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tv   Bloomberg Markets European Close  Bloomberg  July 1, 2021 11:00am-12:00pm EDT

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and alix steel. ♪ guy: 30 minutes to the european close. what you need to know -- stock surging as the eu launches its vaccine passports. london is looking at quarantine free travel for the fully vaccinated. he sees capacity nearly doubling over the rest of the summer. rishi sunak is vowing -- the chance is we will see significant divergence from eu rules. we will hear from the chancellor this hour. crude continues to climb.
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topping $75 a barrel for the first time since 2019. we are seeing back into equities, but back into crude, up by 1.5%. alix: unbelievable -- back above that $75 a barrel, the highest we have seen in three years or so. this brings up those inflationary trends we keep talking about. underneath the hood, it was big tech end to that outperformed that for the first half of the year as we see more record highs. that continues. it hits the five year yield. the highest prices paid since 1979. the highest we have been at all week.
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this has been a very busy week for ipo's. didi was the second largest u.s. listing after alibaba. you are in the doghouse -- you did not bring me doughnuts for the krispy kreme ipo, which we eagerly await for trading! guy: i'm feeling like i really let you down -- krispy kreme doughnuts. let's talk about why we should think about what is going to happen in the second half of the year. andrew bailey delivered a cautious outlook on the u.k. economy. he is encouraging policymakers not to overreact when he said we are likely to ca temporary -- se e a temporary rise in inflation. >> it is important not to overreact to temporarily strong
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growth and inflation to make sure the economy not undermined. guy: the market seems to abhor this narrative. inflation is going to be temporary. we are going to see a spike. that is what we are seeing an yields right now. mark andersen, cohead of ubs wealth management, despite that, despite these relatively low yields, despite the fact central bankers are sticking with the fact we will see temporary inflation, you still think we want to stick with value. pull me through that argument. mark: the central bankers are right in the fact that they will certainly be coming down. as we look further into the horizon of 2022. we see prices overall going higher.
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small companies in the u.s., for the first time 40% are going to pass on prices. there is no reason for commodity prices to be so heated. we will have a stronger level of growth for a longer. periods of time. taylor: so, 2% from the 147 where we sit now. does it cause you any concern that despite the drop in yield, big tech is one of the outperform ors, --outperform ors, but small-cap was an outperformer too. mark: people are buying duration because we see peak inflation right now.
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we saw it in manufacturing today. i think what the market is underestimating is that the fed with howl at the front of it are starting to talk about the -- powell at the front of it are starting to talk about the dual mandates. you will get a strong payroll report tomorrow, and that in combination with the fed starting to think about tapering is what the market is currently underestimating. on top of that, we are holding equities, and what we like to do is hedge those rates will move higher. that is why we are buying energy and financials doing well on a day like today. guy: financials have had a good run in the first half of the year. i can draw your attention to the stoxx 600. stoxx 600 banks up by 25.53%.
