plunge the most since the financial crisis as china announces plans to impose a national security law on the city. there is a call for protests. warning of a severe downturn, but signs of a rebound in asia. nissan reports 20,000 job cuts could be imminent. and richard says the fed could hold guidance until the fall and suggests the u.s. will need more stimulus. --less claims top $2 million top 2 million people for the night week. another packed show. with many retail companies around the world now abandoning a lot of forecasts. we are now seeing the amazing gdp target being abandoned by china. this is quite significant. early, there is no other story in washington on this memorial day weekend than hong

kong which has galvanize the beltway and the press. we will be seen much more of that, i'm sure, through the day. statements by the administration, the condemnation. i will point out that the idea of will we see protests this weekend? francine: i'm looking forward to catching up with selina wang shortly. let's get to bloomberg first word news in new york city. >> top hong kong activists are calling for protest. the national people's congress is expected to pass a legislation that would force for kong to implement laws active treason and subversion. for the first time in decades, china has abandoned the practice affecting annual targets for economic growth. instead, it will shift the

stimulus focus with jobs. u.k. posted record budget aticit last month, standing $76 billion. there is an unprecedented amount of money to prevent the clash -- crash of the economy. an executive at oxford has recruited more than 10,000 people to take part. the u.s. has pledged $1.2 billion towards the vaccine development. quicktake by bloomberg, powered by more than 2700 journalists in more than 120 countries. this is bloomberg. tom and francine? bonds,uities, currencies, commodities. the vix moving back well out

over 30. nevertheless, risk off with yields lower today. all the usual attributions seen a. gold is not record highs, but it is rallying today. francine? francine: i was also talking about gold earlier on. is going on at what in china and hong kong. bit of movement when it came to gold. stocks are sliding. treasuries are climbing. oil is smashing a fixed win streak. there is a national security law coming on the heels of the protests. let's go straight to selina wang in beijing. exactly why is this controversial and why are they trying to pass this law now?

selina: watchers say it is surprising timing for china to be so assertive. but other leaders around the world are distracted with the coronavirus pandemic. this is time for them to do so. this is highly contentious. the last time to push this bill was 2003. thea says this is ensuring prosperity of hong kong. this is the end of hong kong as we know it. it is fundamentally eroding independence, autonomy, and other freedoms like freedom of expression in hong kong. milesong kong is 1200 south of beijing. but given these announcements, how far away is it? what is the emotional attachment of the federal government in beijing? how distant is it? selina: it is very close to the

territorial integrity through china. you heard statements saying this is an internal affair. they don't want it to be disrupted in terms of the national security law. thatsay it is nothing would be out of the ordinary in terms of other countries efforts to secure their safety. what it does risk inflaming tensions with the u.s. trump says they could react forcefully. it would punish chinese do business with them. a lot of experts say that frankly, the u.s. doesn't have a lot of leverage over china. they are probably going to continue to push ahead with this. when do we know exactly how much protest there will be? covid-19 the middle of

and people possibility to protest is affected. ability to protest is affected. selina: people in hong kong are calling for more street protests. it heightens the risk. we could see more of these protests when there was a first attempt. arguably, we could be seeing it very soon. but it is very hard to say. tom: the distinction here, folks, is some bull. it doesn't have anything to do with the hong kong government. this is the national people's conference. various and the sundry chinese lined up.

everybody has on their different ethnicity to show that it is a different group of people. the president walks in with the premier and everybody collapse. i get the show, the pomp and circumstance. what happened the day after the npc when everybody goes home? tom, this is a very ceremonial and very large showing hows powerful the communist party leadership is. it is trying to show signs of strength to the party and also to the people. while it is seen as a rubberstamp parliament, it does way with a large amount of significance. with a large amount of significance. the gdp target that we did not get this year, it is important cue for how people handle investments.

