Transcripts For BLOOMBERG Bloomberg Markets Americas 2024071

Down more than 1 earlier on. We have a weakening offshore yuan, which is notable, because it had been strengthening. Brands, the best performer, surprisingly in the s p 500. It is closing 23 of victorias secret stores. Automobiles doing well today. Lets get a deeper dive into todays market action. Standing by we have taylor riggs. Taylor mostly risk off tone, bonds catching a bid. Gold is slightly weaker, but yesterday was higher. You also have the south african relative to aning weaker dollar, after the Central Bank Cut its key rate less than most. Also playing is crude, up for six straight sessions. You are seeing some of this go back to fundamentals. Prices had gotten so low, demand is starting to come back. Continuing to trade above 33 a barrel or the second straight session. It is the highest now going back to march 11, before the lockout started. Taking a look at the individual stocks, you mentioned l brands. They will try to split up victorias secret and that embody works. Bath and body works. They are seeing lots of demand for some of their current 80s. Companies. Buy saying that stimulus checks from the government have helped, as well as the nintendo switch, as everyone is rushing out to buy videogames. Hormel foods, down 3. 5 . Also coming out and saying there is some uncertainty around some of their plant operations, so all of that is weighing on that stock. Vonnie thank you, taylor. We want to bring you headlines from richard clarida, taking part in an online discussion. He says the federal act forcefully and proactively, drop being the disinflationary, not inflationary, and that fiscal support could be called for. More fiscal and monetary support. Acquisition by private Equity Firm Advent faced delays this week, leading investors to wonder what is next for the software provider. One hedge fund predicted troubles ahead and benefited. Ben axler joins us now. Take us through where you got the idea for this short position, and how it worked out. Ben thank you for having me on. We wanted to look at deals that were struck prepandemic that potentially aggressive or high valuations. Company in to this the cybersecurity space. They had agreed to be acquired by advent 433 a share. Transaction,the proxy statements that were disclosed, background to the transaction, it became evident that some forwardlooking guidance may not have ventured with prospective buyers, and management did not disclose q1 2020 guidance that looked worse than what the street projected. Subsequently, last week, when the company put out their guidance, it was even worse than anyone expected. That gave us some real concern that the transaction could be delayed. We felt the market was ascribing too low a probability that a deal could break. We thought it was a good risk reward to be short the stock. Subsequently we have seen the transaction be put on hold by some litigation, disputes between the parties about the Underlying Health of the business. We are still negative on the company, think they have some fundamental challenges. Still a lack of clarity around the outlook of the company. They are burning cash. Advent believes they could be insolvent even post closing the transaction. So you still have a position. Have you talked to that event since the losses . Ben they have not been making comment. We wrote a public letter to them suggesting to them that we thought the valuation they ascribe to the business was too high, outlining some of our concerns about our findings and believes that forescout was on shaky ground. It was our believe that they likely read the letter, took our suggestions by notifying the company friday that they would not be proceeding with the transaction. From our perspective, we achieved our result by getting our communication across to , then listening to our concerns and backing off of the transaction. Vonnie both of them did say that they were discussing an alternative scenario. What might that be then . Ben i think there is some hope in this alternative scenario that there will be a lower price point reached. Ascribed overe five times revenue multiple to the business, that was on rosy projections. Our belief is a businesslike forescout should be valued at more like 2. 5, three times revenues at best. If you look at the recent quarter and make some projections on run rate revenue, we can still see the stock in the teens. With the litigation being commenced, there is hope for an amicable resolution, but it looks like the resolution situation has turned into an adversarial situation. That is why we still think there is high risk that no deal progresses. Bidder there was another or two before all of this. Any chance they could come back . Ben always a possibility. There was not much color provided on those two prospective buyers. Probably unlikely for anyone to step in between now and when the dropdead date, transaction occurs. Also a question of the ability to get financing for the acquisition of forescout. In the prior transaction, 400 million of debt required by advent to contemplate the deal. Our concern with forescout was that they were losing money come historically have been a cash flow. Lendppetite for lenders to against a declining business is an open letter. Vonnie what does this all mean for advent . Does it hurt their reputation to walk away from a deal like this . Ben i think its strength things their reputation. To the extent they feel the business has had a material adverse effect, some of these challenges were not fully disclosed to them, they have every right to assert their and enforce any legal rights they have. We have seen other private Equity Companies step away from prospective targets, trying to negotiate, use legal tactics. I dont view that as negatively. Vonnie broadly on short selling, how much activity are we likely to see in this landscape . Is there appetite for it, what sectors would you be looking at . I think one has to take a broad view of what is going on in the economy. Obviously, we are in a period of heightened uncertainty, unprecedented in various parts of the economy. Movingbal landscape under different restrictions, dealing with the pandemic at different time frames. Certainly, we would expect reduced mna, private equity activity. We also think there is a huge disconnect between the underlining economy, particularly here in the u. S. , and what the