>> good morning from london, i'm nejra cehic. this is bloomberg "daybreak: europe." climb on hope for a coronavirus vaccine as the moderna trial-- hits. intod trump orders and hong kong special status with the u.s. while finding china.tion to sanction

and goldman sachs reports today after jp morgan, citigroup and wells fargo set aside almost $28 billion for bad loans in the second quarter. it's 6:00 a.m. in london, home..m. from welcome back, nejra. i missed you. let's talk about the forecast for the third quarter, that's what everybody is focused on. third quarter net sales coming in at 3.6 billion and the estimate was for 3.8. third quarter net, the estimate for 3.8. an are looking at acquisition of berlin glass. , it's themargin

second quarter, 48.2. the guidance there, 48% on the margin. the estimate was for 48.1%. looking back, nejra. nejra: thanks, and it's interesting, on that acquisition you talked about, financial details not disclosed yet, that something maybe the market will wait for at some point. a final dividend in the second quarter, but it's been an interesting couple of days in markets. manus: it has. who do you put your faith and trust in? faith and trust in the person at the front of the bus. jamie dimon says we are just guessing. we are at the start of something, and it will come later. and morning if you leave this

call and you think the world is a good place, you're very mistaken. the numbers on those calls tell a very different story to that of kudlow, the white house, and some other figures. some see a turning point coming in the third quarter, away from the risk on-risk off we've had over much of the covid-19 crisis. in the meantime we've had mixed messages from the fed overnight. if you look to the markets, it all seems to be around the optimism around the vaccine. a lot of green on the screen in terms of u.s. and european futures after we saw some divergence yesterday with the u.s. closing higher and euro stoxx closing lower. some underperformers in hong kong. at what point does that become an opportunity? oneiving some powerful risk

in equities. the 10 year yield goes absolutely nowhere, in terms of the dollar receiving the commodity currency outperform, which speaks to risk on and dollar weakness. withsome of that to do indications around stockpiles. the big question to ask is whether if we do see any change in the output cut, where -- whether that will spark taper tantrum's in the euro. sake, just for clarity from asmlled guidance as better than the market had expected. we .8 in the third quarter, the 3.24. had penciled in that is a kernel of guidance. optimism in the markets, risk on-risk off. vaccine, all the patients produce antibodies in

the trials. some did report severe side effects. bringing theis on treatment to the market quickly. nejra: it comes as more records were set in that u.s. sunbelt with forfeit tallies in florida. amid the resurgence of infections, a solid -- solid picture of the economy calling on the central bank to pivot toward longer-term accommodations. to have you with us, along with those comments we had some saying potential for it to drop in the u.s.. what is going to start to drive the market in the third quarter, and in which direction? so the narrative in the

marketplace is the federal reserve's balance sheet is creating liquidity, which is not the case, actually. the fed balance sheet right now is falling and the federal reserve treasury is also warning capital. so essentially retirement of cash from the marketplace. that narrative, whether it's right or wrong, is what drives the market. every 23 people -- is being played out as the cure of the just disease, but for us, it's pretty clear that ultimately the stimulus will run out. we have left the marketplace in a situation where we have no price discovery. because every single asset price in the marketplace is either directly governed by the support that comes from either physical or monetary policy, and of

course that has an end date on likely q3. thes: so that's the risk, fiscal cliff. let me ask you, the s&p 500 for we'vear, the 45% rally had is down 1%. givent correctly priced, jp morgan saying 10% unemployment this year and 7% next year? and $28 billion of loan losses. something is wrong. wrong, andthing is it is the narrative which is that the worse the situation gets economically, the more stimulus we will see on fiscal and monetary policy. that's not right, because at the end of the day, society and companies are driven by the amount of profit they can generate. if you look at the dividend,

they are down significantly. if you look at the guidance in q3 it will also be down. it doesn't really matter because the market wants to believe that a cure is imminent and that we have it under control. of course this is the road to ruin, but nevertheless is the case when you discount the interest rate, and you know this better than me, when you discounted zero, you get infinity valuation. so you can put the s&p 500 or the nasdaq in any number you want because when you operate with a zero interest rate, you're really operating with infinity. should we be paying more attention to the level of the vix and the bearish signal right now? steen: absolutely. you know from the peace that we put out this week that we see 22 as a critical level. every time we've been above 22, we've seen a recession or very

