Transcripts For BLOOMBERG Bloomberg Markets European Open 20240711

Hsbcs turnaround picks up speed. The bank surges in hong kong as speculation grows around a return to Dividend Payments. Good morning, everybody. It is wednesday morning, just over an hour away from the start of cash equity trading. Lets look at futures. European equity markets, u. S. Equity markets of by more than 1 . And, of course, we have touched the levels key levels. The dow at 30,000, and the s p touching an alltime high at the close as well. Real strength coming into today, in futures suggest we have some upside to play for. Futures all point higher. European futures also to the upside. Ftse futures up by about 0. 3 . Broadly speaking, it is the same as the last couple of days. We are talking about vaccine optimism. The news about janet yellen picked up the appetite. It is into just stocks. We can look at what has happened through the asia session. Some of the markets in asia have turned increasingly negative as we have gone through the session. Parts of asia now retreating. The chinese equity market moving to the downside. In the end likewise moving a bit lower. Asia is india likewise moving a bit lower. Asia is gradually negative. Looking for signs for appetite for risk as that, we see that in some of the equity markets, but also in some commodities. Copper, for example, not far from levels not seen for six years. Later on today, we touch on u. S. Data, just how strong is the u. S. Consumer. Here are some of the top stories this morning. France will gradually start easing its lockdown from saturday. Small stores will be allowed to reopen, and if certain conditions are met, cinemas, theaters, and museums will follow suit from december 15. But restaurants will remain closed well into january. President macron says vaccinations could start at the end of december or early january. Treasury secretary Steven Mnuchin is moving 450 billion beyond the reach of his successor janet yellen. He has put most of the money that had gone to the fed lending facilities into a fund that would require congressional approval. The democrats call it illegal. The treasury rejects that. Pastors and it can vaccine was tested in younger people, according the astrazeneca vaccine was tested in younger people, according to the head of the program. But the ehf the group was capped at 55. A trial with two full doses was only 62 effective. Carrie lam continues strengthening ties with china. Defends beijings tightening grip on the financial hub. She says her goal is to restore confidence following a tumultuous year. Global news 24 hours a day, on air and at bloombergquint take, powered by more than 2700 journalists and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Our Bloomberg Markets live managing editor joins us from singapore. 30,000 of the dow. The president was pleased with that. According to some reporting, we found nirvana. Does it feel that way to you . The big . From earlier this year have now gone. Marks fromquestion earlier this year have now gone. Youre going to call me a cynic, but monday or tuesday of this week felt like we had wave after wave of good news. Eminis the s p 500 had put in their highest year on the pfizer news, the vaccine news, and i was preparing a mea culpa psychologically. But we have not broken that level. Despite the euphoria, we have not gotten back to that high from a couple weeks ago. Despite the fact that we have more and better vaccine news. It is kind of disappointing in asia. This is only one day, nothing too dramatic, and clearly the bulls are in command, but it seems like we are starting to run out of slight buyers at the margin. I do not think people who turned bearish over the last couple of weeks are going to be too nervous just yet. Anna maybe we should do our best to bring everybody down from the cloud nine, away from nirvana. On to the question of the day, when will risk assets Price Inflation . Just when we thought things were going right for risk assets, do we need to start taking inflation more seriously . Do we need to start pricing it in more seriously . The last four or five years, there are no signs of inflation anywhere, but i saw the most compelling arguments one of the most compelling arguments for inflation from our u. S. Mliv team last night, making the case that inflation is going to come through in 2020, 2021 next year. We are going to see a hit from the u. S. Fed, and there is a chance of much higher levels, especially with whats happening with energy prices. I found his argument pretty compelling. He said its a warning, because the one thing that might kill this wonderful euphoria is the idea that if we really do get inflation, then those rates are not going to stay low and they will kind of squeeze the soft markets that are for discounted cash flows because they are expecting rockbottom rates ever more. That might not be the case. Anna what does that picture look like if we do start to get inflation . Let me ask you about something more european. I know you were looking ahead to various diary points in the european session, and one of those is the statement from the chancellor, expecting to give a Spending Review and an update on Government Spending. Broadly speaking, when we hear from governments at this point, are we still hearing that they are looking to the imf, that they are not looking to tighten the Purse Strings too quickly, or is the market not focused on that . Mark i think the market still wants it to come through. I take the u. K. Has done a good job to promised support in various levels. People can quibble about whether it is too much for enough, but overall it is a good sign. I think investors are pricing the fact that governments will continue to support not just on the fiscal side, but Central Banks will support on the monetary side. One of the problems with this rally is that all the inputs are there for the rally to continue, except that it is based on everyone continuing to contribute to the full amount of the value, whether it is Central Banks, governments, support measures. If we do see some of those get pulled out, there is a long way it could crash, given where the valuations are. Room for policy mistake, then, isnt there, mark . You look at the dotted line on the conditionality attached to distribute in all those funds. There is room to go wrong in europe, i suppose, even though others are talk about this being a new fiscal decade. Mark i understand the optimism. You look at each story in isolation, there is reason for optimism. We have seen this time and time again, that europe tends to get to the right solution eventually. Even though it sounds like bickering and different divisions, there is always going to be coppermine. I think that is going to be the case for the european Recovery Fund. If you look at this in different parts of the world, there was a recurring scenario. The problem is, we are pricing in a world where all these packages do come through, and the odds are that one of them will fall through the net. There is a chance for a rep. Long negative effect given that we have such extreme valuation on the given the fact that no one is allowed to make extreme valuation, given the fact that no one is allowed to make a determination. Speak to youood to as ever. Program, still 50 minutes to go until the start of the European Equity trading session, stocks are finding their happy place. Global stocks are on track for a record month. Will we continue that momentum . Anna welcome back to the European Market open. We are still 45 or so minutes from the start of the European Equity trading session. A really strong global rally, the s p had a record of a close yesterday, and futures continue to point upwards. Ftse 100 futures looked pretty strong. Lets go to the Bloomberg Business flash