Bigger. Astrazeneca approaches gilead for what would be the Largest Health care deal in history. A joint company would be worth almost . 25 trillion. Cheaters. Brents eightday streak is the longest since february as opecplus seals a deal to extend output cuts but worries persist that some nations may not to the line. Payrolls rebound. On employment in america declined. The surprise jobs bounceback does not apply to black americans. Colin powell turns against trumps threat to use troops against protesters. Lets take a look at what is going on in futures. European futures are not pointing higher right now. We get german industrial output following more than expected. 17. 9 month over month, extending a 16. 5 drop. But even before this news which is just breaking right now on the german economy, we have european futures down. Not seeing the same kind of gains that the u. S. Markets saw after those jobs numbers came out, so not catching up to the u. S. Market. That said, european stocks had a and twoc day on friday solid weeks. Anna European Equity markets did have that great day on friday. The spanish market, austrian market, both of those up by more than 4 . Looking for reaction to the german output number. We do not see a great deal of it right now. The euro fluctuating with that number. Lets have a look at the gm mnc what we can tell about the Asian Session we have been going through and asian equity markets have been pushing higher, up by. 7 . The hang seng, which wobbles into negative territory around half an hour ago, back into positive. Broadly, we have gains coming through in the smaller markets and also in the japanese market, up by more than 1 on the nikkei. 1. 4 to the upside. The story of equities has been a positive one. In terms of the fx markets, we have seen some dollar weakness last week. We continue to see that. The bloomberg dollar index down 1 8 of a percent. Prices inon ore singapore up by more than 5 . Oil prices rallying with brent at 42. 80. People talking about whether we will see brent at 50 per barrel. The commodity story continues apace. Lets get into the conversation now about what is going on in this Asian Session. Modest gains after fridays u. S. Jobs report smashed expectations and bolster and of a quick economic rebound. We are back to talking about that the. Governments are using the coronavirus lockdown to revive growth while controlling the spread of covid19. Both takingulge him measures to use the lockdown today. Lets turn to our mliv rates strategist, who joins us now. No doubt you thought a lot about how on earth the estimates of job losses were so off the mark because in the end, we saw job gains in the United States. How has that reshaped your thinking about u. S. Assets . Good morning, anna. As we said, there is some talk about possible missed of data in that report, and not one economist foresaw gains, which was a big surprise in itself but the big church take away cannot be mistaken, which is that the economy is holding up much better than everyone thought. What does that mean for the markets . A weaker dollar. Why would that be so . Currencyr was a haven through the coronavirus pandemic. Now that the economy is healing, if we get continuing signs that this was indeed the case as opposed to just that one off jobs report, then the dollar will continue to weaken and on the risk currencies will be bid even more. Wondering what you are thinking about oil and its affect on the currencies that you cover. Ven good day, matt. Commodity currencies will do very well in this environment because they have got a double boost to not only from the opecplus deal but also from the riskon Global Sentiment that is boo seeing all currencies in general. That said, the australian and new zealand dollars are already trading near fair value because they have them quite a lot in the past few weeks so i expect the european commodity currencies, the norwegian krone and swedish krona, to gain the most from this. I would not be surprised, matt, if the norwegian krone approaches the euro over the next few months. Matt. Anna. Anna where do you see the euro heading next . We have had this industrial output number look worse than expected. A slight wobble. Not falling by much at all. There does seem to be a theme building amongst the guests we talked to. We spoke to a couple who had positive views on the euro. What will limit the against the euro can make here . Upside thero is dollar and possibly towards dollar 15 in the coming weeks is the biggest story curve steepening we have seen globally and the riskon environment that is making the dollar weaker. We all know the euro area economy will not do as well as the u. S. Economy, but thats already baked in the price, so all said and done, i think the euro has buoyancy this time around. It is the most interesting the currency has been in a long, long time. Anna, matt. Matt thank you for joining us. Ven ram, our currency bloomberg mliv currency and rates strategist. Worth noting the euro ticked up 3. 84 on friday. It has been having a fantastic rally here and right now, we are trading at about one penny under that 112. 83. After americas blowout jobs report, investors will look for reassurance from Jerome Powell to discuss this weeks rate decision, next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are 50 minutes away from the european open, looking at futures that are pointing lower. Lets get the bloomberg first word news here here are our top stories from the terminal. Opec and its allies have agreed to extend production curbs by one month but skepticism the cartel will be able to ensure compliance is tempering price gains despite agreeing to the move. There is doubt some in the group will stick to their pledge. The deal is a victory for saudi arabia and russia. Deadlocked in a price war just two months ago. New york city is lifting its curfew as protests remain mostly peaceful over the weekend. This as the city prepares for life after the coronavirus lockdown. In a radical move, Minneapolis City Council has pledged to begin the process of dismantling its police force. Members say they will consult the community on how to replace it. The u. K. Is pressing ahead with the two we could on International Arrivals despite airlines saying the move will devastate tourism and wreck any chance the travel industry can recover. They are threatening to sue over the policy which comes into effect today. 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. Anna. Have beene discussing, the jobs numbers from the United States on friday really provided a boost for risk markets. Payrolls gained 2. 