Outperforming small stocks, underperforming tech stocks. We are negative on the bond market yields. Brent crude is up. Pfizer concluding they have covid19 vaccine candidate. If you heard the interview, you have the stats. Whats your take on the viability of the vaccine . This looks very exciting. I believe we will get an emergency use authorization than i hope we can start vaccinating sometime in december. Health care workers will likely go first. Moredown the road, people seriously affected like those 65 and older then months later, the general population. The modernact vaccine will be soon. We need all the help we can get. In terms of the effect that im going to get if i take the vaccine, is this something i will have to do on an annual basis or twice per year . What kind of response is my body going to generate that will protect me in the long term . Guest thats a longterm question. Get the vaccine into people first then we can follow them closely to determine whether we have to be revaccinated it if so , at what interval. That is a downstream question. The first question is when will the vaccine become available . Should get vaccine vaccinated first . Lets start moving it from the refrigerator into arms. Vaccines dont prevent disease. Vaccinations prevent disease. Alix in order to do the downstream part, you have to get different variations of the vaccine and still work on it. If its out in the public, will you have a hard time finding people to do the placebo and the test the part of the testing . So far, the virus in its essential component, we call it the spike protein, it has been very stable. Unlike the flu vaccine that has to be changed annually, at the moment we think we dont have to change the vaccine perhaps at all downstream. We will determine that down the road. Temperature seems to be a critical factor in terms of distributional. Think they do you vaccines will be able to be reformulated to make them more stable and therefore more able to be distributed . Guest the Pfizer Vaccine will be distributed to key locations where the very cold temperatures can be managed appropriately and the vaccine programs can be administered sufficiently to use the vaccine. Is more ableaccine to be distributed to doctors and pharmacists so we will have many more locations where that vaccine can be to tribute it. My understanding is that pfizer is working on making their vaccine more temperature stable so we dont have to use these extremes of low temperature to maintain the vaccine. We still have a lot of other vaccines in the pipeline. Astrazeneca, it seems like their results could come out any second. What is the next milestone you are watching . Guest the next issue course is the delivery system. Can we communicate effectively to the general population when it is that they should show up for vaccination and have them respond. There are a lot of skeptical people out there. And safety ofess the vaccine will have to be clearly communicated particularly to minority populations, people of different ethnicities. They have expressed themselves in surveys that they are even more reluctant to receive the vaccine. We need to get that information and the reassurance so that they can make good decisions and come in and be vaccinated. We believe that there. Thank you for your input. Its always appreciated. The market about response to all of this is our next guest. Nice to speak with you. The market has been all over the place when it comes to the vaccine news. The initial news of the Pfizer Vaccine generated a huge the tech sector into cyclicals. Do you think the market has over done this . Have we overreacted to the news . Guest good morning. I dont want to repeat the conversation you just had with the previous guest, but you hit on all the right topics. Some companies in some sectors have been tremendously affected by the virus and the response to it, the lack of Economic Activity in certain sectors. Therefore, something that brings us closer to a normally functioning economy should be an official to those companies but within those companies, many have taken on huge amounts of debt to bridge the gap. Companies are less profitable maybe they cannot survive even if we are returning to normality. Flipside, Tech Companies have been deemed to be huge winners from the virus affected economy. It just so happens that those companies are also valued at astronomical valuations which i dont you could credibly justify in most cases. You could credibly justify almost any circumstance at this stage. The problem you have is that the companies which have benefited from the virus make up quite a large percentage of the index. Many of the companies that have been hurt dramatically make up a small percentage of the index. The rotation we have seen grown on thelue has an impact index as a whole and that complicates it. You throw in the correlation with treasuries and higher treasury yields and a steeper treasury curve, that does cement the difficulty of pricing the grows into value and in a bull market. Alix im looking at the factor function on the terminal. It has been dumping profitability