Oppression of muslims. The bank of england is expecting to boost bond buying today as investors watch for hands on yield curve control. Boris johnson and Emmanuel Macron meet in london. Welcome to daybreak europe. Caution coming back into the markets today. Perhaps signals that u. S. China tensions could come to the forefront again. Signaling a reserve ratio cut. Perhaps even on the weekend. Hearing from the governor throughout the is in session, saying that chinas Monetary Policy is still in a normal range. Economic fundamentals are sound. Those comments have given a lift to chinese equities in the asian session. You will see a bit of a retreat. Some weakness in u. S. And european futures. A lot of that seems to be down to second wave concerns dominating among other things. Jpmorgan sounding a warning on market correlation at 20 years highs. You are seeing the 10 year yield to drop as well. Yen strength in g10, aussie the surge the Unemployment Rate in australia. Oil dropping on u. S. Stockpiles. Also the concerns around the virus in china. Explosiveback to claims from john bolton. His new book is alleging that the president as china to buy more u. S. Farm products to help him win reelection. Thats according to the wall street journal. The president signed a measure punishing chinese officials for human rights abuses against muslims. Another allegation is that President Trump backed internment camps. The trump 2020 Campaign Says the allegations are absurd. The president himself says bolton broke the law and that the book is full of lies. Joining us now is daniela russell. Great to have you with us on the show. Thank you for joining. I wonder how you think the market might start reading into these latest developments. Doesnt put any question marks over the viability of agreements on phase one that have come about so far between the u. S. And china . Daniela the markets are with theirrappling he questionable fundamental outlook. Possibilityound the of a second spike in coronavirus cases. And the large fiscal and monetary stimulus on the other hand which is supporting sentiment. Onewed doubts and concerns the geopolitical front is just something working in the other direction. It is stretch levels right here. Nejra absolutely. In terms of the response mechanism from china to all of this, weve had signals overnight from the pboc of a triple are cut. Some say it could come as soon as the weekend. Will the markets see this as more probable, given the second wave concerns in china at the moment . Daniela i think that chinas response so far has been very measured and piecemeal. Theyve obviously been very much ahead of the rest of the world in terms of the coronavirus. Even just thinking about the disappointing recovery that we have seen their from the first wave of cases, continuing to merit further easing. I think that this was coming anyway. Its potentially just another reason, another strengthening more on both doing the fiscal and monetary side to support things further. Nejra interesting. Even though weve had stronger rhetoric from President Trump, there might be concerns caused by boltons book. The u. S. Secretary of state Michael Pompeo has stressed the need for full transparency and information sharing during the covid19 pandemic. He met with his chinese counterpart and they gave more positive signals in terms of the phase one agreement. We are getting mixed messages in the market. We will continue to digest. We are also digesting the second day of testimony from Jerome Powell. He urged lawmakers to continue to support the economy as it recovers from the pandemic. Concern if be a congress were to pull back from the support that it has provided to quickly. I would not presume to prescribe exactly what you should or should not do. It would be wise to look at ways to continue to support both people who are out of work and also smaller businesses that may not have vast resources for a continued time, not forever. So that we can get through this critical phase. The economy is just now beginning to recover. Its a critical phase. That support would be wellplaced at this time. Words how do you read his and tone from his two days of testimony . Daniela some of the better data that we have from the u. S. Has started to be we hopes of a strong rebound. Remember that to it is such a nightmare. Huge ranges on the outs upside and downside. His cautious tone is sobering. The message is quite clear. Hes asking the fiscal authorities to do more. The fed is very much in crisis mode. Banks hasfrom central really changed from direct growth and inflation to keeping Financial Condition supportive. Really recognizing the role that they play in keeping yields low ant Financial Conditions easy. So as not to choke off any signs of a recovery, given how pensive the outlook is. Nejra yeah. How would you trade the Treasury Curve right now . Speaking, ierally the low end of the u. S. Curve. That might sound a little bit premature, given the weakness we have seen of long and treasuries lately. Maybe im a little too early on the long end. When you look at those long end