Francine a couple of days ago. They are close in condemning huawei in china. This is over a security law that china did in hong kong with the u. K. Offering to suspend the extradition treaty with china, something that china has not taken so well. Nott punish the u. K. By doing dont touch football. It is something that actually could simmer, but we had a great story on bloomberg yesterday saying that under president xi, we could just see a china versus u. S. , china versus u. K. , as he is ready to take on the world as being the strongman back home. Tom it will be interesting to seal. I will be emailing our chinese brethren, on crystal palace, i believe, sunday. Right now, first word news with karina mitchell. Karina bloomberg has learned there is a settlement in the Goldman Sachs case and malaysia. Elation would drop all criminal charges it malaysia would drop all criminal charges against the bank. China has struck back. He has ordered the u. S. To close its consulate in the southwestern city of chengdu in retaliation for the u. S. Decision to close the chinese consulate in houston. China says the action is a legitimate one at necessary. President trump has given in two worries about the coronavirus, canceling his florida nominating convention. That was going to be the biggest event of his reelection campaign. Florida just posted a Record Number of deaths from the pandemic. The president said he did not want to take any chances. , we tail sales soared last month. Saleswere up retail soared last month. Sales were up in june and are now approaching their prelockdown levels. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more im karinauntries, mitchell. This is bloomberg. Tom . Tom greatly appreciate that. Lets go to equities, bonds, currencies, commodities on a friday. Maybe not the nuance of yesterday. This could heat up. Futures negative nine, dow futures negative for. This comes back from the level. S francine talking about gold. She owns it up to her eyeballs, i dont own any because i am up to triple leverage bond yields. Off the lower yield bridging of the last 48 hours. Francine . Tom, we dont trade here in europe. The gold i have is bracelets from my grandmother. As is what im looking at overall. If you reach that psychological that is an00, alltime high. I dont know what happens after that, but we will speak to a couple of technical analysts on that. Sideways, dipping european bonds also falling after u. S. Treasuries turned lower, tom. Tom . Good. Chengdu where is it . Maybet know it because we wander out to beijing when we go past the pacific. It is not far, far west but it is on the way to west. Chengdu well, that is the entryway to the pandas, the entryway to tibet, and the entryway to china. Sharon chen is in chengdu. What has changed in chengdu on this friday . Obviously there is a lot of attention on the u. S. Consulate, on the announcement that china is there were many large crowds outside the consulate, curious veterans looking at what is happening. We did not actually see any , but securitymats was really tight. There were dozens of policemen, army personnel, security agents patrolling the street outside the consulate, checking cell phones checking ids, not allowing anyone to take pictures or videos. Everyone was kind of on edge and waiting to see what is going to happen now that the announcement has been made. Francine what will happen next . Itit oneforone, what does escalate . Or does it escalate . Aaron the u. S. Has closed consulate, china has closed a consulate, but there are so many other issues that the u. S. And china are in combat overcome everything from trade to taiwan, hong kong sitdown, huawei such a long list of things, and escalation could happen on any front at any time. Tom sharon, explain to us the beijing to sheng do, from shanghai to sheng do to chengdu. Even the same in europe and the United Kingdom how far away is chengdu for the pacific rim . Dont really, i know the numbers, but, you know, like you said, chengdu is in the southwest. Idea. T is a fascinating what are the businesses in chengdu that we risk with this economic sequestration . What are the economics or the finance that we will miss . Mean, iyeah, well, i think the closing of the consulate, the main impact is on kind of the people to people relations between the u. S. And china. It is a big place where people go to get their business processed, and now all these workers have been locked out of the u. S. And that is a huge part. But chengdu is also wellknown as a tourist destination. It is well known for its pandas and for its cultural significance. You know, given, us a sense of what president xi is doing right now after mike pompeo called him some pretty bad words. This president xi take offense, or is it business as usual because it happens and he does not take it seriously . Sharon president xi, his demeanor and his approach is obviously very different from what trump would do, so it is very unlikely that we will get some kind of reactionary statement or something that is as whatas inflammatory mike pompeo said. It is always very measured, and when the chinese speak it is