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. world headquarters. we are counting down to the major market open. welcome to daybreak: australia. top stories this hour. beijing shuts markets and schools as a ported seafood is blamed for the coronavirus saying potential carriers cannot leave. optimism of a u.s. recovery overshadows fears of a second wave.

the s&p 500 sees its biggest rise led by energy, health care, and raw materials. and an in-depth look on the economy. we discussed fed policy in an expose of interview with robert kaplan. shery: let's get started with a quick check of the markets. the u.s. futures are under pressure. this after we saw the rally in u.s. stocks. taking the s&p 500 to the highest level since a few days ago. we have seen the rallies for the last three sessions and it has now gained the most in more than one week. and health care leading all 11 sectors higher and we continue to see optimism over the economy. u.s. retail sales jumped up the most in a record. it has really offset that second

coronavirus exceptions. the nasdaq was up 1.8%. this was of course after oil went above $30,000. there are signs of improving demand and product production. what comes to the economic picture, will be getting trade figures from japan . we are setting up for a mixed open after two days rebound. this morning, qe stocks added more than 1% and nikkei futures just edging slightly lower while some stocks could gain ground. as after tuesday's 5% rally. have limitedill market impact there are no large provocations.

they are watching the so-called peace talks in seoul and asked for their three and one. credit agricole says it is a strong resistance level the onshore currency and its steady this morning. story, aging has ordered all schools to close as it struggles to halt a coronavirus outbreak which has already spread to neighboring provinces. let's bring in selena wong in beijing. how serious is this? listed itshas also emergency response level where people will have to be tested decision plusthat other decisions to close really signals the severity of the growing crisis. you have seen officials take a more targeted approach compared to other regions.

that is partly because the stakes are much higher. any aggressive lockdown really prevents them from doing this economic reopening. some compounds have been shut down in the capital has restricted movement. cars and ride-hailing apps have been banned from leaving beijing. most forms of transport to and from beijing still stay open. cases linked to the beijing cluster have already spread to provinces in the region. at the same time, there is a very aggressive testing effort for 70,000 people. according to a trader executive for a recent supplier, we have learned that the custom authorities have started testing incoming shipments for the

coronavirus is being conducted on all shipments of imported meat, according to the source. outbreaks after the was traced to a chopping board of a seller of imported salmon. it would seem beijing has its hands full with this pandemic, but now we are hearing a seven-week military standoff with india has also escalated. just two days ago, it appeared that efforts to lower this military standoff had worked but now it has taken a deadly turn with the deadly conflict along the himalayan border for the first time in four decades. it is unclear what exactly sparked the clashes or how he died. but so far, india has confirmed that 20 of their troops were killed. the military said there was

casualties on both sides but did not elaborate on the count. analysts say that both countries do not want a further escalation and that there forces are not as strong as china's, but it is unclear how to de-escalate tensions. in china and india, world leaders have taken increasingly assertive posture towards this end it is not clear what india can do now. they are in no shape to risk a thisespecially now amidst economic and deepening health crisis caused by the coronavirus. meanwhile, in china you're seeing this increasing national sentiment surging on social media. the conflict had over 110 million views on china's twitter

platform. the editor-in-chief of the global times weren't india quote not to be arrogant. sophie: chinese correspondent selina wang there. shery: we are joined by russell later for more. for now, let's get a check on the first word headlines. has said it will deploy troops to the border industrial complex. gains.00 futures paired

tensions have shored after kim jong-un's increasingly powerful message said it was time and threatened the next move would be taken by the army. curbed police brutality amid widespread protests. he stressed sympathy for families of those killed by police but made clear he will not abandon his hard-line law and order stance. rising tensions between beijing and washington mean chinese -- chinese art ditching in fastest rate. -- chinese think is ditching the market in the fastest rate. a year of street protests and the coronavirus pandemic has sent unemployment in hong kong to rise to its highest level in 15 years.

