tv Bloomberg Markets European Close Bloomberg July 16, 2020 11:00am-12:00pm EDT
york, i am alix steel in london with guy johnson. realasdaq, the underperform her. everything else seems relatively calm. you have to wonder if that is finally reversing. guy: i think it is interesting on a down day the nasdaq is up. it was not coming into the session when i looked at futures what seems like hours ago. european probably outperforming what is happening in the united states as well, which is what we are bearing in mind. the s&p is down by .5%. -- .6%. the travel sector is the under performer today. we could be getting some information from astrazeneca at the start of next week. bear that in mind of terms of what you see in front of you today. euro-dollar not doing much. we got through the ecb without
major hiccups. we now move on to the main event, tomorrow's e.u. council meeting. is, in theory, that should benefit the btp market. we will see what happens there. i think it is going to be interesting to see what comes through tomorrow. that could upset the apple cart in a significant way. over the next hour, we are going to be speaking to the e.u. commissioner for justice as we see a key e.u. court decision regarding data transfer across the atlantic. is he talking to the united states? what are they telling him? that is going to be an interesting question, to say the least. today we see bank of america wrapping up the early-season for wall street.
shares and morgan stanley are higher on revit death record profit. this is driving a 73% jump in total trading. bloomberg the bank is well prepared to handle this crisis. what we designed was a business that in times of stress will be fine and when markets are volatile we would still perform well across the investment banking franchise. this was that crisis and that is what we delivered. i thing it validates the strategy. it is not for everybody. this is what we chose. we did not want to be credit heavy. we wanted to be asset-based and that is what we are. jonathan: we have heard from ceos on this program that we have not fully realized the risks around this recession, that fiscal policy has made it more difficult to assess credit worthiness and there will be more pain in the months ahead. would you characterize things differently?
james: it is hard to tell. it depends on how quickly the covid outbreak across the south how wellwest subsides, people coming back to their place of work function, continued liquidity and stability in the markets. it is too early to tell, but we are not a critics debt -- credit centric institution. until people get back to work, you will have consumer credit problems. there is no question about that. america isporate starting to face bankruptcy at a faster pace. how does the industry get ahead of the bankruptcies? james: i do not know that you can get ahead of it. there are nash -- that is finance journal -- that is a natural consequence. look at the restaurants, the small businesses, the hairdressers and doctors and dentists. we saw such of why
a massive wave of financing last quarter as companies got ahead of that and built up stronger balance in them to the patient -- in anticipation. ritika: i want to talk more about the small customer here. buying tesla at 340 times earnings -- are they flirting with danger? is this the top of the market? james: if you can tell me when the top of the market is, i would be in a different business. the market reflects expectations on earnings and that is what we have. seen new investors coming into this market, as we saw whenever there is a period is -- teslaket should be based upon what tesla has been known to do and they have created an extraordinary company. i do not connect those things. expect to get not
a price target on tesla from you. what is the best way of explaining that in a moment like this, how wall street has done so well in the last couple months when the economy and labor market is still on its knees? james: i'm not sure i would describe it as huge success. one other bank have beat the cost of capital. they have had huge trading revenues but huge credit provisions. what the banking industry has done is to support cooperation -- corporations that needed support. that provided financing that led those stay stable and position themselves for future growth. the profitability of wall street is down. we have a different business model. that is why we have performed the way we did this quarter.
