of citigroup, although tobias levkovich will join us later. on a serious note, things deteriorate in hong kong in the last 24 hours. francine: a lot of the focus is on china. we have the national people's congress and the premier talking about targets being abandoned because it is too difficult to predict gdp and they want to create 9 million jobs, less than the 11 million jobs in 2019. we will have to see what happens with hong kong, the lobbying passing through. the u.s. will weigh in and china is pushing back. i would focus on china all day today. tom: absolutely would. jon ferro way out front on the tensions of washington and beijing. here is ritika gupta. ritika: hong kong activists are calling for protests against a new china security role. the national people's congress is expected to pass the --islation forcing hong kong acts of treason and subversion. president trump well react "very strongly." china abandoned its practice of setting a target for economic growth and will shift its focus to jobs. the outlook is difficult to predict this year because of the coronavirus pandemic. the u.k. posted a record budget deficit last month, a shortfall of $76 billion. that equals all the borrowing from the prior year. the government spent an unprecedented amount of money to prevent the collapse of the economy. advanced trials of a coronavirus vaccine, they are recruiting more than 10,000 people to take part. as u.s. has pledged as much $1.2 billion towards vaccine development. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. tom: thanks so much. commodities, i, will show the hang seng. -15, dowa, s&p futures futures down 124. gold up $15. francine: i am looking at renminbi moving on the back of what we heard from china. stocks are dropping, a lot of worries about hong kong. investors bracing for tensions toween china and the u.s. increase. congressople's abandoned the practice of setting an economic target. tom: the reporting we have seen over the last 12 hours out of beijing and hong kong has been extraordinary. thanks to our team. our lead anchor in japan -- in hong kong joins us live. protest a tradition of going back to 1997 and the two governments of donald zhang. do you assume we will see into the honggh kong monday? yvonne: you already see the pro-democracy side calling for that and the anger seems to be bubbling to the surface now that the coronavirus outbreak has stabilized significantly recently. we are bracing for a repeat of what we saw last year once again , and this is so controversial is the whole world seems to be undergoing a health crisis. beijing is tightening its grip on hong kong and this may be a signal that the main land patience is growing thin. they are frustrated by lawmakers who have failed to get through this construct -- this controversial legislation. the mechanics is how to figure out how this will work out. francine: will they press ahead with this, even incurring the wrath of washington? yvonne: it seems that is the message that president xi is sending to president trump. we have heard from the media and the mpc saying no country has a right to interfere with hong kong. we can do whatever we want. president trump saying they could retaliate in a strong way, but any type of retaliation could be the u.s. threatening of withdrawing hong kong's special status. harmperhaps could do more for hong kong than for china itself, because if you publish hong kong businesses, this will drive the economy more into the hands of china and that essentially is the strategy for beijing, to make hong kong another city in southern china. perhaps the retaliation on the u.s. side is limited for beijing. tom: i think i have my roads right that it is route nine or route three or route two south to the central district of hong kong, are the people of hong kong in fear of those trucks that we solve months and months ago finally moving over the border to provide some form of control? yvonne: it is hard to say, tom. we have gone through a couple of months of this pandemic where things have been quiet. we are starting to see potentially we are bracing for another back and forth of what we could be seeing. sawaw the threat of what we on the shenzhen side of things last year, but at this point what we are hearing is more symbolic or in terms of the technicality of the bill itself. we have not seen signs of force. this is more about the legality and the fact that they are circumventing the legislative counsel to do so. this bill has been stalled in stew thousand three, the national security bill -- 2003, the national security bill. it has basically led to the -- it is bold in beijing compared to 17 years ago. tom: yvonne man, thank you so much. we will have reporting from our china bureaus friday evening into saturday. please stay with us at bloomberg.com, bloomberg tv and radio, more important reporting from china. coming up on the equity markets, tobias levkovich from citigroup. this is bloomberg. ♪ ♪ everyone,morning, "bloomberg surveillance." a british bank holiday and memorial day in america. many at citigroup making headlines, mr. corbett talking about a four-day weekend or you can move your friday day off or whatever, a splash in new york city. working for mr. corbett is tobias levkovich, doing equity strategy for citigroup. we are thrilled he could join us. what have you changed recently or what will you change over the weekend in your strategy on the stock market? tobias: not a lot is going to change over the weekend in the sense that when we look out over the next several months, we have kind of got four issues the market has to get over. how well will people come out of willk