For the first time in three months. It has just gone 6 00 a. M. In london, 7 00 a. M. In paris, 9 00 a. M. In dubai. Who do you believe . Larry says there will be a 20 upsurge in the United States going into the second half of the year. Morgan stanley says we will have a short, sharp recession. A vshaped recovery on the way . It is reminiscent of the great brexit bubble that many people wrote about but never lived. Our next guest talks about risk on, risk off. We will talk about the markets in a moment. Did you have a good weekend . Nejra i did. We can go out shopping again to nonessential shops in the u. K. I personally will not be rushing out. Last week was definitely gay risk off week. Was definitely a risk off week. Andrew shaw thinks that investors should position as such, that stocks and credit will be marginally higher and tighter. Looking at cyclical and value stocks. Wells fargo and ing are among those also seeing the selloff as temporary. Read on the screen in asian equities. U. S. And european futures pointing to quite a powerful u. S. Day in europe and the 10year treasury yield has fallen back. Handle byes see a 105 the end of 2020. Aussie underperforms. General Dollar Strength on the bloomberg dollar index. Firstaker after its weekly drop since april of last week. 79 neww virus covid19 cases reported over the weekend. The capital has locked down nearby housing districts. Chinese Authorities Say that risks that it will spread are high. In new york, Governor Andrew Cuomo warned against triggering a second wave of the coronavirus. Joining us now is david bloom, global head of fx strategy at hsbc. Good to have you with us this morning. Do you see this trend of markets and fx markets in particular being pushed around by second wave fears continuing for a while . Whatever drives risk on, risk off. The market is a row, row market. You can come with your fancy theories and everything. For now, it is all about risk. The dollar iss, rallying, the yen is doing well. The aussie and kiwi are getting smashed. Lets try and understand the here and now. Manus lets do that. A look at last thursday as a very important day for me. For me, something surreal happened. Nearly 8 and we barely batted an eye. That says to me that there is a great deal of fragility out there that we might be underpricing. Rerating last thursday say to you . Somethink powell knocked sense into the market. Losing,ownturn, the s p that was about liquidity and fears. Liquidity, plenty of things were opening up, and now we are talking about second waves, risk onrisk off. We have gone risk off because of shaped. Ity of the u american banks are trying to tell me it is a vshaped. It is a world out there. Ushape and it will be slow and patchy, the recovery. If what is pushing the dollar around is risk onrisk off rather than anything else much here, what is your actual outlook for the dollar toward the end of 2020 . Bearishbullish, are you . David mildly bearish but actually both. D pickup, whathape the government will need is buying power to keep pushing the economy. Have buyingke nokia power and they have to keep going. Sterlings will struggle. The dollar squeezed in between. We can talk about emerging markets. If you have fiscal firepower. Central banks doing crazy stuff. Have not got fiscal power and your fiscal your central bank will have to pick up the slack. That is your euros and your sterlings. Manus the fiscal differentiation is going to be the driver for you. You mentioned the aussie and kiwi a couple of times. Two very different narratives about negative rates. Ssie, you say the crowd has been roaring the encouragement but we will see back. The differentials between aussie and kiwi, and whether that expands . Thed i think you have hit nail on the head basically for once, so congratulations. There is a big break between them, and that is the central bank. The Kiwi Central Bank wants to do more crazy stuff and the aussies want to keep it calm. The virus in australia and new zealand seems to have tampered down. The fiscal push seems to be the same. The gdps could get 45 . We started at 8590. The central bank in new zealand seems to be wanting to do a little more funky stuff. That is the whole idea that we have got. A perfect example where two things are the same except one central bank wants to get more funky. If you have fiscal firepower in general, you dont have to be so funky as a central bank. When you dont, your central bank has to do all kinds of crazy stuff, and that is never good for the currency. Nejra if we carry that over to the fed, wouldnt that make more of an argument to be bearish on the dollar . David you are correct. But the dollar is the reserve currency of the world. If the dollar was just some normal country, we would be negative on it. What happened with risk onrisk off. The dollar sold off like crazy, netted itself perfectly three or four days ago. People started telling me, this is a secular decline in the dollar. All of the dollar bears came out of their woodwork, the s p fell 6 , they got smashed down again. The dollar is a special currency. It is the reserve currency of the world and it is the bellwether. I agree, one day, the u. S. Will get into trouble, but that is not today, not tomorrow, not this year. Of course, you are talking about a variety of people who lambasted the dollar. Stephen roach was one of them. People coming out of the woodwork to lambaste him. You could say it is powell who created the floor under the dollar. David there is always going to be something. When you buy a dollar, you get a freedom free insurance