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tv   Bloomberg Markets European Close  Bloomberg  March 30, 2021 11:00am-12:00pm EDT

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guy: live from london, i'm guy johnson. alix steel is over new york. we are counting you down to the european close on "bloomberg markets." germany reassessing astrazeneca's vaccine after berlin halted shots for under 60's after more blood clot cases. the decision comes after a similar move in canada. german chancellor angela merkel is going to be giving a news conference on the astro shot sometime today. we are waiting for details on that one. credit suisse shares continuing to decline as the bank indicates that the archegos loss could run into billions of dollars. more details on that in a moment. and the three pound $90 -- the price gives it a value of about 7 billion pounds. european equity markets are bid. bonds are on offer. we are seeing a yield move on
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both sides of the atlantic. unlike the united states, equities are higher, but unlike volume. i think we are trailing into the end of the quarter and into the easter holidays. i think volume looks like it is going to be liked all week -- going to be light all week. alix: which is interesting. equities are softer, like biotech getting hit, the nasdaq 100 getting hit, etc. just a snapshot as we front run that plan. this is the highest level in yields we have seen in over a year. that is having a very big impact on the dollar. the dollar index breaking some of those key levels, and that is putting pressure on the commodity market. brent in particular. oil, aluminum, you name it. guy: pretty chunky move, as you alluded to, and the bond market. germany up by 4.5 basis points.
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a decent sized move, five basis points in btp's. laura cooper, bloomberg strategist, joining us now. what is going on? laura: i think that is with like of of investors being on the wrong side of this rebalancing flow. we did expect bonds would be bid, whereas that is not looking to be the case. think this is just a case of this u.s. reflation trade. europe is getting caught in that, and that is why we are seeing yields extend their games like we are seeing in the u.s. alix: lara, we are going to leave it there. we will talk more about yields and just a moment. we want to go to the other top story, and that has to do with banks across the world that try to tally up the damage after the collapse of archegos capital. wells fargo saying it no longer has exposure to archegos. no losses related to closing out their exposure. different for other banks. jp morgan saying banks could
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have as much as $5 billion to $10 billion exposure. jen patrick barnett is joining us with more. walk us through what we know so far. >> not so much, when it comes to the damage on the institutions to their potential loss. right now it is probably credit suisse taking one of the biggest chunks in that whole debacle, with jp morgan saying the speculation is not an unlikely outcome. but i think going beyond the pure impact on the balance sheet is how much this could have an impact towards the banking sector. it is quite astonishing to everybody that in this modern stage of risk management and everything we have seen over the past 10 years since the global financial crisis, it is such a big impact that can still happen, and people are wondering
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if it has been a bit careless from the banks to build such a big position. guy: is there any sense this is going to knock the bank trade off course? banks are the second-biggest performer your to date on the stoxx 600. jan: it certainly raises the question of how much trust can investors still build into banks. even before the incident, many investors were still not very keen on being invested into banks because of the cheap valuation. this incident shows that bank business is highly unpredictable, highly volatile from time to time, and as an investor, you always need to be ready to take such a hit. guy: thanks very much for the update. jan patrick barnert joining us. let's turn to the virus and what
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is happening here in europe, more specific a what is going on with the vaccine story. germany planning to recommend the use of astrazeneca's covid-19 vaccine only for men and women over the age of 60. angela merkel, the german chancellor, expected to give a news conference today. certain key regions leading this one, berlin in particular. bloomberg's senior pharmaceutical analyst joining us on this story. sam, i thought we teared this up. there's still concern about blood clots. what do you make of the latest move? how begin impact is this going to have? sam: obviously the numbers have gone up. not quite sure whether it is the clots, but it is on the background of 2.7 million vaccinations. so we are still within the realm of, according to my numbers,
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pushing the top end of the expected incidents. so i think it is important that people really have a good look at this. alix: when it comes to the astrazeneca part, is it looking more real than it did before? before, the conversation was the u.k. is doing just fine. is this more serious now? sam: the emea just looks at the data they have up to a certain point. but we should not rely on what the u.k. has done or not done. the u.k. mostly had an age driven vaccination. that means that the majority of their vaccine doses have gone into older people. here in europe, the majority of the astrazeneca vaccine was used in younger people. if you recall, they thought it
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wasn't effective in older people. so we might simply not know that there is an effect because not many people under the age of 55 were vaccinated with astrazeneca in the u.k. so that cannot be used as an argument that there is no issue here. alix: really good point. guy, didn't you get the astrazeneca vaccine? guy: i did, and i am relatively young. [laughter] so hopefully i am going to be ok with this. but the astra share price down by 1.4%. it is going to be interesting to see what happens next. this is clearly going to have an impact later on the summer, if we continue to but blocks in the way. sam has walked us through this whole process, but on the ground, the reality of the situation now is that increasingly, people don't want this shot. the eu is clamoring for vials of it, though, and there's an ongoing fight between the u.k. and the eu on that very subject.