to mayrisen in the march the unappointed rate climbed to its highest in 17 years. global news, 24 hours a day on air, on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. sherry? shery: up next, jerome powell sticks to the script for the uncertain economic outlook but sees the beginning of the recovery. we speak with sandy breaker. and the big interview you don't want to miss. robert kaplan joins us exclusively for his outlook amidst the coronavirus recovery at the bottom of the hour. stay with us. this is bloomberg. ♪

>> it is all quite uncertain, but we appear to be entering the second phase of the economy reopening. we are seeing apparently the beginning of that with the climate report and we would expect to see large numbers of people during this time coming back to work. return toruggle to the old ways of activity because they involve getting people back together closely in large groups. all of this assumes that the virus remains reasonably well under control. that it doesn't experience an nation.ross the economies are going to recover from that but we just have to be a little patient from it. some key moments from fed chairman jerome powell's

testimony to the banking committee. this as we weigh more evidence of a recovery taking hold in the economy. joining me is our guest. a lot of psychology going on in the markets. i want to pull up to start on the terminal that is demonstrating that. it came down 2.5% on the cash market low. moveve seen this type of three times since 2011 with the latest episode on march 19. is this signs of a momentum shift? sandi: we are not sure. we think there's so much uncertainty right now and we think the market has gotten ahead of itself. there are so many related to the pandemic being with us.

we are starting to see more spending that was released today with some of the strong retail numbers coming back out. we are in the very, very early stages. we are concerned that the recovery is going to be long and slow. we are taking a cautious approach to our science portfolios. how does that contend with the cyclical outlook? we have seen a rise in value stocks. sandi: as of sure you have been following, growth and value stocks has sort of reach the polar opposites in terms of the amount of differences between the two of them. we have not seen this much difference between two types of stocks. stocks since the financial crisis or even before. on value stocks, we think there are a lot of long-term opportunities there and stocks does not getting attention.

for thoseen looking not only in the united states but abroad as well in a particular emerging-market, east .sian markets specifically shery: one of the more recently loved ones has been apple. you also like apple. -- theying to targets are raising the targets aired -- target. we have already seen their share price 7% higher than the market average price targets. sandi: yeah. we are a manager of managers. in our quality stop concentration, it's another area of the stock market we like right now. there are companies with really strong balance sheets like apple that can fund operations and continue. they can continue to avoid service status and their demand

for product is strong in all market environments. we really like stocks like that. apple is definitely in that category and has proven itself as a durable player their other quality stocks out there that we like in terms of what the managers are buying. some of the tech and consumer product areas are where we see some good holdings through the managers because these type of companies tend not to be so volatile when stock markets are going down. the stock market in particular has gotten very far ahead of itself and we want to be in a more defensive position. talking about volatility, another asset you place our municipal bonds -- are

municipal bonds. where are the opportunities there? sandi: we think there are plenty of opportunities and some challenges as well. we are liking bonds in the near term because of the situation i was mentioning before. bonds help provide some volatility buffer and communities are attractive because they are not subject to tax for most u.s. taxpayers. they are very attractive and we are relying on active managers. environment, we really like alternatives to managers .ho are going along a market

they are representing but with higher returns going forward. sophie: gold prices are consolidating and taking higher on fed powell's testimony. what is the outlook here for the metal? sandi: it's interesting. gold is something we have not had in our portfolios. we have started adding that last summer with regards to concerns about stockmarkets being so high. , up has been up about 28% 11% year to date. we think it is a nice holding to have the portfolio because it is .uch a great hedge it is an environment where we

have basically zero real interest rates and there is no .pportunity cost we think that will continue going forward. sophie: thank you very much for your insights. we will have much more on the market outlook ahead with our q and a portfolio manager. plus, john taylor also joins us later. also, an alert on the bloomberg. korea conjunction's sister is condemning moon's speech, saying it is irresponsible. this is coming from the state owned korean-centric news agency , saying moon asked them to take responsibility for the frank ties. the statement is saying that speech is irresponsible.