5 million in may, trouncing forecasts for another sharp decline. That but the s p close to erasing its losses for 2020 so nearly year today positive on the s p but the picture in the real economy is anything but rosy when you look at it more broadly. Lets get into conversation now. We are looking at the global head of strategy and solutions at Societe Generale. Great to speak to you on the program. Does it make sense to you that the s p and the dollar are very close to where they started the year . Does it make sense for us to be back at those levels . Becausein some ways, the s p is not the u. S. Economy and i think this is a very important element and the dollar has sort of been impacted by a record amount of stimulus and Government Support that is clearly helping become a former a series of defaults. I think the key element here is that, number one, the factors driving the s p have been the Health Care Stocks which will make a lot of earnings throughout this lockdown given the massive usage of social media cloud computing. Now, the second wave of the rebound is driven by the value stocks, the oil stocks, given the rebounding in the oil price. Last but not least, this is something to bear in mind that this is a self inflicted economic hibernation that was accompanied by a massive amount of support to prevent asset prices from collapsing. The economy ultimately going into a depression. Sense if the u. S. Put that economies themselves on hold and now, they are juicing it to get it back up to speed. I wonder what the negative effects are of those jews. Of theexpect any unintended consequences, the problems we had with quantitative easing in the past two, again . To come again . Theu the same ways government looks to flatten the curve of the pandemic, the contagion, Central Banks have looked to flatten the curve and they managed to do so very well because these problems will be extended into the next few years. One of the things that is quite striking is the amount of highyield debt issuance yeartodate which is over 1. 1 trillion dollars, double the amount of last years. So companies are going to be faced with weekend Balance Sheets and a lot more debt than what they had going to the crisis. In a recovery that will most likely be lower than what is expected, so today, i think the major concern will be a Balance Sheet repair that corporates will have to go through, and capex,uld lead to lower low investments, and that might force Government Support to be longer thanbe required. This will bring the question governments finance their deficits and corporate taxes can also be another consequence and may be tech stocks could be the victim of that, and last but not least, the elections the result of the u. S. Election will be a major determinant on fiscal policy going forward. You mentioned tech stocks. We see the nasdaq doing much better than some of the other u. S. Indexes right now, so either the s p is flirting with the flatline for yeartodate, the nasdaq has made it out there. There has been highyield issuance for debt markets. We also see lots of companies coming to market, asked for Equity Investors to put in more money. Talking about how theres going to be a limit to the that the Fund Management industry can step in and support these. Do you see that as an area of weakness . Will companies be asking for investors to step up and they will be faced with nos from the Equity Community . Kokou there is a price for anything and i think one of the is the dispersion between strong Balance Sheets and weak Balance Sheet companies. This is a team that we have been very sort of bullish about and it has paid off pretty well through this crisis. I think that, yes, strong Balance Sheet, and those who have that perspective, they have seen a pretty strong amount of inflows. They will be able to raise equity and repair the Balance Sheet. In the same way we had a releveraging phase before the month 2020 event of share buybacks. We are likely to see equity funded debt for companies that will have no choice but to reduce the amount of debt that is taken to survive this crisis, and i do think that they will be able to raise these equities at the right price. Matt i mean, we have already talked a little bit about bankruptcies and you point out the government and the fed have done what they can to try and stave off bankruptcies. We saw a massive blowout in spreads at the beginning of this crisis. Hillary put together a chart for me. Tightened bothe in terms of highyield and investmentgrade credit but they are still much higher than they were. Do you expect bankruptcies to continue . Could we get a second wave . Could we get cascading bankruptcies later on . Kokou this is the biggest risk, and i think the bankruptcy that we could have seen the fed has it is stepping in the highyield market and compressing spreads and the market is preventing liquidity in financing. I do think that the biggest risk is what i call the fear factor. Is1933, roosevelt said there nothing to fear but fear itself when he was talking about the great depression. Similarly today, if there is fear around social distancing, around the Risk Appetite of investors and households, the marginal propensity to spend could be lower than expected and this could drag and slow the recovery, so the amount of bankruptcy that we could see in the next few years on companies increasing leverage will be directly connected to the amount of confidence we are able to bring give to investors and consumers because otherwise, demands will be more subdued and therefore, cash flow for corporates will be more challenged. Ultimately, banks will not be able to prevent companies from defaulting. Matt thanks very much. Kokou agbobloua from Societe Generale stays with a spirit we have more to talk about with him. Coming up, europes show of unity wins over investors look at the euro powering up to 112, 113, 114 is next . They heaped praise on the cohesion in the region. We will talk about that next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. A little under 40 minutes away from the start of cash equity trading and we are seeing of red arrows bit on futures. Maybe it will be some profit taking. We had gains of 2 , 3 and more across European Equity indexes on friday. The ecb president , Christine Lagarde, appears in front of european lawmakers days after the central bank boosted bond buying by more than the market had expected. Speaking to bloombergs governing council member, pablo hernandez, he said deflationary risks warranted the decision to ramp up stimulus. Kokou agbobloua from Societe Generale joins us. You concerned about deflationary impulses in the european economy . Kokou clearly, this is something you can clearly see when you look at the breakeven inflation. We had it in the euro area starting to recover, and on top, we have negative rates across multiple sovereign issuers. Oflation in an environment more leverage is sort of a pretty bad recipe for any economy. How difficult will it become for the ecb to manage it . We hear from policymakers about using all the tools available to them. They have tools to deal with this . Kokou yes, absolutely. Clearly, the Bond Buying Program , in terms of size, was a strong signaling mechanism. It is something that managed to do pretty well thus far. The worse it is for the banks Net Interest Margin and their ability to lend to the real economy but what has been pretty strong and effective in this crisis is the fact that Central Banks and government have joined forces in doing some things if it could by historical standards. This is why markets are responding in a positive light. That being said, i think one can clearly point to a court that says the biggest risks now is not to take any risk because if the recovery is not as strong or sustained, then we could get stuck in this liquidity trap and ofinto the japanification europe, the long period of low growth or even zero growth with sort of deflation, and this would put athis call on households and corporate Balance Sheets for deleveraging. The central bank has no choice but to act with a to sort of brain confidence back to markets. We know Central Banks will do whatever it takes right now, governments injecting a lot of stimulus. Those who have the ability at least right now. There are some unknowns. Is there going to be a second wave, how much does the economy recover . What do you see