and momentum and buying things like leverage stocks, momentum and volatility. I know this is outside your Corporate Credit world, but i wonder if you thought that rotation made a little bit of sense on the surface even if you are going to get that kind of pop on forward. Guest these are all different ways of saying the same thing. Youre buying the things that have performed well and selling the things that have performed poorly. Buying value and selling growth. The u. K. , european, and Japanese Equities are much more reasonable even if in some cases they dont look reasonable in the absolute sense. All of these factor rotations, all of the strategies are to a large degree have been doing the same thing. We live in this world of one trait. There is only one somatic which is driving markets. Investors have piled into that. That means the potential impact of investors piling out again and be incredibly disruptive and again, prevailing valuations, prevailing prices across equity markets certainly in the u. S. Specifically, alltime high as guy responded have we not already priced a lot of it if not all of your more than the good is we are hearing. Its a real challenge and we are seeing that in market. Sideways asg bullish and bearish narratives temper decisions between the nearterm and mediumterm they are clashing with one another. Guy the narrative continues. The reason why we have been able to do what weve been able to do in equity markets and credit markets and so many other assets because Central Banks have pumped the system with lots of liquidity. I listened to christine lagarde, jay powell, bailey, they are all saying the same thing. We are going to continue doing that. Why should investors believe anything other than that Central Banks have my back i can continue to pile entities, i can continue to move down into riskier assets. Why will not continue to work . Thats the obvious question. I truly dont know the ultimate answer. Equity markets have not had anywhere near the same reaction to the Central Bank Balance sheet policies that they have within the u. S. , youu strip out tech names dont get quite the same picture. Government bonds prices are being directly influenced to some degree. Corporate bonds have been purchased by Central Banks so there is a direct transmission. In japan, you have seen them by etfs but that hasnt had a direct effect on equity prices. Thats a psychological link. Its a self fulfilling prophecy based on the idea that theres a put under equity markets. How Central Banks extricate themselves from that, i have no idea. They have dug themselves into a massive hole and their solution is to continue digging every opportunity they get. Valuation is all that matters in the long term. Buying ridiculously Expensive Companies on the basis that Central Banks have historically continued printing money ad infinitum, i do not advise that as a longterm investment strategy. Up, what is we wrap the dollar supposed to be doing . Guest the dollar is a tricky one. Everyone was bearish on it going into the election. I didnt agree with that. Are rallying, treasuries are selling off and underperforming, the last 10 or 12 years that has been bullish for the dollar. The u. S. Is the most likely to get monetary tightening. Since the election come i think theres more of a story that suggests dollar bearishness. Youre not going to see as much fiscal policy the fed is still going to be the marginal supporter of assets. To havet expect assets a precipitous decline anytime soon. Behink treasury yields will following and tightening and that should exert downward pressure on the dollar. The same complicating factors between whether u. S. Indices can keep moving higher the sector rotation going on when risk is off it tends to be, it tends to bring with it a bid for the dollar. I find it the dollar caught between forces. Economically speaking, a week dollar is not with the Global Economy needs. Its great if you are an em country. In major else with the economies exception of the u. K. , new zealand, and canada, everyone runs a current account surplus. They have no real means of stimulating domestic demand sufficiently. Of Central Banks ,tarting to squeak about that Central Banks see their currencies rallying and its uncomfortable for them. I dont think a big dollar bear market is a stable equilibrium. I dont discount that we could see some shortterm dramatic downward pressure on the u. S. Dollar because foreign owners of u. S. Assets have low hedging ratios. Alix you are going to be sticking with us. I want to break some news. Abouta budget is looking 3 billion of deficit borrowing. It would also employ they would have to cut 40 of the subway surface workers. They need federal funds by late march to avoid these kinds of cuts to the subway system. 40 of the workers, that would be huge. They are forced to issue debt, it would be 3 billion of deficit borrowing. Its going to get messy particularly if we have no stimulus coming out of washington to help minas apologies and localities. This is bloomberg. There is still big support and the population. 