forward-looking negative performance of the equity market. what is happening right now is that what is really driving it is the yield curve. the yield curve correlates highly with the overall estimate of the economy and the velocity of the economy. as we seen a slight steepening since the middle of 2019 in the yield curve, it's not only indicating an increase of a nominal growth and the economy but also increasing the likelihood that we see volatility. volatility remains an asset class that you need to be long. we are suggesting right now that that replace all the government long income with a volatility play, exactly for the reason that the volatility base remains stubbornly bid throughout the massive reality we've seen based on support from fiscal and monetary policy. let's get to the first

word news trade president trump end hong kong special status with the u.s.. a rebuke from china and adding fresh and searching for business and financial hubs. trump also signed legislation sanctioning chinese officials sponsor before cracking down on defense in the city. the bank of japan has left his monetary stimulus untouched while facing a gloomy position ahead for growth this year. a slightly faster pickup in the following year. virgin atlantic has finalized a 1.2 billion pound rescue deal that could save thousands of jobs. richard branson contribute 200 million pounds after raising money from his and virgin galactic. they will provide a loan secured against aircraft. 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: coming up, nissan looks to make a new start as it unveils its very latest model. that conversation, right here on bloomberg. ♪

manus: this is bloomberg "daybreak: europe." back in london. , clearly weline knew that 2020 was going to be a year of growth.

talking about normality, the shape of the v from kudlow, from the fed, etc., in the minutia of technology. thecally back to normal in third quarter. in thisplendent turbulent time, isn't it? nejra: it is. we saw some underperformers yesterday in one day of trading, but that's partly what drives the benchmark down. on the flipside, green on the screen at the end of the session in the u.s.. it's interesting as we look into the third quarter for investment, whether it investors will look through it the way they did in the first quarter and what they will say about the second quarter with that clarity reality to the market. manus: they've given guidance in terms of that quarter, moving forward in terms of 3.8 billion

dollars in terms of earnings. is looking toan turn the page with the latest .elease i'm an electric suv the ceo spoke to bloomberg. take a listen. makoto: first it represents a new chapter. i would say that nissan has a great experience, we have learned a lot from the customer which -- which is reflected in platformwith the new which also has a lot of the .issan technology

it's all in this car and is something that can open the new nissan chapter and provide the custard the excitement of the car. moreover, it can make our employees happy. a for us to make ourselves new value creation to the customer and a global benefit. >> how will consumers respond to the car? what is the most attractive price, features, range? makoto: look at this car over there, don't you think the color is beautiful? , even when you're not driving, the car can be connected with you when you're

not driving. think they would like this car to be part of the customer's life. that is what we are providing. i hope the customer will really love what we are trying to provide the customer. i believe this is one of the strengths of nissan. >> what is the main competition going to be when it comes to other electrical vehicles in the market? competitivemost segment is suv crossover. nissan has strength the crossover segment. i think we will give good value on that segment. that's why we are saying this is

a new chapter. so nissan will be launching new ev's after this. what is the strategy? what will they look at? >> this is part of our strategy. platform, with new vehicles we will carry over with this system for the customer. tos is very important to us take the value of the nissan recognized by the customer. nissanthat was to president and ceo. coming up, merkel says she's ready to compromise ahead of friday's crucial meeting. will discuss that next. this is bloomberg. ♪

manus: this is bloomberg "daybreak: europe." the other major driver this week will be the european story. german chancellor angela merkel said she's prepared to compromise in talks with the e.u. recovery fund this weekend poochie speaking to reporters after meeting with the spanish prime minister heard leaders -- who urged leaders to come together. saying july must be the month of decisions. this friday the e.u. leaders gather in brussels for discussing reviving the economy. morning, host this there's a narrative that if the deal goes through on friday that

are recovery coming out of into fromyour could be stronger an earnings point of view on equities. do you believe that? the $750tingent on billion stimulus plan? think the plan itself would do significant change what is already in place, if you look at the future of the equity it'sts and where the -- going to come from green transformation, especially since europe is way ahead of the rest , with e.u. planning to support this kind of transition. if you look at the physical spend that europe has relative to the u.s. right now, the u.s. is outspending europe in terms of negative deficits. on top of that, the composition of the european stock indices

utilitiesh care and will do quite well. analysts like me have been saying this for years and years, that europe should finally outperform. i think we'll find this out because u.s. is extremely expensive, especially if you look at the technology sector, but also in terms of leading the world in the next period. i think we will see in outperformance of european equities privet we are raiding them over u.s. equities right now. investorsencouraging to be overweight european equities. at the same time you say when germany joins the ranks of that spending, you know that free markets have died. what does that mean for asset allocation? means first off, it germany will be a huge stimulus for the rest of europe. the total is in the neighborhood of 38% of gdp this year. this coming from a country

