tv Bloomberg Surveillance Bloomberg September 10, 2020 4:00am-5:00am EDT
across the atlantic. house speaker nancy pelosi said there would be no chance of a trade agreement with the u.s. if boris johnson's action threatens he's in northern ireland. meanwhile, boris johnson is defending his comments in which he intentionally downplays the severity of this coronavirus. president told author and journalist bob woodward he likes playing down concerns to avoid panic. democratic presidential nominee joe biden said trump failed to do his job and is responsible for tens of thousands of deaths for not getting adequate warning about the dangers of the virus. now, one in five companies in coveringwith only just debt interest payments according to the conservative think tank onward. it is called for the chancellor to relax the rules on virus
loans repayments, warning the economic recovery will be hampered by crippling levels of corporate debt. it says borrowing sense lockdown began, threatening to push more than 4% of companies, employing almost -- only 2 million people into its technical insolvency. the world's animal population has fallen by more than two- thirds in the last 50 years, according to a study by conservation group wwf. the biggest drop had occurred in latin america and the caribbean, where it fell by more than 94%. agriculture and land use were a key driver, natural habitat converted into farmland. the climate change has also been a major factor. global news, 24 hours a day, on air and at bloomberg @quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am leigh-ann gerrans. this is bloomberg. francine? francine: leigh-ann, thank you so much.
now let's get to the markets, as investors wait for today's ecb decision. officials have to confront the slowdown in the euro every of recovery as well as stronger recovery. now for all of this is laura cooper from our markets in life team. -- mliv team. what are investors focusing on? laura: i think the fact that we see u.s. futures on the back foot is suggesting that the euphoric bounce we saw yesterday might be relatively short-lived. it is likely the action yesterday suggests that we do need more of a correction in order to scare these retail investors who have largely driven the nasdaq exceptional rally, but i think for now, really stocks are facing a wall of worry, and the action this morning indicates that potentially they are focusing back on that, the fact that valuations do still remain frothy and there are a number of concerns and still lingering that could potentially point to
another downside today. francine: one of the questions of the day, of course, how useful bonds are in havens in the qe era. when we look at ecb and the strength in euro, are we going to be testing today? laura: certainly the hype today will be all around the euro, and christine lagarde faces a tricky balancing act in terms of managing expectations. no action will be expected. it will be all around talk. but there is no doubt that she unlikely and -- it is that she will come and talk down about the euro, but the fact that core inflation has touched a record low, she is likely to signal concerns around that. i think stage, really the risk, our focus on the euro is less on the euro and on the bond side today, unlikely they could actually push through any stimulus, but certainly one to watch in terms of how they are focused on the downside risk and how that feeds through into
their view on the currency. francine: laura, what about the u.k.? is the u.k. just trading differently? laura: i think that is the case, really we are seeing the pound in the holding period points to markets waiting for the outcome of emergency talks today, so the eu, the possibility that they could potentially seek locate -- legal action has u.k. equities on the back foot, but the focus will be on the outcome today in terms of how much of that internal market bill has actually deteriorated at relations. it is unlikely the eu will actually go so far as suspending negotiations, but certainly the risks are tilted to the downside, both in the currency and inequities, so we are just kind of in the holding pattern, awaiting for that outcome today. right, thank you very much, laura mover from our ml -- laura cooper from our mliv team.
this just coming out from has confrontedy african wild fever in a wild boar the suspected case we talked about, of course, in the media, and i do not know if this will be transmitted from human to human, but it is something to keep an eye on, given all the uncertainty at the moment. spread ofs feared a the disease after cases were confirmed in wild boars in west poland in the past couple of months, something that we just need to keep an eye on right now. coming up later on "bloomberg surveillance," we will continue the conversation with peter praet. we will also talk about fixed income. this is bloomberg. ♪
francine: economics, finance, politics. this is "bloomberg surveillance." i am francine lacqua here in london. just quickly, we had today breaking news that germany has instance ofs first in a while board. it is a disease that could spread to pigs, and that means that industry would be in a real difficulty, if they can't export them. we will talk more about that. it is the trade story throughout the day. let's go straight to the bloomberg business flash in london. here's leigh-ann gerrans. hi, leigh-ann. leigh-ann: hi, francine.
