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tv   Bloomberg Markets European Open  Bloomberg  February 3, 2021 2:00am-4:00am EST

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anna: good morning. welcome to "bloomberg markets: the european open." i'm anna edwards alongside matt miller. matt: today, the markets say the reflation trade is back, with the reddit rumble out of the way , cyclical stocks outperform once again. a european equity futures point to a positive open. the cash trade is an hour away. these are your top headlines from the terminal.
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a new age for ammon on -- amazon. jeff bezos step down as ceo. he will become executive chairman and he is succeeded by the cloud computing head andy jassy. italy has a new hope. former ecb president mario draghi is tapped to become the next prime minister. he meets with the president today. santander takes a $1.4 billion charge in the fourth quarter amid job cuts and branch closures. we will speak to the chairman. just under an hour away from the start of cash equity trading in europe. take a look at the gains we are seeing in equity index futures. the strength that we saw an hour ago, euro stoxx 50 futures up only .5 percent, ftse futures gaining .3%. in terms of u.s. futures, we see green arrows across the board.
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about .7% on the nasdaq, futures on the dow and s&p are up, but less than .5%. what kind of risk indication do you see from the global macro movers screen? anna: you've been through the futures and they point to the upside and we see stocks in asia making moves to the upside so we have a risk on reflation trade in focus, up .9% on the msci asia pacific so we are back to thinking about cyclical stocks, about yields moving higher, and the like. you don't see china playing in this rally right now. pboc, draining funds from the financial system and as a result, chinese stocks underperform but some coming through in asia equity markets. treasury yields on the rise, one point one, back to 1.1 handle on the 10-year treasury yield. a steeper curve at the longer and and the conversation is
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around stimulus and how quickly it comes and what that does to inflation expectation. oil, also moving to the upside, 57 handle on brent, the highest in more than a year. certainly in focus. let me mention what we've got coming through on the drug sector. gsk, giving lines this morning. to develop an mrna covid vaccine variant. they will be partnering on a new mrna vaccine. they are going to support the manufacturer of up to 100 million vaccines. where it takes place, the ability to ramp up the scale is a conversation of late. interesting to see this focus, while not the front runners in the existing vaccine race,
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interesting to see the focus on the mutations we are seeing. matt: interesting the global media refers to one variation as the british variant, even though it seemed we were trying to stay away from national titles to diseases previously. let's talk about something completely different. the end of an era, an incredible legacy for just a so saft are 25 years, amazon's founder is handing over the reins. bezos ill depart as ceo in the third quarter, leaving the company's cloud computing chief and his former assistant andy jassy to run the show. let's get to bloomberg intelligence's tech analyst. what should we make of the timing of bezos' decision to step down as ceo? you would have thought he's had enough problems over the last four years. now that he's through the trump
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administration, it is smooth sailing, relatively. >> yeah, maybe that's part of the reason he's decided to leave now. they say champions know when to quit, so maybe he sees amazon firing on all cylinders, delivering over 100 billion dollars of sales and he thinks the business is in good shape, i can know that the business is in a right direction. on the politics, what hasn't got away is the scrutiny of the big tech companies from regulators, this threat of breakups. i guess this could go one way or the other. maybe he doesn't relish the thought of senate committees, hearings having to fight for amazon's position and avoiding a breakup. he staying on as executive
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chairman, that will be a delineation in responsibilities and he can focus on the day-to-day and andy jassy can focus on the political well-being to see that the amazon today looks similar in the future. anna: incredible that something can overshadow such a stellar set of earnings and shares have flattened. i wonder if everyone was in shock, investors trying to digest what this means. looking at pictures of jeff bezos, what is he going to focus his attention on? it is important to mention he's not leaving the business entirely and will certainly not be sitting still. matthew: that's right, and what is well-documented is his fascination with space, a bit like elon musk. the project blue origin, similar to spacex in trying to create reusable rockets in space and wants to put men on the moon and
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mars, so that is a company he invests something like $100 billion a year on so that will take a lot more of his attention when you think what else is going on in the world of space, the spacex test yesterday and more directly linked to amazon, a bit like spacex, amazon has a project to put out something like 3000 or 4000 low earth orbit satellites to create a broadband network from the skies, which is similar to spacex's star link project. he may not be shying away from the limelight. you could see other head-to-head rivalry between bezos and musk about these space projects. matt: matt, thanks for joining us. matthew bloxham, tech analyst talking about the big bombshell yesterday in amazon earnings, jeff bezos will step down as ceo.
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we will turn to the markets reaction with mark cudmore, bloomberg mliv managing editor in singapore, and not sure what kind of reaction you have to the amazon news. seems like the market is still react in to the reddit mob that we saw drive up the price of name stocks -- meme stocks that have crashed. >> two or three themes, the idea of a relief, the so-called reddit mob hasn't derailed markets. i'm not sure i quite like that negative nomenclature, but the idea the retail traders haven't upset the institutional framework too much. i think that is a theme that will come back many times in the months ahead, but at least the peak first. has survived and markets move higher. another theme is the idea that earnings have been good overall
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and it is great we saw some good price action post market after tech earnings yesterday and on the bezos news, this is a great time for us to hint -- him to hand over. stepping away when amazon is doing exceptionally well, has gone through a tough administration, but business is strong and it has a clear succession plan. the final thing supporting markets is despite many people in markets getting confused about efficacy and variants, vaccinations are proving effectually -- effective at lowering hospitalizations and fatality rates and we are seeing that concretely in israel, showing the path is positive when we get people vaccinated and we are vaccinating people around the world at a fast pace. anna: reflation trade is part of
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the big narrative, the room for reflation that vaccine rollout allows. we will talk about that with our next guest, so i want to come to you want something else, which is the headline right now. italy bond futures jump as draghi is tapped as possible prime minister. i wonder what significance it brings if we see someone who is so well-known to investors, so well-known well known to a global audience, he's being asked -- this isn't final yet -- asked to be prime minister of italy but that would be fairly significant for an international audience, wouldn't it? mark: absolutely. he's a very respected name in markets. i think he did an excellent job as the head of the ecb and -- he's famous for --
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matt: all right, i've got to say, i think we are losing your line there, but i guess you are saying you have a lot of respect for mario draghi, as do the markets. i that it was an amazing -- thought it was an amazing story. i also want to point out to our mliv team and viewers, i use the term mob as a term of endearment. like when i call one of my friends dawg, it is not pejorative in any sense. when i say reddit mob, i love the reddit mob. anna: very important to clear that up, matt. you are a big consumer of certain of their newsfeeds. matt: of certain mileu. mark cudmore, mliv on the bloomberg to find his work and
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of the work of his colleagues. return to reflation, with the dear crowd on reddit and the retail investors that drove up so-called meme stocks. cyclical stocks outperform once again. we will speak with chris turner from ing. later, we are joined by the santander chairman ana botin after the bank reports a $1.4 billion charge in the fourth quarter. this is bloomberg. ♪ want to save hundreds on your wireless bill? with xfinity mobile you can. how about saving hundreds on the new samsung galaxy s21 ultra 5g? you can do that too. all on the most reliable network. sure thing! and with fast nationwide 5g included at no extra cost. we've got you covered. so join the carrier rated #1 in customer satisfaction.
