countries, the fed is not going to be going negative with rates. pointone knows at this for what earnings will begin 2020 or 2021. >> that initial shock effect from reopening, which is basically going from no activity to some activity, then i think you settle at levels where you don't really know where things are going. >> this is "bloomberg keene,lance" with tom and lisa abramowicz. --athan: from our audience for our audience worldwide, good morning. alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. a massive outbreak is sweeping the state. tom: no question about it. the "newez leading

york times" article today on the gravity across the entire sunbelt. it is going to be fascinating to see how the mayors and the with ars buttress up washington that seems to feel like the pandemic has moved on. that is decidedly not the case this morning. jonathan: the pandemic has not moved on. we turn to the economic data a little later this morning. we constrain the reopening process for the economy. neither is positive for the economic outlook. we are already seeing that was companies hesitant to rehire people as a result of a lack of confidence. read ofget the latest initial jobless claims in the united states. the pace of filing is still very high, 1.3 million filings

expected. hear from, we will the sec chair in front of the house financial services committee. interesting to hear what he says. later today, we get the fed stress test results, possibly indicating whether banks may have to cut dividends. a lot of people are already expecting they will curtail those payments. see what a true stress scenario is they are pending for the banks should depend pandemic worsen. jonathan: we will catch up with alison williams a little later to talk about those stress test results. let's get the cyclical outlook from pimco, down the elevator and up the stairs. let's bring in andrew balls, pimco cio of global fixed income. i wonder whether the flight of stairs have gone a little bit

steeper. what are your thoughts? andrew: it is a long way up. i think that in the united states, different states have been hit at different times but coronavirus. you started off in the northeast. other partsseeing of the country. i don't think that is a big surprise. but clearly something to watch very carefully. , therms of our outlook health and related vaccine come of the shape of the outbreak, etc. is going to be a key swing factor. against that, you have the unprecedented scale of the policy response, which is something that has been very anchoring for financial markets. jonathan: whether it will continue to be so will be the big question. policyked about the

outlook. if that still the number one issue? andrew: i think so. we are being really humble at the moment, dealing with these kinds of global events. in terms of the outlook, we had this big drop. we have something that feels look a strong recovery in the near-term, but still a gradual climb to get back to where we were at the start of the year. that while we need to watch very carefully the health statistics in the u.s. states, you do have a lot of policy support in place. i think that is going to continue to be anchoring in terms of financial markets. is a real bias to do more on the part of monetary

and fiscal policy makers. in terms of how to invest, we don't think this is a time to go where theyse assets have already recovered very significantly, but there are lots of good opportunities to buy high quality assets at pretty attractive valuation or with pretty attractive return profiles, things like u.s. agency mortgages, or high-quality credit, corporate credit, senior financials. that kind of safer part of the spectrum. i think there's lots of interesting things we can do there. tom: i want to come off of jon ferro's important interview yesterday with bob prince of bridgewater, which is that we andnow at the zero bound

there is a dampening of the economy, and elastic to of the economy. what if we go the other way and start to see a disinflationary curvecy, where the yield control is about two low -- about too low of rates? andrew: we have yield curve control to factor already in a number of places. it seems like there's a pretty high chance you will see this formally on the part of the federal reserve for too long, but looking to anchor the front end of the curve, not the 10 part of the curve like in japan, but the two to three year part of the curve, so that real commitment. it is going to be a long time

before they raise policy rates. tom: we talked to anthony chris enzi the other day. what is the efficacy of yield curve control if they can only get about 36 months? -- only go out 36 months? andrew: i think there's only so much yield curve control can do when you have such low levels of yields, and with the shape of the curve we already have, i don't think it is that exciting. in a world where we get better , then its, good news because theortant federal reserve with yield curve control would be able to lean on any premature tightening of fixed income markets. but i would agree with you. i think there's only so much that monetary policy, qe, yield curve control can do.

