The backdrop continues to be the coronavirus. New york city finally gets a chance to reopen today. I am waiting to hear the construction outside of my apartment. It has been three months under that stayathome order in new york. A live shot of Herald Square and the area around the empire state building. Construction, add, manufacturing, wholesale trade, and Retail Stores can offer curbside or instore pickup. A former new york state Lieutenant Governor and current member of mayor bill de blasios Fair Recovery Task force. There is really no other person. E really want to talk to today this comes in contrast to the protests we saw. How did the protests affect phase one of reopening . Dick one cannot be certain. I think the Biggest Issue is the revenue loss that the city will suffer as a result of sales taxes and property taxes and income taxes. Its impossible to measure but it is way beyond the capacity fiscally of the city or state to make up for that lost revenue. A function ofs how many people are going to move out of new york city. There are estimates that hundreds of thousands will leave. The way in which the virus spreads and the congestion and the disabilities of that congestion. I dont believe that will last a because when theaters open up and sports stadiums open up [indiscernible] living and new york in particular, the most exciting city in the world, i think that people will begin to rethink any decision to leave. Richnk some people are enough to have houses outside of the city and they are using them a lot of creates temporary vacancies. Hopefully there wont be that many permanent vacancies, because that will have a devastating impact on municipal revenues. It is guy in london. Similar experiences being had in the british capital. Lets talk about how long it is going to take to get to the next phase for new york. This is phase one. When do you expect phase two . Talking aboutis the beginning of july. What are the benchmarks you are looking for to kind of see how quickly new york is going to progress from phase one to phase two . Dontto be honest, i think anybody knows. Guessing about human nature or guessing about how the media is going to be portraying what is happening, i think that the think the i occasional violence of the company is a major disincentive. There [indiscernible] that is much more significant than anything other than the virus itself. The biggest question is employment. How many people are going to decide they dont need a big fancy office in downtown manhattan, we can work from home . We have our computer and the ability to get on the internet, have zoom broadcasts with our colleagues. 100 whye pay should we pay for rent for a fancy office when we can work from home and not have to gather in a crowded subway or bus . That is a very hard thing to predict. That ultimately the attraction of being with human beings, being able to go to a , goe, a theater, a ballgame thisstaurants before was at aon occurred i restaurant that was unusually crowded. I asked the owner, was this something new . He said yes, more and more people are choosing restaurants to be there social centers. The Restaurant Business is thriving. [indiscernible] restaurants pay to Property Owners around the city you are going to start learning about when we are going to return. Itself people like collegiality and friendship and relationships here on that in point, we reopened phase one to get towards phase two. As a new yorker, what happens if there is an outbreak . How are you tracking the success of the reopening and do you have plans for a targeted lockdown, a more strategic lockdown if there are clusters that emerge . When the protests started, when the tragedy in minneapolis occurred the work of our task ce the pressures on the mayor and his staff are a norm us. We were on hold. Know, the task force does not have a prediction nor frankly do i have any one of us think anyone of us individually or all of us collectively can have any kind of accurate projection on how fast it will take. Transport andn on an idea of how we progress. Ridership on the new york subway is going to be significantly decreased. Do you think that probably means that the subway needs extra funding . Narrative,t of the and do you think new york is doing enough to encourage people to ride bikes and take buses . Mpa, over 3. 5 Million People use the subway every day. A very small percentage of them actually sat down. There were crowded cars and buses. I think it is going to take some you canteople social distance in a crowded subway car. Hasever the loss the mta suffered is staggering. We have several billion dollars from the cares act and we are hoping very much that the congress will appropriate another several billion dollars to keep the mta going to make sure it has the ability to maintain its power stations, fleet, its repair facilities and the capacity to move people. Schedules toging try to spread out the use of the subways to minimize congestion. How human nature is going to respond to all of this is beyond the capacity of the average person. Guy we will leave it there, thank you for joining us today here on bloomberg television. His take on the phase one reopening of new york city. You, e have coming up for Nancy Tengler of Laffer Tengler investments joining us. After a rotation into the cyclical we continue to see on both sides of the atlantic. That is next. This is bloomberg. Live from new york i am alix steel. Live from london guy johnson. We talk about the merger monday situation. Over the news gilly in astrazeneca looking to gilead and astrazeneca looking to combine. They have made an offer for gilead which is also working on a treatment. Joining us is Nancy Tengler of tengler your thoughts on this possible tie up . You, and congrats on the new show. Concept, the m a concept but the market is starting to