francine: china approves sweeping new security legislation for hong kong. it's serious concerns about the decision. equities -- where he things the market goes from here. the u.s. reaches 100,000 coronavirus deaths. anthony fauci sees a good chance

of a vaccine. the state to asks move on over a row over his aid. a lot of the focus is on equity markets. our question of the day was why we see such difference between what financial markets are doing and what the real economy is telling us. today the focus is not on the tensions between china and the u.s., a question that has been escalating, we are looking at treasuries. investors are weighing in these fresh fiscal stimulus and what that will do to prop up the economy. i'm also looking at crude oil and then gold, a good litmus test out there. china has approved its controversial new security law over hong kong in defiance of president trump and his secretary of state. who says the city no longer has any meaningful autonomy from china. joining us now from beijing.

thank you for joining us. they just voted to endorse a national security law. what comes next. >> no surprise that the nationals people congress approve the proposal. they are circumventing the hong kong legislature to pass this through. this now goes forward to the standing committee and could still be another several months before we get details that will be banning sedition, subversion and foreign interference. possible retaliation from the u.s. could include visa restrictions on chinese officials and financial sanctions and more dramatically the u.s. could also provoke hong kong's -- revoke hong kong's special trading status. this would be a big deal the u.s. has agreed to treat hong kong autonomously when it comes to economic and trade matters. tariffss of punitive

and technology sanctions that are in place from the u.s. to china, those do not apply to hong kong. the u.s. does have to walk a delicate line here because the revoking of the trade status would also hurt the u.s. and american companies operating in hong kong as well as the hong kong people. china has threatened countermeasures, they could release more details about the unreliable list which would target american companies make it harder for them to operate in china we have no details on what companies could be on that list or how they would be targeted. china tried toas portray the national security law? blow with the removal of the trading status be? >> there has been a whole flurry of state media in the past several days that tries to that this is critical to safeguarding the safety and security of hong kong. they tried to allay concerns

saying this would not change the one country to system way and that it would not undermine the freedom that's enjoyed in hong kong. however that clearly has not allayed concerns in the business community or international community with taiwan saying it's played, with a plan that would help hong kong residents at want to fully hong kong to other areas. a hong also have here kong media tycoon and activist saying these debt she is concerned this law could turn anybody that participates in a demonstration into a criminal. clearly there is still a lot of concerns about this law from the business community and international community. when it comes to that revoking of the hong kong special trading status, chinese state media have argued they are not scared of this threat and the impact this would have on china and china's economy would be far less then it would have years ago. that means if you look at the stats from 2019, just 12% of

china's exports went to or through hong kong compared to 45% in 1992. china is also far less reliant on hong kong for its flow foreign capital and expertise. hong kong is still a critical business because of judicial independence and their adherence to global international governance so this could have a consequent shall impact. francine: thank you so much. let's get to the bloomberg first word news in new york city. >> the number of coronavirus deaths in the u.s. has reached a grim milestone of 100,000. thelatest report says pandemic deeply damage the u.s. economy. says businesses are pessimistic about the pace of recovery. predicting a is pay cut in the second half of the year. place in in a good

terms of we are near the bottom of the economic downturn and hopefully will start seeing improvement in the coming months. in the u.k., prime minister boris johnson is asking the u.k. to move on on the controversy about a top advisor. he said he is sorry for the pain and anguish of the lockdown stood by dominic cummings. he is facing mounting public anger over his decision to theel 260 miles while country was in lockdown. >> quite frankly i'm not certain right now that an inquiry into that matter is a very good use of time. we are working on coronavirus. global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine.

francine: thank you so much. coming up we will stick with our top story as china approves a controversial new security legislation for hong kong. plenty more of that and we also angles including what it means for the markets. this is bloomberg. ♪

>> my question is can we expect china to deliver more ambitious stimulus in the months to come as well as to china have sufficient policy options to deal with a prolonged global pandemic and rising tensions with the united states?

