, with Karina Mitchell. Karina joe biden and Kamala Harris gave made their first appearance as democratic running mates, criticizing President Trump for his failure to respond to the coronavirus pandemic. It could be one of the few times they campaign together. Pandemic have pandemic restrictions have limited his in person events. President trump can make his nomination acceptance speech from the white house or executive residence, according to an advisory opinion. Generally, Government Employees engaging inrom political activity while in a government building. Airbus, the Trump Administration is imposing extra tariffs on some goods from germany and france. At the same time, some products from the u. K. And breeze and greece are taken off the tariff list. Extra tariffs are being allowed because of the airbus dispute. In the u. K. , Boris JohnsonsGovernment Faces a coronavirus pandemic. If it withdraws massive support for jobs and wages too soon, it could tip the u. K. Into an unemployment crisis. If it extends aid, that could keep britain from including jobs that may never return anyway. That would mean a necessary restructuring. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more im karinauntries, mitchell. This is bloomberg. Francine thank you so much. This is what im looking at in the markets. A lot going on in the markets and a bit of volatility, not unusual, but it seems to be accelerated because of all the uncertainty out there. First of all, the iaea cut its oil demand forecast, and they think the air travel outlook will darken. Crude oil in the u. S. Not budging on the back of the news. 42. 74. Futures fluctuating after the global rally yesterday that shows signs of faltering. We had stimulus talks in washington remaining in deadlock, the dollar falling before the key unappointed data in the u. S. The u. S. 10 year yield at lisa to build on what you were talking about with the bond yields, you had seen a couple of days of rising yields and we are seeing that trend rivers after a series of auctions. Yields now breaking a fourday rising streak and acclimating ahead of a 26 billion auction later. Gold getting a bit, which is interesting given the fact that it had sold off most since 2013. People were saying is this the end of golds incredible run . Not so fast. Interesting to see if we will see any kind of action, nasdaq 8. 30es going into that print. What is the response at the time of unprecedented stimulus . Francine joining us now to talk about all this is john normand, j. P. Morgan head of asset fund strategy. Markets andk at the what they are pricing in, what is the focus on . Is it on stimulus, is it on the election, is it on covid, is it on almost too many things for them to actually get it right . John the general focus of tight levelsn the on credit spreads, is that the it is probably too optimistic, especially when you watch how the discussions are going on in the u. S. I think there are risks of this rally stalling, simple because of the inability of congress to come to a quick conclusion on stimulus. Until we see the key macro indicators start to buckle, markets will stay quite elevated. It is hard to find a momentum in the macro data, and the momentum is pretty powerful right now. Francine what do treasuries do from here . John treasuries are going to edge up because we will see a continued lift in inflation, reversing some of the decline we saw in inflation in the spring. For the most part your rise in yield is limited to another 25 basis points from here on 10year rates. Keep in mind, as inflation starts to normalize, it is in a low range for the next couple of years because of high unemployment and what it does to wage pressures. If you have wage pressures bearing down on overall levels of inflation, if you have extra neri monetary stimulus, if you have the new york policy rates for the next several years, it puts a limit on rates, that they will go higher toward the end of this year. Lisa it is interesting how you respond to the two questions here. Stalling on the talks of stimulus, and on the other you have the backstop. You have the stalemated d. C. Which does not seem to be softening, and every week that goes by the economy is losing steam. How big of a risk is this . Lets say we get some sort of momentum stall. Could the stimulus be if there is no sign of the stimulus talks john you have had action in the white house the last few days providing some temporary, albeit reduced support to households. I think if this stretches into september and the market is aware of President Trumps measures expiring at the end of september, beginning of october, this is the bigger issue. The side of the market correction, i would say only 5 . It doesnt look like heavy positioning on the stock market on the part of the hedge fund investors. It is probably the longterm investors that have been reasing Asset Allocation equity allocation over the past several months. I think the drawdown would be limited to maybe the mid single digits. Make no mistake, this is an economy that relies on the fiscal transfers, and if these transfers are going to be reduced through the end of the year, it is going to be, i think, extremely difficult to see any gains on risky markets. Lisa i think a lot of people agree that the economy remains vulnerable and lies an additional round of fiscal input, yet the economy is not the stock market and the stock market has been boosted by the federal reserve. That goes to the yield point youre talking