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. rising aconfidence touch, below estimates but still

better than it was a month ago. tom: it is all the news that is out there right now. you see a little bit of a lift in the markets. we will get to the data check, but what is extraordinary right now is this historic moment for hong kong. and lord patton with us in 30 minutes, which is a great honor. now let's get straight to bloomberg first word news in new york city with ritika gupta. ritika: as you were mentioning, lawmakers in china have defied a threat by president trump, approving a proposal for sweeping national security legislation aimed at hong kong. the micros the advocates say the measures will curb freedom in the city, and this came a day lead -- this could president trump into imposing sanctions on china. been more than 100,000 deaths in the u.s. from

coronavirus. that is three months since the first death announced on february 29 in the united states. according to the institute of directors think tank. wagestly paving 80% of for jobs. the government wants to change it so that companies can bring workers back on a part-time basis. but they would be asked to pay a greater share of wages. and a sign that oil is coming back in asia. shipments of crude jaffa and the middle east, set to load in a month or left. -- a month or less. some of it was already being stored on tankers. 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. tom? francine? tom: retake a, thank you so

much. equities, bonds, currencies, commodities. after two big days up, amazing to see the near 7000 move on the dow as we come off the march low. yield markets, sort of a churn. we are watching the renminbi, and the reactions of the white house will be extraordinary, the state department as well. with dollar-you want 7.16, maybe 7.15 at any moment. francine: stocks are climbing in fluctuating.y much treasuries are drifting. investors in europe are focused on the fresh stimulus from the european union. a lot of people are saying it is a step in the right direction. what we are not there because it needs to be ratified. i'm also looking at wti. we did have an industry report with fresh concerns about supply. it is holding on, just below

$32. there seems to be an acceptance that the market will rebalance. there will be plenty more on that shortly. now, tom? tom: thank you. so much. francie: -- francine: beijing has improved a suit as has approved a proposal for national security laws in hong kong. it could revoke the city special trading status with u.s.. joining us is tom mackenzie. what does it actually mean? this is the u.s. going quite hard on china. tom: that's absolutely right. as tom was touching on earlier, a special trading status has been carved out for hong kong freedomsf the special that the city has had in the

business freedoms they have had. the restrictions on exports of certain technologies, for example, none of those apply to hong kong. that now potentially will change because mike pompeo came out and said to congress we cannot certify that there is a high level of autonomy for hong kong. that was spurred by this move of beijing to circumvent the hong kong government that puts in place a security law that has been voted through. it is not enshrined in law yet, but it is a major step that will inevitably be enshrined in law. we are waiting to see if by the end of the week the u.s. will , or, and willns china respond in kind? targeting u.s.t companies here? we could be back into this tit-for-tat cycle. but the historical framing of this is important. francine: we were just listening

to the premier talking at the national people's congress for this final press conference. what did you make of the tone, tom mackenzie? is he likely to be belligerent, or are the chinese authorities unlikely to pick a fight with the u.s.? there, xifficials jinping, it is always possible -- they want to make this a domestic focus. they want good relations with international leaders, particularly with the europeans. his speech very much focused on the economy. i haven't seen anything where he has discussed in really great detail the security law or even the law that was passed by the house and senate that will go to president trump's desk. he is focused on keeping the targeted measures in place for the economy. he talked about the emphasis for jobs and job creation, which is

keeping leaders up at night because of questions around social stability. it seems to be a very disciplined approach, the emphasis on supporting the economy here. no big surprise they did not discuss these hot button geopolitical issues. francine: tom mackenzie come help us with the idea of goods and services. the great and misleading thing here is that hong kong is all about goods where it is much more financial and services. does beijing just assume that washington will apply sanctions toward the financial markets and the service market? francine: it is the -- tom: it is the free flow of capital that allows the city, many chinese communist party members to get their money overseas and to invest their money overseas, but they use the city as a platform as well for their own wealth benefit. in terms of internationally, of course there has been a big push

to ensure that shanghai and shenzhen are in a better place increasingly, and that that increases the open market. the financial services sector is key. there may be a cancellation, but the u.s. is not going to go as -- as revoking the special trading status. status,we revoke that is this the day where finally the financial mobility and financial culture and cup foods -- and confidence shifts to shanghai? tom: that is the key question. that is what the party here in beijing would like to see ultimately. it is not clear that they want to see hong kong totally gutted as a financial sector, that they are certainly putting in place policy to ensure that shanghai becomes a more attractive capital than the capital market.