Public Markets are signaling. Valuations, we think, are frothy in a number of areas. Conditions, we would expect to be in a period of repressed mna activity. Vonnie anymore kind of deals that you think may break . Ben i dont want to comment specifically on anything that we are looking at. Suffice it to say we are looking at other deals that were whounced prior to the announcing the pandemic in march. Certainly, we expect a higher percentage of deals to break an historically, but we dont want to comment on any specifics we are involved in at the moment. Vonnie understood. Thank you for being here, ben axler. Lets get a check on the first word news with mark crumpton. Mark more than 76 million American Adults did not get medical care they needed for conditions related to covid19 in the past month. Thats according to new data from the u. S. Census. The estimate from the survey also found high rates of Mental Health problems. About 116 million americans reported feelings of being down, depressed, or hopeless. More than 40 of the population reported symptoms of anxiety. This will not be a typical Holiday Weekend at the nations airports. The tsa is changing its screening process to limit physical contact and increased distance between people as much as possible. It has seen a steady growth of travelers coming through airport checkpoints over the past couple weeks. The United States has delivered 50 ventilators to russia as part of a 5. 6 million humanitarian donation to help the country cope with pandemic. The u. S. Embassy says another 150 will arrive next week. Russia has reported more than 317,000 Coronavirus Infections and more than 3000 deaths. Russia sent a planeload of medical supplies including ventilators to the United States last month. Boris johnson will not face criminal investigations into his relationship with an american entrepreneur, according to an independent panel, which just finished the review. The allegations stem from his time as the mayor of london. 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 the world awaits a coronavirus medical breakthrough. We spoke with a Johns Hopkins official about the outlook. There are many glimmers of hope and i want the audience to know that we see hope on the horizon. The appearance of a calling of the virus in certain locales, certainly in baltimore where i am, other areas where you are seeing a flattening of the curve, but by no means does that mean we can roll back our active participation in the social distancing measures when we are out and about. I look at rolling back the social participation. The fact is, we see social participation. Get away with this, with the distances between us, 6, 12 feet, whatever the number is, or do we have to stay locked down . There is a huge push back. I think the population is exhibiting the exact same disillusionment we anticipate. In the beginning of any pandemic, there is great science around this, we see the heroic effort of the population to come together and persevere. That, over time, gives way to this level of disillusionment, where people push back on this feeling, this desire to interact socially. In the u. S. , the memorial day holiday is coming up. Think and plan accordingly. If you are getting together with others, you have to set strategies, so we can maintain social distancing. Tono means is this the time bring the entire family together with the barbecue. There is tons of data from the cdc about household related when members of different households come together, and the infections that ensued. Also a lot of data about transmissions in churches that have exceeded the capacity. Again, watch the large gatherings. About whatut medicine is working, treating covid19. In the treatment of covid19, we still have the glimmer of hope reducing hospitalizations, although that study did not show ,tatistical benefits mortalities with the drug. We also have great news on the front of initial preliminary results in rhesus macaques, as well as guinea pigs showing the ability of several vaccines in evaluations to produce a great antibody response. There is a long journey between the animal model and the human but we have some glimmers of hope that those vaccines are having an impact on the virus. So all good news. Is the virus mutating . No, it is a relatively stable virus. Replicatee viruses themselves, billions and billions of copies per day, we always see a little bit of a drift in the virus structure. We can say that if i give the virus to person b, and they gave it to person c, and they gave it weperson d, between a and d, will see small changes. They are mutations in the sense of the word, but it does not e, the way virulenc that it causes infection. What those changes can tell us, however, what those strain types can tell us, there have been subtle changes in the virus and ultimately help us to understand that the virus in new york city mostly came from europe. Vonnie a nursing professor at the Johns Hopkins university. A Johns Hopkins school of health is of course supported by michael bloomberg. James gorman joining other finance leaders today in the morning operations will not be back to normal this year. Joining us now is our finance reporter. What exactly did he say . James said pretty much what we have started to hear. Theye end of this year, are not expecting the majority of their workforce to be back in the office, preparing their workforce to get used to this idea of working from home for quite a bit longer. Vonnie that presents some problems, but what about in the offices, what is being done all over new york city and surrounding boroughs and states to make it ok for some to come back . Jenny those plans are still being worked out. A big thing that a lot of these banks have talked about is elevators being the one thing that is hard to manage. Getting thousands of employees streaming in and cramming into these small boxes. It is a difficult thing to manage. Some have said it could take as long as two and a half hours to get all of their employees of the elevator. They cannot just build more elevators. That seems to be a sticking point. Even when they have them in the offices, maintaining that social distance, improving the air adulteration system. Lots of considerations as they bring people back. Phil trish and system. Filtration system. Vonnie thank you for the update. Much appreciated. Facebook is saying in the last few minutes that 