Welcome to bloomberg surveillance. I am Francine Lacqua. A lot going on in your markets. Happy monday. Asian stocks are advancing with the u. S. Index futures following a mixed section in asia. Investors move across growth to relax restrictions for coronavirus. I am looking at the dollar drifting higher against most of its major peers. Lets get to bloomberg first word news. In the u. S. Vice president pence is selfisolating after his press secretary tested positive for the coronavirus. He has tested negative everything a day. He has not been in quarantine. He plans to be back in the white house today. Threatening to sue in germany over the countrys constitutional court. Eu final word on ing eu law has infringement proceedings against germany are possible. Speak to the lawmaker later this morning. Saudi arabia has announced austerity measures. It is cutting allowances for government workers. The savings are valued at 27 billion. The coronavirus pandemic continues to hit oil demand. The worst may be yet to come for u. S. Unemployment. That is the warning from fed minneapolis president. Congress should step up and consider providing more help it he made the comment on abc this week. Nearlyecedented loss of 20 million 20 million jobs in april. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Francine. Francine we are getting a bit of data out of the euro area for italy. Industrial output falling 28. 4 month over month. What our economists had 20 . Ated was less kick with the latest on the coronavirus lets kick off with the latest in the coronavirus response. France and italy are amongst countries reporting the lowest fatalities since march. The u. K. Has outlined plans to ease the lock down with some schools and shops likely to open next month. Boris johnson has said any changes are conditional on progress. Joining us now is Nikhil Srinivasan. Joining an thank you for joining us. I know we spoke about four to five weeks ago. It has changed in your eyes . What has changed in your eyes . Nikhil the economy is going to be worse. I was asked if the economy has bottomed. My view was this pandemic would kick out. That is exactly what has happened. Which we trajectory had in hong kong. Endill continue to see no in cases until this pandemic sorts the pieces out in the coming months. The problem is the focus is on the pandemic and not the aftermath. The longer you hold on to your lockdown the worse it is going to be. A rather difficult time but differences when the country reopens. Francine when is the optimal time of reopening . You can reopen too quickly and then businesses reopen and then we have to do a full lockdown. Bad will the recessionary i think we should reopen right away. Holding back dealing with hypotheticals which i do not do. I cannot tell you about a second wave. The data is improving. Be, thegoing to economy bottomed. We start from zero which is exactly where we are, you are going to see improvement. Will it sustain into 2021 . Sure, i would suspect. , you are goingty to see increasing unemployment numbers which is very high everywhere. That is going to make it very difficult when it comes to getting back to where we started from. Francine what does it mean for stocks . Stocks are kind of voluntary when the economy could be under some kind of depression. Nikhil i am not going to talk about valuation because since we spoke, everyone has come out and said this is not a real rally. The fact is the market keeps going up. We are reaching the point where we are going to start to open the economy. Economic activity is going to improve. However, layoffs and unemployment. We are close to 3000. My guess is between the next 5 we sort of peek out. I am only speaking about the next six months. Most people admit they have no clue about 2021. People expecting inflation are going to be wrong. In the range. G valuations are difficult question. To me, it is about the alternative. Aterest rates are basically zero. Rates. E real why shouldnt we buy stock . You are probably not going to make much money in government bonds. You probably have too many corporate bonds. Why wouldnt we sell stocks . Back, thewe will come. Ill nick a the ones predicting strong inflation or deflation probably wrong. What does it mean for gold . Nikhil you look at the commentary. Weve got to get ourselves up. I think you are going to have an initial deflation. You are going to have some deflation, but i think to say we are going to head into inflation, think the next two or three years is exaggerated. What it means for gold again, everyone is saying by gold on the basis of a breakup. I think it is again exaggerated. I think gold is all right. I dont think gold runs away from us right now. Places are of falling for gold or whatever it is. I say lets be patient. Think one should assume that gold becomes the asset for the next six months. Francine thank you so much. Coming up, the worst is yet to come. Minneapolis fed president warns that unemployment is really around 24 and Congress Needs to step up. This is bloomberg. As bad as the numbers are, and they are very bad. They actually understate how bad the situation is. Who in the jobs report today is full of heartbreak. Some of this looks to be temporary layoffs, maybe about three quarters of it. That doesnt make it any better. If you look at who is getting hit the hardest, it is the people who can least afford it. Themong hispanics, blacks, reduction in losses was large. It is no guarantee that these are temporary layoffs. The job force needs to make them so. Francine lawmakers in congress commenting