tv Bloomberg Markets Americas Bloomberg July 6, 2020 1:00pm-2:00pm EDT
i'm vonnie quinn. welcome to bloomberg markets. here are the top stories we are following from around the world. manhattan home sales plunged 54% in q2, the most on record. we mostly to jonathan miller on the latest data. u.k. and eu negotiators meet in london this week as the two sides continued to sketch out a future relationship. we get the view from tony gardner, former u.s. ambassador to the european union. global coronavirus cases reach 11.5 million. in the u.s., we see more reopening's and rolling back. the latest from crystal watson from johns hopkins school of public health. we are seeing markets higher. the nasdaq is the leader today. the s&p is up 1.5%, following china overnight. the vix at 27.
7.0159.hore yuan at let's get a check on the markets. abigail doolittle has the details. abigail: certainly a risk on day at the markets. the s&p, the fifth day in a row for the winning streak. the optimism carrying right into the new week after some strong economic data. of course, we have that continuing rally in china. 100 set for its third record close in a row, being helped out by amazon. and above $3000 for the first time ever for amazon. has a $1 trillion market cap once again. olibre is above 1000 for
the first time. nasdaq a member of the composite and nasdaq 100. speaking of these records, it's incredible. if we look at a chart on the march lows, the nasdaq is now up more than 51%. did not exist in the great depression, but some say the rally for the s&p 500 is great depression like after its huge drop. only time will tell. it seems some of the folks that have been reluctant are finally joining in. these are member ranked returns. money markets had reached a high of $4.8 trillion a week ago. now at $4.7 trillion.
those people on the sidelines are now putting money to work. thank you for that. turning to residential real estate, manhattan home sales plunged the most on record in the second quarter, down to the 4% over the year. how much will we see a bounce back in previous trends? what structural changes can we expect? joining us now is miller samuel president and ceo jonathan miller. we had pending home sales rally back in the last month. doesn't mean that people are taking advantage of the downtick in prices? i have not seen a downtick in most pricing. many buyers expecting a discount will be disappointed. the prevailing trends in housing is that many markets were literally shut down by
government mandate at the state level and could not function. the ability't have for fear oferty personal safety, you don't have a functioning market. what we are seeing across the u.s. is pent-up demand and supply that has built up over the last three and a half months. we are essentially looking at a spring market that is being relocated over the summer market. the summer market will probably be busy. compared to last year, it will show an up to it. but that is simply moving the spring into the summer. cus?ie: what about the lo are people still interested in the same areas they were always interested in? anathan: there is absolutely
rethinking, a talk about the urban to suburban transition. in the interim, that is a little overhyped, but it is there, consumers are concerned about safety. markets -- you are not that much more in danger compared to the server and markets. it is really about overcrowding and the ability to be mobile than density itself. vonnie: what are the median prices per square foot going to? given you only have data per quarter, and it is difficult to know if this is just a corner phenomenon or an extended price change. jonathan: if you look at new york, you are talking about $16 40 or so if a. -- a foot.
the market has been sliding for about two years, but the decline in prices we are seeing are really impacted by a year ago when we had a tremendous number of closings properties that skew the numbers. are seeinghat you right now in the second quarter report that i'm referring to out there is not is much evidence of price discounting yet. now that the brokerage can do in-house showings, physically showing the properties, as of june 22, the next quarter is where we see real price with this enhanced ability for consumers to see property. vonnie: days on market are slightly misleading. metrics like that were stopped
during the pandemic. i am more interested in what you think the discount will be for the foreseeable future, given we will not have a vaccine until next year most likely that is workable, distributable across the country. or somebody looking at real estate for decades, will there be much more of a discount in coming months? signs, theretial may be some discounting but not inot even we have right now markets completely shut down from the second quarter, just opening up now, is anecdotal. the evidence essentially shows that for every transaction there is a discount, there is a transaction where there isn't. about 90% of the transactions that closed in the second quarter had some linkage to the first quarter, where a consumer had physically gone inside a property.
