Thisyou need to know on monday, futures advance through the hour. Upures up 0. 7 , dow futures 0. 2 . What i find fascinating is the centralbank action no one is talking about. It is almost as if the Central Banks dont exist in july. Jonathan it is just assumed that they continue doing what they have been doing. The ecb coming up this thursday. The focus is on the variable policy move. That comes from the fiscal authorities in the United States over the next month and in europe. European leaders meeting going into the weekend. Guest after guest lining up the hind a long europe view. Thats going to get the test this weekend. Tom part of the test is going to be the bank earnings. Lisa abramowicz, i guess we have a flat yield curve. I guess weve got a completely odd bond market. How does that benefits the banks . Lisa the answer is it does not. The flattened yield curve is negative for the banks because you borrow short, lend long. You are nothing for it. On the other hand, the low rate regime has pushed corporations to borrow records amounts of money, and this has been a huge boon, which is one of the reasons people are expecting such a hit back. I have been looking at volumes for the year, and they are significantly higher than the previous alltime highs. Another point of strength for the fixed trading revenues. Someone who is really committed to bloomberg surveillance put out a blistering tweed on the president. I want to read it to you. This is from the acclaimed peter hotez of baylor. The president of the United States retweeted this nonsense. He lacks interest in slowing or halting the virus. The strategy is to continue deflecting, first china, then who, now the scientists themselves. We will need to seek a branch of government still willing or able to lead a federal response. This is a backdrop to all we talk about in economics, finance and investment. Jonathan lets be really clear about this. Every single aspect of government worldwide deserves to be criticized for their response to this crisis. Said travel curbs dont help. Mayor bill de blasio in this city in march said get out on the town. That was what the mayor of new york city had to say to the people of new york. He is worthy of criticism as well. The government, the federal government, is also worthy of criticism as well. What is important is learning from mistakes and learning from them quickly. What we need at the federal level is something a whole lot quicker, a whole lot earlier. We push it too far and went too soon and we went to quickly. Tom we will continue these interviews through the week, particularly our to them into the Johns Hopkins university. Right now, you need a briefing this monday on the state of the markets. We do this with futures up 22, dow futures up 95. Lee ferridge is with state street, head of microstrategy. If i want of macro strategy. If i want to participate in the equity markets, what is different now than any other had . S we have lee i guess what is different is the sheer size of this policy response. We have never seen zero rates across the world. We have never seen the level of qe we are getting now. In terms of Monetary Policy, that is the difference this time. Previously, there would have still been an interest on cash or some sort of Interest Rate on bonds. We are not getting anything here. Alternative. It is clearly winning out now, despite all the risks you highlighted in talk about. Investors are just shrugging it off and saying, if this thing keeps going up, i am getting zero anywhere else. Thats why ive got to be in it. Jonathan we just witnessed the biggest fiscal policy experie ment maybe in history experiment maybe in history. Lee lee the response in the u. S. Is dated. Extra Unemployment Insurance runs out july 31. Ppp loans start getting converted to grants, which means people can be laid off in the next few weeks. So we are facing a potential fiscal cliff in the u. S. In c. A. R. E. S. Act was huge terms of helping to mitigate the impact of the pandemic. Competition levels fell by 140 billion in april. But what we saw was that Government Spending or government transfers went up by 3 trillion. 2. 8 trillion of that was the c. A. R. E. S. Act. We have seen consumers protected by these huge fiscal transfers. And we stillout have a very high employment rate. High Unemployment Rate. Because of the surge in the virus, we are going backwards or pausing on the reopening, so a lot of people are still going to be out of work. If they start to lose this benefit, thats got to impact the economy in q3. Jonathan i catch up on the administration on a monthly basis. It is difficult to understand whether the appreciate of heading eight appreciate the risk of hitting a demand air pocket this summer. Lee i dont think they do. I think they may have been lulled into a false sense of security. What we saw was this collapse in march and april. We have seen a bounce in may and june. But now when we go into q3, it is like, ok. Where is the next impetus going to come from . 