At the same time, it is authorizing sanctions against chinese officials. We will be live with reaction from the forbidden city. European futures prove their resilience after a more mixed session in asia. Angela merkel says it may take time to iron out the details of eus mammoth stimulus package. And lufthansa sets up a showdown with the eu by holding off on a vote for its 9 billioneuro german rescue plan. Cites requirements over landing slots at key hubs. Just under an hour from the start of cash equity trading. Lets look at futures. Instituteat the ifo expects german gdp to shrink 6. 6 in 2020 and then expand 10. 2 in the year after. That is a pretty decent sized contraction, and yet futures are Still Holding higher. Futures up 1. 3 on the dax. It has been a Pretty Amazing week for the dax index. We kicked off up 304 points in change and were up more than 100 tuesday and 150 yesterday. The dax has gained a lot of basically to11,000 11,006 heard 50 yesterday 11,650 yesterday. S p and dow futures are gaining. Nasdaq unchanged. This is a Better Future than we saw earlier. S p futures have turned around and look set to start the session risk on. Anna, what are you seeing . Anna i just want to get breaking news around the aviation sector. Weve got comments coming through from easyjet. They say its not possible to provide Financial Guidance for full year 2020. They are launching a concentration process consultation process. They propose to cut Staff Members by up to 30 , something we have seen other Aviation Companies talking about or doing. The response we have seen from the aviation sector has varied. Some have been cutting jobs. Some have been furloughing staff. Some have been doing a combination of both. Some have been talking to government about sectorbased bailout. Market demand levels unlikely to be reached until 2023. The guidance coming from easyjet, giving guidance around fleet size. Interesting what you were saying, matt, about how the market has responded. These tentative steps towards reopening economies. If there is no obvious second wave, no considerable spike, then markets do seem to be able to lift through geopolitical tension and focus instead on the free opening process and the upside for the economies at the end of this year and into next that could lie ahead. Here we see the geopolitical very much in the hong kong matter. The hang seng down, and asian markets making gains along with the Global Equities story. Once again, there is an Interest Rate here as well. The south korea juan is weaker. Won is weaker. Lookingare generally through geopolitical tensions and focusing on reopening. Matt almost even looking through 2020 and instead focusing on 2021. Lets get a look at the bloomberg first word news. The u. S. Says it can no longer certify hong kongs political autonomy from china, a move that could trigger sanctions and have farreaching consequences on the citys special trading says is is trading status with the u. S. House passed voted to authorize sanctions against chinese officials for human rights abuses. The issue surrounds the treatment of a Muslim Minority group in the west of the country. It comes as the u. S. Branches sub pressure on beijing ratchets up pressure on beijing. In the u. K. , Prime MinisterBoris Johnson is asking the u. K. To move on from the controversy surrounding his top advisor. Johnson says he is sorry about the pain and anguish up a lockdown, but stood by the advisor. The advisor has face mounting public anger against his miles to,o travel 260 he says, Seek Childcare support while the country is under lockdown. Friendly, im not certain there is an inquiry into that frankly, im not certain an inquiry into that matter is an efficient use of time. We are focused on coronavirus. Matt global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Anna . Anna lets get into the markets. European futures are pointing higher. A huge stimulus package the European Union president yesterday. Lets get into that market conversation. Laura cooper is with us. European a rally in stocks today, is it to do with the bailout . Its not a done deal yet, is it . It still needs all the members of the eu to agree. Producing Movement Better numbers, lifting of lockdown measures question mark lockdown measures . Anna it is a competent it is a combination of what you have mentioned. Are, european stocks bracing this water flow effect we saw yesterday, because it really is a watershed moment. The package we saw is exceeding Market Expectations. Markets are begin to price out this imminent risk of a crisis. The futures are quite strong this morning. The euro popped to a twomonth high. But there are nearterm challenges. I expect the plan to be scrutinized by the frugal four. There is a long path ahead for funds being deployed. But what we saw yesterday was a key political hurdle being removed, the step towards datasharing, which is crucial for a premonitory medium, and that has room to rise. Capture that upside. Surveye got the ito forecasting a 6. 6 contraction in the German Economy, but then a 10. 