80 Something Like that. This is not too bad. Yes, there are some opposing it but thats how things are in a democracy and i think it is more areess most of the people supporting the government strategy. Guy that was the german finance minister speaking to us about an hour ago. Today we see protests in berlin. They involve rocks being thrown at the police. Water cannons being used in berlin. Regional leaders are pushing back. German regional courts are pushing back against the action that is being taken by the Angela Merkel administration in germany. We are seeing protests elsewhere in europe. Most people accept that restrictions are necessary to defeat the virus. Is europe going to do as well this time around in dealing with the virus and what Economic Impacts will it have . Christine lagarde speaking this week said the arrival of the vaccine is going to have a meaningful impact on her outlook. Staff of the ecb have factored in the arrival of the ecb and we still see the outlook economic reports suggesting its going to be tough going forward. At thisas had enough point largely of fighting the virus. How tough is the which are going to be and how much more stimulus is going to be required . Tensions on all sides really are quite stark between Population Health policy, economic policy, the sustainability of responses from governments and Central Banks to try to ameliorate the effects of the policies and the effects of people changing their behaviors dramatically because they are concerned about the virus and its transmission. You said that dealing with the virus europe previously i dont think that is really a thing. Whatever the virus is out there is going to transmit whenever people are behaving near normally. In my opinion, it was always inevitable that the virus would recur as soon as restrictions were lifted. Because of the widespread of the virus now, we should be looking and at lockdown measures more at mitigation measures but unfortunately, our governments seem to be falling back into lockdown measures which are a temporary measure only. I think the hope of a vaccine means you can sell these measures is temporary more credibly and that will quell some of the population unrest. This is going to be attention throughout. The virus is going to have an impact on economies and we are going to have a difficult winter. The question for markets is whether or not they are prepared to look through that because there will be a brighter 2021. Thats what markets did through the middle of this year was to say at some point it will get better so we continue buying equities. The ecb doesnt want to have upside forecasts because that would impinge on their ability to ease again and thats the only thing keeping the whole thing together. The a return to normality prevailing situation for the back end of 2019 is not healthy and the challenges are huge. The fiscal policy response will be insufficient again because its not possible for it to be sufficient because the restrictions. Political and fiscal we are all fully aware of. It should do a good enough job overeping activity taking into 2021 and whether you want to invest with the underlying economic fundamentals or just invest in line with the Central Banks bond buying is up to each individual investor. Alix that was impressive. Toistine lagarde seemed indicate it would be quantity not quality of more easing. What do you make of that . I dont think anything they are doing is quality. Its taking further into a massive hole that has no discernible positive benefits to this point. I dont think theres anything the ecb can do to deal with the underlying economic problems because they are structural in nature. They are not cyclical, not things that can be dealt with through intertemporal choices. The ecb is keeping markets at bay. Thinkine lagarde seems to their only job is to make funding for corporate and governments acceptable in terms of the cost of doing so which is a blatant admission that they are engaging in monetary financing. They will continue to do that. In terms of expanding the Balance Sheet further to ensure that yields and spreads are backstopped if not continue to be driven lower. 400 500 on the Balance Sheet, i have no reason to disagree with that. And cheapening up funding further for banks. Alix thank you very much. This is bloomberg. Markets getting ready to shut up shop for the day. We are near record we are near session highs. The european close is next. More details to follow. This is bloomberg. Guy less than 30 seconds to go before the end of regular trading here in europe. Lets show you what the stoxx 600 looks like. It started off in negative fashion, since then has been in positive territory and climbing. A tight range this afternoon. The marketing the market finishing up around. 4 . Not the kind of vicious trading we have seen the last few days with this sense of rotation. More stability today as we digest the difference between vaccine news and virus news. The virus news continuing to get graham grimmer. Not too much to differentiate main markets. A bigger performer as a result of the vaccine news, up by around. 5 . Up around. 