50 of its workforce may be remote in 10 years. Will let some employees work from home permanently now. Not all like twitter, but some. This is bloomberg. Vonnie sania mirza airlines reporting signs that travel demand is perking up. Could be the beginning of a rebound . Joining us now is savi syth, Raymond James analyst. When should we take from what the airlines are saying, could we be looking at a rebound . We are seeing early signs that demand is coming back, not surprising given the stayathome orders are starting to be repealed. Still too early to say what the summer will look like. We are about a month away from having a better idea as to how much people would be willing to take to the air this summer. Vonnie presumably some essential travel going on, government travel in part to learn. What are airlines doing to increase confidence in the flying public . It has been a continuation of ideas, how to get the public to have confidence in the safety of airlines. They have talked about their cleaning procedures, they have definitely stepped it up, educating the public about how well the air is circulated. Wearingthe consensus is masks, both employees and customers, is probably the best way to do it, social distance within the airports, reduce the touch points within the travel journey. I know there has been controversy about leaving the middle seat open or not. I think that is really to make people feel comfortable. The middle seat will not give you six feet of separation. I think that is more theater than reality. To dorlines are trying various things to help people feel more couple getting back in the air. An airconditioning unit in every airplane, so if you are sitting anywhere, you could be exposed. You cover the gamut from spirit to southwest, even the tiny ones. What are your picks in this are they all level by the coronavirus pandemic . Are there some that can handle it better than others . Savi everybody is seeing this decline. If you look at that esa, it was down 96 yearoveryear. Encouragingly, it is down just 91 now, but it is heading in the right direction, taking baby steps. All of the airlines are feeling this pain. How we think about it, we think domestic demand will return faster as people will be more comfortable staying closer to home than doing an international trip. We also think it will be leisure before business. Businesses will be more cautious about asking employees to travel. Probably will take a while to see that. Initial travel will be focused on leisure, especially visiting friends and relatives. Airlines exposed to those markets are probably in better position to have lower cost because the fares will be lower. Airlines Balance Sheets will be better in the long term as well. Thank you so much for joining us today. Savanthi syth of Raymond James. This is bloomberg. Mark a grim milestone in the coronavirus pandemic. The number of infections worldwide has doubled over the past month and has now topped 5 million. Accounts for almost one third of the cases. Experts believe the actual count is higher than the official numbers has covid19 has proved difficult to detect and track. The official death toll is a more than 328,000. U. S. Fatalities have topped 93,000. President accounts for almost oe third of the trump is set to vit the ford motor companys ventilator facilities in detroit today. The big question is if you will wear a mask. The automaker has required everyone at its facilities where a mask at all times. The president has been noncommittal on the question. His visit comes a day after he threatened to withhold funds over michigans mail and valid effort. China is expected to tighten its grip on hong kong with a new security law to curb separation, sedition, foreign interference and terrorism. Thats according to Hong Kong News media. The move could trigger more strict protests street protests. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Amanda welcome to Bloomberg Markets. Here are the top stories we are following from around the world. U. S. Stocks are trading lower after touching positive territory earlier in the day. Tensions wrapping up between the u. S. And china. China responding to a first round of accusations from president trump, threatening to take countermeasures and saying it will safeguard its sovereignty, security and interests. 2,440,000 americans filing claims for unappointed benefits last week has major job losses continue. The total number of jobless claims rising to 36 million over the past nine weeks. Lets check in on the markets. The weekly reminder of the pain it will be felt throughout the was economy priced in a little bit. Stocks mildly negative today. We are seeing all but industrials and the s p 500 moving lower. Energy sharply lower. Consumer staples. Industrials stapled by boeing, raytheon and honeywell. We are seeing aerospace and contractor names moving higher today. There are some willing buyers. A bit of a mixed picture today. Ne bright spot is tjx it is worth noting these are markets that on the down days are continuing to power higher. The s p 500 nears the 3000 mark, basically erasing the covid19related losses the market has seen. Back to where we were in february. Is that justified based on where we stand with the Economic Outlook . I want to welcome robert brown. Markets may be a little bit overly enthusiastic. They may have run ahead of the fundamentals. Robert that is our view. Took somet meeting we money off the table for that very reason. We dont think it is an unreasonable case that has the economy starts to reopen in the wake of the fiscal stimulus people start to think about the economic recovery. Its a situation of things Central Bank Cut<\/a> its key rate less than most. Also playing is crude, up for six straight sessions. You are seeing some of this go back to fundamentals. Prices had gotten so low, demand is starting to come back. Continuing to trade above 33 a barrel or the second straight session. It is the highest now going back to march 11, before the lockout started. Taking a look at the individual stocks, you mentioned l brands. They will try to split up victorias secret and that embody works. Bath and body works. They are seeing lots of demand for some of their current 80s. Companies. Buy saying that stimulus checks from the government have helped, as well as the nintendo switch, as everyone is rushing out to buy videogames. Hormel foods, down 3. 