annmarie: good morning from bloomberg's european headquarters. it is 6:00 a.m. in london. i'm annmarie hordern. strong retail sales a standout in china's data dump, but economic momentum slows on the quarter. we are live in beijing. france becomes the latest european nation to pass 100,000 covid deaths. the latest from paris.

bank of america joins rival, benefiting from a jump in trading activities, but shares slide on the week loan growth. good morning to you, and happy friday. a lot of economic data today. out of the united states and out of china. major data release from china, strong retail sales, rising 34.2% from a year ago. gdp climbed 18.3% in the first quarter, but the monthly picture tells a different story. growth momentum slowing down. this all comes as rising inflation and soaring debt levels have put beijing's policymakers on guard. joining us is tom mackenzie. he is outside the headquarters in beijing were a lot of our attention has been focused. let's start with gdp data.

walk us through this number. the headline is optimistic, but when you dig deeper, a different story taking shape in china. tom: that is right, it is appropriate we are in the financial district in china's western district. we are talking about the economic data, you are right to talk about the retail sales. that was the standout. more broadly, you are right to point out 18.3%, a record number in terms of china's quarterly gdp. but you have to take into account the base affects, the first quarter of 2020 was suppressed because of the pandemic, but what you are looking at now is a slowing growth picture. 0.6% quarter on quarter versus 2.6% in the fourth quarter. it is a more balanced economic recovery. growth is slowing, but it is

balanced. a key component is that the consumer is back. that is articulate it by the retail sales numbers at 34%, smashing estimates. the key drivers of the growth picture in china were exports, industrial production, and infrastructure spending. the consumer was not at play, but they are back. inflation is a concern. they talked about bubbles, and going forward there is a belief among economist at the drivers of growth in the next few quarters will be that global vaccine rollout, and the stimulus from the biden administration. annmarie: you are also outside the headquarters in beijing, what is the latest? investors are looking at key dates to get a look at companies' finances. what is the key thing to look out for? tom: outside the headquarters of

asset management, you expect employees are working hard to resolve these substantial issues. this is china's largest bad debt manager by far. it has about $260 billion in bad debt that it has to work through. it has become a debt problem in and of itself, because earnings at the end of march spooked investors. you saw the bond selloff, particularly dollar bonds overseas and offshore. a bit of a spike yesterday because they announced they have funding to pay a bond on the 27th. they have two more due, one on sunday as well. the bigger picture is they have debt obligations of $17 billion between now and 2022, and they are working hard to refinance as a result of the selloff, and concerns about restructuring.

a majority stakeholder, the finance ministry itself. they have been silent on this issue. this is a question, will china come to the rescue of an asset manager, a bad debt manager in which it has a majority stake, or will allow the moral hazard to continue. annmarie: that is what investors are waiting to find out, what is keeping them uneasy. tom mackenzie, thank you for joining us. s&p 500 futures a little softer, but relatively flat. we hit another all-time high yesterday. economic data strong in china, but very strong in the united states. paul donovan's take, never bet against the hedonism of the u.s. consumer. strong economic data to see yields dropping below 1.6%.

in asia, fluctuating across the csi 300. the quarter on quarter reading was the important one, that was a miss. a little softness on the yuan. joining us today is alan higgins , cio / managing director, coutts & company. let's start with china, and the latest overnight. when you dig into the numbers, what surprised you the most out of this mega data dump out of china? alan: it was a slight miss, i'm not too concerned about that, but encouraged about the retail sales number in china because the bigger picture, we need this move toward consumption in china to rebalance china away from the exports. that was encouraging. on the myths, the revision was

strong -- on the miss, the revision was strong. fairly flat markets. the currency was a little bit -- another headline miss may be a concern for some but i think it is fine. the levels are quite extraordinary. annmarie: definitely. massive ace effects coming into play. what does this mean -- massive base effects coming into play. will the ecb continue to support, or will they ratchet back some policy support? alan: we have seen, unlike in the g7, we have seen some tightening in emerging markets. zilkha, notably. -- , -- brazil, notably.

