On the rise ofis infections across the world. European stocks are edging higher along with s p 500 futures. Now, they are pretty much flat, down 0. 09 . Investors weighing scattered signs of economic improvement against the spread of coronavirus. Im looking at eu sovereign bonds, dipping. Treasuries little changed. Lets get to the first word news with leighann gerrans. Hasresident donald trump tweeted video of a man yelling white power. Confrontation was between antitrump supporters and his supporters. Senator tim scott, the sole black republican in the chamber, urged the president to delete the tweet that is fueling accusations the president is fomenting Racial Division after the killing of george floyd. More protests in hong kong as beijing debates a new national thatity law for the city the hong kong executive says people have nothing to worry about as long as they abide by the wall. Residents must avoid crossing red lines. In poland, voters systemsne country, two consideration when they drafted the bill. Otherwise, they could have enforced the mainland law to hong kong. Deniedoland, voters have the president a quick reelection. 41 . Me first at opponent got 30 with no one getting a majority. Polls suggest the runoff is too close to call. Chinese industrial profits rebounded in may for the First Time Since november. Profits rose 6 last month, leaving an overall slump of over 19 for the first five months of the year. It is a signal the economy is continuing to recover from the coronavirus pandemic, albeit, slowly. Global news 24 hours a day, onair and quicktake by bloomberg, powered by more than 2700 journalists and analysts in im than 120 countries leighann gerrans. This is bloomberg. The coronavirus pandemic has hit some grim milestones this weekend. Deaths have surpassed 500,000 with confirms infections topping 10 million. It is a week after World Leaders had bet on the pandemic slowing. Joining us for more is our health editor. Look at the majority of cases, brazil, india and the u. S. , does it mean other countries are safe or could they be at risk of reinfection . I think we are having a bit of concern trying to get to john lehrman. Try to reestablish connection. I know hes had a lot of work including some of the stories that have come out on the bloomberg looking at the pandemic topics, 10 million cases and 500,000 deaths. It will be interesting to figure out what this means Going Forward for some countries such as the u. S. But also europe. Coming up, defending defriending facebook. Starbucks, pepsico him and levi their names to the Companies Pulling advertising from the Worlds Largest social network. We will bring you much more on that a little bit later. This is bloomberg. I elected to stay in the closet for a long time in my career but i can tell you after coming out that physically and mentally, it takes a toll if you do that everyday and what we are trying to do is eliminate that for people and lift people up. Francine that was jim fitterling, speaking to bloomberg as the executive spotlight. Catch more at 7 30 p. M. Tonight london time. Lets get to the first word business flash. Commerzbank is preparing to have its costcutting and profitability targets the company may eliminate 7000 jobs and close about 400 branches. Kit comes on the wake of criticism from top shareholder. The firm accused commerzbank leaders of abject failure in turning the lender around. U. S. Regulators have approved test flights for the boeing 737 max. As todaybegin as soon after reviewing the Safety Assessment of multiple fixes boeing has made for the plane and signals the government is finally pleased with the changes more than 15 months after two fatal crashes. The number of firms pulling ads from facebook is undermining the outlook and putting its stock price under pressure. Starbucks, levi strauss and pepsico were among the most recent companies to curb ad spending. The boycott is aimed at pushing facebook and peers to promote to crack down on posts that spread racism and misinformation. Francine lets get back to the markets and coronavirus. Joining us now is the chief Investment Officer at investment management. What happens to Risk Management from here . It is a fascinating issue and we have a pull and push for markets. Covid19 crisis reemerging, companies will take flight. Central banks and governments determined to ensure there is sufficient cash to avoid a credit crunch and Central Banks are funding government. There is plenty of cash to ensure the amount available for household spend is highly elevated and companies themselves have cash. Francine a recent number of infections rise, we hit a grimtone today, a milestone, topping 10 billion cases of coronavirus and 500,000 deaths worldwide. If we have a second infection, cases rising again, will markets correct . James unless more actions are taken to curtail the state of the virus, you are citing global figures, the question is markets. We will not return to full lockdown in most economies. Certain geographies and inustries, weve seen that the United States where weve had some limited geographical lockdowns, but also lockdowns associated with meat factories, for example. Francine where do you see the most value regionally . Is there a difference between europe because of the number of infections compared to the u. S. . James