x -- trump attacks xi, accusing him of disinformation, escalating the fight of the virus. pmi slowly improves as the region tries to open up. and waiting for best buy results coming out bright now. macy's out with disappointing sales. we will speak about the long-term economic fallout from the virus. :elcome to "bloomberg daybreak americas." macy's out with disappointing , definitely less than analysts estimated. they do see a pretty strong digital boost in april store sales, offsetting some of their actual physical store sale losses. april seeing that digital uptake as well.

they are seeing business expected to return gradually, and they are reopening stores. they say customer demand is modestly higher than they had been expecting. best buy out as well. that stock up by 2% in premarket. online sales increased 155%. overall comp sales were only down 5.3%. we expected double that for the first quarter. in byoss margin coming with estimates. i want to highlight the turkish central bank rate decision, if you give me one second to pull it up. attention to that is a lot of central banks cut rates. they cut their one-week repo rate to about 8.25 percent. 825 basis points will be where there central bank has their rates.

trend in cored inflation. we have been wearing about mild inflation based on a week earlier up. let's wrap that into what is happening in the overall market. it is definitely a risk off kind of day. you can probably blinged that -- you can probably blame that on some tweets from president trump, escalating the rhetoric. how does that play out in the markets? some selling in the peripherals over in europe. u.s. dollar holding onto its bid, although losing some steam to the euro. oil rocketing higher on its own. that is a serious rebound. how far, how fast? let's dig into all of this market moving news from our washington and new york teams. we want to begin with the main story, washington, and the re-escalating tension between the u.s. and china. president trump ramped up rhetoric against the country, suggesting that xi jinping is behind a disinformation and propaganda attack on the united states and europe. kevin really joins me now.

overnight --atest kevin said really joins me now. cirilli -- kevin joins me now. he suggests there is a disinformation platform to try to discredit some of the reports coming from europe and the united states related to the coronavirus. in addition, the president also making claims that he believes seeident xi is desperate to former vice president joe biden beat him in november in the u.s. election. would make.ints i secondly, it comes as the president is really increasing his efforts to increase the rhetoric against president xi, but also as lawmakers on both sides of the aisle are suggesting that there might need to be some type of policy coming

out of washington in order to go back against china. a host of different rhetorical increases over the last 24 hours. it comes as other chinese officials have also criticized secretary of state mike pompeo with regards to his public comments surrounding taiwan. any new developments coming from washington with u.s.-china relations. alix: thank you very much. now we turn to data out of europe. we are still getting data from countries here. pmi's for the region on many factoring and services levels did beat estimates in may as the region tries to clients way back from the shutdown. michael mckee has more. just seene if we had a pmi in the 20's, we would focus on it. it was just a blip in the markets. michael: the data are lousy, but less than before. that is what passes for good

news these days. the market purchasing managers index does show that maybe they have bottomed over there. manufacturing in germany, , and overall.k. eurozone are higher, and where you really see it is in the services index. in all of those countries, those were in the teens last month. now they are hovering around the 30 mark. definitely an improvement, but you can't put too much into it. at this point, the breakeven of 50 suggests expansion, and what they are saying is we feel better than we felt last month, but we still feel terrible. still, in these days of terrible news, one data point after another, this is what passes for good news. here in the u.s., we get the market numbers at 9:45 a.m. markets may glom onto it today because they are looking for something good in the news. we also get silly fed at 8:30 --

philly fed atet eight: 30. any improvement is improvement. on everyre focused thursday morning is initial jobless claims, forecast to fall to just 2.4 million. that gets back to your original point of imagine if we had said that a couple of months ago. nobody would have leaved. -- nobody would have believed it. alix: mike, you will be sticking around with may for that as well. one thing we are watching for your virus update, the u.s. has given astrazeneca more than $1 billion to develop a vaccine for the -- vaccine from the university of ox or -- of oxford. the u.s. has also given money to tonch drugmaker sanofi develop a vaccine. how does that play out on the geopolitical stage?

meanwhile, brazil turning into the latest hotspot for the virus , reporting almost 20,000 new confirmed cases in the last 24 hours. 200,000ow has nearly infections. that trails only the u.s. and russia. coming up, much more of your morning trade, news and analysis of the market in today's first take. this is bloomberg. ♪

alix: time now for bloomberg

first take. joining me from our in-house team of wall street veterans and insiders, michael mckee, damian sassower. i know you want to get to turkey. we will, but i want to get your take on the rhetoric overnight of president trump personally attacking president xi jinping. in the emerging-market landscape, how crucial is that? damian: it is absolutely crucial. corporate disclosure, what trump is hitting on, this is not fake news. all the way to the top. just think of em. in order for a brady plane to take place across emerging markets, where you have debt relief moratoriums and all of the things are necessary, china must disclose its lending agreements with many of these foreign countries. we have seen that in venezuela, pakistan, nigeria, in order for us to even think about creditors

extending some sort of relief to these countries. china has yet to disclose that. that is at the top level. forget about luckin coffee, muddy waters, carson block, and all of that that goes hand-in-hand. alix: what do you think? michael: what he said. this is a big deal. [laughter] loves to hear.an michael: and he's exactly right. it is a bit of a scandal, and something should be done about it. the bill doesn't specifically bar the chinese from listing in the united states. it requires that their financial statements be audited by an auditor in the u.s. in other words, they've got to do what our companies have got to do. and it is going to be difficult for some of them, as carson block keeps proving. but it is something we need to do now. whether it is a good idea at this time under the ,ircumstances we are facing

whether we would cause a clean break for these countries, not working with them to bring them up, that is not going to help. especially giving everything else going on. the president's tweets, he escalated the feud with china last night. he didn't just tweet that china is responsible. he brought xi jinping into it. remember, to this point he has been very careful not to do it. he's talked about the chinese, but emphasized his good relationship with xi jinping. this just shows that things are getting worse and worse between the two countries, and you wonder where this is going to go, whether or not this marks the end of the phase one trade deal. even if they are not going to live up to it, is it basically over now? there are all kinds of geopolitical consequences that may be entering here. alix: right, and that brings in taiwan. we have heard from certain .eaders on certain topics

