tv Bloomberg Markets European Open Bloomberg August 12, 2020 2:00am-4:00am EDT
the former california attorney general because the first african-american woman and first south asian american woman on the ticket. big revamp. they will exit all non-european corporate banking activity, and they forecast long-lost -- loan-loss provisions at 3 billion euros for the year. we will speak with the cfo of abn amro. let me get to some of the breaking news we are getting here from the u.k.. we have u.k. gdp numbers coming through. we are looking for the month of june and for the quarterly figure. we have seen a rebound in the month of june at a .7%. that was -- 8.7%. that was ahead of the estimates. that's the rebound for june. a rebound was expected. quarter coming in at -20.4%. that was with an estimate of
around 21%. if you look at the year on your number, it's similar. it's the extent of the losses that we saw in terms of economic activity in the second quarter. we look at things for a year on your number. officially what we already knew because of the u.k. in the session. saw the u.k. economy contracting the first quarter. we then saw the weakness of the second quarter coming through, as just mentioned. 22%ad dropped at 20%, or looking at the year on your number. the rebound confirms for june to the extent that we have seen that 8%. the lossesextensive that we've got here. will we see any rebuilding of the economy in the third quarter? how strong will that rebounding be, and will there be any slowing? we will get to the markets. we will get their thoughts on the u.k. data. matt joining me from berlin.
we are under one hour away from the equity market. at the end of the u.s. session. what do futures tell us now? some redstill see arrows for futures here in europe. at the european equity index futures and you will see that they are, for the most part down. nifty futures gaining a little bit, but less than 1/10 of 1%. and euro stocks are both down. if you look at u.s. features -- futures, gains are there. maybe investor still have not thered out what happened at end of yesterday's trade. they thought it was a fluke. as a result they are buying futures in today's trade. so you do see a little bit of a mixed picture there. but get into our markets cover with laura cooper, our bloomberg mliv macro strategist.
she knows what happened yesterday at the u.s. close. was so. equity trade positive and then turned around at the end of the session. what happened? >> what we saw and price action the fact that we had these price expectations in the vaccine hoax. the news out of russia. we also had a surprising the germanming from sentiment survey, but then we saw the gpi. it really had this treasury selloff in them we saw the reports that we were going to see the stimulus still may come out of washington. cyclical shortly unwind. anna: we look for the european markets to catch up or catch down what we saw with the u.s..
what about the u.k. data? it seems like some of the data does not touch the sides in terms of the market, it seems to be moving at such a pace. you can see that in the days we have it we have a rebound of 8% in the month of june, which means we know how dire things were in april and may. did the u.k. gdp move a dial? that we are seeing this come in line with estimates is not that surprising. what is interesting is looking at the details behind the headline figure. that is more concerning for the outlook ahead. when we look at private consumption that looks at consumer spending and the client more sharply than expected. while the estimate for the 20% drop in the corner is in line with the estimates, the boe is banking on a rebound in three
and beyond to support this recovery. what we are seeing is the fact that households are having this elevated level of precautionary saving and they are unlikely to tap into to support the recovery. we also have the unwinding of furlough schemes and the u.k. that are going to challenge the jobs recovery ahead. yes it is a might with estimates, ultimately this does still paint a picture for a sluggish pace of recovery ahead. that thistant to know u.k. collapses much larger than most other major economies that are falling around 10% in the second quarter, comparable basis looking at germany and the u.s., for example. laura, thank you for joining us. laura cooper, bloomberg mliv macro strategist out of london. bloomberg's first word news. top stories from the terminal. we go back to london. democratic presidential candidate joe biden picks
senator kamala harris as his running mate. black woman and first asian-american on a party ticket. she was known as an aggressive campaigner. legal background as district attorney of san francisco and then california's attorney general. adviseruse economic larry kudlow is dismissing concerns the tensions may jeopardize the u.s.-china trade deal. he said that china is substantially increasing american goods. the deal forced a trade were between washington and beijing, but the relationship has deteriorated. the explosion with united nations is creating a crisis. it will ship 1500 thousand pounds of wheat. the blast on august 4 tour through major grain silos in the capital, leaving the country with only six weeks of flour. activist jimmy has been released on bail.
