tv Bloomberg Markets European Close Bloomberg February 12, 2021 11:00am-12:00pm EST
guy: friday afternoon, live from london. i'm guy johnson, kailey leinz is in new york. we have what you need to know out of europe this hour. the u.k. economy has the biggest drop in output in 300 years, but you'll continue to rise. the market prices have a vaccine driven bounceback. this is mario draghi after winning the backing of the party . and russia says it's ready to break ties with the e.u. over sanctions. the bank of russia supporting the ruble. let's talk about where we are with the markets. equity markets a little bit are up by half of 1% in europe. it's a mixed europe between the markets. but broadly, we are higher.
we are also what's -- watching what's happening with the u.k.. steepening continues and the biggest moves are coming. you see that in the u.k., germany, and the united states. but the u.k. does have a sharp bounce back. and russia, look what's happening with the ruble, down by 2/10 of 1% with talk of sanctions and the bank of russia keeping brexit on hold as shank -- sanctions come in and the ruble comes under pressure. kailey: we have a three-day weekend in the u.s. and not a lot of action. the s&p 500 is fractionally higher, volume is below average. we were talking about the sticker -- steeper curve, the 10 year yield is up to basis points. the dollar was stronger, but it's getting back some gains and helping out commodities, gold is off the lows and big -- good
point is actually higher. as a story of volatility for bitcoin right now. guy: let's get back to the british economy, it has not seen a slow down this bad since 1709, but there are positive signs in the fourth quarter. >> last year our economy experienced a significant shock. and there are signs of resilience overwinter, but many families and his misses are experiencing hardship. guy: the chancellor is joining us now, it's clearly grim but december's numbers have indicated a bounceback and the vaccine program has been on the take. and the move in the market over the last few weeks, we have seen a doubling of yields at 25 basis points, nearly 60 now. the pound really rising stock.
it is the market pricing into much optimism? --in too much optimism? bilal: i don't think so. [indiscernible] we did have some terrible numbers for people, but at the same time they were slightly better than expected. the economic weaknesses associated with the second wave in the u.k. and it was not as bad as the thought. importantly, the uk's very involved in the vaccine rollout. more of the population than anyone else has been vaccinated and by anyone not -- and are estimates -- our estimates are significant.
in the vaccines have generally been on the -- side. and it's quite powerful with the high yields. kailey: i'm glad you brought up the bank of england because the chief economist wrote in the daily mail saying that you could see a year from now annual growth in the double digits. his negative rates going to remain in the toolbox and never to be taken now? bilal: that's a fair point, and how they are in terms of double digits u.k. growth. it's very unlikely that negative rates will be used in the u.k., but they are talking about other tools. i think in the end, given the expectations of the growth, it will be hard to use justification for negative rates. they are much more likely than they were and they will need
additional -- in conjunction with vindman fiscal stimulus. guy:'s covid masking the negative effects of brexit -- is covid masking the negative effects of brexit? bilal: in some ways it is. covid has a large part of the economy shut down. in some ways it allows the u.k. to perhaps reengineer itself more aggressively than it would otherwise. the critical thing for me, from a structural perspective, is that would covid has done, it has shifted a lot of activities. that fluidity and flexibility makes it easier, in some ways, to adapt to change. on the other hand, it's opened up more possibilities of adjusting to the new world after covid area -- covid.
kailey: i take your point, but we are seeing some messiness, like in northern ireland. i wonder if the optimism around the federal vaccine rollout is misplaced, given that brexit is structural even once the pandemic is taken care of. bilal: that's a good point and it's really a question of time horizons. in the next week or the six months, the swing variable will be the vaccine, that has a bigger impact on growth than structural issues around brexit, but a few years out the brexit negativity pans out. the big question, the other thing that covid has done is that his opened the door to much more stimulus him -- much more --. what's tough to say is how much
of the brexit issues are right now and what are transitional issues that we will see in the next six to 12 months over how you do paperwork and what you need to register or not register. in that way it is hard to determine how much of these are more -- in nature. guy: the u.k. government says holidays are illegal at the moment. i want to talk a little bit about what's happening with europe and the euro zone economy in particular. we signed downgrading of economic expectations by the commission earlier on this week. i'm wondering how problematic the data will be out of europe if holidays stay problematic and u.k. tourists don't derive. if the german tourists don't derive to italy, and spain, and greece. are we heading for a problem later this year? bilal: yes, absolutely.
