tv Bloomberg Surveillance Bloomberg December 14, 2020 4:00am-5:00am EST
ursula von der leyen extend brexit witother deadline ignored. germany enters a hard locked down this wednesday as italy overtakes the u.k. for coronavirus deaths, plus astrazeneca lines up $39 billion megadeal, the company's biggest deal since it was founded. welcome to bloomberg: surveillance. i'm francine lacqua in london. focused on brexit.
there appears to be a bullish tone more than friday, not only on brexit but the possibility of stimulus in the u.s.. as we look at what we should be watching out for in the markets, european stocks are gaining 0.8%. pound is surging, investors seem to be taking comfort from further stimulus and negotiations, and deployment of the vaccine in the u.s.. more on that through the day. let's get straight to the bloomberg first word news with laura wright. germany is entering and other hard locked down from wednesday. beingsential stores are closed and school children are being encouraged to remain at home. banrestrictions include a on gathering over the new year and will last until january 10. a loser lockdown failed to halt a surge in cases.
u.s. agencies have been hit by hackers. the attack came through an update to a widely used i.t. software. "the washington post" is reporting hackers backed by the russian government are suspected of being behind the cyberattack. the u.s. is aware of the report and is taking all the necessary steps. iran plans to roughly double oil asduction in the next year the country anticipates a loosening of u.s. sanctions under president-elect joe biden. extra exports could cause a problem for opec, which is trying to keep output down. has exempted iran from production cuts due to u.s. sanctions. latish spy novelist john carre has died, best known for his cold war thrillers. mi:5 andofficer with mi:6, he wrote over 20 books.
"the new york times" once described him as the preeminent spy writer of the 20th century. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. francine: staying with our top stories, brexit talks have been extended. boris johnson and ursula von der leyen agreed to keep working on a deal. news.und jumped on the for more, ed evans, our budget editor. how likely are we to get a deal? another extension is usually for something. ed. d: sunday was a point at which the talks could have fallen apart and it didn't. the deadline on whether to go on talking or walk away and what has happened since wednesday's disastrous dinner between boris johnson and ursula von der
ack and you are beginningken a to see the contours of a level playing field and fisheries. those were the two big obstacles to a deal and it looks like they could get taken a step closer to resolving those and they want to do that over the next few days. the one deadline that won't change is december 31, and it is a rather small number of days until we get there. francine: is it both sides compromising or will one side lose more? edward: it looks like both sides. the key is on the level playing field and the second question is, what action can the eu take if the u.k. decides to go its own way and have different environmental, social, and labor rules? initial ask was in media rights of preemptive
retaliation. they are prepared to impose some form of arbitration and dispute resolution before they can do that. it looks as though the u.k. might agree to that. then you get into the debate on fishing. that is an argument about numbers and species. that is haggling over numbers and that is a sign you are getting into the final stages of these negotiations. francine: thank you so much for the update. is the global chief investment officer at credit suisse. things toa lot of talk about. the u.s., 2021, but overall, does brexit matter to your portfolio allocation? >> not a whole lot, francine. tok, we've been learning live with the brexit saga for almost three years now. it does matter for u.k. assets and the pound, but in general for the outlook in europe and
the world, i have to say no, it doesn't matter that much. francine: what matters to you the most? the vaccine, resource allocation, herd immunity? michael: number one, central bank and central-bank support that we continue to need because we still have some uncertainties in the near term about stimulus, the size of it. that can be the vaccine news is great, but we have to be realistic it is going to take time. i don't hope we are going to get a third wave of this virus before we had the vaccine rolled out but it doesn't look good in many countries, germany going --k into locked down lockdown, switzerland not great, either and the u.s. with nobody really at the helm, you have three difficult months ahead of us and those uncertainties are more important than brexit or anything else. francine: when you look at
central banks support, the biggest question is whether inflation is coming. given what we knows of far, even if we have a vaccine middle of next year and we reach herd immunity third quarter of next year, what is the likelihood that pushes up inflation? michael: that is a big risk factor that we also see, but we do see the most imminent issue is actually what does that mean to gilts? if we have a -- yields. recoverye a strong next year combined with surprises to inflation expectation, if the market gets scared about inflation we haveions in general, turbocharged our way into 2021 with stimulus, with growth, and pent-up inflation expectations. that's the real risk for markets. i don't have that as a main case. on in cautiously risk
equities, emerging equities, credit on the emerging side, but it is the number one economic risk i think is out there for markets, surprise inflation expectations. francine: is that priced into the markets? or is it being ignored? michael: it is not at all priced. ist we are seeing now potentially a bottoming of real yields. with that, derived from that, inflation expectation could be riskd and there may be next year. it is not priced into markets and if there is something i am wecerned about, it is that are in this 2017, 2018 scenario where we had a fantastic rally. everyone is bullish, everyone says risk on and boom, yields go
