Recovery fund today. France and germany push for an agreement by next month. Its cio. Suspended coo. The stock plummets 67 after a false delay to the report. Good morning, everybody. We are just under one hour away from the start of the cash equity trading day. The final day of this week. It is friday. Thats have a look at the futures and what they tell us right now. We dont see a great deal of movement in any of these markets. European futures suggest a little bit of movement to the upside. U. S. Futures suggesting some movement in an upward direction,. 5 . They do seem to be improving as we go through the last hour or so of the trading session in asia. If we put up the gmm, you can see we are up we are up by. 2 on the msci asiapacific. Making some modest gains. It does seem the risk rally has come to some kind of a pause. Fatigue. Maybe that was the best way to sum up what was going on. Said, it does seem as if Global Equities are oncall to make some global gains, at least for the week as a whole. Volatility out for in the session. We have quadruple witching coming. It can catch people off guard. A big focus for markets is still on the virus and with that in mind, we continue to watch what is going on in beijing and in many u. S. States, particularly texas and florida. From thecs not far markets as well. A complete decoupling from china as a possibility. Lets get an update of your first word news story. Top stories recovering here at bloomberg. Virus experts warned against loosening restrictions in beijing. In latino searched america with mexico seeing the daily record and infections. Nicolas maduro said he would radicalize lockdown measures. European leaders begin talks over a giant Recovery Fund to help their economies rebound from the coronavirus lockdown. The proposed 750 billion euro program which needs the backing of every e. U. Member state would be funded by joint debt issuance. Countriesmore hawkish against france and germany, which are pushing for a deal to be wrapped up. Donald trump said the u. S. Could pursue a complete decoupling from china. It is the president s most forceful statement yet. That comes as a book by john bolton shows a different side to trump. It says he repeatedly sought to interfere in the u. S. Judicial system to curry favor with leaders including xi jinping. 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. Lets get back to the market story now. U. S. And european futures are drifting ahead of that quadruple witching set to take place on wall street later pr that follows a mixed Asian Session following thin volumes on many benchmarks. Sinoamerican tensions continue to simmer. Notu. S. , as we said, could rule out a complete decoupling from china. Lets get into that markets conversation and talk about where emerging markets in china go from here. Simon flint joins us. Good to speak to you. We talked for a couple of days about john boltons new book and we have witnessed on a number of occasions how trump and biden will sort of take it in turns to try and beat us on china. How is that all playing out in Chinese Markets . Simon i think at the moment, people are kind of ignoring it. The extent to which people think it is a little bit of bluster, and we only really get concerned if we think that the sinou. S. Relations are going to get so bad that it endangers the trade deal, and theyre not any real signs of that yet. In fact, the last time Robert Lighthizer spoke just a couple of days ago in congress about the trade deal, he spoke about it in very favorable terms. Great not have been a meeting, but at least there was a meeting between mike pompeo and his chinese counterpart and again, a few days ago, the u. S. Administration was allowing collaboration with huawei setting technology standards, so even though the rhetoric is it does not bite the market unless they think there is a significant possibility that it will convert into economic stress. I want to dip into some u. K. Data thats breaking across the bloomberg and then we will get back to the emerging markets story. We have some numbers coming through on a number of fronts. U. K. Budget deficit figures coming through, which the market is no doubt going to be focused on so we will get to those. We have the u. K. Talking about Government Debt above 100 of gdp for the First Time Since 1963, such is the state of things at this point. We have u. K. Retail sales coming through. Retail sales. Fuel rising month on month. The estimate was for an increase of six point 3 . Retail sales actually surprising a little bit there. Doubt, the volume measure, but not in terms of price. Get back to this conversation around emerging markets. Its fascinating the way geopolitical tensions, there are plenty of them. It does not seem to be gripping the market as we focus on the second wave of the virus instead. You talk in your piece this morning about the relative strength of the chinese currency of the yuan. When do you think that will change . Windows does the one start to weaken when does the yuan start to weekend . Data. The july gdp that is in the middle of july. And then the state, highest economic body in china. We will be reviewing that data. If it is very poor and it looks stress, they under may decide they prefer yuan depreciation. Startthink things really to go downhill potentially as we get closer to the u. S. Election, so even though it seems very intense now, it is likely to get even more intense following the past conventions in the u. S. That is kind of around the middle week of august. And then especially after labor day on september 7. I think you can have definitely have a situation where if President Trump is significantly behind in the polls, if the s p is doing badly, part of the reason it is doing badly is the second wave think