china abandoned its growth target. kong.s grip on hong hong kong activists pusher protests as china unveils laws to curb treason and subversion, increasing tensions with the u.s. senators push for legislation to punish chinese entities. welcome to "bloomberg daybreak: this friday, may 22. you can guess from the headlines that we are seeing a risk off market. deere disappointing investors, but that stock still up in premarket. bonds getting a safety bid, as well as the dollar, as well as the yen. we'll rolling over. if you don't have growth forecasts in china, how do you know what the impact will be on the commodity market? let's get the morning's top news

from our new york team. the country had its national people's congress, which was already delayed on the three months -- delayed almost three months. going me is bloomberg's selina wang -- joining me is bloomberg's selina wang. reporter: this is the first time in decades that china did not set an annual gdp target. china is going to be significantly boosting infrastructure investment with some $500 billion of special bonds. they are also going to be outlining plans for widening the .udget deficit

some 130 million people were laid off or furloughed as a result of the pandemic, so the focus is to create 9 million new jobs. the government also signaled it is going to bypass the hong kong legislature to pass a highly controversial national security law. it is expected to ban sedition, ofession, and subversion the government in beijing. opposition lawmakers in hong kong say this fundamentally erodes the independence, autonomy, and freedom of speech in hong kong. this further inflames u.s. tensions, with senators introducing a bill that would onish and impose sanctions entities enforcing this law. alix: thanks so much. all of that playing out for the market as well. china's announcement to impose that national security law did drive hong kong stocks to their biggest loss since the financial

crisis. annmarie hordern has more of that risk off spreading across the world. thisrie: we are seeing really across global equity markets. the hang seng suffering its worst selloff in years. nearlyded up closing 0.6%. trade concerns were very prominent, people starting to remember exactly what that means. you cannot expect a respite next week. chief executive carrie lam saying hong kong will comply. that geopolitical risk playing into markets as well. u.s. futures pointing to a lower start in new york. also, it is friday. do you really want to hold onto risk into a weekend with a lot of question marks?

it might be too hard for some to stomach. also, disappointed out of beijing from the chinese national people's congress. they are abandoning the gdp forecast. this was widely forecast, but it omits the northstar for any sort of economic prediction, so that ways on -- so that weighs on commodities heavily. now we have money moving into the haven's, so treasuries are .igher we also have money moving into the yen. gold is having a pretty spectacular day, off the highs of well, trading north of the $1700 an ounce, a really key line for gold. alix: thanks so much. we were speaking about the holiday weekend. it is a long when in the u.s.,

heading into memorial day, and lockdown stretching out to nearly two months now. some people are looking for any excuse to get out of their homes. people expect to do it the beaches, the park, and other locations.l some states are starting to ease restrictions. taking a look at the nation's auto plants, they used cell -- veryngs to show similar to the likes of starbucks, with their sales 60% to 65% normalized from where they were before. all of that pointing to the recovery and the reopening and the economy. coming up, much more of your morning trade, news and analysis in the markets in today's first take. happy friday. this is bloomberg.

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alix: time now for bloomberg joining me from our in-house team of wall street veterans and insiders is michael mckee and damian sassower. question is what was your biggest take away from the npc overnight? damian: certainly it has got to be the national security law and hong kong. i fielded a number of calls for the hong kong

monetary authority, what does its dollar base look like. certainly people are afraid hong kong is going to lose its status, and things are going to get much worse. high in september of last year is certainly within reach, and you see the basis starting to blow out between china you on -- between china yuan. just want to jump in here. alibaba is out with their earnings. in terms of revenue, it was 113.4 billion yuan. they also see full revenue above the guidance there.

similar to what we saw here in the u.s. in terms of the e-commerce giant, and continuing to do very well. that is the company story, not to mention the fact that maybe you have alibaba having to delist at the nasdaq, but that is the third prong of this. whether it is hong kong, whether it is the virus. michael: i think the biggest take away would bg of political -- would be geopolitical rather than economic. we are in real danger with china right now because tensions are high, and china has ratcheted that up with its new law on hong kong. the united states has been warning china not to do this, and numbers of congress have been very upset about it for quite some time. there is legislation moving in congress to sanction them if

this law does go ahead. for the next year or so, things are going to be very dicey. it is a period where investors should be quite nervous about what could go wrong because so far this year, more has gone wrong then has possibly gone right. from an economic point of view, they have switched targets. they are not really the -- they are not really looking at growth anymore. unemployment is another thing that falls into geopolitics. right now, unofficial reports are the unemployment rate is something like 20%. so they've got a problem with the possibility of social unrest added to everything else that is going on, so they should be really anxious to put in some kind of stimulus to bring that jobs number down. so far, the numbers in terms of borrowing aren't that large. it leaves us with a lot of questions about whether china,

and it will be interesting to see how the markets react to this going forward. alix: i feel like different asset classes are responding to different parts of everything you just said. we have equities responding to the tensions between u.s. and china. commodities clearly reacting to the lack of big stimulus and growth target, and you have idiosyncratic factors like hong kong forwards, reacting to what is happening between china and hong kong. so what do you look at two here? howge sentiment -- how do you protect yourself? every: we are looking at spring risk -- at arab spring risk. i am not at all suggesting that is going to happen again, but things are all very cheap

relative to where they were a month ago. if you think things are going to get worse, that the divide between china and u.s. is going to heat up, these might be some ways to protect yourself. i just have to build on what mike said about geopolitical risk. taiwan is going to come into focus. it has been a star performer for emerging markets, but that is obviously, what is going on and hong kong is obviously going to extended to taiwan. as we know, taiwan is home to some large multinational corporates, so some concern there, i am sure. pompeo and certain chinese officials exchanging barbs over taiwan this week. i want to get your take on contagion. if the hong kong and china worries are going to spread to taiwan, what is the contagion to the rest of the markets as you see it? damian: it is going to be southeast asia, first and foremost. we have seen a lot of old back here in markets, such as

indonesia, the philippines, those along the periphery. on thecut by india, heels of both south africa and turkey cutting rates yesterday. one of these economies is doing just about everything in the stimulatey to domestically, given that investors are trying to sit on their hands and take stock of what is going on in the broader marketplace. alix: do you think the fed is thinking about all of this right now? michael: they have to be thinking about it, but there isn't anything they can do about it. what the fed says and does about international economics is they look at what the impact is on the united states. in this case, it is not going to be good. trade between china and the united states already shrinking quite a bit. that hurts u.s. exports, and americans are paying the tax on the chinese imports that we get,