it is not like out of the united states where there are huge beats and tightening monetary policy. it is steady as it goes in terms of the markets. when you look at chinese equities in particular, you can find companies hard to find anywhere else in the world have reasonable valuations. and that strong earnings growth. annmarie: does it change your expectations for yearly growth out of china? alan: not really. especially with so much noise in the data. this is not just china but everywhere. it is quite useful. the revisions are the real numbers. the initial flashes are estimates. when you take into account the

revisions and the encouraging news on consumption, it is steady as she goes for china. annmarie: you said it is a good place to invest. where exactly in the chinese market would be a good place to be exposed to? alan: generally, institutional investors in china compared to any other market -- there is a good place for active managers. it is across-the-board from the mega caps notwithstanding the noise. where you do see value is in the small mid-cap area of china, underresearched, companies less than one billion u.s. dollars to $5 billion. you can find multiples 15 to 16

times and strong earnings growth. it is not for the fainthearted. that is an interesting place to invest. we tend to be a fund investor when it comes to china rather than individual security. we will be focusing on funds in that area. annmarie: alan higgins, cio / managing director, coutts & company stays with us. a lot of other economic data to get through. staying with the china narrative, daimler first-quarter earnings significant he topped estimates, driven by strong demand for its flagship mercedes-benz cars in china. matt miller spoke with the ceo. >> we had disruptions in the first quarter. we will continue to have disruptions in q2. we are talking about what the recovery scenario could look like with suppliers. it is not 100% clear yet what

the supply availability will be. we are hoping we will make up for much of that loss in the second half of the year, but it is day-to-day management. matt: how important is it to keep your suppliers close to your production? a couple days ago there was a story about your crosstown competition working with a battery producer. are you trying to source technology, chips, battery cells close to where you put the cars together? >> the auto industry is a huge network of supply relationships and technology relationships around the world. our guiding principle is to go for the best, the best technology and innovation, where we can find cost structures that meet our targets. that is worldwide net worth, not something that will disappear, nor do we want it to disappear.

as we scale some technologies -- you mentioned batteries -- we will need some and a gigawatt hours on the way to 2030, so we are going for some components as has been the case to the past, build up reduction -- build up production. annmarie: stay tuned for more from matt miller's interview with the daimler ceo throughout the day. let's get your first word news. laura: italy's debt burden is set to exceed the previous record set after the first world war. officials say this year's debt will hit almost 106 he percent of gdp. -- 160% of gdp. south africa's central bank sees room to keep rates low to support the economy and has cut

its benchmark by three percentage points since the start of 2020, taking it to a record low of 3.5%. if there is another spike of infections, the government is wary of tough new restrictions. what >> what you cannot do is have another lockdown. [indiscernible] laura: president biden has delivered on his promise to punish russia for misconduct that was ignored under his predecessor. he announced sanctions, including the expulsion of diplomats, limits on buying new sovereign debt. for all the tough talk, the

white house is hoping for better ties to moscow. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. annmarie: just ahead, france the coming the latest country to record more than 100,000 deaths due to covid-19, as these new variants spread. we will go there live, next. this is bloomberg. ♪

>> there were two reasons to do it, one out of an abundance of caution to see what we are dealing with, and to make sure they alert positions about what to do with it. hopefully, we will get a decision soon as to whether or not we can get back on track with this very effective vaccine.

annmarie: dr. fauci, the president's top medical advisor saying the johnson & johnson issue will likely take days to weeks to resolve, rather than weeks to months. that's get an update from here in europe. france is the latest country to record 100,000 deaths due to covid-19, a humbling moment for president macron, who refused to walk -- to lock down the country for a third time before eventually being reports to bring in more restrictions. that's get more from france. what is the current strategy now after this grim milestone for the government? >> france is the third country with the most deaths behind a u.k. and italy in europe. a national lockdown for at least the next two weeks. the situation has not really

improved in the hospitals. if you look at people in intensive care units, it is close to 6000 at the moment, and we only have 10,000 beds, it is higher than the peak of the second wave and approaching the peak of the third wave. the situation is not improving. the vaccination rollout is quite slow, only 70% of the french have received -- only 17% of the french have received the shot. the economy could reopen, and two thirds of the french people do not trust president macron and the french government in the vaccination rollout and the handling of the pandemic. annmarie: if two thirds do not trust him politically, what are the implications for president macron? >> the implication will be big,

12 months before the next presidential election. a few contenders are to his left. the paris mayor might run against him. and on his right, the president of the northern region and the paris region who might also run. in the end we might see a rerun of the race between the far right wing and emmanuel macron. if a manual macron does not manage the vaccination rollout, and does not manage the third lockdown, the race between him and le pen will be tighter than four years ago. annmarie: thank you for joining us. alan higgins, cio / managing director, coutts & company is still with us. we are sitting in england seeing

optimism, a different picture. headlines like this remind you of the struggles happening across europe. what is the outlook in europe when you see headlines like this? alan: it is very sad news, but what we know is lockdowns do work, so let's look forward to better news coming out of europe and france in particular. we have the vaccine in the background, albeit at a slower pace. we know what happened last summer in the northern europe and the states, covid fell to lower levels because of the climate. we can be more optimistic looking forward, but it will be nice to see france be helped by the vaccine. annmarie: in the united states, standout numbers, especially retail sales. it was peculiar to see a rally

