>> good morning from london. i'm nejra cehic. manus cranny is in dubai. picture for stocks as investors keep an eye on global coronavirus outbreaks. new cases in california rise by a record while infections in florida jump. china confirms a proposed national security law, allowing beijing to override hong kong's legal system. the draft says china will establish a bureau in the city to collect intelligence.

wirecard withdraws results, assets missing $1.9 billion worth of cash. quality doesn't exist. the group says it is in discussions with lending banks. that has got to be the most stunning headline i have probably ever read. i don't know. i'll have to refresh my memory. we've got a debate. jpmorgan says get more selective. howard marks has done the anatomy of a rally and i think we have gone from flawless to hopeless and back again in record time. the question howard asks is, are we being passionate enough about weighing the risk? good morning. nejra: good morning, manus. we have been looking through what jpmorgan has been saying, investors getting more selective in the second half and i found

the comments from jpmorgan interesting, especially when we look ahead to the potential for yield curve control, there are some asking questions whether it will be a buy everything rally but jpmorgan don't think it will be, do they? manus: they don't. james athay saying fill your boots with everything. jpmorgan, they say you want to be the end game winners. when someone comes on the show and tells me by health care innovations and health care stocks, you run into a buffer. here are the markets. good to be back with you. nejra: great to be back. interesting on the endgame winners because they say, jpmorgan, that is opposed to a broad preference for cyclicals or defensive shares. our guest has some -- thoughts about that. msci asia-pacific is unchanged right now on a headline level.

a mixed picture below the surface. the detergents between u.s. and european futures, u.s. futures on the front foot, european futures on the back foot. that could be because the s&p 500 dropped on friday. optimismurope rally on around the recovery funds. index pullsg dollar back slightly after a few days of gains. you are seeing most g10 rally, the aussie, rebounding after weakness with caution in one of the states around reopening. the 10-year treasury yield, pretty much unchanged and oil also fairly steady. covid-19 inases for the united states, approaching 2.3 million, a daily increase of 1.2% on sunday. there are signs of a possible resurgence of the virus in the u.s.

california recorded a record rise in new cases while florida's infection count jumped more than the weekly average. jpmorgan strategists believe investors should be more

near-term noise in economic data, but also a moderate pickup in new case rates. what we are seeing in the united states, the hotspot states including florida and california, what we are seeing is more worrying given the fact that it had been made clear from the u.s. administration that they don't want a return to lockdown. nejra: you've pared back your conviction overweight to equities in late may. however, you think -- because you've been looking at the allocation to money market funds and think because of the cash on the sidelines, that could provide support equity markets going from here, so are you looking to add back to equities because of that and if you are, what would be your strategy coming back to that selectivity theme from jpmorgan, particularly as you see the second wave or an elongation of the first wave playing out differently? how do you reallocate from equities -- to equities from here? edward: i think this money market fund statistics are worth mentioning. in february to april of this year, we saw over one trillion u.s. dollars of inflows into money market funds. that brings the total in the united states alone to $5 trillion. that is the highest we have seen since the depths of the

financial crisis. if you are looking for one statistic to sum up an unloved rally, it is that there is a huge amount of money on the sidelines. that -- i think in terms of where we are looking ahead, if we see any weakness from here, a selloff of consideringwould be putting that money into markets. the liquidity backdrop is such a positive that that should support equity valuations from here. , i think that isn't yet cheap enough. asian equities are one of the cheapest globally. we have the u.s.-china concerns out there at the moment. we still think that looks reasonably good value. the united states is one of the

more difficult equity markets and is showing defensive qualities when we do see times of weakness in the last week, but clearly on a forward-looking ratio basis, it looks more expensive compared to the rest of the world. --us: certainly we are relative to last november. the endgame winners for jpmorgan's are text calms and health care. comms and health care. you have a similar call. technology being tempered by more balanced exposure to the space -- tos equity the equity space. do you wait for a better entry opportunity or do you just say i'm rolling the dice and i'm all in? i'm not going to risk being left behind. when you first mentioned

