States. President trump says masks are good but will not accept that they should be law trade newesters detained under security rules. Citizenship. Offer u. S. Futures are opening flat. Duringa mixed session the regular trading day. Gained, but the dow underperformed. We have positive sentiment coming from vaccine manufacturers. Optimism is a little bit offset by the surging virus cases. Eight of the 11 sectors closed higher. Composite ended at a record high. Oil, it of pressure on is down below 40 per barrel. We saw a rally during the new york session. Since the biggest drop december. New zealand, trading is underway. Chicago nikkei futures pointing to a mixed start across japan. Are looking like we can see up just over 1 at the start of the session. The aussie is holding unchanged. Strategists are not clear about the direction for this risk exposed currency. Organ stanley is bullish jpmorgans calls saying we could see low 60s as a result of the slowdown in global growth. Hours of chinas new security law has led to arrest and protest in hong kong. The u. S. House of representatives unanimously passed a sanctions bill that is meant to hit at chinas crackdown. Know about this new sanctions bill . This just happened in the last couple of minutes. The u. S. House just approved the bill. It is imposing sanctions on banks that do business is with chinese officials involved in cracking down on protest last year. This is similar, but not identical to the bill the Senate Approved last week. The senate needs to approve this house bill before it lands on president trumps desk. That is what we are hearing so far. The Trump Administration in the last 24 hours, the reaction has been quite swift. The are saying they could say see further actions against beijing if it does not reverse course. Sayingd from mike pompeo if the National Security legislation even as rates the rule of law. That it is a rate the roll block. Now its just another communist run city where people are subject to the communist elites wins. Whims. That theompeo added u. S. Is issuing a business and an areafirms where Muslim Leaders have been forcefully detained. Forces say the sanctions against chinese officials that have been involved in human rights abuses are preparing to roll out the sanctions. That has been largely delayed earlier because of the u. S. And china trade relations. We heard from joe biden, saying impose economic sanctions against china if u. S. Threatened on their First Amendment rights. Tensions areral really rising. We also have tensions within hong kong already. Arrest made under the new law. Than 24 hours after the law was imposed, we saw hundreds if not thousands of people storming the streets of hong kong. Intoe point, they stormed the times square mall. We saw police a heavy presence in that area. To guess, pepper spray, Water Cannons to does disperse protesters. It is the anniversary of the handover which is usually marked by protests, but this felt more somber. The National Security law was kept under wraps by beijing. It was approved before the chief executive had seen it. Officers coming out with a new flag basically saying anyone who displays flags or , thats, chants slogans they are doing things that are illegal under this legislation. They were chanting slogans like liberate hong kong and they were holding flags for hong kongs independence. We saw that defiance on the street grade we saw more than 300 people arrested on the street. Thats the latest on the unrest in hong kong. It still ahead, more promise on the vaccine front. Global infections have talked 10. 5 million with more than 500,000 deaths. Next, postpandemic takes. Companies that are identified to dominate once the pandemic fades. You are watching daybreak australia. President trump seems to have changed his opinion of the Federal Reserve saying he is satisfied with current policy. He is very happy with jay powell performance. He agreed he was not impressed initially, but now he said he is more pleased. Saying facet also masks are good but they should not be mandated, even as infections continue to rise in the u. S. He said he is all for masks. Foras mocked joe biden wearing one and has not worn one himself in public despite Health Officials urging him to do so. Global infections have top 10. 5 million. There are more than 500,000 deaths. Jakarta reports hundreds of new infections. Enforcement of social distancing roles will be stepped up. Than 1 5 ofmore indonesias total coronavirus fatalities. Victory putin has won a in his bid to stay in power, despite isolated protests against changes to the constitution. Preliminary results show him backing to remain in the kremlin, although his Approval Ratings remain near historic lows. He seeks to stay in control until 2036. 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 karina mitchell. This is bloomberg. U. S. Stocks rose. Movess are volatile and on headlines like today. It is important to pick the right stocks with the leadership, says our next guest. Always great having you with us. We are seeing the clear divergence in the sectors that we saw a rally during the pandemic. Consumer discretionary is reading the leading the gains. Big tex has been gaining ground. Big tex has been gaining ground. How do we know which companies and brands are positioned to respond to this disruption . Two ways. We are looking for the companies that have been left for dead or roadkill after covid19 is behind us. That would include small caps which are still above 1 billion in market cap. , 5000 stores and 3. 