u.s. as the number of infections rise in texas, california, and florida -- all recently reopened states. not even thinking about raising rates. a dovish jay powell signals that zero rates are here to stay as he seeks to manage expectations about the u.s. recovery. and enough from the ecb. policymakers are tiptoeing into a deep debate on more seamless, some warning that inflation risks are too high. we will speak with jean-claude trichet this hour. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua, here in london. tom keene in new york. a clear reversal when it comes to the cautious outlook that the fed outlined yesterday, partly due to the number of infections rising in the u.s., it also partly due to the rally we had last week. tom: those are the two big stories francine, there is no question that the chairman ended the debate about a v-shaped recovery. amy that will happen, maybe it

will not. he made -- maybe that will happen, maybe it will not. ,s you rightly mentioned francine, today the pandemic is again front and center. it is without question a different thursday than it was a week ago thursday, even two weeks ago. once again the pandemic worldwide, and in selected states in america, really is front and center. francine: it certainly is, and that will be the main themes running through our program. that's get to first word news with ritika gupta. ritika: good morning. a second wave of coronavirus cases is in the u.s. texas reported its highest one-day total since the pandemic emerged, and a month into reported, florida 85 new cases, the most in a seven-day period. still, surges cannot be linked to reopening. a powerful message from federal reserve chairman jerome powell,

saying the central bank will keep pumping stimulus into the economy until the labor market is healed from the coronavirus pandemic. the fed is not even thinking about raising interest rates. policymakers kept the key rate near zero. almost all forecasts keeping it there until 2022. written's top scientists are put -- britain's top scientists are underg boris johnson pressure. one is saying the death toll could have been cut in half if the u.k. had acted sooner. takeaway spending seven point billion -- 7.3 billing dollars to buy grubhub in -- $7.3 billion to buy grubhub. there were questions whether u.s. regulators would approve such a deal. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries,

ritika gupta. this is bloomberg. francine? tom? tom: equities, bonds, currencies, commodities. let's look at them right now. no question futures are lower, dow futures negative, 600 gives you a sense of it, curve flattening. the two-year comes in off of chairman powell's not only answer to a question but really the entire tone of the press conference. i want to feature two things to watch -- maybe not moving today but in the coming days i am going to watch peso, mexican ealo and brazilian r because of the shocking statistics we are seeing in the pandemic. francine: real questions about whether some countries are counting the number of infections differently than they did in other countries, certainly in europe. the market has turned for the worse.

looking at futures, treasuries are adding to the gains we saw yesterday. we just got at the top, markets are concerned that the federal reserve painted this long slog ahead for the economic recovery and markets are worried about these rates of coronavirus infections jumping in parts of america. , oneis the biggest concern that we have to spend a lot of time on. zero rates here to stay, that is the message from the federal reserve, jay powell also pledging to maintain bond buying for as long as it takes to help the u.s. economy through the pandemic. joining us now, jane foley, rabobank head of fx strategy. i guess it was quite sobering after the blowout jobs number on friday to hear jay powell say we are not going to see a v-shaped recovery. jane: morning. i would argue that perhaps the majority of economists have always been more sober, and in

the last month or so we see a lot of exuberance in the markets, particularly in equity markets. even so, many economists have chance of the v-shaped recovery is limited. we saw powell yesterday suggest in the u.s. it would be 9.3% by the end of the year. we have seen extremely high unemployment numbers forecast throughout the developed world and beyond. against that backdrop, it is inevitable we will have a demand-side crisis. if you think about fiscal measures, we have seen measures for very different cap -- from various different countries that a lot of the different stimulus is going into people's bank accounts. is normal to save more when people think they will lose their jobs. they will not be spending either. we have only seen the beginnings of a demand-side shock, that suggests there is very little

risk of a v-shaped recovery. i think that has been the case all the time. francine: what does it mean for where you see the dollar by year end? jane: i think there is at some point in the coming months the in safell of another haven, so another move of the dollar and the end, the swiss franc. we are seeing concerns about a second wave emerging in the u.s. , texas, california, or whether or not we will see this later in the year when we get more evidence that we are not going to see this v-shaped recovery, when people begin to see perhaps in q3 signs of debt defaults, when we see more and more downgrades from credit rating companies of various different companies, cetera. etc.fferent companies, whilst it could be that euro-dollar held up relatively

well, perhaps in a three month view, we do think it could get back below the 1.10 level in some point in the next six months. tom: part of your charm is you are in the trenches of the foreign exchange market, and you know markets will always test an idea, always test a theory. do you just presume if the united states of america decides we will be at the zero forever and we will not breach into negative, that the market will test that theory, that the market will push yield lower and prices ever higher? jane: i think this has a lot to do with central-bank credibility because the fed has a huge amount of credibility, as do all the central banks in the g10. --is interesting that we see when we see central banks do inething, -- mario draghi

