So we are looking at case counts going up and in equity market going up. We are seeing treasuries coming off, you see three bits today, but what we are seeing as well is a steeper and steeper curve. What does that signal, and ultimately will we see Central Banks stepping on that . What we have coming up for the rest of this program, we have a great our lined up. Lets talk about the highlights coming up later in the hour. We are going to get more oversight as to what is happening in china. Alpine chief strategist will be coming alpine macros chief strategist is joining us. Here in europe, the ecb is warning that the eurozone faces about two years of downward pressure during a webinar this weekend. The ecb president , Christine Lagarde said she does see a turnaround after that. Inflation dynamics will be impacted with disinflation to begin with, and then inflation that will occur, that we will have to anticipate, that we will have to measure, but it will be most likely based if we have an increase in productivity on a natural increase in Interest Rates. Guy Christine Lagarde joining us over the weekend. Now, chris, how long do you expect the Central Bank Stimulus to continue . Christine lagarde talking about an a deflationary environment and we assume the fed and the ecb will keep pumping these markets. Chris i think it is hard to see this stopping until it wipes the eyes of inflation. At the moment we are in a disinflationary push, and i think the way they think about it, they will be thinking about unemployment being very high. They like to think about inflation in terms of on a point at coming down and Wage Inflation picking up. I think looking at where they are at the moment and seeing that there is no signs of Wage Inflation anytime soon. I mean, i think inflation will become a bit of an issue, sort of six to nine months down the line, but i think now, absolutely, it is sort of full foot down on the pedal on the accelerator, and plenty more Central Bank Liquidity coming the way it markets. Kailey we heard from francoise over the weekend and he said the pandemic has for so many of what we are exposed to cs monetary policies becoming permanent. Are they here to stay now . Are they going back . Chris i thought they are pretty much here to stay, but in a sense they have been here to stay for the last 10 years. We are at the end of a debt super cycle, so if you think about it, this buildup in intensive this has been going on since the sort of midtolate 80s, early 90s, that sort of time, and it has been a continual process, sort of stepping up in global debt, flatlining for a bit, then picking up again. The higher we have got in terms of global debt, the more they need to open new toolboxes, pick out new kits and new bits in the toolbox to address the crisis. In thisery advanced cycle. We are advanced in the tightness and the brokenness of this International Monetary system. Basically we need a new one, and until we the we get a new one, will have all these different pieces around and about, sort of upping their game, increasing them, and maybe trying to decrease them a bit, but in reality they are here to stay for quite a while, i think. In the shortterm, chris, the data are improving. You can see that. In the United States it is rocketing. Better data means less stimulus . E ech what better data means, they are anticipating better data and unlocking the economic bounce, if you would like, and better days. Market,ook within the it is doing well. The cyclicals are having a bit of a bounce, but they are quite overstretched, and the part of the market that is being neglected is the defensive sector. We are do it bit of rotation, a bit of pause, consolidation. But Something Like the u. S. Market, the s p 500 is below where it was on june 8, where it peaked about a month ago. So yeah, i think the city surprise index tells you that the markets are pricing and a lot of good news at this moment. Kailey what you just said was echoed by a strategist at citigroup, writing a note that Central Banks have already driven in places and they are saying we are capped in terms of upside on the s p 500. Does that mean that even if we get more stimulus, even if Economic Data continues to show these incremental improvements, that nothing is going to be enough to drive Risk Appetite higher than it already is at this point . Mean, i think if the fed came back to the table and started upping its qe again, that would help, and if we had a good earnings season, we are about to start the Second Quarter earnings season next week in earnest, so i think since Earnings Growth is going to accelerate, it could be quite powerful as well. But the reality is really two things drive markets higher, one is Earnings Growth and the other is liquidity. Defense did an awful lot of the liquidity in march, april cap man may. Until we see a reacceleration of Earnings Growth, the market will we will see what they do. They are sort of underpinned by the fed promising to do at least a certain amount of qe. So i think any tightening of financial conditions, any meaningful weakness in equity markets will be addressed by more fed liquidity. I think the move to the upside, we need more stimulus from the u. S. Treasury, from the federal government, or we need more qe or a sense that actually the Economic Outlook