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anna: welcome back to the european market open. 45 minutes from the start of equity trading in europe and futures point to the upside for the global rally in risk assets.
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a part of this to do with the reflation trade that appears to be back, with the reddit rumble out of the way. cyclical stocks are retracing some of their weakness against defensive's. u.s. inflation expectations have moved higher and the yield curve is at its deepest since 2016. let's put this into context and get an fx perspective. chris turner, head of fx strategy at ing joins us. let me ask how the dollar copes with this, because the dollar was in a downtrend much of last year on the certainly the last three quarters of last year. this year has started differently. with the reflation trade, what are you expecting to see from the dollar? >> we are bearish the dollar 2021, and i think in the second quarter, it was adjusting from the problems in the u.s. money markets. the second half of the year when confidence started to grow into the global recovery, the reflation trade really took off,
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so inflation expectations started to surge, especially after the move from the fed and the turnaround in the white house and discovery of vaccines in november and it is going through -- q1, but i think as long as the market holds the view there will be a broad recovery starting in the second quarter and the fed keep rates on the floor and realistic -- interest rates stay negative, the dollar should stay on the back foot. matt: and you don't expect significant inflation, chris? you don't expect -- i don't want to say tapering, but indications of that from the fed? chris: i think when the fed came out with this strategy in september, a shift in policy, preparing to run the economy hot, cycles having hyped too
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early -- hyped too early, i think they were positioning themselves as saying they really have changed strategy so this debate will come into more heavy focus in the second quarter when inflation should push up to 23% or so, and yeah, i think debates will intensify about tapering and i'll be interested to see how they control the long end of the bond market, people talking about a repeat of 2013 and the taper tantrum, if the long into did get out of hand -- long end did get out of hand, perhaps they might consider repeating their qe program to have a more controlled percent in yields so 10-year didn't upset equity or emerging markets. anna: when you look back at what we heard from janet yellen this month on fx, the dollar, how --
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what is your last him prep -- lasting impression of what she intended to say? she said she wants markets to set fx rates, but some have a multi layers approach of what that means. turning it back on a weak dollar policy, what message did you take away? chris: i think she'll very much come from a view consistent with what the g7 and g20 market determine, exchange rates, g20 sign up to -- and ultimately, it comes down to domestic macro policy, if the fed is successful at reflation, the dollar is going to weaken. interesting, though, the u.s. treasury over the past couple of years has taken a more aggressive approach to currency manipulation.
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interesting in january, we started to see some other central banks around the world taking advantage of the weak dollar and strong local currencies to announce increase in fx reserve buying, the bank of israel for example preannounced a program to buy $30 billion this year to protect partly its fortunes, so there will be that -- won't be that friction this year but macro policy should pressure weaker dollar this year and it will be up to the rest of the world to cope with that, including the ecb and a strong euro. matt: i want to save time with you, chris, because we got last night what i thought was an exciting headline. mario draghi, whom we have all covered so closely over the last, well, for the last eight years before christine lagarde took over, may be now anointed the new leader of italy as he has been summoned to meet with
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president matter rella. equity futures today, looking at a gain of more than 2% on the ftse maybe, the equity index benchmark. it means a lot as well for the euro, we saw strength in that yesterday, as well as the spread between italian and german bonds. we will talk to chris turner from ing about that 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. 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.
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matt: welcome back to "bloomberg markets: the european open." we are 37 minutes from the start of cash equity trading across europe and in the u.k. we are looking at futures rising , typically we look at the three main benchmark indexes. the ftse, cac, and dax, gaining .5% give or take. the ftse mib, the italian
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benchmark after news mario draghi me be tapped to run the country -- maybe tapped to run the country. suffice it to say, markets are happy about those headlines. chris turner from ing is with us. what was your reaction to this brewing story over the past couple of days and the headlines we finally got last night. chris: that was one of the alternatives, a technocratic government would be invited under draghi. as you mentioned before, very well respected name and i think italian politics is very complex so it is not necessarily a done deal he will lead that technocratic government. we have to see the broad coalition behind him. we can't assume it is a done deal now, but it would be
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welcome. in fx markets, you would say euro was slightly weaker over the last two or three weeks and started to recover, euro-dollar got caught up with a broad number of things, but i think were draghi to be installed within a technocratic government, allowing the eu recovery funds to be distributed to italy and others, some a major beneficiary, that would be a well development for the euro. anna: if that is not going to be the main driver, where is your focus on the euro at this point? clearly the fight against the virus, the vaccine rollout, what is driving the euro, apart from the dollar? chris: this week, you have seen independent euro weakness,
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perhaps the risk environment has deteriorated, but it hasn't, as you mentioned earlier, equities doing well, commodities doing well apart from iron ore, so i think it is the slow pace of the vaccine rollout, eurozone and ting a -- entering a technical session, in the middle of q1, so i think we see consolidation roughly 1.2 three trading range. we might briefly trade low 1.20 but our core view is we think the dollar trend will dominate later this year, and it will float all boats, including euro, even though the ecb won't like that and they won't seem to be threatening cutting a deposit rate to take the steam out of the euro. matt: yesterday one of the rating agencies warned about the future of italian finances, but
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also, may bigger concern, british finances. how do you see the pound on the back of those debt concerns? chris: twin deficits, like the u.k., we have this week upgraded our pound forecast so we think the removal of the briggs it uncertainty and successful vaccination will allow sterling undervaluation to be corrected, so we see euro sterling ending the year 85 and ending around 82. i think everyone is under pressure at the moment, but overall, i think it is a vaccine story, reopening the economy, allowing the macro story and recovery story to win.
