Transcripts For BLOOMBERG Bloomberg Markets European Open 20240711

The bill awaits signoff from the president. Akron turns up the heat. France threatens to veto a brexit deal if it does not like the terms, piling pressure on the e. U. Not to make further concessions. Welcome to the program, everybody. 7 00 in london. 8 00 in paris. Lets look at the futures. We are fairly flat on futures. The young stock x50 futures flat. Yesterday, we saw some decent gains for the ftse, up by more than 1 and that was a standout compared to the rest of europe which was more mixed. It was mixed in the u. S. Session as well. We did actually see a bit of a late rally in u. S. Equity trading, up to some of those new highs we were talking about in headlines. All of that in the context of the hopes and dreams around u. S. Stimulus. The concern about what can legitimately be done in the shortterm and a lot of hope around vaccines. Perhaps oncent day some parts of the equities space and a late rally in the u. S. Yesterday and we are now pausing. We are pausing somewhat here. We are near global record highs for Global Equity markets, but pausing for thought nonetheless, treasury yields are interesting to watch. We are not far from 95 basis points. 93 on the u. S. 10 year yield. 93 basis points. We will continue to watch whether that spread continues to steepen. The pound is moving a little bit to the upside, recovering some of the losses it made yesterday after we heard barnier told ambassadors that there may not be a deal. We will carry for the headlines around french objectives on brexit this morning. Keep an eye on the dollar gradually losing ground versus a host of other currencies. Thats a quick look at the gmm. Lets get a bloomberg first word news update with lower. Laura Democratic Leaders are throwing their support behind a bipartisan stimulus plan worth over 900 billion. They see it as a foundation for a new round of talks. It marks the first public retreat from the democrats much larger proposal for nearly 2. 5 trillion dollars of spending. Germany is extending its partial lockdown by three more weeks until january 10. Angela merkel will reconvene with National Leaders the week before to reassess the restrictions. She says infection rates are far too high and they need to come down faster. Its unclear of a vaccine will be available through christmas. French president has died. He led france from 1974 to 1981 and was a key architect of european integration. Laying the groundwork for the euro and credited with helping to modernize French Society legalizing abortion and making divorce easier. He died aged 94 after contracting covid19. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna. Anna laura wright here in london with your first word news update. European and u. S. Futures are mixed this morning and the dollar is at a multiyear low against many of its peers and that comes as the pandemic continues to rage in the United States and to some extent globally. Countrys deadliest day yet. Lets get into markets with bloombergs emergingmarket strategist. Simon, good to speak to you. The juxtaposition of stocks at record highs and these high death rates coming through from the United States or in covid as we get into the depth of winter, it is jarring, isnt it . A lot of the rally has been expectations of stimulus and that continues to be the case in yesterdays u. S. Session. How realistic our way do you think . Quite realistic now. If you had asked 10 days ago, i would say its close to zero and it seems to be above 50 and that is really because the democrat side made very significant concessions dropping from a 2 trillion plus package to something below one trillion. It does look like there is a decent chance of something beforeng at least december 18. Anna that is interesting. It seems as if they are at least talking about numbers that you could imagine there might be agreements around. The gap between the two sides in the runup to the election seems so big and the gap is shrinking even if that means the size of any deal will not be so great. Let me take you to the question of the day around treasuries. For a 93 basis point the u. S. Tenyear treasury right now. We see a bit of an upward drift in the u. S. 10 year yield and some of the others as well, a steepening in the curve. The question of the day is specifically asking how would 1 treasury yield affect assets . It is not far away at all, is it . Simon no, it isnt. I think treasury yields probably have to go to at least 120 basis points or 1. 2 quite quickly to really have an effect on the market. I think the risk of yields going that high quickly is pretty low. The fed could act on december 16, will they be ready to act, intervening if necessary to calm down the bond markets . They will have learned from their mistakes during the taper tantrum in 2013. I think its unlikely that you will get a significant spike in yields such that it affects asset markets generally. Anna we will watch those reflation expectations and commentary from the fed about what it will tolerate. We keep watching its trajectory, watching its gradual fall. It is dropping to multiyear lows against a host of other major currencies. This feature is very highly in your world. The trajectory for the dollar. Do you still see that downward move . John simon yes, we do. We see the dollar as somewhat overvalued. The u. S. Has highly negative real rates and probably they will become even more negative as reflation continues. The improving Global Economy means that people who are currently over invested in u. S. Asset markets will start investing significantly overseas and as you alluded to, emerging markets has been a major beneficiary of that over the last month or so. Anna they have been a beneficiary of that. To has been a lot of excitement as we talked about all kinds of some reflation trade, some excitement around vaccines, political certainty in the United States, all of those things seems to add up to something more positive. How much of that is done and how much is there still to do in 2021 . John simon that is a great question. Generally speaking, emergingmarket currencies are still undervalued. We think that they can move significantly stronger from ine, so for example, back 2013 with qe3, you saw much more significant appreciation than we had seen so far and part of that reason, part of that is because people are really under invested so you have a significant shortfall in investment in both equity and bonds for emerging markets relative to where you would expect and relative to what they saw back in 2013. I think there is a significant amount to go in 2021. Anna thank you very much. Simon flint, joining us from the markets live team this morning. Just coming up to nine minutes past 7 00 in london. Americas deadliest day, u. S. Cobit fatalities past 2700 yesterday. Germany covid fatalities passed 27 hundred yesterday. We will talk about the latest headlines in germany, next. This is bloomberg. Rg. Anna welcome back to the European Market open. This is what futures look like. Downside on ftse futures but we saw outperformance in yesterdays session. Lets get a Bloomberg Business flash. Some of the top corporate stories. Laura officials from the u. S. And e. U. Are stepping up work to settle the longrunning dispute over aircraft subsidies. Bloomberg sources say they are hoping to reach a deal before President Donald Trump leaves office in january. It would mark a surprise turn of events after tensions and stalemates. Brussels is cautious about the breakthrough. Mcquarrie is buying other banks for 1. 