The markets are focusing on what jay powell said yesterday. The market is also focusing on what we are seeing across the globe. The number of infections being weighed compared to the extra Monetary Policy being put out there. Investors weighing better economic figures against the continued increase in virus cases. In other news, metals advance with copper climbing for the fourth day. Manufacturing and services in china. That adds to a bit of optimism. Lets get straight to the bloomberg first word news with leighann gerrans. China has approved Landmark National security legislation for hong kong at the end of a threeday meeting in beijing for the nations top legislative body. Representativee confirmed the vote. The u. S. Said it is suspending hong kongs special status, making it harder to export sensitive American Technology to the city. German chancellor Angela Merkel is throwing her support behind a radical Recovery Plan for europe. Packages include 750 billion euros of joint debt. Which is seen as controversial in some countries. Standing alongside french president emmanuel macron, the chancellor back to the plan, saying there wont be any new proposal. In the u. K. , Prime MinisterBoris Johnson is vowing a new deal to rebuild the economy, rejecting austerity policies from the last crisis. Instead committing to spend on infrastructure. In a major policy speech today, he is set to say that balancing the books must wait until the recovery is secure. Federal reserve chairman Jerome Powell is stressing the importance of keeping the coronavirus and check. It comes ahead of testimony before the House Financial Services committee, alongside treasury secretary Steven Mnuchin and. Powells remarks strike an optimistic tone, but he warns the path ahead for the economy is extremely uncertain. 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. This is bloomberg. Francine . Francine thank you so much. China has approved Landmark National security legislation for hong kong. The unanimous vote came at the end of a threeday meeting of the top legislative body. The u. S. Said it is the u. S. Senate is suspending hong kongs special status, making it harder to export sensitive American Technology to the city. , it iss security law said, will be intolerable. Of itis not a question being passed, it is being imposed on hong kong. One of the many parts of the joint declaration. This is in effect and attempts to end one country, two systems. It produces one country, one system. It is in breach of almost anything you want to point out, whether the international are the of civil rights agreement that hong kong should have a high degree of autonomy. It demonstrates what im saying. That at least until the last day or two, apparently the chief executive, had not actually seen it. It is absolutely crazy. That designed to ensure the hong kong freedoms, the autonomy we have regarded as being guaranteed is put on ice or got rid of in order for the chinese equivalent of the kgb to be able to run hong kong in whatever way they want. So it is bad news for hong kong. Example of whyer the Chinese Communist regime you see this as an opportunity for the communist party of china to basically establish a secret police in hong kong . Well, that is what they are doing. They have said they will establish a National Security office in hong kong. It is not going to be run by the Vincent De Paul society. Run by chinesebe security agents and what they will be wanting to do is target anybody who degrees. They havent told people in hong kong, even though they have posters all around hong kong is a great law for hong kong, they dont know the details. Will it enable them to pursue people retrospectively for the things theyve done . How would it define issues like sedition and subversion . How will it deal with peoples contacts with outside bodies . Whether they are ngos or churches, let alone journalists . These National Security provisions are outlined in article 23 of the basic law, which has not been implemented as is constitutionally required by the legislative council. For 23 years, they have failed to do that. Wouldnt you say that the beijing authorities they say because they did not pass article 23, we had to do it ourselves do you buy that argument . Not remotely. Most of the things which they talk about have actually already konglegal in the hong loft. You can go through other pieces of legislation. Treason and terrorism and sedition. Those things are already made illegal, but they are not made illegal in the way that china wants. China wants to be able to define those things in a way which runs to International Human rights law. No shortage of public law on order. How come almost 10,000 people have been arrested for demonstrating over the last few months. Hong kong has those laws. What china wants or wanted in 2003 is the sort of law that would be unacceptable in hong that is what the argument is about. Francine that was the former governor of hong kong. The worst is still to come that is the warning from the the, which says that pandemic is not even close to being over. Even as u. S. States scale back the reopening and more clusters are reported worldwide. Joining us this morning is the chief managing director thank you for joining us. What will happen to Asset Classes around the world . Will they worry about the number of infected going up or will they focus on the economic fundamentals which seem to be pointing to slightly better Economic Data . You are right to point out the huge uncertainty. The obvious fact is that uncertainty is good for markets. The fact that there is uncertainty means that they will main on their toes. It means that liquidity will remain abundant. That there is a lot of divergence between peoples expectations. It avoids the bubble where an opinion and markets become fragile. As long as the economy remains quite weak because the demand side is affected by the fear of contagion. It means that all that this liquidity that has been poured into the system, instead of leading to Consumer Price inflation, it leads to asset