former ecb board member told the german courts ruling could hamper the ecb's independence. >> if one takes it more seriously, then it is a bit worrying if ecb had be willing to go looking into all the frozen counts, who would be heard they quote the savers and companies. in the end, what will the ecb do with that. will they have to balance the price mandate and impact some people, some borrowers this will infringe in the end of the ecb. i'm not sure if it is laughable or dangerous for the ecb >> former ecb also spoke to us and hailed the ecb's response to the ruling >> it does some damage fortunately, the ecb has reacted very clearly particularly in the statement issued by the governing council of the ecb, reaffirming its independence recalling that the european court of justice. the superior court policies and has reaffirmed their mandate and commitment to all area countries. so i think it was an excellent reaction to the ruling of the german constitutional court. >> german lawmakers are examining whether to require the bank to report to parliament on policy following tuesday's ruli

judges say the ecb action was not act by the treaty.et movement on the back of that decision. the ruling covers quantitative easing, so the qe program, but does not cover the emergency purchase program. we will move to euro and some of the german and italian bonds. let's get to first word news in new york city with viviana hurtado. viviana: that is where we are going to begin. court,ecap germany's top the case against quantitative easing. it says some of the ecb actions are unconstitutional in germany, and therefore illegal. the court adding the central bank incisions are not act up by the e.u. treaty and the ruling does not apply to the asset purchase program. an internal u.s. government projection points to a surgeon virus cases, showing the out rake vastly accelerating by june 25ore than 200,000 cases and hundred deaths a day. the white house is calling it an internal cdc document. officials say it does not match with the coronavirus task force 's own analysis. people getting back to work might ease the pressure on economies across t

now, even if they do rule in favor of the ecb, the question is will this change direction for the ecb and will we see a new case perhaps raised against the pspp, the separate program for the pandemic emergency response purchases one thing to bear in mind is that one of the analysts flagged is that these judges don't operate in the political vacuum. given this verdict is coming at a time they are facing the coronavirus and pressures, that no doubt will play into the decision making. >> let's be very frank about this, the ecb had two clear mandates one was stability of the euro as a currency and the other was the inflation target it didn't have a growth mandate or a mandate to bail out governments that had run very high-def sits and didn't have a mandate to deal with a pandemic. but the ecb has been creative under mario draghi and christine lagarde here, it has not explicitly supported the deficits in countries like italy and elsewhere. implicitly, it's very clear by lowering the refunding cost, it has done that. through the sovereign purchase programs, it has also allowed these countri

even the fed is doing more than the ecb. one of the thoughts from the ruling today is that it is going to make it harder for the ecb to do more than it has done thus far. is that the correct way of thinking about this? again, applications for the foreign exchange market if that is the case. is the ecb going to find it harder and harder to do more qe, or at least to put new policies into play in the same way the fed is? what are the impartation's? dominic: it's all about the proportionality, if the ecb can argue what it has done is proportional in regards to the targets, and they can continue what they are doing. that becomes harder and harder the more you do. so i think it is going to be harder for the ecb to some degree, and that to me is the problem. for the euro, what we need to start sinking about across fx in general, we are, at some point in the near future, owing to be thinking how we get out of this, and who is going to be able to recover fastest. if you can't use your fiscal and monetary toolbox to the full extent t

the ecb -- mechanism that the ecb is so keen works?re seeing is little steps being taken by the supervisors to ensure that banks can play their role. back to the crisis of 2008, banks were at the heart of the crisis. banks are at the heart of the solution now. that means banks should not be suffocated. they should be able to transmit the money and basically be able to play their role. that is what you see which is taking place. there are some changes in the requirements so that banks can play there'll -- play their role. they are being taken so banks can really pass on the money to the economy. you see all those steps been taken for banks to play that supporting role to get out of this pandemic. that was the b.n.p. paribas ceo speaking to our colleague, guy johnson come about the company's numbers. for more on bank earnings and the more wider context, let's talk to jonathan. good to speak to you. we heard a lot about the background context, the lockdown, the recession in france and elsewhere. also on the specifics of this business, the

does it rain in what the ecb can do?n: i think it is the beginning of the potential court challenge against the program because there has been a number of ways the ecb has constructed its programs to try to essentially allow debt monetization, which otherwise is prohibited by the lisbon treaty, and what happens with the newest incarnation of that, it was the subject of the german constitutional court ruling today, but the fact that the german constitutional court is at odds with the european court of justice over the previous program, the app, means you could see a court challenge in the future. i don't think it will constrain with the ecb is going to do over the next several months. therefore, i don't think it is a reason to be expecting wider spreads or a much weaker euro or lower european equities, but it monitor if risk to challenges are leveled against the program and the ecj rules against that, then obviously that is a major issue how european sovereigns are going to be funded. they will take a long time. it is not

because they can budget, or does it hurt the ecb aura?an be i don't think it said to be a positive, because it once again throws a light on the politics behind qe, and you don't really want that at the moment. i think that as for the specifics of the ruling, which require the ecb to demonstrate the proportionality of its interventions, i imagine that they will be able to do that. i imagine that if they dug around, they would find the right kind of reassuring words anyway and they certainly can construct her future statements on that basis. i think they can solve that. what is more concerning, i think, is that you have a , thetion where the ecj court of justice supports what the ecb is doing. at than a german constitutional court disagrees with the european court of justice, and this is an inversion of what we normally understand by the judicial hierarchy in europe. it appears the german constitutional court simply goes back to the german constitution and pays no attention to the fact that the germans have signed lots of treaties in settin