so at this point, it is kind of . negative for the economy buy any of thet things it said in phase one, that is really a hit. and the impact on the dollar, obviously strengthening in this case against southeast asian currencies in the chinese currency, that is going to have an impact as well. so they do have to watch it, but there isn't a whole lot they can do. you could argue that in isolated cases, they could move rates to influence foreign exchange by changing the value of the dollar. they would never admit to that. i don't know that they have ever done that, actually. that would be the only tool they have. at this point, they need rates near zero. alix: it is such a good point. i think to highlight that point,

mike and i were talking to carmen reinhart yesterday, and she basically said the virus was the nail in the coffin for globalization. that we were going to be reversing anyway, and this was going to speed everything up. i wonder what you think about that. we were already seeing supply chain's shift away from china. like starbucks, not going away. but i wonder how you look at things like hong kong. damian: this has been going on for nearly five years now, the declining global trade. the nail in the coffin? i don't know if you can say that for sure. you will certainly see realignment of supply chains globally. in a way, that might not be a bad thing for emerging markets .pecifically but i think the u.s. has its focus on what is going on domestically. payments are building. we talked about mortgage delinquencies surging to records in april. forget about emerging markets from the fed perspective.

u.s. loan debt rose to $1.7 trillion, so let's put things in perspective. the fed have their sites squarely focused on what is going on domestically, as well they should. fair point. also, talk about big numbers, u.k. budget deficit is the largest since 1993. bank of japan launched a new lending program to support small businesses, and the yen is up. to your point, you can throw a lot of money of the situation, but you're not necessarily going to get rewarded with a lower currency or more growth. what do you make of the numbers we saw? michael: when you look at japan, their problem is there's is a mature economy, and they are a haven economy, so they never get a break on the yen, unfortunately for them. arein this case, what they doing is trying to stimulate the or,um-sized businesses -- not stimulate.

they are trying to put a floor under medium-sized businesses so out of not go business while the lockdown has things shut off. but they are doing it a little differently. this is more like the tltro's in europe, where they pay the banks to lend to get the bank makes the banks to pay lend. the bank makes you a loan, they get paid 1%. are waiting to see what happens with the lending programs that the government and the fed have. i talked to a small business owner last night who got one of the ppp loans, and he said it helped, but now the eight weeks is just about over, and then what do i do? so all of this money they are throwing at these problems around the world, we don't know if it is going to help.

forbearance,o the 90 day forbearance or regular people paying bills, is coming up real soon. and the number one thing you are watching over the long holiday weekend? damian: we have to talk about argentina. we know that creditors are not going to get paid today. argentina is going to miss its grace period on coupon payments that would technically put it into default. whether that is a hard default remains to be seen because the country is still negotiating with its creditor base come up at the sides remain far apart to reach a deal. this could be the ninth default two millennia for argentina. we will see what happens. i will be watching that intently. alix: i didn't even mean to set you up for that. it just kind of beautifully happened. thank you so much for that,

damian sassower and michael mckee of bloomberg intelligence. any of the charts we use over the next two hours, go to gtv in your terminal. rows of features, check it out. gtv . ♪

ritika: this is "bloomberg daybreak." ibm is the latest tech giant to cut jobs in the midst of the pandemic. one worker says the number of positions eliminated is likely to be in the thousands. it is unclear how many of the cuts are caused by the pandemic. ibm has suffered years of falling revenue. nissan reportedly met cut more than 20,000 jobs worldwide, according to japan's kyoto. reorganize operations in japan in a plan next week.

in hong kong, there has been a spike in downloads of software designed to mask internet usage after china signaled plans to pass a new security law that could tightened its grip on the city. virtual private networks, norge vpn -- networks, vpn, says it saw a surge in downloads. alix: for more on hong kong's markets law, "bloomberg " enter yvonne man joins me. onne: from the opposition, you hear a lot about right now. there are calls from protesters and demonstrators to take to the streets again this sunday, as well as next week. that the outrage, while this is so controversial, is that while the world is

undergoing this health crisis, beijing is tightening its grip on hong kong. they are frustrated by the months of unrest and by lawmakers who have failed to get through this legislation. the new strategy now is to bypass the legislative council and skip the legislative process altogether. the mechanics of all of this is still a bit of a question mark. that still needs to be ironed out. we have already heard from pro-democracy lawmakers saying that this is the end of hong kong, the status of the city as an international city will be gone very soon, and this does threaten the one country, two systems framework. china has said it is necessary, and something that other countries need to have, and that no country has the right to interfere in the matters of hong kong. alix: what can we expect over the weekend, specifically in terms of any kind of protest? it seems like we are already harkening back to months ago.

yvonne: the coronavirus outbreak has stabilized significantly, and perhaps people are more comfortable coming out again. we have seen small gatherings in the last couple of weeks or so. so the anger here seems to be bubbling back to the surface. hong kong bracing for a retake of last year. it is not just national security that people are very angry about, but also the national anthem bill as well, something that carrie lam, the chief executive, is pushing to go through. that basically would criminalize those who disrespect china's national anthem. we have seen, at least in terms of a schedule, a couple of protests have been planned over the weekend. we are assuming this could happen the next couple of days, but markets taken aback by this, and caught by surprise by this move by the npc today. alix: thank you very much.

really appreciate that. it feels like a look the geopolitical risk all resurfacing as the virus tries to calm down. coming up, we are going to break out of of that down with where charles schwab sees risk. we will break down more with the firm's chief global investment strategist jeff kleintop. this is bloomberg. ♪ staying connected your way is easier than ever.