5 . Also coming out and saying there is some uncertainty around some of their plant operations, so all of that is weighing on that stock. Vonnie thank you, taylor. We want to bring you headlines from richard clarida, taking part in an online discussion. He says the federal act forcefully and proactively, drop being the disinflationary, not inflationary, and that fiscal support could be called for. More fiscal and monetary support. Acquisition by private Equity Firm Advent<\/a> faced delays this week, leading investors to wonder what is next for the software provider. One hedge fund predicted troubles ahead and benefited. Ben axler joins us now. Take us through where you got the idea for this short position, and how it worked out. Ben thank you for having me on. We wanted to look at deals that were struck prepandemic that potentially aggressive or high valuations. Company in to this the cybersecurity space. They had agreed to be acquired by advent 433 a share. Transaction,the proxy statements that were disclosed, background to the transaction, it became evident that some forwardlooking guidance may not have ventured with prospective buyers, and management did not disclose q1 2020 guidance that looked worse than what the street projected. Subsequently, last week, when the company put out their guidance, it was even worse than anyone expected. That gave us some real concern that the transaction could be delayed. We felt the market was ascribing too low a probability that a deal could break. We thought it was a good risk reward to be short the stock. Subsequently we have seen the transaction be put on hold by some litigation, disputes between the parties about the Underlying Health<\/a> of the business. We are still negative on the company, think they have some fundamental challenges. Still a lack of clarity around the outlook of the company. They are burning cash. Advent believes they could be insolvent even post closing the transaction. So you still have a position. Have you talked to that event since the losses . Ben they have not been making comment. We wrote a public letter to them suggesting to them that we thought the valuation they ascribe to the business was too high, outlining some of our concerns about our findings and believes that forescout was on shaky ground. It was our believe that they likely read the letter, took our suggestions by notifying the company friday that they would not be proceeding with the transaction. From our perspective, we achieved our result by getting our communication across to , then listening to our concerns and backing off of the transaction. Vonnie both of them did say that they were discussing an alternative scenario. What might that be then . Ben i think there is some hope in this alternative scenario that there will be a lower price point reached. Ascribed overe five times revenue multiple to the business, that was on rosy projections. Our belief is a businesslike forescout should be valued at more like 2. 5, three times revenues at best. If you look at the recent quarter and make some projections on run rate revenue, we can still see the stock in the teens. With the litigation being commenced, there is hope for an amicable resolution, but it looks like the resolution situation has turned into an adversarial situation. That is why we still think there is high risk that no deal progresses. Bidder there was another or two before all of this. Any chance they could come back . Ben always a possibility. There was not much color provided on those two prospective buyers. Probably unlikely for anyone to step in between now and when the dropdead date, transaction occurs. Also a question of the ability to get financing for the acquisition of forescout. In the prior transaction, 400 million of debt required by advent to contemplate the deal. Our concern with forescout was that they were losing money come historically have been a cash flow. Lendppetite for lenders to against a declining business is an open letter. Vonnie what does this all mean for advent . Does it hurt their reputation to walk away from a deal like this . Ben i think its strength things their reputation. To the extent they feel the business has had a material adverse effect, some of these challenges were not fully disclosed to them, they have every right to assert their and enforce any legal rights they have. We have seen other private Equity Companies<\/a> step away from prospective targets, trying to negotiate, use legal tactics. I dont view that as negatively. Vonnie broadly on short selling, how much activity are we likely to see in this landscape . Is there appetite for it, what sectors would you be looking at . I think one has to take a broad view of what is going on in the economy. Obviously, we are in a period of heightened uncertainty, unprecedented in various parts of the economy. Movingbal landscape under different restrictions, dealing with the pandemic at different time frames. Certainly, we would expect reduced mna, private equity activity. We also think there is a huge disconnect between the underlining economy, particularly here in the u. S. , and what the Public Markets<\/a> are signaling. Valuations, we think, are frothy in a number of areas. Conditions, we would expect to be in a period of repressed mna activity. Vonnie anymore kind of deals that you think may break . Ben i dont want to comment specifically on anything that we are looking at. Suffice it to say we are looking at other deals that were whounced prior to the announcing the pandemic in march. Certainly, we expect a higher percentage of deals to break an historically, but we dont want to comment on any specifics we are involved in at the moment. Vonnie understood. Thank you for being here, ben axler. Lets get a check on the first word news with mark crumpton. Mark more than 76 million American Adults<\/a> did not get medical care they needed for conditions related to covid19 in the past month. Thats according to new data from the u. S. Census. The estimate from the survey also found high rates of Mental Health<\/a> problems. About 116 million americans reported feelings of being down, depressed, or hopeless. More than 40 of the population reported symptoms of anxiety. This will not be a typical Holiday Weekend<\/a> at the nations airports. The tsa is changing its screening process to limit physical contact and increased distance between people as much as possible. It has seen a steady growth of travelers coming through airport checkpoints over the past couple weeks. The United States<\/a> has delivered 50 ventilators to russia as part of a 5. 