Rally with a haven assets, and then volatility for stocks. Right now they are having rotation back into the cyclicals. That has not been the story on the week. Tons of uncertainty on the week. Bondswe have the yen and climbing early on monday. A big tell on some of the volatility we saw for stocks. Guy is there anyway david is there any way of knowing how much of this is on the fundamentals of actual news about coronavirus or jobs and how much is positioning . How many people had short positions that took off yesterday . Abigail i they get has a lot to do with uncertainty. You had a huge move down, and then the wave of liquidity from the fed to offset that decline. The fundamentals, people have views on whether there will be a orhaped recovery, a w, an l possibly something worse. When you have a move up 40 more , you have markets incredibly tight. Any piece of bad news will set to the downside. Not as much conviction near the top. You have the idea the virus might not be as strong. Than that payrolls report, i think based on what happened with the haven assets that the jobs report last friday was a big driver for some of the volatility this week. David got our hopes up may too much. Thanks to Abigail Doolittle for that report. The markets have been very volatile, in part because of concerns about the recovery and because of what washington can do to make sure the recovery gets here soon. We turn to isaac boltansky, director of policy research at compass point. Lets talk about what washington is doing and can doing, and before we go toen phase four, lets talk about what is in the bank. Where is the fed on main Street Lending and could that help with the recovery . If we step back on the fed, they have done an incredible job and there does chile and plus bond purchases, which is part of the wave of liquidity in their 2 trillion bond purchases but i do not think there is focus on specific liquidity facilities that were equity ties from treasury money in the cares act bill that passed at the end of march. Here are the numbers as to where we stand. I will answer your question on main street. From those facilities, the fed has actively, 2. 3 trillion in lending powers. Thus far, they have only spent or extended about 100 billion of that. Only four to 5 of their gunpowder has been used in those facilities. What we are doing is turning our attention to the main street facility, which is for small and midsized businesses. This is a big program. Six hundred billion dollars in a lot of expectations. Taking toois it is long to ramp up. Furthermore, it does not solve for what i think will be a broader solvency i issue depeng on which part of the market you are in. Adding more leverage for a Leisure Company or a travel Company Might not make sense, depending on where we are economically. David is an important distinction that unlike the ppe grant ppp, which can be a , with respect to the 13 three facilities, that is a loan. That has to get repaid sooner or later. Isaac it is so important to make this distinction. The ppp was effectively a grant. This main street facility, let there be no mistake. It is a loan. That is why chairman powell has repeatedly said the fed has lending powers, not spending powers, which underscores the fact, being the fed is not economically omnipotent. They can do incredible things in certain markets, which is why we see corporate spreads come in and the spread for eligible assets, in. Those are different 13 three facilities. He did not have the same announcement effect in the main street facility and you do not have the same reality regarding grants versus loans. David quite apart from the main Street Lending program, there is a chunk of money that theoretically the fed can blend. This is money the treasury has put loss money on. Why hasnt it gone out the door . As we are talking about a phase four, we are not taking care of the cares act yet, have we . Isaac in areas we have. The recovery rebate of nearly 300 billion in direct checks, those more those move more quickly than some of the other programs. Hadppp has its warts, but clear economic benefits. Part of the answer has been highlighted by the past few weeks. Our financial architecture is rusty. The fact it is 2020 and we are still talking about cutting checks to people is a bit absurd. Point and relation to some of the direct benefits. , it is good at certain things. It did tremendous work when it comes to corners of the margaret bly Corporate Bonds or assetbacked corners of the market, Corporate Bonds, or assetbacked facilities. They do not have a successful history when it comes to main Street Lending. This is important when we talk about the fed and Political Risk more broadly. The fed is terrified of being tagged as bailing out wall street, yet doing nothing for main street. I think that dichotomy is something that is important when we talk about the main Street Lending facility. David close this out for us on what might be next. Phase four, the heroes act is what nancy pelosi has proposed. You expect there will be another round . We heard secretary mnuchin saying he believes there needs to be something. Isaac i am as confident as i can be in this economic and Political Climate there will be a phase four deal. I think the reason is there is a foundational agreement that can being that can bring both sides together. Democrats won state and local funding and republicans want business liability clarity. Melted into the foundation of agreement and that we can have a broader discussion about unemployment insurance. I am betting there is at least a 1 trillion package