the hits that they are taking, corporate credit, the bankruptcies we were just talking about, i do not think there is a disconnect. that was james gorman, ceo of morgan stanley care and let's get more insight here with marilyn watson. we were talking about wall street versus main street, the underlying real economy versus not. how do you see the rates market moving forward? is it a flat or curved, or do you see growth coming in and boosting main street here? marilyn: we have seen some growth coming in, certainly in the short term. i think a lot of contingents have been surprised by strength of some of the rebounds in the u.s. but also in europe, china, and elsewhere as well. we had a strong recovery for
many sectors. also, the data is volatile. there is a huge amount of uncertainty as we continue to see how the pandemic progresses and the impact on the economy. it might tail off from here, but i do think we will continue to see this growth coming through, but obviously in a volatile fashion. it remains very uncertain that we move forward. you a question .hat jon asked mr. gorman how easy is it to assess credit quality even what is happening with monetary policy, fiscal policy, and what is happening with the virus? thatyn: we have seen dispersion has decreased. in terms of performance in the markets, we certainly have seen
that decrease and we have seen were crowding in trade. forward,as we move something underlying is one of the most and port of things we can do moving forward. if you look at the underlying fundamentals and long-term strength, corporate and different companies here and it is incredibly important. you need to have incredibly good in terms of details to focus on the underlying. it is possible, but what we have certainly seen given the volatility and given the huge crowdingves has been see itshould start to little bit more market functioning. it should be focusing on the
underlying, incredibly important going forward. alix: a big part of that is what central banks are doing ahead of the ecb. in the current environment of elevated uncertainty and significant, the governing council remains committed to doing everything necessary within its mandate to support all citizens of the euro area through these extremely challenging times. alix: did you interpret that as a green light? is there enough support or does it have to do with what the euro group wants to do over the next three days? onilyn: i think the focus fiscal is nothing new and has been reiterated by christine lagarde in the past and implemented in the u.s., the u.k., and elsewhere.
eurozone,ook at the we do have pretty strong expectations of recovery funds. going into the summit tomorrow, we do have expectations. outlying some of the has already been agreed in terms of funding, the need to focus on the industry most affected your and that will certainly be a peripheral europe. i think looking at this time seend versus 2011 you can there is much more consensus now in the e.u. and amongst e.u. leaders that they need a uniform , consolidated approach and there is more support for fiscal stimulus and a fiscal approach, which i think ultimately be positive in terms of fiscal inspiration and e.u. and also better support within the euro zone.
, we are long italy versus germany and long spain. we think there is a further scope for compression. guy: what are your competitors -- one of your competitors has put out a note saying to focus on u.s. rather than european credit. part of that is down to the crowding out effect. the ecb has basically absorbed 40% of issuers. there is also the significant reduction in hedging cost as well. do you think that is a good idea? time to pivot away from it rather than towards it? marilyn: i would argue that now is the time for basically diversification. we do like assets in europe and
we do like assets in the u.s. as well. it is definitely true to say the policies the ecb asset have had a significant impact on the valuations of assets within the eurozone, within europe overall. we think we will continue to see that. if you think about it, we have theady seen a decrease in risk. we have continue to see these strong inflows going into european equities, european assets. i think that will continue. we also like u.s. investment grade as well. i think it calls for diversification and a greater focus on the underlying fundamental. we like both areas, but our preference for the eurozone has increased in the last few months.
guy: great to speak with you. thank you for your time, marilyn watson of blackrock. what we have coming up for you and the rest of the show, we will refocus on what is coming up in europe and take a look from an e.u. perspective. european leaders are gathering tomorrow. n is joining us. this is bloomberg. ♪
this is the european close. the key event for europe is what happens tomorrow at the summit. together inoming brussels, first face-to-face meeting in months. top of the agenda, hashing out the details of the e.u. stimulus package. joining us now from berlin, noah barkin. do you think we get a deal tomorrow? noah: that is the big question. as you know, this is the first physical meeting e.u. leaders have had in about five months and it is a big one. they are going to be discussing the long-term budget, how to spend over one trillion euros over seven years. difficult,be a complex, political discussion, even in good times, but we also have this debate over an e.u. recovery fund that is quite contentious. there is no guarantee that we will get a deal tomorrow, and leaders might have to come back later in the month to clench it. alix: when?
