Thise talking about dispute between america and china over intellectual property theft, which means that the u. S. Gave very little notice to china when closing its consulate and that is analogous to this deteriorating relationship that seems to be deteriorating fast. Tom flareup absolutely captures the moment. Now with a news update our first word news from new york city. Discussing, china calls it an unprecedented escalation. The u. S. Has ordered the chinese consulate in houston to be state, according to the department it is to protect American Intellectual property and americas private information. Houston firefighters went to the consulate after reports documents were being burnt in outside containers. President trump reboots coronavirus briefings with a shift in tone and a warning. Theas more reserved than in past and encouraged americans to wear masks avoid risky behavior. The president promised that the virus will be defeated but said it will probably be worse before it gets better. Apublicans putting together Coronavirus Relief plan support the idea of more stimulus checks to individuals, but they are expressing doubt about the president s call for a payroll tax cut. The difference between republican senators and the white house threatened to push any action on the stimulus into next one. The Democratic Party is sticking to joe bidens a line on major policies. The party will call for universal health care and remaking the justice system. The platform stays away from goals pushed by progressive democrats such as medicare for all. Global news 24 hours a day on air and on quicktake on twitter powered by more than 2700 journalists and analysts in over this istries. Bloomberg. Francine, tom . Futures at 94. The vix 25 point 54, indicating the stability within the markets off of the surges of the last few days. 10 year yield. 5905 . Gold is a huge story now. There are different ways to price it. 1858,sing the comax gold that is a record high. Between america and china u. S. Equity futures dropping and they are down from 1 . These fresh chinese and u. S. Tensions add to the potential risks weighing on investors with Global Equities sitting near a five month high. We always need to look at the perspective of what we saw in the last couple of months. I am looking at gold and silver, because we dont do it very often. 856. At 1 gabrielaing us now is santos of j. P. Morgan asset management. I think she speaks 14 languages. You have had the courage to stay in the markets. Part of the game is you have to participate, how do you continue to participate in the International Equity markets given this news flow . Gabriela tom, thank you, it is good to be with you. We used to talk about before covid which has been true during covid, the idea that market timing does not work. You have some of the best days in the market clustered right around the worst days. Things can turn very quickly. We saw that this year as a perfect example. We had the fourth worst day in 20 years on a thursday, followed by the secondbest day in 20 years on a friday. Beabsolutely paid off to invested through some of the difficult headlines around the virus and around the it has been harder in International Markets because they have underperformed. Underperformed against the u. S. Over the last decade. Duty at hsbcr of before j. P. Morgan, this news of a titfortat with china, does that change your International View . Does that adjust your pacific rim investment stance . Become a lothave more optimistic on International Markets. Having said that, they have been difficult over the past decade. We are starting a brandnew cycle, and this is absolutely internationals time to shine. I think it is a combination of a few things that are starting valuations, but also a better path in this recovery. That is absolutely where asia fits in, especially north asia and europe as well. A better control of the virus, breaking the length between reopening and reinfection allows for faster recovery. To take, investors have in that these tensions between the u. S. And china are a permanent fixture of the economic and investing landscape. They were here last year, they will be here this year, and over the next decade or century. We need to invest through it and asia remains one of the biggest Growth Opportunities in the covid world and the post covid world. Francine good morning from london. For is a big opportunity you despite this flaring up of tensions between the u. S. And china . Gabriela yes. The way we think about it is it will stay with us for the next decade. When we think about the Growth Potential in china, we have to factor in that it will have a harder time in its growth path for the next decade than it did the last decade in the decade before that. We do have to knock off some of the growth expectations as a result of these ongoing tensions. To us, that still means china can grow at about 4. 