Speak in some form of the w. H. O. Conference. Theidea of recovery in united states, all of Global Finance transfixed the chairmans comments last night on 60 minutes. Francine 100 . The chairman is talking about the virus, so we will have a look at this second wave of infection and what it will look like. Lets get to first reduce with ritika gupta. Ritika good morning, francine, tom. Jerome powell says the u. S. Recovery could drag through 2021. Powell told the cbs news program 60 minutes the economy will recover steadily through the second half of this year, but he said a full recovery depends on people being confident, and that may not happen until a vaccine is available. It is the first meeting of the World Health Organizations governing body since the coronavirus outbreak began. China will be challenged on two of its most sensitive issues, how beijing first handled the taiwanse status of participation, the e. U. And australia expecting to push for an investigation into the viru origin. The worlds thirdlargest economy shrank its analyzed rate of 3. 4 in the Third Quarter. Japanese exports plunged 22 on the economy, which is expected to grow worse this quarter. Oil west texas intermediate resumed its run after rising 19 last week. Opeccers in the u. S. And continue to cut output. The drilling in the u. S. Has fallen to a level not seen in a decade. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, im ritika gupta. This is bloomberg. Francine . Tom . Tom lets look at equities, bonds, currencies, commodities. No question there is a lift to the market right now. You see futures particularly in yields, and i really want to point out a couple of oddities pushing against the better feeling. Gold extraordinary. I looked at it today both in dollars, gold in euros, gold in yen, and it is extraordinary to see the surge in gold, particularly in the context of a number of years ago, way back to the early 1980s. Also poundsterling, weaker. But, francine, you knew that. Francine . Francine i did know that. I have spent quite a lot of time looking at pound. Stocks in europe are on the rise, investors finding a reason for encouragement as businesses reopening. Oil seems quite significant because of crude oil and in general a lot of the Commodity Currencies actually rising. I look at pound, but because no one is going anywhere, just staying in the u. K. , Exchange Rates for holidays are less important than they used to a. We will look at that, than they used to be. We will look at that. Thats get to the markets with lets get to the markets with peter shafi. Great to have you on the program. We heard from jay powell. It is clear he doesnt want negative rates and it is clear that the recovery depends on the second wave. Does the recovery that jay powell laid out was it a little further out than what you thought it would be . We have a central scenario, but i think this requires updating on a relatively frequent basis, but more importantly, we also run a lot of scenarios. One of the scenarios that we also look at is what happens if there is a second outbreak, and that obviously distorts everything further to the downside, and that risk cannot be excluded entirely. We dont know that is going to happen. Neither does the fed. But you have to build that into your scenario. That is for sure. Francine when are you expecting a recovery ec . Toer a recovery is going set in relatively quickly. So the Third Quarter is very likely going to be much better than what we currently have, but in my mind that is part and parcel of switching on and then partially switching it switching off and partially switching it back on. The bigger question is how far can we get back to the level where we came from, and there our assessment is not as optimistic. So we also think it will take, certainly in most of the major economies, all the way to 2021 until we have a fighting chance of getting back to these levels where we came from. Tom peter, good morning. I want to talk to you about the elephant in the european room, and that its over the weekend, all the different literature, this is in his the germanness with the court. How serious is that court in topping what madame lagarde and ursula von der leyen and others would like to do . Peter i think it is a very important question. I think there are different ways how this can go. It is very important to see what decided. Actually the court did not say that sorry, the first step is to say the fed and the bundesbank cannot participate until something has changed in the next three months, and that is the top line. The crucial thing is that the European Court has not properly examined whether the ecb took all potential options into account when it made its decision. That is the main charge. And i think that, frankly, relatively easy to overcome because clearly the ecb has done tons of analysis. Potentially every nook and cranny in this thing. The question is whether they will be willing to say, all right, we presented analysis and we played ball and here we go. What i reckon is going to happen Going Forward is that it is going to be treated like an internal german problem where the bundesbank taste charge of this takes charge of this, and they go ahead and say that is good enough for us. That is the immediate question. Adont think it will be changed anything with the ecb here and now. Tom so you are suggesting that we are going to see a greater federalism to help europe come out of this economic crisis . Peter well, that is a slightly different question, but, yes, i do think so, too. But again, the stress here, as with everything in europe, is probably flight. I dont expect that we are seeing a major leap into a more federal state. But when you look at what is being done on the physical level, and this idea about the rescue fund, the recovery fund, which i believe firmly this will fromto fiscal