treasury and they get above 2 , i think theres good longterm value there. They seem very much in consistent with powells very cautious views about the outlook. Rises until the end of 2022. You are really looking at a very long time of a rate near zero. Yes, you have the fed thinning the front end of the curve. The long end is looking exposed. When those forwards over above 2 , thats a level which represents good longterm value in the u. S. Nejra yeah. Would you be getting more on curve flattening rather than curve steepening from here . The curve in the u. S. At the moment is driven alongside the general risk tone. Times,u have seen better the long and has been selling off. Beould much prefer to trading from the flattening side. The best place to be only duration right now is at the long end. Obviously got reluctance to take rates negative. That is penning the front end. Weakness orenewed concerns about low inflation, you could see the long end of the curve outperforming as yields fall. Lets get to the first word news. A virus update. Troubling signs persist in texas and florida were cases are soaring, increasing concerns about a new wave of infection. New york city is on track to move to phase two of its reopening. In china, beijings growing outbreak is posing a new test. Cases in the city exceeded 150 in the worst flareup. China is leaning on its massive banks like never before. The government will push the financial industry to its to sacrifice both beijing also signaled for the reserve ratio cuts could be on the cards to sberbank lending with the pboc pledging a planet room to help stimulate the economy. Boris johnson and Emmanuel Macron me today. Its his first bilateral talks with the european leaders and calling for a fresh momentum to secure a postbrexit great deal with the eu. The government plans and Information Campaign to prepare companies for brexit. Thats in the hope of minimizing disruption. 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. Coming up, second wave fears , germany, in china the u. S. Struggled to contain up next. More on that coming next. Bloomberg. Nejra this is bloomberg daybreak europe. Lets take a look at the risk radar. The msci asiapacific index reconfiguring losses from earlier. U. S. Futures point to a second day of declines. European features in the red as well. The 10 year yield sliding as the yen strengthens against the dollar for a fourth consecutive day. Weakness in the oil price after u. S. Stockpiles build. News of a second wave of Coronavirus Infections are rising. Beijings outbreak top 150 in chinas worst flareup since wuhan. In the u. S. , states including texas, florida, and arizona reported a jump in cases. New york city is moving toward additional reopening next week. In europe, germany orders a meat plant to shut after hundreds of workers became infected by the coronavirus, adding to a string of outbreaks at slaughterhouses across the continent. That keptan country its covid19 caseload is greece. Reopened its borders on june 15. The Prime Minister told bloomberg the pandemic has accelerated the need for a fall as the economy is expected to contract 8 this year. He spoke about his strategy. Listen. By faller winter, a drug would remove the uncertainty regarding consumer spending. A lot of people right now are hesitant. They dont know whats going to happen. I do think we see an abrupt recovery. In greece, because we have laid the foundations for rapid growth, i think the recovery is going to be very strong. We have the potential of making 2021, an important year for greece. We are celebrating our bicentennial from the beginning of greek independence in 1821. It could be a bumper year for greece. Reaction,e market people feel comfortable with greece. Money to soften to blow but not enough money put a strain on finances. I was looking at the bond yields for a tenure bonds. We are 21 basis points under it. People on thisny call would have expected this to happen the year ago. Its clear that people will look into the future and look at what will happen after the pandemic. We have an interesting growth story to tell post covid. Questions. Lot of how do you take advantage of that . Look. We have a lot of debt. We have tapped the markets. We did it recently. We will probably do it again. We want to have, we want to make sure we have steady access to the markets, gradually reduced borrowing costs. This is our strategy. This is what we will do. We want to make sure that we constantly replenish the state coffer with enough money to make sure that we address all of our liquidity needs. We have set aside around 60 billion for debt repayment. Even the greek debt has particularlys, we have low repayment obligations until 2022. Look at the peculiarities. Comfortablefeel lending money to greece under the circumstances. Obviously, its a vote of confidence for what we do. We will not go overboard. We have a very good public Debt Management authority. They if i is us on when and how to access the markets. We follow their advice. Under what circumstances would you look at e. M. . If our borrowing costs