4 . Lets take a look at some of the other asset classes. Aroundd market turning as the equity market has as well. Germany, we are seeing something of a selloff. Yields are a little bit higher. He pound moving higher as well anticipation growing that we will see a brexit deal next week. 3 re nearly trading with a on the session. Throughoin, briefly 18,000, now back below that. Certainly that run very reminiscent of the run we have seen a few years ago. The question people are asking is, what has changed in terms of adoption of this Digital Currency . Is it a Digital Currency or Something Else . Lets take a look at the stocks we have been focusing on. Pfizer producing more detailed data relating to its vaccine, 95 efficacy. Us on thisling program. A key mark in terms of that vaccine rate. We have also been talking about what has been happening with boeing. The recertification by the faa of the 737 max. Then you start the about happens in the supply chain. Ge, a part of the engine alliance. , the sole supplier for the 737 max. That stock a little lower today. Rsa up. The biggest takeover of a u. K. Company this year. Looks like it is a done deal. Up by finishing up there, 4. 5 percent. Some interesting stock stories. A little, on the surface when it comes to the index. The auto sector. Recovery in european car sales, very shortlived. The German Government offering its Auto Industry 5 billion euros to help her through the virus crisis. Lets get to a man on the ground. That is klaus rosenfeld, schaeffler ceo. It is an auto and industrial supplier based in germany. Great to talk with you. Investors were disappointed with your numbers. It was the auto forecast. You industrial business looks solid. When do you think we really see the trough here . Let me first say, we had our Capital Market stay for 2020. We had about 300 investors lined. It shows the interest in the story. Roadmap, andur new strength onntrinsic the stability side. We have presented a twopronged strategy. One, to extract superior value from our two rail business, and two, want to conquer a leading position in the new business. That means in particular, pushing our electrified powertrain business. In that sense we have reinforced our powertrain scenario. 2030, thenefit until strengths we have in hybrid. Projecttrification becomes even more important. To add to this, we have clearly increaseto further 2 billion euros3 billion euros. I think that is a Clear Strategy that will pave the way for scheffler to become a leading player in the electrified powertrain area. Guy thanks for your time today. It has been a busy day. In the near term, to make the transition, you need to keep this business running. Pointed out, we are seeing a reduction in demand. Im wondering how you managed through this process and what advantage you can take of the new program that lynn has laid out, in terms of the aid that is likely to be delivered . In do you utilize that aide order to make the transition you are talking about, given the difficult drop we face as a result of covid . Klaus first of all, we appreciate the fact that the German Government yesterday stood up and stands behind the Auto Industry that is so critical for germany. I was part of the discussions yesterday with madame chancellor, always a great honor to be part of this group. I think there is a general belief and also a general consensus in that group that germany is on the right way to become the leading market, the leading player when it comes to electrification of powertrains. That is where the real strength lies. If this industry comes together, the big oems we have, for government, the suppliers, all of the Technology Germany has offered paves the way for this transition, and that is the real strength out of the commodification. We at scheffler will not utilize state aid. We have a strong material business. That will be able to fund the way into the new business. Question is, the how long does that take and what our operating margins in the middle of that . Getting more subsidies or cashback for electric vehicles sounds great, the carmakers and you yourself still have to make them and provide the parts, when it may not necessarily be profitable yet. Klaus this is why we talked about midterm targets today. The midterm targets give a walk over the next year. The targets we have laid out also may seem a little bit conservative, they are designed to be a rocksolid floor going forward. 150100 determined percent determined to overachieve these targets, if possible. Earlieris johnson laying out his green Industrial Revolution his words. Lets talk about how realistic some of these targets are. Ban the saleic to of Combustion Engine vehicles on hundred percent Combustion Engine vehicles, by 2013 . 