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yet if you look further into the summer, the data which everybody is going to be vaccinated to a sufficient point, that is getting pushed out and out. alix: let's put export bans on something no one wants. always a winner. sam, great to see you. thanks a lot. coming up, more on the rising bond yields. we will break it down with mark anderson, cohead of global asset allocation at ubs. this is bloomberg. ♪
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ritika: let's check in on the bloomberg first word news. i'm ritika gupta. consumer confidence rose in march 2 a one-year high according to the conference board.
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household outlooks grew brighter thanks to millions getting coronavirus vaccinations. plus, were restrictions -- plus, more research and's were lifted on businesses. it is estimated that the cost of the suez canal's closure was $10 billion a day. cargoes were delayed for days, if not months, and that is likely to lead to a flood of claims by everyone affected, from the shipping lines to manufacturers and producers. sticking with oil, opec expects the global oil stockpile surplus that built up during dependent to be mostly gone in the next three months. that is earlier than previously forecast. the cartel says the precise turning point will come in july. those estimates assume the upper-class alliance increases production in may. the group -- the opec+ alliance increases production in may. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. guy: thank, indeed.
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german and u.s. 10 year yields -- thank you very much, indeed. german and u.s. 10 year yields continuing to rise today. there is the german 10 year, and the treasury with a move strongly through 1.76% earlier on. mark anderson, cohead of global asset allocation at ubs, joining us now. let's talk a little but about this. you've got a move that is accelerating to the upside. at the moment, equities are taking it pretty calmly. we've got a payroll number friday the could be really strong and could further repel yields even higher -- further propelled yields even higher. at what point do investors need to start thinking this could have a meaningful impact on their portfolios? mark: i think it is already having a meaningful impact for the fixed income oriented investors, and if anything, we are expecting the yield to move higher towards 2% rates towards
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the end of the year. what is really driving it is the inflation expectations on the back of not only the $1.9 trillion fiscal stimulus package that was announced earlier this year, but also looking forward to this $3 trillion stimulus package in talks now in terms of infrastructure from the u.s.. so these things combine means there is upward pressure on yields. we really find the equity markets have a very positive correlation to not only inflation expectations, but also the kind of growth weights we expected to see this year. so there's only been a mild overshoot on the yield side to be a little bit of a drag on equity markets. alix: i guess my question is how do you play the reflation seem when it is a synchronized, but the bond market reaction is synchronized? mark: that is exactly with the way -- that is exactly the way
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we have to think about it. when we talk about the equity rally, it has been standing on the three pillars of the reopening trade. this equation has not really change significantly in the last couple of quarters. but what it means is we have to reprice back to some degree of normal. you are just going to have equity sectors that are going to perform better on the back of this, so financials, energy, emerging markets, a lot of these very cyclical reflationary trades. it is even despite some of the stories of the last couple of days, so we have to be a bit more careful how we are positioning particularly on the equity markets. guy: what about europe? the cac 40 is up by 9.7 percent quarter to date. the dax is up by 9.43%. the italian market is up by 11% this quarter.