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faster than a call. easy as a tap. now that's simple, easy, awesome. ♪ alix: welcome to "bloomberg daybreak: americas." it feels like there are a lot of different headlines moving asset classes. i want to focus on u.s.

equities. we are well off the lows of the session. you have a negative china/hong kong/u.s. headline. astrazeneca hand, working to ramp up a vaccine. that is playing out in different asset classes. in the fx and rates market, it feels very similar, despite the fact the boj is unleashing a big program to help small and medium-sized businesses. in the commodity market, that is a china growth target story. there is no growth target. really hard to know how they will actually wind up importing commodities, and all of the cyclical commodities getting really hit on that news as well. how do you digest all of these headlines when you are still dealing with coronavirus as well? going the is jeff kleintop, charles schwab chief global investment strategist. let's take it a little bit by a little bit. when it comes to the hong kong issues, from trade and

financial, how are you digesting those headlines? jeffrey: i hate and tensions -- heightened tensions rather than cooperation between the two biggest economies during a recession, there isn't a huge moving u.s. markets. there was already negativity, so the market isn't caught completely off guard. the concern is obviously, there's more hong kong unrest, but this becomes the focus of back that may be less negative for some sectors. if beijing were to abandon the phase one trade deal or move to block operations in china. me to the lackds of growth target. is there going to be a market fallout broader than just the commodity market that we need to key in on here? jeffrey: it is interesting,

china has focused a bit more info lately and some of those local special-purpose bonds may be designed to do exactly that. it is interesting to see the pullback in commodities this morning, and copper and a few others. that took turnaround the focus of the national people's congress more on rebuilding that infrastructure in the west of the country, which was an emphasis in some of the discussions and meetings that had taken place couple of weeks ago. we could hear that coming up, and that could reverse some of what we are seeing in commodities. alix: all of this also hinges on reopening, etc. how are you playing the reopening theme right now? jeffrey: watching the reopening's very closely. wherek the key is to see we are receiving these reopening's. austria -- places like austria that begin to reopen still see depressed new

numbers of cases coming in, and that is generally true for much of europe, so that is important. a lot of other indicators of kind of a return to normal, i return to day-to-day activity. can we see those virus case numbers stay low? they have so far, but it is still early to draw that assessment. alix: the trade in the stock market has been very clear. you've got some all caps and cyclical stocks, and when you have a negative headline or vaccine disappointment, you are buying large tech and health care. is that what you are doing? now, i thinkt going forward is difficult. that is why we are watching the data very closely to see what shape the recovery takes. we all agree april was probably the low in global economic data. already, the maid at a looks a the mayit better --

data looks a little bit better. low, defensive's are actually leading. this is very unusual for a market rebound from a recession low. it is very unusual. i am using the msci definition of sickles and defenses here in their world indexes. defensive's have actually outperformed versus the low, the first time that has ever happened. that may be the market telling us that this is in the real low, or that the recovery the market is pricing in is a long and slow one, but we will get a better sense of that as we get the data in the coming weeks. what is the high-frequency data that is going to dictate how you want to be positioned? in china, 80% of store sales are back to pre-writers levels -- pre-virus levels. what do you need to look at? jeffrey: we want to see everybody getting back to work.

it is looking at air pollution levels to see how much manufacturing comes back, like in germany, for example. retail foot traffic. how many people are returning to brick-and-mortar stores? that may tell us a lot. then looking at electric city used to capture service businesses like hair salons, bars and restaurants. can at opentable data yesterday for online reservations for restaurants. most countries are not seeing much of a move, but in germany, 100% 10 or were down 15 days ago, now just 50% of what last year's totals were as of yesterday. so a huge turnaround in willingness to go to restaurants in germany. that is the kind of encouraging data that can get the markets to add to recent gains. alix: appreciate that inside. always great to catch up with you. we do have the ecb accounts and our last meeting, so basically a

readthrough of some of the things they were discussing. some of the highlights, they say it is a mild economic scenario that is probably too optimistic. the concern is that any sort of models and forecast scenarios are going to become outdated. the ecb also saying inflation will slow considerably and reach the bottom in june. deflation becoming some of the conversation with economists out there. how do you fight that if that is the direction we are really headed in. , v-shapedhat a swift recovery could also probably be ruled out. we do want to give you an update now on what is making headlines outside the business world. here's ritika gupta. ritika: hong kong activists calling for protests against a new china security law. the national people's congress is expected to pass legislation that would force hong kong to intimate laws -- to implement laws curbing acts of sedition and treason.

authorities say pakistan international airlines flight has crashed. the airbus plane was on a flight to karachi. there were 107 people on board. no word on casualties. the u.k. posted a record budget deficit last month. the shortfall wast equal to total borrowing for all of the previous fiscal year. the deficit is not surprising, given the british government spent an unprecedented amount of money to prevent the collapse of the economy. 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. rick -- i'm ritika gupta. this is bloomberg. alix: coming up, the structural shift we are going to undergo during the pandemic. what comes next for the world's top banks? we will have an exclusive interview with bnp paribas' usa ceo. check out tv .

you can check out what you missed. tv . this is bloomberg. ♪

alix: time now for our what come next series, where we speak to investors and top industry voices on how the pandemic will forever change the way that we do things. today we are going to look at banking. fillion, bnpves paribas usa ceo. we have been getting lots of indicators from other big banks on how they are going to start reopening their business. do you guys have a plan yet for the u.s.? it? is jean-yves: thank you so much for having me. it is definitely an unprecedented situation.

my first priority in my position as ceo is ensuring the safety of the staff. it is important to mention that we have 95% of our staff working from home, and the bank is open for business, moving full speed serving clients. return to the office is something we are planning on with a lot of consistency and focus. i would say you should expect it to be gradual. get our first, we will staff back on premises, and assess how the pandemic evolves. we'll do it following state guidelines and policy, but we are engaging with employees, and their feedback is important to us. i see three concerns coming from

them. the first is around commuting. the second is around testing. there's going to be different kind of testing. the third is around social distancing once back on premises. some other banks have been looking at things like setting up a temporary office in the suburbs, for example, or only bringing back capacity to 25%. you have any specifics you could give us into what you are looking at? obviously, each business model will have their own criteria in terms of timing. paribas, i don't expect this for phase one more than 15% back on premises. there is no urgency to get back on premises because the bank is really functioning very effectively. had you told me to end a half months ago that we would be operating successfully with 95%

of staff working from home, i thing i would have been hard-pressed to believe you. alix: no kidding. i would have been hard-pressed to tell you i would be broadcasting from my home, so i am with you on that. i wonder how that comes out on the other end structurally. are you looking at a smaller rental space, a smaller office space? less people permanently in the office? facebook yesterday said that would be their way forward. you ares: i think highlighting another very important point, which is what other structural changes we might be experiencing here. definitely working from home is going to be a trend to last, and there will be collateral consequences. the one you just mentioned, i do believe companies will review inir real estate footprint urban areas. i do believe as well we will be

