tv Bloomberg Markets European Open Bloomberg January 19, 2021 2:00am-4:00am EST
anna:anna: good morning. welcome to "bloomberg markets: european open." i am anna edwards in london. alongside matt miller in berlin. matt: good morning. today, the markets say who is driving? e.u. new car sales slumped by the most. stocks and futures push higher but as bank of america and goldman sachs reported today, they will prepare for the important onset of earnings
season. at the cash trading is less than one hour away and here are your top headlines from the bloomberg terminal. italian senate showdown. giuseppe conte wins a first vote of confidence but the real test comes today in the upper house of the senate. stimulus confirmation. janet yellen is set to tell the u.s. senate committee that it's time to act big on stimulus one day before the inauguration of joe biden. the euro goes global. the e.u. will today unveil a plan to strengthen the currency vying against the dollar for f x dominance. we are just under one hour away from the start of cash equity trading in europe. let's take a look at futures this morning after a day yesterday spent searching for some kind of direction. today, we are seeing futures up across the board with euro stoxx 50 futures getting .5%. dax futures up .7% and ftse
futures a little up -- up a little more than .3%. u.s. futures, take a look at the green arrows across the board. dow jones futures are up .5% right now. s&p futures up .2% -- .6%. looks like investors are placing their bets on big tech again today and momentum. we did get new car sales. european car sales figures out in terms of the 2020 drop, which i set at the top of the show is the biggest ever. 24 percent decline for the top of the year. in december, car sales in europe fell 3.7%, so it looks like a recovery has begun but for the full year, a 24 percent drop is the biggest decline on record. anna: interesting to dig into
the headline. registrations lifting as germany finishes pretty strongly. electric vehicles are a bright spot in an otherwise fairly dismal 2020. our colleagues in the also seen had let's have a look at the gmm to put it into more global context where we are on the markets. we have been through the picture on futures. u.s. futures have looked to the upside. u.s. futures point higher. european futures also pointing higher. you are open yesterday but without our u.s. friends. in terms of the equity markets, china underperforming, down by 1.5% or so but broadly, the picture out of asia is a positive one. the msci asia-pacific up by over 1%. the cost be playing some considerable catch up after yesterday's heavy selling so up by 2.6% in this morning session. a lot of anticipation with regards to janet yellen. she has a senate confirmation hearing later and we will get a chance to that the relief plan she has been talking about, acting big, with borrowing costs so low.
a lot of folks with all of this in mind. let's get to our markets conversation with mark cudmore, who joins us now from singapore. let's look ahead to janet yellen and what you are anticipating and what you will be looking out for. there is commentary around fiscal stimulus and around the dollar. i saw a long-standing fx guru at standard chartered talking about how there has been an effort to sort of feed into markets already come a summer for thinking on the dollar so she tries not to move markets. you think she will succeed in that? mark: i think that point is very relevant in terms of what i am watching today. i'm slightly worried that everything we are expecting from yellen is already priced and i guess what i will be watching is the price action so i think that we know that she will be very supportive of stimulus and focused on unemployment generally. that is a long-term focus in terms of boosting labor and market of the u.s. and addressing inequality.
we know she has got a dovish bent. we now already had a leak for what she set on the dollar so it will be hard for the surprise. what i guess will be interesting is are these fully priced or is there more to come? have we overdone these themes or is there still more to push on them? matt: so you think maybe there are too many people positioned for a dollar drop and that is why you are tactically -- i don't want to say bullish, but you think there is room for tactical bias here for the dollar? mark: that's the right way to phrase it. i completely buy into the bearishness longer-term. we talked about this many times over the past nine months. i think they are very long-term issues and there's going to be various times in those long-term issues because they are multiyear issues. i think it can depreciate quite a bit but there's many times in that period of where the risk-reward days for dollar banks. does not mean it happens every
time. at this moment, we are at a particularly good time for traders who want to take a contrary and bent and are perhaps worried about how exposed they are to that in their portfolio. we have seen the bloomberg dollar index down spain from its six-year low. .2% of the six-year low. we have it performing on those charts. we know the positioning is very stretched for the dollar so we have positioning, technicals, price action, all favoring the dollar. it does not mean there is a fundamentally bullish reasoning but what we do know is there are a number of catalysts on the rise for a not just yellen but a new administration in the u.s. tomorrow, the fed next week, the new variant is starting to spread farther in the u.s., and all these things are potential catalysts to squeeze consensus positions out there. the largest consensus position is the short dollar view. anna: we certainly talked a lot about that at the end of 2020 as
soon as we got the vaccine news. a theme everyone wanted to talk about, being bearish on the dollar. let me ask you the question on the day. which market faces the biggest risk as the presidency changes? where do risks hide as the presidency changes? we have to look at the risk of violence around inauguration or are we talking about what happens to risk assets under a biden presidency? what kind of responses have you been getting? mark: i think you are right. in terms of the inauguration itself, i think the risks are very well highlighted. they are not exactly heightened. for me, i think the thing that is most interesting is the fact that we have got a market here across all asset and to go back to the last part of the dollar a little bit, everyone kind of agrees with the fundamental story. everyone agrees there is a lot of money in the system and a lot more money being pumped into the
system every month and that central banks are doing their best to prop up asset prices and they are likely to continue because they will pump more money into the system. everybody has excess cash in the global system that they need to put to work to chase assets. no one thinks any of these assets are cheap. they all think they are expensive, offer low returns, so we are in this world that everyone is like i have to buy this stuff but i don't really like it. i will keep on buying more but i don't like it. this is a consensus view in the market. people are at different ends of the extremes. i'm just going to buy it. i don't care the risks. you just by every dip. -- buy every dip. we are all in the same boat of how we view the fundamentals and valuations so for me, the risk to the change in the administration will be some catalyst which upsets that broad consensus across markets and that could cause a lot of havoc, turmoil, and volatility very quickly, if that consensus view across markets is upset.
