leyen extend brexit talks with yet another deadline ignored. lawmakers in washington will unveil a $908 billion pandemic relief bill today. steven mnuchin and nancy pelosi are set to speak again. futures higher in the u.s.. plus, astrazeneca lands a $39 billion megadeal to take over alexion pharmaceuticals. it's the company's biggest deal since it was founded. good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua in london. lisa abramowicz in new york. tom keene off, chopping a tree or something like that. is a lot to talk about. and kind of tired of brexit. i know most of the people watching are tired of brexit, but it is the final stretch, and i want to remind everyone, december 31 is not a moving deadline. they should not be able to go over. lisa: which is key. jon ferro, my colleague, is always talking about, what does the deadline mean if they keep

getting pushed back? yet we are getting to a hard stop, so any progress is key at this point to prevent a hard brexit. francine: so we will look at brexit, we will talk about astrazeneca, and that little thing called stimulus in the u.s. let's get to first word news with karina mitchell. karina: hospitals in the u.s. will start getting the coronavirus vaccine today. shipments started leaving pfizer's michigan factory yesterday. over the next three days, shots will arrive in more than 600 hospitals. the doses will be given to health care workers in nursing home residents. russian government hackers reportedly have hit several u.s. agencies. according to the washington post, the attack targeted systems within the treasury and commerce departments and other government agencies. the newspaper says the agencies will breach -- members of the electoral college meet today to officially elect joe biden. some republican lawmakers have

said that would be the end of president trump's attend overturn the results as far as they are concerned. electors are committed to voting for the winner of the popular vote in each state. the president has said he will continue with legal challenges. he was a master of the spy thriller and defied the moral and beauties of the cold war between the soviet union and the west. the carriehor john has died. the city became the setting of spyfirst bestseller, "the who came in from the cold." he was 89 years old. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i am karinantries, mitchell. this is bloomberg. francine? much.ne: thank you so , one of the most

famous names out there. 2020 really sucks. overall there does seem to be a bit more buoyancy on the markets, and bullish mood is also because investors are taking comfort from further stimulus bill negotiations in the u.s. and the impending deployment of the first vaccine over in the u.s. as well. the other thing i'm looking at is japanese shares rallying to a two-year high on monday. it is looking pretty good out there for the moment. things can change, but for the moment we will take it. handaysa. lisa: thank you so much. there is a feeling that the pandemic will end at some point. elsewhere you are going to get a -- enough of a stockpile to get intentionally that -- to get potentially that herd immunity, to speed this rotation to cyclicals -- in the united states, up .6%. the futures on the rest of 2000,

small-cap stock, that is beating the s&p. since the end of october, you've seen a rally of 24%, twice the s&p. with theields blip up, fed meeting where they could potentially announce rotation into buying longer duration bonds. and gold selling off as it was again, proving less of an allure given the fact that you are given a deal in markets, francine. francine: a lot a on the rotation and what happens in 21 -- on what happens in 2021. u.k. and e.u. leaders are negotiating a post-brexit trade deal extending sunday's deadline. where there is hope, we are going to keep talking to see what we can do. u.k. certainly won't be walking away from the talks. i think people will expect us to go after mile. there is interest within the european union to

maintain a close and friendly relationship. we have the same values, a largely shared history, and i believe in a globalized world it is important to have solid, predictable partners on whom we can rely. francine: we are just getting also headlines from we shall bind yet -- where he has told envoys that a compromise could see a deal this week. we are delighted for wisdom and insight to be joined by howard davies. sir howard has been very generous with his time. we have always kissed him on exit. i'm looking forward to the day where we don't need to talk about another brexit deadline having been and gone. what does it mean for the city of london? has finance moved on? is there anything -- are there any contingency plans you're putting in place? and good morning. howard: good morning. i'm afraid i'm suffering from brexit deadline anxiety. there is no doubt one german

word that captures that. in this we don't really know when if ever this deal is going to be finished. but on your question about the city, i think everybody who needs to do -- not everybody, but all the businesses i know about who needed to do something specific in the city to cope with brexit at the end of the year have done. reallyancial deer is not part of this negotiation -- through financial deal is not really a part of this negotiation. we know after the first we will be out. the deal is relevant to finance because if we leave with no deal, clearly the political relationships will be bad. thethe talking about equivalence determinations on european directives, that willingness will not be there for some time. be serious.

