>> good morning from london. i am nejra cehic. dennis cranny is in dubai. racialtherings demanding justice spread globally. president trump facing more defections from the gop. asian equities and u.s. stock futures pushed higher ahead of a week that includes a fed rate decision. oil climbs.

and astrazeneca is said to have made a preliminary approach to gilead. a merger between the two would be the biggest deal ever in the sector. it has just gone see it -- 6:00 a.m. in london. nejra, welcome back. you went away and you unleashed the burn. i know you are excited. curvee never far from a steepener. bondthis momentum in the market be a repricing or is there a risk from jay powell to the bond market? a few bonds at 1%. the older you get, the more enticing 1% looks. good morning. bears were really on a tear.

curve is the steepest in more than three years. it is good to be back. last week was a memorable week. was it really a turning point for risk assets? that is the question. how high will the hurdles be this week? the ecb went above and beyond last week. can we expect much from the fed this week? futures are positive in the u.s. european futures are looking a little negative. eighth day ofits declines. a lot of that has to do with the euro strength. we have pulled back from the 2008 low. it broke out of the twentysomething basis point range. approaching 1%. steady today. oil -- gaining a little. we ask ourselves whether the opec plus deal was priced in on friday. another week of protests across

the world. it saw -- they saw some of the largest crowds yet. mayor u.s., new york city bill de blasio says he is lifting the curfew immediately. joining us now from new york is hordern.'s annmarie new york city lifting the curfew. what has the mayor said about the reopening? annmarie: this city is opening today. the curfew ending a day early. this reopening is crucial. not just for new york state but the entire country. stumble.f looks like a phase one is beginning. curbside pickup, some manufacturing and construction retail back to work but shops, offices, movie theaters, and hotels remain close. if all goes well, maybe to the

-- toward the end of the month, we will have workers back in offices but there are a lot of questions about how the city that never sleeps will go back to normal? how will they meet the needs of customers, employees while still making sure everyone is safe? there are still a lot of questions. and this happens as the city has protests. this weekend, they were largely these fall. we have seen them across the country. astonishing images with hundreds on the golden gate bridge and san francisco as well as the brooklyn bridge here in new york city. relatively peaceful protests. the cause of that, president trump says he is ordering the national guard to vacate d.c. anus: there will be many questions about what happens to the funding of police officers

-- police forces and how money is allocated. what is happening in minneapolis regarding the police? ir city council pledged yesterday to begin the process -- a lot of questions still awake -- dismantling its police force. this comes after -- this comes in the wave of anger. council members said they did not have an immediate plan that would replace the force but they would consult the community for a new structure for public safety. trumplso comes as donald will be holding a roundtable with law enforcement at the white house. the latest series of moves from the administration to a line themselves with the police. while you have joe biden going to houston to meet with the floyd family before immemorial. the electionsl as

are taking center stage in november. colin powell has a broad critique of the president. he says it is causing disdain abroad. he is the latest from the republican camp to say he is ining for joe biden november. president trump striking back calling the former four-star general a "stiff." manus: thank you very much. first word news. potentially the biggest pharma deal ever. sources tell bloomberg astrazeneca has approached merger.or a potential the idea is at a very early stage and there have not been any formal talks or terms were a deal. iswere also told that gilead not currently interested in a

big merger. agreedd its allies have to extend production curbs for a month. -- to ensure full compliance for the cartel. there are doubts that some in the group will stick to the pledge but still the deal is a victory. saudi arabia and russia were in a deadlock just two months ago. new zealand is ending social distancing after eliminating covid-19. in resumption of normal life one of the few countries that have successfully eliminated the pathogen. strict border controls remain in place to keep the virus out. top 7 coronavirus cases million. with.k. is pressing ahead the two-week quarantine on international arrivals despite

move williting the devastate towards him. and wreck any chance that the travel industry has to recover for the summer holidays. are pursuingasyjet the government. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. nejra? nejra: coming up, after fed chairjobs report, powell will see to reassure. we discuss that next. this is bloomberg. ♪

manus: it is "daybreak - europe. " manus cranny in dubai.