policy against all bad things. You buy it and people say you are right for the wrong reasons. Insurance policy. When things went wrong, things went wrong. People caught the reality of the ushaped. There are some times we have seen perhaps the second wave. That is risk onrisk off. Stop imbuing your own qualities onto the dollar. Manus i am not imbuing anybodys qualities. I am just quoting stephen roach. No leading nation ever revalued its way to sustainable growth. We can debate that in a moment. David, one thing i have to say on near 20 years of interviewing you. It is manus. Manus. David madness. Manus david, dont start. We will get up to speed with a little bit of the news flow. Kind of like you say dollar and i say a dime. Lets get you up to speed. Things are looking up for the u. S. Economy according to the white house Economic Advisor larry kudlow. He told cnn state of the union that growth in the u. S. Is recovering and there is a very good chance of a vshaped recovery. Trumps chiefld economic and cyber chief Economic Advisor confidence, the message from the u. K. Prime minister Boris Johnson, launching a review of the social distancing rules as he tries to encourage consumers to go out and buy. Nonessential stores reopened in england today but Industry Leaders say that keeping requirements will hurt businesses. Ghosn, saying he was set up. Now there is some evidence to support the claim. The campaign by top nissan executives to remove him as chairman started almost a year before the arrest for the alleged financial misconduct. We are told that the efforts his wanting toby move closer to renault. 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. Good morning. Up, fed chair Jerome Powell expected to reiterate a downbeat assessment of the u. S. Economy as he heads to capitol hill twice this week. This is bloomberg. Manus it is daybreak europe. Quick flash of the markets. Which narrative do you believe . Morgan stanleys vshaped . Or are you worried about lockdown take two in china . Our next guest points out that the as a dollar the aussie dollar after the last two recessions. Oil is coming off, down 8 last week. It continues because we are worried about a double lockdown. Abe this morning says that you cant spend, spend, spend without some repercussions. We will talk about the dollar in a moment. Whether david roach is right or the bloomster is right. Fed chairman Jerome Powell is expected to bring a cautionary message to capitol hill. His are boxed to lawmakers will likely echo the downbeat assessment given last week when policymakers signaled rates would probably stay near zero through to 2022. His performance has drawn criticism from the white house with larry kudlow suggesting it was overly negative. David bloom is with us. Kudlow took a swipe. Little you say, gave a bit of a reality check. Powellt to you that created a floor on this push down of the dollar. What does he have to do this dollarr you to push the narrative . I am not sure there is anything he can do. If you tell me the Unemployment Rate would get back where it was in 2. 5 years time, he cant change that. The fed has saved the world with the cross currency swaps, showing that the u. S. Dollar is still the anchor of the Financial System under which we live. We need fiscal push. Cheap money is not good enough. Buying bonds is not good enough. It is really the fiscal policy to which we will turn. Nejra fiscal policy is one of the reasons we have spoken to you before, david. You have not been overly positive on the outlook. The last ecb meeting and the agreement around the eu recovery fund. sy do you not see the euro gain sustaining from here . David what i am saying is that there is this tale risk. Ofs breakup risk as kind disappeared. That is great. In the next 18 months or so, it is not going to break up, brilliant. But that is no reason for a sustainable pick up in the euro. Is this changing the growth trajectory of the euro zone . A big fiscal whole, even if you include the whole of the euro zone, still not in great physical shape. Andets take away the risk increase the euro about 4 , 5 . That is what it has done. Great. Move on. This is not creating sustainable growth. Manus so if the ramp up is done on the euro, how do you phase that move . Buy aussie, kiwi come again . How do you plan kiwi, yen . Itid i still think you play against the dollar towards 110 but it has already gone a figure and a half from 114. Let me just get this straight. If you do believe the next Generation Fund is a game changer, then you buy the euro against sterling, not against the dollar. Because this whole brexit thing is making a comeback. If you believe that and you do not believe me, then you buy eurosterling, not eurodollar. Find that interesting, that the market appears to be ignoring the impact of the eu recovery funds proposal on gdp. Talk us through the risk on that and what else you see making sterling vulnerable this year . David brexit is back. The idiosyncratic thing to come through. First of all, as the next generation, it probably would not have happened if the u. K. Was still in. Now we are out and we dont want to pay for it. The chances of us asking for an extension, the u. K. Government says do not want to ask for an extension at all. Deal, partial deal. Partial deal seems to be the best you can hope for. Then, brexit kicks in. The next generation pushes the euro higher, pushes sterling lower. That is why we quite like eurosterling. Nejra going back to 2020 and cable. You talk about the fiscal dislocations and you talk about sterling as the least healthy in the structural discussion around the fiscal capacity. This,dds a new layer onto doesnt it . David absolutely. Then you have the double whammy. The massive fiscal deficit. The economy that everywhere in the world is in trouble. Brexit piled on top of that. That is not a good scenario for the u. K. And sterling at all. Inra eurosterling at 92 2020. David bloom from hsbc stays with us. Coming up, recovery threatened as china seeks to inch out of the slump. This is bloomberg. Nejra this is daybreak europe. Chinas economy continued to recover in may. Industrial output led the way with a 4. 