Attention to that, with the ecb coming up thats a huge deal. Delivers more stimulus, and the bcp will be really under pressure, down by 4 10 of 1 , but its all about the dollar and its driving Global Equities higher. And the tension between the weaker dollar driving risk themete, and the overall has been the protest here in the u. S. Under covid. Lets break down that disconnect. Torsten, what is your best explanation for the markets versus the headlines . We have discussed why markets are doing well, and we continue to believe that the answer is on the significant firepower coming from the fed. If you change the credit market as dramatically as they have , i spreads are very close to where they were before. All of that is, in plain english, making this look a lot better today than it did a month or two ago. And you have the equity of companies with the support to the credit markets, this is probably an important reason why the equity markets continue to do well. Think the fed is making a mistake . Its encouraging people to make Investment Decisions that seem unrelated to whats happening in the real economy. Now at the s p 500 is 22 on a 12 month basis. And set even higher at the 24. So we are seeing a very elevated level of whats been going on in terms of valuations. I think whats important to Pay Attention to is that when jay powell and fed members talk about this they dont worry about valuation. We have not heard them say the s p is too high, let us stop what we are doing. Say we need to enforce,to support and to make sure we get to the other side. Making affected by financing decisions cheap with the goal of replacing the revenue that companies do not get when we are in shut down with those in chief financing. Distinction will be going up, but the goal is to make sure the economy get through this as easily as possible. Alix you live in brooklyn, like i do, they have been covering the protest, Cameron Crise says its easy to see the Monetary Policy exacerbated wealth and income inequality but the relevant policymakers seem unconvinced. If they are doing what theyre doing, pushing money into assets that exacerbates this widening, how does this reconcile . Torsten you are right. You spoke to someone a few minutes ago and i think it is werect to say that what the options for the fed . They did not have much choice in their goal is to not increase asset prices with the idea of saying this is going to aggravate inequality. The goal is to stabilize the financial system, because it they did not do what they were doing, it would create more inequality. Its difficult to talk about alternative scenarios and become somewhat hypothetical, but i think if we all agree that if they had not done what they had done, the economy and the Unemployment Rate would have been very different relative to what we are seeing today. Lets hear exactly what powell said on this. The pandemic is falling on those least able to bear the burden. Its a great increase or of inequality. Everything we do is focused on creating the environment, those who have the best chance to keep their job or get a new job. There is the accusation and alix alluded to it that the fed is helping out the rich by supporting Financial Markets and that will widen the income inequality we are seeing in the united states. We saw that in the great financial crisis. Do you think there is a point where the fed says maybe we need to do less of what we are doing, and that absolutely thats that ultimately gets diluted by the social inequality argument by the concern that we are widening, not narrowing the gap . Torsten i understand and thats a good point, that could looktially they could at this and say what are the alternatives and the tools we have . If you think about whats going on in terms of helping the economy, given the shock we are faced with, the fed could only provide liquidity and give loans , everything they are doing in loans that they are doing in the commercial paper markets, all of that is really trying to make it easy and cheaper for someone in the economy to borrow. Have innly two they liquidity provisioning. They cannot solve the fundamental problem that if you have a long period of unemployment that you can risk turning this into a solvency crisis. Theyre trying to figure out if there will be another fiscal get more and will we fiscal support to household or to Small Businesses . Because the longer the Unemployment Rate is so high, particularly at 10 , the more there is a risk that this could go from a liquidity to a solvency crisis. A way to answer that is to say the fed could do some quick fixes, but if we are worried about the next six months, that can only work by making sure that the fiscal policy does not have more delinquencies on credit cards. Alix and that sort of highlights the divide that we have been talking about. S p is seeing a vshaped recovery and now we are seeing cyclical outperforming with a nonstayathome dock along with stayathome stocks. The curve continues to steepen, the widest in about three years. But the outline that you just gave us implies that the v or u is really tough. Who will be able to spend the money to support the recovery . Help me reconcile. A look at my take bloomberg screen, you can see by the end of this the Unemployment Rate is inspected to be more than 10 . This is what we are expecting with deutsche bank, this is whats forecasted. Almost everyone agrees that the Unemployment Rate will be doubledigit by the end of the year. Raises how is loan how are the fundamentals playing out in terms of being able to pay their bills and if they can are not becomes important for the second part, maybe more fiscal stimulus is needed. One way of looking at this beuation is that there may , and there quietly waiting for data, figuring out how much fiscal support is needed, its pretty clear that the forecast is the consensus, and the Unemployment Rate will be at more than 10 , and we will need more