Research and we will talk about inventory numbers. The equity strategists are just reluctantly upgrading their target and we will talk to new and we will talk to them on the hour. Guy hes a 2900 on the markets at 31 so we will see what happens. As you mentioned, its an interesting day in the u. K. , the pound is getting a minor boost, the market is really shrugging its shoulders as we have seen radical plan to save the economy. How radical is it . Heres the chancellor of the exchequer. I want every person in this house and in the country to know that i will never accept unemployment as an unavoidable outcome. Here here. We are not in everything we have done so far just a step back now. In truth, the job has only just begun. Its a 30 billion bound program, again the pound shrugging its shoulders that what we heard. Guestfind out what our says. Is that the right reaction . Why is this enough to move the pound . Else, the as anything focus is slightly elsewhere. Brexit talks happening separately. And sterling has been moving at a tight range against the euro and is a percent higher but the dollar is mostly half a percent higher for the euro against the dollar, which is from the United States with equities where they are with some optimism that we will get some recovery in the next few weeks. I think the market was prepped that they would get something big. But even as they saw it, this went into a direction that did not surprise them. If i had to guess, we will get a little more out of this. At ise cross to look 1. 9 is theuch more bottom of an upward trending channel, this is something that will be quite convincing to push it out of that pattern. At thend if you look current deals, they are going pretty much nowhere. This is up by one basis point and i have to wonder how you understand the supply and demand dynamics out of what will come out of Debt Management and what will have to be purchased . There is an element of that that is a kit theres an element of that in which its a double edge sword, if everything goes wrong and we cannot find a vaccine, we get the worst of the Overall Economic outcomes that you can imagine. And we will have negative rates and ife bank of england we get a better outcome than that, but the bank will be able to get the qe down and be able to spread the cost of the budget and we will not have to try to do this with negative rates. We can keep a small interestrate advantage on our side and we are ok. Theres a lot of moving parts, weigh upu way up the move this will make things difficult for sterling in the worst case scenario, really difficult. That is the trading that goes down to 115. The market has no appetite to price that. But these are pears. Lets talk about whats happening with them. You have a situation in europe that we are still wondering about. We dont know whether it is going to go through. There could be cold water on that. In washington it looks as if we are getting the next round of , if those events produced a problem, how does that change the dynamics . Test ofeurope fails the engaging the fiscal policies, the health Monetary Policy going forward, thats really what this road wherein the they could choose to engage in fiscal policy, or they could choose to have it go all on its own. If they did what was called the seeg choice, we could bumbling along the bottom of a longterm range, doing nothing, may getting back to 110 and it is stuck there. If they choose the right path, i think you get something convincing. I think its a game changer on the positive side. There are a lot of people who would need that much of a nudge, and i think that opens the way towards 120 quickly. I think its different than the United States. , i think whatck that does is really focus the market more on the election. You can pause and say we are now politically in election mode and we will see how things play out in november. Alix you make a good point about the election and theres also brexit, so politicking. When we talk about yield differentials as the sigman c the significance for currency pairing, is it covid differentials, election risk differentials . Which has the outside influence . Kit they all have a significant yieldsce, the thing with is that yields are nationalized by governments and central banks. They dont tell us anything because they dont move very much. They come in in the morning, and they are not any different one day from the next. Are trading a little bit on covid basis, but much more on economic trends. The big question is who is coming out of this better or worse in terms of the outlook for the economy over the next two to three years relative to where we wear . We are starting to look manically at High FrequencyEconomic Data to get a sense of how that plays out. The fiscal moves are interpreted within the context of what are they going to do to help the economic story. And i think all of that is what is seeing this gradual shift away from the vshaped recovery and down for the u. S. Relative to europe. And thats why the levels are above 113 and why a lot of emergingmarket currencies are not joining in the fun. Two to three years, i cant even tell what that would look like. Thank you for sticking with us. This is bloomberg. Alix im alix steel with guy johnson any new york in new york, guy johnson is in london. Some top advisors to president mp apparently want President Trump apparently wants advisors to undermine hong kong. The market is not pricing that kit, the markets are not really believing it, would this happen . How would it happen . Unlikely to want to have happen and unlikely to happen. I dont see how the u. S. Wins anything from that. And im not sure that this is a against chinago and it ruins hong kong as a Financial Center if you really create mayhem. But you might read it and think why would you do that . Whats the motivation for this . And stability is more likely, its not clear to me quite how you manage it and what you get to gain by managing it. We are