up more than we expected, mostly because inflation happened in february 2018 and guess what. that will also reset central bank thinking, because the number one thing they don't need now is rising inflation expectations. francine: michael, what does it mean -- how do you adjust your portfolio to take all of that into account? michael: first of all, you have to be realistic and say you have to be risk on. there is pent-up investment demand across the entire institutional world. on the investments have missed the rally, they want to get into it, they are looking for dips. oneseptember and october being more meaningful, but we are steering into the year-end with tons of liquidity on the sidelines. i would not be on the wrong side of that, and still be progress, but as a risk
scenario, you need to be short duration, prepare for steepening and play more with an acetal -- asset allocation shift out of bonds. francine: what do you do with health care? we will talk about astrazeneca in a second, but is this industry going to go through massive disruptions in 2021 or have we seen peak valuations? given what has happened in 2020, the health care sector has been reset. huge newe will see investments and aussie -- m&a activity for something similar to code in the future. the study of vaccines will be a mega trend for years to come. the reason we are coming out of this faster than we thought on the vaccine front was health care sector has been preparing
for this for 20 years but didn't have the virus to get ready for and now they have it. that is why we are so fast into this, but this is just at the infancy of development and therefore, i would secularly belong health care. francine: michael strobaek from credit suisse stays with us. we had news about astrazeneca so let's check the share price. it would be premarket. alexion shares, they were up 32%. inres were slumping astrazeneca after the $39 million deal for alexion. coming up, thee rollout of vaccine and what it means for investments and markets in 2021. that is next, and this is bloomberg. ♪
>> economics, finance, and politics. this is "bloomberg: surveillance ." i'm francine lacqua in london. breaking news out of singapore, the most encouraging story in thatast couple of weeks, vaccines are being rolled out, a lot of countries have access. on the flipside, countries having to go into more lockdown measures because of concerns cases arising. singapore has approved its pfizer vaccine, arriving by the
end of the year and they also put encouraging statement out saying they should have enough vaccine for the whole population by the third quarter of next year. in the u.s., hospitals are preparing to receive the first shipments of the coronavirus vaccine from pfizer. health care workers and nursing home residents will be prioritized. cases are surging in the u.s., with deaths reaching 300,000. we are back with michael strobaek from credit suisse. vaccine that is sufficiently rolled out, do we go back to worrying about other things such as trade war? what kind of relationship will the u.s. have with china? michael: i think we will do that. towill take three quarters get this rolled out. there will be logistical issues scareseen, there will be
about is it safe, is it not safe? not everyone is going to take it. all of these things we pretty much know. the good news about the vaccine coming out is they are highly effective and they come out very fast. i think the markets have looked through all of that, bearing some unknown on the vaccine front and we will look at when we can be back to normal levels of economic growth and critically, what are the central banks going to do when all of this is rolled out? as we move back to normality, the number one question is when will they start pulling back the stimulus they've put into the system that has been nothing short of massive. this is what to watch for and their language on that. this china-u.s. issue will be with us for the next decade or more, but i do believe the byber one tone is set
central banks next year and it is a question of how much further they will go with stimulus? michael cummins are all, if you look at fundamentals and the economy, even if we have a sharp rise in gdp, we have to go back to levels we would have had before had there not been a pandemic. when do equities matchup with fundamentals? they arei think discounted one year out already. i'm not convinced at all this gap is in and of itself from. look 9, 12 months out and they are seeing a bright recovery, the pandemic going away, the central banks having put in historical stimulus that they can't put out very fast. size, compared to the financial crisis, we have three times as much. take halfng is let me
or a full decade to get it away. secondly, yields. they are not going to be able to raise interest rates at the shorthand for the next many quarters if not a few years, simply because of the level of unemployment that has been created by the pandemic in the world, and they have two things on the horizon for central-bank goalsetting and that is growth and unemployment. that is not going to go away very fast, either. they are in this catch-22 as to how much further do we allow risk assets to run? the message has been we don't care that much about the levels. powell said that very early in this pandemic. we don't care much about asset because maybe they know what the right level is, maybe not. they say we care about unemployment and growth and those are the key things they will watch. and i think for as long as this is the backdrop, real assets,