asia -- and u.s. stocks futures rising. the msci in asia, the best week since 2011 last week. euro stocks futures giving back a little -- euro stoxx futures giving back a little after last week's euphoria. some would say that the bond bubble has burst. 10-year gilts up 24 basis points last week. a gift weekly jump since 2019. dollar-yen. imax crude belting higher on the backs of the deal between opec's plus and its allies. like "daybreak --

europe" with nejra cehic. nejra: third week of gains for the s&p. coming within a whisker of a racing its losses -- of erasing its losses. while the picture in the real economy is anything but rosie, fridays jobs number allowed for another boost. forecasts for another sharp decline. manus: the jobs data on friday -- jay powell and his press conference on wednesday that will be watched and set the tone for all markets. a little more closely than usual. they will hear if he believes the worst is not over for the -- then economy and what mainstream lending program will also be a focus after the the 600 million dollar targeted plan

for midsize companies hit by the veryavirus due to go live shortly. let us go to our guest host, .sty dwek from natixis you remain prudent and neutral. look at the narrative. we have gone from recession to in 100ion to euphoria days. beautifully encapsulated. --s bead of this repricing is that what causes you to be prudent and neutral in your allegation? allocation? think everything seems to be priced almost to perfection so we do not like to chase the rally. at some point, as specially now that sentiment is turning bullish and the rally is

broadening, there is a question of disappointment risk. we don't really want to run after the rally. that weetely admit probably are not going to see because cashows levels are still quite high and because a lot of people missed the rally. as we see some corrections, they are likely to be a lot smaller. we just don't like to chase the rally. , great to see you today. some people make the argument that the cash levels are elevated. when you say that you don't want to chase the rally and it is priced to perfection, equity markets that is, are you talking specifically about the u.s. or global? esty: there is definitely room for catch-up from global equities. we started to see that again in

the last two weeks, more so from europe and the emerging markets. i think you do have to be a lot more selective in the emerging markets because some situations, despite recent performance like brazil, remain quite tricky and on a medium-term basis, will betray gear to look at. trickier to look at. look at the msci world, we are pretty much pricing in this v-shaped recovery which may now be unfolding quicker than expected following friday's job numbers. esty, one of the discussions we are having this morning on our stories on bloomberg is -- are we perhaps underestimating the momentum? you do have friday's numbers. doubling from the friday low.

is it still too early for you to capsmore to value large over small caps? or istation narrative that something that gathers momentum for you as we get more evidence on reopening? comfortable more with the rotation. and we started that rotation in the last few weeks more to europe over the u.s., more to value stocks then european financials. for a number of weeks now. we believe in this catch-up, in this rotation. moree still a little cautious on high versus investment-grade and a lot of this is about the central banks and where they are going to have their preference, which segments they will support more, and the fact that we still do not really know what the default rate might look like with high yield.

you need to be even more selective. if you are an active manager, a portfolio manager, we think it is the right opportunity but more broadly through indices, we are more cautious with high-yield. within the equity market, we have started the rotation but we to farant to not go overweight into equities for the time being. nejra: and there are some out there that think the rotation will reverse towards the end of the year. that it will not necessarily last, that rotation. with the bond market, you mentioned what you are doing around investment grade versus high-yield. what is your view where sovereign yields go from here? ? manus and i were talking about treasury having its worst week since december? . was that just a blip? esty: i think that will be the

next question mark. we keep getting these obstacles to the equity rally and the markets keep working them up. and now potentially the rise in yields. signow, it is probably a and it is supporting this rotation to more cyclical and more value stocks, that at some point, the fed does not want yields to rise too much, too quickly. that will be one area to look at. i don't know if this is the start of the biggest move yet. there is certainly sovereign yields to catch up a little bit to the upside or the downside depending on how you want to look at it with the equity markets -- which the equity market has been pricing in. i do not think the fed will on

yields.ds -- untap isus: if the yield spike done for the moment for you, what are the consequences of that on the potential yield curve control of the dollar? market, ther sincet running decline 2011. it is like a steamroller. the risk is the fed steps back. what does that do to the dollar narrative? esty: we have really started to see some weakening in the dollar and from very high levels. you had that panic in march. you had the spike in the dollar. it stayed strong for quite a while. if anything, i think it is supportive of risk appetite and this move of more risk on that we are seeing some dollar we

this and that continues. the fed imagine completely stepping back. i think it will be one of the things we look at this week. they are going to want to keep the bond market well behaved. they are not going to want to start a big panic there and they will not want that to spill over into the equity market rally either. and that is one of the things we have seen. i think there is a question of normalization and that has been challenging in the past. and in the futures as well. i don't think they will be anywhere near starting that are already in june following the crisis. dwek will stay with us for the hour. china's trade surplus surges to a record in may. we break down the details, next. this is bloomberg. ♪

nejra: this is "bloomberg daybreak - europe." i am nejra cehic in london. let us take a look at some of the upcoming events. christine lagarde will appear before european lawmakers today after the central bank decided to increase the emergency bond buying program. new york city is due to start reopening but some major retailers say they are holding back. tomorrow marks a year since protests began in hong kong

