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Follow Us Get the newsletter U.S. breaks daily record for virus cases, Fed warning for banks, and air execs meet Pence. Reopening rethink The number of new cases of Covid-19 reported in the U.S. yesterday rose to more than 37,000, the highest ever. Governors are halting reopening plans with Texas, North Carolina, Louisiana and Kansas all hitting the pause button. The silver lining to the surge in cases is that deaths are not climbing at the same rates, possibly due to more vulnerable members of the population remaining cautious. Trump administration officials have again said there will be no repeat of the lockdowns that pummeled the economy in March. Beyond the U.S., Germany's infection rate fell and Russia reported the lowest number of new cases since April.  Potential losses  The Federal Reserve warned the biggest U.S. banks that even though they performed well in annual stress tests, the fallout from the economic slump could lead to significant loan losses. As a result, regulators capped dividend payouts and banned buybacks through September. The banks will also have to re-submit capital plans later in the year, adding to the uncertainty. Most of the largest U.S. lenders are lower in pre-market trading. Sponsored by PIMCO The Long Climb While a near-term mechanical bounce in economic activity in response to the lifting or easing of lockdown measures looks likely, we expect the subsequent climb up to be long and arduous. Read more.   Air fair Airline industry bosses are set to meet with Vice President Mike Pence today as carriers try to deal with the near disappearance of travelers. Among the issues discussed will be how to safely resume flying, and the reaction to a potential EU ban on passengers from the U.S. Globally, airlines are set to lose $84 billion this year, according to the International Air Transport Association.  Markets mixed Equity volumes in U.S. markets may be elevated today as Russell indexes conduct their annual adjustment. Ahead of that, the MSCI Asia Pacific Index added 0.7% overnight and Japan's Topix index closed 1% higher. In Europe the Stoxx 600 Index had gained 1% by 5:50 a.m. Eastern Time with every industry sector in the green. S&P 500 futures pointed to a small loss at the open, the 10-year Treasury yield was at 0.672% and oil was at $39 a barrel.  Coming up... The May PCE Report at 8:30 a.m. is expected to show incomes fell 6% after April's surge, while spending probably jumped. The Fed's inflation gauge is forecast to remain stuck at 0% month-on-month. The latest University of Michigan sentiment number is at 10:00 a.m. The Baker Hughes rig count is at 1:00 p.m.  What we've been reading This is what's caught our eye over the last 24 hours. Trump administration urges court to topple the Affordable Care Act. Wirecard auditors say "elaborate" fraud led to missing billions. ECB's Lagarde warns of complicated, transformational recovery. Trump's comments on China deal boost risk appetite in emerging markets.  U.K. firms get ready for a no-deal Brexit with time running out. Buffett missed out on crisis, revealing Berkshire's big weakness. The rebel physicist trying to fix quantum mechanics. And finally, here's what Emily's interested in this morning There's no shortage of evidence to support the case for an upward trend in inflation. The destruction of global supply chains, which have in turn exacerbated shocking food shortages, lingering optimism about a V-shaped recovery, and -- not least -- the Fed's own strategic review to sharpen up its act on hitting its 2% target. It's just that there are a lot of well-worn counterarguments -- take your pick from the structural forces of an aging population and declining immigration, advances in technology, or anything Larry Summers has ever written. But the more powerful display of the Fed's effectiveness is in the rates volatility market. The term structure here has collapsed, says Bloomberg Intelligence global derivatives strategist Tanvir Sandhu, in a far more dramatic market response than the Fed got with its forward guidance in 2011-12. This tranquility is emboldening investors to pile into risk assets -- but the rates market surface may not stay so glassy for long, if corporate bond defaults start piling up. The default rate for speculative-grade companies could triple by next March, according to S&P Global, and more companies than ever are in jeopardy of losing their investment-grade ratings. That's a compelling prospect for volatility mavens: Investors may be well advised not to fight the Fed, but fundamentals just might. Follow Bloomberg's Emily Barrett on Twitter at @notthatECB Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close.   Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more.   You received this message because you are subscribed to Bloomberg's Five Things newsletter. Unsubscribe | Bloomberg.com | Contact Us Bloomberg L.P. 731 Lexington, New York, NY, 10022