getting some breaking news coming through from the Supreme Court in the United States, the president has not had a good run with the Supreme Court, but he is winning on this one, the Supreme Court backing the president on Birth Control religious exemptions. Elding religious exit institutions from bias after a series of difficult decisions that have gone against the white house, this one is going forward. Thats a hugely polarizing subject in the United States and will certainly factor in as we head towards the november election. To thewant to go back issue of the hong kong dollar. Decision by the Trump Administration to try to destabilize the hong kong dollar , would that undermine the u. S. Dollars credibility . And would it be feasible for the Hong Kong Authority to simply say you know what, we are not going to peg the currency to the dollar, we are now pegging it to the yuan, the chinese currency. That was certainly the political direction to travel. What do you think of those ideas . Kit i certainly think that from a chinese perspective the hong kong dollar itself serves a purpose. What always thought that they would want to do gradually over time is wither on the vine and be replaced by the u. N. Yuan. You on rateg that the dollar yuan has been controlled pretty efficiently, its not been volatile. They use it every now and then as a small way is a Political Tool to demonstrate that they can control it. If they peg the hong kong dollar to it, im not sure how you destabilize it on the others of the world if you do that, you are pegging it to something that is not volatile, the chinese yuan now. It might seem like this is a perfect alternative but im not sure it would help the credibility in that sense of the United States were trying to destabilize the hong kong dollar. The dangerous, the world shrugs its shoulders. We just are bloomberg screen to look at the hong kong dollar chinese yuan rate and move on. Alix and you said that it does not make sense that hong kong is still a financial hub, will it be in six months when we have these conversations . When companies are getting a lot of heat for being involved . What do you think . Kit if the chinese authorities dont want hong kong to be a financial hub, they will have to move that more to shanghai or of ,laces in terms hong kong serves a purpose for china. And there is a decision being made permanently about whether its worth it for china to go on having this special statement and all of the rest of us would like them to leave it alone is much as possible. But my sense is that as long as china is such a big trading china is a long as big financial player, it suits the world for hong kong to be a hub. Even if it is slowly shrinking in size over time. Because we need to be able to andsact business with china transact business in asia. China wants something thats not on the mainland to be an avenue for doing that. Theres a lot of interest in working out a solution against which theres a lot of indignation in places like the u. K. About what has happened. But i would not underestimate the vested commercial interest in not just ruining the whole thing. Alix fairpoint. Thank you so much, always good to have you. Breaking news, anthony found she is speaking at the u. N. Forum on Lessons Learned on the virus. He says hes cautiously optimistic for a vaccine by the end of this year. He says if three trials could begin at the and of july. The s p is off from the high. Coming up we will speak to the wall street top bear who is raising his target. This is bloomberg. Guy from london i am guy johnson with alix steel in new york, this is bloomberg markets. Lets talk about where the s p is aing, our top bear little less bearish, he has upgraded his call. To hes raising his target 4920 7 4900 from 2700, saying this will upset uncertainties and he joins us now. Its great to speak with you today. The first question i have a straightforward, we are at 3100 now, what gets us to 2900 . Tobias there are number of uncertainties, one of them is the recent resurgence of coronavirus patients and the reshutting down of things that had been opened. That elongates the timeframe and forces form normalization. And number two could be the election and uncertainties around policies, Companies Might hold back, hiring people back until they have better feels for whats happening to tax rates, and what happens to regulatory backdrops. And number three, we have lost 30 million jobs, our economists believe that we can get 15 loseon back, and they may Supplemental Benefits on the unemployment side coming august 1. Percurrent cares act 600 week, if you like supplemental unemployment checks, they do end unless they get extended and republicans dont want to extend it. Businesspeople dont want to extended because there are disincentives to go back to work and we will have to see how it plays out. Those are factors we will have to get a feel for. Alix why havent they mattered yet . Tobias thats a good question. , i dohas been good news see good news despite being called wall street top bear. A 70 signal that like the markets would likely be down and at the and of march we went into panic, in 7 and we got more destructive. The markets have now gone to, more than 20 times, next years earnings, which are still uncertain. Its nice that dr. Fauci believes we could have a vaccine, but role for the willingness to take the vaccine on its first round, because in the past vaccines have come out have been tweaked over a period of time until there was greater acceptance, these are all issues that mattered six months from now which dont necessarily matter when the market is rising. Some of the data was Getting Better in terms of opening the economy and what that meant for earnings. Everyone was very shortterm focused. We were too far and i think thats our concern. We were too excited thinking everything would be perfect and its unlikely to be perfect. We are unlikely to see volatility. We keep talking about the movie