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what kind of performance will we see in the second half of the year? a lot of that will determine why european banks will be able to do. christine lagarde address to this earlier. >> the general board last week noted that these conditions do not deteriorate materially. our recommendation on the restriction of distributions, including dividends during the covid-19 pandemic, could be allowed to lapse at the end of september '21. guy: european banks, 25%, you own them at the moment, will it take a continuation of what christine lagarde was talking about? the united states are able to return money. how big a part is it when you
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are looking at financials? mark: that is one of the accelerating sectors for banks. in our investment thesis, it is about trading historically cheap -- on top of it, while rates are higher, which is certainly a positive, we have a broadening and strengthening in the economy. that means we will see less defaults. we will see some of that price tension moving upwards. a lot of -- taylor: more broadly speaking, it has been europe that has been lagging the price action for the first half of the year. do you expect that to change? is that a dollar weakness call for you? mark: we had europe catching up
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strongly in the first half of 2021, but you are right. the emerging market has been lagging. another one we do not often talk about, but the japanese equity market is great lagger. the vaccine rollout has been coming slowly relatively to the u.s. and europe. we saw a short sign from the industry in japan, very weak dollar, very good signs for exporters. taylor: thank you as always -- mark andersen, guy, we bring you back to your favorite headline of the day. awaiting some of the pricing from the krispy kreme ipo. they priced at $17 a share, a
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little lower than where it had been marketed at, $24. it is expected to open at $17. guy: are you really this big a fan? i had not known this about you. doughnuts are the your thing. taylor: i could always eat a good doughnut. they will still own 78% of the economy after the ipo. this is the second time they have gone public. guy: do you have a favorite donna? taylor: can it be rainbow sprinkles? do you eat donuts over there or do you eat crumpets or croissants? guy: a doughnut for me is filled in jam. my kids love them. taylor: coming up, we have to
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talk about that epic rally, posting their best first ha lves since 2009. this is bloomberg. ♪
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♪ >> the republic of iran has been under the most serious, unilateral u.s. sanctions. over the last years our core industry has suffered greatly. we have maintained reasonable
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export these fight the wishes and plans for the former u.s. administration. taylor: that was iran's oil minister on the impact of u.s. sanctions. opec and their outlet -- allies are currently discussing what output will look like. martin rats -- martijn rats, thank you for joining us. martijn: i think what the market is pricing in his the following -- if you think about oil prices in the long run, there is an equilibrium in the market. the marginal cost of production markets the -- angers the market
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most of the time -- anchors the market most of the time. that framework is not correct. the other equilibrium is the price is high enough that it destroys demand. what happened over the last few months is effectively the oil market has come to realize there is very little investment, almost no response from non-opec members to these prices. at the deficit seems to be more structural. it will -- you need to move the destruction price. it is difficult to know what that is. demand begins to be destroyed above $80 a barrel. that seems to be the price the market is currently trying to figure out. where does demand erosion taken?
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we still -- demand erosion kick in. we -- guy: do you think of the market assumption is that large u.s. producers will not kick back in his they correct one? at -- is the correct one? at the moment they are talking about discipline, they're talking about returning money to shareholders. that is the ethos. do you think at $90 that starts to change? martijn: you can do some buybacks and add more rigs back to work. discipline -- there is a level
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where you can do everything shareholders ask for you. relative to the history of the u.s. md sector, and this predates the arrival of shale, relatively history of the sector in the u.s., what we are seeing is unusual. there is restraint, discipline. this is self-imposed. there is an element of one thing to do more buybacks, more shareholder returns. there is also an element imposed on the sector. credit is harder to get. high-yield bonds are only available to the highest companies. partly it is of their own making. partly it is imposed on them by equity and investors. this behavior does have some staying power. we are running well over 100 rakes short -- rigs short.
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that is by no means a small number. taylor: we heard from phillips this morning saying u.s. shale is going to wait until opec starts boosting their supply. i wonder how tempting it is to start ramping up input, at least from the u.s. side. martijn: we look at they you this -- u.s. side but there is -- they are certainly not showing homogenous behavior. they are showing very different behavior. dare i think you will find some of the causes of this -- there i think you will find some of the causes of this restraint. it is an important contingent, but they can carry it only so far. guy: if i am man investor and
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commodities in the second half of the year -- am an investor in commodities in the second half of the year -- martijn: we saw a relatively quick recovery in nonenergy commodities, metals, agricultural commodities -- they did well. the demand story for things like copper, aluminum got stronger. transportation fuel demand is under pressure. therefore, metals, agricultural commodities have outperformed strongly relative to energy commodities. now that the world is reopening, normalizing, the demand trend starts to favor energy commodities over the rest. therefore there is a catch-up within the commodities base,
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better for energy. guy: on that note, we will leave it. thank you very much, martijn rats, head of european energy research at morgan stanley. rishi sunak, he has a plan. you wants to -- he wants to make london competitive. our exclusive with the chancellor is next. this is bloomberg. ♪
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♪ guy: europe is always going to be a close partner and ally of ours, and we will always remain available for na weston's they may have -- any questions they
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may have about that process. i am interested in making sure our financial and does re-air in the u.k. is -- industry in the u.k. is something we are proud about. today we published a roadmap to deliver our vision ray financial services industry -- for a financial services industry that is more open and advanced. >> how well that roadmap is stand up to the competition, chancellor -- how will that roadmap stand up to the competition, chancellor? london is still the biggest financial services hub in europe, but that is being tipped away at. does not --being chipped away at. does that concern you? rishi: london remains the
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premier destination financial services. we have fantastic strengths here and we are going to build on those ranks, not rest on our laurels. -- strengths, not rest on our laurels. the u.k. will be the most exciting places for finance in the world. we -- we will be a leader in green finance. creating a carbon offset market is just one of the things we are doing to create new markets here and new jobs. guy: rishi sunak speaking to anna earlier in an exclusive. joining us now is tom metcalf. anna raised the issue of what is happening in france this week. is there anything the u.k. can do with th -- about the transfer of financial services to the eu post-brexit?