5 annualized growth pace. That is enough to bring about half a billion people into the middle class in china over the , so tremendous Growth Opportunity for consumption in china Going Forward. Haveand more, because you this ongoing break in the u. S. And china relation. If you want to access to the china Growth Opportunity you have to go to china. Listed inmpanies china, we are seeing a wave of these companies go back and list in china as a result of u. S. Pressure. At thee when you look market, are we do a correction due a correction . Is there anything in bubble territory or is that a step too far . Gabriela the biggest candidate would be u. S. Equity markets, because you have seen one of the biggest recoveries from the losses in Global Markets. Less so in europe and other emerging markets. The u. S. Does come to mind is a prime candidate, especially with valuation sitting over to standard valuations above average. When we talk about a correction, at this point we are talking about a normal amount of turbulence in the equity market, which would be a 10 correction, unless things change dramatically we are not talking about going back to the level we had in march. Thiswe will continue discussion, particularly on the balance between those 14 stocks moving up in the United States, and everything else, particularly the stocks on the international watch. From pershing square, their founder and chief executive officer, an exceptionally timely conversation. This is bloomberg. This is bloomberg surveillance. Having a nice conversation on the markets and the opportunities with gabriela santos, jp morgan Global Market strategist. When you look at volatility, how will that perform in the coming months . I dont know if we are range bound, or whether given the amount of covid and possible lockdowns we will be all over the place. Is,iela the way we see it we had such wild swings in the market in the first half of the year on the way down and on the way back up. At this point we do see the market more range bound in the second half of the year, especially u. S. Equity markets that have recovered over 90 of their losses already. That does not mean no volatility. The vix is a little below 30, but that implies the possibility of a daily move of plus or 2 . Volatilitytill have while you have a sideways range over the next few months. Thats what we think, looking a little beneath the actual u. S. Equity index overall is much more exciting. That is where you might have bigger moves happen. Things, both two in terms of sector and region. Regionally we think it makes more sense to be balanced between the u. S. And other regions. We mentioned asia as well as europe as two exciting Growth Opportunities for us in this new cycle. Tech hasof sectors, led the way and rightfully so when you look at the fundamentals. Expectations are already incredibly low for your more sick will cyclical factors. When you look at earnings it becomes easier to have those expectations and reversions happening in your more cyclical sectors in the u. S. Market. What did the eu reader summit that led to the recovery does it increase your appetite for European Assets . Gabriela absolutely. It was a good combination of what we have expecting for the past two months ever since the proposal for the eu recovery fund. We see it as a game changer. It is the first time we are really seeing this move towards a fiscal union and greater solidarity in europe. It reduces the risk premium for European Assets, and it allows for a faster recovery across the region during this new cycle. Its absolutely a game changer. Development inat europe to the fact that europe has been able to engineer a fast reopening of its economy without triggering a resurgence in covid infection. There are two good arguments there for adding that to europe after the u. S. Ambassador shun the asset class. Tom the europe with a nice pop, you can see that on the screen breaking down localized currency markets. Question offou one a stronger euro and the pull back the u. S. Dollar. Can you model in a persistently weak dollar . Waiting we have been for a weak dollar for a few years. [laughter] for five years absolutely. We have had this relentless move upwards in the dollar in the cycle for the past 10 years. The dollar has become an extremely overvalued currency against of the trading partner, faced against its actual longterm fundamentals. Catalystmissing was a to turn the dollar around to allow the fundamentals to assert themselves and the dollar to weaken. I do think we are getting it. What is the catalyst . The beginning of a new Economic Cycle that is led by faster growth happening outside the u. S. Than in the u. S. That is really the story of the recovery in north asia and europe happening faster and finally capital flows returning to those markets. The think we are seeing beginning of a long depreciation of the dollar and that is the cherry on top for u. S. Based investors investing overseas. Much, jpk you so morgan asset manager. Out euro gets talking about this rapid advance in the europe, if it can sustain further is open to question. Thee will be questions in 9 00 hour, Jonathan Ferro in conversation with lawrence kudlow. This is bloomberg. It will probably, unfortunately, get worse before it gets better. Something i dont like saying about things, but that is where it is. We are employing young omit imploring Young Americans to avoid crowded bars and large gathering, be safe and smart. Tom it is a different president of the United States in his press conference yesterday, it is widely said this will be repeated this afternoon. There are so many things this morning, and they go out the window as we need to address breaking news as the United States closes the consulate of china and houston. Kevin cirilli is our chief consulate correspondent in