they are reacting to that moon jae-in speech. we have seen the tensions escalated with north korea loading up. -- blowing up. returning to the u.s. federal reserve, it has boosted the state unemployment benefit. payments extend an extra $600 a week. lawmakers are in on's whether they should and 10 you. the secretary of labor gene says they are making headway on jobs. >> we have had very high on clement -- unemployment. jiminy americans are put out of work and to any hardships meant for them and their families. we got here in a very different route than we got here in the great depression.

the jobs report suggests we are going to come out of it with a different route. we put millions of americans back to work in the month of may and that is a trend that is continuing right now. the data is a month old and there have been a lot of reopening since then. but people are getting back to work and it's important that happen safely and it's something we keep an eye on. but we are getting real headway on the employment right now. >> do you see any evidence whatsoever that these unemployment benefits are holding back rehiring? >> we hear concerns about that raised anecdotally by a number of employers. the point they make is that with the enhanced unemployment benefit provided by the unemployed -- by the federal government, putting that on top of the state benefit, people could be making between $55,000 on an annualized basis on

unemployment, which is obviously significantly more. the return -- the concern is they would not return to work. that benefit buyers at the end of july. congress set that in anticipation that we would not be shutting down our economy. >> mr. secretary, remember when we spoke to you last? your member that we do expect enhanced unemployment benefits to expire in july. what could make you change your view? in other words, what data could come in weaker than expected which would make you think even if people are making more than they have previously made, it does not mean they are necessarily going back to work and could continue to pay rent? >> those are a couple of different questions. we would look at a variety of data coming in. on july 2, we will put out a report for june and i think that report will show many more jobs

added the economy. -- added to the economy. let's watch other trends and see what additional measures may be needed. i don't think it's going to be continuing that $600 benefit, which again is a very important, valuable benefit for american workers. thats a blunt instrument stopped in march as things were closing in light of some real limitations. i think we have learned a lot since then and i don't see that is the policy going forward. >> reports this morning of a $1 trillion infrastructure program. are you working with the department of transportation on that plan? >> there were discussions throughout the administration about what the right steps are for the economy. we certainly appreciate the implication that an infrastructure bill could have throughout the economy,

including for employment. those are among the things being talked about. >> infrastructure one of them? >> there have been different numbers put on it. we will just leave it saying it is certainly something being talked about and there has been some interest expressed in it. but watching the economy, one of the things i have sent on the show before is one of the marks of the viruses have swiftly things have changed. i thing it is important to take time to watch the economy and see how it progresses and not in.ian -- rush sophie: u.s. secretary of labor eugene scalia. we will have more on the economy ahead when robert kaplan joins us exclusively at the bottom of the hour.

sophie: let's get a quick check

of the latest business flash headlines. apple says it re-aims to open at least 75 stores across the u.s. this week, including major locations like u.s. and newark. all outlets were closed -- and new york. all outlets were closed until a phased reopening last month. this week should see the majority of its domestic outlets reopen, the sum will operate sidewalk service only. -- though some will operate sidewalk service only. reuters sites unidentified sources, but has said tencent wants to surpass baidu as a big iqyi is currently valued at billions and it is unclear if tencent has --roached i.t. -- tehem them directly over a deal.

up next, a conversation with robert kaplan. don't miss it. this is bloomberg. ♪

♪ now welcome listeners on bloomberg radio. even with the recovery, u.s. labor market will fall well short of the levels seen just before the coronavirus pandemic. let's get to kathleen hays. : rob kaplan joining us in an exclusive interview. as often happens when you and i sit down to talk, there is a lot going on. no matter what i thought i was going to ask you first, there is only one question, and that is retail sales.

down 15% last month. up this month 18%. were you surprised? strongly that after severe contraction for the first couple of months, first half of this quarter, we bottomed out sometime in early may. we expect growth to continue to the end of this quarter and the surprise in the jobs number and strong retail sales is part of that narrative. we will grow pretty strongly from here. more --: let's dig into is this going to be a faster recovery than a lot of people have been looking for, including people at the fed? >> possible. there is downside risk to the

