♪ nejra: good morning from london. this is bloomberg daybreak: europe. these are today's top stories. onbal equities push higher the back of positive vaccine development and strong u.s. manufacturing data. top daily virus cases 60,000 for the first time. fed minutes show more forward guidance. no commitment to curb control. the june jones report is expected to show resilience before the latest virus rate -- wave.

resilience in the hong sang this morning. the u.s. house of representatives passes a fresh china sanctions bill. welcome to daybreak europe. we could use the word resilient to talk about the markets right now. second day of the new quarter and the second half of the year. we did the risk appetite pick up a little bit yesterday after a slow start. the data helping a little bit. what is driving the positive sentiment overnight in asia but also in terms of european and u.s. futures today is an early trial of an experiment to shot from pfizer showing that the shot was safe, prompting patients to produce antibodies. that's giving a lift to the markets. equity markets are moving on that. the 10 year yield this study. not a lot of movement on the headline level on the bloomberg dollar index. yesterday withn

wti going above $40 a barrel on a u.s. stockpile drawdown. u.s. stocks climbed after a double dose of optimism from positive vaccine developments and better-than-expected manufacturing data. third day of gains for the s&p 500. an early trial of an safeimental vaccine showed and prompted patients to produce anybody's. -- antibodies. tempered concerns over a jump in virus cases. the latest fed minutes revealed that officials sewed no readiness to commit to yield curve control last month. a blockbuster jobs report to cap the shortened week in the u.s.. is our guest. great to have you with us on the show today. thank you for joining. i want to start by looking at your equity exposure for the second half. taking,oach you are

what a quarter we had last quarter. it's not all about following the indices from here. it's about looking at some of the laggards from the rally we've seen so far. sophie: yeah. good morning. in terms of the allocations we have at this point, it's really trying to capture the laggards and everything linked that can rebound. the globalization that started at the end of april could where wein a context are in the early stage of the next economic cycle. we like japanese equities. manus: -- nejra: yeah. when we spoke on the show before, we talk about your target on the s&p 500 of 3500.

i wonder, is part of your strategy in terms of not focusing just on those topline, large-cap u.s. equities, where you see the 10-year treasury yield going and having treasuries in the portfolio as protection based on what the fed is doing. sophie: yes. forecast, wehe s&p are still going ahead with 3500. continue if we don't have a second wave and other weeks of lockdown. mind, from ann asset allocation portfolio standpoint, we like mid-cap versus the nasdaq for -- mastec 500. treasury,f the protection at this point.

we only have a 6% allocation from 20% at the middle of last year. fact that argue shifter cover scenario is driving our allocation. nejra: makes sense. lessyou seeing treasuries as a portfolio protection, it makes it difficult to protect the equity portion. you are very bullish on credit still. you've actually increase your waiting to the maximum level. sophie: yes. we have not been wrong. march, we raised our credit rate from 5% to 23%. it was a huge move for us. we will increase that further for two reasons. the fact, given that our baseline scenario, the early stage of the neck -- next economic cycle.

the credit rate is raised first in the early stage versus equities. we are very reluctant to fight the fed. any kind of new supply coming on basically is manufactured by central banks. [inaudible] it's a kind of pocket where we still have decent return into next month. nejra: right. to come back to the virus as well, certainly we see optimism coming through in markets right now on the headlines that we've gotten on a virus shot from pfizer. one of your key calls looking forward is that social distancing is here to stay. how do you integrate that view into that portfolio? , since we's clear

don't have a vaccine, having a vaccine is our out-of-the-box call at this point. we want to advise investors to hedge your portfolio in case you have a second wave. recovering, that has been reflecting the global economy. if we have a second wave with lockdowns put in place, what will matter is how deep the second yield will be. we think our social distancing could be a way to hedge against that scenario. nejra: what is your base case scenario for the second half? you have some very interesting recommendations and trades below the surface. what do you see the second half looking like?

scenario iseconomic accounting for a ratio. is, if we haver a second wave, how deep will the bb -- v be? which scenario are we going to have in the second half of the year? changes our allocation. [inaudible] it's not effective in supporting the economy. on the other side, a v-shaped recovery would mean that the economic supply would remain positive. for the second half of the year, we will have to allocate.