fiscal stimulus to make sure we dont get too many consumers falling behind. Are in thel like we data having to get worse. Torsten is sticking with us to talk more about europe, but we want to give you an update on the headlines outside of the business world. Another sign of how relations between the u. S. And china are getting worse, the Trump Administration has warned that it will suspend passenger flights from china if beijing does not allow american carriers to enter the market. The coronavirus pandemic prompted flight cuts earlier and President Trump appears to be doubling down on his support for the use of force to put down protest. On twitter he urged police to get tough, warning that the National Guard is ready, protesters were peaceful last night for the most part after several days of violence. The pentagon is distancing itself, warning that he could use active duty military to clamp down on protest. Defense Department Officials say would be better to rely on the National Guard. There are some activeduty troops that have been put on , and the meeting between opec and its allies is now in doubt with saudi arabia and overa joining a hardline quota changes. The saudis and ifsia say it may not other countries do not commit to implementing the supply curve. 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. Guy . Guy thank you very much. Coming up, the daily record auction, and more with our guest, coming up. This is bloomberg. Erg. This is the european close on bloomberg markets, lets take a look ahead at whats happening tomorrow. Its a big day for the ecb. Today we saw a record bond auction, tomorrow its a big christian a big question. The market is certainly anticipating stimulus and you can see a volatile situation. Still with us, what are you expecting . Whether the issue is expanded, from a market perspective, whats really interesting is that the fed went unlimited on buying treasuries, the challenge is that they did not go unlimited, now they had to find tune, and this could be a dramatic increase in the purchasing power , which is going to be a little difficult, particularly in terms of how difficult is for the market to interpret whether they are doing something theyre willing to do. By farer your question, the most important issue has been what they are going to say around this and the willingness to support markets. Alix the markets really expected and they want to but why do they needed . Less than a third has been spent, so why expand it now and why not wait . Question,ts a good only about a third of the firepower has been used, so why not just keep it where it is and see if we need more. This is the challenge with oneioning specific amounts, to say only specific amounts, the market takes out the rulers and calculators and thinks about how long does this run and fit does not run for very long, you can see significant fiscal deficits and the questions begin , but does that mean theres only limited willingness to support whats going on . This is significantly more than the amounts committed, and then ,he market does begin to say ok this issue continues to be important. Before the break, we were talking about the fact that we need to see a from monetary malls see policy to fiscal policy with a similar story for europe. What are your expectations in terms of paneuropean stimulus . Of talk, buta lot its not a done deal. We dont have a full outline with Angela Merkel pushing hard. And we have the stimulus story as well. Desperatelyrde needs Angela Merkel to corral her partners in germany to deliver more stimulus. Do you think she will get away come up get her way . Torsten this is an important conversation in the u. S. And in europe. Fixes, seen some quick some of those are substantial, things were done very forcefully and very significantly and its been very helpful. Crisis process and the longer that we have these economic outcomes as bad as they thisn europe and the u. S. , raises the risk of solvency Small Businesses and even in bond markets. Those things will certainly be important when you think about whether we can have that transition that we will need to ,ee from the Monetary Policy and providing on a more ongoing support, as long as the economy in europe continues to push. I like you and then you bum me out. Thank you very much for your perspective. Coming up are staying in europe and the luxury marriage of tiffany and lvmb. This is bloomberg. Alix the Company Story of the day, tiffany shares are lower over the last couple of days with womenswear daily reporting that the 6 million deal with the jeweler is now uncertain. Deborah is breaking this down. Your call is that the deal will still happen, on what terms do you think the deal will happen . On the same terms that are out there, the 16. 2 billion transaction. Weve taken note of what , we dont has said see anything being bridged, and we think they have to have 60 of sales or so. Hes a smart guy, hes guy, hesant a better going to want a better deal. Is he going to have to spend it all . I think the 16. 2 billion is what goes ahead, as far as we are aware, its cleared in the , and this is why it was extended through april and october. April, theesults in country confirmed on the call that they were operating in line with the merger agreement, and that theheaply deal was as the deal is signed, so we still see the deal going is comment ande speculation on whats happening given the exposure to the u. S. Markets, and we think that the deal still goes ahead. Other deal did not get that lucky like sycamore and l brand. Got deal ended and did not through, whats different . Is it how far they already are on it, what is it . [indiscernible] has been longterm in his vision and exemplary at what he does. A very strong Balance Sheet and preparation for the deal to go into athe deal moves ofber one industry, with one the fastestgrowing segments in luxury goods along with leather good. Sense, anddeal makes the arguments