this is a big challenge for the eurozone. tourism is not the only driver of growth but it is an important driver for many southern european economies. so anything that could lift those restrictions will have a big impact. so far we have seen a relatively slow vaccine rollout. paradoxically the euro area has done quite portly -- poorly. that makes it harder for the tourism industry to recover. that means the euro zone will be more reliant on external drivers like chinese growth, which will be a bigger driver for growth in the coming six months. there's also an issue about the disruptions to the tourism sector will impact the methodology or quality of the
data we are seeing in the euro zone. whether it's inflation or otherwise. that is something that could be more of a headache. kailey: do you think the divergence between what's happening in the u.k. and europe and the u.s. is fully priced in? bilal: that's a good question. i think what you are seeing -- first, there has been a correction lower in the euro in the last week. there has been some recognition of the divergence. you are seeing the pound generally outperforming the euro and there is that recognition. the challenge is that a lot of bad news has been priced into the european cycle. for the market, the market is trying to determine how much further to push the story. there's also the increase in u.s. yield, if that were to pick
up pace that could see the euro head lower. kailey: we will put a pin in that and carry on this conversation in just a minute. we will look at the u.s. market next with valuations. this is bloomberg. ♪ so you're a small business, or a big one. you were thriving, but then... oh. ah. okay. plan, pivot. how do you bounce back? you don't, you bounce forward, with serious and reliable internet. powered by the largest gig speed network in america. but is it secure? sure it's secure. and even if the power goes down, your connection doesn't. so how do i do this? you don't do this. we do this, together. bounce forward, with comcast business. want to save hundreds on your wireless bill? with xfinity mobile you can. how about saving hundreds on the new samsung galaxy s21 ultra 5g?
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it all. abigail: froth, all the liquidity sloshing around in the system is showing up in assets across the board. beyond the reddit craze and those huge moves, you can see this in bitcoin. since last may, bitcoin making greater than 20% increases each month. right now, month to date showing a gain. if we turn to the stock space, it's on fire, incredible. last year they raised $81 billion five times. stocks on pace at this moment to raise double ipo's. so this continues for these blank check companies. speaking of hot ipo's, this is
the white line, ipo stocks, up 145% since last january on huge volume, really outpacing stock indexes, gold, the dollar. and one ipo in two days was up more than 80%. if that's not a sign of exuberance i don't know what is. guy: so many examples. thank you. some breaking news. it's being reported by the cdc, according to governmental sources in canada, air travelers landing in canada will be required to quarantine in a hotel at their own expense. that will start on february 22. that's according to government sources and a similar story is being rolled out here in the united kingdom. it's going to be interesting to see how easily it will be --
with the government struggling to get hotel rooms lined up. getting to the issues of bubbles and froth, we bring back our guest, what do you make of the markets at the moment? bilal: i think many people are looking for correction. that they are suggests that we will see more upside going forward. while there is lots of concerns about the valuation and frothiness of the market, my sense is that the market is not fully invested in stocks. when we look at hedge fund investors, they appear to be underweight if anything. there's probably more scope for going up six feet, rather than a correction. kailey: how long can that last? a lot of the finger gets pointed at the liquidity in the system. that does not look to change anytime soon.
