Welcome to bloomberg surveillance. Im Francine Lacqua in london. The markets are definitely focusing on a couple of things out there. ,here is a lot going in china global stocks continuing to it is yes and in the market. The dollar and treasury slipping. Homebuilder shares in the u k advance after a report the government is considering a temporary increase in the pay. Hold at which buyers weighing a Global Equity market that remains about 40 above its march lows amid this economic recovery, which is under threat from the continuing spread of the virus. We will have more on the markets but lets get to the bloomberg first word news. Here in london is leighann gerrans. Planning billions of pounds in two theaters and then use to rescue the arts and culture sector from the brink of collapse. Announcing the move, the chancellor tweeted the show must go on. He will outline his next steps for the economy on wednesday. The next key date for frexit progress according to one of europes biggest finance lobbies is september. That is when clearinghouses may need to start closing the positions of european firms. The association for Financial Markets in europe says three months may not even be enough for some of the larger clearinghouses. In israel, Prime MinisterBenjamin Netanyahu has declared a state of emergency. He says more steps need to be taken to stem the spread of coronavirus. The cabinet will now decide on new restrictions and present a plan to address the economic challenges of the pandemic. Netanyahu says parliament cannot behave like it is business as usual. Hascoronavirus pandemic permanently changed European Economic policy according to the bank of france governor. He cites the forging of a powerful joint fiscal plan for europe. He also says it has forced more extensive and exceptional Monetary Policy, which is likely to stay. 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. On leighann gerrans. This is bloomberg. Francine thank you so much. The weekend has brought more updates related to the pandemic. The who report a oneday high in global infections. Replaced russia as the country with the her thirdhighest number of cases. In the u. S. , new infections spread up to 2 versus an average of 1. 8 over the preceding week. Alberto, as always, thank you for coming on. The number of infections arising, yet economies are reopening and the market is ignoring it. How will it can out . Good morning, francine. We definitely have a disconnect between markets and the economy. However, one thing to note is the virus trend has been much. Etter in nonus economies in china and europe, the level of contagion has more or less stabilized and today, what we are seeing is a differentiation between u. S. Assets and nonus assets. We think generally speaking the virus has clearly differentiated governments that were simply find a problem versus governments that have been adopted a much more technical approach and we are going to see this in the growth data in the coming months, so europe and american markets are at an opportunity here because theyve been unlocked. Investors have been pouring they into u. S. Assets, but nonus economies have done better with regards to the virus overall, especially china and the Court European countries. Francine do you think we will see a correction or is the economy going to catch up with what we are seeing in markets . Abouto we are worried u. S. Assets and we think we think the u. S. Elections are no longer a done deal and we will see more support for the democrats, which will create some volatility. Policies are changing from Corporate Tax cuts and prowall street policies to promain street policies. What this means is for the first time, the recipients of aid are no longer going to be your only large companies, but we will have more universal basic income, we will have more s. Sidies to sme we will have more modern debtary theory, monetization in the extreme case. This will bring some inflation. The question is, what will Central Banks do . So far, they are anchoring yields so you have more negative Interest Rates against inflation, which means eventually, nonus assets will offer a better return and the dollar may have to weaken. We are positioned for upside outside of the u. S. At the moment and we are positioned to withstand volatility across u. S. Assets. Francine at the same time, we had a warning from Christine Lagarde. We will talk about possible deflationary pressures. Linkedin you make the call whether this will lead to inflation or will this be a global deflationary environment . We dont know exactly when the potential for inflation will begin. Currently in the shortterm, the pressures are deflationary. It is also true that policymakers reacted to the virus in a very nonlinear way, as a tipping point. Initially, they ignored it and then kicked in a very strong stimulus, which was a blanket stimulus in the range of five to 10 percent gdp supporting the economy. So the biggest question to ask yourself is as an investor, will the liquidity policymakers are injecting into the economy fill the gaps that have been created by the virus or will spending addictive with universal basic income in the coming years . Partially theis case. Some of this fiscal stimulus will not go away and Central Banks may become locked in to qe programs, for a long time. What a share in our view is that there is one thing that is not going to exist in the coming years, and that is a positive risk read of return. It means Central Banks will keep Interest Rates very low, even the longer part of the curve to yield curve control. Inflation probably will not be 5 , but will be 1. 