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tv   Bloomberg Surveillance  Bloomberg  July 2, 2020 4:00am-5:00am EDT

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>> california new york city backtrack on reopening as the virus researches. covidly trial of a vaccine shows promise. the u.s. jobs report is expected to show resilience but could be flawed due to data issues. raising the stakes, the u.s. house of representatives passes a fresh sanctions bill on banks who do business with chinese officials involved with hong kong. welcome to "bloomberg surveillance." i am yousef gamal el-din in dubai. quite a bit of movement in the
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equity markets as a result of rather economic data than a growing number of coronavirus infections. stoxx 600 up 1.2%. german is spanish stocks outperforming. the vix overnight broke out. that is another important signal for what may come. u.s. treasury yields unchanged. initially drifting lower after some skepticism. .uro-dollar up 0.8% eurozone unemployment data will show if this story around an economic rebound is accelerating . brent crude on an upside, 1.2% higher. we had the saudi cuts, the opec cuts, and the demand growth will never return to the levels pre-covid. let's get to the bloomberg first
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word news. >> the u.s. house passed the sanctions bill in response to the chinese security law targeting chinese officials cracking down on pro-democracy protesters. the bill needs to be approved by the senate and the president. the number of daily coronavirus cases in the u.s. talked 50,000 for the first time. -- topped 50,000 for the first time. mexico is topping spain to have the sixth most deadliest outbreak. it has over 28,000 deaths. the federal reserve is warning of committing to yield curve control. policymakers have questions about the benefits when they met last month. the minutes of the meeting reveal an eagerness to provide more forward guidance. fed officials see the u.s. somemy meeting support for
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time to come. in russia, p has won a bid to extend his two decade rule. putin has won a bid to extend his rule that would allow him to stay in power until 2036. the move comes despite putin's approval ratings near historic lows. 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. let's get back to our top story, u.s. stocks climbed after a double dose of optimism andaccine development better-than-expected manufacturing data. in early trial of a sex scene from pfizer showed it is safe. .hat is closely watched
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u.s. manufacturing rebounded to the highs level in 14 months, tempering concerns over a jump in virus cases in the sun belt. joining us today is iain t. stealey, international cio, jpmorgan chase bank. in terms of an initial reaction to what is a growing euphoria around vaccine expectations, and a resilient economy. iain: it is an interesting dynamic because we have these virus cases picking up across parts of the u.s.. the markets are looking through what is happening with the economic data. we saw good numbers out of the pmi's over the last few days. the headlines around the vaccine would be supported if you get a vaccine in place and allow economies to reopen again or continue to reopen. that is what the markets are
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looking through what is going on with the increasing case counts across the u.s. at the moment. yousef: we had the fed minutes out in the last few hours, and i look at the five-year tenure treasuries, a powerful story being told in terms of fed officials not showing any readiness to entertain yield curve control, but an eagerness to provide more guidance in the coming months. the fed is not infallible. what is it not doing that it needs to be doing? iain: i think the fed is doing a very good job at the moment. given what happened during march it came with that extensive big in time and scale, and they effectively to tamper down markets. of economic data that comes through for the next few torters and years is going
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be challenged, and it will be a long time before we get back to 29 levels of gdp. maybe they do not want to do yield curve control, but the reality is they will do .omething that resembles it whether it be inflation, unemployment, that will basically allow them to have forward guidance and anchor the yield curve around zero. it will be a form of yield curve control, the market will not want to fight it. pick up on that. jobs staying in the united states, here is what we are expecting. take a listen. chalk it up to data collection issues during the pandemic that began in march. the survey questioned to determine the unemployment rate is simple, did you work during a particular week? the answer can be anything but.
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it is easy to misinterpret the question if you have been furloughed. survey takers may improperly classify people as employed, just not at work when they should have been as a fight as unemployed. the bureau of labor statistics published a jobless rate but said it is higher. we can take comfort from the fact that the trend is it starts but if properly accounting for who is working, the result may be an increase in the unemployment rate, even if the reality is more people return to work. adding to the confusion, it includes monthly payroll figures compiled from a different survey. economist worry the payrolls number could send a diversion signal to the unemployment rate, raising questions about whether it is data error or something bigger. those are important dynamics to consider, but we heard from paul krugman.