it is a knock on effect of no deal, the environment in which the other discussions need to take place. francine: what is immune overall for u.k. finance? even if we have a deal, it could be a -- what happens to the city of london 12 months from now? howard: it is quite interesting that even where we are now is not where we wanted or hoped to be, because we got a pretty hard -- it is clear that the exodus that some forecast has not happened. and the city has continued to prosper. interesting to speculate on why that is the case. it was said a week or so ago that he thought part of the reason was the rest of europe didn't have one center to that spots were knocked off in frankfurt and vice versa. so there is no single

alternative location. also i think that people have found ways of maintaining their business. now, the dangerous bit is that you're seeing people moving assets, moving trading to other thations, and the risk is as that happens, then the staff follow over time. i think that is quite a serious risk. the other risk is not talked about so much, that the regulatory environments in europe, which for example doesn't normally require business to be done in a particular location, in a location policy, not part of the european scene at the moment. why is that? it is because the european regulatory environment has been strongly influence u.k.. -- i was a regular for quite some time, and the question -- i was a regulator for quite some time.

and determining the nature of the regular asian's, what will happen? there are plenty of people in europe who argue that we should have -- that the ecb should be able to say where euro business is transacted and where management decisions are made. at the moment you can delegate back to fund managers somewhere else. thehe question is how does revelatory environment involving a situation -- evolve in a situation like that? lisa: the bank of england has given hints that banks will be allowed to resume dividend payments come next year after suspending them due to comparative -- due to pandemic concerns. considering reinstating the dividend as soon as possible next year? i don't think that it is quite right to say that the bank

of england has given a hint. they have set out a new policy, which is sensible to do so. says that you must operate your dividend policy within a couple of guide rails, expressed as a percentage of capital that would be the maximum percentage that you in six months.e you could go to one or the other depending on your situation. that is a sensible framework. it puts the decision-making back where it should be, in my view, which is where banks will have difficult decisions to make come as well my board, because this is a very uncertain environment. i think banks will look very hard at that and decide on their dividend policy to take account of the great economic

uncertainties that there are. but i suspect that some dividends to be restarted but people won't have made that decision yet, and boards will need to think about that in the new year stop lisa: some investors have said it is uninvestable if dividends cannot be created. do you agree? howard: it is certainly true that investors tell you that. in the -- if investors tell you that, that is probably the most important thing. they said, look, in the new capital regime, bangs have been required to hold a lot more capital than they did in the past. and that means that they are safer, but they are less volatile and they are less profitable. that is perfectly evident for all european banks in the last decade. therefore, they are a bit more like utilities. that is been the objective of the regulatory system, to make banks more boring and more safe. utility that doesn't pay a

dividend is a peculiar stock to hold because the whole upside of being safe and a utility-like stocked is that you should be producing a decent income. i think that is what investors mean when they say banks -- the upside doesn't seem to be there given the amount of capital that you have the whole, and yet there regulatory stream isn't there either because regulators are prevented. know howsaid we don't to value these stocks because we were valuing them on income to quite a large extent, and if we don't know whether the income will be stocked at any one time, how do we value that? so the models didn't really work. i think that is the sense in which they were uninvestable at that time. i hope that we can get away from , deciding distribution policy has got that back where it belongs, which is with the banks themselves.

she howard davies stays with us. we will talk about the covid vent -- sir howard davies stays with us. we will talk about covid loans. this is the eighth anniversary of the signing of the oecd convention in paris. there is mr. macron. we also expect the prime minister of spain and others to talk a little bit later on. you can follow that on our bloomberg terminal, live go, and later we talk about the european central bank, and we talk about inflation with the former ecb vice president. that's coming up in about 30 minutes from now. this is bloomberg. ♪ 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 $400 a year with shared data starting at $15 a month, or get the lowest price for one line of unlimited. come into your local xfinity store to make the most of your mobile experience.