6 million humanitarian donation to help the country cope with pandemic. The u. S. Embassy says another 150 will arrive next week. Russia has reported more than 317,000 Coronavirus Infections<\/a> and more than 3000 deaths. Russia sent a planeload of medical supplies including ventilators to the United States<\/a> last month. Boris johnson will not face criminal investigations into his relationship with an american entrepreneur, according to an independent panel, which just finished the review. The allegations stem from his time as the mayor of london. 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 the world awaits a coronavirus medical breakthrough. We spoke with a Johns Hopkins<\/a> official about the outlook. There are many glimmers of hope and i want the audience to know that we see hope on the horizon. The appearance of a calling of the virus in certain locales, certainly in baltimore where i am, other areas where you are seeing a flattening of the curve, but by no means does that mean we can roll back our active participation in the social distancing measures when we are out and about. I look at rolling back the social participation. The fact is, we see social participation. Get away with this, with the distances between us, 6, 12 feet, whatever the number is, or do we have to stay locked down . There is a huge push back. I think the population is exhibiting the exact same disillusionment we anticipate. In the beginning of any pandemic, there is great science around this, we see the heroic effort of the population to come together and persevere. That, over time, gives way to this level of disillusionment, where people push back on this feeling, this desire to interact socially. In the u. S. , the memorial day holiday is coming up. Think and plan accordingly. If you are getting together with others, you have to set strategies, so we can maintain social distancing. Tono means is this the time bring the entire family together with the barbecue. There is tons of data from the cdc about household related when members of different households come together, and the infections that ensued. Also a lot of data about transmissions in churches that have exceeded the capacity. Again, watch the large gatherings. About whatut medicine is working, treating covid19. In the treatment of covid19, we still have the glimmer of hope reducing hospitalizations, although that study did not show ,tatistical benefits mortalities with the drug. We also have great news on the front of initial preliminary results in rhesus macaques, as well as guinea pigs showing the ability of several vaccines in evaluations to produce a great antibody response. There is a long journey between the animal model and the human but we have some glimmers of hope that those vaccines are having an impact on the virus. So all good news. Is the virus mutating . No, it is a relatively stable virus. Replicatee viruses themselves, billions and billions of copies per day, we always see a little bit of a drift in the virus structure. We can say that if i give the virus to person b, and they gave it to person c, and they gave it weperson d, between a and d, will see small changes. They are mutations in the sense of the word, but it does not e, the way virulenc that it causes infection. What those changes can tell us, however, what those strain types can tell us, there have been subtle changes in the virus and ultimately help us to understand that the virus in new york city mostly came from europe. Vonnie a nursing professor at the Johns Hopkins<\/a> university. A Johns Hopkins<\/a> school of health is of course supported by michael bloomberg. James gorman joining other finance leaders today in the morning operations will not be back to normal this year. Joining us now is our finance reporter. What exactly did he say . James said pretty much what we have started to hear. Theye end of this year, are not expecting the majority of their workforce to be back in the office, preparing their workforce to get used to this idea of working from home for quite a bit longer. Vonnie that presents some problems, but what about in the offices, what is being done all over new york city and surrounding boroughs and states to make it ok for some to come back . Jenny those plans are still being worked out. A big thing that a lot of these banks have talked about is elevators being the one thing that is hard to manage. Getting thousands of employees streaming in and cramming into these small boxes. It is a difficult thing to manage. Some have said it could take as long as two and a half hours to get all of their employees of the elevator. They cannot just build more elevators. That seems to be a sticking point. Even when they have them in the offices, maintaining that social distance, improving the air adulteration system. Lots of considerations as they bring people back. Phil trish and system. Filtration system. Vonnie thank you for the update. Much appreciated. Facebook is saying in the last few minutes that 50 of its workforce may be remote in 10 years. Will let some employees work from home permanently now. Not all like twitter, but some. This is bloomberg. Vonnie sania mirza airlines reporting signs that travel demand is perking up. Could be the beginning of a rebound . Joining us now is savi syth, Raymond James<\/a> analyst. When should we take from what the airlines are saying, could we be looking at a rebound . We are seeing early signs that demand is coming back, not surprising given the stayathome orders are starting to be repealed. Still too early to say what the summer will look like. We are about a month away from having a better idea as to how much people would be willing to take to the air this summer. Vonnie presumably some essential travel going on, government travel in part to learn. What are airlines doing to increase confidence in the flying public . It has been a continuation of ideas, how to get the public to have confidence in the safety of airlines. They have talked about their cleaning procedures, they have definitely stepped it up, educating the public about how well the air is circulated. Wearingthe consensus is masks, both employees and customers, is probably the best way to do it, social distance within the airports, reduce