how long do you think the market will tolerate not getting a deal? important to it is recognize there is a lot of political support for some sort of deal. denmark,our states, sweden, austria, and the netherlands, nicknamed the frugal four emme who are pushing back against this idea of joint debt and grants to e.u. member states. will to getolitical this done. it is not just the cushioning of the economic blow from covid-19, but there is also recognition they have to spend -- send a political signal that the e.u. is united, that they are prepared to -- for solidarity with each other. there is get done, but a question about whether it can
get done tomorrow and there is already talk maybe they have to come back later in the month to seal the deal. let's pivot to your particular area of expertise, the you -- the e.u.'s relationship with china. we have seen criticism of germany and germany seems out of kilter with the rest of europe in terms of attitudes for china. you can understand why germany is where it is. anticipates, do you one of the other things to come out of this summit being a tougher line toward the e.u.'s relationship on china? noah: i do not know if they will have time to discuss china, but germany has the presidency of the e.u.. china-e.u. relations was going to be the top priority of the german presidency. the has been pushed down priority list because of
covid-19. now the focus is very much on recovery. the e.u. does need to come together and develop a common china policy. behavioreen china's during this pandemic. decisioneen the u.k.'s to phase out huawei from its 5g network. debates we have seen in the u.k. are happening all over europe. there is a need for europe to come together to talk about this. alix: i wonder how all the dynamic plays out between china, europe, russia, and the u.s. in that we have a lot of regression in the u.s. because of nord stream 2. then you have china in the background as well. how do these chess pieces wind up playing around each other over the next six months, particularly as we gear up for election year in the u.s.?
election is the key issue here, and i think europe is not going to want to show its cards on china before they know what is going to happen in washington, whether donald trump or joe biden will be sitting in the white house in january. in europe, there is a desire to ensure -- they are very aware that russia and china have been working more closely together and french president emmanuel macron has talked about reaching out to russia to create some european space between china and the united states. deal isthe nord stream a slightly separate from the considerations about relations with china and the united states, but certainly there are lots of chess pieces. i think that is contributing to
> it is time for the bloomberg business flash. union, dataean privacy could affect thousands of companies, such as facebook. onis storing information u.s. servers, exposing them to american government surveillance. the ruling invalidates a data privacy agreement and could force companies to shift data centers into europe. and restaurants got hammered by coronavirus lockdowns.
the world's second-largest beer market -- beer maker, revenue was down 16%. american airlines is forming a partnership with jetblue. american has ambitions to turn jfk airport into a major hub. heralds a new face-off between american and delta airline's. that is your bloomberg business flash. guy: when i saw this story, and i know jetblue reasonably well, where is this going? my first thought was, could this herald a takeover? i wonder about that. jetblue ishing is probably going to get into gear. into transatlantic service, into london. they have not picked an airport yet. i do not know about that one. america is also allied with
british airways. same terminal at jfk. there are so many questions i do not know the answer to hear. the u.s. is heavily consolidated in terms of carriers. i wonder whether this is the start of another round about. alix: i thought the same thing. is this going to be a prelude to an actual merger? more jobs. cutting i wonder what it means for companies like delta in terms of competition within the u.s. guy: absolutely. well,ms of the mix as which is interesting. jetblue carries very little business traffic, so you wonder how come ultimately, the mix will work in terms of the kind of traffic coming in here. anyway, we will wait and see what comes out of this. i think it muddies the water on
what happens at jfk and business relationships and whether we do still see jetblue across the atlantic. anyway, let's talk about what we have coming up. the european close is the next story we will be focusing on him a european equities under a little pressure today, the reverse of what we saw yesterday. trouble stocks stocksg -- yesterday's removing higher. today they were moving lower. conversations coming up on that datasharing after the european court today. this is bloomberg. ♪
have had. the opposite of yesterday. yesterday risk sentiment oil by expectations we work -- risk sentiment buoyed by expectations we are making progress. we are not down by that much. down .5% in your. moving lower the first thing this morning and climbing throughout the rest of the day. in terms of the main markets, let's take a look at what we are seeing in europe in terms of the ftse, the dax, and the cac 40. yesterday outperformance from the ftse 100. i hear news we are expecting something to happen at the end of next week. today we are seeing underperformance on the ftse. down .6%. travel and leisure stocks have taken a hit. a quick look at the grr. yesterday it was the stocks that would benefit most from the arrival of a vaccine that delivered. today is the opposite.