9 billion in sales and cash flow positive a good. They are gone. Will make it but sally will not. We also look for the postcovid 19 world. , because car sales are down so people have to take care of the cars they have much more than a new car the comes with the new oil and you have a few thousand miles. People are driving, they will have to have a oil changes. We saw a car sales today which disappeared. It was unbelievable if you think about car sales down more than 30 for the quarter. Toyota is down 35 on the quarter. Fiat chrysler is down 39 . A company like valvoline is perfectly positioned to pick up on that loss. On the void that is created. We look for those. Tech is that big melting up. Chople are buying big te because other people are buying it. When you have seen so much volatility out there, then you have huge Growth Stocks that have a solid cash balance sheet, it feel safe to put your money there when you are heading into a recession. What you said this has been overextended and where do we go from here . Absolutely overextended. Thats exactly what happens. Facebook is seen as a safe play, than 25 majorore Companies Like cutting them, as soon as Mark Zuckerberg says im going to meet with every Company Boycotting us and the stock jumps up almost 5 on the day. What that is about is everyone wanting to buy and be what they consider safe which is big tech. It will be interesting to see the employee employment numbers tomorrow. That is all we keep thinking about, what are the numbers went to look like . What are the numbers going to look like . The market is going to change so dramatically. The other point i want to make that is so important is the financials. How can you have a day when the financials are doing so poorly . Financials e then you have hightech companies doing so well. The banks have to learn to make money and there is no interest they have to learn to make money in this no interest environment. They are not going to force these into bankruptcy. They are going to renegotiate that. Debt. They will take some hits there. That is why we are buying goldman sachs. Excellent banks with excellent Balance Sheets that are investment banks, advisory banks that will handle not just bankruptcies, but workouts. There is a lot of money in these bankruptcies. They can also be on the other side of buying bonds and they can build their own Balance Sheets. They make money many different ways. That is the way we see opportunity. Buying bestofbreed and buying the companies that everyone is leaving for dead as they are chasing what they assume to be the road to heaven, which is to jump on the faang trying. N. Faang trai you can still see a lag on the s p. Does that tell us we will see more weakness unless the ketchup in the gap is closed . What about the declining. Apple stock . Schism worry about the between those who are performing and those that are not performing. That is a problem. Apple itself, that is very interesting that apple for example was such a laggard today. What is going on there . Why is that the case . Is the reason why the technicals are poor which is it hasnt had growth in two years . The news that they were closing upwards of 30 stores shook the market. That did not bode well. I still think that apple will phone andith a new they are going to probably do well and regain the high. Far off from that anyway. Tell me what you like in the health care space. Perhapsgely speculative never more so than now when we have every company in the race to find a vaccine. We heard positive news out of pfizer overnight. What are your picks in that space . Health care itself, we were concerned today. We were concerned that the market was down here. Pfizer comes out with great news. Its a company that we can trust. It seems very valid. I would go with pfizer and needed the week. They did ok. That why did it not rent the whole market up . What is that telling us . That being said, in health care, we stand by sanofi best. Equivalent ofch pfizer and eli lilly. Is we like sanofi best because one of their big specialties is vaccines and vaccine distribution. Their Marketing Force and their ability. People ask how do i play global . Only one way. By sanofi. They are also strong in their logical, oncology they are strong in neurological, oncology. They have made inroads with diabetes. That is where we are looking, but we dont see the opportunity there. We see the opportunity in the bestofbreed banks and the companies that are so wellpositioned to do well because their Balance Sheets are strong and there is a dividend yield. Back to the Balance Sheets. , great to have you with us. Coming up, president trumps former National Security advisor is standing by his controversial book. We will bring you that next. This is bloomberg. President trumps former National Security advisor is standing by his book. One of johns most explosive allegations is the trump sought chinas help on the trade front to boost his reelection. That was donald trump speaking in english. Read wasnce that you thei agreed to describe exact words that the president used. What did you do in the days and weeks after that . How did you follow up after you overheard it . Mr. Bolton a lot of things are done in order to keep policy on track. In that case, there were extensive negotiations underway for what turned out to be a partial trade deal. There wasnt any way to take those words back. I believe in the records of the chinese government, 50100 years from now, when they are released you will see their notes as to what the president said in that meeting. There was no doubt in my mind on the chinese side they understood what was going on. Its not the only occasion where this comment about buying at Agricultural Products was made. Jobhave to go on doing the that your assigned to do on a variety of fronts, not just how many soybeans china buys in the next year to try to keep policy on track. This is the big issue that undermines everything in the book. You were an advisor to this