5, 2 , 3 . Which is much higher than Government Bond yields, which will push investors to buy corporate debt. And equities that benefit from higher pricing power. Francine thank you so much. Alberto gallo from algerbris investments. The ecb president Christine Lagarde sees two years of downward pressure on prices in the eurozone before a recovery. More on that next. This is bloomberg. Francine live pictures of the louvre in paris, reopening its doors. The worlds most visited museum and home to the mona lisa, reopening today. With coronavirus restrictions, parts of the complex closed to visitors but it has been closed since march 13 and weve heard from the director over the weekend that they lost some 40 Million Euros in revenue. Things, getting back to normal in paris. The ecb president Christine Lagarde said the eurozone faces two years of downward pressure on prices, but could see a turnaround after that. Arde expects the crisis the president added the central bank will need to keep its Monetary Policy exceptionally loose. Inflation dynamics will be impacted with inflation to begin with and inflation that will occur, that we will have to anticipate, we will have to measure. They will most likely be based, if we have increased in productivity, on a natural increase in Interest Rates. The European Central bank and other banks launched ,nconventional instruments massive of securities so these were temporary instruments that they had lasted so the nonconventional instruments have become conventional instruments and there is a second change you have to consider. Policies. Al budget recovery will be european or will not be. Our response must deal with the emergency but be designed for the future. Take should allow us to revive our economys and at the same time, take a leap forward. We need to accelerate the transition, strengthen sovereignty while being open to the world and faithful to our values. Francine still with us, Alberto Gallo from algerbris investments. We were talking about deflationary pressure across the world. Europe, canat europe and the european economy reinvent themselves along the lines Christine Lagarde was saying . Billion, it is a game changer. It is an opportunity for europe under aforward to unite common fiscal policy. We see that as a game changer and many ministers are still underinvested in europe. European assets remain relatively unloved so if or ined, on the 18th august, it will signal a turning point and makes us more positive around european assets. Disinflation, i would say this is the main problem today and obviously the citing this inflation. The question is what will policymakers do if inflation moves higher to one or 1. 5 . For exploring policies would below. Training environment with very in Interest Rates, bunds negative territory, even having 1. 5 inflation is enormous for investors and that is why investors need to find other assets to capture the upside from the recovery and also from the coming together of european countries. Francine where do you find those assets in europe . There aree think clearly some winners from the virus but those are no longer interesting investment opportunities. A lot of Asset Managers and cios like to say i am invested in Investment Grade safe assets, investmentgrade credit. Those things are very expensive. They were only cheap for a week or two in march. You also have losers, which are sectors which were structurally already declining before the virus. Think about retail. Everyone is going to buy online in the coming decades anyway, so retailers were already. We like survivors, sectors that fromurvive, benefit government help, banks, industrial sectors. These are sectors that would benefit from a move towards state capitalist, which is a clear trend post virus. We are going to a state and sectorsconomy that can reduce cost and survive. Those are interesting opportunities across the world, particularly strong countries with the ammunition. Francine thank you for th joining us today. Alberto gallo of algerbris investments. I will speak to the former italian Prime Minister coming up shortly. This is bloomberg. Just francine this is bloomberg surveillance. Im Francine Lacqua in london. Virusvery from the pandemic may not come until 2022. Take a listen. Have been leaders proactively coming with a stimulus package that is to support the economy but i would like to highlight important elements. We should not lose the global challenges in the economy. Astock experience slowdown in 2019 and the pandemic has accelerated the slowdown in the Global Economy and created a shock to the astem, but we have seen positive response from the regulators and the g20 leaders, specifically the finance ministers and Central Banks, where they have learned from the previous crisis where they took their time to come up with a stimulus package but this time, the issue we need to look at certain elements of the Global Economy that enable us to look related toal changes digitization, related to our ability to have free trade and more importantly, should not lose sight of a key principle. Sustainability and also development, Human Capital developments. It is important we dont lose sight of them because normally through crisis, people forget about those longterm issues. Compliance, which is important. We have dedicated a special task force to address compliance. Can i ask you to put on your other half are a moment. Those are the global issues but you are running probably one of the most preeminent touch pieces of the Global Economy in sabic and you talked about the slowdown began before covid. Give the world a sense of what kind of