that might come through yield moves, it might come through some accident on the fiscal side, it might even come from acceleration of those trends. matt: thanks for joining us. mark cudmore, bloomberg mliv managing editor. you can check out his blog by typing mliv on your bloomberg terminal. coming up, high-stakes in the senate in italy. giuseppe conte faces another test in italy's upper house and janet yellen is set to testify as part of her confirmation as treasury secretary to the senate in washington, d.c. more on those senates and the markets, next. 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.
first day if you are stateside. u.s. markets will close. futures point to the upside in europe and the u.s. here is laura wright. laura: giuseppe conte is facing a crucial confidence vote in the senate today after winning the backing of the lower house of parliament. last week, the former premier pulls out of the governing coalition, leaving conte without a majority. qatar is urging other nations to enter into a dialogue with iran. ohio has patched up its differences with its neighbors after a three year rift. now, it's offering to broker negotiations with tehran. the nation's foreign minister hopes the council can start talking with the islamic republic. >> from iran's side, they have -- similar times to engage with those countries and i believe that the time should come where when the gcc will sit on the
table with iran and reach a common understanding between the countries that we have to live with each other. we cannot change that. laura: global news 24 hours a , day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt, anna. matt: laura wright in london with your first word news. now, the biden administration begins tomorrow but janet yellen's work for that administration starts today. at 10:00 a.m. d.c. time, her confirmation before the u.s. senate finance committee begins and so does her sales pitch for her presidents nearly $2 trillion stimulus plan. we are joined by an investment committee member. kevin, i wonder what you think of the stimulus plan.
i mean, it's fairly ambitious and unlikely to pass. markets kind of bit it up and then sold off when we got the headlines, the masterstroke spirit which parts do you think are the most important and which parts are you most optimistic for? kevin: yes. him, matt -- hi, matt. clearly, the stimulus plan is ambitious. $2 trillion is what the biden administration is pushing for, what this is yellen will be pushing for today. they will likely not get this to trillion dollar package but even if they get, let's say, a bit more than half of this, this would imply very strong growth in the u.s. for 2021 and our take on this is that we could see growth, u.s. growth, reaching 7% for 2021 even with this one tankage for this year. anna: good morning.
you describe the democratic administrations package of fiscal assistance as keynesian. we will see what happens to the scale of it, but what is going to be the most value for money about the way the u.s. is going to spend this money? kevin: well, what will be driving markets within this package is clearly what is targeted at howard schultz, clearly. the infrastructure confidence of the package will be very much looked at. what i would say -- what gathers most of our attention is how such a package will be financed really so taxes are going to make it. it would be a tax on households, on high worth households, which
would be taxed. companies will be making most of this to issue bonds and increasing the deficits. this will be, we guess, very much driving going forward. matt: we talked to tony blair yesterday. no big deal. former prime minister of the u.k., anna and myself. he said he thought about wealth taxes for most of his career, but they simply do not work out the way you want them to. do you expect the u.s. to really go down that road, redistributive taxes? clearly, the democratic party -- it is pegged as a party that would make that kind of move, but economists do not always think it is a smart one. kevin: well, the thing is that either we get taxes, tax hikes,
or we get massive deficits, and that is what happened in the area of 10% for 2021, 7 percent to 8% in 2022, in a year where you would be potentially closing the output gap, given the significance of the stimulus package, and then the question is, where can you get those hikes? on the corporate tax hike, that's very much unlikely given the low majority democratic party has in congress so the most likely candidate to see some of those tax hikes would clearly be on the income taxes. anna: what is all of this going to do to the dollar? we had a conversation with our markets live colleague earlier on in the program where he was setting out how it's very consensus to see a weaker dollar and many investors have talked
to us about the weakness in the dollar especially at the end of last year, but now, we have started to see investors factoring in the implications of a biden presidency and higher yields. do you still think that a weaker dollar is going to be the way to trade the currency or do you think that there is a risk it goes higher here? kevin: we continue to see some downside risks to the dollar. clearly, to a lesser strength than what we have seen -- what we have seen last year. the reason for this is this support from the fiscal and monetary policies, but clearly, this democratic administration. put further downward pressure on the dollar, as would a change of policy at the fed with this average inflation targeting as well. all of these could put pressure or downside pressure on the
dollar and this growth environment that most investors are counting on next year also has implications for risk assets . most of the investment community is expecting risk assets to perform pretty well next year and this is also a favorable environment for the u.s. dollar. matt: kevin, we are going to keep you with us. he stays with us this morning. coming up, we will talk about the final showdown in italy. the original senate p.m., giuseppe conte faces a crucial vote with his government at stake. 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,
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anna: welcome back to the european market open. 40 minutes to go until the start of cash equities trading. let's talk about italian politics fit another showdown in the italian parliament. this epic conte's aim of staying on as italy is fine -- italy's prime minister faces another vote in the senate. it has continued to steepen into the end of monday's trade. kevin is still with us. we saw a little bit of steepening, spread whitening around the italian political tension but everyone knows that the ecb is there. i wonder for how long that remains a convincing story around italian debt. goldman sachs raising a few flags that we see ptc be buying and therefore there will not be so much reassurance for roma in the shape of that ecb bond buying package. how do you view bcp's as we go through this year? kevin: clearly, we could expect some volatility on those italian
threats. we would not be too worried or i would not think that's -- whatever the ecb is going to do is going to drive this volatility. clearly, the ecb will remain accommodative this year. i can understand the concerns of some of our colleagues, from investment community members around the levels we are seeing given how narrowly they have slated and where they are today. the main drivers for the spreads would be political risks and clearly, what would scare markets is the risks -- early elections in italy, and this as we take -- these are very unlikely for several reasons. one is that the lower number of members of parliament in italy
for the passing of the electoral law is not really pushing those members of parliament to call for early elections. should we have early elections in italy, we would very likely see mr. salvini and another gaining significant fraction, gaining power in italy and decides the ecb, there's lots of e.u. funding which would be given in a way this year and ahead of 2022. the presidential elections in italy so we are more likely to see a wider coalition than anything in italy. matt: i wonder what you think about the euro. today, the e.u. is going to present a plan to try and make the euro more relevant. this is a long-standing issue. i mean, i remember a few years ago, jean-claude juncker saying it was ridiculous that europe
paid 80% of its energy bill in dollars and yet only got 2% of its energy supplies from the u.s. so it has been a long-standing issue and it's one of the reasons -- one of the many reasons people are so dollar bearish. do you think the euro is going to see more strength over the next 12 months? kevin: yes. there is a potential for this. clearly, the european union -- as it is with china as well -- trying to kind of extend its sphere of influence to have more and more consumption eliminated in its -- delineated in its currency but it's a long-term outlook what could be in fact driving the euro this year. it's most likely the
acceleration in growth. some form of dynamism for the european economy and more flows coming to the region and potentially more credibility for its central banks and for its fiscal authorities as well so as to stimulate the economy. anna: kevin, thank you so much for joining us. investment committee member at -- thanks very much for your time. 7:26 in london. coming up on the program, job openings in london's finance industry. they almost halved in 2020. to what extent should equivalents be the goal or should divergence be still on the table? we will talk about financial services and how it continues to navigate brexit. this is bloomberg.