2 expansion next year. We talk about the 750 billion euro rescue package from the eu. Angela merkel said she does not expect it to pass for a while. She said National Parliaments will be debating at this fall, and she is hoping to get it passed january 1, 2021. Our markets just looking through this year . Laura absolutely, and thats the case of what we have seen through the april and may rally, the fact that we have seen forwardlooking markets price in more of a recovery, dismissing the fact that this is going to be the steepest Economic Contraction on record. Whats interesting, if you look at recent price action, it is actually sending this strong recovery signal. Potentially we are seeing a turn in investor sentiment, because we are seeing laggards, like banks and energy, beginning to leave the event, while tech stocks remain on the back foot. I think it is early days, but it is quite notable that we have seen this divergence. It is a trade that has been unlocked across the board, but certainly if we do see signs of the economic recovery, it is going to be potentially quicker and faster than many forecasters have expected. Certainly that would set the tone for what we are seeing in markets. Laura, you might have thought that investors would be more nervous around geopolitical tensions between the u. S. And china, given the tension over the security log coming in from china and what that might do for trade talks an ongoing dialogue between these two economic heavyweights. Yes, markets seem to be treating this as more of a regional issue, perhaps. Markets markets are kind of taking the u. S. Threat markets is really what this could potentially mean for u. S. China relations. We have seen President Trump earlier remarked that he is expecting to deliver measures by the end of this week, but in this stage, i think it is the case that we are going to hold off on punitive measures around , and that could because theylower want to see how this law is implement it. This is going to be the case of market stress leading to lows, but it is unlikely we will see a catalyst sending equity markets sharply lower in a selloff. Matt laura cooper there, bloomberg in live macro strategist bloomberg mliv micro strategist. Up next, how will the eu rescue plan impact assets . We will discuss further the mliv question of the day with richard saldanha, fund manager at aviva investors. How will the eu rescue plan impact assets . This is bloomberg. Welcome back. We are just over 45 minutes away from the open of cash equity trading across europe and the u. K. Futures continued to climb higher. Futuresres and dax gained almost 1. 5 . Unionfter the european unveiled an unprecedented stimulus package to tackle the worst recession in living memory. The 2. 4 trillion euros in total recovery spending is anchored by 750 billion euros of joint debt assistance. The plan has already started to calm jittery markets and might restore a sense of unity under severe strain. Concerned. Ll discuss is there lots of hope built into the Market Expectations around what the eu can do in terms of sharing . I think we have seen, certainly from other countries and the u. S. , for example, announcements of large stimulus packages. I think in europe, it has taken longer and has been frustrating to some extent. I think we are starting to see progress. There is a Bigger Picture going on right now where you are seeing countries emerging from lockdowns and activities starting to pick up again, and i think that when you see these aid patches coming through as well, it will further add to the optimism we are seeing out there. I think it is good news, what we are seeing. Is a realou think it turning point for the European Union . Does this crisis help the European Union for, more of a federal institution with shared . Ebt richard from that perspective, we will have to wait and see, but you are starting to see the realization of the necessity for this. Also, in individual sectors, youre starting to see stimulus packages for airlines, which have been severely impacted, the big stimulus, a package for the development of electric vehicles. You are starting to see that filter through to other sectors, which has implications. Sense, given make overarching positives around at the big picture level this seems to be a positive development for the European Union, given that, does it make sense for risk assets to go higher on this, despite geopolitical tensions raising their heads between the u. S. And china . At the moment, european investors seem to be putting that to the sideline. Richard the moves you are seeing in the markets to some extent reflect how subdued positioning was. If you look at the sectors that have been outperforming, its been the ones that have been the most impacted, areas such as travel and leisure, financial banks, etc. I think what you are seeing in some ways is that rotation, as we are starting to see countries emerging from lockdowns, people trying to benefit as this activity resumes. We think to some extent that will continue. I think the key for us remains whether we do see a second wave, because that is the key where risk that is out there. There is a lot of optimism, but we have to sort of temper that with the potential of a second wave. Also, the u. S. China tensions that have been simmering for a while, going on in the background, the comments from mike pompeo are concerning. There are certainly reasons to be more optimistic as more countries do emerge from lockdowns, but it needs to be tempered with what we are seeing elsewhere. Yes, richard, thanks. Coming up, the rotation into value has caused many investors off guard. We will discuss the move away from the rally. We see nasdaq futures underperforming other u. S. Equity markets this morning. We will look at areas like banking, energy, and will also ask about share buybacks and where that goes into 2021. Anna welcome back. Ofminutes until the start European Equity trading for this thursday morning, and futures up by 1. 