for you this morning. Fintech startup strike is said to be chasing new funding that could double its valuation. Sources tell bloomberg the new round could have more than 70 billion or even as high as 100. Stripe works with competes with square and paypal. Dell and hp are both getting a boost from the pandemic. They posted Quarterly Results that topped estimates. Sales climbed nearly 3 over the three months, with hp shepherd a record 19 million pcs over the same period. Itsis reporting weakness as namesake brand and banana helpedc, but Old Navy Sales jumped more than expected for the group. The retailers closing for performing stores to focus on its online offering. The company is not providing longterm guidance due to uncertainty created by the pandemic. Bitcoin mania is back. Retailers are driving prices back to alltime highs. It is now up over 40 in november alone, to levels not seen since 2017. To othery is spreading coins, with bang and bitcoin and bitcoin dash cash jumping. Thats talk about global stock nirvana. Global stocks are on track for their best month on record. Investors packed into cyclical sectors, pushing the s p 500 to an alltime high. We are joined by jeffrey sacks at city private bank. Looking at global appetite for risk right now, it seems quite broad. I was looking at a chart that looks at the rates of participation in the global stock rally, and that seems to be fairly broad. Is that your assessment . Jeffrey it is, and there are three reasons. The first is positive vaccine news. The second, we expect accommodative fiscal policy and Monetary Policy. The third factor is what we are starting to see is further signs of a cyclical pickup that is getting through into growth forecasts. Anna indeed. Let me ask about that cyclical pickup. I was looking at an analysis that suggested we are looking at a cyclical recovery. When we look at the assets on the move, junk bonds, cyclical stocks, but this is a cycle like none other. They pandemic. I wonder how comparable it is with other cycles . What comparisons do you find useful with where we are in this cycle . Jeffrey we have had an exogenous shock. It was the sharpest falling gdp in the second quarter, followed by the sharp its rebounded the third. Sharpest rebound in the third. We are looking to see, to what extent do we move from the rebound to the recovery stage, and what the strength of the recovery will be. Our Global Forecast is that it is going to be a 4. 2 global pickup. Europe will have a 4 growth rebound, the u. K. A 3 growth rebound. What we are looking at over the next few months is going to be a really challenging winter as we move through wave two. The but what is notable is that , is notfrequency data weakening as much as it did in q2. That gives us confidence that once we move through the winter and get for the confirmations on the vaccines, we will have the confirmed rebound that will lead to a strong recovery to make in 2021 and 2022. Anna where does that leave smallcap stocks, then . I was looking at a global measure of small caps, and they do seem to be closing the gap that opened up compared to their larger cap counterparts. This is global, but you can talk about the european experience, if you like, about where small caps are at this point. Many of them, able to conduct which sector they are in, but what are you seeing . Jeffrey we are overweight european small caps and midcaps. They typically trade around a 29 premium, and at the moment they are trading at a rate that we expect to move to premium. We are talking about a midcap sector that will outperform a strong market. What might drive that . We think the domestic economies across europe will pick up gradually in the next months. More mobility, we expect social distancing measures will be relaxed. That will bleed through into consumption and servicerelated areas, and that will help small caps and midcaps. Secondly, we are positive on outlook for the euro, even after the gains we have had. That should be positive for small caps and midcaps that are largely domestic focused. We think the reason for further strengthen the euro, apart from the dollar lower, from a domestic standpoint, we think there is less eurozone breakup risk. The Eu Recovery Fund thing 390 billion euros we think lessens the breakup risk, giving another reason for the euro to rally further, supporting, we think, domestic stocks in the midcap sector. It is interesting to look at where the euro is in the european politics, because the pol at we are seeing around the Recovery Fund politically is with countries that are not in the euro, countries that are to the east of europe but not in the eu. I wonder how those question marks over the Recovery Fund, how they will be distributed and with what conditions, how that weighs on the currency or not at all, because they are outside the currency. Jeffrey we believe the Eu Recovery Fund will eventually be ratified by the end of this year, despite hungary and poland being entirely happy with not being entirely happy with the conditions attached to the allocations, based on their rule of law. We believe those countries in particular are dependent on the budget allocations as well as the Recovery Fund allocations, and that is going to be critical in the next few weeks. We think ultimately, with the head of the eu presidency, a deal will be found that ratifies the Eu Recovery Fund. One final point, for the Recovery Fund to not go ahead, you would need all 27 eu countries voting against, and we think that is highly unlikely. Jeffrey, thanks very much. Stay with us on the program. More thoughts from jeffrey shortly. Coming up, as the virus continues to rage across europe, leaders are grappling with how to keep their economies afloat. We have had development in france, germany, and the u. K. Over the past 24 hours. Anna welcome back. Futures pointing modestly to the upside for europe and the u. S. French president Emmanuel Macron has announced a casual easing a gradual easing of the countrys lockdown, as he tries to strike a balance between fighting the virus and reopening the economy. From saturday morning, several changes will become reality. I know to one extent the rate has been i know to what extent the weight has been long and how this has contributed to our daily lives. Therefore, all shops can reopen inhome service can restart, but within a Strict Health protocol and home service can restart, but within a Strict Health protocol. Anna german chancellor is proposing tightening the rules and extending the lockdown. Here in the u. K. , rules will be relaxed over the christmas period. Privatesacks with citi bank is still with us. Dealing with the coronavirus in the shortterm, markets are trying to look through that a bit, given the optimism with the vaccine. In terms of the exposure within sectors, particular does this play well for europe, if we are going to see people playing the vaccine theme more, the value theme more . Is this good for europe and the catchup story of the european stocks . Jeffrey it is particularly good for europe and also the u. K. We like cyclicals, we like values, we like dividend payers. Europe and the u. K. Have ightings in those areas. To take cyclical as an example, 20 five percent of market cap is in that area, and 28 percent of the ftse 100 is in the cyclical area. If you take a look at the value area in the u. K. , 25 of the ftse 100 index is weighted in banks and energy. Both of them sectors, we think, will have strong pickups in the year ahead. Europe, for us, is an area that is under held, undervalued, and there will be a gradual perception change towards european equities. We are starting to see a pickup in inflows. We are starting also to see a pickup in m a activity. We are seeing rising confidence from external investors as well as domestic