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francine: this is "bloomberg surveillance." alisa and francine from london and new york. we are back with sir howard davies of net west group, talking about what it means for investors and actually banks and investments. i want to ask you a little bit about how you see the pandemic playing out. how have the covid lowden's been performing? are people -- how have the covid loans been performing? i think the answer to your second question is yes, we and the other banks have been able to respond to requests for financing. the good thing you can say about the u.k. banking system is that it is strongly capitalized and is very much open for business, so the availability of loans i think has not been the issue. --say are they performing what do you mean by performing? because they are not performing in the sense of paying interest because the interest has been

suspended on them. so what we don't know is whether when the schemes come to an end, which at the moment supposedly is at the end of march, whether companies will then be able to pick up and pay the interest payments on those loans. they are relatively low interest payments, guaranteed loans in some cases by the -- in some cases 100% by the government. what we are starting to think about is what happens when the schemes come to an end and when companies have got to start repaying interest. by the end ofhat march the economy would be back and open, if you like, but i guess given what has been going on recently, in terms of infection rates, that must be a question now. francine: so what do you think will happen? will companies be going bust, or will there be bankruptcies, or with some of these schemes have

to be extended? feel we will probably have a bit of all of those things. the philosophy of the schemes, which was perfectly reasonable at the start, was that we were facing a v-shaped recession, and that these schemes should -- in other words, they should allow companies to remain through this sharp decline in gdp, enforced by the government lockdowns, and then when the guy economy was reopened, they would have more debt on their balance sheet but there would not be the long-term scarring that a large number of bankruptcies would evolve -- would involve. we have now seen that it is not a straightforward thing, this recession. it is a w. we hope it will come back up the other side. and i think that that elongated v or w means that when we get to

the other side of this chasm, .here will be more business i'm afraid that's inevitable. it seems harsh to stay that come up -- to say that, but i think it will be clear that when the economy gets back to normal, there will be businesses that are no longer bad. either because the businesses just got away. we have seen changes in the way people work and live. or because they will just have so much debt on their balance sheet that they won't be able to survive. iose are the companies were am most concerned. the companies that -- not with a high degree of leverage that they will have at the end. i think we should be looking at schemes that can provide some kind of preference instruments, etc., for these companies who will otherwise struggle, but who might potentially be viable. lisa: sir howard, the other factor here is that the bank of england is considering taking interest rates negative in order

to fight off further weakness in the economy as the pandemic continues to extend. how does that complicate your business model? the -- there are two sides to that. one is the practicality of it, and you know banks are working on that. we have seven spirits because we have a bank in ireland -- we have some experience with that because we have a bank in ireland operating within the regime of the ecb. for the most part we can technically do it, although there are issues with relation to retail customers. can you really charge retail customers a negative rate? has not been done in europe, and it has not been done because the ecb divided negative rate funding to banks, which has helped them. so the issue would be if the bank of england does go in that direction, it is not clear to me that they will because there are clearly differences in view of the monetary policy committee.

but if they do, what do they do for an encore? do they also do with the ecb has done, which is to provide negative interest rates funding for the banks to allow them not to have to charge negative rates to individual retail customers. so we would need to see the whole package before we can assess what the impact on us would be. lisa: sir howard davies of net west group, you're sticking with us. coming up in the next hour, representative dwight evans, the pennsylvania democrat there. he is coming in at 6:30 a.m. in new york, 11:30 a.m. in london. from new york and london, this is bloomberg. ♪

karina: this is bloomberg surveillance. --res of esther's nsa think of astrazeneca sank to an eight-month low today. agreeing to buy acxiom\ -- alexian pharmaceuticals. the company specializes in immunology for treatment of rare diseases. deutsche bank may eventually allow some of its 4600 employees in new york city to move elsewhere. german lender is preparing to move operations to the time warner center in manhattan. it is discussing how to allow more employees to work from home and from other locations. that is the bloomberg business flash. francine? francine: thank you so much, karina. this is what the markets are