signed by the president by the middle of august. David that is the question. There is an august recess. What is the deadline . Isaac effectively, i am telling clients we have something by august 2. As you know, lawmakers want to get out of d. C. That may slip, because these calendars we look at our up to leadership. It is going to be a mid august event. At that point, you and i can talk about the conventions, which will be starting right around that time. David there is that. In some way, shape, or form. Thanks to isaac boltansky. We will talk to bloombergs john authers about whether all of this market fluctuation may have something to do with politics. That is coming up on balance of power on Bloomberg Television rnrn radio. Rmyi i guy this is balance of power on Bloomberg Television and radio. I am david westin. We go to first word news with mark crumpton. Mark European Union regulators have been given the green light to pursue deals with drugmakers on a vaccine for the coronavirus. The Commission Says it will dip into an emergency european pop of more than 2. 3 billion to help finance the vaccine research. India now has the fourth largest number of coronavirus cases in the world. A surge of more than 10,000 cases in one day pushed india past britain. Indias lockdown was imposed nationwide in late march, but has since eased and is now largely being enforced in high risk areas. The spike caseload came after india allow the reopening of shops, shopping malls, factories, and religious places. In hong kong, more than 100 protesters marched and shouted slogans during a lunchtime protest in a luxury shopping mall. The demonstration marked a year since a clash with Police Outside the citys legislature. Protesters held flags that read shouting stand for freedom, stand with hong kong. A federal repeals Court Whether it should order the dismissal of the justice departments prosecution of michael flynn. Attorneys say there is no role for the judge to play now the prosecutors have abandoned their pursuit of flynn. Flynn pleaded guilty of this part of special counsel Robert MuellersRussian Investigation to lying to the fbi. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. David . David thanks so much to mark. Our colleague john authers has a piece on the bloomberg speculating that big market selloff we saw yesterday had more to do with President Trumps prospects for reelection then things like the coronavirus or jobs numbers. We welcome john to take us through it. Thank you for being with us. When you read this it reminds me of the Agatha Christie novel. You are playing the role of irot. Le porr you line up all the suspects. Tell us what is not the cause. John if we are going with the Agatha Christie analysis, there is always the possibility of murder on the orange express, where all of the suspect murder on the orient express, buts possible all when i wanted to react to is the notion this is a reaction to jay and his comments on wednesday about the economy. If he had been any more positive about the economy, that would have worried the bond market and been a problem for the stock market. He is basically on a narrow ledge. He promised going nowhere for years and he was not going to attempt to burst the asset bubble. It struck me as ridiculous to suggest this was a negative reaction to jay powell. That was the main point i was wanting to make. You look at the other explanations people have offered. There is reason for concern about a number of states. I do not think it is the second wave of the coronavirus, more continuing breaking of the first wave. There are a number of states where it is still picking up, although not clearly at the kind of levels where they have real reasons to fear an outbreak on the scale of what has happened in new york. I do not see anything about the coronavirus numbers yesterday that gave you any more reason to sell on the basis of the day before the day before that. You have the entrance of retail, but there is no particular of retail investors. He did have bad data from the employment claims, but we have had lots of bad data. We have also had good or relatively good data. I did not buy that as an explanation. My best guess is if you seriously have to come up with sympathizingd i am with the murder on the orient express. Rarelyces have have one whodunit person. If you look at the british market, they have rightly or wrongly, they are now clearly betting that trump is going to lose reelection, that joe biden is going to win. If you look perhaps more significantly, they see the chance of democrats taking the senate as being almost exactly the same. That can give us all kinds of arguments. Carreon, david. Y on. Rr david to carry on the analogy, President Trump named a suspect, jay powell. They play that through a little bit, particularly the senate goes and the president goes, what does that do to the market . Why is the Business World hate that . John because of Corporation Tax. otwe can get into all kinds of arguments about donald trump, as most of us probably do in our private lives, but the one thing that was very market positive that he did was cut Corporation Tax, and that does help the stock market because it increases the amount of earnings that Companies Share with their and justifies higher multiples for higher prices. Senatehave a democratic to go with a democratic president , it is very clearly in the democratic manifesto they will reverse that Corporation Tax, which is extremely unpopular, certainly among democratic voters, but around the country as a whole. If that happens, that will mean , shares will