Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

First speech to call for strength, resolve, and courage in europe, but steers clear of any serious policy prescriptions. Good morning. Lets take a quick look at the data this morning, getting set up for tuesdays trade. We have a yen that has weekend toalmost 109 weakened almost 109. Optimism for a trade deal driving the yen up to almost 109. Right now, 108. 77, driving up the 10 year yield, looking at 1. 80 right now on the 10 year yield as investors feel comfortable enough to let go of the perceived safety of u. S. Government debt. You see s p futures gaining once again after we saw new record highs for the Dow Jones Industrial average, the s p 500, and the nasdaq in yesterdays u. S. Trade. It is definitely looking like a lot of risk on sentiment in these markets as we get more and more optimism on trade. Still, equities may have even higher to go. Here with the details is dani burger. We might seeson equities move higher is theres one key group that has not latched onto this rally, and that is hedge funds and other institutional buyers. We can clearly see this using one measure of exposure. This is the relation of Hedge Fund Returns to the s p 500. You can see what it looks like recently. Hedge fund to the s p 500 is about half of its average since 2002. The reason it looks this way is hedge funds have been positioned more defensively. They do not buy this improvement in macroeconomic backdrops. While we see stocks rotate into value, they have stayed steadfast in their exposure to momentum. There are a lot of bond proxies. A lot of quality safety stocks. Let me show you what it looks like when you have held onto momentum. It does not look pretty. It has see just how much fallen over the past few months, trading on its lowest level at its lowest level. Hurt funds likely getting by sticking to this strategy right here, so they start to rotate into values, start to join in on the riskon rally. We will see stocks moving even higher. Matt dani burger with a look at what we could see. Lets bring in will themselves the chief Market Strategist at hsbc. William, what do you think we are going to see with stock . We are starting to get to levels, 23 percent gain on the s p in new york. A 23 gain 24 gain on the dax index here in germany. Is it too late for investors to get in on this rally . Part of that rally was at the start of the year and then we had to plateau in no direction because there was no direction in terms of economic data. The data was on the negative side. No direction from the trade side. I think that on top of the hedge fund fuel, you had a very negative or very riskoff positioning. Assetsinto safe haven and lower negative positions on anything risk related. We do think you need to balance your view because we are probably still going to be, even with the phase one deal, in a low growth environment, so, yes to exposure to anything related to carrie strategies, carry strategies or longterm growth areas in the world, but really to jump on the cyclical trade. We are only expecting 1. 7 growth in the u. S. That wee you optimistic are going to see a trade deal now . Commentseard positive from wilbur ross. Of course, a lot of hyperbole from the incident as well. Now, we also hear positive andents from president xi sort of behindthescenes, a lot of talk about the fact that he might be willing to come to the u. S. Even if it is not for a state as it. Visit. They are hoping there will be one and questioning or wondering whether there will be the trade deal we have been talking about or if there are additional cuts. If indeed it is more substantial and the ism work to stabilize on this, you know, that would be a signal for a more positive market sentiment. But we first need to see that. I think it is dangerous to speculate. Banking,m hsbc private you are going to stay with us. Our guest cohost for the hour this morning. There is a lot to go through. I want to get to that top story we were just talking about. Trade optimism fueling the market rally. White house officials reportedly weighing a decision to remove tariffs on chinese imports. Meanwhile, china is reviewing locations in the u. S. To sign the first phase of an agreement according to bloomberg sources. During a rally in kentucky, President Trump said they are close to inking that decision. We are so close. China wants to make a deal so badly. I think they would love to see another president. They would like to see another president. Meanwhile, in his first opportunity to address Global Investors since china and the u. S. Resumed talks in september, president xi jinping reaffirmed that his country would open itself further to trade. In order to boost growth at home and create more room for , china will give greater importance to imports. We will continue to lower and institutional transaction costs. Joins us fromang shanghai. Points, thee key key takeaways, from president xis speech . Xiina you did not hear specifically mention the United States or donald trump, but he did mention the importance of upholding multilateral institutions, saying countries should not their unilateral interest about those of other nations. He spoke about enhancing legal finding more free trade agreements with other countries around the world. You have 63 companies in participation here. You have Emmanuel Macron here in participation as well. When it comes to other western countries, you do not have the most highlevel delegates attending and some of them are failing to send any at all. That being said, xis speech is meant to reemphasize the fact that china is meant to reopen the economy further. That is more than just rhetoric and promises. Amid this trade