about. How much does the fed have to step up its gains, increase its balance sheet, engaging a greater degree of monetary easing and stimulus on their front but is not necessarily trickling into the real economy as quickly. If the government does not pass an additional round of fiscal support . John if there is no fiscal support passed over the next month or two months, i dont think the fed will step up its actions. Its position in the credit markets, but for the most part, there is no substitute for households, the trysts the fiscal transfers come all the fed can do is they cannot actually create anything replicating that income transfer. I think their actions in Financial Markets are going to be limited to stabilizing credit. They cannot directly influence stock prices through those actions. What is priced in the markets right now francine what is priced in the markets right now . A deal is priced in, probably because washington eventually does the right thing on fiscal policy, even if it is not always a preemptive move and it takes several iterations to get that deal through. I think the fact that markets are so well behaved in the context of these risks tells you that investors are expecting something to happen. Maybe if it doesnt even happen until september or so, it could be backdated so there is some makeup strategy in terms of the incomes transfer. Soncine john, thank you much for joining us. John normand of j. P. Morgan. He stays with us. We will talk about emergingmarket and europe. Coming up in the next hour, we talk about stimulus and we also talk about democrats with jason furman, Harvard Kennedy school professor. This is bloomberg. Clearly the Financial Markets, we would say, are not necessarily reflecting what is going on in the real economy right now, which is the demand instruction that we saw with the pandemic. It is making it challenging to underwrite new investments in the marketplace because you are trying to predict, if you want to call it that, when we are going to come out of this pandemic and the impact it is happening it is having on a global basis. We need to look at credit on investments with Sustainable Cash Flow that we feel comfortable with. Equally so, that when we look at those companies it is way more important today than it was 10 or 11 years ago, that we understand that margin of safety , what that equity cushion is that we have in those investments. That makes it much more difficult. Was mark jenkins speaking exclusively to blumer television. Speaking to that conundrum to bloomberg television. Speaking to that conundrum. Joining us now to talk credit and beyond is john normand of j. P. Morgan. I want to start there, given the fact the issuance of junk bonds has gone past where we were all of last year. Your are seeing bond yields fall near record lows. How do you reconcile this incredible rush for riskier assets at a time of rising bankruptcy and increasing corporate distress . John i think it is the difference between the time horizon and the i think if the horizon is the next three months, six months, you can see the link, bankruptcies, and the sorts of things that would normally challenge credit markets if they were consistent. But if the time horizon is the next one year or two years, youre probably looking at a more complete recovery as profits get to precrisis peaks. And then the valuations of the credit markets do not move so extreme. I think there is a whole clutch of investors in the world who are focusing a little more on the one to two year horizon, thinking about how profits are going to be restored, how the liquidity environment is going to be sustained, how the expansion could gone on could go on for a number of years. Even if there is interim drawdown in prices over the next three or six months. Lisa this sounds good and it makes sense if you want extra yield, you go something that offers higher yield, but then on the flip side people are saying why are these investors closing their eyes to the growing risk of bankruptcy, insolvency, the principal right to have a lot of these bonds . What do you say to that . Is the policy of suppressing yields and pushing investors into increased risk at a time of incredible risk economically potentially fraud, setting the economy up for a fall if investors go into this debt . John i think there is differentiation when you look at the index levels, if you look at the relative performance of different sectors, whether it is in credit or equities. We see a bifurcation in the market with winners like tech, who are doing meaningfully better than the older economy stocks or some of the covid victim factors. ,here is some credit homework sector specific homework going on. The overall luck the overall level of the equity market continues to rise, sectors are rising, but there are big performance gaps. Some of these issues that you are mentioning, they are still willing to be more or less fully invested because they think that at some point over the next couple of years there will be this confluence of policy stimulus, returned to normal growth, vaccine, and they want to be preposition for that. You are right, there is no risk premium in the markets for something going wrong in the interim. Put in youru nicely notes that we cannot cross assets, but if you look at currencies, the global macro environment continues to send mixed signals for fx. What do you do with dollar right now . To bei think you have very selective, specific in terms of your view, your