nejra: good morning from london. this is "bloomberg daybreak: europe." jay powell says the fed will use all tools to defend its foray into corporate bonds. robert kaplan tells bloomberg health care policies are key to the recovery. a mixed picture for stocks amid increases in coronavirus cases. florida reported a new infections. beijing ordered all schools to close as it fights a new outbreak.

geopolitical risks add to headwinds for investors. oul says north korea must bear all consequences for its actions. indian defense stocks gain on tension with china. the turnaround when i was sitting in this chair yesterday that we saw in u.s. futures, the biggest since 2016, we saw a lot of green on the screen fueled by stimulus from the fed on corporate bonds, but also in terms of fiscal stimulus. today is a different picture. the second wave has become front and center a little bit more again. investors try to see where to go next. in terms of the equity rally, a mixed picture in asia. the msci asia pacific index is flat. u.s. futures edging into the red along with european futures. the 10 year yield missing a couple of basis points. fx, you are not seeing a lot of moves either way for the dollar.

g10, you are seeing underperformance of commodity currencies, also seeing a pullback in oil, retreating with the outbreak in china perhaps threatening the one bright demand spot there was globally. fed chairman jerome powell is giving a caution assessment of the u.s. recovery. he says near-term improvements in employment are unlikely to return the labor market to his level before the pandemic. >> there are parts of the economy that will struggle to return to their old ways of activity because they involve getting people together closely in large groups. it is going to take time to rebuild confidence. anna: -- nejra: the central bank chief also played down the significance of the move to buy individual corporate bonds. powell says the dollar value of

purchases has not changed, just that the fed is moving away from ubs. to his morning expectations are at risk of slipping due to the economic damage from the virus. a record gain in retail sales is offering hope. a surge of nearly 18% in may points to a quicker recovery for the american consumer. cio at us now is the oda. outlookck off with your for the u.s. economy and where u.s. equities go from here. insaw a lot of risk appetite yesterday's session taking a pause today. how bullish are you on u.s. equities within the context of global xts? show.e to be back on the regarding u.s. equity. the market is completely pricing

recovery. we see the fair value on the s&p 500. on the other side, we cannot scenarios.her the more optimistic, we would for thee financing epidemic. we could seen toward 3600. conversely, if the second wave would be more dramatic, it could be the case. nejra: i'm having audio issues, so i cannot hear you very well, but we will come back very shortly and pick up on this conversation. let's get to the first word news now. china is escalating containment measures, closing schools and shoving food markets.

a new outbreak has already spread. residential compounds have been closed. only residents who test negative can leave the city. deployorea says it will troops into areas on its side of the demilitarized zone. the move further escalated tensions with its neighbor a day after the state destroyed a liaison office the country's share. south korea has taken a strong tone, warning pyongyang will pay for any military action. norwegian extending a global truth -- global cruise freeze. they had been staging a recovery on hopes of return to service. florida places like could -- prospects for a return. morgan stanley will fight a lawsuit from the former of diversity who alleges she experienced and witnessed systemic racial discrimination against african-americans at the bank. she joined the firm in 1994 and

claims further white leadership reviewed her plans and terminated her position in december. morgan stanley says it will defend. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. coming up, the president of the dallas fed is speaking to jerome powell's view that the u.s. economy has bottomed, saying he sees strong growth from here. robert kaplan spoke to kathleen hays. we will pick up on that in just a moment. after at strongly that severe contraction the first couple of months, the first half of this quarter, we probably bottomed out sometime in early may. continue toowth to the end of this quarter and into the third and fourth quarter. numberprise in the job

in retail sales is part of that narrative. we are going to grow pretty strongly from here. >> let us dig more into what you just said. is this going to be perhaps a faster recovery that a lot of people have been looking for, including the fed? >> it is possible. there is downside risk to recovery. there is upside. to beof which it is going in my view at this stage is going to have less to do with monetary and fiscal policy and a lot more to do with how effectively we execute the health care policies. >> i know you are not a fan of negative rates. the minneapolis fed had an opinion piece saying you are making a mistake, that negative rates would boost employment and help businesses and put money -- encourage lending to go out from banks.