transfers the more prosperous north to the less prosperous south, you could argue that this is a teeny, tiny step toward a more fiscally federal union. But again, it is baby steps that we are talking about. Peter, if you look at debt i dont know if italy will need debt relief or if they will need a bailout program, but is this make or break for europe right now . Peter i wouldnt go so far, because, look, what youre seeing is the ecb has significantly stepped up its game, so yes, the debt levels are going to be significantly higher. But the proportion of debt that has to be swallowed by the market is not necessarily all that much higher. When you look at the yield levels, i think the situation is not comparable to where we were 2013, or at least not yet. So it is not a problem with italy currently, with debt levels accessing the funding and with these Retail Investment bonds and superhigh demand. When you look forward, i think the bigger question is, how can we really get growth going in an area that has even in better times, at the best, grown very measly daca so that is what in my mind very measly . So that in my mind is the bigger question. I think that is the way i think about it. It is not whether they need debt relief or a bailout in the here and now. Francine what does this all mean for europe . Peter you said it in the currency market. The currency market currently sees relatively little movement. You mention poundsterling earlier. That is where we have seen a little bit of movement, where you see if we have movement of the Interest Rates. You get movement in the currency market again, which currently is just not the case. If you look at euro and dollar in particular, unless you get easing at the central bank moving, i find it difficult to see Huge Movement there. So frankly, i think give or take a few cents, i recommend we are going to move sideways for quite a while, particularly in eurodollar. Francine peter tom Peter Schaffrik with us. That is a good thing. There is a lot to talk about, talking about germany, and the future of europe seems to be front and center. Let me tell you about the conversations we are going to have here on this monday, and that would include lloyd lange find. The last time i saw him he was exiting goldman sachs. Lloyd blankfein with an important update, 12 noon. Stay with us. This is bloomberg. This economy will recover. It may take a while. It may take a period of time that will stretch through the end of next year. We really dont know. Tom chairman powell last night on 60 minutes, Cbs Television network. No question it had a huge influence on the zeitgeist this monday morning. Part of it is the tool kit that the fed has, part of it is the toolkit that other federal bankers have. Peter schaffrik with us. We are thrilled with the Interest Rate strategy take a bakery to take a bigger, broader view as well. What is the turning on negative rates . Synthesize this, over x number of years, what is the scorecard for negative rates . Have they help the echo peter i think there is have they helped . Bit ofi think there is a a mixed giveandtake, recen really. What was said is that they succeeded in supporting the economy as a whole, but clearly there is a cost particular to the banking system. That is the tradeoff that others are looking at in particular. What is the damage it does to our money markets . What is the damage it does to our banks relative to the economy as a whole . What we have seen in europe as well is that it has weakened to currency, which for an exporting nation is of course helpful. But overall, i think it is a mixed message to say that in that front, and certainly when you come to a prolonged period of time of negative Interest Rates, the negative side seems to outweigh the benefits. Tom that is right where i wanted to go. Folks, very important on this monday has people celebrate maybe better pandemic news and a , theedly risk on feel twoyear u. S. Yield has worked lower. Steeper yield curve, and that twoyear yield is actually worked under. 14 . That really goes to the x axis, which is the longer. The pernicious nature of negative rates, is that something that europe has to confront . Peter i think so, and i think youre seeing it already. Not a lot of people have, in my mind, sort of appreciated really with the ecb has done lately. They have pulled Interest Rates , but theseative eigh Interest Rates, where they give money out to banks. Where they have not gone any further is in the rates where they take money in, which guides the asset prices, which guides the overall markets. The deposit rate is left unchanged. Why have they done this . You really have to let it roll off your tongue. They have pulled Interest Rates, where they give out money lower than where they take it in. It is very unprecedented. Why have they done this . Because they realized after many years of negative Interest Rates, you do a lot of damage to your banks, you do a lot of damage to insurance companies, and you have got to do something while not moving Interest Rates generally higher, thereby doing damage to the economy. This is what they came up with. Clearly after a prolonged period of time, the fabric with them, no doubt. The bank we understand of england is looking at how they can try to mitigate negative rates, or at least studying it. Dealing withy with negative rates without the damage that they can do . Peter i mean, you can mitigate it. One of the ways how you can mitigate it is, again, when you look at the other Central Banks that have on there, and with the and with what the ecb has done, you pull Interest Rates lower, but you also allow banks at least a portion of the liquidity that has been created, to be left at the central bank at zero, and that is one of the bid against that you can put in place. Negative,ind, going playing negative across the mid it will