what we have learned from this situation is that consumers generally are not buying homes with virtual. oom as a supplement to the home buying experience, as opposed to a replacement of going inside. vonnie: i understand about different ways of viewing, but what about the fundamental facts that we are in a dire recession right now and there are all aboutof presuppositions whether we will see a recovery, what shape it will be -- so many are just not getting paid, they are out of a job, and are not spending on the things that they need to be spending on. surely, the real estate market has a difficult time ahead of it. jonathan: absolutely. i'm not suggesting that it has not, but what we are seeing is a release of pent-up demand from the spring beginning to happen in many markets over the last month.
once that pent-up demand and supply -- because a lot of inventory did not come on the seceded, once that is you are left with what the actual market is. i would expect the actual market condition will be weaker than what we entered, in the context of pricing and sales activity. right now, it is being distorted heavily by the pent-up for those that can buy. vonnie: what about formally luxury areas -- still luxury areas -- let's say the hamptons, miami, are we seeing the entry luxury points as it was? jonathan: markets like the hamptons, a well-known second-home market, has seen activity levels far higher than a year ago. i think that is a combination of a release of pent-up demand with
the second-home flight. this marketk at how plays out, i think the urban to suburban narrative is too simplistic. you will also see a transition to second-home markets. i look at this technology with essentiallys lengthening the tether of where you work and live and the relationship to each other. we could see fewer commutes the longer commuting times as this plays out. but that is determined when and if there is a vaccine down the road. vonnie: the problem is the coronavirus hotspots are changing. was not a problem for a while, now is, texas now. are you anticipating a market where we see a lot of activity and then no activity for months to come? jonathan: that is another layer
of uncertainty in the market. we don't expect a full recovery in activity as we get to the other side of the crisis. right now, consumers are looking at their markets. -- maybeon't feel safe they don't now or don't later -- they pause and wait. that is challenging to housing markets in general. vonnie: we have to leave it there. always a pleasure to speak with you, jonathan miller, president and ceo of miller samuel. some breaking news now. the french finance minister bruno le maire has been reappointed. i believe he is speaking with francine lacqua, so keep an eye out for that conversation. now let's get some headlines from karina mitchell.
karina: the trump administration has released details in the largest coronavirus loan program so far. some congress members had voiced concern about the level of transparency. the information does not include details for any loans, names of companies that are less than $150,000. the vast majority of borrowers were not made public. new york state is taking another step in its reopening plans. the city entered phase three today, allowing nail salons and tattoo parlors to open. but the resumption of indoor dining has been postponed indefinitely, following spikes in states like texas and florida after they reopened bars and restaurants. maxwell has been transported to new york for a hearing on friday. she was arrested last week on charges of conspiracy and enticing miners to engage in
sex. prosecutors say she is a flight risk. helds currently being at the metropolitan center in brooklyn. the german government has paid $1 billion over the past decade related to the cost of stationing u.s. troops in germany. saidmonth, president trump he is ordering major reduction in troop strength in germany after he branded the nato ally delinquent for failing to pay enough for its own defense. global news 24 hours a day, on-air, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm karina mitchell. this is bloomberg.