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is there a plan to reverse some of that? tom: the u.k. government is doing its best to make out that there is a plan. they talked about four or five consultations and what they are going to do. that is a big question. the hit has not been too painful yet. you have banks setting up store in europe in a more widespread way than they previously were. if you are a rival in london, you're thinking " this is a freebie." it is not week arnie -- weak or anything. guy: the chancellor seems to have given up. tom: the u.k. has given equivalents too much of the eu on finance. the eu has only given one, admittedly critical, decision
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and they have made no further moves on that. i can describe sunak's comment there. from the british side they are saying, " why are they eu taking so long -- the eu taking so long? we will look forward and make the best of this situation." guy: what does it look like? rishi: it is - -- tom: it is not a big change. u.k. wrote many of the eu finance rules. maybe there will be less documentation about firms in london, similar tweaks and changes around insurance, but it is all very minor. you will not see some huge,
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sweeping change that will make london unrecognizable and hugely different. guy: we will watch with different -- interest. tom metcalf, thank you indeed. we are approaching the end of the first trading day of the second half. some energy stocks doing well, we continue to see crude climb higher. the first trading day of the second half coming to an end. this is bloomberg. ♪
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guy: we are wrapping up the first day of the third quarter.
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later on the periphery, which i think is interesting. for a seeing volume sharply done -- sharply down. a little light on the volume side. we are still within the mid four 50's, 455 today. european equities continue to be in a tight range. up .6%. the churn does continue. let's talk about other assets influencing the action in europe. i want to talk about the currency market. brent crude up 1.5%. we will get more details as the day progresses. brent crude at 75. prude catching a bid -- crude catching a bid.
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you've seen the dollar on the front foot against the pound. the pound down .4%. the euro holding in around 1.18. interesting divergence in terms of the way european currencies have been developing. individual markets, the ftse, the dax, and the cac 40. outperformance from the london market. part of that is down to what is happening in the currency markets. the quality story helping out. travel and leisure on the front foot. promising news in europe and the u.k., driving that sector which has been beaten up. the dax up .4%, the cac 40 up .7%. let's talk about the churn. let's deal with that first of all, and what is happening in the energy sector. energy prices, prude being boosted but also gas prices up sharply. energy stocks doing well.
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the meteor sector, the bank is coming back. the first half of the year the banking sector the best-performing sector. technology giving back ground. the basic resources are fairly flat. on a date when the energy stocks are doing well. the first half of the year, the metals doing well, the second half of the air could it be the energy sector? that is what is happening the sector story. let's talk about what is happening with individual names. glaxosmithkline up 1.4%. elliott management down, -- out with a letter indicating what it sees happening at glaxosmithkline. have not heard from elliott since we heard they had that position within gsk. the concerns elliott has the potential upside it sees if we
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see management moving forward in a way it sees as being appropriate and sharply to the upside, 40% plus. management changes may be necessary and the lack of scientific background. may be a factor in unlocking some of that value. maybe that needs to be corrected. glaxo responding, up 1.4%. the numbers for h&m ok. it is the loss of sales momentum , the second derivative i think is causing concerns. h&m down 1.08%, giving back a little bit of ground. that is why the retail sector a little weaker. ryanair up 1.5% today. a strong performance. we are seeing the sector bouncing back nicely. a couple of positive pieces of news. one of these out of the u.k. on double vaccinated travelers being able to visit parts of
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europe they are not -- we are starting to get details and the arrival of the european banks -- european travel. taylor: we are getting the push pull between wanting to travel and the rise of the delta variance leading to other restrictions. spain still hopeful tourism will come. bloomberg spoke with the spanish foreign minister in madrid. maria, the sum of travels -- the summer travel season is so important for spain. maria: it is so important to this country. you need to factor that gdp accounts for 12% based on tourism figures. last year this was a disastrous summer season for spain but also the european countries across the mediterranean. numbers fell to a 51 year low with tourism spending also dropped 86%.