washington. Kevin, there is lots of speculation. They will close permanently the wuhan consulate on the Yangtze River because of the embarrassment of the three gorges dam flooding challenge. Another is a nobrainer that they would close the hong kong consulate. What will the secretary of state advise the president . Kevin its part of a broader strategy in terms of what secretary pompeii no and attorney general william barr have been taking a more aggressive approach against china, particularly since the president signed into law that piece of legislation that would allow for the u. S. To take Financial Action against individuals who support the communist party in china and back the socalled National Security law in hong kong. Theerday i was at department of justice where i spoke with the assistant secretary assistant attorney the nationaleads Security Division at the department of justice. They actually indicted two chinese hackers, allegedly backed by the communist party of china, penetrated not just American Private sector institutions, but a handful of countries around the world trying to get access to covid19 research. This is a very serious, thorough type of strategy that does not just come from President Trump and has the backing of bipartisan support in congress. Tom what a different look and feel from the president yesterday. Was he successful in changing the tone 103 days before the election . Kevin his supporters would say yes and his detractors would say no. There was a calculation made by President Trump his top advisers to have the president stand in the Briefing Room alone, not with dr. Fauci, dr. Birx, or Vice President pence. To get out in front of the podium and take back control, according to his advisors, of this situation from a communication standpoint. Its a different tone. Whether it is enough to turn the political corner, it is too early to tell. Francine is what is happening in houston at the consulate links to the election . Ifs the president look good he acts tough against intellectual property theft from china . Kevin from a policy standpoint, no. I think this would have been when i talk to people like senator mark warner or other more National Security focused lawmakers in congress on the democratic side including a democrat from virginia, when i talked to lawmakers like that they back the United States in terms of where the u. S. China policy is headed. Expectpolitical mindset, the biden and trump campaigns to battle it out in terms of who would be more tough on china. Both sides are saying they would take the more aggressive National Security approach against china, neither side is conceding that point. Francine why is it so difficult to find unity on stimulus . Have a triangulation occurring on capitol hill. You have President Trump backing the payroll tax cut, but democrats say that wont help people who need immediate assistance who have been laid off work. President trump saying the middle class and people who still have jobs could use that extra cash to help stimulate the economy. Leader mcconnell saying he has to Pay Attention to the Liability Protections to make sure that companies are not on the hook when they do get folks back to work. And you have Speaker Pelosi trying to provide for underserved communities. Andcrats want 3 trillion republicans only want 1 trillion. Tom this was published seconds ago. 20 million americans probably will lose their benefits before a final bill is enacted. Do the republicans understand the level of fire they are playing with . 20 million. Pres. Trump its almost kevin its almost incomprehensible to understand the gravity, so Many Americans around the country are being impacted by this. Reporting standpoint, secretary mnuchin yesterday, after meeting with Speaker Pelosi, set the timetable for next friday to be when they would like to have a deal that is completed. Either way, based upon conversations i had yesterday they are still worlds apart. Mattere urgency of this kevin cirilli, our chief washington correspondent. Up, the politics of the United Kingdom. This is bloomberg. Save hundreds on your wireless bill without even leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, you only have to pay for the data you need, starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. 5g is now included with all new data options. Switch and save hundreds. Xfinity mobile. This is bloomberg surveillance. Another sign of worsening relations between the u. S. And china. The u. S. Has ordered the chinese consulate in houston to be closed. According to the state department, it is to protect American Intellectual property and private information. China calls the move and isdented threatening to retaliate. Houston firefighters went to the consulate after reports of documents being burnt in outside containers. President trump warning the pandemic will get worse before it gets better, and he urged americans to wear masks. He resumed daily virus briefings three months after he abandoned them. Polls show more of the public blames him for failing to control the outbreak. President trump speaks on what he calls combating violent crime. To push for federal agencies respond to protests appeals to his base. The president sending President Trump reportedly asking the u. S. Ambassador to britain to help get the british open Golf Tournament played at his course