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tv   Bloomberg Markets European Open  Bloomberg  May 28, 2020 2:00am-4:00am EDT

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>> good morning. welcome to "bloomberg markets: european open." i'm anna edwards, live from london, alongside matt miller. recovery is all that matters. futures trend higher as reopening economies in europe bumper stingless control proposals. the narrative. the cash trade is less than an hour away. the u.s. says hong kong has lost its autonomy from beijing.
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at the same time, it is authorizing sanctions against chinese officials. we will be live with reaction from the forbidden city. european futures prove their resilience after a more mixed session in asia. angela merkel says it may take time to iron out the details of eu's mammoth stimulus package. and lufthansa sets up a showdown with the eu by holding off on a vote for its 9 billion-euro german rescue plan. cites requirements over landing slots at key hubs. just under an hour from the start of cash equity trading. let's look at futures. instituteat the ifo expects german gdp to shrink 6.6% in 2020 and then expand 10.2% in the year after. that is a pretty decent sized
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contraction, and yet futures are still holding higher. futures up 1.3% on the dax. it has been a pretty amazing week for the dax index. we kicked off up 304 points in change and were up more than 100 tuesday and 150 yesterday. the dax has gained a lot of basically to11,000 11,006 heard 50 yesterday -- 11,650 yesterday. s&p and dow futures are gaining. nasdaq unchanged. this is a better future than we saw earlier. s&p futures have turned around and look set to start the session risk on. anna, what are you seeing? anna: i just want to get breaking news around the aviation sector. we've got comments coming through from easyjet.
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they say it's not possible to provide financial guidance for full year 2020. they are launching a concentration process -- consultation process. they propose to cut staff members by up to 30%, something we have seen other aviation companies talking about or doing. the response we have seen from the aviation sector has varied. some have been cutting jobs. some have been furloughing staff. some have been doing a combination of both. some have been talking to government about sector-based bailout. market demand levels unlikely to be reached until 2023. the guidance coming from easyjet, giving guidance around fleet size. interesting what you were saying, matt, about how the market has responded. these tentative steps towards reopening economies. if there is no obvious second wave, no considerable spike,
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then markets do seem to be able to lift through geopolitical tension and focus instead on the free opening process and the upside for the economies at the end of this year and into next that could lie ahead. here we see the geopolitical very much in the hong kong matter. the hang seng down, and asian markets making gains along with the global equities story. once again, there is an interest rate here as well. the south korea juan is weaker. -- won is weaker. lookingare generally through geopolitical tensions and focusing on reopening. matt: almost even looking through 2020 and instead focusing on 2021. let's get a look at the bloomberg first word news. the u.s. says it can no longer certify hong kong's political autonomy from china, a move that
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could trigger sanctions and have far-reaching consequences on the city's special trading says is -- is trading status with the u.s. house passed voted to authorize sanctions against chinese officials for human rights abuses. the issue surrounds the treatment of a muslim minority group in the west of the country. it comes as the u.s. branches sub pressure on beijing -- ratchets up pressure on beijing. in the u.k., prime minister boris johnson is asking the u.k. to move on from the controversy surrounding his top advisor. johnson says he is sorry about the pain and anguish up a lockdown, but stood by the advisor. the advisor has face mounting
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public anger against his miles to,o travel 260 he says, seek childcare support while the country is under lockdown. >> friendly, i'm not certain there is an inquiry into that -- frankly, i'm not certain an inquiry into that matter is an efficient use of time. we are focused on coronavirus. matt: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. anna? anna: let's get into the markets. european futures are pointing higher. a huge stimulus package the european union president yesterday. let's get into that market conversation. laura cooper is with us. european a rally in
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stocks today, is it to do with the bailout? it's not a done deal yet, is it? it still needs all the members of the eu to agree. producing movement better numbers, lifting of lockdown measures question mark -- lockdown measures? anna: it is a competent -- it is a combination of what you have mentioned. are, european stocks bracing this water flow effect we saw yesterday, because it really is a watershed moment. the package we saw is exceeding market expectations. markets are begin to price out this imminent risk of a crisis. the futures are quite strong this morning. the euro popped to a two-month high. but there are near-term challenges. i expect the plan to be scrutinized by the frugal four. there is a long path ahead for
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funds being deployed. but what we saw yesterday was a key political hurdle being removed, the step towards datasharing, which is crucial for a premonitory medium, and that has room to rise. capture that upside. surveye got the ito forecasting a 6.6% contraction in the german economy, but then a 10.2% expansion next year. we talk about the 750 billion euro rescue package from the eu. angela merkel said she does not expect it to pass for a while. she said national parliaments will be debating at this fall, and she is hoping to get it passed january 1, 2021. our markets just looking through this year? laura: absolutely, and that's the case of what we have seen through the april and may rally, the fact that we have seen forward-looking markets price in
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more of a recovery, dismissing the fact that this is going to be the steepest economic contraction on record. what's interesting, if you look at recent price action, it is actually sending this strong recovery signal. potentially we are seeing a turn in investor sentiment, because we are seeing laggards, like banks and energy, beginning to leave the event, while tech stocks remain on the back foot. i think it is early days, but it is quite notable that we have seen this divergence. it is a trade that has been unlocked across the board, but certainly if we do see signs of the economic recovery, it is going to be potentially quicker and faster than many forecasters have expected. certainly that would set the tone for what we are seeing in markets. laura, you might have