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here is what he had to say. paul: it will look good but be in the rearview mirror. it is clear the high fixed the data and everything we are seeing says we hit a wall because of the spike in cases in the sun belt. yousef: let's get back to iain t. stealey, international cio, jpmorgan chase bank. expectation as we count down to the data. ton: i think it is difficult forecast. we saw the challenge people had last year -- i mean, last month around that and the big this we had. you have shown how hard it is going to be to have an accurate number. around cause volatility the actual print until people dig down to see what caused it. i agree with what is said, it is a backward looking number, and it is the real-time data, the
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restaurant bookings, the mobility surveys that they are having which is what people are focusing on at the moment. is's be honest, the market looking through those. we are seeing a flatlining across the summer of those data streams, and turning down in states like texas the virus count is picking up. people are focusing on the good news of the possibility of the vaccine and the pmi's. i think the mobility data is what we should be focusing on. if we continue to see that trend down, that will attract the market's attention. yousef: in terms of the opportunities in u.s. treasuries, you look at the reality of the equity side, you lean into cyclicals, what would you say on the fixed income side of the equation given where yields are at? iain: when we think about fixed income, it makes sense to have a
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diverse portfolio at the moment. we believe the federal reserve and the european central bank will support investment grade credit market, see you need to buy those and pick up your additional spread. there are selected parts of the high-yield space to look attractive to us. you think about corporations that will be around in 24 months . the yields are looking attractive, relative to other asset classes in fixed income, and cash which will be at zero for the foreseeable future. we have seen rates across high-yield pickup to decade highs. a complete free ride in that space. you need to be selective. the federal reserve can provide liquidity, the companies will struggle through this environment. that will be important. from a treasury standpoint, i do not feel yields will go much higher from here. own some treasuries and some risk assets.
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yousef: we will get to some the other calls shortly. iain t. stealey stays with us from international cio, jpmorgan chase bank. still to come, we will speak to right here on bloomberg. i will get into the jobs numbers happening later after the show at 2:00 p.m. london time. plenty more ahead. this is bloomberg. ♪
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yousef: you are watching "bloomberg surveillance." i am yousef gamal el-din in dubai. tesla has overtaken toyota as
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the world's most viable automaker, shares in the electric car company have doubled since the start of the year, giving it a market capital of over $207 billion. inre is still a massive gulf manufacturing numbers. in the first quarter tesla produced 4% of the number of cars made by toyota. daimler says the car industry faces painful cutbacks over the economic fallout of the coronavirus pandemic. the german company's chief executive is warning of drastic salary cuts, saying they are necessary to protect daimler's finances and safeguard investments. executives will face bigger reductions than rank-and-file workers. britain's financial regular says firms should be preparing for a no deal brexit. the financial conduct authority says the breakdown in talks could disrupt equities and
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derivatives operations. it warns to have arrangements in place so they can continue serving european clients. that is your bloomberg business flash. yousef: thank you. here is what to watch out for, at 10:00 a.m. u.k. time, we get the latest on the data from the european union which is critical to understand ongoing economic recovery. and insts forecast 7.7% the u.s. we will get the june p.m. u.k. time. around 2:00 p.m. u.k. time, the german chancellor angela merkel the video conference call and a news conference. still with us is iain t. stealey , international cio, jpmorgan chase bank. i am looking at the numbers for high-grade credit in europe, the best june in a decade. of thee 61 billion euros
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new issuances, but we are heading into the traditional imf in ifak, and positive returns will continue, and is that stream is also going to continue? iain: i think across the world we expect the supply numbers to calm down slightly in the second half of the year, particularly in the u.s. we have seen a record supply out of the u.s. in the second quarter. had more supply, we have had more demand and a huge uptake for all of the deals really, and fantastic performance across the investment-grade space. we think that continues because we will be in a world of zero interest rate policy or negative interest rate policy in the eurozone. low bond yields, and we expect central banks to support to stay there for the foreseeable future. in a world of low or negative rates, people are looking for yield but want a safety net of
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the central bank. the high-grade market and investment-grade seems to be the sweet spot across the fixed income space. downgrades in at june, that is encouraging because they slowed. are you worried about anymore wirecards that could come through? iain: we always have to be concerned. ae high-yield rate has hit decade high. we will continue to have these stories out there. it does seem an environment to have a strong team of analysts to avoid the wirecards of the world and be with strong companies who will be around for the next few quarters and few years. the market as a whole, there is good opportunity there. yousef: in the u.k. we are preparing for super saturday as the country begins to reopen. there is concerned there might be a japanification of some of
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the government bonds and that you had a replay of what you had happened in japan. your thoughts on that? think the western world will become a bit japan-like, low inflation, low bond yields, increased central bank support for these markets. the current situation with the virus has brought that forward. i see that environment staying. i see an environment where we struggle to see government bond yields move higher. central banks will have to be in play for the for seeable future. the federal reserve in the u.s. 2022, that is how long we will have low rates for. i think it will be longer than that. it does feel japan-like. yousef: i was reading an