how long are we going to see this? what would stop it? bilal: for the next three to six month see continue to see aggressively hire equities. you have a combination of large fiscal stimulus from the u.s., we have the biden package and all of that will go into the economy in the next three to six months. and we are at the point where we have this inflection point in growth. things are weak because of covid but we know we will see --. when you have the space for that kind of rapid increase, it's hard to correct lower in that environment. as you go towards the end of the year, you have this jump up in growth and at that point fiscal stimulus is starting to die down. that's were equities with more vulnerable. guy: there was a chart floating
around earlier on showing that only 40% of u.s. companies with market valuation greater than $250 million in market cap -- as yields have gone lower, companies with no profitability or delayed profitability have surged. tech is obvious, and if we start to see yields rising and rising sharply, how do you change the calculations around those companies? how big of an effect does this have on broader valuations? bilal: there's a strong case being made that those yields have justified higher valuations. when you are seeing rising yields, you are also rejecting
the fact that growth will pick up. overall, equities should do well. i think what high yields do is they tell you the mix of equity outperformance. i think high yields what have the biggest impact on mega tech companies like google and alphabet. companies that have the growth component but also the income component and have done well in the -- in the environment. and there are tech companies that don't have those profitability's, that's less clear whether high-yield will be negative for those. they are betting on some kind of big technological revolution going on which has come about through covid. so software companies and so on which should benefit in an environment where you have widespread absorption of tech. that's different than what's
linked to higher rates. i think the bigger implication is these bigger tech company starting to underperform relative to other tech companies. kailey: biotech has been targeted by the reddit day traders that's been taken over, but another area where you see the rabid buying is bitcoin. you see more institutional players talking about it, saying they will accept it. what is your take on bitcoin? >> a market like that which has gone up so much, this could be the bigger it -- the beginning of a higher move. all the talk of bitcoin is making the dollar -- in reality it's an investment. the reason people are buying it is because it goes up a lot. the critical thing for me being that early on with bitcoin, it
was really a niche market for computer nerds, in essence. now it has institutional acceptance. and there's a bandwagon effect were more institutions are starting to absorb it. we are in the early stages of that. increasingly you will see mainstream organizations adopt bitcoin which will lead to bigger demand for a market with very limited supply. there is much more scope for bitcoin to go higher. guy: when the correction comes, and it will, will bitcoin selloff with everything else? what will be protecting my portfolio when it comes? bilal: i think when bitcoin corrects it will be at the same time as many other risk markets correcting as well. i think in that environment, and i should add that there's a strong correlation between the tech stocks and bitcoin. that environment, in the end, a
conventional safe haven will be bonds. which will rally. you can also see gold, traditional gold performing well , gold has struggled somewhat in recent months because the yields have started to pick up. you can see golden bonds starting to pick up with the correction. kailey: thank you very much, happy friday, enjoy the weekend. ♪ when you switch to xfinity mobile, you're choosing to get connected to the most reliable network nationwide, now with 5g included. discover how to save up to $300 a year with shared data starting at $15 a month, or get the lowest price for one line of unlimited. come into your local xfinity store to make the most of your mobile experience. you can shop the latest phones, bring your own device, or trade in for extra savings.
makeup category with weakness persisting. the ceo of l'oreal telling us that he expects this will return to growth this year. >> in china, where the confinement stopped and people resumed their normal life, the consumption of makeup and especially lipstick boomed. so i'm confident that when the pandemic is gone, the there will be a time when people enjoy the stability to celebrate and socialize again and the consumption of makeup, and especially lipstick will really boost the sector. the business has been really down and we have been able to demonstrate in quarter three" or four of last year that even with resale -- retail down, we have been able to grow the business
with growth in q4 with difficult retail. we will be able to grow our business even with troubled retail in the first few quarters . and when it's back it will just be an additional element of growth. kailey: that was the l'oreal ceo speaking to us earlier. you have to wonder, we were talking about how you can't wait to go to a pub. but i would love to put a full face of makeup on and go out somewhere. i just wonder if the rebound will be as big as l'oreal thinks. guy: that obviously does not apply to me, i only wear makeup here.
