Angela merkels coalition hammers out a 130 billion euro booster shot for the economy including Infrastructure Investment and rebates for electric cars. Only one option for the ecb today. The central bank is seen boosting its emergency Bond Buying Program by 500 billion euros. Some investors say anything less would cause a shock similar to marches selloff in peripheral debt. Falling in line. Hsbc and Standard Chartered both back to beijing when it comes to the proposed security law in hong kong. The latter saying it will maintain stability in the region. We are just under an hour away from the start of cash Equities Trading. Lets take a look at what futures are doing. We see red arrows, albeit small red arrows. Ftse futures down 2 10 of 1 . Dax futures unchanged right now. We are starting to see you as futures actually turn higher u. S. Futures actually turn higher. Dow jones is rising. S p and nasdaq futures still down. It looks like weve had some incredible gains. It would be Pretty Amazing if discontinued. The market doesnt want to selloff. Anna yeah. We talked earlier about whether this is a number of rally. It seems to limp on. Lets look at the gym and function. Look at what has been happening in asia. The recession has calmed a little. Some modest gains to the upside. A mixed picture in asia. Some markets to the upside. Australia, philippines, thailand moving higher. Elsewhere, hong kong and china under pressure. A bit of a movement in the dollar. The dollar recouping some of its losses, back from the highs of march. Weve seen a big drop. A little bit of a reset of that. A bit of a signal, risk off in these markets. Yesterday, we saw equities moving higher. The atb, better news on jobs out of the u. S. Banks in an upward direction. Today looking more muted in terms of global gains. Matt lets get to the first word news then right now. Todays top stories for you. Former defense secretary jim mattis has strongly criticized the president handling of unrest across the u. S. Tries toresident trump divide the american people, making a mockery of the constitution. This comes amid uncertainty around the current defense secretary mark espers position. Publicly opposed the president s idea of deploying military in the u. S. Against protesters. Ruling coalition has agreed on a 130 billion euro stimulus package. The plan is even bigger than had been anticipated. It includes a temporary reduction in tax as well as money to rebuild five g networks to rebuild the countrys railways as well. Tense negotiations finalized the package. It took two days. We could not just set out a stimulus package that was done in a traditional sense. Rather, it had to be a package of measures that contained a view to the future. This is precisely what we have emphasized. The package will amount to 130 Million Euros billion euros for the euro 2021. 120 billion will be spending by the government. Matt a reshuffle of the ftse 100 and travel is out. S have been demoted to the midcap. Promotions include a number of socalled stayathome stocks. Kingfisher will now be on the benchmark as will Cybersecurity Firm a vast. Boosted by more people working from home. The changes take effect on june 22. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Anna futures looking a little bit more mixed this morning, there are clear positive captains for risk appetite. In germany, 130 billion euros of stimulus. That is larger than expected. That news came quite late. Boost its expected to pandemic Bond Buying Program today. A manageable contagion rate across europe means that reopening is likely to continue. Keeping our fingers crossed about that. Lets discuss that with laura cooper. The positive feelings around fiscal stimulus, the stimulus expected from the ecb, you might expect markets to move higher. I guess much of that was discounted already. Actually. The reason we are seeing futures on the back of it, it comes off of this exceptional time. We are seeing this by rally by everything rally occur. There is risk built in. We could see the ecb potentially showing some reluctance in terms of actually expanding their program. A lot of these efforts are focused on stimulus helps. Unwind, thats to could keep risk assets in this more muted mode. Reopening. S of matt you wrote a piece on what happens when the stimulus ends. This cant go on forever. Germanys recent package is expected to be the last one, at least until the elections at the end of next year. What should we be looking forward to . Laura that is the question. How much can stimulus continued to keep investor appetite satiated . Up to now, weve seen this exceptional policy coming in from the fed. That reduces the risk of bankruptcy. That propped up the Corporate Bond market as well. How much more can that actually continue as we begin to see more bankruptcies coming through or a second wave of infections or even growing unrest in the u. S. . The capacity for stimulus to mitigate that. When it comes to the ecb specifically, if we look at their current pace of purchasing, that is expected to run out by september. Even at the current pace, they are purchasing about one billion in assets. Up the clearly propping bond market at this stage. If we take this reluctance in terms of the sustainability of that Going Forward, we are going to see some pressure in those markets. Investors are not yet attained to the fact that this degree of stimulus is really unsustainable over the mediumterm. Anna what is pushing up various assets, including the oil price . Overnightn thinking about how far the Oil Price Rally can go. Been about 40ve a barrel for a while. Go . Far does this rally . Is it . Time to expectations of opec . Laura we are seeing this optimistic potential headline. Bolsteredertainly crude oil above those 40 levels. It will be more of a demand side as well. We are seeing these economies reopened. That is pointing to positive signs Going Forward for a mediumterm demand outlook. Ultimately, if you see any tumbles that would likely keep current prices capped. Thosely to propel back to 50 levels or higher that we saw late last year. Matt thanks very much for joining us. You can join in the debate on todays question of the day for the mliv blog. How far will crude rally . Some input to share with us, reach out. Coming up, the stimulus plan. Did german chancellor tops expectations by 30 . The Auto Industry falls short of its goal. More on germany, next. This is bloomberg. Anna have you been listening to a lot of the doobie brothers . What have i missed . [no audio] back this is the european open. We are over 45 minutes away from the open of cash trading after a massive rally that we had over the last few trading days, especially here in germany. We are finally starting to see a little bit of a selloff indicated in futures. Speaking of whats going on in berlin, Angela Merkels coalition agreed to a sweeping 130 billion euro stimulus package designed to spur shortterm Consumer Spending and get businesses investing again. Alongside an immediate jolt by a temporary reduction in the value added tax, germany allocated money to build out its 5g data networks, improve railways, and double down on incentives for electric vehicles. In one of the most contentious issues in the talks, the Auto Industry fell short of its goal of getting direct Government Support for purchases of conventional cars. We are joined now by head of Investment Strategy at rbc wealth management. Good morning. Welcome to the program. What do you think of the german stimulus, the new german stimulus theyve already let 1. 