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.

i would point to a couple of opinion pieces that have opened my eyes about the risks in the south china sea and possible skirmishes or tensions. we focused on the premier of china addressing in a press conference the national people's conference and we heard from tom mackenzie that this is not the forum for him to address what is happening in hong kong with the strong response from the u.s. tom: our conversation moments ago from lord patten, the 28th governor of hong kong for the united kingdom, his clear message is what is needed is a coordinated response, not every developed economy for itself. right now, our first word news. havea: lawmakers in china defied the threat by president trump and passed a proposal for national sweeping security

legislation aimed at hong kong, curbing potential freedoms in the city, a day after the u.s. declared hong kong was no longer a tana miss. -- autonomous. u.s., milestone for the more than 100,000 deaths from the coronavirus, the world's highest death. the first fatality was february 29 in washington state. one quarter of the companies using the british government's furlough plan are taking on the costs to pay workers. the wagesays 80% of for 8.4 million jobs. the government wants to change back firms can bring workers on a part-time basis but will be asked to pay more. a sign that oil is coming back distressedmore

cargoes from africa to the middle east. some of it was already being stored on tankers at sea. 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 ritika gupta. this is bloomberg. quicklyough the data after the two humongous days in the equity markets, a turn in the markets and a lot of consolidation, bonds as well. the renminbi backing up. it is interesting to see what at past will be for renminbi 7.1516. francine: european stocks are actually still undecided about what they really want so they are rising for the moment, bonds are drifting. a lot of the focus is on the passed hongina has

kong security legislation. freshis on this press -- fiscal stimulus from the european union yesterday, easing concerns with some of the european stocks and bonds. wti hovering around $32 a barrel. fresh concerns about excess supply. tom: thank you. bloomberg news has been committed to china for decades. it is something we do and it is wrapped around our terminal business and independent new evolves to ait shanghai, hong kong, and beijing news bureau. selina wang is on the watch in beijing. to hong from beijing kong has always been complex. after the festivities, after this party congress, what would we expect from the leadership and president xi of the

communist party? , we had thatrprise national security legislation approved so it will be forwarded to the standing committee which will be drafting the details so immediately after this wraps up, we will see the draft begin. banningget details subversion, terrorism, foreign interference, and we had that press conference wrap up where the focus was on jobs. job creation is clearly the number one objective, which is critical to social stability and a clear admittance that unemployment is a serious problem after the coronavirus pandemic. tom: i am so glad you bring this up, and the hong kong debate folds into the covid debate and the economic debate as well. the underpinning of the totalitarian regime is social stability.

what have you in our beijing bureau learned about the strength and power of president xi in the last week? is he as strong as ever? andna: it appears to be so, that is one of the keys of this national people's congress, to portray that strength to chinese people, not only when it comes to safeguarding china's economic growth, but when it comes to getting over this coronavirus pandemic, state media and propaganda have been on high gear emphasizing the fact that beijing is able to pull off this event in the middle of the global pandemic goes to show china has successfully controlled this. state media has been emphasizing with hong kong, how this is critical to china's national sovereignty so they are ginning up the report -- support for these legislations. francine: what kind of approval

rating do the chinese authorities have in handling the pandemic? have they done a good job or is that why they are focusing on rebuilding the economy and getting jobs? andrew: it is important -- selina: it is impossible to have an accurate gauge of public opinion in china but under the initial outbreak, there was criticism from denizens mostly of who hand after the outbreak wuhan afterand -- the outbreak and the death of the whistleblower. since then, the tune has changed and the focus has been on how quickly china has been able to tamp down the coronavirus especially compared to other countries. people on the ground feel much more safe when going about their daily lives.

a massive testing campaign in wuhan to test the population within a matter of days, so the public opinion has shifted. another focus is as domestic economies slow down, one tactic from leadership is to refocus attention rather than on economic growth, on nationalism, so you are seeing an increased focus on nationalism to corral the public. francine: thank you so much, selina wang. coming up, geoffrey okamoto, the imf managing director. it will be interesting to have a conversation on what is happening between the u.s. and china, and some of the countries that will need the imf help. that is 7:30 a.m. new york, 12:30 p.m. london. this is bloomberg. ♪

