Transcripts For BLOOMBERG Bloomberg Markets European Open 20240711

Irelands Prime Minister told bloomberg that the outline of the u. K. E. U. Trade agreement is clear on both sides, but it is not clear that Boris Johnson wants a deal. Has let is set to join the s p 500 next month as its biggest ever new member. Just one hour to go until the start of the european trading day. We have the numbers from easy just. The Lowcost Airline is he easy jet. 4. 5 . Down this is a fullyear set of numbers bearing in mind when the end of the easyjet fullyear is, in november. The revenue is attached below the estimate of 3. 08 Million Pounds. Get to something that loss, 835e, pretax million. That is one of the things we need to understand. It will not the recommending payments of a dividend. A big question for is a jet when we get to see the ceo is, is november the worst of it . Hsbc saying that november may be as bad as it gets for the european airlines. Doesnt feel that way from the aviation flight deck, for could things become more difficult as we get through the winter . A lot will depend on the lockdown or naloxone measures in various parts of lockdown or no logged on measures in parts of europe. Lets have a look at where we are on futures. They have looked a little mixed in terms of the u. S. In yesterdays session, the u. S. And europe or higher. Vaccine news was very much at the fore, moderna. We did see a continuation of the risk rally that had and started the week before with the pfizer and biontech news. Some of that feeding into asia as well. We saw banks higher, autos higher. Utilities southern blood. The classic risk utilities out of lagged. The classic riskon move. Talk about whether the rotation into value has further to go. And tesla. , 10 higher after hours. The 21st of december, an early Christmas Present for those with tesla shares. That will be part of our next conversation. Lets talk about the global stock rally, as it runs out of steam, ftse 100 and s p 500 futures pointing to the red. New records yesterday on vaccine hopes for this stock. Lets get to the markets with mark cudmore, our bloomberg mliv markets editor from singapore. When we look at where we are at this point, i was reading with interest your macro view this morning. You were talking about how sometimes you might see details that make you question the big picture, but sometimes you have to go along with the big picture is that where you find yourself right now . Have been super with different approaches to the since, and some people march and april who have been very clear that they have got the message from Central Banks around the world that they will pump up assets. And that means generally to buy a risk assets. Also in favor of buying gold, or even more so things like bitcoin, to bet against the devaluation of market currencies. That news you keep buying and your focus on the upside, not on the risks. Central banks have made clear that if there is any extreme selloff, they will go more extreme as well there measures will be more extreme as well. Stop worrying about companies and earnings that we use to value markets and instead, it is on about timing about when you buy more, and when you take a little bit of money out of the table only so that you can buy later. Approach n the those who have taken that approach to the market have been very successful this year. It is hard for people in the market like myself who have never operated that way to suddenly switch off from things like the economy and valuations and fundamental inputs that were relevant for all of market history up until 10 years ago, and have now become redundant as of 2020. Anna yes, will they be relevant again . I like your reference, the never ending story. Let me ask you the question of the day, perhaps it leads into tesla headline, when will the s p 500 hit 4000 . What kind of responses are you getting . Is it december 21 or a little later than that . Mark, can you hear me . I am not sure if mark can hear me, which is unfortunate, because i was looking forward to getting his thoughts on what is happening with the s p. We are covering the story around in the chesleres share price after hours on the back of the news around the s p. Thank you very much, if you can hear me. We will get more from the team later in the program. Here are the top stories we are covering this morning here at bloomberg. The Trump Campaign is withdrawing a key part of its lawsuit against Election Results in pennsylvania, abandoning demand that the most 7000 mailin ballots had been thrown kept toose they were far from the count from the view of the trump administration. It is just a fraction of bidens state. The in germany, chancellor Angela Merkel has failed to push through a slate of restrictions to tackle the pandemic. She is kicking major decisions into the future, next week, in fact, after being unable to reach a deal with regional leaders. In statues at the push and limit private and public gatherings. The strongest storm of the Hurricane Season has hit central america, bringing catastrophic winds and torrential rain. At 150 miles per hour, its winds are powerful enough to crush homes, snapped trees, and make areas. Uninhabitable for months. Four estimates have arrived on International Space station. They will now begin their mission. Scientific it is the first time in nasas history that a full crew has been carried on a commercial vessel to the International Space station. Global news, 24 hours a day, on air and quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Past the hour here in london, madonna says its covid19 shot has almost 95 effective was almost 95 effective in the late stage trial. We will get more on the vaccine race next. This is bloomberg. This is bloomberg. Anna welcome back to the European Market open. We are 50 minutes away from the start of the European Equity trading session. European futures make move to the downside. Negative. Es nasdaq futures look a little more resilient. 10year treasuries back over 90 basis points in yesterdays session. That remains the case. Lets get back to mark cudmore, our Bloomberg Markets live managing editor. We have reconnected with him in singapore. We did get your response around your market thinking. I was just getting to the question of the day, when will the s p 500 hit 4000 . Does it depend on the tesla news . Matt i im not convinced the tesla news is as big as people think, certainly it is great for sentiment and momentum. It can really have these our. We have seen over the past year or so. There is some positive five. Extra volatility in the s p 500, which means if you are looking for people who like buying options that arent in certain barriers, that means it is good when you have tesla that has a bit of volatility in the stock. Anna indeed, we will get a few clues on the state of that later on. What will you be watching out for . We get retail sales. As we head into the busy period, the runup to christmas, all is focused on the strength or lack of of the u. S. Retail consumer, and indeed a lot of focus on the statebystate lockdown measures, social restrictions that made have been brought into the United States. What are you looking for in the data later . Matt i think it is a really important day for u. S. Data. One of the themes of the last couple of months, we have seen the resurgent virus in the u. S. Yet it has no impact it has had no impact on the economy. We dont see the virus impact that we see in europe. Not just because there are stricter lockdowns in europe, and an official government reaction, the consumer does not seem to be dissuaded in the u. S. As it is elsewhere in europe. I think that will be a positive sign for many risk assets. It means the consumer in the Worlds Largest economy, the most important consumer base, is going to continue ignoring virus threats for a sustained period of time and that brings us can. R to when a vaccine be distributed to the population