♪ francine: not buying it. that' data shows pandemics even when shots get back to business. debts from the virus top 300,000. officials in tokyo make plans to reopen the economy. also coming up, emmanuel macron berates -- for insisting the u.s. has -- very vexing. the drugmaker's chief executive

is scheduled for next week. good morning, everyone. this is "bloomberg surveillance." good afternoon, good evening depending on where you are watching the world. gdp is a good sign of things to come. it is a little bit backward looking, which is why we tend to look at other indicators. certainly when you look at euro-dollar, it is probably moving on the back of it. german economy shrinking some 2.2% in the first quarter. now to your bigger asset classes. european stocks are actually jumping. u.s. equity futures pretty much unchanged. the one thing that we need to watch out for is basically the second wave of infections, but also the simmering tension between america and china. oil climbed, treasuries edging higher let's get to the bloomberg first word news in new there is in the u.s., no guidance from the centers for disease control and prevention on how to reopen bars, restaurants, and workplaces. it includes social distancing,

limiting group sizes, and encouraging drive-through and delivery. an earlier version of the guidance was held back by the white house for being too prescriptive. the federal reserve bought $305 million of etf's on the first day of its historic intervention into corporate debt markets. the figures were revealed in the central bank's weekly balance sheet update. total assets rose to a new record, 6.9 3 trillion. -- etf purchases our partner coronavirus response. -- is set to unveil aid packages further aeronautic industry. -- moves to restart that france moves to restart its economy after loosening lakhdar restrictions. air france and renault have already obtained billions in loan guarantees. there are few signs of a in brexit talks. the latest round of negotiations today.oday -- ends

. just one round of talks remains before a june meeting to discuss whether it is worth carrying on. boris johnson has granted to take away if there is no progress by then. 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. francine? francine: thank you so much. let's kick off with the latest on worsening relations between the world's two biggest economies. president trump says she does not want to talk to the chinese president, xi jinping, right now. the u.s. president, who has previously blamed china for the pandemic, also speculated about severing trade ties between the two countries. my guest this morning is a former diplomat, author, and advisor on emerging markets. i am pleased to welcome to the program anja manuel.

she is the author of this "brave new world: china, india, the u.s." the concern between the u.s. and china right now is that actually we have a second wave of a trade war, something ugly which will get president trump possibly reelected. how damaging would that be to both economies? anja: thank you for having, francine. very happy to be there. second trade war would be very damaging. i would say we haven't ended the first trade war. we are still in the middle of the phase one trade deal. it has not been implemented. it is going to be very difficult for china to do so. i would say this is the worst i have ever seen u.s.-china relations. they are really in freefall. /3 of americans now think negatively about china. that is up 20% from just two years ago. campaign, theal

trump and biting campaign seem to be trying to outdo each other on how tough they can beyond china. francine: you cowrote this fantastic piece for the washington post, which basically explains how the u.s. should reuse some of the stimulus money to counter china. as you rebuild the economy in the u.s., what are the top three points of advice you would give to the current administration? thank you for asking about that. the policies have been focused mostly on defense. how can we keep chinese investment out, keep our technology in. increasingly, there is very difficult conversation being proposed on the hill -- and legislation being proposed on the hill. one senator saying recently we should not allow chinese students to study science and technology in the u.s. i think instead, we should be

focusing on what we can all do in the u.s. and europe to lift our own people up, instead of tearing china down. for example, you can do a lot on scientific research and development. it would create positive jobs and allows to compete with china rather than just focusing on the negative. francine: there is something that has been seen a little bit of a victory for president trump, which is that taiwan semiconductor planning to spend some $12 billion building a chip plant in arizona. are we going to see supply chains around the world being upended? what does that mean for foreign relations? is china going to become weaker or stronger because of the way the virus is ripping through our economies? anja: it's a very good question. i do think here, you see a massive amount of decoupling, especially in the tech space between china and the u.s.. -- mentioned some conductor