price inflation. I suspect that this uncertainty the answer to your question is that it is positive for markets. Francine give us a sense of what your clients want. Are they bullish . Are they bearish . Or do you have to be cautious . Didier it goes back to the previous point. There was a lot of discrepancy between the ones not just playing the momentum, the ones that are scared where this is leading. You have those very spicy stocks, which nobody at least no professional at investor had to own for the longterm in their portfolios, but these are favored by investors who want to enjoy the party. Certainly, we feel like we are not alone in this. The discrepancy between the economy which surely is going to. Ecover at best it means what you want to own is exactly what we need to fit the profile of companies that do not get hit from these very slow retail demands and at the same time do benefit from the support. Basically, it goes back to the old winners. They are the ones benefiting from the structural trends. So the shift to online retailing, the growing weight of the production of ecommerce, online gaming, green activities, and so on. Maintained, are not they are accelerated. You definitely want to put your money and and that is what client want. Overall, our policy makers coming to the end of what they can do for Asset Classes makeill that at some point a correction or will we stay where we are for a while longer. Create in thes fragility because corrections become not much stronger. , it isot as volatility actual corrections. There was ae that Tipping Point at the end of march. The central bankers really realized that the zero lower bound on nominal rates meant that there was a liquidity trap and 10 years of failing to put out push on nominal growth meant that when we got this choice. T, there was no there was a clear risk of wouldionary floors that push up real rates and financial conditions would tighten and we would get into something serious. There was no choice but to really tip over into a major macro policy revolution whereby that would change the way macro policy would be managed going forward. Not what does that mean . It is difficult to say. It is uncharted territory. Will the markets start to price a different inflation outlook . It is uncertainty going forward. Francine thank you so much. Didier saintgeorges there. Coming up, the conversation with Standard Life aberdeen chairman Douglas Flint after the chief executive says he will step down. That is coming up next. This is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Im Francine Lacqua in london. Douglas flint is leaving Standard Life aberdeen after helping to merge Standard Life and aberdeen management. Stephen byrd will take over as chief executive officer likely by the end of the third quarter. Joining us now, we are delighted to be joined by Douglas Flint, the ceo of Standard Life aberdeen. Thank you for giving us your time. Does your company need a radical new strategy to stop investor outflows . Douglas i thing our strategy is very clear. It is one the board supports and it is all about execution. I think keith has done a fantastic job. Job have done a fantastic to create future growth. Great complementary in terms of product size. Basically an evolution into the next phase to build on that platform to build on the opportunities we can see. The chiefwhy was executive change necessary at this time . What will mr. Burda bring that keith skeoch didnt . Douglas he is different. It is a benchmark in his own mind to what he wants to do next. We are coming up to three years on the combination of Standard Life and aberdeen. We are also coming out of a very difficult period of coronavirus and the way we have been working over this period, which keith has led fantastically. As we enter into whatever the postcovid period looks like, there will be a huge amount of adjustment in practices across every business and industry, including our own. To have a settled succession going into that to see it the whole way through, i think of the board thought it was a positive opportunity to take. s background, a very long career in citi, in leading a consumer business, in leading a wealth business for over 10 years. The kind of business that we distributed through. He has an Awesome Technology background. He has an obsession with customer service, customer experience, Customer Value and the digitalization of that. These are all going to be aspects that i think are going to be very important for us and indeed for our industry and therefore he brings a different into the business at a time when those skills i think are very important. Francine does it mean that you could be on the lookout for more, and day . Would you more m a . Douglas far too early to say. We have a very established platform, which i think is a great opportunity. We will let stephen reflect on what he has god, which i think you will find very attractive and a very strong balance sheet. Got priorities. We invest in our businesses. If there are small acquisitions that make sense, we will look at them. Who knows what will happen in the next period . The most important thing is to build on the very strong platform that keith and keith and martin when they were coceos have built. Francine do you think it was time for a change in the chief executive . Duathlon did you ask keith skeoch to step down . Douglas no, it was something we have been working on to for some time. It was a Natural Evolution as we are coming to the third anniversary of the coming together, to the fifth anniversary of his appointment. He has been on the board for 15 years. And as we had the opportunity to recruit a firstclass, seasoned, wellestablished Financial Services later, who is very excited about the opportunities that Standard Life aberdeen offer. So all of these things came together at the same time. As i said, the importance of having an established position as we go into the next phase of the evolution of our development, but also in the postcovid world was a very important thing to reflect on. No, we are