so they will take it as a positive sign. However i am worried that we dont get that positive strengths that is expected. You will see what happens today. Anna mark, thanks very much. Mark cudmore, Bloomberg Markets live managing editor. The latest vaccine news and what it does to the stock market positioning, the global rotation into value has been gathering pace amid optimism about the vaccine. Modern is vaccine has been shown to be about 95 effective, pushing the s p 500 to a record high. European equity Portfolio Manager at auntie annes global allianzrs at aunti Global Investors is with me. I find this interesting. Despite the questions people might ask about technology and if we are going to see vaccines driving were pivoting into value and away from Growth Driving a pivoting into valley and away from growth, it means other stocks that have a really good narrative around their digital products. Absolutely. Good morning. Digitalization is something that is often misunderstood. Everyone typically associate digitalization with technology. But as you rightly said, it is found literally in every sector across the universe. That is where we are finding opportunity at the moment. Companies that embrace digitalization and therefore have the infrastructure in place to manage their business during challenging times. What we saw during lockdown one was probably a greater gap between the winners and losers in society but also in the. Orporate world the winners were able to take market share at a much quicker rate than ever and really build their business and many others were struggling to stay alive. Anna what do you make of the bigger end of the tech market, the problems that i mentioned around vaccine success . What do you make of valuations and also regulatory threats . Marcus the vaccine is interesting, because markets have traded through the woods with covid. Said, they, as you vaccine data points have been hugely impressive in their efficacy, but there are Big Questions that remain unanswered, particularly over the next few months, things unfortunately will get more challenging before they get that are. In terms of how we approach of that as an investor, we see a huge amount of volatility in markets in recent weeks. That creates opportunities, and that is something we will look to take effect of. Where we have to be careful in i youf see a, huge relief rally in many stocks that seem to be covid losers because of the vaccine, but that might be masking many of the structural challenges some of these businesses face. Those challenges will not disappear overnight when we have a vaccine. Anna so where are those structural challenges . Which are the sectors you think will get caught up in the value rally, pushed off by the pushed up by the value rally . Are you talking about leisure and tourism . Do you think it has structural reasons to come back at this point . Marcus it is probably slightly more idiosyncratic. Leisure will undoubtedly rebound from a terrible year this year. Within the leisure sector, i think Corporate Travel is probably something that is structurally impaired. It will probably be more and more meetings virtually like this. I think you will see a structural deceleration in Corporate Travel from 2009 levels. That will create challenges for parts of the hospitality industry. Anna understandably, when we get positive vaccine and news, we see investors flying to the areas of the economy that they think are going to rebound, and you see the more defensive sectors underperform. That includes pharmaceuticals, even though the source of the good news is coming from good work in pharmaceutical businesses. Where do you stand on farmer right now . Because all format is not the same, and what stocks do you think because all big pharma is not the same, and what stocks do you think can carry the rebound of global stocks . Marcus it is a great sector to be positioned in this year, particularly around the vaccine news. The trouble with the pharmaceutical sector is it is very complex, not a huge degree of availability as an outside investor. Within our health care exposure, we tend to be slightly more focused on the medical tech side, and we tend to have slightly smoother, more visible earnings per files. It does come with slightly less risk than you see in that megacap long stocks where you have megacap bond stocks where you have the drug risks on the upside and downside. Anna word to you see the best opportunities around esg narratives, around the environment and in particular green stocks. Many people point to europe and say, we have some big businesses in europe that could do very well as it stands to Gain Momentum under the new u. S. Administration. Is probably one of the first times in recent history that europe has an advantage and the head start versus the u. S. And asia. As we manage that transition, esg, but the Energy Transition toward cleaner energy, i think europe has a Real Advantage here, and the opportunity to actually lead the Technology Transition from this perspective. There is no doubt esg will gather momentum globally. Came out last week and say they expect 50 of mutual funds to be run under esg guidance by 2025. No doubt it is here to stay. If you are can cement that, it will be a huge opportunity for European Tech companies that are at the forefront of that. Anna marcus, thank you so much. You will stay with us. , Portfolio Manager at allianz Global Investors. Much more to come. Coming up, a spanish affair, confirms it is in takeover talks. We talk about europes banking consolidation, and where else in europe we might see m a opportunities. This is bloomberg. This is bloomberg. Accept that it is all going to be bad without working to make it better, weve got to get the new administration to articulate an approach and then try to achieve, in cooperation with europe and the United States and international bodies, clinton,t was bill former u. S. President speaking to bloomberg at the new economic forum. Dont miss todays lineup, including ecb president Christine Lagarde, and indian Prime Minister narendra modi. 40 or so minutes away from the start of European Equity trading session. Futures have been pointing modestly to the downside. U. S. Futures looking a little bit more mixed. Marketing and advertising or mergers and acquisition was certainly a hot topic in yesterdays market. Bbva confirmed it is in takeover talks with its rival to grade one of the largest lenders. At the forefront of a wave of consolidation in europe. Two bankser, confirmed plans to take over their smaller rivals. Marcus is still with us. You have not been that keen on banks in recent years, would m a even withincountry m a be something that would encourage you to look ahead at the Banking Sector, or is that not what you are waiting for . Marcus investing in Mergers Acquisitions alone is quite a risky game. There is no doubt that the european Banking Sector needs m a. It is a sector that has not consolidated enough, and that is why reasons returns in the sector have been relatively weak for the past few years. It is a sector as you rightly said, that we have not owned. Are in a farthey better position than they were going into 2008. Anna with some 13 down in terms of the amount of m a we have seen in markets this year, im sure some of that was due to the hiatus and uncertainty caused by the initial coronavirus lockdown in the spring. Do you see Mergers Acquisitions as a theme worth pursuing here . Something of interest . Because in certain industries, bold chief executives like to tell us that this would be a period of consolidation and. Marcus a. To buy up weaker rivals. Marcus absolutely . Chief executives like to tell us that this will be a period of consolidation and a period to buy up weaker rivals. Marcus absolutely. Smaller companies are fighting to stay alive and that creates a m a. Backdrop for one of the challenges we hear for Companies Looking to pursue m a is that