movingnductor factories back to the united states. i think to a small extent, that is appropriate. the highest, most sophisticated microchips that go into technologies, that go into u.k. or american defense technologies, for example, we should be very careful where those are made. for the vast amount of goods that are made in china, honestly, we should continue to do business as usual and we should not be reassuring those things. francine: when you look at the fight between the u.s. and china, what is it about? world supremacy, the technology race, is it about something much bigger? asked.'m glad you i think increasingly, you hear it about -- being about ideology in washington -- ideology. in washington, some lawmakers

are going so far as to call for overthrow of the communist chinese economy. increasingly, this is becoming an ideological contest the end united states is being described as the new cold war. i think that does not help anyone. better would be to help lift ourselves up and to compete rather than push them down. francine: you also mentioned that in a recent pupil, 63% of americans have a negative view on china. this china have a reputation problem and should they care about it -- does china have the reputation problem and should they care about it? anja: they do certainly in the united states. this is a very simple -- recent pool. you never -- poll. you never know how much of that is the negative rhetoric you hear.

under president xi jinping, they have grown increasingly authoritarian. some of those things may move back and the potential may swing back to something more normal. will we ever go back to a world where china and the united states are largely trade partners and keep their problems under wraps and? in control i think it's highly unlikely -- in control? i think it's highly unlikely. francine: we hear exclusively from the opec secretary-general. don't miss that conversation at 3:00 p.m. london time. this is bloomberg. ♪

♪ economics, finance,

politics, this is "bloomberg surveillance." i'm francine lacqua in london. from rice, hadley & uel is stilln with us. underestimating -- are we underestimating -- anja: we are certainly seeing a sea change and an arms shift -- enormous shift. years, even if you have an election in the united states and joe biden becomes president, he probably won't go back to the wherefrom 2015, 2016 companies were doing everything possible to make their supply chains efficient, and that meant having them all over the world. looking businesses are

-- thinking about how to make their supply chain a little bit closer to home, more resilient in the face of things like pandemic and lots of global political upheaval. i think you are releasing a vast shift. francine: what does it mean for -- you know, does it translate into more populism if countries are a little bit more inward looking? or is that too simplistic right now? anja: yes, we have seen a lot of populism certainly in the u.k., the united states, but also in turkey, brazil. increasingly, prime minister modi sounds like a populist. that is the wave we are living through. will it last? i'm not sure. i hope that the pendulum swings back to something more moderate. what does foreign policy under a second term if president trump gets reelected look like for the world?

anja: president trump now almost 4 years into his term, has a foreign policy team that he feels comfortable with and that he works pretty well with, from mark esper at defense to pompeo at state to robert o'brien at the nsc. they seem to have hit their stride. it is a very hard-edged form policy -- foreign policy. as you know, we have pulled out of a deal with iran. there is no new deal insight. -- in sight. there is not much happening in the negotiations with north korea. we have pulled out of the paris climate change cord. i think in a second term, you will see more of the same. francine: what does it mean in general for some of the countries that will be on the backend of trade wars? do you believe that this administration believes trade wars actually work? so far, they seem to have won

actually. that farmers sure in midwestern states would think they won. we've had far more bankruptcies than we've had in decades. in the end, the american people are paying the price for these tariffs being put in place. many are still holding still, but how long does that continue? do they blame outside forces rather than the president themselves? i'm not so sure. i think increasingly, the american people will catch on to that. francine: you were a very high level diplomat. how has diplomacy changed in the last four years across the world? anja: that's a very good question. you know, i was at the u.s. more than a decade ago. i have to tell you -- u.s. state department more than a decade

ago. i have to tell you, the form policy professionals -- foreign policy professionals were in the lead. now, many of the senior professionals have left. a lot of them have not been replaced. a lot of the normal things that you would be watching, regional assistant secretaries watching what is going on in africa, asia, and a lot of those positions are not 100% filled. i think it has an impact. you see it when you have crisis like this and no one is watching what is going on outside of the main event, which in this case is certainly the pandemic. , thank younja manuel so much for joining us. up next, the fight over a covid-19 vaccine is getting ugly. after hits out at sanofi suggesting the u.s. may be first in line. we will bring you that story next. this is bloomberg. ♪