7 billion. The deal expands its Asset Management business, giving it the size and scale to compete with larger rivals. Cory is pivoting towards Financial Services and away from more traditional investment banking. Is lining upy advisors as it prepares to offload some of its businesses. Bmp have beenand shortlisted for potential roles. Include a sale or ipo. No official comment yet. That is your Bloomberg Business flash. Anna los angeles ordered residents to stayathome. That follows americas deadliest day ever with covid fatalities topping 2700. Germany is extending its partial lockdown until january 10 as the country struggles to contain the virus. We are joined for a market perspective on all of this by the head of european equities strategy at barclays. Thank you very much for joining us. We always focused and should focus on the humanitarian crisis and Health Crisis that covid is but as we sit here with better news around vaccines with investors, we are talking about reflation trades and moving into cyclicals and the like. Where do you stand on how much of that pivot has already been done and how much is still to come . Good morning. We think the outlook for equities in 2021 is perspective. There was a move last month. Basically european stocks have had their best months since november 1975 so i think some is possible and healthy as well. The market has to digest what does a big move in recent weeks, and in the very short term, there are sources of uncertainty that remain. The activity momentum is stalling in many parts of the world as well. Again, i think investors should not lose sight of the big picture which is one of improvement in the mediumterm, and we have seen the diversion of travel is towards the. Tronger growth that should ultimately help risk assets. After two years of flight and safety that solve bonds and cash take a beating, equities in terms of been close. Anna you are mentioned bonds and i want to pick up on that, the link between your world, the equities sphere, and the bond market. We have seen a strong rally to new alltime highs in november, the best month ever for global stocks. That is well known. We have not seen quite as Much Movement in treasury yields. 10 year treasury yields been picking up roger willisons the summer and now, the spread between season is starting to look steeper. What are you looking for in treasuries to inform your equity view . Emmanuel i mean, clearly, the bond market has to confirm the risk on move in the equity market. The last months of rally in are trade. Since late august, we saw the u. S. Tenyear moving up even though we had still a fairly risk off equity market, underperforming. There was a disconnect between what was quite a risk off equity market and higher rates. Here, i think the equity rotation will continue if we see rates moving out. Maybe not on the cards in this short term. Going into 2021, we have seen room for maybe 40 basis point increase that could help rotation gain more momentum. We do not think rates will be, you know, going up in the equity market. If we see some confirmation from the bond market, that should benefit the equity market and thein that, given dislocation away from duration part of the equity market, it will value the cyclical parts. Anna let me ask you where that leaves the trade between europe and the u. S. In the transatlantic divide. Its quite stunning when you look at gains. They are stellar compared to what we see in europe. There are a couple of European Equity markets in positive territory but not many and as a whole, the euro stoxx 50 still down bible 6 by 6 . What do you see of relevance in that divergent performance . Do you see that gap closing at all . Emmanuel yes, i think it is starting to close. Weeks, japan, it performed as strong as the u. S. Because they have cyclicals which have the performance so theres more potential for europe to keep closing the gap within the u. S. Europe has been her to more than the pandemic. It should be stronger as long. Europe should be the big beneficiary of the vaccine should deliver a stronger activity in earnings. At the same time, positioning we have not seen much return of investors to europe. Again, if uncertainty reduces globally but also within europe, a deal on brexit, etc. , that could help europe. The u. S. Is making new highs. Europe is bigger than it was before the pandemic. There is value and potential in the next three months to six months compared to the u. S. Anna really interesting. Emmanuel cau from barclays stays with us. Coming up here on the European Market open, france adds fuel to the brexit fire, warning it could veto a deal is too many concessions are made by e. U. Negotiators. More on that, next. This is bloomberg. Going into next year, including the 50 million from this year. We anticipate 1. 3 billion in total. I dont think we disclosed what we will be providing in the first half but what i can say is, of course, we are ramping up production extremely quickly. So we can get the vaccine to everyone as quickly as possible. The biontechs chief commercial officer. You can see more from the interview shortly after 7 30 a. M. And we will bring you more of that. Thats check the futures. They have been fairly mixed, reflecting a mixed session yesterday. Ftse futures to the downside. Lets talk brexit. France warns it could veto a trade deal between the u. K. And the e. U. The french ambassador told brexit negotiator Michel Barnier not to give too much away in trade talks after nine months of work. The negotiations have reached a delicate point with officials on both sides saying a deal could be done in the next few days. He is still with us. I understand the french president is making a visit to a Fishing Community in france as we speak which is interesting timing. Let me ask you about your base Case Assumption around whether a brexit deal gets done. Still believe, we this is the most likely outcome as we get a mini deal. You know, tense negotiations going on. For yearsen waiting to get a deal and i would advise overreact inot to the short term. We are seeing the most likely outcome. Everything is possible and we might have a disappointment. Thelank the fact that currency market, in particular, a bit more comfortable with the positive outcome. If we get Equity Investor positioning, its extremely cautious. Ultimately, i dont think many investors have been buying this hope that there will be a deal and if we get something at the and, that could certainly help the u. K. Market and the more domestic part of 5050. Anna you mentioned the fx markets. 134 mark. The we lost some of that ground as a result of nervousness in these negotiations. You were underweight u. K. Versus eurozone. Does that change with any kind is that ait deal or position that lasts longer . Stick to a cautious. Iew of the u. K. Market the ftse 100 relative to the euro zone. Its not so much about brexit even though, again, stronger currency in the backdrop of a deal will not have the u. K. Market because its heavily exported. But its mostly about the market structure. The u. K. Market is a very different composition. Health care, utilities. We dont expect sectors to leave the market in the next few months. We have more value. Markets couldk. Benefit the most from a deal and improving sentiment would be the ftse 250. A domestic part of the market. Its less exposure. Anna would you go so far as to suggest that that will respond positively to a brexit deal and that you would, if we got a brexit deal, it would enable you to be more positioned in the ftse 250 or is it just too early to say . Would you need to see the details . Deal of 250. Get a with advise investors to look at opportunities. Again, thehat, rollout of the vaccine is making progress