically shrugging its shoulders. As you can see, a selloff in bonds is unsurprising, given whats going on at the moment. At the backend over the last few days, cathodes continue to steepen in the United States. Alix we did hear that music and you did an amazing job talking to that techno music. Thank you for that. In the u. S. , part of that is going to be about where we are and stimulus talks. Markets weighing down on the trump tweets yesterday to stop negotiating until after the election. Immediately after i win, we will pass a stimulus bill. Earlier today he went on to talk about cutting checks to people, 1200 right now if nancy pelosi was on board targeting the stimulus for a skinny bill. In europe its a different picture, fiscal spending continuing in spain, 72 billion euros over three years in an attempt to revive its battered economy. What we knowgh from spain and the lockdown situation with a growth aspect. You have the government unveiling this huge recovery package. They say they can get the economy back to growth by next year. The deficit is of course going to grow up, but they think they can get back to 7 , which by the way is huge, it takes spain back to 2011 levels. They believe 80 of the money coming from europe will help them to transform and modernize the economy. All of this looks very good, great on paper, but you have to factor here that this is a minority government that hasnt been able to improve to approve anything and their track record on the economy has been zero. They havent been able to do anything in three years in three years and the market has noticed that. Looking at the situation for the Prime Minister you could argue that it looks more stable on that front and that is already being reflected. Narrowing over the last two years. Clearly the market has noticed that this is a market turning from coronavirus with restrictions that are badly hit. Tourism, badly hit. With a big question as to whether they can get the economy to grow in just one year. You we are going to leave there, thank you very much indeed, maria. Case counts continue to climb, restrictions keep getting added, the Economic Data doesnt look particularly good. We did see good news on the stimulus front out of spain today, but that economy was hit credibly hard. Global Asset Allocation strategists joining us now to give us a take on all this. Sophie, im curious, we find ourselves in a situation where people are talking about wanting to invest in europe. That now is the moment to do that. Yet all i see out of europe is worse, restrictions continuing to be added and virus news just not Getting Better at all. Why is now the moment, if at all, to invest in europe . Is there a case to be made . At the veryooking shortterm outlook. If you think more about whats going to happen next year, the big question for investors at this point is already going to see this distribution of u. S. Assets . We started to see it [indiscernible] but we still have to see it. We think there is a building without an l shape as a baseline. What you need to think about is you will have a certain level of globalization that will push investors out of u. S. Growth and into other sectors of the region that are more attractive from a valuation perspective, but also bear a way through to the cycle. Alix i wonder what leads that, though. Is it that jobs program in europe, the lack of stimulus in the u. S. . What leads the conversation right now . Sophie i think the main, main argument behind this would be Economic Growth. In the view that there will be this gradual recovery. There are three main rationales for that. The first is that you see some kind of caps ration on european assets. I guess its the first time in a few years that we start to have questions on whether to reallocate out of u. S. Equities into european from our clients. Thats really a sign. The second thing would be the green deal recovery funds and the repatriation of issues. Thats a good sign. The third thing that is very important is the sector shift we have seen this year that gives more right more weight to growth equality sectors. You know, we are in this environment where we need safety portfolios and growth has become one of those. All stars are aligned for investors to warm up to the idea. Just like the strong euro in the quiteterm, we think it is attractive from that standpoint. Guy france downgraded its numbers last night. I will say downgraded numbers, but it was a big downgrade. Today weve got data from industrialom the sector that has been a beacon of strength that seems to suggest it is fading. Doesnt this argument that europe is cheap, doesnt it need to go handinhand with solid data that supports the idea that europe is recovering . Because those data are fading. Sophie the data are not going to be great anywhere in a third wave. It, are weg to merit going to have a vaccine or not . Are we going to know within less than 15 minutes that we will have confident notes . The two things to take into account will be a push through on the nomination. Its not as though we will have this vaccine or testing in five years and by looking through this, with the current level of casetion, its a building on top of the [indiscernible] at the moment. Alix where does that leave em . If we had to pick one, it seems like