i think the hand over the fiscal -- the handover to negative cost, when you look at the and the benefits, it is hard to see a great case for negative policy rates, but i think it is helpful for central banks to at least give the impression that they might do that because there's only a one in 10 chance or something. that is anchoring in terms of fixed income markets. bad macront of a very outcome, it is possible that we could see negative policy rates in the u.s. with a u.k., but i think it is very unlikely. lisa: given how low yields are

and pension returns, what is the appropriate annual return target you see? andrew:andrew: i think that is a very good point. i think that often, return targets are too high. we have certainly taken hours -- taken what we use down down -- taken ours from what we use for internal guidance. years, aver the next lot of plans have come down from the double-digit type returns that they once upon a time had, but 7% to 8% still looks pretty high in terms of starting valuations. the way we are managing our portfolios at a time when you ,ave some good opportunities but certainly not cheapness across the board. it is better not to try and push

, that with a reasonable balance of risk, it needs to be lower in terms of expectations. jonathan: forgive me for keeping this one tight, but people think we are vulnerable for another shock. i am trying to work out what the defensive asset of choice should be in that environment. where do you go? andrew: i think the u.s. interest rates, from a global point of view in particular, i still think u.s. rates remain the most attractive if you do have a shock, even without a shift on the part of the fed to negative rates. there is further for u.s. rates to fall, whereas when you look will needarkets, you

more of a shift in the central bank reaching for that to happen. one important point you can look at using currencies, there's another way to have some defense against adverse shocks. but while we look at all different ways to do this, you have to be realistic, and with less of a hedge from interest rates, you need to think carefully about the level of risk you have in your own portfolio. you need to reduce risk if you don't have the same efficacy of the duration position in your asset allocation. jonathan: andrew, always great to catch up with you. cioew balls of pimco, the of global fixed income. in this market, equity futures still down around 0.3%, off by eight points on the s&p 500. coming up on "bloomberg

surveillance," just a little tease of an exclusive interview with l.a. lakers star lebron james with "businessweek." that is next on bloomberg. ritika: with the first word news, i'm ritika gupta. and texas, florida, each set records for new coronavirus cases yesterday, and arizona had a peak and hospitalization's. meanwhile, a new model predicts death toll will hit 180,000 by october. a new poll shows joe biden leading president trump in every one of six key battleground states. it shows biden all but a racing president trump's -- all but a racing president trump -- all but erasing president trump's

advantage with white voters. pro basketball star bron james has put together his most vicious deal yet. he and his business started -- star lebron james has put together his most ambitious deal yet. he spoke to businessweek about the company and the restart of the nba season. >> i am looking forward to the season getting restarted, getting back in the liquor uniform,- the laker and continue to push the envelope not only on the court, but off the court. i won't stop until i see real change for us as a community, so my mission stays the same. theka: you can watch all of conversation at 7:00 p.m. new york time, friday on bloomberg tv. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in

more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> the equity market does seem to be a little bit ahead of my view of the future earnings performance for businesses as we look six to 12 months out, and

if that is true and i am right about that, you will see a rebalancing of that over. jonathan: i think a lot of people agree with him that that is true. that was david solomon of goleman's -- of goldman sachs. from new york city this morning, good morning to you all. alongside tom keene together with lisa abramowicz, i'm jonathan ferro. around two hours and 12 minutes away from the opening bell. equities rollover just a little bit, down 15 on the s&p 500, -0.5%. to give you a feel of the bond market, treasury yields on the 10 year coming down a basis point. we are down wooden basis point to 0.66% on tens. just a little bit of risk aversion creeping in here once again. in foreign exchange, the euro

underperforming. euro-dollar down around 0.4%. buildingrisk aversion once again through this morning. tom: there's no question about it. this centers on 8:30 this morning, really underplayed right now, but in the news flow, more important for wall street, the jobless claims statistic. we will give you coverage of that at 8:30. right now, it is a leadership that started out of a very different, challenging childhood, and what he did at his high school in akron, ohio. that was lebron james leading early. our jason kelly with this important interview on his business enterprises. here is lebron james on leadership in the national basketball association. leader is nota about when you decide to do it. it is every single day.