in the u. K. And we do think the economy could see a could help year that the domestic part of the index. There advising to 50 as model already in the u. K. Anna thank you very much, emmanuel cau, head of European Equity strategy at barclays. Thank you for joining us. 7 26 in london. The u. S. Ands officials. Top our guest will be speaking to us at bloomberg. Around cover that story aircraft, around aviation, and we will cover a host of other subjects, rule of law, how much that is holding back conversations on the Recovery Fund, and perhaps get a word in on currency markets as well. All of that still to come here on the European Market open. This is bloomberg. Anna welcome back to the European Market open. 30 minutes until the start of the cash equities session. Downside. Ore to the the u. S. And eus top trade officials have started work to settle a longrunning dispute over aircraft subsidies. Down Trump Leaves Office in january. Sources say Robert Lighthizer and his senior counterpart are in regular contact over the boeing airbus case. We are joined now by the European Commission executive Vice President. I would like to start by asking you about aircraft and the boeing aircraft dispute. How intensively are you talking to Robert Lighthizer right now and trying to actively reach a conclusion on this dispute . Indeed, we are in regular contact. We are discussing how we brought an end to this dispute. Eu solution preferred by the would be that both sides anddraw or at least suspend we Reach Agreement on future disciplines in aviation. That is basically what we are trying to work on. Indeed, we are still intensively engaged. Are intensive. Is it possible a deal is achieved for the end of trumps presidency . It is possible. We have to see in any case from our side, we are open to reach this agreement. Where willing to ensure tariffs from both sides are withdrawn and that we put this dispute behind us. Anna would any deal include repayment of aid received over previous, prior years . I currently cannot go into detail. Those are ongoing negotiations, ongoing discussions. I cannot go into detail of all different elements discussed. Anna let me ask you about something else. The Recovery Fund and the rule of law spewed seems to be holding us back at this point. What do you think of solutions that suggest cutting hungary and poland out of any Recovery Fund distribution at this point . We can say from the European Commission side we are working intensively with the German Council presidency, the lead of the European Council to reach an agreement on our current thekage and to make sure next multiannual Financial Framework and economic recovery plan, that both can into your desk can enter as soon as possible. Both can enter into force as soon as possible. Primarily, the aim should be to reach this agreement on that entire multiannual financial for all 27 Member States. I spoke to a member of the European Parliament from hungary there is aho said mechanism for settling disputes over rule of law and that is why they are objecting to them mechanism in the Recovery Fund. Is there room for movement on that . Said 25 it must be Member States agree on rule of law conditionality. It is something which is agreed and European Parliament something with also the European Commission initially proposed, access to eu funding is linked with respect to the rule of law. I think it is important this principle is upheld. Anna let me move on to transatlantic relationships. How high should our expectations be for the coming transatlantic trade relationship between President Biden and his administration and the European Commission . How quickly can tariffs that have been implemented be removed do you think . Indeed, we are hoping for a fresh start in our transatlantic relationships because we are likeminded partners, our trade and investment relationships between the eu and the u. S. Are the most important in the world. It is important we are working together. Indeed we need to deal with two sets of issues. One is dealing with our bilateral trade disputes including boeing, but also steel and aluminum tariffs which have been unilaterally imposed by the u. S. We hope to have the u. S. Back on the negotiating table as it regards to wto reform, so more engagement in a multilateral forum. We expect new momentum. There are many areas we will need to be engaging intensively, and actually just yesterday, the European Commission published a communication outlining how we see this engagement with the u. S. From our side. Feedback orhad any early conversations with the administration in terms of their priorities for the transatlantic relationship . As president elect biden has publicly said, he is very supportive of international alliances. He is a great supporter of multilateralism. He is a great supporter of improving relations with the eu. I think this provides a good opening, and we indeed hope we will be able to reach a lot of progress in a short time. Focused on the International Role the euro can play. The success ofby eurozone issuance of bonds we have seen of late. A lot of people are talking about the role the euro can play as a reserve currency. How is this conversation evolving, do you think . Indeed, we are working on this issue of strengthening the International Role of the euro. We are planning communication on this later in the month. We are looking at different directions, how we can strengthen eu role in international trade, how we can strengthen the eus role as reserve currency, and indeed their are recent issuances in the context of the eu will play an Important Role in how we can use it more for international payments, so there are many different elements and we are working on this has we are working also on developing for example a european Payment Scheme to improve payment flows within the euro zone and eu. We are following closely the European Central digital euro European Central bank on digital euro. Anna is there a level of the euro that makes businesses you talk to concerned . We are at 121 right now. You know, the European Central bank is not targeting the Exchange Rate. It is targeting the inflation and the Exchange Rate to be set by the market. Therefore we are not, in a sense, setting the race. I am not really hearing Major Concerns coming from industry or other stakeholders. Thank you very much for joining us. For spending time with us on the European Market open. Lets get a bloomberg first word news update. The u. S. House has approved legislation that could lead to companies being kicked off american exchanges. The bill now goes to President Donald Trump, who is expected to sign it. As well as requiring companies to let the u. S. Reviewed their financial audits, firms have to disclose if they are under government control. Iran has approved a bill forcing president rouhani to End International Nuclear Inspections unless the u. S. Lifts sanctions by february, a blow for joe, giving his administration a matter of weeks to make a key breakthrough with tehran. The powerful counsel made the decision which has been criticized by rouhani. Opec is making headway on its cuts. For oil output it remains optimistic todays meeting can salvage a deal. The focus is now on a gradual easing of output cuts over several months. It is unclear if the taper will be january or later in the first quarter. