fears of a second wave. houston weighs a new lockdown as the city says coronavirus cases are getting out of hand. treasury secretary steven mnuchin argues the u.s. can't shut the economy again. and freefall -- the u.k. economy shrinks a record 20% in april, rounding out a difficult week for the prime minister amid mounting criticism over his handling of the crisis. good morning, everyone, and "bloomberg surveillance." this is "bloomberg surveillance." i'm francine lacqua, here in london. tom keene in new york. there is focusñr on what we sawn the markets the last couple of days. juckes, i did kit the same thing he did in his morning note. i did a fibonacci analysis of what we saw yesterday. that is too much mathematics or friday. all you need to know is it was ugly and we have a very nice bounce to -- bounce today, from

the worst vic's -- from the , to today. it is certainly better today. francine: here is ritika gupta with first word news. ritika: there has never been a month as bad as april for the british economy. gdp fell more than 20% as the coronavirus lockdown took hold. on a three-month basis, economic output shrank more than 10%. the imf says the global economy is recovering more slowly than expected from the coronavirus. the fund expects it will have lingering scars from the experience. the imf will release economic with injections june 24. it expects them to be worse than the last forecast in april. the imf says in general asian economies are further along in the recovery path. president trump is rejecting calls to overall law enforcement

to cut funding. he says a strong economy will be the fix for racial injustice. the president is working on an executive order that he says asks police to meet the most current standards. there are few details on what that program will look like. north korea accuses the u.s. of breaking promises it made at the historic summit two years ago. thejong-un's regime says administration has termed dream of peace into a dark nightmare. president trump demanded that kim give up nuclear weapons before the u.s. eases up on sanctions. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, ritika gupta. this is bloomberg. francine? tom? tom: thank you so much. equities, bonds, currencies, commodities.

i am focusing on the stock market with a risk-on feel. edward hyman will join us later. spx up 51 points, dow futures up 525 points. the vix in four big figures. what you need to know is how far we were extended. it is amazing, technically the lack of damage because we were so far extended to the upside. near 17.40 per ounce. atncine: i am looking european stocks rising with u.s. futures, not by huge amounts but still getting 1%. there was a selloff that we talked about extensively on concern of a second wave of infections, but also the prospect of a protracted economic recovery. i think markets are trying to

make sense of the treasuries and the dollar slipping. i also wanted to look at the vix, 36.83. we had that bad figure out of the u.k., the u.k. economy retreating by 20% because of the lockdown. my wanted to see if there was is impact on pound and it 1.2636. more on the markets. mark, what is being priced in? what was the correction about? was it a blip or was it something more fundamental? >> i think it is a blip in terms of we are probably not going right back to the lows, but it is not over yet. we have a few events that we are focused on. the fomc was a big one. the fomc did not disappoint but did not surprise positively. it was going to be easier for them to disappoint, given that

the rally had been driven by stimulus. once that was out of the way, that brought the attention back to the virus story, and that is looking increasingly negative. some thing we have been highlighting is that infections globally picked up aggressively --m mid-may, which would from monday, we saw global fidelity numbers pick up. now we will get back to the idea, is there the potential for the u.s. states to relock down again? problem in south asia is probably going to take the limelight. we will get increased virus concerns, and i think we will price in some of the ex ex exuberance of recent weeks. but there is one really important overriding thing to remember. incredible are on an rally, immensely overvalued, but many other stock markets around the world are still man u ash massively discounted -- are still massively discounted.

