manus: good morning from dubai. this is "bloomberg daybreak: europe." i'm manus cranny and annmarie hordern joins me. protests over the death of george floyd rage in the united states. president trump meets with national security officials and governors today. amazon scales back deliveries and adjusts routes in cities

including chicago and los angeles as the unrest targets, temporarily closes stores across the nation. the hang seng pushes higher after president trump stopped short of sanctions over beijing's new security law. asian pmi shows china's recovery continues. a warm welcome to "bloomberg daybreak: europe." 86:00 a.m. in london. annmarie hordern joins us. we have got to understand, the ofgers on the streets america, the danger to human life, the danger to reopening, and the death rate. real,mentum is really very palpable, we need to understand how markets post -- price those. we have more unrest this evening after a weekend of protests across the entire nation, coast-to-coast.

chicago, new york, boston, d.c. some starting peacefully but ending with quite violent scenes as you have seen displayed across the news. i want to give you a sense of what the new york papers lead with this week, "the new york times," spreading unrest leads nation on edge. completely up in flames, some of the cities. the daily news, waves of outrage and you see protesters in harlem over the weekend. "the new york post," a blast of hope. they are leading with potentially a little hope with the spacex launch. compare 20people 20101968 when the apollo was to --ed -- compared 1968 when the to apollo was launched. manus: they talk about tragedy

in terms of unrest. i take you to the line -- and we will pursue this throughout the program, the demonstrations and even the violence are not just murder.orge floyd's they are now about 40 million unemployed people in the u.s. who are rightly furious. white, black, brown, and as he predict months ago, there will be violence. take us through the markets. more americans have lost their jobs due to the pandemic and black americans have been disproportionately affected, both financially and healthwise. asia-pacific, up one and 6/10 percent. trump didn't say, many thought there would be more to coney and measures -- draconian

measures toward china. the dollar index, under pressure. protests, the new headwinds for the dollar and oil on the back foot after five weeks of rallying. they might be moving the opec-plus meeting. luckily, we don't have any hotels booked in vienna. seems to beollar pricing risks different to equities. headline, to our top the u.s. is reeling from violence across dozens of cities, adding to a difficult backdrop for the carillion -- coronavirus infections. protests spurred by the death of george floyd, who died after white police officers pressed a knee into his neck. backn has scaled deliveries in some cities and apple has left outlets shut and target has extended store closures nationwide. ed ludlow joins us now.

we are a sense of where in terms of escalation, de-escalation risk at the moment across america. good morning. ed: good morning, good evening from california. what he described has intensified into the evening in cities like boston and denver, which had largely peaceful protests through the day. in the evening, many cities have curfews in place, meaning anyone on the street is in contravention of that curfew and we are seeing clashes between police and protesters. nation'sgton, the capital, fires have been started in the last couple of hours in close proximity to the white house. there are continued clashes and that is why -- it is also important to note that across the weekend, there was plenty of policel protest in which participated in, but overall, the direction has been an escalation since friday when the

piñata las police officer -- when the minneapolis police officer had his knee on george floyd snack and charged with third-degree murder and manslaughter, and that is the direction this has taken -- george floyd's mac and charged with third-degree murder and manslaughter. what is the latest from president donald trump? ed: the president has positioned himself as this voice of law and order. we actually haven't heard from him today in terms of his televised address or anything like that. tos largely resorted twitter, a mechanism he has used throughout his presidency, where he attributes the violence and the images you have put up to radical left-wing groups. an abbreviation of anti-fascist, this loose

organization of activists who have no formal structure. he has taken to twitter to say he will mark them as a terrorist organization, which raises legal questions because they are not a formal body. they have no hierarchy, no leadership per se. they are loosely affiliated of localized unions. we did hear from him yesterday at the spacex launch in florida, when he labeled what we are seeing as mob violence. he issued a statement that he would use the unlimited power of the u.s. military on demonstrators. he is basically -- has called on state governors and state oficials to accept the help the national guard and there are multiple reports of the national guard being deployed throughout the country. we know that tomorrow or monday, the president will meet with the attorney general william barr. video conference with law enforcement officials.