it all depends on where we mean by value. In cheapness, europe is cheap compared to u. S. But the forwardlooking perspective of how much money can different economies make and which are better positioned, i think it is right to be fully overweight the United States because u. S. Companies have high return on equity. Iny have high visibility terms of profitability and strong longterm sales growth because they have why one might favor , onu. S. Now is the prospect a political point, the expectation he would bring in tougher taxes and that corporate earnings per share in the u. S. Would reduce. Francine what is your base case for a gradual reopening of the economy . Would it come despite trade skirmishes between the u. S. And china or are you more tempered in the growth we will see compared to a couple weeks ago . James i am certainly cautious on growth. If you were to ask me to articulate my Growth Perspective theerms of the s p 500, index made about 163 in 2019. I am expecting a trough at 125 this year and im expecting recovery to 151, 155 for the end of 2021. 154treet is looking for and of 2021. By the end of next year, the u. S. Equity markets earnings will have surpassed the peak scene at the end of 2019. I think that is too optimistic. Im looking for a flatter trajectory of recovery. Atncine if you look individual stocks, and there is quite a lot on facebook today because they are losing Advertising Money by the bucket, is there still a value in facebook . What do you do with facebook right now . James i think facebook faces to challenges. A very direct challenge associated on how it monetizes. Without advertising revenue, it has difficulty in monetizing the number of people it has on its site. The biggest challenge i think is the companys actions are likely to be followed up by grade regulation and we know facebook would be wholly responsible for everything it carries on its site and that would be a very demanding level of regulatory requirements. It makes facebooks business very tricky. For me, facebook is not the buy. Francine is there anything that is a buy in the tech space . James absolutely. I see an excellent case for some of the top drawer names, the microsoft, amazons, alphabets. I can absolutely see valuations are rich. These are companies that are generating extraordinary levels of growth. Tos is in material contrast the world of 1998, where Alan Greenspan eased Monetary Policy after longterm capital management. Back then, you were supporting companies that made no money. Companies now we have companies with enormous amounts of money and an extraordinary capacity to determine. I found it breathtaking that in apple spend more on buybacks of its own stock them were advanced the entire segment of the business in the United States. Stays withames bevan us. Industrialchinas profits rise for the First Time Since november 2019. More on the state of chinese economy next. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. In hong kong, National Security law could be imposed this week as chinas legislative body votes on the field tomorrow bill tomorrow. Bloomberg was told the law will warn people not to cross certain red lines. When i say we dont know the exact details but we know the framework of the bill is to address National Security, four areas. Power,ing state terrorism act, foreign interference. These are four specific areas that the bill targeted. I think we basically know what it is. It still boils down to interpretation and enforcement. Ken needs to be determined, but even without the details but even without the details, the secretary of hong kong reassured us the law will be enforced in hong kong. Under hong kong law, commonlaw jurisdiction. It is clear that even though the law has been legislated in the mainland, the enforcement and adjudication will be in hong kong. Theve great comfort that authority are already taking to the one country, two system consideration when they drafted the bill. Otherwise, they could have enforced the mainland National Security law to hong kong but they didnt. They know specifically this is dealing with hong kong which is a different jurisdiction so they auld want to make sure security law can work in hong kong. In the past, you have said you expected this law to have a deterrent effect, that it will not be used as much, but right now, you are saying it is really needed in hong kong, so how much do you expect the law, once implemented, to be put into use. The piece of law is a deterring factor. Have itthey dont is really to warn people not to cross the red line. You cannot ask for hong kong independence and we do not tolerate terrorist act like what happened last year during the social unrest. As long as people abide by the law, i suppose we never have to use this piece of legislation. Mind you, macau, another special Administrative Region in china. They passed the National Security law in 2009 and from what im told, not one case has been prosecuted under that piece of legislation. I suppose if people behave accordingly and we do not cross those red lines, we never need to use this piece of legislation. We saw a report on now tv secession,ession subversion, that life sentences could be imposed. Can you confirm or deny that and is that entirely necessary . Neither confirm nor deny because i havent seen the details of the