in the treasury might that yields below 1.6%. was all this data priced in? alan: some of it must have been. the curve is quite steep now, the 10 year yields so much more than two years. it was interesting to see the heavy supplier bank bonds yesterday in the market. they pre-hedge them. they sell interest rates, usually swaps. as they sell the bonds, which were heavy yesterday, they buy back the hedges and effectively by treasuries on an underlying basis. that helps, but the retail sales were absolutely blowout. the jobless claims were really important, that was also a very low level. annmarie: is the market front

running -- are economists late to what we are seeing with this data? alan: it is pretty heartening to economists, which i am one. it is tough right now predicting some of this data. the treasury market, which is an amazing discounting machine, to a large extent discounted the boom in the states. if you step back a bit, the difference in two and 10 years -- the two is not going anywhere, the fed is doing nothing with rates. a 2% target for 10 years, if we are right about this data, and continue a mini inflation scared, this is just a bear

market rally in treasuries. annmarie: alan higgins, i do not envy you at all at this time. cio / managing director, coutts & company, thank you for joining us. bank of america reported earnings, more on that, next. this is bloomberg. ♪

>> the consumer is in good shape. there is an unemployment issue, we have to get that down to where it should be. the businesses have got to get open, but by and large the economy is up and running very well. the question of raising rates is a risk in certain circumstances. it means the economy is normalized. the number one risk to the world is getting this health care

crisis behind us. the best news is the unemployment rate keeps coming down. productivity and the culture, the mentoring that can take places better. we need critical mass where it is and get people to work. annmarie: bank of america ceo speaking to us after the lenders earnings. we will stick with bank of america, shares 3% after those results. along with citi, huge growth. what were the weak spots in their earnings to be trading on? >> one is going to be cost, and the second is the weaker loan growth. we have seen that across-the-board the board, so that is not surprising. when you have more consumers paying off their loans and taking out new ones, deposits are growing. net interest for income for bank of america fell 16%. the cost portion, that is where

bank of america got hit. this was surprising to markets. we expected week loan growth, but costs not related to interest payments rose 15%. they did sound confident it is a one time thing. they are shaking their real estate portfolio. the cfo on the call saying, we are sitting in the middle of a pandemic with a lot of covid expenses that have been more sticky than we had hoped for, but they are going to come out. no question about that. still that optimism, not enough to save the tumble in shares. annmarie: what a blowout for the bank. thank you so much, dani burger, for that recap. france, the latest country to record more than 100,000 deaths due to covid-19, as new variants spread. we will talk european markets,

next, and the impact of all of this. this is bloomberg. ♪

annmarie: good morning from bloomberg's european headquarters. 6:30 in london. i'm annmarie hordern. strong retail sales a standout and chain's data dump. the economic momentum slows in the quarter. we are live in beijing. france becomes the latest european nation to pass 100,000 covid deaths. bank of america joins rivals

benefiting from a jump in trading activity, but shares slide on week loan growth. we hear from ceo, brian moynihan. in morning to you, happy friday. in the data states, retail sales -- in the united states, retail sales are lifting. futures a little soft. what is so odd is what happened in the bond market. treasuries rallied. we are below the support level, 1.6%. oil higher, $63 on wti. people are out spending, good strong support for the commodity market. the biggest weekly gain on oil since march. in china, csi 300 fluctuating since that data dump in china. you want to look at quarter on quarter numbers, and we see weakness when it comes to the

yuan. relatively unchanged on the currency. strong retail sales was the standout number, the positive aspect rising 34.2% from a year ago as gdp climbed a record 18.3% in the first quarter. that is on an annual basis. the monthly picture tells a different story with growth momentum slowing down. soaring debt levels have put beijing's policy makers on guard. we will be looking at global markets across the board. in europe, france is the latest country to record more than 100,000 deaths due to covid-19. a humbling moment for president macron, who refused to lock down the country for a third time in january, choosing to tighten covid hotspots. there are growing concerns among policymakers over the delay to the next generation eu recovery fund. >> i'm deeply concerned by the

delay and implementation of the recovery plan. >> in the last 10 years we must realize we had periods of underinvestment in most european countries. >> what is most important is to ensure in the future years, months, clearly we will be able to accompany and maintain a stable recovery. >> the recovery fund has a vital role to play, especially in countries that have been badly hit by the pandemic. >> we should implement next-generation funds. 750 billion package. speed is the more important than wait. annmarie: joining us now is

