♪ guy: live from london, i am guy johnson. alix steel is in new york. we are coming you down to the european close on bloomberg markets. what you need to know out of europe this hour? the italian government is hanging by a thread. news of the decision is expected this hour. the gpo -- btp yields lower. france is considering a curfew. italy extending its state of emergency until april 30. in corporate news, car stop searching, bonds dropping. early talks about a takeover of the french supermarket giant. equity markets drifting.

it is going to be interesting to see where we go. at the moment we are flat. european equities have got nowhere the last two or three days. it is interesting to see what is happening. the bond market, i have an italian yield, .58. we are watching very carefully what is going on. the italian government hanging by a thread. 1.2161 euro-dollar, down .4% accurate -- a stronger dollar, down -- down .4%. a stronger dollar. sharon bell of goldman sachs joins us now. she thinks european equities still offer value and sees earnings growth of 40%. does your call incorporate a double-dip recession in europe? sharon: it does.

i think there will be a double-dip recession, particularly in the u.k., where the lockdown is harsh and there'll be more lockdowns in europe as you just discussed. i think europe will see a slight negative. this year in the u.k. a deeper negative reflecting that lockdown. we do expect a strong acceleration from the second quarter. bear in mind last year we had a lot of lockdowns. we come from a low earnings base which is what is driving the growth. guy: do you think -- there seems to be a lot of risk in europe. the risk is the virus continues longer at the macro risk is greater. there is also country risk as well. i was stunned by a strong spanish bond market option. i am stunned italian yields are moving lower and not higher. do you think investors will be

fairly rewarded for the risk they take in europe? sharon: there are always risks. i agree they are mounting up. what worries me about risks is valuations of equities in particular, which is what i am focused on look expensive. the european equity market traits on a pe multiple. if you told me about all these risks and the pe multiple was historically very low, i would not be that worried. at 18 times, obviously, there is a cushion. markets have already gone up 20% in the fourth quarter of last year. it is cushioned if one of these risks come through. you do see a deeper downturn. that being said, you see the weight the bond market is reacting and you see today in the periphery the news about italy, you still feel markets --

in europe we still feel europe needs a recovery. that will be a great discourse. whether a downside risk, i still think there is enough in place to help support the market. alix: i wonder if you have to distinguish by sector. i'm thinking about italian banks. there is policy support. that is why you're getting a bid to the bond market despite the political dysfunction it italy. what areas do we still see the risk where value does not make up for it? sharon: banks, the thing for banks will be when you get your economic recovery and the second quarter. if you do get recovery coming through, the lockdowns, which i'm sure get worse for the next month or two, hopefully -- even further into the second half of the year. that come through you get to the question of growth picked up.

for the banks that is crucial because it means fewer loan losses, better loan growth, they are highly cyclical sector. they can be testing equally to the downside if the lockdowns get extended, if it takes longer to vaccinate, if the vaccine should not work. you are right. valuation is interesting. the banks are probably one of the cheaper assets across europe. they have a little buffer relative to the market sectors. we generally see quite right on the sectors because we are expecting growth to improve in the second quarter. guy: where does that leave the u.k.? the u.k. reporting 1500 new virus deaths, the most since the pandemic began. the u.k. is vaccinating aggressively. when it comes to equity investments, if growth bounces back, does the high level of oil

stocks outweigh the rise in the pound we will see and all of the other factors that will come into play. i wonder how you think about u.k. assets more broadly? sharon: i get a lot of inquiries on the u.k. at the moment, which is surprising. you would think when the brexit deal has been done the news flow on the u.k. would die down, but that has not been the case. i agree the virus case has already picked up a lot in the u.k. the lockdown is quite severe. we expect 1.5% contraction in u.k. gdp. that will hit more domestic companies. as you say, there are of global companies in the ftse 100 index. commodity companies, minors, oil companies. more international financial pharmaceutical companies,