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i spoke to the spanish foreign minister yesterday in madrid and i asked her how hopeful are you to the summer season and how worried are you about the delta variant taking in? let's take a look? >> we are sequencing the variant in order to understand the prevalence. for now extremely low. maria: that was the spanish foreign minister speaking to me in madrid. it is also worth mentioning this week we have seen the digital tax go into effect in the european union. that means if you've been vaccinated and show you have a negative test, you do not have to quarantine. the problem is the united kingdom is a huge market for spain, but also the southern european countries and they will have to take a test. before they do not have to. that is a result of the uptick in the delta variant in the united kingdom.
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guy: let's talk about whether or not everybody is on the same page when it comes to this covid certificate. we are getting different views from different parts of europe. is this something everybody is on board with or are we starting to see divergence? maria: to some extent you have to give credit where credit is due. a few weeks ago there was skepticism the digital test would not be ready for july 1. today we are seeing it going to 27 countries across europe at the same time and have some figures to give you because the european commission says it has been downloaded more than 200 million times. it is being received well. the problem is not on the technicalities but on the politics. there are countries that would argue, especially germany, that you have to be extremely careful about the delta variant. they have an election in september and they want to keep this out of the european union.
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others will tell you being overly cautious is equally detrimental for the economic recovery. it is a delicate balance. guy: it certainly is. thank you very much. the airlines are watching what is happening incredibly carefully. anna edwards catching up with ryanair ceo michael o'leary about what he sees happens, the impacts of these certificates and what kind of demand we should expect as we work our way through the rest of the summer in europe. >> they started this morning, they worked really well. 23 countries have been issuing these last weeks. there one or two countries that have not issued -- there are still some problems there. german leisure, scandinavian leisure, heading to the beaches of portugal, spain, greece, and italy. we expect that to continue through july and august which should make a reasonable
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recovery. anna: is this going to be something that will enable you to increase capacity across the intra-eu parts of the network? michael: absolutely. we are doubling our capacity into july and august and carry about 1.7 million passengers in may. we have done just over 5 million passengers in june and we are hopeful we will get somewhere between 8 million and 9 million passengers in july. the business is recovering strongly. the two markets lagging are the u.k. and ireland where there are still restrictions in place, and in my view people overreacting to the delta variants, which have seen an upward spike in cases, but not any movement serious illnesses, hospitalizations, or morbidity. anna: let me talk about the u.k.. we saw spain recently adding to
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the quarantine list, do you have any sense when we will see further countries added to the green list? michael: our sense is there'll be more countries added around july 19. that seems to be the latest date for the u.k. government to move in the final restrictions will be removed that date. the uncertainty is how the european countries, will they welcome visitors without any restrictions, will they accept the nhs or will they produce other documentary evidence that they have been vaccinated? the u.k. is a country where 60% of the adult population have been fully vaccinated. we say that is enough to lead the u.k. families to want holidays in europe, but the europeans need to reciprocate. the best thing would be to join the eu digital covid certification and then you would have seamless travel. as a political issue, not a
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travel issue. guy: michael o'leary speaking to anna earlier on. ceo of ryanair. i am sure the next piece of news will be of significant interest to many of his countrymen. getting headlines coming through from the oecd. the oecd indicating the global tax overall that all of the g20 countries are now backing a global minimum corporate tax. that breaking in the last few minutes. the global tax overhaul is being endorsed by 130 nations. we understand the details, remember this is being done under the stewardship of the g20, which is under the stewardship of the italians at the moment, that the agreement will be finalized in october. we will get details there. the oecd timeline includes a plan for implementation in 2023.