dollaric, i china relations heat up and it becomes potentially market moving. Mean, it is as though it is said to be market moving in the runup to the election. But currency might be relieved to some extent when the election is over. Simon definitely. We will all be relieved. Ca trump second term, it is likely at least in the short run, u. S. China relations will improve or at least appear to. For him tobe no need be seeking reelection so that will be out of the way. In the event of a biden presidency, they said it in a conversation a couple of weeks ago. His presidency will be less ideological, more practical, more predictable, and you may even see the markets pricing a rollback in the existing tariffs so that will be particularly positive to the remember the imnbi. Er the rem anna thank you to simon flint for joining us. We will get further into the conversation a better about where we are later on. We will talk about our question of the day. Who wins . This is bouncing off some of the commentary we had from bridgewater recently. If you think there is going to be or there is not going to be a lost decade, you can get involved with the question of the day and reach out to the markets live team and tv team. Up next, worse than the dotcom bubble . We will talk with roger jones about why he thinks the risk rally has caused the most severe market dislocation into decades. This is bloomberg. In two decades. This is bloomberg. Anna welcome back to the European Market open. Still 45 minutes to go until the cash equity tradings Equities Trading day. Lets get a Bloomberg Business flash, focused on some of the top corporate stories we are covering at bloomberg. Ing has appointed Steven Van Rijswijk as the new ceo, the chief risk officer and member of the executive board. Whoucceeds ralph hamers, left ing to take the top job at ubs. Has suspended its outgoing chief operating officer after the Company Revealed auditors jan marsalek was suspended on a revocable basis. He was do set down from the coo role to a new position in charge of business development. One of the players in the race for a Coronavirus Vaccine could be going public. Sources say they are working with bank of america and jeffries on a u. S. Ipo. The German Company could raise 150 to 200 million dollars, valuing it at 1 billion. This week, it got the green light for the vaccine. That is your Bloomberg Business flash. Lets get back to the risk asset conversation. Stocks and futures are drifting sideways after a volatile week. Today may mark more uncertainty with the quadruple witching taking place. Global stocks are holding onto an almost 40 gain since their march lows. With the weak Economic Outlook and rising risk of a second wave of infections, our next guest says the rally is starting to look overextended. Joining us now is roger jones, head of equities. Your to speak to you, roger. One of the big reasons why people say it might be overextended but they want to get involved with equities is no is that there alternative. You do not buy that argument, i guess . Roger good morning. I do not buy that argument. I think the best point to look at that is looking against Corporate Bonds, u. S. Corporate bonds, so we looked at the earnings yield for equities, and since the financial crisis, since 2010, and we looked at the spread between Corporate Bonds and sovereign bonds in the u. S. , and you actually see that, compared to Corporate Bonds, equities look very so the way you need to justify that is a lot of growth going forwards. That looks pretty challenging for equity markets. Anna that is the relationship between the bond markets and stocks. What do you do with the stocks portfolio at this point . Are you out of stocks, underweight stocks, looking for a point to get back in if we see further falls . What is the strategy . Roger the current one is the best at this point in time, given where we rallied back to you and given that things look overextended. I think in terms of having a bit of participation in equity markets, that makes sense. Clearly, the very strong momentum you referred to, the 40 plus rally since march lows means momentum could still drive things higher and we are in a liquidity driven rally as well. But i would caution that the fundamentals do not match levels at this point. It is fine having a little bit of participation in equity markets that continue to move on this huge amount of stimulus. Ofestors need to be aware the risks of investing at this point in equities and that is that we could get a reality check in terms of the earnings outlook once we are through the summer months. I think that will probably get more visibility in that potential. Anna it is interesting. If you think we are in a bubble, you can either decide to participate with everybody else or lets move the conversation a little to talk about where we head for growth in earnings, and this is the longerterm question. Putting out aater piece suggesting stocks in the u. S. Face a last decade. They argue globalization has been a big driver of improved profitability for u. S. Companies and that will not be a driver in the future. Do you go along with that . Do you think we will be safe without globalization . Roger i think theres of evidence tot suggest that globalization has peaked and we will see some deglobalization, if you like, and that the world is becoming more protectionist and looking for more local solutions. I think this does clearly make a headwind for earnings. Ofenvironment in terms global growth. I see that as a moderation. Huge amounts of debt that are getting built up will be the real suppressant for growth in the medium to longer term in the amount of Government Debt and corporate debt that has been taken on, admittedly at very low rates, but that still has to be