you are seeing the safer end of the spectrum delivering curate utilities trading more strongly. you are seeing oil and gas stocks doing ok. travel and leisure, despite what is happening between jetblue and american, we are seeing the travel sector unwinding some of the gains. some of the industrial stocks interesting today. there is a couple i will focus on in terms of what is happening. sandvik is one of them. today it is down. the numbers were pretty good. scandinavian industrial company. it is the outlook that causes caution. i should have ordered these slightly differently. big company out of the region. it is different than what atlas is delivering. atlas is more to do with evaluations because the numbers
are good. astrazeneca reversing the gains we saw yesterday. much anticipation about what is happening with this vaccine which astrazeneca is backing. thatems to be suggesting this will not deliver an antibody response, but also a crucial cell response which can provide significantly greater longevity in terms of the immunity it could produce. keep an eye on that one. in terms of what we have been focusing on, it is the strength of the euro. let's stick with the currency theme and talk about what is happening with another currency, that is the south african rand, up strongly driven by the carry trade. the country is in the grips of an economic crisis called by covid-19 and years of economic mismanagement. andnior fellow at yelp former goldman sachs ceo of sub-saharan africa joining us now. colin has a 10 point plan for south africa's economy, and to pay for it, tax reforms. he joins us.
walk us through your plan because south africa is in the grips of a significant crisis and many people are struggling to see how it gets out of it. colin: thank you. there is a dual crisis in south africa as a result of the contraction from covid and the national treasury at 7.2% for 2020. a huge loss of jobs estimated to bring the unemployment rate toward the end of the year on expanded definition to as much as 50% unemployment. in that context, these are emergency times. i propose the government consider introducing a basic income grant at a cost of $8.5 billion per annum which would cover the unemployed workers, provide stimulus as they use
that money for essential items, food and household goods and others, and at the same time ,elp drive other elements ,tarting with the power utility which i've proposed should be recapitalized in the form of removing government guaranteed debt onto the government balance sheet and taking advantage of the benefit of the improved ,pread between the government which will save the government money but also release the grant to focus on its core business and provide secure and safe energy supply. ways in which i believe competition can be introduced more effectively to the south african economy, including looking at special export zones and industrial asters to drive investment we come out of covid, a lot of
opportunity will arise to position regions as alternative inpliers of supply chains different regions and away from china in particular. i think south africa can do that given that it has a sophisticated financial infrastructure and manufacturing infrastructure in south africa. colin,what your talk -- what you're talking about his entry level jobs, replicating what china has done. always pushed has the idea of trying to create more value added jobs. on a number ofis occasions. what makes you think the government is prepared to pivot to do this? you're talking about a significant shakeup structurally and fiscally in south africa and i have not seen much evidence
the government is capable of delivering that. lin: the question of capacity of the state is an ongoing problem. it is a bizarre situation in south africa that you have emerging markets and among the strongest management expect deeds in emerging -- management expertise in emerging markets along with the state incapacitated and weak. i think there needs to be an honest conversation between the government and the business community about how to deploy management skills into the state and how to more smartly have the state collaborate with the private sector. this touches on some of the issues i've talked about in this lecture of some ideological battles and debates we have had. it is time to get rid of those and move forward. i am hoping the lecture i gave
does shake the tree a little bit and get the attention of the authorities and perhaps contribute towards loosening up the debate towards a more constructive outcome. like-- alix: what is it there? different parties working together, how is the business community lined up with the government? how willing or able are they to talk to each other? africa is a country of huge amounts of engagement of talk that dates back to the constitutional negotiation and it is a culture of talking, not so much a culture of doing. there is an engagement, but fundamentally the governing ,arty, headed by the president who is the man of the moment in south africa, has an overwhelming majority and south africa. do what they decide
they want to do. they do consult around the covid effectively with opposition parties. it has become more difficult of late but in terms of economic reports, it is the parliament within the african national congress that will determine the government ability to implement reforms. here leadership is everything. ,t is up to the president president ramaphosa, to lean in and say this is the direction we are taking, these are the people i want to lead my administration, and if you are not on the ship i will get you is because this boat -- moving in a certain direction. i think he needs to be more decisive and take the country forward. he has his own political judgments on the balance of forces in his government and his party to take into account. strongest is probably
post covid pandemic then he was pre-pandemic. i would encourage and be hopeful he will lean in and undertake these reforms that he is promising. you talk about the business community leaning in. the business community has lent in when it has proved to be hard to deliver meaningful reform. south africa cannot progress without as tom, it cannot generate the kind of special zones they can beat with china specials -- the kind of zones to compete with china without scom. i'm struggling to understand how progress can be made without strong leadership. we see a series of people come through that business. all kinds of well-known businessmen. why is it not working? colin: the current ceo is doing a fantastic job.
