Bubble. The good morning, everyone. This is bloomberg surveillance. I am Francine Lacqua here in london. The markets are focused on data in the u. S. , stimulus in the u. S. , and for july manufacturing 51. 1, instead of the 50 that was expected. The other thing we are really ,atching out for is gold, 1897 within a whisper of 1900, which will be a big psychological impact. Now lets get to the bloomberg first word news in london with laura wright. Hi, laura. Hi francine. ,rising for the first time about of march to 1. 4 million, but dropping slightly. The data comes as hundreds of billions of federal aid is set to expire. The u. S. Economy could be at risk of a double recession. A Vaccination Program for the protect ait ceases to second wave of the coronavirus. Twice as manyple as last flu season. At shots available for the risk groups will be available to everyone over the age of 50. Disney is canceling the august release of malan and delaying avatar by more than a year. Date. Ime, no new release some cinemas are also having to push back reopening plans. Global news, 24 hours a day, on air and quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am laura wright. This is bloomberg. Francine . Francine laura, thank you so much. China demands the u. S. Closes its a shame juke consulate. The Government Forces china to close its consulate in houston. It acts as a key u. S. Post for development. Ouring us for now is beijing bureau chief. What exactly has been the reaction on the ground . It feels like it has asked related escalated, but it is not closing the hong kong consulate, so it can move a little bit. Yes, if it had asked to close the hong kong consulate, which is much better bigger, but consulate, moving extremely high. [inaudible] francine yeah, sharon, we are actually having trouble connecting with you and hearing you 100 . We will call you back and make sure the line is correct and here what you have to say on the flowing between the u. S. And china. Starting with the chinese tensions, lets get straight to james athey, director of aberdeen standard investments. James, we were talking about the upgrade and tensions between the u. S. And china. What does that mean for your global allocation . How much worse will they get, and what kind of an end that will have on the economy . James good morning, francine. It is obviously a tough one. We have seen tensions as part of the market environment for a number of years now, really, not throughout, but throughout much of president trumps time in office. It has been part of the fabric of the macroeconomic analysis of the international market. Obviously we have seen some escalation in very recent times, but still without really expecting to necessarily see a direct Immediate Impact on growth ofwth or the two regions concerned. I think it falls into a big picture narrative, and that there are Secular Forces acting here. We probably have seen the peak of globalization. It has become a little bit of a cliche, but im going to use it anyway. I think there are costs to such a global model, and countries and companies are going to look to firm up their relationship with each other, such that there is more domestic or corporate robustness within their model, and i think the tension between these two powers is part of that process. What it means in the near term very difficult to say. It has not really impacted risk assets. In conjunction with the weaker claims numbers, we have just seen a bit of a wobble in equity credible valuations really, so we should not be too surprised. I do not think it will, personally, impact my allocation much, but i am invested in a way which is cautious with respect to the outlook. I see this as one of a number of major problems, cyclical and structural, which we are going to have to deal with in the coming months. Chengdu James Francine james, where do you see the most value right now . S the u. S. And everything that we are seeing with these tensions . L, value, truly, it is almost impossible divide anything that you can remotely call value. There are some assets that have reached the precovid levels, and passed those, there are some recovered a lot from the nadir of a march april time. I do think Precious Metals have a long way to go, because i think the only way you can see risk asset performance like we have seen as with this just a central bank and government largess hand in hand, and that must be, even if it does not show up in consumer prices, that will be a debasement of the purchasing power, so conservative metals look like they can push on a lot higher, but obviously where they are today, it is very close to decade highs. It is tough to say that that is truly a value proposition, as we sit here today. I still prefer to be invested defensively. I think the dollar still has some value, because it has done a lot to unwind the rally that we saw in the real heat of the and i trulyiod, believe there are attractive alternatives to the u. S. Dollar. It has shown that it can perform at both ends. If the economy is doing well globally, the u. S. Must be part of that. Impresses Interest Rates up normally, and, conversely, if the economy is not doing well, then the exportdriven accounts with some real structural weaknesses that are out there, they tend to do a lot worse. I still like the dollar. Francine james, let me jump in and actually ask about gold. Are we going to have 1900 today, and what happens after that . Does it just to ever higher . James you might want to point out the way