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editorial by laura cooper, and she made the point as much as this has been a herculean effort to stave off an economic collapse, the amount of support brings its own risks. how you mitigate those? can you at all, or are you just along for the ride? iain: there is a question longer-term if you keep some of these camp alive that should not be. you will have depressed bond yields to the for siebel future. that is something we have to accept, it is the reality we have to go through as the central banks and governments try to get us out of the situation that has been created over the last few months. .ou have to be aware of it you cannot just dismiss it, but the bigger influence on markets is going to be the central bank support function. there will be a time and place
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where you have to reassess these companies. for now, with central banks in play and willing to do more if things get worse, that is where the focus should be. we appreciate your insights. that is iain t. stealey, international cio, jpmorgan chase bank. come, stocks in hong kong gain on the first trading day since the new national security laws were imposed. hong kong stocks moving up. the latest on the security situation live from the city. this is bloomberg. ♪
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yousef: you are watching "bloomberg surveillance." i am yousef gamal el-din in dubai. amid signs the mainline chinese faces thee city reality of the new security law, the u.k. has extended an offer of sedition almost 3 million residents. let's get more context on this. joining us is our senior asia government reporter from hong kong. i want to get a sense what the security situation is like on the ground today. >> today we have not seen the same sort of protests we saw yesterday, which was a public holiday, the anniversary of the handover. also the first full day were the
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new national security law was in effect. we saw hundreds arrested. tear gas was fired off. were policed to make sure they cannot gather or unite into big crowds to create any k also disruption in the city. really taking it cautiously and seriously. workday.a regular there are no major protests anywhere in hong kong. offer: what about this for u.k. citizenship? has alreadyk china pushed back and said at the u.k. follows through on this offer, there will be some retaliation.
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both the u.s. and the u.k. are trying to find ways to punish china for imposing this law on the city. they raised threats of retaliation before china did it. china followed through anyway. there areent anecdotal reports around the city of people lining up to get british passports. yousef: we have to leave it there. our senior asia reporter, thank you for that. this is bloomberg. ♪
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yousef: you are watching "bloomberg surveillance." let's get you the bluebird first word news again with leigh-ann gerrans. leigh-ann: good morning. wearingrump has backed
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a mask in certain circumstances, but he doesn't think it should required. previously the president has marked his democratic challenger, joe biden, for wearing a mask when "there is nobody around." after thes come a day surgeon general urged people to wear safe coverings. ? if i were in a group of people and i was close -- and like pres. trump: if i were in a group of people and i was close, i would wear one. if people feel good about it, they should do it. over-ann: i made concerns the u.s. buying up stocks of gilead's remdesivir drug, some countries are seeking to reassure residents. the u.k. says it has enough resident for every nhs payment -- patient who needs it. reportinggermany is the country has adequate supplies.
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in russia, president vladimir has won a bid to extend his rule in a national referendum. it would allow putin to potentially stay in power until 2036. preliminary results show 78% voted for the proposal. the move comes despite prudent's approval rating being near historic lows. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in , i amhan 120 countries leigh-ann gerrans. this is bloomberg. f?use yousef: my next guest says the coronavirus will accelerate the process of deglobalization, supply chains will be reshuffled , and that is one of five investment themes filled out in the bnp paribas wealth management investment strategy.
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let's get to the meat of this. joining us is the cio at bmp paribas.a -- bnp quality never goes out of fashion. i will say never say never, but run us through your thinking around the higher-quality names. >> yes, good morning. is one of the two investment themes that we dedicate to low risk investors. we think in the current situation it is difficult to focus on the short-term. we tried to forget about the short-term. we want to be long-term for investment. with that, quality stocks continue to be one of the main investment themes for low risk investments. -- you never forget quality. you forget the price. quality remains.
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it is varied for investment in equities. withhe main problem quality stocks is that they are expensive. in they could underperform case the markets continue to be very bullish short-term. , qualityhe long run remains an asset to hone. citi is maintaining a defensive position on their top investors. with health care. is this of the you can get on board at the moment? general, it is one sector where a lot of people are investing in. we are trying to focus on innovation within the sector, so we are neutral at the moment on pharmaceutical companies. they are expensive. they have very good reserves,
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very good returns in recent years, and we want to focus on the most innovative segments of the health-care care industries in general. that is one of the investment risky -- toated to investors. returns are good today, but during the bear market, the bear market was quite difficult. when you invest in this kind of care butn, for health also for 5g, artificial intelligence, you have to be ready to carry risk. today, everybody is bullish on ovation. everybody thinks about new drugs for covid-19. but volatility will remain high. longer term we went to focus on the most innovation -- most innovative segments within the health care industry.