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thought that investors would be more nervous around geopolitical tensions between the u.s. and china, given the tension over the security log coming in from china and what that might do for trade talks an ongoing dialogue between these two economic heavyweights. yes, markets seem to be treating this as more of a regional issue, perhaps. markets markets are kind of taking the u.s. threat -- markets is really what this could potentially mean for u.s.-china relations. we have seen president trump earlier remarked that he is expecting to deliver measures by the end of this week, but in this stage, i think it is the case that we are going to hold off on punitive measures around , and that could because theylower want to see how this law is implement it. this is going to be the case of market stress leading to lows, but it is unlikely we will see a
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catalyst sending equity markets sharply lower in a selloff. matt: laura cooper there, bloomberg in live macro strategist -- bloomberg mliv micro strategist. up next, how will the eu rescue plan impact assets? we will discuss further the mliv question of the day with richard saldanha, fund manager at aviva investors. how will the eu rescue plan impact assets? this is bloomberg. ♪
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>> welcome back. we are just over 45 minutes away
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from the open of cash equity trading across europe and the u.k. futures continued to climb higher. futuresres and dax gained almost 1.5%. unionfter the european unveiled an unprecedented stimulus package to tackle the worst recession in living memory. the 2.4 trillion euros in total recovery spending is anchored by 750 billion euros of joint debt assistance. the plan has already started to calm jittery markets and might restore a sense of unity under severe strain. concerned.ll discuss
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is there lots of hope built into the market expectations around what the eu can do in terms of sharing? >> i think we have seen, certainly from other countries and the u.s., for example, announcements of large stimulus packages. i think in europe, it has taken longer and has been frustrating to some extent. i think we are starting to see progress. there is a bigger picture going on right now where you are seeing countries emerging from lockdowns and activities starting to pick up again, and i think that when you see these aid patches coming through as well, it will further add to the optimism we are seeing out there. i think it is good news, what we are seeing. is a realou think it turning point for the european union? does this crisis help the european union for, more of a federal institution with shared ?ebt richard: from that perspective, we will have to wait and see, but you are starting to see the realization of the necessity for this. also, in individual sectors, you're starting to see stimulus packages for airlines, which have been severely impacted, the big stimulus, a
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package for the development of electric vehicles. you are starting to see that filter through to other sectors, which has implications. sense, given make overarching positives around at the big picture level this seems to be a positive development for the european union, given that, does it make sense for risk assets to go higher on this, despite geopolitical tensions raising their heads between the u.s. and china? at the moment, european investors seem to be putting that to the sideline. richard: the moves you are seeing in the markets to some extent reflect how subdued positioning was. if you look at the sectors that have been outperforming, it's been the ones that have been the most impacted, areas such as travel and leisure, financial banks, etc.
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i think what you are seeing in some ways is that rotation, as we are starting to see countries emerging from lockdowns, people trying to benefit as this activity resumes. we think to some extent that will continue. i think the key for us remains whether we do see a second wave, because that is the key where risk that is out there. there is a lot of optimism, but we have to sort of temper that with the potential of a second wave. also, the u.s.-china tensions that have been simmering for a while, going on in the background, the comments from mike pompeo are concerning. there are certainly reasons to be more optimistic as more countries do emerge from lockdowns, but it needs to be tempered with what we are seeing elsewhere. yes, richard, thanks. coming up, the rotation into value has caused many investors off guard. we will discuss the move away
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from the rally. we see nasdaq futures underperforming other u.s. equity markets this morning. we will look at areas like banking, energy, and will also ask about share buybacks and where that goes into 2021. ♪
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anna: welcome back. ofminutes until the start european equity trading for this thursday morning, and futures up by 1.2% or so at the start of the trading session. investor sentiment has turned abruptly in favor of beaten-down stocks, something many investors failed to foresee.
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but the bets are now under pressure amid a rotation out of rally leaders like tech and into banks and energy companies. richard saldanha is still with us, from aviva, and can discuss this. rua value of -- rua a buyer of value at this point? a buyer of value at this point? richard: we are starting to focus more on sectors and companies that can benefit as we start to see everything actively resuming. isiff you see in the markets not entirely surprising. you still need to be quite selective right now. we are still focused on companies with solid balance sheets, avoiding companies that are highly leveraged. in areas such as industrials, it's quite interesting, because you are starting to see companies that can benefit from economic activity picking up again but are underpinned by decent cash flow and balance
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sheets. i still think you need to be quite selective, but there are reasons to be optimistic. are focused on the issue of buybacks, richard. is this not something that is at dead? for the time being, the idea of a company buying back shares would seem repulsive to at least governments that are trying to bailout the economy. -- bail out the economy. richard: absolutely. what we have seen in the last few years is a buyback boom in u.s. stocks. that is likely coming to an end. you are hearing announcements of companies suspending buybacks programs -- buyback programs. i think in the near term, that's likely to pressurize earnings to some extent, if you look at buybacks having contributed to up to 2% of eps growth for the s&p 500 over the past three
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years. short-term, that may be a bit of a headwind on earnings. longer-term, the implications may be quite positive if we see more companies allocate more capital into capex investment, etc. in the long run, this could be quite a positive thing. anna: that's really interesting, because we do see that money going into capital expenditure. let me ask about dividends, because the two are linked, obviously, and we are seeing a lot of companies cut back dividends in the sectors you would expect, oil and elsewhere we have seen government help required. but elsewhere, dividends are still being paid, a point in the equity income portfolio manager is aware of. richard: absolutely. you have had a lot of announcements recently about dividend cuts, but i don't think there is any reason to despair. you are still getting dividends paid in and lots of sectors.