technology and health care, i'm definitely one to follow that, but with health care relative to technology isn't as expensive. i think health care on the msci world pharmaceutical index is trading at a discount. valuations are less of an issue. hitting all-time highs regularly over the last couple of weeks. that is a bit more challenging. both of those are where the long-term growth is going to be. the show manyn years about the idea of secular growth stories and strength that can provide. our expectation is that world post coronavirus will still have low growth and low interest rates. amid that backdrop, you want growth equities, even when the valuation has been bid up over the last few months in particular. if you can have a secular growth

story that can deliver growth above trend gdp, that would be attractive to the market. we are already seeing at the moment, headlines -- about the idea in the u.k. of a cut now and potentially a bit more austerity in the future. if there is austerity, we need to pay back some of the costs of coronavirus, it could make the growth environment more challenging and that will pay up to health care, communications, and technology. manus: inky for clarifying the differentiation. it is good to get clarity on the valuation. mcdonaldrk, brooks asset management. your first word news, it is monday morning at 6:11 a.m. in london. disappointing crowds for president trump's first campaign rally since the coronavirus outbreak. the events in downtown tulsa, oklahoma attracted fewer supporters in the white house

had touted. overshadowed by continued criticism of the president's response to the pandemic and his reaction to protests against police brutality. >> you are warriors. thank you. we had some very bad people outside. we had some very bad people outside. they were doing bad things. i stand before you today to declare the silent majority is stronger than ever before. [cheers] confirmed ithas has national security law would allow it to override hong kong's legal system. the move threatens the city's status as top financial center. state media says the proposal will give the central government jurisdiction over an extremely small number of national security cases. italy is looking at widening its

budget deficit in the wake of coronavirus. the government plans to focus on infrastructure projects such as high-speed rail. the news comes as the prime minister is drawing up a reform plan to lobby the european union for financial help. 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. nejra: coming up, as boris johnson's government get set to announce easing a lockdown measures, could the u.k. be facing a jobless recovery? we'll discuss that next. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i'm manus cranny in dubai. to the markets, look through the numbers in california in terms of covid-19 numbers. new state ina australia been closed down, .sian stocks come back jpmorgan says get more selective, brooks mcdonald quite likes health and tech, and health has an appealing valuation. .8%.future down let's roll it over, aussie dollar, the rba, undervalued -- up .5%. aussie dollar is bid, morgan

stanley saying it is a spearhead. the tip of the spear. tip of the iceberg maybe. bonds are below .7%. perhaps there is a little bit more to these markets than meets the equity eye. good morning. nejra: good morning. boris johnson's government is set to announce more easing of lockdown measures this week in a major boost to the hospitality in -- industry. a two-meter social distancing rule which many complain makes reopening it possible. manus: those changes come in the wake of last weeks's 100 billion pound boost to keep the -- qe. the bank of england warned of higher and more persistent unemployment with jobless claims already near 3 million. edward park is from brooks mcdonald.

the new narrative everyone seems to be cleaning on is the possibility of a vat cut. would itey cut vat, make a difference, and would it change your investment narrative in the u.k.? would make ank it difference. it would certainly boost consumption. there is a bit of a concern that some of a vat cut is exported so it doesn't necessarily entirely hit the u.k. in nature fashion unlike something like helicopter money which some -- i think it will help in terms of boosting consumer sentiment but the key question is what does that mean taxhe future in terms of rises to pay for that. it is quite an expensive tax to cut so we will be watching

closely to see what the quid pro cutis because that type of now is all well and good, but it needs to -- if it leads to a tax hike, that could be quite worrying. of the bank of england, one of the big discussions that really didn't come out from the last meeting is around the possibility of yield curve controls and manus and i were talking about how some say the discussion and expectation of yield curve control globally might spark a oneeverything rally, but investor at aberdeen standard says it depends on what part of the curve a target in the u.s. that would lead to a rally in equities are not. in the u.k., what are the nuances around yield curve control that might impact the way you invest across u.k. assets? whatd: it depends on