we have heard some pushback on huawei, but nothing from the top. how much of that do you think is because of the npc tomorrow, the national people's congress? damian: i think we know we are going to see more stimulus out of china. look has there for and the -- has their finger on the pulse as well. they know what it takes. they know that fiscal policies aimed at supporting the economy are absolutely necessary. they have been pretty hands-off. they really haven't stimulated to the extent we expect. this could be the beginning of more, especially on the back of this news. i'm expect in the npc to be slightly bullish for assets, but if anyone gets us to where the currency goes, if you look at the payments, you see basically

that use of the you on -- of the yuan fell to its lowest in quite a while. most widelye sixth used currency globally. we all know xi jinping was to see more usage of the yuan in their dealings, so we will see what this all means for the currency because that is the most important thing for em investors. alix: right. what is different this time around is how does he wind up employing all of the chinese workers? how does he wind up supporting and creating domestic demand? usually it is more about stimulus, which puts them in a real bind, especially as there has been local pushback within china itself. can em investors expect more volatility, no matter the number figure unveiled tomorrow? damian: china's track record for making investments with a positive return is not very good. point, but it is

difficult to say whether or not any of the stimulus is going to be aimed in the right direction, but you mckay great point on volatility. what we are seeing globally now due to the stimulus out of the fed is this flattening of the volatility curves globally. i am not just talking the vix. i am talking currency vols, rate vols. we these curves steepen. it is catching everyone's attention, and i think that is what is driving markets higher in the near. -- in the near-term. alix: fair point. after friday, are we going to start hearing pushback on china from all of the u.s. rhetoric? we have seen them pushback on australia, but nothing with the u.s. what are the retaliation options

? china is not options --taliation retaliation options? michael: china is not of the best position now. barriers toaise trade for specific companies. the question is, do they want to do that? theyusly, the commodities buy under the phase one trade deal will have to match up with their needs come out is one reason they have been buying less than they said they would come about at this point, it looks like maybe a pullback from that, a pullback from other trade relationships the united states would be first in line. the chinese seem to want to do this without escalating the rhetoric as president trump has done. they will freeze things. i am not a china expert, but from the experts i read on a regular basis, there seems to be a feeling that the chinese are going to want to play this cool,

lay low, not engage is much as you might expect, waiting to see what happens on november 3, and whether they can get a new u.s. president and try to reset the relationship. alix: you can play a china expert on tv. totally not a problem. question tomilar you. i feel like as of now, the markets have somewhat been a little more calm when it comes to u.s./china trade relations. it has really been more focused on the vaccine and reopening. which is more important now for market sentiment and direction? damian: i think they are both equally important. you saw news out of northeastern china that the virus is metastasizing into something new. markets sold off on the back of that. i can't project especially where equity market sentiment is going i canus its ire, but what say is we see across the whole of emerging markets quite a lot of activity.

cuts may bef rate far deeper than we expect, so all of this rhetoric from china is really extending abroad. brazileen russia and really feeling it, although when you take the difference between the two, it is really brazil. sustainability fears are being aggravated by the covid response. to gdp, alling debt of these things. in russia, we saw their largest bond offering ever on record, and 10 year yields have fallen to the lowest since 2007, when records first began. it is two different countries, two ways of handling it. you could see russia strengthen here. i just think brazil is a real mess. there are some real issues there, and i think that is where a lot of investors are caught here. alix: it is such an interesting distinction. despite the actual number of cases and how they are handling

it, the underlying fundamental issues. turkey cutting by 50 basis points. the lira erasing some of its losses on the news. what was your take? damian: the real issue with turkey is it is a liquidity issue. they tripled the limit on their fx swap agreement with qatar this morning. that is good news. qatar, they supported qatar when the sanctions from saudi arabia and the uae came through. issues, net reserves have run dry. erdogan was seeking a swap line with the fed. he never got it. foreigners today make up the smallest chair of all turkish lira volume executed. it used to be roughly 2/3, now nearly 1/3. so the currency is going to remain weak. foreign investors in turkey are relatively trapped, so it is a big concern. alix: where does that leave inflation? central bank but seeing they see

a mild track in core inflation. -- i think there was a chart that said there are dozens of banks that are within 100 basis points of the zero lower bounds in developed and emerging markets. what is the implication? michael: reporter: the implication -- michael: the implication is we get a lot more stimulus. in turkey in particular, they have real economic problems because they are going to have a trouble getting financing. there have been reports in the turkish media, probably planted somewhat by the government, that they would get swap lines with the u.s. and japan announced today, but no news so far on that. for the rest of the world, it is going to be a question of how the banks can make money at such low interest rates, and in a lot of countries where the banking system isn't as strong as the united states, it is going to raise questions about individual

banks, and the banking systems. there doesn't seem to be a whole lot of systemic issues like we saw in 2008. the weaker the banks are, the less they are going to be able to lend. that cap the ability for economies to grow out of this, to expand what we start to rebound. so it all feeds into itself at this point. alix: great,, guys. thanks a lot. charts we use throughout the two hours, go to gtv on your terminal. rows those features and check them out. real quick check on some of those stocks we were reporting earlier. best buy in particular did see a drop in comp sales, but said they were able to retain about 81% of last year's first quarter sales, even though they had the stores cut. that is something in particular. growth margins coming down to 23%. interns of macy's, they are

delaying earnings, giving more time to prep for its new finance head. they are reopening more stores, but clearly, first quarter preliminary sales number is going to be week, anywhere from $3 billion to $3.03 billion. coming up, we are going to take a look at the people most hurt globally by this pandemic. this is bloomberg. ♪

ritika: this is "bloomberg daybreak." softbank planning another asset sale to shore up its ailing balance sheet. it will raise up to $2.9 billion by raising stake in its wireless subsidiary. son hasson -- masayoshi said he wants to use the money to sell off debt and buy backs. qualityabout acorn's

control methods led to a failed takeover bid. the company also received a warning from the fda. it's is that has reached an agreement with lenders in the sale of its business. disney, universal, and seaworld taking another step toward reopening theme parks in orlando, florida. they will be submitting plans to a local task force today. officials say it will likely be june or later before they reopen. that is your bloomberg business flash. alix: thanks so much. as businesses look to reopen, we will also look at the jobs impact. i want to highlight the impact of women falling out of the job force. out of citigroup, by catherine man. -- accordinglion to the report, most women work

in sectors related to virus related layoffs. austin consulting group says they are taking on an additional 28 hours a week of household chores and childcare, women taking on a disproportionate share. full disclosure, that is not me. my husband does most of the schooling. he's pretty awesome. this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak: americad." still risk off, but we are off the lows of the session.

