Squawk Box Europe Express

Anger in America… protests and looting rage on across the U.S. following the police killing of a black man in Minneapolis. Curfews have been imposed and the National Guard is called in to quell the violence. Retailers Walmart, Target and Apple are forced to shut due to the unrest and Amazon restricts deliveries. In Asia, the Hang Seng shrugs off President Trump’s announcement that Hong Kong has lost its special status, amid relief he stopped short of re-igniting the trade tensions with China. In aviation news, Lufthansa agrees to revise conditions for its €9bn bailout, accepting the loss of certain runway slots at key German airports.  

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Talking tough… Asian equities fall, with the Nikkei retreating from three-month highs as President Trump says he is “not happy” with Beijing following its approval of a controversial Hong Kong security bill. The U.S. President also promises to weaken a law protecting social media firms, saying they have breached their “unchecked powers”, while Facebook founder Mark Zuckerberg tells this channel that social media platforms have no right to fact-check users’ posts. France and the UK have unveiled further measures to ease the pandemic lockdown. Paris relaxes travel restrictions and will allow restaurants to reopen next week, while Prime Minister Boris Johnson permits larger social groups to gather. In autos news, Renault announces 15,000 job cuts aimed at stemming losses from plunging sales. And European market sentiment is buoyed by the news that coffee company JDE Peet’s aims to raise over €2bn in Europe’s biggest IPO so far this year.  

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Autonomy in question: The U.S. government declares it no longer considers Hong Kong autonomous from China in a decision that could end the territory's special trade status and further raises tensions with Beijing. The Dow crosses the 25,000 mark for the first time since March, as back-to-work stocks boost U.S. averages. In Brussels, EU Commission President Ursula von der Leyen unveils a €750bn recovery fund of grants and loans to help the bloc fight the unprecedented Coronavirus crisis.

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Crossing key levels… U.S. stocks rally with the Dow briefly topping the key 25,000-level and the S&P 500 surpassing 3,000 for the first time since March. Banks lead the strong moves higher, after JPMorgan CEO Jamie Dimon says the lender is “very valuable” at this price and also saying there is a good chance of an economic recovery in H2. The ECB says that soaring public debt levels will put pressure on sovereign bonds but the central bank’s vice-president Luis De Guindos tells this channel that the alternative would be much worse, as Eurozone governments have no other choice but to introduce large stimulus packages in the wake of the pandemic. In corporate news, Commerzbank issues up to €3bn of co-co bonds to shore up its virus-hit balance sheet . And we are live in Hong Kong where tensions continue as lawmakers debate a bill which could criminalise disrespect and criticism of the Chinese national anthem.

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A support system…the Nikkei rallies to a 10-week high after the Bank of Japan pledges to slash rates and increase asset purchases if needed, while the PBOC also vows to continue to support the Chinese economy. In Hong Kong, chief executive Carrie Lam says a new security law proposed by Beijing will not impose on the city's rights and freedoms after police used tear gas to break up weekend demonstrations over the controversial proposal. The World Health Organization temporarily halts trials of hydroxychloroquine over safety concerns, as a study suggests it increases the risk of death and heart problems. And in corporate news, Lufthansa shares soar in the close after the airline agrees a €9bn euro bailout deal that will see the German government take a 20 per cent stake in the flag carrier.

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Hong Kong havoc…protests erupt in the territory after Beijing announces it will be imposing new security legislation at the beginning of the National People’s Congress. The tensions prompt the Hang Seng to fall nearly 5 per cent, weighing on other Asian markets. President Trump has vowed firm action if the law goes ahead. Also at the NPC, Premier Li Keqiang says the government has dropped its growth target for 2020, citing economic uncertainty due to the Coronavirus outbreak. Facebook founder Mark Zuckerberg has said that those working from home – up to 50 per cent of employees - will continue to do so permanently but those moving away from Silicon Valley would face pay cuts.

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The Federal Reserve discusses using forward guidance and longer-term measures to support the damage to the U.S. economy, such as capping interest rates. However, Dallas Federal Reserve President, Robert Kaplan, tells CNBC that consumer confidence and a sense of safety will drive the recovery rather than monetary policy. In the UK, Bank of England governor Andrew Bailey changes the BOE’s policy stance and considers negative interest rates, as the UK government issues bonds at a sub-zero level for the very first time. China’s delayed NPC gets under way with the focus on a potential slower growth rate in the wake of the pandemic. Brazil becomes the new epicentre of the outbreak, as the Latin American country posts a new record number of daily Coronavirus cases. And in aviation news, Lufthansa says it is in advanced talks with the German government over a €9bn state bailout.

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Mixed messages…Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary give different assessments of the post-Coronavirus recovery in testimonies to Congress. But both defend their monetary and fiscal stimulus measures, as lawmakers challenge them on giving preference to Wall Street over Main Street. The U.S. Congressional Budget Office has forecast GDP will plunge 38 per cent in the second quarter on an annualized basis, while the Treasury revives the long-defunct 20-year bond in order to help make up the shortfall of a record deficit. U.S. stock markets snap a three-day winning streak following questions over drug firm Moderna’s trial of an early Covid-19 vaccine. Big retail is also hit on Wall Street, as Home Depot’s higher costs eat into its net income while Walmart’s early gains don’t hold despite unprecedented online sales. And in more retail news, Facebook’s Mark Zuckerberg hopes to vie for business with Amazon’s Jeff Bezos, as he unveils a new shopping feature on the social media giant’s platforms.

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President Trump threatens to withdraw the U.S. from the WHO after accusing it of mis-handling the Coronavirus pandemic and being China-centric. However, Beijing pledges an additional $2bn in funding for the global health body. Asian stocks follow the Wall Street rally after the Dow soared more than 900 points on encouraging vaccine trial news from U.S. biotech firm Moderna. French President Emmanuel Macron and German Chancellor Angela Merkel have proposed a €500bn recovery pact to aid the hardest-hit EU members. China slaps Australia with 80 per cent tariffs on its barley following persistent demands for a probe into Beijing’s response to the virus outbreak. And in auto news, workers across Europe return to car plants ahead of the release of EU car registration numbers for April.

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Pandemic problems… Japan slips into recession for the first time in nearly 5 years as the country’s Q1 GDP data shrinks by 3.4 per cent. In the U.S., Federal Reserve Chairman Jerome Powell says that a vaccine is key to economic recovery while Fitch downgrades France’s credit rating to negative due to depressed productivity and a widening deficit. FCA has been permitted to apply for a €6.3bn credit line from the Italian government in a bid to shore up its balance sheet ahead of the merger with PSA. Alibaba founder Jack Ma resigns from the board of Softbank after 13 years while Saudi Arabia’s sovereign wealth fund buys up almost $8bn of U.S. and European blue-chip companies.   

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