20 odd states are pausing or rolling back the reopenings. Weve got this fiscal cliff, which is why q3 is going to be so challenging. In congress, they are probably looking at the data and going, we are over the worst. We can pare back the fiscal stimulus. But i think that would be a huge mistake. Lisa it seems like this is not unknown, and a lot of the administration has said they would like to see more stimulus, perhaps not an extension of the end benefits as such. Yet, there is push for this. What is your feeling in terms of what the Downside Risk is too stocks should they not extend the enhanced Unemployment Benefits . Lee it will take a wild come through. Stocks can shrug off any sort of bad news. Ive been completely surprised given what we are seeing on the virus numbers and what thats got to mean going forward. Hard to say stocks will be better from now, but this wall of negative news has to make investors think about the riskreward of stocks, particularly at these levels, particularly that are actually going up. It is a very narrow rally. If you look to an equally weighted s p against the cap weighted index we always look at, the gap between the two in terms of your on near is about 12 . It is the widest since 1998. This is a very concentrated rally in if you stocks which have become very richly valued. It is when that risk reward tips over. Does the lack of fiscal stimulus mean that tips over . Maybe, and we get closer to the election and that becomes more of an issue as well. There are plenty of negatives out there, but so far, the market keeps ignoring it. I am certainly leaning on the bearish side, but it is hard in the face of the price action. Lisa you point to the fundament to economy, and it is negative as far as you can see. Once you withdraw stimulus, theres an ipo theres a lot of negativity out there. People point not just to the stimulus, but also to the Monetary Policy, which has the promise of doing whatever it takes. Why are you willing to fight against that to be bearish given the fact that you have officials on all sides of the world doubled down on this pledge . Lee its a very good point. I guess i am a bit oldschool inasmuch as i dont believe you can create money out of nothing continuously without any sort of pull back on that. I think where the market looks at it come the bestperforming asset this year in the last couple of years is gold. Gold is your hedge against the continuous increase in Central Bank Balance sheets. Gold provides that hedge against the fiat currency. We can talk about stocks doing well, but is a small subgroup, and there are other assets such as gold doing better. So in the world we are income overall stocks are going to do better. But at some point youve got to start questioning whether the authorities can continue printing and keep supporting an underlying economy that would be collapsing without this support. Jonathan we dont need to see you. I can just the imagine i can just imagine the exasperation. [laughter] great to catch up. Lets think about it. Downost covid, post shut highyield credit. The peak of the yield curve, june 5. A couple of days later, the equity market peaked. I think we have to knowledge that the market has adjusted to the risk coming to the surface over the past month. Lisa certainly if you look away from tech, you see that. The question is whether we are going to get a wave of systematic bankruptcies that could perhaps shake the feeling that centralbank cash flood the market. Really, there is this feeling on the higherlevel quality stuff, the fed has got your back. Jonathan coming up on this nomura, lewis alexander, chief u. S. Economist. A lot of Economic Data this week as we count you down to an ecb decision and a meeting of the great european leaders. Equity futures up 22 on the s p after a twoweek rally. We at a little bit of weight to it. This is bloomberg. Ritika with the first word news, im ritika gupta. It is a grim record for the state of florida. It reported a record of 15,003 hundred new coronavirus cases, the biggest oneday rise since the outbreak began in the u. S. The number of deaths fell by more than half on the day before, and there was a decline in fortis rate of positive tests. Still, theres a warning decline in floridas rate of positive tests. Still, there is a warning that mammy hospitals are near capacity might that miami hospitals are near capacity. Senators marco rubio and ted cruz sanctioned by china for legislation that would punish officials over alleged human rights abuses. And hong kong, residents sent a signal of continued opposition towards beijing. More than 500,000 defied warnings to participate in an unofficial primary. A poll showed that joe biden has a fivepoint lead over President Trump in texas. Lead holds a 46 40 1 among registered voters. The president s handling of the pandemic may have influenced those results. And a big transaction in the semiconductor industry. Analog devices has agreed to buy maxim integrated products. The deal has an equity value of 20. 9 billion. 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. Im ritika gupta. This is bloomberg. If we see a face for deal deal, we will see pushback there. Jonathan in your equity market this morning, good morning to you all. Equities higher on the s p as we kick off earnings season tomorrow and through the week, with the big financials and big tech in focus this morning. A series of upgrades helping to drive some of the big names this morning. Futures up 0. 7 . Alongside tom keene, together with Lisa Abramowicz, im jonathan ferro. Thats where the focus is, the next steps from fiscal authorities. Tom no question about it, but also the monetary update. There is important decisions this week. Theres a webinar with Francine Lacqua and the government are of the bank of england and president of the new york fed. Michael mckee, our International Economics an policy correspondent. John williams will be with Francine Lacqua today. Does any of this that you normally go out to jackson hole and pontificate on, does any of this matter . Michael not really. Theres no potential growth to be measured at the moment, so the fed, like all Central Banks come are basically stuck at zero for the foreseeable future. Which means even with the ecb and bank of japan meeting this week, dont expect any Monetary Policy moves. They are all about Interest Rates. Interest rates are at zero. Not much they can do. It is the fiscal authorities who matter right now. Tom what is so