always kind of in this coded language in terms of how serious they are taking it. I would not expect some kind of explosive statement. Tom sharon, thank you so much. Sharon chen with bloomberg in beijing, and of course reporting here from chengdu. Coming up, we have some wonderful conversations. Elizabeth economy joining us. Later on, ambassador haass will join us from the council on Foreign Relations. Stay with us. Futures negative six. Tom bloomberg surveillance. Good morning from london and new york. An eventful friday after a really odd week. We will address the chaos in washington in a bit, really remarkable what we are seeing in washington with the path stimulus here to august seemingly walked right now. Lets rip up the script right now. What a debacle yesterday for the republicans in washington. How does that for into your belief in the equity market . If we struggle to get stimulus, what does that single signal for Equity Investors . Obviously there will be a challenge. As you point out, this is good to go for the market because it is good to go for the economy because it is could go for household spending. This has been such a strange contraction, and one of the Silver Linings that really has helped the market rally and helped stabilize the economy is that the magnitude of the stimulus actually caused real disposable income what households have to spend to go up year over year, and of course that is the function of the generosity of the initial packages. Have a fiscal cliff coming up next week. If that is not replaced or at least mostly replaced, you have to start to seriously question whether households can maintain this level of spending. Tom not that Laurence Fink has sent you a memo saying by the dip, the habit out there is to buy the dip. Do you have to pause as you wait for the certitude of the fiscal policy . Russ you certainly need that stimulus, but there are other things that are likely to inhibit the markets in the next few weeks and the next few months. We have been long risk, and it has generally been the right play. We think we are entering a period where it will be volatile. The fiscal side you still dont have this to millis under control. Thelly, there is the stimulus under control. Finally there is the hannah the 800 pound gorilla. It will be a more range bound market during the next several months. Francine, that was an 800 pound panda come in case you are asking. Francine russ, what do you want in the stimulus package from the u. S. . Russ i think the most important thing is to continue to support u. S. Households. I think another important component is to support the health care system, it obviously is still struggling to deal with the pandemic. The third component is very important, supporting the states. States are under enormous fiscal pressure. Think about the massive loss of revenue, given people working from home, all of the closure of businesses. That is the third component that the market will be watching very closely. All mean what does it for market dislocation . Where do you see the biggest market dislocation . Think the place to watch more than others right now are some of these cyclical names that have just jumped, surged over the last several months. It has been uneven, and the value growth flotation growth locations seem to have gone back and forth over the last several days. Directly tiedese to household spending. That is not completely irrational if you believe the government is going to continue to prop that up. If it is less tenuous if it is less generous and you will see more shut down due to less economic activity, you have to question if those kinds of stocks can continue to rally or if there will be a pullback. Tom we will tom we will talk in the equity market, there are three outcomes as a general statement. It is still a tech rally, we finally rotate to the unloved, as you mentioned, the cyclicals. Or the oddest of odd things, both go up or both go down. Which will it be . Russ i think we will be in an environment over the next six to nine months, where i still think you will see tech outperform. It is not just tech, it is health care, tech related names, and consumer discretionary. The basic reason is these 99. Ness models, this is not these are phenomenal companies. They have great cash flow generation. As you very well know, the cyclicals to rally for more than a week or two, you will need a sustained recovery. That is still something that is not obvious. We will have recovery, but will it be consistent enough to drive the value rally . We have not seen that since the back half of 2016. Tom russ costa rich with us. Futures russ coaster rich how many Strategic Decisions are out there right now, and are they interrelated . Sounds like dr. L arian. Mohamed elerian. Jon ferro will do the grilling. Our simulcast coming up as well. This is bloomberg. Good morning. Francine this is bloomberg surveillance. Tom and francine from london and new york. We were talking about the h. Rkets with russ koesteric lets get back to him. How do you protect some of the gains you have had so far . What is the one question you get the most from