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given what's happening in europe, does that seem right to you? or is europe just kind of dominated by the kind of value stocks that the market loves right now? and if so, can it continue to stay in love with those kinds of names? mark: i think that is exactly the story. if we look at the vaccine story over this past quarter, that is not something yet. what we have heard is that the technology sector is really not present compared to u.s. or chinese equity markets. but all of a sudden, these are all of the stocks we want to own, so it is value, it is very cheap. if you look at the financial sector trading cheap even to the normal discount we see in the broad market, you have a lot of these great cyclical drivers like high capital ratios of
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banks that are very well-capitalized. if anything, we are going to see stock purchase programs, may be outside of some of the few names mentioned on the show, but on a broad sector basis, a lot of attractive valuation. europe has been the most closed down, so once we finally get these vaccines to be rolling out in the second quarter, we expect 40% of the populace never europe will have a shot in the arm by the end of the second quarter. what that means is the pop in growth is going to get stronger than elsewhere. alix: how long is that trade for? mark: obviously a lot of this comes back to that valuation equation, so how much of a discount do we want to put on some of these fundamental crates? -- fund mental trades? week -- fundamental trades? we do think it can run longer. it depends on how quickly this market is playing into that
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growth story in europe and the reopening trade. we will have to monitor that as we go along. guy: if you are a u.s. investor versus a euro investor, it is 6%, versus 5% if you are a dollar denominated investor. what are you telling clients who want to currency hedge their portfolio? how much currency risk do you think there is within portfolios? mark: you might get the sense that europe has done extremely well, but if we take a further step back from january 2020, if you have been buying some of the larger cap u.s. names, you would be up 20%, 30% compared to 2020. on european stocks, you are going to be flat. so a bit of catch-up is still happening here. the currency front, i think probably the hottest debate at
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the moment is calling dollar weakness for longer. but all of a sudden, we have what could be a bit of a replay in the dollar strength story from years ago. we have attractive yield differentials. that is certainly one of them. on the others, we have the u.s. growth sensation. so with these things combined, why wouldn't the u.s. dollar strengthen? we think there's a couple of reasons to still expect weakness. it is still an extensive currency, and there is an extraordinary month of debt piling up and keeping yields higher. we are telling u.s. investors to move out of some of the u.s. dollar exposure, look for the foreign exposure, even hedging some of those positions. alix: but even if europe is going to play catch-up, eventually people will get vaccinated in the reopening will be huge, the amount of money the u.s. is pumping into the economy is also going to make that recovery that much stronger versus the 750 billion euros
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from the european recovery fund. mark: that is absolutely true, but if we look at valuation on the broad s&p 500 index that is close to 30 times, when we look at the tech stocks in particular, you are trading at a very expensive valuation. when we look at the fiscal stimulus, i think that is a very powerful statement for a lot of the domestic oriented companies. it is certainly going to give us earnings in the u.s.. we see as well is that a lot of the growth impulse coming from the u.s., and typically u.s. is the first develop the economy to come out of a crisis, it just has fantastic spill over other regions as well. the export market is going to be picking up, particularly in asia, as well as great investment opportunities. so it is a beneficiary to some of the domestic oriented plays, but globally speaking, i think
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there is more bang for your buck and places like emerging markets, china. guy: when i look at these markets, and let's come back to europe, i sometimes worry people are confusing value with cyclicality. using there is a danger that that overlap is too great? -- do you think there is a danger that that overlap is too great? mark: i think there is a point to be made. even if you are right, there is a deeper narrative here. on the cyclical side, i think the reason we are quite keen to highlight cyclical reflation or type of trades is when you look into these cyclical oriented sectors, what happens is the earnings growth potential in these sectors is simply a lot greater than those sectors that don't have this kind of cyclical component, and what that means, when you're going to have two consecutive years of global need to be growth beyond anything i am likely to see in my career, that is just not going to happen
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on any normal recovery year. so i think it needs not only do we have key evaluations, but earnings are going to be way ahead of something which has more of a stable earnings generation. alix: it is a really good debate. thank you so much, mark. we really appreciate it. mark anderson, cohead of global asset allocation over at ubs wealth management. this is bloomberg. ♪ s is bloomrg ♪
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ritika: it's time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. ballot counting begins today in the landmark load by amazon workers in alabama, deciding whether to join a union. normally the votes would be tallied on company property, but because the election was held by mail, the national labor relations board is doing the counting at a remote location. the public can watch on zoom. paypal has rolled out a cryptocurrency check out feature in the u.s.. customers with cryptocurrencies
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in their paypal wallets will be able to use them to buy goods from paypal merchants. recently, these allowed -- recently, visa allowed the use of the currency to settle transactions on its network. food delivery startup deliveroo is likely to price its ipo at the bottom of the market range. a nervous market has been weighing in on london's biggest listing this year. trading in deliveroo shares is set to begin tomorrow. that is your latest business flash. alix: i have to wonder, would any of that be different if it actually listed in the u.s.? there was a push to get delivered in the u.s., but the founder was really adamant about sticking with it in london. guy: the idea is you are going to be able to have these two classes, which is something that has put fund managers off. there's also concerned about what is happening in terms of the gig economy and the right of pushback that is happening.