delighted. This has been a cooperative succession between keith and the board. And we are very delighted where it ended up. Francine douglas, what do you think the postcovid world will look like for Asset Managers . Will it be very diverse . Douglas i think it is accelerating changes that were underway. As the savings world and the investment world becomes more democratized by virtue of the fact that there is less corporate provision, it is people having to take more responsibility for their affairs i think the Asset Management world takes on a new role. I think technology will be increasingly important. The coronavirus experience has reinforced and everybody, whether it is personal, corporate, or indeed government, building more resilience into your Financial Affairs. Having the capacity to absorb shocks is ever more important. I hope that is the message both through Public Policy regulation and our industry we can reinforce to help people build the kind of Financial Stability that they need to deal with their natural lifestyle events like retirement and so on, but also to do with having the resilience that is necessary for the kind of shock that we just had. Hopefully we dont have another one that is as severe as this, but people need more resilience in their personal Financial Affairs and that is something we are going to be focused on. Francine Douglas Flint, thank you so much for joining us. He is the chairman of Standard Life aberdeen. Coming up, we have an exclusive conversation with the barclays executive. This is bloomberg. W . W . Uhiono francine economics, finance, politics. Its good to the first word news with leighann gerrans. Leighann leighann the worst of the coronavirus pandemic is yet to come, the message from the world health organization, citing a lack of global solidarity, a number of u. S. States took steps to scale back reopening plans. In arizona and new journeys a, they are halting plans. Los angeles county has recorded its high list daily total of new cases. That all countries will face in the coming months is how to live with this virus. That is the new normal. We all want to get on with her but the hard reality is, this is not even close to being over. Leighann china has reproved Landmark National security has approved Landmark National security measures for hong kong. Hong kongs sold representative confirmed the vote. The u. S. Said it is suspending hong kongs special status, making it harder to export sensitive American Technology to the city. German chancellor Angela Merkel is throwing support behind a radical Recovery Plan for europe. The packages include 750 billion euros of joint debt, which has been controversial in some countries. Standing alongside french president macron, the chancellor back to the plan, saying there wont be any new proposal. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in this isn 120 countries, bloomberg. Im leighann gerrans. Francine major boost to Infrastructure Spending today. The Prime Minister will say balancing the books can wait until recovery is secured. In a speech later, he is expected to announce the acceleration of 5 billion pounds of investment for roads, schools, and hospitals. Joining us these the founding mpc member of the bank of england. Deeann julius, thank you so much for joining us. If you look at the number of money that Boris Johnson is spending with the economy, will it be enough . A lot people say if you are going to make a recovery that is secure dealing with gregs it, you just need a lot more spent . We will see. It seems to me it is absently appropriate to start to focus on the Building Back phase rather than the closing down phase of the economy. But in terms of the numbers, you can only spend efficiently a certain amount, particularly if it is building and construction. I think it is welcome that he is shifting his focus. One really doesnt know at this stage whether that is going to be enough because we dont really know what the pace of the Building Back come of the recovery is likely to look like, particular given the uncertainties around the virus. Ofncine if you look at some the concerns out there for the economy, are you worried about inflation at the end of this . Are you worried about an economy that will be difficult have trade deals with other countries . What is your more immediate and longterm concerns for the u. K. Economy . Deaanne i think the very immediate concern is how the bank of england and my colleagues on the monetary are likely toee see it. Targeting the you inflation the inflation rate as measured by the cpi, and what we are seeing in that measurement is it is no longer actually measuring apples with apples because the number of things that are in that Market Basket that compose the Consumer Price index has been unavailable. Airplane flights or restaurant meals. So when we have is a very volatile metric that we need to look at to target inflation. I dont think inflation is going to be a big problem in the next year because there is likely to be low inflation and even a deflationary situation. What i worry about is if there is too much focus on that point target, we may see a volatile Monetary Policy, which itself can destabilize the economy. So i would suggest what the bank should do is to broaden its bands, its guard wales around that its guardrails around too cpi 4 , and not to be fixated and for the media not to the inflation as rate comes out significantly below 2 . Francine we are seeing this twopronged attack, which you could argue is much better than in other countries with the interbank with the Central Banks doing a lot regarding treasuries. It is definitely a concern. The fact is if you look at the absolute numbers, the amount of additional qe at the bank has put into the market is very close to the amount of Additional Debt that the government needs to borrow. There is indeed close coordination between fiscal and Monetary Policy, and i think the danger is that the credit worthiness of the u. K. Economy has come into question. If there is a view that this is indeed money creation. So