against a proposed extradition law. manus: indeed. on wednesday, it is decision day for the fed. officials are expecting a holding pattern. finance ministers meet to agree on a recovery package. and on friday, the impact of covid-19 on the u.k. economy will be laid bare. we will have the gdp figures. we get industrial production and the manufacturing data as well. nejra? nejra: china's trade surplus surged to a record in may as exports fell less than expected. as the prices of oil, gas, and soybeans declined. china's economy is continuing its slow recovery from the coronavirus slump in may. sluggish.t remains

rising tensions between the u.s. and china remains a headwind. esty dwek is still with us. with that headwind, we have seen uan move back to a 2008 low. suggesting it is looking for stability. how do china-u.s. relations figure in your strategy right now? esty: it is something we need to keep an eye on. we do not expect them to use the yuan as a weapon. the market was pushed weaker as tensions rose. side nowthe stronger though which is pretty encouraging as a sign that they do not want to go into a currency war with the united states. the market has been pretty tensions the rising and so far, it seems to be a lot

-- bark thhen bite an bite. so there is a lot of strong rhetoric. but we have not seen much in terms of the phase one trade deal. the agreement there. or any backing out from the u.s. china continues to move along with their side though it looks being cuffed on china and saying you are tough on china is going to be good and that will last for the election. we are seeing joe biden use a lot of similar rhetoric. he does not want to be out popped by president trump on china but for now, the actions remain a lot softer. and you don't want to jeopardize the recovery which looks to be doing better or quicker than expected with increased tariffs not wanting to jeopardize the

market rally. i think we will be navigating between the rhetoric and avoiding the harsher actions. but it will stay in the headlines and we will have to keep an eye on it through the elections. and later, depending on the results of the election. , will we seeriefly germany, is-- thinking about fiscal response? does it put pressure on china to deliver more perhaps than estimated on the fiscal side? esty: i don't think so. there are two separate issues -- with europe, it is finally good news that germany is pushing sides and moving into fiscal spending. they want to support the recovery. of more on the side integration and cooperation with its recovery fund proposal. and having a big portion of

grants supporting italy, spain, and the like. manus: we are to get into the european narrative shortly. esty dwek from natixis investment and management will stay with us. ♪ you doing okay?

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manus: good morning from dubai. i am manus cranny. nejra cehic alongside me as ever in london. mass gatherings demanding racial justice spread globally. president trump faces more defections from the gop. colin powell backstory to invite -- biden. asian equities and stock futures pushed higher ahead of a week that includes a fed rate decision.

oil rises. are exist --rbs are agreed upon. and astrazeneca making an offer for gilead. the biggest deal ever in the sector. nejra: welcome to "daybreak - europe." it was -- it is great to be back together. i was off last week but keeping an eye on what is going on. we have a global process in a week that none of us will ever forget. what was also interesting is the bond bears came out. manus: they did indeed. i miss deal. oild someone upsets with last week and you love your bond markets. the narrative shifted dramatically on friday. there was shock on mike mckee's face. there were a lot of people very unseated by this amazing news.

just to pause for a second. america, the world and still lost over 20 million jobs. the world is in no way going straight back to normal -- to normality. you will still deal with a temper set unemployment number. i need to get off my grinch popped. nejra: it is interesting because i read a number of articles while off saying that what equities are priced for right now is absolutely perfection, the v-shaped recovery. it is funny we are still talking about it although it seemed for a while that the consensus had moved away from that. i'm with you on the bond market. interesting to see the steepening. and the question is whether we will see anything from fed chair jay powell this week.

is -- i was chastised by a guest this morning saying there is no way that powell will sound less dovish. keep then d'etre is to foot firmly on the floor. it is the duration -- is it the duration or the risk causing this? take it away with the markets. good morning and good to have you back. nejra: great to have you. if you were in the markets, i know you love having me back but it is you doing the markets. we can do them together if you would like. manus: ok. nejra: [laughter] manus: yes. do you know what? you take the bread out of the mouth, wouldn't you? you are right. i was asleep at the wheel. dollar rose.