whether you are bullish or bearish depends on whether you're u.s. centric or whether you have a global macro perspective. francine: if there is a second lockdown, where do you see it first? we are not health experts, we look at the markets. do market participants now need to become health experts? mark: i think having to attempt to kind of have some grasp of roughly the trends that are there, rather than being worried about the lockdown next, it is which lockdowns really matter and what form they will take. the overriding bit is part of the reason i don't think equities will go back to the lows is i think countries are becoming more comfortable with the idea of becoming a bit more like sweden, keeping the economy open to some extent while controlling the virus problem. and feeling they have a better idea of testing, of tracing it. i don't think we will go back to a world of extreme lockdowns like there were in march, no matter how bad the virus. i think we take that picture and

we are going to do more for the economy, less focus on extreme health measures, and you combined that with a massive amount of stimulus from policymakers around the world. there is still more downturn next week, but the dip will be bottoming because there is too much liquidity in the market. tom: just fascinating. i really want to emphasize, a number of bulls reaffirming their bullish out book. i know you are not in the business of buy or sell, but i have to ask you come on a calendar basis in june, this is a gift to the institutional money that did not buy this bull market. they get a second chance this morning. how dippy is the crowd this morning? how urgent is it to get back on board if you missed the up before? mark: that is a great question.

a key question, something we have been talking about since yesterday. just jokingly we said we would get a move below the 3000. you get the bears excited and that is when the institutional investors would get excited. we saw that in the short-term. but i think we will get a further dip. ,he last week or so particularly after friday's job numbers at the start of the week, was the final capitulation, the forced buying of those who -- i think we have now finished the forced buying and that is why we have been able to have this pullback. whether those people that are under invested will buy and, i think they are getting more cash. he continues to climb all the time as they continue to accumulate more cash into their coffers. let me switch to the standard & poor's 500, folks, at about 3000 3100.

3000, 3100. we can test that trading range in a healthy way, not in a panicked way, correct? mark: i think that is 100% correct. bulls do not mind a little bit of a pullback. i reiterate that if we have a pullback to 2800, i think that will be feasible and will not scare any of the bulls at all. many bulls were happy to buy for those eight days in march at 2400. so buying at 2800 is not so scary that the world is falling apart. i don't think there will be any panic. the real opportunity in the world will still be in the u.s. the u.s. equity market will not be a bargain. it will just no longer be so expensive. thank you somore, much for getting me started. mark cudmore looking at the markets for bloomberg from

singapore. we are going to do a lot more on the markets all the way through "bloomberg surveillance peter: we will get -- bloomberg surveillance peter: we we will get hyman -- ed hyman with us. gdpstian keller on -20% possible for europe. please stay with us. this is bloomberg. good morning. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. the economy shrank just over 20%

in april over the virus lockdown. the contraction wiped out almost 18 years of growth out. returning the economy to the same size it was in between thousand two -- in 2002. journey us now is christian keller, barclays head of economics research. first, it could be the u.k., quite a number of countries, the u.s., but also european countries. what kind of recovery are we going to see? ofre is now the possibility a second lockdown after a resurgence of infections. economic that do the forecast? christian: you said something at the beginning that is important. asecond wave can lead to second set of lockdowns. ultimately what brought activity down is the lockdown. by a secondstified wave. i'm not sure that the reaction by governments to a second wave

would be like the first wave. ,f you think about recent data it may be relatively optimistic -- i don't want to use the word, but we were thinking about a relatively good recovery. several data out of china, u.k. data was poor but that was expected. u.s. labor market data was better, so we did actually believe in a relatively swift recovery. rates, not in growth a b in getting to where we were in 2019. we really have a second wave and we have to react to it in terms of -- that definitely would be a question. look ate: when you economic forecasts, and we saw it from part the imf and part the oecd. there are two sets of forecasts. one is what we are seeing now, and the second is because there

is a second lockdown. is this because we are being overly cautious or is it because the nature of the infection or the nature of covid-19 makes it likely the echo christian: -- makes it likely? we look at history come all the way back to the spanish flu, and there have been second waves. eñit depends on how governments would react. you have now better preparedness by the hospitals, and it is not clear to me that even if there was a second wavelength infections, it would lead to the wave of lockdowns that we saw in the past few months. it is clear that institutions in the imf, the oecd, they have to prepare and make different forecasts where there is an area where there is another wave of lockdowns. obviously those scenarios are much worse than the baseline, which does not foresee a second wave or at least not a second

