22 days to go until the election. Trump trails joe biden in a national poll. Yuan rally hit the pause. A weakerlowed with than expected fixing. It is just gone 6 00 a. M. Really filled with a lot of fingerpointing as mark cudmore points out. No one really expect money from a major new package before the u. S. Election, but they are betting on a monster injection. That puts our focus on the rising coronavirus cases europe is battling, and attention will shift to london. We will hear about restrictions from Boris Johnson. Lets take a look at how. Monday lets see how monday morning is shaping up. Equities, the csi 300 outperforming. Up to. 5 . There is a lot of optimism ahead of president xi jinpings address this week. That is expected to announce reforms to the upside. Trade,. S. Equities of the bond markets will be closed for columbus day. Lets take a look at what is going on across asset. When you look at the currency space, it is about the yuan. A higher dollar weaker yuan. This comes after the pboc making it easier to bet against. Libya reopened its biggest field. For libyas economy, a headache for opecplus. On the eurodollar. Officials are stepping up efforts to contain the virus. Boris johnson is expected to announce a new tiered system. Italys government is working on tighter restrictions on social gathering and sports. Our reporter joins us. Maria, what are the new restrictions we are going to learn about today . Weekend,ing into the we talked about how we were going to see new restrictions, and they are coming. Today, the Prime Minister will make the speech. We understand that the government will see that the nation will be divided in different colors. That is the risk of virus and getting that contagion. You would be divided in colors that go from the risk as medium, high, or very high. This is already being done by the french government, and the goal behind it is to allow you to tailor the restrictions. This is not a general or national lockdown. Let you aim to do is tackle specific areas and specific problems. The other country in focus today is italy, which until now had done a very good job at keeping the curve flat. But we are seeing cases jump, the highest since late march. This is a concern for the Italian Government. There are going to be more restrictions today designed to curb some of the social interactions, to avoid the time people spend together. The Italian Government does not want to see anything that looks like march at the start of the year. It was traumatic for the country. Annmarie certainly. I dont think any leader wants to go through what we went through in march again. But we are seeing covid cases take higher covid cases tick higher. What will be the impact on the economy . Maria you make a good point. We are seeing france posting new records. Madrid has gone into a very light lockdown. The key takeaway at this point is these measures are going to be here for longer than expected. Weeks. Not about two this is months we are talking about. Those restrictions affecting tourism and the service industry, probably becoming more structural for the economy. We could see some weakness kick in again because of those restrictions. Thank youmaria tadeo, very much. She will be joining us later. Joining us is our guest, the head of global macro strategy. Our markets properly pricing in more economic restrictions that maria just outlined for us . Guest good morning. I think markets are pricing in softer measures. More measures, yes, but they are betting on the fact that they will not have generalized lockdowns and that policymakers will try to keep these measures as soft as possible and not impacting growth in the way it did over the spring. That said, we know that q4 was going to be a little softer. We know that we are seeing this. Ost in annmarie you have reduced your overweight to europe. Early on in the pandemic, the debate on wall street was whether or not europe would outperform and recover quicker than the United States. Going w think it is that trade is going to switch and we will see the u. S. Potentially outperform europe . Guest i think it is going to depend a lot on the president ial election. There is a view that we will get bidenh stimulus from a and Blue Congress that that is going to be positive globally, that the dollar will be a little bit weaker, and that means that elsewhere you can have better performance as well. But when you look down to it, u. S. Growth is most likely going to be higher. It was going to be anyway, but higher compared to other regions, including europe. It is something we are going to have to see. There is optimism about u. S. Growth, about the recovery, about stimulus. Some of these sectors can perform better and can catch up, and europe should benefit from that. Annmarie i want to ask about the Recovery Fund. Do you think at the end of the day we will see it, and soon . Guest absolutely. We need the Recovery Fund in europe, and germany knows this. We have seen broadly across europe this move toward fiscal expansion that we had not seen in a very long time. We are continuing to get pressure from the ecb. Granted that was a long time ago and it has not always worked, but misses merkels focused on getting this Recovery Plan up and running. We might see a few concessions here and there, but by 2021, it will be with us. Annmarie i want to ask you about the periphery. Do peripheral bonds look less attractive the longer the Recovery Fund takes . Guest i dont think so. Size of aook at the lot of these european economies and you look at the size and scale of the european Recovery Fund from a purely numbers perspective, we need even bigger numbers to support a lot of these countries, like spain and italy. But when you think about the messaging behind it, when you come back to thinking, we have further integration, further cooperation, we are moving in the right direction in europe. There is a view that if the