but the pent-up demand, my wife, everyone, they are looking forward to going out. there's going to be a huge amount of demand initially when people can start socializing. the athleisure might be going in the bin. i think people will be willing to spend to make themselves look good again. kailey: like the roaring 20's, a fiesta of makeup and fragrance. guy: absolutely. we will talk about european stocks with the close coming up and what the week will look like as well. here the closing numbers, the dax is a little bit above performance. this is bloomberg. ♪
positive for europe and a positive session as well. a whiff of inflation but a strong smell of it in the bond market where the curves have steepened up on both sides of the atlantic. certainly very true here in europe. the stocks finishing here at 6/10 of 1%. positive on the day, also positive on the week. the front-end of the week a much more cautious approach but we have seen another positive week. let's talk about how this prices down from an individual market point of view. this is what the story looks like for the ftse, dax, and cac. the dax has been dragged little lower. astrazeneca has done well today, unilever had a solid day as well. and we were talking about l'oreal a little earlier on.
let's take a look at the u.k., this has been one of the stories, a big steepening of the u.k. curve, but i higher curve -- but a higher curve. a few weeks back we were at 25 driven partly by the bank of england and the vaccination program but not by current data from the u.k.. but a december balance with the u.k. economy getting more resilient with the lockdowns. if you open up driven by the vaccine story you could get a positive story later on and the chancellor alluded to that. let's take a look at italian yields, we have seen this move lower. we are gonna talk about mario draghi in just a moment.
this is the grr function. technology has outperformed but i think that's largely driven by what's happening with the chip sector. so you exclude that a little bit but basically doing well, industrials doing well, more of the reflation at the top end of the story here for europe. utilities are right down there at the bottom. that tells you a lot about what's happening. there is some of this evidenced as the stock story unfolds. that's the picture here. let's talk about italy. kailey: first i want to bring some breaking news, janet yellen has been speaking to the g7 and talks about president biden's commitment to multilateralism and stressing more fiscal
support for recovery. still trying to sell the 1.9 trillion dollar fiscal aid package. also talking to the g7 about climate change. we also got breaking news in the last few minutes that mario draghi, who just got five-star backing, will be meeting with the italian president. that's happening at 7:00 p.m., about 5.5 hours. let's bring in our correspondent, what happens next? >> as we have just learned, the prime minister designate is going to meet the president who appoints ministers and prime ministers. so the president has an hour where there is no government. we will suppose that draghi will go there and present the
president with a list of ministers. we hop -- we had stories earlier that the chief executive officer of an italian aerospace company will be in charge of the energy side of the economy. that's as much as we know so far. guy: so certainly bringing in expertise from outside into the government. which i guess 50 technocratic name that will be ascribed. how will he balance the various parties in terms of cabinet designations? alessandro: so far he's managed to get the approval of almost all parties, which is testimony to the power of persuasion of
draghi. only one far right party says they will not back him. but the doors open to vote in favor of measures. this means he has a lot of options and if you need to make difficult decisions that will displease some of the parties, he will still have parliamentary majority. kailey: i'm going to correct myself, this meeting will be happening in one point five hours at 7:00 p.m. italian time. i miscalculated in the breaking news. how is this going to change the game when it comes to euro politics? draghi said that he wants to make the euro zone budget a policy priority, what is the reality of that happening? alessandro: the reality is that he's been saying this for a long time. even before he became ecb president. but now after the pandemic, this
is much easier policy proposition. the e.u. has decided to unveil a big stimulus package financed by common debt to support the economic modernization of european countries. with draghi at the helm in italy, if italy manages to deliver on the forms, it's much easier that this could be permanent in the near future. guy: there was pushback from the bund today, thank you very much. let's turn our attention to what's happening in russia. the foreign minister warning that his country is ready for --