wave of mandated economic activity. tom: christian keller, we are getting in monthly gdp data from the united kingdom. we will get in quarterly data from other countries, including america. are these grim statistics enough to shift the fiscal debate? christian: to a large extent, i think the fiscal debate has already shifted significantly. comingseen what has been out of germany, for example, in recent weeks, the kind of -- you're talking about changing packages of cutting, providing more money to people to allow them to spend it. that is just one instance of a country that is known for fiscal conservativism. what has already happened in the u.k. and also in the u.s., there is a lot of fiscal largess going on, a letter spending without

necessarily thinking about the long-term impact. i think the political debate around fiscal policy has already shifted significantly in the past few months. inflation and deflation -- does disinflation and deflation follow the u.k.'s grim statistics? can you bring it over v-shaped or not to just a complete dampening of inflation? the number is something a lot of people wonder about. on growth we are trying to get a handle on it. we know the mechanics. on inflation, what would happen not in the next few months or quarters. i think that is quite clear. it is really unlikely that you will see any surprises, inflation flaring backup. -termt is a medium

question, two or three years from now, where we could see a situation where we have a lot of monetary stimulus in particular, and a lot of fiscal stimulus also. possibly if there was a second wave and we saw a rebound come in the background we may see something on the supply side shoulde have some -- -- could we be in a supplyon where we create -- more expensive supply, and at the same time wrapping up all demand, and finally getting into a situation where we see proper inflation coming back up. that is an open question for the short-term. all indications are that inflation will stay low and that is why central banks can do nothing until 2023. francine: when you look at

economies, regional economies across the world, where do you see the biggest concern? these were economies that first some of the packages done by governments, but also from the monetary policies have been different. for example, the u.s., europe, and for the u.k. we were active from places in the economic cycle ahead of the lockdown. christian: if i take a broad looking atld say, the economic response, some of the emerging markets are a concern. india and brazil, these large economies where the virus has been increasing, they do not have the room and the space for the kind of monetary and fiscal policy response that we saw in the advanced economies. groupso, across a larger of emerging markets, if you look at the fed dynamics and the -- and what it would mean for

sovereign defaults going forward. i thinkook at europe, we see the diversion clearly. i mention germany earlier, a veryry that mustered a robust response. then we have countries in the periphery, which apart from being hit very hard by oronavirus now expect the tourism season to bring some gdp that may not come. have countries where italy , countries like that are more concerned about. this is required to keep the policy response by the e.u., which may go to the recovery fund. tom: christian keller with barclays, and we will continue. a lot to talk about. if you are just joining us, just grim gdp numbers for one month in the united kingdom. we are continuing to focus on

the markets, and to do that we need expert conversation. in our next hour, we are thrilled to bring you edward hyman of evercore isi. stay with us. from london, from new york on this friday, this is bloomberg. ♪

ritika: this is "bloomberg surveillance." let's get the bloomberg business flash. the biggest airlines in the u.k. are suing the british government, trying to overturn

the new requirement that people arriving in britain self-isolate for two weeks because of the coronavirus pandemic. british airways, ryanair, and easyjet says the warrantee and will have a devastating event on tourism and the wider economy. hertz is asking a judge to take advantage of a rally in its stock, wanting to sell up to $1 billion in new shares. of hertz rallied nearly tenfold from may 20 62 this past monday. it has fallen by more than half. investors are betting that the travel industry is set to rebound. jim says china -- zoom says china deactivated the service in -- zoom says it from now on it will not allow requests from the chinese government to impact anyone outside mainland china. that is the bloomberg business flash. francine: this is what the

markets are looking at. the markets are definitely focus on the correction that we saw yesterday, and they are deciding to focus on giving a bit of a lift up to the markets. the focus is not only on a potential second lockdown because of rising infections, but on what kind of recovery we will see. tom: it will be interesting. we have a nice balance this morning off the corners that we saw yesterday. edward hyman will join us here in a bit. mohamed el-erian later this morning. looking forward to that. stay with us. worldwide from london, from new york, this is bloomberg. ♪ save hundreds on your wireless bill

without even leaving your house. just keep your phone and switch to xfinity mobile. you can get it by ordering a free sim card online. once you activate, you'll only have to pay for the data you need- starting at just $15 a month. there are no term contracts, no activation fees, and no credit check on the first two lines.

