Transcripts For BLOOMBERG Bloomberg Surveillance 20240713 :

Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Response, how europe response given the heightened trade tensions, how they could take advantage of that situation. Is what taylor, this the markets are telling us. Futures are climbing with european stocks. Im also looking at oil and treasuries to give us an indication of where we are seeing some of the havens. Treasuries on the dollar edging higher. I want to show you the chinese yuan. There is focus not only on this extra stimulus possibly coming from japan, but also on lockdowns. More Major Economies around the world opened up, taylor. Taylor we are hitting a milestone in the u. S. Yesterday you were looking at s p 3000. ,000, we have not closed above those levels, but it looks like we are seeming to get there. Some of that hope and optimism on the reopening is filtering through within the s p 500. Focusallcap domestic stocks, and a lot of optimism here about the strength of that u. S. Consumer coming back, making those smallcap mystic stops those smallcap domestic stocks amid the big out performers. We will be speaking with to steven major later about his calls to inflationary trade coming back. I will mention the bloomberg dollar index because you mentioned the chinese yuan. We have seen some strength haven dollar. Back into the that reversed yesterday and we are getting a mixed picture within some of the Strong Equity markets. You are seeing a lot of money go back into bonds, and rightly the bloomberg dollar index, francine. Francine the Trump Administration is looking at possible sanctions to punish china for its crackdown on hong kong. Protesters are gearing up for what could be their biggest day in months. Enda curran joins us. We know there was a pretty big crackdown from china, protests going up. Could this up in the world order as we know it . Certainly no, signs of easing at the moment. We had another day of protests here in hong kong, about 180 emmons traders arrested and a very heavy police presence, very heavy all around the city come and of course remember, the theesters are targeting National Security legislation, so it is something of a boiling point. In hong kong is in the middle now of the geopolitical situation between china and the u. S. , china showing no signs of pulling back on its measures on hong kong. Could course washington levy sanctions, and it could be taking away from the trading power that hong kong has. I dont think there is any sign of a Circuit Breaker or a countdown in the near term. How many more protests are we expecting . We know that police fired pepper spray at hundreds rallying today. Will those hundreds turn into thousands . And echo what is going that what is happening is beijing is expected to pass new security laws for hong kong. Is expected the protests will gain further momentum on the back of that. To carry on into the evening the coming weeks, we get in june, large gatherings are expected. And then we have local elections here in hong kong. So by all accounts, in the coming months between the National Security laws beijing plans to impose, with some local elections in september, the indications are that the protest movement will continue to gather momentum, and of course there likely will be more clashes between police and protesters in the meantime. Taylor what does hong kong want from the International Community in terms of pressure on china he remember, hong kong is wanting to self govern until 2047, in areas like National Security and defense. So essentially hong kong is pushing for autonomy to be enforced and are calling on some governments like the u. S. To move against china. Is viewing that as interference, and they accuse the u. S. And other governments of meddling in chinese affairs. So we have not really seen any signs of reconciliation. I think if anything, the rhetoric from overseas somenments, we have seen comments from the European Unit overnight coming on china to respect hong kong. I think there will be a role for foreign governments in the hong kong story for a while. Taylor on the ground there, what do they think of carrie lams response . Enda the government is pushing the message that the National Security laws are needed, but of course the public reaction is the complete opposite. There are concerns about what it would mean for the legal system, what is underlying for the judiciary, and what it means for the freedom of the press and freedom of assembly. All of the concerns are that Civil Liberties have been taken away, and of course the Hong Kong Government is enforcing with beijing and all of this. I think there is a breakdown of trust on all sides. There is reconciliation among the government. It is political deadlock, and there is no sign in the near term of the activity being broken and no sign of a Circuit Breaker that might lead to reconciliation among both sides. Enda curran, thank you so much. Wening us in the next hour, seek market corrections and the decade of misery. We will be speaking with nouriel roubini, professor of economics. That is coming up in about 50 minutes from now. This is bloomberg. Francine this is bloomberg surveillance. Taylor and francine from london and new york. Joining us now is reinhard buetikofer. Joining bloomberg surveillance. What could or should the e. U. Do in relation to hong kong . How would you deal with the situation . Reinhard well, the first see it asis always to it is. The hournk this is not for talking difficult issues. The step that is being taken by is off suchership momentous consequence that we have to call china out for what they do. Interferingnot just with the high level of autonomy that has been promised to hong kong for the next 50 years, starting when hong kong returned 1997. Na in this is also based on the stillvalidf a International Treaty which is the sign of british joint declaration of 1984. And by reneging on that, china takeback art of gracious gift that they dont think they deserve anymore. They are reneging on their obligations in terms of the International Treaty, and that