Mark for the week. Trading ate yuan 7. 1631. Not Much Movement but we will see what happens sunday night following whatever the president tells us today. 1. 11. Ust underneath vix trading at 29. Lets get a deeper dive in todays Market Action with kailey leinz. Be lower inay equities today but we are still positive on the week. It is a friday. That could change, depending on what we hear from President Trump. As it stands, the s p 500 is positive by 2 over the past five days. On the week, it is still the cyclical growth sensitive sectors that have been the best performers. Real estate, financials, industrials. Into cyclicals has wild up a bit, but the fact that they are the best performers underscores how sharp that rotation into the cheaper areas of the market was. Downtioned those beaten sectors are getting beaten down again today, true for apparel and retail stocks. Reported fourthquarter sales were down 40 , but that isnt in your concentric that is an idiosyncratic story. Pvh, ralph lauren, and gap are all down about 6 . Twitter is lower for a third day, down 3 today, 10 over the past few days amid that ongoing spat with President Trump. President trump issuing that executive order to rein in social Media Companies last night, and then hours later, twitter again flagged one of the president s tweets, saying that it glorified violence. I would be remiss not to mention oil today. Slightly lower but ending the month of may up some 80 , after prices dropped into negative territory last month. We are still down by nearly half on the year. The supply dynamic has started to level out with production cuts and the recovery taking shape, but we are still only at 33 a barrel on wti. Vonnie thank you for that. Turning back to the Federal Reserve, chairman powell defending the Federal Reserves bank to shield the economy. The fed referring to credit markets, but since the banks unexpected pledge to shore up that market via etfs, it has purchased 3 billion in corporate debts. To discuss the feds role in credit markets is srikanth of u. S. Ande head european credit strategy at morgan stanley. Announcement enough, the whatever it takes moment for the Federal Reserve . Srikanth thank you for having me. That wasncement of very important in the context of march and april. That prevented the downward spiral in terms of liquidity and funding shocks. The next up of it is where the fed follows through. As things stand now, in terms of the rally that we have seen, even in a lower quality portion of the highyield space, that does not warrant as much aggression. The action followthrough is important in maintaining the credibility of the fed. If they are announcing something, to be able to follow through on that, is important for how the markets respond in the next crisis. Yes, we think they need to follow through. Maybe not the same extent as the aggressiveness as they did with respect to the announcement, but at least a modicum of following through on the bond purchases is important. Vonnie what happens to crisis when that starts . The fed chair admitted that they barely got going on their program. Srikanth that is a fair question. , the firstt would be leg of it will be with the assets which are directly benefiting from the feds purchases. This is the playbook that we saw with respect to the ecb purchase program. To a large extent, we have already seen that. The next leg of it is the compression. Someand may have we seen of performance of cyclicals, cccs, but the price to date action would suggest there has been a strong decompression trend in terms of Higher Quality outperforming. Assuming the economy starts to reopen in a more gradual fashion , and to the extent there is reasonable followthrough on the feds purchase program, the next leg of it would be look to add more credit risk to portfolios, going down the capital structure, going down in ratings quality, and those are the shifts that we have been making in the past couple of weeks. Down inwhen you say quality, it is not like you dont have a lot to choose from. Im wondering how much more you are anticipating. It seems like there will be a lot. Srikanth that is how the markets would function normally, in the sense that it does start to price in a lot more of these downgrades and default ahead of time. We have seen that play out. Fair, our default forecast was around 10 for highyield in the loan markets. Expecting roughly 300 billion in the nearterm downgrade. That story will start to play out. The point here is, the tail credits, the market would tend to overestimate the magnitude of these default waves. If the recovery start to take hold and corporate focus more on repair phase of the cycle, and we are entering the next cycle, the default will happen. However, there will be distortion of cyclicals. With the amount coming to market, does that put em economies at a disadvantage . Been looking therefore better value before, you dont need to now. Srikanth that is fair. It cuts both ways. You want to see the supply at the current moment. There is a justification for them to issue more. Not just on the highyield side through may. That is a good sign because market activity is being established. Once you start getting out of the covidrelated shock and you get into the recovery phase, we want to see more focus on deleveraging balance sheets, from the credit. If that is the working assumption, the follow on be that there would