3 trillion euros flow out into the economy . Frederique good morning. It is good news. I think a lot of investors have been eager to see more spending out of europe, in particular out of germany. Is one third larger than expected. Its really good news. It is the second week that we have good news coming out of europe. Last week, we had the proposal from the Eu Commission for joint response to the crisis. Was 6 of gdp to spend that money. Its a positive step towards fiscal consolidation. It is very likely it will be watered down eventually. However, there is positive news flow at the moment at a time when valuations are still fairly priced. So we are cautiously optimistic that this might be a turning point for the region. Cautiously optimistic. What do you think the ecb should do in response . Theyve already done a lot. They have not spent all of what they put aside by any stretch. Theres a lot of Market Expectations that they will do more. Is there a real need to do more, do you think . At theque if we look support the ecb has given compared to the regional economy, that suggests there is still room to maneuver, especially the officials who have been speaking over the past 10 days. Ready to be more active and upsize its pandemic emergency program. Having said all that, we dont have clarity about its joint eu proposal that i mentioned. They also reduced pressure from financial markets. It could be that it announcement is pushed back into the summer. For now, we expect another billion euro to be announced from the ecb, for the ecb to upsides upsize its purchase program. Matt dont fight the fed is him an old market added. You have investors were following the money . Start, weve been getting big stimulus injections all over the world plus massive bond buying packages from central banks. Yes. Frederique investors should participate in the rally. We are mindful that a lot of good news will already be discounted. Upside because investor positioning suggests not all are fully invested. We think it is more prudent to be slightly cautious and modestly underweight equities. About thencertainty impact on the economy and risk which seems to be forgotten by markets at the moment. The china u. S. Trade war. We have a president who is increasingly wounded. We dont think that the u. S. Would willingly do something recovery,d hurt the we are worried about miscalculations, missteps. In the u k, we already have the brexit situation which is ruling. There are concerns. There are concerns. [inaudible] should we see a slight correction in markets. Anna thank you very much. Head of Investment Strategy at rbc wealth management. Thoughts,up on those talk about your strategy from here. Some people asking about equities striking a less us to mystic does optimistic tone. Is all the good news priced in . This is bloomberg. Anna 40 minutes to go until the start of Equities Trading. It will be more sluggish at the start of the european session. Asian Equities Trading broadly higher today. Less of the enthusiasm of previous days. It willoptimism and risk assetsr quick economic recovery from the coronavirus pandemic now priced in. Lets talk to our guest more about her strategy. And i was you conversation about following the central bank in what they are doing. We have seen sturm german stimulus overnight. Is there a strategy involved following the vision of the european government . The strategy from germany is money for electric cars and 5g. They are keen to talk about this. Do you think your view on internal sectorals sectors aligns with that . Frederique generally, yes. We are spending more and more time on five key factors. If you look at the way the eu joints on financing its right e, it would be by raising taxes on Single Use Plastics and Carbon Emissions am alike. And the like. Both strategies are aligned. What will be the overall effect of all the stimulus on Companies Earning after this pandemic ends . Will we see a big bounce back . Is 2021 be a difficult year for things . Frederique in terms of the overall recovery, we think despite all the stimulus, the recovery is going to be a slow one and uneven. We dont think that economies will go back to precovid crisis levels until early in 2022. It wont go back to full potential until the end of 2022. We think that the market is also atle bit over overly little bit overly optimistic about how things will snap into shape. The financial crisis, it took 3. 5 years for the economy to return to its precrisis levels. Its a different crisis, of course. Back then, you had a lot of problems and Capital Markets and the Banking System that was not functioning properly. That is not the case now. That is why we think the recovery will take less time than that. However, it will take more time than what markets seem to be implying. Anna whats your favorite trade at the moment . As we look ahead to the cease ,cb, german stimulus coming what we will hear from other central banks. What is your favorite trade . Riskrique the best adjusted returns and are view come from fixed income. They have potential to narrow from here. Its an asset class of just supported by central bank purchases. Particular, highyield corporate are yielding 6. 