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 the trade tensions in china escalating. you wonder here how the u.s.

response, how europe response given the heightened trade tensions, how they could take advantage of that situation. is what: taylor, this the markets are telling us. futures are climbing with european stocks. i'm also looking at oil and treasuries to give us an indication of where we are seeing some of the havens. treasuries on the dollar edging higher. i want to show you the chinese yuan. there is focus not only on this extra stimulus possibly coming from japan, but also on lockdowns. more major economies around the world opened up, taylor. taylor: we are hitting a milestone in the u.s. yesterday you were looking at s&p 3000.,000, we have not closed above those levels, but it looks like we are seeming to get there. some of that hope and optimism on the reopening is filtering through within the s&p 500.

focusall-cap domestic stocks, and a lot of optimism here about the strength of that u.s. consumer coming back, making those small-cap mystic stops -- those small-cap domestic stocks amid the big out performers. we will be speaking with to steven major later about his calls to inflationary trade coming back. i will mention the bloomberg dollar index because you mentioned the chinese yuan. we have seen some strength haven dollar.back into the that reversed yesterday and we are getting a mixed picture within some of the strong equity markets. you are seeing a lot of money go back into bonds, and rightly the bloomberg dollar index, francine. francine: the trump administration is looking at possible sanctions to punish china for its crackdown on hong kong. protesters are gearing up for what could be their biggest day

in months. enda curran joins us. we know there was a pretty big crackdown from china, protests going up. could this up in the world order as we know it? certainly no, signs of easing at the moment. we had another day of protests here in hong kong, about 180 emmons traders arrested and a very heavy police presence, very heavy all around the city come and of course remember, the theesters are targeting national security legislation, so it is something of a boiling point. in hong kong is in the middle now of the geopolitical situation between china and the u.s., china showing no signs of pulling back on its measures on hong kong. could course washington levy sanctions, and it could be

taking away from the trading power that hong kong has. i don't think there is any sign of a circuit breaker or a countdown in the near term. how many more protests are we expecting? we know that police fired pepper spray at hundreds rallying today. will those hundreds turn into thousands? and echo what is going -- that what is happening is beijing is expected to pass new security laws for hong kong. is expected the protests will gain further momentum on the back of that. to carry on into the evening -- --the coming weeks, we get in june, large gatherings are expected. and then we have local elections

here in hong kong. so by all accounts, in the coming months between the national security laws beijing plans to impose, with some local elections in september, the indications are that the protest movement will continue to gather momentum, and of course there likely will be more clashes between police and protesters in the meantime. taylor: what does hong kong want from the international community in terms of pressure on china he remember, hong kong is wanting to self govern until 2047, in areas like national security and defense. so essentially hong kong is pushing for autonomy to be enforced and are calling on some governments like the u.s. to move against china. is viewing that

as interference, and they accuse the u.s. and other governments of meddling in chinese affairs. so we have not really seen any signs of reconciliation. i think if anything, the rhetoric from overseas somenments, we have seen comments from the european unit overnight coming on china to respect hong kong. i think there will be a role for foreign governments in the hong kong story for a while. taylor: on the ground there, what do they think of carrie lam's response? enda: the government is pushing the message that the national security laws are needed, but of course the public reaction is the complete opposite. there are concerns about what it would mean for the legal system, what is underlying for the

judiciary, and what it means for the freedom of the press and freedom of assembly. all of the concerns are that civil liberties have been taken away, and of course the hong kong government is enforcing with beijing and all of this. i think there is a breakdown of trust on all sides. there is reconciliation among the government. it is political deadlock, and there is no sign in the near term of the activity being broken and no sign of a circuit breaker that might lead to reconciliation among both sides. enda curran, thank you so much. wening us in the next hour, seek market corrections and the decade of misery. we will be speaking with nouriel roubini, professor of economics. that is coming up in about 50

minutes from now. this is bloomberg. ♪

francine: this is bloomberg surveillance. taylor and francine from london and new york. joining us now is reinhard buetikofer. joining bloomberg surveillance. what could or should the e.u. do in relation to hong kong? how would you deal with the situation? reinhard: well, the first see it asis always to it is. the hournk this is not

for talking difficult issues. the step that is being taken by is off suchership momentous consequence that we have to call china out for what they do. interferingnot just with the high level of autonomy that has been promised to hong kong for the next 50 years, starting when hong kong returned 1997.na in this is also based on the still-validf a international treaty which is the sign of british joint declaration of 1984. and by reneging on that, china