it has to be every day that you wake up and jump out of your bed . people are going to follow you. they are going to understand that you are not perfect, but know that you are true to them. my mission has always been that, and it will not change. i will continue to point out things i know is wrong, not only socially, and i will also continue to lead by example as a model citizen, as a black man in america. so my mission stays the same. 2014, i think back to eric garner and the t-shirt that you wore, and the nba has consistently stood behind you and its players in terms of protests. other leagues have not done that, notably the nfl. now the nfl has changed its tune. what do you make of that? lebron: i'm a part of a league with a great commissioner in

adams over. he has always -- in adam silver. he has always listened to the voice of his players, and i respect him for that. we see something that is very wrong with our society, with our community, we can use the nba to back us. i have nothing but respect for adam silver. as far as the nfl, i am not in those locker rooms. i am not with those guys, but i do understand that i have not heard a true, official apology to colin kaepernick on what he was going through and what he was trying to tell the nfl and , so i see that to still be wrong. now they are listening some, but i think we have not heard that official apology to a man who basically sacrificed everything for the betterment of the world.

i wonder about the kaepernick issue from your perspective, knowing the business world, the endorsement world, the economic element, how did that change going forward given that, i thing it is fair to say, colin kaepernick was vindicated in a lot of senses? >> i think the fact of the matter is colin kaepernick did what was on his heart. he did what he felt was right. he took all the right steps. he met with the military, i think it was a marine or a navy seal that told him sitting was the wrong thing for do, that he should kneel. but i think as black people, we have been ringing this alarm for a long time, and the rest of the country, i happen to believe most people are good, have just been hitting snooze on it

because the system has been set up in a way that even if you are not racist, you still perpetuate a system that oppresses black people. conversationtant when jason kelly started his project in february, but now in this summer of discontent, exceptionally important to listen not only on his business affairs, but also his take on american society. one thing we see is the of jobless claims moving from 200,000 still well above a million. that is the key thing. we are way out on that weekly claims number. jonathan: the median estimate this morning for the data comes out, 1.3 2 million. the persistence of these

numbers that i really think disturbs a lot of people. this is what i spoke to bridgewater about in the last 24 hours, and unemployment rate that might come down to 10%, but what does the world look like with 10% unemployment if that persists over a long time? that is a huge shock to income that, every three or four months, once again the policymaker will have to step in. the job isn't over. . there is a hard job still to come. tom: what is so important about this is the disconnect right now between washington and the states dealing with the pandemic , and even the states dealing with economic slowdown. i would say it is a primal scream into this weekend for more action by washington. lisa: with respect to state and local finances for sure, also with companies looking for guidance on whether to remain open or close with was back to

their potential liability, which is unclear with respect to the coronavirus, in addition to who is going to come through the door. with the unemployment claims and talking about what lebron james was talking about, it is important to note that black and implement rates in this country -- black unemployment rates in this country are about 13%. this is raising concern at a time when you are seeing the haves and have-nots really see the gap widened. i think this is going to be an increasing focus going forward as the initial wave of layoffs its individuals, and the tertiary waves of layoffs. this is a huge issue right now. we will: i agree, and see the data in the weeks and months to come. from new york city this morning, good morning tea wall. alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. onity futures down 16 points the s&p, negative zero point 5%.

from new york city this morning, good morning. this is "bloomberg surveillance ." ♪

