francine: controls on transactions and freezing assets on officials. the u.s. is considering this to punish china for its crackdown on hong kong. hundreds gather in the city to demonstrate amid a heavy police presence. jamie dimon says good odds for a rapid u.s. rebound. the ecb is committed to addressing market fragmentation. a fact checking label to tweets from president donald trump for the first time.

he accuses the social media giant of stifling free speech. welcome to "bloomberg surveillance," everyone. i am francine lacqua in london. the markets are trying to guess how much tension there is between the u.s. and china and how that will halt the economy. this is what is playing out in the markets. the stoxx 600 gaining some 0.3%. crude oil before $34 per barrel. 71599.i the u.s. considering a range of sanctions to punish china for its crackdown on hong kong. the trump administration weighs whether to declare that the former colony has lost its autonomy from beijing. president trump says he will announce action against china before the end of the week. meanwhile, protesters in hong kong cured up for what there could be their biggest day of unrest in months against china's

increasing control of the city. let's get straight to our chief asia economics correspondent. this has certainly ratcheted up quite a lot in the coming days. how big are the protests right now? we have had hundreds of people gathering in one of the key shopping districts here today. that triggered clashes with police. a very heavy police presence right across central parts of hong kong today. there was a bill that would criminalize -- for the chinese national anthem. we have a very heavy police presence. hundreds of protesters are on the street. buteast 16 people arrested that number will likely grow as the day goes on. there are key tensions here in hong kong and no signs of

easing. francine: how does this end? i know we were trying to go through it yesterday and he explained it briefly on whether beijing was now trying to minimize some of the fallout. on whatijing back down they announced because the u.s. is escalating it? kong isu say, hong caught in the crossfire. --h the u.s. and beijing are beijing sending a firm message that it will push through with this national security law on hong kong that protesters say will erode freedom of expression and speech. the u.s. is threatening to retaliate. it might involve sanctions against chinese officials. we know the u.s. has an option of revoking some of the special trade status it already grants to hong kong. at the moment, there is no sign

of either side backing down and no sign that beijing will back down. by all accounts, tensions are ratcheting up in hong kong. we have the key anniversary coming up in the coming weeks for the events of last year. we were heading towards local election in september, which seems to be a real focus point. no sign of beijing backing down. it looks as though the trajectory for tensions in hong kong are going ever higher. francine: what will happen the next couple of days? how do you see this playing out? >> the big thing will be how the u.s. response. sanctionsonsidering on chinese officials. we also have to see how the report comes out on hong kong's autonomy. by extension, whether or not the

u.s. revokes special trading status towards hong kong. that's a key metric to keep an eye on. ands feeding uncertainty considerations about whether or -- the rule of law will be to the point where the stat us of hong kong as a financial hub will be questioned. we know that the u.s. is set to retaliate. beijing is showing no signs of stepping down. francine: thank you so much. endall have an update with throughout the day. thenderstand that legislature in hong kong holding

a debate. business sentiment improved in china but will tensions with the u.s. hinder an already tepid recovery? the opinion of jean boivin from the blackrock institute. this is bloomberg. ♪

♪ francine: economics, finance, politics, this is "bloomberg ."rveillance china's economy has continued its slow recovery from the coronavirus slump this month. early data indicates that small business sentiment has improved with production and new orders higher. let's get the view from my

guest, jean boivin. he's part of the blackrock investment institute. as always, thank you so much for coming on. how do you see this panning out? this is more tensions in a geopolitics coming to the front between the u.s. and china. at a time when we are expecting more stimulus across the world. jean: good morning. thank you very much for having me. markets essentially focusing for now on the restarting. the signpost we can get from china about how he can play out elsewhere. that is the driver at this stage. it is a pretty strong driver. we have seen continuing support to risk assets throughout may continuing this week despite tensions increasing. i think the good news is we see

signs of ability to recover after big shutdowns. we get to learn also about which part of the economy are easier to restart versus others. news.s the good on the other hand, it is going to be a very gradual recovery, as we can see from the way it is playing out in china. on the background, there is the tension, which you mentioned, which is in the minds of investors and we are watching. at one level, this is adding to a trend that was already in place leading up to the u.s. election. escalation of the u.s.-china tension was already at play. if it were to intensify, that could be a risk to markets. francine: this is our question of the day.