looking at. a nice briefing from sir howard on exit and the impact it could have on pound. stocks starting out in a bullish mood, investors taking comfort from stimulus bill negotiations. also the u.s., encouraging news, i would say, about the vaccine in u.s. and europe, sickles shares powering stocks higher, -- cyclical shares powering stocks higher. , and data out of asia that is encouraging, including improving business confidence, helping japanese shares rally. we will have plenty more on the markets. , robert hayes. that is at 9:00 a.m. in london, and this is bloomberg. ♪

♪ >> this is bloomberg surveillance. off getting a tree

perhaps, we will get an update tomorrow, i'm sure. we will be hearing all about it, picking out a christmas tree. talk to you, sir howard, about what we have seen in equity markets. certainly, we see european equity and british equity at their all-time highs, climbing. states, oneted all-time high after another. given this divergence between financial assets and the underlying economy, are you concerned about financial conditions at this point? >> well, i think the reasons for it are fairly straightforward unless of course you are penalized for holding cash. you are getting very, very low interest rates on fixed interest in you get nothing at all or indeed, negative if you hold money in a bank account. almost anything, and you can see what is going on property

markets, almost anything looks better than holding cash. i don't think it's much to do, in my view, with an evaluation of earnings potential of companies for the future. it's more, where'd you put your money for any kind of return? i think that at some point, there is going to be a concern about valuations, because you back out of these valuations, assumptions about future growth and future profitability. they look pretty implausible. in a general way, this is not something that we don't bet on the stock market here. are on my views on this the tube, if you would like. it seems to me the valuations are quite high to earnings potential given the growth prospected in europe and the u.s. >> as a lender, it does matter, because it goes to the fundamental value of a company at skyhigh levels. you can also see bond levels,

credit valuations at skyhigh levels with record low borrowing costs for some of the riskiest companies. how does that make your business incredibly challenging? it does. but we are more concerned about the fixed interest market. think what you have to understand is that these not operating in a and that the involvement of the central banks is so extensive that you are looking at yourself in the mirror we you're asking yourself about valuations. such large investors in the bond market that they are clearly distorting prices. i don't mean that they are doing it and they have not noticed that they are. clearly, the attention of the authorities has been to push down rates as far as they can on

all kinds of assets and all kinds of tenants, and they are succeeding in that. what it means is that normal pricestions, reasonable just don't really work because you got a buyer of last resort or indeed, a buyer of first resorts. howard, if you look at what we've looked at in 2020, what are the main lessons we can take with us to 2021? moneythat with enough behind the vaccine, we can achieve anything, or is the social any quality this will once again put in place that we need to address? i wouldrd: i think adopt a third one, probably, and that is what we have learned is that we do need the government in some circumstances and

particularly, we need the government to do very dramatic things in terms of fiscal interventions. people are worried about the long-term impact of these interventions, but in the short run and certainly for this year, i think people have been surprised by the degree to which governments have intervened, the amount they have been able to do without pushing interest rates to sustain the economy through difficult factors. i think that is the most important thing that we have learned. the second thing on any quality, that is a good point you raise that thet is clear crisis has hit different people in very different ways. aren the whole people who in steady jobs in the public sector or the private sector retailen protected like or financial services, they have done fine, their expenditure has done down -- gone down, and

their income has not gone down. we can see that a lot of families are cash-rich at the moment. the bank of england has pointed out a lot of savings could be deployed to provide the economy if that happens. but the people who have suffered the most are young people in marginal, precarious jobs. people had some butction in their income, one in three young people in london have had reduction in their income and a lot of those people are young women as well. so we have seen a big impact on any quality, and that will have to be a major theme when we come we resetdeciding how the fiscal position. to havernment is going to think about how they were covered, will it be some tax increases we all know, some spending cuts?

