blocking u.s. residents from doing business with tiktok and wechat. shares in wechat are on a 10-cent plummet. no deal. the white house and democrats fail to agree on stimulus. president trump's chief of staff says the differences are still significant. and it's jobs day. july jobs figures are out later as the return of lockdowns and uncertainty weigh on the u.s. labor market. good morning and welcome to "bloomberg surveillance." i'm francine lacqua in london, tom keene is in new york. tom, it is really d-day because it is friday and we were hoping to have a bit more of an agreement on stimulus package, and now it seems we could not get anything by the end of the week, and a lot of the benefits, a lot of americans had come have expired. of: it is d-day in the sense depression. ringing is reinhard and reinhardt in foreign affairs magazine, calling it the pandemic depression. we will learn a lot more about

that this morning. there are people that have gloom, there are people in in the middle, and there is a sizable group saying forget about it, there is sizable momentum in the economy. we will have to see. francine: let's get straight to first word news in new york city with ritika gupta. ritika: president donald trump is moving to ban tiktok and we chat in the u.s.. he signed executive order residents barring people from doing business with them. it does not amount to a broader ban of dealing with its owner, tencent. tiktok says it is shocked by the order and will pursue all available remedies. the u.s. is looking to tighten workinga president's group on financial markets is recommending the sec strengthen auditors, --bout

in hong kong, plans to offer free virus tests to all residents. the move reflects a boost in testing capacity with help from mainland china. there has been no headway between white house and democrats over new virus relief package. the main sticking point, both sides accusing each other of refusing to compromise. the top linese is number. trillionrats want $3.5 . the republicans want $1 trillion. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. tom: equities, bonds, currencies, commodities. the churn before a big jobs report, no question about that. we pull it back right now, but i don't want to make a big deal about yields being in. we will talk about that in a moment with steven major of

hsbc. oil churning. i would say one of the nuances that is out there is stronger euro against weaker yen. you see that with euro-yen going out to 125. i will let you talk about the turkish lira. francine: it is weaker. we have in mentioning it for the last couple of days. talking about the forces at play, if you look at the charts, it is pretty incredible, and we have a great story saying it is a perilous game of financial markets reaching crossroads with the lire tanking again. i'm also looking at gold. there are are a lot of questions about what gold is behaving like because it is tracking some of the stocks in the u.s. and it is maybe not a safety play like it was three or four weeks ago. and you'ree tension seeing european stocks down 0.2%. an eventfuln

bloomberg surveillance across the span of this day, and we start strong with steven major of hsbc. one of the hardest things to do is to be right and to continue with your call. it is so easy to take the victory lap and to look away, and steven major has never done that. no one of the major bond nailed low bond yields like steven major. j.p.morgan is on the same page as you. there is a foundation of the 10 year yield to 0% and below. you are in the sweat of actually making calls. can you get on board his theory and say that you can see a grind of person since they to the lower -- of persistency to the lower grind of u.s. 10 year yield? yield is below our forecast, it doesn't mean we have to change it. we are not now-casting.

it was 31 basis point intraday back in march. people are focused on the real yield. i hear a lot of it on the show. my view is different than many others. i look at real yield as an outcome, and it is a simple calculation. it is nominal yield minus inflation. it doesn't mean anything, and people need to let go of the prejudice they have. people seem to think that real yield is meaningful. it's not. we've got real yields in the u.k. of minus three. they have been minus two to minus three for as long as i can remember. u.s. yields of minus one can easily go to -1.5 or go to minus two. it is all possible. that the of this idea negative real yield is some kind of constraint. it is not. it can go lower. tom: what is so important here, and you heard this from john ryding of green capital. this in focus that he used was

residual. major,t project, steven at bloomberg, was to his claim to residual to people and frame it out in the terminal, etc. what is the nominal yield going to do? there is the belief that the central bank can control the nominal yield. can they? steven: i'm so pleased you've said that, tom, because to me it is controversial some people to understand this. if the policy is zero and the 10 year yield is 50, that is like saying for the 10 year rerate, you have -- for the 10 year rate come you have five years at 100. and the five years at that is the average. if the inflation expectation moves up to two when the fed wants in or beyond, the real yield is going to become 50 minus two, -150 residual. bonds,ity, people trade