vonnie: welcome to bloomberg markets. i'm vonnie quinn. the pandemic has most companies talking about pre-and post covid strategies. we discuss just that, and where he sees investment opportunities in the future. >> this is going to be going on for a long time. there will be default, stops and starts. today, i use this example a lot. pretty covid, the u.s. high-yield market traded at something like 350 basis points over risk premium. the average high-yield bond was 350 over. this has been going on for the last several years. at that point in time, there was plenty of capital being raised,
called activation funds. those needed to be activated upon some of that. that event was to between something like high-yield going to 700 over or 750 over. everyone thought, it high-yield over, that has to be an unbelievable opportunity to deploy capital and credit. that is where it is today. the u.s. high-yield market, depending on which bank index you use, is in that zone of 700 over. the market is trading at the level that people said, i only hope it goes there so that the funds activate and i can person eight in this -- participate in this opportunism. there is and continues to be a terrific moneymaking, possible moneymaking opportunity in credit, but it certainly will not look like the march 23 lows. >> one of the four businesses
you are in is structured credit, cielo's. those businesses arrived after financial breakdown. it may take a little while longer to get there and the exact shape of it is unclear, thethat growth is largely clo market, but largely credit creation. there was a large amount of credit creation after the crisis. whenever there is that much credit creation, there are structures for that to sit inside of, get slice and dice and ultimately managed. >> we got to the point in january and february where people were sounding the alarm about the amount of leverage on corporate balance sheets, leverage in sovereign bond markets. if we are going to have even
more, are we not just inflating a bigger bubble to burst when the next downturn comes along? >> a little yes and no. what i mean by that is, what happened to the economy is probably singularly unique in history. the economy was moving along and then ran into a multi-month revenue hold. all different kinds of ways to measure it. thewill hear people quote phenomenon in different ways. consumers, the high-end, low-end, mall owners, the world is not built for the zero revenue scenario. so a certain amount of what , inened was the government no way, doing its job. when something extraordinary happens, the government is the last line of defense. you can look at those dollars, whether direct or indirect, as
the government filling a revenue hole that otherwise would have cascaded into an even worse outcome for everybody. thingoo much of a good can be risky, so there is talk about moral hazard, whether the high bond buying part was but bigy and so on, picture, there was a $10 trillion hole in the economy, financial markets seized, and the market filled the hole with a number of things to unglue that seizure. an exclusive interview between erik schatzker and jimmy levan. coming up, we are speaking with the johns hopkins center for health security senior scholar crystal watson on the latest on the coronavirus. this is bloomberg. ♪
vonnie: this is bloomberg markets. i'm vonnie quinn. let's take a look at where we are market wise. off of our highs of the session but the nasdaq is still the leader, up 2%. the dow is up 1.3%. most indices are higher following line high overnight, after the chinese government talk to the market, saying it would be a good thing a regular citizens got involved. the dollar index is weaker. strengthening for the offshore yuan and the euro. 7.0160.hore yuan at about to hit its 200-day moving average, so will we see it go below seven?
over the fourth of july weekend, airline passengers exceeded 7 million for the first time since the pandemic. how does it spread the coronavirus across the country? joining us now is crystal watson, senior scholar at the johns hopkins center for health security. airline traffic is a fraction of what it was but it means people are moving across the country. the instancespact of positive coronaviruses? crystal: i think it's somewhat the planeshow full are, the precautions that the airlines and people are taking, and really a little bit of luck. hopefully, we don't have a lot of transmission from air travel itself, but bringing people together in enclosed spaces with little physical distancing is worrisome. it's important to
underline, american airlines says it will not keep the middle seat unoccupied. united said that it will be adding 25,000 lights as of august. if they are adding flights and american is leaving the middle risk freeupied, is it to take flights, can we be assured that we are fine? unfortunately, it will not be risk-free. anytime we are in close proximity to other people, even if the middle seat is open, there will be a risk of transmission. the hope is that with that physical distancing, it is less likely and transmission effect -- event will occur. tracers100,000 contact would be needed. how do we get this wrapped up? federal we need our government to really embrace this initiative.
