>> good morning from london. manus cranny is in dubai. this is "bloomberg daybreak: europe." stocks push higher as a volatile first half comes to a close. strong china pmi's and record-breaking u.s. home sales outshine virus fears today. the who says the worst is yet to come. the hang seng rises despite reports that beijing has approved a controversial new security law.

u.s. commerce department suspends regulations allowing special treatment to hong kong. boris johnson will channel fdr in a midlands speech, touting a new deal. he is expected to push infrastructure spending and hold off on balancing the books until recovery is certain. 6:00 a.m. int gone london. the narrative i think from two very powerful local points, the health organization, the worst is yet to come and extraordinary uncertainty coming down the pipe . which market is incorrectly priced? u.s. equities or the bond market? you like a little bit of belly in the bond curve, don't you? tell the truth. nejra: i absolutely do. we are seeing ourselves are all the time and ask our guests

this. with all the central bank stimulus out there, it's sort of makes sense that you have equities and bonds gaining in tandem. data track did some research and investors absolutely split down the middle on whether we see gains or losses of 10% for the second half. >> there is a lot of cash sitting on the sidelines. a will ask jean raby just little bit later on about what he think's about that. amazing interview with jonathan yesterday. it got more surreal as it went on, which is debase the dollar, by volatility and get ready for negative rates. how are your markets? .ejra: absolutely, manus we are living in surreal times indeed. you're seeing quite a lot of green on the screen. the china pmi's, u.s. pending home sales. there is some concern in some of

the employment numbers coming through. certainly, the market shrugging off any concerns today in asia. u.s. futures also slightly positive. we had a bit of a delay to the trading on euro stoxx 50 futures, but they are up and running note. the 10 year yield absolutely steady. the dollar not giving us much indication either. when it comes to oil, we are seeing some red on the screen edging lower after it did actually get a boost from the u.s. housing data. the worst is still to come. that's the warning from the world health organization, who say the lack of global solidarity means the pandemic is not even close to being over. optimism about an economic recovery still seems to be overshadowing those concerns, even as u.s. states scale back their reopening and more clusters are reported worldwide. >> we just touched on the markets. asian equities extending their best run since the best quarter since 2009 in the last trading

session of the first half. that is after positive home sales data out of the u.s.. the gauge of china manufacturing climbing. while powell says that the recent rebound in activity is welcome, it presents new challenges, like keeping the virus in check. joining us now is michala marcussen, group chief economist at societe generale. great to have you with us this morning. i am drawn to the risks that powell points out. we are moving into extraordinary uncertainty. again, the warnings are allowed from the world health organization and the chair of the fed. extraordinary uncertainty. how will that manifest itself for you as an economist? what is the key data point to consider if we are getting into extraordinary grounds? michala: i think what we are seeing at the moment is clearly

the concern is focused on the extent to which we are able to open up the economy again and still keep the virus in check. it really is that balancing act. we have seen it different results in different locations. what we are seeing in france is that the economy is slowly opening up again and so far, we have not seen a significant new outbreak of coronavirus. clearly, it is getting that balancing act right in the short term while we are still waiting for the medical treatment that will be able to help both in terms of treatments and a vaccine. when i look at the short-term dynamic, there is clearly a first question mark on the extent of the past damage which has been caused by the various lockdown measures. this is what we are seeing coming through in the data right now. there is significant uncertainty . it is still very significant in terms of the health outcome.

we can calls the, it the broader policy but it's no longer just about monetary policy, but also about fiscal policy. the belief that the central governments and the banks will continue to step in with liquidity support, credit guarantee measures for furloughed workers to be able to keep the supply side of the economy underpinned during this phase. then, i think we really get into the second phase. and i health crisis completely agree that there is significant uncertainty right get the health crisis under some form of control, then i think the attention turns to supporting the recovery phase of the economy. this is where things like the european recovery fund come in. and then we have the longer-term concern on the structural trend potential. one of the things that really