in 2021 is really improving. That is the way i think about these markets. They have come an awful long way quite quickly, and pausing is quite healthy in some sense. We are seeing that second rotation over the next few weeks, i would expect. Which has a bigger effect at this point, fiscal policy or Monetary Policy . Powerful,can be quite it really depends on size. There is a clear correlation between the s p ratio and the qe in march, april, may. It was very tight. As the fed up its game, it went to an extra neural high valuation level, as many of us aneen talking about extremely high valuation level, as many of has been talking about. It is quite punchy, it drives Earnings Growth. We are already seeing told hundred dollars stimulus checks helping on the consumption side in the we are already seeing 1200 stimulus checks helping on the consumption side of the states. Both need to be watch very closely. Both can be quite powerful. Kailey lets pick up on the valuations. You mentioned the s p trading at a pe multiple near two decade highs. We are about a week away from earnings season with virtually no visibility. How big is the Downside Risk when it comes to the Second Quarter corporate results we are about to get ako chris well, it is a key risk that has to be watched closely. The outlook will be more important. A lot of companies are not getting outlooks and talking about what they think. Morewill help equally if Companies Back away from talking or 18 months, 12 and that will be a challenge for markets. Closely, watcht the segmented parts of it. I would watch the outlooks we get across the sectors. Across a range of sectors. Guy you talked about the marketsy of risks the now face, you talked about the fiscal stimulus of monetary stimulus, the earnings season, the data. If you were to describe the asymmetry in the market, is it kind of slipped of 60 42 the downside, 70 30 to the downside . Is there a big move down from here or a big move up from here, or a small move down or up from here . Chris i think what we need to see is liquidity creating a genuine wealth effect. We have this topsyturvy economy in the states. We have it a lot over the last decade. What the fed has successfully done is they have squashed financial conditions, loosen to the market, and that leaves credit conditions. That loosens credit conditions. When you do that, you can get economic growth. You shift on what we thought might be a deflationary bust a couple months ago to what might be an inflationary boom as you look further out. The risk is skewed to the upside, i would say, whether it difficult to0 40, be precise. The amount of stimulus that the fed has put in despite the fact that it is in such deep asession, it is so deep come we know. But the amount of stimulus skewed to the upside with the success they have had in manipulating financial conditions and i think manipulating is probably the right word. You are tilted toward inflationary boom, not deflationary bust. Kailey you only have about 60 seconds. You are good for tilting defensively here. Can you make the case that tech is not a defensive sector at this point . Chris tech is not a defensive sector. If you look at what is going on in tech, particularly the big stocks, but also the zoom market cap is up 50 in one month, tripled in three months. Low we sawcca these stocks go up. They are big stocks, highrisk stocks. They are popular, they are crowded, and they are over owned. I dont think they are defensive at all. Kailey karen a. Chris white link, thank you so much for your 10 chris watling, dank you. Thank you. From the, i guess rockefeller foundation. This is bloomberg. Is the european close i am guy johnson with kailey leinz. This is the european close on bloomberg markets. Are indiaases has surpassed russia. Churning g joining us now is dr. Jonathan quick. From the rockefeller foundation. Thank you for joining us. I want to thank in the United States if i might. We are seeing a pickup in cases, and that continued over the weekend. My question to you is, do you anticipate that this will turn into a pickup in mortality rates as well . Dr. Quick well, what we are seeing, we are seeing indeed the case rate continue to climb. The first0,000 for time for new cases, so that is really concerning. Actually curve is still on the down tick, and i think three things are happening there. One is there has been a shift to youth, who are less likely to die. We are also Getting Better at treating coronavirus, and perhaps the third thing is it may be the higher risk people are the ones who got the message for caution first. But we certainly do expect to see, and we are already seeing in some states that the death rate is ticking back up as the caseloads go up. Dr. Quick, we were speaking to dr. Howard koh earlier in the program, secretary under the obama administration, and he was talking about making their decisions on a statebystate basis. Do you think that would here . Dr. Quick absolutely. That is one of the lessons of a pandemic. And it is a lesson in every segment. It has got to be a whole country response. The messages have to be consistent. The response has to be coordinated. Lookingence is clear around the world, the countries early, decisive, whole country response are the ones that are most successful in bending the curve close