nominal yield bonds, and swaps and futures. the important -- the importance of trading the inflation link is time. there is a mess of explanation, you're completely right. it is just an outcome. francine: how much lower can they go? get nominal, we can the low fortowards the year. points seen 30, 31 basis . that is below our forecast. they could go even lower, francine. it just depends. if the fed wants to go with policy rates at zero for even longer than they are at the moment, it would be correct that 10 year yields go toward zero. that is what has happened in japan, isn't it? i think one of the problems is that one looks at it and says it is too low, there before --

therefore it has to go up. i think all over the world, doing and saying the same thing, we have never seen yields so low, the real yield is certainly negated and it will go up. that is not analysis, that is just some kind of guess based on a. it looks to me that lower for longer is in as the base case. so let's get used to it, and start the process around it. francine: so what is the process around it? in this new world, what are your conclusions? steven: we can work well with negative real yields. the bond market has been functioning in europe and japan with negative real rates, and now nominal rates. i think it is fair to say that it re-prices credit, and it may e.m..e priced some of it is supportive i think for equities as far as we can see,

because you have to look at the issue discount rate. it is not a simple as i'm making it sound. the fact that the rate is lower for longer tells you that there is something wrong. so it is not a case of just buying anything, which is what people seem to be doing. you have to be a bit more discerning. i can understand why people will take baskets of investment-grade credit. that makes a lot of sense. i can see that. but high-yield may have moved too much. if you've got what happened in japan over the last few decades, we did not need a recession. stuff happens. periodically, things are going to happen. we are going to have accidents. there is so much leverage in the system. so we have to be discerning. tom: let's come back with steven major. these are really important comments. i just put out this thought on twitter, real yields and

residuals. an important comment from mr. major. as we heard from john ryding. three standard deviations, just weakened out to a new level as well. i don't think lawrence kudlow will speak on turkish lira today with jon ferro. he will be at the white house, the national economic structure on what the president calls that big friday report. this is bloomberg. it's jobs day. stay with us. ♪

tom: "bloomberg surveillance." good morning, everyone. an exceptional week. francine lacqua in london, tom in new york.

we have steven major, looking at yields the way he suggested they would go. we don't know why they go there, but they get there. steven major, an open question to get in front of your essay. what is the unexpected out there that has your attention? expect the unexpected? let's go all market thatcher -- margaret thatcher right now. what is the unexpected in the full faith and credit that you are worried about? steven: i am worried about things getting worse than they already are. i know most people might come on the show and talk about inflation and inflation surprises. a lot of that is loosely based on what's going on with -- i don't agree with any of that. is mainlysupply explained by increased savings, and savings have gone up for a very good reason. it is risk aversion. i would be worried that policymakers are scraping the bottom of the toolbox, looking for new tools. i heard the bank of england talk

about various tools that are in the box, which is all very well because it is saying that they've got the ability to do more. but really? i guess we are going to find out. there havethe past been constraints on these policies. it worries me that the emperor has no clothes, and at some point that gets found out. tom: steve major, vincent reinhart and carmen reinhart, both just phenomenal economists, have cowritten a wonderful piece for foreign affairs calling it the pandemic depression. what is the best full facing credit policy if we get a reinhart pandemic depression? moment they, at the are doing everything they can on the fiscal and monetary side. people would argue that more could be done. it strikes me that at some stage we will have to bite the bullet, and this is the debate that is

going on in the u.k. or the u.s. how long do you keep the furlough schemes going? i could see both arguments. people need the money. the economy needs to keep going. there is another argument, isn't there? long, youfor too start to create a kind of ossification. you start to pacify people. fy companies. it is very difficult, and i think we have to start accepting that we are in for the long-haul. the best thing that could happen is that people would be a bit more realistic and honest and stop promising themselves v-shaped recoveries. withine: what do you do what the bank of england said yesterday? i don't know if you have concerns of may be forecasts, or we are too optimistic, or the timing of possible negative rates. steven: we are forecasting zero

