>> good morning from london. i am nejra cehic with manus cranny dubai. this is bloomberg daybreak: europe and these are today's top stories. positive signs from the coronavirus vaccine lists stocks. president trump threatens to freeze who funding. president macron backs a 500 billion euro recovery fund for the european union.

austria chancellor retraced that aid must be disbursed as loans, not grants. jay powell will tell the senate the fed is prepared to use its full range of tools to support the economy as traders bet the u.k. will have negative rates by the year-end. a warm welcome to daybreak europe. just a quick mind flashing across the screen on julius baer, one of the swiss private institutions, by the banking institutions. asset management dropped by 8.2%. they say their strategy for islementation of change back. 300 92 billion swiss francs in terms of asset under management. good morning. did we catch you offguard? he smiled and looked at the camera but it is a trifecta day. i have three things. powell, 30e pivot by

million barrels of oil demand in china, and you have a vaccine hope, so it is hope that is driving this or is it the pivot by powell that is the more dominant? good morning. nejra: good morning, manus. it seemed to be what we heard from danna. we had the share hitting a record high. goldman saying that vaccine hit the markets. the wall street high price target on that stock and it seems that that is what gave a lift to sentiment which carries three into the asian session. a lot of green on the screen although not quite as powerful a move high in the msci asia pacific index as we saw in the u.s. yesterday. we recouped the losses to trade pretty much flat, but of course, sentiment, a little bit more subdued than we saw yesterday. same for european futures. the 10 year yield jumped seven basis points. overall, in terms of the dollar, not a huge amount of movement but yesterday, the euro

strengthening the most in six weeks. we have some progress in terms with the to help challenges of coronavirus and we see the euro stay above 109 and the wti june contract expiring today, but how different things look from a month ago. maybetting against moderna be a risky proposition right now . an experiment of vaccine showed signs it can create an immune system response to fend off the new coronavirus. a new record intraday high. short bets against the virus tech from have been growing even as the stock continues to scale new heights. the company plans to take the vaccine into phase three testing. many thousands of patients in july. >> we are finalizing the protocol for a phase three. we are hoping to start it in july of this year. thousandbe several

subjects across many countries. we are finalizing this with the fda and hoping that we can start in july as planned. hordern is ine new york with -- for us. what do we know about the effectiveness but also the safety of this vaccine? annmarie: as manus said, this is really hope, what we are seeing in the markets, driven by the news of this vaccine and you make that a very good point. dispersed step is about safety for the vaccine and the ceo is talking about the phase three that everyone gets very excited about. these results are from a sample, designed tot study look at safety. it should be viewed with caution paid what it did show is that it can create an immune system response to fend off the new coronavirus. the ceo is talking about what could happen in july. that would mean the vaccine going up against a virus in the real world.

stoppedhat has not peoples excitement. shares yesterday rose to a record. their shares are up more than 300% year-to-date. and then of course, we are seeing it today, the risk-on rally in the markets. some of that it ignited by moderno. to fundn to raise money the manufacturing of this vaccine so there is a lot of hope right now in this vaccine. is certainly going to come up from a financial point of view, take a lot of risk appetite. meanwhile, political football is being played with the who, from the president threatening to freeze permanent funding, and other,u have xi on the talking about his ambitions. withrie: i want to start what is going on with the president of the united states, mattis. this was just two hours ago via

his twitter account. president donald trump releasing that letter he sent to the world health organization, a four-page letter. a had a number -- it outlined number of grievances the administration takes at the world health organization and said the agency must demonstrate independence from china. after the list of all these mishaps, this is the quote to focus on. he says if the who does not commit to major substantive improvements within the next 30 days, i will make my temporary freeze of u.s. funding to the world health organization permanent and reconsider our membership in the organization. so that is taking this potential funding to a permanent freeze. on top of that, one line in this letter talks about how he cannot allow american taxpayers dollars to continue to finance an organization that in its present state he says is so clearly not serving america's interests. that is an interesting line because that seems like a nod to the election coming up in november. analysts have questioned if

trump is lashing out at the world health organization as well as china due to the fact that he is up for reelection in many criticize the way the administration handled the pandemic in the united states, and as well, we saw that hit his poll numbers. building is all towards that election campaign. annmarie hordern in new york. thank you very much. let's get everybody up to speed with the first word news as we go into the trading day. they will step closer to a major rescue package for angela merkel and emmanuel macron. they have agreed to a $500 billion euro plan and it includes the joint e.u. borrowing. germany has in the past shied away from it. the plan is still only a foundation, a final deal will need the backing of all 27 member states. the federal reserve is ready to leave lending rates near to zero until the economy is back on track, according to the