with the european union at the block imposes sanctions that damage russia's economy. let's bring in our correspondent , how seriously do we need to take this? the war of words between russia and the european capitals has been escalating. does this stay with a war of words or is it more serious? >> i think you are spot on, it's not a new story, but it is certainly an eye-catching escalation. ever since germany and certain other european company -- countries announced in public that they had determined that alexei navalny had been poisoned with the nerve agent, and they imposed some sanctions on senior russian officials, at that
stage, russia began to speak about the -- through europe with normal relations being impossible. this is really just an escalation, as you mentioned. will it come to anything practical? i think not, my reason is specific. you mentioned just now that it was specified that sanctions which would trigger this retaliation from russia would need to be the type of sanctions that threaten sensitive sectors of the russian economy. like what trump did in 2018 when he sanctioned a russian alumina manufacturer, which would have cut russia out of an important
global supply chain. in the end, the u.s. government had second thoughts and reeled back from that but that's another story. sanctioning officials as political ritual. i think nothing very practical will come out. kailey: given the uncertainty and how things are escalating, how investable is russia right now, given the geopolitical uncertainty? >> i think the root cause of the uncertainty in the marketeer's him -- marketeerism, we just had to look at the ruble exchange rate, the ruble is two-week -- too weak. that's all you need to know. the root cause is domestic politics in russia. putin era -- the putin era is
coming to an end. this creates tension. and i think this will be a period of continued heightened risk. but in economics there's always a flip side. the flipside here is that a week ruble -- weak ruble is that the russian budget gets a windfall. that's very good news for the russian budget and not only the russian oil and gas companies but all russian exporters. so you get a heightened risk award -- risk-reward picture. we saw with the trump sanctions and we are seeing it again now. it's not for the timid, but for
those who have the appetite, it's interesting. guy: do you think -- could be forced to raise rates to defend offering up the value of the ruble? or could she find herself in a situation where a week -- weak ruble is advantageous? >> inflation is at 4% and up until now she has enjoyed unequivocal ball fiscal backing from president putin. and there's political pressure which could make that waiver and threaten the independence of the russian central bank. and against that, and overly weak ruble causes some inflation pressure.
especially on food. but on the other hand, if the big developed markets are busy doing massive expansions, you don't want to have too much carry interest in a currency like the ruble where you have an orthodox central bank. they don't want to do too much. the next rates will be up, not down. it won't come quickly. kailey: when will that happen? guy: it won't come quick -- >> it won't come quickly. i think the central bank of russia will tolerate the higher inflation you're seeing now for a time. this is not an exchange rate
targeting central bank but it will not want to risk comparing the supply side more, which has long-term inflationary effects. it's going to tolerate higher inflation which keeps the ruble a bit weaker. so until the russian parliament election, at least. guy: thank you let's take a quick look at where we are at the end of the week here in europe, a little higher during the auction process into the final numbers, the ftse 100 up nearly a full percent. the dax is underperforming, the cac up by half of 1% but u.k. assets have seen a huge move today despite really disappointing data. we will discuss that in more
ritika: this is the european close, coming up, marcos samuelson at 1:00 in new york. this is bloomberg. ♪ ritika: let's check in on first word news. the biden administration is changing the way the u.s. handles asylum-seekers, slowly admitting those who were turned away by the trump administration under the so-called remain in mexico policy. it there's an estimated 25,000 migrants waiting at the southern border. donald trump reportedly was sicker with the coronavirus than anybody publicly acknowledged. according to the new york times, it was so bad that officials believe the former president
would need to be put on a ventilator. he was said to have very low blood oxygen levels associated with pneumonia. democrats of spent three days trying to show why donald trump should be convicted over the storming of the u.s. capitol. now it's time for trump lawyers to make his case. they say that one of the former president's lawyers missed the democrats video presentation using them of using it for entertainment value. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am rich can cooped up -- ritika gupta, this is bloomberg. guy: canadians now confirming that there travel hotel quarantine room will come into place on the 22nd. it's also being revealed that new york restaurants and bar closings will be extended from