Pay Attention to normal things and ceos are considering how to rationalize businesses for the future. Historically these mergers are good for the sector. This would make sense on the face of it. I think there are big hurdles in and cross pondcs politics if you will. Like the fact that the ceos Work Together and the product type lines are complementary, but i think it is early days and the stocks are not necessarily reflecting that the market thinks this is going to happen in the near term. Nancy, lets talk more broadly about the market. You talk about the fact that you could see this as a sign of things getting back to normal. Dontmarkets in some way feel normal and are responding to huge liquidity from Central Banks and not looking at the Economic Data. We had solid payroll numbers on friday. Does it feel like a rational market to you now . Nancy absolutely not. This has been one of the hardest markets for me as an investor in 35 years. Not the downside moves but the upside, rapidity, and the lack of fundamentally driven reason. I agree the liquidity is definitely keeping the corrections shallow. Has justthat trade about played out and in the summer you will get some sort of a normal correction. Then the election takes over and that carries us through the end of the year. Market hasguing that acted rationally necessarily. Are ink that investors have nowhere else to go. Why we have a hedge on our portfolios. Its the only way we can figure out how to deploy. Alix thats a great way of saying it, deploy your ignorance. Coming up, election thats clearly a risk. The Economic Data a risk as well. If you dont participate in the rally you will miss out especially if you are not getting into industrials and energy. How do you pair those two . Nancy we are not terribly original in this regard but we have a barbell strategy. We are not chasing deep value trades. I think that is shortlived. We expect a scare Step Recovery which is not a super hard stretch to get to. Exposed you want to be to the cyclical growth of companies longterm and we are barbell laying barbelling that with more intense plays in pharmaceutical and health care that we had before covid. We have used weakness to add to higherquality companies with strong fundamentals that were on , Consumer Discretionary, technology, and a few industrial. Guy do you think we will get any surprises from chair powell . We have the fed on deck and chair powell so far has been there to support risk markets. Do you see any change in that scenario coming up later this week . Is notno we dont, which to say we wont be surprised. Tendency inngerous our society to conflate expertise and insight with the ability to predict the future. I love that notion that it keeps us all humble. I am not saying i know the answer but the fed has been a steady hand and i expect them to continue to be a steady hand. It will be interesting to see what kind of stimulus if any we get out of the administration and congress. I think that matters more at this point and the fed will remain constant. People tend to talk about buying those good Growth Companies at a discount they talk about software and cloud. Is that still your play and do you pair that how do you offset the risk headed into the stimulus conversation or the election . Put in place on the sp y and our client portfolios that we initiated in february. It was for different reasons. We were considering political calendars and the low levels of volatility in the market. That worked out very well and kept us clear eyed. We renewed the puts, that round will expire at zero in the middle of july. We are adding to that as we get through the summer and fall. Long portionin the of our portfolios we do like many of those names. We look at relative price to sales ratios and what we are paying compared to the history and the market. Mcleod companies are growing sales much faster than investing in the market and much faster than their price participation. They are very attractive at these levels to us. Some of theom and more exciting consumer names and Consumer Discretionary like ulta and chipotle came into our range in march and we accumulated holdings in those. Its not just binary or singularity if you will in technology. We think there are other places you want to be. We like raytheon technologies, but we are not chasing the deep energy trade or even the deep materials trade. We have exposure in those groups but we are not guy what about europe and the United States . Over the last five days the euro u. S. Investors 12 in five days. Nancy, it has outperformed the u. S. By a considerable margin. The u. S. Markets are trading record highs. Is that a signal you want to start buying the rest of the world . The dollar is going down, do i need to diverge to buy geographically to get that extra into my portfolio and partake in this global rally . Nancy thank you for the question. I found that rally heartening. Broadennt to see this out from not just here in the u. S. , but across the globe. I did find that encouraging. We have clients exposed to the global markets. Thissaid, we have made prediction multiple times where we thought the relative trade was going to favor the globe. The only year that we saw that come true in the last 10 we saw it in 2017. We saw it last year as well. Are not aggressively exposed to the globe, but we do have our clients exposed. I think you must be if you are Something Interesting to see whether the ecb catches up in terms of the Balance Sheet with the fed. Nancy, we will leave it there. Nancy tengler of Laffer Tengler investments joining us to talk about markets. This is bloomberg. This is bloomberg markets. Its time for the Bloomberg Business flash, a look at the biggest news stories. Big Job Companies underway at a British Energy company. They plan to cut 10,000 jobs as part of their reorganization. Top 400 Senior Management jobs will be cut one by 1 by one third. The cofounder of reddit has resigned. He called on the company to replace them with a black candidate. Ceo Steve Huffman agreed and said that reddit would take a stringent stand against racism. A post on a message board on reddit has been a source of tension because of its content. 