he was arrested monday under the city's new national security law, accused of polluting the foreign forces. it comes as china plans to suppress the city. global news, 24 hours a day, on -- powered byight more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. laura wright in london. up next, corporate finance outside europe. in a major restructuring of abn amro. we speak to the cfo next. this is bloomberg. ♪
50 minutes until the start of the cash equity trading day expecting to catch up with some of the losses we saw only in the day. let's get to the story around european banking. announced a revamp of their banking. they are planning to ask that all corporate outside of europe. i will drop its trade-in financing operation. they expect total loan-loss provisions of the year to rise to 3 billion euros. to discuss the numbers and the strategic shift, we are joined now by the cfo, clifford abrahams. very good to have you with us. we will talk about all of these things, the strategic shift and what's happening with provisioning. if i can stop -- start with a low loss provisioning, what is the trajectory for low loss provisioning? do you think we have passed the worst? what does the visibility look
like? all loan-loss provisions in q2 were around 700 million. which is a decent amount, which is why we break even in q2. those provisions were down on q1 and we expect him p.m. in's in the second half of the year to be below the first part of the year. it's possible we peaked for this year. we expect impairments to be elevated next year, but likely down on this year. we are hopeful we have seen the worst. i wonder about the investment bank performance in the quarter, and your plans for the division for the unit in the future. our corporate bank outside europe, a tough quarter. of those provisions, that 700 million within our corporate bank and a lot of that was in our global business, our plans
about business going forward outside europe. we tend to wind down that business. that's about 10% of the group. that reflects our decision to focus the bank and the corporate bank on our home market. group for de-risk the the moderate risk profile. we want to line the whole group to a common strategy. we work closely with our other businesses here in europe. we will invest and grow those businesses. anna: more focused on the european business than. selling theider parts of the business that you will take three or four years to wind down. that business is around 10% of the group in terms of capital. work with the client and take our time and what is still
a tough environment to wind down the business. we will do that to optimize the value of the group to do the right thing for our clients. we expect that wind down to be capital over that period. largethe civ had very losses on individual clients recently, clifford. amros it possible that abn was involved in so many write-downs, and what are you doing to improve control in that business? clifford: the environment has and we are a big bang that operates around the world. we have seen more than our fair share of issues. we have taken a good hard look at our risk appetite across our business is in the corporate bank and tightening up our risk appetite when necessary. some of thoseing businesses where we have seen elevated in the past. i suppose that you are
offering some of those non-european investment banking activities to satisfy european clients. assessment of whether this will damage what you can do in europe if you're ?ot able to operate clifford: we think it will have a limited impact. we will maintain our activities in clearing which is the top three globally. i will remain our global business. within europe we remain in the shipping business, which is an international business. the other business and other parts of the world are in you are -- europe and asia and they were prominent for other businesses. we are copying we can grow in europe. abn amro is under criminal
investigation by the dutch public prosecutor for lacking money laundering controls. can you tell us anything about how those discussions -- how that probe is going and whether or not it's possible you reach a settlement? clifford: it's ongoing. i have no further update. as you would expect we are incorporating fully with the investigation and we will update you when we have news. anna: i suppose that is to be expected. let me talk to you about the day-to-day operations of the business during the covid-19 pandemic. what does this mean for the way you are able to operate the business at the moment? what day-to-day challenges does it still present? clifford: here in the netherlands we have what we call an intelligent lockdown. a relativelyns is
soft walk that started to ease in mid-may. we have seen consumer confidence rising steadily since then. the government has been supporting the corporate and the private sector here with the banks. any spike ineen bankruptcies in the netherlands. we are cautious going into the winter, but it's from a health of an as government measures ease. i am optimistic that the worst is behind us in terms of health. we are clearly watching the economic statistics closely, but i am pleased to see the netherlands track records of resilience and out performing new england -- new zealand .conomy and is still the case we feel good about the netherlands and europe. oft: we are looking at video a retail branch. is the retail business going to stay the same or do you foresee changes, substantial changes for
the way retail banking is done? we see change in the past. in the netherlands we are a leader in digital for a the bank and our clients. we see a step change in that digital adoption over the last few months. we have around 100 branches in the netherlands. not that many for a population of 20 million already. we now really stepped up our video banking. almost all of our mortgage consultations are done through video banking and we are seeing our clients across the business, our private banking clients and commercial banking clients really like video banking. now that they have used it we don't think they will go back to the old face to the old face-to-face in the same way as before. think what covid has done is accelerated and build on past trends. built on past trends. talking tof abn amro
us about the shape that this is going forward, the impacts of covid, the provisioning we are having to do and structural change. at get back to the u.k. gdp story. the chancellor has commented on the latest gdp figures in the email. he said the u.k. economy is now in hard times and goes on to say many more will lose their jobs in coming months. clearly very cognizant of the way the treasury has sheltered many from the real impacts of a onto the has fallen u.k. just as they have in many other parts of the world. now we know the extent of that with the gdp numbers. -- gbtc -- gbp numbers. the forecast is for the month of june. as i came in at a rebound of a .7%, we saw -- 8.7%, we saw an
uptick in the pound. it was given some reassurance at the margin, except for what's going on in the u.k. story. a bump back above 130. here is laura wright. splitting its shares in a 5-1 exchange in an effort to make the stock wessex and said to individual investors. this comes as the carmakers surge pushed its valuation to around $250 billion. that's more than ford and toyota combined. trading will begin on august 31. air b&b is filing for a stock market listing in the next few weeks. it could start trading as soon as the fourth quarter, during the harshest lockdown as air b&b tumbles about 90% and they cut a quarter of the workforce in a bid to survive. by may the company was already seeing a rebound. that is your business flash.
picked senator kamala harris to be his running mate. harris is the first black woman and the first asian-american on a major party presidential ticket. once a rival for the top job, the california senator of indian/jamaican heritage and long been considered the front runner for the number two slot. and on capitol hill, there are growing fears that the stimulus stalemate could drag on for weeks. the key figures in negotiations have been spoken for days, and don't have any talks planned. the white house and democrats are still far apart on key issues such as state aid and the overall size of the relief package. joining us now is the senior .conomist these are two very separate issues. let me start with the stimulus negotiations, or lack thereof. it looks like that may have been behind the downturn in yesterday's u.s. equity trade.
what are your expectations for a u.s. stimulus package? i think a further major stimulus is rather unlikely, given the fiscal dynamics that we have been seeing in congress over the course of these talks. what's likely is two things. one, a series of continued, very births of fiscal stimulus through executive order from the trump administration. we saw a $100 billion package this week. although they are limited. several prominent senators have already called them unconstitutional. and then you are looking at more things like tax cuts and middle-income tax cuts. thethen the second thing is furthering of the fed. we saw the municipal lending facilities with a cut the rate
by 50 basis points, which helps the states with them bearing the brunt of the pandemic. it will help them hopefully securities. those are the two things we are assessing. i am pessimistic on the possibility of a grand bargain like what was done in march and april. i suppose the fiscal spending -- good morning to you -- the fiscal spending is something we pick up when it comes to other economies as well. thank you. just a short comment. we will get back to you shortly. our senior economist stays with us. up next we will talk about u.k. gdp numbers. britain in recession. the u.k. economy tracked more than 20% in the second quarter, outstripping all major european countries. we will talk about the country's outlook and the possible ray of light with the rebound in june on the year.it
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anna: welcome back to "bloomberg markets: european open." 30 minutes until the start of the european equity trading day. we have u.k. gdp. let's get to that conversation. more.k. economy shrunk than 20%. outstripping every major european company. they stripped britain in the first recession since 2009. the chancellor warned of many more job losses in the coming months. the senior economist is still with us. in terms of the performance of the u.k. versus the rest of seems to havek.