clients . Russ i think this is it, and it used to be easier. The last decade you could basically fall back on a 60 40 portfolio, and you knew the duration, the treasury out location was going to protect you. It is not that it wont help, but the problem is with the u. S. 10year now below 60 basis points, there is a limit to how far treasuries can rally, even as stocks selloff. It has become more complicated. We are relying on a broader palette of tools. We have cash in the portfolio, we are thinking about currencies in the hedge. Quality is a scene in the portfolio quality is seen in a portfolio as crippled. It definitely is more difficult than it was a year ago, given her treasury yields are today. Francine what happens to gold from here . Can it go to 2000 and beyond . Russ it can. I think for what is a very simple reason. The problem with gold is that no one can ever agree what it does as an inflation hedge, or is it Something Else . The other is you cannot value it. We do know how gold performed under different environments. The biggest driver of gold is the opportunity cost, and the way you measure that is to look at real Interest Rates. Real Interest Rates are about as low as they have ever been. They have fallen about 40 basis points in the last month alone. That is a huge tailwind for gold. We think gold can go higher, and we do have a meaningful position in the portfolio. Tom i love talking to you because you take a more thoughtful tack. They be it is your legal background, i dont know, but it is an odd thing in the financial space. We have a philosophy now of finance, and it is the finance people playing with this, playing with gold, playing if that. The problem is we have a philosophy of financial repression, and it continues. How long can we keep this game up as a society . Russ that is an excellent question, probably above my pay grade. The answer is probably longer than we think. You remember 10 years ago there was all the talk about printing the money, what it was going to mean for inflation, and we have not seen that. Ultimately, the limiting factor is going to be inflation. The reality is there is a lot of deflationary pressure or disinflationary pressure going the other way. We have aging populations. People spend differently when they get older. Technology is a huge disinflationary force. I think this can last longer than people expect, given all those secular factors. Tom do you look at the buildup in the deficit as inflationary, or is the deficit so did, we are looking at a 4 trillion or 5 trillion deficit . Russ there is some evidence that the debt levels actually act as a drag on growth, and different people will debate that. That is one thing to consider. I think the reality in this environment is differentiating between the gross debt and the debt that is actually held by the public, because reality today, much of the trillions of dollars that is being spent is deficit spending by the government, simply winding up on the Balance Sheet of the fed. That is a very different dynamic than what we have seen in the past. Tom francine russ, what makes you worry about the economy more than other things . I dont know if it is run away or rampant inflation, but is it a call to make now, or can you wait to make the call for 2021 . Russ it might be 2022. I dont think there even if we see acceleration, i dont think it will happen today. You have this massive demand instruction. Households still have a lot of uncertainty. Unemployment is over 10 . There is not a lot of pressure on wages. It would be an odd time to see inflation accelerate. What i really worry about is what is going to happen to all the Small Businesses in the u. S. That are a source of hiring, that ari back on for the economy, that are going to struggle as long that are the backbone on the economy, that are going to struggle . That to me is something that is not being talked about enough. Everything has spoken about it in terms of the bipolar economy. Tom one final question where does all the big money go . The private equity money, the Financial Institutions waiting for something to do . Where does it all go . Russ a lot if it will go to where it is going in the past, looking for Business Models that are robust, that can survive in a slow growth environment, that are in secular growth themes. There is a reason people are looking there. The old joke is, that is where the money is. Tom that has been this has been brilliant. Russ co. A rich esther rich. This is subject to change as we get to the opening. Futures worse, as they say. Worse earlier. Negative four, dow futures 17. Yields were in and lower early in the morning. That abruptly switched off better than good e. U. Data. Showing a better economy. Yield,gh the 10 year the 30 year bonds does better with a higher yield, a lower price. 1887 an ounce. It 44, a barrel, make brent crude. Francine, i think thats great. The heritage of the family, everything is going up. Francine there you go. I never thought of it as a value investment. I should have got more bracelets, tom. This is what you get if you look at the markets. Tom dont write options against it. They will take it. Francine coming up next, we speak with Elizabeth Economy, council on Foreign Relations director for asia studies. We talk about the u. S. And china spat. 