1. 1747. , 1934. 74. Another busy week for the markets. 189 s p 500 Companies Due to report. Some already reporting today. We also have the fomc Rate Decision on wednesday as well. We welcome margie patel, Wells Fargo Asset ManagementHoldings Managing director. Characterize this earnings season for us. It has been encouraging. Last week, we have 20 of companies reporting. 80 of those were above expectations, even though many said they were not in the position to predict earnings for the year. Uncertainty, very pleased with the first reports. You to would that cause be a buyer of these companies, or is it more of a relief that we are not seen the bottom fall out of the market . Margie what it tells you is that, with no proposition from most of the fixed income market, stocks really look reasonably year ifve over the next they can raise their earnings. Many of them are in a position to do that. That is what the markets are reflecting. , theyes dont look bad dont look overpriced compared to historic p es. Vonnie how do Companies Grow their earnings, except for a small bunch of them, in an environment where we may see Unemployment Insurance go down by 400 or more over the next two months, if that transitional agreement gets put in place . Margie that is why you are seeing a lot of money flow into thatll handful of names people feel have an assured path for higher growth. That is why we see happy Dozen Companies dominating the movement in the standard poors. Underneath that, other companies have done well cutting expenses even where there is organic growth, even some parts of the consumer markets, and sumer products are doing well related to housing. Some parts of the industrial sector have done well. Ring, wee more resho should see those Companies Benefit from capital expenditures. Vonnie are you a fan of industrials, housing stocks . Areie we still concentrated in the two sectors we think have longterm secular growth. That would be the Technology Sector and the Health Care Sector are. We particularly like those because they are fundamental longterm demand. We think that is the most attractive place to be. In industrials, where they have a high technological component, intellectual property component, we like the industrials. Vonnie basically a pandemic world that you are investing in. The 10year yield at 59 basis points, at what point do you see that breaking out of that range . Margie i think treasuries are trapped in a zero world for as long as the eye can see. I think some parts of the highyield market still look attractive for fixed income investors. Highyield junk bond, yields around 5. 5 . A lot of extra yield when treasuries are approaching zero. Even bonds rated bb are trading around 4 . That is good relative value. Vonnie what allocation is good value . If you are talking about a yield of 5 for junk bonds, looking at a slew of more bankruptcies, is that a good risk reward profile . Margie only if you stick to the top of the one third of the highyield market, where bankruptcies are low. Commodity related, retail related. If you avoid those high risk areas, the rest of the highyield market should hold its value. Refinanced and have pretty good Balance Sheets they can withstand another 12 months of depressed earnings. So we like better quality in highyield. Vonnie what about the banks and all of the financial stocks at the moment . Ave heard various calls things are still a great place to be, they are overvalued, to stay away. Techiew on financials, fin or otherwise . Margie we have pretty much avoided the Financial Sector are. We didnt think they would benefit from rates dropping, and they havent. We dont see an explosion in loan demand that would help the banks, so we are neutral in that sense or. They have modest secular growth. By and large, we have looked for other areas where companies can make their own future by innovating and having new products. I would love to know your thoughts on this move in gold. Your thoughts on gold hitting a record, what that is down to . Margie personally, i cannot see it from a fundamental inflation way of looking at it, but i think it is a search for a safe asset in a world where there is uncertainty. Silver has also skyrocketed. It is a way of diversifying from other sectors. Fixed income does not look attractive. Is main negative on gold there is no carry, but with the zero,ries practically when you could earn insecurities is not that much, so that is just looking for some other safe assets to invest in, but no predictor of what inflation will do. For that. Ank you always love chatting with you, margie patel. Lets get to the first word news with Mark Crumpton. Oregon, aortland, night that started with a reported shooting and a bag found loaded with a rifle magazines during a peaceful protest turned into an intense confrontation early does morning between demonstrators and law enforcement. Whatal agents fired appeared to be tear gas, flashbangs, and pepper balls before dawn to clear protesters outside the federal courthouse in portland. Demonstrations also turned violent in oakland, california, richmond, virginia, austin, texas, and