travel, as weness are getting used to it digitally. i see structural changes coming from my clients this time. it is a real read domestic for supply chains -- a real re- domestication for supply chains. it would be at a time that the end and limit rate is increasing to contribute to job creation. alix: it is good insight to get from all of your clients. to follow on that, i am interested, i know you are head of the usa, but you have insight into the rest of the world as well. do you get a read from your clients into which region is poised to recover the fastest? jean-yves: being a global bank, we obviously have a view, but more specifically in my role, i am bridging eurozone and u.s. probably a softer,

slower recovery than what we would have hoped for initially foreconomies in contraction 2020 around 6% for u.s., eurozone around 8%. we have similarities on both continents. i have seen some banks doing a wonderful job in terms of adjusting monetary policy and providing liquidity. we have seen governmental programs including at the eu level to really support the economy. tore is one thing i would up highlight, european versus u.s.. in europe, you have universal health care, and i would say and limit protection. that probably has provided more stability and might actually aid a faster recovery. pandemic, of this second waves, this is something that has to be watched very

carefully. alix: whereas in the u.s., it feels like the relief is coming through banks like yourself. can you talk me through the payroll protection program or anything along those lines, how easy or difficult it is to distribute funds? jean-yves: sure. when i am mentioning the central banks of the fed with treasury, good coordination, they have done a wonderful job in terms of supporting this economy. the banking system has done the very same thing here. at bnp paribas in the united states, we have 14,000 employees. we have retail activity. we have wholesale activity. for the west, we have been providing liquidity and participating in some of these programs. the ppp you just mentioned, we and processed 18,000 applications, which will convert into over $3 billion of

guaranteed lending. we have protected probably 300,000 jobs, but on the corporate side, we have provided a lot of liquidity, leveraging the balance sheets -- a lot of liquidity leveraging to balance sheets. we have been actively advising companies on hedging strategies, volatility.creased alix: one other thing has been a push into esg, whether on the capital markets side or on a company side. i am really curious if you see that trend shifting or being disrupted because of the virus. that is an excellent trend being reinforced. obviously, the appetite for esg products was very high in 2019, but over the last few months, a

shift from environmental into social. really, this pandemic has highlighted the threat to our communities, to our economies. , lastome metrics here year, social bonds were some thing like 5% in 2019. year-to-date, it is already 30%. bnp paribas has already returned $30 billion of the $80 billion issued so far. it is interesting to mention as are that the issuers diversified. you have insurance companies, banks, and corporate's. i think it really highlights the business world here. investors and issuers are focused on trying to provide solutions to the environmental and social dimension today and onwards. like what is the demand

for these bonds versus what they might have been six months ago? jean-yves: as i mentioned, last year it was 5% of the total market for sustainable bond issuance. in 2020, it is around 30%. it is a massive shift. i want to be clear, i believe the environment a part of it continue to be very active. i think the whole world realizes how critical it is to protect the planet in a sustainable way. you: so going forward, if walk your business out 18 months, we get some kind of vaccine or really solid treatment, what is going to be the biggest change in the economic trading, banking landscape you are anticipating? jean-yves: as you rightly mentioned, i see sustainable finance to be even more central

to the capital market world. might haveat we entered into a new paradigm in .erms of digitization from homef working will have benefits, i think. employees will probably benefit from a better work/life balance. less commuting, definitely less traveling. i think some of the key criteria of the global world will be reassessed, and i believe supply chains will probably be the first ones to be changing and evolving. really good to catch up with you, jean-yves fillion of bnp paribas. coming up, all of this is contingent on how you treat the virus. andrd university astrazeneca are starting trials of one of the fastest moving

vaccine candidates. we will break that down for you in today's tracking treatment. this is bloomberg. ♪

alix: time now for tracking treatment. we are going to take a look at the latest of elements in the race to solve the covid-19 health crisis. going me is max nisen, bloomberg health care and pharma columnist. the latest is oxford and astrazeneca expanding their trial to move faster. what is the news here? is thathink the news this group and others are short of speeding up the parts that you can. they are starting trials faster than they usually would. they are enrolled larger groups of individuals. i think that is really important because we are rolling up towards the end of the things you can really realistically speed up. ,ctually running those trials

which you desperately need to prove the safety and efficacy, definitely takes a while. you have to focus on areas where the virus is still spreading, so it will tell you whether the vaccine is protective and how protective it is. you get the safety data you need when someone who is vaccinated is exposed to the virus, which can sometimes produce issues. so it is good news, if risky in comparison to the usual vaccine develop it, that there is this kind of acceleration. it is what you have to do in order to potentially speed up the timeline of something already moving historically fast. alix: it seems like the timeline is sped up, but also the age of those that are also going to be tested or vaccinated is also widening out. can you walk me through the significance of that as well? max: absolutely. the normal trajectory of vaccine develop it is quite slow and

cautious. you start with little trials that focus on healthy, younger adult volunteers. but in this case, you are doing everything at once and these larger trials. you are also bringing in kids, older adults, people that can have different immune systems, potentially different safety .isks you don't have the luxury of doing those slow, successive trials. this isn't an entirely positive trade. you are creating a greater risk vaccines ifto these they don't turn out to be effective, but you can't really wait to get the kind of breadth of information you would like to have to move forward in normal times. alix: max, thanks a lot. appreciate it. max nisen of bloomberg opinion, thank you very much.

coming up, how to digest all of the headlines. mark mobius, mobius capital cofounder, will be joining us. this is bloomberg. ♪

♪ alix: welcome to "bloomberg on this: americas"

friday, may 20 second. i'm alix steel. let's take it right from the top. activists call for protests against national security legislation as beijing tries to force laws curbing acts , andeason, sedition excursion. >> they have told the national people's congress that beijing will reinforce national security in the autonomous region. alix: president trump pledged he would respond very strongly. two u.s. senators are proposing legislation to punish chinese entities involved in enforcing these new security laws and penalize banks that do business with those entities. this all sets a risk off tone for the market, with the msci hong kong index falling the most since 2008. china's national people's congress sets no growth target

and a smaller budget deficit goal than expected. >> this is the first time in decades that china did not set an annual gdp target, but we did get more specifics in other areas of stimulus. for instance, china is going to be significantly boosting infrastructure investment with some $500 billion of special bonds. alix: other countries continue to step up to help. the boj launches a new lending program to support small businesses, and the reserve bank of india cuts rates by 40 basis points in a surprise move. meanwhile, the u.s. still debates the next round of stimulus for the economy. >> what we have in the bill is disciplined, focused. it is all necessary, and it has broad bipartisan support. it is just a matter of time. alix: house speaker nancy pelosi says she doesn't think the senate will resist another relief bill for long. they reiterate the wait-and-see

