tv Bloomberg Daybreak Europe Bloomberg July 28, 2020 1:00am-2:00am EDT
could the fed's meeting be a catalyst for gains? wrote -- erode. don't miss our conversation with the ceo of automaker psa group. we saw gains on the s&p 500. the benchmark erasing last week's drop. the rebound in tech stocks overshadowing a slide in banks. futures on the front foot today. postinguropean futures gains after we saw europe's benchmark close in the red yesterday. pretty much flat right now. the 10 year yield back above. the dollar at a 22 month low. gold futures touching 2000. if you look at the spot price we are trading at 1009 hundred $45 an ounce, edging up 0.2%.
havee republicans presented a rescue plan to bolster the u.s. economy. before that, breaking headlines. 300 millionabout euros as an impairment in the second-quarter results. that is the headline just crossing from ing. we will bring more details as we get them. it is booking a 300 million euro as an impairment in second-quarter results. we have a line coming through from delivery hero, raising its guidance after growth in the second quarter. billionr revenue at 2.6 . back to senate republicans presenting their rescue plan to bolster the u.s. economy. the gop would see a trim in emergency jobless benefits, a second round of $1200 payments most americans, and businesses,
schools, and other organizations would be shielded from lawsuits stemming from coronavirus infections. the release of the plan had been delayed due to divisions between the party and the white house. >> we have one foot in the pandemic and one foot in the recovery. the american people need more help. they need it to be comprehensive. they need it to be carefully tailored to this crossroads. that is what this senate majority has assembled. nejra: the republican proposal is just the first step toward negotiating a compromise with democrats, who offered their own a $3.5 trillion stimulus plan. >> senate republicans have presented us a halfhearted, half-baked proposal. , the republican plan is
too little too late. the republican plan is weak tea when our problems need a much stronger brew. us now is the global head of fundamental equities at rebecca -- robeco. dollar weakness has been a theme we have talked about at the start of this week. how much are you factoring further dollar weakness into your equity strategy? i know you have a bottom up approach. does this impact your strategy at all right now? >> it does. it affects the stocks we invest in. we don't see the dollar slipping, we don't see support for the currency. this is good for emerging-market currencies. it is good for the euro. europe is looking better than the u.s. right now from a market standpoint. it does affect the way we fit
our stocks. nejra: what is your stockpicking strategy in the u.s.? fabiana: we are concerned about the macro environments in the u.s.. the stimulus plan is good. the amount is pretty much as expected. i think it only supports the market to a certain extent. we are going to ask, what comes next? what is going to happen in terms of that and also is this going to be sufficient? we do not know how covid will continue in the u.s., at least the next few months. what we have been doing have been pushes on the u.s.. we were overweight europe on the u.s.. we prefer north asia to the u.s.. we have started to take profit out of business earlier in the last quarter from the highflying tech stocks. we believe pretty much we have
given all we could given we have started moving to more cyclical stocks, but we are staying concern on the quality because we are concerned about macro. anna: -- nejra: that is interesting. do you get the sense that in the u.s. the market is on your side with that? or do you feel contrarian? fabiana: i think if you look at the results of the -- the recent results from tech stocks, which have been ok, have technically beaten, the market really seems to have a bit of high flyer tech fatigue. you need more of these stocks to justify the differential in performance and valuations versus the rest of the market. i think the market is starting to feel that highflying tech company fatigue. it will last for a while. coursewe also have of
the fed meeting this week. the expectation generally is that we are going to get a commitment to lower for longer. how much is this baked into the equity market? rates have barely moved recently. is the equity market going to see any further upside from the fed? or do we need something with a lot of bang for its buck out of the stimulus plan to give more of an uplift to u.s. equities? what the stocks have done have supported the liquidity market. everybody has been piling their stocks that were quite defensive during the coronavirus outbreak. what we are going to need next, we actually need better macroeconomic outlook. the next leg up will come from a rotation into cyclicals. right now you can see that in certain regions of the world. you see the improvement in north asia.
you see improvement in europe with their latest rescue package. still not in the u.s.. nejra: yesterday, we noted the fact goldman off the back of a weaker dollar said they like for an exposed tech and energy names on a weaker dollar. they have been touting u.s. stocks with high revenue from bricks asrope and the well. with these be the companies you are looking at on the back of weaker dollar? havena: look, we actually just recently published our quarterly outlook. the -- ating one of the beginning of april we made a call for north asia versus the u.s.. we prefer this because it was coming out of the coronavirus outbreak much faster and getting to more normalized economy. in the recent outlook, we have just added europe to this.