equities steering into private opportunities, private equity funds, etc., because those are the only real return plays in town now that the return in fixed-income, short cash has been taken away. michael, there are industrieshings, that are in a bubble. do you worry some of these valuations are crazy and when it bursts, that bubble, it brings the market down with it? michael: no. i don't worry about that too much. i do believe there are some valuations that are excessive, but if we compare today with what we had in 1999-2000, we are in a different world. solidly world is
footed, also because of the pandemic, with a global business model that has worked betastically and we have to honest that without that, we would have been in the dark place. i don't see the valuation as excessive. that doesn't mean i would be overweight there given this rally. two big is looking for rotations, and those are growth to value and bond to equity. may be 2021 will be the year where we see this beginning to unfold. it will also mean out of the u.s. more into europe, into emerging. i see early signs of that, and therefore, i am not waiting too heavily on the tech rally continuing, but start picking up the cheap stuff, the cyclical stuff, the well priced stuff or the growth, and that is mostly in europe like in germany, in asia, in china, and it is overall more and more away from
u.s. for most assets like tech. if there is something you are buying right now as a precaution, what would it be? gold, swiss franc, yen, something else? michael: for sure, i think gold can still continue to go. 2200 goal for gold. it is a good hedge. cheap ando gotten lastly, i would spend into more safe haven assets. we like the euro, as well as good hedges and good plays against the weakening dollar in the portfolio context. francine: michael strobaek, global chief investment officer at credit suisse with some of the things you want to be invested in. next, we speak to howard davies in about 30 minutes.
vaccines, thebout banking industry, and we will talk about brexit. this is bloomberg. ♪ every year, we set out to do one thing: help the world believe in holiday magic. and this year was harder than ever. and yet, somehow, you all found a way to pull it off. it's not about the toys or the ornaments but about coming together. santa, santa, you're on mute! just wanted to say thanks. thanks for believing.
premium to its friday closing price, it would be the largest deal for astrazeneca since 1999. amazon's self driving startup has unveiled a fully autonomous electric vehicle. it doesn't have a steering will and can drive day and night on a single charge. spoke to the company's chief executive. >> not only do we have the capital required, the long-term vision, the ability to focus and execute, and this is about reimagining transportation, so it gives us a baseline to build from and expands on it. laura: that is your business flash. francine: coming up, we will speaking to the european commissioner for the economy. that conversation will be on brexit, the eu recovery fund, and climate change. this is bloomberg. ♪
word news with laura wright. laura: allowing up to eight people together, britain has approved the vaccine by pfizer and b.i. intech that and biontech. the country has at aside within 750 million u.s. dollars for vaccines and expects more to more to arrive in the coming month. talks about condemning past sunday deadlines with the two sides vowing to go the extra mile. i have not said a new target date, but on december 31 the u.k. will leave the e.u. single marking and customs union with or without a deal. a bipartisan group of u.s. lawmakers plans to unveil a 908 billion dollar pandemic relief plan today in a bid to break the for dock -- the deadlock two separate bills come a
stripped down version without state aid and reliability protections for businesses, and the second bill that contains the two revisions that have divided congress. in italy, they are the european country with the highest number deaths hardest hit by the pandemic with 1.8 million cases. european council president charles michelle expects the vaccine to be approved in the e.u. in the coming weeks, and be before the end of the year. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more this is countries, bloomberg. francine? this off driving startup owned by amazon -- the company plans to deploy fleets of the soft driving carriage. the chief executive spoke to us about challenges in getting the
product to market. >> this is one of those technologies where there is an advantage for everybody debt for cities, in terms of infrastructure. we are working closely with city level, state, and federal level, and we are putting things together. already, inee come nevada and california, -- >> there are other jurisdictions that are looking at trying to be an example from european nations. we see is doomed -- we see zoom establish itself outside the united states? yes, we have global ambitions. >> do you think the public will be receptive to getting into a vehicle like that? it has no steering wheel, no pedals. is safe, it's clean, it
enjoyable. building trust even in the way customerre is a contract, where they see what we are using a supplies. it will take time. little by little we will earn it. think it is an inviting way, that it liberates customers to not worry about driving, parking, and all of those things and just be transported. what they do during that time is also up to them in terms of entertainment, music, productivity. in which see a world people don't own cars? >> not in the foreseeable future. we think it will be a mix, but what we have seen in the urban environments, it is about efficiency, it is about overall benefits, and we think it will be a mix for a long time. zoox chief executive
francine: this is "bloomberg surveillance." has approved the pfizer vaccine with doses expected by year end. planning its post-covid future with a $39 billion future with alexion pharmaceuticals. news of the bill have shares tumbling to any month low. the stock was already under pressure over the efficacy of its potential covert vaccine.