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-- in lots of sectors. from a global perspective, it is worth bearing in mind that in the u.s., most companies are still paying dividends there. it is a lot easier for companies to turn off the buybacks and still keep paying dividends. as we look across the global landscape, we still think you can find attractive opportunities out there, and companies are paying dividends and in some cases increasing dividends. there is no reason to panic, certainly. you still have companies that have robust balance sheets that are going to pay dividends going forward. matt: all right, richard, it does not seem like investors are panicking much right now. appreciate your time this morning. next, the u.s. says hong kong has lost its autonomy. that is seemingly a bombshell in terms of headlines. but we only see the hsi, the hang seng index in hong kong,
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down 1/10 of 1% right now. it does not seem like markets really care about the u.s.-china risk for now. ♪
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anna: welcome back. half an hour to go until the open of the european equity markets cash trade, and futures seem to be on the upside as things look increasingly rosy. that said, let's talk about geopolitics, particularly in china, and what we are going to be watching out for. china's national people's conference insta day. today. and we will watch for nissan earnings. the:30 pm u.k. time, we get latest release of weekly jobless claims and a second reading of gdp to see if the economy suffered a deeper hit in the
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first quarter than originally reported. later in the afternoon, we will keep an eye out for the eia crude inventory report, as is often the case, matt. matt: the u.s. says hong kong has lost its political autonomy from china. the move could trigger sanctions and have far-reaching consequences for the city's special trading status with america. that status could be revoked. but china is unlikely to be deterred. beijing's legislature is expected to approve the resolution to impose national security laws on hong kong today , before the national people's conference end -- congress ends. joining us from beijing is tom mackenzie. tom, how has china reacted to the u.s. decision to does it --s to dispute this resolute
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decision to dispute this resolution? tom: the chinese response to what we heard from mike pompeo, his address to congress, as you say, the trump administration now saying hong kong no longer has a high degree of autonomy from china, the response has , essentially, chinese officials saying this is an internal matter. they say the security law is necessary. the security law prompted this action from mike pompeo to downgrade the status of hong kong in terms of its trading relationship with the u.s., at least in terms of his views on it. the chinese have said this is security law is not going to affect the people's freedoms or the freedoms of foreign investors in the city, but that is unlikely to persuade the u.s. administration. they have made a fundamental shift. from 1992, they carved off a special place for hong kong in terms of trading rights. hong kong does not have the
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tariffs imposed on it that mainland china has, for example, or the exemptions from technology exchanges and investment controls. now we know the trump administration are looking to change the status quo, potentially looking at putting in place visa restrictions on some officials, maybe freezing their assets. longer term, they could look at removing a special trading status, which would be traumatic for hong kong's and when trade the u.s. trading --ationship with that city would change the u.s. trading relationship with that city quite fundamentally. tom, let me ask you about another dimension for the the u.s. andeen china, that coming from capitol hill yesterday. the u.s. house passed a so-called uighur bill referencing the treatments the d of muslim minorities. are we expecting the npc in
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china to address this issue today? will we see a chinese official response? tom: possibly. i think it is unlikely the an hour'speaking in time, will directly address this uighur bill, as you say. what we have seen is both the democrats and republicans taking a bipartisan attempt to push through this bill. they have done that successfully. it will end up on president trump's desk. he has not said if you will sign off on it or not, but if it becomes u.s. law, there will be sanctions imposed on chinese officials over these human rights abuses. that's the way the u.s. characterizes it. the camps are educational facilities. certainly this is a sensitive issue for china because it speaks to territorial integrity. it is a border region of china
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that is very volatile. for the chinese, it is very sensitive. what you will get for the next half hour delegates voting on the security of hong kong, a major step in weidmann forward, -- in moving that forward, and premier chang will give a briefing. we will get details on the exact nature of the bill. he may address the u.s.-china tensions and may address the uighur bill. we will listen to what he has to say. anna: tom, thank you very much. tom mackenzie with the latest on what we might hear later from the npc, still ongoing in china. the fed is thinking hard about targeting specific yields on treasury securities as a way of ensuring borrowing costs stay at rock bottom. the yield curve control is something that has been talked about a lot in connection with where the fed goes next. this statement is according to the u.s. fed president john
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williams. we spoke to him exclusively. it is an issue we are studying very carefully and will be discussing as a group, so i don't have anything i can say about what will or will not happen, but my view is the focus is always on, how do we best use the tools we have? how do we best use our communications or guidance, whether it is the balance sheet or other actions we take to achieve our goals? it depends on how the economy is likely to evolve. right now, there is a lot of uncertainty about that. we are kind of in a good place in terms of we are near the bottom, in terms of the economic downturn, and hopefully we will see improvement in the coming months. i expect to see a significant rebound in the second half of this year. the answer to your question is, what is the right policy response and policy action?