2012 said we are prepared to do whatever it takes. it did not need to do anything, the market just believed it. i think when the fed is talking about rates being zero, i think market believes that will happen. what is going to be interesting is how that curve steepen's at what pace it will steepen as we move into next year, as we move into more of a recovery phase, whether or not yields will remain low. and now we have this argument on this debate about whether or not youfed would assert yield -- assert yield curve control. it will be interesting to see how yields move in that segment of the curve. with this debate currently hanging over the markets. the two year yield, don't they just test that down poured debt down toward .05 .01 or try to test a negative statistic?

certainly not in yield curve control. in this environment, perhaps that would not be the first thing for them to do. it will be interesting if they control, to say having the one year, two-year, or three year at zero, i don't think they have to do it now. that was evident yesterday in the conversation. there is no pressing need for them to do it, but it could be that they want to keep that part of the curve right flat so that it sends a very strong forward guidance signal that would really pan out into the rest of the economy. jane, i guess your fx calls will depend on whether we have a second wave hitting other parts of the u.s. and in europe. how can you track that? how difficult is it? is there a way of looking at things before the headlines in

the media? jane: of course it is difficult for an economist to track what is health care news. but i think perhaps there is a lot of skepticism amongst economist about the euphoria which we have seen over the last few months. it does seem to be disconnected between some of the buying we see in stock markets and the economic news that we had. if we continue to look at the economic news, i think we are going to carry on seeing a lot of disappointment. this week we have seen some disappointments in the inflation data, both from china and from the u.s. that sends a strong signal, as well as suggesting there is perhaps a lack of demand coming through. again, another push back against the v-shaped recovery. but as we get through into the next quarter, as we see more real sector data, particularly on the demand side, i think that is what -- that is when we really begin to see the real true impact of the shutdown and

their effect on the global economy. francine: jane foley, thank you so much. she stays with us. we also speak with the former ecb president, jean-claude trichet. we will talk about the risk of inflation and the risk of negative rates with him. this is bloomberg. ♪

>> they are prepared to do what it takes and to stay the course with a very, very expansionary policy stance. >> if miraculously there is a much better outcome in the economy, they will reconsider. so there is no guarantee that the policy rate will be at zero for 2.5 years. >> pretty clear they don't see any need to pull back for any of those financial stability concerns, so that is just reinforcing the zero rate policy. >> basically we are not going to let companies fail, so you may as well jump in and get involved. >> he doesn't want to undermine the economy to deal with what might be a bubbling equity market. but there is some point in time where he has to think about what that means for broader financial stability. they are not there yet, but i would not be surprised to see them get there later this year. >> the fed needs to stop pulling

punches because a lot of benefit is going to shareholders because what he really cares about his maximum employment. >> the fed will play its part, but it is not the only game in town and i'm not sure it is the prepare game in town -- the premier game in town at this point. tom: a superb set of conversations yesterday on the fed. we thank alan blinder for joining us, and a great honor to have gary stern with us, the foundation of the minneapolis fed. he was quite poignant about talking about inequality and the challenges for minneapolis and minnesota. an extraordinary meeting, no other way to put it, as our michael mckee stop the press conference with his question about asset inflation. jane foley is with us from rabobank. let's go to the important question. i was quite surprised at how the chairman answered it, which is the idea of the actions of jerome powell leading to asset

bubbles or at least to be kind, asset inflation. this time?hat at jane: i think if we look at the evidence after the global financial crisis, it is difficult to avoid saying central banks had something to do with asset price inflation. looking well beyond the u.s. to see evidence of this, we could look into sweden or australia, new zealand. one of the most damaging parts of the asset price inflation is when it hits house price inflation. households, particularly young people, having to chase house prices higher in order to get onto the property ladder. the big problem with that is it leads to households with a very high level of debt. we have seen this rise in many different economies. canada is another one. so over the last few years, certainly in the years after the global financial crisis, several