bears are out. you went on holiday. you want to do the aussie dollar ,. if you wait -- the aussie dollar has been absolutely on a raring -- roaring tear. rerate or reprice? you're looking at the nymex crude market. we get to the editor of the oil market. i like iron ore. --the recovery in the work in the recovery in the world. opec has agreed to a one-month extension and you have record oil production cuts. it also adopted a stricter

approach to make sure that members do not pump more than they pledge which is called compliance. for more, let us get to will kennedy. the word in our story was "draconian" measures. on the laggards. how hard will they be policing full compliance? good morning. will: all they have really is rhetoric and the threat to walk away. the saudi oil minister and the russian oil minister will have a meeting on wednesday. they got what they wanted from the recalcitrant members like iraq and nigeria to meet the targets and to compensate for targets that they have hit -- that they have missed. but if they do not meet it again, what can saudi arabia really do? will it walk away from the deal? that seems unlikely.

the last attempt earlier in the year went badly. it is all about pressure. that said, i think it was a pretty significant meeting. nejra: and will, studying not just the recovery. it takes me back from when we were worried about negative prices on wti. that seems far in the rearview mirror, or does it? will: i do think it is in the rearview mirror. i think the consensus though is that it will be hard to rally much further than this. in the last few months, we have seen a big drop-off in u.s. shale production. texas people have stopped drilling. production has fallen markedly. the question is, if you get much of above $40, how much of that

production will return? wary abouta is very reawakening the shale demon which has tormented them for the last few years. i think they finally have shale where they want it. this: what an image for time of the morning. a shale oil demon. the new york stock exchange may have reopened its trading floor but the fate of europe's last live trading floor is still uncertain. -- chamberlain spoke with dani burger. take a listen. it was europe's last traditional exchange floor until the coronavirus pandemic swept the world. it is where the world's metal prices are set but it has been closed and moved to europe -- to

electronic pricing. will it be able to reopen after the pandemic? they hope to keep this final vestige of in person pricing. ultimately, if we did reopen, we would be asking our staff and members' staff to go back to the ring environment. i think the way we analyze it right now is that we are forrly waiting government guidance. but even if the country can open up restaurants, you can run restaurants in a socially distance way. way.stanced we don't quite see how we can run the ring in a socially distanced way. until social distancing can be when there is a vaccine or better treatment, but

until that time, the most prudent thing would be to keep the ring closed. dani: has electronic trading because of the close down gone smoothly? in a narrow sense, absolutely. we are confident that our market is still liquid and orderly. i talk a lot to the end-users in the market and i genuinely have not heard a single complaint are concerned that people cannot get their business away or their hedging done or investment on under an electronic pricing model. sense, we are very confident in electronic pricing and that it is working. but the broader discussion is drives morevenue activity. because you can have a market that works absolutely fine for getting your core business done but perhaps it does not drive

quite the same peripheral business, or opportunities. just because of electronic is working does not mean that electronic is necessarily better. let us remember that the ring has been working for over 100 years. the 100inted about years more that you have the trading floor. i have talked to traders who sometimes lament the loss. on a big picture level, what does it mean to lose the last open cry trading floor? >> i think there is a very significant emotional element to it. and i am certainly not immune to that. everyone that works here, we come in and walked past the floor and it is a very visible sign of the service we are providing globally. and often, when we have deadened -- dignitaries that come to

london from the finance world, they love to come and visit the simpleause it is such a of that trading activity. i cannot deny that if we ever did lose the floor permanently, which i am not anticipating, it would be a hugely sad moment emotional perspective because it is such a great s work and how metal more broadly how london financial markets work. ♪ did like thaty dramatic music there. i wanted to take you back to 1989. i did not last long on the london stock exchange. market, and the bond markets that we talk about -- that seesaw is gone and i think that is one of the elixirs as to

why anyone ever went into the city. i will leave you with this thoughts.- salutary emotional you get to -- too emotional? i got emotional watching that video. to be honest, we could see right a few changes. the survey from the london stock exchange said traders with like to change the hours. can you imagine? would you have liked those hours? manus: the problem was i spent too long at a wonderful barth. -- wonderful bar. my hand signals though were not very good. that is fixed. i did not last long. a lot of people can id me on

that. that is 1989 vintage. there you go. canstocks with stan -- stocks with stan a price change -- withstand a price change? nejra: [laughter] i'm still recovering from what we just discussed. coming up, ecb president christine lagarde appears in front of european lawmakers just days after the central bank boosted bond buying by more than the market expected. this is bloomberg. ♪

nejra: this is "bloomberg daybreak - europe."