the touch points within the travel journey. I know there has been controversy about leaving the middle seat open or not. I think that is really to make people feel comfortable. The middle seat will not give you six feet of separation. I think that is more theater than reality. To dorlines are trying various things to help people feel more couple getting back in the air. An airconditioning unit in every airplane, so if you are sitting anywhere, you could be exposed. You cover the gamut from spirit to southwest, even the tiny ones. What are your picks in this are they all level by the coronavirus pandemic . Are there some that can handle it better than others . Savi everybody is seeing this decline. If you look at that esa, it was down 96 yearoveryear. Encouragingly, it is down just 91 now, but it is heading in the right direction, taking baby steps. All of the airlines are feeling this pain. How we think about it, we think domestic demand will return faster as people will be more comfortable staying closer to home than doing an international trip. We also think it will be leisure before business. Businesses will be more cautious about asking employees to travel. Probably will take a while to see that. Initial travel will be focused on leisure, especially visiting friends and relatives. Airlines exposed to those markets are probably in better position to have lower cost because the fares will be lower. Airlines Balance Sheets<\/a> will be better in the long term as well. Thank you so much for joining us today. Savanthi syth of Raymond James<\/a>. This is bloomberg. Mark a grim milestone in the coronavirus pandemic. The number of infections worldwide has doubled over the past month and has now topped 5 million. Accounts for almost one third of the cases. Experts believe the actual count is higher than the official numbers has covid19 has proved difficult to detect and track. The official death toll is a more than 328,000. U. S. Fatalities have topped 93,000. President accounts for almost oe third of the trump is set to vit the ford motor companys ventilator facilities in detroit today. The big question is if you will wear a mask. The automaker has required everyone at its facilities where a mask at all times. The president has been noncommittal on the question. His visit comes a day after he threatened to withhold funds over michigans mail and valid effort. China is expected to tighten its grip on hong kong with a new security law to curb separation, sedition, foreign interference and terrorism. Thats according to Hong Kong News<\/a> media. The move could trigger more strict protests street protests. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Amanda welcome to Bloomberg Markets<\/a>. Here are the top stories we are following from around the world. U. S. Stocks are trading lower after touching positive territory earlier in the day. Tensions wrapping up between the u. S. And china. China responding to a first round of accusations from president trump, threatening to take countermeasures and saying it will safeguard its sovereignty, security and interests. 2,440,000 americans filing claims for unappointed benefits last week has major job losses continue. The total number of jobless claims rising to 36 million over the past nine weeks. Lets check in on the markets. The weekly reminder of the pain it will be felt throughout the was economy priced in a little bit. Stocks mildly negative today. We are seeing all but industrials and the s p 500 moving lower. Energy sharply lower. Consumer staples. Industrials stapled by boeing, raytheon and honeywell. We are seeing aerospace and contractor names moving higher today. There are some willing buyers. A bit of a mixed picture today. Ne bright spot is tjx it is worth noting these are markets that on the down days are continuing to power higher. The s p 500 nears the 3000 mark, basically erasing the covid19related losses the market has seen. Back to where we were in february. Is that justified based on where we stand with the Economic Outlook<\/a> . I want to welcome robert brown. Markets may be a little bit overly enthusiastic. They may have run ahead of the fundamentals. Robert that is our view. Took somet meeting we money off the table for that very reason. We dont think it is an unreasonable case that has the economy starts to reopen in the wake of the fiscal stimulus people start to think about the economic recovery. Its a situation of things Getting Better<\/a> as opposed to the environment being good. Is prettynvironment much discounted at these current levels. It remains to be seen if the discounting will turn out to be correct. It made sense for us to get back to a neutral position after we had been slightly overweight. Shery i keep hearing there is a disconnect between Market Performance<\/a> and economic fundamentals. When you look at the market rally, it has been really narrow. It seems investors are rewarding those Growth Companies<\/a> that can actually get through this pandemic. Wouldnt this rally be justified when you consider the companies that are gaining ground . Out in we do point that one of her recent research pieces. Amazons of the world, microsoft are all doing extremely well. Not only do they represent market capitalization, but a disproportionate share of earnings. They are also winners in the postpandemic world. These are companies focused on delivering their services in a digitally enabled way. Absolutely. The differentiation between those types of companies in the market makes sense. Smallcap companies, midcap companies, they have nowhere to bounce back like those companies. Its an important part of asset allocation, trying to figure out how much of the indices can be driven by a few companies. To some degree they can be and should be as they have been, but isin, we think that story pretty much discounted given the wide range of possibilities that lay in the future. In terms of shifting of the risk and some of your tactical reinvestment, you have engraftment grade bonds, cash, all those things that will not pay very much at the moment. Give us a sense of what you are willing to forgo here in order to get that safety. Robert if you want to give up risk, you have to give up return. That is something investors will have to wrestle with in the next several years. The riskadjusted return simply is not going to be there. We are probably at a higher volatility regime. They