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to think critically on how the economy is performing not just right now, but which path to be see it on in the coming months? that is still unclear. we will get better information over time about if we've seen a drop in what kind of rebound or recovery we've seen. >> before we let you go, even though it is unclear going forward, have you imagined what it is like on the other side? i know you think about things like this. when we came out of the great financial crisis, potential growth was lower, around 2% or less. what do you think potential growth is going to be when we get out of this? i want to follow up i asking, are we in age effective treasury fed accord again, in the sense that you are going to have zero or very low interest rates that would really be crippling if rates went up, especially to the u.s. treasury? are you going to be stuck
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keeping rates low, even if you don't want to, for a very long time? >> it is hard enough to forecast where the economy is going to be going over the next several months. we are forecast -- forecasting what potential outlook will be in the next several years is even harder. have -- we want to make sure we don't have lasting damage to our economy and our economy's potential. the actions congress has been taking are not to try to minimize spillovers from the pandemic on the economy, but to minimize the longer damage to the economy. in terms of your second question, the treasury obviously is issuing an enormous amount of debt due to the various spending programs it has passed. there is also an enormous demand globally for u.s. treasury
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securities, especially given a lot of the move away from -- movement away from riskier assets. we have not seen signs recently of stories of demand globally for u.s. treasury securities. markets have absorbed that increased supply very effectively. this is not a situation where the federal reserve in some way restrained or limited what we are doing because of what has happened, in terms of the issuance of debt securities. quickore we go, one follow-up to something you said about a trough. we are opening up again. do you think, barring a second wave of the virus, that we have seen the worst? >> it's hard to say, because the data we have is incomplete. we are looking at little indicators. we will get an employment report from may to get a better picture. we will get data over the next
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few weeks and months that i think will help us understand it. based on what we are seeing now, i think we are pretty close. maybe may or june will be the low point, but let's not forget this is an extreme decline in economic activity, an enormous hardship for people in this country. even if we are starting to see stabilization in terms of the economy, maybe a pickup, we are still in a very difficult situation. that was new york fed president john williams speaking exclusively to bloomberg's mike mckee. for more on the health of the u.s. economy, we will be watching for the latest release of the weekly jobless claims and a second reading of gdp as well, to see if the economy suffered a deeper hit in the first quarter than had been originally reported. coming up, german bounceback? could europe's biggest economy recover by the middle of next year? we will speak to the ifo institute next after his latest
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forecast. ♪
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matt: welcome back to bloomberg markets. we are 17 minutes away from the start of cash equity trading across europe and in the u.k. let's get the bloomberg first word news on this risk on day. in the u.k., prime minister boris johnson is acting to move on from the controversy surrounding his top advisor. johnson says he is sorry for the pain and anguish of the locked down, but he stands by dominic cummings. the advisor has faced mounting public anger over his decision to travel 260 miles for what he says was health and childcare, while the country was in lockdown.
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i am notfrankly, certain right now that there is any worry into that -- an inquiry into that matter is an efficient use of time. we are working on coronavirus. of korea isnk molding using unconventional policy tools to support rove, after cutting interest rates to a record low and forecasting the first contraction since the asian financial crisis. the decision to cut the key rate to 0.5% was unanimous, but remarks from the central bank suggest it will be reluctant to cut even further, so it will low. russia and saudi arabia have agreed to carbonate on the opec-plus deal, two -- coordinate on the opec-plus deal, two weeks ahead of the opec meeting to discuss cuts. situation was discussed in a phone call as russia seems to be
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determined to start easing its output cuts in july. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than hundred 20 countries. -- 120 countries. anna: let's get into some of the stocks we are watching this morning. geopolitical tension is something that might be seen in this session, but in the meantime, let's keep an eye on what is going on with individual stocks. dani burger joins us with aviation. let's start with with anza -- with looked anza. -- lufthansa. dani: they have not yet approved the 9 million euro bailout. they say takeoff and landing slots will hurt their position in the main german hub. they are still reviewing this deal. it is a surprise move they
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announced yesterday. to make matters worse, the belgian paper is reporting today that the ceo told staff he would have a difficult time paying june wages. this highlights how difficult the liquidity situation is for lufthansa. he also said that apparently he's had to go to switzerland, vienna, and brussels and beg for money. matt: soul of tons a a stop to watch today -- so, left anza -- ufthanza a stop to watch, also easyjet? dani: yes. more cost cuts coming from the air carrier. they will slash thousands of jobs, about 30% of the workforce. that amounts to 4500 jobs. that amounts to -- they will also take 51 fewer aircrafts this year than originally planned, but the airline still says it plans to resume normal flights by june.
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it also says it's winter orders are ahead of schedule, but we have to keep in mind most of that is because people have delayed or transferred their flights to the winter months because they have not been able to fly over the past few months this year. emily: -- matt: dani, thanks. this was, i thought, a shocking headline, shocking story yesterday from lufthansa, but the stock did not seem to react at all. maybe investors were counting on a bounceback. europe's biggest economy here in germany could recover by the middle of next year, at least according to forecasts from the ifo institute. we will speak to them next. ♪
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matt: welcome back.
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open.s the european futures are higher here in europe. we also see futures in the u.s. that are trading higher, at least dow jones and s&p futures are higher, nasdaq futures are lower. it looks like another day of risk on action in the markets. investors have been buying risk assets here for four sessions in a row, even though germany's economy is currently shrinking and will likely shrink about 6.6% this year, according to the ifo institute. but the organization expects a recovery by the middle of next year and a 10%, 10.2% growth in 2021 altogether. we are joined by professor timo wollmershauser, an economist at the evo institute. 10% recovery a
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look like in 2021 after what was a devastating 6% to 7% contraction this year? ? it is allmershauser: big loss in gdp we are getting. this is one of the largest recessions since world war ii. we are assuming that by the middle of next year, gdp will be at a level that is, more or less, equal to the level we would have if there was no corona crisis. this drop of almost 7% this year , when we assume to come back to the no corona level, if you like, then this is going to be 10% next year. timo, good morning.
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what are you seeing in your research is -- in your assumptions in terms of a stimulus from the german government? are you assuming just what we have seen so far, or is there another round? prof. wollmershauser: are a lot of assumptions underlying this forecast. andmain assumption is here, this is what we are focusing on, the speed of recovery. since we did not know anything about how fast we came out of a crisis like this, we were asking in the context of our market survey. the result was firms expect the recovery to last, on average, around nine months. this is one of the big unknowns and is the assumption we plug into our forecast. the other thing, the government intervention. the main assumption we did here was that we said, ok, the government is supporting it at a really large scale with hundreds of billions of euros.