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. But what if you could stdo better than that . K. 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. Francine this is bloomberg surveillance. We will talk about the u. S. And and a a second second. In a second. Payna Goldman Sachs will 3. 9 billion in malaysia will drop all criminal charges. Bank isg reported the close to a settlement in that case. China threatened to retaliate for the u. S. Closing its consulate in houston, and now it has. The u. S. Has been told to shut , a keysulate in changdou listening post for u. S. Ibet,opments in th to it is getting difficult to get a clear picture of the coronavirus pandemic in the u. S. The problem is testing shortcomings. New infections may be significantly undercounted. Testing say 67,000 new cases are reported everyday, but the likelihood is closer to 200,000. Resorts in the caribbean are reopening the tourism, but not for americans. They are giving americans the cold shoulder. Authorities are afraid they will spread the coronavirus. The bahamas will begin barring commercial flights from the u. S. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. I am karina mitchell. This is bloomberg. Tom a russian rate decision, down they get when the rate. 4. 25 . This is something we are seeing with a global slowdowns. If you are lucky, you come out of your academic grind and publish a book. Elizabeth economy did that black. River runs she finished up with a third book, the third revolution, immediately definitive on the fragility of the communist party in china and the new experiment of president xi. She joins us from the council on Foreign Relations. Is the strength of the communist party right now . What is the leadership quality, the leadership strength of president xi . Elizabeth great to be here. The chinese are under enormous pressure, the chinese leadership. Even with a Small Economic rebound somewhat expected in the second quarter, they are facing rising unemployment. Program overonal the actions they have taken and hong kong, over there assertiveness in the south china sea, the trade war arent going with the United States. Xi is feeling battered to some extent. He is getting it on all fronts. Even his belt and road initiative, many countries are requiring asking or requesting forgiveness of the debt. A lot of pressure is on xi jinping. On the other hand, when you look at the way china managed the pandemic and you compare it to whats happening in the United States, xi jinping looks a lot better. I think he is getting some strength from the fact chinas recovery is on its way. They are managing their outbreak fairly well. Look at whats happening in the United States. Tom the game theory is simple. It is a game of chicken. At some point that unravels. How does the tit for tat unravel . Elizabeth i am puzzled with what is going on right now with u. S. Policy. I have been a supporter of the Trump Administrations efforts to recognize new challenges xi poses. C it seems as though the punishment is the endgame. We are simply seeking out areas to punish our retaliate against china. There does not seem to be any longterm strategy. There is no endpoint to a tit for tat in that context. If you dont know what youre driving toward, the punishment becomes the end. Im concerned we seem to think in the past month we have had four major speeches and the Trump Administration on china. We have had a range of punitive actions, indictment of hackers, the closure of the houston , the withdrawal of hong kong, for goes on and on. Maybe this is their effort at shock and awe. Our overwhelming firepower and dominance is going to sap china of their will. That is clearly not happening. I am puzzled as to where the Trump Administration thinks these kinds of actions are actually going to take us. Francine elizabeth, that means it could escalate quite quickly . Administration want to do something but at the end of the day realizes it cant to quickly because then everybody is damaged . Elizabeth there does not seem to be anybody pulling the brakes on the administration at this point. There is no diplomatic engagement. We have no ongoing set of consultations with the chinese at this point. The trade negotiations. Said hepresident trump does not care as much about the to. E deal as he used even that, his pride and joy. It is tossed into the trash bin. Im concerned we dont have anyone in this white house saying, where are we going . What are we yielding from all of this . That is a question the administration does not seem to be asking. What behavior are we actually deterring on the part of china . It seems we are just punishing, retaliating without a sense here is how chinese behavior is changing or has changed as a result of our actions. I do see this continuing. I dont see evidence that Trump Administration has an endgame insight. Francine is this a longerterm thing . Overworld supremacy in the next 10 years . Over world supremacy in the next 