done worse in the second quarter than other european countries. but is that just because the lockdown fell more squarely into the u.k. second quarter, we were later into lock down so it did not hit the first quarter quite so much, but we are much more reliant on services in this country. what is it that is weighing on the u.k. economy? pierre: i think you are right. has to do with being two weeks away from the start of the lockdown. that being said, want any european economy has introduced --, there is an argument to be greaterfavor of the extent of fiscal stimulus we saw in many european economies, as well as the labor market that has benefited economies like has been aere there lot of part-time work that many
have. it's kind of putting an impact on things. i would put little thought in gdp figures at this stage. both because it is partly and because the brunt of the economy shock is still to come. it will come when it furloughs across -- sorry? a great are looking at full-screen graphic that shows and compares the u.k. furlough scheme at the top with germany at the bottom. i think the point that you are u.k.g is, schemes like the has in and day. that means a lot of those people will be fired at some point in the coming future. guess inest, -- october, 33% said they will fire
their furlough employees. those employees probably are not out on spending sprees, so the economy is weakened by that. , thisile, and germany covers a smaller amount of wages and it's nonetheless open-ended. it seems like it would be a much better situation for the german economy in the coming months than in the u.k. economy. right. you are i think you have hit the nail on the head. it's a question of short-term, artificial demand in the labor market. in the case of the furlough scheme versus more long-run flexibility and resilience in the longer-term. so once the short-term scheme expires, then you really have the worst of the real economy hitting. you mention that figure of 33% from the recent study. that to me suggests that the worst is still yet to come.
it's going to be devastating for small businesses, especially once the furlough scheme expires. there are calls to be pessimistic and you have to see that is making contact with the decision to delay things. and they are sort of reasonable justifications. you can also want updated forecasts from the u.k. for testing office. so the furlough scheme decision is a big juncture for the u.k. economy. what do you make of the unemployment picture? we had this warning from the treasury, from the chancellor that unemployment will rise and many more will lose their jobs. we got unemployment figures yesterday, which shows unemployment that we are already
dealing with in the u.k. what kind of rate would you expect? 9%are only at three point right now, but what kind of rate would you expect unemployment to peek at? pierre: we don't do unemployment forecasting. so i cannot put a quarter number on it. but i would suspected to get significantly worse when the furlough scheme expires. really appreciate your insight today. hopefully we can get you back on at some point in the near future. economist talking us through the differences in the economic programs throughout europe and earlier on his thoughts on the u.s. stimulus program. let's get the bloomberg business flash. these other top corporate stories for the bloomberg terminal. we go back to london and laura wright. the investor has scored a
$1.3 billion -- backing against brick and mortar retailers. in 2019 andaking it paid off in the first half of this year as the coronavirus led to even more store closures and more consumer shopping online. microsoft is delaying halo internet, the biggest videogame for the launch of its console. it's partly due to the challenge of working from home during the coronavirus crisis. the delay of the latest entry in the multibillion-dollar franchise may hurt sales of the new xbox series console. the international return of the for next year.it european and canadian regulators are wrangling over technical details and are not ready to follow the u.s., which could seen the return of the max as soon as october. a significant delay between the u.s. and other markets could damage the revival. that's your bloomberg flash. anna: thank you. laura wright here in london.
anna: welcome back to "bloomberg markets: european open." 20 minutes to go until the start of the european equity trading day. are european markets playing catch-up. a.b. index is one of the first global companies to feel the impact of the virus crisis. and the brewery in wuhan. but the beer giant is seen demand pick up as life inches that towards normal. told bloomberg that
his company learned valuable lessons operating in the pandemic early on. our close have one of to 40 breweries. we have a big operation in china. it's one of our top five countries. big brewery but it's one of many. everything in the country went through a lot down and shut down, consumers and businesses for a month and a half. and we started reopening and wuhan was one of the last to reopen for the lack -- real been. for the last two months everything is reopening. allything is pretty much open in our offices are back to normal for two months. china is way ahead. the same with karina -- korea. south korea. they also experienced covid is china did at the end of january.
wuhan a bellwether for global consumption? carlos: a think we learned a lot and china. andperate in all continents have a lot of business around the major companies. the biggest advantage was that we learned from china early on how to be able to operate, guaranteeing the safety of our people. understandrve and to in terms of their consumption. how to adapt our supply chain to the new reality. and when the pandemic started going to europe, africa and the americas, we had the protocols that were developing in china and south korea on how to operate. all we had to do was translate everything because you had to observe social distancing, for example, within the breweries. you had to work from home.
consumers now not being able to go to bars, restaurants, hotels, or travel. a lot of locations are migrating to the in-home location. with that, consumers are buying more in supermarkets and grocery stores. in termsa big impact of package mix and brand mix and delivery and distribution. agility was something we learned from china that was very key to navigate, given the fluidity of the situation. every country was a bit different in how the pandemic developed. and what measures governments took in different countries in terms of walk downs, stay home, mandates and how consumers also reacted. but they're learning in china was key for us to navigate in europe, africa, the americas. >> you just announced a record they are -- record beer sales.