takeback art of gracious gift that they don't think they deserve anymore. they are reneging on their obligations in terms of the international treaty, and that has of course consequences for everybody who wants to do agreements and who wants to negotiate with china, and this is why europe should say clearly, we don't accept this as a behavior that we can condone. francine: and kant -- reinhard: and then the next step is saying, what can we do? francine: i was going to ask you that. can they go a step further? what will foreign ministers of e.u. countries actually decide after that call on friday? are we talking about sanctions? how fears can the e.u. be in

this? reinhard: look, let's be realistic. if the communist leadership in china decides that they will pursue this course, no one, neither the u.s. or us in europe, nor anybody else will be able to muster enough leverage to tell them you are not going to do this. them iswe have to tell how we think of it, and that it will come with a cost. of i would assume that some the issues that have been contentious around europe, like the issue of are we going to allow huawei to participate in ,he building of the 5g networks

may look differently under the auspices of recent chinese actions. how would we possibly trust rules if play by our the leadership under whose control they are tells us we are just going to honor the rules that we want to honor, shut up? so i would assume that may be on some of the -- regarding some of the issues that have an debated in their realm of economic relations, europe might draw consequences. at thee: when you look fact that u.s.-china relationships have deteriorated, is it in any way an opportunity for europe? can europe be a kingmaker of a certain sort? i know you said we should be harder on china, but is there any economic advantage in trying to keep china closer?

europe is learning how to cooperate with what we have identified as a systemic rival. i don't think that total confrontation with china will ever be a road which europe will take. i don't even think that this is going to be a sustainable approach from d.c.. decided by that be the americans. for europe, we will continue to compete, we will continue to cooperate, but we will not do that knowing full well that there is no convergence between china and us, and that they are indeed also beginning to export their system of governments, to tell everybody globally that their system of dictatorship is

better than our system of democracy. , we havewe cooperate to take that into account. i don't think this is a favorable development. i would have preferred china to stick playing by the rules that deng xiaoping set for the country that made the country there successful starting in the late 1970's. but obviously the new leadership is playing by new rules, and we have to act accordingly. when you look at whether europe can leverage over china, can they come or is china focused elsewhere right now? reinhard: well, i think europe from a chinese certainly there

is a clear goal on the part of china's leadership to separate if they can europe from the united states. and unfortunately the present u.s. administration is playing into their cards in that regard instead of teaming up with europe and finding common approaches. and prefer to go it alone even denounce the european union america, which i think is anything but intelligent. and from a strategic point of view just faulty. that china hasnk a great chance of achieving this goal. because we know full well how much more we share with the transatlantic allies then with

chinese have the tarrying is a. -- with chinese totalitarianism. francine: thank you so much. coming up, we speak with steven major, global head of fixed-income research. this is bloomberg. ♪

francine: this is "bloomberg

surveillance." taylor and francine from london and new york. let's get to the bloomberg business with ritika gupta. ritika: police in hong kong fired pepper spray at hundreds of pro-democracy demonstrators today. it was the first time in months -- the protesters were marching against new chinese legislation that would give beijing more control over hong kong. at least 180 people were arrested. learned that -- the industries have spoken with zeus about investment. a deal would accelerate investment assets, unlikely to be less and the billion dollars zeus had already raised. seattle --ts to the 1300 of their 18,000 are expected with buyouts. boeing warned it would need to

cut 10% of its workforce. that is the bloomberg business. francine: thank you, rithika. simmering tensions between the u.s. and beijing. oil slipping. my most at treasuries. i look at treasuries and what the dollar is doing right now. the dollar edging higher, the chinese renminbi, chinese yuan is slipping. , lot of folks on the lockdowns with a major economies in the world, are reopening. reopening among the hope and optimism that is filtering about 25,000 on the dow. you see a lot of that helped with the u.s. domain of the 10 year yield not moving. this is after you had a big liftoff yesterday. you were looking at an eight basis point rise in yield

yesterday. we will be speaking with steve major about where on the long end of that curve with some of the inflationary dynamics that a lot of people think are set to hit the massive helicopter money, stimulus money, people really thinking that inflation is set to come back when demand returns. i know that that is a very heated debate here. i have heard a lot of calls that the inflationary environment is not going to happen at all. hasbloomberg dollar index been catching my attention as well because we got a weakening yesterday, but today some strength coming back, really showing that tension that you highlighted within hong kong, with the push-pull, some of this demand coming back from safe havens, namely the bloomberg dollar index, francine. francine: we are getting some information out of the european commission. this is a huge day for issuance of debt. also the you commission has proposed issuing 500 billion