running us now, sam fazeli, director of research of emea. first of all, good morning. why did astrazeneca feel they needed to do this deal? sam: good morning. bit of aually a surprise to me, at least, and as you can see from the market reaction, in the market, too. this was a company that was growing the best growth rates as any large pharma out there, and then they announced this deal. to me it is a financial thing. issuing shares to buy cash flow for the future. they are buying a decent stream of cash flow until at least 2025, and they have got a highly rated paper. they are using that to buy a much lower rated paper. to me it is a financial thing, and also prices of buying fits. overall, where are we on the vaccine for astrazeneca? there was also some very
controversial story about astrazeneca also looking at the russians for the vaccine. where exactly are we? sam: let's not forget that russian or chinese, these are developed by scientists and local companies, and doing combination studies is something that we should be doing anyway have startedthey talking about. the combination of the u.k. talked about was the astrazeneca vaccine potentially with the pfizer vaccine. these are all some things to be explored, but where we are with the vaccine, the new information from what we saw that was published last week, that really didn't change anything for me. if anything, it added a few more questions that i need to see another trial report before i understand what is going on with this vaccine. what we do know works, it is just how it works that is very tough to tell. francine: sam, we are also
hearing from singapore that they have reached a deal with a maker and will be able to inoculate as the population by the third quarter of 22 anyone. what happens to countries that don't have enough cash, that are not rich? who are they talking with? sam: there is an organization and ins involved astra, the u.k., kovacs. toy are procuring doses donate to countries that do not have the financial wherewithal to afford to buy the vaccine in the market at the prices that they are offered. does his foodhat kovacs is something that will -- we have to know more about astra . francine: sam, thank you so much.
bloomberg senior pharmaceutical analyst. investment rome forum is underway today, focusing on investment as a long-term driver of development and economic rose, and it will take place virtually this year. guy johnson is speaking with paolo gentiloni, commissioner for the european economy. let's listen in. paolo: the initial idea was to have the first approval of these spring. late i think this was the idea of the decision taken at the end of the july -- at the end of july when the council approved the proposal of the european commission. week we had, last the final decision, and i think
maybeime, late spring or couldginning of december be indeed implemented. know, the first approval is coming from the european council, with a vote with qualified majority. and after this approval from the european council, based on the proposal from the commission, we disburse what you call pre-financing, so the first disbursement. this will be in the council proposal, 10% of the total amount, which is more or less for italy, 20 billion. but there is a discussion that i hope will be concluded tonight.
the parliament is asking to make is 10% higher. we will see where it could be. so the first disbursement will come, i think, according to the timetable that we decided in july, late spring, beginning of the summer. of course, it is a big challenge, because as you very well know, this means also for the european commission to issue common -- we had a very good experiment with a sure mechanism , raising 41 billion in the markets in november and december, but of course the european commission will become a big issuer of public debt
denominated in euro, and also this i think will have consequences for financial markets. initial -- the initial toe in the water was extremely well received by the financial markets, heavily oversubscribed. so just to refer back, italy, if we are being specific, is currently on track. italy is not running late? no, at the moment nobody is running late because we were a little bit late in the final approval that came last week, because of this political problem that we faced, but now draft or the framework of these plans from a dozen member states, and i am sure that in january we will every membert
state's draft, and then the final versions of these programs will be presented in paying for the approval in the timeline that i mentioned before. thatthink the framework the italian government presented roughlyarliament is a -- is roughly converging with the european messages and priorities, but of course we have to look at the single project in the reforms and the commitments when the draft plan will be indeed presented. commissioner, some have suggested that the fund should become a permanent part of the economic arsenal, that the commission and the european union can deploy. what are your thoughts on this? totally share the
think is theat i right one for the decision that has been set, really an unprecedented one, and -- but i know that several leaders prefer to a hamiltonian moment, a copernican moment, a rubicon in moment, etc., etc.. we willsomething that may be defined in 10 years from now. at the moment we have an unprecedented decision, but we know from experience, the experience of the building of the european union, that if it works it can be repeated. so i think that our main task define this as a
permanent mechanism, but to make it work. if it works, probably i think there is, as all our histories show, the basis to use the same method for new emergencies. this is not a decision that has already been taken, this fund has been decided as an extraordinary one of decision. i repeat, if it works, we will receive it. guy: ok, let's talk about what needs to happen for it to work. first of all, do you worry that bureaucracy, be that corruption, will prevent countries -- for example, italy spending this money effectively? do you think they have the necessary tools to be able to deploy the money effectively? what can you provide to make