things work. We are talking about psychology and collective psychology. The way that things work is you do find that there are lines in the sand, for whatever reason, this one being from the previous peak back in 2011. It is likely that there will be some selling, some sort of level of selling would come out. But i dont really expect it to be as much of a resistance as maybe others do. And, honestly, it is difficult to put a number around this, but just given the growth of Central Bank Balance sheets, given the growth of fiscal deficits that we see in the u. S. But absolutely everywhere else as well, i just think that the number could be, you know, so significantly higher, you know, 50 or 100 higher than 2000 i did not think is unreasonable proposition over the next two years. Francine all right, james, thank you so much, james athey from aberdeen standard investments. Coming up, we look at the labor market in the u. S. This is bloomberg. Berg. Francine economics, finance, politics. This is bloomberg surveillance. I am Francine Lacqua here in london. Now, there is a lot going on in the markets. Most of them are trading sideways p we saw that with some wellknown strategists. Today, stocks are actually dropping because of worries about the u. S. And china. Now, they were worried on it on tuesday actually, they were worried about it on wednesday, then yesterday, the markets americanhe final tensions to focus on betterthanexpected earnings, and today, they are back to worrying about what this means for global trade and global economy. Now, tech stocks also europeans talks, after intels warning of a production delay. If you look at the offshore run, it is dipping. Gold trading mirror 1900, close to an alltime high. U. S. Jobless claims low for the First Time Since march, a clearest sign yet of a pause in the countrys economic recovery, as coronavirus cases a surge and force businesses to close their doors once again. Initial jobless claims rose from 1. 4 million from 1. 3 million. Meanwhile, the ongoing stimulus efforts have stalled from differences between the Senate Republicans and the white house. Leader Mitch Mcconnell says it will not be ready until monday, and lawmakers had been expecting him to release a series of bills as soon as thursday. Still what this is james athey of aberdeen standard investments. James, i keep hearing that europe is now more attractive than the u. S. , but the u. S. Economy was at a different cycle before covid hit, so what is your take . James yeah, that is one that does the rounds or has been doing the rounds periodically for a few years. There is a lot going into that valuation, and i have some sympathy with that argument. If you strip out a small number of incredibly large, incredibly impactful, incredibly, um, overvalued or highly value stocks from u. S. Indices, then the valuation spread does not look quite so egregious, but including some of those names, it does look like u. S. Stocks are incredibly overvalued relative to the rest of the world, and europe as part of that. Therefore i might understand why people might look for a narrowing of that gap, and it goes back to tech. You have a value versus growth proposition there. If you are investing in growth, really you are investing in a small number of tech stocks. If you are investing in europe, you are investing in value propositions, which have been on a secular decline. I think it is a realistic, you know, impact on markets. I think in the long term, it is probably there for longterm narrowing of that spread. I do not think it is a bullish narrowing. I do not think europe can outperform, because i just think the structure and pediments are huge, and i do not see the Recovery Fund as dealing in any way with any of those structure impediments. Francine do treasuries move on the stimulus, depending on what they agree on at the end, james, or do they just move on what the fed does . James yeah, treasuries nominal treasuries, there was a week in june where they popped higher. Zero vol. I do not think that the stimulus package being passed will be impactful in treasury yields. We are living in a world of financial repression. The fed is there, actively come on a day by day basis, and it is expected to be there in increasing philosophy. I think within a small range, you can see yields, you know, spiking a little bit higher, because it should be good for growth, inflation, treasury supplies, but i do not think those will be the biggest influence. I think we are going back into the world where the bond market sees a lot of bumps in the road and sees a set that will cap, you know, any volatility, and therefore, really, it is somewhat of an asymmetric proposition. If you are facing a riskfacing portfolio, you do not give up much in terms of, you know, negative, so kind of free hedging, that will continue to move. Francine what is your take on earnings so far . James yeah, which ones . Gap earnings or the earnings that kind of hit the headlines nbp analysts expectations a nd beat the analysts expectations . There are a lot of things that cfos can do, which makes the earnings take a beat on a quarter by quarter basis, and we are seeing an element of that. I think there are interesting messages we can see within the earnings season. One of the most interesting was when financials were reporting a bit earlier in the season, where you saw that those with mainstream lending programs were really lending into the real economy rather than just being security houses that are mainly