strikes me at the moment is when you look at the economic surveys that go beyond 2021, maybe even 2022, what you see is that the forecasts on trend potential growth -- now, we don't get those updates that frequently but we had one in the spring -- and so far, it seems like there is very little permanent structural damage being discounted. we will see if that picture holds true. i am really trying to think about the crisis in those three phases. nejra: yes. i would like to backtrack a bit and pick up on what you just said about permanent structural damage and what you were saying earlier about policy support. because one of the questions i am sort of asking myself this morning and have been for a while and a lot of people have is, the impact on the labor market. because yes, there were positive signs out of the china pmi's in both manufacturing and nonmanufacturing but some of the

underlying measures having to do with unemployment still in contractionary. territory jerome powell has pointed to those concerns as well. how worried are you about long-term damage to global labor therefore to demand? michala: i do have a very significant concerns on the labor market. i think a first thing to recognize is that this crisis has hit those sectors that lowoyee a vast amount of skill workers. tourism, travel industries, consumer services. this is really important. we already saw a number of pressures pre-crisis coming from digitalization, ottoman -- automation. i think what is incredibly important is that we make sure we focus on the skills of the labor market. i think when we look at the things that governments need to

invest in, we talk a great deal about the green transition, the digital transition, but i also think that we need to talk about thator market re-skilling can accompany those other transitions and make sure we also address issues on any quality. investment into -- on inequality. education, if i had to put something at the top of my list, that would definitely be it. nejra: michala marcussen stays with us for the hour. china has approved nan mark -- landmark national security legislation for hong kong. unanimous vote came at the end of a three-day meeting in beijing. the u.s. says it is suspending hong kong's special status, making it harder to export sensitive american technology to the city. angela merkel is throwing her support behind the radical recovery plan for europe.

it has been controversial in some countries. but standing alongside emmanuel macron, the chancellor backed the plan, saying there would not be any new proposal. prime minister boris johnson is bowing a new deal to rebuild the economy. he is rejecting austerity policies from the last crisis, instead, committing to spend on infrastructure. he is set to say that balancing the books must wait until the recovery is secure. airbus is meeting with labor unions as it prepares to cut thousands of jobs and scale backplane making. the company -- scale back plane making. a slump thatfaces may last until 2025. 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. manus? up, chinaing

reportedly passes it's a sweeping national security legislation for hong kong. we discussed the implications of that right here on "daybreak: europe." this is bloomberg. ♪

♪ >> the messaging from washington has not been help everybody else, help yourself. it has been, don't wear them ask or stand up against this sort -- don't wear a mask, stand up against this. we need leadership. >> that was the miami beach mayor saying flora needs direction and leadership from washington, d.c. when it comes to containing the spread of covid-19. another top story, beijing has approved a landmark national security law for hong kong.

legislative body voted unanimously to approve the law, which attempts to put an end to dissent. hong kong chief executive carrie lam speaking shortly after it was passed says she believes china will take countermeasures against u.s. sanctions. >> we are not going to be deterred>> by such actions. if necessary, i believe the country will take to counter that. manus: the last governor of a hong kong under british rule says beijing's security law will be intolerable for people and eventually businesses, too. most of the activity the law will target are already illegal but not in a way that is acceptable to the mainland government. >> it is not a question of it being passed. it will be imposed on hong kong, one of the many breaches of both the joint declaration and the basic law.

this is, in effect come on end one country, two systems. it is in breach of almost anything you want to point out. o'er the agreement that hong kong should have a high degree of autonomy. it demonstrates what i'm saying. at least until the last day or two, apparently, the chief executive had not actually seen it. it is absolutely crazy. it is designed to ensure that freedoms freedoms, debt -- have gotten have gone on ice, they have gotten rid of.

it is bad news for hong kong. if this was a football game, it is yet another example of why china or the chinese communist a --e can get >> you see this as an opportunity to establish a secret police in hong kong? >> that is what they are doing. they have said they are going to establish a national security office in hong kong. chineseing to be run by security agents. what they will be wanting to do is to target anybody who disagrees. we don't know, because they have not told us, they have not told people in hong kong, even though they have got posters all around hong kong saying it is a great law for hong kong, we don't actually yet know the details of what they are proposing it. will it enable them to pursue people retrospectively for the