. >>> the bank of france governor who is also an ecb board member says the central bank's emergency purchasing plan needs to be flexible to be effective suggesting further bond buying could be on the way. >> if we can't to guarantee the maximum efficiency, we shouldn't be bound some capital banks should be able to buy more and others to buy less >>> the world health organization halts trials of hydroxychloroquine over safety certains as studies show it increases death and heart problems >>> happy tuesday, everybody and welcome to "street signs." let's kick off with a top story involving the travel sector. the german government plans to lift the travel warning by mid-june confirmed by cnbc sources. the new measures will allow tourists throughout the union, united kingdom and foreign non-eu countries taking a look at travel and looers stocks. massive rally. those shares up. tui up more than 30% bare in mind, you can markets were closed as the broader uk market rallied a little catch up there. broadly speaking, a very strong bid for the entire european travel sector. let's get to annette with mor

will speak to -- we will speak ecb and fed. isf bezos says the outbreak the hardest time he has ever faced. as europe's biggest discount airline cuts 3000 job, ryanair chief executive tells us social distancing on airplanes will not work could we talk to the chief executive. good morning, everyone. this is "bloomberg surveillance." i am francine from london and new york. from home, tom, it is friday a lot of people are focused that it is friday. the fed on wednesday. we heard from christine lagarde yesterday. reminder, volumes are thinner than usual because a lot of countries are celebrating may the first. character's a certain to every friday, and this is a friday coming off the exhaustion of all of that central bank news, the analysis of the markets, the big tech earnings. i would focus on this may day, on the persistent theme, the dawning awareness about a seriousness a pandemic continues to be. one lighter note, there is a beach war in america. the governor of california is shutting down the beaches while alabama and texas

you looked awfully good on the lawn of the ecb building a few years ago. ecb? see from the i know you've got a question about it. jonathan: i used to time my visits to the ecb really effectively because they go on tour twice a year, so i would end up in places like cyprus covering the european central bank. you've got to do that. hopefully we will go on one of those tours as well. much.re already doing so what is the objective at the next move. just a couple months ago, christine lagarde said she wanted to put pressure on the fiscal policy maker. what kind of pressure do you put on fiscal if you follow up next thursday with more qe and more asset purchases? ebrahim: i think it is absolutely critical they continue to reinforce at this next meeting. not only are spreads still wide in periphery sovereign debt, but in between, we had that german court ruling that questioned the ecb capability to do its job. i think it is essential that the ecb at least, and some shape or form, reinforce its presence in asset markets. but beyond that, just keep in mind that unlike t

what lessons should the ecb draw from this? need to speak to citizens differently to explain exactly what it is doing? sven: yes, i think that is quite right, and this is also true for the european commission. we had lots of critics from different angles concerning the monetary policy, and i think we did not do enough in the euro system, in the european commission, but also in the european parliament, to take seriously enough their concerns. withld like to start first ourselves, because the european central bank is accountable to the european parliament. we have a quarterly monetary dialogue. these dialogues are very well -- they have not reached the same depth of debate which we have seen now between the courts. therefore, i think we also should take steps, for instance, to give more space for experts to directly discuss with the ecb so that the quality of the countability tour the european parliament is increased rather than -- of the accountability toward the european parliament is increased rather than judgment. francine: c

we've heard from the ecb and the question now, what the broader ecb response will look like. let's get a look at the regional markets. italian markets underperforming. the cac 40 up about 1% the dax up the ftse 100 up 1.1% let's check at the european banks. very strong gains across the sector a socgen shares up paribas is up higher on the back of more support from the french government and tension to the auto sector a lot of optimism. the german rally up 4% they will come to the market for fresh capital. uk names rallying strongly this comes on the back of a very strong session for a u.s. bank i want to give you a look at what we saw in terms of u.s. movers here. goldman up 9%. citigroup up jp morgan up 7%. we heard from jamie dimon, shares up after he called the bank very valuable at its current price. he famously bought shares in 2016 close to the bottom of the market at the time the bank boss said he was not trying to call the bottom but added that there was a very good chance of a recovery and cautioned that it was not yet time for share buy backs. >> caller: i think you'