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna thank you very much. Coming up, u. S. Stocks reach another record as nancy pelosi and Chuck Schumer make a plan for stimulus proposals. Anna welcome back to the European Market open. Lookingincreasingly mixed as we go through the early part of europe. Joe biden said he would provide immediate relief to those suffering from a covid recession. For more we are joined by our Senior International editor who has been following what has been going on in washington. Has there been any movement in stimulus talks . Where do things stand on a bipartisan path forward . For months we have been tracking voices saying we need some kind of fiscal deal to get people through the winter. That has not come to fruition. What do we see . Slog, butbeen a long it looks like there is actual movement. We have the House Speaker and the Senate Minority leader basically together saying they will back off that 2. 4 trillion pandemic package they have been poking that pushing for the election and would be willing to talk about a proposal from this Bipartisan Group of lawmakers, saying that should be a baseline. They are doing this as parts of the economy are doing ok, some are doing well, but figures are showing with the increase in the spread of the coronavirus nationwide, analysts are really concerned growth could slow further or even deteriorate. Initial filings for an limit benefits have increased the past two weeks. Restaurants are starting to close. Cold weather in the east and midwest. That may one of the factors behind the democrats being willing to scale back their package. Anna what republican voices are we hearing from . Enough to put pressure on Mitch Mcconnell . We are going to start seeing pressure on Mitch Mcconnell. The state of the economy, the spread of the coronavirus, pressure from party moderates, and the fact joe biden has won election and his supporting this package are all likely to put pressure on Mitch Mcconnell. He has circulated a plan that largely followed the contours of an earlier plan that has been rejected several times by democrats. It really looks like if there is a bipartisan support for the bill, it will be hard for him to not look at it. Anna thanks very much. Senior International Editor Jodi Schneider with the latest on what is happening in washington with that stimulus deal. Biontech with shots set to be rolled out next week. What we have disclosed is for all countries we are producing and will have ready up to 50 million doses this year. We will be sticking to that target and should be able to provide up to 50 million this year. Going into next year, including the 50 million, we anticipate 1. 3 billion in total. Course we say is of are ramping up production extremely quickly so that we can get the vaccine to everyone as quickly as possible. You see yourself bringing in more capacity . Are you negotiating for more capacity with others . Can you give us an idea how that conversation is going . The biontech network we have added a factory we bought from novartis, we completed that in november and are bringing that up to speed. Pfizer at the same time, bringing up their manufacturing as quickly as possible in the itted states and europe, will be serving the u. K. Very, very shortly. Capacity,ate adding further capacity next year as needed. Our othero supplying partner for china and they have plans for manufacturing, too. Are you negotiating with any other European Countries about distribution . No. Negotiationsall representing all the states in europe. Beennly one where we have separately negotiating was the united kingdom. Can you walk me through what your expectations are for the u. K. To be able to deliver seamless distribution . Where do you see the challenges . You put a lot of work in to get this ready quickly. The u. K. Has cleared it. Can you give us your visibility on the challenge of getting it into peoples arms . A National Health Service Distribution plan. I think that is for the government to comment on. From our perspective in the we are making, sure we get the vaccine to everyone quickly. Distribution, when you receive this vaccine, you roll up your sleeve, you get an injection in your arm, you wait a few minutes as is customary to do to make sure there are no side effects that would not be expected, and you go home. Its pretty much like getting a flu vaccine. The biontechs chief commercial officer speaking about the rollout, distribution of the vaccine. Officials from the u. S. And eu are stepping up work to settle the longrunning dispute over aircraft subsidies. Sources say they are hoping to reach a deal before President Donald Trump leaves office in january. It would mark a surprise turn of events after months of tension and stalemate. Brussels is cautious about the chances of a breakthrough. Mccrory is buying wattle and read. The deal expands its u. S. Asset manager business, giving it the size and scale to compete with larger rivals. They are moving away from more traditional investment banking. Uprench utility is lining advisors as it prepares to offload service businesses. , have been suisse shortlisted for a potential role. Include a sale or ipo. No official comment yet. That is your bluebird business flash. Anna minutes away from the market open, we will get your stocks to watch next, including sainsbury. The british supermarket says it is foregoing u. K. Tax relief and its earnings outlook has improved. Something of a trend with big supermarkets giving back relief they had previously received. Anna looking back to the European Market open. Seven minutes until the start of equity trading. U. S. Futures fairly flat. Lets get your stocks to watch. Dani burger joins us with the rundown. Sainsbury at the top of the list. It seems to be a trend where we see markets saying we have had support from government, maybe we did not need it. Sainsbury seeing better profits in sales after the second locked down in the u. K. They are saying we dont need this relief given by the government. We are going to forgo it. In that picture of improving sales they are saying what we are going to do with our free cash flow, we are prioritizing paying out dividends to our shareholders rather than reducing that debt. That is a sign of confidence that their Balance Sheet remains strong. That does not need to be the focus of the moment. Are european banks, what we watching . A lot of conversation around whether european banks are going to return to paying dividends. The dividend story important for every sector. Liftingis looking at the ban they have on banks allowing them to give payouts to 25 eholders, between 15 and of their profits. The decision is expected from next week. Goldman sachs yesterday saying becausenks are this has not been priced in. Anna what do we know about nestle . Nestle committing money to environmental causes saying they are going to spend 3. 6 billion doing things like planting trees , really promoting agriculture. Earlier in the year they committed money to fight against some of the nonrecyclable plastics industry. Here they are hoping to support farmers, improve soil health, protect ecosystems, committing more money to that sustainable cause. Really interesting, our Intelligence Team asking whether higher commodities prices is going to challenge the likes of nestle and unilever. Dani burger with the stocks we are watching. Coming up, we will bring you the market open. Just four and a half minutes to go. We are talking a lot about stimulus stateside. Does not seem to be lifting the mood here in europe. Futures point modestly to the downside. The open is next. Its down to the wire, the teams been working around the clock. Weve had to rethink our whole approach. Were going to give togetherness. Logistically, its been a nightmare. Im not sure its going to work. Itll work. I didnt know you were listening. Anna we are one minute from the start of cash equities trading. Here are your headlines. Americas deadliest day, u. S. Reports more than 2700 covid fatalities in a single day. Germany extends its partial lockdown until january 10. Another parting shot at aging, the house of representatives baxa law that could see chinese Companies Kicked off of american exchanges. Macron turns up the heat. Eu not to make more concessions. Welcome to the program. Futures point to the downside broadly but not much. Down 0. 