be more opportunities by scaling in todays primary markets in the developed space, rather than looking at emerging markets. I think that would be the next leg of the normalization process , where stuff gets much more expensive within the developed market, leveraged space, because corporate are more focused on deleveraging, and that is where opportunity start opening up in emerging markets. Vonnie when you talk about yield control, at the front end, what went through your mind . Srikanth that is a question better place for my colleagues on the right side. I think there are other levers the fed can start looking at before they get into negative rates or yield curve control. ,he point im trying to make is there is a wellestablished quantitative easing playbook. If they have expanded the playbook to include copper bonds , there are more assets that the fed can start scaling into. Given the market dependency of a lot of the pain points within the cycle, that will be the first call, rather than focusing more on negative Interest Rates or yield curve control. Vonnie thank you for your time today, srikanth sankaran. Lets get a quick check on the first word news with Mark Crumpton. The Trump Administration is morning china will be held accountable for a resolution to draft a law that critics say will lead to restrictions on freedoms in hong kong. The president will hold a News Conference in the white house rose garden at 2 00 washington time, expected to announce his response. His plans could range from imposing modest sanctions to invoking the special trade status hong kong has with united states. Education secretary betsy devos is being sued, accused of illegally seizing millions of dollars in tax refunds from students who defaulted on federal loans. That despite a congressional ban on such collections during the pandemic. The suit, which also names secretary steven mnuchin, says the collections are part of the quoteadministrations botched rollout of the 2 trillion Coronavirus Relief bill. They are not give a specific date or the first phase of the citys reopening but says he expects it to be in the first two weeks of june. He says keeping the subways clean and save is the most important part of the equation. New york city is the only region in new york state still on lockdown. To lift itsnce plan remaining lockdown restrictions next week, there are a few notable exceptions. Vre, iphone tower, and palace of versailles will remain offlimits. Officials say they are working on protecting visitors and employees and how to maintain physical distancing. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Vonnie this is bloomberg markets. Im vonnie quinn. President learning trump had discussed targeting chinas Financial Sector through sanctions and trade policy in retaliation for beijings move to curb hong kongs autonomy. Joining us for the latest is our reporter. What are we expecting President Trump to say . We heard the announcement will come at 2 00 p. M. We dont know exactly what he will say but he has discussed a lot of options. Still a lot of time between when he comes out. We have heard he is discussing targeting chinas Financial Sector through sanctions and trade policy to retaliate against asians move to curb hong kongs autonomy. We are also expecting to hear something about unspecified visa restrictions on chinese travelers. Some of these ideas have been floating around, but it is alreadyf he hasnt begun to punish china in these areas, trade. What can be done in the immediate term to make this work with china . There are some narrow, targeted measures to hit the Financial Sectors, to force china to come to terms with the fact that it is reliant on hubng china as a financial or asia. Would love tos have that same leverage across the continent, and maybe that is one element that could be put under threat. Of course, the Trump Administration also have to be careful. , have heard they are concerned they dont want to put too many shockwaves into the Global Financial system through these kinds of announcements. Presumably, knows that something is coming, will be preparing a response. What can china do it President Trump goes ahead with the worstcase a new real . Saleha of course there is a lot of room for retaliation. They can do it through trade policy, tariffs, we could hear them having more toward geopolitical Foreign Policy aspects when it comes to north korea. Of course, different actions in Financial Markets that they could take through transparency, lack of transparency. There is a lot of room for escalation, unfortunately. Vonnie this News Conference will be at 2 00 in the rose garden but President Trump is facing a huge amount of pressure at home as well. Will he be able to keep the topic of conversation on china this afternoon, how does he do that . During af course, press conference, anything can come up. Minneapolis is on the minds of many americans, and that weighs into his prospects for reelection. China is a major topic that affects a lot of people in the world. But i would not be surprised to hear about minneapolis and coronavirus during the briefing. Vonnie salai how most in, thank you. Ahead, lawmakers considering a bill that would force Chinese Companies listed on u. S. Exchanges to provide the same protections as u. S. Companies. We will go to capitol hill to catch up with the man behind the effort, representative brad sherman of california. This