stance from the white house. >> we shouldn't be blinded by the fact that these are still terrible numbers. we are still in deeply contractionary territory for the second month in a row. we will be looking at some of the more retail and that's the more real-time data on opening up is very gradual. pres. trump: there's a lot of ammunition left in terms of the fed and the treasury and all of the people working hard. alix: fed officials continue to call for government action and pushback on negative rates. in the markets, there seems to be this push and pull developing between two different narratives. one is the tension between china, hong kong, and the u.s.. the other is the race for the vaccine. dr. anthony fauci says he expects the full results of a dharna study from my -- from my dharna -- from weeks. coming within

it is still a little bit of a safe haven bid, and the oil market is getting hit because china didn't have a growth target, so we don't know what is going to be. going me now is alicia levine, bny mellon investment management chief strategist. when you look at the narrative that evolves every morning, what is the main driver in the equity market? alicia: good morning. nice to see you again. push/pull, and for the most part, the market really has a risk off tone. i know that seems like a funny thing to say, given where the s&p is today, but it is really being driven by the stay-at-home economy, large cap tech, and ultimately, the equity markets are telling you, and a way that the other asset classes are telling you, that the demand really may not be there the second half of the year, and the recovery is still questionable,

less likely to be v-shaped. that is the narrative. the one thing that can change it, and we saw it this morning with the fauci comments coming out of that npr interview, is if there is success on the medical treatment or vaccine side, that can change on a dime. but for now, we are really in a risk off moment. alix: interesting. so you can basically have higher equities. so what do you do? do you want to trade these ins and outs? do you have to pick a long-term recovery narrative no matter what? alicia: that's a great question. if you look at those five large cap tech stocks, your to date, they have outperformed the rest of the s&p. the rest of the s&p by 32%. and the recovery from the march action, 75% of the price

is due to those five stocks. so you have this very concentrated performance, and it is actually the most lopsided in history ever. how does this get resolved? it gets resolved in one of two ways. markets,e rest of the the cyclicals that have really suffered, come up to meet performance, or you start seeing a faltering and the leaders. i will just point out, and the last few days alone, you have seen some of those large box techsers and large-cap -- new highs and stay there large-cap stocks hit new highs and stay there. it is not clear if this is softening because we have a long road ahead of us, and we may not have a 20% growth second half of the year. the problem i run into is

that you still have to own these large cup tech stocks. -- large-cap tech stocks. how does that then skew your portfolio? agree, you do have to own the stay-at-home economy. you have to own the tech. the cash returns, if you are a sovereign wealth fund, you're getting cash returns from large-cap tech, so you have to own those for sure. it is an interesting place to look for the reopening of the economy, and there are certain sectors that looked like they could recover earlier than others. so i like, for instance, biotech. , for the last five or six years, has been based. i think it is still a really great place to go. on the reopening side, i like the gaming stocks. i think gaming is really interesting here.

we see reopening, different ways of gaming, whether it is online, macau is opening. and i think gaming represents an area where you can have growth expected. i also think certain sectors of the industrial economy could recover quicker than the service economy. to the extent that you need to play the reopening in some way, i would go there. we had some earnings this morning which suggest things are still dire, so i would do select --ustrials gaining industrials, gaming, and i'll tech. -- and biotech. alix: what about other asset classes? you mentioned equities are telling you the same stories that rates and fx are, just in a different way. do you need to hedge by having dollar in your portfolio and having lower yields in the u.s.? alicia: there's going to be a bid on the dollar for a long

time my even with all of the liquidity coming out. we like gold here. it did consolidate in the last year or so. we think the bid continues, particularly from overseas .nvestors we see gold as a nice safety play without having to hedge any cost. i would be careful in the high-yield space. retailers are not looking good. obviously, energy is not looking great. there are enough sectors that are at risk, and you can see it from the script, but we like investment grade. alix: alicia, things a lot. really appreciate touching up with you. coming up on the program, not china, but argentina is bracing for its ninth default. we will catch up on how to invest with mark mobius, mobius

capital partners co-founder. this is bloomberg. ♪

alix: argentina is bracing for its ninth sovereign debt default, despite the government announcement extending its self-imposed deadline for negotiations to june 2 with creditors. the deadline was supposed to be today. mobius,us is mark mobius capital partners co-founder. tons of em headlines to unpack. can we start with china for a second, and what you made of the overnight conflict with hong kong, conflict with the u.s.? how are you digesting all of that? mark: there's no questions that the tensions are rising, and these have been going on for

quite some time, beginning with the trade war and a number of other factors. so we can't expect to be seeing any let up in these kind of tensions. nevertheless, there are lots of stocks in china that can be purchased that are very profitable and are growing, despite all of the problems we are seeing. i think we have to take it stock by stock rather than taking a general picture of the chinese market. alix: help me understand how you scream stock by stock, and with the government will do in terms of stimulus. mark: number one, we are looking at stocks that will not be impacted by trade war. number two, we are looking at stocks that have a global footprint. these stocks, alibaba is , we want stocks

that have very strong balance sheets. at this stage, we have to have companies that are able to acquire other companies and to gain market by doing so. alix: can you give me some names? all you wind up hearing about with chinese companies is how much debt they haven't how much help they will need from the government. what are these names? ,ark: for the normal investor these big names like alibaba would be the obvious one, but there are a number of others similar to that that would fall into the category. i can't give you the names because we may be buying them, so i don't want to be in that position. alix: there. mark: -- alix: fair. mark: but any of these names like alibaba, like tencent, these are names that could be looked at. alix: fair enough. if any of those companies get

delisted from the nasdaq because of trade tensions, does that affect how you think about the metal? -- think about them at all? mark: not really. that is not going to be any problem for these companies because they are already doing international accounting, and it would be very easy for them to come up with the right accounting practices, so i don't see that is a big problem. i think what you've got to see ofany problems in the face when it comes to technology. they will be able to survive any problems with the market in china, typically because they are a global company and supplying people globally, including any of the u.s. manufacturers. alix: are you worried that we are going to see any supply chain shift that we were already

talking about accelerate because of the virus, or does it not matter as much if you are looking for the right kind of companies that would be more immune to something like that? mark: this is already taking place. it is not only the american companies that have a supply chain problem, but the chinese companies as well. toy now have to look field find out where they can get their supplies, and they are not going to be sanctioned by -- [no audio] -- but i am moving globally, and becoming more of a global supply chain company. alix: where else do you like in emerging markets?