bill so i dont again, ive seen National Security bills in other jurisdictions, singapore and elsewhere and i believe the death sentence is actually very harsh in both jurisdictions, including the u. S. I have not seen the hong kong version yet. I have yet to find out. My question to you, are you worried about that . Are you worried about these countries putting sanctions that may hinder business relations with hong kong and not to mention what happens if the special trading status from the u. S. Is revoked . Is all of this, the National Security law along with protests and all of the negativity that comes with it really worth it given hong kongs future, especially as a Financial Hub . It, we areightly put one of the top three Financial Hubs in the world and there are tons of u. S. Interests in hong kong. I wouldnt be surprised i would be surprised. If the u. S. Decides to put sanctions on hong kong, they could, but i dont see how it is in their interest because the end up hurting their interests as much as our own interests. Francine that was the Senior Advisor to hong kongs chief executive. The profits of Industrial Enterprises rebounded in may for the First Time Since november 2019. Industrial profits rose 6 from a year earlier signaling the economy is continuing to recover from the coronavirus shutdown. The pboc will implement new monetary tools to ensure liquidity reaches the real economy. Still with us is james bevan. Where do you see opportunities linked to china now . James when i look at what china has done, it is the opposite of what the you has u. S. Has done. Seeuld suspect we will exporting deflation in contrast to the u. S. , supporting. I would expect there to be more Service Sector inflation in developed economy. A overall terms, we will see flat profile for inflation. I think that would be supportive for risk assets for the foreseeable future, though i remain committed to risk assets equally and i think people who developedg into economies will make original reasonable margin. Thinking of some of the retailers whose prices have fallen to the floor on the back of the crisis. Francine what kind of names are you looking at . James i would say there is a bifurcation between the online players. World dons of the have the opportunity to continu free cash flow, bute they are still a core holding. In the u. K. , i think some of the smaller retailers are where one should be picking through the rubble to see where one would buy. Apart from the local retailing entities, there are public houses. The expectation that households would have more cash would be supportive. One area that will be tricky is food Price Inflation. There, i think we may see food Price Inflation fall again. Overall,ting the year we are going to be substantially below the bank of englands inflation target. By the end of 2020, 2021, we will be on target. Francine i was going to ask you, where do you see deflationary pressure first . China and then the rest of the world or first elsewhere . James i would absolutely see deflation coming from two sources. First, exported deflation. One can see this from the exportimport data and the pricing relative to volume trade. China is exporting deflation in traded goods. Supply. R area is economies, supply will be more rapidly in demand and on that basis, you may get picked up. Francine james bevan, chief Investment Officer at Blackrock Investment management ccla investment management. Next, brexit and Boris Johnson. I got an oriole here. Eh. Common bird. Ooh look over here something much better. There it is. Peacock, included with xfinity x1. Remarkable. Fascinating. Very. It streams tons of your favorite shows and movies, plus the latest in sports news and. Huh run the newest streaming app has landed on xfinity x1. Now thats. Simple. Easy. Awesome. Xfinity x1 just got even better with peacock premium included at no additional cost. No strings attached. Just say peacock into your voice remote to start watching today. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua come here in london. Lets get to first word news with leighann gerrans. Leighann good morning, francine. Coronavirus cases are surgery with Johns Hopkins universes have topped cases 10 million and the number of deaths have reached 500,000. Despite some experts hoping the virus would start to fade in the summer, it is multiplying faster than ever. President donald trump says reports that russia paid bounties to have troops in russia and afghanistan killed are not credible. He went out earlier denied President Trump was briefed on the issue. The New York Times reported on the story, saying the white house had spent months considering a response but had made no final decisions. Pakistani security has killed four government four gunmen a compound in karachi. They were not able to get into the main compound. Two security guards were killed in the incident. The border guard says the situation is under control. In france, it was president emmanuel macron. First electoral test since the coronavirus pandemic, and his party was defeated in the paris mayoral race. Coming a distant third. It complicates the president s plan to restart his administration. But it was a good night for the greens. Exit polls showed they took city lyon. In leon in global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in