recovery and there is upside. a lot of which it is going to be, in my view, at this stage, will have less to do with monetary and fiscal policy and a lot more to do with how effectively we execute the health care policies. wearing masks, testing, contact tracing, that encourage consumers to have confidence to reengage in broader range of activities. how well we do that will determine how fast we grow. there is certainly an upside case. my own forecast for the year is we will into the air with a 4.5-5 percent contraction and unemployment rate of 8% or more. there is downside risk to that forecast but how well we do the health care policies will be a big determinant of how fast we grow from here. kathleen: when you look at texas, where there has been

increased cases in houston and dallas and austin, what are you seeing? i am wondering, maybe reopening's were barely beginning in a lot of places so it is hard to say how much we got from retail sales. on the other hand, when i look around my neighborhood, i see a lot of people wearing masks. is it possible that even before we are sure everything is tested and nailed down, people are ready to get out and live and work and get on with it? >> what i'm saying here, and i am out every day and trying to play close attention, not only firsthand but talking to contacts throughout our district, there is no question there is a pent-up need to get out and reengage. we are seeing that. we also knew that as people reengage, there was a risk there would be a resurgence in cases.

we are seeing that. the thing we are watching is, is it such a resurgence that it threatens to hurt the health care system? i am not saying that. people are enthusiastic about re-engaging. i concern is, after having extensive conversations with consumers, businesses, i think there is a limit to how far they will go if they don't have confidence in the health care procedures. what is an example? seeingn tsa data, we are we are improving in terms of people willing to fly but it is still way off from a year ago. grow,k we are going to people will reengage. the question as to what extent, and that is what we will learn. kathleen: what would you have to see at the end of the summer? you want to see how the summer goes before you make up your mind about what needs to be

done. what would you have to see? the back ofthis off this encouraging economic report. maybe we don't need to do as much as we thought. maybe we don't need as much fiscal stimulus as we thought. >> i want to keep an open mind. i want to see -- we are watching very carefully the so-called high-frequency data on mobility and engagement. cell phone indicators, whether people are taking trips, the length of the trips. engagementheck with in retail and see what is going on with small businesses and see whether people are flying. all of those indicators that suggest whether the consumer is re-engaging, and we will get a couple of jobs numbers between now and the end of summer. i expect those to be strong. and then we will update our forecasts and see what we think the prospects are for the

remainder of this year and into next year, and at that point, i think we will be -- i think we will be in a better position to judge what we do from here and what is necessary. in the meantime, i want to give the health care practices in the consumer a chance to reengage and to see how far this reopening can go. at then: looking , when yourojections look at that, you have to ask yourself, if you cannot meet your objectives with all of this stimulus in 2.5 years, does that mean right now, the fed should be doing more? so, we have an unprecedented amount of monetary policy action, as you just noted, as well as fiscal policy. even with that, as i just said

we willmy base case -- have strong growth in 2021 but we will still have an elevated unemployment rate at the end of 2021. why is that? again, in that scenario, i am assuming we don't have a vaccine until sometime late 2021. we will have to live with this virus for some extended period of time. and i don't think it is a lack of monetary policy, and i think we will need some additional fiscal action, but i think even with that, it is the health care issues, the willingness of consumers to reengage broadly that i think will be the impediment. the second issue, even when they do fully reengage, some of the jobs that people have lost won't be there to go back to either because their businesses have

resized or the nature of the industry has changed, and there will be a lengthier process for consumers to get back and find jobs either at another firm or another industry. that is going to be a function of those things that take re-time -- take more time, like job retraining. yes, there are targeted fiscal actions and appropriate monetary policy that would be able to help with that. we will have to assess all of that as this unfolds. kathleen: i am glad you raised that point because you start wondering if the fed's toolbox was getting empty. all of the special lending programs and yet, it seems you have to use the tools more or add new ones. but you raised the fiscal policy angle and this question of as

this recovery continues, there do be a point -- what do you when small businesses, and a lot of them are gone and people are unemployed? is it going to mean more government spending? the fed has nothing to do with retraining workers. >> yeah. just to be clear on your first point, we have plenty capacity on monetary policy. alltoolbox is not bear at -- bare at all. we have only used a fraction of them money allocated for these so-called 13 three programs. we have the ability to do asset purchases. we have plenty of dry powder if we need it. some of the frictions and some of the challenges we just talked about, retraining is a good example. that is going to have to be done