aurora, colorado. Adviseronal security Robert Obrien has tested positive for coronavirus. He has mild symptoms and is selfisolating. The white house says there is no risk of exposure to President Trump or Vice President pence. Mitch mcconnell will unveil the latest coronavirus really package later today. The plan will cut supplemental Unemployment Benefits from 600 give laidoff workers about 70 of what they were earning before the pandemic. Democrats want to continue the 600 payment through the end of the year. Major League Baseball has lost its first two games to coronavirus. Miami canceled its home opener 12 playersore after and two coaches tested positive. Philadelphia played miami over the weekend. The phillies scrapped tonights game with the yankees. Baseball was just a few days into its shortened season. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Vonnie welcome back to Bloomberg Markets. It is time for our stock of the hour, under armour. Now. S are positive right earlier losses today after it two executives were named in an sec probe. Stock dropped sharply in premarket trading on this news. It has pretty much recovered as losses, but the idea is that the founder of the company, kevin plank him as well as the ceo, have been named in this federal probe relating to the accounting practices. The allegations are that it theed forward sales from Third Quarter of 2015 and the end of 2016. Both have received notices that the sec is likely to allege certain violations of certain securities law. The sec may file enforcement action against the company. Certainly is not welcome news but not necessarily new. They disclosed in december that they were under federal investigation for more than two years. We know that kevin plank has already stepped down as ceo. He has disproportionate control still over the company, owns nearly 16 of the shares, giving him two thirds of the voting power. Even though he is no longer ceo, he has this extended control. He have to loosen his grip on the company depending on this outcome . This adds another overhang to under armour, a stock that has lost about half of its value this year. Vonnie the timing is fascinating because usually they report earnings on friday. What can we expect on these notices . It will be sure addressed on the conference call. The numbers probably are not going to be great for investors. Under armour has been struggling over the pandemic, has led to store closures for the vast majority of the Second Quarter. When we get these results, they are expected to be brutal. The average analyst expects revenue to call 55 on a year on year basis. Margins could also be a problem. Analysts see them narrowing because the company has also a number of wholesale orders, so that means more discounting and sales items, and that will mean more margin on the way. Vonnie kailey leinz, thank you. Moderna has started phase three of its trial for a covid19 vaccine, sending the stock up by 8 , almost 300 this year. We spoke earlier about the number of participants expected and what the company is targeting. You could have it in the november time frame. In october. E it that is not the base plan but the best plan. Couldon the data, the fda decide to give us emergency approval. That would make the vaccine available in the u. S. For people that are at highest risk, elderly, health care workers, while the fda reviews approval for general population. We raised 1. 3 billion of capital in may two invest in raw materials, equipment, hiring new team members, training them. As we speak, we are making as many vaccines as we can, with the goal of making 500 million, maybe up to one billion doses in 2021. Can we talk about how easy it will be to attract the necessary demographics within the test . How easy will it be to attract those key demographics, the most vulnerable, particularly seniors . Are people coming forward, wanting to take part in the test . It is a bit too early to know about phase three, given that we just started this morning. However, over the last week, we have had thousands of people across the u. S. Asking us to come into the study. We have spoken to diverse various groups. We want to make sure that we have the right representation. This might be a silly question, but bear with me. Is this a antiviral vaccine, t cell . That isis a vaccine able to activate both b cells and t cells. Be cells can provide neutralizing antibodies. Show twore able to weeks ago in our study is that we had a high factor of neutralizing antibodies, about four times of people naturally infected, and also showing t cells, which is good news for the vaccine. At the end of the day, like every other company, we have to run the phase three to know the full efficacy of the vaccine. We are seeing other vaccines produce a t cell response. Will this be one of the key differentiators asked him whether we get an antibody and cellular response . Is that one of the areas that people will need to differentiate . People are actively looking into the differentiation now because we dont have any more data. Everyone is trying from industry, regulators, to try and fromut what we know today