4 rise from a year earlier, still less than the median estimate of 5 expansion. Consumer demand remains sluggish. Retail sales fell. A possible second wave of infections could threaten chinas recovery with a number of coronavirus cases jumping in beijing over the weekend. David, how does this latest data and second wave fears and china impact your risk onrisk off thesis . David i think data at the moment is not really doing it. We know basically how the trajectory of growth works. We dont know how deep the recessions are. If you could get 10 million from payroll in the market moves, you could see that, for the moment, data is not really what matters. For the moment, i would say we just take data with a little pinch of salt. Looking for five, you get 4. 4. In these days, that is not nothing. Manus you go back to the relationship of asian currencies with that of Global Equity market sensibility. Again, you talk about it with the risk onrisk off parameters, the indian rupee, the korean won, etc. Do we just go through better opportunities to buy those currencies . It depends if you are in a trading mode or if you are a longerterm investor. If you are in a trading mode, you trade risk onrisk off. These currencies that have renminbi as an anchor, when you tuck about the indonesia, malaysia, they have the anchor. We expect it to be stable. 7, 10, everyone was getting hysterical, talking garbage. Basically, it has been very stable. That gives asia and anchor. The problem with other currencies, they dont have that anchor, they dont have anything to latch onto. Whether renminbi being so stable, i think it bodes very well for some of these currencies. Manus david, thank you very much. Host thism, our guest morning, risk onrisk off. Coming up on the show, Boris Johnson steps back. Will the meeting persuade either side to give ground in the search for a trade deal . We are live to brussels, next. This is bloomberg. Manus good morning from dubai. It is daybreak europe. Your top stories. Stocks fall on fears of a second wave of coronavirus infections. Over 20 u. S. States see a pickup rate tokyo sees the most cases in weeks. Continues itsy slow recovery. Industrial output rises. The number falls short of estimates. Retail sales, fixed Asset Investment still in contraction. Back intoson steps the brexit fray and holds talks with the president of the european commission. s retailers will open their doors for the first time in three months. It is interesting, the divergence we are seeing. Fears of a second wave in the u. S. And china. Reopening in parts of europe like france. What happened in equity markets in the past week, a weekly loss for the first time in four. Youve got wells fargo and ing saying that the selloff was temporary, and andrew from Morgan Stanley saying it is temporary. Particularly, small caps and cyclicals in the u. S. And valued outside of the u. S. This Morgan Stanley has short, sharp narrative coming from their economists this morning. One gets the feeling that this was written by somebody who perhaps geographically has not traveled to the rest of the world in the past few months. I would say the shock is greater than what is written in the copy. David bloom talked about risk on, risk off of a talked about the kiwi. He said those people who decried the dollar are not to be welcomed on the show with him in it. What will powell say . Will he put a floor on the aussie dollar . I go to davids notes. The last two major meltdowns. The aussie dollar rose by 63 2001 andollowing the 2008 lows. The aussie dollar is cheap as chips. Oil down 8 last week. If there is a second wave coming, what does that do for Energy Consumption . Abe saying there are consequences. I put it squarely on the table that it is jay powell again rock and move the dollar this week. Nejra lets talk about those second wave fears. Newing has reported 79 covid19 cases over the weekend. Shutountrys capital has its largest fruit and Vegetable Supply Center and has locked down nearby housing districts. They say risks that it will spread are high. Andrew cuomo warned against triggering a second wave of the coronavirus. Men manus Boris Johnson makes a direct intervention into the brexit talks today. A video call in a bid to rejuvenate attempts to find a trade deal. Negotiations have struggled to make progress since march, with neither side shifting dramatically from starting positions. Joining us from brussels, maria tadeo. Always good to get your take on this. Is it good enough to break through a deadlock . Should we expect a deadlock breaking today . Not today, i would say, but this meeting should provide some new energy, new momentum to the talks. Up until now, we know that they have been very difficult and that actually, there is a very real risk that the u. K. Could walk out without a trade deal. This timing is also interesting because it comes just a few days after the u. K. Said we are not going to stand for the transition. Happening,it is also european leaders at the