em makes more sense. Emerging markets, its more of a structural by for us. A longterm idea that we have the cant put it out on big tech into more with high components. We find it quite attractive in our multiasset portfolio. But it is clear that there is more concentration on europe rather than the yen in china, where it is more even that they will perform well in the long term, given, you know, the place of china within the em, asia in the benchmarks. A bit abouttalk whats happening in the United States . The stimulus story from the census, we are confused as to where whether we are going to be getting stimulus targeted or not on the side of the election. Lets talk about what happens on the other side. At the moment the polls are pointing to a joe biden when. Im wondering why the market win. Im wondering why the market is focused on the idea that there will be big stimulus with a biden win and ignoring the idea that it will be a significant hit on the tax front. Why are we focusing on the good news and not necessarily the risks to the market . In terms of what we think past election, in the shortterm in terms of election certainty where investors are in a profittaking wait and see mode, past election whats going to matter much more for the market is i think its a given that we are going to have rather easy fiscal support. Governmentsany doing fiscal tightening for the next two years. I think whats going to matter is which stage of the Economic Cycle are we going to be in . In our view it will be the early stage next year. Given that context, we think that whoever is going to be elected is going to be rather favoring equities versus sovereign bonds from an investment standpoint you place super yield curves higher with potential stories around in equities and bonds. We think its definitely a long equities, like higher equity indexes whoever is elected. In the short term they are clearly weighing on sentiment. Guy stick around, we have got much more to discuss. Some headlines just crossing over the bloomberg at the moment. This relates to sanctions that could potentially come out of the eu related to the novichok poisoning of a lexingtonalexey navalny. European partners suggesting sanctions targeting first the individuals, sanctionings targeting entities responsible. See exactly what the details are, but there is a real balancing act at the moment. Some within europe taking a more aggressive line. It will be interesting to see ultimately how it comes out. Brexit is next. Thats coming up. This is bloomberg. House Speaker Nancy Pelosi signaled to democrats that democrats are willing to pass a standalone Airline Relief bill. She spoke with Stephen Mnuchin a day after President Trump ended negotiations on a big stimulus package. Last week House Republicans blocked a democratic proposal to provide more than 28 billion dollars for airlines and contractors. Polish antitrust authorities have find a russian state energy giant went for building the nord toeam 2 two gas pipeline germany, saying it hurts polish consumers and increases european dependence on russia for gas imports. Bypasses traditional routes through ukraine and poland. We asked their finance minister about it. Its in our natural interest. Our idea is to be a reliable countries. European so, i believe we can manage to the necessary gas from the nord stream 2. A little bit nervous about our future. Global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Guy thank you very much indeed. The u. K. Government will apparently pull out of brexit trade negotiations with the European Union next week if there is no clear deal insight by the 15th. Thats according to a person familiar with the matter. The pound, bouncing around on the news. Is the 15th really a cutoff date for the u. K. . Will the eu try to call their joining us now from london to try to fill in the blanks, david. The European Union and u. K. Are trying to talk past each other to a certain extent on this. How significant is the 15th . Will talks continue after that date . David there will have to be some communication, but it is very significant, this moment. The deadline was set by the british side for a landing zone for the deal. Yesterday we reported that the eu had no intention of budging positions and today we reported that the brits are preparing to walk out in the next couple of days. A big breakdown at this point . That means no big comprehensive trade deal. There wont be time to ratify it by the time the transition ends at the end of december. However, there are still going to be a lot of things that can be sorted out. Fishing rights and the question of state aid. Maybe those wont be resolved, but other things will have to be communicated over the coming months. This is a significant moment, its the british side saying look, we are giving up on the idea of comprehensive trade benefits and we will have to come to some other arrangement. Companies and people are going to have to get ready and there will be a significant economic impact. And markets barely blinked. David, appreciate that. Sophie, why isnt this priced into the market . I think we are at this time when we dont know when this is going to end. There are more important things to tackle with. If you look in terms of the u. S. Election, that is a much more important