consumer companies, which have little exposure to the u.k. relative to the rest of the world. generally we like the u.k. equity markets versus other industries, possibly because it does not have a large tech listing, but it does have these cyclical global companies and they have not done in recent quarters with the weakness in growth. if growth picks up they should do better. we think the dollar will continue to fall through this year. we are looking for sterling to rise. that is a slight negative with the ftse 100, giving many companies are buying dollar cash flow revenue streams rather than sterling ones. guy: on that note we will leave it. sharon bell of goldman sachs global investment research. greatly appreciate your time. news coming out of the u.k., we

have the latest numbers in terms of the covid cases. we will talk about those in a moment. boris johnson talking to mp's as well. no evidence of new strains of vaccine resistance, signs of cases are leveling off. excellent conversation recently with joe biden. up next we will talk about what is happening in u.k. and what is happening with the vaccine rollout and also the virus cases. we'll be talking to a professor from imperial college to get a take on all of that. this is bloomberg.

guy: welcome back.

dealing with the data out of the u.k.. 1564 new virus deaths. that alarming number is the highest level we have seen since the pandemic began. boris johnson says there are signs the national lockdown is beginning to work. he is also warning it is too early to call it. pm johnson: the lockdown measures are starting to show signs of some affect. we must take account of that. nobody can doubt the serious damage done by lockdowns to people's mental health, two jobs, to livelihoods as well. guy: johnson saying too early to say if relaxation is possible by mid february, relaxation of the rules. joining us is u.k. government reporter emily ashton. the u.k. is in a race against time. we are hearing that from government officials.

you need to vaccinate a lot of people quickly. case counts are rising and the death is also rising. is there any suggestion the top of things working will deliver the early end of the lockdown, or as scotland is now doing, do you think there's a possibility we will see it tightened? emily: we did not know is the answer. as you say we have seen our highest death rate, the highest daily death rate. over 1500 deaths per day which is the worst so far. a horrendous number. the weight of cases is going down slightly but things change day by day and we cannot take much yet. the prime minister is hailing cases leveling off. he is seeing early signs the lockdown is working. he is still not ruling out toughening measures.

the house causing controversy, the rules in this lockdown are not as tough as they were in the spring even though the crisis in hospitals is so grave. alix: emily, there's been a lot of pushback on the u.k. decision to spread out the shot for 21 weeks -- 12 weeks versus 21 days. any news from the u.k. government about that as experts keep saying do not do that? emily: the scientists here, the u.k. scientists are very clear it is ok and people should trust it is the right thing to do. their explanation for lessening the wait between doses is saying we need to get as many people protected to some adequate level than non-. if you give lots of two -- if you give lots of people two

doses, that is leaving some without any protection at all. a medical officer in england was speaking on the radio and said there is 90% protection from the vaccine after a couple of weeks, just from the first dose. that level of protection, even though it is not 100%, it does make a real difference in people should trust it. on the other hand, i can understand why people who have been promised a second dose within a couple of weeks when they got the first dose and then did not get it are a bit daunted by that. they just want to get as many people protected as possible in these early weeks. alix: thank you very much. bloomberg's emily ashton joining us. i want to get more from stephen leicht -- stephen riley, a professor at imperial college in london and working on a study on how the virus is spreading across the u.k. what have you learned about how the virus is spreading it is any

case leveling off? stephen: we've been looking at other data out there. what we have seen recently from the study is there very high levels of people in the community come up to one and 13 around london. at the moment in terms of prevalence it is very high. guy: would you expect things to start to revel -- to level off over the next days and weeks? how long do you think the christmas search will last? steven: and the government data there is a signal things have leveled off and may be dropping. that was reflected in the seven day average yesterday. the prime minister was referring to the data today. over a short period of time there is a sign.

that does not mean it will be continued for a prolonged period. alix: what you have to do once you get a vaccine? i was talking to someone who said if i have to keep wearing a mask and social distancing, why get a vaccine? steven: different feelings on that. the main thing is protecting those most at risk. we will try to vaccinate as many of those people as possible but we will not get every single one and there will be a pool of at-risk individuals left. we still need to be very careful about not having a large wave of infections in younger people that would spill into those unprotected old people. guy: there was a piece in one of the papers in australia this morning about the debate happening in australia about whether or not the astrazeneca

