Jes staley coming up from barclays, he has got the mess in hong kong. Kevin cirilli will be with us from washington on the trump response to the news out of hong kong. Right now, in your united kingdom, it is a new deal in dudley. Francine it is a new deal. We are expecting the Prime Minister to deliver on his speech that was quite popular in his pReelection Campaign, bringing britain back. We are expecting him to do a lot for infrastructure, give money to schools that under previous tory government slots lost a lot of funding. Deathsy are there more because of covid19 compared to other european countries, the debt load this country has is different than anywhere else in europe. I imagine Boris Johnson will have to do this speech while at the same time keeping International Investors on board. Tom it will be interesting to see. We are monitoring the presence of the Prime Minister in dudley. In new york city, ritika gupta. Ritika the stage has been set for another confrontation between the u. S. And china. Chinese lawmakers have approved a National Security law for hong kong. It will punish acts of six acts of with foreign forces. The law will shape the future of hong kong whose freedoms have attracted hundreds of international companies. The u. S. Warranted will roll back for trade status. Worst of the the pandemic is yet to come. Globalncy says lack of solidarity in fighting the disease. Most u. S. Areas are taking steps to scale back reopening. Arizona closing bars, new jersey halting plans for indoor dining. President trump director to address allegation that russia offered bounties for killing u. S. Soldiers. Ratcliff made the announcement. The white house says the president was not briefed. Record high according to the new york times, the bounty was included in a written report to the president in february. Former Vice President joe biden job promising Boris Johnson promising but fdr Boris Johnson will commit to spending on infrastructure, but says what is needed is a government that puts its arms around people around the time of crisis. 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. This is bloomberg. Thanks. Really interesting day. Let me start with a data check. We have got four balls in the air. Jes staley to come up in moments with barclays. The data is simple. Futures labs yesterday. Solid bid to the market yesterday. Nuances in the coverage about the difference of small caps versus what result in industrial cyclicals. No clue where that will be out the clues this afternoon. The key data point is the two year yield, you can take it up to two or four decibels. 0. 15, we are beneath that. Every tick is a big deal moving 0. 20, 19, 18, 17 and down. We shouldone thing spend more time on is gaining ground. They could gain more ground as they have done in july and august, should there be a safe haven demand caused by volatility. That is according to our chief derivative strategist at bloomberg intelligence. Overall, the market is zigzagging. European stocks are up a bit. They are trying to figure out the flowing of the pace of Business Reopening the slowing of the pace of Business Reopening because of the virus. Tom lots more coming up including the leader of barclays, a good time to speak to jes staley. Stay with us. This is bloomberg. Good morning. This is bloomberg surveillance. We are expecting Boris Johnson to set out plans for a major boost to infrastructure spending. The Prime Minister will say balancing the books can wait until recovery is secure. He is expected to announce the acceleration of 5 billion pounds of infrastructure. We are looking at research by bloomberg economists. We understand by looking at what has been leaked, it does not seem like the five billion pounds is new money. We are expecting that speech. The location is of no coincidence, it is part of the socalled red wall of former labor districts that Boris Johnson managed to gain majority. We will have a look at that. Lets get on to banking conversation. We are delighted to be joined by jes staley, barclays chief executive. This conversation about markets in the pandemic. Thank you for joining us. When you look at the things you had to announce in the last quarter, your good work in terms of trading overshadowed by this how much worse is the economy now . Jes i need to be careful about what i say about our second quarter. Thanks for having me on. You have an extraordinary Economic Contraction in response to covid19. We will hear from the Prime Minister this afternoon. To a degree, it has been met by an extraordinary move by the fiscal policy by governments from the u. S. To the u. K. Also, an incredible move from Central Banks in terms of monetary policy. Youve got these two enormous influences. How the economy recovers, and the time it takes to recover is something we are all going to watch. This is historic. Visavis the bank in the first quarter, our Investment Bank had a strong quarter. The economicat horizon, we have the ability to take economic forecasts and put them into our models which measure risk. We took conservative forecasts in terms of unemployment in the u. S. , the u. K. , the price of oil we took conservative you there. Basically, that ended up with a number of 2. 1 billion pounds, which as a percentage of our Balance Sheet is a high number. That is like putting capital in reserve for negative scenarios, which we hope does not play out. Despite taking that number, we had a reasonable number of profitability reasonable level of profitability because we had this model between consumer banks and wholesale banks. Impact,markable, the the fiscal and monetary policy. Benefit that has been a to banking. Prime minister Boris Johnson has just set down for his speech. As the Furlough Program comes to an end, you anticipate a spike in bed loans. What does that mean for barclays . Jes there is a gathering storm out there. The Furlough Program, being from the states is amazing to watch in how significant the program is in the u. K. And how that has proffered the impact of this crisis. Strongernment has been in terms of putting Small Business loans out that are guaranteed. We have done over 200,000 Small Business loans in the last weeks, 6. 