involved around the chairman and the ceo, the way that he operates in the market lace, really wanted to be seen as fair and we have no comments coming from them and tiffany says they have not been approached. That we have q1 coming out on friday. We do know that theres a 50 thee closure and we expect second have to be much stronger. There, will leave it thank you for your time. Deborah, we appreciate your analysis. Anx, alix, i hear theres awful lot of inventory in the luxury sector and a lot of distress. There will be an effort to unload some of that inventory later on and you wonder whether more deals will build will be getting done. Alix im not going to argue about the validity of this deal but in general, it there was an article in the journal that talks about how the arch trade is shorting the take out targets, thats not usually what you do, they think a lot of goings think that this is to get redone and that covenants will be different because of covid. Certainly seeing this run through the numbers. Lets talk about what we have coming up, the european close is nearly done here in europe, lvmh is in focus, and the insurance sector is being watched. These are the numbers we are looking at, its been a strong day for european equities. All of these are up really strongly, and outperformance on this side of the atlantic, on that side its really down to one thing, theres a dollar story that is driving most of the narrative at the moment. Global equities and european ftse, the dax, and the cac are all strong. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Of 30 seconds until the end european trading this wednesday. A strong day for european equities being driven by partly this idea we are starting to see economies reopening but by what is happening with the dollar. It is providing a great deal of impetus to the story in europe and really strong gains. It is the most beaten up stock for europe in terms of the nature of the breakdown in terms of the market. There is the stoxx 600. We are near session highs. Up to. 34 . In terms of some of the individual market, the story is even more positive. Up 2. 35. 600 lets look around europe and see what the ftse, the cac 40, and the dax have done. There is some outperformance coming through. Then we will break down the grr as well. In terms of those markets, ftse up 2. 64 , the dax up nearly 4 , the cac 40 up 3. 27 . Strong performances be delivered in your. Lets look at the sector story in terms of the grr. This breaks down sectors. If you punch it in on your bloomberg, put in the index, punching grr, you will get this story. Shippers doing well, auto parts, banks, it is the defensives down at the bottom of the market. Bid not really performing but are still bid. Health care, food and beverage, the staples story is still there. Cominghe dash for trash through the most strongly. In terms of the individual names, let show you some of the names we are talking about. Empire, the stock up 1. 86 . Is that deal going to go through . Axa driven higher. It has cut rather than scrapped its dividends. The market like that. The travel and leisure sector, tui announced its expectations going forward, saying it will stop leading cash. It will be back to normal by 2022, that is a year away. At least is starting to find clarity. Also reached a deal from boeing on the 737 max. That is the story out of europe. Strong performance coming through from equity markets. Are we going to see the same to thehen it comes travel sector and the Tourism Market . Europe starting to reopen its economy. I think that is what people are focusing on. Not just the dollar story we are watching so carefully when it comes to the european markets. It is what is happening with the travel sector and the reopening. Travel around 13 of the gdp italy and the fact that over the last few days we have seen the economy starting to reopen, some of the big monuments and Tourist Attractions starting to reopen as well. End toe are seeing and the quarantine. Period thatntine was so important over the last three months. Giuseppe conte will also unveil his plans sometime later today to rebuild the economy, which will include what he will do for the tourism sector. Carnianis is giancarlo , president and general manager of two foreign hotels, thank you for spending time with us. What are you expecting . The restrictions are being limited. What do you think the italian tourist sector will look like once people are allowed to return . Giancarlo that is a good question. We are now out of the really bad days of the lockdown. Everything needs to restart. , notsts will be back normal before 2021. We are expecting a very slow season, mostly done with the domestic market. Will see guests coming from europe. It will be longer when we know the u. S. And the middle east and asia, it will take time because we have to see what every company is moving through the , but we have an optimistic view that we will come back. Most areake time, reopening in the middle of this month. Everyone is trying to reopen good alix talk to me about how they are reopening. What has been the biggest shift, all of these businesses have had to make as we go towards the reopening . It will take time. The business market, we have to see how our behaviors have changed after covid19. Expect asaying we will slow market for Business Travel because we learn how to stay home and how to talk over the video chatting system. It will be a new market. We have to see. Yes, we are reopening, but meetings and big events are still not allowed. We have no tradeshows, no business meetings. No rock concert, no whatever. It will take a while. It will be a different world. I do not know if im able to , andast what will happen if all the players of the market which were there before covid19 will still be there when all of this will reopen. We will see some changes. I am sure about that. What are you hearing in terms of demand . How many people are booking