recovery you are seeing in terms of demand and the shape of recovery that is coming across your desk. Let me start with positive remarks. People are really talking about a second or third wave of coronavirus. I think what we have seen, all governments have been able to lock down the system in order to unfold ands will give them the capacity to deal with the current crisis. I think the world recognizes they need to go back to normality and they have to build the resilience in the system and citizens to deal with such a pandemic. Therefore, despite the fact of any second or third wave, which people are talking about, is not going to push the economy to a complete lockdown based on our previous months experience. In terms of the outlook for the atnomy, we need to look positive recovery that is beyond to 2018. Lly reference that will be in the first four Second Quarter of 2022. We will have this year and next year a year of recovery. Wellpositioned to deal with these challenges. Side, from the business you suspended new capex earlier this year. Is that going to be enough or are you going to have to do more given what you are seeing . Think we need to look at this beyond just the capex. We as a company have a duty to make sure we have a very strong, reliable, safe assets to secure society and communities surrounding our assets. , top priorityl for us and then we go more to understanding how can we protect sabics Balance Sheets in addition to continuing having a clear support to our dividend policy and that also needs to be driven with our Growth Strategy to come up with how we manage our capital. Withire commies entire economies facing discipline, i can sure you sabic has a very strong Balance Sheet thellow us to cope with current market challenges and as you can see from our first half of this year, have announced first half dividends of 1. 5. That clearly shows how resilient ourcs Balance Sheet is and ability to cope with the current challenges. Francine that was the sabic chief executive speaking to bloomberg. We will also speak with the former italian Prime Minister enrico letta. We will speak about Foreign Affairs, ask him about europe and italy. Markets are focused on some positive news we saw with chinese markets. China, really proposing propelling the stocks rally to a onemonth high. This is bloomberg. I got an oriole here. Eh. Common bird. Ooh look over here something much better. There it is. Peacock, included with xfinity x1. Remarkable. Fascinating. Very. It streams tons of your favorite shows and movies, plus the latest in sports news and. Huh run the newest streaming app has landed on xfinity x1. Now thats. Simple. Easy. Awesome. Xfinity x1 just got even better with peacock premium included at no additional cost. No strings attached. Just say peacock into your voice remote to start watching today. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua, here in london. Lets get to first word news with leighann gerrans. Dani a new high for leighann a new high for daily Coronavirus Infections around the world according to the world health organization. Mexico has overtaken france to become the fifth deadliest outbreak, and scientists have written an open letter warning of the dangers of the airborne spread of the virus. According to the guardian, these dangers are being underplayed by the w. H. O. The coronavirus continues to spread. Hopes are fitting for a socalled vshaped recovery. Many forecasts are pointing to a full recovery not happening until 2022. Goldman sachs has revised down estimates for u. S. Growth this quarter. That predict it will be back on track in september and still sees u. S. Gdp growing on the percent next year. Bill who is facing allegations of paying wages as low as 3. 5 pounds per hour. The sunday times featured an undercover journalist working at atactory at a factory a fashion factory. It says they are totally conditions are totally unacceptable and is a busy getting further. They say the factory is not a declared supplier. Fading out the use of huawei equipment in 5g networks. A network for the National Cybersecurity center concludes u. S. Sanctions will meanwhile way has to use on trusted technology. It says that will make security risks impossible to control. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more im 120 countries, leighann gerrans. This is bloomberg. Francine . Francine lets focus on europes second economic recovery. Hospitals italys shock the world as the coronavirus took hold and what would be one of the worst outbreaks on the continent. With locked on measures eased, rebound was forecast in the Third Quarter as an overall drop in gdp of 11 . Rebuild for the future . Letta,joined by enrico former italian Prime Minister and dean of the paris school of international affairs. Thank you for joining us on bloomberg surveillance. Lets start with italy, and that i want to talk about Foreign Affairs in europe and the world. What is the prescription italy needs to get back on a stronger footing . Enrico the most important now the most important thing now is the decision about the esm. Reform of health care in the country, health in the , andry was really shocked it was attacked by this pandemic, and it was so difficult, and it is so difficult now, to relaunch it without european help. The main political issue now is a discussion about the use or think the esm, and i italy will take it. I hope the government will do it. The Italian Government gave a lot of money to citizens, entrepreneurs in the first period of the post pandemic, and next year the european money, the Recovery Fund will be there. Think the esm, i money will b