it is difficult to close deals in the current environment where you can meet companies facetoface and do your due diligence. Think as and when life returns back to normal you could see a flurry of activity in the space. Anna yes. And just briefly, what about the u. K. . People talk about it looking cheap. Does that encourage talks of m a in your mind . Marcus cheap, but unfortunately the u. K. Has been cheap for a long bloomberg time no. The question is whether it is devalued. There are a number of issues that have led to valuations in the u. K. To be so low, not the least brexit, but also covid response. Longerterm there are structural issues the u. K. Needs to navigate. Unfortunately, a lot of the u. K. Companies are old in terms of their constitution and probably need to adapt and change to the modern world. Unfortunately, you dont find many Tech Companies based in the u. K. , it is very much reliant on old heavy industries0 thanks very much,. Arcus when we come back, we will talk to the ceo of easyjet. This is bloomberg. Businesses today are looking to tomorrow. Adapting. Innovating. Setting the course. But new ways of working demand a new type of network. One thats more than just fast. You need flexibility to work from anywhere. And manage from everywhere. Advanced technology. With serious security. And reliable coverage, nationwide. Forwardthinking enterprises, deserve forwardthinking solutions. And thats what we deliver. So bounce forward, with comcast business. Anna welcome back to Bloomberg Markets european open. 30 minutes into the start of the cash equity trading session. European stock market futures look negative. U. S. Futures look more mixed this hour. Will hold aplus joint Ministerial Monitoring Committee taking place today. The Producer Group will delay its january output increase amid weak oil prices. Andrew bailey will speak at a conference, you can follow that speech at 11 15 a. M. Retail sales are forecast to increase for a sixth straight month, but it a slower pace. Later, the ceos of facebook and twitter have volunteered to testify involving their decision something to watch in the tech sector. The covid19 crisis has forced easyjet to report its first annual ever loss. 835 Million Pounds. Developments have lifted its stock in the past two weeks. Joining me now is Johan Lundgren , ceo, easyjet. Thank you for joining us. In a europe that is partially locked down and full of restrictions, i wonder what is your most current experience this november of flying around europe . Paint a picture how tough things are. Johan first of all, it is fair to say little flying is going on across europe. Not to fly more than 20 for the quarter. It is fair to say it is an underlying demand for strong travel. We saw that when the canaries moved to the quarantine list, bookings moved up 900 . For everyday travelers restrictions are in place, the pent up demand has increased. ,ews of a vaccine is helpful because it will give customers more confidence to make future travel plans. Anna hsbc analysts have said november could be as bad as it gets for the european ed asian sector. Is that your working assumption . Sayn i think it is fair to we have taken a number of steps weput us in a good position, have access to the liquidity, and we are seeing good news coming out in terms of the vaccine, and how the quarantine can be more effective. Testing. Velopments in once again, the announcement of the vaccine, we saw an increase in bookings significantly. The underlying demand is there, and hopefully we can see a strong recovery soon. Nobody knows exactly when it will happen. What we know is the recovery will be strong when it comes. People generally want to fly and travel. Anna how much flying do you want to do around christmas . Is winter a lost cause, or are you optimistic . Johan we know customers would like to travel and make arrangements for christmas and the news year. Back to what travel restrictions will be. Travel restrictions are consequence of how the infection rates are developing. Hopefully we get some testing in place, and if we can see refinement of traveler restrictions and quarantine, we can see there might be an uplift in the new year. Ofre is still a lot uncertainty, so we have to wait and see what happens, i make sure we prepare ourselves and set us up so we can bounce back and take off with the recovery when it comes. That is what we are spending a lot of time and focus on. Anna do you need any more cash at this point . You have raised money in various ways, are you looking for more cash . Are in a believe we good position as we speak, but we will review all the options, because we do not know the extent for how long traveler restrictions will be in place. We are taking a conservative point of view in terms of planning, and that is the right thing to do. We will monitor the situation to see if we can cope with the circumstances we are in. Anna what are the conversations like with european governments . You extended the Payment Terms with help you got from the u. K. Government. You looking for further assistance from the German Government . Johan we are speaking to almost all the governments across europe to make sure we can recognize the value we provide them, and get the support available. We have been given support from a number of governments, and will continue to do so. Markets are a vital part of the infrastructure, and they will contribute tremendously to the economy when the recovery is going again. That is why it is important that the whole of the sector is intact when the recovery comes, because it will be crucial and critical to help the recovery of the economy in these countries. Anna are you going to see any of that european Government Support forthcoming . Should we look ahead for news on that . Been active with liquidity in various support from government, the furlough system, and that is a discussion we continue to have with government across all of europe. We need to do that because we do not know the extent for how long this continue in terms of the traveler restrictions. There is good news in terms of the vaccine, but the prudent thing is the plan and be conservative, prepare yourself that you are there to bounce back strongly when the recovery comes. We also need funding in place. We are in a good place, but we will continue to have discussions and look at the options going forward. Airlines might come onto the market at this time, we see m a in the spanish sector. Is m a out of the question for a business like easyjet because of the tough time youre going through, or is it an opportunity . Us at the focus for easyjet, the primary focus for all the airlines out there is to manage and control the things you can control yourself. In our case, we have taken swift and Decisive Action to manage the cash burn and get access to the liquidity. It is not clear to me that there will be a lot of m a activity going forward, i think everybody is focused on dealing with what they have. You never know these things. What i said earlier, strong players such as easyjet will and weakerronger, players will come out weaker or potentially disappear. It is not apparent there will be m a to see changes in the competitive landscape. Some airlines will not make it. Anna the lobbying for the sector, the lobbying message has been very much around Rapid Testing at airports, and how that can be implemented. Do you see that coming on any of your routes soon . So. N we certainly hope we are waiting to see the final recommendations for the tax course in the u. K. Task force in the u. K. When it comes with things like testing and quarantine, and how quickly we can see a rollout of the vaccination program. We have the largest fleet in the crew who could0 be helpful distributing and administrating the vaccine. ,he more we can Work Together airports, airlines, governments and everybody involved, make sure we can get these in place. The sooner we see recovery taking