5 over treasuries. That is quite above the 10 year average of 5 . The recent risk of default. Theres a lot of monetary support, as we have been discussing. Areuse Capital Markets working well, theres a possibility of raising debts to shore up liquidity profiles. Having said all that, the number of companies which are trading at this level, at premiums of 10 over treasuries, the number of companies have half since march. The possibility of default is there. It seems to be not likely. Low enough for the Asset Classes be attractive to us. Matt thank you so much for joining us today. We appreciate your insight and strategy. Head of Investment Strategy at rbc wealth management. This is bloomberg. For u. S. Jobless claims. Ecb will decide whether they need to be boosted. The central bank is widely expected to add another 500 illion euros in emergency funds even though less than 1 3 of the already euros ed 750 billion has been spent so far. Lets talk to the president f European School management in technology. Very good to speak to you. We want to get your thoughts overnight news around stimulus for the German Economy on the fiscal side. Given that production around let me ask you about that first. Concern in eal germany about the role that the bank can continue to in the stimulus. We heard that ruling on a round of fqe. Is there concern that the may not be able to participate in the future . A very trates important question and a serious threat. Able toy may not be support Going Forward. Obviously the decision by he Constitutional Court only concerned the previous problem but there were very Clear Conditions in the udgment by the Constitutional Court, for the purchase central bank should not exceed one specific bond that each shall l central bank only buy as much as what its key capital is. Therefore, it needs to be watched very carefully and thus also the decision by german Constitutional Court needs to be taken very seriously. Until the pet program . You expect that to be next . Its very likely they will use the current problem out iately to figure whether they can go back again to the Constitutional Court, and obviously this but it some time, has to be watched very carefully. The rticular, when conditions under which the urrent program thats run might be different from the previous problem. Of it tying the hands the ecb at a time when they flexible to respond to the requirements of the economy. Is the tool box looking as a result of the german ruling . Definitely, the ecb has to take these concerns from have to be taken seriously. Its the only game in town, lender of only last report given that the political measures were not ufficient to deal with the shortcomings of the not fully integrated Monetary Union yet, so therefore, on the political side, many more significant steps complete the Monetary Union and to also ugment it by an Economic Union and thats also to take the ecb out of the fire. You know, the ecb in years been for asking berlin to spend more money. Domestically, i heard from a lot of politicians in brussels for the great entire european economy. Now they are doing it, and getting a little bit of pushback. What do you think about the stimulus . A yes, this is indeed little bit ironic situation. Exactly. For many years, germany has pushed to spend more to provide stimulus packages on and at the ale very point in time germany that, spots g coming in, referring in particular to the question f whether germany can increase its competitive advantage over other countries. Onetheless, its very important that the stimulus package has been brought on the way. Only in germany but also on the european level simply very unusual situation. He situation in which also the economic crisis is worse in comparison to any of the postwar years in germany and its simply the situation in which the government has to do the to support the private economy. Anna the measures that are being talked about, they have been approved, are they the right ones to get the euro to the places it quickly enough to stimulate the German Economy, talking about the car sector and other parts infrastructure as well . Its a compromise between the ruling parties. Say fwhafkly every party wanted to get its own pet project into it. The social democrats wanted to get subsidies for families, for while the ren, christian democrats wanted to get more investment you , so therefore could say it is not really very targeted or a very problem, but rather it goes, into each area you of, and by that way, it tries to address as many Economic Agents as possible. So this means including companies, including consumers, and now the hope is, and maybe more important than the money itself, to a very strong signal of encouragement, you could even say a psychological comes with hat such a significant amount of money. Matt thanks so much for us. Ning great to get your thoughts on these big important, specially the case, but also the events that were seeing here during these unprecedented times. The rocholl is president of the European School of management and technology. Thanks so much for joining us. Quickly bring you some breaking corporate news. Lvma says its not buying tiffany shares on the market. We had a report yesterday, about a report in womens ware dailey that said they might consider pulling out. The board of directors of 2 and t on june focused its attention on the development of the pandemic and its potential results and perspectives of tiffany, so like according to a statement from the lvmh, is not considering buying tiffany open market. Coming up, british banks efy the uk government and hong kong s security law. Well discuss moves and statements next. This is bloomberg. Statements ne. This is bloomberg. Markets. This is the european open. Were just 20 minutes away open. The we see a little bit of profit taking there considering the rally that the open. At lets get to your first word news here. Police have upgraded the charge against the former Minneapolis Police accused of killing george floyd. The attorney general is also additional ee Police Officers for aiding and abetting. T comes as protests continue across the country with President Donald Trump to crackn new york down on unrest. Later today, the european entral bank will decide if its massive monetary stimulus is enough. Policymakers are trying to region out of its deepest recession in living and most economists expect an increase of 500 as part of the emergency purchase program. Due. Tse 100 is travel is out. Airline easy jet, an airplane parts maker have demoted to the midcap ftse 250 index. A number include of socalled stay at home stocks including kingfisher, of bmq, beyond the benchmark as well as a Cybersecurity Firm. June s take effect on 22. Global news 24 hours a day. Quick take by bloomberg, than 2,700 ore journalists and analysts in countries. 20 anna . Anna matt, lets look at some other big news. Hfbc and Standard Charter, two British Institution that s dominate hong kongs Banking System have backed beijing in the scandal over a proposed new security law. The statements came on the eve of the anniversary of 1989 Tiananmen Square crackdown. A more, we with have guest from beijing. Significance of these announce president s backing the new National Security law, its really that they both around the same time, around such anniversary but give us the latest. I want to point out that first major the beijing to back and hong kong. They have all been in national r the security law despite polls showing broad public opposition in hong kong. Said, hsbcs charter are in a very position. Most of their earnings have been generated in asia but their headquarters are in where the British Government has expressed very strong opposition to the National Security law has offered refuge to as million hong kong residents. Greater china accounts for 40 of the revenue. Important s also and its clear that the new c. E. O. Doesnt want to get on the wrong side of the government. When it comes to Standard Charter, they are less hong kong compared to hsbc but hong ong is still the biggest market, 2. 