get a $50 prepaid card when you switch. it's the most reliable wireless network. and it could save you hundreds. xfinity mobile. tom: "bloomberg surveillance." bye careful study of markets all of global wall street.

we have great conversations for you this morning. just to give you one idea, tom per sally really reaffirms his belief in some form of v-shaped recovery for the american economy. we wanted to take some time outside of the market upset to talk about the great dialogue on deflation, disinflation, inflation and the concept of reflation. we started that earlier this with olivia. the professor made very clear that we need the courage to reflate. .ith us keller us is christian of barclays. can politicians be successful if pulling us away from the abyss of deflation and disinflation?

i would say we call it the abyss of deflation. i think that already starts. if you look at deflation across history, deflation may not always be as much of a business as you say. you don't necessarily go into recession or a depressed economy. japanfrom a crisis like in the early 1990's, and as we do now, you palma and then go into a deflationary spiral, i think this is the most dangerous spot. this is a precedent that has been going on for a long time. it has been a technology change,

a lot of things have played a role to bring us down from inflation from high-level. in the immediate future, i think this is about reflate think. i think the programs that have been put in place where the right ones. we need to avoid deflation, which we are successful at doing. the question about the longer-term is about how much are we potentially creating supply bottoms through rearranging our global economy, structurally, that may be then could create even more inflation, possibly more than we want to. at the moment, i think it is about reflate think, and we are relatively successful at least avoiding deflation at the moment. tom: what we heard from chairman for twon a dot plot,

years, it looks like a hockey stick and then there is this hope and prayer of inflation out there longer-term. basically, the central bank of the world is giving it up. is that right? christian: i think at least telling us they are out of office until 23. if you look at the forecast, the ecb, in spite of having an extra still have an, inflation of just 1.3% or so. i think both central banks are telling us that they fear the risk of not getting inflation back up our high. they see a high uncertainty. they know from the past crisis that other models have not worked. they have been very poor in forecasting inflation. they take the precautionary

approach. low and going to stay do everything to avoid doing everything that it comes back up. uncertainty is really high around them, but the beginning of the message from a policy side that they are going to continue to do everything to reflate by giving us forecasts that tell us there is no inflation two years from now. when you look at all of what central banks have been doing -- it is amazing to think that only five months ago, they had reached the limit of what they could do next. how impossible is it going to be to unwind all of this extra stimulus that they have put out there? christian: i think you are very right. 2009 was the8 and an orthodoxy that we could see. now, we have learned that you can take it a step further by

not only doing more q. week, but also blurring the lines between what is system and monetary policies. systems are encouraging policymakers to spend. then there is the question on how to unwind it. scenarios where you don't get inflation, you can keep interest rates low. x9again, i'm sure the professor talked about it, you can manage this much higher debt burn. the whole question about how quickly to unwind it doesn't pose itself question it did in the past because if you have low interest with you can sum it up distribution to spend on the country. the big question is, could there be a point where central banks actually are successfully deflating, and then have to actually respond to inflation

why the debt burn is high. i think everyone tells themselves right now, this is every other way. the more imminent is to try to inflate, and therefore, that question is on the back burner. the market comes back, the bigger question on how to deal with the debt. francine: if you are a viewer and want to send questions into the bloomberg terminal, please do so by sending them to tv . this person writes in saying why does christian think we are also obsessed between targeting inflation between 1% and 2%? christian: why we are so obsessed about it? ok. there is enough debate about how the 2% inflation target came about. everyone followed. i think there is a certain --

central banks are following each other and that all has to do with differential to allow the central banks. clear. the answer is we do not want& deflation. the closer you are to zero, the you are to center on deflation. given you cannot move interest rates into negative territory -- we have already broken that, but nobody believes it can move very low into negative territory. you want to have a cushion. you want to have inflation so that you don't get into a situation where inflation is zero, you cannot move into negative interest rates, and your ability to move the real interest rate lower is curtailed. this is why central banks have been so obsessed about having an inflation that is above 2%. now, we have people arguing again.