have some some negative francie we also keep being told that they want to extend the transition period when it comes to brexit. That is anainly issue. I think in my mind, there are two ways of looking at that. They near term, and with nearterm i mean sort of the turn of the year, it is in my mind quite risky not having an extension. And potentially that could be another blow particularly for the u. K. Economy. Over the more medium term, when you look at a couple years ahead, it becomes increasingly clear not only for the u. K. But generally for the western european as well as the western economies in general, we are now looking at rebuilding some of of thet production, some outsourced production, and one common interventions is specifically through that point, where even if it goes against efficiency, even if it goes against the general wisdom of Global Supply chains, we probably have to build up some production domestically. Going to happen anyway, with or without brexit, without an extension. Tom one final question. Where are yields a year from now . It is a brutally difficult question, incredibly hard to forecast given the pandemic. But is rbc does rbc have a view on yield is it fors into economics . As it folds into economics . Peter we certainly do. Marginally higher, 10 to 15 basis points, certainly in europe there is less aptitude to go there. But overall, we are expecting very low Interest Rates, certainly Central Bank Rates to stay where they are currently, for a prolonged period of time. So much,r, thank you Peter Schaffrik of rbc. Peter thank you for having me. Tom particularly good there on the german banking question as well. One of my favorite guests, joseph stiglitz, look for him in the 8 00 hour. Stay with us. This is bloomberg. Ritika this is bloomberg surveillance. Lets get your Bloomberg Business flash. Last 17. 7 billion in the fiscal year, after writing down the value of investments, uber. Ing wework and who a sign of the massive changes coming to the airline industry, we will separate the worlds Biggest Online carrier will be cutting 30,000 jobs. Emirates may also speed up the a380. Ment of its fleet of the massive doubledecker plane can hold almost 500 passengers. Carrier duelowcost to liquidity with 376 Million Dollar loans. Coronaviruscts the crisis will reduce passenger numbers by half over the next year. That is your Bloomberg Business flash. Tom . Francine . Tom thank you so much. Equities, bonds, currencies, commodities. A nice move with the vix in the full stick to the 30 level as well. I want to note swiss franc is stronger, stronger against the euro. It is not due to recent strength, but it is right on the cusp of breaking through to swiss franc strength. Francine, i watch that today with gold. Francine i like that you look at gold. I am also looking at gold and crude oil. Commodity currencies also rising. I am also looking at european stocks on the rise. Investors are being encouraged by businesses across the major economies. They are also making maybe taking hold. Gold trading at its highest in seven years. Also industrial metals. Industrial metals climbing after china announced guidelines to revive some of the large infrastructure projects. Currencies, for example, linked to crude oil exporters, strengthening. I was looking at the australian dollar. Coming up, the pantheon microeconomics chief asian economist. She will talk about the reopening of china, and we are also looking at renminbi, and the trade war between the u. S. And china. That is coming up shortly. This is bloomberg. However this time, onlookers expect after the convention was postponed amid the coronavirus outbreak. The first date change in decades. Reports suggest both meetings could run shorter. The number of delegates may also be reduced. They could see strict hygiene measures. Chinas leadership considers the virus the npc agenda may change, including a shifting focus on the economy now heading for its worst performance since the days of chairman mao. A more ambiguous goal. Stimulus measures will be another focus. They pledged more powerful Monetary Policy while the government may support sectors including construction, health care and 5g. On the geopolitical front, the ongoing and unrest in hong kong will be in the spotlight. The u. S. Is delaying its annual report assessing the financial autonomy as the white house awaits further commentary from china on the overage in management of the virus. With a blame game, this congress will be watched especially closely. Preview ofhat was a the Congress Starting in beijing this friday. We will get to Freya Beamish of pantheon in just a second but first we had straight to the bloomberg first word news. The Federal Reserve chair shut down suggestions the u. S. Will hit will enter a Great Depression but he promised to not take a vshaped rebound. He said the u. S. Recovery could stretch through the end of next year. Theump administration trauma administration trade advisor Peter Navarro said beijing spread the infection worldwide. China says the u. S. Is lying. President trump said the return of sports is it is vital to the restarting of the u. S. Resume, bothsports the people playing in the people who attend the events will be tested. Englands chief economist said the country is heading toward unemployment crisis. The chairman of the fiscal watchdog says out put was likely a third smaller last month. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you so much. Boosted liquidity with a loan backed by the u. K. Government. To ceo told us he aims resume flying in july while the lowest cost carrier says we are supportive made available to all companies such as the payroll support schemes across europe and the u. K. Loan scheme. We qualify because we are the largest Passenger Airline in the u. K. But we are opposed is on top of that the illegal state air illegal state aid that air france will receive. Without any corresponding the french are refunding french taxes to air france. We are calling for any for an end to it. Making them available to all airlines. Are you going to be looking to other governments for support . Are you going to be looking for some of the payroll support in other countries such as spain . We qualify for the payroll support schemes in all of those countries and we are very grateful for that support. Asking we can survive for many months if not years on payroll support schemes. We dont need illegal state aid on top of that. We are asking why does air france on top of massive payroll support schemes need additional aid when no one is flying at the moment . What they are doing is they are filling up their satchels with state aid and they will use that as we emerge from the crisis to engage in massive below cost tings petition we have asked the question repeatedly, we welcomed the comments this morning, why is the german and french governments, the people who keep telling everybody you must obey the rules are the biggest state aid dopers in all of this when other governments like the u. K. And spanish governments are not bailing out there airlines because we dont need those bailouts . One of the arguments you will get out of berlin is they need to ensure there is a carrier that is going to be able to cater to Business People and also longer haul flights that you dont necessarily serve. If there were no lufthansa or air france, wound ryanair would ryanair expand to meet those markets . In the long haul it will take longer to recover but they are not seeking state aid. But we have been calling on the European Union to impose under the state aid rules is if the German Government wants to give 12 billion to lufthansa, it also have it also has to give the same state aid to the other airlines operating in germany. Not because we want the state aid but because it is reflecting the illegal amount of state aid going to lufthansa. If the German Government is willing to give lufthansa 12 billion on top of tax refunds and payroll support, they do not need this volume of money, they are just going to use it to wipe out the rest of the competition. They are already allowed to buy up domestic competitors. They will massively distort the longhaul flow into europe for the next number of years because they can undercut the other longhaul carriers who are not receiving illegal state aid. It is a massive distortion of the competition between europe and it is something the European Union should not be allowing. Tom absolutely fascinating. That is a fired up Michael Oleary with ryanair. Extraordinary to get that view versus the other views for the major carriers. Thatberg will be doing with oscar muniz of united airlines. Im sure it will be a decidedly different tone. , up up and today away. This is bloomberg. Tom good morning. From london and new york. We are still in somewhat of a pandemic. I am on central park, the edge of central park. It was a spectacular weekend in new york city. See the tension between a society that wants to get back to normal, testing social distancing but nevertheless come out there over the weekend. That was more visible this weekend than we have seen. Right now, what i would like to do more than anything is get some wisdom on germany. There is one lodestone source to do that. Matthew miller joins us now. Dewey tough tour duty. I was thunderstruck over the differentd all the analysis and writing of this german court. I want to explain i want you to our viewers. Orething out of the 17th 16th century, who are those guys . Matt they are the german constitutional court, responsible for upholding the constitution and they see as challengingn that, the ecbs quantitative easing program. We are not talking about the current pandemic program, we are talking about the previous, from the european debt crisis, quantitative easing program. Say man judges did not did not go against that program but they did ask in the ruling to be reassured by the ecb that the central bank is still working within its mandate. Tom the thing here. I am really out on a limb. Eric nielsen writing on this at length. Prichard was brilliant in the telegraph, laying out the different sides. What it seems to come down to is the german people and their germanness pushing against the elites. How do you translate that power struggle in germany . Matt we actually see that as well when you look at the way the average worker feels about bailing out italy versus the way Business Leaders feel about bailing out italy. Germany great story on and how the northsouth divide is being brought back. The average worker in germany doesnt understand why taxpayer should have to bailout italy time and time again when they think of italians is not working as hard, not as long, not paying as much in taxes. A oil company in stood guard says he hopes the italians gets bailed out because they are big clients of his. Business leaders are worried if they dont bailout italy or spain, they will lose that export revenue on which they have come to depend. Much havehow countries like germany benefited from a weaker euro which was thanks to some of the periphery countries . Matt that is exactly the point. That is what you will hear from these Business Leaders, what you will certainly hear from those in the south, that the weaker euro has helped germany export more which is why its finances are stronger. Italiantion is why do finances remain in tatters . What is the problem . Have they been hit so hard from crises of the past and austerity hasnt helped, rather it has hurt the way their finances are . Why is it that german austerity tends to lead to surpluses . Germany has so much more money in its Rainy Day Fund than the countries in the south. Met clearly need matt clearly needs a road trip to berlin. Thank you so much for that review. Andge issue for americans for federalism in the future in europe as well. Much more coming up. Please stick with us. This is bloomberg. This is bloomberg surveillance. Lets get your Bloomberg Business flash. The trump administrations crackdown on huawei is sending shockwaves through the asian supply chain. Call huawei a security threat. Investors fear that china will retaliate. About 14 ofets their revenue from huawei. 