, and onlds for 10 year the basis the rates are not going up, there is still the possibility they will go down. it is about scenarios and probabilities. i'm not saying the rates are going to go negative. that's not our forecast. but i'm saying it is a nonzero probability. that kind of matters. if it is possible that they go negative, the whole term structure is going to go lower. this is a story may for next year, probably not now. but look at the gilt yields out on the seven and eight year. they are already there. they are going into negative territory. the market is starting to sense that more will be done in time. after a moment, there is the guidance and the qe -- they have done their analysis. i think the problem with qe is it can only go so far.

and it is constrained. there is only a certain amount that you can buy. there is only a certain amount of reserve that you can pump into the system. francine: if you look at central banks around the world, who has it the toughest? dealing is potentially with a no deal brexit at the end of the year. steven: let's start with the one that has it the easiest. you might be surprised to hear this, but i think the ecb can now start to be a bit more comfortable because they've got governments putting in the same direction. who would have thought at the start of this year that germany would be loosening fiscal policy like it is, over the thought that we would have a next-generation recovery fund? who would have thought we are moving toward, edition it's in 2021? steps,re all wonderful and for the ecb, it was a game

changer. everybody said already, they have it easier because they were doing everything on their own before. so that is something positive. job might well be the fed. in a way, the u.s. market is lagging all of the others, and i think this is often missed. the ecb and the boj are already in negative territory, and we have seen the same thing in switzerland. the u.s. has come relatively late to the party in this low yield environment. so i think the constraints on low risk qe might not be far away as well. so if i had to rank, i would probably say that the ecb is in ,he better position in general and it will probably be tougher for the fed. francine: brilliant as always,

steven major there, hsbc global head of fixed-income research. coming up on the open, mohamed chief economics advisor. 9:00 a.m. in new york, 2:00 p.m. in london, and this is bloomberg. ♪

tom: "bloomberg surveillance," from london and new york.

jobs day. please stay with us. and a lot of good guests. ellen zentner and jim glassman joining us right near that 8:30 report. turkey -- this is a economic issue that involves the domestic and international future for mr. erdogan. there is an experiment that has happened. that is we are going to boost the economy, keep interest rates low, and to hell with the currency. ant joins us now. is the experiment over? are we done with the idea of boosting the economy, and to hell with interest rates and the lira? onur: i wish i could say. -- i wish i could say i knew the answer. like it is getting increasingly difficult for policy makers to do all that, with the limited amount of foreign reserves and inflation that seems to be on the rise,

compared to projections. and the fact that there is a , making it impossible to keep the economy going at this pace and keeping the lira in check. cancine: what more authorities do to transcend the slide? onur: there are a variety of things since yesterday, and they are quite interesting when you look at the elements of the policy, i would call it, on its way since yesterday. ,hey stopped defending the lira stopped defending the lira while the banking rate has eased restrictions on offshore markets. the credit change given what turkey has tried to do in the last seven months or so. now they are talking about they are planning to roll back regulations. that force commercial lenders to use credit on the economy. all in all, regulators and policymakers seem to be leaving

behind the policy mix that they have had for the last three years or so, and they seem to be trying to concentrate it as part of the normalization process in the economy. tom: i'm looking at dollar-turkey. sometimes i look at euro-turkey on this, folks. but this is dollar-turkey, dollar-euro. the four standard deviation move, it is -- dollar-lira. the four standard deviation move, and bonds are fx and bad things happen -- what are the bad things that are going to happen? i don't know what are the bad things that are going to happen, but certainly the moment haveira and the dollar been -- in recent days. and the central bank understands that.

think judging by the commentary out there, by people who are watching turkey's economy, it looks like turkey watchers are expecting more than liquidity related measures. got to leave it there, onur ant. really extraordinary move. we will have much more on this busy day in america. coming up later, "bloomberg markets." secretary of labor will report on the american labor economy. this is bloomberg. ♪ experience the ultimate sports hub.

where you can find games, news and highlights. all in one place, right on your tv. the xfinity sports zone. use your voice to search every stat and score. follow the teams you love. and, even get notifications

with breaking news alerts and more. with the xfinity sports zone everybody wins. now that's simple, easy, awesome. say xfinity sports zone into your voice remote today. tom: -- francine: this is "bloomberg surveillance."