♪ is "bloomberg surveillance." i'm francine lacqua in london. let's get straight to the bloomberg business flash. semi conductor plans to spend $12 billion building a chip plant in arizona. the decision is designed to allay u.s. national security concerns. they plan to complete construction of the factory by 2024. companyey shift for the that makes semi conductors for apple and huawei.

nissan is considering making two renault suv models at its plant in sunderland. ad a shift would be part of -- broader discussions for the two companies. -- renaultrun out has also promised to map out cost cuts. is maker of cartier jewelry giving one of the most pessimistic outlooks in the luxury industry. operating profit slid 22% of the lowest in nine years. the company says it is impossible to make any meaningful forecast. a funding package has been agreed. the plan includes a 1.1 billion pound grant and 500 million pound loan. they expected a recovery to take some time as passenger income mis-hit under lockdown.

that's your bloomberg business flash. francine? francine: thank you so much. the fight over a covid-19 vaccine is getting ugly. france has head out at sanofi after the company's chief executive suggested to bloomberg that the u.s. could be first in line to get hold of the drug. joining us now is a pharma specialist. this is basically a huge company. it is french but i a lot of is funded by the u.s.. is the duty to to give the vaccine to first? >> this is a problem we are going to have to consider somehow going forward. --ofi is not afraid afew years ago, they bought massive u.s. biotech company. a lot of their businesses in the u.s.. view themdifficult to

as a french pharmaceutical company because of their headquarters. but that is what it is. in terms of where they get the grant from, the money from, pharma companies and research that goes into the pharma companies often start or are initiated within academia, which is funded by a whole host of charities and government bodies. it's difficult to pinpoint whose paid what for what. the u.s. has very clearly designated months of money to pfizer, johnson & johnson, etc., including sanofi to fund the development of the virus. i don't know whether part of that included a request or requirement for them being first in line to get x number of doses. it is a problem we are going to have to solve somehow. let's say europe funds of it, u.k. funds some of it, u.s.

funds some of it, what do you do for africa, asia, the middle east? francine: if we were not and the middle of a pandemic, right, i guess we would not really know, or the person on the street would not really know who is buying what vaccine for what price. do we need to work together? re companies who find the vaccine, will they give it to others? the basic rules in the past, do they have to be blown up? >> i think we have to do that. sanofi is not the only game in town for vaccine manufacturing. vaccine will not be the first vaccine that could be approved for use. pfizerore likely to be a vaccine or johnson & johnson vaccine or a moderna vaccine out in the u.s.it could even be the

astrazeneca-oxford vaccine. the conversation has got to be out, ase need to figure 7 billion people on earth, how are we going to portion the number of doses of vaccine that we are going to get at a point in time in the next 6-9 months? how are we going to portion that? that's a big question. francine: i understand that the french president and the german chancellor wants some kind of drive to do some kind of equitable distribution, whilst others are talking about a pecking order. emmanuel mensah -- why is emmanuel macron taking the so badly -- this so badly? >> is a pharmaceutical company headquartered in france.

perhaps, it is the opposite of you areonalism that kind of saying that this should not be a decision made by the pharma company. i don't think this should be a decision made by the pharma companies. i think it is a decision that the governments around the world have to make. how are they going to provide vaccine for the general population? remember, there is going to be large amounts of people -- francine: we have to leave it there. many people will need this. ♪