♪ city,an: from new york this is "bloomberg surveillance ." alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. two hours away from the opening bell. your price action shaping up as follows. equities lower by 16 points on the s&p 500. we trim a little more weight off the s&p. in the bond market, the yields lower, the curve flatter. down a basis point, maybe 21 on tens.maybe two euro-dollar coming down 0.4%. your focus one hour from now is the data in the united states, and initial jobless claims and continuing claims as well still

set to remain elevated. claims is a very different statistic from the weekly jobless claims statistic. mark howard comes to us from bnp paribas, where he does global allocation. he was at lehman brothers for years in credit analysis. we are thrilled he can join us this morning. i am going to cut to the chase. real yield, barely any nominal yield at all. what is a retiree to do? mark: that is a great question because even the real yield that is there is a little bit illusory. if you strip out some of the distressed assets in the high-yield market that a sane

person wouldn't normally buy, the remaining yield spread is quite average in the scheme of things, so i think a retiree is supposed to be diversified. they are supposed to own equities perhaps a little more than they normally do, and they have to be very careful to keep because the way to generate return, the way to generate alpha is to be fairly nimble. this is a very odd market. policymakers are really distorting things, and that makes it very difficult for retirees. jon does that on "the real yield," looking for that to come back sometime. jonathan: thanks, tom. tom: when i look at the yield dynamics, there is a one-way bet about the high yield curve control, etc. do you push against the one-way

bet and look for even lower yields? mark: there's a short term and a longer term. we think there's probably going to be some give back and perhaps into then yields, but fourth quarter, we have election .ncertainty but we think central banks are going to keep pressure on yields, and is a tough one to fight against. there's a world worry about instability and some of the states right now. becomes ated states source of instability in the months to come, what does that mean for the primacy of dollar-denominated assets? mark: it is a great question, and i hear that increasingly from global investors.

reflecting both a more active ecb, better growth data, and underlining that issue about whether currency tailwinds might be better in europe than the u.s. know, a lot of people expect one more round of fiscal stimulus, particularly as the administration looks to bolster its reelection chances. it is hard to see the dollar giving up a lot in the short that but longer-term, dollar primacy has some risks. lisa: is that basically your way of saying you are still betting on u.s. dollar ahead of others, or does this mean that this is sort of a medium-term bet on europe? how are you positioning? mark: as one of your earlier guests said before, in a risk off, treasury still holds a lot allure,er -- a lot of

as does quality credit. we wouldn't be surprised to see a pullback over the quiet summer .onths, as investors position we think the dollar will remain resilient, so we are not anticipating a big move. we think the dollar is a little bit expensive versus the euro. longer-term, there are very real questions about dollar primacy. we are not placing big allocation bets on that until we get closer to the election. lisa: yields remain ultralow, and they are going to keep pumping that primed to get asset prices higher. at what point does that come down as we see the highest pace in bankruptcies in the u.s., with chucky cheese filing for

bankruptcy -- with chuck e. cheese filing for bankruptcy this morning? mark: rates, much of the mortgage market, even part of the bb market is hugely distorted, not just in the u.s., but in europe as well. equities are the one place to pivot or to swing your risk endcation in the very low of the market. for thee the potential second wave of corporate stress. the second wave are going to be the ones exposed who have basically been broken from a business model or from a balance sheets standpoint. that is where you are going to

see more bankruptcies. so i think you see more dispersion, more differentiation between winners and losers, and ultimately consolidation of the bankruptcy process. jonathan: only lisa could fit in chuck e. cheese, and our guests would call it a great question. looking at this data at the moment, there is serious shift. we were focusing on sequential growth, and i think we got a slap around the head big time. the focus once again on what is really important, sub capacity economic growth. for a long time, we will be below potential. we talked about the airline sector is just one example. they are going to be below potential for months, if not years, and that is a massive problem for this economy. tom: this is a really important question. i should point out, i've never eaten at charles cheese. i will try to get there before

they shut down the shop. what is so important about this is it really goes to the comfort of investment grade. if jon gets his sub capacity economy, does that take out profits and reduce margins, which begins to affect the price of investment grade paper? that in a normal world, absolutely would be the case, but we are not in a normal world where banks -- where central banks are propping up the market to maintain good liquidity in these markets and access to capital. all of the major u.s. corporations who needed money for year or into early next refinancing or investment purposes have cap the market. the back half of the year is going to be a lot less, perhaps only $400 billion of issuance. so there is just a need for this type of -- excuse me -- there isn't a need for fresh capital,

