Squawk Box Europe Express

Lower for longer…the U.S. Federal Reserve promises to keep rates near zero until at least 2022 to support the economic recovery in the wake of the Coronavirus pandemic, with chair Jerome Powell emphasising that policymakers are “not even thinking about thinking about raising rates.” The central bank has also issued its first economic forecasts since the outbreak, saying the U.S. economy could contract by 6.5 per cent this year. The Dow and S&P both dip after an unsteady Wednesday session with Asian indices and U.S. futures also trading firmly in the red. The Nasdaq diverges again, closing above the milestone 10,000-point mark for the first ever. In M&A news, Just Eat takeaway gobbles up its U.S. rival GrubHub in a $7.3bn all-stock deal. In Hong Kong, internet giant Netease sees its shares rally during its first trading session as Chinese companies face greater scrutiny over their U.S. listings. And in the wake of racial tensions in America, Amazon has frozen police use of its facial recognition techno

Big tech breaks out… FAANG stocks help the Nasdaq briefly pass through the 10,000-point mark for the first time, while the Dow suffers its worst day in three weeks, snapping a six-day winning streak. Investors focus on the Fed, as the central bank prepares to release its first economic forecasts since before the pandemic. Morgan Stanley CEO James Gorman tells CNBC he believes that the worst of the Coronavirus fallout for the U.S. economy has now passed but warned the government not to be over-confident following the recent market rally. Chinese producer prices fell at their steepest rate in four years in May, which has raised the prospect of further easing by the PBOC. And in Hong Kong, HSBC comes under fire from U.S. Secretary of State Mike Pompeo who has accused the lender of ‘kowtowing’ to Beijing and investor Aviva says it’s also concerned about its support for a controversial new security law.

U.S. markets surge with the Nasdaq closing at a record high and the S&P 500 turns positive for 2020 as investors wait on this month’s Federal Reserve rate decision. Veteran hedge fund manager Stanley Druckenmiller tells CNBC that the current market rally and Fed moves caught him by surprise. President Trump has announced that he will not defund police departments after Democrats called for law enforcement reform in the wake of the alleged killing of George Floyd. In energy news, Saudi Arabia has said that it will no longer cut additional oil supplies following the latest OPEC+ one-month extension. And BP is set to slash 10,000 jobs despite rising oil demand.

Something to work on… Asian markets rise on an unexpected jump in U.S. employment but questions linger over whether misclassifications kept the unemployment rate lower in May. In energy news, oil rallies following an OPEC+ agreement to extend output cuts. Chinese exports for May fall unexpectedly, while imports plunge in their sharpest decline in four years. Protests continue across the U.S., with Washington D.C. seeing the largest Black Lives Matter demonstration to date. And in the UK, British Airways, EasyJet and Ryanair make a legal challenge against the government’s 14-day Coronavirus quarantine policy.

Big Bazooka…Italian bond yields fall after ECB President Christine Lagarde announces an almost €600bn extension to its pandemic support package in order to help offset the sharp growth contraction throughout the eurozone. In Asia, markets edge higher as U.S. averages break a four-day winning streak. Unemployment in the States, however, is set to near 20 per cent in today’s jobs report. We hear exclusively from Nissan CEO Makoto Uchida, who says that the shock of the Coronavirus outbreak will serve to accelerate tech changes within the autos sector. And we are live at Lingfield Race Course in Surrey as horse racing – worth £4bn yearly to the British economy – becomes the first major sport to restart following the UK lockdown.

Markets undeterred… the S&P 500 posts its longest winning streak since February. This, despite the ongoing unrest across the U.S., as well as divisions over the response within the White House. The ECB is reportedly ready to expand its asset purchase programme as the central bank looks set to release gloomy growth projections for the eurozone. Meanwhile, Berlin announces a €130bn stimulus package to help kickstart consumer demand and bolster Germany’s economy. In energy news, Saudi Arabia and Russia look set to agree on extending oil output cuts for a further month but compliance issues mean OPEC is yet to confirm today’s producer meeting. Tensions simmer between the U.S. and China after the Trump administration blocks Chinese carriers to the country in a bid to pressure Beijing into lifting its own ban on U.S. airlines. 

U.S. tensions continue with the Pentagon moving 1,600 troops to the Washington D.C. area in anticipation of more violence following the police killing of George Floyd. The U.S. government launches a probe into nine countries which are threatening to impose digital taxes on tech firms. Trade Representative Robert Lighthizer has warned that the U.S. will “take appropriate action to defend U.S. business”. In luxury news, LVMH is reportedly reconsidering its $16bn takeover of U.S. jeweler Tiffany, prompting shares to sink almost 10 per cent. In China, service sector growth has roared back, with the PMI hitting its highest level for a decade. However, unemployment also continues to rise. And in the UK, sterling rises on reports that London will compromise with Brussels on trade rules ahead of upcoming Brexit talks but concerns remain over financial access to continental markets.  

President Trump vows to send in the army should state governors fail to quell the violent protests raging across U.S. cities following the police killing of George Floyd. Some Facebook employees stage a virtual walkout, demonstrating against the social media platform’s failure to act on President Trump’s “when the looting starts, the shooting starts” post. In Hong Kong, CEO Carrie Lam hits out at Washington, accusing it of double standards over its reaction to its own protests, while S&P hints at downgrading the territory. And in the UK, Prime Minister Boris Johnson is reportedly set to meet with European Commission President Ursula von der Leyen ahead of the final round of Brexit talks.

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.  

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.  

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.

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.

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.

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.

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.

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 pl

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.

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.   

Industrial improvement… Chinese output rises for the first time this year but retail sales and fixed asset investment continues to decline. Tensions between the U.S. and China escalate as President Trump warns he could completely cut ties with China, saying he has no reason to talk to President Xi Jinping right now. CNBC learns the President is set to sign an executive order to require key medicines to be manufactured in the U.S to reduce reliance on foreign supply chains. French pharmaceutical giant Sanofi is in hot water with the Élysée Palace after CEO Paul Hudson suggested that the U.S. could be first in line to receive its potential Covid-19 vaccine. And in telco news, BT has refused to comment on whether it will offload its OpenReach stake to fund the launch of its super-fast fibre.  

Warnings on Wall Street… U.S. Federal Reserve Chairman Jerome Powell warns of prolonged economic damage, sending global stock markets into the red. Meanwhile, Cleveland Fed President Loretta Mester tells CNBC that the outlook for 2020 looks ‘dire’, adding that any recovery is likely to be slow, but shoots down expectations the central bank will lower rates into negative territory. President Trump says he disagrees on that point but calls Powell his “most improved player”, praising him for his recent actions to mitigate the fallout from the outbreak. Billionaire investor David Tepper issues a stark warning, telling this channel that the market is the second-most overvalued ever, sending the Dow to a session low. In autos news, FCA and Peugeot suspend their dividends for this year but jointly state that their merger is on track. We also speak to Zurich Insurance CFO George Quinn who says the company is bracing for up to $750m of virus-related claims this year.