important is the idea of what will be the price for this. With all of your years of experience, what is the price out for the foreseeable future that we are all going to pay . Michael that is the hard thing to know. There was always a theory that people would change their spending habits because they would expect texas to go up if there is a big budget deficit expect taxes to go up if there was a big budget deficit. So far it is because of the pandemic. We dont know how much crowding we get because of love the deficit spending, so it is a realtime experiment. A lot of people like to say it is mmt. It is not really, and the sense that we are not prepared to raise taxes to step in front of inflation as mmt would have you do. But it is a new world in which deficit spending has become the norm, and tremendous deficit spending. Lisa we know that the fed is going to remain on zero for the foreseeable future. Some question about negative rates, although right now the fed is not interested in discussing it. They are not thinking about raising rates. There is a question of how much Federal Reserve officials will backstop companies that are the closest to bankruptcy, that perhaps would otherwise go bankrupt had it not been for the pandemic. Theres concern about Zombie Companies and the halting of the Creative Destruction process in the United States that has been a hallmark of this nation. Michael that is an interesting question because a lot of people are focused on this Zombie Company idea. The problem is measuring exactly who would be a Zombie Company and who might find traction otherwise. Forfeds lending programs businesses have attracted less interest than people thought the main Street Program and the Larger Company lending programs of the treasury is administering. A lot of Companies Went to banks with Interest Rates so low. They managed to get loans or go into the bond market and refinance. We will have to see it as the economy continues and if it starts to grow, whether some of those Companies Give up the ghost. We have seen a lot of bankruptcies announced in the last couple of months, so it may be that the Zombie Company theory doesnt hold. Jonathan the big question, how quickly these economies can reopen, especially in the place where they have dealt with the pandemic well. All publicill cap gatherings of more than four people because of this pandemic. They will ban Dining Service from 6 p. M. To 5 00 a. M. Have t underlying just underlining how difficult it will be to normalize any time soon. Michael we are definitely seeing that in the United States come up with the Southern States bright red in terms of the statesin the virus, and that did not want to close down rollback the reopenings. That will have an effect on jobs. Business employment starting to turn down in those states. We are entering a kind of phase two of the economic recovery, and that is Companies Come back, they either have to close down again, or they start laying off workers again. Tom the Hong Kong News is really difficult. I love going to american pool what i am in hong kong. The arcades are really different from anywhere else in the world. Michael mckee, furloughs and layoffs, give us an update. Where are we . Michael we are starting to see a tremendous number. We saw over the past week that wells fargo announced a plan for thousands of jobs. United airlines, 36,000 jobs. Harley davidson. An awful lot of layoffs and firings starting to be announced because demand is not returning at the same time as employees. This does not count all of the restaurants that tried to reopen in may dont have the business. People will be laid off. The Small Business people say 22 of their membership expects to fire workers even after theyve reopened. Tom Michael Mckee, thank you so much. Jon ferro, to me this is the mystery of the end of july. Weekly jobless claims, the end of the july jobs report. What Michael Mckee just said to me, other than the pandemic, is the most emotional thing. Is the net change in the headline number of the payrolls report, that has really surprised to the upside. He real story is the churn the permanent layoffs have been building over the last couple of months. I dont like the idea of it, but i imagine that story will continue. Tom theres no question about it. With the laborl economy folding into what we see in the stock market, futures up 22 right now, and maybe more everany time i have seen it, it is two separate worlds. Jonathan we do not change on the headlines coming out of hong kong. We stayed elevated on the s p by around 0. 7 . If we can get to the bond market, some data to look out for in the week ahead. We will have cpi coming out tomorrow and retail sales in america coming this thursday. Ahead of that, pretty muted price action. Your tin you will yield your 10 year yield coming up a single basis point. In the fx market, huge focus on europe through the week. The ecb decision coming up this thursday, and then fiscal authorities. European leaders meet this friday and into the weekend. Can they find agreement on the next steps . Eurodollar positive. We move higher on the euro. Just a slightly weaker dollar. One hour away from the opening bell. Lewis alexander, nomura chief u. S. Economist, joins us next. This is bloomberg surveillance. 49. 50 i found you good job. Now im gonna stay here and you go hide. Watch your favorites from anywhere in the house with the Xfinity Stream app. Free with your xfinity service. Now any room can be a tv room. Stream live tv, on demand shows and movies even your dvr recordings. Download the Xfinity Stream app today to stream the entertainment you love. Xfinity. The future of awesome. Iredefined the wordng thschool this year. 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