it has not happened so far, as with testing. we need guidance and resources from the federal government. governors then need to embrace this. some states have done it and are doing well but we are nowhere near where we need to be with contact tracing. vonnie: it will be a long road ahead. , withyou, crystal watson the johns hopkins center for health security. coming up, a surgeon services. we will speak to bmo capital markets about this morning's data. this is bloomberg. ♪
shortages to treat hiv because of the pandemic. 24 nations already have critical low stocks or disruptions. president trump is repairing to issue executive orders on a wide range of top x. chief of staff mark meadows says the orders will cover china, manufacturing, immigration, and prescription drug prices. he says it is important for the president to provide incentives for manufacturing to be brought back over from overseas. the canadian prime minister says he wishes the u.s. and mexico well but will not be joining a white house meeting to celebrate the regional trade agreement between the nations. president trump and the mexican president are due to meet wednesday. trudeau had been conducting camden meetings online instead of in person because of the virus pandemic. , sayinged the new pact it will help north america emmert stronger from the pandemic. jpmorgan says wall street is to negative on what it would mean if joe biden was led to president. they say numerous factors could
make him more market friendly vendor think. they say there could be potential benefits from infrastructure spending, softening of terror frederick, and higher wages. global news 24 hours a day, on-air, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm karina mitchell. this is bloomberg. >> live from toronto, i am greg pennell. vonnie: i'm vonnie quinn in new york. we are joined by our bloomberg and bnn bloomberg audiences. here are the top stories we are following from around the world. the ism nonmanufacturing index bouncing back, showing signs of expansion with a print of 57.1.
will the data change as cases continue to rise? u.k. and the eu negotiators continue to try to hammer out a brexit deal this week. we look at the latest with former u.s. ambassador to the eu tony gardner. and we will discuss whether the rally in chinese stocks risks a repeat of the 2016 bubble. we are going to take a look at the markets -- greg: basically, if the chinese state media wanted to stoke they cut a piece in the newspaper saying fostering a bull market is key to the economy. they seem to have done the job.
the rally starts with the shanghai composite, the best showing since 2016. 1.5%.w is up 367 points, the s&p 500, pretty much the same percentagewise. the nasdaq climbs to new highs. in toronto, lagging a bit behind our american peers, but not bad. up 119 points. china got that boost it was looking for when it hinted that it would foster a bull market. let's get a check on the other segments of the market. had been some weakness in crude oil. likereal strength in names amazon. definitely an interesting day out there. we also had a gauge of u.s. service industries jumping to a four-month high.
jennifer lee, senior economist at bmo capital markets. i thought the number, this was good news for the services industry, but then i thought about the labor report. it was a snapshot of activity in the middle of the month. i think there will always be caveats with all of the reports. good afternoon. the nonmanufacturing ism blew past expectations. all the components were encouraging. almost 20 jumped points in the month, the highest activity, anhis indicator of what is going on right now, also the highest since january 2004. little moreas a interesting, also rose to a three-month high, but still below 50, indicating it is still contracting. ignore it can almost
report was so strong. vonnie: it is the direction almost more than the strength in one month. if we see such a bounce back, do we get another one next month? , we need toar gone see several months of this before we are anywhere back to where we were. jennifer: for sure. april is definitely the low when everything was shut down. that whenst expected you switch the power back on, you'll see improvement. seenata that we have across almost all countries around the world, especially in the u.s., four may and june, have been solid. someone had use the term before but i will steal it anyway, it is like low hanging fruit. you'll get some improvement. but the data has been more consistent in the come back, stronger than expected.
going forward, that is the million-dollar question. during normal times, if this was normal times, it would be fantastic with all the data we have seen come especially with the payrolls report. two records in a row. but there is one big risk out there. recently, the rise of cobra cases, especially in the past few weeks. that will cause a slight pullback in the recovery, which we should be expecting anyway. how far it will pullback is another story. with the continuing number of elevated claims out there, americans receiving unemployment, it is still too high, and that is why we are not going to see as strong job reports. of course, depending on how the virus plays out. greg: the market participants seem to be thinking that
everything is going to be all right. , you talk about the threat of covid-19. what is the likelihood of mass closures again? will be are resurgence of the virus, and it may be with us for a while. what are the chances of government shutting things down again? jennifer: i don't think there will be a complete lockdown like we did in april, i don't think there is the appetite for that . people were aching to get out of the house. i think what we will probably see is some localized shutdowns, like what we saw in beijing weeks ago when they had a breakout. i don't see a broad-based lockdown. but we have to look at the high-frequency data, not just a monthly data that we are showing the survey from x number of
weeks ago. likeng at things restaurant reservations, google mobile, how may people are moving around. that is something that we should be looking at, as opposed to this monthly data. a lot of this goes back to consumer confidence. even if you don't have that , this jump inown the virus will make a lot of people nervous and will simply choose to stay home, definitely not going to the restaurants or malls if they are worried about being infected. vonnie: how dangerous is it if the market starts to take notice of the fundamentals again? the markets have not cared that we have fallen so far from the economic fundamentals. ating forecasts of growth any 5% or so just to get us back to where we were.