2 or so at the start of the trading session. Investor sentiment has turned abruptly in favor of beatendown stocks, something many investors failed to foresee. But the bets are now under pressure amid a rotation out of rally leaders like tech and into banks and energy companies. Richard saldanha is still with us, from aviva, and can discuss this. Rua value of rua a buyer of value at this point . A buyer of value at this point . Richard we are starting to focus more on sectors and companies that can benefit as we start to see everything actively resuming. Isiff you see in the markets not entirely surprising. You still need to be quite selective right now. We are still focused on companies with solid Balance Sheets, avoiding companies that are highly leveraged. In areas such as industrials, its quite interesting, because you are starting to see companies that can benefit from Economic Activity picking up again but are underpinned by decent cash flow and Balance Sheets. I still think you need to be quite selective, but there are reasons to be optimistic. Are focused on the issue of buybacks, richard. Is this not something that is at dead . For the time being, the idea of a Company Buying back shares would seem repulsive to at least governments that are trying to bailout the economy. Bail out the economy. Richard absolutely. What we have seen in the last few years is a buyback boom in u. S. Stocks. That is likely coming to an end. You are hearing announcements of companies suspending buybacks programs buyback programs. I think in the near term, thats likely to pressurize earnings to some extent, if you look at buybacks having contributed to up to 2 of eps growth for the s p 500 over the past three years. Shortterm, that may be a bit of a headwind on earnings. Longerterm, the implications may be quite positive if we see more companies allocate more capital into capex investment, etc. In the long run, this could be quite a positive thing. Anna thats really interesting, because we do see that money going into capital expenditure. Let me ask about dividends, because the two are linked, obviously, and we are seeing a lot of Companies Cut back dividends in the sectors you would expect, oil and elsewhere we have seen government help required. But elsewhere, dividends are still being paid, a point in the Equity IncomePortfolio Manager is aware of. Richard absolutely. You have had a lot of announcements recently about dividend cuts, but i dont think there is any reason to despair. You are still getting dividends paid in and lots of sectors. In lots of sectors. From a global perspective, it is worth bearing in mind that in the u. S. , most companies are still paying dividends there. It is a lot easier for companies to turn off the buybacks and still keep paying dividends. As we look across the global landscape, we still think you can find attractive opportunities out there, and companies are paying dividends and in some cases increasing dividends. There is no reason to panic, certainly. You still have companies that have robust Balance Sheets that are going to pay dividends going forward. Matt all right, richard, it does not seem like investors are panicking much right now. Appreciate your time this morning. Next, the u. S. Says hong kong has lost its autonomy. That is seemingly a bombshell in terms of headlines. But we only see the hsi, the hang seng index in hong kong, down 1 10 of 1 right now. It does not seem like markets really care about the u. S. China risk for now. 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. Anna welcome back. Half an hour to go until the open of the European Equity markets cash trade, and futures seem to be on the upside as things look increasingly rosy. That said, lets talk about geopolitics, particularly in china, and what we are going to be watching out for. Chinas National Peoples conference insta day. Today. And we will watch for nissan earnings. The 30 pm u. K. Time, we get latest release of weekly jobless claims and a second reading of gdp to see if the economy suffered a deeper hit in the First Quarter than originally reported. Later in the afternoon, we will keep an eye out for the eia crude inventory report, as is often the case, matt. Matt the u. S. Says hong kong has lost its political autonomy from china. The move could trigger sanctions and have farreaching consequences for the citys special trading status with america. That status could be revoked. But china is unlikely to be deterred. Beijings legislature is expected to approve the resolution to impose National Security laws on hong kong today , before the National Peoples conference end congress ends. Joining us from beijing is tom mackenzie. Tom, how has china reacted to the u. S. Decision to does it s to dispute this resolute decision to dispute this resolution . Tom the chinese response to what we heard from mike pompeo, his address to congress, as you say, the Trump Administration now saying hong kong no longer has a high degree of autonomy from china, the response has , essentially, chinese officials saying this is an internal matter. They say the security law is necessary. The security law prompted this action from mike pompeo to downgrade the status of hong kong in terms of its trading relationship with the u. S. , at least in terms of his views on it. The chinese have said this is security law is not going to affect the peoples freedoms or the freedoms of Foreign Investors in the city, but that is unlikely to persuade the u. S. Administration. They have made a fundamental shift. From 1992, they carved off a special place for hong kong in terms of trading rights. Hong kong does not have the tariffs imposed on it that Mainland China has, for example, or the exemptions from Technology Exchanges and investment controls. Now we know the Trump Administration are looking to change