Operations as the pandemic wreaks havoc on its business model. Good morning, this is bloomberg surveillance. I am Francine Lacqua in london. Lets get to the headlines. Expectations of a 6 slump in the Global Economy, but a caveat hang if there is a second wave, which some economists are expecting, it would be a 7. 6 slump. The oecd is explaining what will happen if the economies stay open and there is a second wave and second lockdown. In theetween 6 slump Global Economy and 7. 6 if there is a second wave. The markets are focusing on the rally in a couple days ago. It is about the fed and what they will do today. Investors are waiting for the decision on monetary policy. Treasuries edging lower and crude oil retreating. Lets get to the first word news in london with any murder. Dani the World Health Organization is walking back its comment on the asymptomatic spread of coronavirus, a day it was very rare, it says it is unclear. The head of the unit says previous projections were a misunderstanding of her comment. Standard charter facing a backlash to back hong kongs controversial security law. Investors say it is uncomfortable about the decision. Its Parent Company is one of the biggest shareholders in the two lenders. Mike pompeo describes the move as a corporate kowtow. The announcement triggers a race to replace him, leading one of the blocs most powerful body. They are divided between geographical and political lines. The economy minister is a strong contender. Britain has gone a record two months without burning coal, the longest the dirty fossil fuel had not been used since the start of the industrial revolution. Coronavirus related lockdowns have hit electricity as industry and commerce remain largely closed. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Off with lets kick it the fed, no changes the expectation for today. All but certain to keep his benchmark rate on hold. Officials will publish their limit and growth targets for the First Time Since the coronavirus outbreak with an increasing focus on Racial Disparities in joblessness. Control, the central bank is expected to follow through with the policy if the 30 year deal becomes unhinged. Joining us now is Anna Stupnytska, head of global macro investment strategy, Fil Investment Management. Always great to see you. What are youjoining us now is aa stupnytska, head of global macro investment strategy, Fil Investment Management expectingd to do today . I think they will have to act. They have seen good easing of conditions, and the economy is reopening. They do not need to take any action given the activity data. I do not think they will be targetedg what will be. They will say there is flexibility and if needed they will implement later in the year. Problematic is the jobs number for the fed . It was better than expected. Does it mean the fed thinks the economy is on a better footing, or are they worried about a second wave . Anna no, i do not think it is a itblem for the fed because was higher than expected. Companies looked to rehire workers. I do not think this is an impediment for the fed in any thebecause they believe Unemployment Rate will remain and doubledigit through the year into next year. We are hearing from many once the scheme expires after july, i think we will see permanent layoffs. I think the fed is aware of that , so this is what they are thinking about, the next few months and years, not what happened in may. Francine when you look at the pushback that we heard from many investors and the fed saying they do not want to go into negative territory, what needs to happen to contemplate negative rates . Anna i think this is very difficult for the fed, particularly given its significance as a Global Institution for the markets and the Global Economy. We will probably have to see maybe another big shock. I do not know if the second wave will be enough, but we will have to see about the economy, but right now it is unlikely. There are many tools they can use. Remain marginal if such an adjustment is needed. They could go on a similar path as the bank of japan and buy equities. This is very controversial. They will do that before going into the negative rates territory. Francine when you look across the world, how difficult is it to see the u. S. Matching with europe, economies that work in cycles. Doesnt mean they will recuperate much quicker . Lot i think actually a depends on the reopening itself. The u. S. Has been reopening faster than its rate of infection would suggest. Many states are seeing a rise in infections. Think economies reopen, i now, is more positives more positive policy with the message in europe in terms of National Support and national stimulus, particularly in germany. The fiscal bank is no longer fighting the crisis but it is more about growth measures. It is not positive just in the longerterm and the euro area. Andcombination of reopening this fiscal signal bodes well for the euro area recovery. , there has been a of monetary support, but i worry about the looming fiscal cliff in terms of Unemployment Insurance expiring in july. And another fiscal package is potentially coming, but the probability is falling over the last few days. I worry whether it is enough to recover in the next few months. Francine when you look at the figures we had from china, we had data that seemed to show possible deflationary pressures. Do much does this have to with the price of oil going down, and could be worrying longerterm that is more structural . Anna it does have to do with it is a i would say structural trend. Been in thei has deflationary territory for a few months now. Oil is one of the leading inflation for global or deflationary pressures. There is a huge shortfall of demand versus excess supply, not just in china but globally. That is the worry i have for the recovery. No matter how much liquidity is in the system, if demand is low for whatever reason, whether behavioral or income loss, there are some he reasons it may not come back to previous levels. Worry we will continue to inflation expectations, this could be a big problem for Central Banks. Much,ne thank you very Anna Stupnytska, head of global macro investment strategy, Fil Investment Management. We will have full reports on the fed decision. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. I am Francine Lacqua in london. Dani time is running out for commerzbank to fix itself, according to cerebrals Capital Management in a confidential email seen by bloomberg. Leadership is focused on profitable revenue growth. Lenders fromeeking the advisory board. Deutsche bank loan provisions surging in the Second Quarter to the highest level in over a decade, as it grapples with the economic slowdown caused by the coronavirus. The cfos says the money set aside for bad loans will reach 800 Million Euros in the three months through june. Owners suffered from the lockdowns in most of its key markets. To counter the hits, they plan to invest 900 Million Euros a year through 2022 to boost its Ecommerce Operations and expand store space. Francine thank you. Prices slowed, suggesting an uncertain recovery from the coronavirus slump. Still with us is Anna Stupnytska , head of global macro investment strategy, Fil Investment Management. We were talking about deflationary pressures in the chinese numbers. What kind of economy will we see from china in the next couple of years . Will the transition to consumer, or will it be a more fraught relationship with the west . Anna i think it will be difficult for them to make its transition given how the customer has been affected and will continue to be affected by the crisis given social distancing. Continues as we see spikes of infection across the country. The issue of unemployment in china is not getting enough attention. It has been surprising because official statistics do not indicate if you look at the ,umber of different indicators it suggests the problem is much bigger than we think. Particularly for groups of Migrant Workers and also graduates. This is something that will continue putting pressure on consumption. On top of everything, we have the chinau. S. Relationship tensions. U. S. , but thehe rest of the world, the u. K. Government are discussing how to limit dependence on china in bring all the to Strategic Industries in medical equipment and medical protection onshore. This is a big global thing. Francine at bloomberg surveillance we had a slight technical glitch, we are back with Anna Stupnytska, head of global macro investment strategy, Fil Investment Management, and we are talking about emerging markets. And specifically latin america. What you do with a country like brazil right now . Worrying, because it is not just internal issues from politics and the spread of the virus, and relatively limited support. But also business depends on china and the rest of the world, and given that the recovery is , brazil ise slow facing a tricky time. It is interesting to see markets are not doing so bad particularly dollar weakness is benefiting emerging markets generally, and brazil and latin america particularly. It is worrying and something that will become more visible over time. You look aten emergingmarket currencies, it brings us back to what the fed and jay powell will say later on. How much do you see in terms of swings with that . It depends on the fed, and what happens with domestic policy. Emerging markets are in a key doition because they cannot a lot of easing because it will. Ffect the currencies and if they do too much and we are in a classic em crisis where the currency drops significantly in the central bank has to step , ito defend the currency think it is a tricky situation for them. That is why the fed has the answer the global cycle to benefit the emerging markets given the limited room on the policy fund. You mentioned some of the funds we saw in europe and opportunities we could see, what do you do with the u. K. Now . Clearly, we have the issue of brexit coming up. It is worrying in the sense that a lot of power in the government is going to managing the crisis, how much theyear have to think about brexit. We do not expect the extension. We think it will happen at the but i worryear, about that. I think the bank of england still has more to do in terms of easing, particularly as we move through the year. They will probably have to cut and more qe to support the market as we approach brexit. I think we need to wait and see what happens with further policy support, and how extendchemes sufficiently to bridge the gap. Thank you so much. Anna stupnytska, head of global macro investment strategy, Fil Investment Management. Francine finance, politics. But get to first word news with dani burger. Dani if treasury yields drive higher, the fed make implement curve control, according to billionaires jeffrey good lie from double line capital. Jeffrey gundlach from double line capital. Decision is policy at 7 00 p. M. U. K. Time. World Health Organization a day after say people without symptoms passing on the onus was very rare, it now that the illness was very rare, it now says it is unclear. They say previous suggestions were a misunderstanding of her comments. Hsbc and Standard Chartered are facing a backlash for the decision to back hong kongs up a controversial security law. An investor says it is uncomfortable about the decision. Its Parent Company is one of the biggest shareholders in the letters. Mike pompeo state has blasted hsbc, discovering the move as a global kowtow. 