yesterday, so i tremendous rally within those highflying, large ech names. these are staggering numbers. just a bit of a break today. if you look at other asset classes, you are seeing a bit of buying in the u.s., selling and the peripherals. modestly, but not a ton of movement after pmi's came in less bad and expected. the commodity markets still going really strong here, 10 days of gains for the oil markets. you have to wonder, at one point do we wind up seeing oil producers come back? the over woman headline, president trump ratcheting up tensions with china, personally signaling out president xi jinping is responsible for the virus. for more on all of that is mark connors, credit suisse global head of risk advisory. help me understand what you do when you have these headlines about u.s. and china coming out,

while at the same time, we still have reopening economy volatility. thanks, alix. stepine today, you are to june of 2018 or a of 2018, there might be some nuances, but these themes are pre-covid. to answer your question, we are using the same approach as we've always done. look at each asset individually. you understand that sometimes, some assets are going to punch well above their weight in terms of risk. on the tech sector, when you look at tech, obviously china and u.s. are leaders in that sphere. infotech volatility is low in the u.s. what we see in our hedge fund managers is that they have

leaned into the tech, but reduced what you have talked about with commodity exposure to a lot of their commodities. they have reduced a lot of cyclical sensitive names because we don't know when we will reopen. those names are going to likely rally, like they did on april 27 and just earlier this week on monday. so there's a lot of imbalance in the marketplace today. overall, people have light portfolios to manage risk. alix: sorry for the noise. my daughter turned on her noise machine. that is why we hear a forest right now. so that is the set up for a recovery opening phase. what about china/u.s. trade? is there a risk trade we need to start thinking about? i said, would you look back to june, june came and went of 2018. there are items of period

volatility, and those are tough to trade. clients that have stayed with the longer running themes of tech, which have been a consistent profitable one, have been the ones that were rewarded . the theme of today's market is approaching new highs, definitely year to date. that our chiefy economist says has almost unrecognizable numbers. people are looking through these and staying with the tech trade. to put in perspective about why they are doing that, coming into this, the top five names in the just five names represent about putting percent of exposure coming into march. they represented almost 40% of returns of the entire index on a one year look back. that was in the good days.

let's say maybe the last couple of months have not been good days. they still lead the index. so they are a persistent provider because they have scale , they are not cyclically sensitive. so on these headlines, tech has really done well and better throughout. so staying the course is what people are doing. i feel that we have been asking this for years, but how long can that actually last? stocks represent more and more of the move we are seeing within equity markets. can it continue without financials and more deeply cyclical sectors? a nero market is not a healthy market, so that is true. --september, we read a piece we wrote a piece. i think there's a lot of pivot points there.

the market was narrow and thin, and we were open to selling off to any catalyst. timeere are period of where one punch lands a little harder, given the market set up. every industry is evolving. ,here are companies coming out new companies replacing financials. financials are also evolving to be able to operating a lower rate environment, so they are scaling as well. away, but i think there are evolutionary steps, where some financials will have almostiness lines, and ape what has happened in the independent sector. sort of like a slinky. alix: good example. so when we do have these headlines from u.s. and china, for example, but really the headline is about vaccines or treatment or reopening, the stop and start, what is the

appropriate way to think about it? themesy with the core and quickly trader on that volatility? managers, for an active , absolutely. for everyone else, good luck. it is hard to anticipate trade this volatility. when we look at the pros, the folks who have done well through april are the ctas, the folks that have faster acting models. their correlation to the s&p is about 3%. that is .03. the next lowest correlation is 60%. so there are models out there who can opportunistically trade this, that have a very narrow intake of data, so they are able to trade that. thegoing back to pre-february trends in the marketplace, it was low growth and low rates.

covid has only accelerated that. it was narrow leadership in global equities. narrowe extent has accelerated that -- has accelerated that. so i think you stay with the themes that have made you money, and we know where that is. alix: it is such a good point. the one thing that has changed has been solvency issues as we move from the panic to the liquidity to the solvency problem. what are you talking with clients about that. that is at point, and difference. the fed just expanded their rateet and their reaction to levels we haven't seen before. on march 23,ttom when they opened up that credit facility, that is a great example of how the market reacts to credit insolvency.

when they have a palliative movement like that, they will lift and take risk higher. pasturther the fed pushes that accommodative approach and facilities out the curve of duration and down the capital structure, that is going to push off solvency issues. there certainly will be a higher default rate. i think our credit analysts are looking between 8% and 10%, and that is what the market is pricing in defaults. that is a normal cycle. markets can absorb that. we kind of already know who is in that cycle of solvency. the question is what is not priced in. that pushes into may more emerging markets, which is still, and very surprisingly, the canary in the coal mine. currency volatility is the only asset to not pop out of the

five. so that is what we are looking at. alix: that is interesting and surprising. do you think there is going to be a catalyst for that in particular, or is the feeling that the global central banks are going to suppress volatility for all economies? statement,is a broad and it is what everyone is thinking. they have done a good job so far of suppressing volatility. boughtber when we first our house, you spend 80% of your time in your basement, looking at how the house works and operates. this was years ago, when i knew nothing about houses. we look at this heating structure and i said, what's that thing? that's the relief tank. and i'm like, it is twice as big as the tank. you are going to need that? that's what the fed has done. they have set up this relief

system and are absorbing volatility at a rate they really haven't done before. again, it is appropriate in the analogy because it is the plumbing. they took care of that. there will be market destruction butar as solvency issues, that is the normal course of business. they have gone further than we imagined. so i don't know how far. alix: and that is a very honest answer. mark, always great to catch up with you. always appreciate having you on the show. mark connors of credit suisse. super interesting debate evolving on twitter, a battle between the black swan author and quant investor. qr -- accused aqr of tail risk bets.