100 Apple Stores Worldwide that have reopened to customers after the coronavirus forced them to close. Some stores will offer only curbside or storefront service. A pair of sneakers that Michael Jordan war in again sold for a record 560,000, almost four times what sothebys initially estimated. Theshoes coincided with jordan documentary, the last dance. That is your Bloomberg Business flash. Francine joining us now to talk about the chinese economy is Freya Beamish, pantheon macroeconomics chief asia economist. Is there anything in Monetary Policy that the rest of the world can learn from china right now . Outbreakile chinas was different from other places, following a different path in terms of shut down and reopening , there are definitely going to and in the data there are some differences coming through as well, and the but also the outbreak the response from Monetary Policymakers. It seems like that is having quite a strong effect on money and credit data from the last couple of months which is a good needsecause china really as much support for working Capital Finance as possible as the Second Quarter depends almost entirely on inventory ,ecause the rest of the world that is for the major hitters in the rest of the world. Each country is going to take its own path. Do we know anything about consumption . Maybe the Chinese Consumer is more hesitant . Freya we are seeing a recovery industrialth in production and exports as well. Effect fromgged filling previous orders and catching up. That is a very different picture from what we are seeing in the household sector and also in business capex. Anderent on the supply side in the components of expenditure within gdp. There are some programs to support retail sales. These voucher systems that china has got. At the moment they are still very small in the context of the size of the overall chinese economy and we are still very far below december, below the levels of spending that we saw in q4 even as of april, so it is a very timid response and the reason for that is partly they are facing inflation at the same time, and there has been a huge scale of job losses as well. The chinese household is still very much in a timid mood. Tom we just heard from our people in asia about the meetings coming up. There is a lot of effort to make it business as usual. I dont buy it for a minute. Show, magnus was on the scathing the intentions of the coming is party. Freya what people are looking for is growth targets and the signal we are going to get for the rest of this year and the big question mark hanging over the second half of the year. What we have to bear in mind is that china is very restricted in what it can do on the fiscal side and it looks like on the monetary side we are not going to get much more. Normally you have a growth target and they would have these meetings. They could be the case that we dont even get that growth target and could get a more flexible approach which in the longer term would be a great thing, a massive silverlining to this whole situation but in terms of the signal we are going to get coming out of this, it is not going to be i dont think we are going to see something that is entirely as strong as people are hoping on the Monetary Policy side or on the fiscal policy side and that is because the main kind of bullets have already been fired in the Global Financial crisis and now china is moving with the legacy of that massive stimulus we have seen previously. Both types of debt overhang and in terms of environmental degradation. The said, we will see wecal deficit this year and thatlready seeing spiraling of the debt and liabilities and if you look at the augmented deficit, we could actually see the deficit rising to somewhere around 18 gdp. Brings the pboc back into action as well. Tom it really shows attention. Freya beamish, thank you so much. We cannot see we cannot say too much on pantheon economics. There charts are just phenomenal their charts are just phenomenal. With futures up very nicely, all sorts of risk on features. I want to show the tension against that which is gold reaching up to 1750 an ounce. I also know sterling is weaker. The United Kingdom has struggled on the virus. On the virus front, there is no question brazil is the focal point globally for the who. Brazil is having a great challenge of it and over the weekend, texas saw a great number of cases coming on as well. A lot more good conversation for you. This is bloomberg. Staying connected your way is easier than ever. Youre just a tap away from personalized support on xfinity. Com. Get faster internet speeds with a click. Order xfi pods to your home in a snap. Or change your Xfinity Services with just a touch. All in one place. Youre only seconds away from all of that on xfinity. Com. Faster than a call. Easy as a tap. Now thats simple, easy, awesome. Tom this morning it was a beautiful weekend in new york city. It is a beautiful monday as there are clear scott clear signs of escape from this great pandemic. Market. Beautiful futures higher. Faang stocks forever. Road to recovery and stay on that road. The powell sheet recovery stretches to the end of 2021 recoveryl shaped stretches to the end of 2021 and beyond. Overlooking central park and francine, it was without question a more bustling new york city this weekend. The weather was beautiful and if central park was not packed, it was quite crowded