what is driving this and is this sustainable? carlos: it's interesting you asked that. china was the first country affected. we did a lot of consumer research during the pandemic. questionaw is that the was, what would you like to do once the pandemic is over. what they told us is that they would love to go back to their normal life. so they would love to go to restaurants, travel, meet their friends physically. visit friends, family members and do the certain things. go to ballgames, go to music festivals. that gave us a little bit of an insight. the fundamental things that consumers are trying to do when they have free time, and in trying to keep their close relationship with family and friends are still very much deep inside of them and we don't think those things will change. was ceo carlos brito.
another company says reinstate to the financial forecast of 2020. it predicts that it's worth it's organic growth will be as much as 2% this year. the world's largest industrial biotech company has suspended april at then beginning of the year. novozymes predicted an organic growth of as much as 5%. through that you can see the effect of the virus. baiget.us now is ester she is novozymes president. me ask you how covid changed your outlook, other than bringing the numbers down from five to two. what has changed? ester: we are living in an environment that is different. many of us cannot have for seen a year ago.
the key to your question is the resilience of the gdp. and ensuring that we keep the top priorities pop on our lines. us to main priority for protect the safety of our employees. and then to ensure we keep a reliable supply to our customers and enabled them to transform our enzymes and microbes into the answers that the society needs. that goes to detergents from solutions to food and packaging and animals. covid has been having an effect. anna: good morning. having an effect on many parts of the business. can i pick up on your assumptions going forward. about various parts of the global economy going into recession.
most recently this morning, the u.k.. how resilient do you think your products will be when it comes to a tough spending environment that is recessionary? how much insight you have as to whether the pickup demand for your health products can be saved through tough economic times? solid we have seen a very 4% growth in the first half of the year. that comes through the resilience. we saw the downside, but we also see it changing under consumer economics in detergents that they are seeking for high-quality name brands. the way our solutions have higher components. in the washing behaviors with an increasing number of watches. we see it driving to the higher amount. it moving into
implementation of the strategy. it is critical for the humanity and human health. so we are going to continue to move ahead with our portfolio and make sure that we provide and keep to the users responding to the society need, even in the forecast of whatever that might be. have operations everywhere from china to brazil to the u.k., the u.s. and india and argentina. where are you seeing the youngest recoveries, and do see any kind of pattern so you think you can forecast what in the weaker regions? very flattering question. that's assuming i have an answer of when it will happen and if i
have an answer. i contained the areas where we andthe strongest volatility i see that as the driver in the low end of our established outlook in bioenergy. see theally where we decline in demand living for 30% decline. recovery, but we are also seeing it losing very fast. is probably the strongest we see across all of our areas. what about some of the businesses that did not fare so well or some of the sectors that you supply? here duringe parts the peak of covid? are you seeing pickup in demand? we just heard from carlos about the past record sales in the bear market -- beer market.
that is learned is that things change very fast in this unpredictable environment. country start to establish operations. we see what could be signs of recovery. that would be to hire bio enzymes for the provisions, but we have also seen things the climbing very fast. we are going to be there with our customers and ensuring that we enable them to respond to the growth whenever that happens. that was the driver of the 4% growth and that is the mantra of how we are going to continue to work. it's resilience, and agility, maximizing your presence and being close to the market. thank you for joining us. talking toresident
us after earnings. i want to bring our viewers headlines we are getting on china, in relation to the u.s.-china talks about the phase one trade deal. china says it's going to bring tiktok issuesand in these trade talks. up thes going to bring trump view, the trump administration view on tiktok and the order that it be either byd or closed to u.s. users september 15. the u.s.-china talks also are going to focus in on farm goods and the u.n. we at least know that as the u.s. and china go back over the phase one trade deal, they will look at issues like the currency, farm goods, as well as
the u.s. businesses of we chat and tiktok. interesting. we mentioned we chat and we will get more possibly within the next couple of hours. minutes away from the european market open. we will get your stocks to watch, including abn amro amro. we spoke with clifford abrahams about the changes. they will have major restructuring. more on that. ♪
you are focused on a range of subjects and banking is at the top of those with the news from abn amro. big restructuring at the bank. they are dropping their corporate finance operations outside of europe, as well as exiting their trading and commodities sector. their financing operations. it has been a drag on the banks profitability for years. the cfo saying they will cut one third of investment banking, and also the cfo saying there is impairment for potential fraud case in germany. might still be shares higher by about 1%-2% this morning. they did see a loss of about 5 --lion euros, slightly worst worse than the 2.7 million expected by analysts. , one of the big stocks to watch today. what about sunrise? an m&a deal. liberty global, the u.s. based
media giant will be buying sunrise global, the swift telecom firm for a value of 5 billion. it could put offerings at 110 swiss francs per share. that would imply a 27% rally from yesterday's close. i should say look out for free net to move on this. they own 20% stake in sunrise, which is selling as part of the deal. it will get 1.2 billion swiss francs for their share of sunrise. burger with the stocks that you need to keep an eye on. european equity markets are open. reflecting some of the weakness that we saw at the end of the u.s. trading day yesterday. nasdaq inches down by 1.7%. the dow and the s&p ended in negative territory. a stumble towards the end of the trading day. it has pumped up during the session. a lot of that was built into the european close. closing up by 2.2% in yesterday session.