that's been the most austere since the introduction of the euro. the 180 degree turn we've seen by angela merkel's government is unprecedented in european history. that will slowly run into the europe in terms of economic activity and support for programs like this. don't forget the conversation that will be had this week, germany being -- saying no thank you, were not going to do this. now all of a sudden they've incorporated it into the strategy of being seen as part of the solution. to overall,ve boost it's really a big change in european policies that germany is in such a quagmire in terms of the economic outlook, it's the opposite of what they've

done since 1999. manus: it's a heck of a change from the narrative we had [indiscernible] and the german narrative then was very different. as we get into the third quarter, new themes emerge from global markets, beyond the gyrations we've had. narrative,w european what does it do to the euro? that we cannk expect there will be an extension of support for the marketplace. i don't think the government knows any better. they have this game of maintaining jobs instead of creating jobs. what i mean by that is if you want to create jobs, you have to do research and people, in

education, and things that actually have productivity built into it. instead were living under this moment of being liquid insolvent, which is the japanese market. i find it pretty embarrassing that we continue to do all the mistakes that japan has done, but nevertheless, that is the case. we're in a very defensive mode that will make it dared -- very difficult for customers to have turned over the next 10 years. they will guide us to lower interest rates and pretend that we can be liquid and solvent. you do point out that history suggest there's is 33% probability that the international equity investor will experience negative real rate return over the next 10 years. ,hat still quite a bit better that you have positive real return.

should be searching for an alternative to equities? but youot necessarily, need to be more judgmental on what you do. the search we have seen based on the narrative that the fed balance sheet is good need to change to one which is which companies are going to survive? which one has built-in productivity? sector whichnology is overlapped by business. people seem to think that technology equals productivity. amazon is faster but it's more renovation than innovation. to some extent, they're paying high multiples for something that trades at a high freak cash flow but low debt make sense come but it's not productivity. i think that's where the focus needs to be. nejra: thank you so much for being with us today. kongg up, trump ends hong

special status. the u.s. president also signs legislation that would sanction chinese officials responsible for tracking down a defense in the city. we are live from hong kong, next. this is bloomberg. ♪ - [announcer] imagine having fuller, thicker,

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♪ manus: good morning from dubai. i'm manus cranny. these are today's top stories. global stocks climb on the hope of a coronavirus vaccine as the moderna trial clears an important milestone, this comes as florida reports a record number of deaths in a single day. donald trump orders and into

hong kong's special status for the u.s.. beijing vows to take strong countermeasures. todayn sachs reports after jp morgan, citigroup and wells fargo set aside almost $28 billion in bad loans for q2. nejra: welcome to "daybreak: europe." it's good to be back with you, manus. it's looking more like renovation instead of innovation when you talk about all the liquidity out there that's been tides a lift to all those lifting all boats. earnings season starting, we asked the question as to whether risk on-risk off begins to change. look at think when you the narrative over the past 24 hours, jamie dimon telling us clearly that the recession is

coming, but is it going to come further down the road? we are in a guessing game, aren't we? nejra: we really are, it might not help that you have mixed messages coming from the fed proved overnight we heard talk about longer-term accommodation. then you have james bullard saying we could see unemployment dropped dramatically. manus: and jp morgan still says were going to have 10% unemployment going through the rest of this year. seem to be focused on , that then's warning world is not a great place. it's far from a v shape. the equity market is trading higher and we go to the ecb, --t narrative is translated about this one, this is

differential and carry trade. 16 you get in japan. those carry trade seem to be the narrative. is it political angst? let's talk about the optimism in the markets. vaccine,na coronavirus all the patients produce antibodies at a critical point in the trial that was just had. though some did report severe side effects. so do the results clear and important hurdle to bringing it to market more quickly? nejra: it comes as more daily records were set in the u.s. sunbelt with new cases in texas and los angeles and fertility's in florida. the fed governor paints the picture of the pickup toward

longer-term accommodations. and huawei's 5g participation must be removed from the countries phone networks by 2020 severed -- 2027. move follows sanctions imposed by washington which claims the firm poses a national security threat, something huawei denies. >> were urging the u.k. government to reconsider give us more time to identify mitigation to the sanctions the u.s. implemented. we feel later on this year we will have some mitigation we would like to talk to the u.k. government about. but today it's disappointing news about the u.k.. nejra: meanwhile the u.s. and china tit-for-tat continues.