phase one studies. The real test that everyone will have to go through is finding the 30,000 participants in the phase three study, 50 placebo control. To know thesuring true efficacy of a vaccine. People are trying to guess now. Phase three will be the real test for everybody. Vonnie that was the ceo of moderna speaking with us earlier on. Stay tuned because we are speaking with anita cicero of Johns Hopkins. Her thoughts on how to reopen schools safely. This is bloomberg. Vonnie this is Bloomberg Markets. Im vonnie quinn. Whether to reopen schools this fall are still unresolved as far as cases continue to spike across the country. Cicero,us now is anita director or the center of health security. There are various constituencies opening about when schools. How do you reconcile the different needs and priorities of all of these different constituencies . Anita first of all, there are the students, that everyone is concerned about, obviously. Then there is also the constituency of the school, teachers, bus drivers, custodians, other school staff that support the education within the building. Also, we should think about the families of the students, families of the teachers. Exposed yet know how they may be to contracting the virus, if it is brought home from school by other students or staff. Weree are there states schools should absolutely remain closed, no questions asked . Think for schools to open, to be successful in bening, they should really opening in places that have a low number of cases, load test positivity rate. U. S. , casesross the. Re increasing in 34 states test positivity rates are also higher than 5 in 34 states. Ths are also increasing in many states. When there is substantial community transmission, it is best to wait on schools. Arizona, florida, mississippi, alabama, others would meet the criteria. Vonnie how confident are you that children are less vulnerable in the main . Even though we do see some cases, they do seem to be less vulnerable. Anita what we have seen, when children contract the virus, they tend to have less severe symptoms than adults. Those with know that Underlying Health conditions, like adults, are more likely to have serious outcomes. So we need to look at things like obesity, serious heart conditions, some respiratory conditions. Also looking to children with intellectual or developmental disabilities. They are often more likely to have comorbid medical conditions that may put them at higher risk. Major League Baseball could not even make it through the weekend without canceling some games. Is there a danger that we go through all of this trouble to open schools and after the first week, there are cases across the country . If so, is it better not to open up to begin with . When schools reopened, i think we should be on high alert for cases. Not only so that we can make donthat those cases result in widespread transmission around the school community, but also when there are cases in schools, it will be important to get on top of those cases and really do a thorough investigation, so that we can learn more about the transmission of kids to adults, adults to kids within the school. It would be useful if we had thresholds to think about from cdc. What are the thresholds about when schools should reopen. Conversely, when should schools shut down . Should they be in a priority risk when we get a vaccine, should children come first . I think frontline healthcare workers should be at the top of the list in terms of other priority groups as well. We will come back and have another conversation with anita cicero. Deputy director for a Johns Hopkins center for health security. Coming up, we will discuss the latest in u. S. China relations. Leland miller will join us. Lets take a look at where we stand markets wise. The s p 500 up. 6 . The 10year yield, 60 basis point now. This is bloomberg. Mark im Mark Crumpton with bloomberg first word news. The body of the late congressman john lewis has arrived in washington to lay in state at the capital as lawmakers gathered to pay tribute to the longtime georgia lawmaker, an icon of the civil rights movement. Nancy pelosi led a delegation today to joint base andrews in maryland to greet his flag draped casket. The first black lawmaker to lie in state in the capitol rotunda. The Democratic National convention will be in milwaukee, wisconsin but will feature broadcasts around the country and prime time. With attendance limited due to the coronavirus, a televised version will include speeches and produced videos broadcast from cities and landmarks from across the united states. The convention will be held august 17 through august 20. The coronavirus pandemic continues to spread around the world. The World Health Organization says the number of cases globally has doubled over the past six weeks. There have been more than 16 million confirmed cases with more than 640,000 deaths worldwide. The head of agency today said we are not prisoners of the pandemic. Every single one of us can make a difference. The House Judiciary Committee will hear from william barr tomorrow. Accusedrney general is of politicizing the Justice Department to back President Trump on any issue. Democrats are expected to focus on such issues such as how mr. Barr has handled prosecutions of mr. Trumps allies, including michael quinn, and the recent abrupt decision to fire the u. S. Attorney in manhattan. They will also examine his role in using federal forces to suppress protests against racism and police abuse. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Vonnie im vonnie quinn in new york. Welcome to Bloomberg Markets. We are joined by our bloomberg and Bnn Bloomberg audiences. Here are the top stories we are following from around the world. Escalating u. S. And china tensions. Chinese authorities take over consulate in chengdu. The marlins and the yankees can sell games days into its shortened season. Major League Baseball faces a setback as coaches and players test positive for the coronavirus. It calls into question the safety of sports. Ofwill speak with the ceo marx realty on the state of commercial properties. Lets get a look at the markets, amanda. We are seeing some positive action, an interesting combination of factors helping markets higher. Materials are the real source of strength. Gold topping 2004 the first time in a long while. Thematerial some group is first one showing the most leadership, but tech is not far behind. It speaks to momentum in the markets. We are seeing some love again for big tech. We will hear from some of the largest as they report today. Health care is right along for the ride, some positive news. Moderna is front and center, its stock is up, as it boosts its funding again. Utilities, financials, and energy are lacking today. Are theist of concerns chinau. S. Relationship, the ongoing tensions. Chinese authorities seized control of the mission in china in what appears to be retaliation for the eviction of chinese councilmembers from the u. S. We want to bring in leland miller, ceo of the china beige book international, for a look at what is happening on the ground. And whathat base happened in houston there would be retaliation, china expressed displeasure at what was going on. How serious do you take what is happening in chengdu . On one level, we are in New Territory in the relationship. It is not normal to close a consulate. On the other hand, houston was shut down, not new york, san francisco. It was chengdu, not shanghai. Intensitys a certain in the relationship that is gaining steam and aggressiveness, but also a moderation in the actions. These are not as tough as they could be, they were done in order to send a signal, but not to create waves going forward. Vonnie both countries can operate on multiple levels. We can have diplomatic spats while moving along the trade file. Where are we on trade . We have seen a stuttering getting past phase one, hopes for a phase two. Where does it stand . Leland this is the real weakness of the china policy from trump. You have hawks in certain parts of the relationship, doves hoping to keep the trade relationship going. It is not clear where President Trump stands. There is an incoherence based on the back and forth. I would say the trade deal is at a very difficult position right now, because everything is pushing the relationship toward further deterioration. You have anger from covid, the november election where biden and trump will yell at each other about who is tougher on china, you have a trade deal that will not be hitting its targets. That will be increasingly clear with the data going forward. So much pressure on a trade deal to fail. Escalationt would an from here look like . We are just looking at them taking down some signs, fixtures from a consulate. It would be odd if there was a major escalation. Things a lot of these may not actually happen before the election, but a lot of things could be done to make markets nervous. We are looking at a bill that would delist tinys after only three years. Its possible the administration wants to jump the gun on this and announce that we are kicking off Chinese Companies in a matter of weeks or months. Things on the capital front, certainly, we talked about banning Chinese Communist members from traveling to the united states. Not too sensible, but these are the types of things that will make markets nervous going into the fall. Alio talked about this escalating into a capital more. How far off is that possibility . Do you see that this or next year . Leland i dont, especially 2020. Congress will like to threaten, President Trump will threaten something that will make people nervous. The reason it looks possible now, when it never did before, the government is written sing funds from going into chinese equities, doing baby steps to make sure it looks like capital flows are in play. These are not things that they will mess with before the election. The more you hear about this, the president get animated on this, we are about to step into financial warfare, start threatening, pulling them out of swift. Even a whisper that they could be on the agenda in the coming months, that will make markets again very nervous. We will hear all of these things and more in september and october. Amanda