is bloomberg. Vonnie this is bloomberg markets. Im vonnie quinn. Washington taking aim at Chinese Companies listed in the united dates with some lawmakers pushing for the delisting of those companies that dont comply with u. S. Accounting standards. Kevin cirilli is in washington now with the lawmaker behind the effort. Brad im joined by sherman of california. You have introduced Bipartisan Legislation out of the House Financial Services committee that would allow for chinese firms to have to comply with the transparency regulations that regulated and other exchanges have to abide by. Rep. Sherman i chair on the subcommittee dealing with capital markets. This had enormous support in the senate. Ive been working on this a long time, but now, politically, is the time to move it. We ought to provide protection to american investors when they are investing in an american stock exchange. This is not just about china. As it happens, belgium will also be affected by this. Kevin you say the time is now politically. Why now . Rep. Sherman elements of the close to therty Business Community just wanted business to go on as usual. The Business Community usually wants business to go on as usual. Then President Trump determined that xi had not been truthful about the covid virus, and all of a sudden, that level of Chinese Support is no longer as politically significant. Kevin President Trump is anticipated to give a press conference and one of the topics expected to come up is this u. S. Relationship with china pertaining to hong kong. This is one of the many bipartisan policies that lawmakers such as yourself have been pushing for. Thatare some other tools you think enjoyed bipartisan support to respond to china . Rep. Sherman just yesterday, we passed a bill regarding the uighurs, imposing sanctions on those chinese and entities that have one million uighurs in detention cancer right now. Yoho and i will be introducing legislation soon on hong kong. There are others working on that as well. It is amazing how many different moving elements there are. This is more of a technical matter. When you invest money in a u. S. Stock exchange, you should have the protections of the sarbanesoxley bill, which i worked on almost 20 years ago. Namely, audited financial statements, and then an audit of the auditors. It is that second step that the chinese are preventing. That is why you have some companies wildly overstate their earnings, and now it looks like there will be some criminal indictments. Kevin about honesty and transparency. Rep. Sherman and we should not have lower standards for Chinese Companies than american companies. All things being equal, i would hope american investors invest in american companies. Expect,hat can we bipartisanship, coming out of congress as it relates to hong kong . First, a clear statement, we stand with the people of hong kong. I met with the leaders there years ago. We passed many pieces of legislation to put us on the right side of history. Treatxt issue is, will we hong kong as autonomous when beijing does not treat it as autonomous, and what elements of the preferences that we have given to hong kong as opposed to china will continue to provide . Secretary pompeo saying that he does not believe hong kong can enjoy that independence given chinas actions. Do you agree with that . Rep. Sherman it is clear hong kong still has more autonomy than any other part of china, but it is clear that is being rolled back. It is a twostep process. They had the rubberstamp parliament approved it, but then the communist party has to act on it. It is clear they are locked into the idea of diminishing hong kongs autonomy, and we need to diminish the effect of that. Kevin how do you do that with u. S. Allies . Rep. Sherman a number of countries have stepped forward, particularly britain, who signed the agreement with china late last century, that turned hong kong over back to a one country, system party system. Kevin we are living in an incredibly polarized time, but this appears to be the one issue where republicans and democrats are united. Rep. Sherman there is a range opinion, probusiness elements of the probusiness wing of the Republican Party have been very reluctant on anything regarding china. There is also a tendency in democrats to simply do the opposite of whatever trump tweeted. Is, hong kong is being oppressed, the uighurs are being oppressed, investors are not and that isted, true, even if trump says it is true. Kevin congressman brad sherman of california, on the House Financial Services committee. One of the leading democrats in the hall of Congress Really shaping that u. S. China policy. Vonnie thank you. Breaking news. Amy klobuchar of minnesota has tweeted out that the officer floyd has on george been arrested and is in custody. The Police Officer has been arrested and is in custody for the murder of george floyd. This is bloomberg. Mark im Mark Crumpton with bloomberg first word news. In minnesota, Officials Say the Police Officer involved in the death of george floyd has been arrested. Sayssota Governor Tim Walz a feeling for calm after another night of violent protests in minneapolis following flow instead while in Police Custody on monday. The governor told reporters today that the Africanamerican Community has legitimate concerns. This is a community that demands and should expect more than words. They should expect results. Governor