we like certain areas such as germany industrials, special material companies. the rotate into cyclicals, that is something we believe in, but we still believe we should stay high on the quality scale. from: fabiana fedeli robeco stays with us. european union may ban travel for two weeks. the bloc may shorten its list of countries. the rebound of cases is hampering efforts to reopen the border. the international has approved billions of funding for south africa. it is the largest emergency payout yet to fight the coronavirus pandemic. south africa's government expects the economy to contract over 7% this year. hits,efore the pandemic
it has been in a spiral since q2. a prime minister guilty on all scandalin the one mbd -- 1mdb scandal. his lawyer says they will appeal the ruling. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much. coming up, tsmc surges past johnson & johnson to become of the world's 10th largest stock. ♪
nejra: this is "bloomberg daybreak: europe." green on the screen in asian equities. u.s. futures come off the highs from earlier after we saw tech stocks lead the gains in yesterday's session. european futures positioned ever so slightly positively. the dollar at a 22 month low. a touch of a comeback against some g10 currencies right now. oil fluctuating around $41 a barrel. tsmc kept up its record-breaking street today, it briefly became the world's 10th most valuable company. to shares boost comes after intel warned its seven nanometer chips are behind schedule and it may outsource production. tsmc's rally is attracting flows into taiwanese equities and increasing demand for the local currency. fabiana fedeli is still with us.
when we were talking about the u.s., you talked about taking profit on big tech names and wanting to move more into cyclicals. do you have more conviction in tech stocks in asia? fabiana: we do. we still have an overweight in i.t. stocks across the world. we also have more conviction in asia then the u.s. given the relative valuations. what the recent events have shown is that no matter what the u.s. administration throws at em and at china in terms of trade it isit is all about ip, all about being at the forefront of that technological, if you want, boundary. this is something that some of the asian names are doing very well. nejra: when it comes to -- theers, given your
fact you are favoring cyclicals, chipmakers obviously, a cyclical sector. buyyou indiscriminately chipmakers or do you have to be selective? fabiana: we are in a changing world and r&d is important. new standard in terms of companies' ability to produce the latest in terms of geometries, technology, it is really important. i would not really just buy indiscriminately, but if you look at them relative to the rest of the world, they are quite undervalued. and they are completely competitive versus from an r&d standpoint the rest of the world. that is where we are focused. nejra: another area you point out as being still quite undervalued is china.
you have key themes you are looking at. one of them is china being destined to become a poor allocation. why are you so constructive on chinese equities? the secondina is largest economy in the world. it is also the second largest equity market in the world after the united states. what if you look at the allocation in investors' portfolios and the index position china has, we are talking about china being 45% of some of the major world indices. when you look at also the allocation of investors in china , at the highest they have ever been relative to this, but it is still a 1% under allocation. we think this is destined structurally to increase because of the size of the economy. you have also if you want a shorter-term trigger. that is the way china has been
able to deal with the covid outbreak and its ability to go back to normal as an economy. the last point i would make is china is really opening its equity markets and its bond and they are increasing accessibility to investors. that creates a much larger pool investors to a pick from. nejra: you also do point out that even with u.s.-china tensions rising, investors seem to be more willing to look through that when it comes to chinese equities as well. fabiana fedeli from robeco staying with us. itsng up, moderna launches first large-scale trial of its covid vaccine in the u.s.. ♪ ♪
moderna's ceos -- says those most vulnerable receive the vaccine first. moderna will underpriced the vaccine during the pandemic. stephane bancel -- , thatne: it is possible is not the base plan, that is the best plan. , the fda couldta decide to give us emergency approval. we will make of the vaccine available for people at the highest risk, the health care
workers, the elderly. doing, weve been raised $1.3 billion to invest in , having new team members and training them. as we speak we are making as many vaccines as we can with the goal of making 500 million doses in 2021. we talked about how easy is going to be to attract the necessary demographics within the test. how easy is it going to be to attract those key demographics, most vulnerable demographics, particularly seniors? are you struggling in that area? are people coming forward? stephane: it is too early to know about phase three. what i can tell you is over the last week we have had thousands
.cross the u.s. asking us , bothe had diverse groups elderly, african-american, latino's, which is very important. we want to make sure there is diversity from the core demographics in the u.s. at the highest risk. >> this might be a silly question, but bear with me. is it an antibody vaccine? is it t cell? how is it going to work? it is a vaccine that is able to activate both b cell and t cells. it is complicated. the b cells provide neutralizing antibodies. the t cells are used for memory. what we have shown in the human study that was published in the new england journal of medicine,
it has a high factor of neutralizing antibodies, four times more than people and have been -- people that have been naturally infected. everybody else, every other company, we have to run the phase three. vaccines seeing other producing a t cell response. is this going to be one of the key differentiators, you think, as to whether or not we get an antibody and cellular response? is that going to be one of the areas we are -- people are going to receive it? stephane: people are actively looking to differentiation right now because we don't have any more data. not only from industry, but the regulators, what do we know today? from the phase one study
published data. the real test everybody is going to have to go through is 30,000 plus ofants, 50% control. -- theng the number of phase three is going to be the real test for everybody. nejra: that was stephane bancel. just want to bring you read headline. this is according to bloomberg reporting. nissan is not planning to pay a dividend for the current fiscal year. it is looking to conserve cash and turn the business around according to people with knowledge about the plans. nissan is set to announce results for the april to june quarter and outlook for the year
through march later today. the quarterly operating loss is said to be about ¥150 billion. we will bring you more updates as we get them. back to the coronavirus. a late stage trial for a top vaccine candidate. they aim to submit it for regulatory review in october. investors are monitoring the rebates -- the rates for a vaccine as local flareups continue to emerge in china and spain. may mean euases borders stay shut. fabiana fedeli is still with us. as a second wave fears remain alive and well, a lot of investors not expecting full-scale lockdowns. we keep coming back to what kind of recovery we are going to see and what this means for value stocks. you say for value to make a lasting come back, we need an improving macroeconomic outlook. is that your base case? >> it is.