advisory and the financialmarketdriven. They have massive writeoffs. They were looking to the future and expecting a lot of losses from their lending to the real economy. Those Financial Firms which mainly take the revenues from Financial Markets and Advisory Services and wall street, if you like, they did relatively better. Is i think that, again, better than the disconnect between what is going on in the Financial Market and what is going on in the real economy. Aside from that, i do not take much from these earnings seasons, because it is a big of a game bit of a game with pushing expectations down. Francine but you do have worries about cash flow . James oh, massively. I mean, absolutely. Obviously, there are some companies, as the economies reopen, cash flow will quickly come back, because they sell things we need to buy. They are not discretionary purchases. A lot of the cash flow worries, i think, will not show up in sort of the Financial Market, the cash flow worries at the very lower end of the spectrum, small and medium enterprises, momandpop providers, those sorts of things. I suppose you have to look at the top few, the forbearance world, the lack of rent being paid, the lack of mortgages being paid, and we are storing up huge problems here in terms of that lack of flow of revenue through the economy, and who picks up the bill at the end of it all is very difficult to say. But, you know, i think we have seen the best of the v side of the recovery. I think things will level off a little now. Depending on what Central Banks do, depending on what governments do, we are going to see those problems, i think, starting to show their head, because obviously there has been huge, huge damage done, and the stock problem is not a healthy one. Balance sheets come on average, were not healthy at all. Youcine so, james, when talk about storing problems, is it something that could turn systemic, you know, that is really worrying once the stimulus from the government ends, both in the u. S. And the u. K. . I think it, sure, had already been systemic. Athink, again, what we see is selffulfilling cycle whereby low volatility and low growth is dealt with purely and simply by monetary policy, and that means over indenting economies, and that over indebtedness drives lower. The only reason you have been able to see that going so long, which is 20 or 30 years, is because Interest Rates have been falling throughout that period. Now we get to a point where we see Interest Rates falling much farther. We see really that the multiplier of debt has fallen so far that the amount of that we needed to add in order to get growth back to where it was just becomes absolutely gargantuan. I still see the virus as a trigger more than a cause in and of itself. I do think we are facing and have been facing structural issues. They have just been somewhat masked, if you like, by policy. Francine thank you so much, james athey, investment director at aberdeen standard investments. Fromg up, as cities emerge coronavirus lockdowns, the way people use spaces is also changing. This is bloomberg. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua here in london. As cities emerge from coronavirus lockdowns, the way people use public space has changed. City land at bloomberg has been giving us some thoughts on this, and Feargus Osullivan joins us. , reclaiming the open space of cities. How difficult is it to replan . Feargus well, there is certainly increased demand for it. Pedestrians need more space, businesses need to come out of interior spaces, and just for people to get around safely. Currently the best way to do that is with bikes. Bikes need extra space on the road to be protected, so certainly there is intense pressure on urban space at the moment. So far, with traffic being less, it has been space previously allotted to cars that have taken the brunt of that, that have been used it to absorb into other uses. Our current level, it is definitely manageable, it is just a question of what will happen if and when we returned to normal functioning of cities. Francine so when that happens, do we need to actually change the way that things are planned effectively . A lot of the ways that we are traveling is changing now, but how do cities get restart . The important point to make here is that we really are quite a long way off that now. We dont really have the class of the yet, without a vaccine, for life to return to normal. I mean, currently in london, while car transport has returned to about 8 of its prepandemic level, public transport use is only at 30 . Now, a lot of people feel that it is not safe to do travel in high volumes, though the evidence does not necessarily confirm that fear. So even with the uptick in cycling, it will be very difficult to absorb the same number of people that were traveling in rush hour during our rush hours in our busiest cities. So i think, for now, it is important to recognize that people who can are going to stay working from home for quite a long time. As we start to emerge from that, there are going to be strong citiesres for to retain a lot that they have introduced during lockdown, like and more bypass like whiter pavements and more bike paths. We feel like the policies, the way we show up with our conversations with advertisers, content partners come with really helped us differentiate ourselves and stand on our own, whether it is around the conversation that has happened over the last two weeks or other conversations, they understand