♪ everyone, "rning, bloomberg surveillance," from london and new york. we are bouncing back and forth between the international relations in hong kong, the politics, and the conversation coming up with the first deputy managing director of the international monetary fund, with the investment world and the shock for those cautious and

gloomy of ever rising market. michael wilson at morgan stanley nailed this. he was cautious into the massive pullback that even he did not on optimism climbed and said you have to participate. andrew slimmon joining us. the leverage off of my wilson's incredible call, we are up 37% on the dow, up 7000 points. now what? andrew: good morning. it is certainly conceivable at this level of rally you have some type of laws -- pause. uat we learned was that the rally would have been desirable because it would allow people an opportunity to get in, but the

market does not give people what they want which was the u rally. so as much asly, the market 200 day is due for a pause, this is where it caused into -- caused into thousand nine after a rally. rally. after so many people want a pullback. i get calls from institutions about how to deploy cash that i don't think the market will give that opportunity. i don't think it will be a pause on the way down. tom: so quaint to phrase the words from another time and place, and that is rotation. i am kidding. what are we rotating to? andrew: i am so happy about this from positioning in our funds.

the bottom line is we all know from our textbooks that value outperforms growth but anyone in this business knows value has not outperformed growth. value outperforms growth when value gets extremely cheap, i.e. more cheap than normal. inevitably, that happened recession -- happens in recessions because no one wants to own the cyclical stuff. they only want to own the defensive stuff. 2000,s what we saw in 2009, and months ago. coming out of a recession is when you make your biggest move and this is what is happening. we have a positioning problem for investors. cap have the mega cac -- tax that have -- techs that have

comprise 20% of the s&p. you have 490 five other stocks that are much cheaper, a lot of them calls to the value camp, and their classic reopening stocks -- they are classic reopening stocks. you are now starting to get rotation where people are saying, i am in the wrong stock. this is what happened in 2009. the market rally was pushed higher and all the things that sold off hard into the recession. francine: talk to me about systemic risks. we have not been talking about them ever since we had liquidity concerns on the market. is there anything that feels to stomach? -- systemic? andrew: i hear a lot of people say, this rally was all about the fed, the fed, the fed, and

-- on thethat put decline. if the fed were to step away, could that cause systemic risk? i don't think they are going to do that. my base view is that the markets respond poorly to unexpected bad news. right now, everyone is focused on what is the risk of retransmission of this virus? what happens if the reopening of the economy does not go as well? that is all very much expected question,so to your what are the risks we are not focused on? that is what will pull the market lower. businessarned in this the as you get into the summer

months, it is your classic sell in may and go away, one reason riskhat is a geopolitical that crops up that causes the market to pull back more than expected. is it the china issue or something else? we have an election coming up in the united states and we are not even talking about it because we are so consumed with this virus. perhaps that will cause a pullback but i don't think the pullback will because by the virus. francine: thank, andrew slimmon stays with us. -- thank you, andrew slimmon stays with us. breaking news out of the bank of england, the focus on whether they will go to negative rate. michael saunders on the mpc sees the risks on the side of a slow recovery.

this echoes what we heard from christine lagarde. a lot of central banks are saying it will be on the slower recovery side, and mr. saunders save -- saying it is safer for the bank of england to ease too much rather than too little. row,"oomberg front michael corbat. this is bloomberg. ♪

♪ is "bloomberg surveillance." ofl icahn has bailed out hertz, calling off a six year bet that caught him almost $6 billion -- $1.6 billion. he was the biggest shareholder. reporting vision fund 80,000 loster about in earnings. they are headquartered in london with operations in tokyo and california. that is your bloomberg business flash. andrew continue with slimmon of morgan stanley, looking at the markets and that texture of the markets as well.

we have become jaded by where yields are, particularly full faith and credit yield. now.e us right what is the strategy on where nominal and real yield are? what is that to do list for you? andrew: i am and equity managers so i'm not affixed income expert -- i am not a fixed income expert. with rates where they are, there will be a continued search for yield in the stock market. withave a situation where the differential as wide as it is, people will continue to buy dividend yielding stocks in the market. tom: i want to get this in. i want to get this in because of time and it is so important.