it has always been for a value. what we are seeing here is that a vaccine is going to happen. it will take time. probably we are going to see something by the end of first quarter, beginning of second quarter of next year. this means a u-shaped recovery. in thoseing to be countries at the forefront of that u-shaped recovery, and at the same time, this is a good time to start rotating into value stocks. we are left right now with a fantastic opportunity which i have not seen in a long time. polarization between quality growth and value in the market is unprecedented. it is the highest we have seen since 1975 in global markets. a lot of stocks right now really look like value. you don't have to go low on the quality scale. now i think it is a good time to start picking stocks. i have heard this
argument so many times and it does not bear out in any lasting way. you say value will come back but in disguise. what is different this time? fabiana: i think we have to be smart about the concept of value. alue is not any more than price-to-book. that is a value stock. it world is changing from a technology standpoint as much more -- content has much more services and consumption content. your stockspick looking at the longer-term sustainability out there earnings. this can mean sustainability from many viewpoints. these are value stocks with a future. that is really what you have to look at. very high active share when it comes to value stocks. that is what i would recommend. nejra: fabiana fedeli from robeco stays with us.
nejra: good morning from london. this is "bloomberg daybreak: europe." republicans unveil a trillion dollar aid package to bolster the u.s. economy, proposing a cut to emergency jobless benefits, more direct payments to americans, and liability protection for businesses. precious metals shine. gold futures touched $2000 for the first time ever. could the fed meeting be a
catalyst for gains? profits slump as the coronavirus erodes demand for luxury goods. another big earnings day. don't miss our exclusive conversation with the ceo of automaker psa group. europe."o "daybreak adjusted operating income for psa group at 517 million euros. that is quite a powerful beat on first time adjusting operating, versus expectation. the ceo saying psa is determined to achieve a solid rebound in the second half. it is also keeping its 2019 to 2021 average automotive adjusted operating margins goal at more than 4.5%. that is what we have coming through. basically sticking to its
financial outlook despite the virus drag. first half revenue comes in at a beat. cfo confident that psa can close the fiat deal in the first quarter of 2021. we have an update on that as well. in cfo also saying psa is normal antitrust discussions with the eu on that fiat deal. the first half adjusted operating income coming in at a beat. the takeaway is it is holding onto its financial outlook even after profit did slump in the first half of the year when pandemic lockdown hammered vehicle sales in psa's biggest markets. we are going to speak to the ceo and chairman of psa group, carlos tavares. looking ahead to the fed meeting this week, we did see green on the screen initially. we are still marginally posting
gains in asia. u.s. futures coming off their highest. a rally in u.s. stocks yesterday led by tech. european futures giving up gains from earlier to trade after we saw a red on the screen in europe yesterday. the dollar earlier was at a 22 month low, but it has made a comeback. that happened as gold has pulled back, meaning some traders have been taking profits on certain currencies versus the dollar. we have seen gold futures touched $2000. the stock price not there yet. the 10 year above a 60 handle. fed officials will confront clear signs the u.s. recovery is stalling when they gather for their two day meeting. economists expect they will hold fire on additional stimulus while congress debates more fiscal eight. chinese president xi delivers a keynote speech at the opening ceremony of the aiib annual
meeting. later today a host of economic data for brazil forecast a jump in the unemployment rate. for the country's public deficit. let's get back to the numbers from psa group. the key headline, first half adjusted operating income at a clear beat. pew joealso heard sticking to its financial outlook despite the virus drag. joining us is carlos tavares, ceo of psa group. thank you for your time this morning. let me just get some insight around the numbers and the fact you have stuck to your financial outlook. what makes you so confident in that outlook given the difficulties in the first half? what makes us confident