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yousef: allow me to pick up on that because you look for ways to hedge your portfolio, to hedge some political risks like the upcoming u.s. or election, like the ongoing chinese tensions. traditional diversifiers are not necessarily going to work. we learned this through the late march lows. what are you telling clients about safe havens? wordnt: well, we use the gratification because there is no way to be completely immune. we use the term diversification because there is no way to be completely immune. escapeot a way to complex volatility. you can process your capital toh asymmetric payoffs, and build some very significant,
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very nice payoffs, asymmetric payoffs with polity returns, but also,pital will be -- with what we had in the first half of the year, credit will increase and we think there is a good probability to make a the fixedurn in income universe. particularly with some sovereign bonds in europe. and also in some good quality companies on the credit markets. yousef: you have got quite a -- if i could follow up on another findings, some of the undervalued plays in china. he mentioned 5g and health care. thes all with a tilt toward west. what is the geographic breakdown here? florent: in terms of
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geographies, we like number one the u.s. market, number 2 -- number three the emerging markets focusing on asia. and all the different things i mentioned can be placed in the u.s., in the euro zone, or in asia. it is really global. this is the case for quality companies, it is also the case for innovation and the health care sector, in 5g, also the case for supply chain charges because deglobalization means we have regional parts for several industries, and that would be global. everybody will try to be more developed by chance. it is a big move. it will take years. is part ofat asia the game, of course. in the supply chain changes.
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a refreshingly longer-term view. florin brown's ♪ good morning. -- speak withwe will larry kudlow about the jobs numbers. that will happen in 2:30 sharp london time. this is bloomberg. ♪
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yousef: you are watching "bloomberg surveillance." let's get you the bloomberg
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business flash headlines and get back out to leigh-ann gerrans. leigh-ann: good. tesla has overtaken toyota as their world's most valuable automaker. shares in the electric car company have more than doubled since the start of the year, giving it a market cap of over $207 billion. but there is still a massive bolt in manufacturing numbers. in the first quarter, tesla only produced about 4% of the number of cars made by toyota. the genie has emerged from the biggest utility bankruptcy in u.s. history. the california giant has successfully completed restructuring and exited chapter 11. critics say the company hasn't fully addressed the daunting challenges it faces. the company says this is an important milestone, but it's work is far from over. jeff bezos' wealth has topped its previous peak. according to the bloomberg billionaires index, he is over
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100 -- he is worth over 171 billion dollars, and that is after he gave up a quarter of his stake in amazon as part of his divorce settlement. his net worth has grown by over $56 billion this year alone. that is your bloomberg business flash. yousef? yousef: thank you for that, leigh-ann gerrans. year to datea performance, that is it. say bolton declines to whether he personally briefed donald trump on intelligence indicating russian operatives offered bounties to kill and bury troops in afghanistan. but he told bloomberg that evolving explanation for the story shows that the time is rife for the kind of interference. when that question was asked, it was no comment, and that is the same thing i'm going to say
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today. we are embroiled in litigation now over whether i complied with the requirements of the prepublication review process, which i think i did. i didn't write this book with the intention of putting any kind of class pride in it. and i don't think donald trump suppressing the book because he is afraid of foreign governments, he doesn't want the american people to read it. honestly this current controversy, i could have written about in the book if i didn't face these other difficulties. susan rice, the second obama national security advisor, writes today in the new york times that if she had information like that being reported in the papers, whether it was totally verified or not, she would have gone into the oval office to tell president obama. without getting into what i know what didn't know, i want to say
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i agree with susan rice on that point. that is what the national security advisor should do. there are not two categories of intelligence. verified over here and not verified over there. intelligence invariably is placed along a spectrum. the intelligence community understands this. they say they have high confidence, some medium confidence, low confidence. people are going to have to judge and different agencies will disagree. there is not a block of granite that you show to the president that is called verified intelligence. i looked, john bolton, at the susan rice essay and the and iby leon panetta, found the mystery. how would you recommend president trump extricate this
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now, and particularly how he addresses the military at the pentagon? >> i cannot tell the president how to get out of a mess that he has created. i heard three different stories whether he told it was briefed, whether it was fake, whether it was fake by the new york times. now his advisers are contradicting them selves as well. it is just another day at the office. that's the way it works. every day is a new day, every story is a new story. what you said yesterday is interesting but it does not indicate what you say today. what it tells the russians is we are in disarray and rife for this kind of provocation not just in afghanistan but in many other places around the world. jon: is there any reason why this would be put in the daily briefing, or that it would not be follow-up -- followed up by
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the president himself? say this, which i do say in the book. donald trump doesn't consume intelligence the way you expect presidents to do so. everybody is entitled to gather information in their own personal style. ronald reagan had his style, george h.w. bush had his. i'm not saying there is any one that is right or wrong, and i think the presentation of intelligence for the president has to take that style into account. what i'm talking about here -- does the president read lengthy briefing papers? does he get into the movies and that sort of thing? the question for donald trump is whether he gets it at all. i think he is uninterested in learning. i think that facts that are inconvenient for him often don't stick, despite repeated tellings.