in scotland. According to the new york times, thepresident asked ambassador to see if the tournament could be moved to his resort. The ambassador warning the move would be unethical, the ambassador raise the move anyway but it failed. Global news 24 hours a day on air and on Bloomberg Quicktake on twitter powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Francine thank you so much. The u. K. And the u. S. May be planning more actions against beijing, according to secretary of state mike pompeo. Foreo praised the u. K. Banning huawei from 5g and for suspending the extradition treaty with hong kong. Ofning us to discuss all british politics is a conservative member of parliament and former conservative party leader iain duncan smith. Thank you for coming on. A number of press in the u. K. Are reporting that mike pompeo china. K. Officials that bought the World Health Organization chief, are you aware of that . Iain i attended a cross Party Meeting with him. I thought frankly he was impressive by his command of his own subject. A did talk in answer to question about where he thought the who was, and he openly made the point that he thought that the arrival of the present chief of the who had taken the who backwards and that it had become quite political, he therefore to getina had managed others to ensure they voted for a particular candidate at the time, thats why the u. S. Has decided to withdraw and use the money to set up areas and institutes around the world that will deal with the sort of things the who, he says, should have been dealing with. Francine does the u. K. Government agree . Iain clearly the u. K. Government has decided to stay with the who. Amongst political circles here there has been a lot of concern about the very poor performance of the who at the time of the original outbreak of coronavirus. Its absolutely clear now to anyone that knows it that the human to human transfer was almost certainly known to exist back in november, yet it turns out the who did not appear to press the chinese authorities for really serious detail or to accept and admit they had a problem on their hands early enough. There is no question that that led to all sorts of problems that we have now seen on a wider global stage. Was thunderstruck this weekend in this four to five day marathon eu summit of the aloneness of britain. Britain was not there, which i am sure you are happy about as a staunch supporter of brexit. You have asked to europe to move on. How has the Brexit Debate changed for the people of the United Kingdom after witnessing a summit that they were completely removed from . Iain its quite interesting. , andch the summit as well one thought came to my head which is that the trouble with the outcome of the summit was that the u. K. , alongside germany, would have disproportionately put a significant amount of money in and become committed. Right now british people are quite interested in seeing that money invested back in the u. K. In light of the covid19 outbreak. I think many people watched very tangentially for the first time. It is a product of leaving the European Union. I think it showed the European Union that at the end of the day they had some kind of compromise which i dont think will work at the end of the day. European countries dont want to bail out the southern european countries. They have a strong euro bond, whether they are what we would call federally guaranteed or guilds backed by the bank of england i think they are in danger. Europe is borrowing money without the guarantee of central banks. There are lots of problems in the financial world in europe. Experiential,ally and there was the experience of being removed. How does that change the brexit dialogue between conservative and labor . Iain not really i think. Now most parties except that brexit is done, and now needs to be completed with a trade arrangement which is as much in the interest of europe as it is the u. K. That debate has turned completely down. Watching these discussions tangentially on the television, switching them on to see if there is another day to discuss it, for the first time it was not Headline News in the u. K. , and only a general statement that they had not agreed. In a way, and emphasize the fact that we have taken the decision to leave and are not going to get caught up in these endless discussions about how much money to put into the budget. China has vowed retaliation after the u. S. Forced a closure of its houston consulate. Where does the u. K. Fit into all of this . U. K. Has come to the conclusion that there are issues with china angina is posing a andr threat with china, china is posing a major threat with how they are behaving. They are breaching the threats around the free market with the espionage they used to catch up, the problem of breaching things like subsidies on Companies Like huawei. While i was able to do business because they were so much lower than everyone else and have driven every other Systems Company out of business except for three in the free world. These are issues beyond the nature of their government and the aggression on their border of the south china sea, taiwan, hong kong. Then there is the uighurs. U. K. Has taken a stance, they have said huawei will not be the provider for 5g Going Forward. Lifted theow extradition treaty and suspended it with hong kong, so