market mover. At pricing,ou look the sterling is really cheap in terms of u. K. Manufacturing standpoints. We have some in the asset portfolio geared towards a recovery in china rather than a big conviction. Stay away from u. K. Small caps. Apart from this not having like any u. K. Sterling exposure from the current point, that is still there. It is already in the mindset of the investors for those who are now waiting for the brexit news to settle down before triggering investment ideas on assets. Talking more broadly about europe, if you could get a brexit deal done, even a skinny deal, something that allowed the two to coexist, is that another reason to want to own europe . If you can take the risk off the table, is that a reason to put money on this side of the atlantic . Definitely. Part of this is 2021, before the german and french elections in 2020 2, 2021 will be clear in terms of the the economic background and the lack of Political Uncertainty at this point. The fact that you know there is strengthening of currency already that is passed us. So, no headwinds. You really have a case for Global Portfolio with more exposure to european assets. On the flip side, though, if we do get a crash out, how can you make an aggressive case for purchasing assets when it will affect europe as much as the u. K. . Sophie i think it will be a more shortterm impact. In terms of growth i think that the is going to matter is rhetoric of are we going to have [indiscernible] if theres a belief that there wont be an lshaped recovery, having something in the portfolio makes sense. At the same time, despite fiscal monday or did he, risky assets still make sense. The valuation on big tech is becoming a stretch. You have a sense of Economic Growth reallocating into cheaper sectors and regions. For yourie, thanks time today and your analysis. Iq. This is bloomberg. Thank you. This is bloomberg. Today we will be getting the minutes of the Federal Reserve september meeting. The ukrainian federal governor spoke to bloomberg earlier today about how those moves will weigh on his own policy. Fed, they and the have done and presented measures to support the economy. Strategicsome of this , the measures, these strategic measures have never been implemented before. So for us its really important it willn example of how work around the world incorporation with the government around the world as well. Try to fight, to help the local economy. Some of these measures we may use also. Some of them, unfortunately, we cant use. Alix, the world watches with interest as the big Central Banks are trying to figure out exactly what their policy is going to look like Going Forward from here. The ecb is undecided. Debate within the central bank, frankfurt, about the direction to take. It was interesting, listening earlier on to the bundesbank, saying they dont need more policy now. Others suggesting that more qe is on the way. We get the fed minutes tonight. Are we going to get a clue as well as to kind of what the mechanisms are for raising rates . I still dont understand how exactly this will work. Alix im going to say no to that, but thats my personal opinion. I think that what we will see is any dissent. There seems to be an evolving conversation there and you have to wonder what it is like within the fed as well in terms of using the Balance Sheet more aggressively and allowing inflation to stay above the 2 level for a significant amount of time to see what the consensus is or not. Guy powell was aggressive, saying dont worry about doing damage now, do it and worry about it later. He was worried about the fact the stimulus talks would be off. Where they aree right now. Its look, guys, we are struggling over here, youve got to deliver it if you dont, the economy is going to suffer . Alix and what else can they do . If it goes back to the fed, what can they do for the people without jobs. As they say, a lender, not a spender. Europe didnt have to deal with the moves that we got yesterday in the states caused by the president. The closes next, dealing with the details that we have going on. This is bloomberg. 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. Guy 30 seconds until the end of regular trading in europe during did not see the volatility in the trade we saw in the United States as a result of the president s tweets. We did fade early, but as everett sees it seems european equities trapped in a tight range. Down. 1 . We are looking for a sense of direction. Clarity and understanding as to where we sit with the stimulus story in the United States. It appears to be a major catalyst. In terms of the currency markets, given i on the pound. It is rallying relatively hard, pushing up through the 1. 