chairman, jerome powell. the comments coming as testimony prepared for a virtual senate hearing later today. he says the central bank will use the full range of tools available to support the economy at this challenging time. in the u.k., pressure is mounting on the prime minister, boris johnson, to be more open about his coronavirus strategy. a panel of mp's calling for the government to publish the scientific advice behind britain's response to the pandemic. it comes amid criticism that his relaxation of the lockdown has led to confusion on what people should and should not be doing. is the world's fastest-growing coronavirus hotspots. the south american nation accounts for 13% of all new cases within the past week. it has overtaken the u.k., the third most coronavirus cases behind only russia and the u.s. it comes amid political crisis, leaving the nation without a

comprehensive strategy to slow the spread of the pandemic. 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. lloyd blankfein says the u.s. will have to stomach a spike in virus cases as the economy reopens. stimulus efforts cannot go on indefinitely. more of that top interview, coming up next. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." nejra cehic is in london. manus cranny in dubai. china is using more offers than the market had expected.

stockmarkets are rising. jay powell has pivoted in terms of the power of his rhetoric about zero rates for an extended period of time, the alpha of markets. asia is rising by 2%. it steadies itself today. stock is the biggest move in europe in two months yesterday as that .5 trillion euro fund seems to have gathered momentum between macron and merkel. have a look at the bond market, dollar-yen, and oil, and this is what you get because you saw yields dropped by seven basis points yesterday. you are also seeing oil up. the powerful trajectory in oil market on the back of china using nearly 13 million barrels of oil a day. pre-covid. what does mean reversion mean? let's talk about jerome powell because he says the central bank is prepared to use the full range of tools available.

he says rates will stay near zero until the fed is "confident that the economy has weathered the recent events, working with me treasury, and the central bank, has launched an unprecedented support for markets since the middle of march. jerome powell is scheduled to appear with lawmakers for a virtual hearing at 3:00 p.m. at auest is the cio capital company. i talk about the power pivot because i reflect back to last week he cautioned about a significant downside risk and we saw the market react. here we are, and i would say this is the most express delivery of forward guidance that i have heard yet. zero rates until we are back at full employment. that is 3.5% mso they say. >> good morning. yes indeed, the least we can say, the market loved it. printing, i think that

this was a main driver yesterday. there were other ones like oderna and macron/merkel. i think the fed is putting itself into a corner because there is so much dependency on the fed to the market that now, it will have to deliver and they will have to deliver on qe, which is expected to be massive going forwards, and negative interest rates, although the market, if you look at it, starting to price slightly positive interest rates going forward. held by theing market. correction.e a we have seen that. that is where we are. >> late to speak to you.

you know what, what you are actually saying in terms of the fed kind of being backed into a corner echoes what we heard from howard marks yesterday when he said that ted support is not forever, that distress coming artificiallyes are supported so it is not necessarily a simple story of shadowing the fed, but that said, are there areas of the market that you want to move into more aggressively based on the stimulus from the fed? part, a fewrst comments. we have learned that it is very difficult to find the fed and very difficult for the fed to do that. of leadership, i will not change much. we saw yesterday fairly lower quality starting to outperform small caps performing as well and then the higher quality in terms of leadership. i will not change that for the

very simple reason that, yes, the fed can solve the liquidity crisis but they cannot solve the sovereignty crisis. there are many parts of the market which look very weak in terms of leverage. small caps, if you look at the ebitda, it is high. although we have seen some changes to leadership yesterday, i am not sure it will be like that going forward. manus: is that therefore, if we take that process forward, the level of defaults that howard marks words of coming down the pike? does that mean the differential is that ig are performs high-yield if there is some kind of cut off point for the fed, that that benevolence does not last forever? >> i fully agree. it is investment grade which is high-yield, which i think is the key driver. if we see that sustainable

compared to investment grade, you are right. ofare going to see some kind change in leadership in the markets. we see cyclicals, value coming back. it needs to be sustained. we are not there yet. investment grade is sustained by the fact because they are buying etf's. part of the high-yield market is doing it as well, but not as much, so we need to see a change in leadership. credits will lead equities. this has been the case over the last two months and i think this is also valued for the months to come. you were saying earlier as well that you think most of yesterday's rally was actually driven by powell rather than the news from moderna. that is a point we could argue but we will knock it i want to ask nonetheless, how hopeful you are about the sustainability in the markets from here based on the prospects of a vaccine,