im than 120 countries, leighann gerrans. This is bloomberg. Francine . Francine thank you so much. A big week for u. K. Politics. Ahead of a key speech tomorrow, Forrest Johnson has ruled that a return to austerity Boris Johnson has ruled out a return to austerity. Meanwhile, the u. K. s chief brexit negotiator will meet with his you opposite number in brussels today for the First Time Since march. It is six months until the end of the transition period. Running is now is Matthew Goodwin from the university of kent. Thank you so much for joining us. When you look at some of the downfalls of covid19 and some of the insight that we got from Boris Johnson over the weekend, can the u. K. Afford not to do austerity . And if they can come are they going about it the right way . Matthew thank you for having me. I think what we are about to see is really some more meat on the bone of what is johnsonism. At the earlier budget this year before the crisis, we began to see the Big Investments in infrastructure, the leveling of the agenda, the Economic Strategy behind the johnson premiership, and i think what we are going to see now is talk about a new deal for post brexit. Adopting the language of roosevelt. We had that important michael go speech come out over the weekend, saying conservativeas to help regions left behind. Avoiding the same strategy of austerity that was assumed by David Cameron and george osborne. Francine Matthew Goodwin, what kind of break the deal are you expecting if we get one . Think obviously the negotiations are ongoing, but i think there will be a deal by the end of the year. Key sticking points currently are around fishing, state aid, and around the European Court of justice. Both sides will have to make some compromise. There is a view within the conservative party, one wing of the conservative party, that they can still push for a sort of Nodeal Brexit and wrap that into the economic down age that the companies, the covid19 crisis. At that is a minority view. There is an appetite on both sides to get the deal done, and for Boris Johnson there is an appetite to than move on, to get back to what he thought his premiership was going to be about, building Global Britain building britain, trade deals with Global Companies around the world, turning what is a messy issue into the defining moment of his premiership. Francine what kind of trade agreements can we see and how long will they take . If i speak to you in three or four years, and we will have interviews in between, what kind of u. K. , will we be left with . Matthew i think the u. K. Economy is going to face challenges. It was already volatile before covid19 deal with the crisis. But i think there is now an appetite to go forward to the trade deals with the u. S. Obviously november is a complication in that. But also with an, australia further afield. With the party going through the next six months, and really the it really is a trailer to a bigger movie, and the movie is a bigger Global Britain, and they will try to navigate around as many trade deals as possible because we know looking at the Economic Data in the forecast that we are all in for a rough ride over the next two to three years. I think the johnson premiership, when he gets close to that election in 2024 or thereabouts, is going to have to look back and say not only did he level up the country, which is what he promised voters, but he also leveled up the u. K. Economy internationally by signing a number of big bold trade deals. Francine we also found out british schools will get a 1. 8 billion pound boost as Boris Johnson is trying to reclaim the political agenda. How much more spending can the u. K. Actually do . Is a bigwell, it question, but as long as Interest Rates are where they are, i think the government is going to be relatively more relaxed than it was in years investing in the domestic economy. I think we are globally entering into an era where governments are going to be a bit more relaxed about deficit financing and are going to be a bit more relaxed about living with large amounts of debt. I think obviously it is going to be difficult for the conservatives to go through the next four or five years spending without tax increases. I suspect they will at some point have to not just on the wealthy but on the middle income as well. Dont forget that the spending program, not in london so much but in those sort of northern, eastern, and so the outside of the big city regions, that was central to the johnson manifesto pledge that he would not just be building schools and hospitals, but he would also be building roads and bridges and all of these things that would the conductivity of the u. K. Economy. So we have many budget coming up with rishi sunak very shortly, and i think that is going to give us some real insight into how the strategy has changed at all from the budget that we had as covid19 was arriving in the first place. Francine what are you expecting from richie soon can the budget . That from rishi sunak from the budget yet from rishi sunak from the budget . We spoke to him on friday. Now that the economy is reopening, it felt like they to furloughoser programs and the like. Matthew i think we are in for a difficult six months, and im sure rishi sunak more than anybody else knows that. We have an awkward moment where