if the market takes everything as a positive signal and continues to go higher, r.o.e. risking some instability down the road? jennifer: there will definitely be some instability. this morning's rally was because pieces front page opinion from chinese media saying it is a good idea to jump into the markets. i don't know if it will happen again tomorrow, but that is yet to be seen. at theot be looking quarter to quarter increases in growth. dive in q2, a huge resurgence in q3. probably just as important to look at the annual figures. we have not changed our forecast for u.s. growth, looking at a 5.5% decline for some time now. we are looking to follow that up with a 5% expansion next year.
everyone will go through that massive q2 expansion followed by an increase in q3. how things play out over the year is probably important. vonnie: jennifer lee, thank you. coming up, we will speak with tony gardner, former u.s. ambassador to the european union, as brexit negotiators meet this week in london. this is bloomberg. ♪
week ended a day earlier than planned. joining us now for perspective is anthony gardner, former ambassador to the european union. ,here are some sticking points and it sounds like it will be difficult to get over. at the same time, prime minister johnson said it was doable by this month. couldn't all be resolved in a couple of sessions? are a lot ofe theatrics in this last stage of negotiations. the deal is possible, i would say. if there is, it will likely only cover goods and not services. remember, services is 80% of the uk's economy. and it will not be a deep and comprehensive free trade agreement that they struck with canada. and theres a deal -- are a lot of top issues on the table -- it will be pretty modest.
there has been some movement in the past couple of weeks, including on fisheries, so-called level playing field issues, meeting the eu cannot cut off the u.k. in some instances, but also some improvements along the irish border. as much as we've been waiting for a resolution to this, from what you are saying, it sounds like any agreement that we will get from here is a work in progress. is this work that never gets completed, we just keep going and going? it probablyis true will not be the end of the story here. if there is a skinny deal, there will be future negotiations which will be necessary to cover all the areas where the u.k. and eu are intertwined. we didn't talk about political security issues but those are some of them. law enforcement issues is incredibly important as well.
there are a whole host of issues that will not be resolved for this time and will be left for a future day. vonnie: of course, the added complexity of life in the coronavirus, borders being closed, decisions on which to open and so on. that they blueprint could come up with? exports and imports are a big part of what is being discussed right now, tariffs and so on. has huge cases of the pandemic, then it is sort of moot anyway, right? anthony: there has been some movement. bridges have been opened between britain and a number of other countries, european countries where travel is beginning to return to normal between the u.k. and italy, where i am now. greece, france, spain.
the issue is in the united states, it's a lot more complicated. if there is an outbreak of serious illness in europe, that will add to the cost of doing business across borders. throughout this process, the concern keeps rearing its head that because of the brexit process, ultimately, london will not have the cache. it is one of the world financial centers. to companies actually going turn their back on the london as a financial global hub because of this? anthony: the u.k. is lucky in a couple of sentences. in one sense, it is lucky because there is no single alternative that can offer everything that london can offer. frankfurt cannot, dublin cannot. in certain cases it can. madrid, milan, amsterdam. there is no clear alternative to london.