now,for wall street banks they are trying to hedge their bets on this. hong kong remains an important city for china to ensure that there are these capital flows, and for members of the communist party. whether we are going to get businesses moving in singapore, which frankly seems more attractive right now than shanghai, is not a question. something that businesses are discussing now. how are they going to head? singapore is quite high up on their lists. francine: thank you so much. coming up this hour, and exclusive conversation with a formerer patten, hong kong governor. there are a lot of questions regarding the press conference with leaking quang -- with leaking quang -- this is bloomberg. ♪

francine: -- tom: good morning, everyone. "bloomberg surveillance" from new york. the headline, the story from hong kong, and extraordinary morning from hong kong. we are looking for the american response. it is a changed hong kong this morning. the headline from "the new york times," and maybe there will be many other headlines in the next 24 hours. the united states to expel chinese students with ties to military schools. we see that headline this morning. joining us on the equity markets but also with always a strong view to asia is benjamin wheeler -- is ben laidler.

hims well-timed to speak to . before we get to the stock yourt, i must address years at the shanghai banking corporation. your interpretation of how financial hong kong can move forward. is obviously very difficult. right now they are stuck between an increasingly assertive china, which seems to have given up on local policymakers there, and the u.s. political climate, which is, with an election coming up, quite modest in support at this point for a more assertive against china on that front. there is this proxy battle between the superpowers, which is deeply unfortunate for hong kong. sure -- iust not think global equity markets are

going to be resilient despite how unfortunate it is for hong kong. tom: you have absolutely nailed bottom of 37% off the march. ben laidler is way out front on this. and then there is the discussion of a barbell approach, or maybe for those that missed this rally, the dumbbell approach. now what? what do you do after a 37% move in the dow? i think you do two things. in terms of fundamentals, you remain focused on the incremental drivers. the market is focused on those data points. they want validation that we are going to get back to that 2019 earnings level by the end of next year, and we are looking at a resumption of activity, the global activity index. it is still 40% down from where we were in january.

we are looking at the easing of government restrictions. obviously very tight on a global basis. and we are looking at this court of miracle treatment for the coronavirus. i am not a doctor. i cannot foresee that, but we do developmentcines in globally. are the-- i think those fundamental side. on the portfolio, i think you have got to be reasonably balanced. we have a core of these sort of quality growth stocks in the markets that we are beginning to move away from now because they have done so well. i think valuations are undemanding given the quality of what these companies have, coming out of the crisis a lot stronger than they went in. you need to pick cyclical recovery winners, where the

risk-reward makes the best sense. we like european financials, we like real estate, we have been adding to energy. got -- you have you have got to pick those cyclicals carefully. francine: what exactly is the market pricing in terms of a vaccine? ae they pricing in terms of second lockdown, or are they discounting that? beenso far we have reopening for the last couple of months, depending on what part of the world you're looking at. and we haven't seen -- we have seen sporadic second wave outbreaks, but nothing dramatic so far. i think that has been the story. and to the fear story, i think this has been a big consensus. what has kept people cautious is the fear of the second wave, the

fear of a second, third tier of economic and financial consequences. and a lot of that has not come to pass. a lot of it has been negative, and people have been gradually pulled into the market. there are indicators everywhere in terms of the surveys that tell you that two thirds of , money is going into money market funds in the last couple of months. that is one of the ingredients of support that i think the market has, which i think is a lot stronger than people give it credit for. thatine: is there a danger we have this divergence that stays between what the economy is doing and what financials are doing? ben: absolutely, and i do think you -- if you look at the numbers in the first quarter, what the s&p 500 saw, flat upper

earnings, one third saw her earnings down more than a third, and those trends get worse in the second quarter. i think that just shows you the diversions. big sectors like tech and health care will probably come out of this crisis not as they went in. some sectors will not come out at all because there will be a bankruptcy. i think there is very little in between. it is just a colossal life or occasion. the stock market has -- it is just a colossal bifurcation. that cannot be said for the real economy, which has more sectors that are sort of under pressure now. .ou have consumer real estate francine: thank you so much, ben laidler stays with us, from tower hudson research. numbing up, a discussion with christopher patten, a former hong kong governor. what a day to speak with him about his hong kong. this is bloomberg. ♪

ritika: "bloomberg surveillance "bloomberg surveillance this is -- this is "bloomberg surveillance." the japanese automaker nissan unveiled a turnaround plan that has involved cutting about 2.8 billion dollars in fixed costs. some plans to reduce the number of car models it offers. forecast forsue a the current year because of uncertainty raised by the pandemic. carl icahn has bailed out with a