pulling out of the deal to buy tiffany, france's richest man was directly involved in the decision to call off the $16 billion purchase. accused lvmh of trying to leverage protests against police brutality the covid-19 pandemic to seek a lower price. lvmh has formally does the -- denied exerting any kind of pressure, and the french government requested a does -- a delay for reasons related to trade disputes with the u.s. foundts at schaeffler more issues for the auto recovery. more than 5% of its workforce is laid off, and it is closing down or selling off several plants. the announcement follows a plan laid out last week by tire maker continental to smash its workforce by as much as 14%.
barclays is considering replacing its u.s. headquarters in times square. sources say the bank is looking for about half a million square space inace it -- hudson yards. before the pandemic, they had joined high-profile financial and tech companies with massive new office towers. but offices in new york have slump this year, with many corporate and employees working from home. and that is your bloomberg business flash. francine? francine: thank you so much. let's focus on high-yield spirit our next guest has taken place in jp morgan finance, being held remotely this year. thank you so much for joining us, james turner. when you look at exactly what the outlook for european leverage, finance markets in the fourth quarter is, what does it actually look like? james: good morning, francine, and thank you so much for having me on today.
actually, we think it is very positive. low, atbal rates very historic lows throughout the world, really people are looking for yields and looking for income, investment grade, high-yield markets are really one of the places you can find that at the moment. around 500 basis points, that is still significantly above the long-term average, and for the next 12 months, we think the chances are that the trend will 500 basis points is not typically a stable level for spreads in these markets, so and are on the way tighter, over the next 12 months, there will be protests, and that will lead to both the end comes you can generate from some of these asset classes but also some form of capital rishi asian. we -- capital appreciation.
we think they are struggling to find that. i do not think the path is straightforward, and there might be market blips along the way. not all factors, not all countries, not all geographies will perform equally. francine: james, what happens to defaults in general? will they pick up significantly? james: well, we have seen a little bit of a pickup in defaults, but it is remarkable how low defaults -- when we sat here in march, they thought that the folks would be double digits. really it is hard to pick them the loanthe 3%, both and the high-yield market, and that is the low we have seen. obviously the central bank and government programs that have been in place have really helped to keep those defaults low, because at this time when companies' businesses were shut down, they really needed access
to liquidity, and making sure they had access to liquidity, business is able to continue through the lockdown period, and also, importantly, a knock-down effect on the capital markets and also bank lending, a source liquidity from that point of view. it is remarkable again how quickly the market reopens, provide liquidity to companies, not only those who were non-covid expose some of the more tech type companies or tmt companies, but also those who have some covid exposure as well, and that really i think has dampened down the level of default. the one thing we are switching theow where liquidity is focus is at least the first, but now we are going to, looking at companies and businesses that had structural issues, businesses that have over 11 balance sheets, and some of those also have access to liquidity during that period. now i think the focus for liquidity is whether those companies are taking on
liquidity, taking on additional debt onto their balance sheet. also, will have the stability to survive going forward, when they have got structural concerns over their business model. so we see defaults much lower than we expect. i think we could see them at the same level as next year, for example, as we see some of those companies. none the less, i think this to fight cycle will be earlier than people expect. francine: james, what about issuance? james: again, it has been a very strong year. the level of issuance in both loan and bond markets is tracking around the same level as last year, around 50 billion euros of issuance. in a year when we have seen such disruption again, that is quite remarkable. we are seeing the issuance pipeline buildup off the summer low. i think,e less lvo's,
because it is relatively low in private as well, but when we look at primary assurance, it is not always telling the whole story in the high-yield market as well, because what they also see our fallen angels. are fallen angels. we have seen 60 billion of those, for example, and again, that is adding to the ability for investors to select loans within the market. francine: james, thank you so much for the insight. james turner, head of european finance at blackrock. now, coming up -- pres. trump: i still like playing a down. >> yes, sir. pres. trump: because i don't want to create a panic. francine: president trump is accused of misleading america over the severity of the virus. the revelations have been published in a new book. we will discuss that next. this is bloomberg. ♪