because every time we get even a whiff of the vaccine, we see quite a powerful rally. >> obviously. it started with a health crisis so any good news on the health front, you can have the market. first, i do not think that human beings have seen any coronavirus successful launch going forward, so yes, there's a lot of r&d currencies spent on that. novartis, they were talking about two years down the line before getting the vaccine. yesterday, i think it was a very interesting trial, but interestingly, at the close, we heard that, you know, they are issuing for $1.5 billion in new issuance in the coming weeks, so i think that is the timing of the announcement -- it was a bit weird given what was announced after the market, so yes, moderna was part of the driver of the market action.

rely on the fast delivery of a vaccine from their side. questioning, that perhaps slightly cautious tone. lloyd lange fine says policy make -- lloyd blankfein says we cannot wait for a vaccine. we spoke to the senior chairman of goldman sachs. take a listen. >> to some degree, look, it is a deus at matamela -- if ex machina vaccine appears, we have to make sure it does not kill people, make sure it is manufactured. the country cannot be on welfare even that long, even if that was something that was magical. we are postponing it but that does not mean it is without help. learning things about treating viruses even if there is not a vaccine. there are treatments. there is some benefit to it. wasnot as huge as if there an ultimate vaccine that would

make people comfortable. i think to a greater extent, we are postponing people's exposure to it and to some extent, you know, we are eliminating the risk that would happen if the health care system was overwhelmed while people had it but i think in the long run, you know, we have to contemplate that people will go back to work , what kind of economy, and no matter when you do it, look at these asian countries where they were fighting because the virus down, exposures were way and notwithstanding that the second they go back to work, they spiked up again. that will be an expectation no matter when you do it. i think when we go forward and look back at this sometime in the future, if we are going to go through that anyway, people will be very critical if the official sector sacrificed more of the economy than they needed to because at the end of the day, i think the exposures are going to be almost the same. >> we have heard a fair amount.

both president trump and the federal reserve, jay powell, the chair, and it seems we are hearing two things. one is that the fed will do whatever it needs to to really support the economy as best as it can, but on the other hand, a lot of caution. it may be more difficult than we think and even the possibility of long-term damage had how do you assess the possible damage over the longer-term? lloyd: it depends how long this goes on. it is easy to see what damage would be. you have certain businesses that have come into contact with the public that are going to go that way we are operating at tight margins anyway. wait until afford to we reopen in some businesses reopen at such a reduced level that they will not be profitable so they will not reopen. that is damage and those businesses will go out of business. people will find other jobs. the economy is resilient so it will sort out. the economy will be changed.

we are resilient and it will come back. one of the things to consider is how long this goes on. the chairman of the federal reserve board had done an extraordinary job, and of course, i want them to replace -- it is not so much a stimulus as a replacement -- a substitute for what people would have earned to try and keep it going but one of the things on my mind is how long can you sustain that. grant,e a $3 trillion the federal reserve, and congress has granted loans. how long can you sustain -- another 3 trillion round after that. at some point, even if we wanted to do that, other outside investors and central banks around the world continued the compounding deficit we are mounting. i think they are doing everything they can and should. i applaud them come in the fog

of war, that has been so coherent and quick off the block, but i think it cannot go on forever. >> it raises the question whether there might be some risks to the financial system itself. it has not been that big a problem, but now the fed is starting to worry about things like commercial real estate. do you see any risk on the horizon for the financial system? lloyd: anybody who says there is no risk on the horizon is crazy and blind. i would say the financial -- again, i am not talking as an insider now but as a pre-alert and attentive observer. the balance and liquidity banks were extraordinary and i do not necessarily mean that as a complement to the people who have been and are running the bank. i think the legislation post the financial crisis and the way in which the federal reserve tests for these -- for liquidity and safety insolvency have been

extraordinary and banks have been on their toes and have been very well-capitalized. lloyd blankfein, the senior chairman at goldman sachs. trying to make any vaccine available to all. we will discuss here on bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." manus cranny is in dubai. let's turn to china. it is pledging to make any coronavirus vaccine available to all in an effort to defuse criticism of its handling of the pandemic. president xi jinping calling for greater global cooperation to fight the virus. of ag manus now is the cio capital company and we look ahead as well to the npc on friday.

