Coronavirus cases and political tensions. The Trump Administration rejects beijings claims in the South China Sea, accusing it of bullying. The u. K. Is set to ban huawei from its 5g mobile network. The plan would mean British Companies need to remove huawei infrastructure by 2027. Welcome to the program, everybody. Lets check out the futures. Lots of moving parts in terms of the market action. Lots of geopolitics to talk about as well. We have futures pointing to the downside in europe. We have to play a little bit of catchup with the united states. Lets get to some of the breaking news out of the u. K. That is certainly going to be one of the focuses in our program. The u. K. Economy shrank by 19. 1 in the three months ending in may. Getting a three month figure. Main manufacturing production rising by 8. 4 . Somecoming out manufacturing facilities coming out of the Strict Lockdown measures, working out how to manufacture in the current environment with covid safe practices. Mayeconomy grew by 1. 8 in month on month. I imagine there was quite a wide range around the estimate. Quite difficult to get a clear idea of bounce in the u. K. Economy in may. Also getting industrial output figures. That rising by 6 month on month. The estimate was 6. 5 . We are getting a take on the Services Sector as well. The threemonth index of Services Following 18. 9 . Investment was for a drop of 17 or so. The u. K. Economy shrank by 19. 1 in the three months ending in may. Lets get a broader picture. We will come back to that u. K. Data in a moment. Lets get a broader picture of what is going on in the markets internationally. We have the gmm screen for you. You can see the chinese equity markets on the back foot today, down by 2. 3 , hong kong down by 1. 7 . I mentioned the futures picture. It is what happened at the end of the u. S. Trading session that is impacting the european futures and asian trading session. We started to be more nervous about california, about some of the lockdown measures that have been reintroduced in california. Also nervous about geopolitics, the tensions in the South China Sea between the u. S. And china. All of that weighing on sentiment. That is really clear to see on these equity markets. I should mention what is going on with oil prices, down by 1. 8 on wti crude as we approach the opecplus meeting. That is a look at some of the breaking news from the u. K. , predominantly, and a look at what is going on in the markets internationally. Lets get into that conversation on u. K. Data with laura cooper, who joins us now. The headline across the bloomberg picking up on the most recent move, the newest information. The u. K. Economy grew by 1. 8 in may. That almost sounds like normal times, doesnt it . This is anything but normal times. Incredible to see a positive number. What a relief. It is true that it is encouraging to see a positive figure. I think the business kind of coming off the back of these exceptionally depressed levels of activity. It is likely to be the case with the 20 decline we saw an april, that will likely be the peak of the economic contraction. Inays data actually came weaker than markets had expected. I think that this does point to potentially more of a sluggish recovery ahead, as it does suggest a weaker handoff into those june figures. Manufacturing, construction were really the only sectors that began to turn back on their engine in the month with most shops and consumers remaining on lockdown. This does highlight that this will be quite a potentially sluggish recovery ahead. Anna laura, if we jump to the global story, we are talking about a couple of factors that knocked markets off their stride yesterday in the u. S. Session. One is the geopolitics, the other is the virus in california. Give us your thoughts on where risk assets go from here. The california virus may become the new swing factor for the markets. Interesting, just the fact that we did see a sudden retreat in stocks on this whether it wass, sparked by the california headline or geopolitical angst. It shows brewing market jitters that can be sparked by negative headlines. Futures today are flirting around that zero mark. There will be quite a lot from markets today. We had earnings kicking off in earnest with major banks today. Backwards looking data, highfrequency gauges on data. I think really what this tells us is that markets are going to be entering into this prolonged period of significant volatility. The volatility index yesterday sparked back to june levels. I think this does portend to maybe markets lacking a nearterm catalyst and kind of just continuing in these ebbs and flows within this titrating range tight trading range. Fed speakers could come out and continue this whatever it takes mantra. It will be quite a choppy session ahead. Anna that could be increasingly important as we continue to watch the virus count edging upwards. Let me ask you about these tensions geopolitically between the u. S. And china. In the session yesterday in the u. S. , it was interesting to see what was happening to the nasdaq Golden Dragon index. This, of course, a nasdaq listing, but companies that do a lot of their business in china. That was quite substantially pooled down by some of these headlines. Geopolitics seem to be gaining momentum in the mind of the market. Absolutely. This shows how sensitive markets are at this stage to these bouts of geopolitical tensions as we continue to approach the election season. Theh sector was underperformance was not just confined to those particular chinese stocks. We saw this broadbase. The new york index letter to clients. Led declines. Going forward, these geopolitical tensions will continue to be a source of ebbs and flows. At the same time, overnight, we had reports that the