war, according to the official report, u. S. Companies actually occupy the most exhibition space here, showing that despite the trade tensions with the two economies, that they are looking to enter the chinese market. Significance the of that event, where he was speaking, and how does that fit into the ongoing trade discussions . This is theina Second Annual International Import expo. It is trying to transition to these consumption led economies and it does support the argument amid the u. S. China trade war that china is trying to decrease the surplus, the trade surplus here. We have thousands of companies in attendance. Around 3000 from alibaba to tesla to astrazeneca. They are here to sign deals. Last year, hundreds of deals were inked, worth billions of dollars, but the issue is that these companies are going to want to see concrete plans. More than just empty promises. About half of the expo dealsants said there did not go through because they did not see followthrough from the china side. Are Going Companies to want to see more than empty promises. Matt thanks very much. Selina wang in shanghai, where president xi jinping held that speech. Still with us is the chief Market Strategist at hsbc. Do you see any opportunity here . President xi, time and time again over the past couple of years, has tried to make this argument, that china is opening up. They have the roads enbridge initiative, and people are arguing, maybe europe should try and strengthen its asia trade ties while the u. S. Is increasingly isolationist. I mean, where are the opportunities . Therethere are willem are clearly opportunities for developed Market Companies that trade within china. The opportunities as you were alluding to at this point in time are more in the domestic theomy, i. E. , with consumer. As the consumer grows wealthier, onher they spend the income for they spend it on themselves, especially on health care and also on travel and entertainment. Consumption growth is a structural and it has a low correlation with what is happening in the trade cycle and in the trade news, so therefore, a relatively defensive trade in our view. Matt do you see other beneficiaries of the trade war . Ashave noticed that Companies Avoid manufacturing in china, they end up in places like vietnam. Marketse other emerging beneficiaries of this trade war . Willem there is some of it but not as much as some people might have expected. Obviously, if you are a producer in china and your customers to next to you and your suppliers next to you as well, it is difficult to go and move. There are these polls of real expertise and real clusters of industry, and therefore, quite a lot stays in china. Where we do think there is opportunity as well is to look at what the governments reaction has been to the trade tensions, and obviously, china is stimulating its local economy through infrastructure, so therefore, anything that has to do with construction, engineering, even the Telecom Sector with 5g and so on are areas benefiting from the reaction of the Chinese Government to the trade tariffs. Matt when you look at regions, there are some when i look at your notes, i do see some em opportunities. In equities, for example, indonesia. Youd like india, you like brazil, and even in credit, you see some opportunities there. Why is that . Willem india, indonesia, brazil, very much the same topic in terms of domestic consumption, domestic economies. Relatively large economies that are somewhat less exposed to global trade than them except thanland, taiwan thailand, taiwan. That is a positive. In the case of brazil, obviously, the reforms with the new president are not so new anymore. Positive developments. In the debt market, we are looking at support from interestrate cuts. Following the lead of what the fed has done, we think the fed is done with its interestrate cuts. In emerging markets, we still expect some support from further interestrate cuts in the likes , whicha and indonesia should support bond markets. Matt we are going to talk a little bit more about that throughout the program. You are going to stay with us. Willem sels, from hsbc Private Banking. Bloomberg first word news. We go to Annabelle Droulers in hong kong. U. K. , the Election Campaign is heating up with Prime Minister Boris Johnson and Opposition Leader Jeremy Corbyn trading barbs. The house of commons has elected its new speaker. Lindsay coil he was a member of the labour party. Without partyt affiliation. To hong kong, and chinas president is backing the leadership of carrie lam. That is despite five months of ongoing prodemocracy protests. President xi says ending violence and restoring order remain the most important tasks in the city. Lam remains in the job after denying reports that beijing planned to remove her. India has decided against joining a trade agreement covering much of asia. It paves the way for other countries to sign the deal next year. India says it has significant issues with the deal called the Regional Economic partnership. President trump has formally begun the process of withdrawing from the paris climate accord. The move was announced in 2017 and will take another year to complete. This sets the stage for the u. S. Departure for the deal. The day after the 2020 president ial election. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt. Matt thanks very much. Annabelle droulers in hong kong with your first word news. Coming up, Goldman Sachs ceo David Solomon joins me here in berlin for an exclusive interview. Do not miss that conversation at 8 30 on the continent, 7 30 a. M. In london. When you are traveling to work, you can hear it on Bloomberg Radio as well. Just tune in on your mobile device anywhere in the world or if you are in the city of london. On the digital dial. This is bloomberg. Matt this is bloomberg daybreak europe. I am matt miller in berlin. Lets check in on the markets right now in asia. For that, we go to Rishaad Salamat in hong kong. Rish. Got a saw ajust public holiday. Order that is down perhaps to there being improved trade disputes with south korea. I am getting my tongue twisted. Nikkei up 1. 