and i have tried to make equity the center of everything we have done, but obviously come in minneapolis on monday night, there was not a lot of equity for george floyd. His family is probably wondering where the one minnesota is for them. And that is on us. Mark the governor also apologize to cnn, saying he takes total responsibility for the arrest of one of networks cruise during a live report last night on the violent protests in minneapolis. Joe biden is slamming President Trump for his response to the protests, saying the president g for violence against american citizens during a moment of pain for so many. The Presumptive Democratic president ial nominee tweeted he is furious, and you should be, too. Its a symbolic victory for President Trump. Washington, d. C. Begins to reopen today, giving him a chance to demonstrate the country is getting back to normal. Washington is still one of the hot spots in the nation for the coronavirus but the city is relaxing stayathome orders because they have met the goal of a 14day decline of Community Spread of the illness. In the u. K. , people are probably abiding by the lockdown but are still worried about contracting covid19. They are also increasingly fearful of losing their jobs, according to a new study. It found 41 of adults left their homes you are than five times in a sevenday period. 14 did not leave at all. Of those that stayed home, they said fear of catching the virus was the primary factor. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Amanda live from toronto, im amanda lang. In new york, i am vonnie quinn. We are joined by our bloomberg and Bnn Bloomberg audiences. Here are the top stories we are following from around the world. Consumer spending plunges. April data shows the sharpest drop on record u. S. Consumer spending as the pandemic halted all but essential purchases. s legal setback. We hear from the companys chief from the company. And the race to develop a global vaccine and what comes after that. Amanda lets check in on the markets. We have a bit of a mixed picture out there, seeing a Little Movement higher in the nasdaq. The subgroups of the s p 500 are solidly negative. Financials and Energy Leading us lower again. We got consumer data and the news just breaking that new york plans to begin its phase one reopening on june 8. Governor cuomo say they are meeting their tests to reopen. That should inspire optimism. Energy and focus here. Occidental petroleum cutting its dividend, we should say slashing, 91 . Froming it to one penny . 11. I want you to look at the data that you just referred to in visual form. This is the april read of how the consumer is doing. Plunged 13. 5 ing in the month. But we saw incomes jumping 10 , 10. 5 . You see that divergence on the screen. Government stimulus checks go home, but they are unable to be spent. The question is how this comes together. Ofr aguilar is the senior vp equities at charles schwab. I cannot imagine of a better place to start. The question of what happens next, can we bring those data that willether determine how the economy unfolds from here. What is your view . Omar we are really at that fork in the road. The market seems to be very comfortable in these the shared recoveries talking about the equity market in general. When you look at the consumer data, whether it is Consumer Spending or consumer confidence, that points to the other side. Continuesnds to to grasp with the idea of uncertainty that is getting even higher now. If you think about reopening the economy, which in general is positive for the market and when we go ahead, it could also bring things that people are worried about. People thinking about how they will react as they go back to some of their businesses. That will provide more uncertainty regarding the Health Crisis, regarding the source of economic recovery, and will probably have to see what happens with the overall political tensions that we continue to see. That overall uncertainty will keep the market very volatile or the next few weeks. Vonnie so what should investors do . Is it time to sit out this kind of volatility, do you make your pick and stay there . Omar we always tried to recommend to investors to think about what is driving the market. Right now, it is very hard to find hard data to hold on and say, based on these economic or fundamental data, or even valuation data, this is what will happen going or work. The biggest advice that we give our customers is to think about the long run. Think about what will happen in a years time, two years time. By then, we should have obviously a different kind of environment. Try to think about what those longterm goals are. Very important, avoid market timing. It will be impossible for people what isthe bottom, or the next shoe to drop. Try to continue to rebalance the strategy to the risk profile you want, but try not to time the market on any given day. The market is being driven by sentiment. And the good news will bring a rally to the market. Any piece of bad news will drop the market. That volatility is something that we encourage investors to avoid by just focusing on the long run, risk profiles. Of course, some of those risks may be baked into a longer term macro view. The president expected to speak at 2 00, and we expect him to talk about by all accounts, the treatment of muslim minorities in china, another leg in a tension between these economies. Where