corporates. That is positive, and given the underperformance we have had from europe not just year to date, but over a long period, even prepandemic, we think that europe can certainly catch up in valuation terms with strong relative at performers over 2021 relative outperformance over 2021. Anna you from to me to look at just how undervalued u. K. Stocks are right now. Looking at a blended twelvemonth forward pe, the ftse 100 does look cheap compared to other major markets. How much can dividends boost the case for holding ftse 100 stocks . In my defense, how much visibility you have, how much uncertainty do you have around those dividends . Jeffrey because of the relative cheapness, the u. K. Is on a 35 discount to the United States, it is at a 50 year low in valuation terms compared to the average valuation of developed markets. Compared to its own history, it is on a substantial discount as well. If you look at the dividend story, we have had a spite of postponements and cancellations during the second and third quarters. The value is now easing, and we expect in the coming months that companies will resume Dividend Payments, and that includes the bank sector, which we think will resume early next year. The average dividend deal is about 3. 5 , higher than the whole developed market. In terms of the total return to expect from the u. K. Market, it is going to be a Higher Quality return with a viable portion of that coming from dividend yields. If you look relative to fixed income, 3 is very high. Anna jeffrey, thanks so much for your time. Jeffrey sacks at cit private bank. Anna welcome back to the European Market open. Global stocks on fine form the next 24 hours. Momentum through the Asian Sessions with some markets turning negative. European futures point to the upside. Lets look at items on our agenda as we look ahead to today. At 9 30 a. M. , the ecb publishes its Financial Stability review, giving a readout on the mountain of corporate debt brought on by the pandemic. How sustainable is that and where will that fit on Balance Sheets . Thechey soon at will unveil Government Spending plan for the next year, including 4. 3 billion pounds to help get the unemployed back to work. States, a second reading of thirdquarter gdp, and assessment of the health of the consumer. Another record rally swept through equities yesterday. Vaccine and a peaceful transition sent stocks soaring, pushing the doubt to 30,000 for the first time. Here with a look is dani burger. It is wild. In 2017, i was at the headquarters of the dow jones and everyone was breaking out there dow 20,000 hats. Now, those are outdated three years later. It is remarkable and part of what makes it so significant is the volume behind it. , 26 the last two days billion shares traded hands. That is 72 higher than this time last year. Why is that significant . Because it is a holiday week in the u. S. And it is thanksgiving. Typically, people take off early. Perhaps they are not traveling as much as they normally would, but to see this conviction behind a rally when usually people are off tells us something that some of the vaccine hoax, some of the optimism is fueling this rally of more of the unloved vaccine hopes, some of the optimism is fueling a rally of the more unloved stocks. Ask about retail, investors perhaps getting a taste for things other than big tech right now. What it isnk that is because when you look at what has been doing well, there is a sense of dip buying, jumping in and buying unloved stocks, but retail traders have been trouncing the pros, we know they were very active. Brokerages vanguard and Merrill Lynch experienced outages yesterday. Not even the infrastructure can handle the influx it is getting. Much retailows how traders are participating this time around and that will no doubt bring memories of the. Com we have Interest Rates pinned pretty low. Second, it is pretty cyclical. Full of industrial and cyclical stocks. Value has been leading the way. It is not this tech bubble, but other stocks catching up to the gains earlier in the year of the tech favorites. Anna thank you very much. President trump, clearly pleased. Dani burger with the latest. Word news upt lets get a first word news update. Angela merkel to tighten restrictions and set the stage for another round of talks with regional leaders called for more lenient measures. The plan is to extend the partial shutdown until september 20 december 20 and bring in new measures in virus hotspots. The u. K. Is relaxing restrictions over christmas, allowing up to three households to meet indoors. The christmas bubble will last from december 23 to 27th. Boris johnson is urging caution, saying the virus doesnt know it is christmas. Doctors are raising concerns this will lead to more infections. Last night, joe biden officially introduced his foreignpolicy team, led by anthony blinken. Work onintees will resetting relations with a number of allies after four tumultuous years under president trump. It is a team that will keep our country and our people safe is a that, and it reflects the fact that america is back, ready to lead the world, not retreat from it. Once again sit at the head of the table. Oury to confront adversaries and not reject our allies. Ready to stand up for our values. Anna global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. The u. K. Chancellor is set to 4. 3 billion pounds of new funding to help the unemployed get back to work as he unveils budget for government departments. Expected to increase spending on infrastructure and Public Services in an attempt to revive the economy. What role in rebuilding the Economy Candy Investment Sector play . To the board chair of the investment association. I know youve been holding your conference this week on helping the u. K. Economy built back after the pandemic. You put a focus on stewardship activity by all asset owners. What does that mean exactly . That doesnt just mean shareholder activism, does it . Keith thats right. Sure stewardship, which i think is about the responsible allocation of capital to make sure we create clients, theue for end of beneficiaries and that has benefits for the economy so it is about embedding stewardship throughout the whole savings and investments ecosystem. How do we turn more savings into more investment, which would be good for the economy and so far i think themic, Investment Management industry has invested 18 billion recap for ftse companies so we have already been playing our part. This is about what else we can do to make the savings into investment more efficient. Efficiently turning savings into investment kamala heard the governor of the bank of england give a speech where which meansng they cant invest in a liquid illiquid assets. I think there are two issues here. One which the government was addressing was how do we effectively increase the supply of savings into investments . We already save a lot. We probably just dont turn enough into investments. The stewardship part of it is about how we invest to make sure that we generate good, productive investments and that is why yesterday at the conference, we released the recommendations of the Stewardship Group from the Asset Management task force, which had 20 detailed recommendations built around three pillars about how we can improve stewardship in the u. K. Anna and some of those detailed recommendations, i was looking at a couple of them. Enabling shareholders to bring their own resolutions as shareholder meetings. What are you looking for the Shareholder Community to do here . Are you looking for them to be more activist . Is that the key . Beth i think certainly better engaged. The whole recommendations are built around three main pillars. One is improving stewardship behavior, about how Asset Managers engage and in particular, a