basically, we are trying to figure out why are real and financial world diverging? how difficult is it to put that into perspective? jean: the one way to look at things, which is there is a disconnect between what is happening to the real world and activity in the economy and what is happening to financial markets. i am not sure this is necessarily the right way or only way to look at this. the markets have moved a huge amount in february and march, anticipating a very significant shock. we saw moves in line with what we saw in 2008. since then, things have been recovering. i think you can reconcile that by the fact that the trough and activity we believe will be in -- in activity we believe will be in april. a lot of the bad news is behind

us. on the back of this, it creates an environment where initial, big response from markets, adverse response. we see some market recovery. i don't think there is a disconnect. there is a question of whether the market is factoring too much at this stage. it is not an issue of disconnect. it is an issue of maybe being too positive on the near-term trajectory. francine: are you expecting a correction because of that? jean: not a correction. we find it hard to have conviction on directional in the near-term from here. on the one hand, you have seen a pretty significant rally. that makes you cautious on the one hand. new --other, there is going to come.

as we see more economies restarting, i think that creates comfort on the ability of activity to globally move in the right direction. there is such a high degree of uncertainty around all these variables that one way or the other, it is very difficult to be heroic and make a directional call up or down. that is why we are neutral. say whereicult to things are going in the near-term. francine: when you look at all of the stimulus out there, we are expecting something big from the bank of japan. is the danger that we do not know how central banks will unwind all of these extraordinary measures? jean: yes. have seen nothing short of a policy revolution over the course of a few weeks in february and march. the scale and size were unprecedented. we are now adding slowly to what

was already big. the announcements are all in the same direction of adding more. i don't think the big risk in the near term is about how we -- from this. i think it is a significant question a medium-term and for long-term investors. for the near-term, i think the question will be more about whether we risk running into policy fatigue. it's one thing to make these big announcements, it will be another thing to execute on them and make sure they reach the entities that the cash flows support. we are more worried about fatigue in the near-term. when you look at overall, you know, the kind of recovery that we will see, you seem to think that actually the recovery could be much quicker than predicted at first. is that because the lockdowns

ended before we were expecting them to or because you are expecting the rebound and consumption to start back pretty soon? jean: it depends on where we benchmark our initial expectations on this rebound. clearly, the rebound will be a few,ore gradual and over a many quarters than was anticipated when the virus first hit. i think we have all been our forecast in the next couple of years very materially. that is a starting point. however, we have been talking l-shaped., the alphabet framing was within a couple of quarters. now, we have the same alphabet framing, but it is within a couple of years. even the most bearish forecast

right now is still expecting some recovery by the end of 2020 two level us -- to level us to a level before the shock. this is a very material shock that plays out, very gradual recovery. that is still a lot smaller in terms of cumulative impact than what the global financial crisis was as a benchmark. given all the price moves we have seen and where we are now, logices some reasonable to expect risk assets to be well supported on a five basis from here. -- five-year basis from here. francine: what does it mean for how you diversify your portfolios? i know you like u.s. treasuries, i think. jean: one of the big questions is, how do you get resilience

and diversification in your portfolio in this environment? what has happened over the course of the last few months is structural -- but these are very material. hand, as a general statement, because of the innovation that central banks have done with putting new ways which are now at the lower bound -- with putting new rates which are now at the lower bound everywhere and central banks conducting some form of yield curve control, the role that government bonds plate, portfolios, is being questioned pretty fundamentally. we are less keen on government bonds playing a central role to protect portfolios for downdraft on equities. that is one aspect. where do you get resiliency

elsewhere? emerging markets, countries that are exposed to china growth could provide more of that resilience. they have higher yields, more room for rates to go down. a bit more diversification may be coming from there. it is less about government bonds, diversification going forward, and it will be more finding -- elsewhere. francine: thank you so much. jean boivin there from blackrock investment institute stays with us. let us bring you up-to-date with what we have heard from christine lagarde. she says the euro area economy is actually facing a contraction this year in line with the european central bank's more pessimistic forecast. what they had given is basically a range. in the last couple of minutes, madame lagarde saying it is facing contraction in line with