would you place that on your list of items to watch . Puts a think it just little more on the uncertainty and volatility in the market. U. S. Havehina and the been at the forefront of the Health Crisis, and we still dont have a solution. Theeconomic concerns, political environment that we are going to face in this case will probably create even more tension. Anytime we see a vence liked him on that we will potentially witness this afternoon, we will in. More volatility once there is a conversation about a potential solution down the road, we will see the opposite effect. That back and forth will continue to drive more volatility in the market. Question,o answer the the Health Crisis has been at the bottom of this. Thisarted this volatility, roller coaster ride as a result of a Health Crisis that has translated into an economic recession. We need to have some sort of positive news that is solid on the Health Crisis to continue on our path of recovery. That is the underlying theme and i think will overshadow any political issues, if we end up having a positive, consistent vaccine result or more work related to the potential containment of the outbreak, that will give that confidence back to the market that eventually things will go back to normal and Economic Activity will recover. Vonnie omar aguilar, thank you so much. The race for a covid19 vaccine. We will speak with a mild technologist at Raymond James bio technologist at Raymond James. Vonnie this is bloomberg markets. I am vonnie quinn in new york. Along with amanda lang in toronto. Chinas president xi jinping upmises it the country comes with a coronavirus vaccine, it will share it with the rest of the world. Earlyould help diffuse criticism to their response to the disease. Mid may, they had five being tested. More than 2000 people were enrolled in phase two trials. China would distribute the vaccine partnered with the World Health Organization and a global nonprofit organization. It is not certain how long that would take. In 2018, chinese vaccine makers markup cutting corners and that gave the industry a bad reputation, and other countries have to agree to allow phase three testing. If the where they see vaccine keeps people free of the infection. Lets bring in somebody who knows a lot about this, dr. Steven seedhouse, biotechnologist at Raymond James. Talk to us about where the u. S. Is relative to china, and whether they are in a parallel race or separate races entirely. I would characterize it as parallel. There is clearly a lot of Development Going on around the world. There is actually quite a bit of collaboration across borders, if you will. Everything is happening so quick, if there are differences in who is first, who has made the latest move to step ahead, we are talking differences in the order of weeks or months at most. Obviously, everyone is moving at a rapid pace, the most rapid pace that has ever really been experienced in vaccine development. That brings with it its own challenges. In general, everything is forging ahead in parallel. Example, manufacturing is being done at risk. Companies, with the help of ,overnment money in some cases which would be lost in the vaccine turned out not to work, but excepting that risk, because the consequences of not having a vaccine are obviously something that we are not willing to accept. Is there a methodology that has the most promise here . There are different approaches being taken to vaccines. Is there one that you favor . Steven not particularly. Favor,u say what you vaccines are moving quickly, for the reason of how they are designed. Get overof favoring to the finish line first, i think you would have to lean on the mrna vaccines. Moderna seems to be the furthest ahead in clinic. That is just because designing the actual vaccine itself is a pretty quick proposition, only a fromr of about 40 days, determining a vaccine to getting the batches ready. Constructingand the vaccine for hundreds of millions, billions of doses come is a different proposition. Vaccines tofavoring get over the finish line, i would favor those. If the question is which would be most efficacious, that is a different proposition. I would lead to more of the traditional vaccines. In this case, we dont have a lot of data because of what i mentioned, because those are slower to move into Clinical Development and we dont have the data yet. Mrna to get over the finish line first. Unclear at this point on what is the best approach. Vonnie it is pretty unclear what we mean by a vaccine in this instance. We think about it as something that protects you for the rest of your life, but we dont know about any maxine that emanates fromccine that emanates here, no guarantee that it will protect you for life. Is some data emerging from these studies, suggesting that not all of these vaccines will make you immune to actually contracting the virus. In some cases, they may diminish or lower the severity of covid, if you were to contract it. Also, the level of effectiveness of the drug may not be 100 . It may not protect everyone that gets it. That is an interesting proposition here. Typically, in normal times, not in a global pandemic, the threshold of what you would want for a vaccine is higher than the drug. You are administering this to otherwise healthy people. The proposition is a Public Health one, not necessarily an individual help one. Health one. You are right. Look a