to gete: we were hoping

translation but we have not just yet. looking at my bloomberg terminal i can tell you what the prime minister is saying. there is a straight question we just heard in chinese and the answer in chinese on stimulus. the premiere will probably be on come -- on comfortable ground. the first question was from a foreign journalist about the fiscal measures taken by china and its impact on the chinese economy. he had asked whether china would take more ambitious measures. we are also expecting to have a lot more questions on china and the special status. there were reporter was asking if the government has options to deal with the pandemic and rising political tension. that press conference of the chinese premier in the national people's conference with any breaking news that comes from that. let's get to bloomberg business flash in new york city. the stakesa is raise in talks with the eu, holding

off on accepting a bailout from germany. to months ited takes lots that will weaken its hubs. they are reviewing the options saying the bailout remains the only viable solution. -- plenty to cut thousands of jobs come almost 30% of its workforce. europe's second discount airline will begin employee consolations . suggesting as many foreign a thousand jobs at risk. glaxosmithklein is looking to produce one million doses -- one billion doses of the vaccine booster. peoplee is to allow more to be immunized and become immune. the u.k. drugmaker is working on its own vaccine and the two efforts are separate.

that is your bloomberg business flash. lawmakerschina's passed a new national security legislation for long -- for hong kong. officials could take months to sort out details. listening tojust the chinese premier press conference at the closing of the national people's conference. we are following it through the bloomberg terminal. if you are a bloomberg terminal subscriber, you can do it like i am. speaking at the conclusion of the npc and he said coronavirus is dealt a heavy blow to the global economy. i think we are at one or two questions in and all of these were on the economy and how they can deal with that at the same time with political tensions. joining us now to talk about the markets and the simmering tensions between the u.s. and lucca, as always thank

you for joining me. are you worried on top of this recession brought on by the pandemic that we are facing a very ugly trade war the u.s. and china? >> i think so. i think one of the assumptions investors are making now and the reason the market is going high is this belief this could be the trump in ae and so verys trying to look aggressive on china but at the end of the day the assumption is just a rhetorical confrontation. i think we have to be very careful because what's going on in hong kong will be something the significant, but so far assumption is it's just a war of

words. i think it's better to be a little more cautious. class arewhat asset you looking at first? our queen of charts did some great charts, for exam on the impact of the dollar. is this situation in hong kong -- as it escalates, what would you sell? this is really a global risk off moment and so i think you're going to get a significant location into defensive. you can see rotation to u.s. bonds. -- should expect , for now itntially is just words but if this

collision takes place, the worst possible time to have this kind of collision. the global economy continues to be incredibly weak. francine: how much do you look at chinese domestic? we are just hearing from the premier the china is shifting the priority to people's basic living needs. it will be more difficult in the past, but will china changes in economy? china in the sense china will be potentially a template for their countries when we look at the evolution , the big question here will be how fast will the spending recover.

need to see if consumer spending will recover but also how significant is this fiscal stimulus will have a significant impact on the economy. the chinese economy is completely different in a way from the u.s.. us, looking at the spending in china if you wonder what could happen in the u.s.. francine: where do you see value if you look across the world? china seems to be the pivot of this in every way you look at it. do you see value in treasuries? are you worried about negative rates? how do you see the investment world? evaluation,ook at

what i can see her probably in areas it could be difficult to invest. energy, at the banks, this is where potentially some emerging markets and equities. when you look at fixed income been some positive ,alue in investment grade whenever you look at the valuations. you need to have some government bonds and when you look around i think the u.s. is the only one offeredovernment bonds a little bit of yield. seeink it's difficult to

value in mixed income right now. --ncine: we are now expecting the central bank to draw everything they can. point -- the thing that comeld say is a point will , though be the last went to the lever on negative disappointment. as long as the economy is recovering, if we start to see some kind of negative news of the economy that this kind of recoveries not gaining speed and also central banks will boost markets even more. we heard from angela

merkel, she spoke before the the eull passed but said has a great strategic interest in maintaining contact with china. kim they emerge a winner from this? first on an eu china relationship, does it give you any hope of a slightly better recovery. >> this is more for the long-term. what angela merkel said in a way is obvious. i think europe now seems to be betweene somewhere in the strategic interest with china but also the obligation with the u.s.. europe is somewhere in between.

