I do want to highlight a 10 year yield in the u. S. , the yield is lower by about one basis point. 60 to 70 basis points, and how much can we tolerate on higher upside when it comes to yields . The Democrat National convention will be focusing on joe bidens vision of the party. Last night focused on trumps performance in office including his handling of covid19. To everyone who supported other candidates in the primary, and to those who may have voted for donald trump in the last election, the failed federal government that watched new york get ambushed by their negligence and then watched new york suffer but all through it learned absolutely nothing. Itay, six months after began, the nation is still unprepared. Magic if we had a national strategy. So everyone has access to a safe vaccine. More than 150,000 people have died and our economy is in shambles because of a virus that this president downplayed for too long. That even before trumps negligent response to this pandemic, too many hardworking families have been caught on an economic treadmill. Alix joining me now is ian, absolute Strategy Research chief strategist. Were going to take it off with the dnc because if you want to know where to invest or what economy is going to be good, you have to see how they are handling the virus. How do you look at what the u. S. Is doing versus europe versus asia . When you look at the type of numbers that we had in the last couple months, i think you have to say that the response initially was the strongest from the asian economy. Locking down, controlling that virus expansion, and the fear that comes from the virus. Eurozone, but im afraid the u. S. Is lagging behind. That is one of the reasons why u. S. Relativethe to the eurozone recently. Just of the handling of the u. S. Situation is clearly not getting things under control. The good news is that it seems to be leveling off and things are starting to get a bit better. Alix i wonder if that narrative is shifting event. Cases in germany had a fourmonth high, but merkel says we are not going to be reopening either. In the u. S. , you are seeing a ,light uptick since they opened meaning maybe theyre getting back to something similar normal. Do we have to be super nimble in how we think about this . Yes, i think so, and recognizing some of these european numbers, there are particular customer concerns and we have seen some of that in u. K. Asrance, and the well. Seeing very rapid expansion by the total numbers above where they were since the early stages of the crisis. I think the scale of the issue is one that is still very different and that still leaves the problem with the United States and the emerging markets and particularly latin america but also india as well. Alix do you still prefer the eurozone over u. S. Right now . I think we still do. Pmially, things like the actually bounced back more in the eurozone than the u. S. We are a little bit surprised by the degree to which we see in some bounce back, some of those fell further and bounced back more. I think we saw that the big delta is not just monetary both in the eurozone and the u. S. , but actually fiscal policy where that 750 billion euro nextgeneration recovery fund, that is massively different than anything ive seen in the last 30 years. If anybody had said to me six months ago [phone rings] alix excuse me. Got to love it. It is all good, i work from home, totally understand. While ian is checking on his phone, to make your point, germany yesterday saying they make their furloughs at the same time the u. S. Cant seem to pass any extra stimulus, that seems to swing the pendulum more to what you are saying. Ian we are already talking about doubledigit fiscal had said and if you that the me six months ago, i would have totally laughed. I would not have believed we would be able to see that kind of shift in attitude. The fact that germans are prepared to actually share that burden around the eurozone, that is another tremendous shift. Merkels legacy for the eurozone is at the heart of this as well of the valuation differential. Alix what asset class can we rate the most . The euro against the dollar, equities a little bit on the back foot, rates, how much higher do we push . Ian we are certainly seeing , we appetite for the euro have had a target for some time for 130 in terms of the eurodollar cost. We think that the euro has taken on more of a safe haven characteristic, its Downside Risks to the dollar have come down. Potentially, if we see the political uncertainty, whether it is a President Trump second term or President Biden and the risks around syntax changes, we see the risks that more investors will want to diversify their portfolios and that the pool ofth a deeper assets that is going to be created, that gives the euro quite a lot of potential here. We certainly think that the european currency has got some upside. We are still very nervous about these emerging economies and emerging currencies, given the pressures on theirdebt given the pressures on their debt position from the coronavirus. Until we get a vaccine, that is going to remain in underlying issue. U. S. Equities are just so expensive on our metrics now. They are more expensive across six different valuation metrics, anytime since 2000. That did not end well. People say it did not stop markets going up for some time. Yeah, but look at the 10 year returns. The 10 year returns from january, 2000 were negative and the 10 year Earnings Growth was just 1. 