to, in some cases, close to zero. So yes, indeed guy what have we learned from europe . Dr. Quick i think consistent messaging about the reality of the virus, the contagiousness of it, and the protective basis which actually work. Reinforcing distance, masking, handwashing, avoiding large gatherings, reinforcing that. The second thing is to provide support for all of the wherewithal that is needed. We have huge differences in test availability. At aesting, we are still fraction of the testing we need to be done in order to get the outbreaks early. Recurrent e of the first sign of recurrence in a state is overwhelmed emergency , if the first sign of recurrence in a state is overwhelmed Emergency Rooms, you are not doing testing. ,he states that have done well like new york, new jersey, massachusetts,d they are all under 3 , some of them less than 1 positive. What that means is they are able to respond quickly to outbreaks. Kailey so is testing the biggest lapse in the response that we need to address at this point, or is it resources, supplies, messaging . What do we need to correct first as we deal with resurgence in the first wave and or look to the second wave . Dr. Quick we dont have time for first, second, third. Three things that have to happen number one, we have got to have that testing and know what is happening. Number two, we have to have consistent messaging, and all hands on deck in terms of those protective measures, which works. That is the only thing that has been proven to flatten and bend the curve, those protective measures. Singing fromo be the same song sheet there. Number three is, be ready for the surges. We are behind on equipment. Not all of the hospitals in the country are prepared. So we need to keep up on that. And those have to happen simultaneously. The testing, the messaging, and hospitals andof Emergency Rooms for the potential surge. The dr. Quick, if the mortality rate continues to fall, isnt that all that matters here . Why should we care about the number of cases if mortality is relatively low and manageable . Dr. Quick well, the manageable part is the tricky thing, because we can go for a while. Having that part of the vulnerable the less to death part of the population, providing the cases, but the key thing is when we look at the population profile in the u. S. , and you look at the share of the population that is at risk, through poverty and through social distance, but also through diabetes, hypertension, we have a huge portion of the population at risk. So it is really hard to keep the whole of society going if you have got a big chunk of it that is still vulnerable. So it is absolutely a false choice to say saving lives is saving the economy. We have to find ways to do both, and i believe that particularly if we all focus on those protective measures, we can do a whole lot more to bring the number cases down and to be sure that the death rate does not come back up, as it is likely to if we do not control it better. Kailey dr. Jonathan quick of the rockefeller foundation, thank you for that insight today. Coming up, have exclusive interview with incoming ceo jim 11 on where he sees opportunity jimmy leven on where he sees opportunity. This is bloomberg. Ritika it is time for the Bloomberg Business flash. Im ritika gupta. The u. S. Supreme court has upheld the federal ban on robo calls to mobile phones. Justice rejected a bid to overturn the law on freespeech grounds. As part of the ruling, the court broadened the 19 and one measure. It contains a collection of debt made to the federal government. That the dakota excess oil pipeline must be shut down by august 5. It found a crucial permit fell short of inventing of federal environmental requirements. Expanding through delivery after the pandemic hammer delivery for main business. The ridehailing service uber and 17ed to pay less billion in stock. Grubhubttempt to buy failed. Its ridesharing business has plunged. Guy thank you very much indeed. We are starting to get details from the sba. This should be a fascinating program. To detail starting some of the loans that it produced out into business. Totaling around 521 billion. Loans weren of those the biggest borrowers are going to be disclosed it seems. The Smallest Companies will not see their loans this close. I imagine private equity is quaking in his boots right now because some Companies May have took may have taken loans they should not have. Ley arizona virus cases arizona coronavirus cases increased three point 1 . Small business are taking these loads, and we are seeing lockdowns halted are either reversed. That means they might need more money to survive this. Guy absolutely. We are not done yet, if i can speak on the stimulus front and small businesses. The life varo of the economy. We certainly need them. The question is, do private Equity Portfolios need that money . We would detail the close a moment. This is bloomberg. Guy 30 seconds until the end of regular trading in europe. Stocks onn european light volume. The stoxx 600, we gap higher. The chinese legacy of a strong session helping europe. We will talk more about china in just a moment. European stocks have been range bound. We are up around 1. 