and as long as the fed is buying assets, we see only a modest pullback for the foreseeable future. tom: maybe this is off the mark howard radar, but i think it is a timely question of state and city finances in america. how urgent is it in the fixed income space to get our state and local taxation, fiscal debt fixed soon? mark: you know that there are short-termural and issues that plague our municipalities and states. gaps are very real budget that need to be sorted out, and i think there is going to be a band-aid applied to that. important, but i think .ashington is working on it

we are all in this together. so i think we will see some band-aids applied to that fiscal situation, but it is a very real issue for a lot of insurance and a broad swath of retirees who are active investors here. jonathan: mark howard of bnp paribas, fantastic to catch up with you. my best to you and the team. fantastic to hear from you. the difference between me and tom, i've never been to chuck e. cheese. tom pretends he goes to these places. there's no way that tom keene has ever been to that establishment in his life. lisa: hold on a second. and a big difference is that not only have i been there, i've had a child who has a birthday there , so i have intimate knowledge of chuck e. cheese.

yes, tom. tom: we celebrated the afterthoughts birthday in venice, and it was just like charles cheese. [laughter] yeah, right --lisa: yeah, right. jonathan: tom keene, firmly detached from reality is always. alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. the opening bell around one hour and 50 minutes away. without the sound effects and the bond market, yields lower, the curve flatter. downto basis points, -- two basis points. in foreign-exchange, euro-dollar coming down 0.4%. a little later in the program, looking forward to the conversation with morgan stanley's chetan ahya. an outbreak of infections --

will an outbreak of infections in places like texas change its view? we count you down to the all-important jobless claims in america. onm new york city, heard bloomberg radio, seen on bloomberg tv, this is "bloomberg surveillance." ritika: with the first word news, i'm ritika gupta. the coronavirus pandemic is racing through the u.s. heartland, setting records for hospitalization and forcing businesses to rethink their plans to reopen. florida and texas each hit records for new daily cases yesterday. a new model predicts the virus will kill 180,000 americans by october. the pentagon has unveiled a list of 20 chinese companies it says are owned or controlled by the military. symbolic,s largely since it doesn't give president any new authority. he already has the ability to impose financial sanctions

against those chinese companies. in california, voters will decide in november whether to reverse a ban on race and gender based preferences in college admissions, state employment, and public contracting. california is one of eight states to outlaw formative action. and lebron james has put together his most ambitious deal yet. he and business partner maverick anter have launched investment company. he spoke to bloomberg about a number of issues. >> people in the community, those are the real ones that are living and walking the streets and being racially profiled, being judged every day they walk in their city. they are the ones that need to be heard right now. ritika: you can watch all of bloomberg's conversation with lebron james and maverick carter

at 7:00 p.m. on friday here on wennberg tv. -- on bloomberg tv. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> the case we have simulated for second wave would generate basically zero growth in 2021, as compared to 5.4% growth in

2021, which we have projected. so that is the classic l-shaped non-recovery, and that would be a really dire outcome, getting even closer to great depression levels than we already are. jonathan: the nonrecovery. the imf chief economist. from new york city this morning, good morning. alongside tom keene, together with lisa abramowicz, i'm jonathan ferro. one on bloomberg tv end bloomberg radio, let's get straight to the price action in the market. equities rolling over, down 26 points on the s&p 500, down around 0.8%. as the session grows older, the dollar growing a little stronger. euro-dollar down by 0.5%. the dollar stronger against the bulk of g10. we are down by two basis points ontens, two basis points 30's.