alexandra dimitrijevic, credit analyst, standard & poor's. good morning to you. thank you for joining us. you hear european policymakers expressing in patients with the recovery fund. do you think this impatience is justified? alexandra: good morning. there are a lot of discussions at the moment. the worry we are having is that we have seen the u.s. on the fast track with the additional stimulus and guidance plan. $2.8 trillion, a lot of support in the u.s. economy. if you look at europe, the recovery plan here is good news,

but there are concerns about the delay in implementation. what we are seeing between the challenges in the vaccine rollout in europe as well as delays, we see european growth to 4.2% in 2021. we improved the u.s. forecast. this will be a point to watch the rest of the year, this gap between china. this morning china with 8% growth, and the u.s. 6.5%. here in europe, some delays in that economic pickup. annmarie: diversions to watch out for, and you talk about the

impact on the credit market. are you expecting more bankruptcies? alexandra: yes. in europe, if we look at the latest como we have if we look e have the 12 month rate close to 6% compared to 2%. we do expect to increase further to around 6.5% toward the end of the year. the reason for that, we have a record level of companies in europe and the u.s. that our at the bottom of the rating scale. b-and below -- b- and below.

these are the sectors, media, leisure, hospitality -- all of the sectors are significantly represented in that lower segment. there is some good news, some sectors are doing really well. technology, telecom, health care . all the others are very much dependent on the lockdown measures, social distancing measures and are very sensitive to the fallout. annmarie: bank of america made that point this week, that a lot of tourism sector companies potentially cannot survive having a second season completely wiped out. you mentioned the growth outlook

was quite positive in the united states. we had strong data yesterday that retail sales -- where there any cracks in the data that you saw? alexandra: i think that is how we are really confirming that we are optimistic on the u.s., and this is confirming a healthy outlook. and maybe more reopening of jobs. if you look at the corporate ratings, we can see [indiscernible] -- we have seen a significant improvement here in the first quarter on the back of this strong economy. last june 40% of our corporate

ratings have now come down to 26%. it is negative, but you can see a significant improvement. a lot of that has to do with the news on the vaccine rollout. obviously, what we expect it will take at least another year for all the employment to come back. annmarie: thank you so much for joining us, alexandra dimitrijevic, credit analyst, standard & poor's. let's get to your first word news. laura: the pause of the johnson & johnson covid vaccine could last weeks, according to the head of the advisory panel expected to make a recommendation about if and when shots can resume. it is weighing the evidence after a report that six people who got the shot suffered rare

blood clots in the brain. a second u.k. official took a position at greensill while working at the civil service, and it raises questions about ties between the british government, cronyism. prime minister johnson has ordered an inquiry, and government interaction with the company. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. annmarie: thank you so much. more from our conversation on bank of america, hundreds of u.s. corporations in the executive signed on to a new statement calling for a defense of american voting rights. the latest backlash against republican led state efforts that threaten access to the polls. brian moynihan weighed in on the issue with david westin. brian: a group of people to go

study this and come back with what should be a set of recommendations. states can make a decision, but that way you would have a studied group of people, that is the right way to conduct the election. let's see what they say. david: when you decide to take a position that is political, -- is that what you did it? brian: our teammates are saying, wait a second, if we think this is something, we have to make it clear that we stand for the principal of the right to vote and we should not infringe upon it. that was the statement from earlier this week. look at the list of people, they fall on all different political sides. this is what america is all about. annmarie: more from that interview, bank of america ceo. in the wake of fresh u.s. sanctions on moscow, what does

the future relations between president biden and putin look like next? this is bloomberg. ♪

pres. biden: the united states is not looking to kick off an escalation and conflict with russia. we want a stable relationship. if russia continues to interfere with our democracy, i'm prepared to take further actions to respond. annmarie: president biden wants a stable and predictable relationship with moscow. the united states impose fresh sanctions on russia including restrictions on buying new sovereign debt in response to allegations moscow interfered with last year's u.s. election and was behind the solarwinds back. russia vowed to retaliate but is open to a presidential summit. joining us now is daragh mcdowell, principal analyst.