continue to go down, theres no particular reason to access esm. The main advantages is that you borrow at low cost. Right now, theres no need to access that. Its available until 2022. If things go according to plan, i dont see any need to access it. Its a safety net thats there. That shouldcomfort we need it, should something go against what we have, theres always the element of unpredictability. Its there. It should be available if we need it. Right now, we dont. Nejra that was the Prime Minister of greece. Daniela russell is still with us. That at theo think start of this month, we were seeing the 10year treasury yield almost approach 1 . You have some ounces also calling for the tenure bund yield to turn positive by the third quarter. In thed wave virus fears market going to put a cap on rates globally . Those yield levels that you are talking about will probably be unrealistic anyway. Are certainlyries cheap. Wave,ars about a second as youve already seen a humongous joint fiscal and monetary easing effort. Central banks, where they could cut rates, have artie cut rates down to zero. Weve seen both across developed markets and emerging markets, a vast wave of qe programs. Governmentsl side, have responded very generously with whats largely already been just insurance measures. The challenge is coming now. Those measures have not been stimulus. When youwave comes want to be reopening things. Provide adoes backdrop for fixed income. Coming up, a record slump in gdp, inflation at a fouryear low and surging unemployment. We will focus on that, next. This is bloomberg. Nejra this is bloomberg daybreak europe. Lets take a look at whats coming up today. At 12 00 london time, the bank of englands rate decision. The be a expand its Bond Buying Program by 100 billion pounds. At 1 00, opecplus holds a meeting at the joint Ministerial Monitoring Committee which oversees the oil output deal. We will get an update on the u. S. Unemployment situation. Initial jobless claims should continue their downward trend. Emmanuel macron visits london to mark 80 years since a historic broadcast during world war ii. Lets stick with the u. K. It is planning a shock and off Information Campaign to prepare companies for brexit. The aim is to reduce disruption at the end of the year. The bank of england is widely expected to boost its support for the u. K. Economy again today. Surging unemployment, a record drop in gdp, and inflation at a fouryear low. Economists predict the central bank will expand bond buying by 100 billion pounds. Good to be a we take more radical steps later this morning . Our guest is still with us. We will talk about the potential steps in just a moment. For today, is there any risk of a hawkish surprise to the market from the bank of england . Daniela yeah. I would say that that 100 billion pounds that you were talking about, it is more than priced in. Yields are looking quite low. Maybe even if they did 100 billion, that could slightly disappoint. Especially as the ecb and the fed both surprised on the dovish side. If they did, that might raise questions about their appetite to ease more and bring questions. Who will take down all this guilt supply . Will the bank of englands show signs of stepping away . Nejra exactly. In order to avoid a hawkish supplies, they need to signal more be on the bond buying. What would you say that the market is pricing for right now . Certainly those bets on negative rates have pulled back a little. Is the market beginning to price yield curve control or Something Else . Various options on the table. The big question is around how they might surprise us. The market is still considering the possibility of negative rates. Really, if that became a much more likely possibility, theres plenty of room for yields to fall further. The market price in the possibility of several rate cuts. I think that the talk around for me, that policy and a more openended form of qe is the most right in the near term. Nejra ok. Daniela their approach will have to change at some point. Nejra yeah. You think yield curve control could offer a more sustainable solution. Where along the curve would you be putting flatters on . The yield curve controls essentially are a natural extension of the Forward Guidance and the signal which is already provided by qe. The fiveyear point makes the most sense. We have seen it in japan at the 10 year. In australia, at the threeyear. In the u. K. , the fiveyear one is important benchmark across the economy. Thatrate also issue at point. Therefore, what you have seen and growth both australia and japan is that the yield curve pancakes out to that yield target. Flatters out at the fiveyear. Nejra make sense. Up, we will talk oil as pressures Energy Ministers comfortable with a price of 15 a barrel. This is bloomberg. Morning london. Good morning from london. Global stocks fall amid rising coronavirus cases in beijing and u. S. States, including texas, florida, and arizona. Fed chair jay powell urges the government not to remove fiscal support too fast. According to a new book from john bolton, President Trump asked president xi jinping for help in reelection. Boosting bond buys by 100 million pounds. On the brexit front, Boris Johnson and Emmanuel Macron meet in london. Welcome to daybreak europe. Caution weighing on equity markets. We have seen some gains in chinese equities. Pboc signaling we could get a rrr cut. U. S. Futures point to a second day of declines. Weakness in european futures, as well. It does seem to be second wave fear dominating here. 10year treasury yield down 2. 