down, in terms they still practice social distancing? is ability to grow the pace more accelerated, is in question. the commercial industrial landings survey that came out showed banks tightening credit conditions for businesses and that usually is a non-monthly indicator meaning we will not get a fourth quarter prop. we have a huge number of people unemployed. how many can come back in a reasonable timeframe? economists think this could be three to four years. with the environment we are in, are we looking at elections coming up, our business is willing to go out and spend and invest in front of the elections , because you could have significant policy changes if there is a change in administration? tom: the bears have been confounded off the march low. upit a sustainable lift where we breached through spx 3000? tobias: we don't think so in the sentiment our primary 40%ic generates a probability of markets being down, we saw this in late january before the selloff and september 2018 before the selloff. there is risk to the move we enjoyed thus far. we were in territory march 30th, signaling a much more positive trend. -- talkingave been to investors, the tone has changed dramatically. people are more comfortable and significantly complacent, and see an increased probability to pull back from the strength. it is not like we are bearish. we think over the next year there is upside, but it is a bumpier road. francine: why do you think the markets are complacent? are they expecting a vaccine sooner than we think it is or are they expecting the economy to stay open? tobias: there are three or four reasons why. number one has been the substantial stimulus we have seen both from a fiscal and monetary side. there has been much better news on the health care side in terms of hospitalizations, treatments and potential for vaccines and cures. number three has been the economy opening up, people looking forward to getting out and doing things. economic growth will improve from a near standstill. we have this overlay of investor , fear of meaningfully underperforming. when the market goes up, and investors have to be positioned or they will underperform and potentially get fired. francine: do you think there is too much hope on the fact that the recovery will be strong because of central banks? tobias: there is this element of don't worry, the fed has got your back read mr. powell -- has got your back. mr. powell was not indicating draghitever it takes of but indicating that the fed has a number of tools to support financial markets. it is more supporting the economy and in many respects what happened from the fiscal and monetary side in late march is an attempt to offset what would have been potentially a much more calamitous outcome in the economy as opposed to being expansionary. the interpretation is the fed is not trying to generate economic growth but prevent what would have happened otherwise. tom: tobias levkovich with us from citigroup, parsing the differential between the fomu and the fomo. you are focused on hot towards our hamburgers -- hot dogs or hamburgers over the weekend. president trump china, mohamed el-erian. this is bloomberg. ♪ ♪ "bloomberghis is arveillance." we were having great conversation about some of the equities that could be on the move. tobias levkovich, talk about the sectors and valuations. if you look at technology what we use day in and day out on lockdown from home, are the valuations overstretched or will the way that we use those change and adapt? tobias: not necessarily overstretched. i think they are no longer that attractive. were inmarch, pe, we the second-best range on the ,arket in the past 80 years under eight times earnings and under 16 times earnings and we got there in march. earnings on as trailing basis and that is the least attractive area in the market. it is not as attractive as it used to be. there are areas in the market that have gotten too crowded like software and services that have free cash flow and clean balance sheets. inrican investors are piling and foreign investors as well and individual investors who have been coming in progressively, taking more speculative positions. it is probably the highly concentrated group of names. that is a little bit unhealthy. we would like to see a wider spread and there is a little more traction in some areas being beaten up like the banks and semiconductors. francine: what do you do with commodities at the moment? we saw the wild ride the oil price was on. tobias: energy is more challenging because you have the supply shock and demand shock. certain companies will not get this -- get through this trend with low prices and mental leverage. people probably need to go to bigger, more stable ones. it is less of an issue in the u.s. outside of chemicals so when we talk about the materials sector in the u.s., it is 80% chemicals in demand. it is extremely poor and oil prices do not help them. they need gas prices. littleal side is a better but you need the dollar to weaken. tom: one of the things we have seen is the change in hedge funds and alternative investment , and the distinction is relative performance, benchmark performance versus "making alpha." tell us about the sport of making alpha. is it easier to do with the volatility where it is? tobias: it should be. , whatising market typically happens is hedge funds will be hurt by the fact that there hedges are not blowing up -- their hedges are not lowing up and their short positions -- blowing up and their short positions are drags. this has hurt hedge fund positions. in a down market, they tend to be more quality trades so they will own the better companies