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there's an interesting kind of debate in london that is raging right now. london is packed with miners and banks and he kind of stocks people haven't loved for years. london has looked enviously at new york with the nasdaq and tech stocks, and now it is getting an opportunity to get some, and it is not quite so sure it once it -- it wants it. alix: also, does it depend on how it trades and how it opens? how much will that guide other ipos or even spac's, for that matter, to list in london, which they presumably want? guy: this is going to be an interesting test case. we had the recommendations come in advance of the ruling in terms of what the authorities are ultimately going to do, but london has to figure out what it wants to be command fund managers need to make up their minds what kind of stock they ultimately want to trade. it is going to be interesting which funds ultimately
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participate in this. is this the right company to be the kind of poster child for this move into a more tech rich kind of environment? alix: did you know that i went to school with will shuh? guy: do you want to tell us stories? alix: i don't for member a lot of stories, but he did have a lot of energy all the time. guy: i don't remember a lot about college either. [laughter] we will take a look at the european close. that is coming up next. you are certainly seeing some significant outperformance over here versus over there. the amsterdam market, for instance, potentially closing at a fresh record high. underperforming a little bit on credit suisse. this is bloomberg. ♪ ♪
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over the next 10 years, comcast is committing $1 billion to reach 50 million low-income americans with the tools and resources they need to be ready for anything. i hope you're ready. 'cause we are. guy: let's wrap up the session
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in europe. volume is quite light. it is a holiday shortened week. i wonder if some people are on the golf course. stoxx 600 climbing, up .8%. outperformance versus what we are seeing -- what we are seeing stateside. we also have bond yields as over here moving quite significantly to the upside. prices coming under pressure. let's take a look at some of the individual markets before we get to the bond market to show you. the ftse 100 up. the amsterdam market only up .5%. coming through to the close we will see with the next five minutes bring. potentially at a record high as we come to the close in europe. a little bit of upward from the smi. we continue to monitor what is happening with credit suisse. i will show you this share price in just a moment. the bond market has been
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significant on both sides of the atlantic. the german 10 year yields rate -27. a trade coming through earlier on in the day. as laura cooper was saying earlier on, people are getting caught on the wrong side of this. the velocity of the move. the suez has been the story over the last couple of days. then we came in and it is about the vaccination story. it is all about the bait infrastructure program announced by president biden tomorrow. let's move it on. i want to show you some interesting stories on the sector story. cars up strongly. i will move on to vw in just a moment. banks have bounced back today. up 2.5%. a strong outperformers over last quarter. those are the two best performing sectors over last quarter. they continue to be that story. utilities, the health care sector, some of the staples at the bottom. the dividend dependent area of
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the market with yields rising under pressure. i mention what's happening in the auto sector. let's talk about what is happening with volkswagen. basically we are continuing to get the huge divergence between the preference shares and the common stock. the common stock is what the family holds. it has been absolutely searching. the preferred, which do not have the voting rights, have been lagging. both have been up over the last six months. that is the common, and that is the preferred. as you can see, quite a scene to get performance gap. keep an eye on that to see whether that continues to open up. let's talk about the other individual names. credit suisse, astrazeneca as well. credit suisse down another 3%. starting to give us clarification about the archegos hit the banks have suffered. significant amounts of money.