serviced, and that means lowering Earnings Growth essentially. With thatill pick up in our next conversation when we talk more about the u. K. The Global Markets story, you talk about the dislocation on a bubble scale for the. Com bust. Why do you say that . What is it you are looking at in terms of dislocation for the metrics . Roger the key metrics in terms of dislocation is that, clearly, any Equity Investment is only worth the cash that generates a using proxy for cash. What we have seen in the last five years is really earnings having a very moderate rise market levels,ck stock prices. We have seen a huge tree rating of stock markets and a lot of this is put down to low Interest Rates, clearly. Stagee have got to the where it becomes so stretched that we have this dislocation for a very low Earnings Growth, but the stock prices have gone up significantly so this is the dislocation. These asset levels and earnings levels, effectively. Anna roger, thanks very much. Roger jones, head of equities. He stays with us on the program. U. K. , we will pick up on that thought he was giving us around debt levels. The bank of england keeps some of its powder dry, it would seem. We will discuss the outlooks for stocks as policymakers leave rates on hold but boost bond buying. To the bank of england yesterday, we will talk about that, next. This is bloomberg. Anna welcome back to the European Market open. Still just under 40 minutes to go until the start of the European Equity trading day. U. S. Futures training more positive and european stock features turning more positive as we move through this hour. Lets turn our focus to the u. K. Quantitative boost easing while holding the benchmark rate at a record low of 0. 1 percent. The bank of england surprised investors by saying it will slow its purchases because stress in Financial Markets has eased. It said it reserved the option to reaccelerating them again should the economy worsened. Lets get back to roger jones, london and capital head of equities. Watching whatwere was going on in response to the bank of englands decisionmaking. Do they have a point . Does it mean they can step away from the markets a little bit, taper their role in the market. Is it right for them to be doing that . Roger so i think theres overdependence on stimulus and on creating these huge amounts of debt and money creation, ultimately. It is something that is building problems for the future. And whenhen we can Central Banks feel able to, they no longer need these emerging see emergency measures that they put in place and can step them back. I think they should take advantage of them. Anna you mentioned in our last conversation debt levels. I know you are thinking about corporate debt and sovereign debt. We had some stunning figures. The u. K. Government debt topping 100 of gdp as the virus costs are mounting. This is the first time we have seen those levels since the Financial Year ending 1963. What worries you about what that does to the longerterm growth trajectory for the u. K. , but also i suppose for other developed markets that are having to do similar funding programs . A very good roadmap in terms of japan and what has happened. Clearly, there is demographic factors that have had a big impact as well but when you see these huge amounts of Government Debt to being built up, we see growth going forward. That is not surprising. Clearly, the economy has to work off this debt. This is not just free money. It is something that has to be repaid. It is something interest has to be made on. This tracks from the bottom line for economies, corporate, for individuals in terms of earnings profits or surpluses. Important is an factor. It clearly needed emergency measures to make out debt available in the short term, but theres also got to be a reality that this cannot go on into perpetuity and this Tipping Point will rise. There is a wakeup call. Too much debt. It cannot drive growth indefinitely. Anna when is it that the bond markets wake up to that and start to ring alarm bells, roger . What is the trigger . What is the level to watch out for . Is it some other measure that we need to be mindful of as we watch these debt levels climb . Roger i am not sure theres any specific number. I think a lot of it, if we look debt, ineability of terms of japan, we have government receipts servicing data so it is an incredible amount, and we have to be conscious of that. I am not sure what modern monetary theory has put across. It is difficult to know when that Tipping Point will arrive. It could well be when we do have higher rates. You know, that starts to bite in terms of the affordability of this debt. Anna we will see whether we get those rates any time. Roger jones, london and capital head of equities. Program, on the conclusions. We will talk about the Global Response to the pandemic, next. This is bloomberg. W . W . Uhiono anna welcome back to the european open. Futures up by 0. 8 on euro stocks. U. S. Futures also up. Lets take a look at what is coming up for you today. London time, european leaders gather for an online summit to discuss the 750 billion euros Recovery Fund proposed by the European Commission. Then we get the bank of russia rate decision. Bloomberg economics expects a full percentage point rate cuts with further rates further cuts to come. From fedlso hear chairman Jerome Powell and cleveland fed president taking part in a videoconference, the focus on building your resilient workforce in the covid19 era. Says the Global Response to the coronavirus is the greatest science policy failure of our generation. In a new book called the covid theam catastrophe, covid19 catastrophe, he says Health Systems were unprepared for the avalanche that followed. Joining us now is Richard Horton , the editorinchief of