once again this thursday morning, it is a little bit more risk aversion building going into the cash open. tom: it is nicely correlated. the first thing i looked at was swiss franc against euro. even that safe haven has come in as well. as you point out, dollar strength is there. twos-tensu see in the and the other alphabet soup you look at every day? jonathan: i think lisa can speak to that as well, a flatter curve over the last couple of weeks. curveeepness in the yield seems to have stalled a little bit coming into this week, too. lisa: i thought it was interesting in light of that, this bet on reflation. how does that para -- how does that para -- how does that pair up? how do we gauge the sense that

yields are going to be ever lower, that growth is going to be slower, with this idea that we are entering an era of eventual inflation? this is where i am struggling today. jonathan: the belief that policy is going to have to be that much more forceful over the next 18 months, we have this massive duration gap between what policymakers have done so far and three or four months band-aid, and the duration of this shocks that could go for a year, year and a half. for me, the big change is the tolerance of policymakers has really been tested. we have seen the shift from governor ron desantis in florida , from governor abbott in texas. we have seen corporations start to move as well. apple, disneyland california delaying reopening plans. all of that incrementally negative news for this economy. what is interesting in that is where washington places all

of this. we know that among the stresses of this very serious pandemic and the stresses of the market is some sort of measurement of how our banks will do. alison williams joins us of bloomberg intelligence. us standing by the bloomberg terminal as the first day of those stress tests came out. that seemed like a real immediate, real-world experience -- real word experiment. does today have even a shadow of that intensity? alison: i think it does. the fact that these tests were put into place provide us with today whatork to do the regulators think in terms of the bank ability to withstand that severe stress, given this unusual and unprecedented downturn. tom: are there profitability -- is there profitability at

threat? alison: the profitability is a threat. one thing you have seen that real-time experiment is that the capital market side of things has held up better, so trading revenue has been really strong. that that will help offset the provisions. however, obviously that had a , fiscalelp from the fed response that has gone into the market. but the stress test today, what we will learn is how their capital welfare with a set of scenarios that were sort of designed for the pandemic, and that details what results we get every year the tests both the

earnings side and sees how the capital holds up. the more interesting test is the added layer that is put on, different than the prior test and that there's three different scenarios. it is really the shape of the recovery, the depth and link decide how bad provisions are. unfortunately, we will not get the same level of detail there. we think that was alluded to on friday. but what that will do i think is create a sense of, what will regulators do? it is another key question for regulators. lisa: how much is it already baked into markets that banks are going to cut dividends further? i am looking now at the kbw bank index, down 30% year-to-date.

some of this is already been priced in, correct? alison: that is the question we get a lot, but what we saw that is interesting, last week when we were doing our preview, if you look at the declines with wells fargo being the most significant, the declines are not too dissimilar to the cuts to 2021 eps estimates. they line up pretty well. someone like wells fargo, where there's a lot of worry not because of the capital side, but because of the earnings side of things, they have seen a much more dramatic cut in their earnings estimates. i guess the other thing i would add is we've had a couple of asset managers that have cut their dividends. you see the dividend yield spike ahead of this, signaling that there is some risk to the dividend, but stocks still got

hit hard. there's a lot of investors out there that own stocks just for the dividend, so there could be some implications there. but to be clear, i don't think we are going to get those types of announcements today. jonathan: alison williams on the federal reserve stress tests coming a little later today. thank you. to get you up to speed on the price action, we are down 22 on the s&p 500, -0.7%. a little bit of risk aversion building once again, following the shift in the rhetoric coming from governors on massive outbreaks sweeping the states. lisa: and companies are taking action, regardless of any shut down. jonathan: more to come here on "bloomberg surveillance." for ourm new york audience worldwide, this is

bloomberg. ♪ you doing okay?

yeah. this moving thing never gets any easier. well, xfinity makes moving super easy. i can transfer my internet and tv service in about a minute. wow, that is easy. almost as easy as having those guys help you move. we are those guys. that's you? the truck adds 10 pounds. in the arms. -okay... transfer your service online in a few easy steps. now that's simple, easy, awesome. transfer your service in minutes, making moving with xfinity a breeze. visit xfinity.com/moving today.

>> unlike a number of other countries come the fed is not going to be going negative with rates. >> know when at this point, analysts, portfolio managers have a great sense of what earnings will be in 2020 or 2021. >> that initial shock effect from reopening, going from no activity to some activity, then i think you settled in at levels where you don't really know where things are going. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. our simulcast to you across this nation and worldwide as well.