anna: a minute until the start of cash equities trading this wednesday morning. stockss standoff, u.s. collapse at the close and cold tumblesbeen a -- in its biggest seven-day lossing years. written in recession. the uk's economy shrinks more than 20%, and outstripping every major european country. the chancellor warns of many job losses to come. plus, a big rebound. the dutch lender will exit all non-european corporate banking activities and its forecast loan-loss provisions at 3
billion euros for the year. what do the futures tell us? matt: futures are mixed, although on the continent, we see futures pointing down in , futures are higher. they are not big moves. -- .2%oint 2% in either in either direction so it looks like the market could still see a little bit of volatility in early trading. the global macro movers screen, this shows you a lack of volatility. these gray bosses -- boxes mean not much movement in one direction or the other and you see them across asset classes. the left-hand column is for live cash equity indexes and as they open up, you will see boxes popping in. they are all gray. we have some movement, the ibex is down .4% in madrid, the cac is down as well as the dax, .2%.
the ftse is up around .1% but it is not a lot of size in either direction with the exception right now of spanish stocks. european markets are opening pretty mixed after stocks in asia fell amid doubts over the timing of the spending package from washington and some position trimming in highflying sectors. that could be what happened in the u.s. yesterday, as well. live equity trade was up and into the close, it turned, possibly on stimulus concerns. joining to answer the question, the new investment management chief investment officer. what do you think, looking at u.s. stocks yesterday? that just investor concern this big stimulus package will remain elusive in america? to comment one
daily wobbles because i don't know really what drives the animal spirits on a day-to-day basis. i can say obviously the stock market is pinning a lot of hopes on continued monetary stimulus. that has driven the market to the height it has seen today and for i would expect that some quarters because the global economy will take a while to catch up. anna: let me ask your expectations of stimulus in the u.s.. needed by the real economy and to get us another leg higher in stocks, in terms of u.s. fiscal input? curt: in terms of fiscal input, it will be important to focus on the sme sector, small to medium-size. they are getting crushed in this environment. you have a lot of restaurants end ofs and the small
the service sector that are really struggling and i would really focus my attention in terms of fiscal packages on that area. big companies outside certain sectors are a mixed bag. you have airlines and travel getting hurt but other areas like tech, which are clearly doing well, and what we've seen is covid has accelerated trends in the marketplace. from a monetary policy perspective, i think rates are going to be looser for longer and they are going to continue to do a lot. makings only so much liquidity abundant is going to do. it has helped push the market higher. concerned some countries have handled the coronavirus crisis worse than others, and here it looks like -- we hear the u.s. has handled it worse than a lot of european u.s. equitylthough
indexes have outperformed european equity indexes year-to-date. ont: sure, it really depends the metric you are looking at in terms of who is outperforming. enters. clearly did not the early stages very well. we had probably a better more stable path forward if there had been a coordinated response early in the pandemic. as we have a hodgepodge of state actions in the united states, that allowed the covid situation to fester longer instead of getting squashed like in other countries. although economic activity was probably less higher than it would have been, it means it will persist for longer. we are not going to have a clean break that other markets have had in terms of a start-stop to the pandemic. anna: where do you stand on
gold? 1917. gold at people, linking get to conversations about what central banks are doing, fiat currencies, whether they are being devalued, and geopolitical situation means investors seek gold. where do you stand on the precious metal? curt: there is a divergence between myself and my team. i'll be the first to admit i've gotten it wrong. by team has had a substantial position on bulk and captured the bulk of this rally. has beenrs for that concerns over going dollar, which has been gold supportive. is i don't concern see the hyperinflation or the weakening of fiat money that you would need to justify shifting
to a hard currency or gold as a hard currency in terms of its focus. i personally don't understand the rally. i've never been a gold bug, but my team has and they've done it completely right. matt: it is interesting. yesterday, we had this debate. often we have this debate about whether or not we will see inflation. on two levels. on one level, will we see measured inflation? most people say no but the tail risk is getting much fatter. on another level, there are people who write to me every day they see inflation no matter what. the bureau of labor and statistics says. what do you think? curt: i think the inflation conundrum has been the central question for economists. by almost any traditional metric, we should have seen more disinflation than we have seen and there are pockets of
inflation throughout the economy, not least of which asset prices. toet prices have continued race ahead and largely, that is a function of cheap money. inflation, ifods you define it that way, it has been a real mystery and something that has allowed monetary policy officials throughout the world to maintain a looser policy than they otherwise normally would. i can tell you all the rules of the taylor rule or neutral real rate to the economy seem to have gone out the window and this has persisted for more than a decade so it is going to cause a lot of people to rethink monetary policy. anna: thanks very much. curt custard from newton investment management where he is cio will stand the program to talk about the u.k. seeing some reaction to the latest data out of the u.k. government bonds falling across the curve at the open. recession is confirmed for the u.k.