the other responded, saying he was comparing apples to hippopotamuses. expensenot take into always being prepared for that kind of doom. now we are going to give you an update on what is making headlines outside the business world. here's ritika a group there word news. -- here's ritika gupta with your first word news. ritika: the white house is policies,eijing's halting china for human rights abuses and economic protectionism, among other things. president trump's stepped up rhetoric, saying she should be is behind -- saying xi jinping is behind a propaganda attack on europe and the u.s. chinese companies could be delisted from american stock exchange is. the bill would require companies

to assert that they are not in control by a foreign government. senator john kennedy says he wants china to play by the rules. 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. i'm ritika gupta. this is bloomberg. alix: thanks so much. just want to highlight a headline across my terminal. italy is raising record 22.3 billion euros from a retail bond sale. a huge amount of money in a retail bond sale. if you look at the 10 year btp's , trading at about 1.64%, up by about two basis points. as theless, ecb, as well merkel-macron plan, have been helping sales within italy. coming up, we are going to take a look at when i set class that's had a huge rally, and some volatility, and that is oil. we are looking at the impact of the tanker industry with randy

jefferies senior analyst, next. this is bloomberg. ♪ berg. ♪

ritika: this is "bloomberg daybreak." easyjet will become one of the first airlines in europe building up services. it will new flights from 22 on june 13. passenger and staff will be required to wear face masks. take two interactive warns the endent pickup in gaming may

-- [indiscernible] -- expectations that will continue. rent the runway is the latest company to offer a discount to private investors. the fashion start up is close to raising funding that values the company below its previous $1 billion valuation. rent the runway is seeking at least $25 million in its funding round, led by t. rowe price. it would value the company at about $750 million. i'm ritika gupta. that is your bloomberg business flash. alix: thanks so much. the market having a monster rally, up for 11 straight days. this chart comes to us from the head of --, and he takes a look at actual production cuts monitored in the u.s. the eia has their own to come out weekly, and he thinks we are

looking at potentially millions of barrels of oil last being evenced in the u.s. than the eia is estimating. joining me now is someone who can help give me more insight, fferies senior je analyst. how do you look at the price dynamic playing out? how much of it is shut in versus demand recovery? randy: thanks for having me. it is certainly a tale of both. you are seeing some demand recovery, mostly in asia. china, for example, is basically back to the pre-covid-19 levels, importing roughly 13 million barrels a day. on the supply side, you have heard many comments around opec+ , saudi, russia, and now the best curtailing production pretty rapidly. most people thought the u.s. would put off in barrels a day

by the end of summer. it looks like they have done that in a month and a half. talking to all of these petroleum engineers and reservoir engineers, everybody is shutting wells. counts are falling rapidly. you are certainly seeing a massive production decline. we still think demand is below supply currently, but that is probably going to inflect in june as opposed to august. that is why we are seeing the rally in brent, as well as a wti. alix: you are the tanker guy. does this mean if we see production coming down and demand recovering, all of a sudden they are resupplying demand? or now there's more floating storage because there's all this inventory to work through? randy: great question. it is little bit of both. all of the attention has been on tankers and floating storage,

with the huge commodity contango . now we have seen that the three months bradford brent -- three-month spread for brent down to about a dollar. it was seven dollars a month ago. so you are not seeing much more floating storage build, our at least median contracts for floating storage. as more payrolls come out of the north sea and nigeria, and obviously the middle east, and go into asia, at first it was basically just being stored. demand.are seeing some you still have floating storage, so that will decrease over time, especially as you start to see a rebound in prices. alix: what tanker is best set up

to take advantage of this? those those withike exposure, the large ones. your own avenue -- [no audio] nethich are trading below asset value, as well as at a 30% to 40% discount to where they were in january. january, the target was day at the,000 a expedition for earnings. currently it is around $50,000 a day. it is lower than 80,000 today six weeks ago, but still above the levels we saw in january because of the equities are largely disconnected from the roi they were. equitiesearnings to disconnect -- so we cn earnings to equities disconnect.

alix: randy, we've got to leave it there, but i appreciate the breakdown. thank you very much. we have more bricking news on issuance in europe. spain is raising net debt issuance targets fourfold to 130 billion euros, a huge amount. italy also sold over $22 billion in retail bonds. stilldual countries are trying to pay and stimulate the economy. coming up, it all really hinges on a vaccine. astrazeneca now getting over $1 billion from the u.s. for an experiment to covid-19 vaccine. we will break down the possibility of it in today's tracking treatment, coming up. this is bloomberg. ♪

♪ trackinge now for treatment. we are going to take a look at the latest of elements in the race to solve the covid-19 health crisis. going to me as sam has ellie --

is sam fazeli of bloomberg intelligence. astrazeneca getting $1 billion from the u.s. for a vaccine. what do we know? sam: well, we don't know yet, but we have seen some preclinical nonhuman results published that seem to be, at least to our eyes, positive. nonhuman primates, so closer than mice. that therly does show bar has seem sufficient to offer $1 billion for the development, so that is good. the other thing i would say is we have seen some other research that deals with some of the question marks people had raised against to be off covered -- against the oxford vaccine because that did create

some uncertainty for a while. alix: even though there are youl some skepticism, can help me understand how vaccines work out with funding? the u.s.,s money from astrazeneca gets money from the u.s. does that mean the u.s. gets at first? whati don't actually know any,trings are, if attached to the funding, but if you read their press release, several times they have said they keep talking about equitable access to the vaccine for the entire world. they are working with various governments to provide the vaccine. what astrable that is doing is developing the vaccine, and then handing it to governments to go and produce their own.