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billions as a result of the unwind. astrazeneca down 1.4%. canada, germany, starting to suspend for younger age cohorts the administration of that shot. astrazeneca suffering. the airline sector bouncing back. at least some more coming through today. ascents may be things are starting to improve. a positive note. that has had a huge impact. paints a positive picture about what the summer could look like. that was the message that i got when i spoke to michael o'leary, the ceo that airline a few days back. take a listen to what he had to say. >> there are reasonable grounds for optimism that once the holidays arrive, june, july, august, we will see significant
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recovery of short-haul travel in europe. you will not see long haul recover this summer. a lot of people who would normally have gone long haul for their holidays, we think ryanair will be the beneficiary of that. alix: that was ryanair ceo of michael o'leary. berenberg has seen a brighter outlook for low-cost airlines. it recently upgraded ryanair to a buy from a hold saying expect ship -- share prices to create multiple entry points to budget airlines. joining us as the analyst behind the call, adrian yanoshik. how does the hesitancy of vaccination, the issue of astrazeneca plate into your short and medium-term view of ryanair? adrian: short-term, it is a negative. we need to have the vaccination rates higher to have confidence to reopen. the short is dominating the
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discussion. my view is focused on what happens after that, what happens in 2022? is there an opportunity there? guy: you have a price target of 20. 1672 is where we are today. what gets us to 20? adrian: earnings momentum and a recovery in margins to levels that ryanair has not seen since fiscal 19. you get that by having a better cost base. having their cost base fall faster than their peers. you get that by eventually potentially getting pricing power next summer. i think this summer it is very uncertain where will demand be. there will be overlap competition for the travelers that will be there. we would agree you might see a lot less short-haul capacity
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next summer. alix: what about the other guys? easyjet? where they fall? adrian: pretty similar. you have a very low cost base, a similar cost base when you cut through the different aircraft they operate. very low cost base. a solid balance sheet. similar to easyjet, although they do not have a lot of the -- they are effectively going to be 10% smaller in terms of their fleet over the next few months than they were last year. effectively, you want to have a solid balance sheet without the overhang of a lot of debt and a lot of interest charges that will be a real problem for a lot of airlines. i'm not just talking about the large airline groups. i am talking about a lot of smaller ones that will struggle to see the other side of this. talking about the likes of sas,
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of small regional carriers that have had some temporary success from state aid or furlough. guy: michael placed a big order for the max a while ago. we are now seeing southwest starting to place bigger orders. in terms of the way the arrival of the max is, and michael has talked about the fact that he will idle aircraft if he needs to, how big of an impact will those max's have when demand does come back. adrian: ryanair brands is the game changer. i suppose that is a bit of marketing. the unit costs, the savings are undeniable. we see across the industry. the global industry's parking the old aircraft and their operating the lower operating
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cost aircraft. it is hard to argue that, particularly when if you're a southwest or orion air you have strong pricing as a starting point, and then you get concessions from boeing because of the delivery delays and upside in the order should get you better economics on the aircraft price. it is a huge tailwind for them from a unit cost perspective but also from a return on capital for the next three to four years. i think it will be very powerful. guy: when you get off the ryanair flight, what will you find in a year? we have another difficult summer. i wonder how much hotel capacity and everything else we get taken out of this industry and how big a problem that will be? if the industry does shrink, how does that affect the airline? easyjet has it all in approach. ryanair does not. i wonder which model will work that are?