matt: welcome back to "bloomberg market: the european open." 30 minutes away from the start of cash trading and we see equities, index futures gaining across the board. most g10 currencies are strengthening against the dollar today ahead of secretary yellen's nomination. the eu is set to unveil a plan backing away from dependence on the u.s. dollar. joining us to discuss is dani
berger. dani: it is notdani: an unfamiliar refrain. it is just trying not to be as dependent on the dollar and increase the use of the euro, bolstering its status as an international currency. this is in the wake of sanctions, international sanctions from the u.s. that have hurt european companies. they want to stabilize the currency from shock and are hoping things like the green packages they are unveiling will help bolster the euro but in terms of policy legislation initiatives, there is little the eu can do to meaningfully increase the use of the euro. anna: with that in mind, what can the eu really do to encourage use of the euro, and also the coverage about how china wants their currency to take a bigger role on the global stage. can we then attribute anything the eu is doing -- can we
attribute any moves in the greenback to what the eu is doing or are they not connected? dani: i think they are not connected. i feel this is an exercise we go through on a yearly basis and it is the existential question, but in terms of the dependence on the dollar, habits die hard and look, the percentage fx holdings in the dollar is 60%, the lowest in 24 years, so this is a downward trend but in terms of what can replace it? the euro's percentage of currency in the euro is stable at 20%. the renminbi is at about 2%, so there is no meaningful threat at the moment to the dollar. instead, what we are seeing is this continued trend drifting lower in the dollar. yellen, likely to unveil plans to have a market dependent view on the greenback, dollar shorts, very heavy at the moment so those are the sorts of things weighing on the dollar in the
short-term. for the dollar to get dethroned as the reserve currency, that just doesn't seem likely, at least anytime soon. matt: absolutely not. i think the idea is to cut the thrown down a little bit. thank you for joining us, dani, on the dollar. let's get the bloomberg business/with laura wright. laura: hsbc plans to accelerate its expansion across asia. the chairman says the world has changed in the 11 months since the bank announced its long-awaited overhaul and that is causing it to be even more radical. >> what we said, the strategic plan we set out in february last year really aimed to transform hsbc over the medium-term i effectively -- by effectively shaping the organization. the world has changed. low rates are here to say.
economic reality means what we were doing, what we planned to do, we need to be more urgent in doing. laura: the french government is urging suez and veolia to find a friendly solution. the stalemate was shaken up over the news of a possible rival bid from two private equity firms. suez wants to discuss the offer, but veolia is only willing to talk about a takeover. that is your bloomberg business flash. anna: thanks very much. job openings in london finance industry almost halved in 2020. 50 firms -- as uncertainty discouraged hiring. we are joined to think about the future of financial services with the u.k. economy and with isabelle jenkins.
thanks for joining us. i want to think about the year 2020. we talk about london finance jobs, jobs on offer falling drastically but difficult to detangling covid effects from greg's it. isabelle: that's right. the impact and it is interesting to hear from hsbc just now, the banking industry in the u.k. already had a number of challenges and were looking to understand what would happen next with brexit and then the challenges of covid. across the banking industry, they worked really hard to respond to challenges, got business is going, supported the government lending scheme, and they are doing that against a backdrop where they knew they needed to change, there needed to be a big focus on digitalization, improving
customer service through digital channels, operational efficiency . knowing they got those challenges against some of the uncertainty of the future, but obviously in the trade deal we had at the end of last year, there was very little about financial services, so we are waiting for a memorandum of understanding to come out at the end of march. even then, when we are talking about equivalence, those specific decisions won't be until after the memorandum of understanding. matt: i think it is brilliant there is a pudding lane. i want to go there. we also saw a chart showing openings disappearing in the city over the last five years, each successive year has been a drop from the last.
i would love to see the charts for job openings in frankfurt or amsterdam or dublin. is that were these jobs are going? another one place that is the master of them all? isabelle: i don't think so at the moment. it is really important to the scale of financial services across europe. posted the brexit decision in the u.k., we had over 2 billion people employed in financial services -- 2 million people employed in financial services. yes, there were one million people in london, but there were over one million people outside of london in the region. in comparison to the time we went to brexit, there were 35,000 people based in frankfurt. we looked at the number of jobs that have moved over the last four years into europe on the back of organizations having to open up their legal entities,
better cooperation in europe to cope with brexit and passport in. the current estimations are that is about seven and a half thousand. i don't think jobs have significantly moved into europe. i think people are waiting to understand what is going to happen to the business and i think it is really important to understand, that they understand the skills of people they are going to be going forward is going to considerably change as we move into a digital era, and i think they've gone through this phase thinking they might hire new people with new skills. what we see now within the banking industry is actually a much bigger focus on refilling and how do they train up the people that got and have them have the appropriate skills? isabelle: we've talked a bit -- anna: we've talked a bit about equivalence, but some suggest the role of equivalence is
different in different parts of financial services. when we talked to fund managers, they like to focus on delegation and the fact the eu allows european money to be managed in london and fund managers, in some areas of london, are concerned that changes and fund managers are forced to relocate or the money has to go back to the eu and be banished. that would be something of a seismic shift. is this something clients are thinking about? isabelle: absolutely, something clients are thinking about. what is important to understand with equivalence is the patchwork of provisions across pieces of legislation -- regulation. it is in no way a substitute for passport in, which allowed a corporation to trade in the other eu 27-28. i think what will happen with equivalence, and again, this comes back to commercial and political decision.