11:00 on the 13th, it used to be 10:00. it doesn't help with brunch. kailey: but it does help restaurants. if you can get an extra hour of sales, that helps when it comes to the bottom and top lines. 25% capacity is not enough and the extra hour could help just a little bit. guy: and let's move on and talk about what's going on in the world of crypto and especially investing. -- has been known as a disruptive force and has recently been making headlines as a superhero for the robinhood crowd. he spoke to us exclusively on bloomberg front row. ♪ >> i think what gamestop showed was the narrative fallacy on
wall street. i think for years there was these folks that sort of were -- these wizards behind the veil. they had a way of conducting themselves that reported to be intellectually superior, but in reality, that short showed that they were prone to the same poor decision-making and broken systems and technology that everybody else has. i found that kind of funny. it also spoke to the fact that we really have not looked closely enough at the systems that were broken as a result of 1998, in 2006, and we are looking at the same problem to
repeat itself over and over again. that is what angered me about this as well. on the backend of it, i felt like these two worlds collided in a way where i doubt that in the final analysis there will be any conclusion of any kind. but just the stench of this whole thing goes to show you, back to what we were talking about before, about how difficult it is for normal, everyday folks to have access to any kind of return. if you break down the capitalist philosophy, they are fundamentally stuck in this cul-de-sac of always being labor. and always being out of the ownership of capital and the ownership class. and this was going to make all
the things we are dealing with a lot worse than they are. kailey: on thursday, the u.s. house financial services committee will hold a hearing on that reddit driven strauch rally -- stock rally. there will be --, david westin joins us now. who's under the most scrutiny? reddit? robinhood? david: all of the above. there is a wide disparity of views on capitol hill right now. some informed and may be some not as much. we had an odd coupling of aoc and ted cruz condemning robinhood for suspending trading . but also a lot of questions about if anything illegal went on. and it reddit, i think they will look at that as well.
guy: what the objective for politicians? why have such high-profile hearings? what do they want out of it? david: the objective for politicians in the united states is to get reelected. so what can they say, what soundbite can they have planned home for the home audience that makes them with good? you just heard, we are on the side of the little guys, we are for the workers out here. others say no we really want to protect consumers who are being hurt by this. there will be a range of views depending upon the constituenc ies. kailey: what can the house of representatives do? isn't this up to the sec? david: that's a good point and most people who know about the sates premature. we have to find out what happened. the sec is looking at that, and the department of justice is looking at things like were
current laws violated? was there inflation in the market? were there other factors that figured into this like the pay per flow issue? others are saying we should have no more anonymity in social media devices, you should know someone has a dog in this fight before they take a position. there is a wide range. but the work will be done by the sec. it's up to congress to change the laws and that will be tough. guy: absolutely. gamestop feels like so long ago already. already in the rearview mirror. david: moving on already. guy: it moves on so quickly. david westin, looking forward to coverage on this next week. david will be coming up very shortly with balance of power. thank you very much.
guy: a three day weekend coming up for those of you watching in the united states, we will be back here on monday in europe. but kaylee, a lot of things are happening. -- kailey, a lot is happening. kailey: it's a big eco-day on saturday, and everybody will be watching inflation numbers. we will have it all covered here on bloomberg tv. that wraps it up for us, coming up, senate majority whip dick durbin will join balance of power. happy friday. this is bloomberg. ♪
headquarters in new york, welcome to "balance of power." i'm david westin. the impeachment trial of donald trump enters its fourth day, with the end in sight, as the president's defense lawyers present their side of the story. we are looking at ending as early as tomorrow. we welcome now kevin cirilli. what we expect to hear from the defense today? kevin: not as much is what we heard from the prosecution. it is going to be about half the time, i am told from sources staffing on the capitol hill. the former president's attorneys are going to lay out a constitutional argument that, number one, they say a former president cannot be impeached because he is no longer the occupant of the white house. secondly, they are going to point to this notion that he in no way wanted there to be deaths on capitol hill. all of this comes as the current