we have seen rate cuts like india's surprise rate cut overnight a 40 basis points. we have seen stimulus, some coordinated debt mutualization. where is the best opportunity? mark: after china, you have to look at india because it is so huge and so many things are going. the market has not done well recently, but i believe they are going to pull out of this and really move from strength to strength. this is a good example of supply chains, where you are going to see a lot of the manufacturing in china moving over to india. it is not going to happen overnight, but this is a trend we are seeing. let's remember, and yet has been very successful in exporting software. outsourcing has been an incredible business for the indians, and i think they will inequally successful manufacturing. the: how do you think of debt load that emerging markets and companies are going to be saddled with? i know you like to look at

companies that don't have a lot of debt, but the country's overall will have a tremendous amount of debt. how should investors take about that? mark: the good news is that debt markets have very short memories. if you look back in history, people were bound out of mexico for a long time. there are problems with argentina. i don't know how many problem we have had with argentina, but they always come back. some people make money on these very low markets, where the rates go through the roof. the good news is that with the fed lowering rates, with the lowering rates, they go to these high-risk countries. so i believe there's going to be plenty of opportunity for argentina and countries like that to restart their economies with more debt. even so just to be clear, though argentina is on the brink

of default again, for the ninth time, because the fed is so invested in the market, you think that is going to have to push out investors looking to take on more risk for the yield argentina?ike ? mark: absolutely, but in the next month and year ahead, you are going to see more people towardsting emerging-market debt and high-risk debt, which pays high-yield. this is something you have to look for. alix: where is the best high-risk debt, or will will it be -- or where will it be when we get to that? wouldprobably argentina be one. south africa would be another. south africa has been downgraded by moody's to junk territory. maybe turkey would be another one where they would be looking.

these are all areas where there's a lot of debt, but there is a history of eventually things being worked out, so at the end of the day, there is a price for everything. let's face it. there's plenty of money sloshing around in the world, looking for a home. alix: there is a price for everything. that's true. where would you not touch, though? mark: the obvious places like , youuela, but even there have to watch develop mensa because things may change. i can't think of many places. maybe nigeria you would have to be careful about the oil price decline. but at the end of the day, there are not many places where we would totally avoid. the only reason why we would avoid a place is because either there are strict change controls so we can't get money out, or strict controls on money coming in. but other than that, there's

opportunities in individual names, individual debt names, and more importantly, individual equity names. great perspective on that. look at thehen virus in the rates for the vaccine, where it seems like one headline has the ability to turn the markets and sentiment around? how are you digesting that kind of new slow? -- that kind of news flow? mark: i think this vaccine thing is overdone. i don't think it is that important, frankly. let's say they find a vaccine by the end of the year. how long will it take for everybody to be vaccinated? this is just a no go. i think the only way out of this is to get people back to work, back on the streets, backstopping. we are hearing this -- we are seeing this here in germany. they are keeping their distance, they have the masks. but that is the only solution,

particularly for emerging markets, where you have young populations resistant to these diseases. i think let's not wait for the vaccine. i don't pick is the answer. alix: mark, really good to catch up with you. .reat to see you mark mobius of mobius capital partners, thank you very much. coming up, the activist calls for protests once again as china implements a new security law on hong kong. we will bring you the latest on what to expect over the weekend. this is bloomberg. ♪

alix: this is --ritika: this is "bloomberg daybreak." ibm is the latest tech giant to cut jobs amidst the pandemic. one worker who lost his job says the number of positions

eliminated is likely to be in the thousands. it is unclear how any of the cuts are caused by the pandemic. ibm has suffered years of falling revenue. in hong kong, there's been a spike in downloads of software designed to mask internet usage after china signaled plans for a new security law that could tighten its grip on the city. it receives 120 times more downloads yesterday than it did the day before. this confirms that china will try to control the internet more. -- there are concerns that china will try to control the internet more. alix: let's stay on that. bloombergnow is " markets: asia" anchor yvonne man. yvonne: carrie lam is about to speak in about 10 minutes. she has already said that the

government is fully cooperating with china to enact this national security law. that is probably going to reignite more anger among protesters and the pro-democracy front. we have seen protests return in recent weeks. this is not just about the national security bill. there is also a national anthem bill carrie lam has been pushing to get passed that would criminalize those who disrespect china's national anthem. the reaction we have seen in the last 24 hours has been swift. we have heard from pro-democracy lawmakers that this was the end of hong kong, the status as an international city will be gone very soon, and this move does threaten the one country, two systems framework. china has said it is absolutely necessary, something that other countries also seek to have, and no country has the right to interfere. so they say they don't care about the consequences at this

point. alix: thank you very much. the hong kong index fell the lowest today since the great financial crisis. coming up, we will take a bigger look at geopolitical risks and what they mean for the markets. we will be speaking with charles myers. this is bloomberg. ♪

alix: welcome to "bloomberg daybreak: americas." i'm alix steel. an interesting session developing. we are flipping into --

territory. some indices are hires. you have hong kong-china u.s. tensions. astrazeneca are pushing forward. dr. anthony fauci talking about moderna and the phase one trial within weeks, lending optimism to the markets. trade andl a safety commodities continue to get hurt for china not having official growth forecast is this year. not a lot of visibility into how much stuff they will actually wind up buying. let's stay with geopolitical risk and what all of that winds up meeting for investors. myers, signum global advisors chairman, joins me now. the latest headline we see is the u.s. condemning china's plan to impose legislation on hong kong, calling it a disastrous proposal.

how should investors think about these headlines? charles: good morning. thank you for having me on. the rise in tension on u.s. and china on this issue and a number of other issues israel and will accelerate from here, particular heading into the november election, the u.s. election. china could become one of the top two issues in the election. i think investors need to take it seriously. we have been concerned about the u.s. equity market. generally, it has been liquidity driven because both of fiscal and monetary policy, there's a lot of retail money in there. the market seems to have discounted a v-shaped recovery. there are three main risks, china being the biggest, but you have the real possibility of a sluggish recovery in the u.s. with high unemployment well into november and next year. secondly, a possible second wave of coronavirus infections.