2030 . That seems close in terms of reengineering an entire industry. Is it realistic . Klaus well, let me respond as follows. I cannot comment on what the british Prime Minister says. That is not my task. I can say is, sustainability is the new normal. For company like scheffler that looks like this from an end to end, this is a great opportunity. , whatabout the mobility is clearly something that supports sustainability, and what other supplier has a number two, number three position . Dont forget, we are supplying in more or less every wind tower in the world. This is a perspective that for us is very strong. Whether the politicians call for 2030 or 2035, is that relevant . It is up to the customer that will drive this next step into sustainability. Here we want to be wellpositioned. Want to understand the demand. This is what counts. Alix we appreciate the candor. Klaus rosenfeld, scheffler ceo. I spoke about Sustainable Investment and private money with mark carney. We are going to be coming out of the health and economic crisis. Question is, what directional repointing our economy . We are going to point toward sustainable growth. Investment that is capitalintensive and job heavy. Investors compartmented to work. Can put money to work. Alix joining us now is philippe houchois. E ended with the u. K. Shift mark carney says it is important for policy to set the tone. What does a carmaker do today when it looks like the ice is not going to be i see you is not going to be allowed in 2030. Philippe you need to set milestones. , how youhe lines define no ice is a bit flexible. U. K. ,n california and the we are looking at banning pure ice only. Which leaves open hybrid powertrains. Do i want to own the scar stocks while this transition happens . Philippe you want to own them selectively. In many ways, we look at where the stocks have value versus history. You,hink history tells there is not a huge amount of downside. Having said that, its going to be interesting to see how each company navigates the transition. Become anas to electric manufacturer. With going to be interesting is how differently they transition out of ice, at what pace, at what cost. That gives opportunities to invest in manufacturing. Alix ice, of course, internal Combustion Engine. We have seen a lot of partnerships with carmakers, because they basically need each other to get through this. Especially when they are competing with tesla. How do you pick the winners and losers who can get there profitably . Philippe as i said, you need to have a strategy. You can differentiate yourself, and i think carmakers are trying to make sure there is differentiation in ev. At think people thought all ev cars will be the same. It is not true. Is at whateresting pace you continue to invest in ice, at what point you start removing capital either gradually or completely from the development of Combustion Engines. We hear Different Things from carmakers. Bsa recently said there were no longer investing in ice. Volkswagen, for which it is more difficult is also hinting at to greenng capital software. That movement is happening already. It is a question of the pace and magnitude. , it isway we look at going to be expensive. But it is almost a requirement in the same way that developing evs is also a requirement. Guy how does this sector deal with the arrival of a vaccine . It cant go to a car showroom at the moment, because we are in lockdown. You will be able to do that postcovid. Is that he positive . On the other hand, people are going to be interested in cutting back on public transport. It is a negative . The sector has been flying, it is up 15 . Vaccine intoor a my thinking around the car sector . Philippe that can only be a positive for premuch every sector, i think. We tend to look through some of we havees, because nearterm risk to some production and sales. Oneink in a broader context of the few positives we see as a result of covid is potentially a rating of cars as a preferred mode of transport. There will be more public transport, but i think there will be more e cars. You see more ability for people to work from home and moving into areas where having a car is requirement. U. S. Ee that in the higherreas have a much vehicles per household. There are a number of factors charged directly constructive, and i think there is no demand destruction in auto as a result of covid. Quite the contrary. It will be different cars, but the demand for cars is there. Guy we going to leave it there. Always appreciate your input. Japanese chois of have jeffries. A little bit of a takedown during the auction with the ftse, but we are seeing the pound on the move. We are trading 133 at the moment. It is right at the top end of its recent ranges. Ftse, dax, and cacs all higher today. We will have more analysis at the top of the hour on bloomberg radio. Jonathan ferro and i will be taking you through the cable show. This is bloomberg. This is bloomberg markets, i am risky group to ricky cooped up. Coceo, that is at 3 30 p. M. In new york. This is bloomberg. The South African president says he has certain his nation can attract more investment and avoid a debt crisis. He spoke exclusively to bloombergs and botta from the south African Investment conference. Investments have been going. Own in relation to our gdp one of the reasons why at the beginning of my 10 year as president focused on attracting investment was to try to correct this. We are in the process of doing so. Goal,d to