callout two things in that area. One is the extension of stewardship behaviors beyond equities into bonds and fixed income, which is really important. The second is making sure that theet companies to disclose risks in their business around bring out those sustainability issues. The second pillar is all about that clients and savers, the end beneficiaries, see the end benefit and that is about making sure tension abouts are talked about, how they implement stewardship and create longterm value. Finally, to make sure stewardship is embedded across the whole savings and investment ecosystem, there is quite a radical recommendation that any Public Sector, from any Public Sector entity that is responsible for managing money should actually be signing up to the stewardship code. If we get all of those three big principles and the underlying recommendations, then one of the things we will do is continue to be a real leader in this space in the u. K. Investorsdo you think we the media, how should judge businesses on their Climate Related Disclosures . The u. K. Is pushing ahead with making this a requirement, Climate Related Disclosures. Atis clear when you look earnings per share on a quarterly or half yearly basis how to judge the performance of a business. How will we used to learn to use this information . Keith i think and this is one of the disclosures why disclosures are important. The better the disclosures, the better the ability of investors to connect those disclosures with the risks in that particular business model, that particular companys strategy about how they deal with Climate Change and the transition to net zero, and that will enable investors to do three things. One, make better judgments about the risk in the business, two to provide capital, where that capital is needed to accelerate the transition and the third thing, if those two things are lacking, we can be a force for change. Anna thanks very much for joining us. , for chair of the investment association. Thank you for joining us after the conference to give us the thought of the investment community. A check on the markets, we are 20 minutes from the start of European Equity trading in futures point modestly to the upside, around. 2 . Ftse futures a little stronger than the rest. U. S. Futures, a little stronger on the nasdaq and elsewhere. Officials from the u. K. And eu have claimed for weeks a brexit deal is within reach, but differences remain. We will discuss the outlook for relations next. This is bloomberg. Anna welcome back to the European Market open. 15 minutes until the start of Equities Trading. Futures point modestly to the upside. Officials have claimed for weeks that a brexit deal is within reach, but as brussels chief negotiator says, fundamental differences remain. A new round of talks will likely go down to the wire. Is it the 31st of december . Maria tadeo joins us now with a guest. Wire, veryhe europeanstyle on that note but i want to bring in a guest, a member of the social democrats at the European Parliament. Features the trade commission at the European Parliament and first of all, thank you for joining us. Very i know you have been vocal about your opinions. You think this is turning into a and lastminute situation and European Parliament will not have time to scrutinize this bill. Based on conversations are you more optimistic . Im only a little upset about. He process at the moment, there is some space for getting the necessary steps in the parliament and we will probably have some excellent during christmas and january, but it is a challenging situation, and i really dont like the situation not only in the European Parliament, three months to have a proper deal, but this is not popular at the moment and links to the delayed process of the session. Assume, justjust to get a sense of what the calendar may look like, lets assume we get a deal from the european leaders at the Council Meeting scheduled december 10. When would the European Parliament vote on that . Thelange we will start process with the english text and then translated into all the linguist ics have to be done. That will be done by christmas and the possibility will be on december 28. Maria so you do believe if we get a deal and that is a big if, it would be ratified by European Parliament and it has to be to be operational. It would happen december 28. That is where we are headed . Be thege this could timetable, but this means we have to conclude negotiations this week. This timetable will not be possible. Then, the negotiators have to talk about extension of the period, so the process can be done and the 27 Member States want to look into the deal and even this is not possible in this short time. Maria to be cap everything, for you to be able to vote this, moving clearly to december 28, there has to be something on paper this week. The irish say they believe there could be a deal by the end of this week. Is that something that we are operating on . By sunday, there will be a break for real . Mr. Lange there are so many rumors. I have no clue, to be honest. I hear this message we are really close to a deal more than deal, the 1200 pages of a but still governance is open. This is a message for three or more weeks. Changeso clue if this things are not. Lets see what the next day spring. Maria as a final question, in one of your tweets, you have been very vocal on this, you say there is no time or you are running out of time to vote the text all because of the prime ministers gambling and you are not going to pay that price. Can you say gambling, what do you mean . We had a lot of months starting in february of starting negotiations where there was no text possible. Making their fundamental positions all the time and this linked to the negotiation behavior of the British Government and this is really a mess, so that three weeksext work ago, this is not sufficient. If we want to start the text in february if we would have started the text in february, we would not have such time constraints. Maria thank you so much for joining us on bloomberg. Is a member of the social democrats at the European Parliament and chairs the trade commission at the ep. To summarize, this is looking a lot like a mess. Some important messaging around the timing and the time required to properly scrutinize any deal. Maria tadeo for us in brussels. Lets get an update on corporate stories this morning with a Bloomberg Business flash. Hsbc shares surging today in the Asian Session amid growing optimism europes biggest bank will resume paying dividends. Tuesday, Goldman Sachs advised investors to buy shares, up 50 from a 25 year low at the end of september. Fintech startup stripe is chasing new funding that could double its violations. Sources say the new round could proceed at more than 70 billion or as high as 100 billion. It competes with paypal and has benefited from the pandemic. Dell and hp are both getting a boost from the pandemic. A report Quarterly Results that topped estimates, lifted by customers upgrading their computers to work from home. Dell sales climbed to near the 3 over the three months with hp shipping a record 90 million pcs over the same period. Bitcoin mania is back. Prices are driven back toward alltime highs. It is up more than 40 in november alone to levels not seen since 2017. Dash and bitcoin cash also jumping. A minute to go until the start of the cash Equities Trading. Next, your stocks to watch. We will keep an eye on hsbc. The french leisure stocks also in focus after president macron announced a gradual easing of lockdowns starting on saturday. We will focus on those stocks also. This is bloomberg. Anna minutes from wednesdays session. Lets get stocks to watch with dani burger. Watch french to leisure stocks after Emmanuel Macron said the country can start to