Unemployed in america is truly unimaginable. I cannot emphasize enough, francine, in the last six hours, the rhetoric between washington beijing. It is extraordinary, going back to 1972 with president nixon and china. Francine lets get to first word news in new york city with ritika gupta. Ritika good morning. The white house is rebuking chinas military and economic policies in a report to congress. Themberg obtained a copy of report before its release. It falls china for u. S. Human rights it falls china for human rights abuses among other things. Resident trump stepped up his rhetoric against china on the coronavirus, suggesting xi jinping is behind a propaganda attack against the u. S. And europe. The Senate Passed legislation that could result in China Companies being delisted from stock exchanges. Republican senator john kennedy says he wants china to play by those rules. Votedin, lawmakers have to extend a state of emergency for another two weeks. They backed by minister Pedro Sanchezs plans for a national lockdown. Been 20,000 deaths from the coronavirus in spain, the secondmost in europe. Mortgages6 million were delinquent last month, almost doubling the total number. A federal Relief Program allows borrowers impacted by the coronavirus an additional six month payment deferral without penalty. About 4. 7 million borrowers are now in forbearance. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, ritika gupta. This is bloomberg. Francine . Tom . Tom thanks so much. Equities, bonds, currencies, commodities. How much is one item today in relatively quiet markets . It has to do with francine lacquas ability to spend money in europe. It is of course eurosterling. I noticed the trend of weaker sterling, stronger euro over the last number of days. It is not a breakout but it is situation for europe is busters up against the euro breakout. Francine i would actually fold into that the fact that for the first time we had some and encouraging i dont say good news but i say encouraging news out of euro area economic data. Drawems to have started to its way out of the steepest downturn because if you look at some of the pmi figures, certainly from may, services and manufacturing, they were terrible numbers but they were better than expected. Some people taking it as a positive today. European stocks still uncertain. With this ratcheting up of the tension between the u. S. Of tension between u. S. And china. It is not the goal that i wanted. I was looking at another type of gold. Tom you will take whichever gold you can get. Francine lets get straight to jeremy stretch,s see idc head of fx strategy. Were talking about the u. S. China trade relationship, and i dont know if this will have a scarring on the economy. Expect a would not significant the escalation. I was listening to your preamble, and you asked if these trade tensions will go all the way to the election. There is going to be a situation where the person no doubt will continue to rail against china, needing an opponent to rail against and the pressure points in terms of Economic Performance in the u. S. I would not expect a deescalation, but i think the mark critz the markets are somewhat sanguine against the backdrop here. Tom was mentioning about the rapid deterioration in terms of trade. If you look at equity futures, they are not trading substantially lower, risk is off, but we are not seeing absolute capitulations. Markets are reasonably sanguine about the rhetoric, but i would not expect a deescalation either. Francine what does it mean for currencies . Dollar, inis impact an already uncertain time for the World Economy . Jeremy of course, we have seen the environment of late where generally when we have a better risk tone than markets that do look for those correlated to risk and will be better placed to do with the recovery process. Conversely, when we see risk back on the defensive, we see the dollar and the dollar indices performing better. The question is, do you think we are back into a riskoff environment as we move into the middle part of the year, or are we going to be looking beyond these trade tensions and look for signs of cover . We are a long way away from any green sheets in terms of those euros on pmis. They are bouncing off what is essentially a very low base, and of course if you set the bow lauren the bar low enough, it is easy enough to step over it. Be improvements particularly with the service to levelsoing back that were closer to march at the first stage of the crisis. That is relatively positive, and fends off the risk time amex the risk dynamics. Them perform a little better into the end of the quarter. Tom jeremy, given pernicious disinflation, and even the discussion of outright goods inlation, and a rollover Service Sector disinflation dare i say true deflation in switzerland and other parts of europe, what do currencies do . What does the swiss franc do given this massive disinflationary trend . Of course the s p are mindful of the disinflation or deflationary trends with the over competitiveness of the snb areanc the mindful of the disinflationary or deflationary trends with the over competitiveness of the swiss franc in the european market. It is still the case that markets are, i think, of the opinion that many Central Banks will look at these Inflation Numbers in the current environment and say they are specific oneoff factors that are in play. It is the medium run prospects that we are mindful over the two to threeyear time horizons, and we have not seen an absolute capitulation yet. It is very much a case of nearterm weakness, but we are not seeing a material impact. There is a little bit of latitude to be able to not has severally react too aggressively do not necessarily react too aggressively. Hour, mervynext king will join us for an extensive cong conversation. Setting up our conversation with mervyn king, he is always opinionated, always controversial. Explain to us, from where you said, the path the king, to