29 level. Reporting seems to be that Michel Barnier does not believe the 15th. Ill work on there does seem to be a suggestion that the u. K. There is also the idea the u. K. Would have its bluff call if that is the case. I think the market is looking past all of this. The Michel Barnier headline providing upside move. The ftse barely budging all day. Tight ranges. You can seat in the dax and the cac 40. It dates back to august. The industrial sector has seen an area of strength for europe. Spanish stimulus bill today. Theoretically good news, but the spanish economy is suffering. New restrictions around europe, even in germany. There will be closing bars. Italy making masks mandatory. The coronavirus stories front and center. The data is starting to disappoint. Lets take a look at individual names. I want to talk about the airline sector. Iag trading down not by much. We saw the u. K. Parking the idea. It will have an investigation into testing, which the industry markets,g on key particularly the transatlantic testing, Rapid Testing to get these routes open. The u. K. Not making a decision. That is disappointing news for that sector. Tesco up earlier but fading slightly. A big online push. A big u. K. Grocery business. Doing well in the Online Business during covid. That should improve margins. That was reflected in the numbers. Roches a number name worth focusing on, having housing issues with sending tests to the u. K. , which will further exacerbate the problems the u. K. Is having, which will writ large across the entire economy. News by 1 g on that in switzerland. Alix lets stay on european equities. One of the stories we are following is hedge fund lucerne capital. They are raising exempt get it theyre raising objectives to a plan to take the company private, saying the plan the firm believes the offer in no way it reflects the true value of the company and mr. Draghi is using the law and the share prices to unlock upside value. Joining us for more is pieter taselaar, lucerne capital Founding Partner and portfolio manager. You own about 94 million shares. 411. Ash offer was about we are just about that now. What price would you take . Pieter i am reluctant to go into what price we would take. There is one thing you mentioned, mr. Draghi is using a lull in the market to buy the company on the cheap. We think he is stealing it from us. I would argue he is using this pandemic situation to his advantage and to abuse his rights as a Majority Shareholder and to squeeze out push out the minority shareholders. The price is ridiculously low. The conference last year arguing the stock is worth between 15 and 20, which was agreed to by mario draghi in private meetings in our conference call. The share price of four euros it stilla feel has almost a 10 discount to the average stock price over the last 12 months. Stockct that we think the generate 1. 5 billion of Free Cash Flow next year starting , three to four times Free Cash Flow, which is in my world unheard of. Guy i am sure mr. Draghi would object to your suggestion he is trying to steal the company from minority shareholders, nevertheless, i think he would make the argument he has done a lot to cut cost and he has sold off businesses, he has tried to raise the value. Public markets are not valuing this company at the levels you are talking about. Why are Public Markets not bowing the business at the kind of multiples and price levels you are suggesting . Pieter i would agree that mr. Draghi has done the right things fundamentally in terms of ,ringing down the debt levels rectifying the french situation, getting that cash flow positive again, and putting the company on the right course to be very successful. For instance, he sold kkr atructure assets to a, which ises ebit an indication of what hidden value there is within the company. He has done everything right and im sure he got frustrated with public equity markets not recognizing the value he is creating, and he took advantage of that. I cannot blame him for trying to take advantage of the public equity markets, not understanding the Intrinsic Value of the company. We are looking at a short timeframe, but in the midst of the pandemic, in general the thinkide and buy side this is a complex story. It has quite a bit of leverage. I have not encountered people who have done fundamental work on this. That is one of the things he probably decided to take advantage of the dip in the stock price. Some people have done fundamental analysis. I have to read my own handwriting. Bearh me by a put with me while i put my reading glasses on. Research,ller does they are specialist. He has put a 5. 7 euro valuation on the business. That is above where draghi is looking to take the business, but way below what you are suggesting the business is worth. Pieter if you look at the sell side analysts, the average target would be around seven or eight euros. There are others like goldman where the share price started around 10 euros. That is assuming the business running on the continuing concern. Out anyhi not spinning of those kinds of transactions. I do not think he will succeed, but he is trying to take it private. He will sell at multiples of 20 times plus to kkr, to morgan stanley, and create a lot of value. Basis, ig concern agree it is worth between seven and 10 euros, which is still way below the four euros and . 11. And 11 cents, i woke up and saw the bid at a . 