that is really trying to take the ecb's knees out from under it. can it go beyond what is doing already? can it use other tools if it is already facing such a challenge in its ability to carry out these quantitative easing measures and other measures? david: i think you are right that one of the big issues and big debates going on within europe at the moment and obviously relevant for investors is the issue of solidarity. much of the debate has been around fiscal solidarity, providing fiscal support, which is, the cost of which is shared across all of the member states rather than being born by each one individually. now we have germany and the constitutional court actually challenging the most effective pan-european institution in terms of its response to this crisis, which is the ecb. so i do think it is very unwelcome, but i also do think the ecb is not going to allow court member state or outside of the european court of justice to stop it from doing what it believes it needs to do in order to meet its mandate. i don't think this stops the ecb

the ecb stands by its inflation mandate.ses surge at novo nordisk, patients snap up diabetes medication ahead of the lockdown. we will talk to the chief executive later. another busy day. a lot of people were talking about in the virtual newsroom that we have created around the world that we can't quite remember whether it is tuesday, wednesday, or thursday. a lot of the focus is on what your markets are doing. this is your data, euro area, april services pmi coming up at 12. the preliminary figure was a touch below that. that services data coming in at 12 instead of the preliminary 11.7. that is a little bit better than expected. i am looking forward to the -- ofexecutive of com campari. look at renminbi. president trump continuing to push the reopening of the economy and oil pretty much stalling. treasury yields edging higher. we will have plenty more on that shortly. we will be speaking to the campari chief executive. trump isent donald pushing to get the u.s. economy to reopen. he says americans should begin returning to

markets of the ecb, the was a little disappointed yesterday in terms of the announcement. the most positive news that we got in terms of tweaks were in the more generous rates on the tltro and the introduction of a new pandemic emergency long-term refining thing -- long-term refinancing operation to assist the sector. think it is somewhat subsidizing bank lending and the system. but overall, i think the market was disappointed. i think the ecb made it crystal clear that they are going to be focusing on the pandemic emergency program going forward, and we would love to see that expanded, perhaps in june or later this year. at the moment, it has a size of 750 billion euros, but we expect that to increase. has a mandate to defend other central banks, and really, christine lagarde really emphasized that they want to ensure that those fragmentations within the system, that they don't want to see any unwarranted tightening of financial conditions, and they want to support all of the economies within the euro zone. guy: do you think btp's go wider versus bunds from here, or do th

the ecb has respond -- manus is in dubai.continueged doing everything necessary to revisenflation. the governing council said it took note of the judgment but integrally remarked that the top european court has previously said qe is legal. yogi dewan is still with us. this has come as some of a surprise which reverberated through markets. cp yields jumped. the euro weakened. aberdeen standard and ubs are worried. they are concerned of a potential knock on effect. others say rulings like this take years. the ecb is still going to do whatever it takes. are you concerned about the knock on effect of this german court ruling on qe and especially the -- yogi: absolutely. it came as a surprise. this case started in 2015. it has been going on for a long time. the issue is around the euros to trillion a asset purchasing program we know as qe and how it is proportion. there are consequences but we are not as concerned as some of the banks are reporting. we think it was just a surprise shock. it does lead to a lot of conflicts within e

you still have to allow the ecb to do what it is going to do. is that right, john?ohn: yeah, it does appear that the european institutions, both the court of justice and the ecb are simple he going to throw their weight around, and more or less say we have established what the right thing to do here is, and whether it fits in the treaty. it is a question about the long fuse issue of the existential question, which i think will not go away until we have mutual debt. for now we can tap this down and maybe it will come up again. -- we can tap this down and maybe it will come up again. what ites not receive feels is a satisfactory answer from the ecb, etc., but i just the long long fuse, slow burn issue of the existential question, which does not seem to be going in the right direction in the longer arc of things. vonnie: that said, there is at least a definite directive. a rip on this after the ecb cannot bye-bye -- buy bonds or whatever it wants to do? don: i guess they are saying that this is not a -- john: i guess they are not saying -- the most annual framework for

if we look at the ecb's response, -- although the ecb tech or equities, it continues to do things thatositive. banks more supply. june without any targets. there was -- they were not going to allow in the transmission of monetary policy. i guess in contrast to what your previous speaker ancient, it would be worth mentioning the combination of asset growth and rate cuts that are accompanied by those crucial set of guarantees guard against corporate collapse and other forbearance measures. think lending is about four times as important in europe -- bank lending is about four times as important in europe than the u.s.. --ncine: how different maia different, maya? maya: on some of those credit guarantees. liquidity and state aid. , think to our minds in europe the financial markets. the companies will carry higher debt on their balance sheet as a result. so, as columbia threadneedle investments, we have been increasing the quality of risk that we take in portfolios. u.s. and adding to higher-quality equities in the u.s. and investment grade corporate bonds. francine: overall, how do you se

the ecb has moved to ease monetary stress. introducing tltro's pltro's to ensure sufficient liquidity, and help loosen the flow of money. 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. up next, world bank of scotland group will look to book a hefty charge as the coronavirus pandemic hits health and finances. we will cover banks for you. this is bloomberg. ♪ >> the challenge of course is that we do not know how deep or long the downturn will last, or the extent of the lockdowns. >> it is really difficult to predict outcomes with any certainty. this is true across all markets. >> when unemployment goes that high, we have reserved for what we anticipate credit losses to be. >> there is obviously worry in that range dependent on the duration and economic impact during the remainder of the year. >> that will bode well for credit. we are optimistic about the extent the losses will impact our future. bank you hear there from executives