5 basis points. We have seen some yen strength. Oil showing some weakness on the second wave fears. U. S. China tensions no doubt may be also preventing some risk from coming back to explosive after those allegations from former National Security advisor john boltons new book. He claimed President Trump asked china to buy more Farm Products to help him win reelection and he backed housing uighur muslims in internment camps. President trump says the book is full of lies. Fed chair Jerome Powell is urging congress not to pull back fiscal support for the economy to quickly. Lots for the market to digest this morning. Oil is extending its drop after a bigger than expected bill of crude inventories. Opecplus ministers meet today to assess output curves. Russias Energy Minister he is comfortable at about 50 per barrel in the long term. Alexander novak told the decision by opecplus to extend output cuts will smooth the market as it recovers from the coronavirus shock. Yes indeed, as you already theioned, we have made decision to reserve cuts for the month of july. I think this was the right decision. We have held a lot of consultation. [indiscernible] we need to somehow smooth the Recovery Period and preserve the fragile balance. We discussed it with our colleagues and we have decided to come up with a compromise decision. As for the future, i would like to remember that during the many years that we have been in this opecplus cooperation, we have always said we are flexible. We need to make sure that the market is balanced and we need to be confident about what the pace of demand recovery is. We will not be basing future decisions on the balance of supply and demand. Note thatso like to we have made the decision to monitor the markets through regular monthly monetary meetings. The next one will be held tomorrow where we plan to discuss the levels of conformity [indiscernible] i want to ask about those conformity levels. The data here we are seeing thus those who were not just supposed to comply with the new agreement, but also make up for cuts they failed to comply on, are you confident these countries are doing so . Talking about conformity levels and preliminary number of numbers, i can say that conformity is that a very high level. Closer to 90 . Time, we will be discussing this tomorrow, as well. We have decided that all countries have to reach 100 conformity. We hope that all companies will ensure a more stable market. Can you give us details about how you are complying early in . The case is close to 100 conformity. We have always been reducing production gradually. To the fact that we are in the summer months, which makes it a simpler task to do, we have been able to achieve because russia is committed to its obligation. Just today just today, we thought beijing canceled two thirds of flights because an uptick of cases. There are pockets in the United States seeing these trends, as well. Brazil had thousands of cases in one day, north of 35,000. Where do you see demand in the oil market right now . [indiscernible] and i think it is a very important one. Demand is probably the most important to the market right now. Is still that there uncertainty and volatility, particularly when we talk about the pace of demand recovery. We have gone through a period when we saw the first green shoots back in april. We thought the first dynamic recovery in may. And now in june, we are seeing variable dynamics. There are risks of a second wave emerging, although it is still quite uncertain. Nejra that was russias Energy Minister, Alexander Novak. In reordering joins us now Annmarie Hordern joins us now. Great interview and thanks for joining us. U. S. Stockpiles continue to build. Novak said 50 is the right price for russia. What does that backdrop mean for my white for what might come out of the j mmc . Annmarie they are going to monitor the cuts they have made. They are having more meetings we have seen over the past few months because of the situation in the market. One of the things that is are thee right now threats of a potential second wave in covid19. To talk about demand, Alexander Novak was saying the fact that he is cautiously optimistic. He sees a rebound in demand, but of course like what is happening in beijing, these things mean risk. When you look at the data coming out of beijing, peak rush hour this morning at 8 00 a. M. Beijing, Traffic Congestion at 29 . Last year, it was at 67 . What we see his worry about demand. That is always going to put a little bit of pressure on the price. One bright spot was europe. They see about 90 of demand coming back. This Trading