place, that is where the focus is on our side. Anna that is initialing thought about the role your employees can play. When we think about the size of the industry and the Aviation Industry going into this crisis, will it be structurally smaller on the others of the pandemic . Johan i dont think so at all. We are going through different phases in this crisis. We are in the phase where it is about the pandemic, the thattion itself, and when comes under control, we will see a recovery that will be more similar to previous downturns in the past. We know what will happen in downturns, shorthaul recover longer recover quicker than longhaul. Gravitatestomers will toward ground that they trust and represent value for money. That is the same trend and all the downturns, and that is the Core Foundation of easyjets strengths, which lead us to believe we will bounce back strongly. But i do not think the sector is going to be smaller in years to come. What we do not know is when it will bounce back to 2019 levels. Most industry commentators think it will be around 2023, but it can come sooner or later, but we know it will happen. Flyingand for travel and will be very strong, so when restrictions are removed, we will see the recovery come back again. Anna thank you for joining us. Johan lundgren, ceo, easyjet. Lets get uptodate with first word news stories. Germany, chancellor Angela Merkel fails to push through a slate of tougher restrictions to tackle the pandemic. She is postponing major decisions until next week after being unable to reach a deal with regional leaders. She is asking to limit public and private gatherings. Flexible working could be according to a new study, women applied for management jobs jumped 20 . Womenesult, the number of hired for senior positions jumped by a third. Four astronauts have arrived on International Space station after a 27 hour voyage, Spacex Dragon capsule. They will begin their sixmonth Scientific Mission aboard the orbiting lab. A crew hasirst time arrived at the space station on a commercial vessel. 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. Click check on the markets, in terms of the futures, futures for europe look sluggish. European futures point the downside. U. S. Futures look more mixed. In terms of the pound, this move to the upside that we were seeing earlier has pulled back. Fairly flat on the pound. Citi says the dollar could drop any percent amid vaccine optimism. Before any weakness, watch for dollar strength. To help us chart a course is Juliette Saly in singapore. What are you hearing on the dollar . Juliette yes, stay tuned. It is a whirlwind. Before we see that, securities is saying you should see dollar strength. Easyjet was helpful for more mobility, but most people are still grounded. A pickup in virus cases particularly in europe and the u. S. , you could see a comeback in the dollar which is down 1. 5 over last month. They say it could pick up 2 over the next month. Recommend being long the u. S. Dollar versus the canadian dollar, and the euro faces downside risks. The dollar index is down 11. 5 since its peak in march. Citi says you could see further weakness coming through in 2020. The Vaccine Distribution and hopes of vaccines spread out globally will check off the bear market signposts, allowing the dollar to follow that path to what it experienced in the early to mid to thousands. Early to mid 2000;s. They say to go long on the norwegian krone are, it could benefit. And in addition to the impact from the vaccine breakthrough, meaning the dollar will likely have a substantial decline of 20 in 2021. The likelihood that the fed will remain dovish as the economy normalizes puts downward pressure on the dollar. That is a longer term outlook. In the shorter term, 2 upside for the dollar in the next month. Thank, Juliette Saly in singapore. Up next, moderna says its treatment is 94. 5 effective, the news sent u. S. Stocks to record highs. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 13 minutes into the start of European Equity trading. Nas vaccine moder is 95 successful. We were told what sets the vaccine apart. Now in 30 days have a vaccine stored in a regular fridge. Like you do insulin. ,s you know, every pharmacy hospital has that capability. We think it is an important game changer. Our vaccine does not require dilution. Anna joining us now, sam friend of the program. Really great news coming from in termsine news flow of stopping bad cases, we seeing to have vaccines that can do that. How important is it that we understand whether these vaccines can stop transmission . Good morning. It is great news, but we need to know whether these vaccines are thee to reduce the trends transmission of the virus. Given that they are making the disease less severe, we know in mode dharna trials moderna trials then there is a likelihood that there is a lower transmission, but we will not know the answer, we know asymptomatic patients can transmit the virus, but we will not know the answer, because the trials were not designed to answer that question specifically. Anna and with safety, we will know enough about the first few months, what happens after being vaccinated because that is what the trials are all about. And your experience when it comes to vaccines, is that all you need to know . Do any side effects emerge after you have been vaccinated . So we do not need to worry about things that will happen years ahead . Excellent another question. You have to consider the fact with any Drug Development what you do with your trials tries to answer the question of any other acute sidery is some effects that you had not thought about. Then with any drug, especially a vaccine, you have to wait and see how that pans out. Even though these trials are done in 60,000 people, the full answer to that for very rate cases only come out over a year or two in large populations. You cannot shortcircuit that. Thank you very much, sam fazeli. Minutes away from the start of European Equity trading session. Up next, your stocks to watch, including easyjet. A lot of uncertainty about the winter, but the Balance Sheet is in a good position into the winter. We will talk about what to expect for the european trading day ahead. This is bloomberg. Anna welcome back to Bloomberg Markets european open. Seven minutes of the start of cash equity trading for europe. Stocks to watch, dani burger joins us. Dani i know you were speaking to easyjet, a fascinating conversation, the ceo telling you he saw immediate demand with the virus vaccine news, but needed testing for Christmas Travel to be safe. Stock markethe reaction, we see them lower 5 . There the liquidity may be better, but slipping to a 2020 835 Million Pound loss for september. The price of cigarettes were raised by 7 , and the vaping business reduced losses. Off the 2 , shaking effects of the pandemic. It had more subscribers, so that helped offset what its all in terms of losses on roaming fees for france and italy. Roaming fees are dropping with people not traveling. Those subscriptions ramping up helping iliad meet their estimates. Anna thank you, dani burger with a look at easyjet and iliad. The big picture story is European Equity market usurers point to the downside, but only modestly, down 0. 3 . ,. S. Futures look more mixed they are negative on the dow and s p, but positive on the nasdaq. Statesf focus on introducing new tougher measures through the Northern Hemisphere winter. The open is next. This is bloomberg. Anna one minute to go into the start of cash equity trading in europe. A value play, the global recession picks up pace as optimism grows over a vaccine. European futures slide as u. S. Lockdowns pick up pace. Irelands Prime Minister says he is not convinced Boris Johnson wants a trade deal. The pound erases its gains. Easyjet posts a loss. The ceo, Johan Lundgren, says he sees some european carriers exiting the market. Away,ropean session is and we were expecting a negative start to the european trading session, concerns about the ongoing fight against the virus. We have seen vaccinations drive optimism, and risk rallies, but we have underlying concerns about how things will get during the winter. In terms of the European Equity market space, this is how much we open to the downside. The ftse 100 down 0. 