then perhaps it uses the barter money to manufacture stuff directly for the u.s. government and the u.s. that is possible. alix: ok, interesting. sam, great. i love catching up with you. thank you for that. coming up on the program, sophie to subramanian -- coming up on the program, savita subramanian. this is bloomberg. ♪

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daybreak: americas." i'm alix steel. let's take it from the top. >> we are willing to be more transparent than any other company in the world and are ready to help address some of the larger malicious cyber activity efforts around the world. alix: huawei chief security officer response to comments as huawei -- comments that wally remains an espionage threat among heightened -- that huawei espionagen threat among heightened tensions between the u.s. and china. kevin: lawmakers on both sides of the aisle suggesting that there might need to be some kind of policy coming out of washington in order to go back against china. alix: this comes as the white as mobilees policies cases of the virus reach 5

million. >> manufacturing pmi has come in at 40.3. perhaps a quicker recovery in manufacturing than anticipated. alix: european manufacturing and services in may better-than-expected. >> rocket purchasing managers index shows that maybe they have bottomed. any factoring in germany, france, the u.k., and the overall eurozone are higher. alix: europe easing lockdown restrictions and u.k. drugmaker astrazeneca now racing towards a vaccine after receiving $1 billion in u.s. funding. it's vaccine candidate is still in human trials. i with businesses reopening, think you can see a good, slow, steady recovery in the third and fourth quarters. alix: della said president robert kaplan tries to set the tone -- dallas fed president robert kaplan tries to set the tone for the rest of the year. >> the real issue with turkey is

a liquidity issue. they have external debt coming due in next 12 months. they tripled the limit on their ethics swap agreement with qatar this morning. -- their fx swap agreement this morning with qatar. alix: more than a dozen global central banks are within 100 basis points of zero. we have some breaking news for you. tjx out with earnings. they are not providing their fiscal 2021 financial outlook, so no surprise. their adjusted loss is about $.74 a share. they have reopened stores worldwide, about 1600 stores. they say they could be mostly reopened by the end of june. they are going to see plentiful buying opportunities -- [indiscernible] by 1% in premarket. in the overall indices, looking

at the s&p futures, they are kind of off the lows of the session, but still down by about 17 points. they rally begin yesterday, led by the faang names. tons ofset classes, issuance now coming from italy, coming from spain. selling after the 20 year came in pretty solid yesterday, and oil continuing to rebound today as production continues to be overestimated in the u.s. we played some ketchup there. going me -- actually, the market is telling us not to worry. not the headlines, but the markets. that is according to savita subramanian, bank of america securities head of u.s. equity and quantitative strategy. she writes, "if everything goes right from here, vaccine consumption bouncing back better-than-expected, sales could move higher -- stocks could move higher, north of

14%." joins me now.ita it feels like we want to buy if there is still a good headline. savita: i think that's right. learned this morning is the market is pricing in a scenario that is realistic. it is essentially the idea that we see the consumer recover reasonably quickly. we get back to 2019 levels of activity by the end of next year . market looks expensive on a whole bunch of different metrics . the market actually looks pretty cheap. risks for the the s&p 500 is to the upside rather than the downside. i think what is interesting, even if you look at our credit data at bank of america, we have seen spending picked up.

we have seen spending picked up mostly in the lower income cohort, so i think what we need to figure out right now is, is that the beginning of a recovery thishe consumer, or is just spending stimulus checks that could actually subside in the next few months? that is one area we are looking at a little bit more closely. i think what we are looking at right now is a market environment pricing in the idea that everything goes right. so the stimulus, which has been monstrous,has been is enough to plug this hole from covid-19 in activity the last quarter. got multinationals potentially re-shoring. that would be good for the economy. is mid to high-end consumer

on relatively clean balance sheets and the lowest financial obligations ratio ever. a lot of this looks really positive. i think the risk is the market not pricing in what is to come this year. if you think about it, we had a bunch of good news over the last puttings, but now it is the whole recovery to the test. how quickly as the consumer going to recover if we see unemployment levels not necessarily recovering as quickly as some of the other barometers? how quickly will consumer services recover? china's bounceback is mostly on manufacturing, whereas the u.s. is a more consumer led economy. those are some of the things that i don't think are priced in. the thing that worries me is we have spent so much money over the last decade, and at some point we have to pay that back. i think that there are risks

that aren't necessarily built .nto the market today alix: the other risk you didn't mention in the market is china versus u.s. president trump calling out xi by name yesterday in a tweet. the senate passing the bill that if passed, could really hurt chinese listed companies. savita: that is absolutely right. that is definitely a risk. closer to the election, i think we will hear more about that. as idea of geopolitical risk a potential headwind to the market could drive some volatility, which is typical. typically, you see a pickup in volatility as you approach november and an election year. and takesere are puts to that scenario. good news with some of this china friction is that multinationals are actually bringing activity back to the u.s. that could be a positive for the

u.s. economy. longer-term, i think we are global,way from this frictionless supply chain environment to a much more closed economy that, longer-term, could put a bit of a dent in longer-term growth. i think where we are in the calendar year as we approach november, that is something you will have to think about. you typically see volatility pick up as you approach november in election year. alix: the other conversation revolves around, one, the reopening trade. when we get positive news on a vaccine, you have small cap cyclical stocks rally. when you have a negative day, you see the tried-and-true health care and tech stocks, particularly those large caps. how do you handle that? savita: i think you are right. it is either --