investments, recognizing that things are changing in the structure of the currency world. Most important thing that has changed is the rate to dollars i low. Raordinar ly where they are record large in some cases. Em is not to carry opportunity that it used to be. If it is not, you should not be selling dollars broadly. You sell dollars versus a couple of high yields like mexico or brazil. Asia is benefiting from a much more robust growth cycle than the rest of the complex. You could sell dollars versus currency in the country. You could have a small a strong balance of payments profile. The rest of the basket, you could have nusra dollars or loan dollars. It does not add up to a big tradeweighted decline in the dollar, even though i think the dollar is going down in tradeweighted terms. It is not the same kind of world structurally that it was precovid. Francine what does a Biden Administration actually mean for dollar . For trade tensions between the u. S. And china . John the clearest currency path from a Biden Victory is a lower dollar versus asia, soaked china, korea, taiwan we will see aggressive, sort of impulsive measures taken against china on the trade front, even though the conflict on a multidimensional basis will persist, but at least you would not have to worry about waking one day and seeing that tariffs have gone up on the asian economies. Marketll increase equity outperformance, sustaining flows into the market that pushes the dollar lower. For the rest of the currencies, i dont think there is a big impact from biden. The democrats control all branches of the government, then there will be an Infrastructure Spending program, looser fiscal policy. But i dont think that increasing growth from Infrastructure Spending is going to translate into meaningfully higher Interest Rates in the u. S. I dont think the dollar is going to capitalize broadly on that. If you believe biden is going to win, you buy asian currencies. If you want to look beyond that, i would say do not trade this through currencies, trade this through the specific sectors of the equity market like infrastructure, materials like mining stocks. Francine thank you so much, john normand of jb morgan. Coming up in the next hour, dana telsey. That is coming up at 6 30 am in new york, 11 30 a. M. In london. We will talk about consumer behavior, retail, and unemployment. This is bloomberg. Karina this is bloomberg surveillance. Lets get the Bloomberg Business flash. Airbnb reported plunging revenue and mounting losses in the second quarter, but bloomberg learned the sharing the home sharing set up his reporting and ipo at the end of the year. An indication of the impact of the coronavirus on global travel. Meanwhile, bloomberg has learned that knowledge or technologies is planning to go public through a direct the sting of shares next month. They would allow current investors to sell shares on the first day of trading rather than waiting for a lockup period to expire. Shares of cisco are lower today. The internet networking product maker gave last cluster lackluster Sales Forecast for the quarter. Saless hardware related fell 16 . That is the Bloomberg Business flash. A look at markets, we are seeing a quiet day, nasdaq futures fluctuating ahead of the u. S. Open. The dollar closest the dollar weakening. 30year yield breaking a fourday rising streak. It comes ahead of an option of 26 billion of debt, another record auction that will total 112 billion dollars of u. S. Treasuries sold this week. As they try to finance the deficit in the United States. Interesting to see that gold is getting a bid after that selloff. Francine gold seems all over the place this week, so im not sure what to make of it anymore. Sometimes with treasuries and sometimes not. Overall european stocks, futures seem to be slipping a touch. A lot will depend on unemployment data. And in europe they be more than the u. S. , people have started to worry that the stimulus talks in washington are added deadlock. Gold resuming its advance, as you mention. The treasury 10 have your notes heading for their first gain in a week after yields closed at the highest since early july. I know we will talk a lot more about stimulus, we will talk about the barriers that there has been between the democrats and republicans. We will talk about the new ticket in town. The bidenharris ticket, and we will talk about the other things we are seeing with oil as well. Lisa im particularly curious to see the jobs number and what the reactions will be in markets. If you have a terrible jobs report and there is more pressure on washington, d. C. , to come together. News,ews, bad news, bad bad news, it is hard to tell, the connection right now between real data and the actual market. Francine and we continue toking at the we try track covid19. In germany, infections are rising and there seemed to be news kate new cases of people who were infected that have now been reactivated. We will talk about the impact of the economy coming up on bloomberg markets. Robin hayes, jetblue chief executive, will talk about covid19 and travel precautions put in place. That interview at 10 00 a. M. In new york, 3 00 p. M. In london, and this is bloomberg. Francine this is bloomberg surveillance. In new yorkncine and london. Lets get lets get back to john. I have not talked to you about frexit. We heard from the bank of england. They tried to map out the fact they are looking at negative rates. They dont want them, they are not here