loss. hertz filed for bankruptcy last week. the pandemic has disrupted the supply chain of the world's second largest computer maker. hp reported revenue fell more than expected, 11% in the latest quarter. profits also missed estimates. hp says it is delaying a $15 billion share buyback plan until the market stabilizes. that is your bloomberg business flash. tom? francine? francine: thank you so much. of's get back to ben laidler tower hudson research. we were talking earlier about some of the equities, the sectors that you liked and do not like. are we overestimating or underestimating the transformation that suppliers will have in our working lives and therefore our shopping and technologies? mean, i think it is --

the depth of this crisis is obviously unprecedented, and i think it will become as it was in the downturn, the divergence on the way out is going to be dramatic. the changes a lot of the sectors will have to make are going to be unprecedented. one of the risks we are flagging on the way out is the cost associated with that. we saw the likes of volkswagen and amazon, like in the billions of extra cost that they will take on in order to manage to reopen out of the downturn. i don't want to sound too bullish here. there are a lot of moving parts here. there is going to be an impact on earnings, and some sectors are going to be very dramatically impacted. you said you are avoiding the u.s. banks. why? we have been adding to

cyclicals here. i just think that u.s. banks are going to lag other cyclicals on the way up. i say that for two reasons. they have two headmans that other cyclical sectors do not have. one is the bond -- they have two headwinds that other cyclical sectors do not have. one is the bond market. bond yields are maybe 20 basis points higher than the all-time lows that are down 120 basis points from where we were in january. i don't think they are going to rise very much from here. the fed regional president williams was just talking an activethat it is debate. the second one is dividends, uses of capital. we have the fed stress test coming up next month. banks have already stopped buying back shares, and i think there is a real issue here that they will have to follow the u.k. and europe and trim back on dividends. these are two constraints that cyclicals have not had at this

point. francine: we have -- tom: we have to leave it there. and lately with tower hudson, an extraordinary call on long market. coming up, without question, an interview of the day with this historic moment from hong kong. lord chris -- lord christopher patten will join us. stay with us, from london and new york, this is "bloomberg surveillance." ♪

ritika: this as "bloomberg surveillance." president trump faces a tough choice on china. proposal approved a

for sweeping national security legislation aimed at hong kong's pro-democracy act, limiting freedoms in the city. the president already reacted strongly to the move and could do anything from sanctioning china to withdrawing the special trade status. taking aim at chinese students in the u.s., the administration plans to cancel the visas of students with direct ties affiliated to universities and the chinese army. president trump preparing to strike back at twitter, angry because the social media network ers on hisct-check tweets. he plans to limit -- spacex will

try again to launch astronauts into orbit -- orbit. yesterday, bad weather threatened the kennedy stay station. -- space station. it will be the first launch in's 2011. -- since 2011. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am. to cocoon -- -- ritika gupta. tom: there was a moment in the united kingdom when prince charles showed the flag as the britannia slipped out of the harbor into the pacific ocean, after christopher patton said employee that key phrase that we knew at the time 23 years ago, the idea of moving on i will get the phrase -- moving on. i will get the phrase in the

moment. who do you blame for this moment? it was to wait at least 50 years and we didn't get there. who do you blame? christopher: xi jinping. he is a new sort of chinese "new,"r -- when i say different from his predecessors. 1997, it90's and since has been far from open in china. on the whole, chinese leaders kept to their agreement on one country, two systems that hong kong could continue with autonomy and its own freedoms. what we have seen with xi jinping is the determination of the strength of the party above everything. he has been throwing china's weight around in a way that it is a danger for democracies around the world and he needs to be called out he is taking

advantage of this coronavirus which has been more difficult to deal with the way it was covered up initially by secret communist officials. he is trying to take advantage of that not only in hong kong, but there are incursions of chinese troops into india. they have been throwing their weight around taiwan. they have been throwing their weight around in the south china sea despite the promises they made to president obama. this is down to xi jinping, who is terrified of having to deliver in hong kong the promises that were made that under the rule of law. week where this on a stanley ho dies. the merchants of hong kong are going back centuries. how would you suggest the business leaders of hong kong will react to this? what will be the best path? christopher: i want to say this

clearly -- when i was governor was greatng, there support from the american chamber of commerce, from the united states in general. even though i had worries about china as we all did, worries about the communist system, not about chinese people but about communism, and i used to lobby every year in congress to give china most favored nation status . i used to also argue that whatever happens, we should endanger the well-being of those in hong kong, and that is still my feeling. what should happen, i hope following the secretary of state pompeo's understandable reaction is that we should form together chinaies which will make

