Reaches a milestone. Good morning, everyone, and welcome to bloomberg surveillance. Im Francine Lacqua in london. We have breaking news the last 20 minutes. China says that the u. S. Has abruptly closed its consulate in houston. That is having an impact on the market. Lets get the markets. Risk sentiment looks a lot shakier after china says the u. S. Abruptly ordered the closure of its consulate. Most european indices have extended declines to session lows. S p futures accelerating their dissent. I did want to show you gold and silver. Lets get straight to the bloomberg first word news. Ispresident donald trump restarting virus briefings. There was a shift in tone with the president urging americans to wear masks and avoid risky behavior. The death toll for the virus in the u. S. Has topped 140,000. Cases are still growing, especially in southern and western states. President trump it will probably, unfortunately, get worse before it gets better, something i dont like saying about things but thats the way it is. We are imploring Young Americans to avoid packed bars and other indoor gatherings. Be safe and be smart. Recovering from a mild case of covid19 may not offer much lasting protection. No analysis of 34 patients that did not need intensive care showed antibody levels falling quickly. About theing concerns durability of a vaccine and reaching herd immunity. Wantsdria ocasiocortez an apology from another lawmaker after a confrontation on the capitol steps. She says she was accosted and was called disgusting. The lawmaker says he does not want to talk about it. Global news 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thank you so much. China says the u. S. Has ordered the abrupt closure of its consulate in houston, texas. A Government Spokesperson in beijing called it an unprecedented escalation. The u. S. Gave china only 72 hours to comply. The news comes after local reports of papers being burned outside the building. Joining us now is our editor. Derek, it is unclear exactly why the u. S. Asked china to close it down so quickly. It is also unclear why there are now fires inside. What do you know . Derek thats right, francine. It has not come out yet. We have not heard from the u. S. As to why the order china to get out of the consulate in houston why they ordered china to get out of its consulate in houston. There have been a number of things the u. S. Has objected to from china recently, including a recent report that there have been some sort of economic espionage targeted at virus remedies. It is way too early to say what exactly the trigger point for this was or if this was something that has been percolating for a long time. Around 8 00 p. M. Local time, neighbors and witnesses near the consulate in houston, texas reported seeing smoke coming from near that facility. It was discovered that there were paper fires in containers outside of the building that the consulate found. Houston fire, Houston Police responded. They were not able to access the area. Questionsed a lot of as to what was going on there. It is not usual to see fighters at a consulate outside. It sparked some speculation and then we just saw, as you said, within the last halfhour, china announced that the u. S. Demanded that it leave by later this week. Francine will china retaliate . How quickly can things escalate from now . Gone on records and said if the u. S. Does not reverse the decision, they will respond in some kind. They have not detailed what a response like that would do. The phrase that they used was, otherwise, china will make legitimate and necessary reaction. We will see what those wind up being. Obviously, the u. S. And china have had a number of complaints against each other in the last months, years. This is definitely escalating tensions. You can definitely see this in the market reactions. Francine risk sentiment looks shakier after china said the u. S. Abruptly ordered the closure of its consulate in houston. Derek will be across that story throughout the day and we will get to him very shortly. Coming up, we talk opportunities in European Assets the day after leaders passed a landmark stimulus package. That is coming up shortly and this is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Im Francine Lacqua in london. Lets get straight to the Bloomberg Business flash. More than 200,000 brazilians are asking british judges for the right to suebhp, the worlds biggest Mining Company sue bhp, the worlds biggest Mining Company. If judges let the case go ahead, it would be the biggest class action in u. K. History. Norsk hydro posted an unexpected loss in the Second Quarter. The slump and demand forced her to take a 200 million writedown. The company is taking measures to adjust Production Capacity and freezing some spending for the year. Elon musk has unlocked the second chunk of his pay award. The companys stock prices hit another target, meaning he can access Stock Options potentially worth 2. 1 billion. He unlocked the First Tranche of the award in may. Teslas market value has more than doubled since then. Francine the euro strengthened to an 18 month high yesterday on leaderspean uni reached a landmark deal for a stimulus package. Joining us this morning is joseph oughourlian, founder and managing partner at Amber Capital. We will also ask him about and a second. Before we talk about anything minutes,the last 2030 we understand that china says the u. S. Ordered the abrupt closure of the houston consulate. We have a very little detail. This is after spying allegations on covid19 research. How do you rate geopolitical risk right now . What does that mean for the markets, but also assets that you own or are looking to buy . Joseph hello, francine. Good to be on the show. I think geopolitical risk has been with us for the last few years, particularly since the election of donald trump. This is nothing new. There has been tension between the u. S. And china on many fronts. Skirmish in ane history that will probably, you know, keep on being very tense between the two countries, regardless of