5 percent on the stoxx 600. Let me show you the break down in detail across the main markets. Outperformance from the ftse 100 great we have seen some of the housing stocks doing very well. The banking stocks have been performing, the ftse 100 outperforming, up 2. 1 . As i say, this has been delivered on light volume. A quick look at the grr. We break this down from sector point of view. Most of the main sectors have been in positive territory. The financials have done well. Banks up 4 . Tech and the car sector also performing. The bottom end of the market also up. In terms of the individual stocks, lets focus on the banks. I want to talk about what is happening with commerzbank. We have seen a Strong Performance coming through commerzbank, up over 7 . We dig into the details in just a moment. Higher developments also , this is a u. K. House builder. There is much speculation ahead of the chancellor speaking later on this week that we will see the transaction tax in the raised, or the threshold raised from 125,000 pounds where you pay no tax up around half a million, that would provide the full up for the Housing Market in u. K. , which has just seen its first sequential decline. Nt, a Chemicals Company down 12. 5 . There is some speculation that has had a large amount of cold water poured on it and the stock trading lower. Commerzbank is under a lot of pressure recently. Today we have seen shares bouncing back, but on friday we saw the chairman and the ceo resigning. The reason for that, the pressure we see coming from Cerberus Capital now saying they want to see these gentlemen replaced in orderly fashion, but certainly we have seen commerzbank coming under considerable pressure from its shareholders of late. The share price has halfed, cerberus hoping the new Management Team can deliver more. Then we are likely to see the ceo being named after that. That is our stock of the hour. As i mentioned just a moment ago, we are seeing a decent equity performance at the closing europe. It pales in comparison to what we saw in china. We have seen chinese equities pushing up to highs. Fiveyear highs on many indices. Joining us is the alpine macro chief global strategist to give us a take on this. Thank you for joining us. Mediainese state overnight describe this rally as healthy. Would you describe the rally we are seeing as healthy as well . Healthyr it has been because if you look at the valuation parameters, nothing excessive. We are talking about trading earnings. Multiples of 14 or 15 times. I do not see it getting crazy. Things can obviously get crazier. Kailey lets talk about crazy because momentum on the csi was the highest since the end of 2014. At what point, if we get so much momentum, are we at risk of seeing a similar episode play out five years later . It is likely we will see a replay of 2015. If you look at the broad macro environment in china, it is similar to back then. The reason i am talking about what i am talking about is if you look at Monetary Policy, if you look at the socalled shadow banking activity, it has gone up fivefold over the last dose go to three months. There is an explosion of liquidity in the system of the government trying to get the economy going again. The stock market has been very erratic for the last couple of years. If you look at the shanghai this is the csi index, not going up that much at all. Guides are retail all the sudden waking up and they want to participate. If you look at the opening of a trading account, in may alone there was about a 1. 5 million new accounts open. Hat was mostly retail once the retail gets on board, they are driven by one thing, the return. I think it is very likely things will get a whole lot crazier going forward. Thatyou can certainly see in the performance of the brokerage account. There stocks are trading incredibly strongly. Why havent the chinese learned the lesson from 2015 . That caused considerable damage. Why are the authorities prepared to risk that happening again . Chen you have to be careful. It is a think governmentsponsored rally. Beinga lot of papers billed as a rally, i do not think so. That is one paper only, that is the peoples daily, that is the communist party mouthpiece. 2015, thenk about peoples daily openly promote the stock market. This time they did not mention it. , it is crazy to think the government did not learn any lessons. I think they must be very concerned, but if you look at the stock index backing up, it is not crazy yet. Five run the government, i would be if i run the government i would be happier to see the stock market go down. Let it run for a few weeks and a few months and see what the government is going to do. Kailey lets talk about china relative to other areas of the world. We have seen something in which europe is outperforming the u. S. Many crediting the fact that their virus response was in some way superior to the u. S. , they were able to get it under control. Will that have happened with china as well as they seem to have control over the second wave . Chen if you look at the pattern , globally speaking, there seems to be a pattern that the countries get down the curve, meaning countries that sustainably flatten the curve tend to have a stronger stock market. Beginning of the year, the chinese stock market is the best performer. It is up. Most of the other markets are still in negative territory. The chinese cycle is slightly different. I