francine: the u.k. economy plunges into recession. growth thanks 6% in march due to the pandemic. we talk this shadow chancellor shortly. dr. fauci ways on sentiment on reopening too soon. a top german judge says the ecb is not master of the universe and must be held macronable as merkel and

agreed to reopen. welcome to "bloomberg surveillance." i am francine lacqua. a lot going on in markets and the german constitutional court as we have reports why they came to that decision. first to your markets. on torkets are latching the gdp figure than the forecast, and people are expecting worse things to come. these are the markets we are looking at. there is a little bit of stabilization compared to what we saw on our ago, but the focus is from what we heard from dr. soon.cannot reopen too treasuries and gold holding onto the previous games. that's get to the first word news in new york city. >> the european central bank is not master of the universe and should not pretend otherwise, according to the german judge who gave his opinion on the qe program.

he is asking for the bank to take responsibility for its qe program and explain it to those negatively affected. level coronavirus cases have topped 4.2 million. in the u.s. cases slowed to 1.4%. 's licensing its potential treatment of remdesivir to five generic drugmakers to anticipate demand. korea virus cases traced to a nightclub have reached 119. dr. fauci told the senate house committee he is concerned about states relaxing restrictions without meeting guidelines when it might be safe. cut $2.8 planning to

billion in costs. the initiatives are part of a three-year plan to be unveiled later in may. the carmaker is phasing out a brand and shutting down a production line and marketing and research costs. it is aimed at turning around the automaker after a tumultuous period. 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. this is bloomberg. thank you so much. the u.k. economy shrank 6% in march as the nation went into lockdown. it puts the u.k. into a deeper recession, the deepest and more than three centuries. gdp fell 2% in the first quarter . joining us now is trevor greetham, head of multi assets, royal london asset management. how concerned are you we will see a recession, a deep recession with a slow recovery?

what kind of crisis the you forecast? trevor: you are right to say this is a taste of things to come for gdp. contraction was 2% but bear in mind the lockdown really started in march, and march had a 6% drop in the economy. april retail sales were down 20%. worsek we will see numbers for the second quarter. the markets are looking through that a little bit. what they are doing in the recovery we see over april is they are beginning to factor in there will be some switching back on of economic activity over the next month, and tomorrow is the day the u.k. in syria gets back to work. -- the u.k. in theory gets back to work. you will get this big collapse

in activity when switching back on. i am a believer in the 90% economy, that when you switch things back on, there will be sectors like leisure and retail that will not come back properly. it starts like a v, then goes flat and below where you would like to see it. that is what markets are grappling with, and the sideways trading we are seeing. francine: what does it mean for what you want to put your money? be in thisoing to flat recovery, does it depend on the consumer, and willie u.k. economy be similar to what you are seeing worldwide? trevor: i think it is a worldwide phenomenon, and different economies got into the locked at different stages. it is a long process. the most noteworthy data i 5% of thewas about

u.k. population has antibodies. this is historic because it reflects infections back foot five weeks -- back five weeks. if we have to get to 60% for herd immunity, we are 1/12th of the way through the crisis. there will be moments of powerful shutdowns and backtracks. it is a long slog. from an investment point of view, we have neutral equities. we are focusing on things, more support for high-yield bonds versus commercial property. stocks, we like the u.s., the tech sector. we are underweight in the u.k. willive value trades depend on whether we get a

relapse or not, but the overall equity question is poised to go either way. francine: if there is a second wave and second lockdown, what does that do to market? it is unclear what is priced in. probably. some markets reflect our best guess of what the underlying economies are doing. reflecting what markets are expecting the economy to do. if there were a second surge and another lockdown, which dr. fauci suggesting could happen in the u.s. in some states, then i .hink the markets go down again from a technical point of view, when you see a figure drop, that six-week period was as fast as the 1929 crash, it wouldn't be

surprising in three months we are back down to march levels, particularly if there is a second surge in the economy has to be locked down further. francine: we will talk about inflation later on, but when will economies be able to create the jobs that were lost in the last two months? trevor: it will take some time. some estimates that the rise in the u.s. unemployment rate, which was at a 45 year low, 20% if you include people on furlough. there are estimates that half of that comes back quickly, but it will not all come back because some services have to shut down. the 90% economy, what that

suggests is unemployment will remain high for some time. there is a weird situation where it all happened in one month. if you saw that new york times graph on its front page, then the april 2020 figure went down the side of the page, it is a weird one month map. twice as many jobs destroyed as in the lehman crisis. but of that will snap back, the rest will be the long slog. we are dealing with the initial shutdown abounds back, but after that it will be tricky to deal with. it will feel like a recession from 86 to 18 months. six to a recession from 18 months.