will be less reward Going Forward<\/a> per unit of risk. If you want a decent absolute level of risk, you have to take on some positioning that historically probably would have made you uncomfortable. This tradeoff between the return of risk is not going to be as fragile Going Forward<\/a>. We dow, given the fact focus on opportunities tactically, it made sense to take money off the table, get some more dry powder in the portfolio by buying cash and Investment Grade<\/a> bonds. We avoid highyield and u. S. Equities, but offset those positions with being underweight in emerging markets and nonus equity markets and some other places. We are trying to be a bit more balanced in this risk environment where we are not getting paid like we used to. That is probably going to represent opportunities Going Forward<\/a> since volatility is going to create more distortion shortterm in a variety of cases. For nimble investors in the next six months it could be a pretty good environment. What factors are you looking at to decide when you are going to get more risk on in your portfolio . We continue to see the stabilization in china, which is already starting to happen. At the same time you have to balance that out with the rising geopolitical tensions. What is factored in when you make that decision to reallocate your portfolio . Think ishat is what we a new normal. It is one of our key themes. The pandemic is temporarily pushed that aside until more recently in the wake of president trumps comments. That will be a drag on growth and a source of volatility for years to come. What would cause us to get back in the marketplace is almost the opposite of what has happened in the last month. It is not so much we think we have a strong forecast relative to the rest of the market. We are assigning pretty good probability to a wide range of scenarios. When the market gets locked in on a particular scenario and forgetting there is still so many unknowns, the market starts to flip from where it has been expecting a vshaped recovery to some degree, places too much emphasis on a successful introduction of a vaccine, reopening of the Global Economy<\/a> without a resurgence. If it turns out over time there is more evidence to support that, thats great. The values that are currently discounted can be justified. If it starts to unwind, and we think it will be a series of steps forward and one step back, if we see more cases from china like we have seen in the past couple of days, the market will start to extrapolate that. We should look to the far east is an early indication of whether or not reopening of the economy can indeed work and be managed without a major resurgence. I think a lot of investors, myself included, think these early signals we were getting in december and january and did not extrapolate them properly into the west or even europe, we will make that same mistake again. Risk is you over extrapolate. Signs oft assumes resurgence will lead to a significant shutdown of the Global Economy<\/a> again. You have this manic depressive state of people going from euphoria expecting a vaccine, returned to some new normal, to one that is just the opposite. We could be in an environment to 3000 onade 2500 the s p 500 for an extended time. Its important for investors to take advantage of that. Shery thank you for your insights. Coming up, the world is getting closer to a vaccine development. Astrazeneca expects to deliver millions of doses to the u. S. As early as october. Bloombergs conversation with that companys ceo is next. This is bloomberg. Amanda welcome back. Pledginggovernment is about 1. 2 billion to astrazeneca in his fight for a covid19 vaccine. Jonathan ferro spoke with the ceo Pascal Soriot<\/a> about the push for a vaccine. We have to show the vaccine works of course. No profitng this at during the pandemic. Its important to keep this in mind. Remember were talking about vaccination. You can vaccinate people very quickly with preselect patients. You have a lot of infections and the disease is still intense, you can get the results very quickly. , we have manufacturing chains that are independent. One for the u. S. And one for europe. They will be no competition between them. We believe we can actually get this done quickly. Is manufacturing process something we know very well. Confident we can make it happen. It is certainly a challenge. Jonathan it is a massive challenge. Global pharma is coming together. You are a listed company, a private company. In terms of making profits you are not run by the government. You are not a charity. When i think about the backing youre getting from the u. S. Government i am wondering how you can assure us this vaccine will be disseminated in a fair way without a preference towards the countries with the deepest pockets. How can you make that assurance this morning . Pascal this is what i would say. It andcommercializing distribute it i should say at no profit. Just a few dollars in cost. It is affordable. There is no issue there. The low income countries, we are working with an organization and are supported by the Gates Foundation<\/a> many countries. We will find ways to bring this to the people around the world, even those with low income. Low and will be very therefore cost is not an issue for high income countries. The issue is the manufacturing capacity. That is what our team is working on 24 7. They have done a good job in the last 10 days and theyre working hard on that. Jonathan this will be about production capacity. My question is a Pretty Simple<\/a> one. If you have been backed heavily couple a of developed countries, can you assure us they will not get the vaccine over everybody else . Not how much will this cost. How do you fairly disseminate the volume of the vaccine and distribute it evenly globally without a preference on a single country over others . Pascal there is no pressure from any country. The other issue is we cannot make the vaccine if people dont want it. Governments and global organizations look at our vaccine and tell us whether they wanted to were not. There are alternative technologies. There are other technologies. To determine us the solution. It is for governments and world institutions to tell us whether they want it or not. If they wanted, we will supply it. The cost is very low. Shery that was the ceo of astrazeneca. Coming up, china unveiled its stimulus to help revive its