but they will have to calibrate those to recognize the relative impacts of the covid crisis on different parts of the workforce. i think that is the lesson for the future as the treasury now thinks about what it is going to do for an encore where they have to register the impact of the crisis on different groups. excellentmake an point that almost the social contract between citizens and the government, that has changed. will that actually change for the foreseeable future? are we going to expect government to intervene in companies well after we have dealt with covid-19? sir howard: i think we probably will, and we have the unusual circumstance of a conservative government arguing with e.u. for the right to intervene and support companies and use state aid.

we clearly have, ideologically, things have turned on their heads. i don't think you would hear arguing about a smaller share of the economy, that is not going to happen. the problem here is going to be if we accept that the government has intervened with a larger part of the economy, how do we fund that? we've got some peculiar, really peculiar rules, laws in place, indeed, where governments have said we will not increase the base rate of taxation, will not increase the base of dat, we will not increase national insurance, and all of those have been devastating. those are the big three sources of government income. how are you going to fund a significantly larger state? i don't hear any answers to that and ion at the moment think that is going to turn into a big question in 2021 and

beyond. lisa: thank you so much, we will have to get you back on to talk about debt longer terms. let's get straight to the bloomberg first word news. >> health care workers and nursing home residents won't be first in line with u.s. hospitals begin getting coronavirus vaccine shot. the first 2.9 million doses with arrive at more than 600 hospitals over the next few days. pfizer is sending the vaccine in containers filled with dry ice below zero.formula president trump says those working in the white house should get the coronavirus vaccine somewhat later in the program. the president has said on twitter he asked for the adjustment to the timetable to be made. he says he is not scheduled to take the vaccine but looks forward to doing so at the appropriate time. and a group of republican and democratic lawmakers will unveil a $908 billion coronavirus

relief plan today. there is still doubt that congress will pass it, however. they will offer language for two separate bills. it will call for state and local aid and liability provision for businesses. and trade talks between the u.k. and the european union have got another stimulus. once again gave negotiators more time to close a deal. officials involved in the process say agreement may finally be reached is weak. global news 24 hours a day on air and @quicktake on twitter. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. back to you. up next, the former ecb vice president talks a little bit about quantitative easing forever. from new york and london, this is bloomberg. ♪

♪ francine: this is bloomberg surveillance. i'm in london, lisa is in new york. the ecb announced last week and a fresh round of policy measures. even three years from now, it is still well short of its inflation goal of just under 2%. during us to discuss some of the financial stability mechanisms is the former ecb vice president. thank you for joining us on surveillance. are investors underestimating the pain which the european economy will have to go through because of companies going bust as we adjust to a new normal?

next year, we will face some time,ms, but at the same there is many good news in the forecast. in first place there was of approvale recent final of the deep package of the which, at least in the second half of next year, will start helping the fiscal stimulus in all countries. at the same time, the package from the ecb will help along the terms of supporting any independent decision by havel authorities to inappropriate fiscal stimulus next year, but the same time, helping the credit supply expansion the

providing at the very low interest rate, minus one, in order to keep up the credit .upply it is true that next year banks will start to place the thatnization of some ndl's come out of the crisis but at anything for the government, as part of their fiscal policy, they will have to expand also the mechanism of guarantees to bank loans in order to continue to support credit supply. when you look at some of the debate out there, there has been so much debt creation and no one is talking about austerity. but if there was some balance of inflation that some economists in some quarters are expecting in europe because of this

stimulus, if we have vaccines that work wicker than we thought, if we have inflation, could the ecb even afford to raise interest rates? we haveell, if inflation, and that is a big, itself forecasts inflation even in 2023 that we are below 2%. i think that on the horizon, the next six years, i don't see inflation really increasing. there are no drivers for that to happen. their recovery will not be too because households will increase their precautionary savings.