euros in joint debt. this is significant for a number of reasons. first, we have been talking a lot about either the lack of solidarity or the perception of lack of solidarity between the southern countries and some of the northern countries. again, what we know so far is that the commission has proposed this issuance of 500 billion euros in debt, and we will see if the government's approve and we will also see what that means for some kind of debt monetization. there have been pros and cons. if you look at what angela merkel did together with the french president, emmanuel macron, a couple of weeks ago, it took the market by surprise. if you look at the details, there were concerns that this does not go far enough. it will be interesting to get steven major's thinking on this. it will be interesting to see where he sees fixed income for a lot of the periphery countries. such as italy but also spain. breaking news, taylor, moments ago that the e.u. commissioner

is issuing 500 billion euros in joint debt. taylor: like you said, joining the ranks of france, running the bond brush, getting $61 billion, i would say in the last few weeks we had a momentous occasion in the u.s., the 20-year bond option that was also received relatively well. so all that helicopter money stimulus really coming out in full force. coming up, we will have an exclusive conversation, john williams, federal reserve bank of new york president. this is bloomberg. ♪

♪ "bloomberghis is surveillance," taylor and francine from london and new york. breaking out of the european

commission saying they are proposing issuing 500 billion euros in joint debt and a 750 billion euro virus fund for eight countries. the 750 billion for the european recovery, 500 billion in grants, 250 billion in loans. joining us now, no better expert than steven major. this of all, on paper, is strong enough? will it appease the people that wanted more? steven: it is a step in the right direction. i think many will be pleased to see a step. the french and german leaders had already agreed something like this last week and it is now going to the next stage. clearly, there will be some opposition but the market is

about probabilities. above zero and rising. it will compress spreads because markets have to price this in as a realistic scenario. if you think about the news flow over the years, it was mainly on the others, all bad stuff about ray cups and defaults -- thisups and defaults and could be a start. it could be three to four times this before they finish, and think of what relief that would mean to periphery issuers. that is money they do not need to issue on their own account. it is central issuance that is joint and several. so far just the ecb has really been carrying the load and everyone has been waiting for meaningful steps. it looks like it is a step in

the right direction. francine: this is a concern, there is a group of rich nations that are being nicknamed the frugal four, that strongly object to this debt issuance. how do you persuade those countries to be onside? steven: rich and small is the key point. s, edrms of gdp weighting is dominated by france, germany -- it is dominated by france, germany, italy, spain. there is a process here and that will be surprising if it was ratified immediately. there is always a negotiation. my understanding is that some of those who oppose the grants would prefer loans, so let's just see what kind of compromise can be made. it seems to me there are already

steps in the right direction, one thing at a time. taylor: if this is a game changer, what does it do to your calls on inflation? steven: i don't think it really changes the call on inflation. where this really matters is on the spread, with the core and periphery yields. the german yield seems to have fore. the bund yield has been of -- has been one of the most boring markets and has cheapened a little bit. in terms of inflation, i don't think it changes that. just going through the factors that drive inflation, it is demandabout demand and has taken a huge shock to the downside this helps with the

process of recovery. it doesn't fix anything, does it? it just eases the pain. it is the same in the u.s., we have such a big hole and the demand shock has been so great, these huge interventions from the government and central banks are trying to build a bridge to the future and buy some time. they are not actually fixing anything. i am more worried about disinflation and deflation risk from the coming months. to make a call that inflation will rise out in the future, i cannot say i am convinced by what i have heard. it is about disinflation and deflation risk. taylor: you are seeing that with italy overnight, 10 year yields falling 10 basis points. do you assume the yield falls further as the spread tightens

between germany and italy? -- therehere is due to is still 200 basis points of the spread. and thats way too much is a lot of spread or a market that is dominated by zero and negative rates. people are hunting for yield around the world, and sovereign bonds like italy, if they are seen as safe, there will be composition -- competition from the corporate market. there is always a clear path being set towards common issuance, if that is what is happening. we have to wait to see the details, but if that is happening, there will be many buyers of italian debt. they will look at greece as well and in some regards portugal and spain.

the benchmark will be something more common to everybody, so imagine the swap yield kevin:, for example. example.ield for france would be somewhere in the middle so the convergence is on's -- on some central level. that means german yields can go up a little bit and periphery yields can clump up -- come up quite a lot. francine: talk to me about the timeline. it if we get is common issuance, that it gets to where it needs to be? steven: markets are big discounting mechanisms and price in all available information, so today's bond deal looks at this year and the coming years. it will be a slow process. the bonds will not arrive overnight. it is about what it does to

future cash flows that matters. to me, it is just a step. it is not like we have absolute clarity. probabilitiesout and about scenarios, and you have to put a weighting on those scenarios, and this is being reweighted. there are a bunch of scenarios and this is removing the less just left tail risk -- left tail risk, bad scenarios, risk of breakup. people who would not be buying italy because they had fears about restructuring or what have you in the future, now perhaps will go to italy. it gives confidence. i will look at this with interest. there are some caveats here.