2 on ftse futures. We saw outperformance by the ftse yesterday, perhaps looking to unwind that. As we wait for European Equity markets, the pound is stronger by 0. 25 . 1. 34 level against the dollar. From a euro perspective, fairly flat. European equity markets starting to open. The ftse 100 is the first out of the gate, entirely flat. The stoxx 600 is pretty flat. November was so strong for global risk assets, and coming off of that, difficult to maintain that momentum through december. We are getting more markets opening. Ibex opening fractionally to the downside. A lot of talk about the u. S. With stimulus. Colleague, Jodi Schneider, about that earlier on and the signs on bipartisan agreement that lifted equity markets and risk assets in the latter part of the u. S. Trading day. Markets are opening slightly this morning as the pandemic continues to rage. Germany is extending its partial lockdown three more weeks. In the United States fatalities topped 2700 in its deadliest day yet. Joining me now is Kallum Pickering, senior economist, berenberg. The news now is dreadful, further lockdown measures to prevent further deaths in europe, and particularly in germany. Taking about the near term, that is front and center for many people. Thinking about the mediumterm and impact the new slow has our expectations for 2021, how much better does next year look . Kallum it looks much better. Consider the fundamentals, you have major we are still well below potential economic outlook. You have disinflationary forces so inflation you also have record stimulus. Monetary and fiscal stimulus in the pipeline. It will last a good two years. In the Northern Hemisphere we are struggling through the seasonal effect of coronavirus, that is weighing on economic momentum. Health officials and governments are restricting activity to control the virus. The hopes of a virus and the warmer weather mean that all of those combined, the low inflation, the record stimulus should start to come through. Next year we probably get synchronized Global Growth at low inflation with a big policy stimulus. This would be better than 2017, the last good year in memory. Anna in terms of that policy stimulus, is the risk that it is withdrawn . Do you have any specific areas you are concerned about that . Kallum if there is any area we could be prematurely seeing stimulus it is in the u. K. , but that globally, what we have is fiscal policy makers are promising to be much more activist than before. They are not concerned about debt, that is different. Centl banks helped a lo with keeping borrowing costs low. Whether it is the fed or the ecb, there is a big desire, not just to let it happen, but Central Banks want inflation above trend for a while, above target for a while, so you have inflationary momentum heading into next year. Policy for a good two years will be substantial. As Central Banks see pricing in higher inflation, until we get a solid recovery, they will lean against that. Discount rates will be low in a stronger environment. Anna thinking about that inflation momentum, how can we be confident that Central Banks can get us there . In the runup to the pandemic, when we had tighter labor markets, it was difficult to generate inflation. It was difficult to get to that target. Why do we have confidence that with the headwinds the pandemic has thrown down s we have more fiscal spending but why confidence inflation will come back . Kallum Central Banks are powerful institutions, but cannot change economic fundamentals. The inflation story is about economic fundamentals changing over the next few years rather than what Central Banks are doing. Two things change over the next decade. It is a big difference. It is defined by huge gains in globalization and restrictive fiscal policies. Positive supply, negative demand, we saw that. This time around it is the opposite. We have deglobalization coupled with fiscal policy that is aggressive, so more aggressive on domestic demand, that will be inflationary. We are going through a period where core inflation is a central bank target, say 2. 5 in the u. S. And u. K. , less than 2 in the euro zone. In the last decade it has been 75 basis points below target across the world. Anna you talk about deglobalization. We have had this conversation with other guests, and they say this will be fundamentally different and has an impact on inflation. Do you think deglobalization impulse is there post Trump Presidency . Kallum yes, deglobalization specifically in the goods trade, not services and information. That will have a big effect on prices. The trade war between the u. S. And china is one element. In europe we have brexit, the secondbiggest economy leaving the biggest trading bloc in the world. Existe some issues that beyond chinau. S. Even though mr. Biden will be more predictable in his behavior when it comes to trade, the u. S. Will conduct its trade war in a more polite way with china. We still have deglobalization. When you think about the pandemic, it adds to that. Governments will say health care is a strategic priority . I still expect that trend to continue. Anna thank you very much, Kallum Pickering, senior economist, berenberg. He stays with us. Up next, france adds fuel to the brexit fire, warning it could veto a deal if too any concessions are made. Hall barnier has been briefing we will get the latest on the brexit negotiations, next. This is bloomberg. Going into next year, concluding the 50 million from this year, we anticipate 1. 3 billion in total. I dont think this is what we will provide in the first half, but i can say we are ramping up production extremely quickly. So we can get the vaccine to everyone as quickly as possible. Chiefthat was biontechs officer. The u. K. Became the first country to approve a covid vaccine, the First Western country after it clears. Vetoe has warned it could a trade deal between the u. K. And eu if it does not like the terms. It puts pressure on negotiators not to make further concessions. Prime minister Boris Johnson says any deal must let the u. K. Make its own laws and control its own fisheries, his keys Sticking Point. Maria tadeo joins us from brussels. Is france serious about this veto . It was interesting to see the french Prime Minister making visits to fishing communities this morning. Nice symbolism. Is france serious about this veto . Maria yes, there is a lot of symbolism in that. This is a few days before europeans go to brussels for a summit. I would say we know the french can veto, any country in europe can do the same. This will take unanimity. If you take this in context and go back to yesterday, barnier giving a briefing to ambassadors, it is more of a threat than a reminder. European capitals believe we have entered the endgame, and whatever happens will happen in the next few days. They want to stay in the loop and know what is happening in those talks. It is a reminder that ultimately this is a political deal and will come down to european leaders and a political agreement. The Technical Details represent, it is almost there, it is the political momentum and push, it will come down to european leaders. Macron has been a hardliner on the fish. He needs something he can sell back home that does not look like a concession. It