[inaudible] the yield curve could translate into the coupon equity complex. nejra: you mentioned the yield curve. are we going to get yield curve control from the fed before the end of the year? they were reluctant to point to it at the minutes. sophie: it could be back to the configuration that came out of the second world war. the fed has no other choice than to put in place yield curve control. for now, we don't have this in our baseline scenario. we hedge against it by having gold and keeping some treasuries hedge.mentioned, as a

nejra: let's get to the first word news. president donald trump has back wearing a mask in certain circumstances. he doesn't think they should be required. previously, he mopped his democratic challenger for wearing a mask when there's nobody around. his comments come a day after the surge -- surgeon general urged people to wear masks. >> i'm all for masks. i think they are good. if i were in a group of people -- >> you would wear one? >> i have. people have seen me moehring one. -- wearing one. if people -- if people feel good about it, they should be wearing one. nejra: vladimir putin has won a bid to extend his two decade rule in a national referendum. the kremlin secured a change to term limit rules. it allows him to stay in power

until 2036. results show 78% voted for the proposal. the moves come despite his approval rating being near historic lows. amid concerns over the u.s. buying up stocks of gilead's drug, the u.k. says it has enough mannish and for every nhs patient who needs it. switzerland says it has supplies for serious ill patients. germany is reporting the country has adequate supplies. 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. coming up, stocks in hong kong rise on their first trading day since the new national security law was imposed. the positive reaction inequities has divided analyst and traders. we will discuss next. this is bloomberg. ♪

♪ >> hong kong was one of the world's most stable and dynamic cities. now, another communist run city where people are subject to the party elite. nejra: that was u.s. secretary of state talking about china's moves to exert more control over hong kong. the hang seng has greeted the new law imposed on the city with gains. the positive reaction in stocks has divided analysts and traders. marketid the gains -- stability around the anniversaries and politically sensitive events. joining us now with the latest is jodie snyder. great to have you with us. the u.s. has passed a china sanctions bill. the u.k. is offering a home to hong kong citizens.

talk us through the international reaction overnight. jodie: we've seen that promised international reaction where both the u.s. and u.k. have said they would take it -- additional strong action if beijing did not reverse course. asian didn't. -- beijing didn't. it was a more sweeping set of laws than had been anticipated. the u.s. house of representatives last night past by unanimous consent a bill that would impose sanctions on banks that do business with chinese withials who are involved eroding hong kong's autonomy. this follows a similar senate bill from last week. it will head to president trump's desk on thursday. in the u.k., they accused beijing of going back on its .romise in the 1984 treaty a path for the

city's residents to obtain citizenship. nejra: we are talking about 35 pages of legislation with this law. some say it is broadly worded, therefore easy to abuse, difficult to apply. legal experts see it as an uneasy marriage between chinese and british common law. how does the law apply in practice? jodie: we had not seen this. no one had seen this coming even the chief executive had not seen it. she was supporting it. law on the anniversary of the handover in 1997. it is 35 pages. it does appear to be an uneasy marriage between china's socialist legal system with chinese characteristics and after law in hong kong, the british left in 1997,

british contract law here. these provisions against terrorism, subversion of state power, and collusion feature heart -- harsh sentences and sweeping wording. some say it is deliberately vague so that authorities can use it when they want to. hereurse, the real concern is among the 1300 foreign companies that have regional headquarters here, in part because of the professional, independent court system and civil liberties. if that is at stake and threatened, these are decisions that companies will have to make. these broad definitions are part of the problem. one of the things that it does, a claims global jurisdiction over hong kong residents and nonresidents. that is something that has a

number of people scratching their heads. nejra: jodie snyder, thank you so much. former u.s. national security advisor john bolton declined to say whether he briefed president donald trump on intelligence indicating that russian operatives offered bounties to kill american troops in afghanistan. he told bloomberg that trumps evolving explanation since the publication of the story signals that the u.s. is rife for the type of russian interference that is being alleged. take a listen. >> what i said to the associated press when the question was asked was, no comment. that's the same thing i will say today. we are embroiled in litigation -- iver whether i can think i did. i did not write this book with any intention of putting classified information in it. i don't think donald trump wants -- is worried about foreign governments reading it.