carney, now to bailey. How are these three individuals different . Jeremy well, i think and i dont know lord king personally, but he is a very cerebral Central Bank Governor who was looking very much at the broader perspective in terms of sort of a longterm view from an academic standpoint. Mr. Carney was much more market orientated and in tune with what is happening with the daily market actions. I know that from some of my discussions with officials of the central bank. Mr. Bailey i think is going to be an interesting one because he has not necessarily had direct interaction in terms of the Monetary Policy perspective until now, until he has become governor, and he is not necessarily a pure economics phd in the way that his predecessors were either. He will have a slightly different bias, and i think it is interesting in terms of he commented on yesterday, a change in stance forecast onkground negative rates, which got the market quite excited. He has been prudent in that all central bankers should keep their they should not want to death they should not want to close off options. And carney from king in terms of their interpretation of the primary operation of policy i think mr. Bailey is going to be different because he is coming in as a participant who had active participation in Monetary Policy processes Francine Francine until now leading the bank. Policy processes until now leading the bank. Francine jeremy, what does this do to the pound . Jeremy we started to see some degree of pricing with negative rates, and i am not somebody who think there will be a rush from the bank of england to consider negative rates. In also reason is, i think the evidence in terms of the success or the efficacy of the process i think is debatable at best. It as i say, i think it is prudent for the bank to leave it out there. Perhaps it will be prudent to. Eave it there as rhetoric i think from a sterling perspective, there are inherent macro headwinds that are going to be relevant. We have seen the flash pmi in the u. S. And in the euro zone. The Service Sector is still very much underwater, or certainly below the like bills we were seeing in the first stages the levels that we were seeing in the first stages of the lockdown. I think that the prospect of a contractioncorrect, in terms of gdp as well as the rising brexit uncertainty play from a negative bias in terms of sterling. I think we could easily see that extended up toward 92 quite quickly. I would not be surprised if we saw the sterling squeezed out at the beginning of this week, but we could see it trading sub 120. Francine jeremy stretch of cibc stays with us. In the next hour, lord mervyn king. The former bank of england governor. We will talk with him about negative rates and deflationary pressures. That is coming up in about 45 minutes from now. This is bloomberg. We are not ruling it out, and now is the right time. Also ay, we will tom the governor of the bank of england. With us, jeremy stretch, from cibc markets. Looking at Monetary Policy this thursday and how it links in with all we do. Jeremy, we were talking in the last block about the subtle shift that someone can signal when taking over as the leader of the central bank. Governor bailey has been handed negative rates. What does he do with that . Do the markets tell him what to do . How does he tactically respond to negative rates . Well, it is interesting. As you say, somebody who arrives in a new role has an opportunity to look at the remit and the of parameters, and innocencio make sense for governor bailey to do that. Came inse, whilst he suggesting that he agree with previous assumption, he is now opening the door to reassess that option. That is not to say he wont come to the conclusion that in fact the effective lower bound is just about zero because there are some challenges that will need to be faced in terms of the Financial Sector if there were to be a move toward negative rates, but clearly markets will continue to try and press in that direction. Or at least will continue to press in that direction as long as the data remains challenging and as long as the market is concerned that the impact and the ravages of the covid crisis are not showing any signs of interiorly easing. And the difficulty from the u. K. s perspective is that while the continent of europe is starting to emerge slowly but surely from the lockdown process, the u. K. Was both slower into the crisis in terms of the peak of cases, but also slower on the way out. I think that is one of the factors which will be leaving the market pressing mr. Bailey to keep that negative rates story under consideration. Banking does commercial respond to this . What have we learned in Continental Europe about given Bank Response to these tendencies . Of course from a commercial bank perspective, it depends on one of the others around that because there are a number of exemptions in terms of various deposits which have alleviated some of the full effects of negative rates. And of course there will be structural rigidity in terms of bonds in the system that are not set up for that negative rates spectrum. I think talking about negative rates could actually be almost as effective as putting them into place because you have opened the possibility that those negative rates could come into play at some stage. It reminds the market that there could be a penalty to be paid for hoarding deposits. And there is a necessity or a compulsion to try and encourage people to spend, both at the consumer and corporate level. The threat of action may be as effective, and certainly the evidence in terms of the effectiveness of negative rates i think is compelling. It may be that the threat of negative rates could be more beneficial and more directional in terms of having an effect than actually the policy itself. At some i am looking data. First of all, the cost of the lockdown stimulus definitely dwarfs the 2009 financial crisis. When you look at a lot of