the most pessimistic forecasts. she says output in the region is likely to be between 8% and 12%. that is the latest. the ecb is also due to update its official projections for growth and inflation next week. the governing council -- road to recovery. jp morgan cheaper jamie dimon sees a good chance of a fast economic rebound in the u.s. what are the potential risks to the restart? we discuss that next. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i am francine lacqua in london. let's focus on the road to recovery. blackrock says the cumulative hit to global growth from the current crisis is likely to be lower than in 2008. woarn -- warn that the main risk is if -- failed to deliver policy in a timely fashion. there seems to be such a pushback in going into negative rates in the u.s.. doingany good come out of negative rates in the u.s.? or do they have other tools that could achieve just as much, if not more? policymaker, you never

want to completely close the door on a tool that you have at your disposal. negative rates is one of those tools. you never know, right? we might have a second wave down the road of the virus and they will need to be -- there will need to be some active response coming from somewhere. if i were in their shoes, i think that's the way they would do it. you don't want to completely close the door on any of those tools. i think they are pretty far from or the bar for them to consider that is pretty high. i don't think this is a central bank that has shown or embraced to negativemovement rates and have instead emphasized the potential downside. that is my own view on these things.

the effective see -- efficacy of negative rates has been compelling. the main way by which negative rates can help is by signaling lower rates for longer but we are already in this world anyway. i don't think there is much traction to be gained in terms of stimulus by piling on and going further into negative rates. sufficient --is about negative rates and a starting point in the u.s. that is already pretty skeptical. that makes it pretty unlikely. ishink a more efficient way probably to provide more stimulus. those are by moving more decisively towards yield curve control or more specific ordination with policy or -- coordination with policy or going more direct. i don't think it is impossible but i don't think it is likely.

francine: the european commission is presenting its proposed recovery plan today. how important is it that there is something in there that shows solidarity? well, certainly the news flow of the last couple of weeks have been encouraging. we have seen compromises being made by germany and france. g to showtial thin some verity is that there is a significant part of this program that -- francine: we have to leave it there. hopefully we can get you back on. soon. 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. ,rancine: economics, finance politics. let's get to first word news. twitter has started fact

checking president donald trump. yesterday a pair of the president's tweets making unsubstantiated claims about mailing voting. -- thes readers to a president says the network is stifling free speech. and the plan includes incentives to buy electric cars, cash for clunkers, to encourage consumers to trade in older models. billion euros 8 in -- nissan and renault have announced a rebound to their alliance well each company will focus on key strengths. nissan on a thomas driving, renault on electric cars. -- on autonomous driving, renault on electric cars. the move could deliver savings as much as 40%. that is your global news, 24

by 2700day, powered analysts in 120 countries. christine lagarde says there will be no euro debt crisis after the coronavirus seeing the impact on the euro area economy will likely be between its medium scenarios. the ecb president has told us policymakers are committed to fragmentation. take a listen to what else he had to say. the emergencyt to program, they have to say that it is going to be an emergency situation and it will be temporary. in that, we are doing that, so thewe have seen that movement of markets has been positive.

>> but are you open to abolishing? that i can assure you capital keys have reference. not only in terms of the assets we purchased, that we buy, but the timing of the purchase, that is sometimes much more relevant. the solution of markets is much more quiet. >> it is now, but we don't know if there will be a second wave. there is also a chance of a surprise, a shock. one thing that you have not announced his reinvestments. this is something that a lot of people expect has got to happen. does it have to happen? luis: the program lasts on your end, we will see.

we have not decided anything on that yet. but i suppose that we have time. paul: we don't know if there will be a second wave next winter. luis: there is a variable. , a solution of the pandemic. but a sentiment of the markets is much better than it was a month ago. that has to do with the evolution of the pandemic, the flattening of the infection curve. i don't know what is going to happen with the potential second wave. detrimental. very market inws of the the recovery of the economy. the worst of the pandemic is over. i think this is going to be important for everything.