on jobless numbers in the u. S. Also morning of more pain to come is the minneapolis fed president. The worst is yet to come on the job front. He told abc news adding that the zero rate of unemployment is around 23 to 24 pdl said that Congress Needs to be providing more help. Still with us, Nikhil Srinivasan. You touched on inflation. How bad do you think the recession in the u. S. Will be . Nikhil i dont think the recession is going to last very long. I think Business Activity will start to pick up. We will see a recovery in q3 and q4. The recession is going to be very steep but quite short. I think going into the remains of the year. Going into 2021, that will depend a lot on policy. I am worried that 2021 will start to look a bit like japan. I use it. I think people will be more cautious in their behavior, as these unemployment numbers remain relatively sticky. Have the confidence to go out and spent. I am confident about the next two quarters. Im not so optimistic about the next year and recovery. It mean forat does society at large . Less globalization . Countries will look let will look more inward . Is that going to be concerned for markets . Nikhil depends on where you are. In the u. S. In a flexible economy, i think europes got a problem in terms of kicking the can down the road. They have to decide what they want to do. They have to make some central bank decisions. I think the Biggest Issue is in the emerging markets. Everyone is focused on the u. S. Might em markets might be hit quite badly. Only seen about 100 countries apply for imf aid. Are. Ds on where you it is going to be best in the u. S. And better in china. China. Better in francine i want to talk about emerging markets. What is your case for inflation going through the roof . Nikhil it will not. People are going to be more careful with their money. People have talked about the feds policy of 1 trillion and how that is going to increase money supply. Not in the mediumterm. I think we are going to be cautious when it comes to conception. People will save it. I am not in the camp of inflation. To separatee got zero cap inflation. I would say that for the next couple of years you will have not much cpi. I think they are going to have that again but i am not in the inflation camp. Francine if we see a negative w t i again, what does it tell us that the recession is going to be worse . Do you think it is Market Action at play . Nikhil i think that was technical Market Action we saw last month. Prices have recovered. I think oil prices are telling you that any of the cut rates will be tepid and possibly not sustainable depending on what happens in the next six to nine months. Oil prices are the most honest indicator of where the economy might be a year from now. Francine Nikhil Srinivasan from partnerre. Stay with us we will talk about the middle east and emerging markets. Coming up, the Worlds Largest exporters. The government announces a tripling of the bap rates. The story next. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua here in london. The Worlds Biggest Oil exporters come to terms with revenue will improve sales. The governor says his plans from 5 to 15 for government workers should overall spending for 2020 will remain close to what was planned. Money relocated to health care. Nikhil srinivasan from partnerre. We were talking about emerging markets. Our to talking about the oilrich countries. Country at theil moment, it is going to be tough going for three months, maybe 18 months. Right. I think you are a lot of people are speculating. Everything. For them, it makes sense to maintain a peg because it will be very bad for them from an accounting point of view. What they have done is very sensible. If you got oil, your budgets are whether it is latin american countries, asian thingies, it is the same but theyre inflow still have a government that still needs to function. Consequence of saudi arabia you will see capital controls. The dollar. Theres a lot of dollar debt out there. 12 trillion and dollar debt. Sales, of the u. S. In about 1. 5 trillion as it rolls over next year. I worry about the em. If the dollar collapses, perhaps it is good for em. Francine where d. C. Dollar . Where do you see dollar . Tnerre the consensus nikhil the consensus is the dollar goes down. Relative to the gdp, it is not printing that much. Think dollar means big. It is a big currency and potentially it goes higher. Francine when you talk about emerging markets, are there specific countries . Nikhil in the action, if you look at the price action, turkey, you can see these countries. I am not here to call capital control decision on any country. Whered say a country theres a lot of dollar debt in collapses tually when you decide to invest in their currency. And falling export is a potential candidate for capital control. Give us acan you specific country . Or is it something we will see in the coming months question mark nikhil it is obvious. You see currency moves every day. It is hard to pull a capital control on a decision. Imf, their thinking away from easing the markets now. They are quite supportive of capital controls. Becomes more important. Is a part of the civilization. Francine thank you so much for joining us. Nikhil srinivasan. Coming up, with lockdown across europe ending, we will hear that interview later on. This is what markets are doing. We are seeing a bit of a lift in asia. A bit more of a mixed session. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Ins get to first word News New York city with ritika gupta. Ritika in the u. K. , there is no immediate end to lockdown, but orest johnson has loosened some restrictions, telling people who cant but Boris Johnson has loosen some restrictions. Some critics, including an opposition leader, say the new policy lacks clarity. In the u. S. , Vice President mike pence is selfisolating after his press secretary tested positive for coronavirus. Tested negative every single day. He will be back at the white house today. China is pressing a stronger monetary response to softened it to growth. The central bank saying unprecedented challenges were faced from the coronavirus pandemic and its and its rterly monetary report saying it will maintain liquidity at a reasonable level. The worst may be yet to come for u. S. Unemployment. That is the warning from minneapolis fed president neel kashkari, saying the president should step up and provide more help. He made the comments after payroll data showed an unprecedented loss of more than 20 million jobs in april. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in ire than 120 countries, retake a good death. This is bloomberg. Francine . Francine thank you so much. President trumps top economic adviser says the u. S. Will not have to shut down its economy again, even if there is a resurgence of coronavirus cases. Larry kudlow told us he expects a return to Economic Growth in the second half, despite what he called the heartbreak of fridays jobs report. Here he is. Is a tough time but it is a tough time for everybody and america, there is no question about that. Wherever you work or dont work, it is a tough time. This jobs report today is full full of hardship. I believe that it will be temporary because i believe the pandemic contraction, or the contraction and the economy caused by the pandemic, covid19, will prove to be temporary, and we are coming down the homestretch in terms of reopening the economy. That it is a rough number, no question about that. But it is a rough number, no question about that. Looks to be temporary layoffs, maybe three quarters of it, but people hope to return to jobs. Lets hope that they can return to jobs. Leadership,umps Vice President pence put together enormous, in normas rescue package you normas package. Rescue i was actually adding it up, about 9 trillion now, including the federal reserve, and what we have done on fiscal policy, the budget. Some of this may work. We may have cushioned the decline. That may part of the story inside these difficult numbers. We will see how this works, and we will see whether we have to go back. Lets talk about president ial policies in a few moments, because i do believe the second half of this year, according to the cbo and private forecasters, the second half is going to have very significant bounceback in Economic Growth, and that will head into 2021, which could be a fantastic economic recovery. John when it comes to reopening understand if you plan are you doing Contingency Planning now . Yes, we are. I am not going into detail. It is outside my lane. I talked to ambassador burks on x and dr. Mbassador bir fauci on that. I will tell you this without naming names. One of the senior people in that group, i asked that person what happens right now, the virus numbers are flattening out. That is a really good thing. That means we can reopen this economy. I asked this person, it happens if you get a jump back up in the virus numbers, and the response was simply, look, we wont have to reshut down because, first of all, we know more, we have more experience, and second of all, we are much better equipped with the right tools. Jonathan are you rethinking your relationship with the Chinese Communist party . Larry i dont think we ever stop thinking about it. As you know from reports today, ambassador lighthizer, secretary mnuchin met with vice premier leo hey of china. It was a very constructive meeting. The print outcome of the communique, was very positive. The print out, the communique, if you will, was very positive. China has every intention of meeting the requirements that was signed formally last winter. It seems like a thousand years ago, but it was only a couple months ago. They are behind on commodity purchases. That may be a function of economic forces. They are pledged to continue, including remedies for intellectual property theft and related measures. Those talks seemed to go well and were constructive. The chinese relationship is very complex, and we know that the virus originated in china. We are investigating. We in the u. S. Government, in the intelligence agencies, National Security council, state department, cetera, carefully investigating what happened and what didnt happen, what may have happened and what actually happened. China has been not transparent. A lot of people are concerned. I saw this with the president at the g7 teleconference meeting a couple weeks ago. They will be held accountable, jonathan. They will be held accountable. When the final studies are in. Kudlow, inarry conversation with jonathan ferro. Coming up, a showdown. The Commission President threatens to sue after the German Constitutional Court challenges the authority of its counterpart. We will speak next to the German European Parliament lawmaker. This coming up next, and is bloomberg. Francine you are watching bloomberg surveillance. This is what the airlines are doing. A lot of the u. K. Focused airlines are down in todays trading session. Lets see what we are seeing ryanair, easyjet, and british airways. They are down 2. 