francine: this is "bloomberg surveillance." i am francine lacqua here in london. now, president trump has downplayed the severity of the coronavirus. he told journalist rob woodward that he did not want to cause panic, while privately admitting it was much more dangerous. now being accused of misleading americans, the president now insists he was right. pres. trump: we are not going to
show panic, and that is exactly what i did, and i was very open, whether it was to woodward or anybody else. it is just another political hit job. whether it was woodward or anybody else, you cannot show a sense of panic, or you will have bigger problems. mr. biden: he know how deadly it was, much more deadly than the flu. he knew, and he purposely played it down. worse, he lied to the american people. he knowingly and willingly lied about the threat it imposed to the country for months. francine: for more on all of this, seen or international editor jamie schneider joins us. jamie, what about the allegations in bob woodward's book about downplaying the virus? jamie: he seems to be, and some of these statements, defending his statements, saying he did not tell bob about how bad -- the country how bad he thought it was, because he did not want
to panic people, he did not want to worry people too much, he did not want to worry the markets and scare the markets, so rather than saying he did not do this or come up with some other explanation, he is basically saying yeah, i did it, but i did it for a good reason. we will see how this plays in terms of, you know, the campaign now. what is interesting is in the past, president trump has tried to deny things and called them fake news and said they were overblown, and in terms of the books that have come out, he has often tried to malign the authors of the books. in this case, he is not done that, and partly because this is on tape. it is clearly his voice, him saying this, so it would be hard to try to deny that. but of course with just two months left to the election, this could be a problem. problem, given that the virus is still very much something that he is criticized for. francine: jodi, do you think this will actually move the polls? well, we will have to see
come and americans, it may move somewhat initially, and americans have short attention spans in that it is still two months before the election come at a lot of things could happen before that, but he has been losing coming has been behind joe biden in the polls consistently, and polls do show americans are displeased with how trump has handled the pandemic. partly, he has sought to shift blame for the virus, which has killed 190,000 americans now, and that is something that polls show many americans do not favor the way he has handled it, the way he has tried to shift blame. francine: jodi, how is biden handling this? is he attacking the president? jodi: yes, he is quite directly attacking the president, quite forcefully, saying he is seizing on bob woodward's interviews, alleging the president is responsible for the deaths of tens of thousands of americans, because he did not adequately
warn of that threat posed by the virus. oneof course this issue is that has -- that joe biden has been discussing on the campaign trail all summer, that this has got to be kind of a winning issue for him. other issues, like the line order one that president trump has been really trying to pivot to in recent months, that one is problematic for the democrats, so this is something that you can imagine joe biden is going to make the most out of, as long as it is a big issue. and these book revelations tend to the last, you know, for a week or two, and then something happens, so right now this is a big issue, but we will see whether it is lasting and how much of an effect it has an actual campaigning and actual voting in just two months. and early voting is starting in some states very soon. --ncine: jod thank you francine: jodi, thank you very much, jodi schneider, bloomberg
news international editor. we are getting word from astrazeneca, saying that safety is an important aspect to vaccines. this is something all of us know, but it was interesting to have a pharma company chief executive to sign that pledge and put safety first. of course astrazeneca, just a vacciner its covid-19 trial was suspended, are facing questions about why there are possibly serious numerological problems in one issue. making company for years. we will -- coffee for years we will speak to the chairman, andrea illy. this is bloomberg. ♪ so you're a small business,
the you is considering legal action over the u.k.'s intention to breach the brexit withdrawal agreement, according to a document seen by bloomberg. block's initial analysis suggest it may have a case even before force johnson's controversial plan is written into domestic law. the thread to renege on the brexit deal has pumped a warning from across the atlantic. nancy pelosi said there will be no chance of a trade agreement with the u.s. if johnson's actions threaten peace in northern ireland. donald trump has defended comments in which he intentionally downplayed the severity of the coronavirus. said he, the president likes downplaying concerns to avoid causing panic or price spikes. joe biden said trump failed to do his job and is responsible for tens of thousands of deaths for not giving adequate warning about the dangers of the virus.