is the fact that over the last six years, we have worked extremely hard to reduce the breakeven point of our company. our breakeven point is around 50% of revenues. we have become a very resilient company, very agile. the numbers for the first half of 2020 demonstrate this resilience. hence the fact we have a very strong conviction that we will respect this guidance that is an average over three years. so yes, it is old whether guidance. we will stick to it. each 12020 in 2020nstrate -- h1 demonstrate. nejra: you talk about the fact you will achieve a solid rebound in the second half. how will you do that if demand remains suppressed? carlos: during the lockdown we
had rigorous management. we had a very significant reduction of inventory by around 24%. that means we are entering h2 with a low level of inventory. the new rebound of our manufacturing system is very smooth. we see plants are coming back in a way which is satisfactory from a cost perspective, of course from quality perspective. the rebound has been very smooth so far. the level of inventories entering h2 is very low. we expect a significant number of cars pending the fact we would like the overall economy to be as stable as possible. we see the conditions for us seem quite promising. nejra: at the same time, you are dependent on the european market, which is recovering slowly, in large part due to
incentive schemes in big markets like france and germany. are you in favor of these incentive schemes? carlos: we are not in favor of incentive schemes. we are not in favor of any initiative that would disclose the market conditions. we would like to make companies -- our customers happy with no distortion. you ourlike to tell auto book is extremely goodbye now. we were 15% up against last year. stellar given the attractiveness and the appeal. this is a very rewarding experience. inventories are very low. conditions seem to be reasonably stable. this is something that of course we can enjoy thanks to our supply chain that is now rebounding.
us just for a moment discuss the proposed merger with fiat chrysler. fiat chrysler's european operations have suffered more than other regional carmakers, including psa. assuming you get approval, do you plan to push through with the restructuring of fiat in europe? what would that look like? carlos: we do not plan to do that. the companies are structurally high in profit and there is no sense of crisis inside of these companies beyond of course the covid-19 crisis, which is something we have all to face. resultsseen in 2019 that fta as much as psa have very strong results. the companies are strong.
the companies are complementary in terms of business, in terms of technology, in terms of maturity. we have a lot of great things to do. we intend to implement synergies after the closing which means there is a lot of value to be created from synergy. there is a lot of value to be created through this bigger company to face the challenges of the future. this is the reason why we are so excited. we believe we will be stronger then the standalone position. we have significant challenges in terms of investment in new technologies. it in theer to do broader perspective rather than the standalone perspective. nejra: there have been some concerns posed by certain investors, though, or questions at least. one of the biggest questions is
whether the terms of the merger would have to be revisited due to the pandemic. back in june you said it was not really an appropriate time to be talking about that. another question is whether the large dividend fiat was planning to pay investors, what the status of that would be. the special dividend. is that feasible post-pandemic? when do you expect to come to a decision on that? carlos: it is a great question from our investors. i would like to explain how we are operating. we are now as the managing board of psa under the mandate of the board approval given in december 2019 to implement the process of this merger. we are in the implementation and execution phase of a decision made in 2019. this is what we are doing, as you know, it is an enormous
amount of work. many discussions, lots of paper. all of this is being done by 500 people working endlessly to get this done. we are in execution mode. if anything else will have to be done, it could be under the mandate of the board. at psa we have a rigorous governance, a dual governance with the supervisory board from one side, the management board from the other side. the managing board is on the execution of the deal that was signed in december 2019. if anything else will have to be done, the supervisor will instruct the management to do that and we will execute that. what we need to focus on his first to get out of this covid-19 crisis in the best possible way, to rebuild and reinforce the balance sheets of our companies. you see that, the resilience of the psa group is obvious.