other than that, we waiting on a unified federal response to this. manus: i am looking at twitter this morning, at two of the biggest global brands in the world tweeting and re-tweaking one another. and adidaseir tweet retweeting. the voices of corporate america are changing. where is it the most present? ed: nike move early and put the tweet out on friday, basically a vocale that you should be in your opposition to what is going on in terms of the -- anything that is in just. starbucks's ceo published a letter, an open letter to his hosting anterday, open forum where they talk about the need to be vocal and have uncomfortable and courageous conversations around what is

happening. made a veryp cfo personal blog post yesterday, where he basically outlined that even for him as the cfo of a big, global bank, being a black american is difficult and that he outlined that. america corporate point, the overall economic point here is this could not come at a worse time. i followed the retail industry. i follow the u.s. restaurant industry and april was a disaster. sales went off a cliff in the first quarter and the hope was over the course of early june, we would see the pace of reopening in some states accelerate. the concern now is this will have a direct effect, where officials will not allow the economy to reopen as fast. there will be curfews in place for longer as a direct response to the violence and from the public health officials side, there is a concern all these

protesters and demonstrators are in close proximity to one another and that brings the risk that we will see a spike in new coronavirus cases throughout the country, that is difficult to control. you see images of people wearing masks -- manus: it will be tough to keep a handle on those. on that reinfection rate, as you say and that is what the new york mayor said. our reporter tracking the latest in the united states. the first word news flow, the u.s. is planning an expanded g7 meeting. told reporters he would like to invite leaders from russia, australia, india, and south korea. he called the set of outdated. the inclusion of russia is likely to be the most controversial. it was suspended from then the g8 when it annexed crimea in 2014.

china and hong kong are pushing back against president trump as the administration threats over says thes -- and threats are unjustified and beijing is within its right to pursue new laws. "it is doomed to fail." you can president is -- government is coming under pressure from scientists who caution. experts said public faith has been damaged, but the foreign secretary has suspended the decision to loosen the restrictions, saying scientists do not always agree. two american astronauts have boarded the international space station from a spacex capsule. the first time americans traveled on a commercial spacecraft.

it forges a new era for nasa and is a big win for the billing -- billionaire elon musk. it is the first time american astronauts have flown from u.s. oil and shuttle program ended in 2011. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. annmarie: coming up, another test for the u.s. equity market. how stocks are holding up as violence hits dozens of cities across the states following the death of george floyd, the black minneapolis man killed by police last week. this is bloomberg. ♪

manus: i'm manus cranny in dubai. annmarie hordern alongside me in new york. annmarie: the u.s. stock market is tested again after weathering a pandemic, closing economies and tens of millions of jobs losses, civic unrest is threatening the rebound. stocks were more than two thirds back from a route that arrest $12 million from share values thanks to a 30% percent rally since march. -- 36% rally since march. paul, thanks for joining us. this morning in the markets, a risk on rally. there seems to be excitement about what president trump didn't do on friday but why are equity markets discounting and not factoring in this unrest we are seeing in cities across the united states?

we are seeingwhat at the moment is such a perfect ofrm, with the confluence the civil unrest you mentioned as well as the fact we have the backdrop of the coronavirus and economic impacts of that. let's not forget, either, that in 2019, we had a big rerouting of the market. we started where the market was aite pricey because we had 30% move in equity markets. i think those things would have to lead one to be a little concerned at this stage that after this bounce, where do we go from here? i think the volatility of the market is likely to continue. think if we start seeing the situation escalate any further from here, you would have to imagine the economic impact on the market over time would start to wear on a daily list and we would probably see profit-taking. we should add the number of

companies around the world which are coming to market to raise equity capital is growing and that is always a sign generally there could be a problem with the short-term. manus: just to pick up on what annmarie has said -- global whats are up 35%, that is we are showing. if i wanted any reason to take money off the table, it would be the social civil unrest in the u.s. my question to you, when does this dangerous social unrest in the u.s. turn from a tail risk to markets to a real risk. destructiont demand , confidence destruction, and what we have a late hour cap -- laid our cap on, that the economy would reopen. an understandable reaction to the perception of a

great social injustice, but the economic impacts of it is already out there in a sense because we already have the economic description -- destruction skyrocketing as a result of coronavirus. in a sense, markets don't feel at this stage the economic impact is too much greater than we have are receiving. i do think the markets have been very quick to raise the opportunity of some v-shaped recovery, which in our view is unlikely. if we start to see the political situation deteriorate to the extent that the presidential election becomes a coin toss, which you could argue looking at some of the opinion polls and so on, that is already the case. that will worry investors into the second half of the year. we did at this stage, bounce very sharply on the basis that markets have priced in the coronavirus quickly.