that the chinese cannot use it to get after people they want to take back to china. All of that is part of a toughening up. Aggressive,s gone they dont seem to bother with the policy but they do a lot of shouting. Do they want to pick a fight with the free world . The u. K. Is influential on that. Is made up of left and right in america, the u. K. , and 18 countries with india about to join. All of them are united in saying that we need to build an alliance of the free world to say to china, you cannot go on behaving like this and expecting to not say anything and you will get away with it. Pompeo was strong about building that alliance. Democrats and republicans agree, and here now the labour and conservative parties agree. There is mounting pressure on china. Tom thank you for joining us. Iain duncan smith, the former conservative party leader. Are more coming up, we watching for any news flow out of china on which consulate they would be closing, that is speculation at this point. There is no speculation that there is a wall trading on the nasdaq. Adrina friedman, an important conversation coming up. This is bloomberg. Tom good morning. Francine lacqua and london and i am tom keene in new york. We are watching the news flow out of houston and china on the closing of the houston consulate by the United States of america, this of china. Looking for the tit for tat and the speculation over what city it will be in china. Is a four letter word. He word is sell. Joins us on the tesla derby. Lets head to first principles. His tesla an Automobile Company . But it trades more like a technology stocks. The multiples at which it trades that are more like a micro Technology Company than an Automobile Company like ford or general motors. Their pe multiples are generally in the midtriple digits and teslas are many times that because of the growth expectations that lie ahead. Tom do you believe the china numbers . ,f this is a revenue story there is some point where that ends ask china. Is there a truth to this china story . Garrett sure. They just entered into china late last year when they finished constructing their factory near shanghai. Ofy are reaping the benefit the higher automobile production from that factory. That will be one of the main drivers of their secondquarter earnings later today. Is increasingly becoming a global company. They just broke ground on the factory in germany and they are moving as fast as they can to construct that, then there will be a new factory in the u. S. , likely in texas we think, which would still be moving forward with very soon. Francine good morning. How many more vehicles do you think tesla will sell in 2020 . Think their vehicle sales will be up about 25 . The big question heading into have forer they Vehicle Production about a half million for the year. We think they will fall a little short of that guidance, mainly because their factory in california, which accounts for 70 of all of their automotive production, was down for almost two months because of covid. We think they are going to fall short of that goal and probably update the guidance in the Earnings Release. Tom what will be the catalyst for reality in tesla . Those the reality crew, that read have been wrong. What will be the catalyst to get ofs stock back to the kind dynamics we traditionally associate with an Automobile Company . Garrett we downgraded this stock from a hold to a cell on friday because we think sell on friday because we think it is a story stock that has gotten ahead of the fundamentals. We have seen red flags that make us more cautious on the shares. For one there has been a lot of Short Covering and the stock. The current Short Interest is only 7. 5 of shares outstanding. 12 months ago it was over 23 . We think a lot of the move up is the result of a short squeeze. Recently they lowered the price on the new model y vehicle. They just introduced that vehicle in march and are already lowering the price which could equate to a demand issue. There has been a big drop in vehicle registrations in the state of california which is the andest market in the u. S. They are entering a major capex cycle with these new factories they are breaking ground on. Did an this year, tesla equity issuance and issued share and now a the stock price is more than double that. Elon musk tweeted in early may that he thought the stock price was too high when it was around 800. We think there is the possibility of another equity issuance here. For all these reasons we changed our opinion to sell. Francine are we talking about a bubble . How much can it actually correct by . Garrett our 12 month price target is 1100, roughly 30 downside from current levels. What everyone is looking at with the Earnings Release this afternoon is the gap earnings number. If they post a gap profit for the quarter they qualify for inclusion into the s p 500 index. Everyone is focused on the gap there is no guarantee they will post a gap profit, last quarter there was a gap profit of eight cents. They had to shut down due to covid. The consensus is for gap loss of a dollar 29 for the quarter but the stock keeps running up like it is a foregone conclusion that they will post a profit for the quarter. We caution investors that there is no guarantee that will happen. There has been a lot of speculate of buying especially from Retail Investors