Television across this nation, around the world, particularly those of you from continental europe. Lots to do in this hour. Right now, lisa and i need a primer on how this is not another exercise in kicking the can down the road this weekend in europe. Jonathan its got to get done. We got to see some progress. Theres a pool of money. What will be grants . What will be loans . What are the Strings Attached . That is it. What do we wake up to in the business papers across the whole of europe . Isurope united europe united were divided . Its really is europe united or divided . It is really not funny anymore. Tom how do you boil this down for our american listeners . They are like, weve seen this plenty of times. Jonathan if europe doesnt get a hold of it this time, it will be another 10 years of crawling out of an economic hole in a suboptimal way. We will have crisis after crisis, political episode after political episode, and redenomination risk that dominates Global Markets. We do not want to see a repeat of that. We need some progress on the continent. Tom part of this is my reading this weekend, and i am behind on ig versus highyield. Weve got a massive debt yield nation. Is we see new debt coming on. How fragile is highyield . Lisa theres concerns that the likes of carnival and norwegian cruise lines are going to lose more money at a time when their whole industry has been thrown into existential angst. Theres been more interesting highyield at a time of states facing the underlying backdrop of fiscal support globally. The idea that all of these very real risks, whether it is the European Union not coming together on fiscal support, increasing tensions between the u. S. And china, and china and europe, whether it is the increasing byron scotts that are slowing growth increasing virus counts that are slowing growth, these are some of the results weve gotten out of riskier debt. Tom she can say existential angst and get rid of it and get away with it . If jon or i say that, we get a threepage memo. We will get right to it right now with a brief to get you ready for the weekend, and to stagger to q3. We can do that with brian levitt, who really filters in all sorts of getting. He is the Global Market strategist for invesco. What are you writing on into the end of july . Question ibiggest keep being asked is about the shape of the recovery. I think there is so much concern about whether it is vshaped, w shaped, or ushaped. The reality is i think it is going to be a prolonged, protracted recovery, intermittent fits and starts. If you look historically at different recoveries, you can look at the one from the early 2000, the more vshaped. Early 1980s, more w shaped area 2008, 2009, more ushaped. The markets actually did best in that ushaped. Im expecting some volatility in protractedrm, but a ushaped recovery can actually be just fine for the equity markets. Jonathan it is hard to believe i made a mistake in the data check i did up top. Turning thehe has had we have seen, the vix down to 29. 8. That is not normal. Jonathan brians point is that anemic recovery could be sufficient. For the recovery to be shallow doesnt mean that this market cannot rebound. Is that the point youre trying to make here . Brian that is the point i am trying to make. We learned that coming out of the financial area investors largely bemoaned that weak recovery for a number of years, waiting things to start to look good, for jobless claims to get back to average, all of these different things. By the time that happened, the markets had already staged a pretty sizable advance. I think obviously, we are all monitoring mobility. We are monitoring reopening. I thing if those things turn, you will have volatility in markets. My point is if you are a longerterm investor, focus more on whether things are Getting Better or worse rather than good or bad, even if they are Getting Better modestly, slowly. Markets should do well. Remember, it is going to be a very long time until we get back to full employment, until there is some pickup in Inflation Expectations, which would mean policy is likely to be accommodative well into the future. Jonathan weve had people lining up to get overweight europe versus the United States. Is that the right idea . Brian the interesting thing about the nonus markets is it looks like we may be for the first time in a while in an environment where the dollar is stable or dare we say weaker. The aftermath of the financial crisis was strong dollar. The u. S. Emerged from it in a better position, and it looked as if the Federal Reserve ultimately did raise rates for the rest of the world. Now you are in environment where the u. S. Is struggling to come out of it. The dollar is under some pressure as policy becomes very accommodative. That is likely to persist. What that enables you to do as a u. S. Denominated investor is to start to look to other parts of the world where evaluations are more attractive. I would say within all of that, when you are looking international, i would still favor the growthier parts of the market rather than looking for the more economically sensitive parts of the market that will wire a pretty significant that will require a pretty significant acceleration in economic activity. I would say for the growers, the companies on the cutting edge of structural changes in society, those are the types of names i would be allocating to outside the United States. Lisa this is such an important point, the idea of going to europe over the u. S. It has currently been what a lot of investors are saying, which is why the euro has been stronger versus the dollar since march. We have this meeting in brussels that looks tenuous in terms of them getting a deal done. What is the Downside Risk not only to the euro, but the entire european risk arc at risk market should they fail to come to some kind of accord . Brian it is a great point. With any nascent recovery, if you dont get the policy mix right, that basic recovery