reopen starting saturday with nonessential stories. We see things like james and restaurants opening later. That should be a boon to beating up retail stocks. Side, some Hotel Companies may struggle because the key ski season may not be open this season so companies that have been beaten up might take a further downfall today. We should keep a close eye on european banks. Ft out with a story that the ecb may lift restrictions on dividends as soon as december 10. Thanks very much, dani burger, with a look at stocks we are watching. Keeping on the Banking Sector. French leisure stocks also in focus. Fordly speaking, the mood risk assets has been a positive one over 24 hours. Or certainty around the politics in the United States and the appointment of janet yellen it seems to treasury, giving the markets recent edge higher over recent sessions and we touched alltime highs on the s p yesterday. Dow at 30,000 getting a lot of attention at the white house. Cap positivity that positivity waning in asia. How will it fair in europe . The startnute until of cash Equities Trading this wednesday morning. Here are your headlines. Global equities are on track for a record month after the s p hit an alltime high. European futures suggest the optimism willuel macron says he start lifting frances lockdown from saturday but Angela Merkel proposes tightening german measures, setting her up for a fight with regional leaders. Hsbcs turnaround picks up speed. As speculation grows around a return to Dividend Payments. The European Equity markets about to open up for wednesdays session. I focus on the Banking Sector as we heard from dani burger. There is the hsbc move, the around hsbc and questions around dividends for european banks. What kind of restrictions will be in place into 2021 around the Banking Sector . It is a focus for investors. Hsbc has jumped up over 2 at the start of equity trading. That is something we are watching. How will the concerns around the ski season and holiday period for the french economy, how will they be played into a market that is broadly positive the risk on story as we look ahead to better vaccine news in 2021 . Some of the stocks you might have expected to stumble are trading higher. Easyjet, up. 4 . Businesse french hotel of over 2 . Interesting to watch the french reopening story and the speed of it and see how the market response. Market moves and the stoxx 600 is up 1 8 of a percent, the ftse 100 up. 3 , the cac and dax to the upside. The s p closed at an alltime high. Global stocks on track for their best month on record. Investors continue to pile into these cyclical sectors. Lets talk to the bruins investment director with us this morning. How much are you repositioning the portfolio around cyclical themes, given the better vaccine newsweek had in recent weeks . Think Investor Development the Vaccine Development has been interesting because it is a sign we are going back to normality in 2021. We havee u. S. Election, deployed some Cash Holdings and added cyclical equities because we think the market will be because the uncertainty from the election is gone and weve got more positive developments on vaccines and the economic data, there may be some shock, but it is better than expected, so we are positioned for a recovery in 2021 and in terms of the cyclical, you can equities we think are the most exposed areas of developed economies and weve added to asia, extra japan region ex japan regions because that is crucial to the recovery. Anna how crucial to your investment . I looked at the Goldman Sachs gauge of financial conditions. It is registering to its close close to its lowest ever. Interest rates being low as they suggesting financial conditions are accommodative. Is that something you are assuming and how far into the future do you assume that to be . That is one of our expectations, lower for longer Interest Rates. Typically, low Interest Rates and terms of equities because a and wecount rate think that should continue well into the future. There is the expectation they 2023. Ot raise rates until will stay near 0 in the developed market for at least a couple of years or longer. Anna where do you think the valuation gap needs to close geographically . Chart thatng at a showed europe is undervalued compared to the United States. Givenlso undervalued and the strength in asia in handling the coronavirus, i was quite surprised by that. Do you expect the value gap for asia to close . Janet yes, absolutely. We expect the value gap between asia and u. S. To close because we are going to see more synchronized Global Growth next year. And you have that come usually the dollar weakens, and that was asias equities. We think the area is more exciting in terms of growth, not just the near term, but longer structural growth areas. The area is undervalued versus the other markets like the u. S. , and the other areas the value cap needs to close would be the u. K. Region, which is an area previously. Laggedea has significantly versus the u. S. , primarily because of the sector exposure, but we think the exposed sectors in europe to u. K. Equities start to perform better next year. You do like u. S. Stocks, so even talking about that closing, you like some u. S. Stocks. Is it the tech side you want to play or do you prefer to play tech in other markets like china . View is the positive development in the vaccine and of the various factors like monetary and fiscal policy, they will lift all boats in the market. As a result, we favor global we added to the and in. K. , asia exjapan the u. K. , we like the growth areas. The u. S. To asia so still dominates in the growth area. A we dontis it is attracted to investors because it is a longterm play. It will generate above gdp earnings growth. Isstill like the area, which u. S. Est place in the equities. Anna thanks very much. Janet mui, Brewin Dolphin investment director. Hsbc shares gain in london and in hong kong. Resume Dividend Payments. Certain brokers positive on hsbc shares. Theyve rallied a lot. More on that next. This is bloomberg. Would have this big issue on the capacity to pay the dividend, which is certainly a big factor which explains why the european Banking Sector is down this year and evaluation, which makes no sense compared to the longterm potential of the banks. We do not really know what is going to happen. We will closely monitor over the next couple of weeks and months. The ecb is responsible to make sure they see clear line of sight from an uncertainty perspective for the corona in the light in light of what we discussed about the second lockdowns. We reserve dividends for payments so whenever that happens, we have reserved dividends, allowing us to continue our business while at the same time providing the right return to shareholders. A look at some of the european banking executives talking to bloomberg about the dividend story earlier this month. Hsbc shares surged in london, trading on optimism that europes biggest lender may resume paying dividends as its turnaround gathers speed. Lets get some analysis. The senior banks analyst and bloomberg intelligence. Jonathan, good to speak with you. Is hsbc a oneoff or are we expecting the european Banking Sector to follow suit . Jonathan hsbc is a special case because the reason they got big enough was there hong kong Shareholder Base where the u. K. Regulator stopped the flow of dividends from a Profitable Bank to shareholders. They were vocal at q3, but hsbc isnt about capital returns. It is well capitalized, but they want to be a growth banks so they want to use their capital to grow. They have a restructuring plan. But when iing story, think about capital returns, which we think for the stronger banks, provided they meet criteria, they will be allowed to restart dividends. One wasnt that wouldnt be you