is only so much for markets to grapple with at this stage that they haven't been able to quantify the potential impact from this and just decided economic impact at this stage is relatively similar to what was in the price. i think you are right. hit yet to come and if we look at the 1960's when we saw over 100 u.s. cities being impacted by this civil unrest, if we got to that stage, you might find the markets take for the flight. annmarie: i've heard a lot of people talk about the parallels between the 1960's and now. you've said a lot of is priced in but we have consumer spending off a cliff. if these kind of protests continue in the united states, does this change your outlook? i know you consider it a u-shaped recovery in the u.s.. paul: i think it is a two-legged aspect.

quick toave been very take into account the unprecedentedly heavy degree of stimulus we have seen, and it has been a very different stimulus from the one we have seen in the great financial crisis because it is fiscal and monetary. if there is some kind of a reflationary impulse, that would generally favor equity markets a little bit more. situatione overall for markets off this bounce, there is a fork in the road. near-term, will there be a value rotation which we've already started to see the beginnings of? that could be relatively short and sharp. -- moreorally the likely to have a period of reflection and markets retrace some steps. maybe oner-term basis, a one to two-year basis, we could see something more

if the weaker dollar inflationary environment comes to pass. the idea that from here it is one direction out of the debasing of the market is probably unlikely. the fact you say we expect a u-shaped recovery with maybe the right side of the u a little lower than the left is the most likely outcome. now we are moving into a paradigm shift, the right side of the u versus the left side. you've taken us into a whole new paradigm shift. my guest host this morning from newton investment management stays with annmarie and i. hong kong stocks higher after president trump stopped short of full out sanctions over hong kong's new security law. is it the escalation?

-- de-escalation?

annmarie: this is "bloomberg daybreak: europe." stocks in asia nudging higher with hong kong jumping at the open happiness over what trump didn't say. on friday, the president stopped short of tough sanctions over the new security law for hong had while the speech rhetoric, it lacked specifics that would affect beijing. manus: meanwhile, you've got goldman sachs seeing the yuan falling to the lowest levels since 2008 over the next three

months as uncertainty over u.s. policy toward china puts pressure on the currency. is from newton investment management. guest concurred. you gave us a right hand and left hand u-shaped recovery. you see a lower left, higher right. you've got the export numbers not splendid, the in employment -- the employment numbers not splendid, the u-shaped recovery in china. is likely tor-term still be problematic, because we will have the overhang of not only the aggression from the terms ofrd china in trade policy, although in the near term, there has been relief about that, but the global economic slowdown, which is unlikely to be sparing toward china.

we do think that over time, the chinese authorities have been relatively sensible and analytically about the way they've managed their economy. we also think the chinese consumer overtime will continue to grow as a percentage of the overall economic high in china. there is forget either likely to be a period of time or there will be a weaker u.s. dollar and a more inflationary outlook and that is on a long-term basis. it is probably not for this year and we are unlikely to take hold before 2021. that will be an environment in which the risk tolerance of markets will improve, but also the availability of easy liquidity around the world should benefit emerging markets and china is part of that. wethe near term, i think wouldn't see china come out of this more strongly, but we do think the environment as regards

the ease of money, fiscal stimulus around the world should certainly benefit the chinese over a longer. bank of time -- longer period of time. annmarie: many say the market is not pricing in what is going on. is this the rock-bottom between geopolitics? are you pricing for the fallout? are: in general, there so many aspects of geopolitical conflict at the moment as well as the backdrop of the virus that it will be very difficult to deny the possibility of there being some kind of impact on markets, but i think that applies around the world. i don't think that just applies to china. at this stage to think it all gets forgotten is extremely unlikely. manus: yes, some people would say that markets have been too quick. .aul markham, newton investment