the professor was posing this years ago whether we should move to 4% to have a bigger cushion. it is irrelevant now because we can make it there. i do have some sympathy for people who believe that maybe -- whether we have 1.5% or 2%, the question at some point, how much financial risks are we going to take this to move that last 50 basis points or 100 basis points to reach 2% if i'm comfortably at 1% or 1.5%? i think that is the debate worth having. francine: thank you so much. christian keller, barclays head of economics research. the city of houston warns that the coronavirus has it on "the precipice of a disaster." officials are getting close to

re-imposing stay-at-home orders this week. earlier this week, texas recorded its highest tally since the pandemic emerged. the republican party is moving key parts of its august nominating convention to jacksonville, florida. the event has been scheduled for charlotte, north carolina, but the state's governor has refused requests by president trump. the president warned the governor to lift all social distancing orders. the u.k. plans to have a light touch customs regime with its border with the european union next year even if there is a no deal brexit. both parties are trying to avoid adding burden to businesses already struggling with the impacts of the coronavirus. this is bloomberg.

tom: thank you so much. greatly appreciate it. a wide series of guests coming up on the markets, links to the economy. later on, the lieutenant governor of new york, the touch of experience in managing this experience -- pandemic. on our simulcast, this is bloomberg. ♪

this is "bloomberg surveillance." fears are spreading about a second wave of coronavirus infections in the u.s. as cases

surge in texas and california. the u.k. economy contracted 20% under the lockdown in april. joining us now is our bloomberg health editor, john lower men. what do we understand about how covid-19 is actually working? what are the chances that we have a huge resurgence of infections, people going to hospital and the increasing need of a second lockdown? john: what we are seeing so far in the u.s. is pockets of resurgence, not really a nationwide resurgence. úíobviously, areas like new yor, still, the virus continues to contract. areas where you are seeing higher cases, i think what i have seen noted is houston, in particular, along with more hospitalizations in california and more cases in arizona. what you are seeing there is that the virus is still out there, it continues to spread. it is a highly contagious virus.

nobody has immunity to it. if you relax the measures that to the pandemic spreading not quite as quickly, when you start to relax the measures, it is going to start spreading again. i think that is all we are seeing. tom: we should point out that is most expert on this up bloomberg. you know there is more beds in a three hospital district of boston or the beds in new york city than all of other cities combined. is the real impingement here for the experts that they will be sort of hospital beds rapidly? john: that is a concern in any place that the virus is spreading. they have huge hospital resources in new york, huge population as well.

the real area where we saw a problem in new york was in nursing homes. wondering if there is a second wave, if these hospitals and nursing homes will keep more people out, have more restrictions on traffic through those nursing homes. if there is a second wave in any area -- and they can be highly localized. .xothat is whyçóo%'rk-& stadium again because they can't send patients to other districts, highly sick patients, people with a very contagious disease and other areas to be treated. if there is a second wave, even if it is localized to these particular areas, it is a real concern for those cities and areas. knowine: how much do we

about how many people have had it, and if you have had it, even if you are not immune to it, is it likely that it doesn't get worse the second time you had it? john: that is a good question. whoooks as though people have had it actually do get immunity. more and more research does seem to be concerning that people who have been exposed and have actually had an infection our immune. we don't know for how long. people,that 2 million roughly in the u.s., have already been diagnosed of the disease. what we don't know is how many people who have not been diagnosed actually have the disease. areasis data from other that is actually quite good. the u.s. is trying to get a handle on this now with broader testing, but still, that is