end of the week. I would say it is more about resetting the relationship. There is some new energy to this. Ok. A lets also talk about the reopening in europe. We heard from Emmanuel Macron over the weekend. What did he say, and how does france compare and reopening plans to the rest of europe . Maria this is a good question. It is not just the french government, many of the European Companies reopening internal borders. You could now theoretically go from country to country. This is good for tourists, good for hotels, good for the entire industry overall. Theyit is clear is that are doing this quicker than expected. Macron said, we are opening restaurants starting tuesday in the paris region. We are going to open up all the schools. We do need to see a new normality. The spanish are bringing forward everything by 10 days. The great Prime Minister over the weekend saying we are hoping it works. They are saying that they are reopening but also doing it faster. Thank you very much, maria tadeo in brussels. The chairman of the Hong Kong Stock Exchange was caught off guard by chinas decision to impose new National Security laws in hong kong but remained supportive. The chairman spoke exclusively to bloombergs david ingles about the exchanges busy ipo pipeline. I was, like so many people, because there was not any early indication that it was. But, having said that, i think it was a good sign. Surprise . T it was a know, that it was a good thing. I think it provides clarity and future stability. There was a lot of uncertainty about the law order, etc. I think this certainly created clarity and stability for us to move forward. David what do you think would be the biggest misunderstanding based on the information we have now of what people are concerned about. Frankly, in your view, what they should not be concerned about at all. Early,frankly, it is too we do not have the detail yet. But based on the information we have so far, and it was the Central Government official also said it is only a very small group of people this was targeted at. Other than that, i think the rest of us are waiting for the details. Nobody expected it, the element of surprise probably creates a little bit of uncertainty. I believe that, now, in this current geopolitical environment, Many Companies are finding it difficult to navigate, and especially companies that operate in multiple jurisdictions. Each company will make its own decision. I think it will be up to the company to decide what would be best for them. David in terms of the concerns you have heard from this too shall investors, what with those concert from institutional investors, what with those concerns being . And how does the government and investors address those concerns and lay all of that to rest . Laura first and foremost, it is a matter of confidence. By the time detailed regulations come out, people will see that it will not affect the core value of hong kong. The core value being the rule of law, a fair and transparent market, integrity of the market, and a level Playing Field where everyone is treated the same. David ipos are coming. It will be a big week this coming week as well. Should we expect a lot more names for the rest of the year . Laura we have a pretty good and healthy pipeline. I cannot talk about names and numbers but we do have a healthy pipeline it we hope to get to number one this year. David compared to last year, will it certainly be better than 2019 . Laura i certainly hope so. David msci, tell us a little bit about that, the rationale behind it, and when we can expect the tangible fruits of that agreement . Msci, it is an effort of the entire team, plus the government support. It is part of our strategy to expand into index products, derivatives, etc. Come outside of the equity, which is our report which is our core part of our business. It is very much part of our strategy and it is a big win for us. Through our hard work. We believe that it will be successful. We know that it will be because these are very attractive products. We have a good working relationship with msci. The products will come out gradually, hopefully soon, maybe later this year. Not all at once. But, in batches. That was the Hong Kong Exchange chairwoman chairman, speaking exclusively to bloomberg. Just checking on futures. This is beginning to build up momentum. U. S. Equity futures pushing lower. The s p 500 down 2. 5 . The momentum and narrative is changing. Anthony fauci talking about, dont book your holiday anytime soon. This is about china closing markets. About to youlked and i, vshaped is just happy talk, really. It is going to be a longer road, isnt it . Nejra futures taking a road lower. But the 10year treasury yield also dropping five basis points. Extraordinary when you think we were at 1 at the beginning of the month. The rest off the risk off is really across asset. Do in what will powell terms of the narrative . European stocks, going to be an ugly opening in europe. We beat the redhead line. There you go. That is why people turn into daybreak. Ftse down by 2 . Lets get into the day books. We are looking at a series of events for the week. How will it define how you look at risk . Brexit is front and center. Prime minister Boris Johnson and the eu commissioner. If i go slowly, we will get there. Nejra on wednesday, it is jay powell time. The fed chair will aim to offer saying thatat britain could be the next advanced economy to introduce negative rates. I dont think that is a speculation for thursday. It is an increase in asset purchases. Reopens inas retail the u. K. , Boris