you can see it through the numbers. for a veryunding simple purpose. it is to reach the end of the year in the best possible so that synergies can be created with good cash position. for the management as much as for me, look at the cash position where we close. this is going to be the most important point. -- depend heavily on h2. it is premature to discuss this as long as we do not see the rebound on the fta side is much as the psa side. the end of the will be the time to appreciate. this is the mindset. we have to be very professional. we have to be very rigorous. mandate of thee
binding deal from december 2019 and we are executing that mandate. by the end of this year, after the rebound, we will see the cash position. from: what i have taken that is investors will have to wait a little bit longer to get a specific answer on the terms of the merger for the large dividend fiat was planning. come back and talk to us later in the year. thank you so much, carlos tavares. customers areh making purchases faster than the company can cut costs. ♪
daybreak: europe." lvmh customers are curbing purchases of high-end fashion faster than the company can cut costs. coronavirus hit the demand for luxury goods. joining us now is deborah aiken, a senior analyst from bloomberg intelligence. did we see all areas hit in terms of the followthrough into the profit? h: yes, if we look across, wasrange of revenue decline 23 to 39%. however, if we look at what in leather goods, they held up well in terms of the profitability contribution. the biggest issue was on selective retail, which houses
the hospitality side, the , retail, that came through with extra loss. that had a big impact on the net line, 38% decline on the adjusted operating profit versus 20% decline on sales. nejra: what can we read across to other luxury names? deborah: as we were going into q2, the consensus was calling for 47% declines. 38%.has come out at we are looking at second-half recovery. the market is looking at parity. it will be flat for the second half. the thing is that companies are actually underlying cutting
costs, they should, stronger. -- sorry, half one sales, there are fixed costs that cannot be taken away. china, korea, e-commerce, all in double digits. we have seen similar numbers of -40% coming through in smaller companies. everyone is looking for a second half rebound. numbers, over 50% of stores will close. they cannot get there quick enough. we need to see the transition happening. retail to expecting recover until 2021. nejra: thank you for joining us. isiana fedeli from robeco
still with us. we have had the numbers from psa group this hour. i spoke to the ceo a moment ago. we are talking about the luxury sector. what is your take away so far from earnings season globally? what i think we are going to see, we are starting to see it, is a large disparity among companies. the companies you need to monitor are not the highest flying tech companies that we know are doing well. if anything, they could start to disappoint. whether it is the u.s., whether it is europe, whether it is china, what you have to look at are those companies that have been wounded by the coronavirus outbreak and the economic slowdown, but not morally. they are ashmore tilly -- mortally.
at the same time they have underperformed. investors may not buy into them right now. they might wait to see what happens with the economic backdrop, but the market is moving toward those companies. , is thereyour work anything that surprised you in the way companies have either weathered or not weathered the coronavirus crisis and perhaps gone against the expectations you might have had among -- a month ago? fabiana: i would not say there has been anything surprising. what i have seen is that management that we believe was stronger has actually dealt with the crisis much better. , having stronge management, strong human resources management, is absolutely key. we have seen companies that have
done that better than others and companies that have invested a lot and managed to keep up with their innovation. those companies are the ones that are going to come out of this much better. they don't need to be the highflying tech stocks. they can be in many different sectors. companies do you view that are dependent on consumer demand? we have been talking about consumer spending in relation to luxury. that also translates to the car sector, which we were discussing earlier. how do you factor your outlook for a rebound in consumer demand? fabiana: we are going to see huge differentiation between results. we have already started to see it. there are companies that are are dependent on -- that having a much tougher time. withcompanies in trouble not strong enough balance
sheets, working capital management, those are destined to continue to have problems. if you look at companies that have innovation, companies that are at the forefront of what consumers like, actually, those companies continue to do well. you see results from consumers also in asia, for example. consumers are continuing to buy. they are being far more picky and using different avenues. nejra: great to have you with us today. thank you for joining. fabiana fedeli at robeco. coming up, lloyds banking group has a new effort to improve staff diversity. promotingre about equality in the workplace. ♪
nejra: this is "bloomberg daybreak: europe." inclusion is shaping up to be the next frontier in investing. investors are pushing companies to create more welcoming places for employees whether their disability is physical or not. joining us is dani burger. why are investors concentrating on this specific issue now? >> esg has been important for investors for some time. people tend to just concentrate on the environmental and governance sections. social is getting ignored. investors realize that, especially within social, rights and equality for disabled workers. we have seen, this may, 22 institutions that manage $3 trillion sent out a call to action to corporations saying they need to provide more accessibility and better hiring practices to include more
equality among their workers, especially when it comes to disabled workers. it a good thing to do, it improves net income, net revenue, by 28%. these companies who take on accessibility programs also see their profits double versus their peers according to 2018 investor reports. the problem has become especially prevalent during the coronavirus crisis. more people with disabilities have been disproportionately impacted by unemployment. the time really is now to be pushing for these issues. nejra: coronavirus certainly has been a catalyst for a lot of change across industries, not least esg. thank you so much to dani burger. that is it for "bloomberg daybreak: europe." green on the screen in the u.s. yesterday. europe closes in the red. gained through the asian session
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