and short the weaker companies, relativerkets benefit to general market performance. are they good stock pickers or not? that is your alpha aspect, some are better than others. tom: in the zeitgeist of the last 48 hours, is the feeling that only retail is in this market, only the individual investor? do you buy that? tobias: the challenge of retails has been there for a while, the demise of brick-and-mortar retail stores is an ongoing development. we have all been focused on buying things online and having them delivered to our door rather than having to drive somewhere, find parking, walk through a retail environment, and pay. the convenience of online has been going on for a while and the pandemic has accelerated the demise of retail. if people do start getting out, will they want to go to retail stores to get out and do something as opposed to click on their pc or tablet? term theren the near will be a desire to get out for the experience. can you do it in a way that protects you from a social distance and point of view? we will see that over the next few weekends because stores are opening up, and my gut dealing as we will see people wanting to do that -- my gut feeling is that we will see people wanting to do that because they have been cooped up at home. francine: we are getting news out of a pakistani airlines flight that has crashed. i am looking at the u.k. media. verified,t 100% and it could have crashed -- 100% been verified, it could have crashed outside the airport. we will look at the underlying reasons outside of this. the pakistan flight to karachi has crashed. about 100 people were on board. this is what the markets are doing, the focus is on china because of the u.s.-china trade war, the national people's congress, and the new security law passed on hong kong with protesters expected to fight it. mobius,p later, mark that interview coming up at 1:30 p.m. london time. this is bloomberg. ♪ ♪ what terrorism? there is no such thing as terrorism here. it is so obviously targeted at all of the empty government protests. kong, there isg no graceful way for beijing to manage their special circumstances. >> it is deeply concerning to the united states. hong kong is a great friend to us and we are monitoring the situation closely. and i havetoomey been working on this for some time, but the events today and the announcement that china intended to crackdown further in hong kong has added, i think new urgency to passing this legislation. >> we will review it in the house. i have asked my committees to take a look at it. i take second place to no one in congress, house or senate. tom: it is another moment for the united states and china, washington and beijing. marty schenker, you and i have seared to our memory that moment we woke up with mixer nixon -- mr. nixon in 1972, with secretary kissinger leading the way. before that was a drama that we do not remember, shane kai-shek's visit to america during world war ii and the speech to congress in 1943. i would suggest that moment so lingers in the minds of republicans and democrats, how do they honor that heritage as they address beijing? marty: what congress and this president have to figure out is how to respond in an appropriate an evenout creating deeper crisis in the relationship between china and the u.s.. i think that will be a difficult and delicate thing to accomplish. wording, andeful we have been playing folks throughout the morning our conversations on china, and what i would suggest was a measured response from congress, both republicans and democrats what -- democrats. what do you perceive at the state department is one example? marty: mike pompeo at state will have to assess the situation and make a recommendation. congress does have the authority under a law passed about 20 aars ago, to stake -- to take look at the status of hong kong and see whether the special rule remains in place. clearly, with the adoption of these new laws for hong kong, that status is threatened and it will be up to congress whether they want to take the unprecedented step of revoking that special status. francine: what will make them decide -- how unhelpful is this that it is in the midst of one of the largest economic downturns we have ever seen? will it make them unlikely to pick a further fight with china? marty: that is exactly the point. u.s.orld, china and the being the two economies suffering in an unprecedented downturn, the last thing each economy need is another -- each economy need is another crisis added on to the virus crisis that slows economic growth even further. what you will see is strong rhetoric, but cautious actual steps in response to this as it plays out that -- as it plays out. .hat would be my guess francine: who has the upper hand? tom: are they pro-china? francine: go ahead. ahead.ease, fran, go francine: who has the upper hand in this? been claiming china spread the virus. marty: donald trump has been beating that drum, escaping any responsibility himself. announced they plan to implement the trade one -- phase one trade deal, china does have leverage here. while the trade deal was a pretty important step, they are committing to implement it if somehow the u.s. and donald trump step in to escalate the situation, they could walk away from the trade deal, which would in its own way -- we think the markets are suffering now, that would be a tremendous blow to the world financial system. tom: you are wired into 2000 reporters. how alone is the united states and our reporting, is this a question of allies or is it trump alone? marty: it is interesting. china, and we have reported this quite extensively, and there virus