4 as of this morning. This is after the prime minister, Boris Johnson, said on sunday that quarantine measures will soon see passengers arriving in the country. Lets get straight to the Bloomberg Business flash in new york city with ritika b gupta. Is in talksi aramco about delaying payments. Of the initialze installment to the kingdom sus sovereign wealth fund. If it is possible to reduce the price tag. In west group is looking for financing after 20 drop in for your profit. Airliner of the biggest raised 2. 4 billion to provide a cushion for the coronavirus impact. Elon musk is lashing out at the california county blocking tesla from reopening its only u. S. Car plant. He says the carmaker will sue and has filed a complaint with the District Court in san francisco. That is the Bloomberg Business flash. Francine . The European Commission has threatened to sue germany twice in a weekend for challenging the Commission President ursula von on leyen said the final word law is always spoken in luxembourg, nowhere else. Courtters, she said the ruling is being analyzed with an infringement process against germany. Argus joins us. He sits in the European Parliament and is on the committee for economic and monetary affairs. Thank you so much for joining us. When you look at what this means, it just seems like it is difficult come either traumatic for brussels, traumatic for the ecb, traumatic for germany. What is the most elegant way of getting out of this . What is so important about this judgment is it puts basically fuses, and this is dangerous. It puts a fuse on the german legal order and one on the monetary order. The one on the monetary order is materially truly dangerous theuse the pspp program and newer pet program of the European Central bank is put into question, and therefore, it is so important that the conflict in the monetary field is settled. Also to avoid the new increase in spread and market risk. So there has to be clarity, that all member states, in particular germany, stand behind the euro. This means that it is really important that in the euro system there is a cooperative solution, but in order to make that possible, the legal challenge has to be sudden, and for this, europe has to make clear that it stands behind the European Court of justice. Otherwise, there is a danger of proliferation of National High courts calling into question the competence of the european level. Ruling, following the do you think the ecb can exit powers, orercise its do you seem to be intimating the ecb should be bunch were careful if this matter is not should be much more careful if this matter is not resolved quickly . Sven the court said the following. Materially, the purchasing program may well be legal, and within the european order, the legal order, but the reasoning for it has not been proportional enough. And therefore, they demand a new decision of the ecb for the pspp program. Now, the ecb has responded and said we do not respond to national courts, we obey the European Court of justice, the European Court of justice has said it is not a problem. ,nd if there is no new decision that the court has ordered the bundesbank to stop participating in the pspp program. In this is the route for conflict, which is a reason for of the euro skeptics. Conflicthas led to the , has to be calmed with a new legal peas inside the system. Francine do you think this ruling threatens the stability of the euro . Are too stupid, it is a threat. Responsible act responsibly, it can be settled. Inside of the euro system, i think everybody is very much aware of what is at stake, and therefore the cooperative solution for the ecb and for the bun to spank has to be found. Of the bundesbank has to be found. The european institution, and first and foremost the European Commission, defense with the European Court of justice and the european order otherwise, hungary,ee people in in poland, exploiting this space in order to call into question our rule of law and are fundamental rights. Francine should the bundesbank take the lead in defusing the case and the crisis . Sven i think the bundesbank and has a cooperative safekeeping solution. If politicians make size proposals, this will be stupid because it will be seen as an infringement of their independence. Therefore, i will not enter into making precise proposals, but i can only say as a politician, it is needed that we settle the legal conflict when it comes to the european rule of law inside of the european and between the european institutions as member states. So that the euro system can continue what it needs to do to keep the euro stable in crisis. Francine what are the options of urszula vendor line right now of ursula von der leyen right now . Sven for my letter, i received a the case is clear. It will be very fast, declaring purchasingive bond program be on the competence of therefore,stem, and they will that is a clear case of procedure. However, it would not make sense to impose any fines. This is only to restate the legal position, finding based on the Court Judgment itself seen as an infringement of the independence of the highest court in germany. This would not be wise, and i am not francine you have been critical in the past of the ecb, especially when it comes to the transparency of its actions. What lessons should the ecb draw from this . Does it need to speak to citizens differently to explain exactly what it is doing . Sven yes, i think that is quite right, and this is also true for the European Commission. We had lots of critics from different angles concerning the monetary policy, and i think we did not do enough in the euro