he said by not doing this, you are favoring banks over people. what's wrong with that argument? first of all,is when i look at the performance of negative rates outside the studiedr me, and i have it as carefully as i can, the jury is out as to how effective they have been and whether they have actually helped growth. there are side effects to negative rates. negative impacts on the havecial system, also, we a very large money market industry in this country. many companies access commercial paper, which depends on a healthy money market industry. my concern is negative rates may wind up doing more damage and have more side effects. it is not as clear to me what the benefits are. >> i want to ask a similar question about yield curve control. when you were talking about this

week, you mentioned it could distort signals to the market. a lot of people say a steepening yield curve, inverting yield curve, can send everybody a message. you said that could happen, right? why would you even consider going for a policy that is going to destroy important market signals that some say are so important? i'm skeptical about yield curve control. at the moment, i need to be convinced of the reasons. having said that, what could happen is we've got a substantial amount of government debt that needs to be issued and we had a substantial amount before this crisis, now exacerbated. as we are in this crisis, while we are still in it, i saw some evidence treasury yields were being strained because of the substantial amount of debt issuance. that would be one argument that

would cause me at least two want to examine yield curve control. i don't see evidence of that right now. which is the reason why i'm skeptical. i want to be open-minded. that was robert kaplan. jerome powell giving a cautious assessment of the u.s. recovery. more on that next and retail sales data is the bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." weakerdrifting in asia, on european futures as investors try to assess where to go after the big risk on we saw yesterday off the back of u.s. stimulus. monetary and fiscal. the 10 year yield slipping.

we are generally seeing the dollar flat across g10 today. in terms of dollar-yen, looking at a 107 handle, not moving much . oil pushing back on concerns about the second wave. demand being hit in china with a lockdown in beijing. have yous, great to with us for the hour. let's pick up on the conversation we began earlier in terms of where we go for the u.s. economy from here. we saw optimism come into the markets with what the fed announced around buying individual corporate bonds. themuch more do you expect prospect of stimulus in the u.s., fiscal and monetary, to some -- provide support for equities? how much is already priced in? we are pressing a v-shaped recovery. a lot of support is already priced in. our conviction is the monetary and fiscal authorities will do whatever is necessary in order

to ensure there is a recovery in the u.s. economy. discussions on yield curve control and also negative interest rates. we don't think it will need to go to that stage right now. however, a wave of infection would be more dramatic, especially the yield curve control. wave, yourhe second global scenario is the economy will come out of recession in the third quarter. reason your worst case is the s&p 500 at 2700, which is what, 13% lower than where we are now? not really a full on bear market. is the reason you don't see that much downside because you think that globally, policymakers are

better equipped to deal with a second wave? >> i think we are better equipped for the pandemic point point ofnd policy view. we have measures in place. we have hand sanitizer. people are getting accustomed to social distancing. i think we are in good shape to deal with clusters of infection by this kind of test and trade methodology. on the monetary policy, our we will dois whatever is needed to ensure the economic downturn does not last too low. also, we are in the year of presidential elections, so you can be sure from a government point of view they will do

whatever is necessary. to help the economy. messageerome powell's yesterday did certainly have a strong note of caution. he talks about an uncertain path for the recovery. and also said even though we might see a bounceback for the beginning of the recovery, are the labor markets going to be short of the robust levels before the coronavirus pandemic, and also thinks the economy is going to be less well short of where it was in february. we got that record jump in retail sales in the u.s. yesterday. are you confident that is going to point to a sustained rebound in consumer demand, or whether it would just kind of -- people rushing back after not being able to shop such a long time? would tend to agree with jerome powell. it is going to be long and fairly painful. you know we have mentioned in recoveries, being the

logo of nike. the first phase is going to be fast. the last 10% or 15% will be slower and more painful. there is readjustment. track equity activity in the u.s. with data indicators. we think we are roughly at 75% of what the activity was over the past three years. 15%, if it isor -- the 10% might be painful to get. the shape lead toes after a while. plateaus after a while. anna: more than half -- nejra: more than half the gains were people buying automotive said also going out to restaurants, which suggests they

need to drive more post pandemic. you wonder whether they will spend more on other items. you talked about where you think the activity is going to get back to in the u.s.. u.k. is, but also the the laggard in the global picture. let's focus on the where the boe 's next. anticipated to focused on its qe program when it meets tomorrow. speculation is mounting it will impose yield curve control. a policy pioneered by the bank of japan. what are the prospects for yield curve control? >> we think the situation is different. u.k. is the the opposite. we don't think they are going to go to yield curve reversal yet. they are more likely to go to

negative interest rate. , i don't think this is very soon. if the covid-19 epidemic was getting worse in the u.k. or if thee was policy related to brexit negotiation, this is a big topic for the u.k.. prime minister johnson did not want an extension of the deadline. one of the consequences of this they will havet to reach an agreement before the end of the year. negotiation was much better. what we think is they will reach an agreement with the european union. this agreement will probably, the last-minute. sometimes november of this year. there will be some volatility