he doesn't want the american people to read it. with respect to russia and what they are up to and afghanistan and a range of places around the world, this current controversy, i could have written about it in the book if i didn't face these other difficulties. susan rice, the second obama national security advisor, writes today in the new york times that if she had information like that being reported in the papers, whether it was totally verified or not, she would have gone into the oval office to tell president obama. without getting into what i know or don't know, i want to say i agree with susan rice on that point. that's what the national security advisor should do. let me make one more point. there are not two categories of intelligence. verified over here and not verified over there. intelligence, invariably, is placed along a spectrum.

the intelligence community understands this. they have high confidence in sum, medium confidence, low confidence. people will have to judge. different agencies will disagree. there's not a block of granite you carry around to show to the president that is called verified intelligence. there's a range. you deal with uncertainty. that's part of the job. >> if the susan rice essay and panetta, essay by leon i found the mixed ordinary in their heat. how would you recommend that president trump extricate himself from this now? particularly, how he addresses the military at the pentagon. >> i can't offer advice on how to get out of a mess he has created. by my count, in the last five days, he has told three different stories on whether he was briefed, whether he was told it was fake, whether it's fake news by the new york times, a whole range of things.

his advisers are now contradicting themselves as well. how do i view that in terms of the trump presidency? it's another day at the office. that's the way it works. every day is a new day. every story is a new story. what you said yesterday is interesting but does not dictate what you say today. what it tells the russians is we are in disarray. we are right for this kind of provocation. not just in provocation but in many other places around the world. is there any reason why intelligence like this would be put in the president's daily briefing and not followed up directly with the president himself? >> i don't want to comment on this specific story and its intelligence applications for the reasons i said a minute ago. i will say this. donald trump doesn't consume intelligence the way you expect presidents to do so. everybody is entitled to gather information in the wrong

personal style. ronald reagan had his style. george h.w. bush had his. i'm not saying there's anyone that's right a wrong. the presentation of intelligence to the president have to take that silent to account. what i'm talking about here is not, does the president read lengthy briefing papers? does he get into the movies? the question for donald trump is whether he gets it at all. mention --s a uninterested in learning. the fax that are inconvenient for him often don't stick. despite repeated telling. can he say that he was never briefed on it or that he thinks it's fake and get away with it? we will see. maybe he will. nejra: that was former u.s. national security advisor john bolton. coming up, jobs day. what can we expect? more on that, next. this is bloomberg.

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♪ >> it will look good but it will be in the rearview mirror. it will be a debt cap bounce. it's clear that the high-frequency data and everything we are seeing says we hit a wall because of the spike in cases. krugmanhat was paul speaking exclusively to bloomberg on the u.s. jobs report, laid out in -- out later today. expected to see further improvement in the u.s. labor market. it may not capture the scale in the rebound and virus cases. we will be watching out for the data which comes out at 1:30 p.m. u.k. time.

our guest is still with us. how much of a q do you take for your strategy right now from the jobs data? does it have much focus for you? are you more focused on high-frequency data or other things in your strategy? sophie: for now, positive momentum from assets. it is still reflecting the reopening of the whole economy after weeks of lockdown. the momentum is here. in the short-term, the employment figures should reflect reopening. the focus in the second half of the year will be the unemployment figures come in case of a second wave. or the economy is recovering less fast than we expect. reallocationigger within portfolios as investors try to assess how long it will take to go back to pre-covid-19

levels. if you look at the end of july, the employment payroll will stop. how much monetary support are you going to have in the second half of the year? nejra: exactly. that's a big question for a lot of investors, in terms of when that support comes away. how painful could it be for the label markets -- labor market? our guest stays with us. much more to discuss. coming up, we speak to larry kudlow right here on bloomberg about those jobs numbers. also coming up, another legend calls it quits. john paulson is leaving the hedge fund industry. we have the details on that, next. tones markets, a positive on coronavirus vaccines. u.s. futures in the green after three days of gains for the s&p