10 years . Elizabeth as long as xi jinping is in power, it does span economics and military and ideology. There will be conflict. Its about how you manage the conflict. I would imagine a new if not the Trump Administration for another four years, will adopt a different approach. It does not mean a Biden Administration will not be equally tough on china, but it means we will be engaged with china. Look for areas of common ground. Put the United States back into multilateral institutions where we can have greater influence. I think we will have a rethink of china policy. Tom this is what you do. You fly into hong kong, you fly to singapore. Will sit in a room and you will hear a pin drop when they asked the question, what should we do and hong kong . Should the business and finance operations of hong kong begin to make plans for singapore . It is ah i think difficult question. Enormous between my sympathy for the people of hong kong and desire not to inflict any greater pain on them and the kind of pain that would come of aa real withdrawal multinational presence in hong kong. My feeling is that china is transforming hong kong into just another chinese city. The Financial Institutions and others are dependent on the rule of law, independent judiciary, transparency, the norms of governance they have come to expect from hong kong. They have to understand those are probably lost. That is the determination they will have to make. Tom Elizabeth Economy from the council on Foreign Relations. Cannot say enough about the third revolution and the new chinese state. I read it cover to cover. Coming up, we left in fridays strong. Us. With futures, 11. This is bloomberg. Good morning. Francine this is bloomberg surveillance. As we track the virus, bloomberg has developed a partnership with a leading authority on covid19. Johns hopkins has been at the forefront of the International Response and we bring you experts in public health, infectious disease, and emergency preparedness. ,oining us is Andrew Pekosz professor and virologist. I think the cdc has laid out some guidelines on School Reopening in september. What do we know about how covid19 through young kids . They are veryknow young, under the age of 10 the very young, do suffer from the disease. There are secondary syndromes that occur in the population. Infection is not severe and under 10. We dont know how well the population of kids is transmitting the virus to others. We know from other diseases like influenza that the very young are actually good transmitters of the virus to their teachers, schools, parents, household members. That is the information we are missing and that is critical for opening schools, particularly schools for elementaryaged kids. Statisticsed at the and the log slope. California is actually good on a relative basis versus the disaster that is florida and texas. Is it fair to combine florida and texas together to aggregate their data into what is to come on cases becoming deaths . Andrew this disease has shown localis really about spread and local transmission and local cases. I tried not to encourage people to collapse too broadly across other states. I think you are correct in terms of there are more worrisome numbers coming out of texas and florida, and some other states actually. Even worse than that is the large number of states that are showing the beginnings of increases in cases. There is a systemic issue going on across the country in terms of how we are intervening to keep virus levels down. Tom alabama and mississippi are having a tough week as well. If that is the case, what is the experience we have learned from new york to help florida . Andrew massive testing. Capabilitiesckdown in terms of being able to limit the spread of the virus. , waiting until those virus cases get down to manageable levels. There are a number of guidelines out there. One of the ones the cdc puts forward is this 5 positivity testing. When you get down to those levels, then other interventions like Contact Tracing can be put in place effectively. That will then be the tool that will keep infection levels down. Contact tracing wont work when youre having 60,000 cases across the country come through because that is too much of a strain on the infrastructure. It cant be done effectively. Francine we spoke to the chief executive of rouche yesterday. He is worried we are testing too much. Peopleested we only test with symptoms. With that be enough to get a handle on this would that be enough to get a handle on this . Andrew if you are getting tested and dont get results for four, 5, 6 days, the testing is almost irrelevant. You will have to be in quarantine for that time. The current guidelines say you should be quarantined for 10 days after experiencing symptoms. We have to find a way. If testing is going to be limiting, we have to use it more effectively. We may need to scale back who we are testing to speed up the time in which those results are coming through. To have seen the Manufacturing Capabilities and Distribution Capabilities for these tests would have been scaled up so we could handle a larger metatesting, but it