u. S. Is going to dismiss any kind of targeting of the hong kong dollar, which if you recall last week, was that Pressure Point for markets. I think this does just highlight the geopolitical tensions will be a source of ebbs and flows. It adds to this narrative of market volatility ahead. Anna thanks very much. Our markets live cali joining us with the latest strategic thoughts on the markets. Lets get a bloomberg first word news update for you. Back to the virus. The World Health Organization says covid19 probably will not disappear in the coming months and it is unrealistic to predict that a perfect vaccine will become available for everyone immediately. California declared a sweeping rollback of newly reopened businesses, closing restaurants, bars, and theaters. Hong kong tight and restrictions to contain a resurgence in coronavirus cases. Face coverings are to be made compulsory in shops in england from july 24. The move comes after pressure from unions, business groups, and opposition politicians, who have accused the government of lacking clarity in its guidance for defeating the pandemic. England has mandated face coverings on public transport last month. But made them optional for shoppers. Joe biden is calling for the setting of a 100 Clean Energy Standard for the u. S. By 2035. The democratic nominee will also commit to investing 2 trillion on clean energy over four years. The proposals mark a strengthening of the plan he proposed while fighting for the nomination. Global news 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Up next on the program, finding common ground. Angela merkel and Giuseppe Conte present a united front ahead of this weeks meeting on eu emergency stimulus. Will an agreement be reached . We will discuss next with axa ofestment managers head microeconomics. This is bloomberg. Anna welcome back to Bloomberg Markets european open. The cash equity trading day. Futures do suggest we will be considerably weaker at the start of trade. U. S. Futures are fairly flat, suggesting we are playing a bit of catchup. Angela merkel showed a united front with italys Giuseppe Conte ahead of a crucial eu summit this friday. They warned that the bloc needs to deliver a massive response to the pandemics economic fallout. We spoke to mario santino. He told us the European Council has enough Bargaining Power to appease all sides. It is a muchneeded deal. Closely hope leaders can into a deal as soon as this week , or at the latest, at the end of the month. The euro group, back in april, set the stage for a fast response. Thisok the first steps of response into the crisis and we to need to close this deal strengthen the confidence of investors, of citizens in the recovery phase of this crisis. Will a deal eventually come with any type of strings in order to get the frugal four on board with this . Mario i think we have enough bargaining room. This gives margin for maneuver at the negotiation table to find an agreement that fits everyone in europe. Process whenical we negotiate in europe. We have different views over the time agreement, this around but this time around, enough soere will be as to bargain and find a deal that suits not only the frugal, but the anna that was out mowing euro Group President that was the outgoing euro Group President , Mario Centeno. Now, we are joined by david page. Very good to speak to you this morning. We had some enthusiasm, confidence from Mario Centeno that a deal can be done despite the hesitance of 4 particular nations. How crucial is it for European Growth story that we get this Recovery Fund . David well, i think it is crucial that it comes through. And has underpinned investor hopes that we start to see some movement Going Forward in eurozone recovery. Centenos comments probably are a little bit of hope over experience. We think it is unlikely it will come this week or later on this month. As is the way with european negotiations, particularly with divergent views coming through, i think it is likely to take longer to come through. Takes some of the pressure off of the negotiations. I think we are likely to get something come through. I think the package overall is a fundamental step forward in what the eurozone is able to offer in terms of fiscal stimulus. I think it will take a little bit longer to come through. The risk of that is that the actual delivery of this, the stimulus that the euro is being spent themselves, is not going to be something that will supplement the eurozone economy in the near term. It looks like something that helps in the years ahead but not the corridors ahead. Europe will need further stimulus while this comes through. The pattern of the day. One of the risks is, if the data improve,materially if Continental Europe continues to really manage this any outbreaks of the virus quite effectively, then perhaps that is the danger that the resistance to put so much money into play just grows. David yes, i think so. What we are seeing at the moment is a very strong rebound come through. It has been across a number of states. T i think those Growth Numbers are beguiling. We get sucked into this statistical fallacy that a 10 fall and then a 10 rebound really just does not get you back to where you started from. Although we are seeing strong rebound coming through, we are still expecting eurozone growth down across the course of this year by around 7 . We are still looking at a very sharp fall. There still expecting unemployment much higher at the an itf this year th currently stands. Regardless of the fact we are seeing an encouraging early rebound coming through, there is a lot of work in terms of the recovery probably through 2021 and 2022. The ecb is playing its bit but it can only do so much. Fiscal stimulus will be important. It does not expect