your clients doing, especially european clients, in terms of strategy . Planere an overriding game that they are executing right now . Kokou yes, i think a lot of clients have reduced their risk and moved into cash and defensive sectors given the unprecedented volatility in march, and i think london len in once said there are weeks where nothing happens and weeks were decades happen. As an interesting given the feart of inflation later down the road. Fixed income the space where you see the curve steepening trades. We are the idea is that in three years time, the massive amount of sovereign bond issuance, even the recovery fund, is acting with the issuance it has to do. It will lead to a steeper curve and higher yield. In the short term, it is under control. Longerterm, forward curve, bond yields should be it is clearly a strong theme. Anna interesting thing to talk about. Kokou agbobloua, thank you so much for joining us. We will see if we get comments. Global head from socgen. We will talk about oil. Crude climbs again. The Oil Rally Continues after opec makes another move at the weekend. This is bloomberg. Welcome back to the European Market open. In terms of the equity session, we are half an hour away from the start of the trading week. And from the equity market session, we do expect to see weakness at the start of trade, the asian section gained, but weekend of early from the jobs report. We see entrenchment expected. Talk about oil. Opecplus agreed to a one month extension to the groups Record Oil Production cuts. It also adopted a stricter approach to ensuring members dont pump more than they pledge. Its all about complaints. This is a victory for saudi arabia and russia, with a price were behind them, to control iraq, nigeria, and others to control prices. And saudi arabia raised the official price of oil the most in 20 years. Were joined by alex booth, head of market analysis. Good morning. What is the significance of what we heard . What is going to have the longest Lasting Impact . As a month of production cuts, or is it about complaints or what saudi is doing on price . Alex hi, good morning. Good points that you make. I think the enhancement over the weekend was certainly, i would say welcome by the markets. I think if we dont see these cuts extended, certainly the end of july, youll see the length start to build in the market again. We certainly needed this extension, basically. I think its always been an issue with complaints whenever there has been opec agreements, and i think its very interesting that the saudis and russia coming on board is now enforcing it. Because from what weve seen, theres been an issued variety, as well as complaints across the country that essentially signed up for this. Clearly, the saudis made a very,. Big effort, considering just how high the experts exports were in april. They were brought down 3 Million Barrels into may, and they seem to be holding those levels. Highlightingworth we are still seeing the length and the markets. We are still building crude inventories ensure. China, yes, it has increased its imports massively, so there was certainly an increase in crude demand through may. Built inventories ensure. We are seeing a reverse of that. Yes, inventories are building out at the same time to a greater extent than imports, so we need to see this cut continue, and, as saudi and russians have highlighted, countries such as nigeria and iraq, really come into line with this, as well. Matt what kind of rebound are you seeing on the demand side, alex, as we see economies lifting the lockdowns . Alex well, thats a good point. I think one of the obvious areas, say, was china. So, if you look at their changing imports, their changing that inventories ensure, was suggesting about a 1. 2 Million Barrels a day increase in apparent demand, or implied demand, sorry, for china, and may. We have seen that in may. We have seen that drop back a bit over the course of doing so far. Its still early days. But if you look further to the west, were still seeing this very steep drop of in crude imports into ocp your desk europe. The empty europe. The imports are down. This bigs still disconnect. If you look at the product markets, not just crude oil, but transportation fuels, were ,till seeing inventories being kind of volumes held offshore. So, any kind of uptick in demand, theres a lot of product waiting to fill that gap, as well. You look at the u. S. , again, numbers are increasing. But theyre still down around 20 year on year. It has improved a lot, but it is still its a tricky, tricky balance, at the moment. E lookingx, when your at safe Oil Companies and 52 a barrel on brent, some talking about 50 now, do you see safe Oil Companies attempting to reopen companies and restart conversations about not expending production cuts . What is the pressure like is the Oil Price Rises . Alex well, i dont think were there yet. I think the rhetoric has been seeing how this is working. This is the first time that weve seen this change, and there is this complaints. Atimately, weve only been in cut territory for five, not yet six weeks, so i think its probably premature, and certainly they would want to see a stability around here. I think its premature to think they will be coming back, especially when you see the threat of what the rhetoric from ok, youd russia around, really have to comply. We have done the heavy lifting in the last month. I think the repercussions, if they dont toe the line, are very high. Matt alex, thanks for joining us, alex booth, head of market analysis. Thanks for your analysis on what is going to be a huge story the past month. People are focused especially on it today, with the extension. Now, the Nyse New York Stock Exchange may have reopened its trading for, but the state of yours last lip desk europes europes last live Trading Floor, spoke to bloombergs dani burger. Lets take a listen. Europeswas yourdesk last europes last traditional floor. Metal prices were set closed is open Trading Floor and moved to electronic pricing, like its european peers did in the past. Founded in the 19th century, will they be able to reopen after the pandemic . The ceo hopes to keep this fine advantage this final vestige of pricing. Ultimately, if we did reopen, we would be asking our staff, our members staff to go back to the ring environment. So i think the way that we analyze it right now is clearly were waiting for the government guidance, waiting to see the steps reopening habits. But even if, for example, the country can open up restaurants, you can run restaurants in a socially distanced way. We dont quite see how we can run the ring in a socially distanced way, so it may well be that we, together with our category one members, actually decide that until social distancing can be lifted, maybe when theres a vaccine, or maybe when theres a better treatment, that until that time, the most prudent thing would be to keep the ring closed. Dani has electronic trading, because of the closedend, has it gone smoothly because of the influence of the person on the floor . So, i think and a narrow sense, absolutely we are confident that our market is still liquid, the our market is still orderly. I talk a lot, end users of the market, and i generally havent heard a single complaint or concern that people cant get their business away. They cant get their hedging done. They cant get their stuff done under that pricing model. Under a narrow sense, were very confident electronic pricing is working. But i