where europe needs to use infrastructure, we already saw pre-christmas the eu granted equivalence for central clearing parties and security depositories because those are key parts of infrastructure the european financial services need to continue doing business. you are more likely to see equivalence for pieces of infrastructure they need. where there's potential for that to move to europe, it becomes more of a commercial and political decision. when looking at fund managers and delegation, where the money can be managed from, i think if nations think it will give an advantage to move that business into europe, you would see some shift of the business. matt: thanks so much for joining us. isabelle jenkins, leader of financial services for pwc u.k.,
but she's held a number of positions in shaping the vision for the city of the future, working with financial markets association's globally and in europe. coming up, italy's prime minister wins a first vote of confidence, but the real test comes today in the upper house. we will discuss the situation of yet another government on the brink in the boot. this is bloomberg. ♪
health commissioner speaking in brussels and some of the lined she is giving, saying the eu has strong tools to end the pandemic progressively. the european medicine agency expects more vaccine applications this year. she did start off by warning the bloc is far from overcoming the pandemic. sticking with brussels in a sense, let's get the brussels. for analysis of our next story, giuseppe conte faces a high-stakes confidence vote in the senate. the final showdown comes after he received the backing of the lower house of parliament monday. joining us from brussels, murrieta day old with a look. does he have the votes that he needs in the senate, having survived in the house? >> the numbers do look tight in
the senate and that is what matters. he needs to win in the senate. in the italian press, even the papers that are closely aligned to conte say this looks very tight end the government for days have been hunting for senators that may be willing to switch party lines and back conte today. there are two making the rounds, senators that may be willing to back him that would not vote in line with the government. if he manages to get that, he would stay in office. there would be a government reshuffle, but he would stay head of the italian government. if he doesn't, that brings -- opens the door to bring in the technocrats. when the euro crisis was at its peak, or open the door to an election. the election, given the logistics would be so hard, we are in the midst of a pandemic, that seems at this point a
far-fetched option and that is perhaps explaining the caution in the italian bond market, even on a day like today where we don't know whether he stays or goes by the end of the day. matt: could you repeat that phrase? in italian? maria: [speaking italian] that is the key words. this gets repeated every hour in italy and it means senators that would not vote for conte, would not be willing to do this and across party lines. in italian politics come you vote for something and two years later, you get something completely different but what conte is thinking, the country needs this national rally around him to cut the money from the recovered fun, to prove -- approve new legislation. he holds that will strike a chord with senators today.
about 10 or 12 he needs would not usually vote in favor of conte. today, they should or that is what he is hoping to achieve. matt: all right. sorry, i'm just looking at the yields here. btp's yielding 61 basis points, down a little bit, though we did see italian yields rise yesterday. it was only a slight gain and we were looking at gains in bunds as well. anna: yes, and it is interesting to see there has been little reaction to what is and other government crisis, especially compared to the previous one where salvini walked out of the government but if he does narrative the european central bank is active in the market. you have the money from the recovery fund that is coming and this is a technical detail but important the term for the
italian presidency is ending at the end of this year so after july, an election cannot be called. you have a tight window to call an election in the midst of a pandemic. even by italian standards, politics defy logic. it seems it would be difficult to organize an election from then until the end of the summer so that window being tight means the election, perhaps the prospect is far removed. anna: thanks very much. we we'll be back with maria later in the program. let's get a first word news update with laura. laura: president donald trump is ending his term in office with historically low approval ratings. according to a gallup poll, his numbers have dropped to 34%. he's already had the weakest average rating of any president back to the 1940's when the survey began. his final two weeks saw a significant drop in support of the storming of the capital and his second impeachment.