3300 a share. Under began the day at 2500. An annual survey of Online Shopping suggesting that Amazon Mobile pay inbest online retail. Alix thank you so much. Froms an upgrade, 30 300 2700. Thats a serious upgrade. In the midst of that what will the margins be like . Are going to be something you want to Pay Attention to. Amazon web services is the primary driver. The web Services Side is where you get real value. I think amazon is going to make big political headway and tax headwinds, and big employee headwinds. I wonder if all of those have been factored into this incredible price target. Some ways this is a windfall from an event that was. Nexpected alix you could make the argument for facebook, google, and twitter in europe, how do you price that . Guy i dont think you can. You have to assume that the better the story it becomes for amazon you will put a bigger target on that business. Fact thatk to the amazons ultimate value in so many ways rests on the web Services Business and that web Services Business drives Everything Else both internally and externally and gives them huge power as well and that is where the power will often live. A lot of Companies Want to work with businesses online. Designers are full with businesses trying to put their websites online. Alix coming up we will talk about oil and the opecplus deal with Francisco Blanch of bank of america. This is bloomberg. 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. Live from new york i am alix steel joined by guy johnson in london, happy monday. Brent erasing earlier gains, the Energy Minister saying it would not continue with a voluntary curve after june. They added on a one million barrel a day cut that will end after june. He compared opecplus to a central bank. Compared to what central bankers are doing these days. After all we are seeking stability of the oil market. [no audio] we want to bring in Francisco Blanche, head of Commodities Research at bank of america. A lot to unpack with opec. People keep writing about the comparison of opecplus to Central Banks, meaning they think they can control the curve up oil prices. Can they really . Francisco they can definitely do a lot. The comparison is adept when you think about how saudi arabia has pegged its currency to the u. S. Dollar for several decades. Reasons whyof the they need to find stability in the oil price because they are not getting much by means of currency cushion. Australia has the means to control the price of iron or because the currency helps them cushion those blows. Balance the trade deficit and to balance their account deficit. They are the central bank of oil and have been for a long time. Stability is important to the oil price and saudi arabias stability and that of other opec countries. There is some analogy there. Alix the one thing they cannot do is buy up treasuries which is how the fed might control the yield curve. Its harder to manage inventories and also supply while dealing with demand at the same time. What does this mean for short and longerterm oil prices . I think the opecplus organization has a fair amount of impact on the curve and they can definitely flatten the front end of the curve. We have a piece out called tightening the oil some barrow sombrero. We thought opec did a good job of regulating. The reality is, opec cannot control the back end of the curb and today we have a lot of Spare Capacity. Longterm oil prices will become more anchored. At the end of the day saudi arabia was producing 7. 5 Million Barrels and will now ramp up to 8. 5 Million Barrels. They still have 4 Million Barrels a day of Spare Capacity there and another four and a half elsewhere in opec. All the Spare Capacity caps the back end of the curve. If you start shifting the front end you will not be able to push the back end higher in my view. The back end will be anchored in the mid40s for quite some time. The before we move onto ramifications of that, break down how successful you think the cuts will be. Youre looking at 9. 7 Million Barrels a day. Iraq is promising compliance . They will comply for the months they did not comply . I have a hard time believing fiscally they can manage that. Francisco i think that is definitely partly true. At the end of the day what is important is that inventories are no longer building out an excel or rating pace like they were in the months of march and april. Opec has managed to curve it supplied to a point where demand and output are more or less balanced so we are not sending barrels into floating storage in the high seas. Thats the last thing opec wants to see, it puts a lot of spot pressure on the spot price while the forward isc does not want that, it terrible for saudi arabia. They have managed to flatten the curve, iraq has not complied. We expect iraq to be fully compliant. Been a lot better behaved this time around. They have been more liberal than others expected and agreed to stay on for another month despite the fact that the Russian Energy industry is hurting from these cuts. The Energy Industry looks more like europe or america because than it does like saudi arabia has. There is one russia has Many Companies and interests. I think that will help the market stay balanced. Ultimately this is about demand. We need to get demand back. To your point earlier opec can behave like a central bank, but the fed cannot buy oil and the fed cannot print gold. Opec cannot create demand for its oil. Naturally see that return and that is the question everyone has when we look at financial markets, will the economy fully follow and that is our biggest concern, that we end up with a shallower recovery consumption. Guy lets talk about what this means to the shale industry in the United States. Oilhat price does u. S. Become globally competitive again . World cannot live without u. S. Shale oil. We have 10 Million Barrels a day of u. S. Shale production and world demand is 100 million. To 95f demand comes back Million Barrels a day we will still need shale production. I think shale is required. The question is the pace of the return. For the time being in the next couple of months we will see the shutins that happen naturally in the past two months and they will be in reverse. Theill see a rebound from 1. 