do you model in your optimism dividend growth, or does that slip away with this economy? andrew: the problem with dividend growth is that investors have paid a very rich premium for some of the more defensive oriented stocks, and those stocks are lagging significantly coming out. the spread between cyclicals and defenses has really taken off, as it should, and things like utilities and some of the reits, and some of the they lagged the rotation -- lagged. the rotation going on is from defenses to value. to the extent that dividend growth is low volatility stocks, i think people have tended to overpay. utilities going into this were trading at a hundred year

all-time high relative pe. that is going away, versus some of the cyclicals that have dividend growth so you have to fight for case and group. francine: what is the most undervalued thing you see out there right now? if you look at the world economy, i don't know if it is a sick or a region -- a second sector oregion -- region of the world that could create the best opportunity in a few years? andrew: the trick of this business is that you have got to be willing to buy things when it is not clear and not obvious and the green light is not flashing green, and i think the two areas, where would you put fresh money today? not clear, and maybe i am a day or two late, but the u.s.

, valueals typically stocks have taken off. travel and leisure stocks are up significantly. the one exception is financials and i don't think financials will be left behind, so they start to move. the other area -- and this is very controversial -- but i think where the cheapest growth in the world right now, the widest is the chinese internet stocks. tom: we have got to leave it there, andrew slimmon for morgan stanley. thank you so much. ♪

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we've always believed in the power of working together. that's why, when every connection counts... you can count on us. ♪ "bloombergs is surveillance." president trump faces a tough choice on china.

lawmakers approved a proposal for sweeping national security legislation aimed at hong kong. pro-democracy activists say it will limit essential freedoms. the president threatened to restrung -- respond strongly and could revoke hong kong's special trading status. the administration is taking aim at chinese students in the u.s. visas of canceled the chinese graduate students that have affiliates with the chinese army. is preparing to strike back at twitter, angry because the platform slapped fact check links on two of his tweets. he will issue an executive order that could lead to a flurry of lawsuits against facebook, twitter, and tech giants,

narrowing the liability they have for third party post. spacex will try again to launch astronauts into our bit -- orbit. voyage of the first american astronauts from u.s. soil 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. the. -- i am ritika gupta. london,ncine lacqua in tom keene in new york. the news flow is extraordinary. something we are not talking about, the republican friendly rasmussen poll came out with grim polling statistics on the president last night. features that. that is one thing we can talk to

marty schenker about this morning. minutes5, 6, or seven and we have to go to the news story of the moment. focus on the washington response , and tell our american and that audiencee the positioning -- global audience the positioning of mike pompeo. what is the strategy on hong kong and beijing? marty: as you mentioned a few seconds ago, the "new york times" story that the trump administration is planning to revoke the visas of chinese graduate students with ties to the military, which is a pretty -- it constitutes the single largest student population in the u.s., so that would be a pretty significant move but it is still short of what we would

call the nuclear option, which is revoking their special status. , but i havegreat secretary pompeo with a strategy. is that the president's strategy? marty: i think absolutely, mike eareo has the president's on foreign policy. he seems to be able to anticipate exactly what donald trump wants to do and is able to convince him that these kinds of actions against china are in our long-term interest. mike pompeo is the single closest advisor to the president and does have the president--- president's ear. mike pompeo is trying to walk a fine line by tweaking china where it can without causing

tremendous economic distress. francine: marty, will the chinese retaliate and will they williate by measure, or they go quite aggressive? what do the chinese authorities have to lose? marty: so far in this escalating tension, it has been tit-for-tat . expelledse have significant numbers of u.s.alists when the restricted the number of chinese journalists into the u.s. to the extent that there are concrete actions taken by the u.s., you will see incremental reactions from china. this is still short of revoking hong kong's special status, which would be truly an extraordinary step and i don't think we are anywhere close to that. isncine: marty, if hong kong

-- i don't know whether you can call it a proxy standoff or whatever you want to call it between the u.s. and china, could it flare up elsewhere in the world? course, the next major , that china isn confronting, is the issue of taiwan. there is the danger that that issue could be brought to the fore. the whole action against hong kong came as a sort of complete surprise, so would china feel emboldened to do something similar to taiwan? it is a real risk people need to calculate. tom: too short a visit, marty schenker, chief content officer at byrd news. -- bloomberg news.