2 . Earlier optimism in the pound has been unwound. 132 is where we trade, fairly flat. On much of a game changer ftse 100 trading. The ftse is down 0. 3 , and that is the early mover. The ibex down 0. 1 . The cac and dac making modest moves to the downside. European equity markets opening modestly lower after the s p 500 closed at a record high following the news about moderna s vaccine. Running us now is grace peters, executive director of european equities strategist, Jp Morgan Chase bank. Good to speak to you. Give us the contact or size and scope and significance over the vaccine news we have now pfizer, biontech, and moderna. Does this iq rethink your exposure, or is it tweaking at the edges . Grace we think we are in a recovery phase across Global Equity markets. They are higher over the next 12 months, but as they go up, you will see this broadening out of leadership. Leadership has been concentrated around growth equities. We think there is room for cyclicals to participate in the rally. This is something we have been saying for months, advising clients to balance portfolios, adding cyclicality and structural growth. News around the vaccine brings clarity postu. S. Election and lens itself to the idea of a bridge to more normal Economic Growth and recovery, and slightly higher bond yields, but help equities and cyclical rotation. We dont think it is about cutting growth altogether. Growth in Technology Transformation is the key, part of our commitment. Covid has change the investment landscape. There are new areas of growth to invest in, particularly those with an environmental tilt, and part of the economy has been heavily impacted by mobility restrictions, and they may be upcoming in some regions. Some parts of the market look oversold when you start to bridge toward normality. Anna what is the relationship between value and the 10 year yield . Some people point to rising bond yields, it lifts bank profits, therefore value stocks move in conjunction. You have been looking at charts showing how value is momentum driven by 10 year treasuries. Grace there is a strong correlation between bond yields and value equities. Also autos, mining, construction, a group of equities that move tightly with u. S. 10 year yields. We expect bond yields to move up, and our target is 1. 125 over the next 12 months for u. S. Treasury yields. That will help cyclical rotation. It is not as simple as looking at historical correlations and extrapolating that going forward. In the world post pandemic, there have been seismic changes, and some sectors will not fully recover even with a vaccine that is mass disk you did. Mass distributed. We like cyclicals, but have structural tilt. I mentioned environmental trends. Hugenergy trends had a boost from the pandemic, and various government commitments that have been made over the past six months. When you use that as a pillar for investment decisions, you get nice cyclical exposures through capital goods, semiconductors, Utility Companies and construction. We will be watching 10 year government yields, but we dont think that is the beall and endall of which part of the market to choose rotation into. Anna which parts of the market do you think will not fully recover . A lot of people talk about travel and leisure, tourism, and those things being depressed at this point. Do you think they do not recover . Is there a subset that will not recover . Where are you focused on sectors that will not rebound . Energyi mentioned the transition, and the flip side is energy equities, oil equities. That would be an area of the market that we think still has challenges to it. Recover as aprice vaccine is distributed . We expect yes, and there will be a rally on the oil price, but one we look at the longerterm picture, the Energy Transition and shift away from fossil fuel to Renewable Energy makes economic sense. You are seeing governments from china, japan, the u. K. , the eu green deal announced, and potentially now the u. S. Under president elect biden all pushing to accelerate the Energy Transition, and we have caution when it comes to oil equities because they need to invest to make their businesses future proof, and balance capex spending with the need to manage cash flow and pay investor dividends as well. That is one area we focus on. Airlines are linked to the Energy Transition. They need to d carbonized as well as decarbonize, and set employees to work from home and make that investment resilient. There are pockets we must consider when we think about what normalized earnings look like. Anna do you expect to see market volatility decline or increase with vaccine news . We see volatility of up positive nature, what do you expect from volatility . Will feature,ity because we are seeing this morning, more positive vaccine lockdowns are happening now that undoubtedly could impact nearterm growth. It does not do a lot for the next quarter of profits, even if it gives us more confidence. Volatility is likely to feature. We would use periods of volatility to add cyclicals that we spoke about, but do not forget the growth component and the technology component. Once the drawdown in Technology Stocks going into the u. S. Election, we have not seen them rebound. We think technology will deliver. Some of the best growth over the next decade, when it comes to equity earnings, and obviously talking about a rising treasury yields, ultimately it is a low number in historic context, 1. 25 . No growth, no inflation, low rates support longer data growth equities, because growth is scarce when it comes to investments. Thank you very much, stay with us, grace peters, executive director of european equities strategist, Jp Morgan Chase bank. We will get which sectors from her to indulge in and avoid. Serious measures are among the toughest decisions the virus numbers are too high. This is in the context of the difficulty extending the recent lockdown measures for Angela Merkel. This is bloomberg. We should accept or assume that it will be bad without working to make it better. We have to give the new administration and articulated approach, then try to achieve cooperation with europe and the United States and international bodies. That was bill clinton, former u. S. President speaking to bloomberg at the new Economy Forum. Easyjet has reported its firstever annual loss amid the pandemic, but ceo, Johan Lundgren, told me the prospect of a vaccine has boosted Consumer Confidence for the airline industry. Johan the announcement for the vaccine, we saw an increase in bookings significant. It shows the underlying demand is there, and hopefully we can see a strong recovery soon. , executive peters director of european equities strategist, Jp Morgan Chase bank is still with us. Theked johan about whether aviation sector and leisure part of it might be structurally smaller on the others of the pandemic. He did not think so, he thought underlying demand would pounds pack to 2019 levels would bounce back to 2019 levels. Do you see the future of aviation the same way as the ceo of easyjet . Grace i think there is pentup demand on the consumer on the business side, but i see when we think specifically about the Energy Transition, the Airlines Industry when it comes to the European Economic area contributes 4 to Greenhouse Gas emissions. We are seeing a huge spike when it comes to attitudes toward climate change, the energy transmission. A lot of that is driven by the fact Renewable Energy makes economic sense. Over the past cade, the cost of wind, solar has come down 80 . The cost of electricity as well. Thanable energy is Cheaper