you will see the country enact many of these policies that have been discussed. no the budget deficit will be widened to 3.6% of gdp. in the wake of the financial crisis, you see a massive increase in infrastructure investment. with the focus on technology investment, they will be paying for that with special bonds. jobs,r is the creation of given rising income and rising wages. they want to create 9 million jobs which is still quite substantial. francine: thank you for the update. selina wang in beijing, joining us. coming up next, the blackrock portfolio asset manager will be joining us. we will ask about the u.k.. this is bloomberg. ♪

francine: this is bloomberg surveillance. we were talking about the hong kong protest, and this is what all of this means for markets. the former manager from blackrock and when you look first at the protests in hong kong that they are planning, this law -- how much more angst will it put on markets that are already fragile? difficult for marcus to

try to price increasing geopolitical risk and at the same time deal with the unprecedented covid and social crises. i think a specific example of markets are at the extent of u.s.-china tensions. but we should not becoming this a trade war anymore. we should be calling this full-spectrum strategic competition. i think we are inevitably going to get some kind of u.s. response to these actions. think assets, i think it is a lot further to go with the de-escalation of u.s.-china tensions. youcine: do you care or do not care as long as the fed is there? >> there is an important long-term contributor. we are pretty cautious.

think the fed has provided enormous support to markets. think it would've been entirely wrong. think fromlevels, i a covid and macro front, the markets now look a little bit complacent. rupert, we spoke with the former governor of the bank of england yesterday who suggested the politics of hong kong is not his province. but he did comment on the distance that the west is from hong kong. is distant would you gauge hong kong for president trump? i think it is pretty front and center of u.s. politics now. along with covid

is one of the defining issues of the election campaign this year. and crucially, this is a cross party issue in the u.s. all sides in congress are pushing aggressively for a much tougher start against china. i think trump feels this is a personal priority. there will be a very proactive congress on this hong kong issue. has pretty far-reaching implications. geo-nationalt politics, it is a full-spectrum u.s.-china competition. -- tom: can you envision western sanctions within equivalency to what we saw against mr. putin? me with the efficacy of some form of economic and political sanctions against beijing if they take over hong kong. efficacy is a very

interesting question. i do not know if this will be particularly effective because both sides will be strategic. the chinese clearly is imposing their will. sanctions will be a likely development hit. i think that we should expect to see the full range of the u.s.'s extraterritorial impact brought to bear against the u.s.-china relationship. how do youupert, look at the recession and the trade tensions? do you look at it in the alphabet numbers on when we see a recovery or when we get back to normal? there are so many metrics about how you assess the current economy. rupert: it is pretty hard. take a look at the data, the

current conventional data that we look at. i think that we shouldn't be blinded by the fact that these are terrible numbers. we are in deep contractionary territory. we will be looking at some of the more real-time data. but it is very gradual. even in the countries where they are the most advanced and they are opening up, the scale of activity coming back is very slow. beginning of a very deep political slowdown. companies like china are further advanced. very exposed to global manufacturing and trade. and ultimately, all of this depends on the developments of the vaccine and treatment. in the short term, how much opening up can we get? so far, it has been very tentative.

we can open up without getting into problematic territory with virus infections. tom: good news, rupert harrison will stay with us. we are thrilled he can do that on friday before memorial day weekend in the united states. coming up on the open, mohamed el-erian and radical uncertainty in china. this is uber. -- this is bloomberg. ♪

tom: good morning, everyone. stories,tching two particularly from america, very carefully. one of them is in hong kong. at the national people's conference in beijing. an extraordinary moment for china. we have seen a response from the state department. president trump making brief comments. we will get to that in a bit. and in america, we get ready for memorial day weekend with an understanding of where this pandemic is heading. rupert harrison is with blackrock and he has a passing negative interest rate. rupert, let me start with your public service the united kingdom. did you ever think you would see negative interest rates in the u.k.? i go back to 2010 and

i never thought we would see negative interest rates anywhere in the world. and i still am not sure we will see them in the u.k.. i understand it is a technical glitch and governor bailey is driving that forward. you are good at the financial system in america. it is perceived as a radically different structure than europe. wouldve interest rates not have efficacy. is that true? that you buy the idea that you put yourself in a negative rates and it will be different? in europe, the efficacy is questionable. we have a pretty significant negative impact. i think there are specifics in the u.k. in terms of building society and part of the financial system. those have been eased up

somewhat. i still think the banks have been very reluctant. i think that we see the full spectrum of policy leaders available to them, particularly through coordination means that they don't need to go down the route. it is more a combination of yield curve control and fiscal policy? that is probably the right way to go. i expect that will remain the case in the u.s. as well. francine: we understand that negotiations are probably not going as well as they could be and there is no will to extend the transition period. what will we be left with at the end of this? the tone of the discussions are pretty negative at the moment. i think they will get worse over the next few months before it gets better. remains very.k.