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-- will work better? adrian: it is an all in approach in terms of hotels and travel. i guess the question is does the whole system shrink wrong -- shrink along with the airlines? typically capacity on airlines is more flexible. you cannot move the hotel to another region of the world. you cannot put that greek hotel where the hotel in southern spain, you cannot move that into south america or into asia. you can do that with aircraft. i think the best approach for these airlines is to be an airline. it does not mean you cannot get a little bit more -- a little bit higher returns of your easyjet. take advantage of some of those opportunities for the package. all of the airlines are doing it. i think the core of these airlines continues to be a good operator and keep unit cost as low as possible and keep a healthy balance sheet. alix: quickly, do we feel like
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the cash is sewage -- the cash issuance can make it or will we see more dilution? adrian: we are thinking mostly about ryanair and whiz, they have very high cash balances. the cash rates are falling away, likely to fall away into the summer. i think you could see new equity issuance from the smaller guys, possibly again at some point from iag, although they have a high liquidity level. potentially even from easyjet at some point. i can see more equity issuance, but not from a ryanair. i think they can make it through without. guy: adrian, appreciate the time. interesting note. thank you for sharing with us. adrian yanoshik, berenberg equity research transportation
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analyst. we are done in europe. these are the final numbers. positive session. the dax closing north of 15,000. the ftse underperforming a little bit. the cac 40 was 36,000 yesterday, maintaining that level today. the european equities, that reflation value trade, that narrative working very strongly in terms of the numbers we see posted. that is the close. this is bloomberg. ♪
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ritika: this is "the european close. coming up tomorrow, an exclusive interview with ecb president christine lagarde at 4:00 a.m. in new york, 9:00 a.m. in london. this is bloomberg. alix: president biden will
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unveil his next economic recovery proposal, and this time is really stimulus. it is expected to focus on infrastructure, and markets are starting to anticipate the impact on growth. if you look at what is happening about breakevens, fives, tens, 30's, they are all rising to the highest level since 2011, particularly the shorter-term. the white and the blue line. the question is is it a head fake or is this real? joining us is one who thinks it is a head fake. joachim fels, pimco managing director writing in acute to outlook investor should be prepared for an inflation head fake and look to prepare portfolio flexibility and liquidity. you think what we are seeing today is a head fake? joachim: what we are seeing is a head fake, particulate when it comes to inflation. inflation will move higher over the next few months and i think the markets have started to
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price that in. we think it is going to be a spike and not a spiral. a lot of the factors that would push inflation higher are one offs. partly bays affects because last year's price were rolling out of the 12 month window and related to the run-up in energy prices. thirdly, as the economy reopens, you get price adjustment. again we think this will be temporary. later this year inflation will come back down again. we will spend most of the second half of this year and also next year below the fed's target for inflation, below the 2% target. in that sense we think what is happening now is a head ache. -- a headfake. that does not mean bond yields cannot push higher, but we are at much more reasonable levels now. we have been underweight bonds, underweight duration, but we
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have moved to neutral and we think investors should be prayer for more volatility -- should prepare for more volatility because investors could be spooked by the run-up in inflation and that is what we mean when we say head fake. guy: what levels you need to get to before you move to an outright it is time to buy bonds? extending that lot -- extending that thought, at that point do i buy tech as well? joachim: there's been a strong correlation between bond yields in the tech sector. as real yields, because that is what matters, as real yields have been pushing higher, we have seen more volatility in the tech sector. how high can bond yields go? i would not rule out a 2% print on the 10 year yield. at that stage bonds would look attractive. bonds have a lot more room to rally at these levels than they
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have when yields were 100 basis points lower. they can be a potent hedge for risk assets. if and when bond yields make a reversal, bond yields had lower again, that should be good for those sectors that were most negatively affected by the run-up in yields. guy: i can hundred -- alix: i can understand why the short-term inflation effects might be transitory, but if we get some kind of $3 trillion infrastructure package over the longer-term, why isn't that inflationary? joachim: two reasons. the first is if you get infrastructure spending, the spending will not, immediately. this is a multiyear thing. there are not that many shovel ready products -- projects on the infrastructure side. this is not something that will hitch the economy all at once. it will be spread out over many
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years. secondly, a significant part of the infrastructure spending is financed by tax increases. the net stimulus will be much smaller than the headline number would suggest. we think increases in corporate taxes, increases in personal income taxes for high income earners, therefore the next effect of the stimulus package, this infrastructure package would be more than what the headlines -- would be much smaller than what the headline suggests. guy: cannot talk about how the fed will deal with all of this? does the fed raise rates this economic cycle? joachim: i think it will be a long time before we see rate hikes. tapering is something that is likely to happen next year. we think it is a story for early
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next year that they start tapering. obviously if they do that they will start talking about it, probably from as early as june, when they have more clarity on the economic rebound, when they will probably revised up there growth forecast yet again. 6.5% growth is what they have so far. this looks low to us. the type of talk from the fed will start. let tapering is likely to start early next year. rate hikes are a story for 2023 or early 2024. the fed will want to be done tapering, they will want to see inflation at 2% for at least a year, and they will want to have a forecast that shows inflation going above 2%. on top of that, as you know, they want maximum employment,
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maximum -- that is something not in sight yet. that is a story for two to three years. alix: i am wondering where this leaves europe in your thesis? there seems to be two schools of thought. on the one hand reopening is powerful because it is so locked down. on the flipside of the kind of spending from governments will not match what we see from the u.s.. yields get con up in hours. it makes it challenging. how do you compare and contrast -- yields get caught up in ours. how do you compare and contrast? joachim: europe is lagging behind on the vaccine front by three or four months. that is why we think the rebound will start later than the u.s.. we think we can get 4% gdp growth in the euro area this year.