it is a step in the right direction and that is what matters. francine: if this goes ahead, do you have a target on italian yields in 12 months? steven: 1% would still be high and we know where we have been in the last few years. you know that the spread has been minuscule. yields willat bund go up so if we are talking about the german-italian spread, the bund yields have already found a floor level around the policy rate so it is difficult to see them going to -50, -60. they could drift a bit higher towards zero in the next few years, not immediately. italian yields would be comfortably below 1%, i should imagine. that is a meaningful move from here, enough to make it worthwhile.

it is enough to make it worthwhile taking the risk. i look at the range of scenarios , what is the chance of italian yields going back to 2%? very low. what is the chance of them going to 1%? pretty good. taylor: fold this over into the u.s. what would be a fair value on a 10 year? we have been stuck range bound. where do you see the 10 year yield heading? steven: our forecast is 60 basis points -- i'm sorry, 50 basis points. i am looking at the screen and getting confused. 50 basis points. that is based on the idea that the fed is on hold for several years. let's imagine two or three years, and if they were to start hiking, they will struggle to get much above 1%. that is how you can calculate a number like 50 basis points and

be realistic. if the fed never hikes again, is fair value of 10 year zero. 50 basis points is not unreasonable. i am impressed with the way the treasury market has traded. two months, the fed was buying $600 billion a week. they are down to 1/10 of that now and the market does not move , because there is a genuine demand for safe assets. precautionary savings have surged. people want to keep their money safe and the bank as money ends up in bonds. there is no lack of foreign buyers either. looking around the world, what can you buy that is so safe and offers yield? u.s. treasuries. 50 basis points is not an unreasonable forecast.

we have stuck with it for a few months in the market is steady. taylor: can you be certain the u.s. will not install negative rates? steven: we cannot be certain about anything. in terms of negative rates, i would say never say never. it is probably not going to happen this year. in the u.s., it is a big legal obstacle and a strong banking lobby, but the legal obstacle was serious. in the coming years, next year or the year after it is possible. i am looking at the u.k. if for example the u.k. went to negative rates, the read across would be that the u.s. could go in the same direction. slowly over the last there's, some of the opposition to negative rates has been fading away. it seems to be nodded all that you have available if you are

prepared to do whatever it takes. you need the flexibility of negative rates. far and if youso have a long, drawnout recession you need to be prepared. i will not say never. it is not our base case forecast for this year but it is a possibility for next year or the year after. taylor: a heated debate, thank you so much to steven major. we will change that conversation and go over health with jim o'neill. this is bloomberg. ♪

♪ this is "bloomberg

surveillance," taylor and francine from london and new york. we are joined by jim o'neill, chatham house chair. u.k.,to talk about the negative rates. but first this advisor to boris johnson, how much damage is this doing to the credibility of boris johnson because he does not want to sack dominic cummings? jim: one of the big lessons i in anyd was the case kind of political line, never let the individual be bigger than the story. ont is obviously dragging and i cannot imagine it can drag on for too much longer. they have either got to somehow get attention focused on issues which are far more important, or deal with it differently.

when you lookne: at the state of the u.k. economy, we understand you could be part of a bigger task force to regenerate the north. this is something you have been passionate about for a long time. would you take a formal role the government? jim: i don't want to talk about this. as you know, francine, i am theemely passionate about northern powerhouse and the purpose of the agenda. i talked to lots of people about it a long time -- for a long time and that there remains a big part of my life. government has not lost its focus as a result of covid-19 and if anything, the issues of the circumstances that

have taken place and the evidence of it goes on, the leveling of the gender in the northern house is more important than they were. francine: if you look at the crisis that will come from the coronavirus, christine lagarde said this is the worst scenario we are looking at because middle level ground on how much the economy will suffer in the euro area has gone up a notch. will it be similarly in the u.k. that we look to the worst case scenario for the economy? jim: i am trying to keep a very open mind. i have gone through quite a lot of economic crises, and there has nothing ever been anything quite like this one. it is easy to say that about every crisis. seems, it isn't entirely impossible that we do

get a v-shaped recovery out of this, and a lot of that is greatly dependent on vaccine discovery, obviously. because it is a big shot and a long hope and probably should not be the forefront of most people's expectations, but remaining two issues like leveling up the northern powerhouse, this is a chance for our government and governments across europe and elsewhere to in the spirit of never letting a crisis go to waste, to build back better and stronger and more inclusive economy than was there before. many examples in addition to what i have touched on having to do with net zero target emissions. the government has a chance to influence its bold target for emissions by 2030 in the u.k. in