had to deal with this by putting in measures to contain household debt, to contain house prices, too. it has been a byproduct of perhaps one of the most limiting impacts, wealth and equality. people want change in government. it can have big side effects, i think. tom: given the normal human condition, given any asset as it ise leverage up, said. what does the dollar do if you leverage up? of dollars,hortage and is price stronger? jane: the fed of course has been extremely good at providing a huge amount of dollars, a huge amount of dollar liquidity throughout the world right now, anthat is not necessarily issue. i think the wealth inequality, i think part of it has to do with

the seventh -- sorry, not the wealth inequality -- i think the fact that we have a huge amount of savings not just in the western world but also coming out of asia is part of this problem. the money needs to find somewhere, and traditionally you might have a lot of this money going to much safer assets, and now of course with yields so low, you have money pumping into more risky assets. problem,art of the pumping up asset price inflation as well. there are different components to it. i would certainly say the of verybank action cheap money is a significant issue. francine: jane, when you look at some of the havens -- yen and swiss -- what would you do with them right now? euro swiss has pushed higher, really on the back of the change in income.

we have seen over the last few weeks, two of the big changes, first in terms of ecb policy that we are going to do whatever it takes to keep -- two chase away fears of fragmentation. in the same can be drawn from the commission's budget proposal. it could be a summer with a lot of negotiations and a lot of horsetrading, but it does suggest that there is a potential will in germany in front -- in germany and france to provide grants to the area.rn european the swiss bank is reluctant to do that. they heat up, the swiss bank benefits. i think generally, for safe havens, if we did get another rise of the pandemic, perhaps in

europe or the u.s. come if we do get another wave of doom and gloom, the shape of the globally, very -- of the global recovery, this could very well be china-u.s. concerns leading into the u.s. election. think all of these things suggest that we will see safe havens big again in the coming months. tom: jane foley, thank you so much. greatly appreciate it, with rabobank today. we have much, much more coming up. a good conversation here with a really lot to be said. please stay with us. futures negative. this is bloomberg. ♪

ritika: this is "bloomberg surveillance." starbucks is making a big bet that the future of restaurants will involve less lingering over the latte. the world's largest chain of coffee shops is planning pickup lonely -- pickup only locations in new york, boston, and chicago. it will close for hundred traditional stores in the next 18 months. tesla is nearing a historic milestone, getting closer to displacing toyota as a most valuable carmaker. shares have risen 23% since the start of june, giving the electric carmaker a market cap of more than 119 million

dollars. valuation is $212 billion. disney has outlined a plan to reopen its california theme parks on july 17. they have been closed since mid march. requirements for social distancing means disney will have to limit crowds. all guests will have to get a reservation for part entry in advance. that is the bloomberg business flash. francine: thank you so much. this is what the markets are telling us. there is a bit of profit taking, certainly markets are seeing it lower compared to what we saw just yesterday. the focus is not only on the resurgence and the jump in rate infections of coronavirus and parts of america, but also the focus is on what the federal reserve did yesterday. i am looking at european stocks, down 2.3%. 38.18.lso down tom: i don't know if we will

ever get back to 12 to 15, but certainly down to 30, and that is where we sit this morning. also a note, gold is higher. i am watching that carefully. 17.40-ish an ounce. a historic time for central banks worldwide. coming up, a conversation with jean-claude trichet. please stay with us. from london, from new york, this is bloomberg. ♪ you say that customers make their own rules.

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only with xfinity mobile. now that's simple easy awesome. switch and save up to $400 a year on your wireless bill. plus get $200 off a new samsung galaxy s20 ultra. >> we are not thinking about raising rates. we are not even thinking about thinking about raising rates. but we are thinking about is

providing support for this economy. this is going to take some time. most forecasters believe that. and ane chairman, extraordinary press conference yesterday. i thought the questions were particularly acute from bloomberg and many others and i thought the chairman was really on his game, getting very comfortable in choosing his words carefully. one of the great themes we see in central bankers is not only choosing their words carefully, but also trying to find out what the next fear is. that has been advanced by the economist -- of europe. joining us now, the former president of the european central bank, jean-claude trichet. trichet, i must address this historic moment by leadership of france and germany to stagger toward some form of fiscal policy union for europe. are we getting there? jean-claude: i think what has

been proposed is extremely important. many are speaking of the start -- moment and i think it captures what is happening now. of course it is far away what but it isomplete, very important. know whoe is no one i understands borders and the restrictions of borders like you. can we culturally get towards a fiscal union in europe or greater europe? as a process, it takes time. waswn proposal, when i awarded the charlotte on prize -- thecharlamagne prize