in the short-term i think europe can only wait and see on the potential escalation. i think there is not much europe can do. first europe has to fix the situation in europe itself. what we see now i think is very positive. in the long term if you look at the strategic issues, it is too early to tell, they have to wait for the dust to settle. this won't happen before november i suspect. we saw between the italian 10 year and the german bund yesterday. will people vote on that? thatill have countries have been reluctant to send

their conditions attached to it. i think it will go ahead and i think it's very positive for europe and positive for investors who want to be involved in european assets. concern was the fragmentation, political --fusion, there's no fiscal this is a big step. , thisd to think of europe is a giant step but i think we have to wait until the decision is implemented. changer ande a game i think it's important that germany has changed its position quite significantly. what has been agreed was

unthinkable a few years ago. we know that in europe there always big gifts. ifs.g francine: if it gets done too late, is there danger for spreads? what are you doing with italian and european assets ? in europe, the decision process is long. i think everybody knows that. it's important you see movement. is underwaytation and if you are lucky, in 2021. marketsthe impact on will be very significant and so

i think we should never underestimate confidence when there is an agreement. economy in thehe meantime i don't think will make a difference. important is there is a plan implemented and everyone is involved which is required for the plan to go ahead. francine: thanks so much for joining us. are stillntime we hearing from the chinese premier saying china will see growth in 2020, there is no target these of the closing remarks at the nationals -- national people's conference. follow along for bloomberg subscriber, it's very useful for this press conference in chinese.

all the measures he says will provide relief to market , for example liquidity risks. targetve also offered to rate cut and monetary easing. talking about the impact of the pandemic and the virus at large. he said first these are targeting -- we will continue keeping an eye on what the chinese premier is saying and all of those headlines. interview coming up next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." we were just hearing from the premiere in china, li keqiang,

saying a high-priority for the government. the bottom line on stimulus is that the government has to be disciplined on the front that it will not hesitate to roll out measures if needed. in his own words, he says we will not pick up dirt and leave a trail of dust that will block those coming from behind. the press conference is in chinese, so we are relying on our fantastic team on the ground, bloomberg reporters translating for us. premier li has been asked a number of questions. the first answer was a question from a foreign journalist. he says china will be able to prevail under the leadership of the comet's party with xi jinping -- of the comet with xi jinping -- of the communist party with xi jinping as the

core. we will bring you any news coming up. european equities are on track for their best may since 2009. stoxx 600 is higher this morning, having already gained 3% from yesterday's close. countries restart economic plans to liftunce travel restrictions. credit suisse the recovery -- credit says the recovery underway in china could take hold in europe. comic activity will remain below precrisis levels well into 2021. turning us now is michael strobaek from credit suisse. great to have you on the program. we are looking at life pictures from the national people's congress. recovery,e talk about v-shaped, the death of a recession, are we discounting the u.s.-china trade were at the forefront, and what would that mean for equities? michael: good morning, francine.

i think we are moving from one risk to a new one that really has been with us for several years already. it is clear that the coronavirus a new has now given impetus to the geopolitical standoff between u.s. and china, and obviously when u.s. election year, the candidates will look whatomeone to blame for had happened, how it played out, and what was shared in terms of information and so on, and we are seeing some pretty sharpening tone coming out of the u.s. this week. we will hear later this week from the president what exactly the measures are that are going to be taken as part of an and emerging perhaps

cold war on the back of the coronavirus. this will have an impact on markets for years. right here right now, it is more important that we come out of the crisis that has been triggered by the virus. francine: yesterday our question of the day was trying to figure out why there is such a divergence between the real economy and financial markets. do you see this divergence dotinuing, or at some point they match up? michael: i think this divergence can carry on for quite a wild, but it is also important to know that you cannot just link the fundamentals one to one. markets look forward. they are nine to 12 months down the road. already what they are seeing is a recovery that has been supported by you norma's -- by enormous fiscal and monetary stimulus, crossing several lines that we could never have thought