opec-plus is considering further cuts. this is bloomberg. ♪

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annmarie: good morning from new york city. i'm annmarie hordern. this is "bloomberg daybreak: europe." a mixed picture for u.s. stock futures as protests over the death of george floyd rage across the united states. president trump meets with officials and governors today. amazon scales back deliveries and adjust routes in cities like chicago and los angeles. targets have closed across the nation. the hang seng pushes higher

after president trump stopped short of identifying tough sanctions over beijing's security law. pmi data shows china's recovery continues. i see you have breaking news on saudi arabia? manus: we do indeed. this is all about bolstering saudi arabia. the central bank is to inject 50 billion rials into the banking system. this is another layer in a really progressive movement over the past number of days. 50 billion rials goes into the system, the central bank says to support financial stability according to some. it is to boost credit facilities to the target sector. at the end of last week, the billionbank took 150 riyals and shifted it into pif,

the sovereign wealth fund. it is their spending vehicle, all pieces of boeing, marriott, disney. what we have here is transfers from the central bank about liquidity and growing the future of saudi arabia because it is opec week. annmarie: we think it is opec week. it wouldn't be in opec meeting without the group debating and having all this drama on when they should hold the meeting. it is supposed to be next week but they are talking about moving it to this thursday. alongside what is happening in saudi, a slew of austerity measures the kingdom has taken and we have seen them have to draw on reserves due to the collapse in the oil price. everyone tracks each other, i think he said the money

from the central bank into pif was a percent of the reserves. net foreign assets, these are the markets this morning. that foreign assets in saudi arabia, declined 4.5% last month. , let's just asked the question because the dollar, we've got nymex and dollar yuan. who is pricing the civil unrest correctly? is it dollar worried about demand destruction and reopening risk? the oil market gives back .1%. let me check my numbers. compliance of89% opec, and opec-plus compliance at 90% -- 92%. iraq and kazakhstan, doing better. there is dollar you one. 7.30 and back to seven. back onres gave back 1%

the concern in the united states of american. a riskn wants to hedge on u.s.-china relations and goldman sachs dropping their call for a 20% dump in the market. and thexx 50 up 1.3% hang seng, 3.5%. concerned about the lack of action as opposed to rhetoric from the white house friday. somerie: let's get to of the first word news outside of business. violence has erected in dozens of u.s. cities following the death of george floyd, a black man from minneapolis who died in police custody. ranged frome peaceful marches to setting fire to police cars and government buildings. president trump is blaming the riots on antifa, the movement of left-wing activists. he said he would declare the group a terrorist organization. jerome powell has defended

aggressive action to shield the economy from the coronavirus pandemic. ,t an event hosted by princeton he said the central bank has cost a lot of red lines, but only because the virus demanded that level action. juneext fed decision is 10th. says it has no plans to shut it site, but action erected after the company announced a sweeping cost-cutting plan that included the reduction of over 4000 jobs around the world. talks with unions about the future of the northern side are set to get underway tomorrow. two american astronauts have boarded the international space station from the spacex capsule. it marks the first time humans have traveled into orbit on a commercial spacecraft. it is a new era for nasa and a big win for billionaire elon musk. it is the first time american astronauts have flown from u.s. soil since the shuttle program ended in 2011.

global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. manus: they think the central bank is closed with decision on targeting treasury deals -- yields. he discussed the possibility of yield curve control and talked about her expectations for an economic recovery. the second-quarter numbers when they come out are going to be very negative numbers. we know that was the height of the shutdown when there was no activity. in the third and fourth quarter, we are going to see activity begin to emerge. some of the quarterly growth rates are going to state what it looks like in the field because we are going to see on the base

of little activity and they will look like big growth rates but we will be below where we were at the start of the year in terms of employment and output. money people out of work, it is hard to imagine we see a v-shaped recovery. i think it will be slow and businesses will be slow about reopening and people will be thoughtful about spending, so that means monetary policy has a we support the economy getting back to full employment and price stability. that is more traditional monetary policy and a tool, our interest rate tool, which we have used before and also asset purchases. but asset purchases are not to improve function but support the economy as it moves toward full employment and price stability. >> there are people at the