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that is the dominant theme. anna: chris turner, joining us from ing. when we come back, we will talk about the reddit fueled rally in stocks like gamestop and amc. we will get the latest. this is bloomberg. ♪
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>> to corner the market and create a short squeeze, we estimate it requires each one of these wall street individuals to accumulate a position of somewhere around 4200 ounces. that's a lot of silver and where are you going to put it? anna: that was goldman sachs' global head of commodities calculating how much silver wall street participants would need to corner the market. we saw endeavors in the silver market got our attention for the first day or so of this week.
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the wild run-up of trades popular with the reddit crowds is starting to come crashing down after a spectacular run up. shares in gamestop are down 65% from the record close. joining us to discuss is dani burger. is this the end of the reddit rally? that seems like an imprecise question i've just asked you. dani: it seems to be alert -- losing steam, volumes are lower and in a few days, 176 billion dollars was wiped from the market cap of gamestop and you really have these two converging narratives on sentiment. on one hand, people posting on reddit saying hold the line, and people like mark cuban holding and ask me anything on reddit, saying if you can afford to, you should hold onto your shares. at the same time, we are seeing increasing tales of losses. those sorts of things, being posted on reddit because ultimately, the question is, if
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these shares are in freefall, who is left holding the bag and that may be retail traders who bought in over the last couple of days. for what it is worth, one of the more well-known robinhood type reddit traders was one of the first people to point out gamestop lost $13 million yesterday. he had taken 13 million off the table, so those are losses he can perhaps afford, because he is playing with house money at this point. matt: roaring kitty is his youtube name, we can't use his reddit name on air, but i wonder how happy he is with robinhood. one who lost $7,000 on meme stocks is very angry at robinhood. what is the damage control? they wanted an ipo. dani: they are still planning on it.
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people familiar telling bloomberg they might list the spac, that feels like the natural and to a period where we are seeing this ipo and spac frenzy. they have their finances under control, the clearinghouse isn't requiring them to put as much collateral so they have eased some restrictions, but right now , there seems this big call to reduce risk, trading on wall street. at the moment, it takes two days for trades to clear. robinhood and that clearinghouse want to lower that to one day. usually two days is fine. it doesn't matter, but in volatile period like we saw last week, like the covid-19 march slump in markets, you get these issues where it doesn't work for investors to wait two days for the settlements to end, so that might be the next thing we see, market usually a boring subject people know -- don't pay attention to, we could see some
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changes in that regard. anna: dani burger with the latest on the reddit retail phenomenon. let's get a bloomberg business flash with the top stories we are covering for you. laura: the end of an era for amazon. jeff bezos will be stepping down as ceo to focus on innovation. he'll be replaced by the head of the company's cloud unit, long seen as a successor. he founded amazon in his garage more than 25 years ago, becoming one of the world's richest men. a good holiday season for google's parent alphabet. the tech giant was buoyed by ad spending during the biggest shopping spree of the year, beating estimates. performance was driven by ad revenue on the video platform, jumping 46%. one problem area was the cloud unit, which reported a huge operating loss for the quarter. spacex's start-up test flight
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has ended in a fireball, but nobody was on board. one of the prototype engines appeared not to reignite during an attempted landing, a december test ended in a similar crash. elon musk hopes the starship will eventually carry people to the moon and mars. that's your bloomberg business flash. matt: laura, thanks very much. laura wright in london with your business flash. italy is looking to a familiar face to lead it out of its latest political crisis. the former ecb president mario draghi has been approached to become the next prime minister. joining us now is john filleting -- bloomberg's reporter in rome. i think a lot of people have a great deal of respect for mario draghi and the job he did at the helm of the ecb, but why was he chosen to take on this challenge? >> good morning. it is because he is a
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prestigious figure and the politicians have failed. there were two rounds of talks, and attempt to see whether the parties in the outgoing coalition of the prime minister could patch up their differences and reach a new agreement. that failed, so basically, the president, whose job it is to pick a new premier reached out and is going to meet mario draghi today at midday and offer him a mandate to become prime minister designate. anna: and what is it that influences his prospects from here? he's going to be asked, is it as simple as whether he wants the job or not? what dictates whether this happens and where things moved next? john: of course, draghi is expected to agree, but what happens next is he has to try and build as broad a majority as possible, because the president
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warned italy cannot afford early elections now, but with the pandemic, with the recession, so it is up to draghi to meet these party leaders. we've got first indications the five-star movement, the biggest force in parliament, the political leader has said the party would not back draghi, formerly an antiestablishment, does not like technocrats, but the party itself is divided, so there will be support for draghi in the centerleft democratic party, european groups, possibly in the center right, as well. matt: john, as i said, in the financial community, there is a lot of respect for what draghi did. i wonder how he is seen popularly in italy. will the people, the voters in italy see him as above this populist political shenanigans
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we have seen in italy over the past 75 years? >> to be honest, there is a lot of cynicism toward the politicians. i think more people have been shaking their heads in disbelief at how politicians could choose now to create a government crisis, make a government collapse and here we are spending days doing negotiations on who should get which job, so yes, draghi is a prestigious figure, and he may well manage to inspire more confidence in its italian's and they obviously looked to him to try and solve priorities, including the economic spac. anna: he would be following in the footsteps of other technocratic leaders in italy. thank you for joining us. bloomberg reporter john follain with the latest on what is happening in italy, certainly moving the markets this morning,
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whether it is the bond market, btp yields versus bunds. the end of an era after over 25 years, amazon's founder jeff bezos is handing over the reins. this is bloomberg. ♪
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matt: welcome back to "bloomberg markets: the european open." we are a 10 minutes from the start of cash equity trading across europe and in the u.k., i'm looking at equity index futures that are rising about .5% give or take, a little stronger on the continent and in london, but the ftse mib futures, two .7% on optimism mario draghi can do this, as the leader of italy. let's look at the latest tech