♪ francine: economics, finance, politics. this is "bloomberg surveillance." i'm francine lacqua in london. let's get straight to the bloomberg first word news. >> the coronavirus pandemic is

reviving the worst case scenario for the u.s.-china relationship. donald trump says he does not want to speak with his counterpart, president xi, adding that the u.s. would save $500 billion if it cut ties with beijing. factory output rising a better-than-expected 3.9%. wti prices surged to the highest in more than five weeks as opec and its allies started scaling back crude shipments. the cartel cut exports by nearly 6 million barrels a day for the first two weeks of may. international energy agency says the outlook is improving with the demand a little stronger-than-expected. the latest u.s. jobless claims number were inflated by a clerical error. it incorrectly reported nearly 300,000 filings, about 10 times the correct number. that error likely distorted the national figure. it pushed the eight week total

to over 36 million. 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. francine? lufthansa -- francine: lufthansa will quadruple flights next month as coronavirus lockdowns ease. the number of flights they are offering per week would usually total the daily account at the height of summer. joining us to discuss is bloomberg's managing editor for global business, benedikt kammel. talk to us about the lift onto -- lufthansa bailout. what are the sticking points? >> we are inching closer toward a bailout. the number we are talking about is 9 billion. aid theyhe sort of

need to keep going. we are sort of on the finishing line here. the back-and-forth with the government, what kind of sta ke the government might get. the number ranges anywhere from no steak at all to something closer to 25%. there is some debate in the government, whether the government wants to have such a forceful direct and in a company -- hand in a company. there is also a debate about whether this is legal. ryanair saying they are unhappy with these bailouts. he is quite unhappy about it. is actually taking it to court in the case of air france. he might do something similar with lufthansa. we are expecting this probably in the next couple of days,

might even happen today. know at this point. francine: ryanair is pretty livid about what they say is unfair competition. with they go to the courts, could the bailouts -- if they go to the courts, could the bailouts be stopped? >> it seems unlikely because these are unprecedented times. the companies would say this is not just a bailout, this is a matter of false --, this was an unforeseen circumstance. what ryanair is saying, you are getting all this money, we are not asking for money, so you're creatingn uneven playing field. michael o'leary has a sort of ufthansa to the drunk uncle after the wedding drinking all the half-empty glasses. it creates an unbalanced

marketplace. 30 billion euros is what he says the industry is getting. he says we are not fighting with one arm behind our backs. we have both arms behind our backs right now and that is plainly unfair. francine: do we have any insight into when things could get back to normal, or a bit more normal? lufthansa slowly ramping up flights. i guess it won't be the summer when people start traveling again significantly given quarantines. justa dipping toe into the water right now. the large majority of airplanes remain grounded. the question is really, even when they do start flying again, will these planes be filled with passengers or will they be flying empty? which in some ways exacerbates

the problems. it would not lead to any revenue streams. it really depends on what kind of behavior we can expect from travelers, from business travelers, leisure travelers. will they want to get back on a plane? will they even want to get back into an airport? we will see a lot of checkpoints come along lines. one executive -- checkpoints, long lines. one executive said being out of airport will be as much fun as having open heart surgery. some aviation executives have said it is going to be not this year, maybe next year, maybe even beyond that. francine: really interesting. thank you so much. former minneapolis fed president arianna coachella culture spoke -- the former minneapolis fed president spoke to bloomberg. assessment powell's of the economy unfortunately is exactly right.

we know the numbers from april. we know that the report when we get it from a it is likely to look even grimmer. we know the numbers. toknow there is some risk the downside as we move forward about how fast is a recovery going to be. so all this i agree with. -- my column was pointing out was more, ok, we've got these situations. even the modal outlook looks bad. the downside outlook looks ignores. why not -- looks even worse. why not rollout everything that you have got right now? that would look like trying to flatten the yield curve down close to zero, or even, and i've , really trying to explore ways to push into straits along the curve even