i am nejra cehic in london. we start the week on a front foot in terms of risk appetite. u.s. futures slightly higher after global equities had a third weekly gain. of enthusiasmt over the ecb last week. 10 year yields edges up, a 24 basis point rise. positive but some of the gains from the opec plus deal fading. christine lagarde appeared in front of european lawmakers today days after the central bank boosted bond buying by more than the market expected. speaking to pablo hernandez -- he said the deflationary risk warranted the move. esty dwek is still with us. thank you for sticking around. even after the ecb surprise,

going beyond what the market expected, people immediately began to call for more. do you expect more from the ecb and if so, what? took a page out of the fed's book and announced a bigger than expected increase to the program and an exemption. we expect the program to last beyond 2020 but they did not necessarily need to mention it today although with the increase and at the rate they are going at it, i think it makes sense. i am not sure how much more to expect at this point. we are seeing a bit of a difference in the dynamics between europe and the u.s. and we will have to see if europe where the data is lacking a little bit more, does gradually moreup in may and probably in june and then beyond. and how much more the ecb can do. we are not seeing any incline

towards anymore negative rate but i'm not sure why this emergency program will not be extended potentially even beyond 2021 and potentially pop up again to make sure there is enough ammunition there. manus: the one thing that struck me in the conversation is -- for once, europe, monetary and fiscal policy may well outgun both the u.s. and japan. come on eileen into your notes and i see that you believe the valuations and be more fruitful. banks were up 17% last week. up 60%. were in terms of your presumptions, valuations remained extreme. is this one part of your core call? our views. one of

the valuations on european financials have been very much disconnected on the downside. they were extremely cheap. we have started to see the catch up. the proposal for the recovery fund. the european commission proposal. and now the ecb continued to add to that. seeing yields rise a little bit which can only help. it is alsorspective, a medium-term outlook that changes where grow -- where growth is going to be more supportive than it has been in the past and where you will have less worries from peripheral countries like italy because you are going to have so much support and ultimately, that should shift into the european banking sector and then catch up. saying earlieras that some people are already calling for more. they expect the ecb to add

another 500 billion euros to its firing power in september. jp morgan. when we were talking about the u.s., you said you were in the mode to purchase what the central banks by. if we translate that to the ecb, does that mean you are giving your show in or increasing allocations to sovereign debt? we have not singled out peripheral debt. we have stayed broader across the sovereign states. we did not want to pick italy on its own even though it is one of the main beneficiaries. we wanted to include a number of the peripheries. we have kept a broader view. broad in the positioning at the moment. that ione of the things

just want to get a sense from -- is the inflation numbers the ecb expects 1.3% in 2022. there is no sense of inflation urgency in europe. does that play to your thoughts at all? esty: we in europe have tried to or 1.5%,tion above 1% anywhere closer to the 2% target and it is going to take time to get back to those levels if we focus on the core and we don't look at the moves in energy prices. i think they were so close to avoidion, they want to that scenario which will be extra ammunition for the qe programs to continue. but we are far away from inflation worries in europe. esty, thank you for sharing your thoughts with nejra

and i this morning. miles to go before we sleep. is potentially the biggest sovereign deal in history. a merger withing gilead. this is bloomberg. ♪\

manus: this is "daybreak - europe." our top stories. the drugmakers set to possibly do a deal. astrazeneca and gilead. the possibility of a combined pharmaceutical company. let us get to our reporter on the west coast of the states. ed hammond. how likely is the deal?

is this serious? ed: good morning. let us start with how likely is the deal -- we don't know because at this point, we don't inw if gilead is interested doing this and if they see any merit. ,nd we don't know if astra having made the approach around the 12th of may, whether they going interested in forward to do a deal. in terms of how serious it is coming you have to think it is very serious. no company would wake up one day and think, just for a laugh, i'm going to pursue a merger with a $100 billion rival. from everything we understand, it was a proposal -- we are interested in a deal, could it work? it was very high level. and we believe the conversations were at senior levels of the

company. nejra: there are many reasons it could make sense. steps?e the next play --s put gilead in could other companies mull over some bids? stilllead is probably mulling over the approach from astrazeneca. we don't know if something more formal will come. in terms of putting gilead in play, i suppose notionally. buyers isst of extremely small. you think of the big u.s. firm a companies including pfizer, bristol-myers. of peopleall universe that could, even if they want to come in could. nejra: it was an industry facing

consolidation pressure even before covid-19. ed hammond my thank you so much. that is it for "bloomberg daybreak - europe." the open is next. u.s. futures in the green. this is bloomberg. ♪

anna: good morning. welcome to "bloomberg markets: european open." i am anna edwards in london alongside matt miller in berlin. matt: today, the markets say where is our rebound? european futures point lower after the europeans job data pushed the nasdaq within touching distance of an all-time high. the cash trade is less than one hour away. here are your top headlines. big pharma wants to get