is not going to persist for too long. Much like in the United States how we have to get the policy mix right, not only monetary, fiscal and reopening, the same can be said for europe. Perhaps a Silver Lining in all of this, if we can even find Silver Lining, is that this may lead us to more europe rather than less. That is what we have all largely been clamoring for for some time , the hamiltonian moment to the , thed states and europe joint fiscal union. If europe doesnt get the policy mix right, it is likely we will see a lot of years that look like what we sign the aftermath of 2008. We are hopeful, and we will be watching closely. Jonathan the unicorns, the rainbows, the lollipops, we all wanted to happen. I have been conditioned to be skeptical about it. What is going to make it change . This is not a political point. It is not about political bias. This is a point about politics. The politicians on the continent regardless of whether they are on the left or the right, they have disappointed again and again and europe. We have seen it on the far left in europe, on the far right in europe. When does it change . Brian we have seen disappointment, obviously less so from the European Central bank, but more so from the elected officials. Perhaps desperate times call for desperate measures. We will find out. Lets wait and see what the days bring us. But i believe that what we have seen is incremental steps. It has been a very gradual move more europe rather than less. To 2011, 2012back during the european debt crisis, there were concerns that the union is bringing up, that they would move away from the is breaking up, that they would move away from the common currency, and yet, here we are. Lets hope the incremental steps continue to be favorable and this becomes something of a Silver Lining out of all of this. Jonathan great to catch up with you. My best to the team over at invesco. Could this be the moment that finally unlocks some sustained dollar weakness and a hero that gets back through eight euro that gets and a euro that gets back through one dollar . Tom youve got to really listen to david bloom to get an fx update this morning. Jonathan the theme from hsbc for the last few weeks, the team of dollar resilience pushing back against the cyclical, structural, political arguments for a weaker dollar and talking up dollar resilience. Lisa i always question where you stand on european leaders i wouldith some sort of wonder what tom things about the dollar weakening. Jonathan everyone knows where i stand on politicians worldwide. Jonathan 100 ash lisa lisa 100 . The question is how much does a strong euro torpedo goods coming from the region . Up until now, it has been viewed as a sign of strength. Jonathan i would take the euro pushing higher over a weaker euro to try to fuel exports and everyone pessimistic about it. I think we would rather see a stronger euro and real reason for optimism on economic recovery and fiscal integration in the perceivable future. I would take that over every thing else, and i am sure others would, too. Coming up on the program, will thing much out on the program, wolfgang munchau. This is bloomberg. Ritika with the first word news, im rick gupta. Across the im ritika gupta. Across the u. S. , states are officialscould are warning that they could implement lockdowns again. Case numbers are climbing but all but six states. The white house has drawn a line in the sand for the next coronavirus a bill. President trump could reject a measure passed by congress if it doesnt include a payroll tax cut. Democrats are solidly opposed, and even republicans are cold the idea. In the u. K. , Prime MinisterBoris Johnson will announce 3. 8 billion of extra funding to help repair the National Health service. He is also due to announce plans to by the end of october. German chancellor Angela Merkel is raising doubts about reaching agreement on a Landmark Recovery fund this week. In brussels, eu leaders are meeting in person for the first time in five months. Amongst them, how the money will be distributed and greenlighted. Reportng to a supplement on secondquarter gdp, the accommodation and catering industry in china shrink 18 from a year ago. Some areas in china still have pandemic restrictions in place, plus tourism has shrunk as people avoid public places. 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. Im ritika gupta. This is bloomberg. The stakes couldnt be higher. If we do it right, we can overcome this crisis stronger and emerge stronger from the crisis. All of the necessary pieces are on the table, and a solution is possible. Jonathan ursula von der leyen there, European Commission president. From new york city this morning, alongside tom keene and lisa abramowicz, im Jonathan Ferro. Counting you down to the opening bell, with equity features shaping up as follows in new york city. Think of this as the bounceback from yesterday off the back of those netflix numbers. In the fx market, there is your stronger euro. 1. 14, up 0. 4 going into an important we can for the europeans. Tom look at the technical constructions of the euro. Certainly at the highend of a sloppy range that we have seen. Lisa agrees with me maybe once every three weeks. Arrow and i havent pharaoh ferro and i havent agreed since christmas. Weve got to talk to wolfgang intelligence on his definitive knowledge of germany. Jonathan it was christmas of 2015, just to clarify. Unchau joins us now, of euro intelligence, the director there. Talk to us about chancellor merkels shift in the last 10 years. The difference in this crisis compared to the previous crisis, and what is driving it. Wolfgang the difference is that , therevious crisis possibility of joint borrowing and joint physical effort. That was the casing 20 filed that was the case in 2012, and that prompt at mario draghi to act the way he did. Germany was not prepared for that discussion. Her party was not prepared. Her country was not prepared for that discussion. The