500. the nasdaq hit a record. this is bloomberg. ♪

♪ nejra: good morning from london. this is bloomberg daybreak: europe. these are today's top stories. global equities push higher on the back of positive vaccine development as strong u.s. manufacturing data. virus cases top 50,000 for the first time. fed minutes show eagerness to provide more forward guidance but no commitment to curb controls. resilience shown in the hang seng this morning despite tensions over beijing's security

law. the u.s. house of representatives passes a fresh china sanctions bill. we start the new month with some resilience. we ended up with green on the screen yesterday, three-day bash days of gains. the nasdaq hitting a record. risk on in the asian session today. european futures firmly in the green on optimism around potential vaccines. the 10 year yield not really reacting. oil is steady after gains yesterday on the u.s. stockpile drawdown. u.s. stocks climbing after a double dose of optimism from positive vaccine developments and better than expected manufacturing data. an early trial of an expert mental vaccine showed it safe and prompted patients to produce antibodies. a closely watched gauge of u.s. manufacturing rebounded in june to its highest level in 14 months, further tempering concerns over a jump in virus

cases. it comes as the latest fed minutes revealed that officials showed no readiness to commit to yield curve control next month. a blockbuster jobs report capping the shortened week in the u.s.. hedge fund legend john paulson has called it quits. he said he's converting into a family office. it's the latest in the string of big-name money managers leaving the industry. -- with thee details is dani burger. a long way is coming. he made his big fortune in 2008, betting against the housing market. since then, he's had a stumble of a time, failing to really capture another big winning bet like that one. it was one of the biggest ever made on wall street. it seems like he has had a tough run of it. this year was the nail in the coffin. the volatility giving a lot of

trouble for hedge fund managers. the industry is already having to deal with cheaper alternatives like index funds and etf's. some of his bets over the past years have been everything from wrong calls to bets on drug stocks to the severity of the european debt crisis. it was only this year that he says, i'm going to take back funds from our investors and convert into a family office. not completely getting out of the investing business. certainly getting out of the hedge fund business. he's not the only one. lewis bacon said he was winding down his firm. this year, liquidations have reached their highest and's 2015. according to a survey, investors are expected to pull out $100 billion from hedge funds this year. launches are expected to be as -- low as well. it's difficult for investors to do their due diligence on funds to put new money in. this is a problem that hedges

will have to deal with. nejra: yes. are we expecting more moves of , more pain for the industry in the second half? dani: we certainly are. if you look at returns like david einhorn, that march turmoil is over. in fund still lost about 5% june. even though markets or calm, it's difficult for veterans to deal with this environment. most times, you would say, volatility is good. this is when they can prove that they can do better than index funds. they did in march, coming out of the bottom. they were more stable. as stocks continue their upward march, an index fund will be able to capture that. it's hard to justify your high fees in such an environment, when buying a cheaper alternative can get you there. nejra: dani burger, great work.