the markets are aware of that and are encouraged by the moves he has made. in terms of the operations of his comrade, those type of issues have improved. they are still ongoing but they are not as crippling as they were to the economy. news -- themajor major noose around the neck of the government is the debt pile. it is effectively a business out of business. until that is resolved, they are not a going concern. as ias to bite the bullet suggest in this 10 point plan and take the debt out of escrow. i think this is now having the south african airways issue on the path to resolution the next
matter the minister of public enterprises has to grab hold of together with his colleagues the minister of finance and sort out once and for all. guy: an interesting lecture last night. thank you for being the details to us. colin coleman, senior fellow at the university and the jackson institute for global affairs. these are the final numbers. the ftse, the cac 40, and the dax lower today. we have the details of a big meeting tomorrow of the eu council. we have the cable at the top of the hour on dab digital radio in the london area. this is bloomberg. ♪
guy: i am guy with alix steel in new york. " on is "european close bloomberg markets. let's turn our attention to the tech landscape. earlier today we had the ruling on the privacy that could affect company such as facebook and the eu competition commissioner said the commission is looking into voice assistants such as siri and alexa. >> there is a risk markets could develop in a way that would harm consumers and competition. that is why we have launched this inquiry so we can solve the problem and take action before it is too late. guy: let segment this a little
bit. talking about an investigation into digital assistants. she will also focus on the internet of things. the other thing was the big rolling out of the european court regarding data and the transfer of data across the atlantic. in 2016 we had a problem with this. we now have another problem with this because the court has ruled against the data shield put in place at that point to cover how this data is transferred from one side of the atlantic to the other. didier reynders is the eu commissioner for justice. he oversees this and i am sure he is watching this decision with a great deal of interest. commissioner, thank you much for your time. we greatly appreciate it. the court went watch further than anticipated -- went much further than anticipated. was it a surprise? commissioner reynders: we were aware we would receive a -- inon of the court and
good discussions with our colleagues in the u.s.. today it is impossible to take and explain it is abiding budget. it is the highest court at the eu level, so we need to apply the decision in two parts. it is an invalidation of the privacy, so the decisions between the u.n. and u.s., but it is a validation of south growth.- of that is the most important instrument to exchange data between europe and the u.s. and many other partners in the world. it is a mixed feeling we have today. we need to continue to modernize to have a better approach in line with the gdp and the general regulation on the data protection. we need to continue to discuss with our u.s. colleagues to see
what is possible to do, to prepare a new decision in the next month or years. alix: have you talked to your u.s. colleagues? commissioner reynders: of course i have started discussion with my u.s. colleagues at the beginning of my mandate. i was in washington to discuss with william barr in january about the way forward. yesterday i had trade secretary wilbur ross. i have a new phone call tomorrow to see how it is possible to react together. it is clear that it is a buying decision. we need to apply the decision of the court and discuss with our u.s. colleagues to see what are the best possibilities we have to give a full application of the decision. we need to analyze and detailed the decision.