what we need is to make certain that the independence of the bank of england and the stick tof the bank to it regardless of the government, and to prevent any sort of run on the pound as the qe gets larger and order and larger in this economy. You see the bank of england going into negative rates . Governor has said that they are putting under active consideration. I think it is probably pretty unlikely that the bank of england will choose negative rates. It seems to me that the evidence that negative rates work in terms of hitting an inflation target is very poor. It didnt work in sweden, it hasnt worked in japan. And the downside of negative rates, in my view, certainly outweigh the upside. It is very difficult for the banking sector, the Financial Markets to operate with negative rates unless you counteract that with a type of special Interest Rate for excess reserves, which is what the ecb has done. It is difficult for households and businesses to actually get their heads around negative rates. Not somethingy that should be combined with heavy qe if one wants to protect the exchange rate. So i think all these considerations will come into play when the bank considers whether it needs to do anything further, either on Interest Rates were on qe. One way to think about the big cut in Interest Rates that the bank made just in the first week when Andrew Bailey was governor, he recognized the issues in the bond market, and the Monetary Policy committee cut rates down as close to zero as you could get and still remain positive. Probably trying to preempt further pressure for further cuts. So i think that could well be regarded as a bit of a line in the sand. It is never right to exclude completely on negative rates. Yield curve control, to do everything negative rates we do in the shortterm, can they do much more without going into negative rates . Deaanne they could. They could certainly go into yield curve control. I dont think they need to, though. The evidence so far in the markets is that there is quite a demand for the kind of Interest Rates that they have right now. Guiltk the three year sold for the three year guilt sold for negative rates. The time to worry about that is if the economy flat lines and doesnt come out of this period in a sensible shape. I dont think that there is much evidence of that yet. The furlough measures has they come off, we will see what that does to employment and to consumer demand. Conference measures are looking better. If anything, there is too much exuberance to get back on the beaches and get back to work. It is pretty unlikely that there is going to be a need for yield curve control in this country. Thank you so much for joining us. Coming up on bloomberg surveillance, a conversation with jes staley at 11 00 a. M. London time. This is bloomberg. Francine this is bloomberg surveillance. I with the Current Crisis impact Sustainable Investing . My next guest says the coronavirus is providing a tragic get timely reminder of our responsibilities. He says nature and society can only remain in balance for so long before the pendulum swings back. Dudes change avid attitudes towards investing in 2021 . Fred kooij. Ow is we also had a conversation with larry fink on sustainability early last week, and the transport sustainability is increasing during the pandemic. Will the transit stay . Fred i think they have to. Impact investment focuses on those positive change agents. It does much more than just building on esg. Because it focuses on what a company does. I dont think we can avoid that the world is changing very rapidly. There is a world of information where corporations cannot hide, and employees and investors and consumers are Holding Companies to significantly higher bars of behavior and conduct. And as has been tragic timely reminder that this is a trend that is no longer isething to be ignored and very much here to stay. There is a lot that the mainstream markets need to started not nudging acknowledging about the investing approach. Francine what do you put in your ideal portfolio . What are the things that you want to own at the moment . One impact isthe that you have a limited choice of investments. Even though all through the list of industrial segments you can find businesses which are focusing in on changemakers that have a staying ability that have sustainability and what they are doing. I think that the businesses which we invest in, they simply have the ability to benefit from this virtual circle of gaining market share because they have this competitive nudging bedded. Specifically the energies transition, housing and health, energy efficiency, it is all industries which had the perfect balance, resilience, and regeneration embedded into what theyre doing. Performed extremely well relatively so far this year, and we are optimistic that they can continue to do so because certainly in this investment world, with the shortterm data points, it is hard to put too much reliance on. It is critical to the becauseerm, and for us we are thematically invested in sustainability. That somehow is easier for us to kind of keep our eye on the ball. Iine is there a danger dont know is there a danger that because of covid19 and some of the crisis going on that less companies will be what they areout investing in . What do you need to make your life easier . Is it common data across the board so that this company is reporting this, but i can compare it to this to see what is more sustainable . Fred data is a doubleedged sword. There is a risk that too much money goes into datadriven type investments, thinking first example of sustainable etfs they may not necessarily do what you think they are going to do. Saysmay not feel what it i think that more transparency is required. But it is very hard to imagine that we are going to be working in a world with less transparency. We see what is happening with the various movements this year. The first half of 2020 has just been extorted. Clearly covid, but before that we have australian bushfires. And of course black lives matter. These