has of course consequences for everybody who wants to do agreements and who wants to negotiate with china, and this is why europe should say clearly, we dont accept this as a behavior that we can condone. Francine and kant reinhard and then the next step is saying, what can we do . Francine i was going to ask you that. Can they go a step further . What will Foreign Ministers of e. U. Countries actually decide after that call on friday . Are we talking about sanctions . How fears can the e. U. Be in this . Reinhard look, lets be realistic. If the communist leadership in china decides that they will pursue this course, no one, neither the u. S. Or us in europe, nor anybody else will be able to muster enough leverage to tell them you are not going to do this. Them iswe have to tell how we think of it, and that it will come with a cost. Of i would assume that some the issues that have been contentious around europe, like the issue of are we going to allow huawei to participate in ,he building of the 5g networks may look differently under the auspices of recent chinese actions. How would we possibly trust rules if play by our the leadership under whose control they are tells us we are just going to honor the rules that we want to honor, shut up . So i would assume that may be on some of the regarding some of the issues that have an debated in their realm of economic relations, europe might draw consequences. At thee when you look fact that u. S. China relationships have deteriorated, is it in any way an opportunity for europe . Can europe be a kingmaker of a certain sort . I know you said we should be harder on china, but is there any economic advantage in trying to keep china closer . Europe is learning how to cooperate with what we have identified as a systemic rival. I dont think that total confrontation with china will ever be a road which europe will take. I dont even think that this is going to be a sustainable approach from d. C. Decided by that be the americans. For europe, we will continue to compete, we will continue to cooperate, but we will not do that knowing full well that there is no convergence between china and us, and that they are indeed also beginning to export their system of governments, to tell everybody globally that their system of dictatorship is better than our system of democracy. , we havewe cooperate to take that into account. I dont think this is a favorable development. I would have preferred china to stick playing by the rules that Deng Xiaoping set for the country that made the country there successful starting in the late 1970s. But obviously the new leadership is playing by new rules, and we have to act accordingly. When you look at whether europe can leverage over china, can they come or is china focused elsewhere right now . Reinhard well, i think europe from a chinese certainly there is a clear goal on the part of chinas leadership to separate if they can europe from the united states. And unfortunately the present u. S. Administration is playing into their cards in that regard instead of teaming up with europe and finding common approaches. And prefer to go it alone even denounce the European Union america, which i think is anything but intelligent. And from a Strategic Point of view just faulty. That china hasnk a great chance of achieving this goal. Because we know full well how much more we share with the transatlantic allies then with chinese have the tarrying is a. With chinese totalitarianism. Francine thank you so much. Coming up, we speak with steven major, global head of fixedincome research. This is bloomberg. Francine this is bloomberg surveillance. Taylor and francine from london and new york. Lets get to the Bloomberg Business with ritika gupta. Ritika police in hong kong fired pepper spray at hundreds of prodemocracy demonstrators today. It was the first time in months the protesters were marching against new chinese legislation that would give beijing more control over hong kong. At least 180 people were arrested. Learned that the industries have spoken with zeus about investment. A deal would accelerate investment assets, unlikely to be less and the billion dollars zeus had already raised. Seattle ts to the 1300 of their 18,000 are expected with buyouts. Boeing warned it would need to cut 10 of its workforce. That is the Bloomberg Business. Francine thank you, rithika. Simmering tensions between the u. S. And beijing. Oil slipping. My most at treasuries. I look at treasuries and what the dollar is doing right now. The dollar edging higher, the chinese renminbi, chinese yuan is slipping. , lot of folks on the lockdowns with a Major Economies in the world, are reopening. Reopening among the hope and optimism that is filtering about 25,000 on the dow. You see a lot of that helped with the u. S. Domain of the 10 year yield not moving. This is after you had a big liftoff yesterday. You were looking at an eight basis point rise in yield yesterday. We will be speaking with steve major about where on the long end of that curve with some of the inflationary dynamics that a lot of people think are set to hit the massive helicopter money, stimulus money, people really thinking that inflation is set to come back when demand returns. I know that that is a very heated debate here. I have heard a lot of calls that the inflationary environment is not going to happen at all. Hasbloomberg dollar index been catching my attention as well because we got a weakening yesterday, but today some strength coming back, really showing that tension that you highlighted within hong kong, with the pushpull, some of this demand coming back from safe havens, namely the bloomberg dollar index, francine. Francine we are getting some information out of the European Commission. This is a huge day for issuance of debt. Also the you commission has proposed issuing 500 billion euros in joint debt. This is significant for a number of reasons. First, we have been talking a lot about either the lack of solidarity or the perception of lack of solidarity between the southern countries and some of the northern