3 billion, made china bank in greater last year, 61 of that came kong. Hong weve already heard some harsh reactions from british includingalster carmichael including a Parliamentary Group in hong kong. You cannot as a decide for any sbc sacred bridge of International Law very much, you elina wang talking about, to some, surprising headlines at hsbc and Standard Charter are backing beijing over hong kong right now. Reporting from the chinese capital. Stimulus plan. He german chancellors spending package tops expectations by 30 but the Auto Industry falls short of its goal. More on germany next. This is bloomberg. Next. This is bloomberg. Anna welcome back to the European Market open. It looks as if equity will slip a little. In fact, futures worsening halfhour down. 1 of 1 . Oil also slipping from a high. Month that as opec plus unity long threatened by a running feud over complying with production cutbacks. The oilg spoke with minister of another crude producer, norway, who says hey are also making substantial cuts. Were making a substantial cut now, when we december at the end of this year well be producing 300,000 barrels than what was initially planned. At the moment i feel this is a contribution, that were already seeing clear signs in the market that its moving towards stabilization quicker than the worst fears. So well end regulation by the end of the year but at are the , these cuts that were ready to go through with. At the moment there is no of extending into 2021 . No, were not discussing or in the cally Department Ministries at this time. Now, the ght situation is that well see these cuts through until the end of the year but then the , we can end regulation quicker if we see thats possible, but on the onset, the plan is to keep these production cuts in place until the end of the year. See some d you signs of stabilization. Anna were seeing that with price of oil as well but we still have more than a of ion barrels in terms inventory. How long do you think well see like proper supply and demand stabilization in the market . I think its difficult to there are sure analystsas markets that can answer that question better than me. Were seeing them go up. Worst some of the fears we had a month ago storage to Maximum Capacity is maybe something were not as worried about right now. Out there is still a huge surplus. Demand is not back to where think asfore but i more countries eventually start opening a little bit seeing and were some of the pandemic receding in some countries isoss the world the hope that people will start flying again, driving their cars. Bounce backwill even though we know its going to take a while, and his will, of course, also affect the demand side in picture. Market i know oslo is starting to open up and norway in general. Demand seeing more pickup within norway . Like an seeing, example you can see by moving around is that people are starting to fly again. Have changedgs because of this pandemic. Think just having digital meetings on webcams, et cetera, is something that well probably keep doing more even when things go to normal so its too early to say now exactly how this will play out but were eeing more people starting to move around but we still have a really high focus on virus at bay, so we still have many measures we lace to ensure that have good hygiene that we dont sit too close together to make sure it doesnt because it p, is, of course, a Major Health Issue that we take very seriously. Anna during the previous had urn in 2014, opec invited norway to come to the meeting. Have they done that this time around . Is this something would you be interested in doing . We were invited as the observer on the meeting that they had before they came to the conclusion of cutting production. Ere not part of this cooperation. Were not a part of opec. Myself attend but we were represented on our in the s here ministry, so, i mean, were group. T of that any production cuts we make will be based on independent decisions, based on whats for our economy and our resource management. Anna have they invited you, im curious, to the june meeting . Not that i know of, no. Matt that was Norwegian Oil inister tina bru speaking with anna. A little bit later well be showing more of that nterview alongside conversations of other Major Players in the oil world. Live our bloomberg event powering forward, crude awakening, at 3 00 go. Uk time on live ust tyke livego on your bloomberg terminal or go to bloomberg. Com, you can also on linked in Facebook Live and twitter. Merkels coalition agreed 130 billion euro stimulus package designed to spur short term spending, and get businesses investing again. The wideranging plan end of the top expectations by 30 . Joining us now is raymond editorman government here in berlin. Andare the winners here who are the losers . Well, matt, actually, arente all winners, they, because nobody is getting any money taken away from them nor are conditions worsening for anybody. They are handouts. Now, there are people whose expectations may not be met, clearly that would include the Auto Industry, which had been hoping for kind of a cash bonus for purchasing cars. That hasnt happened and of a revolution in germany, where, of king. E, auto is that was also the case back in 20082009. Car inancial crisis, industry got a big bonus that didnt happen this time around, so they are on the list. Municipalities are getting less than they expected. I can imagine environmentalists complaining about not going ar enough on green stimulus. It includes, for example, airlines, for debatable. Ill be anna so all of this money, handouts at the moment but maybe someone will have to it in the future. I say maybe. Who is going to have to pay for this in the future, then . Well, you can very well imagine that answer, as always, its the taxpayer. Not quite clear yet. Late last night the finance minister said not all of new money will not be by debt. Part of that will finance new package. Its not clear yet what well be looking at today, the cash will be coming from to finance all of this. Its bigger, its broader, surprising, what we last night. Matt ray, thanks very much. Were up veryys late reporting and editing story. Our government editor here in