things they have done? how will it define issues like subversion? how will it deal with people's contacts with outside bodies, whether ngo's, churches, let alone journalists? >> these national security provisions are outlined in article 23 of the basic law, which has not been implemented by the legislative council. for 23 years, they have failed to do that. would you say that at least the beijing authorities say that because they did not pass on their own article 23, we had to do it ourselves. do you buy that argument at all? >> not remotely. most of the things that they talk about are already illegal under hong kong law. you can go to the crimes ordinance, other pieces of legislation on treason, terrorism, sedition, so on, those things are already made

illegal but not in the way china wants. defineants to be able to those things in a way that runs counter to most abuse around the world on human rights -- views around the world on human rights. -- howe with almost 10 come almost 10,000 people have been arrested for demonstrating peacefully? hong kong has those laws. what china wants is the sort of law which would be unacceptable to people in hong kong because it would take away some of their basic freedoms. that is what the argument is about, not whether there should be national security law. nejra: that was former governor of hong kong. michala marcussen from societe generale is still with us. we heard from the u.s. commerce secretary, wilbur ross, as well, saying the security legislation raised concerns about the transfer of key technology.

there was also a great story on the bloomberg yesterday talking about the u.s.-china feud getting nasty with red tape as a weapon. this is only likely to escalate in the run-up to the u.s. election. how much concern do you have about the longer-term impact on the economy given everything we have discussed with covid-19 in the last conversation as well? >> we seem to be having a little bit of technical difficult he -- technical difficulties. what happened there? it's fascinating when you listen to chris paten. the markets have sort of shrugged their shoulders and more or less said, what else do you want to do? sort of expecting this nearly,

didn't they? nejra: absolutely. we are not releasing much market impact at all in terms of what we have heard overnight to do with this. we were having a conversation in terms of how this may be might build up through the date as we get more details. that is what we are still waiting for. at the moment, the approval has been reported and we are waiting for more details as to what exactly the legislation contains. given that we are slightly tilted towards risk on right now and you added the comments from the who, you wonder if we might start to see a little bit of risk off come through later in the european, u.s. session. >> blackrock, there is a big note out on the terminal this morning. they talk about cutting u.s. equity positions to neutral. they talk about the risk of policy fatigue in the u.s. and the risk of fiscal cliff. we will see if we have u.s. equity futures. no, we are very firmly positioned in the asian session. do you like the glasses? nejra: i love the glasses.

u.s. futures are ever so slightly positive, manus. european futures up 0.3%. >> we will come back in just a moment. coming up, build back better, build back greener, build back faster. not my words. boris johnson commits to roosting infrastructure spending. we will discuss -- boosting infrastructure spending. we will discuss the usc cut -- u.k. economy coming up next. ♪

♪ for think it is opportunity all of our police agencies to begin to evaluate the priorities of our city. if we put more resources into mental health, preventative measures and to ensure that the community are provided preventive opportunities, there

is no need to continue to increase police budgets. presidents the naacp speaking about defunding the u.s. police. boris johnson will sell out -- set out plans for a major boost to infrastructure spending on the nation today. the prime minister will say that balancing the books can wait until the recovery is secure. he is expected to announce an acceleration of 5 billion pounds of investments in roads, schools, and hospitals. michala marcussen is from societe generale and she is still on the line. if we look at this, many are saying this could be something deal,oosevelt style build, build, build. build back, build better, build greener. how important is a roosevelt style deal at the moment for the cake? michala: at -- for the u.k.? michala: we have to keep in mind

the u.k. is facing an additional headwind in addition to the current health crisis. the u.k. is also facing the headwind from brexit, which we think will take about 0.7 percentage points off of trend growth potential in the u.k. clearly, there is a need for something to boost the economy in the short-term and medium-term. i think when it comes to the medium to longer term, infrastructure, building green, building better, all of those things are certainly welcome. i do hope to see a good dose of education in those measures as well. i would make the point that these tend to be measures that take time to implement. if you think about building a road, it is something done over od.when itime peri comes to infrastructure and you wanted to give a short-term boost to the economy, you need impressive amounts put table.