vaccine has high enough efficacy. they were talking about a 60% level of efficacy. whether or not the 60% efficacy was enough to get you to herd immunity. what was your view on that? steven: herd immunity will be a moving target with this virus. as we vaccinate more of the population and we get natural immunity we will gradually change our behavior and recapture as much of normal life as we can. it will not be a distinct threshold. we need higher vaccine efficacy if possible. i that the evidence is clear that all of the currently licensed vaccines have a major role to play in helping populations get back to more normal. alix: as the u.k. is trying to get out more vaccines but also spreading quickly does it change the herd immunity timeframe for

the u.k.? steven: at some point we need the current measures to work so the number of infections goes down. if there high numbers of natural infections that will adjust the dynamics brought out by the vaccination as well. guy: how does the government react when cases start to fall? how should the lockdown be unwound? there is a focus on getting kids back to school. do you agree that should be where we should look first? if we do not know what happens with transmission amongst those that have been vaccinated, how does this work? do we need to unwind it

differently than you would expect? either you end it or you start sending kids back early. i'm curious how the sequencing would work. steven: i would watch the number of covid cases in u.k. hospitals. that is the thing we are trying to protect. it is at very high levels. there is a sequence of steps that needs to feed through. we have to have a low hospital admission. people currently in the hospital have to be treated and may well have to be home. the timescales at which we can get that down to a level we are somewhat happy with again is much longer than just watching the cases. i would not expect there to be a rapid reaction to cases not going down. we have to look downstream at the reasons we put the lockdown in place. guy: professor, appreciate your

time. professor steven riley of the imperial college london. thank you very much, indeed. this is bloomberg. ♪ so you're a small business, or a big one. you were thriving, but then... oh. ah. okay. plan, pivot. how do you bounce back? you don't, you bounce forward, with serious and reliable internet. powered by the largest gig speed network in america. but is it secure? sure it's secure. and even if the power goes down, your connection doesn't. so how do i do this? you don't do this. we do this, together. bounce forward, with comcast business.

alix: welcome back to "the european close." i'm alix steel. guy johnson in london. canada's convenience store giant wound up buying -- for a deal. we want to get insight as to what that means. the whole offer is about $20 billion for par 4. joining us from paris is the bloomberg european luxury reporter. why now? >> bloomberg news heard yesterday there were tops between the convenience store operator that made an offer to buy carrefour and it was well

received by investors in carrefo ur. shares went as high as 70%. shares fell as much as 12% in canada. the payment is expected to be largely in cash. guy: what does the analyst community make of all of this? angeline: there's a lot of skepticism among the analyst community. they do not see a lot of overlap when it comes to operation and geographically. couche-tard operates convenience stores and they do not see a lot of synergy possible with grocery stores. couche-tard has a lot of convenience stores in north america. a lot of the revenue comes from france but it is a large american footprint. analysts also worn france is historically one of the most competitive and less rational retail markets in europe.

it is a business that struggles with growth this year as well. alix: i can imagine buying a french company is not necessarily the easiest thing to do. angeline: indeed, any potential that involves buying a french company generally gets government cushioning. carrefour, since it is the number one private employer in france, it has a workforce of around 100,000 employees and you can be sure the government will probably want to get reassurance that no job cuts take place. unions will be quite strong. right now france is going through a tough year with the pandemic induced recession. there was also an episode in 2005 when pepsi tried to buy the dairy and water company. that did not go through because

of opposition from local politicians. guy: i remember that. i remer it being -- i remember it being seen as a strategic interest by the french which a lot of people had raised eyebrows about. is there a suspicion amongst creditors that the company could be geared up? angelina: carrefour has a financial debt of 5.2 billion euros. right now the take from the analyst is couche-tard has a clean balance sheet. for the company, it would not face too much problem on that front. what is interesting to note is carrefour is owned by two shareholders.

the billionaire owns 5.5% -- and the family behind lafayette department stores owns 9.8%. for the deal to go through, both would have to give the green light which is not an ibecause s traded much higher and they would be happy to exit, some of the analysts have said. we have yet to hear directly from them. guy: angelina, thank you very much indeed. joining us on the potential takeover of carrefour. we will show you the share price in just a moment. we will do the european close in just a moment. we will give you the details what is happening in europe. this is bloomberg. ♪