sure that this all happens? indeed, i think there are two main challenges, what is the content of these plans, because the very fact that europe has a plan, meaning ,hat we have shared priorities and these priorities are first of all the green deal. i have heard the italian prime minister referring to this, and rightfully so, unless we only mention the fact that the e.u. , which was a defining decision of the underlying commission, would have a global leadership on the green deal is not now a solo journey because in recent months, other
countries, we had the american elections, we had commitment of course with some contradictions from china, but also from japan, south korea, south africa. real newk it will be a green deal commitment as a global level, and europe will have the advantages of the first moment. so on one side we have -- parity, the green deal -- the priority, the green deal of the resilience. on the other side, you were saying -- and it is absolutely problem ofwe had the execution, implementation. we know that several member haves, including italy,
difficulties in absorption, and these difficulties will be multiplied by the amount of in then a short time next years, so we strongly recommend to take note of -- francine: that is paolo gentiloni, speaking to guy johnson. you can follow the conversation on the bloomberg terminal. coming up, renewed hopes, sterling jumps as the u.k. and the eeo extent brexit talks. that with less than three weeks from the deadline, will we get there? more on that next, and this is bloomberg. ♪
francine: economics, finance, politics. this is "bloomberg surveillance." i'm francine lacqua, here in london. sterling is rising. it fell this morning. the pound set higher after the agreedd e.u. leaders to continue with a trade agreement. burgerkets reported dani has more. dani: we have seen some of the
hedging calm down from where they were on friday, this yellow bar where it was on friday. the one week option to protect against drops has somewhat eased, but it is important that at the moment this is about double the average we have seen over the past 12 months, and the issue with the short-term options as we see traders go in hoping to hedge against a deadline, but those deadlines come and go, which means it has bought protection against this option, and it was more money wasted. without any clear cut off when the talks will end, perhaps we continue to see the most stress in one month with reversals on cable. this is a form of how much our traders are hitting themselves against volatility in the pound, and again, this one has eased, but is it still an extreme level? before it was beyond that march pandemic level, it comes up again. these one month risk reversals are still the most bearish, only
beating two times, once in march and the other time we saw this level beat was when the brexit referendum happened. so still a lot of stress, francine. francine: dani burger with the latest on pound movement. let's get to the political angle. for more, we are joined by maria tadeo in brussels. when you look at the talks on going, does it get us closer to the deal, or could it always unravel? maria: francine, to some extent it does just purely based on the fact that the two sides are very much at the negotiating table. if the prime minister had wanted to walk away yesterday, sunday, which was framed as a make or break deadline, that was a perfect opportunity to do that, instead we heard from both the prime minister and the head of the european commission that they want to go the extra mile to get a deal going. the language around the playing -- on friday, the head of the commission was clear that the e.u. does not expect the u.k. to do a copy and paste
of regulation. if you move away, that is ok, you are a sovereign country. we will have to tweak market access, but we don't want you to copy. that is something that could give the prime minister a helping hand. we understand that shall bonnier is telling european investors that he does see that that michelle bonnier -- that michelle bonnier is telling investors -- we understand that we are not quite there yet. francine: what will we see in the next one to four hours, maria? will be key to see what type of reaction we get from the briefing, whether or not we hear from the germans or from the french. there was also speculation that we could see a trip from ursula von der leyen to speak with macron to speak about brexit on that note. it is also interesting that the pie minister says i'm ready to go to paris, to go to berlin to go what it takes -- if that is
what it takes. change in theld next few days. francine: thank you so much, maria tadeo, our reporter in brussels. the markets are focused on a possibility of a brexit deal, focused on stimulus in the u.s., and overall there seems to be more optimism about a vaccine as well. "bloomberg surveillance" continues. in the next hour, we speak with sir howard davis. -- or howard davies. we will speak with him about the banking sector. all of that coming up, and this is bloomberg. ♪
boris johnson and ursula von der leyen extend brexit talks with yet another deadline ignored. lawmakers in washington will unveil a $908 billion pandemic relief bill today. steven mnuchin and nancy pelosi are set to speak again. futures higher in the u.s.. plus, astrazeneca lands a $39 billion megadeal to take over alexion pharmaceuticals. it's the company's biggest deal since it was founded. good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua in london. lisa abramowicz in new york. tom keene off, chopping a tree or something like that. is a lot to talk about. and kind of tired of brexit. i know most of the people watching are tired of brexit, but it is the final stretch, and i want to remind everyone, december 31 is not a moving deadline. they should not be able to go over. lisa: which is key. jon ferro, my colleague, is always talkiut