seems like a larger amount of testing. It seems we are having a supply chain issue when it comes to testing. Francine i know there are new guidelines about reducing the time someone needs to spend in quarantine. Is 10 days enough . Andrew it certainly seems like the data coming out now is suggesting 10 days is a reasonable time for quarantine. Using to telle the people are infected are so sensitive that they detect even small amounts of the viral gene, the viral rna. It is clear when we detect the small amounts of rna, that is not enough virus for the person to spread it to someone else. The new cdc guidelines reflect the fact what we are really interested in when quarantining someone is the period of time they can transmit the virus. Going from 14 to 10 days maintains a high probability we are keeping people away from other people during their transmission times, but it allows them to get back into normal activities a little faster when they pose little risk of spreading the virus. Francine great. Andy, thank you for joining us. Andrew pekosz of johns hopkins. Check out the bloomberg for the latest information. Tune in everyday for our conversations with johns hopkins. At swan, that conversation 11 30 a. M. In new york. We will talk about intel and valuations. That is 4 30 p. M. In london. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. Karina good morning. Shares of intel are falling the Company Revealed that a new chip production process suffered another delay. That boosted rivals. At issue is a new method for cranking out smaller, more powerful chips. It is the latest sign the coronavirus is wreaking havoc in hollywood. Disney has canceled the august release of the anticipated film delayed future star wars and avatar movies by when you. Amc has delayed his reopening until midtolate august. About 400,000 Airline Workers around the world have been fired, furloughed, foretold they will lose their jobs because of the virus. The biggest losses have been in north america, europe, and asia. Job losses in related industries such as aircraft makers, airports, and travel agencies could reach 25 million. That is the Bloomberg Business flash. Francine thank you. There is a settlement in the case involving Goldman Sachs and malaysias troubled well fun, one mdb. Numbers are being are bigger than what we thought. How surprising is this . It is very surprising. They are talking about 2. 5 billion in cash. , that wille number assets. The form of seed francine if this is a number that gets confirmed, is that it . Is Goldman Sachs no longer implicated in this . Yudith yes. Numbers, therm the 2. 5 billion cash amount. Goldman thet of charges will be dropped. It does include a line that says droppingrnment is applications on other charges, including joe lo. In the statement it talks about how this deal basically the underfunding the employees have pleaded guilty. It does not mean these people, but it might not be the deal might be other parties involved in the case. Tom when francine when you respecting this to have how quickly can this be confirmed . Yudith for the numbers . Francine yes, for the numbers. Elementa 3. 9 billion settlement. Is this a completely done deal . Yudith yes, it is completely a done deal. They already have the signing. They have been here all week to hash this out. Does this is this acknowledgment of misconduct of two other former employees . Will there be legacy issues and how they are seen in the region . Doesnti think goldman have a huge presence for dealmaking in Southeast Asia and not in malaysia. Just means that goldman this will pave the way for goldman to increase their presence. As a find they as a fund they dont have that big of a presence here. Francine this is what the markets are doing right now. The futures are drifting because they are worried about the escalating chinau. S. Tensions. They worried the recovery in the u. S. May actually have stalled. Treasury yield touching an alltime low before bouncing back. Gold trading near 1900. That is close to an alltime high. The dollar extending a weak slide. Bonds are falling after the u. S. Treasuries turned to lower. Coming up, more bloomberg surveillance with richard haas e. That will be brought to you by tom keene, Jonathan Ferro and lisa abramowicz. Coming up is more bloomberg surveillance simulcast in just a couple of minutes. They will talk tech stocks, the economy, treasuries, and stimulus. This is bloomberg. I think the vshaped recovery is very hard to see. When we talk about a correction at this point, we are talking about a normal amount of turbulence in the equity markets, which would be about a 10 correction. Fiscal stimulus gives us that shot in the arm and buys us time to get there. That is what the u. S. Economy needs. We are right at the edge of a huge fiscal cliff. This is bloomberg surveillance with tom keene, Jonathan Ferro, and lisa abramowicz. Jonathan for our audience worldwide, good morning. This is bloomberg surveillance. Alongside tom keene and lisa abramowicz, im Jonathan Ferro. , once again, its about tension between the United States and china. We get the tit for americas tat. Tom we