financialiced in the stability review that low .nterest rates are a burden now there are reload rates for longer. it erodes the profitability of banks and threatens the insolvency of some insurers. in terms of monetary policy, you have to stay away from more interest rate cuts and focus everything on purchases. luis: our approach with respect to the impact of the loan for longer in terms of interest rates is the real cost and the real drivers of the low profitability of banks is not our monetary policy. it is much more structural. there are structural reasons behind capacity. atthat even when you look monetary policy, our monetary policy was positive with the

provision of the banks because sothe recovery improvement when you put together in a the council for monetary policy, you can see that at the end of the day the policy is not the real cost of the -- paul: it is acknowledged that the longer those rates last, the bigger the problem becomes. in terms of the programs of our purchase programs, in terms of the liquidity that we are positioning, giving to them today. paul: but will there be cutting rates more? luis: we are focused on delivery of the

liquidity to the banks in good conditions. as well as our purchase program that i think we'll have a real impact on market conditions. francine: that was luis de guindos speaking with paul gordon. now, pernille henneberg. we are's pecking this recovery fund. what exactly will be the proposal? we spoke yesterday to the swedish finance minister, that she said they don't really know with that mutualization's and the conditions attached to it. what do you think europe will end up with? focus will be of on the european commission president announcement of a proposal on the e.u. budget and the recovery plan. what we will then have after that is a complex negotiation

agreeds to be firmly upon. the initial focus is probably very much going to be on whether grant and still be a loans come and then the initial potential decision from the countries that prefer less of a sharing across the countries. our european rate strategists argue that markets are priced for the survival of this 500 billion euro grant. it is a fairly high possibility for today. they see a somewhat limited scope for further spread tightening. if there are any weakening's of this proposal later on, that could result in some widening of the spreads. be closer tol we

joined borrowing? what we have been told is that there will be fiscal transfer within the e.u., and that is compared to where we were previously. it doesn't guarantee that europe will come out of this crisis. but they argue that it makes it possible to have a better outlook for the economy. same time, the proposal is opening and closing the door for a true e.u. fiscal is part of this view that it is going to be temporary. that is the proposal that we is of course some indication of how much it can do. the joint issuance.

there is a dangerous shift away from the issuance with what we had gotten so far, so that is of course something to keep in mind. francine: if we don't get euro ferryman -- is the very fundamental -- is the very fundamental solidarity a risk or will countries get used to it and then we will move onto the next crisis? pernille: we haven't had that so far. what we have had is he remains the situation whether there is pressure on the ecb to deliver a yield curve and express control limitationn on the of policy from the german constitutional court remains in place. the issue in terms of the fiscal space is not so much the rules

from the europeans set up, but it is more than market pressure that our own countries that need the fiscal space to support the economy but do not have it when you look at how markets will be -- francine: do you worried that at the end of this we will go back to something looking like the greek crisis, that countries that have been hardest hit by the virus will need some kind of bailout unless there is debt relief? is,ille: what the proposal that the countries, not the sectors, but have been hit hardest, they should be helped by this new proposal from germany and france. it seems that there are some very important steps and our economists have been eyeing this from a political perspective. this is very important.

for europe it remains to be seen how much it does deliver, an important step in the right positive in the most sense of decision from the banking in europe. francine: when you look across the world, and we will talk about the u.s. and asia and japan, all the extra stimulus, regions have been affected differently by the virus. what do you worry about the most in terms of who will be hardest hit, and then the recovery? pernille: some global --spective -- you mentioned one of the challenges is that the virus has not hit continuously, so global supply affected when the global economy reopens. some manufacturing activities were open in asia, but that happened at a time that the

virus was spreading in europe and the u.s., implying that manufacturing was closed down there. opening a little bit of of the economy to distort the global supply chains. that is just one aspect. there are a number of uncertainties surrounding the projections at the moment. and it makes it difficult to make projections for the rest of this year and next year. a range, if you have and this is what christine lagarde of the ecb was trying to say -- if you have a range, it seems it will not be mild. it will be towards the worst case scenario. will that be fair globally, or is it too soon to tell?

about thethe baselinefrancine:

effects and uncertainty of the economy is having to face at that affects how consumers are going to respond. so a lot of uncertainty, and that could make it optimistic, the assumptions that many have. francine: thank you so much.