House was one of the most bearish back in march. That is a bright spot. I would imagine that last 10 for Global Oil Demand is going to be the hardest. Opec los also had a report out about what is potentially going to hold that back is the fact that people are not flying as much. That is going to put pressure on jet fuel. You also have people remaining to work at home. That could impact gasoline demand. At the moment, the demand picture is not looking too bright. So, where is the upside risk, if there is any . The upside is that economies are starting to open. We have seen a vshaped recovery in gasoline demand. While there is that concern in beijing, china has really led the way. China is back almost two precrisis levels. That is some of the demand. India starting to pick up, as well. You are seeing stabilization. The worries are about the fresh concerns and pockets around the world. U. S. , astates in the well as places like beijing. We are seeing stabilization in the market. Oil ministers never like to give a direct answer, Alexander Novak said they are more comfortable with 50 a barrel. 40 is pretty much where they are budgeted right now. He set at 50 a barrel, they could start to boost the reserve fund. In that, they are able to overcome the crisis a little bit weaker. Nejra my thanks to Annmarie Hordern. Now lets get to the first word news. President trump asked for chinas help to win reelection, the allegation made by john bolton in his tellall memoir. The white house is seeking an injunction, preventing the former National Security publishing. He is the most senior official from the administration to publish an account of his experience. The Campaign Team dismissed the claim as absurd. But he broke the law, very simple. As much as it is going to be broken. This is highly classified. It is highly classified information. Fed chairman Jerome Powell is urging lawmakers not to pull back fiscal support to quickly amid increasing debate over whether to extend temporary aid programs aimed at shielding households and small businesses. He said the economy is recovering and the record rise in retail sales bode well. Jd. Com has made its debut in hong kong. China second Biggest Online retailer is also listed in new york and raised almost 4 billion from the secondary share sales. They follow last weeks Successful Listing as rising tensions between washington and beijing are threatening to curtail Chinese Companies access to u. S. Capital markets. Several British Companies with ties to slavery have apologized and announced plans to pay reparations. Lloyds of london and green king have pledged to make payments to projects supporting black and ethnic minorities after being identified in a database of slave compensation. In the u. S. , pepsico plans to change the name of aunt jemima products and mars is reviewing its uncle bens. 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. Coming up, credit boom. The pboc signals a looming cut to its reserve ratio as policymakers seek to defer lending. Can they push the secondbiggest worlds economy out of its virus slump . This is bloomberg. Nejra this is bloomberg daybreak europe. A little bit of a risk off tone to markets today. Chinese equities on the front foot with signals of a triple are cut from china. European and u. S. Futures on the back foot. Second wave fears dominating. The 10 year yields dropping about three basis points. You are seeing the yen strength in, one of the best performers in g10. Aussie underperforms. Concerns of a second wave in china. Back to china. It is leaning on its massive banks like never before. The government will push the financial industry to sacrifice to bolster an economy facing its worst slump in for decades. Beijing signaled for the reserve ratio cuts could sberbank lending with the pboc pledging a credit boom to stimulate the economy. Swiss lawmakers are pushing for the money to be used for a state pension fund. Negative rates have been enforced in switzerland as the central bank seeks to control the value of the frank. Russell is still with us. I asked about the potential of a rrr cut earlier in the show and you were saying that perhaps further easing should be expected from china. Where do you prefer to trade the rate curve . Would you be favoring the front end or do you prefer duration stood mark if so, why . The favored point is the long tenured chinese bonds. We have seen the low of 2. 5 toward 2. 