politically committed to some of the redlines. i think there is an argument in some parts of the u.k. government that when the economy is so disrupted anyway by covid and the economic crisis, that exitmask and disrupt the from a lack of a trade deal. in some ways, it is even easier to take the short term pain in order to achieve longer-term fiscal goals. fluctuationw much will we see on the pound? rupert: the sterling has been pretty weak already, particularly the euro. a biased lead to the weaker side. we are approaching a deadline around the end of june and about the formal extension period deadlikne. -- deadline.

both sides will probably de-escalate that a little bit. i think that it will feed into moments that are negative. even the implementation of the protocol, it is something where both sides are weakening that protocol. around the level playing field provisions. it will be negative for sterling for the three month horizon. yesterdayeremy modeling down and getting some challenges that dr. harrison sees. we will continue with rupert harrison of blackrock. toant to draw your attention someone that has the sole and fabric of hong kong in him. that would be the great mark mobius.

9:00r. l area and in the hour. this is bloomberg -- dr. el erian in the 9:00 hour. this is bloomberg. ♪

francine: this is "bloomberg surveillance." we are back with rupert harrison. we talked about the u.k., china, hong kong. what is your take on europe?

-- by angela merkel and emmanuel macron, but will other countries need a bailout? rupert: i don't think so in the short term. the franco german agreement around the fund is a significant milestone that has been crossed, particularly in terms of angela merkel agreeing to go with commonly issued debt spent through fence -- france and across the european union. a river has been crossed in a small way. the constraint is the fact that it is being done through the msf regular budget framework, it delays spending. this is a seven year budget. spending will be front loaded which is something we will not see in 2020.

it will be spread across 2021 and 2022, and while it is a outcome, in terms of the scale of stimulus being applied, the overall response of europe is a lot smaller. francine: does that mean we will see more populism at the end of the crisis? rupert: that is a big question. we have to assume yes. one concern we have had over the last few years, we have been talking about populism in europe since 2016, was that this was all happening during the good times. cycle,s the peak of the low unemployment, falling unemployment across the european union, and yet markets were concerned. we can only expect that in a very difficult economic

situation that can get worse. it does not mean it will get worse in every country. you still have angela merkel in germany with high popularity, but we should be concerned about longer-term, high unemployment, concerns over immigration and china, these can drive populist politics. tom: we are enjoying a debate over 20% unemployment, modeled as high as 27% unemployment rate within the unique american political system. i will leave it up to you, dr. harrison, how does the parliament kerry system of majority government deal with a 20% unemployment rate? rupert: that is an interesting question. the history of the u.k. shows a majority parliament can swallow very high unemployment.

if you go back to the thatcher government, you had very high unemployment as a result of the industrialization of the u.k., and yet margaret hatcher became -- margaret thatcher remained politically dominant. her votes were 40% or 45% of the population and she seemed to be tackling the major problem, inflation initially and then union control and the ability to govern the economy. environment,t there is a difference between the u.k. and a lot of the u.s. it is hard to overstate this furlough scheme, almost 10 million. that is one quarter to one third of the labor force supported by this furlough scheme, keeping them connected with their employer, preventing the sky high unemployment we have seen

in the u.s., for now. employer'ss on the being able to survive long enough. tom: as i look as an outsider at the labour party, i detect a visible change in the leadership. it is stunning, the body language and imaging we have seen from jeremy corbyn to the new guy. have the winds shifted to the center ground for a more conservative labor -- labour? rupert: i think so. era hasof the corbyn brought the labour party into the mainstream. at the same time, this is still not tony blair's labour party. it is a left wing labour party

economically, in tune with the times. the consensus party is moving to the left on economics, but now it is much more in contention. politics in the u.k. feel more normal. you have effective opposition and an effective opposition leader and the government failings are being exposed more. francine: what will boris johnson be judged on? is it trying to safeguard the economy? he has been getting a tough time as of late. if there were a vote in six or seven months, what would people want? rupert: we don't know because we are in this phase where public opinion seems to be overwhelmingly focused on how governments are dealing with the health crisis. in the u.k., the economic crisis has not hit home. you were talking about the furlough scheme.