area and i continue to trust that it would be part of the -- we have at the moment. we should be aware of the fact that the proposal of germany and france is a very important one. it has been discussed but i am very confident that this proposal and the commission will be realized. francine: what makes you confident mr. trichet, about the fact that all countries have to vote for this? one of the countries is now on howd with the proposal, but can you get those countries that have been more reticent on board? jean-claude: everything as always is in the technicalities and the way it would be

operated, but i have considered the fact that we probably have -- and i don't want to be too decisive on this because it is a -- ar to be discussed but lot could be spent as subsidies or tax. all taken into account of course, they would be some kind of discussion between the commission and the various countries concerned. considered such, rightly so in my opinion, by the overwhelming majority of observers. what worries you about the european economy right now? fiscal policy is seemingly going hand-in-hand with what the ecb is doing, but what will the legacy be of covid-19?

will there be a need for structural changes in the way some countries operate? the oecdde: , thections -- projections various countries concerned, i see clearly that at the end of 20 -- 2021, we won't be at the level of 19. fors true for the eu area, most countries concerned. that on topt mean which is very, big and dramatic, we will have also minor changes. the market will change, and the household will change the consumption. the global economy will change.

such circumstances, the most reward will be for the economy that can most adjust. we will see what happens. looking at the last oecd predictions -- projections to see that when you add a in 2021 and growth in 2021, you will arrive at the same difference in the u.s. and the eu area and comparison with 2019. 2021, both in the u.s. and in europe. that is rightet, where i wanted to go. the work with the oecd, i think it was an extraordinary report. one of the summaries was still europe lags in overall economic might and spirit.

up over europe pick it the next five years? what do they say to get europe to better productivity? jean-claude: we have many differences in europe. it is quite complex. there are many differences. we have to work a lot on and try toreforms, be as agile as possible. the virus is an accelerator of changes. those who will be rewarded will be those who are faster because they have economies that are can't have thed

level of productivity that is sufficient. projections are not saying that europe will lag behind. be recession is supposed to .n the first option catch up in-- the 2021 will be no different at the end of the day. tom: it is the time in the interview where francine and i always like to get you in trouble. let me ask the difficult question. from where you sit with your experience, is the federal reserve system of the united states, are they simply nationalizing american debt? our full faith and credit -- our full faith in credit, bills,

notes and bonds? jean-claude: it is an interesting question not only for the u.s. but for japan and all advanced economies without exception. it is clear that because we are in exceptional circumstances since the last crisis, the last 10 years, we had to be extremely mobile. not to support the government theto take into account reality of the situation and the very low inflation level in particular. that is good for japan, europe and the u.s.. the consequence is that you have in your balance sheet public debt outstanding. less in europe.

it is a factor which is characterizing all advanced economies without exception and of course it cannot last forever. that is true. the reason why we have to work it out to improve the situation and get out of the trap which is characterizing the advanced economy at the moment. francine: thank you so much mr. jean-claude trichet, the former ecb president stays with us. let's get straight to the bloomberg "first word news." here is ritika gupta. ritika: the u.s. labor market focused back to job losses. one .5 million americans filed for unemployment benefits last week. that is more than seven times the pre-pandemic average. president trump will resume his campaign rallies june 19 in oklahoma.

it is a date and place that has meaning for african-americans. it is the commemoration of the end of slavery and the site of one of the worst massacres of black people by white people in the u.s. theadministration says president has built a record of black success. president trump keep confederate names on some of the military .ases the forts weref rebel generals. london's heathrow airport has begun cutting frontline jobs. they will first seek voluntary departures after agreeing on a severance plan with unions. the airport has previously warned that the quarantine could lead to a third of its 7000 jobs being cut. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries.

dying ritika gupta -- i'm ritika gupta, this is bloomberg. tom: we really appreciate that. coming up, an important conversation. david westin with the speaker of the house, with turmoil and protests still across the u.s. david westin with nancy pelosi. stay with us. this is bloomberg. ♪

francine: this is bloomberg surveillance. multiple ecb officials are warning in the wrong -- are

warning about the rising risk of deflation. is so active, inflation expectations have declined to fast and the overall risk of a spiral is -- we are back with jean-claude trichet, the former ecb president. when you look at deflationary pressures around the world, is the biggest concern that we have a huge wave of deflation take hold? jean-claude: it is obvious we have a wave of deflationary pressure on top of the very poor -- a very difficult situation from that standpoint and the pandemic is creating additional problems. instance,b staff, for the last projections are only plus 0.3%. 0.8%.ear,