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news. there was a big bombshell yesterday, and it came out of amazon. also, google's parent company alphabet handily beat estimates thanks to a resurgent digital advertising as the pandemic spurred online search activity and youtube viewership with viewers stuck at home. one problem area was the cloud unit over at google, which reported a huge operating loss for the quarter. maybe because these guys are doing so well in cloud. amazon, really destroying the street's estimates, more than double what we saw from an analyst survey, and the bombshell and and to the era of jeff bezos as ceo. amazon's founder is handing over the reins. bezos will depart in the third quarter, leaving the cloud computing chief andy jassy to run the show. we are joined by the equity
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analyst at hargreaves lansdown. what was your reaction when you saw these headlines last night and what do you think now of the future of the company? >> good morning. you are right. this is huge news. i was surprised. and my first thoughts were, what a time to be stepping down. he's going to leave on a high, but there are a couple of things people need to keep in mind. the first thing is jeff bezos, this isn't him retiring. he's not going to disappear. he's still going to have plenty of strategic oversight and looking at the letter he sent to employees explaining his transition, he has loads of energy still and we can expect to see a lot more from him. second of all, as you've touched
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on, it is not an accident -- it is not only a huge surprise we are seeing ahead of asw taking the helm really, because that area of the business is so incredibly lucrative. it wouldn't be a huge surprise to see more attention given to aws going forward, that is a scalable benefit of the clouds business. just phenomenal, really. really an exciting time. anna: an exciting time and interesting to see it is the boss of the cloud business who is going to be taking on the company. what do we read into that other than the obvious, that there is a lot of potential in cloud? sophie: yes, absolutely. you are absolutely right, but the main thing to keep in mind also is for now, amazon is still absolutely a retail business.
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just look at those numbers. its first 100 billion plus quarter in history. you can't argue the majority is coming from retail operations. you are right to point out, i personally do think we are going to see amazon moving up the ranks and gaining a bit more importance and the right man is at the top job to see that happen and as i said, what we should be focusing on is the business impact that will have. the margins are pretty insane to be honest compared to the retail business, from a profit perspective longer-term, this could be a turning point. matt: does amazon face regulatory challenges, sophie, not least for how it treats its
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lower wage employees? sophie: it is 2021, and it is right we can expect workers to be treated fairly and paid accordingly, but also, this isn't a new problem for amazon. underneath that kind of pr noise, this hasn't derailed the investment pace. what i would say is while it is great to see people have more of a voice, these are risks amazon is acutely aware of. these are risks amazon will be dealing with and working hard to mitigate and as i said, it is not a new -- matt: sophie, you make a great
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point these aren't new risks. you know, problems with the treatment of workers in their warehouses have been talked about for a decade now, and especially coming from the altruistic standpoint of jeff bezos, why is this something we continue to hear about? why hasn't amazon already handled it? sophie: you raise a great point. we need to keep in mind a workforce standing something like 1.3 million now makes it an incredibly complex issue to unpack and get it right. we've seen recently a business who understands to get it right and do a thorough job, which is a complex thing to do given its scale is bad for business and amazon does understand that.
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i think we can see improvements. anna: it is interesting, the culture at amazon, the way they talk about every as being day one, and that brings with it a whole load of innovation and excitement, and new product development, but you wonder where that leaves them on some of the other measures we have been talking about and therefore on the regulatory risks. sophie lund-yates, equity analyst at hargreaves lansdown. let's get to another conversation you've been having this morning. matt: siemens has raised its 2021 guidance on better-than-expected sales, the latest sign europe's biggest engineering company is benefiting from a rebound in china, but maybe more interestingly right now, it is also the end of an era for the once behemoth conglomerate. showcase or -- the outgoing ceo
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has taken a lot of the business apart and done really well for shareholders. i spoke with him as he hands over the reins. >> first of all, we clearly do see even if part of the value chain has been performing well, we learned a lot from the first wave in march and april, which we can apply now. we hardly had interruptions anywhere, either in the supply chain or production, nor the interaction with r&d. we very much pushed a digital service remote services with customers due to the fact we were limited in accessing sites. what we have learned in our industry is the industrial digitalization has gotten a big push and that plays into our cards because we are number one
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in the digital industries and manufacturing so that is the good news but then again, we are not alone in the world. we have customers and suppliers which we desperately need in order to sell our products, so that's why i was careful about the demand-side going forward. we must not forget we are in the capital goods industry, and customers in the capital goods industry, they invest, if they've got trust, in what they expect to come and that is why it is so important that you get the vaccine rolled out to everybody and make sure there is certainty on what to expect in the future in terms of health and safety measures. >> do you have confidence europe can roll out the vaccine in a timely fashion, relative to the u.s. and the u.k.? the process that the european
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commission made to get this vaccine seems much slower and more disorganized. joe: well, the good thing is the european union has tried to be a real european union, and stick together with all the member countries and make this a european effort. that's the good news because typically what you see is there is a lot of nationalism, potentially understandable. that is the good news. what we see, though, is the european union is far away from being able to execute well on what they decide, and that's the area we need significant improvement. otherwise, you fall back and every country does its own thing, which is not a good thing because typically if you have a pandemic, which by nature is global, the global community ought to stick together and get the best out of it. i think we are still at the very
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beginning. what i believe is there will be a massive, a massive supply ramp-up in the next quarter, and then, we need to organize execution well. i am meaningfully optimistic that by may-june, you will have 50%, 60% of the population in europe vaccinated and that is a good start for the second half of the calendar year. matt: that was my interview with outgoing siemens ceo joe kaeser on his last day in the role running the company. hands the reins over to roland bush. next, your stocks to watch including, siemens is one to keep your eye on after beating expectations, but santander is a big one as well. the bank takes a $1.4 billion charge in the fourth quarter, and we speak to the chairman ana botin later in the program. this is bloomberg. ♪