think the broader discussion is about which venue drives more activity. Because you can have a market that works absolutely fine for getting your core business done, drive the it doesnt same peripheral business. Perhaps it doesnt attract the same opportunities to make markets. Just because electronic is working does it mean electronic is necessarily better. Lets remember that the ring has been working for over 100 years. Dani you sort of hinted about this, talking about the hundred years more that you have of the Trading Floor. I talked to traders who sometimes lament about the lost art of the open outcry trading. More of the big picture level, what would it mean to lose your desk europes europes Trading Floor . I think there is a very significant emotional element to it. Im certainly not immune to that. In,ody who works, you come walked past the floor, and its a very visible sign of the service were providing. And often, when we have dignitaries that come to you london from the metals world, often the broader finance world, they come to visit the lme, because it is such a symbol of that trading activity, so i cant deny that if we ever did lose the floor permanently, which i am not anticipating, it would be a hugely sad moment from an emotional perspective, because it is such a great symbol of how metals markets work, and more broadly, how the london Financial Markets work. Anna interesting conversation. There was the ceo talking to dani burger. Up next, well talk about south africa. The central bank has taken an offhand approach, compared to its europe and u. S. Can apart. We speak to a fund manager u. S. Counterpart. We speak to a fund manager. That is coming up next. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open, right now about 16 minutes away from the start of cash trading. We do see futures pointing down after the rallies weve had over the past couple of weeks. Here in europe, the economy really turned to the ecb. America has turned to the fed. But not everywhere has the Central Bank Firepower to help medicate the impact mitigate the impact of the pandemic. There are Unrealistic Expectations coming from supply [indiscernible] the central bank had been successful. Because they have been successful, we think they can be used to solve all of the problems. Matt this more handsoff approach by the sar be leaves sarb the space for the leaves space for the to step in. And they Just Announced it is raising money for a 600 million fund for just that purpose. Were joined now by the ceo of 91. Welcome back to the program. Thanks for joining us. Is more important in a country like south africa . What is most important to do with this fund . Enrique good morning, matt and anna. You know, the difference between most emerging markets and a developed economy has been the lack or limited fiscal monetary room, or space to move. And clearly, the fed has flooded the entire room. It is not liquidity. It is essentially firepower to support productive capacity and companies through this period of uncertainty before they can raise capital for the normal channels. Now, south africa has a sophisticated Financial Market and an institutional savings bull. What we tried to do is encourage the savings pool to go where the problem is, and not to take too long before companies are effectively zumba fight or productive zombified or productive capacity into a weaker upswing than anticipated. Anna good morning. You mentioned about the savings pool, is there room for International Investors . Is International Investors believed theres a return to be made on the south african recovery story . Could they get involved in this fund, or is this just a domestic front . Saying isall were its the domestic as it pulls or owners have an issue if they do not support the protective capacity. Theres no reason why International Investors cannot participate or invest in good companys appropriate. Appropriately. One of the problems is that the rules are very strict, and therefore, theyve been relaxed through, after some lobbying and discussion, only a few days ago, but the normal Capital Raising process is slower than you would have seen in the u. K. Or the u. S. I noticed the financial targets reported over the weekend almost 70 billion of new equity has been raised in the crisis in most of the developed markets already, which is small, but much larger than the emerging markets. Matt what kind of companies are you looking to invest in here . Are there any criteria . For example, is esg involved . Seeing, matt what were or what were trying to do is have an impact and commercial return at the same time, but obviously raise the kind of pools of money would be interest putting in esg type investments. But we have identified good companies. We know well, which many of us as a owners actually have stakes in, but which are currently in and theres a lot of hope youve seen it in equity markets a lot of hope in vshaped recovery and very quick back to normal. We know that is not going to happen. We know that covid19 is a permanent impact, and that the way out, particularly in the economies which didnt have the ability to stimulate fiscally, will take longer. Need we really that want to address. But we dont want to put money into losers just to buy very expensive jobs. The economy also has to work, it has to be forcible. We have to understand that. But in the emerging markets, we dont have what you have in the u. S. , guaranteed worker incomes, and other business sectors to restructure. There, theres no safety net. Anna there is no safety net. Perhaps this is more important what youre doing here, more Important Energy markets than developed market because of the other measures in place. Does this look like a model that can be used in other parts of the emerging world . Hendrik with think that actually, that model is already at play in a place like china. But its more driven by estate that through the businesses, where you clearly have seen xi jinping declare jobs and active capacity as number one, top priority in the nearterm. So, we think it could work, but south africa is quite unique. It has a wellfunctioning capital market, pools of money, and you dont have to wait until the businesses are stressed. In america, the combination of stressed investment, but government underwriting or government financing for people out of work is a different model, and we think many markets could think about this. Anna interesting conversation. Thanks for bringing us this story. Thank you very much for joining us this monday morning. Coming up, talk about mega pharma m a. It might be the biggest pharma deal in history if it were to go ahead, astrazeneca eying a merger with rival u. S. Gilead. We discuss that next. This is bloomberg. Anna welcome back, European Market open, eight minutes until the open. Looks like we will get weakness as the glass wears off the job story in the u. S. Few drugmakers behind the permanent responders to the covid19 pandemic are looking at the possibility of a combined future. Astrazeneca is said to be interested in a merger with gilead. Sources tell bloomberg informal contact has been made and what would be the biggest Health Care Deal in history. Some liquids have been proposed. Some big ones have been proposed. Aaron. G us now, erin what can you tell us . Aaron i think this approach is a floating approach. The reality is any deal of this size, even if youre proposing it without terms, is going to be something you have to think quite sincerely about before