Not as high as economists were expecting. , it is interesting tom it is interesting, the flows right now. I felt the research over the week and a massive, massive reset of what this recovery is going to look like. This goes to Prime Minister johnson and to your wonderful conversation with the chancellor of the exchequer yesterday, fran. The idea of the United Kingdom seneca the United Kingdoms fiscal policy into the summer and october as well. There huge mysteries out there fiscally for each nation. Francine you have a government in power that should be because they are because conservatives should be more proausterity, but they are also having to deal with this massive coronavirus. Deaths from coronavirus surpassing 500,000, that is moving the markets. European stocks are falling, oil is down. U. S. Futures are not as down but they are fluctuating a little bit. Something i dont look at very often, i want to show you 10year yields, add 0. 65. Going on is something with poland, strengthening after Election Results pointed toward a runoff. That is something we need to keep an eye on because it came largely as a surprise. Tom i am dazzled at francine on that. Really part of the story here, and certainly on u. S. Foreign policy, where will the troops end up in germany or in poland as well. And of course the unique characteristics of the polish economy. When i look at the day to day, it is real simple. It came in friday, charts are sophisticated on the two year yield and the 30 year yield, and the spread dynamic as well, all of this playing to the mystery here of Central Bank Policy into the summer, and of course the raging debate that we are seeing over yield cap control. We are going to get set up, get the hour started here. Lots to talk about this monday, july 1. It is wednesday, and i believe, francine, the colonies the colonies, i say celebrate on friday. Stay with us on friday. This is bloomberg. Good morning. Francine this is bloomberg surveillance. Tom and printing from london and new york. We went through what the tom and francine from london and new york. If we take a longerterm look, we are now joined by dino by xu take away the fears of the second wave, it could change everything. Economically are rebounding. What does that mean for markets . Are we going to just see ever higher markets, or will we do a correction . Good morning. I think it is starting with what is already priced in. In the beginning few months, you will see a numbers both in the service improving. The question is whether or not that they can sustain real spending, consumer sentiment, whether that can sustain. I think in the first couple of months, it will flatten out after that. The markets will all be pricing in Global Growth because of the longterm average. In thisets were pricing as a simple income statement blip. Which i think is wrong. Of i think that is a huge issue, the labor market is a huge issue for previous recessions, and that despiteonsumer the amount of stimulus, i think it suggests that the markets will be overpriced on optimism and they will become this means they come off to different degrees, depending on which sector of the market has the higher risk off. But pricing being back to normal, the markets are looking through several years, not just through the next couple of quarters. There is a lot of uncertainty between now and then. Francine are you more optimistic about the u. S. , or given some of the composition of the markets but also the economy overall, you would be optimistic elsewhere in the world . Bhanu this is a really important point. There is a distinction between the u. S. Economy and the u. S. Market. I am not optimistic about the u. S. Economy. Much. In north asia, more much better even in europe. Rest of the world will the u. S. Market, which has a heavy preponderance of health i think that is the reason why the u. S. Market is going to be a very difficult market to beat, and the currencies may be a slightly different issue. The euro may be different because particularly the fixed income, the u. S. Being much. S months down as or a major rotation into value, which is all the market has been sickg, ill be albeit albeit on can albeit unsuccessfully. Tom a brilliant note this weekend on the dynamics of world exports. As you know, they are down, down, down after a soggy Previous Year as well. How does the collapse in world exports full into the silliness of gaming and guessing the socalled vshaped recovery . Bhanu this is such an important point. Was negative last tariffs were impacting exports. Now you have a trade war with the care now you have the coronavirus and a trade war. 13 mes are down yearoveryear. If there is one thing that has driven experience in global earnings, it is the multiplier of global trade to gdp. If that source, the markets can see a vaccine we now, even in that situation, i think the Market Expectations will be off. For the second half of this year and also for 2021, it is down. People rates are low and basically are asking the question, what else are you going to do with your money, valuation multiples are going to be high, but they really need is driven by trade flows, globalization. Ncine that nk you so much, bhanu baweja with ubs. We have more on the ute on the unique dynamics from florida, particularly the age dynamics. The mayor of miami beach will join us. This is bloomberg. Good morning. Francine this is bloomberg surveillance. Lets get straight to bloomberg first word news in new york city with ritika gupta. Ritika deaths from the coronavirus pandemic have top 500,000 