moment worried about how big the fed's role is and how big in setting prices. it has been a conversation with us and colleagues about yield curve control. this is where the confusion is on wall street for some in fixed-income at the moment. would yield curve control for you be something focused on the front-end to the belly of the curve or would you think about doing what japan is doing, which is all the way out to 10 years? how much control over the yield curve would you be looking to have? pres. mester: my view of yield curve control is it is to support forward guidance. if we were going to do it. the committee has discussed yield curve control as a tool in 2010 during the financial crisis and then also as part of our framework for a potential tool. no decision has been made on that at all. of that ion't think something that would be in this

phase of what we are doing to make sure markets continue to function, but as a tool, it is worth thinking about what those tools are going to be that we can use. now, that is a discussion for the future phase and my own view is if you wanted to do it, you'd have to think hard about how you would implement it and also, as i said before, how do you exit from it? with any of these tools, there are pros and cons of using them. thet now, as you point out, yield curve is very flat at the with the forward guidance we have given already, maybe it is not necessary to emphasize the forward guidance, but i don't want to take it off the table as something that has potential. i just don't think was seated in this phase or going forward we would necessarily need to use, but if we were to use it, i would view it as a reinforcement of forward guidance on the shorthand. there is the go,

possibility we could end up in a new trade war with china, additional tariffs going on. have we already absorb that or would that be a new hit to the economy now? emissions -- pres. mester: whenever there is a rise in uncertainty, i think we have to take it on board as being another potential headwind to a recovery. to take theave conditions as they are. i think we have played this game before and saw how the uncertain tea did dampen -- uncertainty did dampen, and we have to take that on board with another uncertainty added to the incredible mount airy have -- amount we are a have. annmarie: i was loretta mester speaking with bloomberg. coming up, bloomberg's opinion

columnist says the u.s. central bank should resist market pressure to do more. he also talks about zombie markets. more on that next. this is bloomberg. ♪

manus: "bloomberg daybreak: europe." i'm manus cranny in dubai. annmarie hordern is with us in new york. bloomberg opinion columnist says the u.s. central bank should resist the pressure from markets to do more. he wants by taking policy rates negative, the fed would risk creating zombie markets and that no longer sends an accurate price signal and fails to allocate capital. paul markham from newton investment is with us.

that is the proposition come you get a misallocation of capital. i put it to you we have a profound misallocation of capital and dislocation of liquidity, which is saving us at the moment. what would the ramifications be if mohammed says -- of what he says and do you think we get them? been doing that for a while and i think it has been very vigilant around other central banks, which have gone to that measure. there have been enough to be evidence that it is pretty hard, as your last segment mentioned, to escape from. the philosophy is pretty tricky to engineer. stage whereh a new they aren't is abating that action and you add additional headaches of worrying about the

impact still have on markets. particularly in the u.s. economy, where the average person is likely to have to markets. 401k that is a pretty tricky proposition. the pool is there if it needs to be employed, but the fear of never escaping it and the profound misallocation of capital which has already happened going even further probably stops the fed from going that far. powell said on friday it crossed a redline and had to do some. you say it is impossible to rule out the negative rate, but what is left for the fed to do? are you expecting anything? paul: no. for the time being, the feeling will be enough has been put in which -- butily,

also the facts the fiscal impact from some of the action taken is yet to be quantified. him enough for them to take a breath and see what happens next. even with the backdrop of the civil unrest we are seeing in the u.s., it is unlikely to any signs of reaction from the target dynamics within the economy in the next few months, they may be tempted to activate it. for this time, i would say no. manus: i want to get a sense -- i've got to think pieces pushing the markets. risk and shaving back saying hedge yourself as you go to peak trade angst in the summer. you want to sell call options, buying put options on nike and apple, etc. then goldman sachs capitulating,

moving away from their 20% drawdown in markets. i would say that is a form of capitulation. are you a hedger, do you think it is worth it? does the jpmorgan have merit? versus goldman sachs, which seems to be rolling over, removing higher. paul: there has been commentary on both sides of this argument, manus. ism that point of view, that why news flow has been a big part of markets and it has been the case for us that the rally we have seen in equity markets by been driven primarily small, incremental pieces of news flow around lifting of lockdowns and travel restrictions being eased in parts of europe, for example. those things aren't enough for us to know where we are going, where the consumer is going,