even reaching the topic with your counterpart. But its early days. As you say, it would be the biggest Health Care Deal of alltime, transformative for both companies, so it will be fascinating to see what happens next. Matt what would the strategic rationale be for this deal if they decide to move ahead . Aaron so, i think if you look back just in the last two decades or so, all the mega pharma caps have been megamergers, and its all about getting scale and having the resources for r d. As you know, cost a lot of money to develop and to get new drugs on the market, and its all about pipeline. While the focus at the moment is obviously covid treatments, vaccines, longerterm, all Drug Companies will better with the idea of how do we have a robust pipeline so we have drugs come to the years ahead . By combining the two, gilead has a track record of innovative therapies, including hiv, so there could be some nice dish ands to the pipeline if there were to be a deal. Anna this is a question nobody knows the answer to right now, but will we expect to see this will be scrutinized in the u. S. , possibly even blocked its a very sensitive issue. One drug Company Buying another drug company. Aaron youre absolutely right. Weve seen a trend about increased protectionism to protect strategic industries, and this falls into that category. But i think you could argue this is theoretical, both astra and gilead are working on treatments or vaccines for covid. And if you have seen, the u. S. Is supporting both of those ventures. They offered to invest Something Like 1. 5 in the work they are doing. They are also working on pushing the gilead treatment. You could argue there is a close relationship and there is operation on the covid front. Aaron, thanks so much for joining us there, our executive editor for global deals. This is bloomberg. Anna a minute to go until the start of the first trading day of the cash equity markets for this week. Big pharma wants to get even bigger. Astrazeneca approaches gilead for what would be the Largest Health care deal in history. Worth almost a quarter of a trillion dollars. The eightday streak is the longest since february as opec plus seals a deal to extend output cuts. May toeall the nations the line. Unemployment declines in america but the surprised job bounce back does not extend to black americans. Colin powell turns away from president trump. Futures in europe point lower. Matt they are pointing the lower. We have had such an amazing rally here in the last two weeks that in a sense, it is to be expected. The dax is up. Futures pointing lower. We will see the ftse open first, down 0. 2 . Openhould see the ibex right now as well. Benchmark stocks down 0. 2 . Benchmark it will be off about 1 if futures are any guide here. You see the aex down. You see the ibex down. In the lefthand column. All of the equity indexes in europe opening in the red. In terms of sovereign bonds, on the far right hands right of your screen. You see a little bit of a mixed there. Investors are buying german long debt, dutch long debt. Right now but they are selling italian front end debt at the twoyear. And swiss front end debt as well. Smashed jobs report expectations putting the dollar on course for an eighth straight day of decline. We saw equity indexes all around the world up big. Joining us now is peter kinsella, Union Bancaire privee. You are focused on currencies but i will quickly start with the opening and what we see in the equity index. Not incredible rally, it is surprising to see stocks down this morning. Peter it would not be surprising at all. We have had this ongoing rally since april or thereabouts. It does not surprise me in the slightest that we see a push back. Broadly speaking, given the jobs report, given the sheer length up move, a down day would not be unexpected. Look more broadly when you at the rally and the risk assets we have seen since march, do you see that continuing . Is that why you see no reason to hold the dollar at this point . Peter i can see continuing for a while. I dont think it is going to go in a straight line. We had a huge up move demo we could plateau for a while but i have been more constructive on risky assets than not. You have Central Banks across the world giving monetary stimulus. You have a fiscal stimulus that will, once the lockdown ends. Trending insome are very expensive p ls. What we tend to see in the fx space is the dollar does tend to weaken. In terms of price action from the dollar, it is consistent with what we have seen in previous economic recoveries. Iambic king broadly the dollar will continue to weaken. And the fed printing literally unlimited quantities of kiwi. Of qe broadly speaking, it is very supportive for global assets. On the one hand, peter coming you are thing because of the economic recovery, investors no longer feel the need for a safe haven. The dollar has proven to be a safe haven assets during the crisis. On the other hand coming your saying it is also because the fed has the Printing Presses rolling on. Right now and that typically will devalue a currency. For you alsocern in terms of inflation . Do you see that on the horizon . , inflation is something we have not had to worry about for a very long time. And there are a number of reasons for that which are well know. Most of the disinflation we have seen is a supply side issue. Consequently, i am of the view that cost side inflation should not be something we have to worry about. Frankly speaking, even calculating inflation will be difficult. Changedion baskets have drastically since last year. Most Central Banks are likely to ignore inflation for the next year or so. Might see a we moderate increase in inflation. Ink at the sheer increase the u. S. In terms of money growth, it is very patchy. A modestd lead to uptick in inflation. The real question is whether Central Banks will care my view is they will not. It is not really bad news for risky assets at this stage in the cycle. That that is interesting conversation on inflation and what Central Banks are really for at this point, peter. How would you describe the mandate . We know what the mandate says it is supposed to do around jobs but do you see them having a real role in keeping borrowing costs low . What is the role of the fed here . For me, the role of Central Banks around the world has shifted or morphed from explicit or over inflation targeting to settle Debt Management to subtle Debt Management. They are trying to keep the front end of the yield curve to very low levels and in doing so, they are encouraging governments to borrow. How many times before covid19 did you see or hear Christine Lagarde pleading with the rest of europe to keep spending money . Her point was i will keep regs though but you have to keep the show on the road i will w but you have to keep the show on the road. Matt peter coming you are going to stick with us. More to come from peter kinsella. Strategy. D of fx coming up, we will talk about americas jobs report and what investors have to look forward to after that. ,eassurance from fed chairman Jerome Powell is what they would like. We will discuss. This is bloomberg. Matt welcome back to Bloomberg Markets, this is the european open and we are 10 minutes into the session. 