i think the ecb will have to do more.the purchase programs to what we have seen from the federal the bank of england, they look significantly smaller. they are going to have to flex to try to bring back spreads. governments need to be able to borrow significant amounts at the moment and they can only do so provided our own costs remain very closely under control. this is not our policy makers want to be spending their time and it is unfortunate they are going to have to do so for the next few weeks. problem is that a lot of investors might not want to lend money to italy unless they are sure germany is willing to pay them back. do you see ramifications for the german court decision? the response has been very proportionate in that they are continuing to do whatever is required in their mandate. make anyt is going to changes potentially slower. the old clichÉ average that europe will only find compromise in a crisis is coming back to bite us again. i think the ecb will get there eventually, but they are likely to do so at

my bet is on the ecb. are your thoughts on the extent of support we have seen from governments in developed markets? and what that does to capitalist or mixed economy models into the future? just to sort of kickstart that analysis, will it be heavy support from governments that kind of saves capitalism? with very sit different looking economies in the future? gregory: i mean, it's hard to say. what's clear to me is that we are not coming off of the trip anytime soon. --y would definitely be there will definitely be continued and significant fiscal and monetary stimulus on that side. it's kind of like a tug-of-war. fiscal and monetary stimulus on the one side versus the unemployment on the other. if we are not able to get those employees back to work quickly, the fiscal-monetary wins. ultimately, fiscal-monetary cannot go on forever. that's why a lot of people are talking about helicopter money as the next frontier. i think fiscal-monetary wins in the short-term but on the long-term, unemployment wins on th

has it reduced the room for maneuver for the ecb?certainly added to the uncertainty when it comes to the implementation of the ecb's qe program. the ecb did not try to talk to the german constitutional court. it is relegating the whole matter to a purely german matter , so that attitude between two important institutions in the eurozone as a whole is not helping. from here, the ecb will try to fight the issue by putting greater emphasis on the pepp program, the pandemic purchase which has not -- been mentioned specifically and by implication where the bundesbank should and principal be able to participate further, that is the same reason the court used to criticize the implementation of qe that it may be used for pepp as well. uncertainty will likely increase from here. tom: it is jobs day in america. the struggle in europe and all the constitutional stuff that i don't understand, will europe revert with higher unemployment back to the permanence of that higher unemployment? valentin: that is one of the risks definitely. it is the ca

a way forward is for the ecb. were to go there, we would see a further narrowing of spreads. nejra: carsten, we've got some breaking news that i want to bring to our viewers. apologies. lufthansa and the german government, we've got reports coming through, have agreed on an aid package. this is a red headline. bloomberg.ng the the german environment minister commenting on the lufthansa deal saying that confidence is to include the co2 element. just want to get your first reaction to this, in terms of list anza and germ -- in terms of lufthansa and german government agreeing on a package. do you expect to see more of this sort of thing in terms of the government stepping in to help stressed companies? carsten: i think there are. when they created the stability fund for german corporate, they euro.reserved 100 billion to eventually participate in bigger companies -- to support bigger companies. left the first one here. -- lufthansa the first one here. government would intervene. it is as clear and shows how difficul

we are expecting more action from the ecb. also expecting more action from the fed at some point as well. but nevertheless, it does look as though the u.s. economy is going to open probably a little bit more swiftly and gain a little bit more traction, as u.s. assets also have the benefit of having a lot of technology in the mix as well. just in terms of what people think about how they are going to be allocating assets at this point in time, do you discontinue to stick with the u.s.? max: oh yes. you are probably trying to give me not a boring angle, but i will probably be even more boring now and say there's no other way around than the u.s.. if you think about it in terms of distribution of probabilities, if you are saying if we continue to grind higher in stocks over the next couple of weeks and months and it is very difficult to see in the process of a global gradual reopening of economy how we rotation intog cyclicals, small caps, value, how that would happen. i would say you still stick to the quality, the growth, the t

as far as the ecb is concerned, i think it will force the ecb to be a bit more cautious about bond buying. there is -- i do not think there is a strong impact on the current measures, foot if we think six month ahead or a year ahead, i think the ecb will have to be that much more cautious. nejra: and i guess that puts even more pressure, then, on the fiscal side. we have heard about some hard-liners in sweden, the netherlands, for example, edging toward some sort of compromise. my thanks to clemens fuest, president of the ifo institute. coming up, the chinese foreign minister says some american leaders are pushing toward a new cold war. this is bloomberg. ♪ nejra: economics, finance, politics. this is "bloomberg surveillance." i am nejra cehic in london. now, china has warned that american leaders are pushing toward a new cold war. the foreign minister has says that the situation is dangerous and could endanger global peace. tensions between the two countries over the coronavirus have plagued hong kong. let's start with hong kong. protests anew over the weekend. where are we with the secu