want to think i want to play capital returns. That sets it apart from the next question about what the ecb wants to do. U. K. , butlated in the what is the ecb looking likely to do . With seeing reports the dividend and might be lifted soon. Jonathan the thinking was we dont want banks to redistribute because we want to bolster capital. Extra capital retained by refusing payouts. We think they will look at it on a casebycase basis and provided models arent overly aggressive and you have a capital buffer and are returning to profitability, you can restart. To us, it says from the bmps of the world, a few names have plenty of capital and other regulators are likely to follow. Switzerland seems pretty happy to let their banks pay. Talkinga good slide about whether they would play back. For the stronger banks, we think with a sensibles flight path, they will be up to restart. Rather than looking at 100 of profits, you are talking 40 payout ratios including buybacks to start with. It is really 2021 onwards that the capital return becomes a material part of an investment case. Thanks very much, jonathan for bringing us the analysis. Analyst atbanks bloomberg intelligence. Stocks trading higher today, which is why we focus on the. Lines from urszula Devondre Pike and ursula von der leyen. The eu is preparing for no deal with the u. K. , the next phase will be decisive for a deal. The next days, says ursula von der leyen. 133. 80. The pound, it has been stronger this morning, not moving and an enormous amount. Shes talking about the Recovery Fund. Janet mui, Brewin Dolphin investor is still with us. Your thoughts on the Banking Sector, whether the banks will be able to go back to paying dividends. How important a factor is that for you . Sign things are getting back to normal in 2021. That is a good sign and for investors, Dividend Payment is very important. If you are looking for capital higher. Ey need bond yields to happen for the Banking Sector in europe to outperform and it looks cyclical because volumes are stuck at negative and the ecb is unlikely to raise Interest Rates for the sore foreseeable future. It will be continually squeezed and the Interest Rate margin is still one of the biggest theyibutors to profits, so may have a run for these bank stocks, but we are not certain whether this can continue for a long time or outstrip other areas of the equity sectors. The a lot will depend on yield curve i suppose and that is often part of the conversation when it comes to the Banking Sector. Other sectors in focus, pharma is in focus because of the innovation taking place. Some people are very excited about new technologies. At pfizer when it comes to the vaccine. What do you seem to get excited about in farm at the moment . Pharma at the moment . Is it the vaccine conversation or is it other matters you think will push pharma higher . In the pandemic, people realize how Important Health care really is, so the vaccine news is very positive, but longterm implications for the sector is usually it takes 10 to 15 years to get a vaccine approved, but we may get that within a year. That is a huge breakthrough for the medical sector. It really paves the way for , thee breakthrough because Pfizer Vaccine is an experimental vaccine, so it projects that we have a breakthrough in that and that would be better for the medical and humanity as a whole. After this pandemic, we are into to probably see more the pharmaceutical sector. We are talking about remote if you cant see a doctor physically, you can talk to them over a phone. You can check your health etc. S, we think those areas are exciting and a breakthrough for the medical sector and humanity. Anna another sector in focus, aviation. Manus cranny caught up with the ceo of Emirates Airlines today. This is clearly a sector influx. It stands to benefit greatly from the vaccination news, but it is maybe too early for that. How do you play aviation at this point . I think the vaccine news is very positive and we think for that who continue, we need the wide distribution of the vaccine, populationeed enough to get vaccinated where you achieve immunity, so we think it will take some time. In a scenario, it will take a year for widespread vaccine distribution, so it will take some time. There will be some back and forth in the share price. Until we get rid of covid, there will be some back and forth and noises around the health so a more positive airlines story because prices are so depressed. Sure it is whether structurally speaking they are attractive, because after this pandemic, people are still going to focus on green recovery, Climate Change and that will impact the Airline Sector because they are being scrutinized for their emission of carbon. Anna janet mui, Brewin Dolphin investment director with themes she is looking at. Janet will continue her conversation with us on Bloomberg Radio at 9 00 u. K. Time. Lets get a Bloomberg Business flash, some of the top corporate stories at bloomberg. Saidch startup stripe is to be chasing new funding that could double its evaluation. The new round could put it at more than 70 billion or even as high as 100 billion. Stripe competes with paypal and has benefited from the pandemic. Sending more shoppers online. Cap is reporting weakness at its namesake brand, but strength that the old navy helped sales jumped more than expected. Retailer is Closing Stores to focus on its online offerings. Company is in providing longterm guidance due to uncertainty created by the pandemic. Bitcoin mania is back. Retort retail traders are driving it back toward alltime highs. It is up more than 40 in november alone to levels not seen since 2017. The frenzy is spreading to other coins, with dash and bitcoin cash also jumping. That is your Bloomberg Business flash. As the virus continues to rage, leaders are grappling with how to keep their economies a float a float. This is bloomberg. Anna welcome back to the European Market open. European equity markets, losing early enthusiasm. The past 24 hours, dominated by risk on story that has lost its groove to the Asian Session and and europe. U. S. Futures, fairly flat. Emmanuel macron says he will start lifting lockdowns from saturday but Angela Merkel proposes tightening german measures, setting her up for a fight with regional leaders. The latest from brussels on these divergent approaches. Tell us more about the approaches we are seeing from these leaders. Maria yes, and you make a good point, because there is some measures. N the announced if you look at what macron said yesterday, by december 15, he wants to end the lockdown in place and and that replace that with a curfew that would look similar to before the second wave. By the end of january, the country would be back to seminormal. If you look at what and lumbar coal is saying, to some extent, to makesite and wants the restrictions apply in terms of december 20, right before christmas and in some cases, those restrictions could be increased. The government in germany and and a number of focused on keeping that infection rate flat as we head into the christmas holiday, so this morning, to some extent, it is a different approach from the french and the germans. They are taking different directions. Anna yes, and seeing urszula bonder lion saying we are risking ursula von der leyen saying we are risking a third wave. Shes also talking about brexit. Is a message in which she repeats the lesson is perhaps europe opened up too quickly and that triggered the second wave and she says there is potential for a third one. It is interesting, she is now giving a clear timeline for the vaccine. We know last week, she hinted the European Agency to give the Pfizer Vaccine the go. She said the first europeans could get the vaccine by the end of the year. So there is light at the