president. You overheard him lead on a foreign leader to help him win an election. You have served your country again and again. Yet, you chose to wait to put this information in a book instead of doing something about it at the time. I still dont understand why. Mr. Bolton it is very straightforward. I have given it to the american people, who are the ultimate judges of Donald Trumps performance. Because of the way the democrat advocates of impeachment in the house structure their effort, they basically made it impossible for republicans to participate in an impeachment process that might have led to a different outcome. We have a model for that, this is not a hypothesis. In the watergate crisis of the nixon administration, democrats and republicans did Work Together and while the and did not go through a trial in the senate, he concluded he had no choice but to resign. I dont march to nancy pelosi strong. I thought what i did was ultimately in the best interest of the country. Because i was not going to participate in a completely i have to jump in. Why was it in the best interest of the United States of america to wait to put this information in a book . Mr. Bolton thank you for allowing me to speak. The fact was that the democratic leadership, the advocates of impeachment had built a cliff and they and other lemmings were heading toward. That,k it is very clear had i participated in that practice that they commit it my testimony would have made no difference. It is not just my belief, this is something that as you saw in the debate in the senate, many republicans but the white house argument. Even if you believe in the quid pro quo, the famous phrase during the hearings, even if you believed in the testimony that was given that a quid pro quo had taken place, that that conduct by donald trump did not rise to the level of an impeachable offense. That is to say even if he did it, it is not a grant to impeach and convict. That is a legal argument, and the way that came up was entirely based on the democratic strategy. Go on a narrow basis. The strategyjust of the advocates of impeachment, that was Donald Trumps strategy. Former National Security advisor john bolton. We will have more to come. This is bloomberg. We begin with our first story. Hong kong is waking up to a new reality with hundreds of people arrested over the new security law. That attacking beijing or the communist party will be dealt with severely. The law has sparked criticism with the u. S. Pledging a strong recs response and the u. K. Offering the right for use in its residents to move to britain. The Trump Administration has proposed action against banks doing business in china. Nancy pelosi says what china has done has signal the death of the dust halted thety has return of in restaurant dining next week. Say restaurants will have to continue to use sidewalk space. At Governor Cuomo says it is a new york city measure only and the next the rest of the state can return to normal. The trial of the former indian asian Prime Minister proceedings in the case will resume on july 15 with a further delay permitted if he has to attend parliament. The trial involves billions of missing dollars and about 680 million that landed in his personal bank account. 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 karina mitchell. This is bloomberg. Anearly tests for experimental coronavirus treatment shows promise that a new vaccine could come as early as the new year. The number of infections in the United States continues to rise. Many howso promising is this latest news from pfizer . Some gooding to give news than words of caution. Very small, very early trial, but it did show what you want in a first human trial. No serious safety issues. No evidence of an immune reaction. Trying threee other similar vaccines, so they may be able to improve on this as they move into large studies. On the other hand, the immune response, the thing they are measuring, we dont know if that correlates to protection in the real world. You will still need to run big studies before you can have any confidence that this is going to be protective. It is a good and needed first step. We have been talking about concerns about cutting corners and doing things the fastest possible way. His the fda given an assurance of how they will approach a per approach a approval . Yesterday, they announced the first set of guidance on the approval process. That it isclear going to wait until it has data from the big robust trials before he makes a decision as opposed to giving approval based ,n intermediate markers Something Like the presence of antibodies in a blood test after immunization. I think that is a good thing, because without a big safety database, without seeing how the vaccine works in the real world, you cannot be sure. It does mean a longer process of 20,000 people to 30,000 people. Step to buildary confidence and have some degree of surety that the vaccine is effective. Expect a vaccine to come out of these companies to not try to take all of the effectives, just be as it can be in the shortterm given the urgency of getting some sort of treatment right now . Yes, that is something definitely to keep in mind. As soon asion is there is a vaccine, everything can go back to normal, unfortunately that is not likely to be the case. The first vaccines might not prevent outright infection. They might only prevent symptomatic or severe disease. It is still very valuable, but a different proposition in terms of how many people you need to vaccinate to have a protective effect and you wont be able to entirely lift precautions to Public Public health measures. It will be hard to assist assess durability. That would take waiting too long. It will be a learning process and i think we will eventually have more than one vaccine. That seemed to play different roles and also meet the challenge of manufacturing so many doses. We will probably need multiple different efforts. Not the clearcut Silver Bullet that people are hoping for. We appreciate your reality check. Any economist has been talking to us about the recovery from the coronavirus. He is concerned about the second wave and the Lessons Learned so far. We are in big trouble. About 1. 