how is that going to affect -- what is the ecb going to do about that? will they answer if germany's highest court does not allow the bundesbank to participate in quantitative easing? paul: the base case is this will be resolved. that is quite important to remember. someone --s until not clear who -- someone has to justify the ecb bond buying program. that is one factor. august is when the three months expire. at the moment, the suggestion seems to be the ecb works out who should answer the german court, although for the german court to decide on that they have to come up with another legal case. it is a messy situation, and everyone i spoke to says we will sort this out. not worry. in any case we will carry on buying without the bundesbank. matt: it is -- vonnie: it is such a difficult time. i know you asked about reinvestment for the program as well. what did he have to say about that? paul: the pspp. , youssue is at the moment do buy debt in relation to the size of the economy, which means the bundesbank buys most of the debt under the executive purch

and the ecb has been too corrective.y have been doing a good job so far, but they cannot resolve the situation, the lack of growth, they cannot solve issues of insolvency, paying for liquidity issues, it sarah there is too much trust. we have been in a situation ande the central bank independence is questionable. i see it difficult for how they could go towards normalization without risking a whichf and a debt crisis, would create deflationary pressure, forcing the ecb to ease again. how can they get out of it? i think there are fewer options longer-term. anna: fewer options, and yet the ecb makes the point -- christine lagarde makes the point that she needs all kinds of tools right now. i thet being challenged german constitutional court's ruling this week? in troublependence because of that ruling? guest: i think it is a very important ruling. i don't think there has been enough appreciation of the meaning of it. i think the toolbox have been rated by the just -- have been raided by the justices. the bundesbank would b

it will restrain the ecb in the medium-term.ot apply to the current measures at the very general level. it is a warning to the ecb not .o be too aggressive about it the ruling raises fundamental questions about the eu and the overall institutional architecture of the union. i think this ruling does include a number of risks, as far as the ecb is concerned. i think it will force the ecb to be a bit more cautious about bond buying. theri don't think there is a stg impact on the current measures, but if we think six month ahead or a year ahead, i think the ecb will have to be more cautious. david: that was the president of ifo. coming up in the program, don't waste good prices, according to christian culture. talk about the opportunity for australia to reshape the economy and move stronger from this virus pandemic. that's coming up. this is bloomberg. ♪ haidi: australian prime minister scott morrison is set to unveil his plan to take the economy off life support but also warning that unemployment will get worse before it gets bette

adon't think it will be changed anything with the ecb here and now. tom: so you are suggesting that we are going to see a greater federalism to help europe come out of this economic crisis? peter: well, that is a slightly different question, but, yes, i do think so, too. but again, the stress here, as with everything in europe, is probably flight. i don't expect that we are seeing a major leap into a more federal state. but when you look at what is being done on the physical level, and this idea about the rescue fund, the recovery fund, which i believe firmly this will fromto fiscal transfers the more prosperous north to the less prosperous south, you could argue that this is a teeny, tiny step toward a more fiscally federal union. but again, it is baby steps that we are talking about. peter, if you look at debt -- i don't know if italy will need debt relief or if they will need a bailout program, but is this make or break for europe right now? peter: i wouldn't go so far, because, look, what you're seeing is the ecb has significantly stepped up its g

let's talk about the ecb. the ecb may finally be getting what it has long called for.t is governments coming to the rescue with stimulus. the proposal by french and german leaders for a 500 billion euro package is seen as a significant step towards a common fiscal policy in the union. the plan must be supported by all 27 members. the ecb stays alone on the front line. from the plane says the centric -- philip lane says the central bank is fully extended to extended emergency bond buying program. we are joined by samy chaar from bank lombard odier. dirty emmanuel macron -- today save the euro, you think -- did they save the euro, you think? samy: they are giving a very important additional tool to the eurozone and european union, which is the fact that you can do fiscal transfer. one-off that they are proposing. we can imagine that in future crisis, whenever they come, they ine opened pandora's box allowing to tap into this new tool, which basically would allow transfers between nations it.need it is extremely significant and kind of the missing piece of the european pr

central banks, ecb are driven by their mandate.have the privilege of being independent institutions , for myself, the european parliament which i report back, and are accountable to. i go every three months to tell about our action in tools and how we measure them and assess them. driven,re also mandate and mandate dictates that we do whatever is necessary, and whatever is needed in order to actually deliver on our purpose, which will be a factor of circumstances. to give you an example, we are currently going through exceptional circumstances. the global economy and the euro active, isve to be facing this unprecedented shock that we could not have imagined. in that case you clearly have to go beyond the normal and conventional tools to use things of in exceptional nature -- you think of an exceptional nature, and have to be designed and calibrated with the appropriate level of deviation and room to maneuver in order to deliver on that mandate, whether it is to avoid the tightening and financing condition, or to make sure that mone

the ecb or the national central bank? berlin thinks it can be local policymakers, which proved less controversial. to suggestank seems it will take a support role with the ecb taking the lead. elon musk is reopening his tesla factory car plant in the u.s. and is daring authorities to arrest him. moscow -- elon musk has been furious at the shut down for weeks. governor newsom has already sought to ease tensions, believing tesla will be able to restart as soon as next week. 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? nejra: coming up, open borders key to jumpstarting growth. austria's chancellor spoke to bloomberg about the reopening of the economy. more from that next. this is bloomberg. ♪ it is "daybreak europe." we are back again. i'm in dubai. they haven't taken away my residency card yet. china-u.s. relations souring. austria-china relations souring. trade misery pervasive. we got far too far ahead of ourselves.