by colleges and business leaders locally across the nation. i think in addition, there could be some targeted fiscal measures that will help those who are still unemployed. there could be targeted fiscal measures that would help state and municipalities because of the loss of tax revenue they suffered to make sure they are not cutting back while we are trying to improve the job situation. those are examples of fiscal policies that could help. there are other fiscal policies that could be targeted and provide stimulus. the issue is not that we will not have enough ability on fiscal and monetary policy. the constraint we will have to live with and execute well and maybe better than we are is the health care policies. kathleen: in terms of corporate hours,ying, the past 24 the fed has not taken any steps

to buy corporate bonds. the fed does not really need to be doing this. raised thisey point. why do you need to do it now? we surprised about that? is there something to that? this is a step the fed does not need to take? >> i was not surprised. and the reason is because the markets are functioning reasonably well right now. risk assets, as i don't need to tell you, have rallied substantially. spreads are not where they were but they have tightened. the challenge for us at the fed supportingbalance market function but also showing restraint where market function is going well. that is a tough judgment paired i am not surprised there is some

criticism -- that is a tough judgment. i am not surprised there is some criticism. kathleen: i know you are not a fan of negative rates. some think negative rates would boost employment and help businesses and encourage lending from banks. not doing this, you are favoring banks over people. what is wrong with that argument? all, concern is, first of when i look at the performance of negative rates outside the u.s., for me, at least, and i have studied it as carefully as i can, the jury is out as to how effective they have been and whether they have actually helped growth. in addition, there are side effects to negative rates and the negative impacts on the financial system, and we have a

very large money market industry in this country and many companies access commercial paper, each depends on a healthy money market industry, and my concern is negative rates might end up having more side effects and it is not as clear to me what the benefits are. i want to ask you a similar question. you mentioned it could distort signals from the market. a steepening yield curve, inverted yield curve could send everybody a message. consider you even going for a policy that will destroy signals that you yourself say are so important? >> as i have said, i am skeptical about yield curve control, and at the moment, i need to be convinced of the reasons for. what could happen is we have a substantial amount of government

debt that needs to be issued. we had a substantial amount before this crisis and it has now gotten exacerbated. and as we are in this crisis, while we are still in it, if i saw some evidence that treasury yields were being strained because of the substantial amount of debt issuance, that would be one argument that would cause me to want to examine yield curve control. i do not see evidence of that right now, which is the reason why i am skeptical. i want to be open-minded. economies -- does how does china's economy look right now? we have to see not just the u.s. leading the way but china. where are they in terms of their challenges with the virus, cases rising again, taking steps to stop that, the trade tensions -- exist? because

how does china look to you? >> china -- on the bright side, they are recovering and the industrial sector has certainly recovered. the consumer sector is having a number of the issues we just talked about. the consumer willingness to engage in a broader range of activities. they are spending but there are certain things they are showing a reluctance to do, and we see that in the data. it has been well reported they have outbreaks but they have very good testing and contact tracing so they are able to localize it and address it locally very quickly. i am optimistic about china's recovery. i would just note, for those who watch economies outside the u.s., for example, europe, germany -- germany's gdp growth will probably do worse this year than the u.s. other european countries will do

worse. they are much more dependent on exports. china, for one, has a big impact on their gdp. if china is weak, your korean growth -- european growth will be weaker. china is recovering but there are some of the same constraints i just talked about. they are having some of the challenges we just talked about. kathleen: we have a viewer question who wants to come back to this question of buying corporate bonds and why the fed has done it or is doing it now. i think it is pertinent for you because you wrote the essay last year saying there was too much borrowing and too much debt and too much leverage. -- is that what it

is doing now? does that have something to do with this viewer question? data that the fed is looking at that we are not privy to question mark >> -- pretty to? -- that we are not privy to? >> in my view, it has been an amplifier of the downturn. it is right to be sensitive. we should do what we can in the middle of this crisis but as we start to emerge from it, i do think it is wise -- i think it is wise to show restraint in some of these actions that affect markets because we can have side effects where it incentivizes more risk-taking, more leverage and other negative