thank you so much. paul krugman spoke with bloomberg about the recovery from the coronavirus, his concern about a second wave, and lessons learned from the crisis. take a listen. >> we are in big trouble. back about a month and a half ago, i was laying out the bad scenario. it was clear that we were going to have a couple good months of recovery because there was a lot of pent-up demand for stuff that people weren't being allowed to do. the bad scenario was that we would have a spike in covid-19 cases that would lead us to have to stall and backtrack. that's happening. we are going to get a jobs report on thursday, tomorrow. it will be, it will look good. it will be in the rearview mirror. clear that the

high-frequency data and everything we are seeing says that we hit a wall because of the spike in cases in the sun belt. >> let's stipulate for a second that in order to get a durable recovery, we need to get the virus under control, or hopefully an effective therapy or vaccine. setting that aside, from an economic policy standpoint, we know that in congress they are going to revisit this question at some point in early july, what would you say are the key priorities from an economic policy standpoint? >> ok. i've been of the view that this is not like the aftermath of the financial crisis, when you had a wounded economy. feesconomy got over its before the crisis. it took years to get out of it. you needed a lot of stimulus along the way. i don't think that's happening now.

i don't think the economy, as of february, was fundamentally unbalanced. control,rus were under there's good reason to believe that we could have a fast recovery. we would not be -- need all that much in the way of policy. that's a number of months off. where we are right now, we are back in the situation we were in in march and april of an economy that is in a coma because of the virus. the goal of policy is to make that situation tolerable, to avoid having the depression spread any further than it has to make it partially locked down economy livable. we need to continue a lot of the programs that we put in place in march. the big concern is that a lot of that stuff will expire in a few weeks. >> are you surprised by the

effectiveness of the programs? we see household income actually up between april and may, relative to their march level. despite the extremely collapse when unemployment -- in unemployment, you can't look to much at the stock market. it looks like demand is reasonably buoyant for some consumer companies, not something that you would expect to see during unemployment. have you been surprised by the effectiveness of what they passed? >> yeah. i was surprised by what they passed. the cares act was highly imperfect. , by how wendards dealt with previous downturns, it was actually good. in particular, the unemployed benefits were a huge lifeline. most of the unemployed ended up with more income. in turn, that contained the

spillover. we shut down part of the economy. one of the great concerns was that shutting it down would lead to a secondary round of unemployment. we provided so much aid, that didn't happen. krugmanhat was paul speaking exclusively to bloomberg. our guest is still with us. fascinating and wide-ranging conversation. i want to pick up on the theme of the system being flooded with central-bank support. also, what you called heavy state intervention to support economies during the covid-19 crisis. what do those two seems mean for those out there hunting for yield and searching for income? that's what worries investors at this point. how fastying to assess

we will recover from covid-19. on the other hand, you have risky assets that have come back quite fast, even if the nature is different from what happened in the past. going forward, trying to take some lessons from what happened on the 23rd of march. highlight howt to navigate this 20% negative yielding debt. [inaudible] look at the cares act. the fact that some companies couldn't do any buyback or why there it explains has been this rush for etm, for cash repatriation.

state not to get into intervention. it will be quite difficult for income investors on that front. nejra: yeah. you point to japan equities as a potential dividend safe haven. our guest stays with us. here is what to watch out for later today. we get the latest unemployment data for the european union. 7.7% for the month of may. in the u.s., june's report at 1:30 p.m. u.k. time. bloomberg economics estimates the unappointed rate to drop to 12.5%. this is the first report since the u.s. began its widescale reopening. at 2:00, ursula von hold aela merkel conference. coming up, opec slashes oil

output to the lowest since 1991. will it be enough to offset the demand impact? we will discuss. this is bloomberg. ♪

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nejra: our annual broadcast of the fireworks spectacular, carrying on the orchestras fourth of july tradition this weekend on bloomberg television area -- television. concern over a jump of coronavirus in the u.s. was offset by a drop in american crude stockpiles. that's what caused the game yesterday. the cartel/oil output to the lowest in 29 years as it escalates efforts to revive global markets. saudi arabia delivered extra curves promised in june. laggards like materia stepped up their performance. that's according to a bloomberg survey. our guest is still with us. if i look at your commodities view in the multi-asset portfolio, you prefer oil and base metals to gold.