called full moon. Butybody is missing out, this has meaningfully underperformed. When the markets go up people feel compelled to buy in the institutional world because they cannot take the career risk of underperforming. But we see a lot of investors not really comfortable there. Hedging and all kinds of other factors in the mix as well. Tobias, you have played a major part there have been major parts played, where how much faith should we have in powell . Tobias the fed not just the fed, but also the government on the fiscal side, there will be another stimulus package to probably extend the benefits. The question is the magnitude or how generous the government is going to be and they will have to present provide something before the election. The fed i think take a 10 fall back in the market. When you move into the teens is where you start to get more nervous. One of the data points we are tracking is what percentage of constituents are down 20 or more. Back in late march it was near 100 . About 45 were down. The fed cares about the economic feedback and stock prices are down dramatically with cfos looking to say there is something more sinister. And they start scaling back their plan and rehiring with Capital Spending and building inventory. Down towardsoving start to seel, you 50 to 70 , i think the fed would point out not the desire that we are making money but that companies dont sit back and say lets defer plans. Thats the real concern. Alix thats interesting, its another part of that feedback loop. We only have about a minutes, with all that in mind, how much you care about earnings . Whats the number one line on the Balance Sheet . We do suggest that the investment of the market a hall pass. We know its going to be horrific. Its more about can they provide todance and give information the Money Managers that things are looking better and they have done a better job with costreduction because most people are looking at 2021. And at that point we need to have a better sense of normalization. There are estimates right now where numbers were at 150. That5 of clients told us they thought 164 was too high and we will have to scale that in the markets might just be speaking. Alix we will leave it there. We really appreciate your call. 2900 for the s p. This is bloomberg. 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. From london, i am guy johnson with alix steel in new york. This is bloomberg markets. We are wondering whether or not we will see if the lockdowns have been reimposed having an impact on demand. Alix we were looking at a weaker demand, and this really begs the question if the stimulus offsets the destruction. The crude market was dealing with that, in the economy is also dealing with that. We did see substantial improvement in crude inventory. Solid draw in gas industries, much more than expected. But the inventory did rise and its really gasoline and jet fuel, thats what you are looking at when it comes to product pricing and you are looking at refinery utilization jumping about 2 . That refineries are working harder but you saw the crew to build, wehe crude will see export issues as a mitch mac a mix matt a mismatch. Malic, itsstian good to talk to you. How do you see the supply and demand dynamics right now, as we speak in this market as the u. S. Particularly struggles with can we reopen and regional lockdowns . Is thatf the main fears the emergence of this lockdown now. One of the things worth noting is the expectations are already quite low in that there is a lot of concern about the National Lockdown globally. Whats interesting is that thats translating into a localized and nimble approach which i think is in some ways better than the original a moretion, as we see focused view around demand. What that means for supply and demand is that yes we will see potential renewal around demand but it will be more localized and diluted than what we saw. If thats the case, then with demand growth continuing we can see this through the year, and supply is still massively curtailed. This points towards a deficit, this may not be a straight line, it may be up and down, but ultimately we see it on the others. The other side. Christyan how nimble is that how nimble is the supply side to be, will that be reflected in the supplyside side of the equation . Christyan absolutely. You are moving towards the bottom of supply and demand. April, that in march and and you can see the supply needing to come off. Where we see the biggest capitulation is big oil, not just on the ioc, but across the world. Billionate about 5 barrels coming off line, one is permanent and being laid to rest and the other four are deferred. And whats going on in the sales, more and more is being taken offline, companies are going bankrupt and thats an , i saw the supply equation in terms of supply losses through this year, and the demand equation is assuming permanent damage, this is still less than a deficit towards the back end of this year and supply and demand which we need to bring down, that will ultimately drive the price significantly see the newople normal for demand, and this is permanently taken offline with a sharp deficit emerging. Alix that brings up an interesting point, there are two views emerging in the market, that we will see a supply shock and you will have Oil Companies still leveraging very well because they will need all of their products. On the other hand, theres the story that we will not see the calf and the companies that have transitioned like bp and shell might be in a better spot because they have brought down so much of their assets, what do you think . Christyan you raise a good set upthey have already their 50 blend which i think is foolish when you look at whats coming back online. Even with all of efficiency in the world, the first year projects make the cut in terms of being able to sanction them. Rebound and a price even three renewal of projects, only to the highest returns we will see the