one in five u.k. companies at the so-called zombie with profits only just covering debt interest payments, according to conservative think tank onward. it calls for the chancellor to arrest the rules of -- warning that the economic recovery will be hampered by crippling levels of corporate debt. push -- employing almost 2 million peoples's and technical insolvency. the world animal population has fallen by more than two thirds in the last 50 years. that is according to a study of the conservation group wwf. the biggest drop occurred in the caribbean and latin america. agriculture and large use change -- land-use change is a factor,
much of it converted into farmland. climate change has also been effective. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i'm 120 countries, leigh-ann gerrans. this is bloomberg. francine? francine: thank you so much. italy has been selling coffee since 1933, but no year has been more challenging for business than 2020 when many of its customers were forced to shut up shop. called project for generation 2030. the group says there needs to be drastic change in the way we run our economy, which will focus on sustainability. i'm glad to be joined this morning by andrea italy -- andrea illy. let's talk about your business and what kind of demand you saw in lockdown. how much business did you lose because people did not go to coffee shops anymore, and when
you're expecting more of a return to normal. andrea: yes, the lockdown affected -- impacted the out of home coffee consumption because for italy it is important. nearly 60% of our business is in hospitality, so cafes. then we have a significant office spaceety in and transportation. thisnes and ships -- all was shut down. but the company proved to be quite reactive, and within a significant to that and with a significantly -- and with a significantly large recovery in the home. yeartment we just did last with new profit as well. all in all, the factor is manageable. francine: do you believe home
consumption can ever really make up for the loss of revenue if we don't get back to work or don't go back to cafes? andrea: well, consumers are the same, and so the business is to follow them where they are. this is the strategy that offers blend wherever consumers are. so with that strategy, if they stay at home, they can have it at home. the strategy proves to be effective in this special occasion. francine: i know we have spoken in the past about your search for a partner in the u.s. has covid hurt that? is that being delayed because of it? there has been a little postponement of a few weeks, and
during the initial phase of the lockdown. consuming,cess is and there is no significant loss of interest from the potential investor side. the attractiveness of the company remains the same. francine: talk to me a little bit about the actual coffee market. you know, did we see a price discovery -- recovery? illy?uch does it impact andrea: despite the change in consumption which i already spoke about, the production side is quite regular both in terms , in terms of quality and even the price level remains adjustment the same
after the dollar devaluation. so i would say the crisis, which significantly, and countries like brazil and ,olumbia -- brazil and colombia did not impact the economic side of the coffee here in this sector. all looking ate the last couple of days, the tremendous, horrific fires in california. there is more and more talk as we transition on the economy to something that is more sustainable. i know you have done a lot of work in that especially in the agricultural field, playing your part. you are now part of this regeneration 2030. is now a perfect time because we are dealing with covid -- does it accelerate your green efforts, or is it a bad time because we needed to have a
handle on covid first? well, it is an excellent time to start the regeneration to 2030. the climate and sanitary crisis have the same group. the anthropocene -- the industrial revolution, on the industrial revolution is causing all these kind of problems. and the idea of regeneration 2030 is to transition our society from the current model, which is linear. continues to extract the resources from ecosystems without never recovering. model new paradigm, a new of society, which is a regenerate of and circular. whichever can be regenerated,