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, dani burger. This is bloomberg. Francine . Fedcine as we await the decision today, investors are taking stock of a rally that sees the s p 500 wipe out losses for 2020. A Legendary Hedge Fund manager says it is concerned with those who are doubtful about stocks. If there was a line for humble pie, my lord, we all had huge gulps of it, me included. Francine joining us now is Kathleen Hughes from Goldman Sachs asset management. Thank you for joining us. When you look at the fed, what do you expect in the fed . How did the jobs report change everything from where we were expecting the fed to be in six months from now . Kathleen good morning. I think when we look at what weeks at what we expect from the fed today, it is not in terms of policy changes. We had some fixed income consumer activity, we had some surprise in the jobs report on friday, but we think they will continue a dovish stance without any major policy announcement. We can point to the fact that they are very focused on the potential second wave of the virus. We are also still digesting what the Economic Impact of the virus is, so i think that is where the fed is mainly focused. We heard from the vice chair recently that it would be a couple months maybe or further down the road before they did announced changes. Ar base case is, there is small chance that they could get some guidance or info on for guidance, or the reclassification of qe. We think that will come in time. Francine when you look at what is going on around because of the pandemic antilockdown and the economy, where do you see the biggest unknown . Partly it is because the virus in itself, but is there anything in the economy or the markets that clients are focused about . Kathleen i think they are focused on what is the overall impact to the economy. Everyone is watching both employment, we are watching virus and health numbers, all of that play out. I think what we have seen in howing to clients is really this impacts their own companies, their own balance sheet, what do they need to get through this. Certainly the actions of Central Banks early on in the crisis have been focused on bridging the gap, stabilizing the economy, and are really focused on seeing us through this slowdown in this unpaired and this unprecedented economic slowdown. Kathleen, is the money do clients worry that the money, what was promised by Central Banks, did not get to the right place, or are they confident in an infrastructure used by Central Banks to get the money where it needed to be . Kathleen i think early days there was that worried that the money was not getting that last mile to where it needed to get to, but what we are seeing now is that the mechanisms are in place. Certainly the unprecedented debt issuance, more than 1 trillion has been issued this year by corporate, and that has made its way on the corporate balance sheets. That has been behind the huge runup in assets in global money market firms, so the global money market funds are up 1. 2 trillion year to date as of the end of may. That corresponds closely with the amount of debt issuance we have seen. If you think about it, ceos were faced with the same uncertainty in terms of how their own companies would be impacted by the economic slowdown, so they did what they needed to do and shored up their balance sheet. So that money is sitting there and will be deployed and put to work as needed. That is really a good example of money getting to where it needs to to join the comfort side the corporate side. Francine i know you said they learned a lesson as a lot of us work from home or work remotely. How will that change a lot of this and how they view risk . Kathleen i think risk is always something in mind. We have seen it manifest itself in a couple of ways in a conversation we have been having since the start of the pandemic and the move to remote working. One clear way it has come up in conversation has been around technology, and the desire to make sure that they are relying on technology to reduce Operational Risk, whether that is investing money as corporate treasurers do every day, making sure there is no risk involved in investing that money, and with people working remotely, they are less able to interact as closely as they might have been. ,n technology, cybersecurity and the safety of that Technology Come and the transparency that that technology can give them. I think technology is a way to reduce some of that Operational Risk and drive efficiency. S areis what corporates focused on. Francine how much is the world how much is the corporate world focused on the world with selling differently . Kathleen that is a great question, one that were spending a lot of time on. The whole topic of esg has been front in the mind of investors long time. Tes for a you spent lots of time with important ceos and government officials at the World EconomicForum Earlier this year, and esg and sustainability is at the top of mind. Looking at the environment and the supply chain in reducing carbon emissions, relying on clean energy and Renewable Energy i think since the pandemic, the focus has really in esg, and the importance that that is bringing to the forefront for investors and for companies. I do believe what we have seen is that companies are going to be judged by both vect