[indiscernible] -- or the value rally off the bottom, distressed stocks. i think as we move toward the end of the year, the comps for some of these stay-at-home stocks are going to get tougher and tougher because we have had great sales allocated towards this very small cohort of companies, but think about next year. how hard is it going to be to phenomenal, record sales in some of these companies that benefited from the covid stay-at-home environment. that is the time we need to start thinking about the comps and may be exiting some of these high-growth leadership areas of the market, and moving into some of the companies that have much easier comp, i.e. traditional retail or the beaten up value names in the index. another reason i think we could see rotation this year is the

comparison on sales and earnings just get harder and harder for some of the darlings of the s&p 500. alix: interesting take. appreciate it. always good to catch up with you. coming up, we will take a look gluto survives the retail and what the business actually looks like. this is bloomberg. ♪

alix: retail still out front and center for earnings. macy's starting to reopen more

stores. tjx earnings out as well. they are reopening stores. they could see full reopening by june, but what does that look like if we survive this crisis? joining me is a man who has a lot of experience in the retail world, gerald storch, storch advisors ceo. the main headline has been j.c. penney, j. crew, neiman all filing for bankruptcy. how many more do you think we see until we recover? gerald: the answer is a lot. people are not buying clothing. you don't need to get dressed up when you are not leaving the house. it has been trouble for a decade for apparel, as people have shifted spending two more hard-line electronics, things like that. and the malls have been suffering mightily. the apartment stores suffering. so what we see here is just an exacerbation of those

long-standing trends. so while the coronavirus is a force for consolidation in every industry, where the strongest retailing, itand is especially bad for smaller companies. the ones that were winning before are the ones that tend to sell the necessities. walmart, costco, target, best buy, home depot, lowe's. these guys are doing vastly apparel and department stores are in serious jeopardy. alix: who else is on the list? gerald: i think an excellent are fairly easy to see. eople like a seen a -- people that are mall-based in apparel. i don't know that any of the other department stores -- [no audio]

-- all drawing down all of their lines. they have cash right now, but when they enter the fall season, the orders are way south of any numbers that you had in the past holidays, so they won't be able to make up for it. still spring, they will have those loans come due. they will have to pay them back. do we see m&a after the bankruptcies? buy ay would we want to bunch of j.c. penney stores? gerald: i think people will look more at what are the individual asset values. for example, there's a rumor that amazon was looking at buying j.c. penney. that might make some sense.

i don't know if it is true or not, but j.c. penney has distribution centers amazon would love to have. j.c. penney has an apparel presence, which is one of the big growth areas amazon is looking for. they bought whole foods when they wanted to grow in grocery, as you may recall. so it is possible you might buy some of these comedies for some theye individual offerings have, not to operate as they did before, but as a part of a bigger brand theory. and saks haveman been looking like starcrossed lovers. there's only room for one big luxury player. neiman is trying to come out of bankruptcy, faltering, and having to liquidate. i am glad you brought that up. what kind of liquidation can we expect? can you help me track it to the

commercial mortgage debt market? gerald: they are trying to stay alive. the history and retail was very poor for this, so the creditors don't like what they are seeing. they will push them to liquidate, and when they liquidate, they will try to sell inventory to generate that. many did, we know that not pay rent in march. in april, didy not pay rent. so there are behind-the-scenes to negotiate all these things, this problem becoming uncontrollable. i think they have done a pretty good job of that. so i don't think the immediate problem is that. it is the longer-term problem, the long-term - problem, that many of these stores will closed. there will be a lot of pboc his

-- a lot of empty boxes. much will still be way too retail real estate out there, and you're going to have to see some big problems as a consequent. -- as a consequence. --x: if i go into a store actually, if you were going to start a store today, a brand, a company in retail, what would it look like? what would you sell? who would you hire? gerald: it seems obvious, but first of all, i would have a major online presence. look at the sales report that came out today from best buy. over 100% growth in same-store sales online in their internet business. similar garish growth in online sales at target. similar thing at walmart. so you better have really good online business. maybe try to fix some of these brands that i have toyed with that are in trouble out there.

put them together and make a big online play of all of these brands, and really have something that adds up to something meaningful. the stores he would have, i think you want to go to more engineered pickup locations as opposed to places that you browse and touch everything, but rather, you might go online on your smart phone, figure out what you want, going to the store, and pick it up, whether in the store or they bring it to the curb. some way that involves the least amount of touching and trying. they might have some add-on suggestions when you get there, say here are some other things that match. that might be a way to get the basket up a little bit. but i think that kind of trend in the future. by the way, retail was going this way before, as you may know. there was a huge increase at pickup stores. i think it was headed this way for a long time, but this is going to double or triple the pace of that kind of development. where would you source the

goods in that pretend online store? gerald: that is a good question because one of the huge impacts of the coronavirus is a shift in the supply chain. china has become a huge source for many of the products that we buy in the u.s. every day. this was shifting, with all of andtariff pressures regulatory pressures. now it is going to shift even more to other countries as you see government pressure, as well as consumer pressure, saying i don't one everything to come from china anymore. so you will have to diversify supply chains. what we saw here is the consequence of decades of switching to fast fashion or a just-in-time mentality, where you try to have no inventory in the pipeline. so with the pipeline broke, stuck disappears. they are out of everything from hand sanitizer to anything that might be there. the same thing will be true in the future if there is a second wave of virus. it would be malpractice not to change your supply chain

approach from one highlighting efficiency and speed to something much more focused on flux ability and having more andn -- on flexibility having more inventory flow to the customer, and less being overseas in china. alix: so great to catch up with you. fascinating conversation. storch of storch advisors, thank you very much. another trend brought on by the pandemic, the blight of the suburbs. would give my left arm for some more room. that is coming up. this is bloomberg. ♪

alix: this is "bloomberg daybreak." posted revenue and

quarterly sales that beat estimates. macy's is delaying its quarterly earnings report because of the pandemic. it is estimating that it suffered a $1.1 billion loss in operating in poem -- operating income. it's new york city flagship is absent from the timetable of story openings. the u.s. has given astrazeneca more than $1 billion to develop a coronavirus vaccine from the university of oxford. the british drugmaker is hoping to have doses ready soon as september. the u.s. has also given money to french drugmaker sanofi to develop a vaccine. that is your bloomberg business flash. alix: thanks so much. here is another trend we are all watching. that is the young joining the rich in fleeing america's big cities for the suburbs. from new york to san francisco locking down to

prevent the spread of the virus ulcer drove young people to flee their apartments to stay with their parents. citibank is looking to establish satellite offices in the new york suburbs. jp morgan doesn't it is fate having more than half of its -- doesn't anticipate having more than half of its staff in the office. [indiscernible] -- the office. as people will probably work more from home now, i think people are worried about their physical space. i think what we are seeing, a trend a little bit away from urbanization and towards the suburbs, i think that is only accelerating now. shapiro, whos tom invests in a lot of rental homes outside the city to take part in this dear urbanization trend -- this de-urbanization trend. coming up, more on the fed's

message and the structural changes within the job market, initial latest read on jobless claims. this is bloomberg. ♪ staying connected your way is easier than ever.