there is the need to also focus on short-term stimulus as well but we will see what the government has in its plan. i think the real issue here is to make sure that this infrastructure is effective and potential.k. trend and this is a time where we have that very strong brexit headwind. nejra: with all that and what you expect from the fiscal side, what role do you think the bank of england will now play in stimulating the economy? anna: i think as we see -- michala: i think as we see in many locations, central banks are in a situation where it becomes all the more important to keep real rates low. if we think about the long-term stability of public finances, just relying on the idea that the central bank can keep it real rates low forever may be a bit of a challenging ask. i think the real issue here is to make sure that the investments, the public investments that are put into place and hopefully also with

the aim of giving a little bit of a lift to private investment, although we should remember that corporate balance sheets are also coming out in this crisis more indented. i think the real focus has to be on the growth agenda for the longer-term. it is really on the with economic growth that we are going to be able to solve the debt overhang. nejra: absolutely. we have got the chart showing the u.k.'s debt to gdp. michala marcussen from societe generale, great to have you on the show today. coming up, a close. where can markets -- coming up, a chaotic half comes to a close. jean raby from natixis investment managers, that exclusive conversation next on "daybreak: europe." higherd european futures and a lot of green on the screen in asia as well, even with many risks out there. andwho warning on covid

political risk in hong kong. this is bloomberg. ♪ it's pretty inspiring the way families

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good morning from dubai. i'm manus cranny. nejra cehic alongside me in london. your top stories. volatilesh higher as a first half comes to a close. strong china pmi is in sales ouchking, home i'm virus fears. who says the worst is yet to come. rises despite

reports beijing has approved a controversial security law. the u.s. commerce department extends regulations allowing special treatment to hong kong. u.k. prime minister boris fdr in aill channel midland speech, how a new deal will push infrastructure spending and hold off on balancing the books until recovery is certain. nejra: welcome to "daybreak europe." with that warning from the who on the worst being yet to come in terms of covid-19, we do seem to end the month and a little bit of a risk in town and the s&p 500 also positive. i suppose the question you have to ask yourself is is the worst behind us when it comes to markets? if we see a drawdown, will investors see that as a buying opportunity? manus: i had a guest earlier said that the risk was 10% on the upside in the u.s. equity

market. i think the question we need to debate, the credit market, the fed is the number three holder and some of the biggest etf's and credit. what happens to those etf's as they begin to buy corporate bonds? that is part of the debate, isn't it? nejra: absolutely. it is interesting because at the moment it has looked as if the tide has lifted all boats and you wonder whether we will see a little bit more divergence in the second half. in terms of the outlook for equities, they said absolutely split down the middle for investors in terms of seeing 10% upside or downside in equities. the keyword is uncertainty, you said it earlier. manus: yes. we will catch up with our destiny moment to find out how uncertain the ceo of natixis is. global equity markets, best quarter and 11 years. gold is your defensive play if you believe in that, of 18%.

blackrock, they upgrade europe to overweight and cut the u.s. to neutral. gold is back to flat. gold is trying to be the top currency. the best quarterly advance since 2016. .he five-year hsbc talking up the five-your pay just a few weeks ago. record low. we touched this level again. to 0.25%.ne from 1.7% oil and aussie dollar reflect the china narrative in terms of pmi rather than the hong kong risk. is up 0.12%. copper is up 0.71%. 6004. landmark approved

national security legislation for hong kong. that is according to multiple local media outlets. the unanimous vote came at the end of a three-day meeting in beijing of the nation's top legislative body. the u.s. says it will suspend hong kong's special status, making it harder to export sensitive american technology to the city. jerome powell is stressing the importance of keeping the coronavirus and check. it comes ahead of the testimony before the house committee alongside treasury secretary steven mnuchin. powell's remarks strike an optimistic note, but he warns that the path ahead for the economy is extremely uncertain. in the u.k., prime minister board john is proposing a new deal to rebuild the economy. he is rejecting austerity planning instead infrastructure spending. he is set to say that balancing the books must wait until recovery is secure. 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? ofra: with the first half 2020 drawing to a close, where can markets go? joining us now is jean raby, ceo of natixis investment managers, one of the world's largest investment -- asset managers. thank you for joining us. we are looking at the best quarter for global equities and 11 years. this after the worst quarter since 2008 in the first quarter. the who says the worst is yet to come. is the worst behind us for equities? jean: good morning. when i look at where the markets are today, clearly and i would echo some comments made by chairman powell, there is short-term uncertainty. of looking ahead in terms solvency concerns, and terms of

