Remain independent. Economy ts, the global takes precedence over the geopolitical tensions between the u. S. And china. The price of the bailout. Brussels set its criteria for backing the state aid pac package from berlin. We are just under an hour away from the start of cac equity trading in europe. Ets take a look at where the u. K. Markets were closed yesterday. They didnt get that take part in the risk on rally that we saw across the continent. We also see u. S. Equity futures rising. U. S. Cash trade was also closed yesterday to honor the memorial day holiday. As a result we see futures in new york up about 2 on the dow and nasdaq futures as well as s p futures up 1. 8 right now. Lets get your first word news. Here are todays top stories from the bloomberg terminal. Once a virus hot spot in europe, italy reported the fewest cases since february. Below 100 for a second day. The global death toll tops 340,000 with 5. 5 million cases confirmed. In england, Outdoor Markets and car showrooms will be able to reopen from june 1 if they can make the coronavirus guidelines to protect shoppers and workers. The government says other nonessential stores such as shops selling clothes, books and electronics can open two weeks later from june 15 if the spread of the virus is kept under control. Chinas leader is move to sweeping security laws. E chief executive says local residents support the legislation. She is pledging the citys freedoms will be preserved saying it is untrue the new law would ban protests. France is set to announce measures to support its Auto Industry today. It will be the first european government to do so highlighting the crucial role cars play in the economy. The plan will include incentives to buy cleaner cars and step up efforts to develop electric power trains and automotive batteries. Powered by more than 2700 journalists and analysts in more than 120 countries. Now asian stocks are climbing with u. S. And european futures despite the escalating geopolitical risks with japan leading gains as the worlds Third Largest economy reopened. Joining us now is emerging markets strategist at Bloomberg News. Why do we see this risk on mood as tensions between the u. S. And china remain high . I think it is probably the markets have an ability to separate the deterioration in the political relationship between the u. S. And china and the economic relationship and for example if you look at the april data, it just had some release, it shows that the chinese were buying significantly more pork and were starting to buy gas from the united states. They try and make their phase one agreement quotas. While i think that might be mistaken, i think that is an important element of todays rally and then the second thing is the background of liquidity and the Global Economy and this process of reopening across the world. You were talking about at the top of the hour, i think that reassured people on a global basis. Matt we were talking about the u. S. China tensions. Some have likened them to a cold war and your question of the day pertains to that. How best to trade chinau. S. Cold war. What is the consensus mp is the u. N. The best way the trade it . I think the number one choice was hong kong stocks and the hong kong dollar. That is because there is such a direct impact and maybe the most traumatic news we saw out of the n. P. C. Related to the Hong Kong Security law. Youre right, it is a popular vehicle for people to trade and i personally think it is going to be difficult for us to persistently break above 720 in ollar rahin biterms. Matt what else do you see happening today in emerging marks . That is your bag. What do you see as the most important trends investors should be watching out for today or this week . Well, i mean, i think people just simply being relatively optimistic about the process of reopening. Like this morning, i was cracked open the latest google mobility trends and if you look across most merging markets at least you have a quite significant improvement even in places where you have really quite serious coronavirus outbreaks like india. Even youre seeing mobility increasing for resale through work and i think that is likely to be threatened in those more developed markets. The dwept yen if you like. We saw for example south korea and the second wave of coronavirus there. It is a very modest second wear but you did see relative underperformance in korea in terms of social distancing. People have increasing social distancing as a consequence of that second we have a wave. If it were to take place, it seems to be well under control now, you might see a similar problem in places like taiwan and thailand and some degree singapore. Again, that is conditional on seeing a second wave. Matt simon, thanks very much. Simon flint there. Emerging Market Strategist for Bloomberg News joining us to talk about the markets. There is a lot going on, especially in berlin. 9rmany offering the airline a billion euro bailout. Will the deal be untenable . Well discuss the airline and bailout in the age of coronavirus next. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open. We are getting some breaking ews on an i. P. O. In europe and amsterdam. Jde peets. P. O. Of it looks like their offer period is going to commence today. The range indicates a market cap that is pretty darn big. 14. 9 billion euros at the low end. 16 billion euros at the high end. The primary offer will be max 23. 