the incoming biden administration plans to block president trump's land to allow travel from the eu, u.k., and brazil. the white house was planning to rescind the ban, but a spokeswoman for biden said the new president will keep the restrictions on the advice of his medical team. boris johnson plans to host an expanded summit in june, worrying members who fear the u.k. may be trying to restructure the group. johnson wants to establish a coalition to counter china and other authoritarian states. he's also keen to project u.k. influence now that it has left the eu. 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. matt: -- anna: thanks very much. hsbc plans to accelerate its expansion in asia. the chairman told bloomberg at
the asian financial forum the world has changed since last year's overhaul and hsbc's plans need to be more radical. >> what we said is the strategic plan we set out in february of last year, aiming to transform hsbc over the medium-term by effectively shaping the organization investing in growth. the world has changed. low rates are likely here to stay, economic reality means what we were doing, what we were planning to do in february, we need to be more urgent in doing, so we are accelerating the plan by controlling -- confirming areas of focus in the bank. especially in asia, where we see, and we've said we see the opportunities to expand across south asia. technology, ata enabler. we want to capitalize on this by
bringing forward investment and building more capabilities. we've made long-term climate commitments. we are intending to up the pace, up the intensity, and up the delivery in 2020. >> china is somewhere you are going to be making a big push, wealth management and private banking, the greater bay area will be a focus. quickly, what are you planning? >> across the area, particularly on the wealth management side, we see substantial opportunity, but also on the banking side within the greater bay area. the opportunity to have, to lead in finance across the greater day with the marketplaces there is enormously exciting and our
intent is to step up commitment, step up investment across the greater bay area and in areas of the wealth business particularly. matt: that was hsbc chairman tucker. we will bring you stocks to watch, including rio tinto, targeting increased shipments of iron ore this year to meet strong demand from china. that price has gone up and miners are heavy on the ftse. this is bloomberg. ♪
china. rio tinto, emphasizing that saying they're seeking more shipments of iron ore because of the demand. it could be 2.8% higher than last year. still, they did cite regulatory impact over damages to ancient sites in western australia and that sparked calls for overhaul of laws and how you protect traditional lands so that could weigh on rio tinto. european car sales, we've got the numbers for 2020. 24% fall, the worst on record. it was a strong finish to the year for vw and psa and that limited the december declined to three point 7%. those bright spots could help carmakers which were able to cope with the pandemic with more online sales and things like subsidies. logitech, raising their forecast, strong demand for things that help with work from home and remote learning. matt: thanks very much, dani
anna: welcome back to the european market open. here are your headlines. italian senate showdown. giuseppe conte cleans the first vote of confidence but the real test comes today in the upper house. stimulus confirmation, janet yellen set to tell the senate committee it is time to act big on stimulus, one day before the inauguration of joe biden. the euro goes global, the eu will unveil a plan to strengthen the single currency, vying against the dollar for ethics dominance. matt: let's take a look at
futures, up across the board, whether you look in europe or the u.s. ftse futures come up .5%. we will be watching the miners on the ftse, dax futures up .75% and cac 40 futures up a little more than half a percent after yesterday, european markets searched for direction and u.s. futures didn't do much of anything but now they are up big with nasdaq futures gaining more than 1%. the global macro movers screen, the far left hand column being the equity indexes and the ibex and ftse, both gaining at the open with the madrid index up .7%. ftse in london, now .5% and climbing. we do see markets, european markets opening higher and continuing to increase, the dax
up .6% out of the gate, the cac 40 up more than .5%. investors are still awaiting comments from the treasury secretary nominee janet yellen on stimulus and the dollar. she speaks in front of the u.s. senate, important to acknowledge on a day like today that there are many senates. joining us, wells fargo asset management head of investment grade credit here in europe, but of course, it is so important to watch the stimulus. it is what drives markets. the u.s. stimulus situation is what drives markets around the world, and the dollar. what do you expect to hear from the incoming -- treasury secretary. >> the packages we've seen so far is 1.9 trillion, on top of
what we had last year so that is meaningful at this juncture and also, it seems to be money in the pocket of americans going forward and we are seeing also the biden administration wanting to hit the ground fast in the first few days of office, and so those are the kinds of expectations. in terms of numbers, we will have to see what actually gets through, because the margins, be it in congress or the senate, are quite short on the u.s. side so there will be handling in the weeks to come. >> it will be a difficult ride in the u.s. senate for the 1.9 trillion. good morning. what inflation very impact would you impact -- expect? if 1.9 stays 1.9 or become something considerably less, but what are you watching for in 2021? henrietta: i think it is one of
the hot topics of this year. my sense is it is going to be a feature of the second half of the year rather than what we are seeing now and we will have to see how persistent that inflation is, because we may get a boost in terms of growth as the population gets left out following the vaccination programs and that may push on the inflation front. we have to see how long that lasts, and i think from the central bank, there will be a willingness to look through that. certainly on the european side, they will be happy to see a bit of inflation, but on the federal reserve side as we saw preempting that, some of the comments that happened last year in terms of what they are targeting in terms of inflation. matt: when we look at charts that are, for example, central-bank balance sheets, i thought they were crazy after
the financial crisis, but now, they are out of control and when you look at national debt to gdp in the western world, it is also -- it is nuts to a point where carmen reinhart would not have believed it and how is that sustainable longer-term? henrietta: longer-term, you need to stay in the slow environment in terms of rates for it to stay sustainable and that is what the central banks are trying to engineer in terms of their guidance going forward and certainly anchoring the short end of the curve and the european side, making sure the spreads between the various sovereigns don't get out of hand. that is going to be the balance you try to strike over the months to come and why the inflation question is an important one. it is important to note that if you look at the u.s. treasury yield and 10 year, that has
already doubled since the lows we saw last summer, so we have seen a degree of normalization on the rate side and some of that has already happened from my perspective, and we are in a situation where there is a gravitational pull from the negative rates you have in europe on the japanese side, as well as. anna: that degree of rates normalization you reference, that's already caused questions, that short dollar or weak dollar consensus we saw at the end of last year. have you saw it, as well? henrietta: we see a pause in the weak dollar and there are factors impacting that, be it the noises from the ecb that aren't particularly keen to see the euro appreciate too much. we are also, the rates differential has come back to an
extent, as well, which would be supportive the dollar, but you have got a situation where you have deficits on the u.s. side and so longer-term, a weaker dollar is still a possibility from our perspective. matt: we are going to keep you with us. henrietta, wells fargo asset management head of investment grade credit stays with us. we will focus in on the continent, maybe the island nation when we come back. the ecb and the european commission worn about corporate vulnerabilities, industry groups call on politicians to help viable firms clean up their balance sheets. we will discuss the capital gap facing europe's companies. this is bloomberg. ♪ 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?
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matt: welcome back to "bloomberg market: the european open." 10 minutes into the session and looking at gains .5% or more across european equity indexes. let's get the bloomberg business flash with laura wright. laura: hsbc plans to accelerate its expansion across asia as part of a strategy revamp. the chairman marc tucker says the world has changed in the 11 months since the bank announced its long-awaited overhaul, forcing it to be even more
radical. >> what we said, the strategic plan we set out in february last year really aimed to transform hsbc over the medium-term by effectively shaping the organization and investing in growth. the world has changed. low rates are likely here to say. economic reality means what we were doing, what we planned to do in february, we need to be more urgent in doing. laura: european car sales plunged the most on record last year. demand recovered somewhat in the second half but couldn't make up for the collapsed during the initial outbreak of covid-19. electric vehicles were a rare bright spot. bloomberg estimates the car sales in europe topped china's for the first time. that is your bloomberg business flash. anna: laura wright here in london. europe's firms are facing 600 billion euro equity shortfall.