firms also are a little bit more diverse before they see demand so that means it is only fiscal policy that prompts us to increase. so the recovery is on top of a very depressed economy this year, but it is no longer related to overspending. the recovery will be a bit sluggish. there is that no reason for inflation or flareups. look to the past 25, 30 that is such a long

period of time. that, it was the last two episodes of higher inflation. ith all countries increasing, don't think this will lead to significant inflation. and if you mention monetary , theopments throughout increasedeets of ecb the money1000%, and supply increases by 200- something and inflation increased by only 25%.

we cannot really apply the reasoning of monetary theory the other is not like theories. the big theories of inflation have been discredited by a long, long period where they have not worked for reasons that can be explained but that we have no time now to go into. francine: i hear you talk, and this is what a lot of people are saying. it is unclear whether some of these quantitive easing monetary policies have been that effective in getting the ultimate goal of juicing inflation. and here we are, major central banks around the world expected to ingest another $2.8 trillion into the financial system next year alone. if there a sense that there is no exit strategy and that these policies are not effective, but have to continue withou for feaf disrupting the entire financial

system irreconcilably if they were to try to exit? vitor: of course, there are diminishing returns in the economy, that was already clear before covid. tot monetary policy does is divide indirect incentives by stationary financial means. we know other conditions are necessary and sometimes indirect incentives are not enough. connects fiscal policy for expenditure and income transfers are essential to support recovery. and monetary policy helps that even if the decision is dependent around fiscal policy, the convergence of the two have to collaborate and

are collaborating. the fact that fiscal policy continues to provide stimulus is helped by monetary policy and that is what constitutes a more robust recovery. that when wens have a more robust recovery, say, by 2023, 2024, the central banks may start really thinking about the shrinking of the balance sheets. francine: before that time, could you foresee the ecb buying equities? vitor: no, i do not. i think that is a very difficult step to take because it is very risky. done,legal, it could be it is not for been. -- forbidden. but i think it is very difficult

to see that happening. and i don't anticipate really another extreme situation like the one we had here that could justify such a move. ecb pledgesen the to keep financial conditions is this really monetary stimulus? vitor: well, yes, because viaisely monetary policy is the financial variables of financial markets. that is general transmission. keep thosepected to favorable financial conditions that also will help fiscal policy next year. forcine: thank you so much joining us, the former ecb vice president joining us this morning. coming up in the next hour, bloomberg school of public on vaccines and also

astrazeneca said it is developing or at least looking into with russia. this is bloomberg. ♪

♪ happy monday, everyone, this is bloomberg surveillance. lisa and francine from london and new york. if you look at the markets, there is definitely a little bit of optimism out there. part of it is because we could see something in the u.s. in terms of stimulus, also a bit of optimism that we are not looking at a new deal brexit. this can change very fast but for the moment, there does seem bullishness in the market and that is raising hopes of a deal. the other thing i think the market is also looking at his impending deployment of the first vaccine in the u.s. while looking at european stocks gaining 1%, the pound retracing some of the volatility that we saw last week and you can see crude oil, $46.95. lisa: one thing that i do talk about, seeing that rotation into cyclical stocks continued to gain momentum. in the u.s., you can see that.

1% versus 6/10ly of 1%, just to give you a sense of where we have come from. as rest have returned twice much of the s&p, 24% in that time. 10 year yield step up a little bit ahead of that fed reserve meeting, we are going to get decision from them later this week. bit, selling off just a that risk off deal, francine, staying pervasive and consistent. francine: we will have plenty more on what this means for the next six months. also coming up, a senior portfolio manager. it will be interesting to get hurt stance on gold. i think gold is releasing a pretty dramatic move today. this is bloomberg.

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francine: another extension of brexit talks with yet another deadline ignored. nesting this guaranteed. lawmakers in washington will unveil a 900 a billion-dollar pandemic relief bill yesterday. futures higher in the u.s. plus, astrazeneca lands a 39 billion-dollar deal to take over pharmaceuticals. good morning, happy monday. lisa, we look at the markets, of course, we look at the rotation, we look at some of the cyclical stocks. we are also looking at is the pound. it's interesting to see brexit talks and yet, so many people saying that they have kind of moved on from there. just in the case have a no deal. the more things change, the more the t