5 billion pounds. All the way to major programs. We have done over 10 billion pounds of lending as well. The reaction has been strong. What that has enabled us to do is stay focused on the financial integrity of barclays. Barclays has been a strong highly capitalized bank. It is critical if we are going to play our role in helping the u. K. On the world recover from this virus. Highestd in with the level of capitalization in the history of barclays, 13. 8 capital, very liquid. We have the strength of a strong Balance Sheet, profitable underlying business. Hopefully we can be a firewall as we get through this crisis. Thecine if you look at deterioration of the u. K. Economy, is it worse than expected . What does that mean for your client activity . Jes the contraction in the economy is probably less then we would have expected a month and a half ago. Had started to recover. It is not down nearly as much as it was a couple of months ago. Aided by government programs, the Furlough Programs, there is a little bit of a storm gathering. We have 90,000 mortgage payment holidays. We have given payment holidays to credit cardholders. We got the Furlough Program. That is going to start to end in june and july. It will be interesting to see what happens to unemployment at that point time. That point in time. We are not out of the woods. We were covered more than what we would have thought, but there is a second storm coming. Staley, tom keene in new york. You have had an eventful 2020 to say the least. There is discussion about you exiting next year, may be into 2022. I want you to state right now for wall street what the barclays vision is forward and where barclays fits in on an international basis. Hsbc has challenges. Deutsche bank and all the other banks as well. Just there is a mystery about barclays. Jes we have been pretty consistent since the beginning of 2016 when we arrived and launched the barclays is to be a universal bank. Bank is is onel that combines a consumer business, we have a large credit card operation in the u. S. , roughly one third of the gdp of the u. K. Goes through Payment System set barclays. We have branches across the country. The largest credit card operation in germany. You match that with corporate Investment Bank, and we believe we are one of the [indiscernible]banks in london. An Investment Bank and consumer bank. Using that diversification to tom that is well said. And stole to run your hong kong banking shop. Hong kong and the news. How is barclays going to project at the margin with ms. Chen in hong kong and this uproar . Are thesly there whole geopolitical situation is complicated. We are a global bank. Our friends in asia are important to us. We have a good team in hong kong and singapore, and tokyo. We are focused on the Main Financial centers. Tom i dont want to interrupt, but this is too important. We will hear from the white house today on hong kong. Hsbc, hong kong and Shanghai Corporation has made a decision about hong kong. I want you to make news about how is barclays going to project to the people of hong kong, given this new effort by beijing to limits their security and Business Opportunities . What is going to be the barclays stance on hong kong . Not going to get involved in the politics of that. Clearly, we support all of our colleagues and clients across asia. China and hong kong. A statement, we are not going to make a statement. We are a major british brink and major british bank and we need to be cognizant of decisions made by the u. K. Government. We are not going to get involved in politics. Tom well said. Thank you so much. At some when you look of the things we have been the banking and system, what needs to happen right now for nma to come together . Try to compete productively with u. S. Banks. We are competing productively with u. S. Banks, particularly with corporate and Investment Banking. If you look at our first quarter, our market share in Investment Banking went up quite a bit the first quarter. That is a trend we have had over the last couple of years. The nma site, one of the challenges is banking is involved in a digital revolution. The amount of change we have to manage because of new technologies, the new way of digitizing finance, is credibly complex. Embracingys, it is the new technology to run the finance and getting away from youin market mergers where divert your attention. I do not think you will see the nma market come back to the major banks for a long time. Thecine does that mean u. S. Will continue being more aggressive in places where european banks traditionally were better . ,es i think the u. S. Banks going back to toms question, u. S. Banks are committed to the universal banking model. A number of european banks have made the decision that they want a decrease they want to decrease in their investment. They are pulling back. Committed tos are that universal banking model, so is barclays. Tom jes staley. I appreciate mr. Staleys comments on this historic moment for hong kong and what barclays will do. We are to continue with mr. Staley. More to talk about about barclays future. Stay with us. It is an eventful day. The Prime Minister speaking north of london. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. Aboute talking nonperforming loans, and also china. Lets get back to our conversation with jes staley. When you look at the difference of this crisis which started as a health crisis, turning into an economic one, how different is it from 20082009 . This is not a banks needing to be bailed out. Jes one of the few things i that banksnsider is were the catalyst for the economic crisis of 2008 and 2009. The banks got in trouble and had to be bailed out. One of the regulatory responses was to say lets rely less on bank Balance Sheets to Fund Economic growth, and push towards Capital Markets. Relying on debt being placed with the insurance companies, pension funds, etc. What we have seen on one level is that they got it right. The world economies to rely much less on bank Balance Sheets today than they did 10 years ago. Therefore, in this crisis, the banks have stood up better than they did 10 years ago. What has taken the burden is the Capital Markets. The Capital Markets responded quite effectively to extraordinary monetary easing by the Central Banks. Thene calculation, 20 of euro bond market is held by the European Central bank. That is an extraordinary move by a central bank to buy corporate debt to support the Capital Markets. Think it has i been a more efficient economic response than what we saw blade on the backs of banks 10 years ago. Francine we talked about we had a look at the exposure of some of the banks to why your card. What was barclays exposure . Participation in the Holding Companies involving , clearly ality manageable number for us. We do Business Wire cardour card accounts. A lot of consumers rely on those accounts. There is a concerted effort between governments and banks to manage this in the most beneficial way. This is going to pose a some parts of the Financial Technology industry. Banks are highly regulated and they are safe. Walletse things like which will get new attention. What we are seeing is our deposit base grow because as people get where it, they go back to the same tom this is really interesting. Thank you for answering this on wire card. Germany, but also america. Young is under the gun. There is a massive missed audit in wire card as well. I want you to speak to the rigor of auditing at barclays. Do you feel there are mysteries on your book in relation to wire card . Do you think auditing is tight enough . Taking atarted cautious approach to wire card some time ago. Very mindful , last thursday . Or a few years ago . [laughter] jes long time ago. Before. D did have we have been conservative on how we have dealt with them. They are a big business in the u. K. It is a tough situation. It seems like something quite significant was missed. I think markets will pay a price. There has been a moment here in 2020, and i know for you personally and for barclays that has been a most challenging year. Part of that has been protests, not only in america, but nationwide. Avenues. Mber of how is barclays going to reassert a diversity effort at the bank . Matcha huge challenge to diversity with academics. How are you going to do it . Jes embracing diversity and inclusion has been very forrtant to me personally many numbers of years. We want barclays to be in the forefront of being responsible, connected to employees, customers and clients, and trying to take Society Overall forward in this issue of inclusion. Whether it is gender, lgbt, think therely i needs to be a particular focus on race. What we have seen happen over the last couple of months has got to be shocking to all of us. In a number of initiatives in the u. S. Into the u. K. We deal specifically with the race question. I have had all sorts of conversations with black leaders inside of barclays. We have to recognize there is racism out there. Ht on theo put our weig balance in order to fight racisg up opportunities and recognizing there is a significant problem part ofnonblack barclays has to embrace our black colleagues and make sure its an inclusive environment and we increase opportunities for blacks across this blank across this bank. How is barclays improving the pipeline of upcoming black investment and executives and how will you measure success . You clearly need metrics and you need to track how many people your hiring and promoting. You need to make sure you look for diversity candidates, you go to schools that have strong diversity programs. We put a hundred million recently around covid19. A lot of thats going into communities to help entrepreneurs of diverse backgrounds. Seeave set up a number to what measures we can take around the race issue. I think weve done pretty well with things like gender. Weve a long way to go with race. You have to have aspirational goals, can you communicated asked transparently. We need to do that. Francine just getting some breaking news from the ecb on dividends. Appear to be lobbying the ecb for dividends in the fourth quarter. Crisis willhink the change the relationship between regulators and banks Going Forward . Thats another big change i think between 2008 and 2009. And now. Delays the relationship between the regulator and the banks were more a question of adversity. Withnk we are dealing these every day. The regulars and banks in order trying to the economy going. A decision here around the dividends, a very tough decision for us to take. The instinct at this crisis that we have to Banking Industry incredibly strong. Its hard to argue, we are coming through this in a strong way. One of the lessons from this crisis will be cooperation in the engagement between those who supervise and the doing the supervision. I applaud whats coming out of the bank of england and the fca, theyve been very supportive to us. Question. Al i want you to give us an update on the pressures. July 1 beckons tomorrow. Im going to get asked autumnal planning into the end of the year. Every thing can do faster and earlier this year. Give us an update on the for right size to barclays. We are very comfortable with the size of the bank. One of the other commitment weve made is