1.1% over three years, instead of what we normally have. francine: do you think that this concern will, the increase even if central banks don't do more now or has it been minimized? jean-claude: it is the fact that they have done in a recent time, a lot, particularly after the ecb last week. they are trying to counter with the most efficiency possible. a downward trend, so i'm confident that when we have the next protections, they will be

more flat rate. at a moment when we took the decisions which we have taken wouldat counts the most be the changes because the central banks are finding against -- they are not responsible for a level of productivity or the potential growth that we have and in number of other characteristics of the advanced economy, it is very much a problem of the advanced economy, so i hope very much that all partners, not only banks but governments and private sector, are aware of the fact that it is an exercise which requires everyone to participate. otherwise, the weight of the burden is on the shoulders of the central banks, which is not

except all. as anresident trichet, thereer, you understand is no such thing as a free lunch. some people would say right now we are having our free lunch in economics and the latest phrase is yield curve control, or a yield cap. jean-claude trichet on yield curve control. how is that going to work out? jean-claude: i know that jay powell has mentioned the fact that they are looking at some studies on this issue. it is a way of addressing the issue of the qe's of the day. i don't think you have to say this is impossible or this is

very bad, but it doesn't deal with the general problem we have. avoide the necessity to the -- that calls for all partners to work actively. the central banks cannot do everything. are a number of adverse consequences. partners.ve the other we hand theime, central banks a little too much. the decision taken by the u.s. government, by the european governments are also very important. avoiding thepoint,

deficiencies, i cannot say that governments and -- this is the price of trillions of dollars of new debt. what is the mechanism to retire that debt over a lifetime? jean-claude: very important question. as you said, there is no free lunch. somebody will have to pay for the money which is spent today, which is spent. it will have to be repaid. assumption is that it will be paid because we have a long period of time. it won't be necessary anymore, you have some budget, sound

management, both receipts and spendings. ofn we will have a period stability with low interest rates and higher inflation. all of that combined -- the price to be paid will be either a high level of inflation which is acceptable, or default or some of the states concerned which would be equally -- it is a fine line between the two but it is the only working assumption that i would accept. there is no free lunch. francine: thank you so much mr. trichet, for joining us. always a treat for you to join us. mr. jean-claude trichet, the

former president of the european central bank. coming up today, we will speak with a columbia graduate school of economics professor. this is bloomberg. ♪

ritika: this is bloomberg surveillance. let's get to the bloomberg business flash. the trump administration is --ering amazon and ebay that is the bloomberg business flash. markets aree focused on two things tom and i have been talking about, all morning. first is the second wave of coronavirus infection in the u.s. and also the focus on what chairmanfrom the fed, jay powell suggested the pandemic could inflict lasting damage on the economy and of course we want to those

infection rates going up in certain states in the u.s.. looking at fixed income treasuries continuing higher. tom: it is going to be interesting to state -- to say the least. 0.17%. that really bears watching. there is a foot on the two-year where it does not move. i am not saying which way it is going to move but i want to see the nuances into the weekend of the two-year yield. seeill be interesting to what the nasdaq 100 does. to see if they give up the ghost today as well. i want to mention david westin's interview with speaker pelosi, later today, i believe that the 12:00 hour here on bloomberg. really front and center as francine just mentioned for

those of you just waking up or joining us, the pandemic has been off the radar for so many. in recovering east coast cities and some of the major cities of the united states, including the west coast. there is finally demonstrable evidence of states with much worse statistics and internationally, many developing economies are hugely challenged. that will build the major stories today -- that will be one of the major stories today. please stay with us for another hour of bloomberg surveillance. ♪ save hundreds on your wireless bill

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decidedly in their backyard. the pandemic surges from arizona to texas, from brazil to pakistan. second wave or a continuing first wave? dr. fauci says it is not over yet. they chairman dismisses any and sayingoveries v-shaped, any chance of a rate rise -- our michael mckee asks a rude question about asset bubbles and the press conference ended. amazon, apple, they closed higher yesterday. good morning everyone. this is bloomberg surveillance. i am tom keene in new york. francine lacqua in london. francine with a vengeance, it started yesterday and maybe a little bit the previous day but with a vengeance across this