we may come out of this with less damaged equities the higher government debt. francine: thank you so much. trevor greetham, head of multi assets, royal london asset management stays with us. coming up, as the u.k. economy shrinks 6% in march and the government extend its furlough scheme, we speak with the shadow chancellor next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." i am francine lacqua. >> thousands have returned to

their offices across some of asia's financial hub. things will not return to normal for a long time. hong kong is planning for partitions in some workstations. employees will be able to choose to work from home permanently when the outbreak finally receives. half theey has told company that they are unlikely to reopen offices, but most can work from wherever they want. employs around 5000 people around the world. the indian government is planning a $65 billion spending plan to support the economy. it expects a contraction india's top motorcycle maker, hero, is urging the government to reduce taxes on its products.

bloomberg business flash. francine: thank you so much. let's get more on the u.k. sinkingws the economy into the deepest recession in 300 years. the government has confirmed the extension of its furlough program. more than 6 million workers will get paid at least until the end of october. it could cost 84 billion pounds. we are joined by anneliese dodds , shadow chancellor, uk labour party. thank you for joining us. the gdp figure was bad, maybe not as bad as expected but still bad, and many think this is a taste of uglier data to come. how should the government try to fix the economy? anneliese: that is absolutely right, and these figures reflect

the beginning of the lockdown in the u k unfortunately it is likely we will see more reductions. the u.k. government has an jobsmic package to support and incomes during this crisis. we have been trying to work with the u.k. government. some changes in the furlough scheme. i demanded the u.k. chancellor come into parliament to talk about it. it is critical now that we ensure everything is working as well as possible, and that we avoid any cliff edges. i am concerned with the furlough scheme that we could see an employer contribution, a substantial one required on august 1 for all employers. that would risk and increase in

unemployment, large numbers of people coming into the jobs market at the same time. we need to avoid that affect if possible. it will be difficult for the labor market, given many of them have jobs that are put out of reach as a result of this crisis. francine: would you say the government is doing a good job ,rying to cushion the economy and is a difficult to be the opposition now? anneliese: we did call for a number of elements in the package. in the case of the furlough scheme, we are asking government to look at other international examples for quite some time and encourage them to work with businesses and other organizations to get some kind of furlough scheme introduced. we hoped they could have supported those working. we do not have that in the u.k.

i was hoping the chancellor might be open to that for the u.k., but she said it would not. my concern is many businesses want to get some people back part-time now because they need to have some part-time working to keep the business going, so it will be ready to reopen. we asked the chancellor to do all we can to get into the fertile scheme earlier than august 1, because it will potentially be too late for many businesses. holesne: do you see any tothe government assistance companies and workers? do you see anything that could be done? been ase: there have number of different elements, and economic package.

i wrote to the chancellor last .ight if at all possible, we need the gaps to be filled. it is an issue for the u.k. in comparison to other european nations. our social security system covers a very small element of people's previous incomes. our social to security system, and that is not the case in other european countries. it is much more of a problem in the u.k. than comparable nations. the government needs to fix those gaps and ensure that people who fall outside the scheme are covered properly by social security. we have a lot of families without financial resilience. francine: what are those gaps?

have a scheme for self-employed people that went live today. there are a large number of people who might be recently self-employed. that relies on previous tax returns to assess their income. for the a big gap there newly employed as well. we trying to suggest a solution to that so there are different ways people can deal with this. they do not want to -- they are concerned about the risk for fraud. we think they can combat that and deal with anybody who tries to manipulate the systems. there is a shared agenda. we think in a number of areas government needs to look

carefully at futures, particularly our loan scheme. the package is loaded heavily toward loan guarantees as a proportion of its overall value. we said that may be sensible in the u.k. context, there may be other mechanisms ready to go compared to other countries. but we need to ensure especially for small businesses, it will not be unsustainable in the long-term. there are discussions with the various lenders. we need to make sure those businesses can continue into the future. how would the government actually be paying for all of this? these are expensive schemes. do we need to get used to more debt for much longer? anneliese: ultimately, the u.k.