president trump signed and xavier border banning residence from doing business with tiktok. the gates of the software giant, tiktok, is purchase also careful about promises to keep data safe and will not do anything viewed as hostile as it navigates u.s.-china concerns. we spoke to him earlier this week. >> the whole situation is quite novel in terms of what are the principles involved here, what principle should china apply to companies in china or the u.s. or those reciprocal and predictable. i'm not at the company now. we have made investments in china, we have engineers from all over the world, including in china. microsoft is very careful about its data promises. we will try to have strong

relationships globally. we won't do things that are hostile, that are viewed as hostile. >> what about the app in general? it is a very popular app. is this something you would like to see in the microsoft family? bill: it is nice that tiktok has competition through innovation, and it doesn't seem like preventing that innovation from being available, that that makes much sense when you want new things out there. i am not in the target audience, so i'm certainly not expert. i have gotten a lot of education . my daughter spends time on it. they did a great job on it, and there are a lot of ways to take it, and hopefully that is allowed to happen in some form.

>> let's talk about what is allowed. is the trump administration correct in trying to force this chinese company to sell tiktok's u.s. operations or even shut it down in the united states because it is chinese? should the company be subjected to that? i mean, 100 million americans are using it. ifl: what law -- i mean, this is such a clear thing, why wasn't it clear three months ago, six months ago? when people make investments, they should understand what is allowed, what is not allowed, and what is the reciprocal principle involved in this thing. maybe i have not read the right article. i don't understand what happened on saturday. know, i'm, you focused on the foundation and and i willc, probably provide advice at some point, but i am not at the center of the decision being

made here. yourdo want to quickly get thoughts on the antitrust situation. obviously i'm sure that the hearings have been a bit of deja vu for you, having gone through a lengthy review process yourself. do you look at companies like apple and amazon and google and facebook and think they have become too powerful? is this an effective way to preserve competition? bill: these companies are shaping the economy. the idea that congressmen can get a chance to talk to their leaders and understand how -- what they are doing in terms of media and competition, that all makes sense. they were lucky there were four of them on the hot seat. i was all by myself, with critics sitting next to me. getting i guess we are nicer to ceos in the old -- nicer to ceos than in the old days. i was always going to washington

and talking about our values and what we did was helpful, predictably -- particularly through these pandemics where these company have done so well, now understanding what is it like to be an entrant into these markets. there are legitimate issues scattershot way did get raised. francine: that was microsoft cofounder bill gates. joining us to talk about all of this, derek wallbank, senior editor in singapore. the trump administration definitely widened the china to contact, we chat bank that wechat on top of tick talk. are we going to see more bands emerge from this? the wechat notice that came out from the white house, it was a bit of a surprise. i think we all expected because president trump said that tiktok

was going to have to -- was going to have to be divested from bytedance by september 15. we all expected something like that would happen. to when the executive order on that one came out, it was like this is a big deal but this is sort of in the same frame that we were thinking here. on $.10 --t came out we chat came out, it was a complete fundable from the clear blue sky. i don't think a lot of people were expecting it, and tencent fell by as much -- nothing like that was priced in at all. so what we are looking for now is the executive order said that over the next 45 days, there would be some form of guidance on exactly how this was going to work, what sort of transactions were going to be blocked. how the order was staying specific to we chat and what

does that mean? does that mean everything having to do with wechat, to other parts of the -- does that extent other parts of the tencent's universe? was aimed atthis we chat, but this is something that the devil is in the details, and the details have not been released yet. tom: the details have not been released. is there any evidence of any wrongdoing here by the communist party? derek to -- derek: i think that has been clear reporting that wechat has 's state ties to china system, and that certainly is something that the trump administration was trying to outline as being problematic. it put out a fairly good size list of reports that they think are problematic, and the trump administration cited national security in both the tiktok and the wechat orders.

francine: how does china retaliate from this? do we have any insight as to how they are viewing this and what they're waiting for? derek: the first thing that is going to happen is that tiktok says it is going to challenge this somehow. i think that was anticipated, even if it is going on through the talks with microsoft. china's state media has come out and said the entire u.s. action toward tiktok and bytedance is a smash and grab, so that has not risen -- that has not been received very well there. the wechat side, it is very much the early days. we got some response from china's foreign and fairs administration. -- foreign affairs administration. they were not very happy with this. but in terms of what action is going to be taken, it is tough to say here. the other thing that is difficult, going after wechat actually might hurt some american companies who are operating in china. if you are starbucks and you are