anna: welcome back to the european market open. 10 minutes into the trading day in europe, which futures suggested would be mixed and it seems with a bias to the downside. loses ground and the footsie fairly flat. the u.k. economy shrank more than 20% in the second quarter quarter, outstripping every major european country. it pushes britain into its first recession since 2009, raising questions of the handling of the pandemic. the chancellor warned of more job losses in coming months. gilts opened lower across the board. curt custard, newton investment management cio is with us. the market reaction we are seeing here, as we see abn amro , we see markets pricing in a small rate cut from the .ank of england it would seem money markets pricing in a 10
basis point rate cut in 2022 now. where is the market thinking moving around the gdp number? we knew it was going to be bad. what is the new information the market is moving on? curt: i never really know what consensus is likely to be but it seems the number came in slightly better than consensus and that could explain some of the movement. hesitant to focus too much on these quarter over quarter numbers because the base effect on these things because these movements are so dramatic is immaterial. when i look at economic recovery, gdp level relative to the precrisis peak. we are still a good ways off that, even with the rebound in july and june here in the u k i think we are still a long way. i share the chancellor's review
we will see more job losses when the furlough scheme ends. i think q4 will be tough. q phil -- q4 will be tough around the northern hemisphere. matt: we've got a great picture of wembley stadium, where people play soccer but also guns and roses played a legendary gig there in 1992 with brian may. the u.k. job losses could fill wembley stadium 2.5 times. you how manyws people have already lost their jobs. the ones that are set to lose their jobs, we've been talking about the fact that 33% of employers using the furlough are probably not out buying tv's and refrigerators, right? they are already saving money and scared. isn't this going to be worse for the u.k. economy then it will in countries like germany where we
have a program that goes on for much longer indefinitely? curt: i think you are right. i think it is going to be tougher here. it will be tougher in the u.s. as businesses try to realign supply and demand. as i mentioned earlier, the small to medium sized enterprises are getting hammered and i expect that to continue. lining isial silver there seems to be an appetite among governments to be able to extend programs or renew programs, but we haven't seen evidence of that yet. as it sits now without any evidence that governments are up or to continue to re- extend the furlough schemes, etc., i would expect q4 to be tough and consumer behavior to reflect than anticipated toughness so i expect us to see that continuing going forward. anna: with the shifts we are
seeing in the way consumers are spending or not spending, do you find it difficult to allocate to the u.k.? maybe not enough tech businesses, service sectors that rely on face-to-face, or is that outdated? do you find it easy or difficult to allocate to the u.k. at this point? curt: we try to focus on our themes. those are what we think the medium torkets, long-term. composition, you have heavy industry, oil, the banking sector, which is undergoing a transformation and these things don't lend itself naturally to areas of growth, where tech is one of those areas, by example. and we don't really allocate regionally. we allocate where we see the drivers to the global economy, but the u.k. as a region in the large-cap space isn't
particularly well-suited. matt: is there still a difference? obviously the ftse 100 companies aren't just catering to the you gig economy, right? these are very international companies. maybe they will move at some point but is there still a concern about brexit for you? although the covid lockdown action has made us forget, that has a due date at the end of the year. >> i think we're at the point where brexit happened, it is now moving on to the terms. i have never been one that was a massive doom and gloom person. i thought it was more of a political exercise than an economic one. i concur in c and interest rates will adjust and that is appropriate. i'm not too worried about nifty -- i'm not too worried about brexit going forward. if you look at housing prices, they started to rebound.
we would expect once covid relaxes and as restrictions relax, we will start to see an increasing in house prices going up and that means more of an indication about whether there is external fear of brexit going on. anna: thanks very much for joining us. curt custard, newton investment management cio. the will be continuing conversation on bloomberg radio, 9:00 a.m. u.k. time dab.us on london let's get a business flash with laura wright. undergoing aro is revamp. trade andop providing commodity financing altogether. it comes as the bank is trying to turn around its investment banking division, hard-hit by the coronavirus crisis. in a is splitting shares
5-1 exchange to make the stock less expensive for individual investors as the carmaker's recent surge pushed its valuation to $215 billion, more than ford and toyota combined. trading on the split basis was august 31. microsoft is delaying halo infinite, the biggest game for the launch of its new console, partly to the challenge of working from home during the coronavirus crisis. the delay of the latest entry in the multibillion-dollar halo franchise may hurt sales of the new xbox series x consul. that is your bloomberg business/. matt: that is laura light with your business flash. telco takeover. liberty global agrees to buy the swiss phone carrier sunrise in a $5 billion deal. details next. this is bloomberg. ♪
gains as u.s. futures point to the upside. m and a activity affecting markets, liberty global has agreed to buy sunrise communications in a deal that values it at $5.4 billion, 5 billion swiss francs. the cable giant offered 120 -- 110 swiss francs, a premium to the closing share price on tuesday for sunrise. for more, we are joined by the media editor in tokyo. what is the industry logic for doing the deal? > in a word, convergence. by combining these companies, that combines switzerland, which liberty owns, with sunrise, giving them almost a third of the market for the fixed broadband network. that allows them to compete in that space head-to-head with the com,s was, -- giant swiss
to compete with the cable industry. that is in contraction because a lot of television viewers want to jumped online, netflix, that sort of thing. a convergedunning telecom company coming you can benefit from that switch so that is the logic behind this. it gives you scope across all three of those major businesses. it is a pretty strong premium, given how shaky the economic outlook has been. why do they have to pay up so much? ise: i think part of it sunrise's share price had been depressed because this is a deal that had been conflict -- contemplated for another angle months ago. it was basically rejected when the idea was sunrise would buy switzerland, a unit of liberty global so now it is the other way around. you have the global combined sunrise and combining the two
that way. after the deal had collapsed, basically the share price had gone down. if you look at this from the point of view relative to they are about 7.5 that is similar to where you have the giant trading swiss -- six times so it is in the range of what telecom companies are worth. anna: thanks very much. the share price, i can see the premium. , media editor, joining us. happens to be in tokyo. let's get to the stocks on the move in the european session. 24 minutes into your trading day and this is the share price, up 9.8% for asos.