the structural damage being done to the economy. that being said, as we think about the crisis is the main driver of sentiment today, with each day passing one has to believe or at least i do believe that we are getting closer to a vaccine or medical treatment. when i look at the long-term. with each day passing, we are going to get closer to a time where the situation normalizes and i think that is what the markets are saying to us today. that there will be a vaccine, there will be medical treatment, and at that time we may be in a position where the economy is quite robust. robust because we have had significant stimulus across the board, from central banks and government. think as i'm concerned, i

this is what the market may be saying to us, that the short-term there is uncertainty. it is probably a little more than the fixed income markets. the economy may actually be stronger than it would have been , then it would otherwise have been had we not had covid, had we not had the stimulus plan we saw. manus: with that kind of forward-looking view that someone say is quite optimistic, is the bond market mispriced? run since 1995. let's focus in on the bond market for a moment. given your economic scenario, do bond yields travel higher in the u.s. and on europe on the back of that narrative you just outlined? forget thatnot

valuation and price is not the same thing. of course, financial assets today represent to a significant extent the impact of the stimulus plan and the liquidity provision taking place by central banks and governments alike. clearly in the pricing of risk assets that are influenced by those stimulus plans. the question becomes how long will that program continue. what will be the continuing impact? i think we have some time away from that and at that time it may be that the underlying economy will have picked up to a point where things slowly normalize as they did a few years back when they were getting into the renormalization.

i do recognize that interest rates are at an all-time low and that we may be in store for some inflation further down the road. that iflike to believe inflation were to materialize further down the road, central banks would probably be happy to overshoot, given the extent of and addressness that valuation. i don't see that as a major threat to be honest. i want to pick up on a comment you made, which was that equity markets are to some extent reflecting the view that the economy could come out stronger at the end of all this then had we not had covid. at the same time, you pointed out that there is a disappointment risk in the

market. risk or asthat as a a more protracted disappointment in equity markets? short disappointment for sure. we have seen some over the past few months. how the equity markets have behaved. could there be significant disappointment risk? there you have to go to a more drastic scenario, which i don't subscribe to. believe that the answer to a second wave for so-called second wave would be the same -- [indiscernible] we know more about the virus. we know more about how to deal with it. our health care systems have

expanded to deal with the situation. see a retest of the new lows. disappointment risk, for sure. to the point where we would retest the new lows of march, i don't think there is a base case. manus: can i get a sense from saying there is a lot of cash on the sidelines. have you moved significantly up the cash register? are you ready to deploy an arsenal of cash into these markets? up.: the line broke i missed part of your question. apology. manus: no question. do you get a sense there is a lot of cash on the sideline and is natixis holding a lot of cash

to deploy? jean: i'm not sure i get the question right, but clearly there is a lot of cash to be deployed by investors. i think what we are looking at now and i think going to preach a little bit for my choir, as we think about the cash, one wants to be discerning because the impact of the letdowns are unprecedented. saying something that seems evident, that requires some judgment call. fundamental to the analysis as opposed to buying market data will be important going forward. i also think that we had seen it continue. it will continue. available --

[indiscernible] we have at managers, role to play. thank you very much. jean raby, the ceo of natixis investment managers. let's set the agenda for you for the rest of the day. by the way, the ceo of natixis. 10:00 a.m., it is going to be the euro area. headline inflation. it is going to accelerate. , given ther later underlying weakness in the economy, we are forecasting contraction. 8.3 to be precise. manus: bank of england chief economist andy halliday speaks on covid-19 and the outlook for

the remainder of the year. later today, u.s. treasury secretary steve mnuchin and the fed's jerome powell will testify in congress. we have already had part of that text released. merkel throws her support behind a radical european recovery plan. she warns eu members there is no time to lose. we are live from brussels next. ♪

nejra: i'm nejra cehic in london with manus cranny in dubai. week,ok, huge story this defended its policies on hate