are all symptomatic of the discomfort with the status quo, and corporations have to react to that. Transparency is only going to increase. Is it businesses accelerating the trend, or is it business is changing course because everything we are seeing so far . Fred good question. Ideally, as this is that we have identified for our clients, the ones that dont need to change course because theyve already been dissuaded from the culture within their business yeah, you could see for example in the last month or so, we have seen nature Oil Companies have emissions targets, some advertisers having to boycott because of hate speech, we see Board Members resigning to promote more racial diversity. We are seeing changes of behavior, and ultimately we think that is welcome from a normative perspective. But the key thing for us really is there is a narrative here. If you are embracing this kind longvesting, you are going this zeitgeist come along with what employees are focusing on and with what consumers care about, and the big one here is policy. We are getting a massive tailwind from policy. Look at the recovery fund. It is almost like a cheat sheet of where you want to be exposed in the next five or 10 years. Francine thank you so much. This is what we are also looking at. Hong kong, left, right, and center this morning. Carrie lam is delivering a video speech at the United Nations human rights council. The freedom of overwhelmingly response this is in to new security laws. There were questions about how china would interpret these laws and define them, especially when they talk about treason. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Lets take a look at what to watch out for today on the economics front. The brick and i was forecast headline inflation will accelerate a touch to 0. 3 yearoveryear in june. After hour later, watch out for First Quarter gdp from south africa. Speaking on covid19 and the outlook for the rest of the year. P. M. ,s scheduled for 9 00 that for 9 00 a. M. And jay powell will testify in congress. China has approved a Landmark National security law for hong kong. The move is a sweeping attempt to quell dissent in the city and threaten hong kongs appeal as a financial help. Lets get to karen leigh come who joins us on the phone from hong kong. What is the current status of the National Security law in hong kong. What do we know so far . Karen china Just Announced a briefing to borrow test tomorrow on the law. Where we might get more details than whether it will be retroactive. All of this comes after carrie lam held her Weekly Briefing here today, just after chinas legislative body was reported to have approved that law. And what residents are worried will change the shape of the city as we know it. Aboutng what this means the one country, two system. And the reputation as a safe place for business to exist. Francine how might the approval of the law impact the protests we have seen in hong kong . Karen officers and activists are recounting of it today, and joshua wong stepped back from the party he helped found. Timing of the approval is interesting for people here. It is coming one day before the anniversary of the citys hand over to china in 1997, and this is a day that is typically marked by mass protests. There was a march to market last year that brought out 500,000 people. The organizer has been denied approval to hold a rally this lastminuteeking a appeal. Some people are saying they will come out regardless of how that turns out, and we will look to see if they get arrested or what the reaction is from authorities and police tomorrow. Francine what is the impact of the moves announced by the u. S. . Karen the u. S. Has said it would move to strip some of the trading privileges that distinguish hong kong. There is concern about the transfer of key technology. The Commerce Department looking to and whether that is the beginning of more action by the u. S. , we dont know. We have been watching closely to see what it does now, especially once details of what exactly it will entail. When we get approval that it has sorry, when we get confirmation that it has formerly been approved. And the u. K. Has also been critical. The former u. S. Secretary has said this is a great step. We will be watching closely in the next week. On howe the concern is the law is interpreted, so we will have more from karen leigh throughout the day. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. Dont miss our conversation with the barclays chief executive, jes staley, in about an hour from now. The markets are focusing on hong kong, also focusing on what is going on around the world with covid19. So the markets and this is kinda the dichotomy they have this is kindh of the dichotomy they have had to deal with. They are looking at these continued increasing virus cases. They are looking at the dollar strengthening, treasuries pretty much steady. Metals i wanted to show you copper because that is a way of looking at it differently. China reported these improving purchasing manager indices for both manufacturing and services, adding to optimism that stronger than forecast, with pending home sale figures yesterday. 20 more on the markets and plenty more on hong kong. This is bloomberg. This is bloomberg. Francine jay powell calls the u. S. Economic outlook extraordinarily uncertain due to the pandemic. He cites the need to keep the virus in check. The w. H. O. Warns the worst could be yet to come. Beijing approves a controversial security law for hong kong. The u. S. Commerce Department Suspends regulations allowing special treatment for the financial hub. And Boris Johnsons new deal. The u. K. Prime minister will commit to spending on infrastructure to rebuild the economy and a major policy speech today. Good morning, everyone. This is bloomberg surveillance. Im Francine Lacqua, here in london. Tom keene is in new york. We have some inflation data. This is important for the euro expected,ty much as from 0. 3 . And weto the first half, go into the data that we see on wednesday. A shortened wee t