3 . We have an improved dialogue taking place. They are trying to ease tensions. That is helping the market. That whole optimism about the trade deal helping to list equities in this part of the world. The philippine market, the second best performer. Jci as well. Not currently on that is what is going on with the csi 300, which is about. 3 out, engendered by a move to reduce funding for one year for banks. Five basis points down. Liquidity helping stocks in china and hong kong. People essentially looking beyond the darkening economic storm clouds, which certainly are pervasive in the city. We did get an Interest Rate decision out of australia. Rate cuts helping to lift the aussie dollar. That rally resuming, nudging towards 17. Essentially what we have here is what governor philip lowe said. He said they are basically done for the time being with regards to rates and that limits the gains we saw on the equity markets, up. 1 . It did help the aussie dollar to move to the upside. The 10 year yield was perhaps the worst behind them as far as the economy goes. Further easing of policy. We are 40 minutes away from a Rate Decision out of malaysia. This is where we are. We had the ringgit at levels we have not seen for Something Like three months earlier. Came off that. Looking at rates at 3 . It is a bit more if with about one third of the economists suggesting they may well go for a cut. U. S. Dollar index just down a fraction at the moment. This is the position we find ourselves in. In rally resumes. Is it also enticing other people to come in . Has this rally got legs . It could engender a fear of missing out. That itself could produce a positive selffulfilling prophecy, as it were. Back to you guys. Matt you are sounding like our old friend, john dawson, for a moment. It would be great to see him. It is great to see you as well. Rishaad salamat in hong kong with a look at the asian markets. Lets get the Bloomberg Business flash. We go back to Annabelle Droulers in hong kong. Annabelle thanks. Disappointing investors with its quarterly results. It posted lackluster gains. Two of the most closely watched metrics on wall street, but it was not all bad news. The ridehailing company Beat Estimates it improved its annual loss forecast, pledging to turn a profit by 2021. Barclays is being investigated by u. S. Regulators as to whether it violated security flaws. It raised concerns about marketing practices for certain bonds. We have been told the probe is preliminary and may not lead to any allegations of wrongdoing. Decliningnd the sec to comment. Mcdonalds Human Resources box has left the company after 15 years. The departure coming one day after the start ceo was fired. Mcdonalds is viewed with a lot of scrutiny because it is viewed as a bellwether. That is your business flash. Matt Annabelle Droulers with year business flash. Christine lagarde has one under her belt as the president of the ecb. Her first speech in the office, she called for strength, resolve, and courage, but steered clear of monetary policy. Meanwhile, over at the fed, the San Francisco president , mary daly, did talk shop, saying a Material Change in outlook was needed to warrant another cut. With us. Ls is still we have got some of the big wall street banks forecasting a surge in rates. Others are forecasting that we could fall into negative territory by 2021. Where do you see rates headed . Willem nowhere. Evenally stable to 2021 because it depends what part of the economy those economists are looking at. If you look at manufacturing, it is very weak and it is good to remain weak for a while. You need quite a substantial trade deal to improve that sentiment. On the other hand, the consumer is quite strong. As we have seen in the labor markets figures last week. So basically, what it means is that Central Banks in terms of Interest Rates is too glum. The solution is not there. In the case of the fed, i think that there is no need for the cuts. Matt is there any need for fiscal theres so much talk about fiscal stimulus being necessary in europe. It has me starting to think about the times when we used to talk about Infrastructure Spending in the u. S. We did get a tax cut package. We did not get Infrastructure Spending there. Do you think that that is something you see on the horizon . Willem it is what people are hopeful for. It is a political decision, which is one of those difficult ones for investors. When youre talking about earnings, rates, a whole army of people can analyze that for you, and we feel very comfortable with that. When it is about politics, its much more difficult. They are hoping for Green Investment in europe. So instead of upgrading the whole European Equity market, why not just invest in that kind of area of the economy . The Green Investment in the stock market. That is something that we know needs to have been generally around the world anyway. We would rather play that from a somatic perspective rather than say, yes, this will happen. Not that attractively priced relative to the u. S. T discount is basically matt that is a fair point. The esg argument is one that we are hearing more and more in the mainstream. The question is how far could it go . Is there an end in sight . Willem sels from hsbc Private Banking stays with us. Coming up,