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from all of that on xfinity.com. faster than a call. easy as a tap. now that's simple, easy, awesome. alix: this is bloomberg daybreak. we have the latest raid on the u.s. economy with initial

jobless claims. asare seeing a risk off town tensions escalate between u.s. and china. a touch of alix: selling in the peripheral debt market as a lot of supplied comes on in spain as well as italy. also want to take into account oil. a risk on day. jobless claims are out. coming in roughly in line with estimates, maybe slightly elevated at 2.4 million. the continuing jobless claims atber much higher, coming in 25 million. that continuing number is the one we want to keep our ion, showing how many -- our eye on, continuing to show how many file claims. the overall number, 2.4 million people filing for jobless claims last week. less bad on the headline number. michael mckee joints me now. also, i should point out the week before was revised lower by

about 3 million -- 300,000 as well. michael: you will get a low movement. those numbers are always adjusted each week. when you're dealing with very small numbers it is a problem. 300,000 when you're talking about 2.4 million is not of a deal. we are still trying to get the pig through the python. people in states trying to get through their system. they may have filed but have not got money yet. we are starting to see the continuing claims pile up. those are the people that are finally getting checks. you have to keep filing to continue getting checks. there is a lag in the delay. that 25 million is from last week, the week before. there is a week delay. keep an eye on that. when we start to see that decline is when you will be able to say there is a recovery.

offay see some people go because they will be rehired under the paycheck protection plan, but it does not look like a lot yet. one other number i would highlight is a new number in these jobless claims figures. that is pandemic unemployment assistance. this is the part of the cares act that was designed to give unemployment insurance to gig workers, people who ordinarily are not eligible. week --2.2 million last the week before last, because that is also delayed. 854,000.up from a major jump in the number of gig workers getting unemployment insurance. that will contribute to the overall. we might note the philadelphia fed business outlook comes in a -43.1, which is better than expectations and certainly better than the -56.6. this is where ivo my eyes and

say so what? role ml mywhere i eyes and say so what? alix: less bad. michael: in the area covered by the philadelphia fed, things are little better. it is just the sentiment index but it does not suggest we will see major changes. alix: not anytime soon, and equities not responding to any of the data which is what we saw in your. reinhart, is carmen professor of the international financial system and newly appointed world bank chief economist. professor, it is a sincere letter to speak with you -- it is a sincere pleasure to speak with you. i want to get a sense of what you see as the unemployment scars as we come out of this. where do we heal, where the scars? carmen: an important take away

of chairman powell's testimony and an important part of my work on the aftermath of the crisis is it takes a while. , i have beencars quite -- quite dismissive of the v-shaped recovery. yes you will have some spectacular mons because you are coming -- some spectacular months because you're coming out of dismal numbers by a historic likely but this is not to be an environment in which we growth and income per capita get back to our pre-covid levels for a few years. scars -- onerms of of the very wise things chairman

powell is doing is laying the groundwork for convincing markets that is likely to be the federald therefore reserve policy will remain accommodative for the foreseeable future. michael: when you have that kind of outlook, it suggests the fiscal authorities in the u.s. and around the world will have to do more. we are already pumping trillions into the global economy and that will be funded by debt. your work is on debt. i know you have said we need to put the fire out first, but will we be paying a big price down the road for this? carmen: down the road? yes. this is a question i always get asked and i have the same answer. in the midst of world war ii, did anybody ask are we going to put less effort in because we are worried about debt and the

answer was a resounding no. you worry about winning first and then you worry about how to pay down your just a couple of days ago in an interview for the , i'm due totte leave harvard for the world bank , the theme i had is we will be doing a lot of worrying about debt issues in the foreseeable future, but that should not be the guiding principle of what we do today. the bigger the scars, the longer this drags out with the possibility of subsequent waves more the lasting damage accumulates. remember, we are not just seeing , if that was not enough,

in jobless claims and output, we are also seeing balance sheets that are literally getting wiped out. you are seeing downgrades of every form by the credit rating have notd i think we seen the tip of the iceberg in seem of -- in terms of the loan problem we will have. michael: what does that mean for the economy? we willpeople would say survive because we have a printing press, but does this mean we will worry about significantly higher interest rates or a lot more joblessness for a longer time as companies go out of business and put people onto the unemployment rolls? in terms of higher interest rate, it is difficult for me to reconcile higher interest rates with an economy

that is going to be sluggish to recover. i think the concerns of a higher rate are out in the future. facinge not what we are in the near term. i think the nearer term concerns actually go the other way, which is private-sector deleveraging, headwind into be a terms of growth and deflationary forces. i think the reason for the deleveraging is voluntary and involuntary. involuntary is business failures. and chapter 11. as i said, this is the tip of the iceberg still. alix: the other wildcard is as

we come out of this, how many companies are rethinking their supply chain to do more closer to home and more nationalistic bent, hoarding more stuff in case something happens like that again. can you model that out for me and what the broader impact for global growth will be if that is the track we go on? carmen: without being melodramatic, i have set covid-19 is like the last they'll in the coffin of -- the last nail in the coffin of globalization. crisis the 2008-2009 that gave globalization a big hit, as did brexit and the u.s. china trade war. covid is taking you to a new level. i think you are right that we are going to see much more inward tendencies and that will

be a factor i think will slow down overall global growth. i think it will be particularly damaging for developing countries as opposed to advancing. i do not think anybody benefits from that. that haver countries smaller, less wealthy domestic of theirnd much more growth comes from outward orientation, i am concerned that just -- we have had globalization before. and the run upy to world war i was an era of high globalization, given the technology limitations. world war i, then the depression, then world war ii left us with an era where you had capital controls, you had

very limited trade relative to the half a century before. i'm not saying -- i do not want that we areamatic going full-fledged in that direction, but that is the tilt. i think covid has left countries feeling they need to be self-reliant and away we have not seen before in a long time. michael: to follow on that, the markets are starting to take seriously the idea that the trade war with china is coming back. what impact would that have in a time when we are already trying to recover? very negative impact. parallels -- historical parallels are very seldom exact. searchot-hawley tariff

came at the most inopportune moment. ,ven without a new trade war the wto is saying world trade is between 13% and 32% this year. the last time we had anything like that, you have to go back to the depression, where we had that kind of collapse in a single year of trade. , i think the repercussions would be the greatest for those countries that are the most export dependent. the shadow it cast is across-the-board. a/southso not just emerging -- a north/south emerging issue.