is the thinking in the market on china that it has the policy room to upset any negative effects of an escalation in u.s.-china tensions? >> yes, there is. we have seen in the last week with the cpi number that they are giving some room for the pboc to move from a targeted approach to local banks, new loans, to rate cuts, and why not some q. week? china -- the cuts that that could lead to some offshore weakness. they have some room for more action. let's see what that policy action is. ubs saying -- 2021. 5.5%. we will see. .ur guest this morning coming up, a breakthrough plan. angela merkel and emmanuel

macron backing 500 billion euro recovery funds. what are the details? is everybody on board? this is bloomberg. ♪

manus: good morning from dubai.

it is "bloomberg daybreak: europe." cranny.manus a covid-19gns with vaccine. u.s. deaths top 90,000. president macron with a your covering -- recovery fund.

aid must be discussed as loans. fed isell says the prepared to use the full range of tools to support the economy. the u.k. will have negative rates at the end of the year. nejra: welcome to "bloomberg daybreak: europe." we saw a rally in the s&p 500 yesterday, the biggest jump in six weeks. was it more than what powell said in terms of keeping rates near zero until the u.s. is back on track? or does it have more to do with the prospects of a vaccine? we could come to the conclusion it is a combination of the two. manus: absolutely, the rates traders saw a roaring flag to race toward.

the whole bond market reappraised the situation if we get a vaccine. then we are back at full employment, therein lies the point. you will go from 20%. let's look at the rates narrative. these are your yield curves on the back of the powell pivot. they are the steepest this year. can the momentum continue without a vaccine? changed theivot has narrative. let's look at the rest of the risk appetite. the you wan is the biggest loser weeks, one of the cheapest currencies out there.

we've rocked it yesterday, the biggest jump yesterday. jp morgan, said a temporary switch -- they expect a sharp bounce. it is a technical rotation. good old china. let's turn to europe. a lot of developments yesterday. christine lagarde said she will continue with the bond buying program. , we remaind undeterred on our price stability objective. manus: meanwhile on the fiscal front, angela merkel and email macron hasmmanuel offered --

europe must stick together. this is about rapid economic recovery. we want to set up a temporary fund of 500 billion euro from the eu budget, not a credit but a budgetary expenditure. which will be provided to the most effective sectors and regions. merkel after a videoconference. the german-french land will need the backing of the other members of the eu. effort, how does this take us forward? >> it does in many ways. richest the two most

countries in europe. to change theng conversation, they are looking at the european commission hypothetically tapping markets to raise funding for countries affected by the coronavirus. bonds that could enter the markets that could change the conversation to the next stage. you are talking about fiscal transfers between countries, not a loan, it does not have to be paid back like credit would. they have been pushing for for weeks. caveat is this is going to have to be approved by 25 other countries. saying, we do not like

it much, we have to see. at thewhen i was looking details, from what i understand, this is a blueprint. stumbling to come to a solution to share the responsibility, one of the issues was the loans versus grants debate. we have a blueprint, but how likely is it to go through given the opposition we already had on corona bonds for example from the countries you have mentioned? >> there are two elements. notla merkel said this is like the eurobonds, this is a tool in place. is willing to throw her political weight

behind this proposal. that could give it some momentum. what also changes is the european commission would be in charge of raising this money, then provided to members. that would be their contribution to the project. there is one part of the package that would be there, and what thatare trying to do is there is a balance. as credit with some conditions, but she acknowledged this crisis doso big we will have to things we have never done before, and that would come in form of the grant. a commission would keep an eye on this money. nejra: thank you so much, maria

tadeo in brussels. the fed has great power, but ammunition is not limitless. >> there is a divide between people who think stocks are highly priced today given the economic outlook, and people who think that is ok because the fed will make sure the economy and the markets levitate. in many ways that is the more important divide. .e all think life will go on towardill be a return normalcy. there will be a vaccine.

divide is the people who do not understand why stocks are where they are, and people by saying,rstand it you cannot fight the fed. that is an even bigger divide today. erik: what do you think? can you fight the fed? >> i think the fed has great power, but not forever. --st of all, i do not think jay powell talked about the fed will not have the ability to run out of ammunition. i do not know if the fed's ammunition is limitless. i know the fed can cause markets as long as stay up it buys. but i do not know if it can buy forever.