yet. Is there an ideal time to use negative rates, and how much of a surprise would that be for the markets . The best ways like to stimulate the economy is a weaker currency. I think negative rates as having negativebiguously consequences. Negative rates could be quite helpful in achieving that objective but most Central Banks are of the mindset that influencing the price of domestic assets gives you the most leverage through increasing activity in the credit market or the bond markets because rates are already so low, or increasing activity in the bank loan market. That is the policy of all Central Banks. Even though they would bubble be like a weaker currency, it is determined by all of these foreign factors outside of their control. Best to not go down a route like negative rates, hoping that the currency will go down, but finding you are impeded by what is going on internationally. John, do you think the u. K. Is much more concerned than other parts of the world, given covid, the possibility of a second wave, but also brexit . Is the think the u. K. Riskiest of the Major Economies to invest in, because of that very specific risk of a defective hard brexit, meaning no deal. It could be an implicit hard brexit through a very narrow deal. It seems like this is an economy that is faced with a high likelihood of another shock to the corporate sector, though it is already trying to deal with the adjustments from covid. In europe,exist japan or the u. S. Is a very specific risk, which i think is going to materialize by the end of the year. Lisa do you think stocks are going to sell off in the u. K. Substantially . The ftse 100 is dominated about dominated by a bunch of big corporate nationals. It is a bit divorced from what is going on with domestic activity. It would not surprise me if a broader index like the ftse 200 lost 6 of its value on a hard brexit, and you dont have the backstop to support the equity markets the way a bunch of other countries have backstops for policy mystics. Lisa the u. K. Has certainly been left out of what many view as a recovery in the continent of europe. People are saying that is the place to invest. The narrative saying they have been recovering faster than places like the United States from the virus. Do you think it is overdone . John i think it is overdone at the broad level. If you are comparing broad indices to the s p, i dont think it is sufficient to say that europe is better at managing the virus. That index has a much lower waiting lower weighting. This is why the u. S. And europe on a dollar basis, any common currency currency basis has been delivering returns over the past four months, even though europe has been much better at flattening the curve. It is not just economic momentum. Maybe you could make the argument that consumer stocks should do better in europe then in the u. S. , because there are fewer risks to Consumer Confidence in a place like europe. Comparing purely domestic sectors, maybe europe does deserve a nod. Looking at it on an index or country basis, i think you look at the u. S. And tech remaining leader. Francine what do you do with tech . We were looking at some of the valuations, thinking is this really deserved . Out withtocks came some pretty impressive earnings. John i think that is the key. When you think about the levels, you really have to judge them relative to the earnings and the fact that tech is one of only a couple sectors in the index, which is delivering year on year earnings. Structurally for structural reasons, partly related to who did to covid. I think it is premature to be under waiting those underweighting those sectors. There is going to be less demand for the things Tech Companies deliver but that is a temporary pause in tech outperformance. Tech was leading before covid, and it is not going to turn not going to change the it willm cases, though change the shortterm risk reward around the sector. Francine what does that mean for taxes, for certain sectors, and how does that change where you want to put your money . John i think it is going to mean higher corporate taxes on the assumption that there is a democratic sweep. Only a Democratic Senate would back it. Higher taxes and Market Participants only look at that aspect of the platform, equities would fall but if you look at the totality of the biden platform, which is raising taxes to fund domestic initiatives, whether it is infrastructure, ring energy, Broader Health care coverage, some of those will be put back into the economy and lift other sectors. I think on a sixmonth basis, there is not much that is tradable at the index level around a Biden Victory. The shorterterm issues are little more complex depending on what investors want to focus on. The highest conviction view is if we get a democratic sweep, you want to be overweight infrastructure, material mining, material stocks, as we will get some sort of bid for greater domestic Infrastructure Spending. Number two, you want to be overweight asian equities and asian currencies, thinking we will have a much more thoughtful and less aggressive policy out of the night and administration. Out of the biden menace ration. Francine thank you so much, john normand from jp morgan. The is Karina Mitchell with first word news. 26 Million Dollars in the first when he four hours after he picked senator Kamala Harris. They made their first joint appearance in bidens hometown. Cy pelosi has turned back from Steve Mnuchin to restart stimulus talks. The white house hasnt budged from its demand that the stimulus be smaller. Drop by onelling to bit 1 trillion if the republicans increase their is by 1 trillion. Meanwhile, President Trump revamped his push to get schools opened. The president says it is ridiculous that some districts let students attend some days in person and sundays online. Mark esper appears to be on his way out. Bloomberg has learned that President Trump has had privately he plans to replace esper after the election. The president is said to be frustrated by esper on a number of things, including deploying troops to recent protests. One person said esper plans to leave regardless of if the president is reelected. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. I am Karina Mitchell. This is bloomberg. Francine karina, thanks so much. Coming up, we will have a good conversation about the u. S. , but also International Trade relations. This is bloomberg. Lisa lisa in new york, francine in london. The view from the boston fed president who told Michael Mckee that extra stimulus is required. I think there will be an appropriate time to have more guidance. I think at this stage of recession and the pandemic, thats poor guidance is probably only mildly helpful. Interest rates are quite low, and in that environment, i think people are already assuming it is going to be some time before Interest Rates rise again. While it might be marginally helpful, i would actually say that our lending facilities and some of the facilities being run by the new york fed are probably providing more support as they are getting at the cost of funds , individuals and businesses that are more important. I want to talk about lending programs. Chairman powell emphasizes the fed can lend, not spend. Is that the wrong prescription for the economy right now . Lending programs have not seen a lot of take up. The announcement of our willingness to buy corporate securities quickly pushed those Interest Rates down, and as a result, we didnt need to buy very much because the market reacted to our announcement. I would say Credit Conditions are much better than they were in march and april because of the reserves actions. That was an important stimulus to the economy. In terms of spending, that has to come from fiscal policy. The u. S. Economy benefited from the very quick and significant stimulus provided by both providing better on them limit benefits, broader unemployment benefits, checks going to individuals. All of those things were very helpful in preventing look income individuals helpful in enabling low income individuals to make spending decisions. Ended, thec has not unlimit rate is still above 10 . We need stimulus and fiscal policy to continue. I think that is incredibly important, let Congress Come up with some sort of plan to continue to provide support. Have you modeled some sort of plan for the end of that stimulus . My view is that some form of additional stimulus is going to occur. It would be bad news for the economy if we dont do any additional stimulus at this time. You supervise the main street program, perhaps the most controversial. According to your figures, 856 billion in loans in the system, but it is a program that could do 600 billion in loans. Does that suggest modifications need to be made . The highlight we made was already in modifications. We came out with a revised terms sheet that was revised once again to make the program more accessible to a wider range of small businesses. We have also opened it up to the nonprofit sector, while we are not live on that part, banks are able to start negotiations with nonprofits. As you know, it takes a long time to negotiate a bank loan. It does not surprise me that we would start gradual, and that it would pick up over time. That is exactly what we are seeing. One reason we are seeing a lot of the lending coming from early from Community Banks and midsized banks as they are probably a little more flexible and can act more quickly. We would expect larger banks over time will slowly do more. The goal is to make sure that businesses that need it, that are credit in february, that have had their cash flow disrupted and are likely to be viable businesses after the pandemic is over are able to get that kind of cash flow financing, and we are seeing a pickup in that activity as borrowers and banks get more familiar with the program. We will continue to see increases. Francine that was the boston fed president. Coming up next, wells fargos senior economist talking about markets. That is coming up shortly. This is Bloomberg Karina this is bloomberg surveillance. Lets get the Bloomberg Business flash. Two of j. C. Penneys biggest landlords according to dow jones Simon Property group and are dow jones says they have offered concessions. Meanwhile, lyft posted their worst public perform their worst performance as a public company. Their losses rose by 31 . Still, numbers were better than expected. They maintain they maintained their forecast. Marketas a 44 billion in market in china. It is threatened by chief the app that has become integral to everyday life in china. One hong kong resident says the band threatens to turn iphones into expensive electronic chaff. That is the Bloomberg Business flash. Francine karina, thanks so much. An economist at wells fargo says not all economies are on the upswing. Joining us now is sarah house, wells fargo senior economist. I like that you put the u. S. Overview which is wrapped in mystery, inside