for a lot of people, the economy is stuck in suspended animation. they have not seen the full impact of the economic crisis. in the u.k., the government's rating overall has held up. there has been a rush of patriotic support the government during a crisis but that is starting to fail. it will be interesting to see whether we move on to focus on the economic side, which they seem to have done pretty well, or whether dealing with the health crisis dominates, whether the government is perceived to have got it wrong. it is still too early to say. francine: rupert harrison, thank you so much. up next week talk china and honk -- up next, we talk china and hong kong with jonathan fenby.

this is bloomberg. ♪

♪ terrorism, there is no such thing as terrorism here. it is so obviously targeted at all the empty government protests. kong, there isg no way for beijing to manage the special circumstances. >> it is deeply concerning to the united states. hong kong is a great friend to us and we are monitoring the situation closely. >> senator to me and i have been working on this for some time,

but the events of today and the announcement that china intended to crackdown further in hong think, newded, i urgency to passing this legislation. asked the committees to take a look. inake second place to no one congress, house or senate. tom: i would look for an active friday in washington, some of the voices of the last 24 hours, the specific point that beijing is unilaterally without the hong kong government beginning to change the rules, some of the language quite striking. what we can do is give your perspective and understanding, this penguin classic on china with jonathan's friends -- jonathan spence is the one volume. more importantly was jonathan 120 120 -- jonathan fenby's

page masterpiece from years ago. we are thrilled he could join us. thank you so much for joining us. will china dominate hong kong? jonathan: china is certainly taking a big step towards that. usedormulation which was after the handover from the british colony in 1997, one country, two systems, it is quite clear that in beijing's mind one country dominates. that is to say the interest of the central government in beijing and what we are seeing through the mpc is evidence of that. tom: what is so interesting here , and i would take it back to the two terms of donald sang ages ago and all of the changes in hong kong now.

is there any linkage or emotional attachment of the business elites of hong kong with beijing? jonathan: yes, a lot of the business elite in hong kong have long played a big role in the mainland economy. they were one of the conduits , going backgrowth three or four decades. and that remains. at the same time, hong kong's position as an open international center is of enormous importance to them. the question is how far that will survive given beijing's tightening up troll that we are seeing -- control that we are seeing. francine: why is beijing doing it now? jonathan: in the immediate term, because beijing is set up with withrotests in hong kong,

the strength of the pro-democracy movement, which did very well in local elections late last year and might do well again at council elections in september. it seems the hong kong government has not been able to control the protests and pro-democracy movement. reason the immediate which has been built up with the sending of various new senior officials from beijing to hong kong to craft the strategy. longer-term, there is a tightening of political control and which theseen coronavirus crisis has exacerbated in the mainland. francine: talk to me about the parallels, the fact that the u.s. is blaming china for not getting on the pandemic, does it

make them willing to actually defy the west more with hong kong, or less? jonathan: more, i think. there has generally been the mindset in beijing is increasingly one of self-reliance of china standing on its own, looking after itself. this is a long-term project and xi jinping has been talking about a long-term struggle that he sees the country being involved in. china wants to go through with the phase one trade deal with the united states and notably, its defense budget unveiled today did not show an increase. lowestone of the increases we have seen for some time. china wants basically to get on and rebuilding its economy concentrating political power on the communist already. -- party. tom: the cottage industry of

wonderful expert on china, 'red flags is an outstanding book. are you with the economy that president xi's power in china is more tenuous than we perceive? jonathan: i think it is pretty strong, but it depends on a number of factors, notably the economy and economic growth. we saw from the national people's congress, the government report today, concern about reviving the economy. it needs a strong economy in order to buttress the political worry ond there is quite a number of fronts, notably employment. me it look at this and to