berlin. Coming up, its the market open. Utures are pointing slightly lower but keep in mind weve had Pretty Amazing rallies especially germany over the last few trading sessions. The open is next with some profit taking is next. This is bloomberg. Next. This is bloomberg. In berlin. This is bloomberg. In berlin. N. This is bloomberg. A minute to go until the start of thursdays equity trading day in europe. Lets get to your headlines. Ermany goes big on stimulus. Merkel hands out a boost for he economy including an Infrastructure Investment and rebates for electric cars. Only one option for the boosting its rogram by 500 billion euros. Anything less would cause a shortoff. When it eijing comes to the proposed acute law in hong kong. Will maintain stability region. Matt were seeing futures lower. We could see some profit today after, weve had the d. A. X. At one point over the last few trading sessions. Its risen, every single one this week. Looks like it could sell off today. He ftse will open down as well. Lets take a look at the paining. Lefthand column under equity indexes which is currently all black the fo out to see come e open lets back to that because im pretty sure that were tarting to see equity andxes open up already, footsie is lower. Of 1 right now, and the ibex down. A little he dax longer to open up, maybe because of the bigger gains that weve been seeing on the dax. Well see a bigger loss. Yesterday, the dax closed up points. That was a 3. 9 gain, so now as investors take profits, European Markets opening lower. Had propelled the 5 stoxx 600 index up this week as well. Thats despite the big of german talyst stimulus, which the drops are despite the catalyst. Nor going back and between up th and down. 130 billion euros added to the economy here in berlin. Larger than had been anticipated. Pooja g us now is kumra. What do you think of this stimulus, german ly for the economy . This comes after march. If you think about it in gdp, its been of nd 8 to 9 in terms that. Retty sizable, but i think this recent package for 130 does not show if its new money or if it top of what they already have but we can assure that at least 50 and the ew money German Government has funded that so well expect more issuance coming from germany, pretty likely in the quarterly update. Good morning. Sales tax cut will be a impulse for the economy. They tick all the right boxes so the types of being introduced right now for consumers to get them spending. Yes, indeed they are trying to address every ingle measure, but its something that we need to see. Are still rkets realizing the scope of the European Market and how it the economy. For regulators its hard to the best s measure. One thing that they need to concentrate on is on the as well but if you do see the European Commission package actually ratified by the parliament, that would be a big game changer for uropean countries across the board because that would e a good package, in addition to the easing that were seeing. The thus far and recovery stoxx 600, compared to the recovery in the s p anemic. Been fairly of course, the u. S. Acted quickly with big numbers, were getting some pretty big numbers here as well. I mean, germany has now euros, 1. 3 trillion more than 1. 5 trillion to low into the economy and its obviously a much country. Why are european stocks continuing to lag . I think its something across, asically eve seen this move since the movement of the markets. Are thinking there may be another package. Just trying re to be more careful. Would read into the germans market move. Anna weve seen a bit of on the ing through eurozone economy in recent days. It does seem to suggest some some recovery taking place. What do you think is the important impulse to be looking at . Terms of data, it will give you an idea. Basically, from their contraction between 8 to 10 , so its solid. I think in terms of they realize recovery will not be suddenly but it will be slow. Have not been reacting much to data as such. More reactive to Monetary Policy as well as i think y side, so as we start reopening, there which has e data been lacking but the key be pmi, will inflation with low oil markets those are key, but in the next few months, all about the stimulus package. Ink thats kind of that will actually give the kind of confidence that arkets want and the stability that we want to see. Much. Thank you very well pick on that conversation next. Kumra, european rates strategist. Perspective and can we see some big expectations out there. Me the money perhaps is apt. Slowly start to open their economies after the pandemic. Expectation. Ket what will we hear from the European Central bank. This is bloomberg. An central ba. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. Some lossesg at here. Points. Is down 92 the ftse is off 25. Some profits after the rally weve seen in the last few trading sessions. Corporate e top stories from the bloomberg terminal. You have a reshuffle to kick 100. The ftse travel is out. Airline easy jet and have ne parts maker been demoted to the midcap ftse 250. Companies that have been boosted are stay at home stock. Kingfisher, bmq boston on the ftse 100, boosted by people working from home, those changes all take place on june 22. Mark your calendar for the move. Stood charter has joined hsbc in endorsing chinas controversial Hong Kong Security law. It says it will help maintain economic stability and social stability in the hub. Ncial the move comes despite critics saying the egislation will diminish freedom and violate the one systems, wo principle. Rollsroyce expects to cut jobs in the uk this year. Its the first wave of the reduction to survive a aviation n the industry. The londonbased jet engine aker ultimately plans to trim 8,000 rolls from that division. Rollsroyce is offering redundancy to all work force, and part of its back office and thats l your Bloomberg Business flash. Save me. Yes. the ecb will decide today whether its massive monetary to be further boosted after europes deepest recession in memory. They are expected to add another 500 billion euros even though less than 1 3 of allocated 750 billion euros has been spent so far. To pooja kumra. Looked ead that and at this a little earlier, i was thinking to myself, why ecb really need to act now, if they have all pandemicrelated funds that they put aside, 2 3 of still left to be spent and other measures have been effective in bringing down yields. So why is there an urgency . And i wonder if it has to do ith the inflation picture in the eurozone. Whats the urgency for you . So yes. As you said, i mean, they lready have a lot of room, i mean, so far, weve just billion 750 package. We need to see in march and toil, they were reacting the shock of the market. Kind of