think it is clear there is a pattern, the countries getting the infection under control tend to have a better market. Market is holding a promise from now on they will deliver high returns, not only because it looks to me they get the infection under control, but also if you look at the easy balance sheet, it is going through the roof. There are two things to consider. Going forward, this will be a doiod where european stocks a lot better than the u. S. Equity market. That is my guess. From a chinese point of view, i am wondering what the perception is of the trade war. Where are we from beijings perspective in that conflict . I read a number of pieces over the weekend talking about the fact that we are already effectively in a cold war. Will that geopolitical risk translate back into the market . Halep muniz the equity market to that risk given the fact it largely driven by retail accounts . Chen i think it is very risky. Make no mistake. The speculative frenzy is driving the market and driving to the crazy level that will have a crash. It is very risky. Not only that, but the geopolitical condition is volatile these days. We do not know what the u. S. Policy will be in the Chinese Government is very nervous about it. Of course they are nervous about it. President trump the policies are erratic. It is not very predictable. They are concerned about that. I think we should all be concerned about this. Not only the chinese stock market, but we have to be concerned about our Global Market as a whole. There is a second trade war that will flareup. A lot of markets will be very risky because right now the World Economy is very weak. Stock prices are reasonably high. That by definition means markets are very vulnerable for the bad news. We need to being paying attention to a lot. Kailey that is all very fair. Jens out of alpine chen zhao of alpine micro. Next are giving is your time. Time to check it on the first word news. Ritika the Supreme Court has ruled states can require president ial electors to back their states popular vote video. Thecourt rejected arguments constitution gives president ial electors the right to vote as they please the matter who won the popular vote. Lawsuits filed by Hillary Clinton who refuse to vote for her despite her popular vote win. Is said to issue executive orders on a wide range of topics. Mark meadows says the orders will cover chinese manufacturing, immigration, and Prescription Drug prices. Meda says it is important for the president to provide incentives for manufacturing to be brought back from overseas. Maxwell is said to be reported to new york. The former girlfriend of Jeffrey Epstein was arrested in new hampshire. Prosecutors play say she is a flight risk and they will fight any bail for her. She will be sent to the same jail where epstein was found dead last year the finance industry is ramping up the pressure on the eu over brexit. Theres in europe warned could be major disruptions by the end of september unless there is progress on a trade deal by then. Recent talks through the u. K. In eu and it was little movement. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am ritika gupta. This is bloomberg. Let me pick up. Thank you very much, indeed. , Governor Cuomo is saying no decision on whether School Districts will reopen. Every parent is on tenterhooks waiting for information on whether schools will go back this term and obviously in the fall. In terms of where we are with the close in europe, we are done and dusted. The ftse 100 outperforming. A little higher during the auction. It was driven by rollsroyce bouncing back. Barrett Development Also having a good day. You see the homebuilders doing well. The ftse 100, the tax, and the and the cac 40ax all on solid footing cured cuomo says casinos and movie theaters remain closed. Able to carry on the coverage at the top of the hour with u. K. Focus. The table the cable show taking to the air on dab digital radio. Jonathan ferro in new york. Ill be joining him in london. We take up looking at the u. K. Economy. This is bloomberg. Guy live from london, im guy johnson with kailey leinz. Alix steel is off today. Lets talk about what is happening in the Hedge Fund Industry and a little bit more detail. The Bloomberg Television exclusive. Cio jim 11 spoke with Erik Schatzker jim levin spoke with Erik Schatzker about covid and whether the conversations will make it hard for anyone to make money. Jim this will be going on for long time. There will be default spirit i precovid, thee u. S. Yield market traded Something Like 350 basis points. Bond wasge highyield 350 over. At that time, and this is been going on up and down for the last several years, at that time , there was plenty of capital being raised for activation funds come the activation funds needed to be activated upon some of that. That event was typically Something Like highyield going to 700 over or 750 over. , if youmoment in time got to 750 over, that has to be an unbelievable opportunity to deploy capital and credit. That is where it is today. The u. S. Highyield market today, depending on which bank index you want to use is something in the zone of 700 over. The market is trading at the level and people said i only hope it goes there so the fund can activate and i can participate in this opportunism. I