between june and november in the negotiation because nobody has an interest to show they have given up for political domestic reasons. is volatility also in the u.k. in the meantime. anna: -- nejra: i have spoken to people who see opportunities both in the pound and u.k. equities. of course we know those large caps often have an inverse correlation with the pound. do you see opportunities in the same way in the u.k.? be positive over the long term on the british pound. i think it is going to be so tense and so volatile it will at thisiate opposition stage. we will stay away from that currency. in terms of equity market, on

the larger indices, a lot of the properties in london are not having a lot of their business within the u.k.. they areot mean listening to the domestic economy. you will have to look to benefit from activity in the u.k. economy. nejra: lots more to discuss. coming up, second wave fears. u.s. cases up. we are live in new york next. ♪

nejra: let's take a look at what is happening at 10:00 a.m. london time. hola schulz and his french counterpart bruno le maire will be talking about the franco german parliamentary committee at half past 12 london time. opec publishes its oil market report. at 3:30 this afternoon we will report ona weekly u.s. oil inventories. fed chair jerome powell delivers his semiannual monetary policy report to the house financial services committee as england's premier league returns this evening, games will be played without spectators from 6:00 p.m.. brazil central bank announces its latest decision. policymakers are expected to cut their key rate for an a

commuting to a record low. pandemic,ck to the u.s. infections are up by 1%, and more than 20,000 jump in one day with florida and texas most affected. china is escalating containment measures in beijing. a growing outbreak has topped 130 cases. visits to residential compounds have been restricted. annmarie hordern is in new york. run us through the latest in terms of the risks around a second wave globally. ,> if you watch all the news especially in america, you hear people debate. is this a second wave? or are we still dealing with the first wave? there are pockets in america we have spoken about. cases ateported new the highest level since the pandemic began. in texas, the second-most

populous state, they are seeing hospitalization and infection surge. the hospitals have ample capacity to deal with this, but there is worry about people going out to bars and restaurants, not maintaining social distance. new york city, watch the -- once the epicenter, they are seeing hospitalizations and infections actually still decline. on the other side of the world we have trouble with what is going on in beijing. emergency response to the second highest level. schools going back to virtual learning. we are seeing the resurgence of covid trends happening in pockets around the world. in the u.s. it is the discussion whether it is a second way for first wave 2.0.

with the u.s. as well, president trump has signed an executive order on the police force. what does that include? announcedcutive order yesterday is about curbing police brutality. president trump talked about the fact this would encourage better training and leverage federal funding. he did say except when an officer's life is at risk. he seems to be walking a thin line. on one hand, political advisers are saying his handling of the protest about racial injustice, on top of the coronavirus, has damaged his reelection. at the same time, he maintains his law and order stance. that is going to play to his base. nejra: annmarie hordern in new york. crude retreat as a second wave of infection threaten china. one bright spot for demand. more details next. ♪

nejra:nejra: this is "bloomberg daybreak: europe." jay powell says the fed will use all tools to support the economy and defend its foray into corporate bonds. robert kaplan told bloomberg health care policies are key to recovery. increases in coronavirus cases. florida reports record new infections. beijing orders all schools to close as it fights a new outbreak.

geopolitical risks add to headwinds for investors. seoul says north korea must bear all consequences for its actions. welcome to daybreak europe. we saw futures in the u.s. team strongly, the biggest turnaround since 2016. global stocks getting a boost on the optimism around stimulus from the u.s.. today we see asian stock drifting. u.s. european futures edging into the red. 10 year yields dripping a couple of basis points dollar index unchanged. .e did see strength yesterday interesting given the risk on we were seeing. you are seeing commodity currencies underperform. the swiss franc getting a boost. the best performer in g10 so far. oil pulling back on those second wave fears globally.

getting back to what jay powell says, he's giving a cautious assessment of the u.s. recovery. he says near-term improvements in claimant are unlikely to return the labor market to its level before the pandemic. that is echoed by richard clarida. he is concerned inflation expectations are at risk of slipping. one glimmer of hope is retail sales, posting a record gain in may. oil is retreating, snapping a two-day gain after the second wave of coronavirus cases in aina and a report pointing to further swelling in u.s. stockpiles cast doubt on the demand outlook. opec officials are meeting online later today before a meeting of the joint ministerial monitoring community -- committee. throughws output cuts july. alexander novak joins annmarie hordern for a mutual discussion

-- virtual discussion on the future of oil. they are going to discuss how oil-producing nations are navigating demand. see live go.ils, emerging markets have escaped the risk off spike. subdued.y remains with several central-bank decisions on deck and growing coronavirus outbreaks, what opportunities are left for developing nations or investors? here with a deeper dive is dani burger. great to have you with us. >> all things considered, emerging market are performing relatively well. the weaker dollar helping out em currencies. stocks have gained 30% since the march low. volatility is falling. as a whole, we need to concentrate on debt.