the hotel giants see room revenues plunge 80%. >>> ecb fights back. vice president says the central bank only answers to european courts and not governments as it resists the court's call to justify its bond purchase program. >>> significant loss of output has become inevitable. that's the message from the new boe governor as the bank forecasts a 14% drop this year sterling rises as it predicts a sharp recovery in 2021 >> caller: expect a recovery much more rapidly than the pullback in the current financial crisis >> as you can see, it is turning into a positive morning, the dax now charging higher. gains really broad based investors expect to return on the recovery weighing in on their expectations with a sharp drop in the output, inevitable at this stage they are expecting a rapid recovery looking through the dire earnings from a number of companies across a raft of sectors. looking ahead at the end of the year and out to 2021 that's the story for equities in europe wall street is looking at a bounce the dow looking at a triple digit rise s&p 500 an

the ecb is committed to addressing market fragmentation. a fact checking label to tweets from president donald trump for the first time. he accuses the social media giant of stifling free speech. welcome to "bloomberg surveillance," everyone. i am francine lacqua in london. the markets are trying to guess how much tension there is between the u.s. and china and how that will halt the economy. this is what is playing out in the markets. the stoxx 600 gaining some 0.3%. crude oil before $34 per barrel. 71599.i the u.s. considering a range of sanctions to punish china for its crackdown on hong kong. the trump administration weighs whether to declare that the former colony has lost its autonomy from beijing. president trump says he will announce action against china before the end of the week. meanwhile, protesters in hong kong cured up for what there could be their biggest day of unrest in months against china's increasing control of the city. let's get straight to our chief asia economics correspondent. this has certainly ratcheted up quite a

what does moore look like at the ecb?mes at an interesting time as we get some pushback from the constitutional court in germany. they turn out and do even more qe. jordan: i thought it was fantastic. we had the announcement from the german court and then the ecb did not slow things down, they pick things up. the kiwi they are doing -- the be lesswant the ecb to like their past selves and more like what the fed did for the bank of england is doing. just to give you some numbers come every week the ecb is purchasing around 4.3% of gdp. that sounds like a good number, but the bank of england is doing double that. the fed was doing at least 15 times that. increaseo see the ecb the package. something like 500 billion would be towards the top end. if they went even further, that would be more fantastic for spreads. that would mean risk on in terms of equity markets. you debt spreads narrow. higher qe leads to a weaker currency. jonathan: that is what i want to jump in on. i think that is critical. increase europe and an of flo

philip lane says the ecb is prepared to boost bond buying.wn debate with subzero policy continues. andrew bailey testifies today. this as the u.k. chancellor sees a recession of an unprecedented scale. nejra: welcome to "bloomberg daybreak: europe." it is bearish, according to the latest bank of america survey. shaped0% expect a v- recovery and 68% say we are in a bear market rally. reports around moderna questioning the data. moderna questioning the data. if we talk about the rates, it's all about [audio drop] there is hurdles to be jumped. high hurdles.ite he says i don't embrace or endorse that kind of linkage. kathleen hays -- language. not kathleen, it took the governor to join in. pushing back against negative rates. what did powell do in his testimony yesterday? yesterday, some say he damaged the narrative for further stimulus because he did not commit hard enough. the bondhave gotten market is really the risk that if you don't get that stimulus, do you get the barclays risk yield shock? you have a bad policy error. the efficacy of pol

it's still alive and well at the ecb. italy has been too big to fail with the financial conditions across the whole of the continue negligent. not just itself. >> we're going to have to leave it there thank you for joining us this morning. christopher jeffrey, head of inflation and rate strategy at lgi. jeff, also thanks for contributing there >>> coming up, the 750 billion euro recovery fund gets a thumbs up from france and italy, but opposition remains in a quartet of northern countries. we'll speak to mario centeno, next there's a bridge. between ideas and inspiration, trauma and treatment. gained a couple of more pounds. that's good for the babies. between the moments that make us who we are, and keeping them safe, private and secure, there's webex. ♪ ♪ beautiful. across america, business owners are figuring things out. finding new ways to serve customers... connect employees... and work with partners. comcast business is right there with you. with a network that helps give you speed, reliability and security. and eno