25 premium which is still below the level where it was at the beginning of the month. Abuse of the is an Corporate Governance rules in the netherlands and we will take this to the Enterprise Chamber court in the netherlands and we will litigate this and we believe we have a lot of legal tools to change the course of action. Guy indeed, but in the United States this is the kind of case that would be litigated. Do you think europe has the necessary tools to litigate such a case . Is it harder on this side of the atlantic . Pieter it is funny you mention that. We are not very litigious in europe in general, and in the netherlands in particular. Mario draghi decided to pick a fight in my own backyard. Dutch, i went to law school in the netherlands, we are very well plugged into the legal scene, so we have very good legal counsel. We will litigate this and we will ask for mr. Draghi to not share in this related Party Transaction and we will ask for an independent board member to be appointed in order to go through the fairness of this process, or rather the unfairness and evaluate the and how the independent board arrives at the share price. Alix i should point out we did ltice and they said officially no comment. I wanted to end on a broader note. We have been talking all day about the rotation of leave u. S. Stocks and go to european stocks. The Growth Potential has been week, there is a virus surging in europe as well. Findingyour take as to good returns, Good Investments . Europe, what people have not, on two in europe because the virus has overtaken the europe,s, is that the eu pushed through a one trillion stimulus package that eurobondsinanced by jointly issued by the eu member states. They are jointly liable. That is the first time that has ever happened. Throwing their hat into the ring and the liability at stake together with the kinds of greece and italy. To us it is a major step forward for europe. In the past there was always a discount in europe because of the fear of your breaking apart. May be italy or another country leaving. We think that risk is minimized in europe. We see a lot of opportunities in europe. Guy redenomination risk may be potentially gone. We hope the deal gets over the line. Come back and talk to us more about your broader view of what is happening in the market. It is interesting to get your take on what is happening in europe. Of lucernelaar capital management. We greatly appreciated. European stocks finishing the day in tight ranges. The dax up just a touch, Everything Else negative. A little but of a push higher towards the end of the day. You can carry on the market coverage, we will do post game analysis. Jon ferro and i will be taking you through the cable show on db Digital Radio and around the world on all of your bloomberg devices. This is bloomberg. Ritika this is of a good Bloomberg Markets european close. I am live in the principal room. Ceo at 3 00 in new york. This is bloomberg. Alix covid cases keep climbing in the u. S. In new york andrew cuomo says the state has 1300 new cases. New york city also in the middle of targeted lockdowns in cluster areas. Also painful for Small Businesses trying to survive as business talks stall out as stimulus talks stall out in d. C. More on how women are impacted, cate luzio, luminary ceo, joins us now. Luminarias a place where women can go and discuss and generate ideas. Luminary teamed up with unilever for an initiative for covid relief. Appreciate you being here with us. Cases rising, targeted lockdowns, no stimulus. What happens to womenowned businesses . Cate thanks for having me. We are seeing the impact since march. 25 of womenowned businesses have permanently closed since the pandemic started. When you look historically over the last several years, 1800 new businesses started every day last year by women. 12. 3 million jobs provided by women in businesses, and then you look at women of color in particular, that is even greater. This is a huge problem. The Economic Growth we were seen for womenowned businesses prior is not just revenue and job creation. It is now stagnating as businesses are closing and we note womenowned businesses already have semi challenges like access to capital, access to network, limited funding. This is hitting hard overall. Schools . His about is this about parents not being able to do two things at once. It seems women have had to shoulder the burden of looking after kids at this time and it seems as if that has placed a huge burden on that portion of society. The economic effect has been massive. Is it as simple as that or are there other complicating factors . Think anything is simple during this time. We know this by the women we support that regardless of having to care for children or elders, this is having a real impact. If you have to shut your business down, if youre not able to generate revenue, if youre not able to get more customers, what do you do . It is disproportionately impacting women. The entire pandemic, one of the reasons we know is women are the primary caregivers. We did a study that said absolutely. We also know as of last week that one in four women are thinking of dropping out of the workforce because of this. Women dropped0 out of the workforce in september and you complicate that with womenowned businesses, which were fastgrowing again, employing women and men around this country, and certain cities being super impacted. York,t luminary in new and we saw our revenue decline. Without the tools and resources and networks and guidance, it is hard to rebuild and recover. Alix what is the best solution . Is it trying to generate demand, giving these businesses access to cheap loans, how do it . Cate there are a couple things. We already know more than 70 of womenowned