it is a very important document. alix: this affects over 5000 companies that have to send data through the u.s. and the eu. it will not be resolved overnight. what is the u.s. supposed to do as a plan b? commissioner reynders: i said we twosa valuation of order from the privacy chain. we are not the only ones to exchange data. it is possible to continue to work with the standout clauses. there are other instruments inside different groups. i'm thinking about the corporate rules. it is possible use different tools. with the u.s., what is possible to do? to see how it is possible to give an answer or organized better protection because i am in charge of the full respect -- for the eu citizens in europe and abroad and we need to be sure the protection we are given to the citizens about their personal data -- if you exchange
that idea, you have the gdpr, -- but if you exchange with the third countries out of european union, we need to be sure we have the same level of protection. we need to analyze what is possible to do, to have better a level of protection from the president of the economic forum in europe with the full compliance with the decisions of the court. we have since many years discussions about -- it is possible for better confidence for the eldest person to give the same level protection we are given in europe. commissioner, you talk about third-party countries. the u.k. is now a third-party country. does it have sufficient safeguards in place to allow data transfer as well? commissioner reynders: we need
to analyze the situation in u.k. and not take a unilateral decision from the committee about inequity. for the moment i must say we have two elements of appreciation. the first one it we try to understand better what could be the situation in the u.k. after january 1. is it possible to have information from the u.k. about a set of rules to protect the personal data in the case after brexit in the same way we are protecting at the eu level? it is the same approaches for all the different parties of the countries. the second element is we will analyze the different elements in the court today to see if there are some needs to apply different elements of the judgment of the court to the u.k.. that will be the same for all the different partners. first reading of the
decision is tomorrow in relation with the u.s.. at the u.k., the most important -- abouts to receive the way to organize the production after january 1. we are in discussion of that. you know there are many discussions between michel barnier and the u.k. authorities about the brexit solution we need to find. alix: the eu commissioner for justice. that will not include more indoor activities. alcohol can only be served to people if they are ordering food and there is still no walk-up bar service. reopening but with still severe restrictions based on what we have seen within the rest of the country. start arew cuomo will national advertising campaign for mask wearing. this is bloomberg. ♪
ritika: time for the bloomberg business flash. a look at some of the biggest business stories in the news. u.s. mortgage rates keep falling. the average fell to just under 3%. it was the third week in a row rates have set a record low. thend for homes propped up prices and help the housing market hold up better than expected. -- bloomberg has learned the ride-hailing service has discussions to raise $500 million. the new funding round would give the freight business a standalone valuation of four business -- of $4 billion. uber freight operates as a broker, connecting truck companies with shipping companies. that is the latest business flash. guy: breaking news on the ecb.
during the press conference after the repaired statement which had to be agreed by the governing council, christine lagarde talked about the idea she sees the ecb using the full. pepp program in all of the money available. apparently not everybody is happy about that and apparently there are grumblings within the governing council amongst officials that they did not sign off on that and they do not agree with it. it highlights the tension that exists within the ecb about what happens next. north-southed this disagreement that exists and how far european program should go. alix: it was several governing council members. they wanted to include a line expressing competence at the most recent forecast as realistic. during her oppressor we did see -- during her presser we did see
the bit into the bond market continue in italy meeting investors liked it. guy: absolutely. this all ahead of the big meeting tomorrow in brussels at the council meeting on the other set of the rope from the commission between european leaders. it is a big day for europe. we will what comes out of it. will it be a 750 billion euro rescue plan? alix: looking forward to that. i will be here to take over that. guy will be on vacation. do you fish? we will talk about that later. coming up on "balance of power" david westin will be speaking to nancy pelosi on bloomberg radio and television. ♪ it's pretty inspiring the way families
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welcome to "balance of power" where the world of politics meets the world of business. i am david westin. later we will have an exclusive talk with nancy pelosi. right now let's check on the markets. they are coming off, but the real story is the big tech losing its luster. abigail: a big tech continues to lose its luster. over the half -- over the last few days we have seen a healthy move into some of those recovery and reopening cyclical sectors. we have seen the mega cap text stocks slide. we have the s&p 500 down .6% breaking its two day rally. morgan stanley put up a tremendous quarter, beating revenues 21%, better than the best quarter ever. really great performance. amazon down for the fourth day in a row, the first time we have seen that since may. that is a case of too