further below zero. >> i'm curious, isn't there a general perception in the market that to a certain extent, the fed is already doing that. the idea of going to zero, whether you actually do it or you take some of the measures that the fed has already put out there, the effect almost seems like it could potentially be the same. i guess what i am saying is, does it matter if we go to zero on a nominal basis or if we just continue doing what the fed has been doing so far? is -- i think fed this is why some of us have been calling for the fed really exploring negative rates. if you treat zero as the lower bound, there is just not a lot more room for the fed to do more. people talk about balance sheet policies. the game plan is to push down on long-term yields. there is just not a lot of room

unless you start to take seriously the idea of ok, we can go negative with yields. i think that is -- again, the situation is, you know, i joined the federal reserve as a policymaker back in 2009. i thought the situation was dire than. this is much worse. i think it really calls for the fed to be doing what it can with the tools it has now and really saying openly, we are exploring ways to make those tools even more powerful by being willing to push into negative and maybe even deeply negative. >> an unprecedented crisis requires an unprecedented response, i get that. dualyou look at the fed's mandate, explain how lower or even negative rates can help a central bank get more people back to work. europe and japan have had negative rates and it has not resulted in a hiring boom. is thatnk the challenge

what europe and japan have gone, what i would call shallow negative rates. they have gone a little bit below zero. i think the situation, both in europe and japan come is better than it would have been in the japan, of -- your about is betterand japan, than it would have been in the absence of that. trying to decouple the interest that banks are earning on reserves from what people are earning in terms of cash. why is this helpful? why is it effective? is paying's interest two banks on reserve goes negative, that means they will be willing to bet up the prizes -- bid down the yields of securities in the market place, like mortgage backed securities, for example. they will be willing to make loans on cars come on others -- cars come on other kinds of

cars, on other kinds of lending. francine: coming up, italian digital bank illimity says it still expects a positive result for the current year despite provisions for more loan losses. we will focus on italy, coronavirus and the country's banking sector. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i'm francine lacqua in london. let's get straight to the bloomberg business flash. >> thanks. the possibility that there might be unequal access to a potential coronavirus vaccine from sanofi. bruno le maire says that is

"revolting." the suggestion from the pharmaceutical company's chief executive has sparked outrage in france. president emmanuel macron plans to meet with company officials next week. richemont is warning of grave economic consequences that could last up to three years. the maker of cartier jewelry is giving one of the most pessimistic outlooks in the luxury industry. operating profit slid 22% to the lowest in nine years. the company says it is impossible to make any meaningful forecast. inplans to sell a stake open reach. francine: let's focus on italy's banking sector. illimity has reported net profit

for the first quarter of 4.5 million euros. is still expects a positive result for the current year, despite provisions for decreased loan losses. joining us now is corrado passera. he is the chief executive of illimity and former italian minister of economic development. thank you for joining us. you are a challenger young bank. how are you facing this emergency? we are: we are facing, showing quite a good level of resilience. our bank, that was designed beginningvery totally digital, could switch to smart working in a few hours. results are very good. you know the illimity story very well. 3 billion worth of assets.

we got back to breakeven at the end of last year. this year, we kept growing. we reached a very good level in quarter one and liquidity. this new paradigm bank concept is really proving to be the right one in the new situation. francine: talk to me about the current environment and what that means for your targets. do you have to revise them downwards? is there anything that will change in the next couple of weeks or months? areado: actually, since we specialist, we focus on companies with very strong business plans. before lending money to them, we went through very strong stress test. as of today, none of them is showing any particular issue.

the two markets we are serving, market market and mpe unfortunately are due to growth in the next future. the third area where we specialize are direct making services. clearly, the coronavirus environment is pushing companies and families in that direction. actually, we see more opportunities than a risk as of today for an agile, digital bank like ours. obviously, liquidity and equity key componentso of our success. francine: what is the shape of the italian banks? is there a risk they will be hit by a new wave of nonperforming loans and does that create a