pernille henneberg stays with us. coming up, jamie dimon sees good chances for a fast economic recovery in the u.s. as the nation begins to get back to business. we are also seeing across development in hong kong -- you are looking at life pictures of the -- hundreds have been gathering in the city to demonstrate a plants national security from china. officers have fired pepper spray at least 180 -- and have arrested at least 180 people. this is bloomberg. ♪

francine: this is bloomberg surveillance. i am francine lacqua in london. let's get to the bloomberg

business flash. aboutance has talked stacking numbers with -- the plan also calls for a 40% cut in domestic capacity with france, by the end of next year. klm has already started a voluntary departure scheme for staff, but the french arm thinks that may not be enough. amazon is in talks to buy driverless vehicle zeus. round estimates $3 billion. merck has unveiled candidates for a coronavirus vexing, but an executive says it may take longer than expected to deliver coronavirus vaccine, but an executive say is it may take longer than expected to deliver it. the company says it will not give any one country preference when it comes to a vaccine. that is the bloomberg's

newsflash. now on to your markets. the markets are trying to figure out exactly how much pressure the u.s. will put on china, and they are trying to see what that means versus all of the stimulus, including the japanese package that will come onto the market. europe,re advancing in investors looking past the tensions between washington, beijing, and the dollar edging higher. to talk more about the world economy, let's get back to pernille henneberg. when you look at the u.s. and all the space of negative rates, will we see negative rates, or is it just not worth the hassle right now? pernille: so what we heard last the minutes suggests that the fed is actually considering -- not so much on the negative rates.

we had similar indications during the week. and what our economy has highlighted is that negative more challenging to introduce in the u.s. than other regions, and of course we have more of a consensus now globally as to the effectiveness of negative rates may be more limited than previously thought. thank you so much. henneberg, economist at citigroup. twitter has started fx checking -- fact donald trump. we will discuss that next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." let's get some of your european share movers. european travel stocks have been rallying with a report saying germany is aiming to lift travel warnings for 31 european countries. that is adding to news from the

weekend, planning to restart tours in the country. carmaker unveiling cost cuts. along with nissan and mr. beachy. -- alongas started with nissan and mitsubishi. what about this new action from twitter? >> basically this is a new checks and balances you could say, and this is on president trump's twitter feed. we saw it happen yesterday when he tweeted about mailing ballots, twitter then amended that come which you can see there, talking about the fact that if you want to look about more facts about mailing ballots, click here. the president did not take this lightly. he tweeted that it is completely stifling free speech, and i as president will not allow it to happen. on top of that, he also said twitter is now interfering in the 2020 presidential election. so this is likely going to be

another big fiery debate, in a very divided political scene as we head toward november. francine: what is the plan to reopen new york city? annmarie: it is the city that never sleeps, and i think it will slowly be coming out of slumber. governor andrew cuomo says they will focus now on reopening the city. the only region in new york state that is still on lockdown. rebuild track is to penn station as well as laguardia airport. you can ask any new yorker and i that anyone would agree those two establishments need a facelift, but federal approval is needed for both projects. andrew cuomo wills discuss both of those today when he visits president trump in washington today. annmarie hordern with the latest on new york city and the plans to reopen it. the markets are actually moving on the back of these simmering

tensions between the u.s. and china. stocks are still climbing, markets are first looking at the u.s. and china and seeing how bad the relationship between the u.s. and china will actually be. oil slipping, oil and treasuries higher, they are focused on relaxing the lockdown. contracts on three american goodie gauges pointing to a former open they are wall street. china's run also slipping. bloomberg surveillance continues in the next hour. we will be talking to steven major from hsbc, plus we will be joined by jim o'neill of chatham house. this is bloomberg. ♪

francine: controls on transactions and freezing assets on officials -- the u.s. is considering this to punish china

for its crackdown on hong kong. hundreds gather in the city to demonstrate amid a heavy police presence. jamie dimon sees good odds for a rapid u.s. rebound. the e.u. commission presents its recovery plan today. the ecb is committed to addressing market fragmentation. and twitter adds to a fact-checking label two tweets from u.s. president donald trump for the first time. he accuses the social media giant of stifling free speech. good morning, everyone, and this is bloomberg surveillance. i'm francine lacqua in london. taylor riggs is stepping in for tom keene in new york. we will have an update on hong kong shortly. taylor: an update on the protests that seems to be escalating over the weekend. you mentioned t