think it is both. I think there is and continues to be terrific moneymaking , but it willredit not look like the march 23 lows. Businessesf the four you are in is structured credit and clos. Those businesses thrived after the financial crisis. What is the future for them now . Jimmy i think you will be similar on the way out of this recovery. It may take a little while longer to get there in the exact shape is unclear, but that clo market and credit creation, there is an incredible amount of credit creation in the decade after the financial crisis. Whenever there is credit creation, there will be structures to get distributed, sliced and diced, owned, and managed. Erik we got to the point in january and february where many people were starting to sound the alarm about the amount of leverage and the amount of leverage in credit markets and the sovereign bond markets together. If were going to have even more , are we not just inflating a bigger bubble to burst when the next downturn comes along . Jimmy a little yes, little no. What i mean by that is what was the economy was probably singularly unique in history. The economy was moving along and ran into a multimonth revenue hold. Theyre all kinds of different ways to measure it. Youll hear people label the phenomenon different ways. Consumers, the high end, the low end, mall owners, were not built for the zero revenue scenario. A certain amount of what happened was the government doing its job, which is when something extraordinary happens, they government is the last line of defense. You can look at a lot of those dollars, whether the direct dollars are the indirect dollars as the government putting a revenue hold that could have cascaded into an even worse outcome for everybody. Too much of a good thing can be risky, so there is talk of moral hazard and top of whether the highyield bond buying part was thereary, but big picture was a 10 trillion hole in the economy and the Financial Market used that as a result, and the Financial Market did a number of things done glue that future. Kailey that was sculptor capital incoming ceo jimmy levin speaking with Erik Schatzker. You can listen to that exclusive interview on your bloomberg terminal. You brought up such a good report with regards to moral hazard. The fed, without doing a whole lot, we continue to see the issuance, the busiest month in june. Investors seeming to think maybe highyield is a bit safer than it is because the fed is backing them up. In the credit market there is a case to be made for that argument. My question is what happens to corporate earnings. Many of these companies, as eric was talking about, have given up their balance sheets. I appreciate that Interest Rates are low, but the money ultimately needs to be repaid and that will have a depressing effect on earnings. I wonder if we will start seeing season we arext about to start shortly. About thewas talking lost decade for equities. Yes, we have ourselves across the bridge. Yes, companies have survived, but in what shape have they survived and have they turned into Zombie Companies . Guy is in on it kailey unanswered question on where we come up on the other side. Much more is coming up next. This is bloomberg. Ritika welcome to Bloomberg Business flash. I am ritika gupta. Well leave a decade at the british bank. He will stay on until next june. Facebook is now confronting complaints Mark Zuckerberg meets tomorrow with the leaders of the ncaa cp, the Antidefamation League the groups have accused facebook voter suppression. That is the latest business flash. Thanks. To talk aboutnity who is coming up in the week ahead. A bunch of things coming up. Industrial production for germany tomorrow. Some earnings beginning to kickoff. Levi strauss. We also have the meeting as well. Week is the for the u. K. Chancellor speaking midweek , talking about what is going on with the u. K. Economy, are we going to get a bank cut, are we going to get change to the statutes. Which levers will he decide to pull . Kailey it is a quieter weaken the u. S. I will be keeping a close eye and thursday for initial jobless claims. We got the big upside surprise the report on friday. The reopening process is slowing down, even reversing. I think will get an interesting read in terms of that highfrequency data on thursday. Guy jobs, jobs, jobs. The huge focus. That is it. Coming up, balance of power with david westin on Bloomberg Television and radio. That is coming up next. This is bloomberg. To rgb and radio audiences worldwide, welcome to balance of power where the world of politics meets order business. We start with the market. We have a nice brought rally right after the july 4 weekend. What is going on . Theail we are looking at longest winning streak for the s p 500 of 2020. The s p 500 up or a fifth day in a row. That is the first time weve seen that since december of last year. Indexesall of the participating to a wide degree. Some of this was set off by the big rally in china. A parabolic move higher, spiking higher for those china stocks leading to all of the Global Equities leading the way in the u. S. , some of the tech heavy stocks. From a sector perspective, we are looking at defense of sectors on top such as the Communication Services as well as Consumer Discretionary and cap leading the way and tech