Johnson urges brittons to shop with confidence, but will they . This is bloomberg. Nejra this is daybreak europe. It is a clear risk off day. Read on the screen and asia. U. S. Futures down lower. Futures firmly in the red. The 10 year yield slipping some five basis points. Stronger dollar across the board but you are also seeing a stronger yen. All of this coming through on second wave fears. It is a key milestone in the reopening of the u. K. Economy amid those second wave fears. From today, nonessential stores in england will be allowed to reopen for the First Time Since the lockdown. Prime minister Boris Johnson is urging consumers to go out and shop with confidence. New wests, the ceo of end company. Itons toexpecting br shop with confidence today and continuing the rest of the week . It will feel different out there in the west and, the rest of the country, for customers to in the streetsafe and a lot more incentive, i imagine, for retailers to get that confidence. You say one of the biggest concerns is the social distancing rules. Safety first is obviously the narrative from government authorities. You urge a reconsideration. What differential would that make . How big a difference with that make for the ability to let us a shop . Social distancing, of course we have to prioritize that. The difference between two meters and one meter. If you take the hospitality sector, restaurants. The difference between 30 trade and 70 trade. It is a massive game changer. We are calling on the government, service sector, toail, hospitality, we need ensure that very good track and trace is in place. There will hopefully be better treatments for covid. At some point, there will be a vaccine. If were going to live with this virus for the next 6, 12 months businesses will have a very thin chance of survival in the year ahead. Nejra one thing that might put people off of going out for a day of shopping is the fact that a lot of public toilets are still completely closed. Wars and establishments are not planning to a lot of stores and establishments are not planning to open them. Do you think that will put people off . The businesses you represent, how do you expect them to work around that . Feweris going to be a lot shoppers coming out. I think that as the restaurants july,spitality open up in they will be more vision for public lavatories. Beartment stores, they will loos in there as well. It is going to feel different. It is not the Shopping Experience it was precovid. But obviously putting safety first and trying to make the experience as nearnormal as possible. Manus we have reopened for quite some time, the models, shops of a luxury evidence in dubai. It is almost like visiting a mausoleum. This is the point. We need to be incentivized to go there. We need to think of an experience. As we go into this, do you think we will see many of the mega brands go through incentivizing, discounts . Priority, the first particularly this week, building that confidence. People of been in their homes for three months. We need to build that confidence to come out into the fresh air and experience that high street and retail. It will be very local. We are going to see obviously incentives. I think the luxury brands. All of the things you would expect in retail and highend luxury, and probably more from some of the department stores. Those moments on the street. Through summer into autumn, we will have to obviously work to clear that stock to retailers. Items will remain in stores. Obviously operating challenging for retailers. Much, ceonk you very for the new west end company. Concerns about toilet access, etc. I want you to go out and do a quick take around the west end, the great toilet trail. [laughter] thea i have to say, given transport restrictions at the minute as well, that you have to as of today in the u. K. , wear a mask on public transport, i am not sure i am going to be rushing out. Othersindeed, lets hope to get out shopping. This is bloomberg. Manus it is daybreak europe. Lets quickly show you what is going on with u. S. Equity futures. Seeing a pickup in safes. These markets are reranking the next wave risk. Warnings from Anthony Fauci about traveling to the United States of america. Beijing goes into partial lockdown. At the same time, Hong Kong Disneyland is set to reopen. Scoop of the day involves carlos ghosn. He has always said that he was set up. Now there is some evidence that may support the claim. The man tracking the story is reed stevenson, Senior Editor in tokyo. Good morning. Reed reporting essentially goes back a little bit into the past. We are looking at events during 2018, leading up to the november arrest of carlos ghosn. Essentially, reporting has uncovered fairly methodical and planned sort of way in which initially there was growing push over Carlos Ghosns nissanrr integrate enault. Then, growing concern, then the start of an investigation into ghosn. Then, leading up to his arrest and how they were going to essentially seize the opportunity presented by his impending apprehension to really reframe and redefine the relationship. Stevenson, we have run out of time, but we will catch oh we will catch up with you later on in programming. Meantime, futures deeply in the red and the u. S. And europe. A risk off day. This is bloomberg. W . W . Uhiono good morning. Welcome to Bloomberg Markets european open. Mattanna edwards alongside miller in berlin. Just a oneoff. Stocks turned negative again after fridays day of reprieve. Futures in europe and the u. S. Tumble. The cash trade is one hour away. Europe reopens