what will hurt the kremlin the most? daragh: in the short-term, the diplomatic expulsion from the united states will damage their ability to conduct intelligence operations in the u.s. that day-to-day operational impact. with the sanctions overall, it is more of a signaling exercise. previous sanctions in europe and the u.s. the individuals had asset freezes and it is more of a reflective motion of disapproval. the sanctioning of sovereign debt for the first time at this point was the biden white house demonstrating it is putting new options on the table. it should be noted they are focusing on primary issuances of

sovereign debt, it does not affect the secondary market. it is not as big as they could have gone. it is not the nuclear option they have talked about, but it is telling the kremlin we are willing to open this toolbox and look at these options for future sanctions. and to demonstrate there are new rules of engagement coming up. annmarie: with the next nuclear option being sovereign debt sanctions hit the secondary market? daragh: that would be one of them. the degree to which sovereign debt has been put out of this big redline, russia does not issue a lot of debt at the moment. it has massive foreign currency reserves. it has been running up deficit

through the coronavirus, but in most years it is comfortably able to self finance, and due to hydrocarbon reserves. if worse comes to worse, there were other ways it can act on international capital. the european union has enacted similar sanctions. do not know if they are going to or if that might be a step too far for brussels and member states. it is not necessarily the locking out of russia from financial markets, but more increasing friction and making it more difficult for russia to engage in international markets. and for institutional investors around the world, is this a country whose debt we want to be

lying? -- we want to be buying? when a country does issue debt, basically this is the u.s. government saying we are in an adversarial relationship, and we do not want u.s. financial corporations funding the russian state so that it can continue to engage in adversarial behavior against us. annmarie: is there wiggle room? biden said he wants to meet with putin next summer in europe. would russia agree this is some sort of momentum there could be for working together at some point? daragh: there are definitely areas were russia and the u.s. could be working together, things like arms-control. we did see the new start treaty

rolled over quickly in the first days of the biden administration. there are other areas emerging, competition in cyber warfare. it might be worth to keep talking to each other. the value of a summit to putin is a more symbolic aspect to demonstrate russia is a power that the u.s. will negotiate with one-on-one. whether there are areas of agreement on thorny issues like ukraine or georgia is more difficult to say. frankly, we assessed when the biden administration was coming in that there would not be any attempt to repeat the reset, that the u.s. is engaging in a relationship with a clear set of eyes and a sense that this is a

fundamentally adversarial relationship. it is more about managing that and finding ways to keep that competition in check so you avoid -- annmarie: i remember the hillary clinton reset button, that in russia was labeled as -- daragh: overcharge. annmarie: quickly, russia's response. daragh: we have not seen much of one, which is interesting. they came out with a bland statement saying how could the summit proceed in the short-term. we are likely to see reciprocal expulsion of u.s. diplomats or a reduction of the size of the u.s. embassy in russia. it is difficult to see what russia can do. it will already sanction u.s. debt.

russia needs to participate in the dollar economy, and it will not have much impact on the united states. and sanctions on individuals and entities we have seen against russia do not have the same impact. it will probably be asymmetrical that is not reported as much, but there does seem to be a degree to which the new nature of the sanctions and the opening of this new toolbox has given the kremlin a little bit of a pause, and left them unsure how to respond at this point. annmarie: thank you so much for joining us, daragh mcdowell, principal analyst, verisk maplecroft. coming up, do not miss our exclusive interview at 7:30 u.k. time. this is bloomberg. ♪

annmarie: good morning, one hour from the start of european trading. i'm annmarie hordern. the china story has been dominating headlines, joining me is our china credit reporter. what are the latest developments? what are we waiting to hear from? >> we reported last night that they are planning to make repayments for 600 singapore dollar bonds this month. this will help a rebound. they came off of a low of $.45 and are in the $.70 range. it looks as though securities has made a payment for local

bonds. the dollar bonds. that shows this story is about the global investors and their concern about what will happen for the dollar bond. offshore debt is what is in focus, because there is more uncertainty around enforceability and the strength of the guarantee of the bonds, and whether or not offshore bondholders will have to accept a haircut in a restructuring scenario. annmarie: tencent sold a $4 billion deal overnight. other signs that the market overall is improving. >> tencent did very well with his deal, and we are hearing it is boosted by news. i think it is important to know that this is the worst week

since march. asset managers make up a significant chunk of china's investment grade bonds. they are trading very wisely. we are seeing a lot of pressure from higher chinese names. annmarie: very quickly, what are investors panic about? stefanie: it is a question whether or not beijing will pull back support. that would result in a reassessment of valuations across china's credit market. annmarie: thank you very much. a very busy week covering this story. that does it for me. coming up next, mark and anna

will take you through the european open. happy friday. this is bloomberg. ♪

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(announcer) do planks for maximum core and total body conditioning. (woman) aerotrainer makes me want to work out. look at me. it works, 100%. (announcer) find out more at aerotrainer.com. that's aerotrainer.com. anna: good morning and welcome to "bloomberg markets: european open." i'm anna edwards. mark cudmore joins me to go through the market action. the cash trade is less than one hour away. china's economy grows by a record in the first three months of 2021. retail sales soar, but momentum slows on the quarter.