rooms . How many people be arriving in italy . I imagine this would be a great time to visit some of the sites. How busy do you think italy will be over the next few weeks . Iancarlo it is incredible we do a party when we see a reservation arriving, because for months and months we have only seen cancellations. We had a lot of domestic clients during the weekend. It is not the domestic we can save the business. Business would be slowing down, and we know that throughout the year. Think we will be back as usual. We are going to see the next few weeks what happens with the germans, with france, and whatever. [indiscernible] which we requested for a reopening, and we will have to do that. It is a situation of wait and see what will happen next. It changes every day. We have seen reservations with employees speaking up. It is really slow, but we are confident that in a few weeks, especially the seaside and mountains will get reservations from europe as well. Guy what you need from the government . What needs to happen . What helped is the industry need . Is it getting the help it needs . Giancarlo we are asking a longer period of payments for all of these stocks because it will be slow. It is all working from home. The offices and so on. At the moment im speaking with you alone in a 100 room hotel. It will change in a few days. We need the government to have a long period in which they guarantee we can still have the have the times. S a lot of to have a longer period for that, and then we need some cash flow. Every single hotel and restaurant, it is a big problem of cash flow. Something that has been done is not enough. We are asking more for a longer period, especially from tourists. Tourism has a big impact. More. Gdp, but it is much when you see the city of florence, which was usually overcrowded, to see it now you understand exactly how did it has how dead it has been. It is bigger than 13 , the impact of tourism, especially in a city like this or venice or rome or milan. Giancarlo carniani, thank you very much. Market analyst for italy and general manager of two florence hotels. We want to give you an update of what is making headlines outside the business world. Here is ritika gupta. Ritika america caught a break last night. Thousands of people demonstrated over the death of george floyd, but there were few signs of routings of lootings that marked the last few days of protesting. Some of that may have to do with curfews and the arrival of the National Guard. Is deeplyis says he concerned about the unrest in the united states. In the weekly greeting he says racism cannot be tolerated, and call the killing of george floyd tragic and said he is praying for all of those whove lost their lives because of the sin of racism. Nine term iowa congressman steve king lost in the republican primary. King henry be very king had been king had been rebuked after making statements about racism and rebuked there is wing concern the u. S. Europe will fall behind the u. S. Eu china according to the is hoping to team up with Drug Companies to share the cost of developing a vaccine. The European Commission warns the move is necessary after the u. S. Struck similar agreements. 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. I am ritika gupta. This is bloomberg. Guy thank you very much. Waiting for the final numbers out of europe. Very strong. Just obsession highs for the european markets. Being driven by a number of factors. The most be up end of the market continuing to catch a bit. The dollar is a factor, the opening is a factor. An indication of more ecb stimulus is a factor. The numbers look good. Well carry on the coverage with covid and get the Daily Briefing from 10 downing street. We will take that live and in full on the cable show on dab Digital Radio in the london area. This is bloomberg. Guy from london, i am guy with alix steel in new york. On is the european close bloomberg markets. Lets get some analysis. Lets bring in Abigail Doolittle for a look at the corporate dash to cash. Abigail it is pretty interesting. With all of the economic uncertainty, from the pandemic to other factors, bankers and Corporate Executives seem to agree it is a great time to raise capital, bolster the Balance Sheet, especially with the Federal Reserve stimulus at work. This was true for the month of may. What we are looking at are the last 10 days, the Capital Raise is done. In white that is ige or Investment Grade bonds. In the month of may this year, 250 billion, far more than any other year. In blue, it is not just credit supported by the fed. Equities,condary with 25 billion raised. Thanipos in orange, less 5 billion. The for cash strong in the month of may. You would think it was done as a premium but not so. If we look at the Investment Grade yield, this is basically the lowest yield an investor is willing to accept on a bond to guarantee a rate if the bond is called, it is at about 2. 4 . That is pretty close to the five year low. Clear that the supply and the corporate debt market is being absorbed and the liquidity is abundant. Alix thanks so much, abigail. I feel like i may have to thank the fed that. Focusing on one bank, citigroup is coming up a record quarter of debt underwriting and debt underwriting and dente loot should continue. Us more, sonali basak joins as well as richard zogheb, Citigroup Global head of capital markets. Does it continue for as long as the bed is in the market . Richard it cannot continue at the pace we saw in march, april, and may. Volume, weny kind of will have the best quarter in and june total, issuance exceeds all of 2019. Agree everyone seeming to be restaurant in the equity markets, demand will be there. I think it will be difficult for us to maintain this level of supply for an extended period of time. Lots of companies that wanted to tap this market needed to shop liquidity. Come, but be some to if we want to have decent volume, we left the we will have