the debt generated out there, how will it move currencies looking at currency pairings, what do you look at as attractive right now . Jeremy somebody who asked me earlier in the week about the state of the u. K. Deficit, talking about borrowing numbers and in excess of 300 billion sterling, look at 55 billion as a deficit target shows the scale of the fiscal capitulation. Talking about may a budget deficit of 15 to 17 gdp. But the u. K. Is not having a budget blowout in isolation, and that is the point to remember. Even in the context of discussion of what that might mean for rating agencies for sovereigns because we are not talking about isolation buyers, it may well be the case that that doesnt necessarily have a direct cause of impact. I think for those that have the wherewithal to have significant fiscal injections without causing significant stress in terms of thomistic treasuries, then there can be some of domestic treasuries, that there can be some scope norway is interesting because norway went into the crisis having a budget surface of on average of 7 the last five or six years. Was positive. Even though we have seen significant spansion because of the size of the Sovereign Wealth Fund and the potential repatriation flows that we have provides an obvious thee for countries like norwegian krone to perform well. Francine thank you so much for all of the insight. Stretch, of cibc. The world bank chief economist, a conversation a negative rates. Much more also on this debt created out there. That conversation 8 30 a. M. In new york, 1 30 p. M. In london. This is bloomberg. Ritika this is bloomberg surveillance. Lets get to the Bloomberg Business flash. The u. S. Has Given Astrazeneca more than a Million Dollars to develop a Coronavirus Vaccine on the university of oxford. British drug maker hopes to have dosage ready as soon as september. The u. S. Is also given money to sanofi to develop a vaccine. Generic drug maker acorn has filed for bankruptcy. Controversy about its Quality Control methods. It also has reach an agreement that is your Bloomberg Business flash. Tom . Francine . Francine thank you so much. This is what i am looking at when it comes to your markets. First of all, stocks in europe, but also futures in the u. S. Are pointing lower. It has to do with the chineseamerican ties, about this trade that has actually deteriorated, or the rhetoric is getting more aggressive. It is definitely catching a cloud over the recent rally that tom,d with treasuries, aligning with the dollar. Tom the euro stronger against sterling. Coming up, Wolfgang Munchau really been looking forward to this wolfgang much out on the future of germany. Please stay with us. This is bloomberg. Francine this is bloomberg surveillance, tom and francine from new york. Another lengthy conversation on negative rates. Ratesl be talking about and what it would mean for banks if the u. K. Were to go there. Europe,about the u. K. , wolfgang, thank you for joining. I have like, 25 questions i need to ask you about euro area. Do we know how brexit is going . Moment, they are treating barb wires on both sides. We have a deal at the end . Wolfgang it is possible but you especially from the noise because whether or not you get it you will be at the position where we are now. Negotiatorshe indicated where they are willing to compromise. We are seeing u. K. Is ready to compromise. E. U. Is probably going to compromise on the level Playing Field. To eunot sustain demand regulation after brexit. That is a demand too far. U. K. S a case, to ask the to respect the level of regulation, the level Playing Field at the point of departure. There is compromise on both sides. In the end, it is a political decision for johnson and the council to decide whether they have enough or whether they want to walk. We cannot deduce, from what we know, what the outcome will be. Howcine the handling and itnson dealt with covid19, makes facetoface meetings much harder. Brexit gets sure done in time . Wolfgang there is a case for him to accelerate the process. It would not be in his interest to delay. One advantage he would have with a hard brexit would be the Economic Cost would be hidden by the covid crisis. No one would be able to disentangle it. For most people, it would not be a real number. Runs a good way to hit and if you want to go ahead with it. That tilts the Playing Field slightly in favor of a harder brexit. Last time, he needed a deal. He would have been in trouble if he did not get a deal in october. Now, it is different. Tom wolfgang, good morning from new york. One of your great expertises, and i say this with Great Respect for the european experiment, i see you and many others, about the germanness of the moment. The airline is going bust. Robes,standing up in red galvanizing the nation. Tell me the linkage now between the german ethos, the people and the elites. Are they remotely on the same page . Wolfgang at the moment there is a disconnect. You can see this in an opinion poll by the German Government; trying to clamp on investors in china but others are prochina, interesting development. You see this in the ruling by usingnstitutional court, very old arguments about national sovereignty. We have to see how the handling is going down in the public, which has not resonated yet. Germany have a good crisis response. It have less covid infections than other countries. Impact on industrial germany will be one of the worst in the eu and the big dramas are yet to come. Tom is there a point, and folks, we should mention, wolfgang, one of the great experiments of journalism, ft deutschland, is there a point where the german people do they rebel . I dont understand the protest mechanism in germany like i maybe understand it in france or the u. K. Or america. Today protest . Do they protest . Wolfgang no, it is more hidden. 2000s, the politics of reform, it happened when middleclass, the children of middleclass people became unemployed. The pressure rose o