71. 8 Million Barrels before we start pulling back to around a 2 million barrel a day declined by year end. At some point next year shale production will return and we will see more growing activity and completion activity and a pickup in production. This is already starting to signal we need that shale to return to market. Guy one of the issues that we thegoing to face is that shale guys need to sell forward, they need to hedge from a Balance Sheet point of view. That looks like it will get tougher and tougher as well for a number of different reasons. In terms of managing the business, businesses are in need of cash, they need to have these Balance Sheets and be able to hedge forward. How much more difficult is it going to be . It is going to be harder and we have seen for the most part the Financial Sector and Banking Sector reducing their lending to energy in the past few months after the big shock of negative prices on april 20 and the turmoil that has cost the main issue here in my mind is that shale is going to come back more slowly. We will need a stronger price incentive for that to happen. Its not like it wont happen but i think you will need to see the spot price leaving the forward market higher and that eventually will occur at some point next year. The spot price is going to create a big premium to a forward price for a good chunk of 2021 if we dont have a second wave of covid19. We need to incentivize those shale players to bring barrels. They wont be able to hedge as easily and a lot of the money that comes in, they will use it to reduce leverage. The players that need to hedge the most are those with the highest numbers of leverage. They will take the money and start using it to pay down their debt and make sure they are more aligned with opec. Before we get to the up,ruptcies wrapping it lets talk about demand. Over the weekend we learned that Chinese Oil Imports hit a record, they have been building a lot and they are crediting the demand to the strengthening ties we have seen and weakening spreads. Is that sustainable demand or do you look at it differently . Francisco i think chinese demand has been recovering sustainably. In the u. S. The way i would like to describe this is gasoline is experiencing a vshaped recovery. Sel is worse very and sing diesel is experiencing economists will talk about different letters and they will have this word search for they want toels tack on to the economy. The oil market is clear. Shaped. L is l that is what we are seeing in from the u. S. Data and europe. Those are my observations. I think ultimately we think demand will come back to a 97 brain next year on average. Ell lose a couple million this is assuming there is no second wave that leads us to major lockdowns. A steady pass led by road have u. S. D we still china tensions which i think will impact diesel consumption as well for trade transports. Guy a lot of volatile inputs we have to think about. Francisco, thank you very much. Head ofo blanch Global Commodities joining us from bank of america. Lets catch up with the bloomberg first word news. U. S. Cities hit hardest by the coronavirus start to reopen today. In the initial phase new york city will allow construction, agricultural, manufacturing and wholesale trade. Retail stores can offer curbside or instore pickup. If all goes well new york could expand the opening. Thousands have died in the city from coronavirus. President joe biden is trying to link joe biden to activists. He is trying to portray the democratic candidate as weak on crime. Joe biden has joined the protest against a black man in Police Custody and the president is on the defensive. Prime minister Boris Johnson finalizing plans to ease the locked down and rebuild the economy. He is hoping to rebuild support in his government. He will brief his cabinet on the next stage of lifting restrictions. Later this month he global news 24 hours a day on air and on quicktake on twitter powered by more than 2700 journalists and analysts in over this istries. Bloomberg. Guy . Guy thank you coming up we will be joined by Jon Winkelried from tbg holdings. He discussed the growing risk around the firms assets in china. The exclusive interview is coming up next. Welcome back. You are watching bloomberg markets. I am guy johnson in london with alix steel in new york. Itscapital has steered portfolio through the first phase of the coronavirus crisis, its coceo Jon Winkelried ,is turning his attention to other issues think routing the glowing risk around the tpg assets in china. He an exclusive interview discussed the tensions between washington and beijing. Jon i think you have to be thoughtful about what is going on between the u. S. And china. It affects a lot of things. These massive economic superpowers and there are so many things that are intertwined. I was on a board call the other day and we were talking about supply chain and part of it we get from china, and important parts of it we get from china. As a result of that you have to be thoughtful about that. Eric i am going to push you. People might misinterpret