sanctioned. And there will still be a lot of production being stranded and left alone. That ultimately creates a bigger supply issue later on, but the majors have taken on a resetting of the price which is better poised to come out and sanction projects with a new framework. And any transition, which is what we are doing, could see more capital taken away with new energies. Which means that even if this comes back it will not come back in the same way. I want to pick up on that point, theres a bigger question hanging over this sector. Why would i put money to work in an oil and gas company with all of the legacy risk that entails . Why would i not deploy that capital into greener companies which are forwardlooking rather than backward looking . Fair point,ts a you could purchase a Utility Company would lower returns, its basically the future for energy. That therewe believe will be oil for many years to come, so why not have the best of both worlds . You could have an Energy Company that could sell best in class oil barrels with fantastic cash , this could climb for 10 to 20 years and not just the next two years. And this could underwrite the dividends, equally using that cash flow to fund new energy. Like ournies that we and in class, blackwell, also low carbon intensity, thats an important metric and positioning themselves for selling energy, whether its power or other forms, which is essentially the future. Id rather go for a hybrid with the best of both worlds then one , if the oil and gas company cannot figure out how to transition both forms of energy. Whatguess it depends on your view is. Guy i guess it depends on what your view is. And i think it is still to be determined. We thank you for your time, thank you for running through that with us. Lets check in on the bloomberg gupta,ord news, ritika over to you. Rulings, a Trump Administration rule was upheld allowing employers to use religious grounds to opt out of the requirement that they offer free Birth Control in health plans and the court gave victory to religious schools, the constitution has faithbased groups having more power to hire and fire employees to carry out important religious functions for the president of mexico is taking his biggest gamble, hes in washington to meet with President Trump despite the advice of some of his top counselors not to go. He wants to safeguard the commercial connection between the two countries. He is reviled south of the border, after calling mexicans criminals and racists. 2. 5 million berkshire halfway stocks are going to five charities area they are valued at more than 37 billion since the giving program was started in 2006. And is it time to break up the Big Tech Companies . To ased that question former hollywood mogul who sat down for an interview. Google is the only actual monopoly. The others have varying levels of competition. You haveutely when monopoly power you have to have regulation. Couplehink in the next of years we will probably get closer to it than we have ever been. I think thats healthy. 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. Gupta i amd ritika gupta, this is bloomberg. Florida covid cases hospitalizations are coming in at 333 and positive. Positivity rates are over 14 . Those are both coming down. Coming up, how do you prevent a pandemic from happening again . What can we do to invest now to help us later . We will speak to our partner and economist on the latest report. This is bloomberg. Alix live from new york, i am alix steel with guy johnson in london. Health is at the top of the agenda of every business and investor around the world but that does not mean we are taking a quick check on the sectors performance. Lets go to scarlet fu. Hit,ett when the Pandemic Health care was seen as a Growth Opportunity and a haven because every country around the world was looking for some kind of vaccine, and demand skyrocketed. Biggest health care etf was picking up in late february, they are gaining momentum, and peaking in may. We have seen a big drop off and that is reflected in the price action. Health care was the second worst Industry Group after utilities, down 2. 5 for that month. When the s p 500 rose almost 2 . Allocation for the sector 30 . Ed to a net analysts say that it became netrent that this was not a positive, it just hurt it less than other sectors. So what change . Or hospital operators, opportunities for elective surgeries were halted, which are high revenue ventures. And companies are working on some kind of virus remedy and are under pressure to keep drug costs low, it became apparent that any vaccine requires a long road ahead. And election risk is creeping in, a democratic sweep of the presidency and congress could lead to changes and would likely lead to higher tax rates. Onwe get ready to embark earnings season, analysts estimate that health care will be down 18 . Guy . And then you can overlay the investment in the u. S. With the europe argument. Thank you very much. As ever, this is perfect for what we are talking about, prioritizing health and how we deal with the Global Pandemic we are experiencing. Prioritizing a prescription for prosperity, analyzed in over 200 countries over two decades to identify Health Challenges and opportunities that we face. Joining us is the coauthor of that report. Thank you for spending time with us, im wondering if we could focus a little bit on the pandemic and get an idea of whats happening. The big challenge we are all trying to understand is what can we learn from the pandemic that we could then applied to future pandemics because inevitably they are coming. This is really been an unwelcome reminder for how much Health Matters for the Global Economy. Lowering 3 the cost to 8 of gdp. But every year we dos the gdp reduced by 54 . Recovering from the pandemic, health is now at the agenda very organization, from the governments, to companies, and it a once in a Generation Opportunity to rethink our Public Health as well as