of in peace times, getting out of this economic malaise that has been triggered by essentially the lockdowns of the entire western world. my view has been that you should not stand in the way of that tidal wave. this cycle was not in my view the way it did, and it got reignited by stimulus and the economies coming back up live, if you will. china is showing the way. europe is slowly following up, and the u.s. needs to come out, but all of that will continue to support especially equity markets, risk markets, credit people to an extent that have really either underappreciated and will -- and/or are in a state of dimaio -- of denial, and this can carry on come in my view. francine: you worried that there will be a lot more policy action

needed? what happens if we have a second lockdown? michael: that is obviously a very risky scenario. my personal view is that governments are now turning fornd the responsibility how this virus goes through societies by essentially telling people you need to take more personal responsibility for how you move around out, given that the virus is not going to go away and may actually become, if you will, again quite sort of problematic into the colder months later this year. i cannot imagine that with what has just been done in terms of stimulus that we would go into a second full-blown lockdown wave. it is simply too costly. it is at times inconsistent, and rather than yet again let's just say pumping out $15 trillion of

stimulus, i think we will hear that we will hear that we need to learn to live with this and find better and smarter ways than shutting down entire economies, sending healthy people at home, closing otherwise healthy companies. this is not a time consistent strategy, and i think for now we need to work with the stimulus that we have gotten and he needs to become more pointed, and need to companies consider their survival so that they come through so that people can get back into jobs. we do not have a further credit default wave that potentially destabilizes confidence and trust in the financial system, and therefore i think what we have gotten, we will have to work with now, but obviously some of it is open end. who knows where that can go? francine: where do you see the

most value in the markets? stillr viewers, we are seeing pictures from beijing, reporters asking questions to the chinese premier. i know you spent a bit of time looking at oil and the fact that there is a rebalancing underway. is that one of the most important factors? theil rebounds, it means global economy is also slowly coming back. michael: oil is one element of an enormously complex puzzle that has been created by this crisis. as i said, this cycle was not ready to end like this, and i don't think it has ended. paradoxically, i think value everywhere outside of government bonds are mostly going to go toward the heads of the central banks, and ifo's -- i think those are very unattractive values that have created in broad range of equity markets.

suddenly on the earnings yield, equities now look even wraps more attractive come and we in late march when we concluded s&p down 35%. we were getting $5 trillion to $10 trillion of stimulus. 50% to 70% of earnings in the s&p 500 are perfectly healthy, maybe even benefit from this crisis because it is telecom, it is health care companies, pharmaceuticals. and i thought together with my team here that we need to step into this and pick up what has just been created here, which is who have ars longer time horizon huge given 38 million people with initial jobless claims which is really bad.

, we havee same time got central banks basically saying we will support the spreads not blowing further out, and equities. but if you are the residuals of this stimulus and the growth that we think we will get back to at some point in 2021. that is why equity has value. oil completely dropped out of the sky for reasons that we could never have expected, and there was a lot of value come in my view, created in the energy sector by that. oil being on track for going much further up. that is actually good news. francine: michael, do you see the biggest missed price -- i don't know if it is a mismatch, emerging markets, or something to do with high-yield -- but given the environment, and i guess you need to figure out first what the legacy of the prices -- of the crisis will be

on the market longer term. michael: i think we have been in an equity market previous crisis driven by searching for not only yield but also solid growth. solid growth was built up quite heavily, and i would not be surprised if we finally begin seeing the rotation that everybody has been looking for for the last, if you will, 10 years, that view dramatically underperforming growth. this crisis could be a trigger of the rebound rep -- could be a trigger of it. the rebound rally we have seen, normally what comes out of a correction and a recession -- sorry for using the word -- but we have these sort of crop rallies where everything -- sort everythinglies where i think those value

areas are very clear with financial assurances in the energy sector. all the things that have sort of been beat down versus the growth years, theso many time for that rotation is coming . it is in europe, it is in emerging markets. much more than something like -- withine: what do you do technology stocks? does the way we live, shop, and work change because of the crisis? michael: i think it will intensify, francine. the trends we saw going into this crisis will be amplified by are moving, i.e., we or living in an industrial revolution, 4.0 already, and we have been reminded how important data exchange, enter conductivity over the internet,