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the aim of this support is to abide insolvencies. that is to avoid long-lasting effects on the level of gdp. we simply assume that these government measures are more or , so we will come back to a level of gdp year that we would have had without the corona crisis. finally, there is the assumption that we have additional stimulus measures starting in the second half of this year, supporting companies. this is also part of the forecast. matt: i have been looking for evidence that companies are bringing their supply chains closer to home for the last couple of months. i have not seen much, although it is a question posed often, or
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is a goal that we hear about. i don't really see it happening. what about the companies you have talked to? are german manufacturers trying to bring their supply chain back to a domestic bubble? prof. wollmershauser: i don't think so. this is a good question that we have not asked yet to our firms, but it is in the next round of the questionnaire, so we will get an answer to this by the end of june, but so far, and i can simply confirm what you are observing, i don't see that there is a big restructuring of supply chains. these supply chains have been built up over two decades or so. i think that firms will not change these -- build new change overnight. everything depends on the question of how the world economy is recovering from this
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virus, from this pandemic. but at the moment, i don't see any evidence for this. professor, thanks so much for joining us today. timo wollmershauser. the organization forecast a 6.6 contraction for the german economy this year, followed by a 10.2% expansion in 2021. coming up, it's the market open. futures are still pointing higher. the gains are not as strong as we have seen. 30 minutes ago, we were looking at 1.5% gains on dax futures. now we are only looking at 1% even, still better than a stick in the eye, especially after 600 points of gains for the dax after the last three trading sessions. ♪
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anna: welcome back in market open. just a minute to go. let's get to your headlines. has --. says hong kong we will be live with reaction from the national people's congress. european futures prove their resilience after a mixed session. it may take time to iron out the package,f the stimulus but european futures are higher. lufthansa sets up a showdown by holding off a vote on its 9
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billion euro rescue plan. key futures looking positive still. futures still holding up. gains after seeing a pretty stellar week so far. startinguity indexes to trade, let's take a look at the global metro movers. to get a sense of how they are opening up. up first, the ftse. you can see that on the left-hand column. over on the right, sovereign bonds. in a lot of cases, investors are selling off sovereign bonds. that is why you have the red squares pushing up the yield. maybe they feel comfortable enough to let go of that debt
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and they are taking the proceeds and plowing them debt back into stocks. you can see now that even the dax is open. spain's ibex in madrid. we are looking continued gains for european stocks. very interesting considering how much we are at so far. as i said before, the dax is already gained 600 points in the trading session. to be moreut 590 exact. we are looking at another 90 points up today. so, it is just continued the back of ironically the lufthansa bailout that came first, then you had the auto's bailout. then you had the big eu rescue package.
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that spurring investors to continue to buy stocks. after the eu rescue plan. that had an unprecedented stimulus plan to tackle, what we can call the worst recession in living memory. 2.4 trillion euros in total recovery spending anchored by euros in joint debt assistance. 250 billion in loans. it is only a proposal for now, but it has the market happy. , headg us is jane foley of fx strategy at rabobank. how much does this recovery plan -- first of all, good morning to you. how much does this recovery plan -- how realistic does it seem to you? if we are talking about the european recovery plan , then clearly this has got to be agreed by all 27 members.
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it is very good news, but it is quite possible we are going to have a period of horsetrading, which is normally what happens in european politics. generally,t to more the monetary stimulus plans that we've had as well around the investors are being supported by this. circumstancen the where we are going to have a disconnect between the news that is going to be printed. at the same time, we have this risk on appetite. this huge disconnect between what is going on in the real economy and what investors are doing, largely because of this liquidity you mentioned and all of the stimulus plans. good morning to you, jane.
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how strong can the euro get on this news flow surrounding the fund. it seems to be the guessing momentum. the european commission plan now. even though some of the other frugal four are not behind it yet. how strong can the euro get given that the dollar has been such a haven of late? it depends about whether we are talking euro-dollar or a host of any other currencies. i think if we go back really for the last month or so, we look at euro-dollar, we might see a completely different picture if we look at the euro against some other currencies. what we had in march was this flow from em into g10. i think the volatility within notg10 currency is perhaps particularly huge or particularly significant. it is not really the move to be
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focusing on. with respect to the euro, i think it has held up relatively well if we go back over the last two months. istainly right now, it getting more momentum, as it should. if they do push through this plan, that is a really strong vote of confidence in terms of coordination from europe. it is still and if. we do know the history of the european countries. they can be bickering and horsetrading. we know that at least in europe, we have some concerns about the fund's going to southern europe, so there is still a lot of ground to be covered before we , we haveith confidence grants to southern europe and that might put us in to the eu sentiment we have been seeing in italy. , bute not there yet
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certainly, this is a big real piece of news. further ifcontinue it continues to be a positive, constructive piece of news. you know, great investors like george soros, great economists like joe stiglitz have warned of the possibility of a divorce. home maygh sitting at think the euro is going to break up and are very skeptical about it. do you think this is a move toward federalism that really cements the union together? is a dirty word in most european countries. i don't think it is going to be a word that many european politicians are going to be brave enough to use. threat of aas the breakdown.