side effects, which i think are real. we have to balance those against the needs of the crisis. i am not -- i don't know if that we are privy to something that no one else is seeing. we had said we were going to take action on corporate bonds to help with market stability, and we have done that. we have to find the right balance. i am sensitive to that concern and criticism. kathleen: let me ask you a question a lot of people have raised. i'm amazed at the number of people who are bringing this up now. they did not bring it up during the great financial crisis. a lot of people are talking about the fed is creating more inequality, more income inequality. a a time when we have

spotlight shone on racial inequalities, groups of people who are behind and not catching up. as a man who worked on wall street, who has been a management professor, has been at the dallas fed for 10 years, how do you answer that? history where black unemployment and hispanic unemployment was higher than overall employment rate. in the last couple of years leading up to this crisis, running the economy hotter, we have been able to close that gap and for the first time in a long time, we saw the gap between white unemployment and black and hispanic unemployment start to narrow and some improvement being made on this issue of wage inequality. regrettably, as result of this crisis, because blacks and

hispanics have disproportionately suffered, we have given back a lot of that progress and the gap has no widened. role that monetary policy can play. we have to be conscious of that. we need early childhood literacy, better educational attainment, better skills training, and the number of targeted policies that will close -- to help close this gap. there are side effects to monetary policy in they can strengthen risk assets. leading up to this crisis, i think running the economy hotter did have a number of positive effects to close this gap. we will weigh all those factors going forward and understand that monetary policy, by itself, will not address this. we have to be conscious of some

of the side effects. dallasn: robert kaplan, fed, thank you so much for joining us on a lengthy discussion. sophie, i will send it back to you. sophie: thank you. geopolitical tensions rise as the standoff between india and china leaves at least 20 people dead. bloomberg. ♪

sophie: let's get back to the rising tensions between india and china and that seven-week standoff in the himalayas. joining us now from new york is daniel russel. great to have you with us. do you have an understanding of what has happened? we thought tensions were de-escalating just two days ago. what went wrong? daniel: the indians have been signaling a desire to de-escalate. the news today is really the most serious clash in modern memory. according to the news reports, at least 20 indian soldiers were

killed. we do not know if or how many chinese casualties there were. normally, there were no firearms -- normally, there are no firearms involved in these clashes. her been a lot of skirmishes in the past between -- there have been a lot of skirmishes in the past between soldiers. this is a major escalation and we really have to worry about reactions from both sides. the besthis is not time to have a military conflict, not that there is a best time. they are dealing with domestic outbreaks of the coronavirus. aging has had to lock down parts of the capital -- beijing has had to lock down parts of the capital. absolutely. this is a time when you would think that beijing would want to stabilize the periphery, ease up on confrontation, and focus,

facing the the issue chinese communist party at home, which is the economy. the border with india is not the only place where china is throwing punches. tensions in hong kong, south china sea, taiwan. there is a lot going on. islooks like xi jinping making a conscious appeal to chinese nationalism and it looks like xi jinping is calculating that china can handle the consequences of these actions. it is really not clear because modi government is also highly nationalistic. there will be intense pressure on modi to retaliate against china but without a lot of good options. tensionsurning to the

on the korean peninsula, how would you describe the action taken by the north? maximum tension for minimal risk? , it is a hellrica no moment. that is an attention getter. you do not need to use dynamite. it is a gesture of a couple of things. first, it is a graphic demonstration that kim jong-un rejects the south korean president's attempts. jong-un is telling moon you will have to do a lot more than just offer some humanitarian assistance to north korea if you want your policy to

go anywhere. sophie: thank you so much for joining us. that was daniel russel. plenty more ahead on daybreak asia. this is bloomberg. ♪

>> good evening from new york. down toe counting asia's major market opens. our top stories this hour. beijing closes all schools as coronavirus cases jump. imported seafood is blamed and the city says potential may not leave. optimism over a u.s. recovery overshadows fears of