a way they could not have dreamt of just four months ago. it is important that policymakers think imaginatively, openly, and address some of these issues in a different way than they may have a few months ago. taylor: what do appropriate economic stimulus measures look like to you that would get you the goals you would were -- you were referring to? jim: the two things that are applicable in the u.k. which i have talked a lot about the past couple of weeks, one of which i think is an opportunity for the government to give the bank of england a different mandate. historically ever since inflation targeting, the conversation of so-called nominal gdp targeting has been back and forth and rejected, but in my view the circumstances to do something like that today would be very warranted.

whilst it would not go toward a faster recovery, it would increase the probability of it if they gave such a mandate with a relatively high nominal gdp target to hit especially initially. the second thing which is especially topical around the u.k. at the moment, the u.k. could resurrect some initiatives or think along the same lines of things that happened in post-world war ii construction, or having -- some people might call it a domestic version of the sovereign wealth fund where you have an entity that the british government is a 100% shareholder, and takes equity stakes in different companies and businesses in the same way as singapore has successfully done and the department of international trade does, a 100%

shareholder of the cdc. the case for doing something like that in the u.k. is dramatically stronger than one might have thought about months ago. taylor: we were getting headlines about the e.u. commission has proposed issuing about 500 billion euros in grants as part of some stimulus measures to help boost the economy. are those along the lines of measures that would be helpful here? you think of what could be 500 billion euros in grants? jim: i approve of these kinds of steps and in the very first days, thought it was probably a bit of an error to sort of --lout the playbook of 2008 which is understandable, by the way, it is easy to say that if you are not hitting in the hot seat of rapid decision-making

during the crisis -- there was so much based on providing debts. of course especially in isolation, just encouraging so many businesses to take on a lot more debt did not strike me as making a particularly large amount of sense. has some appeal and could have some up likability here, but given how far we are into it -- could have some applicable here -- grants i have touched on, having some kind of government entity taking equity stakes in different sectors of the economy especially on a regional basis would make a huge amount of sense to me. francine: what will this crisis be remembered for, outside of health concerns and if you have

time i want to talk about antibiotics. jim: i hope the crisis will be remembered for two things. first of all, you cannot separate health and finance. i had the privilege of leading that review. it is probably the most interesting thing i have done in my career, and one of the huge frustrations despite the fact they have somebody of my background to do it, is trying to make people in the world of business and finance and pharmaceutical companies and elsewhere realize the damage that can be done if you don't deal with infectious diseases. my goodness me, we have seen that pretty clearly. specifically on that, i would intentions tohe rush to get treatment and solvee, efforts to

antimicrobial resistance can be made. i hope this destroyed the idea that health and finance are completely separate things. more broadly and linked directly to it, and also things i have talked to you about for the last 12 month, i suspect this might be the end of the obsession of the shareholder maximization economy, let's call it, and we shift more to what i call a stakeholder economy where business is going to have to think much more carefully about its broader role in society, employees and the circumstances of its customers, including those that do not have customers today and what will happen in the future. a much more inclusive approach

to make sure the winners of capitalism are more easily shared. francine: thank you so much, jim o'neill of chatham house. the picture for the markets looks like. the focus is on u.s. futures extending gains. that is filtering through optimism we are seeing in europe, investors trying to look past the tension between washington and beijing to focus on economies around the world reopening. i am looking at renminbi. renminbi is one we are looking out for because it has been slipping, nearing its lowest level against the dollar. the question is why there seems to be a diversions between financials and what we are seeing in the economy? one man to answer is nouriel roubini, professor of economics

at nyu. he has been talking about a decade of misery. this is after we heard from the commission that they promote issuing 500 billion euros in grants, but we heard from christine lagarde the president of the ecb that it is a worst-case estimate for the economy that has materialized. aboutine lagarde talking the annual contraction of 2020 being in the range of -8% to -12%. all of that coming up. ♪

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transactions and freezing assets of officials, the u.s. is considering this to punish china for its crackdown on hong kong. hundreds rather to protest -- gather to protest. jamie dimon sees a good opportunity to rebound. the ecb is committed to fighting market fragmentation. twitter adds a fact check label to donald trump's tweets for the first time who accuses the media giant of stifling free speech. surveillance," taylor and francine. debt issuance from countries and and wemission, the plan still need a vote. we heard from steven major saying this is a step in the right direction,