5 months ago, i was laying out the bad scenario. It was clear we were going to have a couple of good months of recovery because there was pentup demand for stuff evil that were allowed to do. That scenario was that we would have a spike in covid19 cases that would lead us to a stall and backtrack. That is happening. Were going to get a jobs report on thursday which is going to be its going to look good but its going to be in the rearview mirror. It is clear that the highfrequency data and everything we are seeing says we just hit a wall because of the spike in cases in the sun belt. That in orderlate to get a durable recovery, we need to get the virus under control or a effective there be for vaccine. Therapy or vaccine. In congress, they are going to revisit this question at some point in early july. What would you say are the key priorities from an Economic Policy standpoint . I am of the view that this is not like the aftermath of the anancial crisis where you had wounded economy before the crisis so it took years to get out of it and you needed stimulus along the way. I dont think that is happening now. Know my politics, but i dont think the economy after february was fundamentally unbalanced. If the virus were under control, theres a lot of good reason to believe we could have a very fast recovery and we wouldnt need that much in the way of policy. The problem is, that appears to be a number of months off. In march or april, the economy is in a, because of the virus. The goal of policy is to make that situation tolerable. Depressionving be spread further than it has to and partially to make a partially locked down economy level which means we have to continue the programs we have put in place in march and the big concern is that a lot of that stuff is going to expire in a few weeks. Are you surprised by the effectiveness of the programs . We see Household Incomes between april and may relative to their market levels despite the collapse in unemployment. You cant look too much of the stock market, but it looks like demand is reasonable for some companies. Not something you would expect to see during unemployment. Have you been surprised by the effectiveness of what they passed . I was surprised by what they passed. The cares act was highly imperfect, but by the standards of how we have dealt with previous downturns, it was good. Benefits were a huge lifeline. Unemployedt of the ended up with more income. That contained the spillover. We shut down part of the economy and one of the concerns is that that would lead to a secondary round of economy but we provided so much aid that didnt happen. In brazil, lawmakers have approved postponing local elections to november. They were originally scheduled in october. The First Nationwide vote since president bolsonaro took office. We have seen the surging number of coronavirus cases in brazil. One million at the moment. That is the second highest count in the world just behind the United States. Nearly 8 Million People have lost their jobs in brazil because of the pandemic. It is hard to see how they can progress this campaign and elections and this environment. Coming up next, we will get an idea of how varied the views are for a postpandemic rebound. Disagree ond bears where the aussie dollar is heading next. This is bloomberg. You are watching bloomberg daybreak australia. Overnight, some good news on the virus vaccine front overweight the fact that we are seeing new infections across the u. S. We saw brought outperformance again when it comes to the fangs the s p continuing to widen. Futures looking like just 1 . We continue to watch the aussie dollar pick up pace. There are varied views when it comes to where the aussie dollar is heading postpandemic. We saw a rebound. Geopolitical tensions on the other end of the spectrum, jpmorgan sees it rising toward the end of the year. Because iur views will bring up this chart which is seeing the rebound as we see australia for its part do a good job of shutting down the borders and keeping the levels of infections and fatalities low. System is note being overwhelmed. This is a currency that is a proxy for the china growth story. Is it more optimism domestically or optimism that we will see the robust stimulus with recovery . Everybody was focused on where would we see the currency directionality and we felt clearly at those levels that the direction of travel was to the upside. A lot of that has to do with the first in first out status of china trade the stimulus that was being directed and the signals that we were getting. As it progressed, australia has had a this case outcome in terms of dealing with the virus and transmission risks that have been largely will contained. Our experience with the virus has allow the economy to reopen. Today,u are faced with we are going to have the fastest 2020 growth rate of the jake and economies. J10 economies. A less dovish central bank. We have not seen aggressive bond purchasing either. When you think about continued sensitivity to the china stimulus that is ongoing, it should support steel optics and iron ore prices for this quarter. Still relatively strong levels, we think the currency can push through the . 70 level and make its way to . 