that is according to industry group, the association of financial markets in europe. the eu needs to find new ways to recapitalize businesses so the whole -- hold on corporate balance sheets doesn't derail the recovery. the head of investment grade credit at wells fargo is still with us. i wonder if you see this equity funding gap, according to the association of markets in europe, they are suggesting businesses that find themselves in so much debt might want to consider hybrid products. do you see that as one of the ways out of a stretched corporate balance sheet environment? henrietta: we've already seen some of that over the course of the last year, so if you look at 2020 we had record issuance on the debt side and we saw corporate hybrid issuance in some of the harder hit sectors, particularly on the oil and gas side, for instance, so that is a way of plugging the gap in that
regard so i think we will be moving depending on how things evolve over the first half of this year toward more of a repair ring of the balance sheets, particularly for the sectors that have been harder hit by the pandemic, so i do think there is bifurcation between sectors that will be relative winners in this situation and those that have struggled. matt: i don't expect it to hit ig credit, but if you look at smaller firms that don't have access to those markets, but maybe own money to the firms that do, do you see any possibility of debt forgiveness? this is something we talked about a lot at the beginning of the crisis, but seemed -- people seem to have stopped talking about it now and this is about a trillion dollars worth of debt i'm referring to, these small,
medium size enterprises. henrietta: i think what is masking it at the moment are the tremendous support packages the government's have come to pass over the last year or so, and the support from the central banks, as well. this is not a permanent state of affairs. governments are going to have to start moving and start to address the support packages, furloughs, and so on, and that will have an impact. maybe not the investment in grade -- investment-grade market, but on smaller companies and that will be an exercise that will have to be done with care and also in collaboration with the banks, hence we've seen provisions on the banking side start addressing and preparing for that transition later on in this year. anna: we've been talking a
little about italy today and the political turmoil. that is a narrative we return to. we are -- return to with regular frequency, but the ecb is backstopping the market as we know, so many tell us not to think too much about the. what is your view on italian assets at this point? henrietta: you hit the nail on the head. he got an active ecb at the moment and they don't want to undo the good work they've done over the last few months, and i think we've had a taste of that over the courses of 2020, no comment about spreads and the market reaction. there's been a learning curve in that regard and that is something they don't want to reiterate going forward. in terms of what to expect today, i do think we will have to see what happens in the senate and it is less clear-cut than the vote that happened yesterday. however, the willingness of
having snap elections at this point and the benefit for the main parties looking at the polls doesn't suggest it is necessarily the path they will go down, and i don't think some are very keen at this juncture, given the challenges facing the country, to organize a snap election at this juncture. matt: so -- we were talking with mark cudmore at the top of the hour about investors across all assets are still, i guess, slightly bullish, still need to be long, but they are holding their noses because they have to put their money in there, but they are not really expecting decent returns. is that the same with ig credit? are we nearing a point where it just kind of hurts to pay, but
you have to? henrietta: i think we are in an unusual situation, where the activity that has happened, particularly on the central bank side, has meant financial assets have front run fundamentals and we need to see that fundamental catch up occurring in the months to come and to be fair, there is a fair amount of uncertainty around that in terms of rollout of vaccine, positions in terms of travel permissions going forward, so yes, assets are already pricing in this recovery, be it on the investment-grade side or the equity side, so i think it is fair at this juncture to have a bit of a pause for thought. we have results coming out, that will give indications as to some of the damage that has occurred and potentially, we will have to see how willing companies are to give guidance going forward, but that can be an information point
that will help markets make their mind up. we are still looking forward to the stimulus on the u.s. side. from an ecb perspective, we are not expecting much. they already came out at the back of last year. anna: thanks so much for your time. good to speak with you. henrietta pacquement, wells fargo asset management head of investment grade credit for europe. she will be interviewing the conversation at 9:00 u.k. time. after a tumultuous ride with the trump administration, european leaders are eyeing new cooperation with the u.s. under joe biden, so what does the future hold? this is bloomberg. ♪
matt: welcome back to "bloomberg market: the european open." 20 minutes into the session, we are looking at green arrows across european equity indexes. watch the dax, you might see it climb higher right now as the most widely read newspaper or widely circulated newspaper in germany is reporting merkel, the chancellor angela merkel is looking to extend the lockdown we are into february 15.