speech after an advertising boycott gave momentum to push them. >> i think it is quite right civil rights organizations should pressure us to do better. that is hopefully fair. we have 3 billion people thereabouts. thankfully, hate speech is only a tiny minority of the total amount of comment -- content on our platform. the 15 billion sent from our platform on an average day, only a tiny fraction of that is hate speech. it might be harder to identify try toove, but we should do as well as we possibly can. we've got a lot better over the years. identify aboutwe 90% of the hate speech before

anyone reports it to us. it was as low as 23% a few years ago. independent assessments have confirmed that the velocity and scale of which we assess and to deal with a speech when it is reported to us is significantly stronger than twitter and youtube and others, but people why we mades demand further announcements. to look at thee measures we can take. >> you feel you are taking things down at a faster velocity than twitter and youtube, but are you held to a different standard? are you single doubt unfairly? thick with success comes

responsibility and accountability. that facebookven is a private company, we provide the platform on which so much public and political debate now plays out. true in theecially highly polarized environment in which a lot of these debates are now playing out in the united states in an election year. .e are acutely aware emotions are running very high. after the killing of george floyd and of course we are constantly scouring our platforms to make sure that there is legitimate public debate. yes that people say things that maybe people don't want to hear, but we believe in free expression, but we do that within certain limits. we seek to make sure that those proper.re

we do play a particularly important role in those debates. the only thing i want to point out is that we are never going to eliminate all hate speech. hateful individuals say hateful things to each other, it has been around since the dawn of time in every form of communication. email, telephone, now social media are used by a minority of people to utter a minority of hateful things. want anyone to imagine that weekend rid the world of hateful speech because that is part of the human condition. our job is to make sure it is minimized as much as we can minimize it but i don't want to people think we can do it altogether. >> what about the idea that particularly inflammatory content in some way leads to more eyeballs and in some way

leads to a bigger bottom line? greater revenue for facebook? is there a worry and how do you tackle that criticism? let me be absolutely clear. we do not profit from hate. we have no incentive to have hate on our platform. we don't like it, our users don't like it. users we know from the surveys we conduct with users, they don't like to see hateful, inflammatory content on their news feed. of course, they don't like it either. everybody is against hate. it is what do you do about it? we do not benefit from hate. we benefit from positive human connection. facebook's vice president for global affairs. we do not prop profit from hate. coming up on the show, a chaotic

half comes to a close. 50% of 2020 now over. equities are priced to perfection. the cliché runs on as the coronavirus cases continue to surge. where do markets go from here? this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." the first half of 2020 draws to a close today and after a fierce rebound, stocks look priced to perfection, but can they continue their upward march? here to discuss is dani burger. what are you seeing? dani: here is the auto picture we find ourselves heading into the second half of this year.

you have global equities which have just seen their best quarter in about 11 years, but when you look at the earnings estimate, this fundamental picture continues to deteriorate. there is a large gap moving into the second quarter and it is clear we are pricing in an economic rebound. you could argue we have central banks with a dovish policy. that is helping us to move further from here, but here is one of the big risks for the second half of 2020. that is this. this is the corporate risk. this is bankruptcy filings in the u.s.. ofbally, there was a lot corporate risk. most companies have filed for bankruptcy since 2009. the fed can do all it wants to support financial markets, but how can it really backstop and closingcompanies from and likely jobs from disappearing off the market? so does that mean we are headed for no rebound in 2020 or at least further from where we already are?

jp morgan argues there is a large buyer that is going to come into the market and help support it for the second half and that is retail buyers. you can see cash funds really pick up. all this panic, people want to move into cash, then they start to withdraw. for now, most of that money has gone into bond funds, but we should see retail buyers jump into equity etf's, and that will help give markets a left for the second half of 2020. manus? manus: thank you very much. that wraps up from jean raby from natixis. the economy could come out stronger than postcrisis. let's have a look at u.s. futures. this is blackrock. they have gone neutral on equities. they fear that there are those cliffs in the united states of america, don't they?

nejra: yes, definitely. positioning for the upside. this is bloomberg. ♪

anna: good morning. welcome to "bloomberg markets: european open." i'm anna edwards in london alongside matt miller in berlin. matt: good morning. markets say, let's finish on a high. european futures point lower after gains yesterday. the dow in the u.s. was up 580 points. the cash trade is less than an hour away.