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so had he said that he was never briefed on it or that he thought it was fake and will get away with it -- we will see. yousef: that was john bolton speaking to bloomberg earlier. let's get back to market action, with quite a rally in the european session more so than it was in the asian section -- session. overall the optimism around improved economic data and positive vaccine development trouncing the growing web of people that are getting infected with the coronavirus. the ftse 100 up 1%, similar gains as well on the cac 40. let's look at these other asset classes. we were looking at a euro-dollar that is moving quite a bit to the upside. .4%.e currently up
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dollar-yen just a little bit of downside there. let's go to a bit of a snapshot of what is still to come. another legend calls it quits. john paulson says he is leaving the hedge fund industry. we have the full details next. this is bloomberg. ♪
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yousef: join bloomberg for our annual broadcast for the boston bostonectacular, the pops salute to our heroes, a july 4 tradition, this weekend. u.s. equity and bond markets will be closed tomorrow for the independence day holiday. let's get to a different story around the hedge fund legend john paulson. he has called it quits. he says he is conferring paulson and co-into a family office. latest big-name -- this big-name money manager to leave the industry. situationbeen quite a with john paulson, in the cards. he made about $15 billion, but against the housing crisis, one of the biggest profits made by hedge fund manager. since then he has had a series
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of stumbles that has chipped away at that profit. in 2012, he did say that even if he retired, he wanted the fund to continue on, but in more recent years he struck a different tone as he can use to see investors pull money from , from drug companies to laststimating the debt and year's epic crisis. he said 80% of his funds were his own. finally it took this global pandemic for him to throw in the towel, saying he is returning investor money and converting into a family office. yousef: this is supposed to be a time when hedge funds can shine, at least the better ones out there. are we likely to see more closures for the rest of the year as the pressure mounts? dani: this certainly typically is the thesis and we appear to have vote more -- to have more volatility come at volatility seems to arrive at the opposite
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conclusion, that we see more liquidation. it looks like that piece is likely to contend -- that pace is likely good to continue. the pain looks like it will continue, and if you think we are going to get any more launches to take advantage of what is a disappearing number of managers, that is unlikely as well. considering things like social distancing, it is going to be difficult to do due diligence, find new managers to put money into, and not to mention they will have to deal with the threat from cheaper index funds, which they typically underperform and seem to have dumb so this year, yousef. to have done so this year, yousef. yousef: let's get back to the rally unfolding in european equities. let's start with european stocks, currently higher on the stoxx 600.
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there are laggards, but looking to extend the weekly gains off the back of optimism on economic data and positive vaccine development. for the moment at least, the ofwing number of corroded -- coronavirus infections take a backseat. a little bit of upside, a weaker dollar story. wti trading above the 40 handle. we have opec-plus continuing to cut back on production. the latest numbers encouraging if you are long on that trade. at six, 10-year yield -- at .67. plenty more coverage ahead. "bloomberg surveillance" continues. this is bloomberg. ♪
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tom: this morning, in america, it is a jobs day thursday.
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there is a holiday friday. something about repeated injury and happiness. today's word is miscast if it k -- is misclassification. i how to helplue the surge in cases of the virus. per capita, arizona, it is worse than new york ever was. mexico surges. france is better. in the united kingdom, nejra -- simply forever a change. good morning, everyone. this is bloomberg surveillance. keene in new york. francine has a well-deserved day off. nejra cehic joins us from london. i am absolutely baffled by the need of the united kingdom to take a summer holiday. what


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