to see expenditure peak until 2023, 2024. I think we do need to see Something Else coming through. There is a risk that the politicians get a little bit lost in these numbers. Anna right. Charte just looking at a of the italian bond spread over german bunds. What would it take to move that spread further down . If there were something that could move that lower, the ecb, Christine Lagarde famously talked about how it was not her job to bring down that spread. Although, she clarified those comments later on. Is it the ecb that brings it down further, italian action specifically or the Recovery Fund, the paneuropean debt efforts . David i think once you see the Recovery Fund working, want to see almost a step towards fiscal and once you see the some partners,r one of its that i think that will give the market some confidence. We do expect that to come through. In the meantime, the reason we have been able to hold at these ofels, despite the fact is down toances, it the ecb to manage that. Although Christine Lagarde famously suggested that was not their role, actually, everything they have done since have suggested that has been exactly what they needed to do. It has given them the opportunity to manage those spreads and make it possible for governments across the euro zone to do the job they need to do in the short. The short term. Anna thanks very much, david. Investmentfrom axa management stays with us. We talked about some of the u. K. Data at the top of our, didnt we . U. K. Gdp data showing some kind of growth in may, but not as much as some anticipated. We will talk about the u. K. We will also talk about it from inflation perspective. Can higher prices eroded the u. K. ballooning debts . We will discuss next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 40 minutes to go until the start of the european trading day. Down by one point 4 , according to euro stoxx 50 futures right now. Away itsannot inflate growing debt pile like it has done in the past, according to richard shes, the next chairman of the u. K. Fiscal watchdog, the obr. Higher inflation would just push up the cost of servicing it. Axa Investment Management is still with us. W seems to be that a third of the debt in the u. K. Is index linked. I guess i was thinking that is only a third. What about the other 2 3 . Is there any future in inflating away some of this debt for the u. K. . David i think what the u. K. Needs is nominal growth. Part of that nominal growth is to make sure we have healthy levels of inflation. When we talk about inflating away debt, it is often viewed that strong as part of how we reduce the very high debt burden. There clearly was not on inflation linked stock or debt out there at that time. The u. K. Troduced after economy had used a relatively high levels of inflation to bring those numbers down. It was designed to give ofestors a degree confidence that that would not happen again. Policyccess of that constraints them. That would not be consistent with that either. There really is not flexibility further u. K. To be able to do that, nor indeed many other developed economies. We are just seeing some comments coming through from the chancellor, rishi sunak. He is commenting on this gdp data, saying that the gdp figures show the scale of the challenge. I was looking at what you penciled in for the u. K. In terms of Growth Numbers this year. Did the positive reading for the month of may give you any reason to change your assessments about how much the u. K. Economy goes this year . David it does make it more difficult. We penciled and a 4 rise in gdp coming through this month. What you do not get in may, you might get engine. In june. There is a large degree of uncertainty. These numbers suggest that the manufacturing and Construction Side of the economy responded very well to the reopening. The service sector, where really we saw the delayed reopening because of the virus coming through, that is where we have seen the weakest growth. That is what has hobbled the gdp numbers. If we see the Service Numbers picking up in june, july as the economy is opening up to the same degree that we saw in manufacturing and construction, then you could see a bounce or catch up coming through. We thought we would see a 20 quarter on quarter fall for the second quarter. Taken alone, these numbers are to the downside. That contributed to our view. Anna ok. David, thank you very much for joining us. Investmentfrom axa management, thank you. This is bloomberg. 49. 50 i found you good job. Now im gonna stay here and you go hide. Watch your favorites from anywhere in the house with the Xfinity Stream app. Free with your xfinity service. Now any room can be a tv room. Stream live tv, on demand shows and movies even your dvr recordings. Download the Xfinity Stream app today to stream the entertainment you love. Xfinity. The future of awesome. Anna welcome back to Bloomberg Markets european open. Start ofs until the what looks to be a negative session. We will talk about reasons behind that in just a moment. The late drop in u. S. Trading will look to factor into european trade this morning. Here are some of the things we are watching out for. At 10 00 a. M. U. K. Time, we will get some Industrial Production figures out for the euro area. We get some eurozone data later. Cpi will be, u. S. Published. The german chancellor, Angela Merkel, meets the spanish Prime Minister at 5 30 p. M. We saw her with the italian Prime Minister in the last 14 hours. Later on, we hear from the st. Louis fed president , james bullard, and the fed governor. We get secondquarter earnings from some of the major u. S. Banks. More on this from dani burger as we go through the program. Jp morgan, citigroup, and wells fargo will be reporting today. We will bring you a previe