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next euro be quite strong as well. as we reopened later we get more growth recurring in 2022? the direction of travel is the same as in the u.s. but the pace is much lower. obviously there are more fragility's in europe than in the u.s.. guy: let's talk about those fragilities. italy has a terrible track record of spending money that comes from brussels. it is abysmal. why do we think this time will be different? the next generation fund is coming out. mario draghi knows this is a problem. nevertheless, the bureaucratic infrastructure in italy is not going to be capable of dealing with this huge amount of money coming out of brussels. the u.s. will be spending lots of money on stimulus, when it is not stimulus it will be consumption driven. next year it will be infrastructure. europe will not be anything like that in terms of the impact we will see. joachim: first of all there
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significant national fiscal stimulus already in the pipeline in italy and other countries. the mario draghi government announced another 2% of gdp, additional relief measures, that is the first thing. secondly i would not underestimate mario draghi. i think he will do big things in terms of implementing and spending the stimulus. he has broad support for now from a broad coalition with a large majority in parliament. i would expect that to be a case for another 12 months or so. the money from the next generation will arrive earlier than that. it will come from the summer of this year. i would not underestimate him. i think by and large the global recovery in the european recovery will help to lift all of the boats, including the italian one.
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guy: we will need to get growth to handle that level of debt. we see what happens. i hope you're right. joachim fels of pimco, always interesting. thank you very much, indeed. this is bloomberg. ♪
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alix: let's take a look at what we are watching over the next 24 hours at 2:00 in new york president biden will sign the ppp extension act into law. tomorrow he will detail the plan on infrastructure that it looks like the market is front running right now. guy: that is the main event everyone is waiting to see rate how much detail we will get on the spending side and how do you pay for it all. here we are paying attention to her press conference angela merkel will be holding. still not a time for that to the best of my knowledge. we are seeing a number of states in germany starting to restrict the use of the vaccine to the
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60-year-old. it will be interesting to see how angela merkel deals with that. ipo is coming through. a lot of bonds being sold by germany. the ecb is delighted by that. alix: in the meantime it will be about the infrastructure plan and the u.s. as well as the impact on yields. coming up on "balance of power" jim servetus will be joining the show on bluebird television and radio we are not done. we will keep topping. guy: we are definitely not done. we will move to bloomberg radio. the cable show takes to the air with alix and myself on dab digital radio. hope you will join us if you're in london. this is bloomberg. ♪
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kevin from bloomberg's washington bureau to our tv: -- kevin co -- taylor: we are lower on the screen. abigail doolittle joins us for more. abigail, the further shakeout continues. abigail: yesterday was all about the hedge fund blowup. today we are going back to this year's obsession, higher rates pushing down. yesterday small caps underperformed, but today a real winner. this is the s&p 500 is down .4%. yields higher but well off the highs. at the high the 10 year yields have been closer to 1.77%. the highest and 13 or 14 months, and as you know, the big trade is that pressures the tech trade since pope start to worry about valuation, last year's trading.

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