Energy generated by fossil fuels. When you get to the point where it makes economic sense, you will see governments come in and accelerate that drive, the eu green deal really led on that front, but it is not just europe. When we look at china, we see commitment. Japan, the u. K. Are moving in the same direction. Biden reentering the Paris Agreement is something that is incredibly powerful. Sectors Like Airlines across the board, investors need to look at Carbon Emissions and the potential of higher taxes, or other ways that impact the cost. Anna when we look at the winners from the Energy Transition, tesla, incredible gains this year looks set to cominghe s p index, middle to late december. Is that the way you want to play that Energy Transition, through pureplay businesses, das play businesses . Grace you can play it through both, whether you are talking about the shift to electric vehicles or the generation side, thus supplyside were you have highly rated Utility Companies in europe and the u. S. When you talk about the pure players, whichever sector they fall in, you have Companies Highly rated for a reason, because they are driving that push into the market. I would absolutely invest in pure plays to get that superior revenue exposure. There are a number of companies, take the utility or auto sector, they have undergone transition. His messes that have been investing get to a point now where you can start to see renewables be a higher percentage of their mix, or on the auto side, hybrid or electric vehicles starting to be increasingly more meaningful. We are at an Inflection Point where it will be a material contributor to corporate profits over the next 510 years. If you invest in these companies, you can not only get the annual growth but are rereading potential as more and more of their business becomes these newer trends around electricity in the Energy Transition. There are opportunities in those. Anna thank you very much, grace peters, executive director of european equities strategist, Jp Morgan Chase bank. Grace will continue her conversation with me on Bloomberg Radio 9 00 a. M. U. K. Time. Lets get a Bloomberg Business flash. Is inanish bank bbea talks with its rival to create one of the countrys largest lenders. The move comes a day after they announced they were selling that gives it firepower and booze its capital ratio. Airbnb has filed for its ipo, outlining widening losses and plunging revenue due to the pandemic, but projecting optimism when the economy recovers. It is set to be one of the biggest this year. The Company Plans to raise as much as 3 billion. Santander there is buying Technology Assets from wirecard as a German Company winds down its operation. It marks an end to the dissolution of wirecard and will help santa and air build its payments platform. 500 employees will remain with unit. That is your Bloomberg Business flash. Landing zone identified. That shape of the brexit deal is becoming apparent. That is next. This is bloomberg. The big thing was preventing a financial collapse. The Central Banks acted definitively to do that. That is all that was historically important. The mistake is for them to vastly exaggerate their continuing relevance. They lack, starting at the zero bound where we are, the capacity to provide meaningful impetus to their economies in any way that is consistent with any concept of a central bank functioning. They do not have the capacity to meaningfully affect the degree of inequality. They do not have the capacity to vaccinate people. They do not have the capacity to fight climate change. They need to acknowledge the limitations of their influence. Interesting comments from larry summers, former u. S. Treasury secretary, speaking to bloomberg at the new Economy Forum on the limitations of central bank influence and activities. The u. K. Is calling from realism for more realism. Some progress has been made, but there is a lot left to do. Irelands Prime Minister said the brexit deal is clear to both sides. Will be a hope there comprehensive trade deal, but it will be challenging. Have are three items that been there for quite some time. In terms of access to the Single Market in europe with the u. K. Green to adhere agreeing to adhere to it. My sense is if that got sorted, the area of dispute resolution. Ould get sorted fisheries is approving difficult. A lot of focus on other issues. My sense is that the political will in the United Kingdom to get a brexit deal done, it will happen. If the European Union wants a as a memberour view state that it is in the interest of our citizens and respective economies to get a deal that makes sense. A no deal would be damaging to our respective economies. We should do everything to get a deal, it is the risk of possible thing to do. It is the responsible thing to do. We have a new u. S. President , and the importance of they are not being a hard border between Northern Ireland and ireland. Do you think that changes and makes it more likely that Boris Johnson would compromise with the eu . I spoke to joe biden during very proudery warm, of his Irish Heritage and makes no secret of that. Im looking forward to his presidency. The more broad issue is ,rospects of a biden presidency it was clear from my conversation that he was going to engage with europe. That is probably more significant for the u. K. Response, because it seems to me that the United Kingdom values its relationship with United States, and vice versa. Therefore, the u. S. , the new president would prefer a deal between europe and the u. K. I think the u. K. Is conscious of that. The president elect with climate see on alignment of interests, sparked by the president s commitment to multilateralism and reset the relationships between the u. S. And europe that might enhance the prospects of a deal. You said both sides have to compromise to reach a deal, but there has been some question about whether the European Union has to compromise given the change of emphasis from the u. S. If oris johnson feels more pressure from the u. S. , maybe that trade deal with the u. S. Europe needbt, does to compromise at all . I would not overstate that. I think europe wants a deal. Also it is in our interest that there would be a comprehensive trading deal between the u. K. And the European Union. That was the irish Prime Minister speaking at the new Economy Forum. Urday the spanish bank that stock is on the move, up from yesterday. Imperial brands on the move on the back of their numbers, 4 gaining after thirdquarter earnings. The mayor of manchester says 3 Million People in the u. K. Have been excluded from Financial Support during the pandemic. Burham speak to andy next. This is bloomberg. Businesses today are looking to tomorrow. Adapting. Innovating. Setting the course. But new ways of working demand a new type of network. One thats more than just fast. You need flexibility to work from anywhere. And manage from everywhere. Advanced technology. With serious security. And reliable coverage, nationwide. Forwardthinking enterprises, deserve forwardthinking solutions. And thats what we deliver. So bounce forward, with comcast business. Welcome back to Bloomberg Markets european open 30 minutes into your trading day. This is what we have for you on European Equity markets right now. Well, we are not actually moving very far at all. Your stoxx 50 fairly flat. Flat in paris, flattened frankfurt. Lets get a bloomberg firstorder news update. Here are the top stories that we are covering. A key partaign of its lawsuit against the Election Results in pennsylvania. It is demanding that most 700,000 mailin ballots be thrown out because observers were kept too far away from the count. The challenge is now against a smaller number about. The strongest storm of the Hurricane Season has hit central america. It made landfall late on monday in nicaragua, bringing catastrophic winds and torrential rains. Are powerful enough to make areas