donald trump has issued an order to in hong kong special status with the united states. is also signed legislation that would sanction chinese officials as possible for cracking down in the middle east. >> we will watch what happen. not a good situation. their freedom and rights have been taken away. in my opinion it will no longer be able to compete with the free markets. a lot of people will be leaving hong kong, i suspect. and we will do a lot more business because of it because we just lost one competitor. nejra: joining us is bloomberg's china government editor. great to have you with us. what are some of the provisions that trump proposed? >> under policy act signed in 1992, the u.s. treats hong kong with its own legal and economic system, treats it different than the mainland in trade and commerce and other areas. this executive order has throughout several of those

provisions, including some that would effectively treat hong kong the same as the men and. -- as the mainland. u.s.uspension of the extradition agreement with hong kong, revoking license exceptions for certain exports, and even terminating the fulbright scholar exchange program. so a number of things, but neither trump or his administration have offered specifics about how it's going to affect major sectors here like the financial industry. also a lot of people wondering what the material impacts will be. what does it mean for the city itself? >> that's the big question here. the white house has not specified which chinese officials might be sanctioned. it still adding new uncertainty for businesses here after a very long year, and it's raising some pretty steep questions about the

city's future as a global financial hub and whether it is sustainable. and the questions that have been swirling over the last couple of weeks after china imposed its sweeping national security law hibi -- here. with entities and individuals the u.s. decides our primary offenders, when it comes to undermining the city's autonomy. after that, the treasury -- including barring top executives from returning to the u.s.. so they will have a lot of questions. it's good to keep in mind that trump has threatened action since that security law was enacted here. it could have us is that -- substantial impact on an economy that's been battered by protests and now the virus restrictions that have just come back into effect. nejra: we've heard from china among bowing to take strong countermeasures.

what exactly have we learned in terms of the response from chinese and hong kong officials? >> we are expecting more reaction from the leaders today, they have already bowed strong countermeasures and just sanctioned u.s. officials over the measure but did not elaborate. they urged the u.s. to correct its wrongdoing and stop interfering in the city, which is something they have urged many times. this comes after china over the last couple of days sanction for u.s. officials including marco rubio and also lockheed martin. the hong kong government has not said anything publicly that we have seen, but a pro establishment lawmaker pushed back and said the measures would drive hong kong to rely more on mainland china for support. so we're waiting for more reaction later today. much, karen, thank you so

or china government reporter tracking changes in tit-for-tat. has left itsapan monetary stimulus untouched while painting a gloomier picture for growth this year. boj said the world's third-largest economy is facing a slump in 2020, but faster pickup in the following year. virgin atlantic has finalized a 1.2 billion pound rescue deal that could save thousands of jobs. contributenson will 200 million pounds. another firm providing more security. hungarian lawmakers have approved legislation to curb growth of airbnb style

apartments. budapest relies on airbnb rentals. more than almost any other major city in the world. posings other cities in -- daily earnings top one million for the first time in more than four months last week. as businesses begin to recover from the lockdown. 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: shares of wells fargo plunged after reporting its first quarterly loss since 2008. wells fargo alongside jp morgan together set aside 28 billion dollars for bad bounce in the second quarter, signaling a deteriorating economic outlook. we caught up with the wells fargo ceo. >> we have staffed up to solve

some of the problems we've been dealing with over the last couple of years and in part because banking is changing. we will have fewer branches but we will still have many thousands of branches. we will have few -- fewer branches in the future. we have more activity happening digitally from front to back, meaning how our customers interact with us and how we deliver capabilities in a more tech driven way. all those things will lead over time to a smaller headcount. we have probably 270,000 people and other banks of our size operated higher revenue levels but from a substantially smaller footprint. that will happen over the course of the next few years. curious how much is underlying fundamentals versus

influence. and when those run out, are you assuming inevitable losses will be pushed out later into 2020? side, creditnding card recovery still way down from where it was in the first quarter, in the middle of the first quarter. debit cards, we have the largest debit card payments there. we're back up 10% year-over-year, which is where we were before the shelter-in-place went into place. it's not the same payments to the same payees, but consumers at least right now are spending at that level. it's undoubtedly supported by the level of stimulus being received through direct stimulus payments, through extra unemployment benefits, and because banks and others are deferring required payments on installment loans. so people don't have to pay