looking to do a promotion on wechat or you are looking to accept wechat payments or a purchase of a new apple iphone, how does this affect you? i think there is a lot of things here in terms of those details that have yet to be fully understood. tom: derek wallbank, thanks for the brief. now to the news, a busy news day, with our first word news in new york with ritika gupta. president donald trump is looking to ban tiktok and wechat in the united states, barring u.s. residents from doing business with the companies. toalso -- it also extends bytedance. -- tiktok says it is shocked by the move and build challenge it. another round of emergency stimulus from the bank of england. the hit from the coronavirus was shallower than initially thought, but that upbeat

assessment was lost on the markets, driving the dow with expectations of more flareups in the virus. and a messy brexit. governor andrew bailey says he is ready to support the economy is necessary. their hopes for a speedy economic recovery in germany, and a rebound in manufacturing is catching up with the services sector. there was a 9% gain in june, with factory demand rising. it suggests europe's largest economy may bounce back more quickly. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries, i'm ritika gupta. this is bloomberg. tom: a big storm a few days ago, huge power outages across the pies -- the tri-state area, and now manhattan. there is a substantial power outage beginning about 25, 30 minutes ago. it is certainly on the upper west side and some of the upper

eastside, up to the upper parts of the island. there is power on parts of manhattan. it appears. part ofry large manhattan without power. we will continue with powerful conversation through the morning here on this job stay. so much going on. futures -18. stay with us as well, in a very dark new york city. this is bloomberg. ♪

tom: good morning, everyone. bloomberg surveillance. francine lacqua and tom keene, with power. we are on generators, i think. huge black out across manhattan right now. we will keep up-to-date for our

global audience and new york wall street as well. will speak stay, we to a lot of economists. stephen joins us now with ts lumbar. we are going to talk to a lot of fancy people today, including you. you have a gift are saying, ok, we don't know what's going on, but here is the choice set or set of outcomes. what are the set of outcomes at 8:31? >> i think the main outcome that we have to watch is the number of jobs. people who are unemployed where the jobs have been lost permanently. just at the beginning real recession. normally gets around four to

five indy 07, 08 it got to around 8 million. unemployments peak at the end of the recession, not at the beginning. so what you have here is you have this covid created contraction, government created contraction and reopening. and so a lot of these temporary are not all going to come back and by the end of the year we are going to see 10% unemployment play on negative yields. millis is urgent, i think we all agree on that. but do you suggest there will be further stimulus as we move toward 2021 with your 8% unemployment rate? steve: this is the last fiscal dance. most of what is going to be in there, like the extension of the unappointed insurance benefits, will in's -- will expire

probably january 31 next year. the next round of stimulus -- i don't even think this is stimulus. it is still a financial bridge. the whole -- to hold things together until the economy finds its footing, expanding as the pandemic ends. the next round will be left to either trump or biden, and whatever the congress looks like, january next year. will go: how many jobs forever? how many job losses -- some of them will come back, but how many will be permanent? steve: i think permanent means no jobs will ever come back. it just means they permanently lost out as opposed to temporary furloughing, probably up to eight to 10 million. which gets you to the 8% to 10% unemployment rate, which is a severe recession in that state. to keep up with the current news flow, it would not shock me that

this is a very bad number today, because obviously trump's executive order shifts the focus of the markets and shifts the focus of the tension away from the data toward his relationship with china. if the situation with china gets worse, what does that due to to the u.s. economy? steve: well, it certainly doesn't help, and this is certainly a time when you want the chinese to continue to buy what we have to sell, and you want to sustain a commercial relationship, which is why these things are 45 day executive orders. i think a lot of this is a lot more noise than fact, and trump is not going to throw out the phase one agreement. he needs it, and that is a line he won't cross. and i think the chinese understand that there is a certain amount of bluster that and on here, and noise,

things may be go on not exactly the way they were, but things have a way of settling down. so: stephen bliss, thank you much, with ts lumbar this morn. -- stephen blitz, thank you so much, with ts lombard this morning. there is a blackout in manhattan. i'm beginning to see some reports of lights coming back on selectively in the upper west side, maybe a few other geographies. but i want to be very careful there. there is a blackout in manhattan, and it seems to me they are working on it as we move through the sunrise of new york city. stay, open on this job anastasia amoroso will join us. -- dr.. l arian, and mohamed el-erian. blackrock ase of well.