pay for what it is doing in hong kong. i hope that we will stand up for hong kong as over 500 political leaders and church leaders around the world have done. i hope we will stay together and i hope business will welcome that if you undermine the rule of law in hong kong and start to make hong kong a less important financial hub in asia, it is already responsible for two thirds or more of the direct investment that goes into and out of china, and i just think that a lot of people are running their businesses from hong kong or thinking about recruiting people to work in hong kong. i hope business will put without , what theyrvousness think. francine: are you saying the

steps taken by the u.s. so far could actually backfire and hurt businesses and people that have already been through a lot? christopher: let me be clear about this. what the secretary of state said and what i imagine the president will say is pretty accurate. he has described what everybody is saying, this trojan horse rule of law in hong kong and the promises made to hong kong of one country, two systems. i'm pleased the secretary of state made that. you cannot argue that what happens leaves hong kong with a high degree of autonomy, but i hope the american legislature will not move on from that, and will impose sanctions on hong

kong. if you want to impose sanctions on china, fine, but do not impose sanctions on hong kong for what china has done. francine: would you not say the u.k. and u.s. would treat hong kong as the rest of china? christopher: i hope we will still try to work to restore some degree of autonomy, a greater degree of autonomy in hong kong, and we will make china understand there is a price to be paid for what it has been doing, not just in hong kong but elsewhere too. month and upcoming meeting of the g7 and i have argued that they should make sure hong kong is on the agenda, and that president trump, who i think will be in the chair at bringeeting and others, together a common position on hong kong and china. we all have the same interests

commercial or otherwise in relation to china. when you look at the annual reports of the international chambers of commerce in beijing, japanese, american, european, they all do the same thing, make the same complaints about the way china does business. we need to not work separately in relation to china. we need to have a common position that will terrify china. patten, your comment from 23 years ago -- "i relinquish the administration of this government. god save the queen. patten. message to the united states secretary of state as you call for a developed economy response? what would be your counsel to

mr. pompeo? christopher: first of all, to thank him for the interest he has taken in hong kong which i think is widely and enthusiastically accepted in hong kong. he is not interfering in hong kong, he is expressing the sentiments of the democratic politicians about the possible a community was under the rule of law. i thank him for that the chinese -- for that. the chinese don't understand the problems in hong kong. i would ask him to remember that liberal democracies around the world -- i mean the world "liberal" in a classic sense -- open societies around the world are stronger when they work together. for 50 or 60 years under american leadership, europe, japan, canada, australia, the united states, all of us worked

together under american leadership and i hope that is what this administration or a future administration will do. china is an enemy to us now. i am sorry to say that, but that is how it behaves. not chinese people but the chinese communist party. tom: let's continue with christopher patton for this historic day for hong kong. we have got much more coming up and no doubt this will be my first question. the new american representative lipsky,mf replacing mr. it will be interesting to see his comments. please stay with us. from london and new york, this is bloomberg. ♪

francine: this is "bloomberg surveillance." we were having a good conversation with christopher patton talking about some of the steps the u.s. had taken in hong kong. you started off by saying nosident xi will do what leader has done before. you call him a dictator. why does he feel emboldened? christopher: he feels emboldened to do it because he records -- reckons the rest of the world -- and it is true -- are preoccupied with fighting the pandemic is not as bad as it has been, because of the secrecy and mendacity of the communist party in the beginning to blow the whistle on what was happening in

wuhan. he is under a great deal more pressure. they are reacting with some nervousness because first of all , the way the pandemic was , and it is also true that the impact on the economy in china is going to see unemployment rising and all sorts of economic and social tensions related to that what he is trying to do is whip up enough -- as much nationalist sentiment as possible with everything that is going on, because of the united states and the outside world. he wants to deflect attention from the fact that the real problem is the way the communist party behaves. communist parties are all the same, brutal and liars. francine: how should europe deal with them? --heard from angela merkel

these are pretty big accusations you are making. angela merkel seems to intimate the e.u. should get closer to china because of economic ties with that -- economic ties. with that be a mistake? christopher: that would be a terrible mistake. we need to make sure china behaves by the rules, the china keeps the agreements that it makes which it doesn't do at the moment. i believe in standing up to china when it breaks its word to us, and it does over and over. we will need to have some sort of relationship with china if we are going to deal with the pandemic in the years ahead for example -- years ahead. for example, there will be big questions about antimicrobials given that 95% of the

antibiotics in the world are made in china. we will have to find agreements which they keep on the environment, on trade. when they break them and bully us as they have done in australia and sweden and norway and elsewhere, we have to stand up to them. these weak diplomats have to be told. patton, how dor --?ind a new if china is in search of a way to calm things down, can you identify that person or the process within their totalitarian regime where you get to the next shaolin lay? christopher: nobody from the outside can.