periphery does not hold up, it will be bad for all of europe and the northern countries. Areink the messaging is, we going to continue to support the periphery, and i think the bond spreads will reflect that. Background tothe all of this, the covid cases picking up, where does this leave brexit negotiations . October 15 was supposed to be this critical day. Do you think it will end up being that much of a hard stance that the u. K. Will take, or do you think at some point we will see a deal and they will continue negotiations until the end of the year . Guest i think they would like to get something done in the next couple days, but there remains a couple really key sticking points so far. Heis johnson is saying pushed the deadline so that businesses can prepare, but ultimately i believe we will have a deal. Whether it is a very barebones, itategic Industries Deal and happens well into november, they will continue to talk, whether they call it official talks or not. The discussions will continue and i dont think we are heading towards a no deal brexit. Annmarie no deal, but maybe a barebones deal. With us. Stays we will talk about the stimulus saga as it continues in dc. Trump and pelosi are blaming each other for the lack of progress. Is anyone pricing in a deal . This is bloomberg. It all turns on what the definition of saving the economy is. If they can put up the package that is proposed, the 1. 8 trillion, that is probably enough to buy us another three to six months. It wont come in time to make a difference for the month of november, but the impact may be starting to be felt like christmas. Felt by christmas. In terms of the long run, the cares act and the existing program have done very little to lift structural growth for the long term. Reporter Monetary Policy has been what has saved the credit markets in a lot of ways. A lot of these bigger businesses that have been able to seek financing. But how would you compare that to all of the access to credit for smaller businesses, as we have seen so many of them shut down already . I think what the policymakers are doing here is leaving themselves open to another round of criticism, just like they got at the end of the financial crisis, which is the Government Programs were designed to bailout the big boys, but they left main street behind. The main Street Lending program has been a disaster. Which was a Great Program as an emergency stop gap, of course is gone, and all the aid to the airlines has been used up. We are going to start seeing layoffs here. And structurally, more than half of americans are employed by small to mediumsized businesses. A lot of those businesses are never coming back. Annmarie guggenheim global ceo scott minerd talking about stimulus. President trump and Speaker Pelosi blaming each other for the lack of progress over the weekend. Shippingdent sent signals, while policy has labeled the administrations current offer as grossly inadequate. Republicans want to do it. We are having a hard time with nancy pelosi. She thinks she can influence the election, and i think they are hurting themselves by not doing it. Annmarie meanwhile, traders may be coming around to the idea that the u. S. Election may not be ending in fireworks as volatility bet sees around the world. The real believers seem to be in e. M. Dani e. M. Is telling us the risk is less apparent. It is all over the voluntarily space. You and i both talked to people who said the biggest risk is not necessarily a democrat or a republican in the white house. It is if we get a contested election. Biden leads in the polls. Hear is the curve. The difference one week has made is stark. We have this kink in the curve where the election exists, but we have everything lower down out around the u. S. Election. Let me show you what this looks like compared to ems. Here is the spread between the ems and the vix. Moey usually are more vile us of a, but contested election means this space of emerging market volatility has shown the biggest plunge in the volatility space. It is almost too cheap to ignore, as one of our guests told me. But one of the weird things, if we are expecting a blue wave to be priced in, perhaps you would expect tech volatility to be priced in. However, the spread between tech thethe vix, it did drop in turmoil mid year, but it has remained elevated. Getting moreis not expensive. A blue wave getting priced in when it comes to stimulus in an uncontested election, but here is one space where the trade is not necessarily playing out. Annmarie thank you for that. Lets get more context on this with esty dwek. What do you make of what dani laid out . We are seeing this volatility in e. M. It seems that things are a little quieter as the market starts to price in not just a blue wave for the white house, but really across the entire political spectrum in the United States. Guest absolutely. As we just mentioned, i think there weretwo key points worrying markets. The uncertainty, how long until we had a result, and the contested election. And the idea that we did not know which direction we were going to go in but this could turn ugly. The more we see the polls swing toward biden, the more confident we are that a contested election is not the best case scenario. If you get this blue wave that looks to be increasingly likely, you get even more stimulus. Biden would be seen to be softer on some of the trade relations, or behave differently and approach them differently. It is not a surprise that all of that makes volatility in general and for emerging markets coming down. This negative base case scenario, and now the market is pricing that out. Annmarie falling volatility, will that give investors the push to park cash in an asset class . Guest one area we have to keep a nine on, especially we have to keep an eye on is yield. They have been extremely well behaved. Yields are acting as if curve control started or could start at any