is not just the french. Elgin is on the same page. They belgium is on the same page. Anna no surprise the Prime Minister of france went to a channel port this morning. That me ask about the timeline. The Irish Foreign minister is talking on irish radio saying, he hopes the Brexit Process is drawing to a close. Any share that view. What does the timeline look like between now and the end of december . Maria this is the question i ask all the time in brussels. I would say the situation is fluid. Anybody who tells you that they know when the deal will come to, i would love to speak to that person. We hear it could be anything. Is a political deal, and that can stretch into next week into the european summit. That is problematic. This is about european internal affairs. The european leaders want to talk about the european budget and recovery. They have to deal with the hungarians and the polish on that front. It is not so much about the deadlines but the political momentum. We may need that moment between Boris Johnson and Emmanuel Macron before a dale can be agreed to. Before a deal can be agreed to. It is hard to put a date on this at this point. Anna thank you very much, maria tadeo. They want to talk about planet change and other things other than brexit. Kallum pickering, senior economist, berenberg is still with us. Are you surprised the contribution it makes to the u. K. Economy how much emphasis is put on fish . Everybody knows the link to the Scottish Independence movement as well, but are you surprised the extent this is a Sticking Point . Kallum i do think it is what fish represent an economic terms, which will be small decimal places. From a political point of view, you have a couple of issues. Take the u. K. Side, first you mentioned scotland. Townser, the coastal along the north have been hollowed out and shifted toward a servicesbased economy. They have a commitment to renew these areas. If they back down too much on fishing, that would undermine their commitment. Unless we forget, it was those regions which helped Boris Johnson won a landslide against Jeremy Corbyn last year. Those are mostly brexit regions, so this is a key political issue. In the end, if the size can get compromise on a level Playing Field which is the key Sticking Point, it can affect all elements of euu. K. Trade and the deal will not fall. Your colleague mentioned it, what we need is the political will to get what is an almost finished deal over the line. We might need a political intervention. To get the brexit deal over the line, the irish Prime Minister decided a deal could be done. We might need a bigwig in europe to speak to boris and get this done. If we get such a phone call, i would take it as positive news that things can be wrapped up soon. Key there do seem to be things missing. Our reporters tell us the u. K. Has yet to provide details of its state aid system, and that is something the europeans want to see. Thinking about how much that matters, another u. K. Government might have views to the extent it wants to support u. K. Business. How much do we worry about these Sticking Points . Are they just filling the time before the deadline . Kallum this is a key issue. You once some detail about what the u. K. Plans are, and it wants an independent regulator for u. K. State aid. What follows from that is the u. K. And eu, we know that you the eu is set up by Single Market rules, they can set parameters that they can both agree and maneuver within the parameters. Following that, you can set up a governance mechanism. This is a technical issue. If you want a deal, you need a bit of political will. It is hard to say what the Sticking Points are. I would emphasize the hard deadline is december 31, but if they get a deal, i think the europeans can get a deal in place for january 1. Anna a lot of focus to the ,xtent countries have to borrow western economies having to borrow to fund their way through the pandemic. On the u. K. Side, you provide interesting context about the amount of borrowing now by some measures is not a severe as in the financial crisis. Kallum that is right. The story of the financial crisis was one where we were borrowing excessively on the private side, which gave the illusion of rapid underlying Economic Growth. The government was running structural deficits heading into the crisis. When the crisis happened and we came out the other side, we realized it required this time what you have is a healthy economy growing at its lowest attentional because it is held down by brexit risks with safe government borrowing. What we are experiencing now is a oneoff surge in borrowing due to the pandemic, and when we get the full recovery by 2022, once the labor market is back at full employment, we will find borrowing is only a little higher than before the pandemic. Lets wait to see the recovery play out. Then decide whether or not you need to fix any issues. Anna is inflation a problem you are watching in the u. K. . Ross theno, ac advanced world, we would see outright deflation. When we get back to full employment, we mentioned those fundamentals and aggressive fiscal policy around the world, that will probably be an inflationary mix three or four years from now to worry about. Anna thank you so much for your time, Kallum Pickering, senior economist, berenberg. G will speak to Kallum Pickering later on bloomberg radio. Active managers struggle to keep up, that is next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 23 minutes into the trading session that shows the london market outperforming again despite the pound up 1. 25 . In the best run for Global Equity on record, active managers could not keep up. According to bank of america, cap damages posted the third worst month. What went wrong for these managers . Dani it should have been a month where these managers were able to stock take, but you have to pick the right stock. When we saw this rotation into the cyclical and names, managers had a tough time dropping their old habit of relying on the big tech names to take their portfolios higher. Because that had done well in the beginning of the year, and it had to be a sudden change into november to pile into value stocks, which prior to november had chronically underperformed. Managersportfolio of a blended value approach only 14 of them were able to beat the russell 1000. You did a little better if you are a value manager or growth manager, but this also shows us that because these investors missed out on the value rally, if they were skeptical in november and decided to move into it, it shows the value rally has further to go. Toa if they were exposed key stocks that did well, maybe they did better. For example, tesla, that may have helped them. What is the streets current thinking on the electric carmaker . Dani Investment Managers have been underexposed because it was not on the s p 500, so they were not benchmarked against tesla. That might change. We have seen status upgrades, most notably Goldman Sachs up to a buy, and they have 780 as a price target. That implies a 37 increase from its current level. Almost and on tesla, equal number of buy and sells. Theman does up the ante of need of these managers to own tesla if it does continue this momentum is rally it has been having. Anna thank you very much, dani burger, with a look at the performance of active managers and how key stocks are doing, such as tesla. Lets get to your movers right now. The ecb will allow Bank Dividends we have known that story for a while but spain is reporting those dividends 25 . Be 50 20 5 15 rollsroyce sees an opening for jetreturn to narrowbody market. They have been in a lot of trouble because of the extent they rely on aircraft being in the sky to earn those maintenance contracts. On imaging outlook and covid antigen testing. Technology is the best performing sector, up 0. 