go down prices, all other things equal will come down to account for that. I am not making any great predictions on how the market feels about democrats versus republicans. On this very significant issue caused a strong rally in the market a couple of years ago, that getsnn reversed, that wille bad for share prices. It seems if you look at the way the Prediction Market sorry, yes . David i was going to say you know the market so well. How sophisticated are they . If you look at the state where there are rises in the number of coronavirus the absolute number is not the question as is the direction. It is florida come it is texas, it is arizona. John President Trump does not have much david President Trump does not have much hope in california, but he needs the other three. John it is almost all of the above. It has been strange how the black lives matter protest have not had an effect on the markets. It has been somewhat strange the market has rallied as much as it has when there is clearly evident coronavirus is not completely banished in a large swathe of the country, including a large number of red states. Think, andent, i nobody can prove anything about causation. There is a combination of a number of things. The coronavirus has not gone away, and if it gets any worse it is going to be particularly in states that matter to the republicans. It does look as though he is losing the politics of the black lives matter protest, that is hurting him, and we have received lots of research the amount of Research Notes i have seen detailing what a repeal of the Corporation Tax cut will mean for eps and for the s p, a lot of people do have it in mind. My best guess is if there was any reason why an overbought that was not particularly sold yesterday, somehow or other these things finally came together to reach critical mass. We still have months to go before the election. It is possible these will turn around again. That would be the best explanation for what has happened. David your explanation is far better than mine. Thank you so much to john authers, Bloomberg Opinion columnist and also markets editor for bloomberg. We will go over this tumultuous week on wall street. On wall street week at 6 00 eastern will be joined by katie koch of Goldman Sachs and Larry Summers of harvard. Ons is balance of power Bloomberg Television and radio. David this is balance of power on Bloomberg Television and radio. Time for stock of the hour, which is microsoft, which is gaining ir from President Trump because of its refusal not to sell facial Recognition Software to Police Department. Kailey leinz is here to explain what is going on with microsoft. Kailey it is not taking too seriously the president s retweet of his former director of national intelligence, basically saying microsoft should be banned from getting federal government contracts because it is refusing to sell the facial Recognition Software to Police Department spirit microsoft is not the only one making moves in regards to facial recognition. It follows the moves from amazon to put its own software on hold. Ibm is getting out of the business entirely. This comes in the aftermath of the killing of george floyd and the antipolice brutality movement because facial recognition is still relatively undeveloped business. It will be worth 70 billion in the next four years. It should be used in the majority of airports and hotels. Studies have found the software has racial bias, miss identifying people of color up to 100 more times than a white man. You can understand the social considerations. To bring it back to financial implications for microsoft, it won that 10 billion computing contract from the pentagon, and the business is vital to its top line. It makes up 33 of revenue. That is not something you would want to put at risk. It is not just microsoft that could be involved with the Cloud Computing contracts. We know amazon has sued over the pentagon refusal to grant its contract, saying President Trump has a political enemy in jeff bezos. David he intervened inappropriately in the allocation of that contract and he was outspoken about microsoft at the time. At the same time, the contracts are large. Are they material to these companies . Amazon and microsoft are huge companies. Kailey it is a fair point. 10 billion is a large number, but it is relative. Even when it is not talking about government contracts, tech regulation has been brought to the forefront in the last couple of weeks, not just related to microsoft but also amazon and the eu, and yesterday joe biden, the democrat, coming after facebook and its policies saying it its not doing enough to police the content on its policies. It is not just from President Trump. Big tex scrutiny is a bipartisan narrative at this point. David thank you for that report on microsoft. Powerup on balance of we will talk to Katherine Baicker who has a new study about how we all feel about our Health Care System in the wake of the pandemic. That is coming up on balance of power on Bloomberg Television and radio. David this is balance of power on Bloomberg Television and radio. I am david westin. Time for first word news with mark crumpton. Mark thank you. The white house is considering severely limiting employment as themmigration bases nation recovers from the coronavirus pandemic bloomberg has learned one possibility under consideration would restrict people from entering the United States on several different visa categories, including the h1b program for as long as 180 days, affecting hundreds of companies and thousands of people. H1bis awarded to 85,000