housebound shoppers are keeping more of what they buy, shopping online a big theme of lockdown. earnings, predicting organic to plusin a range of -2 2%. downgrade to the guidance they previously offered service stock is down by 4%. admiral, the infinite -- insurance space, hit a record as lockdowns cut motor insurance claims. fewer claims playing well for the bottom line at admiral. matt, why don't you weigh in here? matt: i'm just looking at the market movement, especially keeping in mind what we saw yesterday at the u.s. close. real concern that bled through to asia. they haven't hit european stocks. remember, yesterday european
stocks were up, so typically when the u.s. falls after europe gains, you say europe -- see europe and down to match them -- go up to catch them. you see european stocks that are still higher after a week or close yesterday. we see stronger futures in the u.s.. dow futures are up almost 1%, s&p 500 futures and nasdaq futures are up .75%. you do see, it does look risk on. coming up on bloomberg television, with covid crushing the tourism industry, what is it going to take to get people traveling again. we will hear from the ceo of booking holdings and the world travel and tourism council ceo, next. this is bloomberg. ♪
anna: welcome back to the european market open, 30 minutes into wednesday's session in europe and we are managing to eek out gains for equities, up .25%. u.s. futures pointing higher, helping us get over disappointment after the confusion yesterday where we saw weakness. the grr tells us the sector perspective. a focus on travel and leisure coming through in the program this morning. in the nextguests 20 minutes to talk about that. travel and leisure is the biggest losing sector.
interesting in passing because we saw a rally in travel and leisure yesterday so perhaps losing a little ground off of stocks that have gained the most. to the upside, more resilient sectors. not a particularly risk on rally. telecom, the biggest gaining and mende part of that story. restoring confidence in leisure travel, the view of glenn fogel. expressed confidence in the company's performance but was uncertain of how the travel industry will fare post-pandemic. glenn: certainly people are seeing better than the lows in april. certainly, things have improved a bit. that said, you are right. until we get a vaccine or effective treatment, travel will have some issues. things are better than they were, but we are all still far
away. let's face it, a half booked both -- hotel is not possible. people want to feel it is ok to travel and the thing that will help us get there is a vaccine. hopefully we will see something in the not-too-distant future. >> is the future behind you? is it better or does it plateau from here? what trajectory army on? been: a lot of people have talking about flareups and part of the world, places that have been fairly good but all of a sudden, coming out with more infections and causing lockdowns. you look across melbourne, some thehe issues, parts of world where things were great or very good and now not so good. even in europe, you are seeing a bunch of flareups here and there.
i think we will be on a bit of a roller coaster for quite a while. weil we get that vaccine, need that vaccine or some effective treatment because when you read these things, these terrible news items, when people are still getting ill and some people are not making it through their illnesses, it scares people and people want to feel safe. all of that leads to cash burn, etc.. you didn't have to raise any cash so far, you are cutting some of the worst force -- workforce. how many levers do you have to make it through until there is a vaccine? glenn: i think we did raise over $4 billion, so we feel pretty good about the $4 billion raise. we are feeling comfortable in terms of where our balance sheet is and we've been clear. we have no problem getting through this crisis. that said, what will the other side of the hill look like?
what will change in terms of the industry, and you are mentioning about business travel and business travel provides a lot of revenue to some of the big ofins, certainly the front the airplane is where people are paying big fares, helping airlines. will people be going on as many business trips? we are much more leisure oriented, so there is a silver lining for us because when there is a lack of demand, those people on the supply side are more interested in working with a distributor like us to fill up empty seats on a plane or empty room in a hotel. helpful to us, and we don't want it that way, but that is what is going to happen. matt: that was by johnson talking with the booking holdings ceo glenn fogel and alix steele. joining us now is gloria guevara travel and tourism
council ceo. gloria, what do you think about the necessity of a vaccine or some such treatment. what does the tourism industry need to see? a vaccine is great and important, but we cannot wait for a vaccine. we need coordination among countries so we can have a where we can have testing, contact tracing, and travel could resume. we need to learn from countries that have been successful containing the spread and reopening. countries thatin were successful, there is continued spread and when you look at cases like greece, for instance, iceland, where they were successful containing the spread and on top of that, a lot tracing,g and contact testing on arrival and protocols
in place, you can see the is on a greatavel pass. we need coordination among leaders and countries. unfortunately, you see decisions being made in silos. without coordination among countries and that is a bad thing for travel industry and millions of jobs that have been impacted. that is what we would like to see before the vaccine is available. anna: good morning. you can be successful as a country of fighting the virus but in a way, that is detrimental to the travel and tourism industry. i'm thinking of countries that have almost entirely shut borders or restricted travel. from your perspective, what is the best outcome for you? which examples can you point to, strategies that have done both, control the virus and allow
people in and out? gloria: one case that has been interesting for us to follow is iceland. another one i mentioned his grace. when -- greece. the number of cases is unbelievable. greece provides a test on arrival, if you are positive you are isolated. if negative, you download an app for contact tracing and move around the country. it is not a binary solution. we can have both with the right coordination. some countries like australia and new zealand didn't have a clear path for the reopening and that has been a challenge. you cannot live without travel because it is the backbone of trade and the economy, and that will be painful to recover. it will be more of a u shape than a v-shaped. airlines do you think
have been dealing with this thus far? my personal experience in flying, i've noticed not a lot of people were wearing masks properly and the plane, the flight attendants were hesitant to enforce the rules. had people sitting directly next to each other, even though you've just come out of an airport which constantly remind you to stay 1.5 meters apart from any other people. what are airlines doing to make things better? gloria: we believe wearing a mask should be mandatory in all forms of transportation. most of the airlines are enforcing wearing the mask. mask, 92%wear the to 96% of risk can be reduced. we believe the airlines have implemented protocols and those protocols are standard. there are some cases, isolated,
airlines not enforcing that unfortunately but i believe most of the airlines have been enforcing wearing the mask. same with the hotels. we have protocols with the knowledge we have acquired in the pandemic where -- matt: what about the seating? clearly, the seats in most airlines now are not large enough for your average adult passenger. ifall know that, right, and you are going to sit people directly next to each other so we are touching no matter what, is that still a good idea? gloria: the reality is the flights are not full. you don't find flights 100% capacity. you see a lot of flights 50% or 60%. you are right, it might not be a good idea to have someone next to you, but wearing a mask, sanitizer, protocols, the experts will tell you that will reduce the risk. not wearing a mask and having
someone next to you, of course you have a higher risk of spread. the point is where the mask, follow protocols, use sanitizer, and that will help you reduce the risk. experts are telling us three components. where the mask, follow protocols, wash your hands, use sanitizer, and distance. what size of industry do you think we will grow back to in terms of travel and tourism? business travel will be challenged because people see the potential of doing things differently. challenged bye safety concerns and people experiencing more domestic vacations. what can be your expectations of the size of the rebound in travel and tourism? gloria: let's remember that before covid, travel and tourism accounted for 10% of the global gdp. we are seeing strong domestic recovery for markets, but to
tell you the truth, in china, the recovery in business have been unprecedented within the space. wey are having a meeting -- did not anticipate and same with other countries in asia. at a ventures, culture, and business followed, but we will see a recovery in business once we see a strong recovery in leisure, we believe. matt: thanks for joining us. gloria guevara manzo, world travel and tourism council ceo, talking about what the industry needs to recover from this unprecedented drop. next, lebanon's government has fallen, but the next political chapter is still a ways off. we will be discussing what is next with charles hollis.