within europe it was contentious. this is a currency union in which trade integration was an integral part. we are seeing a challenge to that at the moment. carmen, you will be sticking with me. carmen reinhart of the harvard kennedy school. mike, always a pleasure. i appreciate that. breaking news. starbucks is saying it has regained 60% to 65% of prior yellow -- prior year u.s. comp sales and they are expanding their covid-19 leave policy. that stock is up. china comps rebounding even more. good high-frequency read on what happens when you wind up reopening, how quickly you can get back. coming up, how a hidden debt pile threatens emerging economies. we will talk more with carmen reinhart. this is bloomberg.

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>> absolutely, a deal is possible. it is in the interest of creditors to make an agreement , there with the pandemic has already been a debt default in lebanon. argentina is first in line. there are many coming up. argentina will hopefully be a model of how this can be done. alix: that was professor joseph stiglitz of columbia university talking about argentina's debt struggle. it seems like blackrock is giving a little bit of room for argentina. still with me as carmen reinhart

, incoming world bank chief economist. because the title i cannot ask you about argentina, but it is a good lens into the rest of the emerging-market world. his debt forgiveness going to be the thing? is.en: i think it already wave of debtrst forgiveness with the g20 announcement in which a temporary moratorium was announced. remainre many challenges on the creditor side and the debtor side. creditors, china is by far the largest creditor. it has lent more, especially to the low income countries, to the

high debt countries, than the rest of the g20 combined. participation in debt forgiveness is critical. -- there are some countries at the moment that have been very hesitant to take advantage of the moratorium, the six-month moratorium on debt payments because they are afraid that the credit rating agencies are going to downgrade them. let me say this. i think they should be of rate that they will be downgraded, but they will be downgraded, it will not be because they have participated in the debt standstill. right now what we have is a wave of sovereign downgrades because of collapsing export revenues,

the appreciating dollar has increased the weight of their external dollar debt. growth and the fiscal deterioration. when we talk about debt problems , the precursor to it is what you see already happening with the credit rating agencies and haverades for sovereigns hit a peak. alix: what is reality there will be some forgiveness? you mentioned china, but china has a ton of problems on its own in terms of its own companies needing the kind of debt forgiveness. carmen: that is not true for the united states and it is not true for italy or france. global,n the midst of a

not recession, but a global depression. the scale -- we were discussing this earlier -- the magnitude of the jobless claims, which are on a scale that is completely off the charts from any past recession, even the global financial crisis. question,conomies, no have problems of their own. china is the second largest global economy and it is a developing country, but because of its huge global footprint it forenormous repercussions the remainder of the developing world, and that is a big responsibility. challenge to debt forgiveness also involve a private sector that will not

budge. we have seen this with the back-and-forth with the argentina negotiations. i suspect we will see this more as other countries have negotiations. that could be lebanon, that could be ecuador. the list may get a lot longer the more the covid crisis does damage. alix: go ahead. epidemic iscovid far from over in emerging markets. brazil is becoming the new hotspot. with emerging markets for a while. alix: i appreciate your perspective. always wonderful to talk to you.

carmen reinhart of harvard school and incoming world bank chief economist. congratulations again on the new post. more talk about going digital. we are talking bitcoin and its trajectory in today's technically speaking. this is bloomberg. ♪

alix: time for technically speaking. mike mcglone joins me now. it is time to talk about bitcoin. mike: since it is such a clear market, i thought i would focus on bitcoin. i will show you the chart with bitcoin hovering around 10,000. the key thing you want to watch his adoption. one of the big indicators is futures. that is what you see in that chart. futures open interest in bitcoin has reached a new record high, which means more adoption and becoming more like digital gold, which will probably push the

price higher. alix: let's talk about the relationship of bitcoin and cold. where is it, where you see it? mike: people often called digital gold. that's look at the correlation to gold. it is the highest ever. right around two times is the bitcoin beta to gold. gold has broken out to a new eight year high. bitcoin has been hovering around 10,000 since 2017. with gold appreciating, it looks like bitcoin is more likely to follow. alix: mike mcglone, always a pleasure. mike mcglone of bloomberg intelligence. that does it for me. coming up on "the open" with jonathan ferro, the astrazeneca ceo will be joining him. u.s. china tensions permeating the narrative within the market. also initial jobless claims 2.4 million continuing claims rising. also the market taking it in

stride. lots of supply coming on with spain and italy and the bank -- the bond market able to absorb that conversation. yields holding firm in europe and in the currency market, you still have the dollar coming off as the euro gained steam and oil on its own tear. that is an interesting story for me in the commodity market. retail, a mixed picture as we head to the open. this is bloomberg. ♪

w?w?uhió'ñó ♪ from new york city for

our audience worldwide, good morning, good morning. the countdown to the open starts right now. 30 minutes away from the cash open. here is your price action. we bounce off the lows and equity futures. negativep 500 still .25%. yields come in two basis points on the 10 year, we drop down to 0.67%. in foreign-exchange, it has been the story of the last couple of days. euro-dollar up .1%. that is the story for the price action. here is the top story for me worldwide. two points of tension domestically in the labor market. 25 million continuing claims in america. 39 million initial jobless claims in just nine weeks. there is a real pain in this labor market. we will discuss it through the hour. the other point of tension is the international scene.