volatility ts [inaudible] hey will have the updated growth and inflation focus. Now, its very hard to where growth will be this year or next year but we did see some people being by ecb, and this suggested the contraction minus e as high as 12 and thats a pretty big number that weve never seen before. Given the fact that ecb has to maintain its mandate, and to get there they need to give more confidence to the market, and they are ready to use their tools but again, we know its coming, its whether they use this meeting, or should they wait for another meeting. Only reason why they could think about meeting for another meeting one, weve seen some positivity with respect o the Euro Commission proposal which has given some movement in the markets. Secondly, we have the funds so ng in, on june 18, they might like to see whats happening with that actually fore using the funds again. Yes. Key matt can i just quickly ecbs, one of their biggest tools has been the in terms of quantitative easing they cant find that hammer. Foresee a problem with the bank taking part as well . Will be one of the key questions also that ecb during theo face press conference. O i think with respect to the bank, first, its pspp, but after this ruling we know that they will be questioned at point. Secondly, we also need to note we did get a statement just after the ruling that they are doing everything within their andate, which is pretty uch true because the court of justice ecb has been waysandmeans prevent any fragmentation. Enforced. Its something thats also told to us. Well see in the coming months there are deviations in the way that cbs is making their purchases, so in march, we buying,a lot of key but thats less visible than we saw in may, and that that ecb omething will try to do right now, at least for the gdp program, with respect to the they are maybe able to get a proper dialup german courts. Matt thanks for your time. Appreciate your input on day, an important especially for the ecb. Well all be watching today. Pooja kumra. Rate strategist. Shell be continuing the onversation with me on Bloomberg Radio at 9 00 a. M. If you want to hear more, well focus in as we get and closer to the ecb decision on what to expect today. Frankfurt tune in, in lone, in the city of london. Digital, ne in on anywhere else in the world go to the internet. You can figure it out. Loomberg radio is not hard to find. Up next, meet the corona economy. At el is out and stay home is in. The ftse 100 reshuffle. Well look at the levers and joiners. Next, this is bloomberg. Next, t. We already were at Record Number f debt on a of measures from corporations when we got year. January of this one of my concerns was that when we have an economic downturn, this highly leveraged economy of ours to more to lead severe pressures on the economy than we would you lly have, but now, know, the Federal Reserve has basically eliminated of corporate debt. They have sent the world a signal, and as were now putting on record amounts of leverage debt, situation is even getting more exacerbated. Ultimately, the fed is going to find itself position where when it phase out these programs of support for corporate debt it will be a happened back first when ben talked about stopping easing, it wasnt met well. Hey will challenge to find out where the put is and this is now a permanent feature of the market. Dudley has told bloomberg he believes they are flirting with moral here. D what does that mean in terms of how Companies May look out of this crisis . Us understand whats at stake here. First, i would quote nothing isd man, so permanent as a temporary permanent program. Corporate america is going to the e addicted fed providing support. Hat it means is that corporations will take greater risk, that if you have a highly leveraged Balance Sheet relative to your competitors, your equity will be punished on business expansions. Pressures will be on c. E. O. s to continue to ncrease the amount of leverage, especially when the fed has got a policy of anntaining low rates for extended period of time. Ultimately, is of reckoning . I think that the Federal Reserve will be faced with a they nge of whether allow a day of reckoning, or hether they basically decide that they just have to continue to provide to the system until inflation rates pick up too levels that probably would be viewed as by most ble participants of the fed today. Scott, weve seen record amounts of borrowing from but at the , same time, if you look at downgrades its happening at a faster pace than weve at least a decade. How do we pair off that thinking . Really interesting, because again, this is something we expected. Expected to see downgrades among high b issuers iple into the eye hield category of about a trillion dollars slowdown. I think that were on pace but there is also another question, which brought up today at the s p conference, which is hat the rating of a bond reflects the probability of default. A so when you have Government Program that provides liquidity, youve major way one of the causes or sources of default, which is the roll your debt maturities over. Atyou have to think that some point, the rating going to start factoring in the implicit federal f the reserve and its going to long run n the reduce downgrades. Cio scott minerd speaking. Ftse shakeup is showing the impact of the crackdown. Household repair group, hope serve. Easton. Us is joe some of those main changes on the ftse 100 are a sign f the times reflecting how were not able to travel and but wech fun anymore can certainly stay home in our houses. Mentioned, you they are related to the clearly, mpact, jets. Asy they have had huge declines in passenger numbers, and as ival jumping down well. Probably one of the companies thate potentially longest of the recoveries because its very difficult to enforce social istancing on a cruise ship kind of environment. Analysts all across the board are very cautious on stocks. Out, ther one dropping we mentioned, they are quite an ble related, in attempt to come out. And you mentioned everyone has more time at home, looking for things to do, and the one thats coming in is hope serve, which is company that provides emergency callouts homes. Inally, the other one is british gas, not so much a dropping outy, after 33 years. Greater smaller on from rivals. After covid weve had these related eally not to covid19. Related to the lockdown. Joe. Anks very much, well see these changes, i guess, on june 22 finalized investors ly should be watching their creens for moves in those stocks. There is a lot of funds tracked, and a lot of etfs, these indexes will be forced to buy or sell depending on the changes. Joe from our stocks team. Next, the uk is on collision course with china, to huawei. Ong the xt, we discuss british relations with a china specialist at the International Relations yu jie. Nning, this is bloomberg. Bloomberg. Anna welcome back to Bloomberg Markets european open. This is what we have across the European Equity space. Markets are under pressure, down 0. 