this is bloomberg. good morning. ♪

ritika: this is "bloomberg surveillance." let's get the bloomberg business flash. uber made more love great debt for the first time, uber made more money -- for the first time uber made more money delivering food than it did delivering people. the company is maintaining its quarterlyintaining a profit by the end of next year. t-mobile is now officially number two. its merger with sprint has helped to the company overtake at&t to reach over 98 million subscribers. it expects to add 1.9 million new monthly customers this year. first place verizon has about 119 million customers. that is your bloomberg business flash. isncine: the bank of england reassuring, trying to reinsure -- reassure investors that they will not tighten monetary policy anytime soon, even with a better expected forecast.

-- better-than-expected forecast. i spoke with the governor, andrew bailey. governor bailey: the things we look at with further quantitative easing, intentionally the use of negative rates, and for guidance, those are the things we have brought out. control: so yield curve has not been discussed? governor bailey: we do discuss it. mean,something that -- i we have preferred to look at quantitative easing in that respect. point weld make the would go on looking at the toolbox. nothing is fixed forever, but it is not in our planning at the moment. francine: what would it take to go into negative rates? the central banks, a lot of them have done it, those that have gone in, come out, those that have gone in, not yet come out. there are really fascinating

conversations with the work they have done. i draw two points. one come as you get into this territory, there is a much bigger interaction with the structural banking system. has really sent retail deposit rates negative, and i understand why. it means the bigger the share of retail deposits in your banking system funding, the more attenuated the effective negative rates will be. that is one thing. the second thing that i would conclude and looking at the experiences of the other central bankers, at what point in the cycle you are using at? that is with interaction with the financial system as well. francine: so risk off, negative rates post covid, in the recovery fate, -- recovery phase, does that help the economy? gov. bailey: we are not facing

that situation today. it is true that when you look at the experience of other to haves, they appear worked more effectively in the recovery phase. now, i would, however, qualify that a bit by saying i think there is a tricky identification issue at that point as to what extent it's negative rates that are driving, for instance, the recovery of the banking system, the lifting of the release of provisions, and therefore the ability to lend. that would have happened anyway because it is cyclical. it is a rather tricky issue in that respect. the evidence is there, but it is a little hard to identify the causes. francine: in terms of sequence, it is not something you would rule out? it could happen at that phase? gov. bailey: the definite message going in today is they are in the box. that are banking systems

are in the box and some that are not because there are different policies and we understand that. they are in the box. we are not using them at the moment. francine: that is an interesting we come -- that is an interesting conversation we have but governor bailey. it is useful to explain to the markets why their forecasts are so high, but it is they're speaking to him, they had not accounted for a second wave for a lockdown. it is a different way of doing forecasts and some of the other institutions. tom: they had a v-shaped recovery starting out, his first days at the bank of england, and that has changed radically as we have seen the pandemic change as well. let me look at the data right now. futures -16, deteriorated a little bit. vix,e up a stick on the 23.89, after a very good close that we saw yesterday as well. we are watching the yield market, yields come in further, including that real yield, negative one point 10.

-- -1.10. a distraction to all this is a power outage, not in the tri-state area, but a power outage across new york. the good news is there are reports of power coming back on. i just heard from the harlem 114 area, power on the upper eastside. you,es tweets in, thank charles, for that update on the upper west side. seriously, there is still a power outage to greet the sunrise in manhattan. stay with us through the day. it is jobs day across america. ♪ what happens when a wireless carrier

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but don't just take our word for it. take theirs. it's your wireless. your rules. only with xfinity mobile. call, click or visit a store today. , as nevermorning

before, the american jobs report. it is a complete mystery for my halted recovery to the optimism of, quote, "a lot of momentum." belief in a pandemic recovery, none other than ron howard and reinhardt -- reinhardt and reinhardt. they say we are living a recession. a stimulus is needed, congress dithers. and the presidential role to protect our nation, tictoc, and ktok and now wechat. how will china -- and for that matter, how will apple respond? good morning, from our world headquarters in new york, i am tom keene, with francine lacqua. francine, mr. bloomberg, the 108th mayor ofew