who is elected in november. Francine when you look at europe and the eu Recovery Fund, as far as i can remember, you were always quite bullish on europe. Does that make you more bullish or is it going to be a credit market to be long european equities . Joseph it makes me very, very bullish. This is a very significant step. Since the creation of the european monetary union, what has been desperately lacking in the euro zone is a common fiscal policy. This is the beginning of that, regardless of the amount, regardless of what the grounds for loans, i think this is the beginning of a common fiscal policy. That is very significant and a very good news for European Assets and european equities in particular. Underan equities are very owned and they have been for a very good reason. There has been complete crisis, thet of the sovereign crisis. We have had lots of political problems in europe. What we have seen, particularly u. S. Investors have shied away from European Assets. They are grossly underweight right now. In general, people are generally people are grossly underweight. You see that in the valuations. I think this is the beginning of a Strong Performance of European Assets, continental European Assets, eurozone assets. Francine where do you find value in europe right now . What countries . Joseph you know, Southern Europe is interesting. I think financials are particularly intriguing. Down to extreme levels, as though we were in the financial crisis. The Balance Sheets are a lot stronger. Credit markets, credit markets are telling me that there is not such a big problem with the cost of risk. So i want to own those assets. There is a number of sectors which have actually been quite resilient and have not done very well, particularly the telecoms stocks. There is a lot of there is lots of prospects for further consolidation and greater discipline along those sectors. That is also the case for the banking sector, by the way. Yesterday, we had news. I think that is the beginning of longawaited consolidation process in the banking sector. Francine are you trying to buy the companies that maybe take targets . S takeover or are you bullish on financials overall . Joseph i am bullish on the financials overall but some Companies Look very appealing at attractive valuations. The sector has been so sold off that you buy the whole sector at this point. Francine is there anything that you used to own or were interested in that you think is no longer a good deal because valuations are too hi . High . Joseph i think defensive stocks are very rich. I would be very worried about those a bit worried about those. Francine last time you are on, we talked extensively about you trying to shake things up. Was week, Amber Capital looking at possibly having representation on the supervisory board. Latest ofook at the people coming in and the changes, have you had or has Amber Capital had any contact with them . Do you know what their intentions are . Joseph we have been in touch with everyone, with all the parties. The good news here is that you have got two french tycoons that have invested in the company. One at the stock level, the other one at the holding level. That is not listed. That tells me that if two of the smartest investors and biggest french billionaires are interested in this company, there has got to be some value here. It also tells me that they are unlikely to put up with the crass mismanagement that we have had for the last two decades. Francine do you have the same vision . Do you share a vision with some of them . Is Amber Capital now having to prepare to fight against the Controlling Shareholder . Or are they on side . Joseph you know, i think that all the discussions we have with all of our fellow shareholders are very constructive. Know,d not say that, you i certainly would not say that we are acting in concert. We all have a common purpose, in that things improve at the company. They can only improve from such a low level of management. Francine do you have any insight into what qatar will actually do with its stake . We were talking a couple of months ago and you said you could also look at increasing gardere air. T in la joseph we have increased our stake. I have noticed that vivendi has done the same. They have asked for board representation or they might ask for board representation. There is certainly lots of question marks about the transaction that was done at the holding level. We do hope, because this transaction was announced on may 25, that the amf, the french regulator, will force the company to disclose the terms of that transaction. It has been rather opaque. It is quite surprising that the amf has not done anything whilst a quarter of the capital in the company has changed hands. We would hope more clarity. We have been asking for more clarity to the french regulator. We would also hope that this transaction wouldnt go against the interests of the of the listed company where we are invested. All defend ourll rights when the time comes. But i am confident that things will improve greatly in the company. I think the stock is incredibly among massively undervalued. You are paying nothing for travel, retail. Yes, airport traffic has come down dramatically, but travel retail eventually will come back to more reasonable levels in the coming years. At that point, there will be value there. Francine joseph, just going back to banks, is there a bank that you would want to get a piece of right now . ,s there one particular bank one financial stock that actually looks undervalued . Joseph you know, we like the sector in general. We like, in particular, some of the italian banks. We like some of the spanish banks, the greek banks. We think of the greek banks, you know, the help from the Recovery Fund is massive as a percentage of the greek gdp. We have been avoiding banks for the last few years inking that thinking it that there was lots of regular thinking that torye was lots of regula problems. The regulator is giving lots of forbearance. There is one bank which we would love to own because it is the cleanest of the italian banks. It is probably one of the best managed banks in europe. It is unicredit. They have done an amazing job. We think that bank is just grossly, grossly undervalued. Francine thank you so much. Joseph oughourlian, founder and managing partner at Amber Capital. Coming up, we talk about tesla. Its search has added over 100 billion to its market value its surge has added over 100 billion to its market value. We talk teslas Quarterly Report next. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. About one stock that has had a stellar summer. Thantesla has added more 100 billion in market value since late june. Faces ae in shares major test this afternoon when the Company Reports financial results. Here to walk us through what to expect is dani burger. Part of the reason that tesla has had such a good past month is because expectations are high for the Second Quarter that they will post strong deliveries. That is giving elon musk a huge payday. When we look at what the market cap has done, briefly surpassed 300 billion to become the most valuable auto company. Market cap of 150 billion means that elon musk got access to about 1. 69 billion option contracts. He cannot sell those for another five years. If he were, it would give him 2. 1 billion. You can see elon musks net worth went up significantly as of late. This quarter is if it can post another quarter of profitability. What it needs is a fool net profitability for an annual period. If it can do so, it meets the requirement of getting into the s p 500. That would give it access to a lot of passive money and Institutional Investors that follow indexes. We are looking for a net profit here. Francine thank you so much. Dani burger with the very latest on all of this. If we had time, talk to me about what else we are looking for. I know that snapchat poste earnings yesterday. Does their net loss make any progress . It actually widened. You can see this is that user growth. The yellow bar is what was expected. They just barely missed. This is the most important metric for snap and it could be a bellwether for the rest of the social media industry. Francine coming up, a slump in aluminum demand pushes norsk hydro into the red. We speak exclusively to the chief executive. Thats next and this is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua, here in london. Lets get straight to the bloomberg first risen with laura wright. Laura the u. S. Is charging two chinese hackers with trying to steal terabyte of data, including coronavirus research. The Justice Department says information taken was worth hundreds of millions of dollars, adding the two men were assisted by chinese officials. To continue their criminal activity, allowing them to continue it because they are on call for the benefit of the state. And u. K. Ares. Signaling more coordinated action against china. Secretary of state mike pompeo says he wants to build a coalition that understands the threat posed to beijing. , heking with dominic raab said action may follow after the g7. Judy sheldon is one step closer to joining the Federal Reserve board. Winning approval of the Senate Banking committee and a partyline boat. Panel also voted in favor of christopher waller, who passed with a clear margin. Nominations go to the senate for confirmation. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more this is countries, bloomberg. Francine . Francine thank you so much. Lets get to our exclusive conversation. North hydro has posted an unexpected loss in the Second Quarter. An impairment on key production under 200adjust million dollars. Norsk hydro says amanda dropped 9 during the period, but in europe, products slumps by 32 . Joining us from oslo for an x elusive conversation is the chief executive officer of norsk hydro. Thank you for giving us your busy day today. When you look at the markets and how much they fell, what when are you expecting things to get back to something that is a little bit more normal. Well, obviously the covid19 situation has obviously impacted our secondquarter earnings. We disclosed this morning the solution, are largest business area. With a drop in the Second Quarter. Particularly, we have seen reduced volume in the transport though segment, and even this situation is very unclear, we believe that the next quarter relief, bute of the still at the level of 15 to 20 from lasts in q3 year. Still the situation is unclear. Francine you are seeing signs of recovery. How long do you think it will take for these markets to fully recover. Is it too difficult to call given the covid situation, or you dont know how it will change longerterm . Most analysis points to that the recovery will not happen within this year. Has seen goodhina signs of recovery in china, but on the other hand in the u. S. And europe, we believe it will take a couple of years before we will be back at precovid levels. Francine what is your biggest concern in the shorter term . You have done well keeping costs down. Can you get that to something that looks more permanent, like permanent cost cuts . My main concern in this situation is the security of our people, and im very happy that we have been able to protect our people at the same time as we have been able to keep the world turning. We have been able to sustain and. Ave full operations one of the reasons we have been able to do that is a lot of precautionary measures, both inside the plants but also working very close in the local communities, with assisting the local communities with the hospital beds, with equipment for the local hospitals, to ensure that the health of the people is protected. Cost, if going back to you look at cost reduction, can you stay at these levels once markets resume, or is there a risk that costs go back up like they used to be precovid . An improvemented program last year, which was the billion, 7 billion krona to be delivered by 2023. Deliver 4. 