6 . Coming up, the risk between the eu and its budget hold downs is getting wider. We speak to the chairman of the Biggest Group in the area. That conversation with maria tadeo in brussels coming up next here on bloomberg. Anna welcome back to Bloomberg Markets european open. 30 minutes into the trading session that looks to be fairly wherehen you think about the stoxx 600 has not moved far. The ftse 100 up 0. 2 . The laggard seems to be the ibex in spain, down 0. 2 . The tech sector is leading any gains being made, up 0. 6 . Travel and leisure is doing well. To the downside, energy and chemicals. Laura Democratic Leaders are throwing their support behind a bipartisan stimulus plan worth over 900 billion. They see it as a foundation for a new round of talks with republicans in the white house. It marks the first public retreat from the democrats larger proposal. Germany is extending its partial locked down by three more weeks until january 10. Chancellor merkel will reconvene with National Leaders to reassess the restrictions. She said infection rates are far too high and need to come down faster. Will unclear if a vaccine be available before christmas. Opec is making headway on its talks on oil cuts. Todays meeting looks to salvage a deal. The focus is on a gradual easing of output cuts over several months. It is unclear if the tapering would start in january or later in the first quarter. Global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna it is time for the brussels edition, and the budget hold out is getting wider. Polish and hungry rejecting appeals to release their veto. They will now most likely have to tackle the rift when they meet next week. Joining us now is berea taddeo, who brings a guest into the conversation. Maria this is heading for a big clash next week when european leaders get to brussels to talk about this big issue for Member States. They want that Recovery Fund operational by next year. We are joined by manfred weber, chairman, european peoples party. We are happy to see you, especially this week because your party has a big say on this. Time tou say this is a ditch him . Manfred in a crucial moment for the development of the European Union, there is uncertainty among the citizens. That is why the behavior of the Prime Minister of poland is irresponsible to block now and take the European Union hostage for their interests. [indiscernible] our expectation from the Parliament Point of view is clear. Parliament is ready to give the money. Parliament is ready to spend the money and give momentum for the european economy to come back and recover. It is what we need, we are ready. Ask, you talkto about the council, but when we hear from the commission, if this comes down to poland and hungary vetoing the overall package, there could be a coalition of the willing. How does that look in detail . Manfred we want to keep your together, that is our ambition. Gave thehe agreement message of solidarity, and we do it together. Nowhere else in the world are 27 memory States Joining Forces to bring Economic Growth back. Again, the irresponsible behavior i would say as a fallback position, it is a good concentration to plan without poland and hungary than it is about corona and the recovery. If they do not want to join or respect the rules of the game, rule of law is independent of judiciary and freedom of media. If they do not respect those rules on the european level, we will do without them. They must be aware this can be a problem for their own countries. Maria you are seeing potentially a plan b on the table that could sideline hungary and poland if needed. There is consensus among the other 25 countries to go that way if that is what it takes . Manfred exactly, and that is a good thing because 25 countries have a good understanding. Money,the big amount of 1. 8 trillion euros, it is now the moment to make clear this can only be spent under the law mechanism. To link the money to the idea of the judiciary and free media, that is what the whole parliament is fighting for. It is good to see 25 number states support the idea and only two are against, and they are isolated. Polls show 80 of citizens in the European Union want to see such a rule of law mechanism. That is why now is the moment to do it and implement it. If hungary and poland are not willing to join, it is one option to do it without them. Your line on this is clear, you have been transparent. We did hear from Angela Merkel this week suggesting the german presidency does want a 27 member state agreement. What does a compromise look like when merkel talks about that . I struggle how you can bridge and water down the text anymore. What is she talking about when she says she needs a compromise . Manfred the European Parliament was driving the institution to get the rule of law mechanism. In july the Member States were not able to deliver on the rule of law mechanism, so we made it clear without this, there is no money. That is a big achievement. On a compromise, on the substance of the agreed rule of law mechanism, i dont see any room to maneuver to change anything. To the hungarians and polish politicians that this mechanism will not be abused or misused. It is not about this or interfering in international responsibility. Abortion is not an international responsibility. That is why we can assure the concerns of the countries, poland and hungary, but on substance i do not see room to maneuver to change anything. The trial agreement for the german presidency in the European Parliament is the base for the road ahead of us. The text cannot be watered down, that is your position. If it does, it would be problematic to parliament and you are back to square one . Manfred we have hong kong and so much development, europe must be the continent of freedom of press and the continent of independence of the judiciary. That is why there is no compromise. If poland and hungary are not supporting this, we have to go for a plan b. You have tot, consider how to spend the money. We have to guarantee this money it is not only about the National Budgets the money must be spent for real future investments to give the young generation a good perspective. It must be linked to concrete reform programs. I want to see solidarity in europe but responsibility on a national level. You have to do your homework as well. That is targeted to the socialist countries in spain, the european money is compensating the national budget. Ask, when youto look at the politics, many critics say the reason we are in this position is because the it has not been tough enough on totor orban, you probablyou alm be a problem child. You need to ditch him now. Manfred we have already excluded epp, half, because they have no Voting Rights or member in any institution. They have no say at all anymore. That is one important step. I voted in favor in parliament to start a former procedure against hungary. When it is about rule of law and independence of judiciary, you have to stand firm. That is why epp is clear on this. We do this against viktor orban, and that is why there is no room of interpretation. We fight for this. Maria there is room to make this official. His party is in your political family. You are saying he does not have much rights, but he is still a member. Manfred yes, we have macrons team, and there is an obvious conflict of interest in the czech republic. We have a lot of problems in the European Union. My ideas not to politicize it. It is up to the