♪ guy: we are wrapping up session.

take a look at where european equities are ending. let me show you some numbers. the stoxx 600 has been basically drifting sideways over the last few days. today was really no exception. we are up a little bit. we are still trading sub for 10. we are up 0.2%. a little bit of difference in terms of the way the ftse has been trading versus the dax and the cac. the movement to the pound seems to be one of the biggest factors in what is happening with the ftse 100 at the moment. if you're looking for at mystic story, some of the small caps -- for a domestic story, some of the small caps seem to be doing better. the cac and the dax up by 0.2%, 0.3%, but no clear sense of direction. the more interesting action today in the bond market. fascinating to see what is happening with btp's.

i think the record bid today in terms of demand for a spanish tenure today -- spanish 10-year today. this is the ecb in action today. christine lagarde sticking by the ecb's forecasts and suggestions as well that the ecb will continue to stick to its delivery of monetary policy and the continuing purchases of bonds, so spreads continue to come in. in terms of the way that is impacting the euro, a little bit of euro weakness today. we are seeing downgrades from banks. we continue to see dollar strength. the double-dip for europe seems more and more likely. case counts continue to climb, and that means more lockdowns and economic damage. in terms of what has been happening within these markets, to give us an idea of the rotation we have been watching, are we going to continue to see an ongoing rotation into europe?

that is the question we were asking sharon bell earlier on. what we see today from a sector point of view, we see defensive's to the forefront. telefonica share price driving the telecom sector higher. travel and leisure weak. thanks continue to be weak. all of these high beta trades around europe not really working as well today. let's dig into some of the individual names we were talking about when to go about. car for being driven higher, 20 euros a share in terms of the potential bid coming through. we are still shy off of the skepticism from the analyst community. we were a little higher earlier on. the london stock exchange has its deal for infinitive over the regulatory line. as i mentioned, telefonica driving the telecom sector today, offloading its towers business. the market certainly liking that, driving it up by 10%.

alix: let's get back to what is happening in italy. matteo renzi is expected to hold a press conference to announce whether to have his ministers will resign after a long simmering clash with italian prime minister giuseppe conte. if you loses his majority, we go back to the drawing board. joining us is professor giovanni racina. it is a real pleasure to talk to you. you have tons of experience in this area. what is your best guess as to what we see in 10, 15 minutes' time? >> i think in italian politics, i tend to avoid trying to guess what is going to happen. [laughter] but things have been going up and down in the last day, with all possible outcomes and optics being considered. the weather has been turning fairer than it used to be and yesterday -- then it be

yesterday. there is a possibility that eventually, whatever is agreed among the partners, there is a peaceful transition to a different political condition, but not unlike the present one. guy: they are arguing about how funds are distributed. can you give us your take of what is at the core of this argument? is it really about that, or something different? if it is really about that, that is pretty important. giovanni: there are policy issues. one is whether the european

money should be spent more on investments. renzi has been pushing a lot for adding more structured investments in the recovery plan. but on these, the government has excepted quite a lot of what renzi was asking.so a policy ags been reached, and another issue for renzi is using at least part of the money of the european stability for relief. and of course, the third issue is the governance of the european money. so who is going to decide how the money is going to be spent? renzi was very much insisting the government to be this, and not some sort of credit structure. on this, i would not say it is easy, but it is possible to find

an agreement. as very often in italian politics, the issue is political. the reason is about the relative weight of the various elements in the government, and the recent attempt of renzi, who is not in a good political situation at the moment, to better position and show the country he is actually mattering. so he has policy disagreement, but also a lot of politics. alix: we know how you feel over in the u.s. as well. if conte's coalition falls apart, what does that mean for the disbursement of the euros? giovanni: my general impression is that this is very much italian politics. on the bottom line, there are deeper mechanisms at work. deeper, but very visible, because at the center of the mechanism is the presidency of the republic.

the president of the republic is very quietly, but very effectively acting. so my idea is that whatever happens politically, mechanisms will be put in place for the management of the recovery fund to go on. i would not say business as usual because of course, there are kind of mechanisms there that will assure that italy will go on with the pandemic relief, with the vaccinations, and also with the management demands and the management later on of the european recovery fund. so i would not say that politics is superficial, but i would say that it is only part of the story, and whatever happens, the country will be able to take care of these issues.