debt has done significantly better thanks to higher yields. central banks and develop nations cut, but that could soon change. lose some ofg to its luster. central bank in developing nations are beginning to cut aggressively. brazil has a right decision on deck and they are likely to cut to 2.25%. that is the same as what the fed is targeting in september. a crazy picture. similar rates when brazil has chronic inflation. differential in interest rates is starting to diminish as central banks in em nations have cut 5000 basis points since 2018. it means carry trade getting less attractive. we have seen hedge funds step back from that trade as well. it might be risk on and you want to buy their stocks, but the picture is starting to look hazy.

let me pick up on that point debt.ani made on i wonder whether you and your portfolios are making distinctions on em sovereigns and corporate debt. i spoke to a guest who was positive on em corporate debt saying access to financing was pretty good. think the key question regarding emerging-market debts, will be a question of differentiation. by that i mean the price of oil. our own forecast is the price of oil will stay low. our 12 month outlook is $40 per barrel. this would be in favor of the oil importers at the expense of the oil exporters. we will of allocation, have a strong preference for oil importers.

in the corporate segment, there are sectors that will be favorable, such as health care, such as emerging markets, and other sectors where it will be airlines,such as maybe banks. someone. -- so on. nejra: you have a preference for oil importers, perhaps health care being one of the sectors. we talked about achieving activity, economic activity versus pre-pandemic. china is out ahead according to you. almost 90% of pre-pandemic activity. is that one reason you might want to allocate emerging-market equities given china makes it such a big part of the basket? >> absolutely. early. say china is

that is also why it is very interesting on this new inflation in beijing to see how the chinese authorities are able to cut. it orey able to maintain is it going to spread? the chinese are taking strong measures. this will be able to maintain the situation. nejra: more to discuss, but the bank of israel governors of ventral bank does not have the same firepower to deal with a second wave of the coronavirus. the emphasis needs to be on testing and localized lockdown. he spoke to bloomberg in his

first tv interview since becoming governor last year. out very wellted positioned. high growth rate. low debt to gdp. therefore we have the buffer to weather a swift move in lockdowns, we also exited relatively early. rising inctivities the economy. secondly, we do not have as many buffers as we had before. therefore, we need to be able to do not across-the-board lockdowns, to do testing, trading, isolation, localized lockdown, in addition, what we did do very well is be very ,lear about unemployment

various grants to business entities, and we would do well if we had plans that are clear to the public. to. they would be entitled >> you have been active in terms of supporting economic recovery. is the expansion on the cards to keep yields in check? >> so far it seems so. obviously the bank of israel will do what it takes to make economy to support the from the tools we have, the monetary policy committee tools. i should mention, the monetary policy committee has two tasks. the first is making sure

financial markets work and financial markets work in difficult situations, both government bond market as well as the fx market. we took swift action, strong action. to provideep is credit and transmit monetary policy. this we have done through this qe program which to give you a perspective is about three times the size of what was done during the 2008 financial crisis. we have done several other creative programs such as giving special loans to banks to loans, repose, absorbing corporate bonds, and we lowered the rates of degrees there. and given package your question about government bonds, we will continue to ensure we support the economy.

i believe that as long as the fiscal side, you have to remember, this is a fiscal crisis. this is a health crisis as well as economic. most of the crisis is on the fiscal side. as long as the fiscal support is toward supporting the economy, supporting growth and the agencies will see it favorably and therefore credit conditions should continue to be continued. strategies,of other you have been buying foreign criminal -- foreign currency for quite some time. there are questions i'm getting from investors as to what your dynamic window is. it seems to be operating around those parameters. what are the boundaries you are trying to keep the israeli shekel within? >> i would not state publicly ,xactly what our boundaries are

in the the depreciation spike, as i mentioned, the situation that happened drying up the dollar market at the onslaught of the crisis, have been a reflection of the fundamentals that the israeli economy exited early and relatively well. having said that, most of the crisis has happened on the domestic sector, not the exporter sector. the last thing the bank of england -- of israel wants to havingthe export sector more difficulty than the reduction in trade, the problems still within the israeli economy. therefore, our dynamic window has shifted to account for that. fit, wey, where we see

are intervening. show, aoming up on the drug has been shown to help prevent death from covid-19. what does that do for fears around the second wave? this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe. drifting on equities. we are seeing red on the screen for u.s. and european futures. we saw a risk on in yesterday's session. optimism around u.s. stimulus, monetary and fiscal. dipping to yield

basis points. dollar-yen pretty much unchanged. oil certainly seeing a pullback on concerns around the second wave in china hitting demand there. a widely used drug has been shown to improve the survival of people with covid-19. the anti-inflammatory reduced deaths by a third among patients on ventilators and buy a fit among those receiving oxygen only. it is the first treatment to show lifesaving promise months into the pandemic. i want to pick up on the second wave conversation with you. earlier i was talking to our reporter in new york and we picked up on the fact that in the u.s., there are questions over whether what we are seeing is the second wave or just a continuation of the first wave. i called it first wave to point out. a seconde see not wave, but just a continuous tide of cases coming through? what does that mean for risk assets?