gold had a fantastic run last quarter. why do you prefer oil and base metals? sophie: this is due to our as we switchario gears to the early stage of the next economic cycle. the new cycle happen. on the oil side, we are forecasting for $40 by the end of the year. we would prefer going into oil currencies like the canadian dollar. on gold, it's clear it is becoming more attractive if we have our baseline scenario in mind. scenario, l-shaped some gold allocation makes sense. yourg some could boost portfolio. nejra: yeah.

it's interesting. you were telling me gold could work as a hedge against yield curve control as well. on the commodities currencies, emergence on the view of the aussie. morgan stanley things economic performance will believe it. -- we it. let's switch over and carry the conversation through to emerging markets. you've got some interesting views on china versus the rest of emerging markets. how does that play out from here ? we preferie: for now, developed markets to emerging markets. it's because of the china weight. two years ago, if we were telling you that em would outperform the s&p during a drop-down, no one would believe it. during thishat market selloff through march,

china has beenof surprising. portfolio, more -- it makes sense to take exposure to value rather than chinese auities where it will reflect defensiveness position. nejra: yeah. that does fit with the view that you have in the multi-asset portfolio over having a preference for those parts of the market that have been lagging from here. just to sum up the conversation we've and having for the whole hour, why do you actually see more upside for equities for the rest of the year? on the equity complex, we think it will mount up. this seeing the s&p up year.

[inaudible] from a related perspective, look at what happened. for now, there's to supporting forces. [inaudible] the other thing is the low interest rate boosting the long-duration sectors and stocks. short-term, you want to would here to the equity markets. you have more leeway in terms of monetary support. that's much more on markets at this point rather than emerging markets. we see more support. nejra: great to have you with us for the hour. a comprehensive strategy.

times.up, tough cuts.ing of drastic pay the latest, next. this is bloomberg. ♪

♪ nejra: this is bloomberg daybreak: europe. daimler ceo has warned of drastic pay cuts in deeper restructuring as the auto industry faces painful cutbacks to overcome the economic followed of the virus. joining us now is christopher know. great to have you with us. give us more details on what we know. kristof: good morning. blunt duringeo was

a panel discussion last night that was hosted by the company's main labor union. cutbacks across the entire organization. 70%. he said he doesn't expect to see much of that this year because of the dramatic downturn and the related earnings slump. agreed toment board take a voluntary 20% production on their salaries. that was a step to prove that this is a all hands on deck situation, to be able to emerge from this crisis that shattered the entire industry. nejra: how are investors likely to respond to this all hands on deck approach? guess they will take it as an encouraging signal. have able to really market reaction, they will wait for more tangible results of the

restructuring. as a reminder, he took over the ceo job last year. he has been struggling to get his restructuring plan off of the ground. now the whole market conditions have changed and got much more difficult because of the coronavirus crisis. investors want to see evidence rather than just words. nejra: yeah. more broadly, when it comes to restructuring across a lot of theseto sector, with emergency measures that need to be taken with covid-19, does that delay those sorts of plans? does it speed them up? sophie: it forces the manufacturers -- christoph: it forces the manufacturers to aim for deeper cross cuts. it is unclear at this point in time how the economic recovery scenario will pan out, a v-shaped recovery, a longer recession.

at the moment, there are encouraging signs. it's too early to say if you could already fire up your global manufacturing networks or if there's a second wave of infections and the recovery will take longer than anticipated. much, great you so to have you with us. we are seeing a risk on tone to markets today. driven by optimism around vaccines. european futures pointing to a strong open, up 9/10 of 1%. a fourth day of gains. u.s. futures positive after three days of gains for the s&p 500. the nasdaq hitting a record yesterday. the 10 year yield not giving us a lot of the signal. neither is the dollar. oil, pretty steady after gains yesterday on a drawdown in stockpiles. that's it for bloomberg daybreak europe. the european open is up next. this is bloomberg. ♪

♪ anna: good morning, live in london. matt miller in berlin. matt: good morning. the markets stay focused on the positive. europe looks set to open in the green with risk assets back and demand ahead of today's u.s. jobs data. the cash trade is just an hour away. here are your top headlines from the bloomberg terminal. pause the oni