assuming that they will get there. If they dont we would caution watch out below. Francine thank you so much for the insight. Nelson, a cfra senior equity specialist. Miss that conversation. This is bloomberg. This is bloomberg surveillance. Lets get the Bloomberg Business flash. Showing business prediction during the pandemic. Snap a missed its own forecast and is holding off making projections for the period. The events usually drive thirdquarter end sales like sports, movies, and backtoschool sales cannot be counted on. Four women who used to work at google are seeking classaction status in a gender pay disparity suit against the company. They have asked the state court in california to let them represent more than 10,000 peers. Womenmen say google pays 6,800 less per year than a man in a similar job. Google says the claims are unfounded. That is your Bloomberg Business flash. Francine as we continue to track the virus, bloomberg partnering with a leading authority on covid19. Johns hopkins has been at the forefront of the International Response and we bring you insights from experts in public health, and disaster and emergency preparedness. Auer froms is lauren s Johns Hopkins. What did we learn about antibodies . Antibodies dont last long, is this only for antibodies once you have had covid19 mildly or can it be antibodies created by vaccine . Working hard to understand the difference in antibodies created by the natural infection and those created by vaccine candidates. Andast vaccine trials infections we see immune response and antibodies produced in the phase one into that these vaccine trials are in. It does not always mean we have conferred protection. As we do more work on protect collecting data around neutralizing antibodies in particular we will understand better, particularly when we get into the phase three of vaccines whether or not these vaccines mean people are protected. Protectedcan we be from covid19 with t cells even if an individual does not have the antibodies . Lauren there is a lot of work on t cells versus antibody response. Normally, and a traditional youine landscape would spend several years figuring out if the vaccine needs to be good at producing antibodies or if we have to induce t cells or if you need some combination of the two. Right now we dont have that timetable so we are Going Forward with these approaches that the astrazeneca and mrna vaccine that we just heard about last week. I think we will find out as we look forward, a lot of people looking at t cell experiments to understand what role they play, but we need time to understand how they both work in the body. With these vaccine trials that were successful, how far away our way from making sure these vaccines are safe, usable, and knowing how many doses . Lauren we have a few candidates which is promising and fast. We have seen vaccines in other infections be immunogenic and when you get to phase three, thats when you are saying, does this broadly protect the population and can we move into largescale production and get a vaccine out to the world, sometimes in phase three we dont actually get that broad protection that we need to have a successful vaccine. I think everyone is very positive on the results. I think the safety data looks good and there are some adverse events in these vaccines. Three wee into phase have three promising vaccine candidates right now which is incredibly good. Francine thank you so much for joining us. Be sure to check the bloomberg for the latest information and tune in every day for our conversations with Johns Hopkins experts for an inside look at the vaccines for covid19. Houstonese consulate in futures on the s p 500 are dropping and we are seeing similar moves for european stocks after a flareup between america and china added to concerns on the market about the deteriorating relationship of these two economic superpowers. Treasuries are edging higher and the dollar also loosely rising. Joining up, join jonathan and ferro onoin Jonathan Bloomberg radio and bloomberg tv in just a couple of minutes. ,he other thing we are watching both gold and silver trimming some of their gains. This is bloomberg. Businesses are starting to bounce back. But what if you could do better than that . Like adapt. Discover. Deliver. In new ways. To new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back. But bounce forward. Thats why were helping you stay ahead and adapt with a network you can count on, 24 7 support and Flexible Solutions that work wherever you are. Call or go online today. Going to be a lot more unemployment coming, a shift from what was temporary climate to permanent to some degree temporary unemployment to permanent to some degree. They have to right size their businesses. Not everything is going to turn on right away. Some things that were turned on will be turned back off for a while. It is going to be bumpy. This is bloomberg surveillance with tom keene, Jonathan Ferro, and lisa abramowicz. Jonathan good morning, good morning. This is bloomberg surveillance. We are live on bloomberg tv and radio. Alongside tom keene and lisa abramowicz, im Jonathan Ferro. Times havehow many we woken up in 2020 to say rising u. S. China tensions . This morning we are doing it again. Tom this is developing as the entire world waits to see how china will respond to the closing of the houston