think the equity markets right now are not pricing the second wave. we don't have strong confidence in the fact there's going to be a second wave. we think we have the tools to deal with a second wave in terms in terms of masks and someone. duty is to provide -- to protect our client assets. we have embedded with a sizable allocation some safe haven assets for you. gold, one is japanese yen , one is exposure to u.s. treasuries. mentioned, theou volatility is quite high. important.is pretty we are not recommending at this stage to have equity indices.

if the volatility were to go down during the summer, it could be a good opportunity to buy some protection to protect our portfolios against the second wave. nejra: i think the last time we spoke you had a put on the s&p 500. it is interesting you have changed that view given the recent volatility. you have seen upside to the s&p 500. 3600.e it getting to at the moment, you bought a small underweight on equities. what would make you change that to overweight given that your base case is a v-shaped recovery? >> in terms of vaccine for covid-19, we do not expect a solution for most of the people before 2021.

this is not something we anticipate. we think there could be a combination of drugs that will start to work to treat patients, and that could be positive news. we think there could be some sort of cocktail of drugs that could prove effective. that could be good news. then the economic activity could start to go faster. thing that hasr happened in equity recently is a significant sector rotation beneath the surface and to some reaction between growth and value. had you wanted to jump on that at all tactically or were you thinking about doing that before the end of the year? >> we have not jumped onto this

trend. we have an investment process which is based on three pillars. the first is the financial sustainability of the company that we buy in. the second is the sustainability of their business practices. the third is the sustainability of the business model. methodology, our we end up having a growth portfolio with quality companies. this is our investment philosophy that works over the long-term. we have not changed our philosophy and our style during this phase. we are confident this time will outperform over the long-term. nejra: thanks so much for joining us today. we appreciate your time as always. coming up, cause for celebration. football fans rejoice over the return of england's premier league, but at what cost? how coronavirus has kicked the

beautiful game financially. ♪ e financially. ♪

nejra: the beautiful game returns to the u.k. this evening. the world's wealthiest football competition, or soccer, will be played before anti-stadiums to prevent the spread of coronavirus. fans will be able to watch every remaining match on television. many of the games will be available without a description -- subscription. the financial position will be determined in the coming months. >> what football is going to look like post covid, my views on that are going to be shaped by what happens over the next three months.

this season has been impacted by covid. we are hopeful next season will be less impacted by covid. from an organizational and financial perspective. we don't know the cost of the virus. for more, bloomberg's business reporter joins us. my producer is more than excited about the start of the premier league, but there is a big issue of there being the lack of fans. how much of an issue will that be for viewing, do you think? >> it is going to be weird. we have sort of got used to it. i think anybody that has watched , if you're are interested in the game. some of the broadcasters are going to be putting in artificial crowd noises. although that seems weird, you get used to that quite quickly.

you kind of make up for it in a way. going a lot of things are to be different about this season. one of them being the players are going to be wearing shirts with black lives matter imprinted on them. historically, no form of political messages have been allowed. how significant is this moment? >> it is a very big moment. players have been sanctioned for expressing political views in the past. political. seen as supporting a political party, but a unifying gesture. just as he held benefit to people who are struggling, he is endorsing messages that are

positive from players. positiveat's one development many people will see as positive. risks,ook at the football is back, but how much has been lost on ticket revenue and broadcast? >> according to experts, they estimated a few days ago the clubs, the premier clubs alone have lost 500 million pounds the season. a further 500 million of income will be deferred for the next financial year. altogether from 2018 to 19, looking at a billion pounds, roughly 50 million pounds per club. that is just the club cost. the clubs in the lower leagues, the financial situation is really serious. there broadcast money is

minimum. nejra: football may not look the same again for a very long time. thank you so much. that is it for "bloomberg daybreak: europe." looking at a weaker open judging by futures. ♪

>> good morning. welcome to bloomberg markets. the european open. i'm anna edwards in london alongside matt miller in berlin. matt: the markets say take a pause on the risk rally. appetite for debt surges. and germany advertises for sovereigns. stock futures trade lower. the trade is just an hour