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we had the head of the european commission warned that the be an extent of the crisis for europe. to think that there is anti-eu sentiment growing in italy, the fact that we had nationalism in countries such as poland and hungary growing. we had these signs of friction. i think it was that very threat that has been prompting perhaps some of the politicians in grantsto try to have within this plan. so, whether or not they are able to push this through and agree a compromise really does remain to be seen. if they do, it is a step in the right direction, but don't forget, we are bound to see huge increases across europe as everywhere else. usuallyt of tension
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brings on the type of political discontent. it is likely we will have people voting for change and that could that bring this anti-eu they really want to strive to obtain. anna: they are more than just statistics, they hold the potential for social unrest. let's listen to prime minister boris johnson making an appearance remotely, answering traceons about track and and the technology surrounding cruciallyss, but also about the ongoing questions. he was asked whether there should be an inquiry. >> quite frankly, i'm not certain right now at inquiry
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into that matter is a very good use of official time. we are working flat out on coronavirus. what do you think are the prospects of the pound right now? and why? the wider implications it might have of the ability of the government to push omens message and drive behavior. or are you thinking about brexit? what is it that drives your pound strategy? combinationt is a of those factors. theu.k. press suggesting dominic cummings affair. is,ly a very angry tory mp angry, but it is a distraction. pollse seen opinion
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showing the labour party and the prime minister's support really pushing lower on the back of that. and perhaps even more worrying than that, you have other experts warning that if people that government is such an example to not be so careful about traveling or obeying the rules with respect to the coronavirus, then we could see an increase. question, if people's commitments to the restriction is water down by this. criticismment internationally had always been significant in terms of its handling of the coronavirus crisis. we have had tens of thousands of deaths in the u.k.. round about 40,000 people. that has a very significant impact itself.
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we have seen in the u.k. teachers are very reluctant to go back to school. parents to say that they are reluctant. you have seen talk about the fear ratio. lack of have perhaps a respect for the government or a lack of trust in their policies and a high mortality rate, it is very likely it is going to be difficult for consumers to leave their homes and go back to work or go back to restaurants and shops when they are reopened. that could prolong the economic recovery. you've got a very poor outlook for the economic recovery, quite prolonged recession. then you have linked without the possibility that at some point along the line, you've got more monetary stimulus, maybe even negative interest rates.
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then you lay on top of that brexit. or at could start relationship between the eu and then be the very low ebb. all of these factors together. willing and that is a very negative story. matt: yes, a lot of negative headwind. look at the offshore yuan. it really gain some strength and then bounced up a little bit right now. we are getting headlines that the china legislature has voted to endorse the security law for hong kong.
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that led to the u.s. revoking hong kong's autonomous status yesterday. of course, this was expected. this was a big headline. s&p futures are now lower, followed by a little bit higher, but the npc's of course going to rubberstamp the communist party proposals. this was not in any way unexpected. thisill puts into cement hong kong china order to pass the security law. next, we are going to talk about what this means. hong kong losing its autonomy in terms of the u.s. status it is granted. what it means for the fx market. we just saw the offshore
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renminbi. this is bloomberg. ♪
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back to thee european market open. we are 15 minutes into the trading day. we have the latest headlines coming from china. chinese lawmakers have approved sweeping new national security
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legislation for hong kong following warnings from the u.s. , who said that hong kong no longer has any meaningful autonomy from china. jane foley still with us. what is most significant to you about this story? is it to do with the autonomy itself and what that does to the financial sector or is it about the trade negotiations between the u.s. and china? think the stories are totally interlinked. from the political point of view it is clearly the autonomy issue. this is a huge move. for the markets, i think it is what happens next. probably is next is there going to be tariffs? are there not going to be tariffs? course that the u.s. stripped hong kong of its special trading status. we have seen newspapers suggest
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that trump will announce a response to china later this week. there is already a lot of tension in the markets, particularly asian markets, about whether or not there is going to be a deterioration in the u.s.-china relationship. what does that mean for trade rules? very interestingly, what does that mean for chinese growth? are china going to politicize the renminbi war, weaponize it someder to try to get back of the export shares. or as a shot across the bow for the u.s. to say, we could do this and you would not like it. ofre are a number interlinked issues, but certainly if it does we can significantly, that is a real concern for all china's trading
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producers,ommodity that comes to mind. that could be a significant issue that does drag on through this year, next year, and maybe beyond. we see the renminbi strengthening a little bit. why doesn't the market price this in as a real risk? risk andhave this as a then on the other hand, we have u.s. stock markets pushing higher. we have the risk-on mood coming from the g10 markets and g10 investors pushing up stockmarkets, looking for value, and this is the story -- the liquidity for the huge amount of stimulus. on the other hand, we have this trade war issue and the deterioration of the relationship between the u.s. and china. it is quite possible that if we fast-forward one or three months
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that if this relationship continues to deteriorate, this is going to be the bigger issue. we have to remember what happened to the markets last year. china flowing. impact on the u.s. dollar. we could return to that. right now, there are two huge influences. i think it is quite likely that at some point maybe through the that it will be this deterioration in the u.s.-china relationship which gets the other -- upperhand and pushes risk appetites down again. thank you very much. certainly a merry dance on european equity markets. we have been up and now just up 0.3%.
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james foley, head of fx strategy at rabobank, thank you very much. holds off athansa rescue package containing strict eu demands. but as cash runs low, does the airline have a choice? we will discuss that next. this is bloomberg. ♪
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matt: welcome back to the european open. we are 24 minutes into the trading day. still looking at green arrows here. we are looking at gains of more than 0.5% on the ftse and the dax. still gains here in europe, even as the u.s. futures turned a little lower for a moment on that china news. let's get into the airline story. lufthansa holding off on accepting a 9 billion euro rescue plan despite running low on cash, almost running out. weeks to go. european commission rules require the airline to surrender takeoff and landing spots, which it said would weaken company hubs in frankfurt and munich, which i guess that is the point. joining us now is our senior editor in berlin. it looks like the executives at lufthansa just don't want to or the supervisory board as it
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really works don't want to accept the eu stipulations to get a bailout. >> quite worried, particularly what this means for jobs. the supervisory board and germany is made up 50/50 of people representing the capital side and people representing workers and it is that ocean, the worker side, that is most concerned about this. the bone of contention's blocks in frankfurt and munich. there is talks of lufthansa giving up as many as 20 slots. that is not only mean you fly less, it also means jobs on the ground and that is really with the supervisory board is concerned about. thisesting to see how plays out because, as you said, there is no real alternative. this airline is bleeding money, losing one million euros every hour by their own account. they don't really have a plan b.