uninhabitable for months. Flexible working could be the solution for businesses struggling to recoup women into recruit women into senior roles. Women applying for management jobs jump to percent after the wither the roles parttime and a job share option. As a result, the number of women hired for senior positions jumped by a third. On thenauts have arrived International Space station after a voyage on the Spacex Dragon capsule. They will now begin their six Month Mission aboard the orbiting lab. It is the first time in nasas history that it full crew has been ferried to the space ship. N on a commercial global news 24 hours a day, onair and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Lets talk about the latest vaccine news. Modernas vaccine is shown to be over 90 effective. The ceo tells us what sets is vaccine apart. What is very important with todays news is that we can now have the vaccine stored in a regular fridge, like with insulin. Every pharmacy, dr. , hospital has that capability. We think it is a very important game changer. The other important piece to keep in mind is that our vaccine does not require dilution. Anna joining us now with thoughts on the latest vaccine news, Bloomberg Intelligence Senior Analyst and director of emea research. A really good to get your thoughts. This has been a good two weeks for mrna. The message rna vaccine is the type we are talking about with my dharna moderna and pfizer and biontech. Absolutely. Platform, if this it holds up to longerterm longiny in terms of how the protection lasts is that, you know, if god for bid we had a mutation that showed an vaccine,o escape the there could be another version of developed very quickly of it developed very quickly. This really helps to manage not just this pandemic, but potentially any other pandemic. They have to be studied when they happen. Anna indeed. Interesting to see if it applies to other diseases that we talked about. That story perhaps for another date. Everybodys interest lies in the vaccine at this point. In terms of the longevity of protection that vaccines provide, is there a rule of thumb as to how worth it it is to do a vaccine based on the amount of protection it provides . Provides just three months of protection, is it worth doing . If it provides a year, perhaps it is. There is a lot we dont know about antibodies. We saw the Prime Minister of the u. K. Selfisolating, even though hes already had the virus. I wonder what the latest thinking is on how long immunity lasts. Mean, there is a lot of questions in what you just said. If ive had the infection before and i have been exposed to somebody, i may not get the disease, but i may still be a possible for the virus. It might still replicate in me. That is something why people have to selfisolate. What we need to figure out with the vaccines is whether people are still infectious once they have had the vaccine. That still has to be worked out. In terms of durability, i think the data is Strong Enough for us to not worry much about how long this protection lasts. How quickly can the virus evolve around the vaccine . Anna ok. Another question for another day. Sam, thanks for joining us. Sound fidelity sam from Bloomberg Intelligence. Boris johnson has come under fire for reportedly telling a meeting of conservative mps that the solution in scotland has been a disaster. He described as tony blairs biggest mistake. Joining us now is andy burham, mayor of greater manchester, someone who has some thoughts on this. Very good to speak to you today. I know you want to talk about those who have been excluded from help from the government through the pandemic, and we would do the any minute. Let me get your thoughts on these comments from Boris Johnson around devolution. Devolution a disaster. He was not referring to the whole process, maybe just the way it has been used to push for independence in scotland, which one might understand mightve upset a u. K. Premise or might upset a u. K. Prime minister. Andy i think thats what he did say. You could apply a more broad interpretation, which would be worrying to me. As mayor of london, Boris Johnson called for the devolution of power out of westminster to the english regions, london in that case. I am making exactly the same argument as he did when he was mayor. Need to see do power and once mr. In westminster closer to people. I would say to the Prime Minister, that is the best way to secure the u. K. In the long r run. To create better balance for the u. K. In terms of politics. I think he needs to be careful not to clarify his remarks. I do not think it will have gone down well in scotland, for the scottish tories. It gives independence a bit of a boost, unfortunately, with comments like this. I hope he will set up clearly what he means when it comes to devolution. We have seen this year the limitations of trying to run everything centrally. It doesnt work well. Its time for the u. K. To adopt a different form of governance. The do you think that virus will be a catalyst for further devolution . N . D over what time scale the andy well, it should be. If you over centralized policy and try to run everything from whitehall, it does not work very well. We are seeing that with the test and trace system. If we have that under control, we would have had teams on doorsteps having conversations with people face to face. Massivel outsources a contract, its all about call centers, and surprise, surprise, it does not work very well. Betweenthe difference over centralization and localization of decisionmaking and services. I would argue that if we had localized rather than centralized at the start of this pandemic, we would probably have mounted a better response as a country. Anna i know you have been writing about those who say they have been ignored by the government through the pandemic, those who have not received as much money as other parts of the community. Is this around those who are selfemployed who are maybe difficult for the system to target . Who is it that you think has not been paid enough to this process through this process . Andy there are 3 Million People in all and people in different categories. People who are freelancers, people who become newly selfemployed, so have not yet submitted a tax return. People who are paid as Company Directors of small businesses. When you add them all together, they amount to a lot of people. Weont buy the excuse that are hearing from the government that it is all too complex to help these people. They are taxpayers. We can go to what they paid in tax over the years and see how they have been harmed this year. I am calling on the chancellor, who is making a spending statement a week from tomorrow. There will be 3 Million People across the u. K. Hanging on his every word. They are desperate for help. Its no exaggeration to say that jobs, homes, marriages, lives depend upon what hes got to say. Myself and the mayor of liverpool had a meeting last week with a campaign group, excluding the u. K. We have met many of the people that have been affected in the northwest. Its quite heartbreaking actually to listen. The truth of the matter is, we have a Great Mental Health crisis here on top of a pandemic. Its why the government really does need to step in to help them. Anna with that in mind, do you think that the lockdown measures should continue past early december . Wideof course anengland policy at the moment. Do you think those measures should be extended . Think we are going to have to see where the cases are, arent we . I do have a real problem with the idea people under perpetual lockdown or restrictions. The World Health Organization is very clear that lockdowns and restrictions should not be used in that way. They should be used as a short, sharp break to get cases down, but not sort of always enforced. The governments are going dutch government the governments are going to halfway health restrictions. I would say we need