to see a shift to acquisition financing. Sonali acquisition financing, the Leveraged Loan Market is still below par. What are the limits of the fed support . Richard that is a great question. The fed supports the nonInvestment Grade market is focused on companies that were. Nvestment grade prior to covid 22 where ifd march you were Investment Grade prior to that and you were downgraded because of the pandemic, than the fed will be there to support you. Willcquisitions financing not be supported by the fed. There is an implied level of support because the fed is taking care a lot of these fallen angels. That allows the leverage investors to focus on people with deleverage names and they do not have to worry about the overhangs of the fallen angels. That implied support has caused the rally, first in the highyield market. We have seen a rally in the Leveraged Loan Market. The last time we spoke a few weeks ago i told you i felt the leveraged loan was going to be elaborate, and it has been, but it has recovered much more quickly than i expected. While it is below par, it is coming back to more reasonable levels and we are seeing the forest announcements of new lb os towards a transaction. Spain announced yesterday the day before we were seeing the first new lbos coming back and that has to do with the Leveraged Loan Market has come back stronger than people expected, including me. Sonali with the Leveraged Loan Market coming back, a lot of this is private equity firms and Companies Already highly levered. We had scott minerd speaking to investors this morning. He will be on the Program Later today. He said there is excessive leverage. I wonder whether you think banks and investors will start to take that into account when they are investing in future situations . Will there be some sort of cap on leverage . Richard there will definitely are going to be financed at lower leveraged levels than anything we saw being financed in 2018 2019. Important, a as lot of the covenant protections that had eroded during those strong market positions in 2018 and 2019 will not be there. New lbos will have to have a larger equity component and there will have to be a more lender friendly document as opposed to borrower friendly document. I think that will still be the case. The fact thats equity markets have sold off some, there is a reduced valuation, therefore reduced purchase price, still makes a number of these lbos attractive to these firms. I think the answer to that is yes, but it will be on a casebycase basis. Alix does the 2020 election change that . It feels like the last couple of elections have been big banks and now they hate private equity. Does it change what they are able to accomplish . Richard i do not think it will have a major impact on private equity. Theres been a lot of focus on private equity, a lot of focus on the tax burdens we get by calling everything capital gains. They are an incredibly important component of the economy and an incredible source of liquidity. Given their size and the breadth of what they touch, it is going to restrict the activities to a large extent. I do not see that. Will there be tightening around the edges . Sure. Particularly if we see a wave of inls on the lbos completed 2017 to 2019, if we see a number of those Companies Default because they were overleveraged, than there will be some outcries to regulate to a greater extent. Large,theyre just so they are such an important point of markets and the economy, i think major reform is probably not in the cards. Alix great conversation. I appreciate you joining us, sonali. I appreciate you joining as well richard zogheb. This is bloomberg. Guy welcome back. Two huge days coming up for Global Markets in terms of the events we will be watching. Tomorrow is about the ecb, about christine lagarde. If she going to deliver. Is shens are high, going to deliver . Expectations are high, but as you pointed out why she doing anything right now . And it is payrolls friday. Alix it is going to be bad. The question we will assess is how bad. I am also looking at company stories today. Walmarts general meeting is underway, saying they are definitely removing guns and ammo from the salesforce from the sales floors of their stores and reaction, you would think, to the rights we have seen. Google coming out later today. Guy looking to forward to seeing exactly what happens with that set of numbers. I think the walmart story is fascinating. We also have Warner Media Group coming through, it is ipoing that number just being posted. The ipo going out the door at 25 is now trading 27. I guess timing is everything. You would not have wanted to do this a couple of weeks back, but at least they are getting that market away. Equity markets your strong. The story a little more muted over there. Alix yes, but still relatively strong considering the headlines you are seeing overall. The s p is up 1. 2 . Financials also leading the way. That wraps it up for me and guy. Uplance of power is coming next with david westin. This is bloomberg. David from new york to Bloomberg Television ready audiences worldwide, welcome to balance of power where the world of politics meets the world of business. We begin with a check on the markets. Abigail, you cannot keep these markets down. It looks like we are continuing that rotation into cyclicals. Abigail right on both points. It is a risk on situation, which feels surprising relative to what we have in the u. S. It does not seem to fit. Stocks up for a fourth day. We have the s p 500 and the dow both up more than 1 . Your mentioning the move into the cyclicals. There is a feeling that is bullish. There is also a feeling that has a lot to do with reopening optimism. You see industrials up more than 3 , banks up 4 . Banks being helped out by the fact that haven bonds are dropping off. The 10 year yield backing up six basis points, back above its 50 Day Moving Average in a convincing manner. That is