guy: i've spoken to a number of people about the next generation fund, and whether or not this is a hamiltonian moment for europe, whether or not europe will be able to have shared debt going forward. the answer i get back from a lot of people in brussels is this needs to work. if this program works and the funds that are spent are spent well, and the whole program delivers what is expected of it, then we can do this again. but if it doesn't work, and countries like italy, with their bureaucratic problems, fail to spend this money effectively, then we are not going to do this again. do you think italy will be able to spend this money effectively? giovanni: this is a very complicated question to answer. italy has structural problems, and as i said, i would not say the politics is superficial and political crisis are superficial, but certainly there

are deeper elements there. this is certainly a major challenge for italy. i am quite confident that eventually, as very often, the country will be able to meet the challenge because i think that eventually, when there are moments of emergency, the country tends to respond quite well. so i believe that these structural problems would be, not entirely solved, but certainly partially solved so that italy can be up to its task and demonstrate that this kind of european mechanism can work. but if that happens, i don't think this is because this kind of political crisis will be avoided. because this is also part of the italian structure. this is because the country has deeper resources to meet these kind of challenges.

guy: professor, really appreciate your time today, and urinalysis. -- and your analysis. thank you very much, indeed. a little dip to lower during the final moments of the equity session here in europe. not towards session lows, but getting back towards them, certainly for the ftse 100, down by 0.2%. office lows, which came through at around 6736. the dax and the cac fading into the close. we will analyze all of that on the cable at the top of the hour. we will do that on digital radio. this bloomberg. ♪

ritika: this is "bloomberg markets: the european close."

coming off of, the meta-tronic chairman and ceo. this is bloomberg. ♪ guy: welcome back. let's talk about the weather, always a british habit, but it is having a meaningful impact on gas markets. asia has been short of lng, liquid natural gas, due to supply problems in really cold weather. slightly driven by fear, thou gh, two record low prices. >> the market is at a point where demand kind of catches up with where it was in 2019, and with that catch-up, we are going to need more opec oil, and we may need more shale as well.

the market is anticipating that, and it is ultimately trying to get ahead of that dental supply problem later on in the year. guy: contango last year, backwardation this year? >> we are their own really -- we are there already. i think the whole curve is 50 plus, all the way down the board for brent. it is not a reflect enough today. it is a reflection of where the market will be getting to later this year. guy: just as an aside, we are getting the effects of the polar vortex at the moment. you have seen it out in asia. pretty chilly where we are. europe is likely to get cold over the next few days, even colder. gas prices in asia are at records. lng prices, huge move in u.k. nat gas yesterday. what are you able to make of this?

what are your gas guys saying? >> there's a huge move in u.k. gas, not today, but reversing yesterday. you know, it is a market that's got slightly driven by fear, obviously. asia was short lng. there were various production problems. this has been going largely for the whole winter. it is not a sort of january 1 phenomenon. this is a phenomenon that has been in existence for a couple of months. this problems have left inventories a little bit shy of where they need to be in asia, and when companies reached out to buy additional supplies, spurred on by low temperatures, those additional supplies weren't there. it drove prices higher, and we have reached a point where we got a largely illiquid market

because there's not many buyers around, and there's not many sellers around, so trying to pin exactly where fair value is is a tricky situation at the moment. but there is, and there has been genuine need for product amongst asian utilities. lng from europe and from the u.s. has made its way to asia to the extent that it possibly can. those are longer voyages. there's limited amount of shipping in the lng market. as a result, europe is a little bit starved of its lng cargoes. lng is not the biggest part of the gas mix in europe, but it is a growing and important part of the gas mix in europe. having those cargoes taken away and sent to asia, which the markets are telling people to do , has left europe tight. with the threat of a longer, colder winter than people would

probably typically expect, then yes, we are repricing in europe to reduce demand for gas. guy: that was the ceo of vitol speaking to me edward. -- speaking to me earlier. anna edwards joining me now. what is it driving the gas market? is it just a super cold weather? anna: what is driving it is asian buyers, the biggest consumer for lng in eurasia, and the warnings that this winter is going to be colder than normal. a lot of people remember very