what is the current state of the chinese economy as it moves out on its own . How are things unfolding their economically . Leland i think people are making a big mistake by looking at china as returning to anywhere near normalcy. Of course we are seeing a recovery from month to month, quarter to quarter. What we are not seeing is what the chinese announced in her Second Quarter gdp data, which is year on year. We are not to the levels we were a year ago, certainly not eons. They announced these things so that they could hit certain numbers at the end of the year, which really counts for them, but they should not be taken seriously. Incrementally improving but huge parts of the economy are still weak. This is just an incremental return to levels that are still gains. Near allyear we are not back to where we were before, not even close. Vonnie you keep an eye on the granular data, goods moving around china and so on. What are you seeing . Are exports being curtailed, is production down . Leland in a nutshell, what we have seen the chinese recovery be is a recovery of the supply side. Government,anned they are very good at getting production up and running, factories running. They are able to get back to output levels similar to last year. It is a lot harder to move the demand side. Services are better but still weak your on year. We are seeing a return on the supply side. The growth we are seeing is on the supply side, not the demand side. It is not showing stronger consumption, and that is what other countries should be taking from this. I dont expect that to happen anywhere around the world. Vonnie always great to speak with you, leland miller, the ceo of china beige book international. Back hits mlbs come a snag after a dozen marlins players test positive for covid19. This is bloomberg. Vonnie this is Bloomberg Markets. Im vonnie quinn in new york. Alongside amanda lang in toronto. Major League Baseball has lost its first two games to the coronavirus pandemic after 12 Miami Marlins players and two coaches tested positive. The philadelphia phillies, their opponent this past weekend, had to postpone their game against the yankees. There will be some games here. T, just not the ones is this going to be confined to these particular teams . That is the question. The marlins played the Atlanta Braves before this, and their captors are already out with covid symptoms. Seen the Cincinnati Reds have players sit out because they were feeling sick. Confinedy, this is not to just the marlins. Obviously, playing the fillets, potentially spreading to them as well. Can we assume maybe it is too soon to assume but maybe it was a mistake to get sports teams together in practice and then restarting leagues . Nhl i say that with an eye on the nhl. They floated something nba, everyone playing in the same area. They were not really keen on that because it is really hot in arizona and there is only one indoor stadium. The question of restarting has been there for some time, but this really brings it to the forefront. Vonnie what are the players themselves saying, are they showing a united front . Is a former cy young award winner with the los angeles dodgers, plays for the dodgers now. He decided to sit out the season. Tweeted, this is case in point why i did not play. I did not feel it was safe to do so. Here you have an example of someone saying he did not believe mlb was putting the health of players first, not resisting the temptation to say i told you so. I reached out to a couple of agents, and they said their clients understand this is always a possibility, and they accept it. But you have to wonder. Someys, superstars guys, including some superstars like mike trout, did not play. Given that fans would not be in attendance anytime soon, which would be an important step back to normal, is the pressure coming back from tv revenue . Is that where the pressure is because that is where they make the money in these leagues . Na li will not make money if they dont play games, simple as that. The push is to get to the playoffs because that is where the big revenue is. Thoughtthink the owners sitting out the season was a good idea from a financial perspective. It is a hard temptation to turn down to basically forgo an entire season, prorated revenues. What would it take for them to close down the season, do you think . That is a good question. The only indication we have is, earlier this month, commissioner manfred did an interview where because it is a 60game season, if one or two teams was severely affected and could not play a bunch of games, for the integrity of the schedule, he said they would have to think hard about what they are doing. It seems like we are already at that point. There is a meeting today with the owners that i believe was scheduled. Certainly, you would think it is being discussed now, the wisdom of continuing. Thank you very much for that. We will stay tuned for what happens next. Many workers are being told they will not return to their offices anytime soon either. What does that do to commercial real estate and changing leasing practices . We will speak to the ceo of