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taylor: perhaps it will be a big win for janet yellen, the treasury secretary who has tried to spearhead some of these conversations. you'll have to correct me if i miss speaking. when this was announced, we had a lot of these conversations in early june. countries like ireland, which i'm taking a look at the oecd right now, they have a 12.5% corporate tax. i think they came out and said yeah, right. i don't think so. i am curious to see ireland, hungary, switzerland, how they respond, if they are part of these countries, which i think they are, maybe supporting this global minimum tax, really interesting as well. we are getting word according to dow jones this also includes china and india. these are some of the developing countries.
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they previously had a lot of reservations about this overhaul. they appear to now be on board. guy: the idea is you create a wave of momentum that other countries cannot avoid joining. that is what has been the strategy from janet yellen and others. that is why maybe they have been able to bring on the lights of china. countries like ireland will have difficulties. it has been a core part of their belief. a core part of that is resting on their tax structure. obviously there are other factors as well. it is a meaningful impact in washington, d.c. if you're going to be talking about global tax, the race to the bottom, the concerns of the u.s. raises corporation tax, the company will go elsewhere. maybe this puts a floor under the strategy. bloomberg's mike mckee joining us to give us his take on what is happening. a huge win potentially for janet
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yellen. michael: definitely a huge win for janet yellen and the biden administration and the united states coming back from a time when most countries were not listening to us on foreign policy. it is in most of the countries interest to come to some kind of deal. they've wanted to avoid a race to the bottom. you do not want to say the irish are on the bottom but they have made money by having low tax rates. this does not prohibit countries from having higher tax rates. it is expected the united states and others will be above that. when companies are looking at where they should locate, it will be a question of not just taxes, but other expenses that should even out. it also should get rid of some of what we used to call in versions in the united states, where companies would move their mailing address to another country like ireland and keep other production facilities here to pay the irish tax rate. taylor: it is interesting.
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how some of those countries respond? ireland, switzerland? are they involved in this? are they included in the 15% minimum? how do they respond? michael: we do not know if ireland will go along with this. 130 countries have signed on but some have not. it may be the irish and others are working out what they're planning on doing. we do not have a lot of choice. it does not change their tax rate significantly, but it puts others in the ballpark. the question is can they attract more business, they may be able to keep the business they have. guy: janet yellen making comments, saying the tax deal is "an historic day for economic diplomacy." she sounds pleased. let's talk about what happens next. the objective was he would not
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have this race to the bottom. if you are the u.s. administration come he can start talking about raising corporation tax, you can start the process without worrying about companies going elsewhere. where are we in that process? my understanding is in some ways this is an irrelevant because the process is now increasingly looking very stalled in a d.c. michael: right now the prospect of tax reform is not on the front burner for the bided administration. this may make it easier in the sense that it takes away one of the really contentious issues. the u.s. can raise its tax levels but probably means they will not go all the way to 20%. there is a global minimum tax -- all the way to 28%. there was a global minimum tax that was part of the biden plan. they are raising more revenue
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from u.s. companies getting more business overseas at that may take some of the need to raise the corporate tax away. it is also important to note this includes, we are still waiting for details, this includes a digital tax. it is going to affect u.s. companies but also foreign companies and tax revenue as these internet companies do business overseas. it takes off the burner the idea of the sanctions for. the trump administration had threatened tariffs on european countries if european countries went ahead on a tax. it looks like this will take that off the front burner, take that off the stove. guy: janet yellen will be in europe next friday. hopefully we get more detail as to exactly will be happening. we appreciate the context. bloomberg's michael mckee. also details from the opec meeting.
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the j mmc has some recommendations for gradual oil output increase, talking about 400,000 barrels a day. that will take place on a sequential monthly basis from august through september, and they're recommending extending the deal to the end of 2022. the market was looking for more, looking for around 550. we did not get that. we only got 400. taylor: and pivot to some of those oil conversations to any sg conversations. activist investor engine number one to promote activism. the ceo joins us next. this is bloomberg. ♪
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ritika: coming up, ellen wald, atlantic council senior fellow. this is bloomberg.