highly incomplete. i don't think we have a really good understanding of how many people have had it. francine: thank you so much, john lauerman looking at covid-19. coming up at 6:38, andrew. this is bloomberg. ♪

tom: "bloomberg surveillance." good morning, everyone. we pick up the pieces of yesterday's market debacle. us in theill join next half-hour. a lot of other good conversation as well. it has been beneath the radar and equator is the challenge of roselle. -- brazil. marcelo carvalho is with us. he has been distinguished in his career studying the people of

brazil, the politics, and how it simply links%j in to their very future. right now, it is a future of crisis. thank you so much for joining us today. --, howarvalho: how fragile is the -- carvalho: we look at the impact of the crisis on emerging markets. it hurts the credit account, capital flows. the global liquidity environment we think is very helpful for us in emerging markets in brazil, in particular. the economy is in bad shape, it is a deep recession this year. however, inflation is very low. well below the

target of 4%. that allows the central bank to cut rates dramatically and probably keeps rates low for long periods of time. there may be challenges for brazil, but we think the best way forward is one of radical recovery, low inflation, rates lower for longer and appreciating currency after a lot of pressure earlier this year. tom: can you extrapolate that enthusiasm over to a strong by on all struggling or emerging markets? is carvalho: key here differentiations. i mentioned the impact the global crisis has on the current account, trade flows because of volume coming down because of prices coming down because of the impact of tourists, but not

all emerging markets are created equal. for instance, take oil prices. when they are down, it is bad news. importing. news for tourist flows are collapsing globally everywhere. that is very bad news for thailand, egypt, mexico. it is actually good news for those countries that have more tourists are broad that are coming into the country like brazil. in general, we are constrictive on emerging market prices, but differentiation is the name of the game, being selective certainly pays off. francine: when you look at some of the emerging markets overall, what are the one our two countries that will be better off? we often talk about emerging markets, but each country is very different. which is the one that will get through the crisis better, but

also see the right structural reforms? dr. carvalho: this is the key question because you saw the short-term impact of the covid crisis, but we have to look at the lasting applications for the global economy for emerging markets. the long-term challenge is quite important. critically, i think for emerging markets, long-term is the risk of big authorization. global -- say hello to fragmentation. to find out who does better, we have to look at three things -- the metro legacy starting points, global leakages between each economy and the global picture, the institution of strength. who wins? look at countries like south korea, they checked many boxes. look at egypt or argentina. they have a lot of things to do.

the big economies like russia thebrazil do well, but really long-term, what really matters is institutions. if you look at countries of bad institutions, you come up with names like chile. even though it is very small and open, long-term should be able to do either faster growth given the institution of strength. tom: thank you so much. greatly appreciate it. too short a visit. marcelo carvalho with us from bmp. we are going to be very much focused on the equity markets and what we observed yesterday. mohammad will join us, edward hyman will join us. we start strong in the next hour, david pearl will join us. he is a very astute growth/value investor and will give us investor perspective not in the

short-term or quick rebound, but on what we are going to see in the coming weeks and months. again, if you are just joining us, futures rebound very nicely. the vix comes in from 42 to 36 as well. i would also point out, grube gdp news on a monthly basis out of the united kingdom. that will be one of our themes in the next hour as well. please stay with us on this friday from london, from new york, this is bloomberg. ♪

tom: this morning, houston, we have a problem, and phoenix,

too, and it is not funny. it is not the movies. there pandemic is different than new york's pandemic, or is it? they have relaxed a social distancing and are running low on hospital bed. yesterday, the bid had a problem. the need to buy a rather large dip. hyman pearl and edward in this hour. it will not be a convention, rather it will be "to celebrate the renomination of the president." social distancing presumed to be allowed in jacksonville. please read the fine print on the back of the ticket. convention, you and any guest voluntarily consume all risk related to exposure of covid-19, etc., etc.. good morning, everyone. "bl