marx realty. Amanda welcome back. Im amanda lang in toronto. Fewer than one in 10 workers have returned to their offices, despite being given the green light to do so. That is according to tracking by landlords. It is a very changed picture, and we are hearing from more and more companies that they will not be sending workers back to the office anytime soon. I want to welcome craig ditelzweig, ceo of marx realty. Thank you for being with us. Lets start with that reality. Even when people are allowed to go, they dont want to, at least not yet. Leasingle in the business, commercial real estate, there was an on pause feel. When is a time to say we have to do Something Different . Craig we have been talking to a lot of our tenants. They tell us they are planning to come back right after labor day. There are some in the office right now, but you are right, it is not a lot of people in the office right now. I was joking to my team members, than people purel in Office Building right now. Happenseeing tours again. We are noticing that in those, cautious,e very interested in the lower levels of the building. A want to be able to walk up and down staircases, which is something that is new. We also see tenants interested in buildings within buildings, so that means they would have control over entry, who is in the building, and they want to really control their destiny, which speaks ill to the coworking groups. That is fascinating. How many tenants are you losing, when their leases are up, and what kind of discounts are you giving on new releases leases . Lost any have not tenants, we have been doing some shortterm extensions. Trying to kick the can down until we can figure out our business. All of ourpleted releases that were out for execution part to the pandemic. There has been no discount on rent. Of e offered two months reduced rent to get them to close the deal. Right now, we are not really hearing about discounts in rent, but that said, tenants are being particular about the kind of buildings they are looking for. We have seen some real innovation around how to use spaces, including marx realty, switching over to more hospitality service. How much more of that, repurpose thing of existing real estate will there be . Craig so much more. We think the future of real estate, the office sector, there is a lot of commodity right now. Those are in trouble. Are doing is infusing our products with hospitality. We have a doorman outside that opens the doors for tenants, very welcoming. Islly what tenants want differentiated space. They want to feel warm and invited, especially because they have been home all this time. Outdoor terraces, lounges, cafes to collaborate. All of those things that make coming to the office terrific. We have been talking to our team. We have been back in the office, this is our fourth week. Many of our team members are saying they want to come in five days a week instead of three because they are cooped up in their apartments. It makes it more inviting to them, makes it like they want to be here. That is important for employers because it is all about the talents. Vonnie you also have shopping malls. Yonkers is one of your malls. How concerned are you about Retail Business . Craig enclosed malls are having a tough business. Our center is an openair center, and that is very different. Are, more than ever, interested in having an outdoor experience. Those that are open are saying it is like christmas in july. One hour lines to get in. That is very unique. What we are also seeing as a result is rent collections have doubled. It is a story of the haves and havenots. Vonnie we will definitely catch up with you soon. Good luck over the next few months. Thanks for joining us, craig ditelzweig. Right now on capitol hill, we are awaiting the ceremony lewis,g congressman john the civil rights icon who died last week. President trump speaking to reporters a few minutes ago, saying he will not be going to capitol hill to pay his respects. There is a private ceremony about to get going in a few moments. There is obviously some hours for the public to visit the congressman as he lies in state, tonight and tomorrow evening. We know that joe biden is a long is a way is on the way, as well as his wife bill. Mike pence along with karen pence also will be there. The president on the way to joint base andrews, saying that he will not go today, nor tomorrow. I believe you with the pictures of the congressman on his way to lie in state in the u. S. Capitol. This is bloomberg. Caroline 2 00 in new york, 7 00 p. M. In london. This is Bloomberg Markets the close. I am caroline hyde. Romaine i am romaine bostick. Taylor i am taylor riggs. Caroline infections flown across the sunbelt as china sees a resurgent and germany warns of a rising cases rise in cases. They are kicking up the latest stage trial. U. S. Stocks rising after investors speculate the Federal Reserve will double down. Record. Ped to a we are waiting on congress. Republicans set to release their vilest virus stimulus package. All that and much more coming up. Romaine a big week for the markets. Waiting on the fed and the stimulus