mild winters recently. [indiscernible] so lng has to go a longer route, later than when it is needed, and that drives the prices up. finally, as we just heard, supply outages at some production plants are continuing to limit supply in the second half of last year. alix: there were a ton of analysts all upgrading their lng prices due to this rally. if we wind up seeing warmer weather, it doesn't stay as cold, what are inventories like? what is the disruption there? anna: it all depends on how long

the cold weather lasts. we all see prices for march being lower than february, and if the weather gets back to normal, we might see a bit of a cooldown of the markets. supply issues are expected to eventually resolve, but if there is another cold snap and if the cold weather lingers, we may see a different situation. especially in europe, -- [indiscernible] that means in the summer, there will be higher demand with new gas. guy: what do using this is going to mean in terms of investment in lng capacity? are we going to see what we seen this winter improving the investment case? giovanni: -- and i: -- anna: if

they sustain for a longer period , we might see more decisions in new production possibilities. last year, only one plant was functioning. higher prices will potentially serve investment because their forecasts and expectations are going to be a shortage of gas after 2022, so demand outpace supply. because energy plant takes about four years to build, plus a couple more years to do deals and collect buyers, you are looking for a longer period of time, and a higher source of energy production. the producers are now trying to make sure that you close that gap and get these supplies on the market when you are going to see that shortage.

alix: typically the way that lng is traded is you do 20 year contracts with an exporter. there has been a spot market that has been developing. i am wondering what this crunches doing to change the trading, change the buying dynamic. anna: i think the trend in this situation, there's going to be a boom in the market, so both producers have -- [indiscernible] -- building their lng trading desks over the last decade, and securing supplies so they can buy and sell in the market developing at a fast rate. the global energy market is still linked in long-term contract.

you might see also people moving to contracts to make sure they don't have to go on the market and secure at times like now, when we see record high prices. guy: we are going to leave it there. great reporting. really interesting stuff. anna joining us on what we see in the market. this is bloomberg. ♪

alix: live from new york, i'm alix steel, with guy johnson in london. the debate has really begun. the house is set to vote on a historic second impeachment of president trump. the vote is expected by mid to late afternoon in the u.k. tomorrow. something else i am watching is guy's birthday. usually the older the you get, the more you don't want to

celebrate your birthday. however, this is a very big birthday to guy, so the whole team did want to say happy birthday. that's all i get? [applause] [laughter] -- that's all i get? [laughter] guy: i don't want to say anything because i am just enjoying alix in the hat. alix: we got you a happy birthday wine. it is a mall back -- a malbec. it is supposed to be quite good. we will find a way to ship it to you, and you can open it after your birthday. guy: at some point, hopefully i will be able to be on the other side of the atlantic, hopefully after i get the vaccine. now that i am over 50, i may be able to get it. maybe that will improve my prospects of being able to come see you in new york. alix: happy birthday, guy. [laughter]

that wreps up for me and guy. guy: i feel uniquely honored you have taken such a big effort, alix, and to suggest yourself -- to subject yourself to wearing the hat on global television isn't that we should all take a moment to enjoy. alix: it matches my outfit. happy birthday. have a great one. we will see on friday. that wreps it up in new york, as well as in london. coming up on "balance of power," democratic hunger's woma -- democratic congressman mcgovern will be joining david westin on bloomberg television and radio. this is bloomberg. ♪

♪

david: from bloomberg world headquarters in new york to rtv and radio audiences worldwide, welcome to "balance of power." i'm david westin. the house of a sedative has begun discussion on a single article of impeachment against president trump. now we welcome bloomberg reporter emily wilkins. tell us what is to come. emily: the house has cleared a procedural vote on the impeachment for later today. that means they are about to move into actual debate on the impeachment. we know that the democrats have the votes they need to approve the impeachment resolution. we know several republicans, including conference chair liz cheney, will be joining them in about. exactly how many republicans is unclear. we know there is a lot of debate on it at this point. after the resolution clears the house, it will be sent to the senate, where there is a trial.

the exact timing on that is a little bit l