4 . The ftse down 0. 3 . Some bigger losses on the periphery. The ibex down 1 . We spent the last couple of days talking about all sectors in positive territory. Red, things are not all but a bias to the downside. Matt was talking about the aston martin story, that is having an impact on that share price. Bank stocks to the downside and insurance. Beveragere, food and going higher. Matt lets get the bloomberg first word news. Todays top stories from the terminal. Prosecutors have upgraded the murder charge against the former Minneapolis Police officer accused of killing george flynn. The attorney general is charging three additional Police Officers for aiding and abetting. It comes as protests continue across the country, with President Trump calling on new york to crack down on the unrest. Germanys Ruling Coalition have agreed on a 130 billion euro stimulus package. It is bigger than anticipated, and includes a reduction on tax as well as money to build 5g networks and improve the railway s. The stimulus package had to be a package of measures looking to the future. The package will amount to 130 billion euros to the year 2021, of which 120 billion will be spent by the government. Loan italys Pandemic Program is under fire. It has delivered 0. 1 of the 400 billion euros in promised businesses. The delays are down to banks dragging things out because of strict regulations. Government squabbling and bureaucracy obviously do not help the situation. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Anna lets talk about anglosino relations. The u. K. And china are on a collision course. Boris johnson has criticized chinas plans in the former british territory of hong kong. The are looking to exclude Chinese Telecommunications giant network. 5g hsbc have backed china in the standoff over a proposed security law. And have a big exposure presence in china. The statements came on the eve of chinas 1989 Tiananmen Square crackdown. Business community was called on for support. Economic freedom is being threatened by beijing. And itthe critical part, is important to have business members support this. Is dr. Yuing us now jie, Senior Research fellow, chatham house. The conversation talking about china and the u. K. , but you can broaden it between china and the u. S. On the specifics around Anglo Chinese fallout what do you expect to come of britains stance on hong kong . What difference will it make . Dr. Jie good morning, thank you for having me. So far, what we have expressed is a lot of words of war between the two countries. Written bythe oped the prime minister. And china saying do not interfere in domestic affairs. I do not see any actual move from either government. , weink what will happen will see how beijing will proceed with its National Security law. Is that really the end of the rule in hong kong . We are not sure yet. Perhaps it is too early to draw a conclusion. Matt how much do you expect this National Security law to limit the freedoms of people in hong kong . For example, would people still othere to protest against things happening on the mainland , or in their home territory . Would they be able to commemorate Tiananmen Square . Expert. I am not a legal from what i know, the court , trade,of hong kong services, tourism. Given what is going on last summer with the protests running the street, tourism has gone down completely. If we talk about trade in services, without a stable environment, you cannot carry out trade and services. This brings Major Economic damage for the hong kong economy as well. That is part of the reason they decided to introduce this security law. Anna how unexpected is beijings stance here . At the sign of the handover, there was an agreement around and one country for 50 years. Was there an expectation beijing would act this way toward hong kong, but not yet . Has this come too soon . Dr. Yu i think it is down to what happened last summer, and things happening back 17 years ago when hong kong tried to introduce a security law. The Hong Kong Legislature did not enact the entire act completely. Considering what happened last summer, beijing has decided to take initiative itself. Is not in, beijing such a quick stage. We have put it in context of last summer. Matt how important is hong kongs status as a Financial Hub . The economic output it generates is a Financial Hub, how important is that to beijing . Reducehey be willing to the Financial Product of hong kong in order to take control . Think at the moment i hong kongs Financial Sector is important, but not as important as 20 years ago. Beijing now has shanghai. Retreatse companies from the United States, then perhaps hong kong has become the solo financial platform for , if they wanties to present it as an international company. Chinas endms of goal, is reconciliation with the west and the United States and u. K. Very much in chinas interest with what they want to pursue are not . Dr. Yu i think the reconciliation is in chinas interest, but only with conditions. With the condition that china in this post covid19 world, china has become more selfreliant. Judging by the policy result from the National Peoples isgress last week, china more interested in its own domestic affairs. Secondly, if china can do business with the rest of the world, it is fine. If china cannot do business with the rest of the world, especially in terms of ideology, it is not compatible. China has decided to charter a new way. Matt thank you so much. , Senior Research fellow, chatham house, joining us to talk about this important relationship. Up next, the u. S. Defensive secretary opposes u. S. Military predecessor issues a scathing attack on the president. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are looking at a little bit of a selloff after at least three days of rallies. The dax down 72 points. The ftse off almost 20. Top corporate stories from the bloomberg terminal, we will see a reshuffle of the ftse 100. Airplane parts maker have been lowered to the midcap ftse 250. Increases in kingfisher, the to the ftsend 100 will take effect june 22. South korean prosecutors are , iting an arrest warrant overts the action is allegations of unfair trade, price manipulation and violating audit laws. The news agency previously reported the executive was under investigation over controversial mergers between samsung units. Rollsroyce expects to cut 3000 jobs in the u. K. , is the first wave of reductions to survive the downturn in the aviation industry. The londonbased jet engine lls. R plans to turn 8000 ro rollsroyce is offering all of itsto staff. That is your Bloomberg Business flash. Lets get more on the u. S. Protests. A former secretary of defense, general jim mattis, has ripped into President Trump over his aggressive rhetoric. He wrote, all trump is the first president in my lifetime who does not try to unite the american people, does not pretend to try. Instead he tries to divide us. As protest continue for a ninth night, minneapolis has updated charges against former police toicer Derek Chauvin seconddegree murder. President trump says he does not think he will need to deploy u. S. Troops, but he has the power to do so. It is customary, we have a powerful National Guard, over 300,000 men and women. We can do whatever we want as far as that. As far as beyond that, sure, if necessary. It should only be used as a matter of last resort, and in the most urgent and dire situation. We are not in one of those situations now. I do not support invoking the insurrection act. I commend the secretary of defense expert for taking the position he took because military leaders almost in unison do not believe that our military ought to be used to fight our own people. They ought to be used foreign invaders. Lets get more on this from new york. Annmarie hordern joins us. Trumpsng rebuke from first secretary of defense. Absolutely, he went after donald trump in a statement published in the atlantic. Condemnation of the president of the United States, and extraordinary because the military is usually a political. This will get a lot of attention from democrats. The question is how much mileage it will have. It does strike at the heart of and hissident Trump Administration and what he has been talking about, a strong military. This was his First Defense pick, secretary of defense jim mattis. He was revered and respected so much that he was in the cabinet. I was speaking to someone who said he could not imagine a time when we had a sitting president castigated by a former member of his cabinet. That is why this statement is extraordinary in the United States and the political sphere. How has the president responded to this . Annmarie he went to twitter, his favorite choice when he wants to hit back. He said it was an honor of his to get rid of his First Defense theetary, and branded him worlds most overrated general. His press secretary said mattis was doing this to impress the d. C. Elite. At the same time that the statement came out, trump was sitting down with sean spicer, the former press secretary who is a conservative host at media outlets. He was renewing his threats. Earlier in the day we heard from the current secretary of defense, mark esper, who said he does not support the insurrection act. What is so interesting about this is just a few hours ago, l said they are cutting the budget of the police. This is something protesters want to see happen. Has a very different picture from state and local officials and the presidency. Much. Thank you very maybe the National Guard is more appropriate, if at all. Coming up, how far will the rebound rally go . Currency and rate strategist joins us next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 51 minutes into a negative trading session for europe. During then worse session. Lets tell you about stocks on the move. We will start with the auto sector and daimler falling. The market has built up expectation running up to the announcement last night. 500 job cuts, restructuring coming from the luxury carmaker aston martin. Estimates. Gs beat it is helped by the u. S. And china. We see a little profit taking after the big gains this week. Lets talk with bloomberg mliv currency and rates strategist. It has been risk on all week, and we could see the end of this global rally we have been watching. Is this just a pause, or will we see this rally continue . There is a good sense why becausey should pause, we have overshot fundamentals on just about everything in stocks. We saw treasuries selloff big time overnight. The increase in treasury yields is the markets way of messaging that things are getting back to normal, even if not in the real economy. On wall street it seems to be normal. You could think this is an overreaction. You could say the selloff in treasuries was overdone. If you look at the plunge in the 10 year yield, from 2 in two months, this is not a overreaction. Anna i wanted to move to the ecb and what you expect to see their. What you expect to see there. I guess the market focus with that in mind will be on italian bond yields. If we do not get an increase in the plan from the ecb, what we see from italian bond yields . We do not get an expansion immediately, i think italian bonds will selloff a bit. Bonds have been trading risk, particularly a tie, and they are long overdue. For correction. The ecb minutes for the april buting showed they have all promised there will be an expansion. The question is not if, but when. We saw a selloff in treasuries overnight. Right now we are looking at 75 basis points as the yield. What do you think is going on with the u. S. 10 year . Ven i think the increase in the 10 year yield is a welcome factor in my opinion. As the yields go higher, it suggests the markets are beginning to find their feet again. Turmoil in the markets, first of all the treasuries rallying big time before stocks got the message. Itrall, it is the direction should be going. Thank you very much. Currencys market live and rate strategist. Good they get his perspective. European equity markets under pressure, down by 0. 3 . U. S. Futures, we expect a bit of weakness. Elsewhere we are expecting a little bit of a retreat. The optimism from earlier this week seems to be on pause. That is it for the European Market open. Stay with bloomberg television. Is next, they will take you to the runup to the u. S. Market open. You say that customers make their own rules. Lets talk data. Only Xfinity Mobile lets you switch up your wireless data whenever. I accept 5g everybodys talking about it. How do i get it . Everyone gets 5g with our new data options at no extra cost. Thats good. Next item corner offices for everyone. Just have to make more corners in this building. Chad . Your wireless your rules. Only with Xfinity Mobile. Now thats simple easy awesome. Switch and save up to 400 a year on your wireless bill. Plus get 200 off a new Samsung Galaxy s20 ultra. Francine another shot from the ecb. The central bank has been boosting its emergency Bond Buying Program. Some investors say anything less would cause a shock similar to market selloff. Experts break with trump. The former u. S. Defense attack onopposes the protesters, and others issue skating attacks on the president. And beijing, when it comes to