we have not thought about gold recently, dennis hartman -- gold and yen. we catch up with suki cooper from standard chartered on gold. this is blue. -- bloomberg. ♪

♪ "bloomberg surveillance," tom and francine. gold is on the rise again, gains driven by rising u.s.-china tensions and speculation over negative u.s. interest rates. let's get to suki cooper with standard chartered, the precious metals analyst.

what needs to happen for gold to go down? question, is a great and a lot of the focus has been on the upside risks. outof the factors playing as although investment demand is strong, the physical market is weak, so we see strong allocation into gold backed etf's in terms of retail gold demand, but key markets of india and china have seen demand plummet, and germany by the jewelry selector -- sector, we have seen it go down. we could see the downside risk becoming more material with the recovery. francine: what is your take on inflation? months itaying in 18 will be a big surprise and we will see a sudden surge inflation. suki: in terms of the

inflation-deflation tug-of-war, there is a greater risk of deflation. yes, and inflation environment be positive for gold but the financial crisis, the fiscal stimulus and quantitative easing -- the base to a case scenario is there is a greater chance of deflation rather than inflation as we see a decline in corporate profits and the underwhelming recovery we are expecting for the second half of the year which would not create a positive backdrop for gold. the treasure is -- the trigger is whether we see negative real yields which creates a supportive backdrop for gold. tom: the understanding is that central banks will keep buying gold. i am fascinated by this

question. , whocentral banks buy gold do they buy it from? suki: much of the time they are buying it from the open market. there has been a number of factors in buying gold from the official sector level. 2019, in 2018 and purchases were the highest in 51 years. this year we expect the buying to slow down but we think the central bank will be net buyers, and the desire remains intact as well. own how much gold do they on a historical basis? the knowledge of myself and some of our viewers and listeners who are older is james bond and fort knox and all of the other silliness. how much do they own now? how much of a player are they in the microeconomics of price?

suki: this is a fascinating trend because over the last 10 years they have been increasing their allocation to gold. the total holdings across all of central banks are back at record levels. that goes back to the 1960's. they are certainly up to the levels we saw back then. in terms of the total world stock of gold, central banks hold about 1/5, close to 50,000 tons across the official sector. francine: away from gold, you spend time looking at silver, platinum, and palladium. which looks more attractive? suki: we still believe palladium has the strongest supply and demand dynamics. covid-19 has had supply and demand shocks for the whole commodities sector but for palladium, we think we will see robust demand driving momentum

in prices. across the complex as a whole, we are seeing weaker fundamentals in the current environment, and silver and value drivenseen a by speculative interest in that they have been undervalued. palladium, the market is likely to be undersupplied or close to balanced. we will continue to see the momentum driving into q4 and q1 next year. gold still has robust dynamics given the macro environment is still supportive, given the and quantitative easing, and the negative interest rates lowered the holding cost of gold. we think gold and palladium have

the strongest drivers. tom: suki, i look at gold and the mining of it. is there a lot of new gold coming on? suki: at the start of this year, we anticipated modest growth, and environment of elevated prices and cost reductions under control. we are starting to see a good increase but even before covid-19 we were starting to see a slow down in the mine out book -- output. gold has had the most number of mines that have been impacted, but total quantity estimated is about 70 tons that has been impacted. we are more likely to see mine output stabilizing or modest the

lower this year so although a huge number of mine have been impacted, we are starting to see operations come back online and we think the growth will be's tinted. expect -- growth will be dented. tom: what could be a price value? what is the standard chartered call one year out on the price of gold? forecasting are record quarterly average at devon team 25. we see -- 1725. we might see prices stabilizing at about 1700 for the third quarter as economies start to reopen, and we may see a slowdown in terms of the eminent

investment demand. typically, the third quarter of the year is supported by the physical market and the physical market is incredibly weak. we saw india's in points -- imports plummet to close to zero in q3, but q4, concerns around a second wave of infections perhaps will get better clarity in terms of a vaccine, which we have not -- we do not think will be rolled out and implemented until 2021. we could see prices averaging 1750, another record quarterly average. francine: suki cooper, standard chartered precious metals analyst. up next, we speak to jason farley for an update on covid. this is bloomberg. ♪