worldwide, and the total number of cases surged past 10 million, according to the world health organization. The u. S. And brazil account for almost half of new cases. States such as texas, arizona, and florida have become overwhelmed, reversing plans to reopen their economies. There has been an attack on the Stock Exchange in karachi. Authorities killed four gunmen before they could enter the building with grenades and automatic rifles. One Police Officer and two security guards were killed. President is rejecting a report that russia paid bounty for american and allied troops to be killed in afghanistan. The president says u. S. Intelligence agencies did not believe the information was credible and did not brief him on the white house denied reports that the president had been briefed but had done nothing to respond to russian bounties. In hong kong there were more protests against the National Security law china is expected to impose. It is said people cannot ask for independence nor commit what he called terrorist acts. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, ritika gupta. This is bloomberg. Francine . Tom . Tom thanks so much. From london, from new york. Bloomberg surveillance. Resetting the end of the first bhanu baweja stays with us. You mentioned at the very beginning of this conversation your concerns over the labor economy. There is a labor economy which i think we understand, of the developed markets, of furlough and layoff. What does the labor economy look like for developing nations and emerging markets . Bhanu these are the folks on the other side of the globalization case, where globalization is coming back, automation is picking up, and this is where you will see tremendous pressure in the labor markets. For things like africa, india, is 25 ormated it 30 from the overall with the politics in these countries, changes going to become more populous, it will become the footprint of things as it picks up, and these economies, like japan, unlike the u. S. , do not have any headroom. One of the common mistakes investors make, they say why cant public debt in south africa or india or mexico go to gdpf gdp and ash percent of 90 of gdp rather than 50 of gdp . Because their cost of debt is higher. Is an issue that directly translates into a fiscal problem for these countries, and this is the crisis that we have, that we see in developing a honda maze. This is a fiscal problem. In developing countries. This is a fiscal problem. From keneard this rogoff on this show come and he was heated about the difference between these nations. Public entities like the imf and the world bank provide lipservice, but there has to be events. Events or 2004 event are they 1992 events or 2004 events echo how does this play out . Bhanu i think it plays out from growth coming down in a much bigger way. The markets have been looking for a rotation away from the u. S. Into the rest of the world. You will not see a blow up in these currencies, but you will see contiguous negativity from these continuous negativity from these currencies. They have already done that for the last 10 years, but now that china, not just a developing economy would also Global Growth for sown, countries like brazil, africa, india, as is already becoming existential forethoug. For the rest of them, you will see lower l support for the longterm earnings. Asia is the exception because that is where there is good fiscal and that is where you have the sectors come as francine and i were speaking earlier, the right sectors in the equity market. Francine when should we start worrying, if at all, about runaway inflation, and what that means for the dollar and emerging markets . Bhanu there are so many things to worry about. I think you can strike that off your list. I dont think you have to worry about longterm inflation right now. Because Central Banks in these economies they are an instrument of holding of debt come of government debt, has been about 2 . Europewhat the u. K. Or or the United States you really have seen an increase in the same way. The labor market is going to be deeply distressed. So that is going to take a long time for the optimism to translate into inflation. It is going to happen through a misallocation of resources, through taxes, and financial repression. Basically from the 1990s Asian Financial crisis. The anatomy of this crisis is very different. E have not seen this before, that is not usually inflationary. An italygoing to be like problem, and the rest of it is going to be a problem like that. It is not going to be inflation, but it is going to be muted returns. Francine when will we know the exact legacy of this crisis . We talk about scarring in the economy. What are the three main scarring points we will be left with . Bhanu first of all, the labor market is going to be a huge issue. The other one, i think this crisis is going to pull forward many of the positives that were in existence. This, developing economies are losing out. So a move to automation is another thing. The move to populism and a higher footprint of the state i think is a third way to think about it. Not necessarily inflation. The labor markets bring in a big way a swift move to automation and a big move to world economy. These countries will be clear ers, and i think that will days will be the wrong policies coming through, im afraid. Francine it is a little tom im going to take a chance to get the conversation started for a fourday american workweek. What is ubs thoughts on the jobs report that we will see on thursday . We do think that the increase is going to be about 1. 