and theoretically all biological systems, whatever is organic can be regenerated should be regenerated. talking about ecosystems, talking about the waters, the land, and to the societies which are complex biological systems. part ofs the nonorganic our society, which is the mineral part, a circular model, oure they definitely reduce consumption of resources because socannot continue extracting many resources from the the ecosystem. so this is the idea. it is a gigantic opportunity supported by gigantic investment from the european union. targeting very ambitious goals in terms of the reduction of carbon initiatives -- carbon
emissions, a regenerate of culture and so on, in order to transition all of society from the model, the past model to the new regenerate of one. a large amount of resources will be needed, besides investment and knowledge. this is exactly the job that the regenerated society foundation -- that the regenerated society ,oundation is going to produce and disseminate knowledge for the transition of any business. francine: there are many questions regarding this. do we have a common definition? is it difficult to compare, and how do you avoid having chief executives sign up because it looks good but at the end of the day don't do much for real? essence of regeneration 20/30 will be three pledges. one pledge is about the circular
economy the regenerated . a second pledge is about world happiness, which we understand is the main driver in terms of motivation and the final goal, intensifies investment. the last part is climate action. the partners are requested to sign this pledge, and then of course to implement this pledge. so when you mention greenwashing, sometimes you have british item which is "fake it until you make it." sometimes corporations start with greenwashing, but then they quickly realize they cannot fixing thehey start problem immediately after
vaccine, valuation, certainly when it comes to technology stocks. the euro is steady somewhat. investors are waiting for the outcome of the european central bank meeting. i'm also looking at crude oil. it is declining but treasuries are gaining. the european central bank is widely expected to keep policy steady. investors will be closely watching for comments from christine lagarde on any hint of whether the stronger euro is becoming a problem. let's get straight to the bloomberg business flash in london with leigh-ann gerrans. lvmh-ann: the chairman of did ask the french government to -- for help in pulling out -- france's richest men was directly involved in the decision to call off the sistine billion-dollar purchase. tiffany has accused lvmh of trying to leverage protests against police brutality, and the covid-19 pandemic, to seek a ther price, but arnaud said
french government debt for reasons with the trade dispute with the u.s. more rows for the german car industry. the automotive supplier is a limiting 4400 rolls, more than 5% of its workforce, and is closing several plants in his home market as the impact of the pandemic. the announcement follows a plan laid out last week by tire maker continental to slash its workforce by as much as 13%. that is your bloomberg business flash. francine? francine: thank you so much, leigh-ann. let's get more on the ecb meeting. having to confront a slowdown in the euro area recovery as well as a stronger recovery. as of march, bond buying has averaged 22 million euros a week under the emergency purchase program, and christine lagarde will be quizzed in her news
conference on market expectations for more stimulus later in the year. joining us is touchy on a castro. thank you for joining us -- is tatjana castro. does the ecb have to address euro strength? good they will never officially admit to it, but it will be something that they focus on for sure. and then we will have to see because clearly they will try what they can to sort of talk it down, the continued strength of the euro down. but then clearly it depends on also what the fed is planning to do. and if they continue to target lower rates. so it really plays both ways. but do you think it could be coming problem that
could become a problem? we have a researching number of infections, but could euro strength be one of their biggest problems? be, and it'sould not an easy one to solve because inflation seems to be low. the eurozone actually for a change seems to be praised for the policies they have put in place compared to other large economies. so you can see why there is -- and again, euro strength, the weakness of the dollar, and the weakness of the pound-sterling. ecb, issues that the europe find it very difficult to influence because clearly those issues in other countries. so to that extent, there is little they can do than to cut rates. they already are so low. i would expect them not to go down that route.