end of the tunnel. When it comes to brexit, she says we are working to get this deal but if we dont, the European Union is ready for no deal. Anna she also says the next days will be decisive. We will see if that turns out to be the case. Thank you very much. Maria tadeo in brussels, keeping across those threads. Next, german Business Leaders are calling on the u. S. To stop sanctions over nordstream 2. We speak to one of the stakeholders. That conversation with omg next. Whether the about move to a Biden Administration makes a big difference or not. Will we see continuity in u. S. Policy . This is bloomberg. Anna welcome back to the European Market open. 30 minutes into your session and equity markets losing a little earlier enthusiasm but still up. 2 on the stoxx 600. Lets get a first word news update. Treasury secretary Steven Mnuchin is moving over 450 billion beyond the easy reach of his presumed successor. Hes putting the money, most of which has gone to support the fed is lending facilities, into a fund that requires congressional approval to be accessed. Democrats are criticizing the move, with one calling it illegal. The treasury rejects that analysis. The dose of the astrazeneca vaccine that showed a highest level of effectiveness was tested in younger people according to the head of the u. S. Vaccine program, giving an ze, but thef do age was capped at 55. A wider trial was only 60 effective. The eus top diplomat is warning the possibility of tougher overions on turkey, renewed tensions in the Eastern Mediterranean between turkey and cyprus. The foreignpolicy chief says the leaders will tackle the issue at their meeting in december. Hong kongs carrie lam is vowing to strengthen ties with china. She used her annual policy speech to defend beijings tightening grip on the financial hub. She says her aim is to restore confidence following another tumultuous year. One of her key economic policies is to scrap duties on commercial properties. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. Germany has rejected u. S. Sanctions over the nordstream 2 pipeline according to a government report. Some of germanys biggest exporters to russia are calling on Congressional Democrats to oppose the restrictions. Lets speak to one of them. Joining us for an exclusive interview is ombs ceo. Great to speak with you this morning and in terms of the own mv perspective, do you expect the new u. S. Administration to have a different policy on nordstream 2 or will we see continuity . Good to talk to you again. I do expect hope for a change with the new president elect biden, but we have to remind that it was not the president who was asking for the sanction, it was the cap congress. In this context, i think the congress has to change the mind and initiatives. It is definitely not good to see additional threats on additional sanctions against the pipeline. It would be good to rebuild the trust in the transatlantic your relationship. Europe is ready to have open arms of discussions, but it wouldnt be a discussion the pipeline project. This is an economic project. Answer political european politicians are going for. , this is of for omv utmost importance that we have erode the good Investment Climate needed to be invested into infrastructure for a Climate Change program on the way to what is needed. Anna specifically around nord stream 2, does europe still need nord stream 2 . Importsple point to lng and increasing supply that way. Is that a possibility . Rainer of course, there is a competition between lng and nord stream 2. That is why we would see these sanctions coming up. We have a program in germany, they would like to switch from coal to gas Power Generation and i think additional gas quantities are needed. Our analysis is if nord stream 2 is not coming, europeans need to import more lng. That is my clear reading. That is your clear reading and word you expect that to come from . Have the think we will lng to contract me a new lng, but lng, of course. Anna theres a lot of talk in europe about the Hydrogen Fuel as a potential for adding into the european fuel makes. Where in the Hydrogen Supply chain are you and he in investing are you interested in investing . Rainer omv has capacity to produce hydrogen. That is our focus, how can we produce Green Hydrogen . To produce just from renewable energy. We also have a skill set of chemical technologies like where we are going to split the natural gas into carbon and hydrogen. The main topic will behind region will be produced without s and we should not limit our technological skill set purely to renewable energies, but on the one hand the chemicals of part of your business, i know the deal that was done with borealis takes you in that direction. Intend to integrate that and if you do, how long will it take, do you think . Rainer borealis is a chemical business and weve announced weve seen a hundred Million Euros of synergies with us. You would have to at least partly integrate borealis into that is our major intention. This is going to happen next year and we will convince investors with big gross numbers Growth Numbers and deliver synergies. Storylinerealis is a for a circular economy. We were reporting at bloomberg yesterday that key shareholders at omv may be uncertain about the way the Supervisory Board has been supervising strategic decisionmaking at omv. Do you think we will see changes to the Supervisory Board with that in mind . Rainer this is the question you should address to the shareholders and not the ceo. All i can say is we have enjoyed trust and cooperation with our Supervisory Board and we prepared to continue such a relationship with our Supervisory Board. Way are you happy with the your relationship is evolving with the new chairman . Rainer as always, why not . Do you know mark . Hes a great guy. Anna well im glad youre getting on so well. Thank you so much for your time. Speakingainer seele about nord stream 2 and beyond. The eu smashed Global Records on its first sale of social bonds. What has made investors embrace it . This is bloomberg. Of course it is going to help. Lets assume they have a Rapid Testing system that has the efficacy and the reliability that they should have to do that. That should deal with a lot of the concerns some countries have, but not all. Anna that was the emirates president tim clark speaking to manus cranny. A lot of interest in the aviation sector right now, not least of which what kind of use can the aviation sector make of Rapid Testing and vaccines once they are available . Interesting to hear his thoughts. For European Equity markets, moving to the upside on the stoxx 600. We seem to have refound some positive direction, up around. 25 on european stocks. U. S. Futures moving to the upside, a couple tenths of a percent. Dow futures come over 30,000 on the dow. Nasdaq also up. 4 . The European Union smashed Global Records on its first sale of social bonds last month, its first two offerings among the biggest ever. What makes it so attractive to investors and issuers . To bring into that conversation, the ubs global head of bcm syndicate. I wonder how surprised you were about the markets appetite for social bonds . How do you give this context . Good morning, everyone. Thank you for having me. Success. Smashing it was expected. It was wellcrafted, wellprepared, and the Broader Market was waiting for the transaction to come to the market. The third they had offering, very successful, 8. 