it looks completely united against the world, you can depend on the fact there is politics going on like nobody's business. aw do you manage to express country view in china when you will disappear straightaway? parliament,rstamp there was one dissenting vote on the hong kong resolution and six i think who abstained. i imagine they are already in reeducation camps learning the right things to do. it is very difficult to be a dissident in china and xi jinping, this dictator, has closed down any dissident activity he sees. he is not about human rights law. critical about the

way he handled coronavirus has simply disappeared and those who tried on social media to set up was happen -- set up what was happening, they were closed down. he is intend of sending his ministry of security into hong kong, the equivalent of the chinese kgb, and they are not -- they're trying to shut up anybody who objects to china. tom: across from alexandra house and down from the mandarin hotel in central square, are the offices of the jp morgan company . i want you to advise american banking now on what their approach should be after this historic day. how should james dimon and others sustain and project in hong kong? christopher: they should be very

cautious, which i imagine they will be. i hope they will not pull out of hong kong. what has been happening as china has been trying to tighten its grip, unfortunately quite a lot of particularly younger executives have been wanting to move elsewhere. i am pleased the main banks and others are still in hong kong, and i hope they will continue to support the american chamber of commerce, and the american chamber of commerce will continue to stand up for the rule of law, will continue to stand up for all of those things which have helped hong kong and american business in hong kong and american business around the world to prosper. american business is so successful because it has helped create an environment. markets can operate on a fair basis and i think that is the ,ay the best banks have behaved not occasionally without getting

things wrong. we will not go over that, but they are better than the alternative. francine: christopher patton, thank you so much we will have to -- think you so much. -- thank you so much. christopher patton, former governor of hong kong. do not miss "leadership live with david carlisle," speaking exclusively to the youtube chairman. this is bloomberg. ♪

♪ francine: we were just having a great conversation on the market. conversationgreat on the agricultural commodities. we spent enough time talking about oil and not the rest. joining us is tracey allen with jp morgan. if you look at the patterns and the way we consume food and the way the harvest have panned out, what is the biggest concern you have over the next one to two months? will this pandemic change the way we eat and treat

agriculture? tracey: the main concern i have is the future outlook for consumption in the way the underlying agricultural economies be it born, soybean , or-- corn, soybean oil biodiesel, how that will integrate back into the mix. it has been moved into more relaxed states of lot down and it looks that there is a vast recovery for underlying aggregate -- agricultural demand. we are ready for a rally, and aggressive move higher in the next couple of months. francine: this would be in what parts of the world? what parts of the world benefit the most? tracey: the main area i we are watching at the moment is the u.s., and trying to take up the gradual improvement in traffic

flows we have begun to see, the early stages of signs that consumer activity is starting to improve off the terrible april lows. we are seeing a gradual improvement in gasoline and diesel demand, and that means we start to see an improvement in the blending demand for biofuel. in the case of the u.s. pacifically, that points to a much higher grind of corn for production and quite a recovery, particularly as we approach june and july where things will be more normalized. tom: with the news flow out of hong kong -- it has been far too short of a time with you this morning and we look forward to having you on for a longer conversation, tracey allen. much more coming up, including visits to hong kong and beijing to get an update on this historic moment. if you were just waking up in

america, it is not 24/7. -- 2047. there is a new structure to hong kong. jobless claims today, thursday, in america that sets up the labor economy for the june 5 unemployment report where we may see 20% or more unemployment rate in the united states. there is a churn to the market, futures red and green, bonds as well. good morning. ♪

♪ tom: this morning, let the

firings, layoffs, furloughs continue. another 2 million plus claims in america, with a 20% plus unemployment rate. what should be the necessary and portion a response? -- so much for 2047. china changes the rule to hong kong. what could be president trump's necessary and proportional response? dowe were you nearly 7000 points ago? what is the necessary proportional response to missing this great bull market? this is "bloomberg surveillance," tom keene in new york, francine lacqua in london. even with the claims report we will see this morning, hong kong is front and center. francine: there is so many layered to this.