5 in 10 years. Risk when youd of get these kind of valuations. Of reality. Ose last time you were on, my daughter interrupted us with a tantrum wearing a helmet, so only fair. Bringing his ian thoughts on the u. K. And brexit talks yet again. This is bloomberg. Alix this is the european close on bloomberg markets. Brexit talks resume in brussels today, the u. K. s top negotiator will be discussing at half to a deal over dinner. Seven weeks ago for the u. K. And the you and that you toie. U. And the e. U. Make a trade deal. Can you update us on the main two Sticking Points . The main Sticking Points in the talks at the moment are a heries of the series fisheries. One of the main aims of brexit was to reagan control of its fishing waters, that is a big Sticking Point that has not yet been resolved, and you also have an issue where the e. U. Once the u. K. To continue to the aligned with labor policy, state aid. Whereas the u. K. Wants to have the freedom to make laws in such areas to the benefit of brexit. Headways there been any during the pandemic, has anything changed on either side . Joe well we have seen some concessions made on both sides. For example, the way in which it will be structured, that was something the u. K. Wanted, where the e. U. Wanted an overarching framework. The u. K. Conceded that there will be an overarching framework. They didnt want that to have such a role. Progress,made some and that does seem to indicate a willingness. Alix the question of timing, right, because i thought we had until the end of the year, but now there is a sevenweek thing. Can you give us a real sense of the timing . Joe yes, right. The ratification process has happened and theres also quite basic practical things like translating the text of an theement in languages, legal language and what will be used. Harm s one show shovearm used to negotiate. Thanks a lot, bloomberg u. K. Political reporter, really appreciate it. Of absolute Strategy Research is still with me. We have pretty much gone nowhere and we have seven weeks to go and you are looking at a very strong table right and youre looking at europound at 95. Why . Ian i would ask that same question. I think it is more about the weakness of the dollar than the strength of sterling. That we are still in a pretty chaotic situation in the u. K. When you are looking at the equity market rather than the market, you are looking at a market that is only gained Something Like 8 in the last three months against eurozone equities that are at 28 in the same period. I think thats more realistic reaction. And the degree to which the Exchange Rate appreciates, im afraid that just our action. I think that there is still a lack of a Clear Strategy around the u. K. The only upside is that with valuations so low, the u. K. Has value trades, if we see value coming back onto the agenda, the u. K. Will be one of those areas that wins and quite honestly, i still think politically, any outcome can be a big positive surprise. At the moment, i think markets looking at a chaotic exit. Alix what happens if there is something in between . They bring in the goal post, reduce ambitions on both sides for a shorter agreement. The you feel like that is at all a possibility . Ian i think there is. As we heard from your correspondent, the biggest concessions come from the u. K. s side, and given the current environment where globalization seems to be narrowing in, the idea that the u. K. Has been a Global Trading hub which is one of the advertising before the brexit takes off, that doesnt look terribly realistic. Action around links to the United States or particularly to china following the recent issues around huawei, those are being constrained as well. The u. K. Does need to do a deal with the eurozone. Alix lets play the pretend game. You get a deal, what happens to u. K. Assets . Ian we go from mega underweight to just underweight. Im prepared to move those more toward neutral. We still have major problems. Weve got a budget deficit that we areing larger, dependent on the kindness of strangers. And the less we got the potential for the Interest Rates to be some of the best of other countries, perhaps because we response, notovid even that, we havent got that. Im still suspicious that the value had in sterling is a temporary rally and we will be looking to sell sterling rather than buy sterling. Guy does that mean a steeper curve is a foregone conclusion . Ian i think it will be necessary. Anchorh policymakers can the near end of the curve, what they will be talking to clients about is having a look at the action in the jgb 30 years. I think that will be true for the longerdated sterling bonds as well. Alix we do focus on the individual aspect of the economy, too. Furloughing workers at the time in a cycle when the furlough scheme is set to roll off in a couple months anyway, how do you expect that to resolve itself . Ian i think we have taken the view that furloughing workers would actually be a smoother transition to reengage in the economy then perhaps the u. S. Approach has seen very high numbers of unemployment by mailing direct checks. At the moment, and this is where the u. S. Is doing quite well, and the u. K. Is disappointing, our suspicion is that longerterm, these types of furloughs schemes will probably work out to be easier because you get much less labor market dislocation. When you need to take those workers back on, potential you can. Is, when do weon need to, and will the government have to carry on extending these schemes . At the moment, it looks as if they will need to. Alix looks like it is definitely going to have to extend it. I wonder what you think that means about the deficit. You are reliant on the kindness of strangers even more so when you have to fund Something Like that that is going to keep on going. Ian that is the reason why i dont think you can expect to the easing of the bias toward very low rates and continuing in the u. K. To control some of those pressures. I think if we do see the Exchange Rate start to weaken the try to make u. K. Assets more attractive, i think that the bank of england would likely go along with that rather than trying to fight it. Alix really good to chat with you, from the underweight to regular underweight. Mega underweight to regular underweight. Thanks very much, always good to catch up with you. This is bloomberg. This is the european close on bloomberg markets. One thought we are focusing on is Marks Spencer cutting 7000 jobs, 1 10 of the total workforce. The clothing business was hit very hard by the coronavirus lockdown. Joining me to break it down is