response has raised the ire of countries like australia. the e.u., they have their own separate issues from china, plus developing countries that took loans from china are having difficulty paying it back. china is somewhat isolated itself and that is of its own making. there is not a global approach. it is e.u., individual countries all have varying different issues with china's behavior. francine: marty, thank you so much, marty schenker. let's get straight to the bloomberg first word news. is pledging to implement the first phase of its trade deal with the u.s. despite rising tensions and the coronavirus. the centerpiece of the deal was china's promise to buy more u.s. goods and deals. the promises look even further out of reach. there is ahin says strong likelihood congress will need to pass more stimulus legislation, but repeated the trump administration's stand on the matter that it is not needed right now. president trump told reporters "there could be one more nice shot." a pakistan air flight has crashed, on a flight to karachi. there were 107 people on board. no word on casualties. in japan, the key inflation gauge fell below zero and more than three years -- for the first time in more than three years. the central bank launched a lending program to help small businesses hurt by the coronavirus outbreak. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. tom: thank you so much. coming up, we will talk to a gentleman who is quite good at trading volumes, something we do not talk about enough, about the spirit in the market to bid and act. we will talk to randy frederick of charles schwab. this is bloomberg. ♪ ♪ bloomberg -- "bloomberg divinglance." we are into the derivative and trading aspects of this rally and the reason we do that is because the world has changed. for weeks, we had subdued volatility and quiet to the market, everything priced to protection -- perfection feeling, and then a rally. to 40, 50,loded up and even 80. we have come back at a sustained 32, and these are not normal times. randy frederick of charles schwab has spent a career looking at the market what is the character of the vix and this new volatility? randy: you described it effectively. it had been at relatively normal levels for probably at least a full year, in the 12 to 18 range. when this virus hit, volatility and on oneptly particular day closed at an all-time high. this vix has been around since january 1993 and we hit the highest single closing level since it began. there sopremium levels people can write options? can they write an option against it to bring in premium, is that old traditional game or is there a new game this time around? randy: if you are talking about selling calls again stock -- covered calls against stock decisions, you will sell those at a price above the current market price and get paid a premium to sit and wait. beyond that raises price, it gets called away. you make the gains in the stock from the day you bought the stock and you get to keep the proceeds when you sold that option. if the stock does not rise to that option, it simply expires. tom: is that strategy working now? randy: it is, and the risk in the market has been higher than it has been. the vix is one way of gauging that risk. people feel, if the volatility is high i am getting paid a premium. there is an enormous amount of risk. keep one thing in mind. price covered call strike is above the price you originally paid, your risk is cry low, meaning i am selling an option -- quite low, meaning i am selling an option at a price i am glad to sell at and i will fine.e do not -- be do not sell those at a price you do not want stock so that -- sold at. francine: how does coronavirus change the market? randy: we are not back to where we were. we were in the 80 range and we are back around 30, which implies a healthy level of skepticism, recognizing the fact that we are in a new bull market , but clearly the risks of the virus have not fully subsided. in many cases, they have not leveled off. they are beginning to and we are seeing the economy reopened globally, but we do not have effective treatments or a virus vaccine in place that, and those are probably a few month doubt. -- a few months out. at any time, we could see a resurgence of outbreak as economies open and testing becomes more widely available. the panic level, i have described levels above 40 as panic and above 30 as high anxiety. thresholdween that between high-end zaidi and more normal -- hi anxiety and more normal levels -- high anxiety and more normal levels. china for thead first time in decades abandoning their gdp target. randy: that has been one of the biggest challenges and most unique characteristics that we have never seen and the past. i have been in the business 30 years and i cannot recall a time that businesses simply abandoned the forecast of future guidance because there is such an enormous amount of uncertainty about when or if treatments or vaccine will be available. what it does is it creates problems with the mathematical models people use to calculate valuation, forward earnings. they are using formulas that are typically designed to take into account enormous amounts of data and that data is just not there. it is not wrong and not zero, it is just absent and difficult to make formulations. we find ourselves being surprised how well the market is doing, but it is doing what it has always done. tom: randy frederick, thank you so much, he is with charles schwab and a time of new volatility. update withndemic dr. andrew pekosz with johns hopkins university. we will do that next. this is bloomberg. ♪ ♪ "bloombergs is surveillance." latest