ourselves, the 100 billion into our economy in five years. We are already more than halfway there. Commitments are being made by companies, and many of these commitments are being actualized. Investment in an investment weease savvy our gdp. I think we can turn things around quite significantly. But it also means that the also needs to demonstrate its role in our economy. The public sector, investment has tapered down. Thatw want to boost through refocusing our state enterprises. We will also see the private sector beginning to invest more. How confident are you that south africa can avoid a sovereign debt crisis . This a risk that the finance minister highlighted . Debt takenen it upon ourselves to draw a line with debt we are now going to arrest the debt level, numb down bring them down quite significantly over the next four years. We are spending far too much money on debt servicing costs. , in some cases, then what we pay for education. That cannot be. Weve got to bring down our debt level and make them much more manageable. Was the South African president speaking to bloomberg earlier today. Guy, he talks a good talk, but you look at the numbers and you have investment as a percentage of south africas gdp has been declining since 2016. It is going to reach a record low this year. How do you turn that around . Guy unique growth. Unique growth and you need to figure out how to get unemployment down. It is a huge problem. How do you generate entrylevel jobs . What kind of a model do you do . Down toident has gone the high value growth strategy. You wonder whether or not South African needs to mimic what we have seen in places like china, and you need people to be employed to be able to build that middleclass and for that to become the engine of growth. It just isnt there at the moment. Ofll dealing with the legacy the administration. The big stories going to be what comes out of turkey. There is a Central Bank Rate decision, and a lot of people are expecting a hike. President erdogan today back to old form, talking about maybe the problem with higher weights, despite his recent change of heart, but nevertheless i think a huge day for turkey, huge day for emerging markets, and we will have great analysis on this program tomorrow to do with that. Way on thatther story, for the turkish central bank. This is bloomberg. Time for the bloombergs newsflash. The biggest stories in the news right now. Goingsulators say that 737 max can safely return to the skies. The planes will resume flight after a 20 month grounding sparked by two crashes. The faa ordered boeing to make a package of fixes to its jetline. It is the biggest change to App Store Revenue structure since it opened in 2008. Tole is cutting the charge most developers who Sell Software and services on the app store. The company has faced scrutiny from government regulators about the percentage it takes from purchases. That is your latest business flash. Guy thank you very much. Suggest thiseem to simply is not enough from apple . Alix its not enough. T is really immaterial Morgan Stanley says, look, they get revenue from the big app developers. The revenue hit is going to be immaterial for them. Guy the eu says it is going to carry on with this investigation. In some ways, they are probably kind of caught between the 30 and may be going too far in terms of reducing it further. It is going to be interesting to see whether apple has to respond even more. Alix i love the reaction. Yeah, not so much. Nice try, but no thanks. That does it for me and guy. Corwinup, dr. Steven joins david westin. This is bloomberg. Businesses today are looking to tomorrow. Adapting. Innovating. Setting the course. But new ways of working demand a new type of network. One thats more than just fast. You need flexibility to work from anywhere. And manage from everywhere. Advanced technology. With serious security. And reliable coverage, nationwide. Forwardthinking enterprises, deserve forwardthinking solutions. And thats what we deliver. So bounce forward, with comcast business. I hope my insurance pays for it. Can you tell me how much this will be . [cashier] 67. Sorry. Wait, have you heard about goodrx . Goodrx finds free coupons to help you save up to 80 on your prescriptions. Wow, i had no idea. [announcer] goodrx, stop paying too much for your prescriptions. David from bloomberg World Headquarters in new york, to our tv and radio audiences, im david westin. Lcome to balance of power going to start out with a check of the market. Abigail, we are stuck sideways. Abigail we are indeed. Very small moves for the s p 500, the now the dow, and the nasdaq. The bigger ranges over the last four months, bolstering to break out, but we are stuck in that range as well. We have more action, we have the russell 2000 outperforming, at smallcap index up. That cyclical value rotation continuing. Kbw bankhowing in the index, up about 1. 4 . Investors wanting in on that move toward reopening. Where they are moving out of, the big tech names. Interesting though, i we have stocks basically stuck in this
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