1ack to million kroner by the end of the year. I believe that these cost levels , and a lot of that can be sustained also after covid. And that is part of the overall agenda to improve profitability and drive it through the company. Taking a you are also review of your world products. Can you update us on that . Hilde there are some delays, but this review is ongoing. Where we look for alternative solutions for the business. Review your dividend policy. Hilde the dividends that we were supposed to deliver this year has been postponed. The board has a mandate to hold dividends until the situation is more clear related to the covid situation. That is still the case. Forcine thank you so much speaking to us, hilde merete aasheim. Coming up, pedal to the metal. Gold nears an alltime record. Silver is higher. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua and lender. Title to the metal. Gold continues its march to record expectations. Highestas jumped to the in seven years as investors flock to the Precious Metals due to a resurgence in virus cases, slowing growth and negative real Interest Rates in the u. S. Of commodities at citigroup ed morris told bloomberg silver will also win from its extra boost in industrial applications. Way to dot convenient it is through an etf. You dont have to inconvenience the inconvenience of owning bullion and moving it from place to place. Bullion is great but how do you store it . It is a financial instrument that allows you convenience by not having to deal with the physical material. Seem to of the elements be boosting bullion, also seem to be helping silver as well. When it comes to silver, how much of the industrial demand rebound optimism is playing to it as well . Ed it place to it. Plays to it. It there is an element, all of those things going into the gold market, the appreciation of the dollars, currencies, the continued world of high risk and low Interest Rates. But in addition to that, you have the industrial uses of , and that boost should really change the relationship between silver and gold. So in terms of looking at the next year or two, you have a combination of factors. The underlying factors boosting gold and silver, and the industrial factors that should change the ratio between silver and gold. Ask the ageold question, right now given the unprecedented year that is 2020, do we look at gold as a commodity or as a currency . What do you advise investors to shift their perspective into . Ed we have never bothered thinking of gold as a commodity. It is not like other commodities. It is not consumable. You never really lose the store of gold in the world. It is more like a currency, more like an asset that fluctuates with a lot of other things. This is the kind of moment where gold really works in terms of the yield that you can get from it based on the fallout from other things that are happening in the global economy. You dont have to worry about deterioration consumption. It is something unlike other commodities which, if you get a sense of where the world is going rather than a snapshot, the world is currently. Is the momentum and bullishness that we are seeing or isld unusual to you, it comparable to other periods in financial history in your experience . Ed it is comparable to other periods. At the nature of the world we are living in, we are going through a critical environment that can be compared to something so far worse than the great financial crisis, when gold etfs came into being in a big way for investors, and it is on a dangerous precipice of being Something Like the great 1928 to 1932. We have seen the play in gold in 2008, 2009. We saw the play in gold in 2016. This is, in terms of risk and the global system, something that nobody living today as an adult has ever seen before. Pretty bullish on Precious Metals. What would make you change your stance, if at all . What elements would you take into account . Biggest onethe would be if there were inflation rising in the World Economy somewhere. You can think of that inflation in terms of food and fuel. E have just in the u. S. Limited in terms of recent history, adverse weather conditions and if you look at the main food staples soybeans, wheat, and corn they look like they could be inflationary. And with the dollar depreciation, inflationary across other countries. Similarly with energy. ,o food and fuel lead inflation and reflation could be a damper, could be a headwind. Francine that is ed morse speaking to us earlier. The u. S. Secretary of state, mike pompeo, is in denmark for talks. Ecb president Christine Lagarde will participate in a Washington Post live webinar. Istral Bank Vice President also speaking online. His speeches scheduled for 4 00 p. M. Andy Goldman Sachs chief executive joins and the. Oldman sachs chief executive coming up, what are the risks and what are the opportunities are private equity in this exceptional year he . Point managingd partner william jackson. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua, here in london. Hong kong has reported a record daily local virus cases with 105 infections, so we need to keep and i on that as it will be a benchmark on whether a city can get rid of the virus or at least flatten the curve significantly and try to protect itself as we are seeing a rise in hong kong. The second piece of news we need to bring your attention to after the focus on the chinese consulate in houston, where we understand there is a fire on going. The u. S. State department has now confirmed that chinas houston consulate will close. This was confirmed by chinese authorities earlier. They are also saying that this is over intellectual property issues that may be linked to the spy that we saw yesterday. It may not. We will bring you any breaking news houston and from china. Now lets focus on private equity. Bridge point focuses on established eating companies valued up to one bit established leading companies valued up to one billion euros. With an uncertain future, is this a good time to invest . I am delighted to be joined by william jackson, managing partner at bridge point. Thank you for joining us on bloomberg surveillance. When you look at covid, how