how do theot just returned to past, but dramatically enhance per spared he and health at the same time . Alix i think just about everyone will agree that Everyone Needs to be healthier and live longer and live well. You had a great report that said for every one dollar invested the economic benefit could be two dollars to four dollars. Is responsible is who is responsible for the first dollar . Individuals . The state . Jaana traditionally its been to the Health Care Providers, a lot of the actions what we is have healthdo on everyones agenda and keep it there for the long term and really start to think about how we can think of health with social and economic policies, and making sure companies are and to keep their employees communities as healthy as they can and how we can really reform issues of thee pandemic. Its an exciting time to do that because we have a lot of , as well asappening in the innovation side of the , many are in Development Across the sector. This is a moment to really rethink how we can build a Stronger Health and economy for the long term. Guy one of the things the developed world has a problem with is health care, do you think focusing on prevention, weight, blood sugar and diabetes, will be a wakeup call for society to deal with those problems . And by extension resolve the problems we are having with productivity . Jaana absolutely. On the flipside of the cost of poor health is if we invest on Better Health we can get a high return. We estimate that we could add 10 years to a healthy and active midlife which would make six to five new 55. Thats 12 trillion for the Global Economy and translating into almost half a percentage point. And companies would be the big beneficiary. Health care workers could be less distracted by caring for their loved ones ill health, and workers can retire early because of health conditions. In many ways there is a strong those areasst on where the economic returns are the highest. Question is how but i would love to be 30 again. You have an outline for what we need to do to prevent another pandemic and its not just lower blood sugar, it is surveillance, r d, health care response, but also personal care. But what is the biggest one in that list . I dont think that there is a single but everybody has a role to play and companies have a big parts. We already talked about companies and Health Care Providers can take the innovations they have seen and implement a lot of the digital inflammation the digital interventions we have seen applied to chronic disease care, so that we can make sure that people are taking their medication which is a big challenge today. Particularly now with every company thinking about how they can care for the health of their employees and customers. This is an opportunity to think in the long term. We have seen challenges for productivity to go back earlier, for people who are suffering from Mental Health conditions, or back pains or migraines, they have a hard time focusing on their work which reduces their productivity and i think we can find ways that companies can reduce the Mental Health pressure and make the workplace less stressful for those who are seeing aging workers. We will have to find ways to keep our Older Workers safe and healthy. Alix thank you, i appreciate that. This is bloomberg. Its time for a look jaana its time for the business ritika its time for the business flash. Chairman expressed his disappointment with the Trump Administration in an interview. I cant help but be disappointed by anyone in this administration, other than the treasury secretary. But, and im sure there are other people who have done good this is a terrible administration. Still new york city is planning to open Public Schools in september, the mayor anticipates a blended learning program, students will be in class two days to three days a week and families may choose all remote learning. Thats your business flash. Thank you. Some news in new york which i am excited about, the mayor says that new York City Schools will likely be open and inperson two to three days a week starting in september. And who gets to regulate that . Is it the governor . Mayor de blasio . Trump really wants schools to reopen and is threatening to withhold funding. Cautious, much more and it feels like its another political issue. Particularly as the data suggest that kids are not likely to suffer as a result of covid. Whether or not they transmit it is where life gets interesting. In the u. K. , the Johnson Administration has come under pressure with sony people arguing that they have mishandled School Reopening and sending confusing messages to the education sector. But i think it would be difficult for the administration to go back and change the way it is approaching this. The interesting thing will be whether or not parents send their kids, and theres growing evidence that a significant portion of parents, even if schools reopen, will not send their kids back to school in september. We will have a few more weeks of data under our belt before we get that idea. The other thing we are facing at the moment is whether or not we will see this shift towards era. Stanleys morgan equity guys joining us. This is bloomberg. Alix live from new york, i am alix steel, guy johnson is in london and this is the european close. Heres the headline from the u. S. , tech outperforming, forget that bearish close, still all about tech. Its amazing to see it happening, and it might be an argument against why you would want to pull money out of the u. S. And put it in europe. This is a debate that wall street is having an we are having over here. Lets talk about where we are in terms of the markets right now. If you say equity markets are a little slow, but in europe we are still trading on incredibly light volume related to the hundred day average. Most of the markets are down, with stoxx 600 down by 4 10 of 1 . The pound is getting a little stronger as this has progressed as we have seen