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anna: welcome back to the european market open. let's get your stocks to watch this wednesday morning. volvo, one of the stocks we should be looking out for. in their fourth quarter, beating estimates though they warned the first quarter issues like supply chain so some caution. analysts say volvo doing well in the fourth quarter, calling it a great year, especially when it comes to their order, we could see a modest reaction higher. gsk joining forces with curevac which should help against various strains. santander, beating on their income. jeffries says we should see shares modestly higher. anna: we will be speaking to ana botin from santander. we will bring you the start of
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the european markets trading for this wednesday morning, and with a focus on italy, because we see italian futures flying, up more than 3% on the news about draghi. this is bloomberg. ♪
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anna: welcome back to the european market open, one minute until the start of cash equity trading. a new age for amazon, jeff bezos will step down as ceo and become executive chairman. he is succeeded by the cloud computing head. former ecb president mario draghi is tapped to be the countries next prime minister. italian futures are on the rise. santander air takes a $1.4 billion charge in the fourth quarter amidst job cuts in branch closures.
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we will speak to the chairman, ana botin. matt: futures up across the board as we head into cash trading now. euro stocks 50 futures up more than 1%. gains less than 1% on the three major european benchmarks. it is the ftse i am excited to see at the open. futures were open up 2% on optimism that mario draghi will be tapped to run italy. that will be fascinating for the financial markets and hopefully a good thing for the people of the country as well. you see the global macro move or scream, the left populates as markets start to trade. the ftse first out of the gate, up 0.6%. the ibex up 0.3%.
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the cac quarante up 0.9%. as the indexes open, they are opening risk on this morning. we are waiting for the ftse, and a lot of times you have an outsized move in futures it takes a little longer for a market to open because you have to settle more bids at the top. there is the ftse on your screen, up 1.3% -- 1.7%, a bullish open for the benchmark index. european equity markets across the board are going higher. that is also as the fading reddit rumble puts the reflation trade back in focus. joining us now is michael bell, exec. director / global market strategist, jpmorgan asset management. it was an amazing week of meme
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stocks. can we put that behind us now? and is that what caused the drop in the benchmark indexes as well? mike: yes, i think it was a technical selloff as some funds were forced to cover their short positions to avoid increasing their net exposure. they had to sell long's as well. that is what caused the selloff toward the end of last week. from here markets are back on the fundamentals, and the fundamentals look good, we are getting incrementally positive news on vaccines, and positive news on the oxford vaccine preventing transmission -- not fully, but reducing transmission -- very good news in terms of
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the ability to get back to normal. the market is focusing on the fact we have a world where people are focusing more on how many people end up in hospital rather than how many actually catch the virus. the vaccine seem to be doing a good job preventing people ending up in hospital, and that is what matters to reopen the economy. anna: we are looking at data coming from all over the world where vaccination rollouts have been speedy. the likes of brazil, the uae and the u.k. the vaccine rollout is part of the narrative and the reflation trade that goes along with that. i want to get your response on what is happening in italy. italian stocks up 1.8%, and futures suggest a bigger jump on
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the possibility of a prime minister mario draghi. what does that do to italian assets? mike: i think it is good news ultimately because the market wants a steady hand on the wheel. draghi was the man who stepped in and almost single-handedly save the euro in 2012. he carries good faith in the markets, and that will be viewed positively. matt: how positively? we saw the euro react to the upside, we see spreads tightening, we see stocks up today. can he turn this around for italy? moody's was questioning the future of that country, saying they have a once in a generation chance to do the right thing with their rescue money. mike: yes, i'm not sure it will
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be that easy to change the long-term fundamental outlook for italy. ultimately, what you would have is a solid caretaker. he will make decisions which will be viewed favorably by the market, and someone who is supportive of the eurozone project. compared with some other candidates in italian politics that are more concerning for markets, he certainly is seen in favorable terms. anna: the italian story, because of the news about mario draghi, i am seeing a red headline saying my dharna'-- sang my ying moderna is of interest . all of that takes me back.
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i want to get back to the reflation conversation. i was looking at inflation expectations, and we had data looking at a sneaky upside surprise. should we be thinking about inflation, and what time horizon? mike: i think you will see a pickup in inflation as a headline level higher than it was. at the core level you will see inflation pick up once you get this pent up savings, and there is a huge amount of pent up savings. $1.4 trillion more than last year. if that gets spent, that will lead to pick up in inflation, but i do not think the central banks will worry about it. it will be temporary because when you look at slack in the labor market, permanent unemployment, there is a fair amount of slack there.
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you will see some inflation come through, but it will be relatively temporary. matt: we heard yesterday from german chancellor angela merkel that she will consider using sputnik five and the chinese vaccine as more countries are willing to accept vaccines from others. does this look better than we thought last week? mike: yes, ultimately and obviously in europe in particular, they need to get as many vaccines as possible. now that we are getting data in terms of the actual trial data showing some vaccines, the russian vaccine seems to be effective, that opens the path, and the more the merrier when it
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comes to vaccines, trying to get this horrible situation we find ourselves in dealt with as quickly as possible, and a return to something like normality. as long as vaccines are showing to work and be safe, countries will uses many of them as possible. anna: thank you for joining us, michael bell, exec. director / global market strategist, jpmorgan asset management. mike will continue his conversation with us on bloomberg radio. next here on bloomberg tv, we are joined by michael bell, exec. director / global market strategist, jpmorgan asset management after the bank reported a $1.4 billion charge for the fourth quarter. we will get into that conversation next. this when you switch to xfinity mobile, you're choosing to get connected to the most reliable network nationwide, now with 5g included. discover how to save up to $300 a year with shared data starting at $15 a month, or get the lowest price for one line of unlimited.