doom loop? corrado: that is likely. as you know, italian banks have gone through a number of crisis and they have gone through the quite successfully -- them quite successfully, both in 2008-2009 2011-2012the crisis. italian banks have doubled their equity. they have done a very good job while they were consolidating as an industry. today, they will have to pace a sureng amount of mpe's for but they are well-equipped. in this case come in this crisis, they are certainly -- in theycase, in this crisis, are certainly rightly perceived as a solution in this crisis. obviously, the industry is going through a total reshaping. the combination of digital

ishnologies, new regulations totally reshaping the industry. old, traditional banks will have troubles, while new paradigm banks will certainly be the new winners. francine: what do regulators still have to do to allow banks to play this vital role, given their transmission mechanism? hasado: the government devoted a very huge amounts of sme's andupport families. the problem is more with the length that it takes to reach destinations. in my opinion, what we should do is to make the procedures much faster. today, money has to go through

traditional credit worthiness valuations, while in an emergency case like this one, we should be much more rapid in making these evaluations. tot we really should do is devote more money as government to incentivize new investments, new hirings, and new equity into companies. we don't see that much yet in the measures taken by the government, but probably the next -- hopefully, the next decree will take care also of the long-term view of the crisis. francine: thank you so much, corrado passera from illimity stays with us. more italian shops are set to reopen on the catholic church will be allowed to hold masses. we will focus on italy at large with corrado passera.

that is coming up shortly. this is bloomberg. ♪

♪ francine: economics, finance,

politics, this is "bloomberg surveillance." i'm francine lacqua in london. let's focus on the italian economy. with bloomberg economics forecasting a 13% contraction in gdp this year, italy has put forth a second stimulus package. it focuses on liquidity for businesses and aid to families. still with us, corrado passera, chief executive of illimity and former italian minister of economic development. thank you for staying with us. is the money enough in the second stimulus? or is there a problem that it is enough but not getting to the right places? corrado: the money is probably enough. the total amount that has been devoted is certainly impressive in size. the problem is about the ways this money can flow and get to the right place. we must look at our country and not only our country, if we want to use a metaphor, as a car with

4 flat tires and we need to fix all of them to move forward. the wheels are containing and managing the infection, strengthening health care and community facilities, ensuring the financial resilience of families and business, and the fourth is accelerating the relaunch of the economy. if just one of these four remain flat, we do not go forward. each wheel is its own component. relaunching the economy needs tax incentives. there is not enough in the last increase. taxeed an unprecedented incentive program for companies that invest in innovation, hire new people, increase their equity, and consolidate. thisnnot forget longer-term view. each industry needs a specific measures. in some industries, it is a

matter of subsidies. in other industries, it is a matter of us speeding up authorization procedures. and others, it is simply to keep working in the same way. economic policies, industrial policies after be focused and's -- have to be focused and specialized in the different industries. we need a massive plan of investments. francine: so far, given the new stimulus package, how we reduced the gap -- have we reduced the gap with other european countries? has italy reduced the gap? asrado: yes, as far emergency funds and finances concern. concerned.is

in that respect, we are not -- and the other perspective, in the longer-term view, in terms of investment, in terms of what is needed to relaunch structurally the economy, we are probably still, we studied quite -- still need quite an intervention. we need to invest a lot more in infrastructure. we need to invest much more in innovation and research. we have to invest much more in education. francine: thank you so much. we have to leave it there. corrado passera there, chief executive of illimity. "surveillance" continues. ♪

♪ francine: not buying it.

retail data from the early days of china's reopening shows the pandemic's impact on consumer spending may persist, even when shops get back to business. deaths from the virus top 300,000. the infection rate in germany and japan drops. officials in tokyo make plans to reopen the economy. emmanuel macron the rates sanofi for suggesting the u.s. may have first access for eight vaccine. a meeting the drugmaker's chief executive is scheduled for next week. we had a couple of data figures. gdp is the one i would watch out for. a couple things going on with oil. what's amazing from a corporate point of view is the huge spat between the french president and sanofi. it really props up loads of debates on when we have a vaccine, what it means. do you distributed equally amongst nations? or is