72. After that, we think it gets more problematic. On the other hand, you have the rba looking less dovish. Is it interesting that the governor has said it is hard to argue at this point overvaluation for the aussie . At what point will they get uncomfortable . Go back to his speech a week ago and he seemed quite relaxed. A cheaper currency helps with inflation. Closed andrders are you dont benefit from tourism and education and you dont get the benefits of the lower currency, a low currency from here on would put inflation back into the economy something we dont need as we are dealing with a crisis. It is doing its job at the moment. Value tobably fair push to the upside as we mentioned. . 73 or . 74,ound the rba would need to start jawboning. Instigatingt them bond purchases again. In part to push back or lean into the currency strength beyond that if that were to occur. With a relatively Strong Performance from the australian economy in a challenging environment, where does that put fiscal stimulus . Could we see a quick withdrawal risking all of the gains that have taken place . I think that is the number one question we are getting from investors is what is the risk of this fiscal cliff . We have a view that the fiscal cliff is visible to policymakers and we dont see a scenario where you immediately withdraw the stimulus. If a policy error is made, that would be a challenge to the outlook but we see it as, you need to learn from this very substantial crisis stimulus that has helped us hibernate and you need to move more traditional forms of growth stimulus. 23 is a key date. They will come and tell us what to expect from the initiatives of the crisis stimulus. You have a multiple month debate with the economy and various parts of businesses and employers etc. To form a stronger stimulus view for the budget that was pushed from may to october. We expect fiscal stimulus to be alive and well. The instantly high level of unemployment or weakness is going to make jobs a political issue. The best way to deal with that is to focus on fiscal support. We dont think the cliff is, it is more of a hill than a cliff. Great to have your insights. Dont forget, if you are away from a screen, you can always find indepth analysis on Bloomberg Radio now broadcasting live from our studio in hong kong. On another programming note, joined bloomberg for our annual broadcast of the boston pops fireworks spectacular. A salute to our heroes carrying julye orchestras fourth of tradition from the comfort of your own home. That starts 8 00 a. M. Hong kong time on july 5 on Bloomberg Radio and bloomberg. Com. This is bloomberg. We will be watching japanese automakers when trading kicks off in tokyo. Gm and Fiat Chrysler are praising u. S. Consumers after the Quarterly Sales beat estimates. Our auto reporter joins us now. How is it that auto sales are so strong when so Many Americans have lost their jobs . Happened in the last quarter was that there was a lot of pent up demand because many parts of the u. S. Economy were shut down. Once people were able to get back out again and i cars, there was demand. They also had stimulus checks from the government. There were attractive deals that automakers were throwing out there to entice people to come back and buy a car. That fueled a lot of what we saw in these last quarter results. How sustainable is the rebound . That is a question on everybodys mind. Economists, they say we are going to watch through the summer and see what happens. We are seeing the same trends that we saw before the coronavirus hit the u. S. People want to go trucks and suvs. They dont want sedans. All of the things are still true. The fed has still been accommodative and it is still relatively cheap to buy a car. The concern is that we may see more and more consumers opt to buy a used car instead of a new car. The used car market is still strong and that is a trend we saw before the virus, that now people are more uncertain about the economy. We have an election coming up in november that could buy more people to buy that could drive more people to buy a used car. How did the detroit three do with the Second Quarter . I think both gm and Fiat Chrysler did better than expected. Their sales were still down around 40 . We dont know about ford, because they dont report until tomorrow. Most analysts are still expecting a loss in the Second Quarter. From all of the detroit automakers. Ford has forecasted a are expected to lose 5 billion in the Second Quarter. Fiat chrysler just got a 7 billion loan backed by the government of italy. That shows you they are hoping for the best but expecting the worst. Or preparing for the worst. Preparing for the worst. Great to have you with us. Lets get you a quick check of the business flash headlines. Tesla has replaced toyota as the worlds most valuable automaker. The stock has more than doubled this year climbing on wednesday to give them a market cap of 207 billion. That is 6 billion more than toyota. Paulson after john achieved fame, he is the next big name money manager to quit the hedge funds hedge fund business. He is now converting his firm into a family office. The company had the assets of 38 billion in 2011. He will now concentrate on his personal fortune. Wirecard extended loan facilities even though interest on the original deal had not been paid. Coming up in the next hour, we will get more analysis. Plenty more to come on daybreak asia. This is bloomberg. Shery welcome to daybreak asia. I am shery ahn in new york. Haidi i am haidi stroudwatts in sydney. Our top stories this hour, hong kong wakes up to a new reality with protesters detained under chinas new security law. Washington is pledging a strong response. The u. K. Will offer citizenship to millions. Lobo virus infections continue to rise with record new cases reported daily in the United States