their mortgage, credit card, or auto loan if they ought not to for a period of time. that is by design, it's having but unless we've come back up the other side of the v, it's likely to be some reckoning there. anderms of coming back giving yourself the perspective are clarity of when you can start rewarding investors as well again, it's noticed -- noted you made the dividend cut to tencent. some say could go to zero. do you agree with that? is that something you may have to look at if that v-shaped recovery is even pushed out further into the future? earnings long-term , and some recent requirements that were put in by

the fed that govern how the banks, no more than the trailing four quarters average of profitability. between these allowance bills, we had a big legal settlement a couple of quarters ago. our trailing four quarters of profitability is relatively low. so we have struck a dividend proposal that is beneath that so there is little risk of it going down from there. the economy could's ego orszag in a way where -- could zig or zag. the dividend approach really doesn't assume, as we do today, that we have ample capital. so it really isn't as much of a capital issue as it is an earnings issue. we close quarter with an increase capital level in percentage terms, the streaming

capital ratio for big banks. that'suirement is 9%, about 23 billion dollars worth of extra capital on top of the regulatory requirement. so dividends in particular are more about earnings for bigger banks and less about capital sufficiency. between these big allowance bills and relatively large cushion that has built up since the last crisis, the doesn't seem to be a lot of concern or confusion over levels of capitalization. the wells fargo aftereaking to bloomberg the first quarterly results since 2008. -- the worst since 2008. will discuss the outlook for crude. this is ♪ bloomberg.

nejra: this is bloomberg "daybreak: europe." manus cranny is ended by. -- in dubai. more oil produced and the quota last month. would reducen that supply by 842,000 barrels a day in august and september. that proposal right temper the impact of the plant increase. great to have you with us. here we are, this is the great market, inthe oil

terms of the moves. the naughty boys and girls club have got to come again. good plan or folly? good afternoon from singapore, and thank you for having me on the show. i think it's probably the right decision for opec-plus to proceed with the tapering. they already kicked the can down the road one month. it yett impossible to do again. by kicking the can, i mean agreeing to continue the deeper cuts for yet another month. it looks like a foregone conclusion at this point that they will put another 2 million barrels a day into the market starting in august. so the short answer to your question is, there has been a bit of deficit in the market,

certainly in june. banksit's not bad for all , asia is really hurting. seen brent prices more than double since late april. if we do have more supply come onto the market as you described, could we see it to -- so-called taper tantrum in the markets, or is it already been priced? >> that phrase i saw earlier on bloomberg, i think there are two things going on here. for what i said in my earlier , just to maintain cohesion , but i think there's a real danger of opec putting extra oil

coinciding with the man recovery starting to stall. we've seen a few pullbacks included last week and again yesterday. we've seen state governors some things but there is a question mark on demand recovery in the u.s. still surging in parts of africa, latin america, but there is a danger that the extra supply in the market will coincide causing the recovery market to flatten.

share thate market moreexpect as demand rises than about prices sliding where they are now. so there's lots of specific monitors -- monikers we can use, temper tantrum is the risk. like to be seen as the alan greenspan of the market. the laggards into doing additional cuts is really just a houdini act to serve -- to soothe our nerves. may be alexander novak would argue with you on that. rememberbia -- let's that they are in this for the long haul. back in april they said were

going to continue this sort of adjustment all the way through april 2022. so it is very important that these countries which have been ,een as a little bit hawkish russia being a little dovish on oil prices, critical for them to ci to eye on this. nejra: great to have you with us, thank you so much for joining. coming up, jp morgan reports record training results as the pandemic impacts looms over next quarter results. we talking u.s. bank earnings next. this is bloomberg. ♪

nejra: goldman sachs reports

today. dani burger joins us with the details. >> we can expect goldman sachs today to have earnings much like jp morgan, thanks to the market volatility and volume, trading in underwriting profit should help offset some of the credit losses. of course it's a different picture to wells fargo was yesterday reported its first quarterly loss since 2008. over thentary we get economy, citigroup, j.p. morgan and wells fargo all yesterday warning that the worst may be yet to come. jamie dimon warning that you won't see the effects of the recession yet because of the stimulus, but one set fades out, you might see this recessionary action. michael corbat also saying you should not leave the calls with a rosy picture of the economy. the goldman sachs ceo last month talking to bloomberg saying he expects a v-shaped cover and leveling out over the next 6-12

months. will he still be saying that today? those excited equity boys and girls club. the european market is up next. ♪

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>> good morning. markets," "bloomberg i'm anna edwards live in london. cash trade is just over an hour away. global stocks climb on hope for a coronavirus vaccine after a trial clears a milestone. tokyo raises its virus alert to its highest level. florida reports a record number of deaths in a single day.