will be accruing substantial debt through this crisis, as are many other countries. that will be the norm in many developed countries. , the debtuntries burden will be much more of a problem. we are urging more international cooperation with that. when it comes to the u.k.'s finances, in the long run they will need to pay down that debt. proposals, ande one of the u.k. newspapers, "the telegraph" suggesting the pay would come from a reduction in public funding, increase of taxation. my main concerns are first of ,ll we need to do all we can the crisis has taken an enormous amount and we need to think how

to help support household spending. too quickly, it will impede the recovery and the economy may grow more slowly than necessary. secondly, the u.k. recovery from the previous financial crisis was imbalanced. we cannot have that in the future. francine: thank you for joining us, anneliese dodds, shadow chancellor, uk labour party. plenty more from bloomberg next. ♪

francine: this is "bloomberg

surveillance." i am francine lacqua in london. we are talking not only to the shadow chancellor from the u.k., who is getting us some scenarios for markets. the focus is what dr. fauci was saying, markets are taking that in stride. treasuries and gold holding onto the previous day's gain. stan druckenmiller, we discuss that next. this is bloomberg. ♪

>> i think we ought to have a humility.

dr. fauci, i don't think you should be the only one to make a decision. as you listen to your advice, but the facts will bear this out. we keep kids out of school for another year, what is going to happen is the poor and underprivileged kids that don't have a parrot to teach them at home are not going to learn for a full year. i think we have to look at the swedish model and our kids getting back to school. i think it is a huge mistake if we don't open the schools in the fall. >> i have never made myself out to be the end-all. i am a scientist, a public health official. there are a number of other people who come into that and give advice that are more related to the things that you spoke about. needing to get the country back open again and economically. i don't give advice about economic things. i don't give advice about anything other than the public health. that was some of senator rand paul and his

testimony to the fed. let's get to first word news in new york city. ritika: an easing of the u.k. lockdown begins today with prime minister boris johnson calling baby steps, reopening the economy. in england, people will be able to spend unlimited time out doors, and people working from home are encouraged to go to their jobs. says the economics total costs could reach 84 billion pounds. almost. economy shrank 6% in march as the nation went into lockdown. it almost certainly puts the u.k. into a deep recession, potentially the deepest and more than three centuries. gdp fell 2% in the first quarter. the current three months likely to be even worse. saysornia's alameda county tesla can start operations as soon as next week. it came amid a test standoff as

ceo elon musk says he is getting back to work regardless of the rules with county officials. world set by shipping container line is warning of a 25% slump in volume, suspending its full-year profit outlook, saying the pandemic is having a significant impact on activity. while the outlook is grim, they still managed to generate growth and its operating profit. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, retake a good death. this is bloomberg. francine? francine: thank you so much. stan druck and miller says the risk reward for equities is the worst he has seen in his career. -- still withager -- trevor greeson greetham. we talked about the recovery you

are seeing and we were worried about falling off a cliff and the slow recovery. what do you do with inflation? do you worry about inflation coming back with a vengeance because of the stimulus, or is it something that at the moment we should not be thinking about? trevor: i think it is premature to worry about inflation at the moment. what we have heard with the pandemic is an amazing inflation-deflation shock. with the med more precipitously than supply, they have both fallen. but if you look at the oil price, there has been a collapse in the oil price. seeing the biggest monthly drop in core consumer price inflation, .4% month-to-month drop. then what happens next is the supply recovers faster than demand does. you can already see that in china. consumer confidence and consumer behavior has been hit very hard. so you're likely to see this

wave of deflation going around the world. andupply switches back on consumers are still very much retrenched. further out, you could argue that the degree of money printing and the sort of fiscal stimulus you are seeing will end up being inflationary, but that is more of a medium to long-term political question. whether the way the people actually decide to set policy in the recovery is inflationary or not is something to worry about later on. francine: should we worry about the big picture political questions, trevor? thenok at the ecb and being challenged by the german court, saying this could be the breakup of the euro. we have a story on the bloomberg terminal looking at the ghosts of the 1992 italian devaluation. are these worries about bailouts and things that frankly we thought we put behind us going to come back to haunt us?

trevor: i think this is a defining moment for the european currency, because i have often thought that you're only going to have a properly functioning euro when you have a large central budget or fiscal transfers, and the only likely situation which you could actually cross that rubicon and enter into what the germans would disparately -- disparagingly call a -- is if you have a single enemy the euro countries are facing. this is a war on coronavirus. it is an opportunity for europe to come together, and i was interested in the idea that the ecb should be inch -- should be issuing very large-scale irredeemable bonds. to fight the coronavirus. we are talking about a trillion euros.