amidst the coronavirus. We have not laid anybody off. Sure our colleagues are safe and confident about where they are. Thrive in terms of headcount. People will be revisiting. We like the scale of the bank. The scale of the bank and the u. K. Gives us a lot of advantage. And gives us a competitive advantage. We are not to make it smaller, so i think we are going to stay the course. Thank you so much. Right now with our first word news in new york. Federal reserve chairman Jerome Powell will report of the extra doria extraordinary uncertainty cordoning the economy. He will stress the importance of keeping it is these contained during an economic rebound. The economy has entered a new phase. President trump is reigniting concerns he is interested in preserving a relationship with the kremlin. Publiclydent is shrugged off allegations that russia paid bounties to kill american troops in afghanistan. The president s intelligence chief promised to look into the report. House democrats unveiled their Climate Change plan today. The goal is to effectively capture more Carbon Dioxide than power plants and cars emit after 2050. The opening bid is a battle over Climate Change. No more delays for american taxpayers. The Internal Revenue service will not extend the filing deadline passed july the 15th. Taxpayers can still get an Automatic Extension to october the 15th. But they must pay any money they owe in july. Global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Tom let me set up where we are. Bloomberg surveillance in london in new york. Markets action, futures in a little bit. Great conversations in the morning. Aboutwas a heated moment their projection and belief on the pacific rim and particularly hong kong. Kevin cirilli joins us, our chief washington correspondent. There is any number of news items, but lets cut to the chase. How will the secretary of state respond to actions from beijing . I think from a broader standpoint, yesterdays decision with regards to the commerce secretarys announcement of revoking Hong Kong Special trade status, its the first policy tool in the toolbox for the United States. Last week, some republicans and democratic lawmakers that say, october of this year, the Bipartisan Commission thats been looking into china, the response the pandemic as well as a host of other issues will be making the recommendation in october. This is just the first step. Last week in the senate, Bipartisan Legislation passed that would allow for lawmakers to issue sanctions against some individuals to do dealings with the communist party. Critical and you nail it as you always do, the luxury of waiting till october. Its off the radar, i get that. What i want to calibrate is the urgency of the moment for the Trump Administration and the triangulation in taiwan. I totally hear you on that think there is a frustration not just amongst republicans in the midst of opportunities for there to be a united front of u. S. Policy pressured in beijing. Exists i would say this on the left. So i think theres one way to look at it as a rally behind the flag, an approach to foreign policy. On the flipside of that its also very subdued and its the one area where mark warner agrees with pat toomey. Because of that, you could make the argument and some do that because its not dominating the national headline, it actually allows the United States to come at it from a position of strength because a remain somewhat hidden from the mainstream consciousness so to speak. Francine ive seen a number of columns saying donald trump is a big problem with senior voters. How much does he need them to win the election in november and how can he turn it around . It is absolutely crucial. The president if he wants to get reelected he needs to move his poll numbers with senior citizens. Florida, seniors are such a key in this battleground state. Its not just the sense of Health Care Policy so to speak. But also from the Vantage Point of covid19. Theve really been forefront of that issue in the United States. Beyond that though, look for the administration and the Reelection Campaign with this local issue on senior citizens. The state in new york for example, republicans of someone successfully pressure the democratic governor on pressure for their policy. Its another tactic they do in a battleground state like pennsylvania which is governed by democratic governor. Probably my craziest question yet but there is a story claiming republican insiders say donald trump may drop out of the 2020 election if poll numbers dont improve. Is there any truth to that . I dont buy that. Absolutely not. Remember at trump tower the day of the access Hollywood Tape and all of those rumors were still circulating at all never forget when i asked Kellyanne Conway if that was true and she looked at me like that five heads. President trump is not gonna drop out of this race. My reporting does not indicate that. Kevin cirilli, our chief washington correspondent. Thank you so much. He has a book out, you may have heard it, but a lot of people talked about it. Ambassador bolton tomorrow. The conversation. Policy and the National Security under the biden administration. This is bloomberg. Tom good morning everyone. Interesting day wrapped around economics and banking. Ago,onversation moments Prime Minister johnson speaking in england. What about Municipal Bonds . We dont spend nearly enough time. We just spoke with peter. One of the credit dynamics right now given the pandemic, when you walk in and you look at the ,housands of municipal credits how vulnerable are they to pandemic shocks. Its really a big question mark. Around congressional stimulus. If you look at the impact the shutdown has had on finance. Its higher ed. It runs the gambit really. The economy being locked down in the impact on revenue is pretty much across