8 . Detrimental to the growth momentum. ,s a result of the rising yield we have seen corporate issuance slowing, which is squeezing Financial Conditions. Which is one of the reasons why we expect there to be rate cuts in china. We think the mediumterm lending the point which is really worth focusing on. We are not too far away now. It is the 10 year point which is a good indicator as to what level to be buying chinese bonds. Interesting. one of the recent points we have seen come out is whether we will as we seeexporting various views on the deflationary, disinflationary, or inflationary path for the globe as we emerge from the pandemic. What is your view on that path for deflation, disinflation, inflation globally . Daniela certainly, we have seen in china the chinese Producer Prices going back into deflationary territory. That comes in contrast to what are at the moment a lot of expectations about fiscal and monetary easing and deglobalization. We are certainly starting to see some pockets of higher inflation and developed markets due to shortages in things like food. But im very skeptical as to whether it would last. I think there is a lot of focus on the supply side. But we also need to consider the demand side. And maybe to hit is even bigger. Asia is still exporting disinflation. The positive inflation we are seeing in developed markets is a bad sort of inflation and comes at a time when wages are falling and labor markets are weak. It is exactly the sort of inflation we dont want to see and that is likely to have a disinflationary impact further out. Nejra interesting. Earlier, you said there is reason to be a list core rates. What are your calls and europe . Bond yields have fallen back slightly. I think the risk is slightly more balanced. Europe, i prefer still the periphery. Rallied in ahave long way, but volatility has also fallen. I think that that makes investors more comfortable to be buying italy. It could push us back toward the levels that we saw before the covert outbreak. I think that the support you have seen from the ecb and the fiscal back edge is supported packages supported. Nejra thank you so much for joining us. Daniela russell, great to have you with us today. Coming up, market disconnect. Why stocks and the real economy seem to be out of sync. This is bloomberg. Nejra this is bloomberg daybreak europe. A bit of a pullback today, but in general stocks continue to defy gravity. Even with risk off markets today , Global Equities have generally resumed their upward march, but given fears over a second wave of coronavirus and a still struggling economy, why is there still such a disconnect . Dani burger reports. Dani something may be broken in equity markets. U. S. Stocks are well on their way to erase losses for the year, but the coronavirus pandemic rages on, job losses are steep, and the Global Economy is facing its worst recession since world war ii. As equity lost touch with reality . Or perhaps the stock market never reflected reality to begin with. It represents the profitability of particular companies, which is a particular subset of a certain kind of company. Not representative of the whole economy, representative or even the whole corporate sector. Dani there are signs of strengthening. Job figures are improving in Consumer Sentiment has begun to rise. The stock market is a forwardlooking discounting mechanism and its rise is telling us things are going to be better down the line. Dani for some it is not about the economy or earnings or civil unrest. There is only one factor right now, the fed. I think it is the beginning of able market rally. You cant underestimate the effect of what the fed did, pouring trillions of dollars in the quiddity into the financial markets. Dani plenty of investors dont buy any of these arguments, but sitting on the sidelines watching your peers make money isnt easy. There is more money sitting on the side. The market is not getting, doesnt look like it is going to roll over again and im sitting on too much cash, let me allocate. I think that is behind us. Dani investors are still bidding up equities. With the second wave of infections threatening more lockdowns, how much further can stocks go from here . Nejra joining us now is dani burger. Great to see you. Another aspect of the equity rally has been the rise of the retail trader cheap brokerage account. How often do you see this used as an explanation . Dani reporting on this, it continues to be a source of debate. It is a story of 2020, people trading on these low fee brokerage accounts like robin hood in a speculative manner. It has certainly impacted options trading. Call options. We have seen volume surge to records this month. Surging after a declared bankruptcy. In terms of market impact, that is not clear. Only about 2 of overall market trading. That is small investors who trade less than 2000. They are a very small market share of overall trading. Barclays did a study. How stocks react. They saw a negative correlation. It actually tends to fall despite some of these highprofile examples. Matt great, great work nejra great, great work. Breaking news to end the show. China lawmakers are to discuss the Hong Kong Security laws on june 18. That is out of china. Air france is readying a plan for 8300 voluntary job cuts. Should enforce job reductions. That is it for daybreak europe. The european open is next. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Anna good morning, welcome to Bloomberg Markets european open. Im anna edwards in london alongside matt miller in berlin. Matt good morning. Markets say the fatigue is now setting in. Risk assets remain in the red as u. S. Stocks snap a three day winning streak. The cash trade is an hour away. Lets get your top headlines. Donald trump