the furlough schema come to an end and we will have lots of workers go either going back to their companies or switching over to universal credit and nofare if those jobs are longer available. As the u. K. Economy begins to orientate itself away from the crisis and into the postcrisis reality, i think we are going to be facing some really difficult numbers in terms of unemployment especially. Lets not forget this government wasnt expecting to be managing any business. This government was supposed to be managing the big, bold ideological points. It was not supposed to be about crisis management. I think the chancellor is going to be trying to think about innovative ways of paying for iss crisis, but crucially the absolutely critical point about the conservative Party Everybody has to remember. Measures that crucially do not hit the low income workingclass voters on which the conservative party is now far more dependent than the conservative party of David Cameron ever was. The electorate of this party has completely changed over the last five years, and many of the voters are losing their jobs and are most at risk from the current crisis. For borishuge dilemma johnson. Francine thank you so much for joining us, Matthew Goodwin from the university of kent. Up next, starbucks, texaco, levis add their names for to Companies Pulling their names from advertising for facebook. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to the bloomberg with leighann gerrans. Leighann good morning, francine. U. S. Regulators have approved test flights for the boeing 737 max. They could begin as soon as today. That is after reviewing the Safety Assessment of multiple fixes boeing had made for the plane. It signals the government is finally comfortable with the changes. The jet has been grounded for more than 15 months after two fatal crashes. Commerzbank is preparing to up its cost cutting and possibility targets. Sources tell us the company may eliminate 7000 jobs and close 400 branches. It comes in the wake of criticism from top shareholders managements failure in turning the company around. Extraordinary shale gas fortunes. The company has become one of the biggest victims of this big pakula collapse this spectacular collapse in energy demand. It is now entering into agreements to eliminate about 7 billion of debt. That is your bloomberg business. Francine . Francine thank you so much. We are getting breaking news out of bp, agreeing to sell petrochemicals for about 5 billion. We are seeing a couple of these m a restarts. Bp just the latest one to sell petrochemicals operations to any neos. To i cut adest companies to spending to facebook. Advertisers call for removing ands that glorify violence foment discrimination. Alex, we have been following this quite closely. But what exactly is the boycott about . Alex it is running on the coattails of those helping the black lives matter movement. Thatdea of the hate speech is perpetuated on facebook and on the social media platforms and a lot of conspiracy theories as well. So some activist groups in the to. Called for the brands work cut facebook. And often they will find or sometimes they will find that their ads warrant run alongside harmful content, whether that is conspiracy theories or hate speech, and it looks like their brand is endorsing that content virtually. And secondly, the money might end up in the pockets of the personal group hosting that posting that content. So it is a way for brands to stop that from happening. Exactly does this mean . Does it mean that facebook will change, or does it mean that we are just going to see more advertising dollars being dropped . Alex facebook has already announced a few changes. They will point people toward their election page and try to ascertain what is truth and what isnt. Most of facebook advertising, 98 of its 70 billion in revenue is from advertising. From small and mediumsize enterprises. When you see direct consumer razors, a lotes, of those are not owned by big companies, and because they are direct to consumer brands, they depend on facebook for their business. Is it going to be a meaningful hit to facebook resin to facebook revenue . Perhaps not, but it is certainly making a lot of noise and hitting facebook and its pockets is perhaps the best way to get this to happen sooner rather than later. Actually does it change some of the other advertisers . Do we know where those dollars are going to . These areuse a lot of massive, big brands, and a lot of it is about brand building rather than direct sales. If i make chocolate bars, i dont advertise chocolate bars on facebook so you click through and buy chocolate bars. What they do is a lot more similar to what you see on television or billboards, therefore you could probably expect that more of that will go closer to more traditional forms of advertising. The other part of it, of course, we are seeing more media brands, from the New York Times to others, bloomberg, trying to have more direct relationships with the brand themselves. Theyre going to thirdparty ad platforms, like the New York Times has a direct party with lm with l. A. Mh those might be avenues for them to go to. It is easier to cut spending right now in the fallow summer months. Particularly now we dont have the olympics or the world cup or anything like that. It is an easy time to say we are cutting spending on facebook where they probably did not have high spending on facebook now anyway. Francine thank you so much. Our bloomberg tech columnist, alex webb. 2020 is not likely to be forgotten anytime soon as we head to the midpoint of next ordinary year. We will discuss what investors might expect for the next six months. This isext, and bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Lets take a look at some of the events to watch out for this week. We will get euro area cpi tomorrow. Bloomberg forecast headline inflation. 