countries. Again, what we know so far is that the commission has proposed this issuance of 500 billion euros in debt, and we will see if the governments approve and we will also see what that means for some kind of debt monetization. There have been pros and cons. If you look at what Angela Merkel did together with the french president , emmanuel macron, a couple of weeks ago, it took the market by surprise. If you look at the details, there were concerns that this does not go far enough. It will be interesting to get steven majors thinking on this. It will be interesting to see where he sees fixed income for a lot of the periphery countries. Such as italy but also spain. Breaking news, taylor, moments ago that the e. U. Commissioner is issuing 500 billion euros in joint debt. Taylor like you said, joining the ranks of france, running the bond brush, getting 61 billion, i would say in the last few weeks we had a momentous occasion in the u. S. , the 20year bond option that was also received relatively well. So all that helicopter money stimulus really coming out in full force. Coming up, we will have an exclusive conversation, john williams, Federal Reserve bank of new york president. This is bloomberg. Bloomberghis is surveillance, taylor and francine from london and new york. Breaking out of the European Commission saying they are proposing issuing 500 billion euros in joint debt and a 750 billion euro virus fund for eight countries. The 750 billion for the european recovery, 500 billion in grants, 250 billion in loans. Joining us now, no better expert than steven major. This of all, on paper, is Strong Enough . Will it appease the people that wanted more . Steven it is a step in the right direction. I think many will be pleased to see a step. The french and german leaders had already agreed Something Like this last week and it is now going to the next stage. Clearly, there will be some opposition but the market is about probabilities. Above zero and rising. It will compress spreads because markets have to price this in as a realistic scenario. If you think about the news flow over the years, it was mainly on the others, all bad stuff about ray cups and defaults thisups and defaults and could be a start. It could be three to four times this before they finish, and think of what relief that would mean to periphery issuers. That is money they do not need to issue on their own account. It is central issuance that is joint and several. So far just the ecb has really been carrying the load and everyone has been waiting for meaningful steps. It looks like it is a step in the right direction. Francine this is a concern, there is a group of rich nations that are being nicknamed the frugal four, that strongly object to this debt issuance. How do you persuade those countries to be onside . Steven rich and small is the key point. S, edrms of gdp weighting is dominated by france, germany it is dominated by france, germany, italy, spain. There is a process here and that will be surprising if it was ratified immediately. There is always a negotiation. My understanding is that some of those who oppose the grants would prefer loans, so lets just see what kind of compromise can be made. It seems to me there are already steps in the right direction, one thing at a time. Taylor if this is a game changer, what does it do to your calls on inflation . Steven i dont think it really changes the call on inflation. Where this really matters is on the spread, with the core and periphery yields. The german yield seems to have fore. The bund yield has been of has been one of the most boring markets and has cheapened a little bit. In terms of inflation, i dont think it changes that. Just going through the factors that drive inflation, it is demandabout demand and has taken a huge shock to the downside this helps with the process of recovery. It doesnt fix anything, does it . It just eases the pain. It is the same in the u. S. , we have such a big hole and the demand shock has been so great, these huge interventions from the government and Central Banks are trying to build a bridge to the future and buy some time. They are not actually fixing anything. I am more worried about disinflation and deflation risk from the coming months. To make a call that inflation will rise out in the future, i cannot say i am convinced by what i have heard. It is about disinflation and deflation risk. Taylor you are seeing that with italy overnight, 10 year yields falling 10 basis points. Do you assume the yield falls further as the spread tightens between germany and italy . Therehere is due to is still 200 basis points of the spread. And thats way too much is a lot of spread or a market that is dominated by zero and negative rates. People are hunting for yield around the world, and sovereign bonds like italy, if they are seen as safe, there will be composition competition from the corporate market. There is always a clear path being set towards common issuance, if that is what is happening. We have to wait to see the details, but if that is happening, there will be many buyers of italian debt. They will look at greece as well and in some regards portugal and spain. The benchmark will be something more common to everybody, so imagine the swap yield kevin , for example. Example. Ield for france would be somewhere in the middle so the convergence is ons on some central level. That means german yields can go up a little bit and periphery yields can clump up come up quite a lot. Francine talk to me about the timeline. It if we get is common issuance, that it gets to where it needs to be . Steven markets are big discounting mechanisms and price in all available information, so todays bond deal looks at this year and the coming years. It will be a slow process. The bonds will not arrive overnight. It is about what it does to future cash flows that matters. To me, it is just a step. It is not like we have absolute clarity. Probabilitiesout and about scenarios, and you have to put a weighting on those scenarios, and this is being rewe

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