how we think about things and we learned a lot from the engagement we have with them. But clearly we are not coming out of the pandemic anytime soon and the economy is suffering. How much longer do you expect there to be a retraction in Global Advertising . It is hard for us to predict these things beyond our control, such as when shelterinplace will end and how events will come back. We do know that with a much larger audience, with all the progress we have made on revenue products, a direct response to advertising is so important to coming out of the situation as a Stronger Company that can deliver, even better for advertisers, that when life events come back baseball season starts tonight, basketball season starts next week people coming back will help us be in a better position. How would a Subscription Service work . Am i going to have to pay for my twitter . What would and would not be behind a pay wall . We would be happy to take your money if you would like, emily, but it is more like these would be valueadd services beyond what people get today. But it is still really early to gauge for us. We are hiring people, thinking through the opportunities. People test them, and when weve got things to announce, you will thosehem through announcements and not through job postings. Emily we have to talk about this great hack, the biggest hack that i can member through those years Vice President obama, billdent gates all in this massive bitcoin scam and i know you are working to figure out who is behind this. With a massive election coming out, how can you ensure that the integrity of our elections are safe . We work really hard when we have a security issue like this both to understand it ourselves and to communicate really clearly what we have learned so people all around the situation can gain the confidence that we have fixed the situation and now we will work hard to make sure it doesnt happen again. And also to help people learn. This one happened to be social engineering driven, so we want everybody to learn from what we went through so other people can avoid the same kinds of challenges. These are really frustrating and disappointing when they happen, with the way we show up at a time like this hopefully hopeless bill and removed post with people around the company. Emily you have the ceos of apple, andmazon, facebook set to testify on monday before the house subtrust subcommittee. From jackts to hear dorsey as well. What do you make of this, and has jack received a formal invitation . Sure about that. It seems to be more about other companies than it does about us. Regulators and policymakers are important around the world. We want them to understand our principles, our policies, how we enforce them, and we find that everybody is better off with the exchange of ideas that we can have. Im not sure that will apply back to next week or not. Chiefne that was the Financial Officer of twitter, ned sehgal. Pi pmi, surges than the 56. 6, better 51. 5 forecast. Lets show you what is going with gold. Definitely nearing 1000 900. The impact of a lot of the tensions between nearing 1900. The impact of a lot of the tensions between the u. S. And china, also the european stocks on intels up a warning about a production delay. Of googler employees are trying to go to court to file a classaction lawsuit. For more on this, we are joined by Bloomberg Quicktakes jennifer. Where will we be in two or three weeks from now . Jennifer you know, classaction status for gender discrimination lawsuits dont have the best track record within the tech industry, but these four former female google employees are continuing to pressure the industry. If the judge grants them classaction status, they would seek to sue the company on behalf of over 10,000 of their peers, so according to the lawsuit, they say google paid women less base salaries, some bonuses, and fewer Stock Options from men in the same jobs. Google for its part has tried unsuccessfully to dismiss it, and a representative for the company says they plan to defend their policies. But a lot of eyes will be on what the judge decides in this class certification hearing. In december we saw a group of women earlier this year successfully move forward with a classaction suit against oracle. Alternatively, similar cases against twitter and microsoft were denied. We are going to have to take a look at what happens here. Jennifer, ubisoft has also been in the news for harassment allegations. It is a familyowned company. Can they really change . Really been long overdue. Earlier this summer we saw several women come out publicly acknowledging their experience with sexual misconduct, and as it pertains to ubisoft, they have apparently a toxic work culture, and women are saying now is the time to speak up. You mentioned they are a family run company, but in the past few weeks we saw the ceo swiftly take action after these allegations came out. He ousted several executives at the company and promised extensive changes. But in my reporting on women, it is one thing to say you are for exclusivity, and it is another to change business practices, especially when women make up such a large portion of gamers around the world. If there is a major incentive for a company like ubisoft to address the problem that exists in the industry and manifest itself in some of these games, especially at a time when everyone is home and playing games now more than ever. Francine . Francine jennifer, thank you so much. Jennifertage zabasajja right