aspect of the yield curve you control. if you are controlling the probably of the curve, less involved in longer-term expectations. controlling the 10 year part of the curve is a very important one for equity investors looking at the trade-off between equities and bonds. from a financial markets perspective, the 10-year is an important level. and what is happening in terms , where10 to 30 year mortgage rates are important. is probablywindow where the most bang for your buck comes. mostems to be the number important for quantitative easing so we expect that area to be targeted for any yield curve control. manus: you disappointed there wasn't something more -- something more exacting from the

bank of england last week? a lot of stuff that i read, which was under a billion, everyone was presuming that would come. there was disappointment there wasn't more. what was your take? i mean, 100 billion was at the bottom end of market expectations. it is a difficult balancing act that central banks have. it was almost a repeat of the federal reserve. here is 100 billion pounds. however, you've got a gloomier outlook. have done, why they are disappointed is it is well and good to have additional quantitative easing but if it is on the basis of a gloomier outlook, why wasn't there discussion of negative interest rates, particularly in the last few months minutes. and in addition, what are you going to do more from here? there hasthat because

been returned to liquidity and financial markets the central bank needs to do less is the main thing pressurizing sterling on the day of the meeting. i think in aggregate, it was a disappointing meeting mainly because they ttip the economic problems but -- teed up the economic problems but didn't deliver. i think it is looking more vulnerable. not only do we have what the bank will do from here but it is a question for all the central banks, what they do from here. we have brexit risks coming up. the mood music over the last week or so has been more positive with regards to brexit, but there is still the risk we -- and thentiations we have a combination of an to releaseuggling

itself from coronavirus at the same time as tax rises and the cliff edge brexit. the outlook for sterling is looking quite weak. nejra: edward park from brooks macdonald asset management stays with us. hong kong's angst pro-democracy campaign fears prosecution as china's national security law will allow beijing to override the city's legal system. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. nationalroposed security law will allow beijing

to override hong kong's independent legal system. a draft shows the central government will have the right to directly prosecute residents and will install a new police agency in the city. chinag us is bloomberg's editor. what more do we know? what are the new details we have about the national security law? largelyls of this have been secret and this weekend's announcement sheds light for us. the proposedrmed law would allow it to override hong kong's independent legal system which is a big deal because the system is what underpins hong kong's reputation as a safe space for international business. the central government will have jurisdiction over an extremely small number of national security cases under specific cases under the draft. collect intel and handle national security cases and calls for hong kong to establish

-- to protect national security. it will be accountable to beijing. manus: what has been the reaction from hong kong's pro-democracy forces? karen: they are worried. there are a lot of questions for them right now. china has said the law is needed to fight things like terrorism, but activists are saying the use of legislation on the chinese manly -- mainland could target people like journalists and and theyhts lawyers worry they will have to start operating like activists do on where they could face criminal charges for every thing they can do and in the short-term, the -- looking to a legislative council. they are concerned about the door -- authorities disqualifying candidates and whether they could gain a majority. manus: many concerns all the way

around. that is our china government editor. the very latest on hong kong, legislation from the mainland. a flop for trump in tulsa. campaign rally failed to attract the numbers. ♪

♪ manus: from bloomberg's middle east tour quarters -- middle east headquarters in dubai, it is "daybreak: europe." a mixed picture for stocks as investors keep an eye on coronavirus outbreaks. by cases in california rise a record while infections in florida jump. , a proposed national security law allowing beijing to

overrule the hong kong system. withdrawalsd , cash on results, and its balance sheet. it is constructive discussions with leading banks. welcome to "daybreak: europe." sawame a four-week where we global equities gain. the dollar and the yen gained as well. jp morgan has said that even when you look at risk assets, you need to become more selective in the second half. manus: discerning, selective. --t they say, you need to the indiscriminate approach

simply won't wash going into the second half. martin malone, a lovely email over the weekend, saying that andmarkets are -- a vaccine reopening narrative that might just not be there. it is it is --nejra: interesting as well, jp morgan pointing to the fact that the liquidity will not paper over the cracks indefinitely. when it comes to stocks, look at the covid-19 and game winners. technology, communication, and health care as opposed to a broad preference for cyclicals and shares. others out there saying, with investors looking for yield curve control, that would spur up by everything rallies. manus: i got in trouble.