business suffer from stress. We had access to capital. Are all womenowned businesses going to raise Venture Capital . No. There needs to be access to capital. A lot of women were shut out of ppp. That problem was exacerbated. The unilever program and the initiative with our fellowship are going back to basics and saying what you need around the country to rebuild and recover and reimagine your business . Access to funding and getting more education around what is out there, is that a loan, is it a Business Credit card, is it angel investment, is it as simple as going to rent . It is not a check, it is access to networks. Working with unilever of our first partner, we will announce with ubs next week and verizon in november, is to target these womenowned businesses around the country that have been hit hardest. Alix using your banking do it . Nce, how you havesix women alone two. How do you bridge that gap . There is part, if it is out of the bank support womenowned entrepreneurs and womenowned businesses, but it has to be greater than here is the six people we need to help. This needs to be done at scale. It is more than funding it is more than just the bank. It is coming together and providing access to resources. If this does not happen, what is the outcome . How bad could it be . Cate we have already seen 25 permanently close since march. That is a huge statistic. I think there is also an opportunity. We know from 2008 when a lot of women lost their jobs, nothing like today, but we have necessity entrepreneurs, women say what can i bring to the table. There is an opportunity. We have to be able to support those women, whether they have left their jobs, whether they have to get back because of childcare or virtual schooling, we have to be able to support them. Companies working with organizations like luminary and others say ok, lets get it to get together, lets get boot camps around business planning, financial knowhow, and preparing these businesses to be sustainable and succeed in the long term is what we need. We need to do this at scale. Our goal as a Small Business is to do this for 1000 womenowned businesses across the u. S. We welcome the support of these Large Companies that want to invest in the unity is for they live, work, and serve. Again, this is the reality of the situation. Andave to do more for women women in the workforce in general. Guy we will leave it on that note. Appreciate your time. Cate luzio of luminary. This is bloomberg. Guy Vice President mike pence and democratic bp nominee Kamala Harris are set to take the debate stage in salt lake city, utah later tonight. Joining us Bloomberg Contributor rick davis, who ran john mccains 2008 president ial campaign. How consequential is this event tonight . Been made more consequential because of the disastrous performance by President Trump in the first debate. The republican ticket led by Vice President pence needs to recover in order to get back into this election. It is clear from polling data its the last debate that the republican ticket is losing some support. It will fall on mike pence to try to stop the bleeding and get the campaign back on track. Alix can mike pence be a trump surrogate . Rick as far as attacks on joe biden and Kamala Harris, sure. He has done this before. Pushs able to effectively back on Hillary Clinton and tim kaine, her Vice President ial nominee during the debates four years ago. We know he can throw the punch. The question is is that punch going to be able to land because the issue set is so different. If this debate is not all about covid, it would surprise me, simply because of the headline news. Harris pushs kamala back against the narrative she is a leftwing liberal . Rick that will certainly be part of the attack that mike pence puts on. Donald trump tried to position joe biden as being a leftwing liberal or captive of them. She has a good story to tell. She can talk about her own biography but also about how joe biden made it clear he is the democratic party. He will govern in a centrist fashion. If she says that, it will have a similar impact bided had when he said the same thing to donald trump your alix we are looking forward to it. Rick davis. Former Mccain Campaign manager plus Bloomberg Contributor. Youll will be joining david westin tonight for our coverage of the Vice President ial campaign. That the Vice President ial debate. That wraps it up for us. Coming up, balance of power with david westin. Stimulus or no stimulus . A head fake for the market. This is bloomberg. 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. President trump, who is back in the white house and tweeting up a storm yesterday, including the tweet that was basically calling up stimulus talks. Among other things, he said ive instructed my representatives to stop negotiating until after the election win, immediately after we win we will pass a major stimulus bill. That sounds like the stimulus is off. Then he seemed to take a if i am tack, saying such a standalone bill for stimulus checks, 1200, they will go out to our great people immediately. I am ray to sign right now, are you listening, nancy . We welcome our chief washington correspondent kevin cirilli. Is the stimulus on or off . What is going on . Kevin call it the may be so negotiation. Con