now we will talk more about the ecb.ter of the universe, that is what a top german judge said in a german newspaper. up next, the latest from the continent. this is bloomberg. ♪ >> i think there are two factors to consider. , youasdaq composite index look at the companies on nasdaq, we have the companies that are defining the economy of tomorrow. we have companies from every sector on nasdaq, but when you look at companies doing well, they do tend, whether they are biotech companies, we have 94% of all biotech companies on nasdaq, as well as technology companies. they are demonstrate in great resilience. the second key factor is the fed. the federal reserve in general, if you look at the overall performance of the market, not just companies on the nasdaq, but the impact of the virus has been muted by the aggressive action of the fed to support the economy and companies to make sure we have easy access to capital, and we can manage our companies through this crisis. >> do you need to bring your people back into the office

it is not that the ecb violated the constitution in germany.t is that the german government violated the constitution by not challenging the ecb. it is that kind of ruling. it also deals with the public sector purchasing program, the old qe they did coming out of the financial crisis, not the pandemic emergency purchase program they are using right now. maybe they are connected, but somebody would have to file a suit and it would work its way through the courts. i don't ticket really shuts down -- i don't think it really shuts down the ecb because they could satisfy the court ruling by coming back with a different analysis of what they were doing and why, but it does throw a small monkey into the ecb at a time when they don't need it. but it probably isn't going to stop anybody from helping the euro zone, and it really isn't going to have the petitions for other central banks like the united states or japan because this deals with a treaty that put the european union together rather than anything fundamentally inside the central bank itself. to

nejra: that was ecb president christine lagarde.ard parks from brooks macdonald asset management is still with us. to carry on the conversation we were having earlier, i know you think that the policy accommodation we are seeing globally could turbocharge the economic recovery and risk assets rallying to reflect this but when i look at your credit views come you have upgraded the u.k. and international investment grade, does that include the eurozone raised on what the ecb is doing or might do? edward: mainly in the u k and in the u.s. we still have concerns -- we are seeing a huge amount of policy response from the ecb but we still effectively don't think it is delivering what markets are looking for. there will still be economic pressure on a lot of the companies which are domiciled in the eurozone. our upgrade in terms of credit, we focused this on the investment grade market. the federal reserve has done a huge amount but what it has really done is support high-yield. -- there hasot been a lot of talk about fallen angels. the fe

done talking about the ecb.ion will unveil its recovery plan later this morning. it could be a significant turning point in the bloc's history, as member states debate the possibility of joint borrowing, of shared debt. let's get more with maria tadeo in brussels. what do we expect from ursula von der leyen and ecb? -- ursula von der leyen, this is her biggest moment since she has taken over the european commission. there has been a lot speculation about what will be unveiled today. what kind of fiscal stimulus and what kind of joint debt sharing burden are we going to see from european member states? there are three things to focus on. one will be the size of this. just how big is the budget going to be and how big will the recovery fund be? german and french are pressuring for 500 billion euros. lookecond factor really to is the compensation of it. are we going to see mostly -- grants, as germany and emmanuel macron are pushing for, or do we see it as long-term? ursula von der leyen already entered that we are

then the ecb buys the debt. is sort of icing on the cake, that stuff you try to do on a pan-european level. to have seen even more on the national level than on the european level. and we wereblem is, speaking to tina fordham about this in the last hour, it doesn't look like it is in up -- if it doesn't look like it is enough, it is going to make the european union look. it is going to make the institutions that make up the european union look weak. if you are in italy or spain right now, you are feeling like you haven't had everybody else rallying around. allt needs to be shock and to put the populace -- shock and awe to put the populists off the table. i am wondering whether you think 500 billion is capable of achieving that. they going to be saying the european union just delivered 500 billion, or are they going to be saying, is that really it? guy: i don't --erik: i don't know what they will say, but you may be right in the perception, but what they forget is that they are issuing debt like there and holding

you talk about the race between the fed and the ecb.ave seen various people say it could be up to 1.5 trillion. -- wouldubling of ppp morebling of ppp put pressure on europe? >> it would keep pressure on. i am not sure the fed is done and i am not sure the ecb is done. i don't think the ecb can do more than maintain pressure. changer would be positive for the euro and on the other side, really clear and progressive fiscal policies where at the moment, i don't think the way europeans have set up their fiscal strategy has convinced investors that is a strong reaction. it is more what the ecb is doing. it is not going to help europe. quite a lot is priced in at this point. it will keep us down rather than send us much further down. up, the oracle of omaha speaks. hathaway's annual shareholder meeting. that's next. ♪ save hundreds on your wireless bill without even leaving your house. just keep your phone and switch to xfinity mobile. you can get it by ordering a free sim card online. once you activate, you'll only have to pay for the data

in the end, last week's ecb meeting was about making sure companies have abundant access to liquidity down the line, amadame lagarde said, we'll do whatever it takes with respect to our asset purchases, i think it is only a matter of time before fallen angels are included in the quantitative easing policy. >> the central bank measures across the world have really been targeting liquidity, as you just outlined there. solvency, to steve's earlier point, is clearly an issue or risk we need to be thinking about. in your view, do you think ther is a default cycle coming? what would it look like? when would those warning signs begin to flash up? >> there will be a default cycle. interesting what the bond market is doing at the moment, it's clearly to happy to lend to those companies which can survive lockdowns even though their profitability may be stressed what we call the distressed ratio, the percentage of high yield that yields above 10%, which is classically a good leading indicator for defaults that has not come down the credit market is saying, look, you've got your winners here from