germans framed the euro crisis is pretty much the crisis of fiscal irresponsibility. I disagreed with that framing, but it was very much the way it was talked about in germany. ,he greeks, the italians everyone was living beyond their means. Situation, it was impossible to act jointly. This time around during the coronavirus crisis, the germans felt really sorry for italians, and there was a great groundswell ofs empathy for what happened and for the need to show solidarity. Sensed that shift in public mood quickly and realized this was a good time for a joint public effort. This is not germany shifting on euro bonds and fiscal federalism or any of these things. This is a oneoff. Merkel wanted a big oneoff gesture, which is why she and emmanuel macron, president of france, agreed to this 500 billion proposal of onetime fiscal stimulus. This is what they are discussing in brussels today. Jonathan there is a belief that this comes a mechanism to do the same thing over and over again. Are you saying that wont be the case . Wolfgang absolutely, that wont be the case. The whole basis for this is that it is a oneoff. For people regarding this has the beginning of a larger process, legally, they cant do this again. What will need to happen for this to become the first step in a multistage process would be for the Member States of the eu to change their treaties to say that the arrow bond is now part of what the euro bond is now part of what we are doing, and i see absolutely zero chance of that happening. The dutch will certainly not agree to that. I am not even sure that the germans, merkel at this stage would agree to that. What happens now in brussels is a oneoff, and it should be seen as a oneoff. It would be very reckless to think this is the beginning of , thatd of the euro zone we have nailed it. We havent nailed it. Tom i want you to talk about generational shift in the leadership we will see this weekend. We remember the old horses of this development who came out of world war ii under exceptionally difficult circumstances and made this European Union. Is it a generational shift this weekend in brussels . Wolfgang i think it is a generational shift. It may well be one of Angela Merkels last big appearances in europe. She still has another year to go, but the new generation, the room forr guide in the the Younger Generation is the Prime Minister of the netherlands. It is a generation of younger. Rime ministers this generation is very different than the generation marked by the second world war. In thiseration was born europe, and they have a desire to carve out their own country. It is a very different mindset that has governed the council. They usually come together, but is apirit of the 1950s thing of the past. Thethan deeply lisa leader of the frugal for, does he have an argument the scope for the plan . Wolfgang he has a number of good arguments, and lots and lots of bad arguments. The good argument is that it is absolutely wrong to preassigned country allocations. Italy gets 80, spain gets 80. The commission gave that list of countries, and then they retrofitted the various criteria so that this was the outcome. Rudder says this is a ridiculous way of proceeding. Basically, if you want to look at the effect of the crisis, we dont know the effect, so you have to take current data, and that may suggest that belgium would get a bigger share because belgium is suffering from the crisis. With if the agree general rejection of any kind of european solidarity, that everything has to be alone, that countries need to reform and a quid pro quo to get the money. There are lots of unreasonable aspect of it, but the way the package was designed, it has made it open to criticism. Package is trying to do too much with too little money. Is trying it is trying to be a fiscal transfer, trying to be an investment program, and trying to solve italys solvency. Ssues however much it may be, you are not going to solve all of that with one package. Jonathan always appreciate your time. Stay close. Weve got to follow up with you on this. Coming up next on this program, mkm chiefarda, economist and strategist. This is bloomberg. Jonathan 60 minutes away from the opening foul. Recovering from yesterday evenings losses. From new york city, good morning to you all. Alongside tom keene and lisa abramowicz, i am Jonathan Ferro. 1. 1424 going into an important weekend on the continent. In the United States, the physical discussion will continue. Thisond market wide open administration to continue acting counter cyclically. Your yield on a tenure security. 6 . Tom the yields are extraordinary and screams of financial repression to steal a phrase from william gross. , whong us is michael darda takes firstorder economics and folded into market strategy. Thent to go back to financial crisis and isl m theory and the effect of massive Government Debt on basic algebraic functions we all take as gospel. Are we ready to blow up our economic theories because of a 4 trillion deficit . Michael i do not think so. Weve been talking about isl m modeling over the course of the last few months, and it was actually quite helpful in thinking about the liquidity shock that hit in the early phase of the pandemic in the dark days of march. We can see that in the inflation breakeven market. There was the scary period where real rates shot up and Inflation Expectations crashed. Extraordinaryeds actions, that has reversed. The fiscal deficits are not putting any upward pressure on rates. A large part of that is because we have a pad a big crash in the economy. We are coming back faster than anticipated over the last few months, but theyre still ground to make up, especially on the labor market and there are still lingering risks so the rate structure is low. Ofhael tom you are one the great nominal voices of the racket. We have seen many requests this week for the return of the real yield. It is under intense discussion. Forget about the real yield. The nominal yield