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the only plan b is insolvency, a plan brought up in negotiations with the german government, but nobody's really seriously contemplating that. even lufthansa, in a statement yesterday, said that this rescue package as it was agreed earlier this week is the only viable way . how do they get there? that is the question. anna: yes, how do they get there. with all these parties in the mix, it seems there is further to run on a pretty protracted negotiation. thank you so much. other news in the aviation sector, easyjet's stock trading up 4% as they announced the plan to cut 30% of jobs. back to the geopolitics and japan saying it is concerned about the mpc decision on hong kong. the foreign press secretary releasing that statement on hong kong. we are going to get reaction within the region to the vote at the mpc.
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that was not a surprise, but it does trigger some risk. when we come back, we will be live in china with the latest from the mpc. this is bloomberg. ♪
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anna: welcome back. we have been led a bit on a twist and a turn. recovering a little bit of their poise. around the bailout fund. geopolitics in the short-term because we had a bit of a drop driven. euro stoxx 50 now back to the upside. in terms of the sectors leading us around, they are still
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bouncing. autos and auto parts. easyjet cutting jobs. if dons a trading higher. the recourse to government intervention. both of those strategies pushing stocks a little higher. there are no sectors and negative territory. matt: let's get you the bloomberg first word news. the number of coronavirus deaths in the u.s. has reached to the grim milestone of 100,000. the pandemic is deeply damaged u.s. economy. new york fed president john williams is predicting a pickup
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in the second half of the year. >> i think we are in a good place in terms of i think maybe we are near the bottom in terms of the economic downturn and hopefully we will start seeing improvement in the coming months. i expected pretty significant rebound. in the second half of this year. matt: in the u.k., prime minister boris johnson is asking the country to move on from his toproversy around his advisor. the advisor has faced mounting public anger over his decision to travel 260 miles during the lockdown to, he says, seek childcare support. frankly, i'm not certain right now that an inquiry into that matter is a very good use of official time. we are working flat out on coronavirus. global news, 24 hours a
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day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. anna? talk about what's going on in china. we are looking at live pictures from the forbidden city in beijing where the national people's congress has now rubberstamped the hong kong national security law. that was probably widely expected by many, but it did cause a bit of a wobble in european stocks for a moment. the decision to impose the legislation brought protest city and prompted the u.s. to revoke its recognition of hong kong possum economy. china has also announced -- or is monitoring the u.s. warship from the south china sea. tuning is now from beijing is bloomberg's anchor tom mackenzie. what is the latest on this? we are starting to get international reaction,
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including from japan. tom: that's right. the japanese putting out a statement saying they are seriously concerned about this decision by the chinese parliament to vote through this bill. one step closer to enshrining this national security law into hong kong's own law. they are getting this law on the books. prior to this vote, we heard concerns voiced by the u.k. and other european countries. this is a security law beijing says is necessary. it said it won't undermine the autonomy of the city or affect people freedom. that argument is not winning many fans in hong kong or internationally. there is deep concern that the security law will fundamentally erode the freedom that hong kong has enjoyed and it is a major step from the u.s. to say that it cannot verify that hong kong
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has that autonomy, a high level of autonomy, which means that it's trading relationship, the u.s. trading relationship with hong kong could fundamentally change. since 1992, hong kong has had the special status. it has not been hit by status -- tariffs from the u.s. or had restrictions in terms of technology that mainland china has faced. though, the trump administration is reconsidering its options. restrictionsese possibly this week. longer-term, it is potentially in the cards that the u.s. could change the special status that hong kong has. china says it would respond with its countermeasures. the state media says it is preparing for a long, drawnout battle with the u.s.. u.s., we aret the froming to see concern
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other countries. there is international reactions. markets are not pricing this into much. there may be the assumption from investors that at least in the short-term they are going to be relatively lacking in impact because if you are looking at things like restrictions, asset should not have major market implications. that the u.s.ely is going to remove special trading status from hong kong and impose tariffs on the city. that seems unlikely. u.s. economy, which was struggling. chinese side does have this list of u.s. companies. that andd publish
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enforce that, but they've held off on doing that. singapore, japan, no europe. now looking at geopolitical tensions now. these geopolitical tensions are very real across a whole range of areas and will very likely get worse from here. thanks very much. tom mackenzie in the forbidden city talking to us about the latest developments. we will turn to norway next as the country, as the economy in the country is facing a double hit from low oil prices and the coronavirus crisis. we will discuss next. this is bloomberg. ♪
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anna: welcome back to the european market open. equity futures pointing higher. nasdaq futures way down by reports of what trump might decide to do or not to do around tech stocks. we need to tell you about what is going on, disney has announced plans to reopen its theme parks. the ceo spoke to emily chang and david westin. he said disney is planning to take a slower and more cautious approach.
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said we would not open up until we could do so responsibly. we have a learning's from shanghai, we have earnings from our dining area we opened up weeks ago. we have been able to make some learnings in terms of how you get that social distancing. that is the key for us. whether they are on main street interaction. we are confident we can do that and open up responsibly. >> universal is planning to open up june 5. why a month later? >> we feel that this is the right time for us in july. sit --ot a super is different situation than universal because we are much bigger, we have a much more complex system, we have a different labor system. we are also going to be implementing a labor system.