5 billion issued 13 times over price book. Im not worried about performance. Anna how are these e. U. Issued bonds . How is they comparing, the market rating them and trading them in relation to the bonds we know much better, that have more history . It is a good question, and i would say probably the first transaction came slightly cheap because of uncertainty. The volume the eu is planning to issue, i think it is twoestablished, the first transactions performed well in the secondary market and , i can see antime outperformance of transactions versus conventional offerings. For the broader green bond market, it it is a great benchmark. Anna can i ask a question that is only a partly serious one, how long the for all bonds are esg . I ask this as a way of getting into the conversation about how big the sector can become. They start off niche, but they become dominant. Is that the way you are looking at this . How certain can you be all bonds that are labeled esg really are at this point . It is a right point to make. Albeit, if we put things in context, it is only a couple of Percentage Points of the global issuance we see during a year that the esg space is covering for the time being so we have a lot more ground to cover in that regard. Watching, itreen is a topic market is discussion. Markets are very open, but at the same point, as we are building more principles and standards, that topic is well covered. Im not too worried about greenwashing to be such a big topic in the future. Anna what about the role of the ecb in buying up esg bonds . Does that support their price . Wemany conversations since first saw quantitative easing undertaken in europe, we had conversations with buyers of government debt. You said we will look at corporate debt, is it the same in the esg space . Armin all the qe programs by the pcb are at hearing to the same principle. There is no ecb are adhering to the same principle. The ecb is very conscious of the topic,. Very keen to support the broader esg market and the dynamics we can see in way of the esg green bond market and the statement in september when they changed the collateral rules to allow slb transactions to be part of the operations, that is certainly a big statement by the ecb, and it is a game changer as well for the esg market. Theres been a lot of talk about the limits of Monetary Policy, of what Central Banks can do in terms of acting on the Climate Change agenda. Do you see that we might see policy change from the ecb to make it more attractive to issue green bonds because the ecb is more likely to buy those of her over others or would that be premature . Armin the statement in september to change the i think thatles, in itself is already a statement and a change from what theyve done before, because these transactions havent been allowed as collateral until then. It will be allowed by january 1, 2021. I think it has been clear by miss lagarde in terms of her statement around green bonds. What it means to look at climate risks, not only for their own holdings. You look at broader debt capital markets, not just the green bonds, but the broader story, are you concerned as we sit here with virus levels still rising, the vaccine coming over the horizon, but some way off, are you concerned about the level of indebtedness we have to european businesses at this point . Armin i think it is normal everyone get prepared. Indebtedness is increasing, but at the same time, previous crisis have shown the system overall is able to deal with it. Im very certain to this time around, it will be no different. Ofwill certainly be a time further volatility ahead of us, but for the time being, we have proven we can deal with this crisis very well and im very confident we will in the future. Anna thanks very much. Good to speak with you. Armin peter, ubs global head of debt syndicate. Thank you for your time on the subject of esg bonds. Next, when will risk assets price in inflation . We will put that western to a member of the markets live team. Kristine aquino, that is next. Anna welcome back to the European Market open. 51 minutes into your european trading session. European and equity markets, higher. 1 . The Global Equity rally, stumbling a little bit through the Asian Session and into europe. U. S. Futures, flat positive. Lets get a Bloomberg Business flash. Shares surging amid growing optimism europes biggest bank will resume paying dividends. Tuesday, Goldman Sachs advised investors to buy hsbc shares, up 50 from a 25 year low at the end of september. Fintech startup stripe is said to be chasing new funding that could double its evaluations. Sources say the new round could put it at more than 70 billion or as high as 100 billion. Strike competes with square and paypal and has benefited from the pandemic sending more shoppers online. , buts reporting weakness growing reported numbers. The Company Still isnt providing longterm guidance due to uncertainty created by the pandemic. That is your Bloomberg Business flash. If the two minutes into the session, lets talk to Kristine Aquino leads the markets live team in europe. Goldilocks stocks, risk assets over 24 hours, but now we stumble slightly. Are you clear on what we are looking for as the next catalyst for risk assets . Think the next catalysts are still the ones weve been waiting for all this time. Clarity on the fiscal stimulus for manymany path countries, including the u. S. , u. K. , and europe, and perhaps a little about Monetary Policy and how those two factors will combine and how that will set a background for 2021. Is probably just daytoday noise. You mentioned yesterday the roaring rally is quite natural for a day like today, especially heading into u. S. Thanksgiving, when traders take some risk off the table and consolidate gains. It wont be a thanksgiving like many others weve seen, but some similarities might remain and we might see some people taking time out. Let me ask about inflation. When will risk assets Price Inflation . I asked this of mark cudmore earlier on and he said for a long time, we havent seen inflation at all but ive been reading persuasive arguments recently. Kristine i agree with mark in that it is difficult for investors to Price Inflation just because it is an abstract thing they havent seen in a long time. Weve heard from policymakers lamenting the lack of inflation, and so to comprehend the possibility it might rare its difficult is quite when we havent seen it for ages. Weve seen a bout of it throughout the year as markets make their way through the turmoil that was 2020. Earlier in the summer, youve seen evidence of investors flocking to things like gold or maybe even bitcoin as a potential hedge against inflation. The logic behind this is up for debate. Both are many doubters of of these assets as a hedge against inflation, but it hasnt fromed investors considering it, but largely, it is quite difficult for markets because it is not necessarily something they see. We know the nature of markets is to take a look at what is ahead right now as opposed to what could be transpiring down the road. Isa and how long that road that leads to inflation. Let me ask about the u. K. What are you looking for from the chancellor later today . What will matter to markets . The pound was stronger, now weaker, we heard lines around brexit, what are you watching for later . Kristine it would be good to get a sense of what is the governments priority in terms of spending, whether they are largely focus on addressing the pandemic and how that figures with the u. K. s general pledge to keep its budget and spending we getk and whether mention of the dreaded austerity word and i think particularly, it would be important for the gilt markets and we will see how that goes. Anna lots to watch out for. Kristine aquino from our markets live team. 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. Francine hey november to remember for the markets. The dow hit 30,000 for the first time. It is far from a wyatt thanksgiving period. Quiet thanksgiving period. Steveary of the treasury mnuchin, his successor will need approval. Speculation grows over repayment. Good morning, everyone, and