5 million, slightly below consensus. We dont think we will repeat the massive 2. 5 billion uptick. The thursday jobs report, i think what is important is to bear in mind that in an ordinary crisis, you find that the unemployment to gdp is about 0. 56, which means that if gdp falls by one percentage point, the on appointment rate picks up by about. 6 percentage points. This crisis is going to be way higher. Services which buffers, and an ordinary crisis, it is a very different playbook this time. Services is where the big hit is. Services is where the big hit is. Wherend the lower part is you will see the biggest hit. So you could be in a situation where 12 months from now you are normalizing. On lys not just in the u. S. But across europe, that is when the insolvency begins to pick up. That is when unemployment begins to pick up. I dont think the market is paying enough attention to that. Francine how much insolvency are you expecting . 18 of u. S. Ceos say they default on bond payment. We think the u. S. Should be priced somewhere around 7 to 9 , probably closer to 9 . What the markets are pricing in is close to 5. 5 percent or 6 , so the markets are pricing much lower. Francine thank you sent tom thank you so much. Bhanu baweja, we thank you so much. Okuns law is this linkage of unemployment dynamics to gdp, really extraordinary. The different opinions that you are seeing come of the gradations of the dynamic that will be on the labor economy. Francine, so much of this and i know i read about the United Kingdom and the october cut off for furlough support the difference francine between the furlough and a layoff is front and center in july. Venting co. It is, and it is a very different system with regimes in the u. K. Then in the u. S. In the u. S. , and a lot of people got checks through the post. These checks instead of being spent, they were being saved. It has created that controversy. U. K. , if they could not go to work, they were being paid 80 by the state. But we are coming to the end of this as economies reopen, tom. More onhave much economics, investment, and politics. Amy pope will join us from chatham house. We will get the first briefing in the morning on the u. S. Political economy. This is bloomberg. Good morning. It is a very different situation. Ais a very, very such serious situation and the window is closing for us to take action. Good morning, everyone. Extraordinary set of weekend asversations in government officials manage the message of this pandemic. Amy pope joins. Amy, the entire nation seems to want a federal response. Mouse feel that pandemics can be relieved by a federal response versus a more state and local sponsor . Amy absolutely. The federal government needs to put in place the protocols and the expectations and provide guidance. The states are going to implement. If you dont have a common set of standards across the country, dates are going to implement differently. That creates a vulnerability right there. Is so fascinating about this is that the president has done what he has done whenever you think about , his actions including his criticisms of the world health organization, who takes over the federal response in a vacuum . We are not seeing anyone really emerge. People trust dr. Fauci for good reason. He has been managing responses to various outbreaks across various administrations. Dr. Fauci is not really being given the leeway to do what he needs to do. Thewise, we are not seeing same leadership we need from the centers from disease control. So you see a couple of examples of governors who have been leading but you have the governor from new york or the governor from Washington State is ill prepared for texas or florida or anywhere else outside of its jurisdiction. We are seeing the vacuum basically not being filled. As a result, some confusion. Francine who can fill that vacuum or who will fill that vacuum . Amy that is the problem. The situation we are seeing right now is creating a roadmap without a clear end in sight. The federal government is meant to fill that vacuum. And there isnt a natural leader otherwise to do so. That is what is so troubling about where we are in the u. S. , there is not an obvious candidate. No one has the credibility and there is no one who has the authority to impose a set of restrictions or protocols across various states, especially with different political actors. That is a significant vulnerability for the country as a whole. There is not another natural actor that can fill in when the federal government is not stepping up. Francine what does this all mean for the election coming in november . I know it is a long time away but it is also around the corner. Is something the president should be paying attention to. There are some troubling poles that have been coming out. The first, if you look at Senior Citizens, a population the president has relied on in the past to win the election in the first instance, the support within the Senior Citizen community is eroding. That makes good sense because they are most at risk of contracting the virus and having very serious repercussions as a result. The president s failure to establish leadership looks like a failure to protect them. There are troubling reports in various states that we would expect to be much more favorably skewed toward the president. Suggest he is losing in arizona. We have talked about the battlegrounds of michigan and pennsylvania and wisconsin. Right now, those states are favorably pulling for joe biden. Tom will that be a catalyst . The critical