third, a democratic sweep in november, including the senate, meaning taxes are going to go up meaningfully. havehen china which you asked about. i think we will see more tension not only around hong kong, congress passing more legislation on a bipartisan basis. i think some people don't realize how bipartisan the support is for these types up unit of -- punitive actions against china and whether it is shutting china corporate out of u.s. capital markets, huawei over the u.s. market more broadly, these are real issues. i think trade tensions will come to the fore over the next couple weeks as well. alix: where do you think we will see the biggest freeze in markets relating to the headlines? you brought up a good list. if it is trade tensions, it is specifically financial risk with delisting on the nasdaq and g alleged -- geopolitical risk. there are lots of facets to the problem.

where is the biggest we will see? charles: what i would be watching closely is the rhetoric out of both president trump and his campaign as well -- his election campaign as well as the biting campaign. i think both sides, soon, we'll try to outdo each other to see who could be more hawkish on china. the polling on this is interesting. over two thirds of american believe china should be punished for the coronavirus. this is an issue that resonates across party lines in the united states. there is huge bipartisan support for this. an answer to your question, i think what we will start to see, more punitive action, rhetoric but also action out of congress on specific bills to find ways to shut chinese corporate out of our capital markets, including forbid some of the federal pension funds from investing in chinese assets. there will also be a push for pension funds to divest from

chinese assets. i think that is probably the most immediate risk there. the second quickly is on the trade side. while i think phase i continues to move forward, there is always the threat from president trump, which he does have unilateral authority to do, to raise tariffs, if necessary as a punitive action. put on your vice-chairman hat and say i am apple or starbucks and have big business i operate.at what would you tell me about terms of -- what would you tell me in terms of risk of operating there? charles: i think it is a risk for a u.s. ceo but if you are the ceo of any multi glow by -- multi-global national, and this is already happening, pre-covid but has been accelerated with the crisis, in that a lot of companies have been looking and starting to move supply chains

out of china to diversify. that has been accelerated. when china had to shut down large cities and parts of the country in response to covid, it was a wake-up call to a lot of companies, that they needed to protect their supply chain and diversify further. i think we will see the process accelerate, including with quite a bit of pressure from washington to also do that on companies. i think you will see winners in that process like vietnam, india , and even bringing some of that back on shore in the u.s. as well. alix: interesting. not just into the u.s. but otherwise diversified. something else you raised was the risk of a democratic sweep in november, and higher corporate taxes. some might say we are headed for higher corporate taxes no matter what. what do you think? charles: i agree. we have been seeing no matter who wins in november, but our base case is that joe biden will

win, even if president trump is reelected, taxes are going to go up next year. in part because the deficit will be at levels, already there, that will be even higher than we could have ever imagined. secondly, if president trump is reelected, the key date will be july of next year, because that is the date u.s. debt ceiling has to be raised. i think the democrats in the house will hold president trump essentially hostage on that issue and force him to compromise and agree to tax increases, in part to help address the deficit. if biden wins and it is a democratic sweep, meaning he has house and senate, i think you will see corporate tax go up 21% to 29%. that increase is not factored into most sell and buy side models. that is a big change that analyst needs -- analysts need to start pricing in. secondly, an increase in personal income tax for higher

earners, which were democrats typically starts around 70,000 -- $70,000 per year. we could see the carried interest loophole closed once and for all. there is talk about taxing unrealized capital gains. i think the democrats will find as many ways as possible to raise taxes above the personal income tax and corporate income tax the way we usually think of income tax. alix: where does that leave big tech? biden vice president joe is speaking saying amazon needs to pay their taxes. where does it leave that conversation in d.c.? charles: it's interesting. we have been warning our clients or highlighting for a while that this regulatory move against big tech is happening, and in the end, it will be more punitive than what is priced in today. most stocks hit high because they are benefiting from the stay-at-home phenomenon.

is privacy,it antitrust, and tax for big tech. on all three issues, apple, amazon, google, facebook are most vulnerable. themegulatory move against will continue, regardless of who wins in november. i think you could see senator warren push further, aside from punitive action, and forcing these companies to pay more u.s. tax but push to break some of them up. i think google and facebook would be most vulnerable on issue a breakup. alix: you mentioned you feel we are in for a bite and win in november. how bad is the economy in november that we get joe biden to win? charles: i think what is really interesting on the economy, and again one of our concerns is the u.s. equity market pricing in a v-shaped recovery and progress on a vaccine in the next six to

nine months. all of that as optimistic. the real issue in november on persistentlyill be high unemployment. unemployment today is around havebut i think we will 10% to 12% unemployment into the election and well into next year. in some of the swing states trump has to win, unemployment could be as high as 20% to 24% still. that is the biggest risk president trump has on the economy for his reelection. i think that will help joe biden as he gears up his campaign and gets back on the road soon to start campaigning again. that is the biggest risk. alix: charles, thanks so much. it was nice to catch up with you. signum.myers, from >> pakistan international airflight has crashed.

it crashed while attempting to land. there are 100 -- were 107 people on board. local officials say there were no survivors. china is planning to implement the first phase of its trade deal with the u.s. despite rising tensions from the coronavirus outbreak. a piece of the deal was china promising to buy more u.s. goods and services. even before the pandemic, analysts questioned whether those targets were realistic. now the promises are even further out of reach. a record budget deficit last month in the u.k. it's equal to total borrowing for all of the previous fiscal year. the deficit is not surprising, given the british governments unprecedented amount of money given to prevent the collapse of the economy. global news, 24 hours a day, on air and on tictoc on twitter, -- quick take on twitter,

powered by more than 2700 journalists and analysts in over 120 countries. from as the world emerges the lockdown, we tackled the important lockdowns like what happens to all of those office chairs sitting in your office. the worry is that if you leave too many out there, people will sit next to you, chat it up with a colleague, and that would undermine social distancing efforts. choiceof you know, the is something that can cost $1000. they will store them in empty conference rooms in time as they learn how to figure out the armrest thing, which drives me crazy. coming up, we dig into retails mixed bag of results and look at potential consolidation with an official. alibaba trading 1.6% lower in markets after it topped its fourth-quarter earnings sales forecast. newburgh users, check out gtv for any charts we use

throughout the show. this is bloomberg. ♪

>> this is bloomberg daybreak and i have your bloomberg business flash. the clock is ticking and hurts is in a deadlock with creditors. they face a deadline today to agree to a deal on debt payments. some investors are confident they will get their money and time to file for bankruptcy. [inaudible] that's according to japan's kyoto. it also reports that they may reorganize operations in japan because of falling demand for cars. the company is scheduled to release its new midterm plan next week.