eric who doesnt european coverage over in europe. What did you make of it at the stock reaction is nearing down by 5 . Typically if the company gets cutsct together and gets in order, investors can reward that. Why not this time . Haveats right, you would expected a bit more of a reaction from investors and it was initially positive that think what people are concerned the problems just this company is facing. They were already in trouble, the clothing business has been suffering for years and it does not look like things have been helped well, obviously things have not been helped by the virus. Sales are down 40 during the quarter. The food business really did not make up for it. I think the board is concerned about, where do they go from here . Is this enough . Alix i wonder why now . On the break we were talking, it has been six months in the pandemic. What happened today that made them take those steps . You wonder what they were doing the last seven months. It is already the second round of cuts theyve had, they cut 950 jobs about a month ago. They have been restructuring for years, really, predating the covid situation. Theyve got plans to close about 100 stores. It seems like a perennial restructuring situation. A company that just doesnt, the two parts dont the together that well is a problem at the moment. The clothing business has been and food is doing ok, but the business just struggles to mesh together. Alix do you have a read on if there is any more levers they can pull . Eric they could cut more jobs, close more stores. Some of the analysts are expecting some further store closures. They still have too much real estate, they have some small food stores in town centers and city centers that are doing pretty well, so theyve been trying to open more of those. They could accelerate those kinds of plans away from not quite Department Store type stores, but the ones that do but nobodyomewares, seems to want to go into those stores to buy those things altogether at the moment. Alix that is a good point. Are there any other peers either performing better or having a better strategy or outlook . Eric theres a couple of clothing chains that are bouncing back quickly. Obviously does have a big online azos has bounced back pretty well. Next is another u. K. Fashion chain. They have held up a bit better. On the food side, a lot of the big groceries here got a huge boost from the lockdowns early stockpiling,e were and they railed to adapt a little bit better. Marks and spencer, they still have a good positioning in terms of their mix, it is free highend food offerings that people really want going forward, but it hasnt gotten that shortterm boost. Overall they are kind of lighting. Alix i wonder in the u. S. When s, all walmart and kohl of them teasing the fact that we dont get more stimulus out of the u. S. Government, that is going to hurt them. Do you know what they are saying with a furlough scheme supposedly ending in october . Eric they are pushing hard on that, that is a big concern. Not just 7000 jobs today, but 35,000 jobs that have been cut by u. K. Retailers since the lockdowns began, since the pandemic began. That is a huge number in this size economy. They are blocking hard for extensions. Theres obviously a lot of to end of those programs as well. Alix thanks a lot, we really appreciate that. We are almost to the close over in europe, about four minutes to go. Here is where we stock up. Not a ton of movement, lower on the day. Light, but not as bad as monday. Light, but not as bad as monday. This is bloomberg. Alix live from new york, im alix steel. Guy johnson is off this week. Stocks finishing up the day in european trading around the lows of the session. We were in positive territory for some of the morning but then rolled over. A bearish reversal. European stocks down. 7 . A big part of that is energy. The underperformer within european stocks, part of that is the Energy Prices are low. Retail not doing so well. Consumer discretionary, financials, communication, all of those down 1 . Big action in the currency market. Eurodollar around the highs of the session, up. 4 . The cable rate dropping 1 . I asked ian hartnett what he thought of that and he was like, i have no idea. That obviously weighing on the ftse. A modest bid into the bond market. Want to highlight the u. S. Bond market, yields lower one basis point. You have the 30 year touching key levels. Watch that space. Crude is off the lows of the session. And uglier close in europe. I want to dig deeper in some of the movers. Here is bloombergs senior markets editor. Scarlet almost four stocks down for every stock up in the stoxx 600. All 19 into see groups in the red. None of the major western european markets closed higher except for iceland, greece, and russia. Lets get into some individual names. Persimmons, the u. K. Biggest homebuilder, benefiting from the reopening of the housing market, reporting First Half Results that showed a sharp increase the uks biggest homebuilder it will resume dividends six month after suspending the payouts. Ryanair getting a boost. This is europes Biggest Discount carrier. Yesterday it said it was reducing the flight schedule. Credit suisse says the move is good because it puts ryanair and a better Competitive Position for a cover over the medium term. Credit suisse reiterating its outperform rating. When you look at the decliners, the theme is retail. U. K. Department store chain plans to cut 10 of its workforce. 39 plunge in clothing and home sales in the last 13 weeks, more than offsetting the gain. Pandora, the danish julie company, not the American Music , the Danish Jewelry Company not the American Music app, says sales may fall as much as 20 and a recent improvement has stalled. Fary shares were up 50 so this year, outperforming other luxury names. Investors like to the companys pandemic strategy, which was keeping a strong Balance Sheet through share sales and securing lines of credit and reducing inventory. Todays outlook do not restore that confidence. To bancshare