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that is going to take time for the millions of reservations we have on the books. we think july is the right time for us. >> let's talk about shanghai. you have been doing these temperature checks. our people actually showing up with fevers and getting turned away? have you gotten to that 30% capacity yet and when do you plan to go beyond that? >> everything has gone extremely well shanghai and i must complement the guests for their cooperation during this whole thing because it really takes the chemistry between both groups to make this whole thing work social distancing. learning is that we have stuck to our limitations we have raised on ourselves. we are up to about 20,000 guests that we take per day. we are maintaining the social and we believees
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is those social distancing guides are relaxed or changed that we will be able to grow eventhat and really please more guests than we can today. will be nextrts and when? what about hong kong, tokyo, paris, and disneyland itself? we have no announcement we are ready to make on those other parks. they are all areas of different situations in terms of the progress of the covid-19 pandemic, but also different situations about where the government feels they are at providing some level of assurance is that they are going to be responsible to open up. we have to take our cues from each different local government. ofis really just a citizen
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the environments that we operate in and we want to be a good citizen, so we really do follow the lead of the local government. what we believe is good common sense from a disney standpoint and that determines our opening date. disney prides itself in flawless execution of plans. it also is a planner. has it changed your emphasis on assets? events or is sporting movie theaters or theme parks or cruise ships? >> i think over time some of the fears that people have, they are warranted fears about getting together in big groups. it is going to dissipate on the function of trust. it is the trust that we will not in any way violate. disney opens up a little later
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than others. we open up with not as many people within our parks, but we do that because we want to build trust in the new environment. baby steps every step of the way. matt: that was the disney ceo speaking with emily chang and david westin. , theng now to norway country sit between crises and a collapse in global oil markets. western europe's biggest crude exporter now faces its worst economic slump is world war ii. joining us now is our guest. how does it look? certainly the drops we are seeing in economies around the world are horrendous, but how
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does the recovery look for norway? recovery is probably going to be slower. quicklyrnment responded to the virus outbreak. the effectsulted in to the economy. those most extreme containment measures are likely to be in the second quarter. it will probably take a lot of time before they recover fully. secondly, you have the lower oil price, which is accelerating the downturn at the same time as it will hamper the recovery. the manquite big for lent gdp this year, but it will take several years for the economy to get back to the same place. what kind of help as the
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government giving to the economy at this point? it is having to walk the line between too much reliance on oil to not wanting job losses accelerate to quickly. how was that tight roping walk? the economy being less oil , that focus has by no means changed during the crisis. oilsupport package for the industry in late april aims to help maintain activities in the trillium and supply industries. we also lose much of the driving force. of knowledge in the oil
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sector. the government is also planning to propose a green transition package. so, it is definitely on the radar. i guess that is not quite as important for norway, such a ,ich country with so few people we are all in favor of the green jobs aret not going to be as plentiful. >> definitely not, but the oil accountsolation only for 2% of employment in norway.
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the share of petroleum related jobs on the supply sector is much higher. this is why the government is the supply sectors. companies are trying to gain more knowledge within the renewable sectors. that is the supply sector said trying to maintain certain jobs. anna: thank you very much. seb chief strategist for norway. we are going to return to the markets conversation when we come back on bloomberg tv. acrosss of the picture european equity markets, quite resilient right now, but we do
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have u.s. futures that have lost ground a little bit. it is the nasdaq now in negative territory being weighed down by concerns about what president trump might decide to do with his executive action later on today. we will keep our eye on that. this is bloomberg. ♪
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never certainly divergence
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between wall street and main street. >> the market has always had a tenuous relationship to the underlying economy. >> this is a global pandemic that will reduce growth rates. the markets seem to be ignoring that. are we going to enjoy a v-shaped recovery? realizing there will be market deleveraging of the corporate sectors. the recovery is going to be -- >> you have this split between financial markets in real economy participants. economy is predicting what may happen in the future. >> the market seems to have a life of its own. that has been a reality. we may see venerable
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institutions that have to make fundamental changes that will change the market's value in ways that are hard to foresee. it does not surprise me that there is a separate movement of the stock market and the economy every it >> let's hope we get a positive outlook rather than a second wave, which would be a real shock. anna: that was a number of bloomberg guests who think there is a divergence between the real economy and the financials. joining us now is bloombergs mliv rates strategist. we have heard a lot about the u.s.-china relationship in the last 24 hours. what does all of this mean for the chinese yuan? effort some people suggested means weakness, if china wants better trade relations. >> money, anna.
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by the end of the year. do notice the pboc, they have which isan percent, out of lines with emerging market growth. that suggests that there is more growth for the pboc to a con does accommodate the economy in the face of the coronavirus. escalate.ions leave a weaker yuan, no question about that. they can move to almost 0.2%. anna?
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matt: what happens to the hong kong dollar peg? does that go? >> that is a great question, matt. place since 1983. it has served the hong kong monetary authority very well. there is absolutely no reason for them to think of something they have been doing really well. they can change the hong kong dollar from being tied to the u.s. dollar to the yuan, but i don't see that happening either. matt? anna: thanks very much. joining usven ram there. about the talking weakness of the you in that would not -- yuam that would not -- yuan that would not improve
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relations with the u.s., but my cell a few more chinese products. this is bloomberg. ♪ staying connected your way is easier than ever.
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francine: china approves sweeping new security legislation for hong kong. it's serious concerns about the decision. equities -- where he things the market goes from here. the u.s. reaches 100,000 coronavirus deaths. an


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