videoconferencing, etc., etc. just imagine that would have not worked in this crisis. we would have had a much, much worse crisis. and everybody are learning to live a new virtual home-office driven reality because of obviously the fear of this virus thing ghosting around that will imprint many hundreds of millions of people's way of living. i sadly suspect all of the people that seem to be more susceptible to getting seriously ill or die from this virus, and other generations, younger generations will have already shown the way, and i think we will be even further boosted in this direction. that is the paradox with this crisis, that it amplifies everything probably that we saw tech into it, and now big echs in of the bigger t

the u.s. and china are dropping these large companies and going into and coming out of this crisis profiting from it. francine: michael, who has done a better job -- i don't know if that changes your appetite for treasuries versus guilds versus some of the things we are seeing in europe -- but who has done a better job dealing with the fallout? yesterday we had this commission. doesn't make you want to buy european assets more than treasuries? michael: i think what they are s thatis crossing rubicon we could not have imagined 3, 4, five years ago, especially of the lead that seems to now come from germany, in its push for solidarity to not make this crisis the one that breaks the union. i think everyone recognizes that

southern europe, especially come has ended up in an abysmally bad situation because of this crisis, and there's obviously a risk coming into the summer months, and the second half, the summer months that if there is no sign of support for southern if the virusially situation becomes worse, in the summer months, which we sort of have to -- we are basically just opening up as if nothing has happened. a lot has happened, but if you look at how we continue to socialize, behave in public, etc., etc., we will know in a year with the asian countries like taiwan, south korea, and areas of china are doing. that can worry me a bit. that i think we have to learn to live with this. people will have to take more responsibility themselves.

for europe, if we are seeing a mutualization and a collateralization of expenditures that are granted pretty much for free, that is completely new territory for the european union, and that would make the european union as an investment going into an area, if you will, much more active for global business. francine: what happens to in 18 months? the camps think inflation is going to be a worry, whether there is a risk of destruction or -- deflationary pressures taking hold. anhael: i think deflation in 18 months' time frame is quite unlikely. aat we are dealing with is fantastically deep deflationary

demand, supply oil confidence shock that, amplified with demographics, technology, and so on, will not bring back inflation any time soon. i would not worry about that right here and now. i would more worry about who picks up the bill for this, which seems indeed to be treasury and government bondholders. francine: michael, thank you so much for all of time today. michael strobaek of credit suisse. let's get to first word news in new york city with her to could go up to. ritika: china has approved sweeping new national security laws for hong kong. it defines u.s. warnings over as there wasture an increased tension yesterday. city's special trading status at risk. also authorizing sanctions against chinese officials for human rights abuses.

it comes as the u.s. ratchets up pressure on beijing. china has warned of reprisals over sanctions for what it deems interference in its internal affairs. russia and saudi arabia have agreed to coordinate on the opec-plus deal. it comes two weeks out of a crucial meeting to discuss the output cuts. theian president putin and saudi prince mohammed bin salman -- they are determined to start easing output cuts in july. and nissan has unveiled a new turnaround plan after reporting an over $6 billion loss for the fiscal year, including cutting capacity and the number of car models available. the japanese carmaker will also close its barcelona plan that will keep one open in england.

the new timeline means elon musk's company will have to wait a few more days to launch two extranets -- astronauts to the international space station. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, ritika gupta. this is bloomberg. francine? francine: markets are actually drifting. stocks are climbing in europe. that's get a look at what we are seeing. european stocks you can see our at 1%. u.s. futures are fluctuating a little bit more. investors weighing these fresh fiscal stimulus from the european union against increased friction between the u.s. and china. i'm also looking at nymex. and a lot of people are saying that oil will start to rebalance. ika was just talking

about that phone call, and that treasuries are drifting. of uti is falling below $32 a concerns of fresh excess supply. the e.u. hasector, unveiled an unprecedented $2.4 trillion stimulus plan anchored by 750 billion euros of joint debt insurance. -- of joint debt issuance. overe unique model built 70 years is being challenged like never before in our lifetime on our union's history. it was a as though d-day for the 21st century. countries and our our economy. >> it is clear that the negotiations now will be very difficult. this will not be concluded at the next e.u. council meeting. >> this is about all of us and it is way bigger than any of us. this is europe's moment.