prevaricate's while the s&p futures absolutely keep on trucking. msci comes back unchanged. i think that had more to do with geo -- with geopolitics in hong kong. of stocks, in terms the yen winners as you say. of 1%.e 100, quarters you spend more if there is a vat cut? it is hard to argue that the aussie is overvalued. morgan stanley, the tip of this beer. trade.o be a high carry 74 by 2021. we are talking about numbers and there is only one number stacked up, isn't there? nejra: yes.

we are talking about cases of covid-19 in the united states, approaching 2.3 million after a daily increase of 1.2% on sunday. possible signs of a resurgence sun belt states. florida infection counts dropped more. presidentanus: trump's campaign rally. trumpian his campaign manager had boasted that half a million -- trump and his campaign manager had boasted that half a million people requested tickets and that they would not be an empty seat. in the end, there were just over 6000 people in the building according to the fire department. donald you are warriors. trump: you are

warriors. we had some very bad people outside, doing some bad things. i stand before you today to declare that the silent majority a stronger than ever before. been: derek wallbank has tracking the story. away fromd we take that rally? they lack of people inside or that there were bad people outside? do we know the truth? peoplein terms of the outside, there were protests we had reporters on the ground and there really was not a giant crowd to block. the trump campaign had expected so many people that they had set up an outside stage. trumpiginal plan was that

and pentz would speak to that original crowd. of course, just 1/10 of the number showed up, a very red state, to see president trump. it has got the trump campaign worried about what their actual show of support is. giantsaid that he has a silent majority that maybe not comfortable coming out and expressing itself in this moment , but right now, polls are showing that jill biden, the democrat, is not just leading at the national level but he is leading state-by-state in every important swing state. if the election were held tomorrow, certainly a decided edge. the trump campaign will take this and say, right, what do we

have to do from here? i think this was a pretty good sized wake-up call. we also had some pretty racist comments from the president over the weekend. meanwhile, the messy ouster of the u.s. attorney for the southern district of new york is frustrating trump's effort to get the sec chair, clayton, to fill that job. derek: the effort to get rid of the u.s. attorney for the southern district of new york was kind of bungled at the start of the weekend. now, jay clayton, the fcc chairman, we have a report that says clinton was surprised and dismayed by the uproar about his spot. some friendsre are

and allies of clayton who are trying to suggest that maybe you don't want to actually go forward with this. certainly, democrats are suggesting he re-think whether or not he wants to go forward to it. so, that is a complicated situation. the southern district of new york, that is probably the most key district in america. you are talking about what covers manhattan, so you are talking about what covers the trump organization, and a lot of trump stuff. about whatuestions the trump administration was investigating, because people saw this removal come out of nowhere. questions about what is going on , certainly that some of

clayton's close advisers are saying, withdraw from consideration, stay at the helm of the regulator, and go from there. aat is certainly a bit of messy thing that has sort of come forward. expect some congressional scrutiny on this issue, especially in the house. nejra: bloomberg's derek wallbank, thank you so much. let's get to the first word news. wirecard says it is missing 1.9 billion euros that probably does not exist. withdrawing results first quarter 20 20. constructive discussions with

regulators. china has confirmed. give media says it will jurisdiction over a small number of cases. a stabbing attacking in reading being investigated as terrorism. 3 people died. a man was arrested on suspicion of murder. 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. manus: coming up bychkova could be a major shift in the bond markets. it could make the major debt issuer. this is bloomberg. ♪

nejra: this is "daybreak: europe ." take me look at the risk radar, not a lot of direction from asia. u.s. futures are on the front foot. european futures deeply in the red, perhaps playing a bit of

catch-up. the 10 year yield is fairly steady. we are seeing the dollar fairly steady as well, although pulling back a little bit against some g10 currencies. oil also steady. brent had a 9% gain. as eu leaders negotiate a 750 billion euros plan, the bond market is bracing for what could be a major structural shift. the push for a jointly funded program could see the block become a major debt issuer combined liabilities of the eu and agencies approaching one trillion euros by the end of 2021. mcdonaldrk from brooks asset management is still with us. the eunegotiation around recovery fund more an equity market or bond market story for you?