question out of monday morning, amy pope, is that given the cases growth, which is both which is frightening, or even the death growth, is there a urgency you detect in both parties, particularly by republicans to get going on a monday morning . I dont see that urgency. Amy no. But if i am a governor sitting in a place like texas, i would be putting a lot of pressure on the federal government and the president to step up. To theely, the response virus is not a political issue. It should not be partisan. It is just about competence. It doesnt matter. There is not a republican way of responding, there is not democratic way of responding. There is just a way of responding. The country needs to unify. It provides a perfect platform for the president to dimly demonstrate leadership skills. It is puzzling he has failed to pick up on the opportunity presented to him. Isis hard no matter who sitting in the chair, it is a hard problem to solve. Sending out mixed messages and putting the responsibility on thernors, refusing to own problem and the solution at the executive level, all of that undermines his leadership as a whole. And it puts a question in the mind of voters. Francine thank you so much. My pope joining us in the meantime, we are getting live pictures out of corot she karachi. Ss conferencee on an attack that killed three people, two guards and a policeman. This is bloomberg. Francine this is bloomberg surveillance. Texas is fast becoming the new center of the coronavirus pandemic in the u. S. Test test rate positive rate jumped to a record of more than 14 . Texass governor has ordered bars to close and wishes he had done it sooner. In china, another sign the economy is recovering from the coronavirus pandemic. They rose 6 from a year earlier. Profits dropped more than 19 the first five months of the year. Frustration is starting to give way to hope. There has hardly been any progress in negotiations over a future relationship between the u. K. And the european union. Both sides are gearing up for an intense eight weeks that will define what the future will look like. They are optimistic they can reach a deal. In mississippi, they have voted to get rid of the confederate battle flag emblem. Lawmakers adopted the sign more than one century ago. It was the last state flight to contain the emblem that is widely viewed as racist. Global news 24 hours a day, on the air at tiktok, on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. The u. K. Prime minister, Boris Johnson, has rolled out a return to the austerity that followed the 2008 financial crisis. He will spend large amounts on infrastructure to jump start the british economy. Breakfast negotiations restart today in brussels. The two sides have six months to overcome their differences. Am grateful to have you on the program. When you look at what Boris Johnson is laying out for the future, he is giving a lot back to schools. Is it to make up on how he has handled covid19 . They are not going to say that out loud. There are lots of things behind it. Think, remember, this is a conservative government that came to power on the back of winning seats in traditional labor areas. I think the Prime Minister is conditionhe fact that traditional conservative policies are not what he needs. Francine i know we usually have you on to talk about brexit. Is there a difference in the first time where ministers are meeting facetoface to discuss brexit . Economy preparing this to deal with a no deal brexit . Doubt the there is no government wants the brexit deal. Politically, it looks a lot come out having signed a deal with the european union. And positions of both sides, even if we get a deal, it will be a sim trade deal. It will have negative shortterm implications on the british economy. Good morning. I have noted that it seems from a distance, a change in the Prime Minister, is part of the change a restructuring of the labour party . All of a sudden, he is not going he isinst mr. Corbin, going up in something different, new and more moderate . I agree. He seems to have changed a little bit. Leader is a lot more professional and effective than the predecessor. Whether it is because of a brush with serious illness in the hospital, i dont know . He is having to take the opposition seriously for the first time in some time. He is trying to double down on having serious policies. Tom what does the calendar look like through the summer . I read today through the october end of the budget for helping with labor and such. What does the calendar for london look like through the summer . What should we look for . The first serious thing to look for is tomorrow, when the Prime Minister will lay out his plans for rebuilding the british economy. This will be an attempt to move us on from the health aspect of the pandemic to the economic recovery aspect. We have brexit restarting again now. The talks will continue. Those tracks will be moving forward steadily over the summer. And into summer and in the autumn, we will have a chance. Or delivering francine do you see on these brexit negotiations, do you see both sides wanting to compromise because of the damage covid19 did to their economies . There is little sign of compromise. What is true is that both sides would rather have a deal then no deal. What will happen is by the time we get very close to the todline, remember, we need have a deal by the end of october to get the e. U. To sign and ratify it. You will see the heads of state getting involved. As trade deals go, this will be a thin one. Francine thank you for joining us. Coming