francine: that is of course ursula von der leyen. spain, with italy, has suffered the worst of the economic -- of the coronavirus pandemic. joining us now is jose maria roldan. thank you so much for joining us. when you look at some of the concerns out there, when you look at some of the concerns over banks, and maybe there is a is thereegulation -- anything systemic that worries you in spanish banking landscape? michael: not -- not in particular. everything is going to be confronted with rough waters in the coming months. of course, the economic deceleration that we are seeing across the world, and the type of simultaneous crisis is going to have an impact on balance

sheets, on quality. i think we are prepared in terms of solvency, liquidity. we werear better than 10 years ago, so i think that is think there are going to be rough waters, but we are determined not just to weather the rough waters, but also to do what we need to do ourt now, which is serve clients in getting them through this complicated environment. francine: what does it mean for -- what do you worry about the most? what does it mean for capital reissues? do the -- do you worried that they are lending too much and that it is risky, or that they are not lending enough? what is the risk here?

jose: this is totally different. doing in a normal period of economic deceleration would be as a regulator, you as a bank you would try to fortify yourself, your balance many, try not to get too risks, fortify yourselves in terms of solvency and liquidity. now, weneed to do right need to finance the real economy. because people are going to be confronted with losses coming from this lockdown, and they will need to recover these losses for the coming years. if we were to not extend credit to the real economy, this would be the worst scenario for all of us. for each individual bank and for the system as a whole. the good thing is that banks have understood this.

authorities have given way to releasing buffers. and with the help of government funds to, releasing to weatherpanies this -- you worry i have right now is that i think it is extremely important that regulators at central banks are swift in releasing these buffers. also to clarify the process going forward, revealed in those buffers in the future. because the expectation is that in one year time, the supervisors are going to come to you and said you need to reveal your buffers in one year. clients are going to be very reluctant to lend to the real economy. on the contrary, there is the sense that this will be a multiyear process and this will lead to tensions. francine: is spain pushing brussels to grant further relief

from some of those capital rules on sovereign bonds? it is pretty technical. our reporter follows this and explains to me that this is called the prudential filter. how worried are you about these sovereign bonds putting a big hit on banks, given the crisis? not too much. our attention is on the relief on buffers. we need to verify how we are going to go back to normal, by normal meaning the capital delivery that we had before this. risk, because for the time being it is not in the portfolios. it is related to the real economy. we need to clarify with the regulators that going back to normal sanctions is going to

take several years. course, what facilitates, you know, this theme of rough waters. the return to normal is more relevant than the measures that are being taken. francine: tom thank you so muchr joining us today. and maria roldan, the chair chief executive of the spanish banking association. in the meantime, for the better part of the last 50 minutes, we are keeping an eye on what the chinese premier is saying. 10 to 15en answering questions. he was referring just moments ago to the need for peaceful reunification with taiwan. some of the questions he got were also on hong kong. he got questions on stimulus. he was very clear in urging that there was need for international cooperation to control coronavirus but also to do with

the economy. he was asking for some kind of global that some kind of help or cooperation at a global level. this is one of the things that we need to keep an eye on. he was reiterating the one china principle in ties with taiwan. that is significant given all of the political tensions that we were talking about. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york. we will speak to the former governor of hong kong. this is bloomberg. ♪

francine: china approves

sweeping new security legislation for hong kong. the u.s. declares the city no longer autonomous. we speak with former hong kong governor chris patten in this stocks shrug off the tensions, hour. with european equities beginning a fourth day of gains. the united states reaches 100,000 coronavirus deaths. anthony fauci sees a good chance of a vaccine by year end. boris johnson asks the u.k. to move on from a row over his aide. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua, here in london. tom keene is in new york. tom, we are getting breaking news. we have been following the final press conference of the national people's conference in beijing with premier li. he said they are willing to work together on a vaccine and he is asking for more global cooperation. and euro confidence