European Court of justice to guarantee our system works, to defend rule of law inside the European Union, and now is the moment to do it and make it real. I am ready to do so. Maria you made your position clear on that front. We thank you for your time. That is manfred weber, chairman, european peoples party. Looking like a heated european summit next week. Anna a lot on the agenda, thank you, maria tadeo in brussels bringing that interview. Still to come, another parting shot at beijing. House of representatives baxa law that could see Chinese Companies kick off of american exchanges. That is next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 44 minutes into a trading session that looks negative, flat to negative for the broad european equities. The ftse 100 making modest moves to the upside, looking for new momentum at the start of december. The u. S. House approved legislation that could lead to chinese Companies Kicked off of american exchanges. Lets get to john liu. This is a longrunning subject of conversation, the extent to which Chinese Companies listed in the u. S. Disclose the same as u. S. Corporates about their finances, and the extent to which they can be scrutinized. This will not be something immediate, but it could result in big chinese names losing access to u. S. Capital markets. John it could potentially result in Companies Like alibaba being delisted from the u. S. Right now the legislation would require these companies allow u. S. Regulators to look at their audit books, and if they do not do that for three consecutive years, those companies would be delisted. Under the current circumstances, none of the Chinese Companies are allowing the u. S. Regulator to do that. Potentially, all of the Chinese Companies listed on american exchanges would be affected. If you look at the reaction in the market today, there is an expectation there will be a resolution found between the u. S. And china. The chinese have expressed a willingness to give concessions to make this work. Anna i suppose it is whether the concessions will be big enough to satisfy bipartisan support for this kind of legislation, which goes to president trump. How is this viewed in china . We are into the last week of the Trump Presidency. John the chinese strategy has been one of strategic restraint. When there has been american action, china has retaliated, but otherwise they have tried to stay low and outoftheway. The reaction in china has been one of concern. One way that has manifested, you see Companies Like alibaba do secondary listings in hong kong. Part of the reason they have done that, they see this uncertainty with u. S. Policy and the risk of delisting. Anna and whether the culture will turn, they will be ready. Thank you for bringing us that story, john liu. Lets stick with technology themes. Facebooks vp of Global Affairs and medication says the company it is not regulation standing in the way of growth. The reason why the European Union has not been a place to foster Successful Companies is not because of regulation, but why is it china and america are the places with extraordinary successful Global Companies . Facebook is only 16 years old. Alibaba look at the growth. Tiktok, explosive growth. The reason for that is not exclusively but principally because they have large domestic markets, unfettered domestic markets. About theworries zealous focus on new regulation for the European Union is not whether that regulation is good or bad, i expect there will be some good and some bad, but it detracts attention from the project of creating a seamless digital Single Market in the European Union. I worry policymakers will be embroiled for months and years crossing the ts and dotting the is on regulation, and they will be emulating other parts of the world. Meanwhile, the homework of completing simple markets would be the biggest boost for commercial success in the European Union still goes wanting. It is a real shame. Do you think that gives written i know youre not a fan of brexit doesnt give britain any advantage . Is the fact that britain is freer likely to give it any advantage . Reverse. Ct it is the we see the signs already, it is a combination of a much smaller market. Combined with regulatory activists. I see no sign the u. K. , its departure from the European Union will stall access to this ise market which it departing from in a matter of days. What i see in the policy debate for the u. K. Is far from thinking about how to make up for that loss on a market scale. It is that they can regulate with greater speed. Anna that was facebooks Vice President of Global Affairs and communications, nick clegg. Coming up, how will 1 treasury yields impact . I put that to laura cooper from the mliv team. That is next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 53 minutes into the trading session that looks flat as a whole. Lou are cooper laura cooper, it is a gloomy session in terms of themes we are looking at. European markets not moving far that fast. Lets talk about the ketchup story on equities. I spoke to barclays earlier, and they expect the ketchup story for europe to continue. To be there is value locked up in European Values after we saw this exceptional gains through november, and it is largely predicated on the fact european equities, there is a compelling valuation. If the stoxx 600 trades at a discount, around 50 to the s p 500, but now it is trading at a 20 discount. There is an attractive relative value play. When we take a step back, the ecb is providing support by keeping financial conditions easy. There is the potential to remove their bank dividend, and when we think about the overall recovery prospects on the back of the vaccines, european equities are leveraged to the opening trade with banks and energy. Those sectors steeply discounted still. There is quite a scope for those sectors to catch up. Anna let me ask about the latest brexit news lines. You have to make it look difficult and create market volatility before a deal is done is that what we are seeing now with cable . Wera i think that is what are seeing, given that we are seeing posturing ahead of crunch time for any brexit deal to come to pass. We are seeing that reflected in the currency. It is a pressure valve around that. Cable has ignored headlines the past few weeks, but yesterday it caught up to the downside. The fact we are seeing a climb today points to the fact that optimism is being priced in. Downside risks are clearly skewed. If we do not see clarity later today or through the weekend, we will see focus shift to Contingency Planning instead of a no deal deal scenario. That will be captured in sterling and tilted toward reaching the 1. 30 mark. Anna briefly, your thoughts on the markets live question of the day, we are at 94 basis points on treasuries, how would 1 affect assets . 1 as a do not see threshold that will for the risk rally we see in equities. The pace of gains is relatively contained. Limited of a tantrum is. If yields are rising on growth prospects, that is supportive. The overall stock backdrop, given the financial conditions at record lows in the u. S. Then the fed will step in and keep long end yields contained. That will provide a further tailwind to the rally. Anna the power of the fed, certainly. Thank you, laura cooper, from the markets live team. This is bloomberg. Francine americas deadliest day. The u. S. Reports more than 2700 covid fidelitys in a single day. Fatalities in a single day. Macron threatens to veto a brexit deal, putting pressure on the eu not to make more concessions. Back atic leaders to 900 billion stimulus proposal. It puts the ball in the white houses