system, in the European Commission, but also in the European Parliament, to take seriously enough their concerns. Withld like to start first ourselves, because the European Central bank is accountable to the European Parliament. We have a quarterly monetary dialogue. These dialogues are very well they have not reached the same depth of debate which we have seen now between the courts. Therefore, i think we also should take steps, for instance, to give more space for experts to directly discuss with the ecb so that the quality of the countability tour the European Parliament is increased rather than of the accountability toward the European Parliament is increased rather than judgment. Francine coming, Morgan Stanley warns that an inflation breakout is on the horizon. We discussed the strategies called for in the british shift, and we look for openings in paris as they loosen restrictions on businesses in france coming into effect today, as the country embarks on a gradual process designed to avoid a second wave of infections. Those are live shots from paris, and this is bloomberg. Francine economics, finance, politics. Im Francine Lacqua and lender. The coronavirus bring an end to the 30 year run in disinflation forces. Can stanley say the return for accelerating prices will overshoot centralbank targets. Joining us to discuss this is dani burger. Dani b Morgan Stanley is looking at the forces of centralbank and government, Morgan Stanley saying the meaning down the road we will get a huge pickup in inflation. It will be able to end the cycle we have seen of low growth and low inflation. They also say when you see what coronavirus is doing and expanding the wealth gap in different societies, that is going to force governments to act. That act is going to hurt three factors, which have helped keep inflation low. That is trade policy, tech giants, and corporate titans. They say the wealth gap trying to solve that is essentially going to move those factors from the picture. They say the biggest threat of this researching is in the u. S. , and it is like that to be in 2022 when the threat is the biggest, but still it, it is ins cycle of Central Banks overshooting the target, according to Morgan Stanley. Francine doesnt that fly in the face of the deepening inflationary trends we have been seeing around the globe . Dani it is certainly a contrarian call. Everything from copper to oil to restaurant the hotel prices traders have started pricing negative rates in the u. S. , or perhaps preparing for disinflation, which would be the first time in some decades. Part of what Morgan Stanleys call hinges on is the solving of the wealth gap. When you look at what the u. S. Congress has done, for example, there loans to Small Businesses are having trouble accessing them. We are not seeing the needle move on that front. When you thing about what happens after the coronavirus, the scars also might lead leave pricing pressures intact. People might he scared to go out, go to restaurants like they used to, go to flights. A lot of strategists think bank of america thinks those pricing pressures me that we will have zero or negative rates for at least the next two years. Francine thank you so much, dani burger with the very latest on the inflation calls. This is what your markets are doing. If you look at european stocks, they were up. Now they are more flatlining come after a mixed session in asia. The king at the dollar and some of the dollar calls out there, if you look at looking at the dollar and some of the dollar calls out there, the dollar climbing over most of its major peers, while treasuries were pretty much steady. ,quities in japan outperforming amid the talk of a potential further supplementary budget. Korean equities were down in the trader earlier on, and i am also looking at the 10year bonds februarythe most since 2017. We will have plenty more on bloomberg surveillance. Tom keene joins me out of new york. We will look at your markets, and a lot of talk on not only what is going on with coronavirus, but with the impact on the economys first law earlier on the economies. Earlier on we were speaking with the spanish economy minister. The other thing we were watching out for was turkey. Turkey lifting a ban on lifting a band with bnp paribas in the u. S. After they met local obligations to turkish lenders. This is according to people familiar with the matter, so we will spend some time understanding exactly what that means for euro markets. Turkey imposing the band last week after market interventions, and rules failed to stem. We will have plenty more on turkey and on the u. K. This is bloomberg. Francine u. K. Prime minister Boris Johnson announces his plan to restart the economy. Restrictions on movement will be eased wednesday. Some shops and schools could open in june. In the u. S. , President Trump urges americans back to work while combating a coronavirus outbreak amongst white house staffers. Vice president pence is selfisolating following his press secretarys diagnosis. And the European Commission threatens to sue germany, while president ursula von der leyen issues a strong rebuke over the constitutional courts ruling on ecb bond purchases. Hi, everyone. This is bloomberg surveillance. Im Francine Lacqua, here in london. Tom keene eight, in new york. That therse remember terrible figure in terms of the unemployment we have in the u. S. , as economies slowly reopen in europe, but very carefully. We figure out exactly what ideally is the time to reopen
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