smallt that, with the budget that the member states have given the e.u., even doubling that small budget, they will look like they are fiddling. i think there is a major risk around the euro area at the moment. i'm hopeful they come through it, but i think you might get more stress in the financial markets. just as you get the echo crisis with the -- i think there will thenother echo crisis with pandemic. i think the euro will come through it. would you worry about the lack of solidarity, and if there is a second euro crisis coming? what is the timeline for that? is it three years, or could it come much sooner? trevor: i think it is in the next year or so. do question will come, and i sympathize with the because they can only do what they can do.

the member steps -- the member states stepped in to deal with the crisis as it happened. the e.u. can only do what it is allowed to do by the governments . it is another unfortunately asymmetric shock that affected italy more than germany. it is a situation where there is a question about the solidarity about fighting the virus. if there is, that is a forming moment for the much closer european fists go union -- european fiscal union. closelyyou have to work with the bond spreads and ut spreads again. it may be something that doesn't happen, but certainly every time you get a big economic shock or recession, the stresses and strains of the current loose

fiscal arrangements within the euro area come back to the fo re. it may be the what-happens-next story. lots oftill have government debt and deficits, will people start talking about finding italy amid a large deficit? this is really going to come to a head. francine: what does it mean for some of the european assets? do you like them less than maybe american assets, or do you make a distinction regionally? does asia look more attractive because they recovered quicker? trevor: the u.s. looks more attractive. the u.s. has approached the -- the u.s. approach to the coronavirus is very patchy and chaotic and pretty much done at the state level. i have a chart that looks at the degree to which economies were topening versus the degree

which they have got a surge in virus cases. there is no correlation at all. but then you look -- then if you look at the way statewide economies are reopening in america versus the vote in the last presidential election for trump, it is basically the more republican states are reopening, the more democrat states are not. so that is going to be a problem. the danger is there is going to be an extra surgeon america. 40% u.s.tock market is stock and health care. the u.s. has were financials and things that are doing well. i would prefer the u.s. stock market over europe. that is just an extra reason not to overweight european equities at the moment. we have to batten down the hatches. it could take a long time for the political stresses in your

re again.o the fo francine: thank you so much for joining us, trevor greetham. here is what we should be watching out for today. unveiling a travel and tourism roadmap. midday, angela merkel will give an update on the response to the coronavirus pandemic. in the u.k., boris johnson will be -- his first since the changing of the lockdown rules. and jay powell will discuss issues. in the u.s. -- the u.n. council -- the euwill councile president will make an address. and still expecting positive results for the current year despite provisions for the low

losses. we will focus on italy, coronavirus, and the banking sector. that is coming up next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." that's get to the bloomberg business flash in new york city with ritika gupta. ritika: commerzbank is taking a nearly 480 million euro hit to deal with the coronavirus fallout. it is marking down assets and boosting deserves to deal with bad loans. the fact that base lenders have 180 5 million euros of its provisions are directly related to the outbreak. abn amro posted a higher than

expected loss in the first quarter, coupled with higher provisions. the bank set aside over one billion euros to cover the cost of loans, and it says the figure may rise 2.5 billion euros for the full year. the lender also reported its first net loss in seven years. the indian government has announced a $265 billion spending plan to support the economy. india is set for its first full-year contraction in four decades. companies have been urging the government for weeks to increase support measures. isian's top motorcycle major urging taxes on its products -- easing taxes on its products to help consumers. 28% taxax is very high, on motorcycles, which to the common man is very high. the first thing is the need for that to come down. ritika: that is your bloomberg business flash. francine: thank you so much.

let's focus on italy. we will be speaking to corrado becerra from italy very shortly. i actually think that he is on the phone with us now. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance ." italy registered the highest number of new coronavirus cases in just under a week, but we will get to corrado passera in the second. -- in a second. let's also talk about oil. we spoke to the energy secretary of the u.s. here he is. >> we have 23 states that are opening up their local economies. oft represents roughly 40% gasoline demand in the united states. we are seeing oil prices stabilize. it is important to note that this increase is good for consumers, in the sense that jobs are protected across the economy. we have seen no dramatic impact on gasoline prices across the country, which i think is very important as well. david: take us behind the scenes.