3 yearoveryear engine. A busy day wednesday with the latest fed minutes published and here in europe, a Rate Decision from there. And a weeklong referendum completed and the changes will allow Vladimir Putin to extend his hold on power beyond 2024. Friday, u. S. Markets will be closed for the Independence Day holiday. We are days away from the completion of the first half of 2020, which has made history in more ways than one. The Coronavirus Crisis is expected to plunge 90 of global economies into a recession this year. That has caused market upheaval. Lets listen to what investors had to say on their outlook for the seven half second half of the year. With low u. S. Interest rates and the prospects of a sluggish u. S. Economy through the summer, you wonder if the dollar will weaken, and i think that would be very good for the emerging markets. Picture isve the still intact for gold and we are expecting fresh alltime highs. Muche quality sectors have big time highs. We have two positives for the china, asia. Because we believe there are opportunities for the rest of the year. Sayingly we are investors are overweighting health care technologies, industrial, and consumer discretionary. Transco lets go breakne good morning, down the first half for us. Well, of course the first half, we are not going to forget, as you alluded to. We started the year falling from those record highs driven by the fear trade of the pandemic spread across the globe. It was the shortest bear market on record because we had trillions of dollars of stimulus pumped back into the market with saw that which saw that breed on quite sharply. The msci world index is rounding out the Second Quarter with its first quarterly gain since september of 39 of 2009. Also as you can see on my chart, it has been the u. S. Equities that have rebounded the fastest, outpacing the gains you saw in the stoxx 600, which is the blue line, and here in asia, which is the yellow line. When it comes to sectors, no surprise was so Health Care Stocks outperform. Also the communication stocks because of the work from home trade, and you saw an underperformance in real estate and energy, even though we are seeing wti rebound from that when it fell below zero dollars. We are also seeing this rebound in risk assets really push valuations up as well. So we have major benchmarks trading at their highest multiples and more than a decade. Francine when you look at what exactly has been happening, bond market havent really been buying the rally. When do we get more cash when do we get to more normal markets . Juliet it shows bond traders are more wary about when we will see some kind of shape of an economic recovery, blowing out that elusive vshaped recovery. It seems bond traders are more Global Economic recovery is going to be slow and fragmented. Virtually unchanged from where we saw it in march. Essentially any move that we saw there, the buying opportunity, the selloff, i should say, keeping those yields in check. The bloombergbarclays treasury index went up 9 so far in 2020, so that makes it its best first half performance since 1995. Francine thank you so much, Juliette Saly with the latest on the markets. European stop that european stocks are sliding. Investors weighing some scattered signs of economic improvement against what we have seen in terms of the acceleration of the virus spread and the number of infections. Lets get straight to your markets, if we can pull that up, to give you a sense of what has been going on. We have also been looking at crude oil, down a touch below 38 a barrel. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. U. K. Rofessor of interchange in europe joins us. That is coming up shortly, and this is bloomberg. Francine coronavirus is cases coronavirus cases surge past 10 million, deaths top 500,000. The w. H. O. Reports the most infections for a single day. Chinas industrial profits rebound. The economy continues to recover from the shutdowns. The pboc says it will use new tools to ensure liquidity reaches a real economy. And starbucks, pepsico, and diageo are the latest companies to curtail ad spending on facebook. Pressure on the social network to crack down on hate speech shows no signs of slowing. Well, good morning, everyone, and welcome to bloomberg surveillance. Im Francine Lacqua, here in london. Tom keene in new york. We have a couple of data points in europe, and we also have news. Boris johnson trying to get away from the focus on Coronavirus Infections to basically lay out an economy that he wants for the next three or four years, and he says they will not go through austerity like in the last crisis. That is interesting because he is a conservative prime minister. June confidence actually rising. It is rising to 75. 7,ut