vaccine but different than what we would typically think. I will mention one thing. I have been surprised at late of including one, that we have done among investors, how many they say would or would not get a vaccine if it was available. A little over 50 of people say they would get a vaccine if it were available today, which is lower than i would have thought. Amanda we have to leave it there. Thank you. Dr. Steve seedhouse is the biotechnologist for Raymond James. Twitter versus trump. The social media giant calls out one of the president s tweets for violating the rules. We will have the latest after this. Amanda welcome back. Huawei technologies have been causing tensions in the u. S. And china. The judicial system takes a long time. We have confidence in the judicial system in canada. As she is excited to the u. S. , we believe she will be treated fairly and exonerated in the end. Case, why notthe just come to the u. S. And make her face charges here . That is up to the individual. That is her decision. I was a prosecutor and a lawyer for a long time. I will not second guess her decision. This comes when we see fresh sanctions out of the u. S. , sourcing microchips made with u. S. Technology. Facerepared is huawei to this, how much inventory heavy buildup to face this . This is an escalation of u. S. Efforts to crush huawei. As you know, we have had an impact of about 12 billion last year because of a limitation of items. There will be an impact. Buttressing for our survival. That is what this is about. In the meantime, there is a very Significant Impact on the Semiconductor Business in the u. S. , significant loss of jobs, which is a shame. Existentialow and threat . Fromthis prevent huawei being able to do business with these carriers . This is part of several factors that is standing in the way the u. S. Government is imposing to prevent the u. S. Government from being willing to talk with us. Situation incal china, now the president ial campaign, the absence of a Strong Technology program in the u. S. U. S. F those things the needs to address and will not even talk to us about the kinds of activities we have done in the u k and in other countries around the world, to address Real Security risks. We hope to have those conversations with the u. S. Government. We hope there is not such a loss of u. S. Jobs. The expectation is these strategic, competitive concerns and tensions will continue. That is a fact of the time that we are living in right now, the dynamic between these superpowers. Try to assurei its survival, what is your strategy is markets that you still have access to . We are doing more than what we could do based on the impositions from last year. Deeper,ave to dig even prioritizing the products that are most important to our customers. We are ramping up our research and development. A are fifth in the world with 20 billion investment this year in r d. To some extent, we are trying to move forward with products that may not require these components, trying to come up with alternatives to these components, and doing research and development. It is a multipronged effort. We are not sure how big the but itwill be on huawei, will be a Significant Impact on american jobs. Keeps standing as a defense that it is independent from the Chinese Government. Then why do you feel the Chinese Government feels the need to intervene here on the side of huawei, whether it is with rhetoric or action . Lets put it this way, the recent escalations in the u. S. , i hope china does not intern escalate and block the ability to do business. If the Chinese Government was apple, to apple, what the u. S. Is doing to huawei , dont you think President Trump would be criticizing huawei and defending apple . Vonnie that was andrew purdy, huawei chief technology officer. We are minutes away from President Trumps News Conference in the rose garden. Joining us now is our reporter josh wingrove. We were not anticipating a News Conference today. What will he say . Josh we think it will be all china, some indications of measures announced, in response to the hong kong actions, but also in a way, actions around the virus. The Trump Administration talking about china covering up the virus, untruthful, slow to release information. Says that he will fire back somehow, we dont know the specific measures he will take. One thing they have been noting, has these one trade deal not really been accompanied by the agricultural practices that trump wanted. We do expect trumps response to hong kong and china, writ large, coming up at the white house. Vonnie our thanks to White House Reporter josh wingrove. Stay here on bloomberg tv. We will be covering the News Conference. From new york, i am vonnie quinn, and for amanda lang in toronto, this is bloomberg. It is 2 00 p. M. In new york, 7 00 a. M. In london. Romain when you look at the price action in the market today , we have been in a Holding Pattern for the better part of 24 hours ever since we learned that President Trump was planning on holding a news event today. In his typical cliffhanger fashion he didnt provide any details. Everyone waits. We are expecting to see trump a little bit later in the rose garden in washington, presumably to talk about a potential escalation in the u. S. Approach to china. The s p 500 still hugging that 200 Day Moving Average set at about 3001. It will be an up week despite the fact that we are down,