our economies have changed and will change in the future, what does it mean for you find opportunities for companies to buy . William it is a fascinating time, isnt it . Against all the terrible things going on out there, from an investment perspective, this is a great moment for private equity to come into its own. Because the model is so attuned to action, when you think about it, there is this very direct connection between a company and its shareholders. Look at the we market, where our business is today, what are the challenges they are facing we are facing . The big challenge right now is how long this crisis is going to go on. In the boardrooms i have been in, people are starting to think about what is going on right through 22 anyone. The need for capital is going to 2021. On right through the need for capital is going to be out there. Francine what does it mean in private equity exits . Looking at numbers, the exits have all but stopped during the pandemic. When our private equities going to be able to exit some of the things, and when are we going to see big acquisitions . William it is a really good question, francine. The real question that sits out there is, what is the right value . What i have been surprised about , the stock market is very high at the moment, back to where they were, which is interesting in the context of where the real world economies are. But exits have come back surprisingly quickly. Week, ahave read last venture, and we did another transaction the week before. The world is coming back kind of fast on this, but it is very selective, the assets that people want to it has to be in the right sector, got to have a good growth prospects. But if you have that, you have to have a lot of liquidity around. Francine where do you find the best value right now . Are you targeting any companies where value is cheap, or do you know what the economy will do or how it kind of puts us on a different footing, so youre waiting to see what the pandemic shapes up to be . William well, i think this whole question of, you know, where valuations are is really brilliant tracing because you have a tugofwar between economic collapse going on across some sectors, and we are seeing the real impact of this crisis here. Im not sure, particularly given withainst that, you go massive government stimulus. That is the real challenge here. There are definitely sectors that have great growth prospects. You look at the repositioning of health care that is going to go on through this crisis. , andook at the move online much of this i think this whole period is about acceleration of trends. That is going to create some interesting opportunities. Francine what is the main worry right now . Do you worry about companies not having enough cash flow . What kind of level of Due Diligence do you have to do now compared to 2019 . William i think the real challenges that people are on 2021ehin blind still earnings. Nobody really knows how 2021 is going to turn out. You have not given guidance yet about the 2021 numbers. You are starting to see the second wave come through in melbourne overnight, the challenge in the Southern States in the united states. But i think my view would be that it is amazing how quickly people resume to some kind of normal. Although economists have stopped, i think people would be getting their businesses back, interestingreally dynamic itself because at the beginning of this crisis, i think we all saw this was really the way through, working from home at all this. What is very clear is that if you are trying to grow a business and develop it, it is thoseifficult to enhance relationships by zoom. I think you will see people getting back into offices, trying to do so safely. That is going to happen quite quickly. When you are looking at new investment opportunities, it is looking at what can operate in this environment. Francine william jackson, will you buy companies with more attention to esg issues, to more diversity . Has 2020 actually been a game changer for things like that . William i think it has been a game changer, francine. These are no longer people used to describe these issues of, well, we are putting big butrt into it include esg, they are day to day business is now. It is really, really important, and it is important not just because it is the right thing to do, but it is important because i dont think people will want to buy businesses that dont welldeveloped policies in place because they are not making progress. It is a journey because a lot of companies have a long way to go. The important way to go is that you are on that journey. Francine thank you so much for joining us, william jackson, managing partner at bridge point. This is what the markets are focusing on. We broke the headline minutes ago saying that the u. S. Has confirmed that the houston chinese consulate was closed. They give us a little bit more of a glimpse into what is happened. According to the u. S. , it is because of intellectual property issues. The markets are turning a little bit down because of this. Moreare pricing in u. S. China tensions. Futures are also dropping. If you look at the dollar gain, it is racing to a decline, and dollars are edging higher. In the next hour, tom keene me out of new york. This is bloomberg. Francine itll have to wait. The word from u. S. Congress is that the next tranche of stimulus may not come until august. Republicans back stimulus checks, but a payroll tax cut is in question. Metals shine. Silver jumps to the highest in almost seven years. Gold rises towards a record amid uncertainty over the recovery. And elon musks payday the tesla boss nails a 2. 1 billion award as the carmakers market value reaches a milestone. The Company Reports earnings today. Good morning, everyone, and welcome to bloomberg surveillance. Tom and francine from new york and london. Moments ago, the u. S. Saying this is over intellectual property issues, the closing of the chinese consulate in houston. The state department has confirmed that the consulate in houston will close. Tom