is truly a historic moment. we were talking about the distance from taiwan to china or the dynamics of the south china sea. it is unimaginable that a naval ship of the united states could grace hong kong harbor as it has well over 100 years. how do we show the flag and display to china any military projection? jonathan: it is difficult to do that because you don't know how far you can go. i am not sure how far washington wants to go. certainly, the south china sea is an area where china continues to expand and it is up to the u.s. what measures it wants to take. that worried about the prospect of the use of force by the people's republic against

taiwan, because i think that would entail so many downsides for china that it is really not on the agenda, whatever the rhetoric is. ,om: explain, jonathan fenby one final question, can you explain the position of the military at the national people's congress, and the amount of ear they have of president xi. what is the linkage of the military in chinese leadership? jonathan: the people's leadership army is an important support for the political regime. xi jinping from the beginning of his power eight years ago has paid great attention to keeping army on side, to reorganizing the army to make it a more efficient force, and eliminate

as much corruption as possible within the army. the army is a very political body in china. francine: thank you so much, jonathan fenby. coming up on the open, the morgan stanley chief economist at 9:00 a.m. in new york. this is bloomberg. ♪

♪ "bloomberghis is surveillance," tom and francine from london and new york. bening -- joining us is jones. we have talked about trade tensions between the u.s. and china and the people's congress and they abandoned their target, plus the protests in hong kong. do you buy gold in this environment? ben: gold has been attractive time on the bit of back of central-bank demands. the attraction of gold has

increased when we have these bounce of crisis, bounce of risk aversion. the markets are very fragile at the moment so anything that is perceived as negative news like some of the news from china overnight, that plays into an attraction for safe haven, and gold is certainly one of those at the moment. we are seeing throughout this period at the beginning of the year that the etf demand for physical backed gold is strong. the other thing to think about is the opportunity cost of gold, worsest to carry is much now because we are getting lower rate on fixed income and less income coming from equities with the dividend cuts we are seeing. -- tom: as a -- excuse me,

francine. francine: please, go ahead. tom: state street has a heritage back to 1792. how do you tell people to buy and hold? you look for assets that are, have an attractive income or stable and good-quality at the moment. that is what you tell them if you want them to buy and hold for the longer-term. tom: i look at that buy and hold, but with an asset allocation, vix 28, going up to 30, we are seeing new volatility. conservativeapt asset allocation to a new volatility? ben: that is a good question and one thing we are seeing is

historical matrices and coalitions are starting to break down. longer-term, and you need to look at historical risk trends and really start to question them. perhaps that means focusing less on historical models and trying to think about the longer-term implications of what covid-19 and this crisis will put in place. thingss me think about like how is the tech cycle going to play out, what is the demand for certain commodities going to be? it makes you question some of those correlations that really are starting to break down. what we see is low volatility starteded to decline -- to decline from the highs in

march. the unusual correlation patterns are still there and that is a challenge for investors. francine: what are the longer-term implications of this? is it an economy that will struggle for many years or a decade, or will it bounce back? what are you looking at? ben: it is the unevenness we need to think about what this virus has done is accelerated a trend that was already in place, the greater reliance on technology, the greater degree of working from home. those trends have been accelerated. what was also done in the wayter-term is changed the people interact with each other and the way we travel, so the travel industry will be hit quite hard for a long time.

that area will recover more slowly. the demand for driving, we have already seen that. people are driving more in the but and norway and sweden, they are not using public transport. tom: we have to leave it there, ben jones with state street. much more coming up. later in the morning, mohamed el-erian will be with us, many guests as weest -- focus on the politics of hong kong. this is bloomberg. ♪

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faster than a call. easy as a tap. now that's simple, easy, awesome. ♪ tom: this morning, beijing

unmasks a plan to shift to a one country, one system china. beijing circumvents the hong kong government through the national people's congress meetings. the trump administration suggests strong condemnation and well restrung -- respond strongly. there was a reported wearing of the presidential mask as mr. trump went all ford versus ferreri. --hours of lemans 4g the four gt. citigroup gave everybody the day off, michael corbat is too big to fail genius. from new york, from