3 million shares with the green shoot but dont quote me on. I the settlement offer is expected on june 5. There is the latest i. P. O. News for jde peets. This Company Makes tea and coffee. Eets coffee, im sure you know about worldwide. It is a big nonalcoholic beverage producer. Germany has offered lufthansa a bailout. The deal still requires e. U. Approval and officials are not making it easy. Sources say the European Commission wants lufthansa to surrender some of its key flight slots amid concern that the airline have an unfair advantage overcome pet or thes. Were seeing basically germany negotiate right now with the European Union but it does look like lufthansa is going to get a bailout and i believe berlin has about 90 billion euros earmarked to take direct stakes in companies. Are we going to see germany become the holder of more and more of what right now are public assets . Actually i dont think this different nning of a strategic behavior to have German Government. Lufthansa was a very special case. ,he company because of covid19 ran into an unprecedented situation. In that case it was important strategicically to make sure that lufthansa survives and i dont see this as the beginning of a new trend. Matt yeah. Lufthansa. Obviously this is a company that is 40,000 employees so it understandable that the government wants to do as much as it can to keep the airline in business. Of course it is also important to have one flagship carrier especially in a country that really doesnt have any other competition. It would be hard to fly domesticically if it wasnt for lufthansa. Volkswagen lost a really important decision yesterday. What do you think about the auto sector now that the highest court in germany decided customers who bought cars that had cheating device are going to be eable to take them back for the Purchase Price . This discussion is going on, for years it feels. That is nothing new and from our perspective, when you see what auto stocks have done over the last month, years almost, then it feels like it is already priced in and provisions have been taken. Definitely not positive news but not necessarily incremental news to the sector. En it comes to governments involvements, then we have heard over the last week, it is going be more about trying to support or incentivize the environmental components of for example electrical vehicles but it is not clear yet to what extent the government might consider the Automotive Industry when it comes to the Recovery Funds that we were talking about. Matt i suppose the recovery in terms of your expectations is the most important question. For your strategy, right . What do you expect in terms of the recovery now that the number of new infections for example is lower and lower. Yesterday in berlin we had five new infections. It looks like were going to see a light at the end of the tunnel for the summer. This is what you see the markets reflecting and definitely this will help to ake the economy recover from a never seen downturn in Second Quarter of this year. Still the question mark remains on the slope to have recovery and so now we are expecting it to be a slower recovery with earnings of European Companies being back to 2019 levels probably only by 2022. But then still be big differences among sectors when it comes to the speed of the recovery. Some might take longer. They are facing some structural issues. We heard what the french government was saying. Coupled with demands to reduce the number of domestic flights for environmental reasons. Some factors probably will take longer to recover. We heard some of the Catering Companies as well into the when it comes to their guidance into next year. On the other hand some sectors might be well supported by what i mentioned before, the e. U. Recovery fund s that arein discussion right now, especially focusing the green sector for ample building renovation, renewables. Some might be helped by thistime type of funds and might see a quicker recovery than other sectors. Matt absolutely. Were going to keep you with us a little while longer. The head of european equities at dwf. Well talk about the other big issue facing the Global Economy. Tensions are on the boil. The war of words between beijing and washington continues as china condemns the u. S. Blacklisting of 33 of its terms. Well get all of the details next. This is bloomberg. Matt welcome back to the european open. We are just about 40 minutes away from the cac trade. I want to bring you some headlines quickly that were getting from japan. The country is set or at least according to a document that bloomberg has seen is going to pay 2 3 of the rent for virushit firms. I always thought it was interesting that the government shut down companies not allowing them to make any money or bring n any revenue but still allows landlards to collect rent from those companies. In a true shutdown you would shut down the spland lord and the company and the restaurant or the consumer good sales or what have you. Japans solution going to pay 2 3 of rent for virushit firms. Up to a million yen if you were hit by the virus. If you have a 10,000 a month lease, 2 3 of that gets taken over by the japanese government. Really interesting story. Well continue to wait for developments on this. As i said before we went to or the e of the other other two huge issues facing the Global Economy now, the u. S. China, what some are calling a cold war. China is pushing back against blacklisting of 33 of its firm fwiss u. S. The latest sign of the rapid deterioration after the foreign minister warned that some in america were pushing relations to a new cold war. On a separate front beijing is seeking to reassure hong kongs judiciary will remain independent under a new National Security law. The planned legislation has been fueling concerns that the city may lose one of its Key Selling Points for International Companies and thats where the two dove tail. Really very much these issues related. Our guest is still with us. I thought your take on the ruling was interesting. This is a similar issue, isnt it sn in that these tensions have been there