a bit of a rethink here. We need to be more targeted in our use of these restrictions. Close down problem business premises, not all business premises. Encourage more compliance with face coverings when people are out and about, but perhaps not always go for the blanket restrictions approach. Thats the message that we have been giving to the government from greater manchester. I very much hope the government will listen. Thanks very much for joining us. Andy burham, the mayor of greater manchester. Something entirely different, 42 minutes into the equity trading session, European Equity markets look to the downside, but not by much. Lets turn to what hedge funds are doing with their money. Among the investment giants reporting Third Quarter holdings overnight is Warren Buffetts Berkshire Hathaway. It reveals a big bet on vaccine makers. Joining us to discuss is dani burger. Yhich stocks did berkshires bu over the quarter . Is a really distinct flavor to berkshires bets. Caution over the u. S. Economy. They initiated new positions in stocks that would benefit from vaccines. Announcedore pfizer the effectiveness of their vaccine, berkshire added a new position to pfizer, as was mark as well as merck and other pharma companies. In terms of what they sold, it was all about financials. Berkshire hathaway well on its way to completely exit j. P. Morgan and wells fargo, reducing positions by as much as 96 in some cases, also slashing some low shall banks local banks as well. Sticking with the u. S. And u. S. Equity story, we heard just overnight that tesla is set to join the s p 500 december 21, i think. What sort of effect will that have on the benchmark . Ani tesla is a huge it is said to be one of the Biggest Companies at 390 billion of market value. To be added into the s p 500, and of course, thats a disruptive event. Asset managers who tracked the benchmark would have to sell about 40 billion of other equities to make space for tesla. Have gone out to investors and said, hey, should we do this in two phases . Of course, with that index comes about 11 trillion of passive investment. Thats part of the reason why we saw tesla have this huge move overnight once the news was announced, because investors will have to track that index, will have to buy into tesla. It could also help the s p 500. Look how much better tesla has benchmark. The i should say, with that, elon by 15wealth gets higher billion, surpassing Mark Zuckerberg to become the third richest person in the world. What a week its been for elon musk, its when a coronavirus diagnosis, space x lunch, and now the essence launch and now the s p 500 inclusion of tesla. Anna my week looks incredibly pedestrian by comparison. Dani burger with details on tesla and beyond. Up next, with u. S. China relations at their worst in decades, we will hear from speakers at the Bloomberg New Economy Forum about the way forward from here. This is bloomberg. Are competitive to china was inevitable. But keeping it healthy is vitally important and that will not be easy. Action some cooperative to help us into a catastrophe. Through the highest level diplomacy at an early stage of the Biden Administration is to define the parameters. We should build an open World Economy that works for all. Firmly safeguard the system under the wto, reject unilateralism and protectionism. When the economy becomes so big and your interests are all over the world, you dont have to protect your own interests. The American Administration is about to change, but the clock will not simply be rewound. I hope that he would be able to focus his mind on developing a framework for an overall constructive relationship with china, because the last four years have been quite a tumu ltuous ride. Fromhave fully walked away these commitments, posing challenges. I dont think that going into a world of deep protectionism going forward. I see more regionalism. The reallysome of interesting views expressed by guests at bloombergs new Economy Forum giving their take on u. S. China relations. Ecb president Christine Lagarde will be joining the proceedings. Dont miss that conversation at 4 00 p. M. London time. Lets get a Bloomberg Business flash. Tesla is joining s p 500 month and its largest ever as its largest ever new member. It follows months of speculation which helped the companys valuation skyrocket. Indexese one of the most influential members, with a waiting similar to that Berkshire Hathaway or johnson johnson. The spanish bank is in takeover talks with a rival to create one of the countrys largest lenders. The move comes a day after bbva announced it was selling its u. S. Arm to pnc financial. This gives the firepower for a deal and boosts is capital ratio. Ipo,b has filed for its outlining widening losses and plunging revenue due to the pandemic, but it is projecting optimism for a rebound in demand when the economy does recover. The listing is set to be one of the biggest this year. Sources tell bloomberg the Company Plans to raise as much as 3 billion. That is your Bloomberg Business flash. Up next, when will the s p 500 hit 4000 . We will put that question to the markets live team. Kristine aquino joins us next. This is bloomberg. Anna welcome back to Bloomberg Markets european open 53 minutes into a European Equity trading session that looks modestly negative for european stocks. U. S. Futures negative, actually fairly mixed if you include nasdaq. Kristine aquino joins us now. I want to ask you about u. S. Equities. The question of the day, when will s p 500, when will it get to 4000 . You have been taking soundings on this on the markets live blog. What have you been hearing . itsine kristine obviously difficult to put a number on when. The skew as far as the responses we have gotten is that it is more likely to go towards 4000 than much lower from here. The reason being is that, you know, the sentiment in the market really is that investors are very willing to take that s p 500 index higher every time we get bouts of good news. Yesterday, we saw that with the moderna announcement reaction. We did get a positive reaction as well similar to what we saw from the pfizer announcement last week. We are kind of entering this period now where every time there is a marginally positive development on the vaccine front, equities are just very willing to power higher. Anna what about the things you are looking ahead to . Weve got u. S. Retail sales due out a little bit later. Woody i what is the expectation there . To be a that is going really big one to watch, especially watching the holiday periods. Its been an absolutely shattering year for retail. Retailers are preparing to capitalize on this sort of new environment into the holiday period where there is a lot of uncertainty regarding lockdowns and various cities in various cities and countries across the globe. The concern is whether shoppers are going to be as willing as they have in the past two pile into the Holiday Shopping period. Retailers are getting creative in capitalizing on that. They are trying to cater to this different environment we are in but the question is whether that will be enough to turn around such a dour year. I think it will really remain to be seen whether Consumer Sentiment or positive sentiment we are seeing in equity markets translates directly to the real economy via Consumer Sentiments. Anna thanks very much for joining us. Kristine aquino, who leads the markets life team in europe live team in europe. Bloomberg surveillance is up next. European equity markets on the back foot this morning. This is bloomberg. Francine the rally stalls. Highly effective vaccine sends u. S. Stocks to record highs but optimism is tempered with fresh restrictions across america. Full speed ahead for tesla. The electric carmakers set to join the s p 500 next month as its biggest ever new member. The Bloomberg New economy form, bill clinton says xi jinpings longterm rain has upended relations between