10 minutes in. Bloomberg business flash. Top corporate stories. Potentially the biggest firm a deal ever. Sources tell Bloomberg Astrazeneca has approached gilead about a potential merger. In the very early stage and there have not been any formal talks or terms and we are also told that gilead is not currently interested in a big merger. A spokesperson for astrazeneca says the company does not comment on speculation. The u. K. Is prepared to tighten its takeover laws. Reports the government will introduce new legislation to force companies to report attempted takeovers that could produce security risks. The plan comes as Boris Johnson looks to reduce the nations reliance on foreign companies, in particular huawei. The union says the airline is threatening to fire all of its pilots and then hire them back on individual contracts. Agreement can an be reached on new employment terms. The union says the move seriously undermines the talks. And that is your Bloomberg Business flash. Anna . European equity markets under pressure today. Own by 0. 75 u. S. Futures are fairly flat right now. Fridays job number provided another boost for risk markets. S p close to erasing its losses for 2020. Still with us is peter kinsella. We are ready talked about the u. S. Economy, but what you saw in the nonfarm payrolls on friday, does that change your view of the market . The shape of the recovery . Backow quickly things get to normal in the u. S. . Peter we hear a lot of talk about the shape of the recovery. Ushaped, vshaped. A lot of it is very nuanced and frankly not that helpful. Look at china and look at the shape of their recovery. The Manufacturing Sector has gone back to work pretty quickly and are probably back to about 90 of the precovid level. And the Service Sector is back albeit with a much larger lag. And as social distancing policies are implemented, sectorsnts and other will have a slower return then the Manufacturing Sector. I would expect similar rates in the u. S. And the rest of the world. Manufacturing getting back to precovid levels pretty quickly while Service Sectors will take more time. Anything involving heavy social interaction such as restaurants and theaters, that will be coming back with much more of a lag. It is like a two speed recovery. In that sense really, the lshaped or the ushaped, it does not really matter the shape but the style of the recovery. And i think that is likely what we are going to see. Matt do you think we will see a better picture in the eurozone . These furloughs schemes in countries around europe to keep people employed during the downturn. Are they just going to get fired after . Or will we see a much lower Unemployment Rate in europe compared to the u. S. . Peter if you look at the shortterm directives we have seen and the furloughs schemes, the intention of those schemes is to keep income coming and the door for people. We see the economic recovery come back and then we will see people working again. 20082009k at the recession, unemployment did not go through the roof as many people thought it would of done. Simply, Companies Understand it is hard to get good workers. They want to hold onto them. They dont want to lose them for sure, cyclical downturns. In that context, i think what the u. K. Has done is a good one. In europe, they should, if they avoidcky, they should serious longterm unemployment. That might not be the case with our friends in the states where it could be likely if we have a slower recovery that we could see high levels of longterm unemployment he sustained for quite a long time. Anna and where does that leave the euro particularly against the dollar . We have had a number of guests be very positive on the euro. Would you be the same . Peter i have been rather bearish on the dollar for a number of months. The reason i have been bearish on the dollar really is it is a function of what the fed has been doing. Curve at veryeld flat levels. And engaging in swap programs. Eurodollar is that it would rise but mainly as a function of dollar weakness and not as a function of euro appreciation. What we have seen since merkel and macron announced their plans debt, you have seen the trade of the euro appreciate which is been interesting. The trade rate of appreciation continued last week and friday as well. The ecbeuro, what announced and what merkel and macron have announced have reduced the tail risk of a crisis in the eurozone. And i thought what the ecb said last thursday was that they would extend the program but asset classhase any for any duration. What they are saying is that they will do whatever it takes to keep the show on the road. Says mind, that basically that you have seen some shortcoming in the euro. Fordest grind higher dollareuro is definitely do were in my opinion is definitely able in my opinion. Matt you have a forecast for gold of 2100 an ounce which is a big rise. It does this mean that all Central Banks around the world are pumping out money . Reasons imf the quite bullish on gold and i have been for over a year was i saw quince a dental easing by various Central Banks. The fed, the ecb in september last year. The bank of india, etc. Banks all over the world were easing policy. When you have Global Competitive devaluations, gold is the only asset that will hold its value. Moreover, the fact that we have seen an increasing use of negative deposit rate means gold storage costs are cheaper than regular rates. This will attract consumers that have never looked at gold before. Every day, every conversation i have with people is they want to know about gold. There isells you that a strong underlying demand for gold. If you look at it over the longerterm, the pace has been unbroken with the states. Which is consistent with the large upward movement with gold. If we look at relationships with the u. S. , that means that the current value is at about 1200. The tail risk would be if we see Central Banks moving towards helicopter money policies. Of 2100 an ounce is very doable. The dollar would be one of them but it would be the least of them if i am frank. There are other strong reasons to hold onto gold. Matt fascinating stuff, peter. Peter kinsella, it Union Bank Union banka ire privee. Peter continues with us on the radio. Also works. Co. Uk British Airways threatens to fire all of its pilots in its standoff with unions as it considers suing the u. K. Government over quarantine rules. We will bring you the latest. This is bloomberg. Anna welcome back to the European Market open. 23 minutes into the trading day. Looking negative for the stoxx 600. Gain in theiggest stoxx 600. The opec deal extending things for a month in trying to deal with under compliance. Astrazeneca falling after bloomberg carried our story that astrazeneca had contacted gilead. A very informal approach. And in the aviation industry, the iag gaining. Ahead with pressing a twoweek quarantine on International Arrivals. Of us get more details on the story. The move has come under fire. They say it will devastate towards him in the country. Along with threatening to sue the government, this has been raised in conversations with the unions. Joining us is our reporter. So angeredthat ba, by the quarantine roles, is threatening to sue the government and they are not alone about this. With ryanair and other travel companies in the u. K. Are considering suing the government over the policy saying it was curtailing coronavirus while also destroying thousands of jobs. The feeling among airlines and other travel companies is that most airlines are restarting their flights in the middle the month or early next month, there is still a worry that this might put off people from booking travel later in the summer which is crucial for airlines. Would