will they do more in terms of the purchase program -- the asset purchase program? that is widely expected, and it's expected to be announced later in the year. it is really the weakness of the other currencies. i think rather than the strength of the euro. there is very little that can be done about it, or the ecb, i would think. francine: i need to bring you actually some headlines from the astrazeneca chief executive, saying that the covid vaccine is still possible by the end of the year. this is something that we have been wondering, that certainly has had any impact on the markets when they halted the trial yesterday. how difficult is it to model what the economy will do? how dependent is it on the vaccine or on the form that the lockdown will take? tatjana: i know there is a lot of hope on the vaccine. clearly, that will be a huge positive development. but at the same time, for me
personally, i don't think a second wave is such of a concern, nor do i expect that the vaccine will bring everybody back to the same behavior that we had before the pandemic started. so yes, of course it is positive, because it is likely to save lives and it makes people more confident to go about their business again if they have the vaccine. for it toke time actually be implemented. people -- it will take some time. but clearly, that is sort of the real economy affected in terms of the financial markets. the markets affected even if the vaccine was in place. i think that would help to fuel the rally further. francine: thank you so much, tatjana castro. up, the you -- the e.u.
francine: economics, finance, politics. this is "bloomberg surveillance." i'm francine lacqua, here in london. the european union is considering legal action against the u.k. over plans to breach the brexit withdrawal agreement. the e.u. believes it may have a case even before the u.k.'s internal market bill is written into domestic law. maria tadeo joins us from brussels. what options is the e.u. exploring? maria: we know the legal team working for the european commission is starting to look at the bill that the u.k. government has pushed through, which would undo elements of the protocol that was agreed to by the e.u. act, th u.k., and the legal team believes there is a case to be made by taking legal action on a deal that was agreed by two sides. breach of anear agreement that the e.u. very legally binding and should be respected.
so what they argue is that there is a case that could be launched, and also that would open the door perhaps to some to a suingalty action and perhaps see some kind of financial compensation if that is the way to go. it doesn't mean that politically we are headed that way, but the legal team looking at this already believes this would be a clear breach of an agreement between two sides. the million, gazillion dollar question is how much of the -- how much of it is negotiating tactics, and how much of it is a risk of no deal? maria: we knew that the negotiation had taken a more aggressive tone over the past three days, but did not take a lot of individuals back because now you're going to a legal text . it would have legal consequences. one of the theories that is floating today in brussels is that this is almost the u.k. in a very machiavellian and also
perhaps intentional way, trying to trigger a crisis to get a reaction out of the european leaders for weeks. there needs to be a political push now, and this is really the moment how e.u. leaders have to get on the case. perhaps by doing this two weeks before they go to brussels for a meeting scheduled for september 24, that would trigger a reaction from emmanuel macron, angela merkel, and create some ape of climate for negotiation in this high-risk strategy. francine: thank you so much, maria tadeo with the latest from brussels. now a couple of things i need to bring up today -- first of all, the markets. let's look at the markets and have a look at what they are focusing on. european stocks are slipping. i think we can also bring this up on tv for you guys to have a look. euro is pretty much steady as investors wait for the outcome
of the european central bank meeting. oil, treasuries gaining. something that you need to decide on, whether you comment inadvertently on the euro or not, investors are watching comments from madame lagarde on any hint of whether the euro is becoming a problem for the region. then various headlines from the astrazeneca chief executive, saying that the covid vaccine is still impossible by the end of the year -- is still possible by the end of the year, and they will affect your 3 billion effective doses. he still says that health and safety is the most important thing. this is bloomberg. ♪
francine: growing confidence. the euro rises as ecb forecasts are set to show a more optimistic outlook. investors look for clues on extra stimulus at today's meeting. trump on the defensive. the president contends he was right to downplay the severity of the coronavirus, after comments made to journalist bob woodward earlier this year became public. and lawmakers become lawbreakers. the e.u. considers legal action over the u.k.'s plan to breach the brexit deal. the two sides hold an emergency meeting today. good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua in london. tom keene is in new york. tom, i will give you your brexit briefing in a second. it was interesting, hearing from the astrazeneca chief executive. i know that's why you get up in the morning. is putting safety first and he can still deliver a vaccine by the end of the year. tom: it is nice to see the buzz one day on. -- for sally