that was, of course, on the ecb legality.up in the next hour, joe quinlan and bank of america private bank hedda chief investment officer market strategy. that is coming up next. this is bloomberg. ♪ save hundreds on your wireless bill without even leaving your house. just keep your phone and switch to xfinity mobile. you can get it by ordering a free sim card online. once you activate, you'll only have to pay for the data you need- saving you up to $400 a year. there are no term contracts, no activation fees, and no credit check on the first two lines. get a $50 prepaid card when you switch. it's the most reliable wireless network. and it could save you hundreds. xfinity mobile. tom: this morning, america is unemployed. forget 15% unemployment. the math, and the math is 22 percent, even up to 27% unemployed. the nation recover from great depression joblessness? on asorning, modest risk they combined their shock. the dow 24,000. look at the vix, just below 30 as well. and i will do my french, francine. the french go in search

inflation seems to feed into the ecb's thinking. inflation rates falling to zero point 1%, the lowest in four years. pretty much to be expected given we halted the economies were a couple of months. tendencieslationary point on renault. there is no question the labor economy overwhelms everything else. the depression of labor is absolutely front and center into this week. with all the other news and distractions as well, the labor economy, globally, is stunningly week. francine: we will have a lot of folks on unemployment across the world. ritika: in minneapolis, a third night of violent protests over the death of a black man who died in police custody. protesters torched a police station and a number of businesses were also burned. demonstrations spread to other cities in kentucky over another police shooting. the president called the rioters thugs and threatened to send in the national guard. this came hours after the president issued an executive order seeking liability protection. earlier this week, twitter began selected fact-c

germany's constitutional court says the ecb must prove its bond purchases are legal, and then the ecbit will keep buying bonds regardless. kathleen: well, there you go. i mean, why would the european central bank -- there was a meeting late today, and this is what came out of it. onically, the judges germany's constitutional court ruled that quantitative easing is not consistent with e.u. treaties and german authorities should have challenged this in the past. the ecb acknowledged what they said in a statement but they also responded saying, number one, the e.u. has already ruled that these purchases are illegal, and then they went on to say this, "the governing council remains fully committed to doing everything necessary within its mandate to ensure that inflation rises." that is their mandate. its medium-term aim and the monetary policy action taken in pursuit of the objective of maintaining prices ability is transmitted to all parts of the economy into all jurisdictions of the euro area." in other words, we got to be doing this bond purchasing from everybody, including germany. th

the ecb has already scrapped the environment.hey've already found a way around that now, so i don't think there needs to be a big premium on italian btp's right now. the question is, in a year or two years from now, the ecb stops buying italian debt. who is going to service the italian debt as the economy is structurally weak, the population is aging, and italy hasn't seen its economy grow since precrisis, never minute crisis? you add those things together, there needs to be a premium on btp's, but it is not this level right now because you don't want to fight the ecb. it is something down the line that i think we will definitely need to focus on. alix: super interesting distinction. the whole don't fight the ecb, don't fight the fed. i want to get your take on boeing and small caps. boeing is not to getting -- is not taking government aid because it could debt markets. small caps really staged a rally over the last week and a half. if the fed is going to buy high-yield debt and fallen angels, we can go buy small caps. what is th

it will restrain the ecb in the medium-term.n't apply for current to the currented measures, but it is a warning to not be too aggressive about its bond buying. but the ruling raises more fundamental questions about the overall institutional architecture of the union, so i believe this does include a number of risks. ,s far as the ecb is considered i think it will force the ecb to be more cautious about bond buying. i don't think there is a strong impact on the current measures, but if we think six months ahead or a year ahead, i think the ecb will have to be up at more cautious. -- to be a bit more cautious. nejra: that was the president of the ifo institute speaking earlier. still with me is lothar mentel. let me pick up on what clemens was saying in terms of the german court ruling, perhaps forcing the ecb to be a little bit more cautious because some red into the account of the april meeting that there were signals of more stimulus to come in june. do you expect expansion of bond buying, at least with regard to pepp, from th

i am also wondering about the ecb saying they are going to increase bond purchases.e talking about the lack of moving yields in response to this risk on feel. is this market even a market anymore, given the fact that central banks basically own it? jonathan: i thick it is fair to say that some of these bond markets are no longer markets anymore. i usually beat up on the jgb market because of how much the boj ads. some of the securities in japan hardly trade anymore. but on the european can package -- on the european package, i find it really interesting that even when we had a smaller number, the netherlands and austria weren't behind the plan. so you're telling me that the plane is more encouraging because the plan is bigger. i believe it could be bigger and the perfect place -- bigger in the first place. a bigger plan sounds good, but i want to see everyone on board with a plan to do something at the european level. conversations the have been going on. the frugal four, the ones that contribute th more than they get back, analysts have been talking about that if th