notfinitely want to fly to london if i knew i was going to have to quarantine for two weeks. I might go through dublin as i have heard that is a loophole state. Is at a possibility if i book my flight through dublin . Loophole that anyone can exploit. We are still not clear on the details given the fact that you would obviously have to travel from somewhere else. Anna what about the relationship between ba and its pilots right now that up in trying to renegotiate the deal. Now, they are threatening to fire and then rehire all of their pilots. What is the legal background . Pilots has been in talks with the union and they have now notice toresh the pilots. Unless they can reach an agreement with the union on new employment. Further 125 for a in addition tot those that were already being discussed with the union. Anna thank you very much. Airlinegs european reporter. Up next on the program, we get back to the exit brexit discussion. The pressure is on for Boris Johnson. That meeting coming next week. We discuss that next with Allie Renison from the institute of directors. It is been a while since we discussed brexit and we thought we should do that. This is bloomberg. Anna welcome back. This is the European Market open and we are a half hour into that open. Dax coming under particular pressure, down about 1 . Down by about 0. 9 . Looking at the sectors brent crude is up at 42. 90. To tighten up on compliance by opec and friends. Oil and gas up i 1. 2 . To the downside are the Health Care Stocks and technology. A mixed bag. Matt your bloomberg first word news. Top stories from the bloomberg terminal. New york city is lifting its curfew. Its protests remained mostly peaceful over the weekend. This as the city prepares for life after the coronavirus locked down and in a radical move, minneapolis has pledged the process of dismantling its police force. Members say they will consult the community on how to replace that. Colin powell has become the latest notable republican to express concern about President Donald Trump and he says he will now be voting for joe biden in november instead. Threat the president s to use active duty troops and against protests show that he has drifted away from the constitution. New zealand is ending social distancing after eliminating covid19. It paves the way to resume normal life and is one of the few countries to successfully eliminate the pathogen entirely. Strict border controls will remain in place to keep the virus out. 7obal cases have now topped million. With over 700,000 deaths. 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. Anna . Anna let us talk about brexit and the future of the trade relationship across the channel. Tish and eu leaders are negotiators are meeting. Said the talks needed extra political momentum putting pressure on Boris Johnson, the british Prime Minister to reboot the process when they hold talks next week. Euare joined by the head of and trade policy at the institute of directors, Allie Renison. Three major sticking points , andd fisheries, ecj standards. Do you see any quick process being made on any one of those . Is there anyone that is a key stumbling point . Allie i think it depends on what soon means. There is a summit at the end of the month. Some see it as a do or die summit. I think all eyes are on that summit for hints of progress that we have not seen until now. Have ignored the press conferences and say it all depends on what happens later in june. To what extent will this end up being a distraction and will that work in the favor of having or will transition people want to focus on their own priorities meaning we will have a district event . That is the concern we have. Meaning we will have a event . Tive that is the concern we have. Matt we speak to tim martin sometimes from j. D. Weatherspoon and he is not concerned about that even if his biggest seller is coffees. Allie we have to have some context. In terms of the wider business , i think the biggest concern that unites everyone is making sure this is done properly. You can adjust but they cannot do it if we end up in the same situation we had last year. Businesses are only getting information about the tariff schedule, the plan for the irish border and that is what we want to avoid. Whatever the outcome coming you need to have a smooth adjustment. That is interesting about the period of adjustment. , howyou talk to members much time do they spent thinking about brexit given what weve seen from covid . There are huge unknowns around the economy. U. K. Ember covering the leaving the European Union and saying even then that this is being pushed off the front pages by covid. Businessesme are thinking about this . Allie i think it is commensurate with the news coverage. See more proactive interest from our members and i think that is because it has been more in the media of late. Reminding people of what they have to do. You have to remember it there is confusion about what businesses should be doing at the moment. We have been told that transition is not to be extended that we dont have any narrative from either side about what to prepare for. We know it will not be the same kind of no deal that we had last year. If you talk to businesses in the aggregate space, they have no idea because things are changing on the daytoday basis what position they will be in at the end of the year. ,hat reinforces the message make sure people will have sufficient time to adjust. At the moment, what the Business Community needs to prepare for is not 100 clear. Renison, thank you very much. Head of eu and trade policy at the institute of directors. Coming back, we will be back to the pharmaceutical story. The biggest firm a deal in history if it goes ahead. Astrazeneca is said to be eyeing a merger with gilead. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. We are looking at a mixed picture. For the most part, red arrows across europe after the amazing rally we have seen. Thisax losing 85 points monday. Two drugmakers are behind the industrys most prominent responses to the pandemic and they are looking at the possibility of combining in the future. Astrazeneca is said to be interested in getting together with american rival, gilead. Sources tell us informal contact has been made in what would be the biggest Health Care Deal in history. The managingw is partner and Equity Research analyst for pharmaceuticals at brian garnier. St of all, let me dispel the word merger drives me insane. It is one company biting another. There is always a target and an acquirer. A pipe dream that pr firms would like us to believe. Is astrazeneca trying to buy gilead . Well, it is very difficult to to startou are right talking about the right words. Think link up is closer to the truth then merger. If a merger was at stake, it is 1. 