there. Up, pubs, cafes, and restaurants are already open in england. Tomorrow it is the return of jims. Of gyms. The chief executive of pure jim, the u. K. s biggest operator, is up next. This is bloomberg. Francine this is bloomberg surveillance. Pubs,es, and rest cafes, and restaurants are already reopened in england, what does the future hold for industry that relies on packing customers into a small space. Thepleased to be joined by ceo of puregym, the u. K. s biggest jim operator. Gym operator. How much of a nightmare is it keeping your customers safe . Fair amount of experience in doing this now because we have gyms reopen in switzerland and dense mark in denmark. We have protocols and procedures that we are very confident about, setting up and keeping people safe when they work out. There are 10 Million People in the u. K. Who are working out in gyms. Many of them want to come back again. So we are constant in terms of what we can do. Procedures toe separate equipment, provide plenty of social distancing. You mentioned the small gyms. The average size of our facility is about five or six tennis course, thats tennis courts, so we can provide plenty of rooms for people that plenty of room for people. Theyre instituting a great new cleaning and sanitization that weand procedures have always kept our gyms clean, but we need to hold her selves to a completely different standard in the new area that we find ourselves in. We are confident we have got that right and we are ready to go tomorrow morning. Francine given that you will have to accommodate less people in your gyms, what does that mean for revenue and sales . Provided are members work with us a little bit, what we found in denmark and switzerland is, people are not crazy. They want to avoid the busier times and places. People have a bit more freedom in terms of working hours, so ory are coming in an hour two earlier or in hour or two later, and they are avoiding the morning and evening peaks. We can still offer lots of people the opportunity to work out. So provided people work with us in that regard, we can continue to provide a great workout at a great price. We are only 20 pounds a month. Bute i understand when do you think you will get back to normal . Even if people work with you, you will not have 100 attendance like you did in december, 2019, right . 80 , 40 percent capacity, and you are hoping as people feel more comfortable you will slowly build up to an 80 number . Humphrey when we have seen across europe, we have 240 sites week openk and at 6 we open at 60 , 65 , gradually built up over time, and we are trading at about 90 the equivalent period in the prior year. We are seeing a similar trend in england. U. K. Has had a worse crisis than switzerland and denmark, but nevertheless we think we will get back toward the end of the year and be part of next year to a pretty reasonable level of activity, and certainly a level of activity that is economically viable. Nothing is worse than managing with zero revenue, so we will get back to it reasonable level of viability. Francine how many more people do you think well just want to stayathome and have online classes, and what provisions are you taking to cater to those clients . Who still want to be part of the experience but just want to do it at home . Humphrey we put in a huge effort into online classes. We made hundreds of classes and routines available freely to all of our members and actually to anybody to download. We think it is great for people to be active which ever way they want to do it. Withe that as symbiotic the corporate vision, and we the membership we have had, including in ireland and the u. K. , there are lots of things at the gym you cannot do at home. You dont have sets of dumbbells , all the things that people want to work out with thats part of their routine and discipline and get in the gym. We will see people use a mixture of those things as well and we will see many people coming back to gyms, too. Remember, this is a Health Crisis where the need for physical activity and fitness and the benefits have never been clearer to people. We will see a lot of people wanting to get more active, and we hope he number of those will come back to us in the gyms, the number of those will come back to us in the gyms. Cobbold, humphrey chief executive of puregym. Thank you. There is concern about escalating tensions between the u. S. And china. It is also that recovery in the Worlds Largest economy has stalled. 1900 aning near ounce, close to an alltime high. The dollar also extending the weeks slide. Gold has been on a rally and we spoke with mark mobius about the precious metal. Mark the fact that Interest Rates have gone down, that means the emerging rates with corporate debt and sovereign debt can move down. The second thing is the amount andoney that world bank other organizations are putting into these markets to enable them to pay back their debts and do some infrastructure spending, that is another thing. Within the countries themselves, they have been increasing spending, taking a lot of their budget. It means the budget deficit is going to be greater, but that has also been pouring into the markets, so i think it is a combination of these things that led to an increase. The interesting thing is that gold has done just as well as the equity markets. I noticed that. Although gold lagged since the beginning of march 2 this year to now, gold has lagged the s p 500. But if you look at the fiveyear numbers, it is exactly