dell is cutting costs to deal with the weakening global economy and will quit making contributions to employees retirement plans. they are hiring internal promotions and raises for the rest of the fiscal year. chiefember -- memo, the officer -- spending officer spoke about technology. alix? alix: thanks so much. time for bottom line where we look at companies worth watching. today, we focus on retail as we wrap up a week of earnings. alibaba, looking at slower revenue growth so far for this year. stewart onjerry this. >> coronavirus is a force for consolidation in every industry. in retailing, it is double power, especially bad for smaller companies, as the

companies largest winning before are the ones that tend to sell the necessities that are thriving. joining me now with more is cathy leonhardt of pj solomon , cohead of consumer retail. kathy, great to get your perspective. do you agree with gerry like consolidation here we go? cathy: good morning. m&a without question is slow right now. ia is about optimism, and think, given the level of uncertainty in the sector, we will not see him in day for some time. m&a for ad a -- see long time. i think we will see consolidation because you need scale to leverage these fixed operating costs. even the big retailers, their costs are going up. see m&awe will

consolidation of midsize players. alix: i'm glad you brought up the costs going up. i have been wondering a lot. are we seeing structural margin shift within retail as they have to put out more money in their retail stores to help workers, customers, also having to invest a lot more on digital and to be able to deliver things faster? the costshink we see go up in several ways. you are seeing strong sales growth with the mass retailers, but it has come at a cost. you see it in terms of the products mix because essential categories are fundamentally lower margins, food and consumables. there is also a higher cost related to fulfilling digital orders. >> bloomberg television, brought to you by principal television

group, -- get to know us at principal.com.

>> the challenge in bankruptcies is that you see liquidations and store closures, but given the retail stores are not fully opened, that puts -- alix: kathy, i'm going to stop you for one second. we were actually dealing with technical issues, so i want to welcome back our "bloomberg daybreak: americas" audience. we were speaking to kathy lenhart of pj solomon about the retail sector and i asked, what do you wind up doing with default now as landlords are really wanting to crackdown on getting paid their rent. cathy, would you mind walking us through again how you think this will tilt retailers into may be more bankruptcies? question thats no the covid crisis has put more retailers at risk of bankruptcies and insolvencies. the challenge as we go through this period of bankruptcy is, one of the ways retail funds

bankruptcy is through liquidations of the stores. it is hard to liquidate stores when they are not fully open and you can't predict what the traffic will be going into these stores. we never seen a period like this. bankruptcies happened in their natural way. this creates a different motivation, because the lenders can't recover on their debts right now, because, where do the proceeds come from? it has created an interesting environment that we as a firm are working through with many clients. alix: what is the biggest question your clients have right now? what we haven't talked about yet is the struggling reopening their stores. cathy: i think the biggest question is, what is going to happen? universally, retailers find it difficult to plan for the future. what happens with back-to-school? nearly all retailers, as you

noted, eliminated guidance. of deepn a period uncertainty. it is hard to predict how the consumer is going to behave. , at least know is anecdotally, as stores have opened, our clients tell us they have opened to stronger results than they have expected. one, while traffic is down, the average ticket is up. athink consumers, from discretionary spending standpoint, tapping in -- standpoint, are tapping into those as well. alix: as we head forward, what do you think of the employment landscape for these guys? what are you telling your clients as to what kind of workers they should be hiring? all tech workers rather than the people on their floor? [laughter] hire: you still have to employees in retail. it doesn't go away. the question is, does the topline cover the expenses you need?

it's interesting, from the big-box retailers, mass retailers, they are hiring and need more people to execute on their strategies. you saw walmart hired 200,000 ,mployees to stock the shelves clean, sanitize, do the curbside pickup. for those that go out of business, we will see a significant amount of unemployment. as you know, the retail sector is a big employer in the market. that is going to hit the economy. has been a, it pleasure. thank you for sticking with me. cathy leonhardt joins us from pj solomon for the future of retail. we want to get a quick check on the markets. a couple different narratives are happening. on the one hand, significant tensions being raised between the u.s. and china over hong kong as it develops into the weekend. the risk on tone is dr. anthony

fauci is sounding positive on the vaccine -- phase one vaccine trials, putting a push and pull on markets as they try to inch their way into positive territory. asset classes, it is still a risk off field. the curve is flatter, but steeper than earlier. you see it into the bond market as well. the currency market is about the dollar and will be about the yen. industrial commodities ease are getting hit by the lack of growth target in china, even though the vix feels a little bit tough. as we ended the show, i want to announce programming changes to bloomberg television. starting tuesday, we will simulcast radio and tv from 7:00 to 9:00. we will have all the headlines and analysis to set you up for the trading day. lots of bowtie action will be happening. i'm taking next week off, learning how to sleep in. you can find me on bloomberg

markets from 10:00 to 12:00 with guy johnson. i will be tackling a different time of the markets as well as the european close. i have now anchored every hour of the market open, except these two, so that should be fun. we will bring you great going forward. thank you guys. you make my job fun and you to get to sleep in. you might see me on tv every day, but none of what you see would be possible without the amazingly smart, dedicated, supportive, and creative team. everything you see is because of them. i have worked with tons of teams throughout my career, and this is really special. there is a unique bond that brings together morning show anchors and staff because you get up in the middle of the night. kaylee, nicole, john,

justin, and gail, it has been an honor. i will catch you in a week. this is bloomberg. ♪

♪ >> from new york city for our

audience worldwide, good morning. the countdown to the open starts right now. here is your friday morning. in equities, we recover on the s&p 500. positiveutures into territory, up three points. we reverse all of the losses in the morning. in the bond market, 10 year treasury, here is your yield. and the a u.s. 10 year, u.s. dollar closing out the week with strength against the euro. euro-dollar is one half of one ash .5%. let's begin with the big issue, -- .5%. let's begin with the big issue, the relationship between china and the united states breaking down as china reasserts itself in hong kong. pres. trump: nobody knows yet. >> it is deeply concerning. pres. trump: if it happens, we will address it. >>