we know president trump has a good relationship with the crown prince of saudi arabia. is that something the president encouraged or helped arrange? >> the president has been engaged in this conversation for the last few weeks. as we talked about the past, opec began its conversations about the early march timeframe. saudi arabia and russia got them selves into a bit of a dispute over the production numbers. when the saudis decided to take some action at the beginning of the pandemic that led to increase production and a reduction in the pricing of oil across the world, it impacted the u.s. producers very dramatically. the president saw that early, engaged with the heads of state in both countries. russia, and he talked with president boudin several times and engaged with the king of saudi arabia. the point of those conversations is to bring stability to the marketplace and stability to the producing community. that is really our goal here.

david: is there any risk the u.s. may come back too far, too fast? energy transfer lp came out and said that shale is coming back quite fast. it went down 8%, and now the full quarter it is back online. are you concerned about undermining the efforts to stabilize the oil price? dan: i don't think so, david. if you're familiar with our energy information information eia, theyormation, talked about the economic boom we are just on the verge of seeing. the third and fourth quarters in 2020 and certainly into 2021 are going to be very robust. so the production will come back online as the economy begins to take off. if you look at those numbers, i think you will see what the president has referred to as a v-shaped recovery looks very clear in the charts right now. you will see the production chen -- tend to match that v-shaped

curves. imports ofs look at power grade equipment from adversaries. words inutting your mouth, but it raises the questions about the supply chain. what was the risk you saw that restriction? david, theappened, president issued an executive order about a week or so now. we have identified what we refer to as the bulk power, electric grid. it is the pieces or the components that make up the electric rid that provide the enormous amounts of electricity that keep the lights on in major cities. what we have seen is that the supply chains have moved to other parts of the united states and other parts of the -- to other parts of the world, and candidly, to parts of the world that don't have our best interest at heart. we have seen the imposition of certain types of technology into some of these components that

make up the grid that would allow data transfer, it would allow manipulation of the grid in certain cases, and that is very concerning for us because if you think about where we are today in this pandemic, if someone who was not aligned with our goals in the united states, who again did not have our interest at heart, decided to turn the lights off in new york city, then those hospitals go dark. that is a very, very concerning situation for us. so the president rightfully recognized this and we have begun the process of evaluating the grid. we have been working with the industry players both at the governmental level as well as the private industry level. was the u.s.t energy secretary dan brouillette. >> there is one thing that we need to proceed with.

first of all, we are 95% export, so production around the world. the main market price, the u.s.. growinglenges rapidly. we -- i can see, with the great majority, that there is not a problem of liquidity. the problem is the involvement with the former -- if everything -- in south korea, the economy is very strong. china is coming back again. 90% of the week where the economies are reopened back again.

i could believe that some sectors that will be good after weeks, it isths or not -- we need to be understanding of how we can year, and theext plan. it is important now that the demand gets us to react in the right way. italy this week to launch hope had great success, we it becomes a physical reality because -- >> when do you anticipate that italy will be out of recession and that the numbers will go up again? what is your forecast for sales

of lamborghinis? >> well, i think no one has a crystal ball here. we can see these webinar figure numbers in different situations. italy for sure is settling at this moment. as you know, the gdp, the number is -10%. we have 4% of production. i believe the first month will be very, very difficult, and i really hope that the regional government, as it faces relaunch -- forof the segments lamborghini, for sure, it is a big market. we hope it will be back to trade as soon as possible. guy: are we going to see a plug-in hybrid this year? or do you think actually what is going on around the world is

going to reflect either of those two things happening? >> i can be honest with you, not this year, but for sure that is the best of the future. we are going to have mobile cars. fullll keep our portfolio with the idea because we were very successful last year. the first month of this year was huge. the problems that , in theoing to have short term for sure. ♪

francine: the u.k. economy

plunges into a recession. growth sinks nearly 6% in march due to restrictions to combat the pandemic. pessimism rains and markets. on sentiment. and a top german judge says the ecb is a master of the universe and must be held accountable, macron micron -- as tries to reopen the french german border. london andcine from new york. -- tom and francine from london and new york. markets are seeing a bit of risk off, worrying about a second wave of infection. they worry about the number of deaths going up in the economies around the world, having a second period of lockdown. tom: i think yesterday was a very difficult day mathematically, francine, for this pandemic. we saw that not only in