the same. About theone up same, 75 from the low in five years. So we are in a very interesting situation, where people are looking at stocks to preserve their capital, because stocks will adjust to inflation. And also gold. They are hedging their bets. That up. Ad you brought when i look at real yields, particularly in the u. S. , and then i look at gold, that to me does not really say vshaped. In terms of inflation expectations, we are still 100 basis points off even where we were a few years ago. How do you reconcile that . Mark one thing you have to remember, when Interest Rates are high, people will tell you you your holding gold. Gold does not pay any interest. Are zeroInterest Rates or near zero, then gold is an attractive medium to have because you dont have to worry about not getting interest on your gold and you see the gold price will rise as uncertainty in the markets are rising. By the way, one of the other interesting things about gold and i have not gotten numbers i have not looked at the numbers recently i assume that mine output should be declining for gold, and that puts additional pressure upwards on the price. Francine when you look at the latest u. S. China spat, does that dinner is does that diminish your appetite for these things . We should see between china and the u. S. , china and u. K. , china and other countries . Mark we factor that into our calculations, and china, along with brazil, and india, are very china and india are very big for us. We look at what the global nonus activity is. For example, i dont know whether you have seen it, the Alibaba Financial Services has now teamed up with photo, in south africa to provide Financial Software and apps. This is the kind of thing that is happening. These Chinese Companies are moving globally to places where they are not going to be affected by the situation in the u. S. That is where we have to look. There,his before we get gold, are you buying it at these levels . Mark yes, i would be buying now and continue to buy. Alix what about silver . Mark silver also, because silver will follow gold. But gold is the most important. Francine that was Mobius Capital Partners founder mark mobius. Far from a deal behind closed doors. From aussed the latest brexit editor up next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Im Francine Lacqua, here in london. Get to the u. K. Politics. This week separate talks between britain and the e. U. Over their future relationship, and this with both sides, saying they are still far from a deal. In private, officials said they are making progress in key areas. The u. K. Chancellor has directed an extra 3. 7 billion pounds of funding for scotland, wales, and Northern Islands to help them deal with the pandemic. And the north and Northern Ireland to help them deal with the pandemic. Hun the noise, is progress being made . Yes. For all the theater yesterday, where they are talking about big differences, a deal being unlikely, progress is being made in a couple of key obstacles to a deal. The european side has recognized that european justice is not for the brits. They dont want to impose that on the u. K. On the others, the british have record highs structure of the deal needs to be structured in a way that is tailored to the european side. Appearopeans may want to may want to repeat what they did was switzerland where there is a series of agreements. It no way affects one area if there is a problem with another. An british are cognizant of issue and they may be prepared to compromise. So two big issues that theyre issuing closer to on an agreement, but they are still there are still big obstacles with the level playing field, affecting competition between the two sides, and it may be that there could be compromise on that nearer the deadline. We are not at that point yet. Any negotiation would give away a key concession, so this looks like it is going to go on right through to the deadline in october and down to the wire. Quickly, how much is the money for scotland, the other nations, and is that to keep the union together, or is it for covid relief . Edward on paper it is for covid relief, to help them deal with the pandemic, that there are very real concerns on the government side about the union. Brags it has obviously played into that. Obviously brexit has obviously played into that. Scotland obviously voted against brexit and it is opposed to it, but the government has made a key point of being different, expressing differences with the u. K. Government and the way it handled the coronavirus pandemic. In practical terms, the results, the results may not be that different, but the communication causeven the nationals a a boost over the months. Francine thank you. We will have plenty more bloomberg surveillance. Tom keene joins me out of new york. Later, a discussion with Peter Oppenheim or of goldman sachs. This is bloomberg. Francine titfortat. China tells the u. S. To close the consulate in chengdu. Pompeo rhetoric mike up the rhetoric. A republican plan for the pandemic rolls out on monday. Extra relief funding to scotland, ireland, and northern wales in the u. K. Gainhe nasdaq erases its for the week. Good morning, everyone. Welcome to bloomberg surveillance. Im Francine Lacqua in london, tom keene in new york. Tom, gold, gold, gold. We may get a 1900 handle or close to it. I like the way you readjust your bowtie right before we see you on camera. Francine i havent tom well, i havent looked in a mirror in 82 years. On a friday, you adjust