where our fabric of life is going to be. we don't know how certain businesses embedded in our culture -- restaurants and theaters and so on -- how they are going to reopen. big questions because they reverberate through our employment markets and our consumption patterns and so on. what i'm saying is there is near-term recovery versus longer-term outlook, and i think that is why this is the market really of potentially two hal ves. one is now setting the tone for the come -- summer. one is the continuation of the reality we see, and the other is a rotation where the markets tread why -- water at the headline level but get lead differently. all of those things have arguments for them but the idea that we push in a straight line from here would not be our central base case. there is a good chance one or

the other happening. annmarie: our mliv question is how far can em stocks outperform? a similarf it has trajectory as developed markets, especially places like brazil that are getting hit, as, more economies open up, is this a em? to look at paul: it is often pushed together as similar economies, but the difference so frequently within emerging-market equities is to look at countries which are primarily driven by the commodity side of things and those that are not. the ones which are primarily commodity driven by the ones which could potentially benefit from this very significant amount of stimulus which we have seen from the central banks and governments with fiscal and

monetary policy at the sink time and that could be better for the market and for emerging-market economies themselves. if we see a prolonged rally with a weaker dollar, a risk on that could be for a longer term point the risingven by inflation potentially from that monetary and fiscal base, e.m. would be a leadership candidate in that environment. at this stage, i think any significant em move would be short and sharp and for many investors, difficult to capture because it would be so brief and potentially violent. look atrth starting to e.m. ideas, but i wouldn't say it is time to pull the trigger on them yet. annmarie: paul markham from newton investment management. thank you for joining us. we want to show you live pictures of minneapolis as unrest continues to spread across the united states. it is a week today that george floyd, a black man, died under

the custody of police and we have seen unrest throughout the country and it comes particularly as black americans are dealing with a disproportionately heavy impact on their health and finances from the virus. this is bloomberg. ♪

annmarie: welcome to "bloomberg daybreak: europe." the equity market bounce weathered the pandemic and tens of millions of lost jobs. it has to navigate civil unrest. joining us is dani burger. do the gains look sustainable from here? dani: it is certainly hard to put into words the scope of unrest and anguish that has gripped the country. mind, sometimes it feels inappropriate to say what will the economic impact of this be?

strategists i've spoken to have hesitated to even begin to answer this question. one thing many agree on is that it is the scope of gains we have seen since the march lows, anything might force investors hands from this point. jay powell talk friday about 40% of people who make $40,000 or less, are unemployed in the u.s.. a letter from west says the a lot of -- there is a lot of tension in that statistic but says fed support will win out for markets at the end of the day. in the 1960's, we saw civil unrest doesn't always lead to turbulence in the markets. if one thing is going to have a big impact at this point right now, it is political risk. you can see that clearly when you look at the vix curve. you see a huge, premium. investors bidding the self reaction period saying a lot of inatility is likely to come

october despite the rest of the curve flattening as economy start to reopen. that kink in the curve is political tensions priced in especially over the weekend. chimes with jpmorgan's note this morning which talks about monetizing the volatility. selling call options and holding or buying options. talk about the biggest risks for u.s. equities. is it trade, is it civil unrest? what is it? dani: when i mentioned strategists who didn't want to unrest, they were happy to talk about u.s. and china trade tensions. you can see in how equities are behaving, u.s. futures started flat, late gains. gains in asia and they attribute this to what trump hasn't done. on friday, he condemned china but didn't take any draconian

measures. what you are looking at is u.s. stocks that have a lot of sales, where they sell to china or china exposure have outperformed from the bottom. this is the risk. if we get tensions, those stocks have done extremely well. they might fall back to earth. manus: indeed. dani burger, tracking volatility across the markets. annmarie will bring a snapshot of minneapolis. matt and anna will take you through the imagery in united states of america. these are shots of downtown minneapolis. 45 cities, 16 states that have curfews and the risks seem to be not abating. 40 million unemployed in the united states. annmarie: that's right, and we've seen protests throughout the country. six miles from me in brooklyn, they got quite violent.

we will be tracking this through the morning. that is it for "bloomberg daybreak: europe." the european open is next. this is bloomberg. ♪ cma. ♪

coming to open, you live from london. the open is just less than hour away. the u.s. is rocked by another night of riots over floyd.ling of george thousands protest in solidarity at home and in the streets. meets with ump security officials and governors today.