5 bigger then gilead and it would probably be driving it but i think it is worth talking about some kind of deal between the two and not necessarily a merger. Different to think about a merger. Anna let me ask you a little more about that. If this was to be one company outright eying another, ma be givenegulation scrutiny this move towards more protectionist policy we have seen in various parts of the world in light of the covid19 pandemic. Trying to buy a Drugs Company would jump to the top of the list. Scrutinye regulatory and with that be a reason to keep a partnership light . Not necessarily. Actually, if you look at what have toeca and gilead involved in hiv treatment which is very specific. They are by far the leader in the world in hiv. This makes gilead a real cash machine. But this is very far from what az is doing. When you think about combining two companies, you think about synergies. Az is about oncology, respiratory and metabolism and rology or hiv. Ioli i dont see why the regulations would look at this merger with bad eyes. I dont see an issue there. T, they the covid fron or both working on treatment vaccines by dozens of companies are doing that so even combining those approaches will not make them a real threat for the others. Matt and even if they went ahead with this, these things take time. Aftereaking of, i wonder a longerterm period, when you look back at these megamergers, deals, how many are successful in hindsight . Wow, there have been very different times for those megamergers. At the beginning of the 2000s, the rationale for that was to get bigger in an environment where size really did matter. It is not necessarily still the case today. And a few other remaining mergers that are still consumed are done with some kind of defensive angle because clearly at a single drug becoming too big so they wanted to diversify to acquire some hematology. It is becoming very rare to get any strong rationale to go forward with this kind of megamerger. And talking with most of the management people from largecap firma, very few of them think it is a solution. Pharma, very few of them think it is a solution. Fridays u. S. Jobs data showed black unemployment climbing to the highest level since 1984. This comes amid an increasing call to reexamine the socioeconomic disparity in the u. S. Sula burns has been on the program before, the only black woman to ever lead a fortune 500 company on a longterm basis. List the top of my worry but i entered this discussion and this debate during the start of the coronavirus optimistic, interestingly enough. Optimistic about coming out of this disruption time in a better position then we entered. And that meaning that companies paid attention to what we now call the essential workers. We start to understand what an essential worker really is. The guy who delivers food, the guy who stocks the shelves. Knowing that at lot of the black and brown people in the United States work sociallower part of the economic employment ladder, that reset use this time to the whole conversation about how into and brown people fit the employment ladder but also how Companies View essential workers. How we have to pay them and nurture them. I am hoping it is an opportunity but i dont know it will be. Im glad you are optimistic. How optimistic are you about statements being made by corporations . Think many companies, more than i have ever seen before are speaking out. They are starting to feel uneasy about the state of america. Phase. They are starting to realize that this is fundamentally unsustainable and it is definitely unfair. Of it is starting to go out balance and it is important that the rhetoric in the administration which is generally negative and definitely demeaning that it has to be offset by some action, real action, funding groups, changing employment practices, being affirmative and how they actually address their employment needs. Being affirmative in hiring black and brown people and progressing them through the companys. Without that passion and that drive, i think we will not make progress and i think the companies are starting to realize more and more that not making progress is not sustainable. They will have to do something. It is kindws is that of like it all came together at once. Ofwe get enough crescendo voices, we can keep the action going. This is not the first time that a black man has been killed by a policeman. It happened before that and before that. Im hoping this time, this sacrifice of this human does not go unrequited or unpaid back. It is important that Companies Stand up and say we have something to do with the solutions. Seemat makes this different to you that the outcome of this will be different and more positive than maybe what it was in the past . Ula a number of the broadbased coalition starting to speak please do not get my little optimism as overjoyed optimism. Dont get me wrong. I amt believe what hearing today will actually drive change. We have to stay involved. All of the news in the streets, on the news media will have to stay involved to see true change. Littley reason i am a more optimistic is because people are getting fed up with the current state of play. Xeroxthat was a former ceo, ursula burns. How will these changes impact liquidity . We will put this into context. See u. S. Futures fairly flat as well. Aquino speak to kristine. This is bloomberg. Matt welcome back to the european open. Right now, almost an hour into the session and equity indexes mostly down this morning on a monday to kick off the week. Kristines now is aquino who leads our mliv team in europe. What do you think of this slight selloff . Visit profit taking after a decent rally . It has been a hard couple of weeks for equities. No rally goes in one straight line. Tomakes sense for investors take stock of what has been going on in markets and look for the next take catalyst. There are some standouts more broadly. The euro in particular has been having a good run of late. The ecb last week the ecb meeting last week only supported the rally. I will be interested to see where that rally goes from here because of the interesting have lists. Of thehat do we make moves in bond markets at the moment . This deepening we have seen. Thele talking about whether fed will have to address that later this week. Qued the it has pi interest of a lot. This was previously unthinkable. Very experimental in even for the bank of japan but now investors are more willing to consider the idea. The steepening we have been seeing in the yield curve in the u. S. And in general does seem like a bit of a return to normal functioning in bond markets where you see a longer steepening as a response to what we have seen from the central in terms governments of monetary and fiscal stimulus. , that normal times would be a perfectly reasonable reaction. But of course we are not living in normal times by any means so it is worth questioning what is driving that long steepening beyond the usual inflation driven factors. Matt thank you very much for joining us. Kristine aquino who leads our mliv team here in europe. Speaking of right now, we are seeing equity indexes that are lagging for the most part. We do see a little bit of a mixed trade here with the ftse and the ibex 35 barely treading water that the dax is down a little more than 100 points and the ftse is down 20 five. This comes however after some really decent gains over the last few weeks. And months. In some places as you were saying earlier for example the s p 500 in new york is on was to unchanged for the year. Date yes, year to unchanged almost for the s p 500 and the dollar. And the nasdaq has already gone through that. Benefiting from some of the more structural changes wraps we have seen around the pandemic. Wobbling around the front lines so not going anywhere in a hurry. This is bloomberg. Francine big pharma wants to get even bigger. What would be the Largest Health care in history. Thousands march against police brutality. New yorks curfew. The Minneapolis City Council takes steps toward abolishing its police force. Payrolls rebound. Unemployment in america declines. Despite a jobs bounce back, it doesnt extend to black americans. Welcome