what thoughtful means, does it mean change . That youghtful means have to make certain changes because you have to given the elevated level of risk, you have to make sure the changes will lessen your dependency. If you dont you do it at your own peril. That we would be advocating for our companies to think about lessening their dependence. That does not mean cut it off. That means risk manage, that means risk manage. Eric that makes sense. We dont know where this is going. It is possible that the battlefield may extend from where it is now, trade technology and security, it might extend to finance President Trump has threatened that it might he might even have threatened that it will. Of can think of all kinds reprisals the chinese might take, perhaps for good reasons as they see the world. Do you fear your capital may be stranded there . Jon i do. Bunch ofar game a different scenarios on this in terms of what might happen. You have to consider what might be the most profound changes that occur. Adverse outcomes and one of them auld be that there is relationship or Economic Activity effectively freezing between the u. S. And china. Do i believe that will happen entirely today . I think its a low likelihood. Its a higher likelihood than it was but its a low likelihood. I do have the worry about level of investment and how much value you have as an Investment Organization and how much value you have and what you are flowing to china. If it gets stranded or frozen and you cant get your money out it has significant implications. We are thinking about those things and not suggesting that we are there but i think we are evaluating a bunch of risks that if we ended up having lets think of it as a blackout on our relationship with china, what are the risks . Thingsevaluating those and taking the actions on how we risk manage around that. Guy that was tpg partner and ried on bloomberg front row. Jon winkelried on bloomberg font row. You made an investment in china, what do you do with the investment now . Do you bring it home, bring supply chains back . The ultimate question from our this going to, is be good or bad for the economy. Alix most economists think deglobalization will be bad. , was stuck by Morgan Stanley and he says that the fight between the u. S. And china could actually be good for some. They look back to germany versus the u. K. And say it helped innovation, productivity, and you can see the same thing with china and the u. S. It could help technology and productivity with an off the beaten path take. Where you hide out and how do you invest in this scenario . Alix guy at the moment output gaps are global. One of the key things we have to think about is wages. That virtuous circle, that recreation of a middle class which is so important after the Second World War in terms of what was created for the u. S. Economy. Hugely powerful force. Thatinly that is something could be good for the u. S. Economy. Certain Economic Data suggests that is a big piece that is ultimately missing. About as are thinking you make investment decisions. If they are a u. K. Bank trying to do business there that is tricky especially in hong kong. Deal of a merger between astrazeneca and gilead. We will break that down. This is bloomberg. Guy welcome back. Think about the astrazeneca gilead story that we have been talking about over the last 24 hours. Made astrazeneca has made an approach to gilead in the United States. That would create one of the huge deals of all time, probably the biggest deal in the pharma sector. Salim syed joining us to give his take. Lets talk about this. A lot of the reporting suggests that a lot of these conversations are in the past tense. Does this deal makes sense and do you think its going to happen . Salim thank you for having me. This does seem to be in the past tense. Yesterday we got two articles, one was from bloomberg that astrazeneca seems to have approached gilead. The article mentioned specifically last month which would indicate that this is in the past tense. Is ae can wonder if it deal that would likely happen. Most seem to believe it is not. There was an article that came through by the london times that mentioned that astrazeneca had dropped interest in gilead. On a fundamental basis which is how i like to look at things, the two businesses dont have a ton of overlap. Ead is predominantly astrazenecas largest business is oncology. One could question whether there would be synergy. These are two of the largest players that are developing a treatment or a vaccine for covid19. To the extent that astrazeneca wanted to have more of a corner on that particular market. That couldas a be a potential approach to gilead. Alix should astrazeneca go after another company . Cover i dont astrazeneca, but it seems like from those i have spoken to that astrazenecas multiple is that it is in the mid20s which indicates that investors really like this company. ,oing after another company during covid19 and crossborder deal that we are seeing today would probably be viewed negatively. Coming up on the program, adam of the Peterson Institute and former policymaker will be joining us. His look at the fed and what the ecb could do. This is bloomberg. Live from new york, i am alix johnson ind by by london. This is the european close on bloomberg markets. By guy johnson in london. This is the european close on bloomberg markets. Is amazing that we find ourselves with these market levels given we are just reopening new yorks economy. Phase i is coming through today. In terms of what we are seeing locally in the market, lets compare and contrast across the atlantic. We have got this more cynical bias toward the market. Banks are doing relatively well but over the last hour or so, we have started to fade. European markets have outperformed over the last few days. Eurodollar, 241302