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come into your local xfinity store to make the most of your mobile experience. you can shop the latest phones, bring your own device, or trade in for extra savings. stop in or book an appointment to shop safely with peace of mind at your local xfinity store. anna: welcome back to the
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european market open. 11 minutes into the trading session that shows european stocks on the front foot. the reflation trade is being talked about, and also mario draghi and whether he will become the next prime minister of italy. italian assets outperforming this morning. the bank of santander air tikka one billion profit hit in the fourth quarter. they have had branch closures and week lending from revenue.
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joining us now is ana botin, chairman / executive director, banco santander. thank you for joining us. i wonder if we can start with the bigger picture, what a tough year 2020 has been for many people everywhere, and in terms of your business, you suffered a big loss in terms of the financial impact. how does this crisis compared to other crises you have had? ana: good morning. the right down is a good will associated with legacy acquisitions from 15 years ago. it does not reflect her underlying business which performed in a solid way. underlying profit was 5 billion. we took a 15% increase in provisions from covid. in the bigger context, we did this by growing customers and
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revenue. customer satisfaction, high. 47% cost-income. we are able to do this because of our mobile growth, digital assets are paying off. yes, it has been a challenging year, but we have delivered solid results, and we are well placed for 2021. matt: in terms of the lending, we have heard regulators and nobel prize-winning economist warn about a cascade of bankruptcies to come. on the other hand we have seen bank after bank telegraphing a rosier forecast by lowering loan loss provisions. how do you square that circle? ana: banks have done a huge amount of work in the last few years. we have increased capital by a
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large amount. capital has increased 70% in the last few years. we have transformed our business model in a significant way. we have a rocksolid balance sheet and are well placed. profit in 2020 and the provisions we have made, we could double those provisions without getting into capital. compared to previous crisis, we are in a better place. the imf says the sector is strong. there might be smaller banks who have issues, but very strong overall sector, and banks have been part of the solution in this crisis. matt: what bankruptcies do you expect to see? especially in the sme's so important to europe?
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ana: we have had an experience that is better-than-expected. at the peak, we had 100 billion, 80% of that expired, and only 3% in arrears. we have been prudent including in the fourth quarter. we are projecting a cost trending downwards in 2021. the losses will come through, but the provisions have been made. we are working on the imf assumption in terms of growth and employment. we have been prudent because we believe there is still uncertainty. anna: you talk about the restructuring costs you have taken. will that be it, do you have further visibility and could there be more to come? ana: we have launched a strategy for 2021 which is to focus on
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the one europe and one cent and there -- and one santander. we are obviously, customers have changed behaviors. all transactions and sales were through digital channels. we will continue to follow customers and adapt to that. we believe the branch in the personal relationships is important. we will combine that with digital service customers are demanding. matt: you said you don't want to participate in m&a. so many bankers especially in europe have said they want to lead in that role. we have seen some deals fall through.
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then we have seen other banks selling off their arms, does neither side make sense, given if you are offered a good deal or a way to raise capital, wouldn't that be an option? ana: we are above the top 10 in capital rates. we have guided to 12% capital, a rocksolid balance sheet and well-placed for 2021. we are not participating in m&a. the main acquisitions this year have been in digital. we just closed wildcard. that is our strategy. we have enough market share in spain, and going forward our strategy is very much leveraging the scale and want santander to
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advance our digital payment platform. e-commerce is growing faster than regular commerce. in brazil we have grown more than the market, 50% market share. in spain, the same, that is what our focus will be. our digital consumer bank has grown 1% net operating income this year, and open bank which has a strong track record in acquisition with a digital tech that form which is totally in the cloud. that will provide the growth in markets we do not have a physical preference. we are confident we can deliver. the 47% of high satisfaction proves this is working. anna: let me ask about dividends in your release. i want to understand what conversations are happening with
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the ecb around the freedom banks have to pay that dividend. ana: we have been agreeing with $.10 per share through 2021 at the top of our range in capital. very strong capital organic including lending. and we got communication, all the european banks whether they limited the dividend. we will pay a dividend on 2020, in cash, 2.75 cents per share on top of the $.10 we paid a few months ago. the board's intention is to resume the 40 sent to $.50 cash dividend as soon as supervisors allow that. this is the plan. matt: i know you do not want to talk about something so far removed from bank earnings like a day today, but i have to ask about mario draghi. you worked with him closely over
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the eight years he ran the european central bank, and it looks like he may be tapped to run italy. i want your take on what you expect from a leader like mario draghi considering your experience with him. ana: mario is a great leader at every level. it is up to the italians to decide who the leader should be, but on a personal level, i have the greatest respect. his famous words, we will do whatever it takes to save the euro. i wish him the best if he gets the job. i am sure he will deliver for europe. anna: thank you very much, ana botin, chairman / executive director, banco santander. coming up, we are back to the vaccine rollout. next generation covid-19
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vaccines could help protect against multiple variants. we will talk about that next. this is bloomberg. ♪
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matt: welcome back to the european open, we are 24 minutes into the session and looking at
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big gains in italy. you heard the optimism ana botin had for mario draghi. if they were to elect him as the next leader, the markets are voting along, up 2.3% on the ftse, the benchmark index in milan/ it would be an incredibly interesting choice for us, because we have followed mario draghi slow closely. -- so closely. anna: he was the president of the ecb for eight years. it would be fascinating. everybody in financial markets knows him well, he is a known quantitive. that adds up to a 2.25% gain. next generation covid-19 vaccines could help protect against multiple variants.