for a while and this is just sort of one more step, one more escalation in the bad u. S. China relationship. Definitely. It is not helpful. Obviously covid19, we are already struggling with the conomy and to bring additional disrupting factors to discuss is not helpful for the path of the recovery. Certainly already beforehand, we had a lot of discussions about where global trade is going to go. So what kind of growth rate will we see in global trade and actually yesterday, over the weekend in europe, we had one of the biggest companies, the chairman was giving an interview saying that they intend to cut their workforce probably by around 20 Going Forward because e fears that global trade will deteriorate, Global Growth will deteriorate. Well see. Overall the Global Economy remains very much integrated and having to move production facilities might hinder the profitability of some companies which again should not be what we are what we want right now over the difficult environment. But yeah, the global trade iscussion will remain with us. Matt what is your quick take . On e. M. Investment . Mean, certainly on the the Positive Side what you have is emerging markets, especially china wholl probably get out of the crisis earlier than the other big regions so that is the positive for them. On the other hand, now the global trade discussions and the conflicts with the u. S. , that is probably less helpful. We have heard the Chinese Government saying for the first time really they are not giving any g. D. P. Growth target for this year. Emerging markets otherwise, when youre talking, thats a different story. Here we only see by now the coronavirus. Matt i have to cut you off there. Head of european equities at d. W. S. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Matt welcome back to bloomberg markets. This is the european open. We are 30 minutes from the start of cash equity trading. Were seeing gains of more than 1 on european futures. Much bigger gain on european ftse futures. Yesterday we saw a big rally in continental assets. A little bit of catchup being played in london. The risk on mood continues to roll around the globe as economies start to open up from their lockdowns. European banks could face a 315 billion euro hit to their capital levels as loans turn sour and n fallout from the virus. The regions top regulator added that the Banking System should be able to withstand that thanks to the almost 300 billion euros of excess capital and 180 billion euros of further reserve that have been freed up by the watchdog. Were joined by one of the main ones. Our guest joins us. Chairman of the European Banking Authority. Thank you very much for your time. You think it looks like the banks are safe right now because of all of the reserves that they have put aside, been forced to put aside and now are allowed to be set free. Yeah. Thank you very much for having me. Yes, as you indicate, the report that came out yesterday is that the position of banks as we went into this covid19 situation in rope, prior to the financial crisis of 2008, as of december of last year, the end of the year, banks had 14. 9 , five Percentage Points more than 2009. As we said that is the result of mainly the relation that has been over the last years and the banks have accumulated. On top of that, measures have been put in place since the crisis started. That leads to basically about 458 billion euros that could be used for to absorb losses if needed so that gives banks comfortable position to start with that crisis. Matt what kind of losses should we expect . Clearly it is going to be impossible for you to put an exact number on it. Can you give us a ballpark figure . Some number, some range of numbers that we should expect in terms of the possible losses for banks this year . It is difficult. Difficult for a number of reasons. Mainly because first of all we dont know how it is going to develop from this point on. The shock of the crisis was very large. How long is it going to be over ime . Potential losses. It is difficult to put an overall number. We run a stress test every two years. We took the results from the last stress test of 2018 and pdated with two aspects. The sectors. More likely to be affected by covid19. We increased the volatility that those sectors would default. 380 basis points of potential loss the banks may occur. Compared to the 500 basis points, buffer. This should be enough to support the of losses. Matt im assuming that the worst Case Scenario of your stress test didnt include all global governments forcing a shutdown of their economies for eeks or months on end. Youre expecting to surge here. You expect us to see Bank Failures because oover this surge of bad loans . Thats difficult to tell. We are going to proo provide individual Bank Information in june for every bank. Hey can do their own analysis. Not all banks have the same amount of capital or are exfodse the same type of loans. Ome are more hurt than others. They should be dealt according to rules that we have. Should not cause systemic impact on the Banking Sector at all. Matt let me ask you a question that is from the other side of your perspective. Im sure that macron, johnson, merkel are all hoping that they can count on these banks to do the lending necessary in this time of crisis. From your point of view do you think the banks are lending enough now to help the economy now in its time of need . Yeah. Our initial concern from the crisis was that. That the banks were able to operate. Im happy to report i feel banks have been doing their job. Here has been no significant breakup in the financial sector. In terms of their ability to forward by ing, put and we banks have helped see that the liquidity remains very good despite the fact that the first thing that we