we are in new territory here. the fed has never bought securities. this time around they included corporate securities and then moved on to include noninvestment grade corporate securities. it's buying can make these things rise, but only as long as it is buying. we have seen these things where there is a column of water and a bowl sitting on top of the water. if the water stops, the bowl falls to earth. fed hopes it's ,uying will inject confidence and they will take over buying. that remains to be seen, and whether that will be at today's levels. erik: is there any reason to

expect that is going to happen? let's talk about the corporate bond market, but use as an q2, q3, andhad q1, every time the fed tries to pull out liquidity, investors rebel. there was the paper tantrum, the fourth quarter of 2018. are you suggesting the moment the fed tries to withdraw thatdity from the market really prices itself on solvency more than anything else, the same thing will happen? >> i think it has to happen to some extent. this is the dilemma. can the fed keep it up forever? if it does not keep it up can?er, will the prices we -- will the prices weaken? areks and bonds as well

selling at prices that they would not sell at if the fed were not the dominant force. prices would be determined by the outlook for the company's. ies. fed were to recede, we would take over as buyers but not at these levels. you mentioned the difficulty of withdrawing support. i personally believe there is some the end much -- there is too much concern drawing withrt, and not enough withdrawing support. if it had been done earlier and gradually, it could have been done.

there was a temper tantrum in the fourth quarter of 2018 when the interest rate on the 10 year reached 3.75, and the market started going down from there. kids like candy, and investors we have totes, but have discipline also. that was howard marks, cofounder and cochairman of oaktree capital. let's get to the first word news. the u.s. will have to suffer through a spike of virus cases is that economy reopens according to lloyd blankfein. he says policymakers cannot wait for a vaccine to reopen the economy. blankfein said, this time do not worry about the banks. >> most critics of the banks have to acknowledge they are

liquid and safe. can i contemplate if something goes on so long, this massive default -- sure, but i would say of 10 or 25 things to worry about, that should not be on the list at all. a vaccine is showing promise. there are signs it creates an immune response. the results are a sample of initial studies. the company says the data could not have been better. phaseare finalizing three, the last in the study. we are hoping to start in july of this year. severaldy would be thousand subjects across many countries. to start in july

as planned. nejra: 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. manus: coming up, gold falls off. more on the markets. this is bloomberg. ♪

>> we have asked the question repeatedly, why is it that the german and french governments keep telling everybody to obey the rules are the biggest dopers

and all of this. other governments are not bailing out there airlines. ryanair ceowas expressing his concerns. and talking about differences between aid packages. let's get a check in on the risk radar. rally continuing in the asian session today with a picture with u.s. and european teachers. the 10 year yield jumped seven basis points. the dollar unchanged. oil on the front foot. let's get back to our guest and talk about gold.

weekhas fallen from a four high. moderna says it's vaccine has showed positive signs of creating an immune response. view that precious metals in particular are underinvested. what makes you think that given that we have hit a seven-year high in gold? isthe reason for that, one quantitative easing experiment. if you look what the japanese , the equitying market has not done anything. if we believe the central bank balance sheets continue to grow, gold is a play.

gold or silvere ratio, it has gone down. when the fed started to do qe, there is -- [indiscernible] precious metals are undersupplied. on the cross asset side, let's go there. we see a palpable sense of relief. the dollar drops. the how do you play scarcity value

on the back half of the year? >> in terms of leadership, you need to stick with high growth. we leave the low growth with the central bank. we need a premium for growth. [indiscernible] ,ithin other asset classes , that is thels approach we use across asset classes. when you talk about

scarce assets, you talk about high growth companies, and i love that in europe you reference to the granolas. is that basically your strategy in europe to go for those granolas, or are you more hopeful given what we learned overnight about the german-french proposal for finding a solution to coronavirus? first, the german plan is a proposal, so there is no guarantee. there will be some resistance. you cannot base short portfolio on that. pay.comes the price to

you need to go with these , not only in the u.s. but in europe. ie rest of the market some issuesbelieve will continue to come. casualtiesbe some across different markets. manus: hold those thoughts on the casualties. coming up, betting on the negative. betting that you cable join the negative rates club by the end of the year. this is bloomberg. ♪

manus: it is the market is betting the u.k. will go negative by christmas. will the bank of england -- how do you traded? reflected in was the currency. moree europe we might see qe, one billion pounds of additional qe. then there is a discussion in there.., we stay

nejra: brilliantly done, thank you so much. the european open is up next. european futures slightly higher. u.s. futures flat. this is bloomberg. ♪

anna: i am anna edwards alongside matt miller in berlin. say, is thereets more room to run? the socgen analyst who called butslump said there is, cold water on bond markets.