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that comes amid concerns existing vaccines could become less effective as the coronavirus mutates. they aim to have a candidate approved by 2022. how significant is this news? there is a lot of talk about how we will cope with all of these variants? sam: it is obviously good news there is another player in the space in terms of getting us vaccines to deal with the current infection and possible variants. there is a lot of work to be done. 2022 is a fair target. they are being conservative hopefully. i am expecting we will have up to three potentially approved variant vaccines before the end of the year.
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that will still help. matt: it seemed to many irresponsible that the u.k. was stretch out the first and second dose of the vaccine to beyond what the clinical trials had run, however it looks like with new data, it is not going to have been a bad decision. are you impressed with that? sam: i am impressed with the dosing interval as regards the astrazeneca vaccine. we have no information what the impact of spreading out the doses of the pfizer biontech vaccine will be. this new data which i am trying to digest, with many more cases being steady, it shows -- anna: thank you very much.
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we will get back to our top story on amazon in just a moment. this is bloomberg. ♪
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matt: welcome back to bloomberg markets, this is the european open. 30 minutes into the session and we are seeing big gains in italy. the ftse benchmark index up more than 2% on optimism that mario draghi, former head of the ecb will be tapped to lead the country. the stoxx europe 600, the broader benchmark across europe is gaining, up 0.8%. the sectors on the move if you look at the global -- the group
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ranked return screen -- banks of the leader. we spoke to ana botin at santander, and she assured us capital structures have been put into order. media is doing well, as well as telecom and defense of sectors. in general everything is up. it is a risk on wednesday. let's get the bloomberg first word news. laura: european commission president ursula von der leyen is taking the blame for the vaccine exports, she made the comments at a private meeting after facing criticism. she was forced into a u over controls over vaccine shipments between ireland and northern ireland, undermining the commitment to keep the irish border open. mario draghi has been approached to become italy's next prime minister. the head of state will meet
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draghi today to produce a new coalition for the outgoing premier. the euro climbed on the news that the veteran policymaker may be about to take charge. legal team of former president trump his impeachment is flawed and should be thrown out. they filed their response ahead of the senate hearing, saying trump's speech inciting the capitol riots is protected by the first amendment's. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: it is the end of an era at amazon, founder and ceo, jeff bezos, will step down from that post in the third quarter, 25 years after founding the company. he is not disappearing entirely. this get more on the legacy he is leaving behind.
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dani: one of my favorite anecdotes of his early days, he goes to hbs and they tell him, your company is doomed, sell it now to barnes & noble. since then, he has grown the company to $1.7 trillion market cap, sharing rarefied air with microsoft and apple. stepping down from the ceo role at this moment might make sense if you view it in that lens. amazon was able to get $100 billion in terms of sales, and getting to the next 200 might not be as exciting for bezos. the other awkward reality he will have to deal with, being one of the richest people in the world, because his wealth has substantially grown, what has come with this is the portfolio of companies he owns, be at the washington post or blue origin, the space company which competes with spacex, she is falling
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behind. bezos said he wants to concentrate on his passions, that space project being one of them. a lot to deal with, and one of the big things he believed behind is this issue of regulation, antitrust scrutiny. there are a variety of antitrust cases brought against amazon, including various states in the u.s., the ftc, canada, citizens in india -- so this will be a big task for amazon to deal with. how do they deal with calls for the company to be broken up? we heard strong words from democrats calling amazon and google monopolies that need to be dealt with. this will be the lasting question from here on out as bezos bows out of the ceo position. matt: have you seen jeff bezos's
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10,000 year clock? i highly recommend looking it up. it only ticks once per year and chimes once per millennium, a 42 and dollar clock he built with a wealthy friend on his property in texas. blue origin is amazing. you mentioned it is behind spacex, which blew up another rocket yesterday. is this a business he will focus on, because i thought he was devoting only wednesday's to blue origin? dani: the letter he sent to employees, he called out his passion like blue origin. you have to remember that behind spacex and hitting milestones, the way he is funding it is selling $1 billion of amazon stock every year.
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this is a project he is dedicated to, and now he can dedicate more than just wednesdays. anna: thank you very much for that update. italy is looking to a familiar face to lead it out of its clinical crisis, former ecb president mario draghi is approached to become the next prime minister. let's get details on this from our bureau chief. he is going to be asked, we have to find out if he wants the job. what obstacles would be in his way if he decides to take what is suggested? >> i would take for granted he will say yes. the uphill battle will be forging a majority in parliament. italy's part meant is bitterly
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divided. some parties have signaled they will not support him, or they are skeptical about supporting him, another technocrat. this will be the first challenge for draghi. matt: he is not just another technocrat, he has had extreme success bringing the entire european union out of a crisis. do you have a sense of what the people on the street in italy think about mario draghi? >> the support for the euro is strong in italy. they credit him for helping save italy's economy, but there is a deep mistrust over technocrats. rightly or wrongly, draghi is perceived as part of this.
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he will have to shed this image and show that italy can grow through growth and not cost cutting and austerity. most italians are tired of political shenanigans, and the complexity of this crisis in the middle of a pandemic. they hope for an effective government to bring together the country and eu funds ready to be taken if italy can present a credible plan. anna: thank you very much, it is having an impact on markets already. we see it in the ftse, and in unicredit, up 4.6%. coming up, hopes for a green recovery. we speak to the ceo of a waste management company, renewi. this is bloomberg.