that sounds like a long way away, especially considering what we've been through, but it is not as long as we had been expecting. this current lockdown goes until january 30, i believe, or january 31, and it had been reporting that she may extend the lockdown eight to 10 weeks, so another two and a half months. this, being a lockdown, extension of just over two weeks, even though it destroys my valentine's day plans, is not nearly as bad as it could have been. anna: that's the first thing i thought, happy valentine's day, when i saw that day. here, we are talking about the second week of march. let's put that to the site and think about global politics because it is the last full day of the trump administration. the eu and u.k. are hoping for a
cooperation with america under joe biden after a rocky four years. joining us with context, maria tadeo and kathleen hunter. maria, from the european perspective, the eu perspective, will divide in administration lead to smoother relations with europe? maria: that's what they are hoping. it is not a secret, anyone in brussels and any european capital will tell you they are relieved trump is not back in the white house. the relationship has become dysfunctional, pretty much on every front when you think about the digital tax, trade, climate so when they look at a biden, they do see a return to more traditional american politics, perhaps more traditional american leadership in the world and names biden is bringing in, you think about anthony blinken, speaks perfect french, knows europe well, someone different
from mike pompeo, who was seen as very hawkish, america first on the foreign policy so they do hope this will rekindle ties in some ways but i would also note there are some areas we could see tension. one would be china, the united states even under biden is expected to take a tough line on the chinese, the europeans signed an investment deal with china and secondly, the idea we repeat all the time, european strategic autonomy, meaning europeans say they want to have a bigger voice on the global stage and set their own policy. to give an idea, they are meeting via conference, they will talk about strengthening the euro to potentially future compete with the dollar. it doesn't mean it will happen, but it signals the direction of travel in which they say from now on, we have to be more strategic and more independent, perhaps owning the trump legacy europe should not follow the
u.s. blindly going forward. matt: turning to the other key partnership coming into play, the u.s. and the u.k. kathleen hunter, how special will this special relationship be under biden? kathleen: i think boris johnson is looking for a reset when it comes to u.s.-u.k. relationships. i think obviously, joe biden and donald trump -- joe biden and boris johnson don't necessarily have the closest of relationships between a u.s. president and a u.k. prime minister. i think there has been -- biden on brexit, a rebuke from biden over the summer when it looked like boris johnson might be breaking the law over ireland and that was not received very well from joe biden, who has
irish ancestry. it is a bit of rocky relationship. i have a harder time coming up with a better example of a scratch your relationship with downing street. it is an opportunity for a reset, but i'm not sure it will come so easily. matt: thanks very much to our reporters, maria tadeo in brussels and kathleen hunter in london. let's take a look at what is on the move this morning. hsbc, in terms of what we heard from what we've heard, we hear from the chairman giving hints of a looming strategy revamp. in terms of hsbc, yesterday, we heard from the ceo, at least in terms of a letter that he sent to an activist out of hong kong whose accounts -- not only this
activist's accounts were locked, but the accounts of his family were locked by hsbc. the reason is pretty clear, the chinese communist party ordered that. stellantis, now up more than 4%. yesterday, they were up 7% and change. this is over two days, gaining .1%, but to be fair, it was at this level if you look at the chart last week. lindt is actually down. i know sales dropped, but lindt sees strong demand growth for premium chocolates as the economy recovers, as lockdowns come to an end. i feel i have been eating more chocolate than ever under
matt: welcome back to bloomberg markets. the european open. 30 minutes into the session. we are looking at gains on the dax. holding up 0.5%. the cac up about one third of 1%. a headline came across from the german newspaper earlier that angela merkel would only extend our lockdown until february 15. we had been expecting an 8-10
week extension. this is interesting. you can see that banks are doing the best. energy is second-best. health care following that up. at the bottom of the stoxx 600 is retail and cpns. help me out. anna: consumer product and something else -- services. matt: consumer products and so. [laughter] -- and soap. [laughter] laura: italian prime minister conte is facing a crucial confidence vote in the senate after winning the backing of the lower house of the parliament. another pulled out of the governing coalition leaving the prime minister without a majority. the incoming biden administration plans to block
president trump's -- the white house was planning to rescind the ban due to new rules on texting but a spokesperson for biden says the new president will keep the restrictions on the advice of his medical team. white house officials do not expect president trump to pardon himself. -- himself, family members, or close aides. but clemency is in the works for a famous rapper and others. there was speculation he would try to pardon himself. he previously claimed he had the power. this is bloomberg. anna: laura wright in london. rishi sunak, the british chancellor was trying to ease
the concerns of british business. trying to reinvigorate the british economy. he pledged to spend on major construction projects as well as skills and innovation. joining us now is tony denker, cbi director general. welcome to the program. on those commitments of rishi sunak, what would you like to add? what are you looking for from the chancellor right now? tony: i think the chancellor has a budget in march which is interestingly timed. i don't think he expected we would be dealing with extended locked down and the coronavirus pandemic and the restrictions. we are looking for two things. the first is to take action on covid. now. it all expires in april and
businesses will be making decisions before the budget. he needs to act now. and when it comes to the budget itself, let's get focused on business investment. we are going to have to do stuff to get business investment moving. our forecast for the economy says it will be all government spending and consumption if we are not careful. if the chancellor wants to improve the situation in the medium-term coming adding that business investment as he describes is the order of the day for the budget. anna: how would you suggest he goes about encouraging further investment? tax breaks? we have low enough interest now. tony: comprehensive business rates reform. we have one of the highest property taxes in europe. and not only that, but it has a
perverse incentive to be net zero friendly. the higher the business rates you end up paying. when we have spoken to businesses up and down the country, their priority is comprehensive business rate reform. all of those kinds of stimulus is important. or having some tax incentives around r&d incentives. that is the kind of stuff that will get our economy moving again. matt: what about working with the chinese? how difficult is that going to be when we have issues like hong kong activists flee back to england and find their bank account locked?