i don't see london being replaced. of activity,iches it's expected that activity in london will decline. one important point for your viewers that encapsulates the problem that the u.k. would have year, the u.k. is trying to get all of the benefits of being a member while not being a member. when they were a member of the eu, they tried to negotiate to get all the benefits of being a nonmember. the eu is saying, you chose to leave. if you left, you cannot get all the benefits of being a member. that is certainly true in financial services and a number of other areas. , on a: the other thing separate note related to coronavirus, britain is handling it differently than many of the countries in the european union,
appears more and more with the reopening in britain, there is a different strategy at work. talk about how reopening have gone in mainland europe, in most of the countries that make up the european union. a story today about museums reopening. it is working, though, right, ambassador? anthony: i am in italy. italy was hit or delete by this coronavirus, but they took bold and severe steps early. they shut down. a real shut down, not a partial lockdown, which is what we live through in london. in the u.k., they did things differently. i think history will judge the u.k. government pretty harshly. they shut down late. i remember some large events around mid-march where 30,000 people got together, and it was
very well known then what the consequences of bring those people together would be. then there was a change in strategy by the government -- where theytrue -- said we don't actually believe insured immunity and we should follow what the europeans are doing. the figures speak for themselves. the deaths and the excess deaths, what can be anticipated given prior trends. the u.k. and the u.s. have fared very poorly. greg: before you go, maybe it is impossible to separate the two, but when the average briton looks back on this part of history, what will be the bigger impact, the pandemic, brexit, or can we not separate the two? wo different things,
although may be tied in a sense, although this may be provocative. populism has played a role in both, certainly in brexit. a lot of the populist rhetoric. in the pandemic, britain is different, we don't have to follow whatever you brethren are doing, we just know better. that is populism. besides speak for themselves. longer-lasting issue will be the decision to leave the european union. that is not something that will be dealt with in a couple of years. it may be a generation or more before a decision can be taken to the eu. the impact on the young in the u.k. will certainly be much greater, from the decision to leave the eu, than the pandemic, despite all of the terrible deaths being caused by the pandemic. thank you for tickets on to speak with us today, anthony
vonnie: this is bloomberg markets. i'm vonnie quinn in new york. let's get a quick look at markets. we are still seeing a nice rally for u.s. equities. report the best performer in the s&p 500 on a copper outlook. it has been selling better than i thought it would during the pandemic. when we see the movements in the market today, we come back to the idea that china, the state run media put a piece in the newspaper saying it out the bull market is more critical now
than ever to the functioning of the economy. so what kind of power do they have put in that kind of message into state media? tom orlik joins us now. when an american politician hints about wanting a strong stock market, there might be a reaction. when the chinese agencies makes the scorn -- this kind of reaction, there is a result. >> there is history to this as well. famous5, in that boom-bust cycle in the chinese market, the state media played a role on the way up. there was a lot of boost the talk in the state press. because of the outsized role that state investors play in the market, and because chinese households recognize the government has these tools that they can use to manage the economy and financial system.
that became a powerful driver on the way up. with the state media also found was on the way down, they could not do much to prevent the fall. regime,so how does the if you like, hold onto confidence? how can they be sure it does not happen again? it is boosting, like a central bank would. sharpe have seen a very move up in the chinese market in the last week or two, up 14%. that is a big game. at the same time, in 2015, the market was up more than 100%. we are still quite a long way off of that alarming, percentages rise, that alarming bubble we saw five years ago. phrasesame time, the key in the state media was that "a healthy bull market would be
desirable." haveymakers seeing stocks risen so quickly to that, they'll be asking questions about whether this is the healthy bull market that they want to see. there are a bunch of tools, levers they can use to manage that, from opening brokerage accounts, to controlling the amount of leverage people can play with, to changing the message in the media. vonnie: thanks as always, tom orlik. stay tuned. lots more markets ahead. this is bloomberg. ♪
7:00 in london. this is "bloomberg markets: the close." i am caroline hyde. romaine: and i am romaine bostick. caroline: the nasdaq notches another record high. for the first time, we are seeing risk on worldwide. chinese stocks jumped the most in five years. state media stokes bullish enthusiasm. why investors are concerned this rally could risk repeating the 2015 bubble. the beginning of the end for u.s. pipelines. the supreme court ordering the dakota pipeline shutdown, abandoning the project, in less than 24 hours. why it is becoming impossible to build and why warren buffett is backing them. romaine: the price action you will get