up in the next hour, david sowerby. We will talk to him a little bit about the markets and the economy that we see as well. This is bloomberg. Francine this this is bloomberg surveillance. Chesapeake energy has become one of the biggest victims of the spectacular collapse. The oklahoma citybased gas company has filed a chapter 11 bankruptcy protection. Chesapeake agreed to 11 eight 7 billion in debt. Eliminate 7 billion in debt. Another asset sale by bp. They have agreed to sell its petrochemical business. The price, 5 billion. Bp calls it the next strategic step in focusing its portfolio. Of tests for the boeing 737 max will begin as soon as today. They reviewed the Safety Assessment of the plane. The 737 max has been grounded for more than 15 months after two fatal crashes. A growing list of facebooks advertisers are expected to help spending on social media. Among them, starbucks, pepsi and unilever. Read bush securities says it will have a Significant Impact profit. Ooks tom we greatly appreciate it this morning. On facebook, it is interesting. Isarly, all of social media making it up as they go. Alex webb joins us on the money moving out the door and advertises saying no, we will not participate in the way you do business. Alex, what is the distinctive item here . You are young, you are hit. Ip. H cocacola is iconic in branding and marketing and they are running away as fast as they can. What is the distinctive element . It is going after the money. We have seen so many assets to try to change the way facebook behaves. It has have limited effects. It is the biggest if the biggest advertiser in the world says no, this is not good enough , facebook has to start changing its practices. More likethey become a News Organization . Difficult. Despite the size of these big names, facebook gets most of its profit from small enterprises. It is Mark Zuckerberg who controls the majority of the voting shares. He does not have to do anything he does not want to. Think we will see some changes around the edges. Does, i think facebook will continue to try not to have to vex content proactively. There are cost elements there. It costs a lot of money to get people to do that. Just to get to employ the people to do that. The protests need to continue as long as it takes. As long as they have a facebook page, it will return with advertising at some point. This is basically cocacola playing paying for an ad they dont agree with. Is there anything else facebook could fix without it going against some of the things they dont want to do because it is costly . A similar thing happen with youtube. A few years ago, the u. K. Times found that ads were appearing alongside videos that promoted isis. They were not happy about that. Youtube is a different case. There is not as much User Generated Content as there is on facebook, for instance. Talking about promoting conspiracy theories. Verizon might appear alongside that. You can see why verizon would not be happy to see that. It is difficult for facebook to vex content as google does because there are more contact points. The way people consume information on facebook is different from the way they consume it on youtube. Where is advertising going to . It is being pulled from facebook and spent elsewhere or is it just being pulled . Discussed it a little bit advertising spending in the summer is not as big, particularly when there is not a world cup, or Olympic Games this year. Those would be the big events to keep advertising spending hi in the summer, when otherwise it would be shallow. I am not sure that they will outspend elsewhere or increase spends or increase spending elsewhere. They will continue to spend on outlets. Media is not a huge amount of spending on billboard advertising given that a lot of the world is still in lockdown. Thank you so much. Our alex webb. In the meantime, this is what the markets are doing. They are figuring out what we have seen in terms of the numbers of cases increasing. If you look at the markets, they are fluctuating with futures. These marketsing stimulus measures against accelerating virus pressure in the u. S. And brazil. I know you are keen on what is polish. G to the it rose. Tom the two year yield in the went out to a 0. 15 handle. We are not to a 0. 15 handle but we are getting there fast. We have more to talk about, particularly on the american economy. Lets set it up for our global audience in the United States. Something to do with the colonies and the mother country. That will be friday, july 3. Before that, we will get a very early employment report that is widely anticipated, from ubs, in this hour. Coming up, Matthew Liz Eddy of deutsche bank. They have been lights out about the flow of economic growth. Interesting work from deutsche bank. For an get you prepared interesting labor economy week. In there with us markets. Here is what you need to know, yields grind ever lower. Stay with us. This is bloomberg. Do the math and the math is simple. Logicallyre very naive. Too many have mayors who are openically neutered and the economy. This morning, the pandemic across america rages. Do not ask about the trajectories of mexico. The yield breaks lower. The two year yield nearing a 0. 15 handle. Hope for a vshaped recovery evaporates. The second half of 2020 is upon us. We consider the many risks and uncertainties of getting to new years day 2021. Good morning. This is bloomberg surveillance. I am tom keene in new york. We begin early, we like to do that on surveillance. Good conversation, framing out the second half of the year. What i