moment. That does not seem to be changing. But they are drifting higher and could continue to drift higher. As long as that is gradual, it is not much of a concern. If it starts to look more unruly, we will have to keep an eye on that. I think ultimately we will see cash move more into the equity market, especially if the bond market stays well behaved. We were expecting some of these more cyclical sectors are likely to catch a bid and start to play catch up for what we have seen the last six to nine months. Annmarie you have this maintained preference for Investment Grade over highyield. I wanted to ask what your thoughts were over u. S. Bankruptcies. Neel kashkari mentioned this over the weekend about a wave of Small Businesses going under. Are you concerned about more bankruptcies coming out of the United States . Guest that is a risk we are keeping an eye on, clearly because we are not back to 100 . The mobility data and the spending data is showing that. Given the situation with the virus, given the fact that we are headed into a complicated winter and this will be quarters, not months, you know that a number of sectors are not going to get back to normal for a very long time. As i heard earlier in the program, how many businesses are going to be able to continue to survive like they have . 2021 could be trickier. That is one of the reasons we need more fiscal support. In general, we are definitely keeping an eye on the default rates. Moreis why we are comfortable in Investment Grade. Annmarie on that fiscal support, i have not even asked outright, do you agree with what we are hearing from everyone in the markets, which is basically we will get a deal, it just will not be before the election . Guest i think that is absolutely consensus, and i agree with it. The markets at the moment, that is all they care about, getting the stimulus. If we get some before the election, we expect it to be topped up after, so markets are pretty happy. If we dont, numbers in the u. S. Are showing the u. S. Economy can withstand and resist throughout the Fourth Quarter and wait until after the election and we will get even more later. From a stimulus perspective, it is more a question of when than a question of if, and that is what is supporting markets. Annmarie just to wrap this all up, given what is going on in europe and the u. S. , you do like em currencies. Dani was talking about volatility, but we see that coming down. Where in e. M. Do you like currencies . Guest we are extremely selective, and it is going to be a fact of the dollar starting to weaken again. We have to make sure that improvednd that the Growth Outlook in the u. S. Compared to elsewhere, thanks to all the stimulus that is now expected to come, doesnt keep the dollar too strong. We need that weakening trend to cut back a little bit more. There are a number of places undervalued, but generally speaking, i would say we have a preference for asia. The virus situation is being dealt with a lot better, the Growth Outlook is better, they can benefit from china and the Growth Engine there. I would say a bit less volatility coming on that front as well. Annmarie esty dwek from Natixis Investment Managers stays with us. Let get to the first word news with laura wright. Laura the u. K. Is set to tighten restrictions in an effort to curb the spread of coronavirus. Prime minister Boris Johnson will unveil a new tiered system of alert levels, dividing england into areas of medium, high, and very high alert. The deputy chief medical officer has warned the nation it is at a tipping point. Prime minister Boris Johnson is calling for the eu to back down from its hardline position on fisheries. He made the comments on a call with chancellor Angela Merkel and emmanuel macron. It comes ahead of the key summit on thursday. It is unclear if enough progress will be made or if the u. K. Will walk away from negotiations. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Annmarie . Weakere coming up, a than expected fix from the pboc as authorities take steps to rein in the yuans recent rally. We will discuss that next. This is bloomberg. Annmarie 6 25 a. M. In the city of london. The pboc has moved to restrain the recent appreciation in the yuan by removing a twoyearold rule that made betting against the currency expensive. Juliette saly joins us from singapore. We also saw a weaker fix in the pboc, and we see this moving the yuan. Juliette we certainly do. Remember, this is after the onshore came back after the holiday and strengthened the most since 2019. This lifting of ththe rule showed they are putting the brakes on some of these recent appreciations. Ofy stopped short encouraging declines. That is seen by many as a move they will tolerate some strength. This could push the yuan back toward 6. 75 to the dollar. It provides an elegant way to mitigate the appreciation of the yuan without upsetting a belligerent white house in the middle of an election campaign. Annmarie wow. What are other analysts saying about the move . Juliette we were talking to fred niemann from hsbc on Bloomberg Radio earlier, and he said what happened over the weekend was a tactical move from authorities. He does not see it as a game changer. He does expect there will be more strength coming through in the on and offshore yuan, but you will see the recent rally blunted by the move by the pboc to lift the roll on buying currencies moving forward. The rule change is not a signal for this. When it comes other currencies, you have this call saying that any weakness in the seann in the cny could affect others. Saly, thankliette you so much for joining us from singapore. Coming up, joe biden widened his lead over President Trump with just over three weeks to go before election day. All the latest on the campaign trail coming up next. This is bloomberg. Are you frustrated with your weight and health . 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