the board we are seeing the short term liquidity crisis. There revenues are way down. And then you have the up and down trying to reopen, not reopening bread is a lot of uncertainty Going Forward. What are the Behavioral Changes going to be. Might impact Municipal Bonds for longerterm standpoint. What would this look like . Originally we thought it would take a while for the supply to go back in the market. And then its opened up. Point in mutual fund. And now for the year we are only 11 million. We see a lot of money come back into the market. At the same time they said theres demand out there so im going to bring debt to market at a rates. Seen a big uptick over the last six weeks in particular, some of it has been taxable and others exempt. But on a yearoveryear basis we are not down that much. Thats probably the dynamics Going Forward. One of the big question marks is how do these get over the solid liquidity issue . Market,y borrow in the will they come to market with other types of data over the next several months. Should notis trend go away all of a sudden. , theinterest rates low issues will continue to come into the market particularly something around infrastructure. The dynamics probably are in place for some time. Francine you also focus quite a lot of time on security selection. Choosetical is it to places that could be fairly safeguarded by the pandemic. That is one of the interesting question marks about how to choose securities on a Going Forward basis. States are big, they cant declare bankruptcy. Do. Es also a lot they can they can raise taxes, they can cut spending. Talking about doing that. Its important and we will see if those come to fruition or not. They can push down to the local level some of the offsets which is more problematic to some degree. Youve to think about what tools they have in their toolkit. To be able to manage through longtermlso a essentiality of some of these. Important systemically provide Commuter Service rail service, etc. With they coming in can actually access the market but they did. Theres a lot of demand. Longerterm people were thinking about the area needs a Public Transportation in the mta come we will lend them money at a favorable yield. They can choose. Thinking about longterm durability. Francine thanks so much for the update. Meantime, the Prime Minister the u. K. Is still giving a speech for the u. K. Points the four key saying the u. K. Cannot be prisoner the pandemic. A return to austerity yet again. Build backvowing to ter, build back boulder bolder. More on the Prime Ministers speech coming up. This is bloomberg. Francine this is bloomberg surveillance. Virus,rack the developing a league a Johns Hopkins has been the forefront of the international response. Everyday we bring insight from ,xperts, Public HealthInfectious Disease and emergency preparedness. Johns Hopkins University school of Public Health professor and virologist. When you look at the number of , especially ins. The south, theyve increased quite dramatically. The virus is always going to be with us here. Efforts to drop down the cases by these Public Health interventions, the purpose is to get them down to a level that can be managed with testing and Contact Tracing. Its clear from whats happening across the south that many u. S. States may not get to a low enough level of cases for them to transition to relying on Contact Tracing and testing as a way to keep the virus down. Numbersd foremost, case have to get down to lower levels so that other methods can be put in place that allow the economy to open up but also keep the virus cases down. Francine we talk about a whateable level of cases, is a manageable level . Is it the number of places in an icu . How do you measure it . You need to make sure you have hospital surge capacity, meaning you have numbers of opens bet open beds. But another important measure is to only have around 5 of the total amount of tests you are administering positive for covid19. The cdc guideline, theres some flexibility in terms of what number you want to reach. To get to that level, that tells you theres a low enough number of cases that a good Contact Tracing mechanism can be put in place. You do a lot of research on your own and you are looking at how viral proteins target some of the factors in the cells. What have you learned in your research . This virus is interesting in toms of the way, its able cause a wide spectrum of disease and part of that is the virus can short circuit certain ways your body response to infection and it can allow other immune responses to ramp up uncontrollably. A key area is trying to understand why some people go towards a severe case of having their immune systems ramped up where as others and control it well and have smiled symptoms. That will allow treatment measures to put in place for severe measures of covid19. Francine looking forward to finding out more on that. He is from Johns Hopkins and be sure to check out on the bloomberg for the latest information. Every day for exclusive conversations with Johns Hopkins experts. Bloomberg forjoin our annual broadcast of the boston pops fireworks spectacular. This bloomberg. No one at this point, companies, strategists, Portfolio Managers has a great sense of what earnings will be in 2020 or 2021. The fed is literally looking at a Television Camera and saying we just printed money. The initial shock effect from reopening is going from no activity to some activity. Then you settle at levels where you dont know where things are going. This is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. Jonathan for our audience, good morning. This isomber bloomberg surveillance. Alongside tom keene, together with lisa abramowicz, im jonathan ferro. Economy,erds of this secretary mnuchin, chairman powell on capitol hill. Tom it has been a six