edward: at the moment, it is more of an equity story. i think in terms of the impact, the overall level of debt, a would likely be done in conjunction with further action from the ecb, so the amount of actual liquidity that the recovery fund would take away from bond markets might be called bank. for us, it is all about the equity story and the rebuild of europe. one of the reasons we have underweight at the moment is the concern that we don't have this fiscal and monetary coordination. italy, as part of the single currency, clearly it has had a situation where it had a stronger euro than it previously would have done. some structural issues as well, but in part it does not have the firepower to deliver coronavirus

results itself. positive on the peripherals, we need to see a recovery fund. manus: and the shape of that recovery fund needs to be more towards grants rather than loans , skewed needs to be more italy, spain relative to the rest? or how do you look at the risk, the apportionment come or how do you position for that fund to come through and deliver? edward: the most positive in terms of the equity response would be exclusively in grants. it cannot just be done on gdp. it would need to be disproportionate to those most impacted by coronavirus but also most impacted and not have the flexibility to do their own fiscal packages. our expectation is that the packages would end up being smaller than the european

commission packages. firm negotio -- negotiating position. atually, just teeing up mid-july summit. given what we have heard so far, we are not sure that july, we will have any agreement either. nejra: there was a lot of excitement on agreement over -- whichage,

meant inflows. reason wert of the have seen have -- have seen more inflows, i don't know if the market is more positive on growth of the economy or politics. biggest surface -- concerns about the fund, the far too little and far too late. behink market patience will

stretched into the third and fourth quarter. structural,sk, enduring unemployment. assumingkets aren't any of that risk? moment.no, not at the what the richer european states will do. , italy, spain. think the stakes couldn't be much highter. -- higher.

unless it was such a fudge, talking about a 500 billion loan package. if it looks like that, i don't think it is delivering what the eu is needing. are the prospects for euro dollar? -- we are still positive over the near-term. in the u.s., when we sunday dot plot from the fed, no

expectation of rate rises. with the chart, with monetary and fiscal stimulus, there is more capability down the line to increase rates. our expectation, over the medium term, is that the dollar will continue deliver. see in the risk off, risk on movement, we are seeking the euro-dollar move in line with that. over the medium term, i think it is more difficult to get positive on the euro. manus: ok, edward. thank you very much. our guest host stays with us. coming up, going, going, gone. -- 1.9 billionos euros vanishes. wirecard says cash on its balance sheet probably never existed. ♪

."nus: it is "daybreak: europe the scandals deepens at wirecard. one point $9 billion gone missing from the balance sheet. cashard now says the probably does not exist. companyrom grace in a once considered at the forefront of german fintech. the details, where is the money? what is happening? what have you learned? auditors say there is a big hold that should exist on their balance sheet.

this morning, they released a statement saying that the cash probably does not exist. last week, they said the money resided with lenders, specifically tw oh in the philippines, who denied having any kind of business relationship with wirecard. it is still a mystery why that money existed on the balance existand if it did it has about 2 billion of financing, the banks can recall the loans. 6 ranks.owngrading

resigning.the ceo nejra: it has gone from national pride to embarrassment. ceo.fallout for the former braun, former ceo, he was biggest shareholder. andook a loan to buy shares used the shares as collateral. call. triggered a margin he has to liquidate those. nejra: that is is for "daybreak:

europe." u.s. futures in green. this is bloomberg. ♪ you doing okay?

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♪ togood morning, welcome "bloomberg markets: european open." areoday markets say they uninspired, asian stocks fluctuating on the trading volumes but european futures point to a negative open and the cash trade is an hour away. here are your top headlines from the bloomberg terminal. a fall from grace, wirecard withdraws its