economy. We speak with china Facebook International<\/a> ceo Leland Miller<\/a> on what to expect next. This is bloomberg. Shery this is Bloomberg Markets<\/a>. The ongoing pandemic has upended chinas most important political event, the National Peoples<\/a> congress. It started in beijing today after i delay, bringing delegates to get a leaderships plans for the upcoming months. He was a look at the challenges ahead. The annual sessions of the National Peoples<\/a> congress and the parallel advisory body typically bring together 5000 Party Members<\/a> over 10 days. This time, onlookers expect a different format. The convention was postponed in march. The first day change in decades. Reports suggest both meetings could run shorter, while the number of delegates may be reduced. We can see strict hygiene measures. A sign that chinas leadership considers the fibers to be contained. The agenda may change, including a shifting focus on the economy, now heading for his worst performance since the days of chairman. The customary chairman mao. It could be a bandit a more ambiguous goal. Stimulus measures will be another focus. They have pledged more powerful monetary policies while the government may further support sectors including construction, health care and 5g. On the geopolitical front, the ongoing unrest in hong kong will be in the spotlight with beijing going for a greater role in supervising his politics. The u. S. Is the legates annual report assessing the financial further commentary from china on the origins and management of the virus. With a ratcheting blame game, this congress will be watched especially closely. Geopolitics will indeed be the spotlight whether Hong Kong Security<\/a> law to be discussed at the National Peoples<\/a> congress. The move could fuel a fresh protest and also increase u. S. China tensions. Joining us to discuss is Leland Miller<\/a>. Always great having you with us. This is basically a rubberstamp parliament, right . If we see this pass, does that mean the u. S. Will be forced to withdraw hong kongs special trading status . What would be the implications of that . Leland it will put the u. S. In quite a bind. In effect this will be the end of one country, two systems. Thisll be china breaking his pledge to keep hong kong to allow hong kong to keep his freedom through 24 7. They got react 2047. Double her the protesters and hurt the supporters in hong kong. What i suspect is they will be a long, drawn out process where you see a tougher stance on the u. S. Side, sanctions on certain individuals. You can see certain sectors being attacked, rather than just a wholesale pulling back of the special relationship. This is a tough situation for the u. S. Government to begin right now. Be in right now. Shery there will be those on the prodemocracy side for whom this is a devastating blow. This was coming. It may be accelerated. In terms of what needs to happen in response to it, give china accelerates away from two systems, what do people have to do . Has it all been done in preparation for what is coming . Leland i dont think anything has been done but we know it is going. When beijing throws the hammer down and says we are moving forward and we are going to have the article 23 sedition laws put in place, they cant walk back from that. They will not walk back from that. The u. S. Response is very tricky. Increasing the leverage will not give them a better outcome. There is some maneuvering. A lot of this will fit into the overall toxic u. S. China relations right now. How much do we push on the hong kong issue . How has that affected the trade deal . How does that affect huawei . I think the u. S. Government and the Trump Administration<\/a> has figured this out quite yet. Shery in congress we seem to be looking at a rarely rising bipartisan pushback against beijing. Nancy pelosi is saying the house is looking at delisting this chinese company, something the Senate Already<\/a> passed. What are you expecting on this front and what would that due to the broader u. S. China relationship . Leland i dont expect it to be doing much at all. Isisting Chinese Companies<\/a> what it is called. It is setting a standard where every company, no matter what your nationality, have to adhere to certain regulations and they have to adhere to certain audit requirements. Chinese companies dont do that right now. It would level the Playing Field<\/a> that is currently advantaging Chinese Companies<\/a>. Its a nobrainer but not subbing that will hit right away. You have to have three straight years of noncompliance and then you get your Company Kicked<\/a> out. This is not a shortterm thing. It is not going to affect the relationship that much in the coming months or years. Us your read of the current state of the chinese economy. You have the granularity that few people have on what is happening there. Leland the interesting dynamic is we are not focused on seeing recovery or not. We are just reading that data. This is different from beijings take. They said the party vanquished the virus and there will be recovery so they will announce recovery. Wesocus on your bigger so soes, your large firms in major cities. We have been seeing, since we focus on not just those firms with the bulk of the economy, the private sector. They have had much more challenging conditions and are not recovering the way beijing is claiming. They are still in contraction territory. There is a very different story between what is happening in the big privileged firms versus the vast bulk of the economy. We are trying to tell the story beijing wants to talk about the former. Shery Leland Miller<\/a>, thank you for your time. The ceo of china beige book international, looking ahead to the National Peoples<\/a> congress that kicks off this week in beijing. From new york and toronto, this is bloomberg. Scarlet scarlet it is 2 00 in new york, 7 00 p. M. In london. I am scarlet fu. Romaine and i romaine bostick. And this is Bloomberg Markets<\/a> the close. Eye on what has been happening in equity markets. Dour as turning concerns weighing on equities. The s p 500 down about. 6 . Redr 11 sectors in the dragon down by energy, health care, and consumer staples. That is dragging down other names as well. Sales and cost up. National oil well done more than 6 . Amazon one of the bigger drags on the s p 500 down about 1. 5 . 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