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guy: oil prices sharply higher today. let's talk about another aspect of the oil sector. it has been challenge after challenge for exxon. as we learned today it got stung by a filming operation. the company apologizing or comments drawn on camera by one of the oil giant lobbyist, the lobbyist saying the carbon tax exxon has promoted is unlikely to happen. excellent deeply apologetic. this comes on the fact of the fact the company lost to a small active investor, engine number one, which won three exxon board seats. it is launching an etf. it got a ticker vote and we need to talk more about it. let's do that right now and talk
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about what will be happening here. jennifer grancio, engine number one ceo joining us. i have to ask you about this excellent story everyone has seen that has captured the attention. you think the penny has dropped. you think the implication of what you did is filtering through at exxon? you think there is an understanding of the kind of change that will be nest area at this company? jennifer: let's talk about that and that it be i can pop to the -- i can talk about the broader objective we have. from an excellent perspective, our campaign at exxon, led by charlie penner, was about making sure the boards have the right capabilities to understand how to manage every aspect of the company, including how the company remains a great company through the energy transition. i would say about the current news cycle we look forward to the directors joining the board
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and the company managing for the future, acknowledging some of the changes in transformation that have to happen, and if i step back, we built engine number one specifically because we see a link between the impact the company makes on workers and society and the community, but also on climate and the environment on the long-term financial value of these companies. whether it is an activist campaign or the new products we have launched, we can work with companies and hold companies accountable for doing the right thing over time. guy: let's give it to the etf and talk more about it. etf money is passive money. this is the exact opposite. walk me through the structure and down etf will help you further your cause? jennifer: we as a firm think about ourselves as capitalist and we want to help these
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companies do the right thing. as more data becomes available we can see the relationships between what companies do on social issues, on climate issues , and how it impacts their long-term economic and financial value. what we have done, and this is a new twist is put together a product -- it is an index product. it holds the big companies. it provides a vehicle clients can hold these companies over years or decades and we, on behalf of clients and investors, and both assertively and actively hold the companies accountable on impact but also help the companies make choices on impact. we can do small campaigns for larger more assertive campaigns to help the companies get credit for the good things they are doing that may not be valued because the models are too short term.
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it is a way for everyone to have a seat at the table, be in the market, not divest from the market, and they know their dollars and shares are being very active in working with these companies and pushing on these companies to make noises in the long-term. guy: at the moment the data is there on carbon. it is not there in other areas. do expect the data to come. do expect those areas to become a focus? jennifer: we think very broadly about all impacts. today we have the data on carbon, and carbon footprint, and we think is fairly straightforward to build a model about how each company is impacting the environment, and how financially that relates to how they are valued over time and the choices they can make in running their business. we are deep into that. at the same time we are working very actively with our own data
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giants and modeling teams, with a lot of academics and partners to drive the conversation on better and better data on the social side. i think we see the relationship between companies that have a package of good wages and benefits for workers and how that shows up in the value of the company over time. more work to do on the data side, that is a big part of our business. in the boat etf's, we expect people will hold these companies over years and have the ability to get upside in climate and social factors. guy: we are looking forward to seeing what you do next. who is the next target after exxon. come back and tell us about that. jennifer grancio, engine number one ceo. coming up, jared bernstein joining balance of power. this is bloomberg. ♪
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>> from the world of politics -- >> we have overly generous unemployment benefits keeping people on the sidelines.
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>> to the world of business -- >> we survive the pandemic of 2020 really well. the balance sheet is strong. >> this is " balance of power" with david westin. ♪ david: from bloomberg's world headquarters in new york to our tv and radio audiences worldwide, welcome to "balance of power." big news in new york city today as the indictment of the cfo of the trump organization, who turned himself into authorities this morning. to take us through the charges, we welcome greg farrell, who covers investigations and law enforcement. thanks for being here. it sounds like he did not pay taxes on perks given to his employees. it does not sound like that big of a deal. greg: the charges have not been made public, so we know

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