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matt: welcome back to "bloomberg markets: european open." 41 minutes into the session, we are looking at gains on equity indexes across europe. it is a risk on session with the broader stocks zero 600 up 0.7%. in italy, the ftse is up more than 2% on optimism mario draghi
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can do a better job running the country, and you can see unicredit, the italian bank helping the lenders lead the way. they are the biggest getting industry group on the stoxx 600. that's get the bloomberg business flash. laura: the end of an era for amazon, later this year jeff bezos will step down as ceo to focus on innovation. he will be replaced by the head of the company's cloud unit come along season as a potential successor. bezos founded amazon in his garage more than 25 years ago, becoming one of the world's richest men. alphabet was buoyed by digital ad spending during the busiest shopping spree of the year, beating estimates. add revenue on youtube jumped 46%. one problem area was the cloud
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unit which reported an operating loss for the quarter. spacex test flight ended in a fireball again. nobody was on board. a prototype engine did not reignite during an attempted landing. a december test ended in a similar crash. elon musk hopes the starship will eventually carry people to the moon and mars. anna: thank you very much. let's turn our attention to green matters and renewable and recycling in particular. renewi, one of the largest waste businesses operates in a hot circular economy. let's bring in the ceo, otto de bont. we put up a trading update earlier this week, but in terms
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of your growth expectations, this must be a hot sector, how do you plan to grow the business? otto: we are active in europe, and that is the market where governments are leading the economy. we are protecting the world by giving new life to used materials. we are renewing materials three ways. we look at the recycling rate, and every year we look to increase the recycling rate. we are at 65% today, 65% of the 13 billion tons is turned into secondary material, and we are looking at increasing that further to 75%. we look at increasing quality of the recycles that we produce. we increase the value in the
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value chain, and increase our overall contribution. if you look at our profits, it is around 60 million euros, and we expect to double that in the next three years by increasing quality and are rate. matt: how much are people recycling? i remember when the idea was interesting 20 years ago, and now it has become something you have to do. it can be difficult to separate waste, and a lot of people are too irresponsible to do it. otto: we focus on commercial waste, that is the market where we collect waste from industries, from resales, from hospitals, from offices and so on. if you look at household waste, that is mostly done -- there we treat the waste, and it is a
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smaller part of our business. anna: 65% of the waste you collected is turned into a secondary product, this is the circular economy, and what your business is based around. that leaves 35%. what are the quicker wins from the 35%? and what will be the things we will be talking about in 10 years that are difficult to turn into anything else? otto: great question. if you look at the 35%, most -- a small part goes to landfills. we are highly incentivize to increase the rate. if you look at a 35% [indiscernible]
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one example [indiscernible] we take recycles and turn them into products used for other products. another area [indiscernible] we are looking at converting that waste. the third area, which is a big area is the construction industry which affects the largest material usage of all industries. today we convert about 2 million tons of construction demolition waste into different raw materials. we have these big containers we
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collect, and we break up the raw materials, and from them we reuse the plywood, the metals and so on. matt: what kind of changes have you seen during the pandemic? construction increases -- construction continues, i should say, at least what i see around here. what about the waste you get from other commercial enterprises? does it continue to come at the same pace? otto: we have seen a shift due to the covid crisis. as you can imagine, resales and hospitality sectors have come down significantly.
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it has been compensated by the construction industry. [indiscernible] this compensates for the lower areas. another area that is obvious is hospital waste. we're the largest collector of hospital waste, and we have seen a tremendous increase because people are wearing more protective clothing and masks. anna: we started talking about expansion plans, where do you see parts of europe or the world where the government's and legislative environment is most favorable, and you would like to expand? otto: that is exactly where we are looking. her main volumes today -- our
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main volumes today, if you look at the governments driving a circular economy, as you may know, we set the target to be 50% in 2030. that translates into a reduction of 50% of usage of primary materials in any production environment, meaning demand for secondary materials increases over the next few years. governments have also set higher tax rates for alternatives to recycling, which would be incineration and landfills. that creates more space for us to operate. our plans are to further develop new technologies to treat waste, and continue to increase our
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effective rate. and then expanding those technologies abroad as countries start to adopt these new and ambitious targets. matt: thank you so much for joining us, otto de bont, ceo, renewi. coming up, how much further can treasury yields rise? we will put that question to laura cooper, bloomberg's mliv macro strategist. this is bloomberg. ♪
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matt: welcome back to "bloomberg markets: european open." we are seeing gains across the board today. you can see the stoxx europe 600 broader benchmark index is up 0.7%. the italian benchmark is up more than 2% on optimism mario draghi will be tapped to run the country. the euro falling back down a little bit, although extremely little change. it had been up yesterday when this draghi news crossed the ticker. now it is down 0.09%. joining us now is laura cooper, bloomberg's mliv macro strategist.
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this is one of the more exciting headlines, and there were many, jeff bezos stepping down -- but mario draghi to run italy, what you think of that? laura: it is the case that everyone's favorite central banker's back, and markets are taking this as a positive sign. italbonds opened this morning and ds tumbled. the risk proxy for the region, the bund tenure spread is testing levels months ago at multilevel he lows. markets are taking this as a positive sign, but at the same time there are hurdles ahead that we could see opposition to him forming a government. this is providing some lift to sentiment this morning. anna: we are getting read headlines, french services pmi,
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47.3, germany, 40.7, the french number above expectations, but these numbers are below 50 suggesting contraction in the services sector in january. none of that living the euro much. what response are you getting to the question of the day about how much further treasury yields can rise, because we finished this program were we started, a conversation about reflation expectations. laura: we are seeing treasuries under pressure again. this reflation narrative is back on the radar. treasuries have not been range bound since january because a lot what drove the selloff, the expectations were stimulus and the vaccine led growth to come roaring back have yet to have fundamental backing. it will be hard for treasuries to rise above that 120 mark, and if you look at where markets
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anticipate the 10 year, they peg it by year-end not much higher from today. matt: thank you very much, bloomberg's mliv macro strategist. this is bloomberg. ♪
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francine: end of an era. jeff bezos will step down. whatever it takes. former ecb president mario draghi will be asked to form a new italian economy and steer a country out of the crisis. stimulus in the u.s., earnings and fading concerns about volatile retail trading. good morning, everyone. welcome to "bloomberg surveillance." i am francine lacqua here in


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