♪ "bloombergs is surveillance." airlinesf american says bankruptcy is an option he

will not consider. doug parker told the bernstein decisions conference that bankruptcy is failure. american is struggling with the americant load in the -- in the industry. jp morgan and bank of america expect a surge in trade revenue. the jp morgan coexecutive expects a 50% jump over last bonddriven by strength in equity. brian moynihan expects a more modest increase around 10%. shareholders at chevron have made a rare move against the energy board, calling on them to disclose lobbying efforts to fight global warming. hp is signaling the pandemic has disrupt this by chain of the second largest computer maker.

revenue fell 11% in the latest quarter. they missed estimates. they are delaying a $15 billion share buyback plan until the market stabilizes. that is your bloomberg business flash. francine: the fed is thinking hard about targeting yields on treasury securities as a way of ensuring borrowing costs stay at rock bottom. john lewis spoke to us exclusively. >> we are studying carefully and will be discussing as a group, so i don't have anything i can say about what will or will not happen, but my view is the focus is always on how do we best use the tools we have? our guidance, use whether it is the balance sheet or other actions we take, to

achieve our goals? it really depends on how the economy is likely to evolve. there is a lot of uncertainty that.that we are -- about we are in a good place and that we are hopefully near the bottom in terms of the economic downturn and i expect a rebound in the second half of this year. what is the right policy response and action? we think critically on how the economy is performing but what path we see it on in the coming months, and that is an unclear picture. we will get better information over time. what kind of rebound will we have. >> even though it is unclear imaginerward, how you what it is like on the others,

when you -- when we came out of the financial crisis potential growth was lower. what do you think potential growth will be when we come out of this? are we in sort of a defective fed-treasury accord? we will have zero or very low interest rates that would be crippling if rates went up, especially to the u.s. treasury. will you be stuck keeping rates low, even if you don't want to, for a long time? >> it is hard enough to forecast where the economy will be going. forcing -- forecasting output will be harder. that is an area of concern. we want to make sure that is this is that exist today -- arenesses that exist today

able to continue and we do not have lasting damage to our economy. the policies we are taking, the actions congress has been taking , have been to minimize the longer-term damage on the economy. the treasury is issuing an enormous amount of debt. demands an enormous globally for u.s. treasury securities. we have not seen any signs demandy of a storage of globally for u.s. treasury securities. markets have absorbed that increase to supply very effectively and rates are low. this is not a situation where the fed reserve is constrained or limited in what we are doing because of what is happening in

terms of the issuance of debt. follow-up very quickly to something you said about a trough, we are opening up again. do you think barring a second wave of the virus that we have seen the worst? >> it is hard to say because the data is incomplete. we will get an employment report for may to get the bigger picture and we will get some more data over the next few weeks and months that will help us understand that based -- understand that. based on what we know now, we are close. let's not forget, this is an extreme decline in economic activity and an enormous hardship for people. even if we are starting to see a stabilization in terms of the economy, we may see a little bit of a pickup, we are in a difficult situation. francine: that was the new york

fed president john williams. for more on the health of the u.s. economy, we will be looking out for the latest release of u.s. jobless claims and to see hither we suffered a bigger than was first reported. we keep the focus on hong kong and china approving security legislation that defies the u.s. president trump. that will be the focus of our new extended "surveillance." keene, jonathan ferro, and lisa abramowicz simulcast on tv. ♪

>> it is hard enough to forecast

where the economy is going to be going over the next couple of months. forecasting the next several years is even harder. markety other financial is pricing and something. >> economic forecasts are hazardous at best, even more so now. >> this is "bloomberg surveillance," with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york city, good morning. this is "bloomberg surveillance ." equity futures all over the place this thursday. we are live on bloomberg tv and radio. keene, i'mom jonathan ferro, together with lisa abramowicz. so much as happened between the united states and china, but not much has changed. we are still waiting for the white house's response and what they do next. tom: it is absolutely going to be the white house's