of an enigma. What are you expecting from the job numbers . Sarah i think in terms of the continuing claim numbers that we will get today, we will see another tick down. When we look at the week that this covers, this is the continuing claims over the week, the new jobless claims are the first week of august, and we did see new coronavirus cases begin to fall over that period, so there are hints that the virus situation is looking a little more stable. We think that the jobs market is going to follow that closely. We are expecting to see some further improvement in terms of the job situation, but the pace of that improvement is going to be much more mild than what we have seen over the past couple of months. Francine window we know if some of these jobs that have been lost are actually permanent . How long does it take for that to take hold . Sarah it could take some months. We are still in the initial phase of the bounceback, so we have seen some really strong numbers out of the industries that have been hardest hit like leisure and hospitality. That is the big risk for the jobs recovery going forward, is that the longer a crisis continues, do you start to see some of the jobs weakness spread into other industries that may perhaps some of the more white collar industries, so that is going to impact jobs at the corporate level, even those that can safely work from home as companies are trying to better control their labor costs. That is really what we are going thated to be wanting, composition of job growth, where you are seeing some of the strongest increases or alternatively, where you are seeing job growth stall in certain industries. Lisa in the meantime, we are seeing gridlock in washington, d. C. They are not getting together for any kind of deal for fiscal support. Are we looking at a policy error here . Sarah we are certainly at risk of a big policy error could impact our outlook pretty negatively. Of course we had trumps executive action but that is a temporary bandaid and is not really move the needle much to compare it to what congress can do. We think there is still a good chance to get some sort of deal, but right now there is not that crisis moment that congress is trying to stave off, and they are getting some conflicting signals in terms of how desperately the economy needs some more stimulus and if you look at where markets are and even the fact that you are seeing the job market continue to improve, so while we are still 13 million jobs short of where we were in february, we did see almost 2 million jobs added last month, so that has taken some of the fire out of congress to maybe get a deal done soon. We think that maybe it gets wrapped up in the budget negotiations but we will need to see them by the end of september, so we dont have a budget for fiscal year 2021, so that might give an opening for some negotiation. Lisa lets say they dont come to a deal by september 1, how much does this negatively impact your expectations for u. S. Growth . Sarah it really puts consumers in jeopardy. ReallyConsumer Spending left the downturn in the second quarter. Quite impressively, we have seen personal income is actually up 4 , relative to where it was at the start of the pandemic because that fiscal response has been so strong, but for many consumers, you didnt you werent able to really spend it when you had to shut down in full support in full force. It looks like we cant get some of this done something done, the degree of support is going to be much more modest, you could see a pretty substantial weakening in Consumer Spending as we look out over the remainder of the year, so even seeing those Unemployment Insurance benefits go from 600 50 of athat is persons monthly income, so we do see a potential drop in spending that is going to be very discernible. Much,sarah, thank you so sarah house with wells fargo security. This is what the markets are looking at. A stimulus package in the u. S. , not seeing anything at the moment. The rally we are seeing is fading, but only when it comes to u. S. Futures but european stocks. Also what im hearing out there is after so many disappointments for riskier stocks, it seems that a lot of strategists on wall street should be forgiven for warning clients that the market rotation might not last. Here is a great story on that coming up in the next hour, we talk about the stimulus, we talk about the bidenharris ticket. Talk about some of the things we talked in the apple story, certainly when it comes to technology. It is very clear when you look at the dynamics that apples 44 billion china market could be threatened i what President Trump is trying to do with we chat by what President Trump is trying to do with we chat. This is bloomberg. Francine skyhigh. The s p 500 shoots above its highest ever closing level before finishing a few points shy of the mark. No compromise. Democrats and republicans point the finger at each other. The two sides remain trillions apart on the similars package. Boston on the stimulus package. The boston fed president says over eagerness to reopen the economy has backfired for the United States. Welcome to bloomberg surveillance. Francine lacqua in london, Lisa Abramowicz stepping in for tom keene in new york. Weve got unemployment figures in the u. S. Lisa 2020 is not a normal year end this is not a normal august. Many people cannot get away for vacation. Really focusing on the labor market, people talking about improvement, but we cannot forget how unusual it