i know it could be lucrative to work with them. on the other hand, there are issues with democracy and freedom of speech there. how do you feel about that? tony: you're asking me from a cbi point of view? matt: sure or the business. tony: look, we obviously need to have a reset moment on where we are regarding chinese firms and investment. we want to take advantage of that. strategic and national assets are business for the government. i think the chinese can play an active role in our economy. we will defer to the government when it comes to security and diplomacy but they are clearly an important part of the mix. anna: we will see how that will fit with the new president in
the u.s. what about the red tape? post-brexit, the government seems to be consulting with business about where red tape can be removed. where would you like to see that happen? tony: you are right. this is the talking point. there is desire on the part of the government to take advantage of newfound freedoms outside the european union. that sounds like a principal we should get behind. but we don't have is clarity about where we want to reregulate. i don't think people are in the mood for deregulation, a race to the bottom. the digital economy and digital realities -- for me, the most important area we talk to our members about is reregulation in favor of business investment. often, regulation is trying to
balance consumer prices with investment. it may have gone the way of consumer price protection. and we have less than the bank for business investment. the area of most interest to us is how can we unlock more business investment, how can regulation or reregulation be pro-business? anna: it all comes back to that investment theme. tony, i want to get your thoughts on the friction we have seen in eu-u.k. trade. how much of that friction is teething trouble? and how much of that is by design? tony: i think it is teasing troubles. the reason we have to get on it is firms have held back and are
waiting until the problem settle down before trade flows returned to normal. from our intelligence, the biggest problem is that gbni order. northern ireland was always going to be the most complex part of the deal. the other thing holding people back is confusion about rules of origin. it is still incredibly confusing to british businesses. if we are going to unlock this, we have to get in control of those border flows. the full volumes have yet to hit test. and we have to have clarity around the issue of rules of origin and how firms can provide the necessary evidence and paperwork that they are compliant and therefore eligible for that free trade. anna: good to speak to you, tony
this is the european open. we are 43 minutes into the session and looking at gains. the ftse up about 0.5%. we wait here in berlin the government's rolling about how hard-core the lockdown is going to get and how long the extension will be. so far, pretty good news. one paper says that angela merkel will only extent it until february 15. revolut has big ambitions. this month it asked u.k. regulators for a full banking license enabling it to offer overdraft, loans and deposit accounts. joining us to discuss further is martin gilbert, the chairman of revolut. he is the founder of aberdeen asset management. he has a new position as deputy chairman of river and mercantile
group. he continues to be a busy man even throughout the pandemic. let me start with revolut and ask what your vision is for this company with a banking license. martin: it is a global super app and part of that is due upside for a u.k. banking license. we are not underestimating the difficulty, by the way, of applying for a u.k. banking license because quite rightly, they are not handed out like confetti. what we believe we have done a lot of work and we believe we are well prepared for the application. anna: good morning to you, martin. and to get through the application come it seems revolut has appointed a number of really experienced people such as yourself with financial
backgrounds. i wonder what that tells us about the cultural differences with fintech. what are your reflections about the cultural differences? martin: i want to make clear that i love the culture at revolut. it reminds me of the early days at aberdeen. if you concentrate on growing the business and running it and doing well. but, when you do apply for these sort of regulated licenses coming you need a balance and hopefully, i and my colleagues can provide that balance to the company. but i do stress, we are not out to change the culture of the company but to improve it in terms of regulation. and we have come a long way in the last two years. the risk function and customer service function have all
developed hugely over the last two years. matt: i wonder what you can do there with your background and given the nascent business, the kids want to get into asset management through these apps. etf's have become a huge and growing business. do you see a future like that for revolut? martin: there are no plans at the moment to develop a full asset management capability but i do think that a generation below me will prefer to manage their money on their phone rather than through a private banker or that type of channel. yes, i do think it is something that will inevitably come to fintech.
asset management is being disrupted. the big shift from active to pass it has led to lower fees and the third big headwind the industry has is proud -- is public to private. that is a trend that the individual retail investor has so far found difficult to participate in. it has largely been the domain of institutional investors. i do think eventually there will be asset management on the app. i think it will be pointed much more towards passive and etf's as you have suggested. as i say, the generation below me is quite more conscious about -- conscious about fees. anna: talking about
opportunities, where do you see u.k. finance finding those opportunities? more broadly across the u.k. -- there is a lot of focus about whether we will get the equivalent status with the eu. should that be a preoccupation or should there be opportunity into virgins -- in divergence? martin: if i look at it as asset management, it will make it. the europeans would prefer the asset managers to be positioned globally in markets such as dublin and frankfurt. where they are tens to dictate where the banks are. that service these asset managers. in asset management, we won't have equivalents.
we also want to develop fintech. it is a great area and it is great fun as well. and great fun being part of something that is disrupting traditional financial services. and you either disrupt yourself or you will get disrupted by someone. matt: it is funny -- the importance of the city does not seem -- it does not seem so key coming from aberdeen or edinburgh. you have proven that import and financial activities can take place elsewhere. why doesn't the capital of the financial world shift to frankfurt were to amsterdam or to paris? martin: i think we underestimate the infrastructure that exists
in london to service the financial service center that is located there. i suppose it is where people are based basically. it would be a brooding to other cities and as much as i love going to dublin, frankfurt, or even paris, but especially dublin and frankfurt are not as big as london in terms of population. that is something. i don't think we in the u.k. should underestimate the threat from these satellite financial centers in the future. if we do underestimate them again, we will be disrupted and people will offer good tax benefits to move, and these sorts of things. we have got to be wary in london about the growth of these
financial centers. anna: martin gilbert, thank you for your time. chairman of revolut and deputy chairman of river and mercantile group. coming up in the program, which market faces the biggest risk as the u.s. presidency changes? what does the handover mean? we will put that question to our market live team. this is bloomberg. ♪
anna: welcome back to the european market open. european equity markets moving to the upside. there are risks around. the political risk coming out of italy. the prime minister is speaking in the senate ahead of a confidence vote. joining us now to think about this is kristine aquino who leads our markets live team. what risk is the market pricing when it comes to italy? we have seen a push-up in spreads. christine: absolutely. the main risk that markets are watching out for is what does this mean for the prospect of snap elections in italy? ultimately, what we have seen radel markets in past instances
of italian political unrest -- what does this mean for the calculus of a new government? but as you say, it is very minute. the move we have seen in bond markets, italian 10 year yields are just over 60 basis points. a far cry from the 3% we saw at the height of market turmoil last year and even in previous bouts of italian political uncertainty. it is an incremental move in markets. there is the risk we are watching out for regarding snap elections but it is a very measured reaction. matt: on the mliv blog you asked -- which market faces the biggest risks as the u.s. presidency changes? what are you hearing? christine: the markets that have
gotten a lot of attention regarding the question of the day is the asset classes that look particularly crowded. we just got data from bank of america regarding their january fund managers survey showing that the most crowded trade is long bitcoin followed by long hectic and short u.s. dollar. that tells you what are the asset classes thinking and are they in danger as we face a big transition in u.s. policy. just because it is a crowded trade, that does not mean there is an imminent reversal coming soon. we have seen that in the case of the short dollar trade. we have seen a lot of people calling for a reversal of that move but we have not really seen that transpired just yet. all the same, these are the most crowded trades. it will be interesting to see how that plays out. anna: the market can stay
♪ francine: italian senate showdown. giuseppe conte wins the first about, but the real test comes to date. yellen on the hill. biden's treasury secretary pick is telling the senate that it plans to act big on stimulus. the president is expected to issue pardons, but not to himself or family members. he leaves his term with a 34% approval rating. good morning. welcome to "bloomberg surveillance." i'm francine lacqua here in london. the markets firmly focused on