from the terminal with laura wright in london. morning, the u.k. confirmed it suffered the worst economic downturn in europe. gdp for the second quarter slumped 20.4%. it will raise more question over the handling of the pandemic. recovery is underway without putting june jumping eight .7%, but there are worrying signs the bounceback bake -- may run out of steam. joe biden has picked senator kamala harris as his running mate. she becomes the first black woman and asian-american on a major party ticket. aggressiven as an campaigner with the legal background of district attorney of san francisco and then california attorney general. hong kong's media tycoon and lai hasy activist jimmy been erased -- released on bail. he was arrested monday, accused of collusion with foreign forces. it comes amid fears china plans to increasingly suppress the
city. apple has been long critical of the city. 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. this is bloomberg. anna: thanks very much. laura wright in london. after last week's blast in beirut, lebanon's government has -- what heed but called a corrupt elite that sabotaged his government. nationt will change in a suffering a crisis. our next guest has experience in political risk and government relations in the middle east. charles hollis, falanx assynt and former commonwealth diplomat. good to speak to you. yesterday, we heard from a guest who said if there is political will, change can happen in lebanon.
in the lebanese context with the involvement of foreign interests and the mystic warlords, is there a will for change? charles: good morning. thank you for having me. think that is the key question. on the street level, there is a lot of anger and demand for thege, but whether cantical structure withstand that without being torn up is the question. of a return ofns theseime minister, but don't seem viable. a new system led by an independent technocratic government, a political stitch up that looks like business as usual is more likely to fuel anger than to calm it. as you mentioned, there are entrenched interests of economic
in the country and from outside the country, saudi arabia and others who have capital in containing the current sectarian basis for the government. i must confess, we are pessimistic about whether a new pedicle -- model. matt: saudi arabia seems linked with the government. the prime minister spent a long time in saudi arabia, possibly against his will. governments of western countries, for example, france, emmanuel macron has shown some interest, are capable of pushing back against the main interests in the middle east enough to help lebanon form a andrnment free of warlords
such economic interests? will andi think if the economic clout was put behind it, but i don't see that. the west in particular failed to stem the descent into chaos in syria. there is a strong emotional link between france and lebanon and people don't wish to see another stage. problems western governments need to look at. iran in particular is keen to shore up its deep-rooted links lah it the law -- hezbol would take a lot of commitment for the international community to wring lebanon from that influence. we've already seen one
failed state in the region, as you say. now 1.5 million syrian refugees in lebanon. is the prospect of another failed state enough to convince the international community it is in their interest to do something financially or in some other way? charles: i think the numbers you are looking at have advanced. the conference which president macron helped coordinate last week got $250 million of support. the day before yesterday, the government -- the cost of repairs from the repairs up to $16 billion. by theking system, which lebanese government's own calculations has suffered losses of around $83 billion, with the constricted -- the fall in lebanese gdp is now around 200% of gdp. the sums required to support
lebanon are massive and i don't know if there is that amount of economic will power in the west to put it back on normal footing without enormous haircuts to the banking system and big economic dislocation. matt: charles, thanks for your time this morning. ,harles hollis at falanx assynt the managing director and a former u.k. foreign and commonwealth office diplomat and advised clients in the middle he hasd worked, decades of experience in the region. dollar-yuan be about to wake up the u.s.-china trade risks? we will get the latest from em strategist simon flight next. this is bloomberg. ♪
gdp print, the lowest since 2003. dickens.g but focus on u.k. assets, the ftse 100 up .7%. always a link between the footsie and what happens on cable. we saw cable bounce, but back to levels piteously during the session. the pound against the u.s. dollar at 1.3057. although we have seen weakness in the pound ahead of the number, the june figure better than expected to lift us to where we had been. paris have seen movement is in gilt markets and across the curve, gilts sold off and yields went higher. matt: let's talk about the u.s. and china. month'sspike on last closures, dollar-youan. could it wake up to trade risks?
simon, what do you think? i agree, i think the yuan looks too strong considering the deterioration we've seen in the relationship and that does risk spilling over to the phase one trade deal. matt: simon, apparently that's all we have time for. simon flint, bloomberg's emerging market strategist. that is it for the european open today. stay with bloomberg television. next is "surveillance." if you like, you can switch to bloomberg radio. you arel you what, if in the city, you can get it on london dab digital radio. if you don't have that, you can ap your bloomberg mobile
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