tech giant to cut jobs in the midst of the pandemic and cut jobs in at least five states. one worker said the number of positions eliminated is likely in the thousands. cuts unknown how many were because of the pandemic. nissan may reportedly cut more than 20,000 jobs worldwide it also reports that nissan may reorganize operations in japan because of falling demand for cars. its new midterm plan next week. hertz faces a deadline today to agree to a deal on a miss debt payment -- missed debt payment. some are sure they will -- tom: he is with johns hopkins university bloomberg school of public health. mr. bloomberg is the founder of andmberg lp, the radio online platform as well. as we go into a memorial day weekend attempting to understand emergencyes on our community and he is celebrating a wedding anniversary. congratulations to you and your bride. what is so important is the stresses on an exhausted medical community. how are they doing? andrew: absolutely. the pandemic itself has been such a focus of the medical community and of people, but we have to remember there are other things going on, other health care issues that need to be taken care of. there have been reports of drops ,n pediatric vaccination rate which is a concern because things not being done now will have implications later in the year or next year. tom: how serious is brazil? i looked at the log glide path per capita, and the glide path of brazil and ecuador are really grim. andrew: the southern hemisphere is now getting into with late fall, -- into its late fall, early winter season so there are concerns about whether the covid-19 virus would do better in winter light conditions. brazil and ecuador are having tremendous trouble controlling the outbreak with huge numbers of cases. other countries in the southern hemisphere have controlled it with rigid and active surveillance and testing for the virus. several countries in south america are problem, and the emerging problem in africa is somewhat of a concern. francine: are there enough testing kit in emerging market economies, or is that a worry that we do not know exactly what is going on? andrew: the number one worry in those countries is the number of tests. right behind that is the availability of good laboratories that can run those tests in a timely manner. those things combined will make it challenging for some countries to respond well in terms of testing, isolation, and contact tracing that are needed to control this outbreak early. francine: what can you tell us about the end of the lock down? we are seeing the biggest economies in the world reopening , some slowly, some less slowly. given the time lag of people ending up in hospital, when will we have a better idea of the exact situation? andrew: this is one of the challenges with this virus because it can take from one to two weeks to show symptoms, and you are infectious for probably about seven days. the lag between when cases start to come up is significant. you are seeing some small spikes and states in the u.s. that are loosening their economy. some states are doing better, but we will not know until two or three weeks from now how these states are doing with their public health interventions. tom: one final question, i don't mean to be trite. how safe will the beaches be this weekend? what are your thoughts on heading to the beach? andrew: you know, as economies open up, as some of these social distancing -- social distancing should still be in place so people need to be careful about keeping their distance outside. it is great to get outside to do some activities, to try to enjoy yourself, but social distancing and wearing masks will be an important thing to do irrespective of your activity. it is a little odd to say that on a beach, but maintaining social distancing is a critical thing as people try to get out and get back into some sense of normalcy. francine: andrew, thank you so much, dr. andrew pekosz of johns hopkins. .out vrs we have some really excited -- exciting news. tuesday, after the bank holiday, ferro, andene, jon lisa abramovitz with "bloomberg surveillance" simulcast on radio and tv. they analyze the market sentiment and investment environment. it is more of you and jon on tv, and lisa. tom: it has been an amazing experiment to try to figure out how to do radio and tv at the same time, but we are going to dive off the diving board on tuesday. us for news on hong kong. this is bloomberg. ♪ there are times when our need to connect really matters. to keep customers and employees in the know. to keep business moving. comcast business is prepared for times like these. powered by the nation's largest gig-speed network. to help give you the speed, reliability, and security you need. tools to manage your business from any device, anywhere. and a team of experts - here for you 24/7. we've always believed in the power of working together. that's why, when every connection counts... you can count on us. ♪ alix: china abandoned its growth target. kong.s grip on hong hong kong activists pusher protests as china unveils laws to curb treason and subversion, increasing tensions with the u.s. senators push for legislation to punish chinese entities. welcome to "bloomberg daybreak: this friday, may 22. you can guess from the headlines that we are seeing a risk off market. deere disappointing investors, but that stock still up in premarket. bonds getting a safety bid, as well as the dollar, as well as the yen. we'll rolling over. if you don't have growth forecasts in china, how do you know what the impact will be on the commodity market?

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