Chipmakers asias chipmakers. And oracle is an talks to purchase tiktok. Reports ap group surge in iron ore. We hear from the ceo this hour. It has just gone 6 00 a. M. And london. Dsia. M. In downtown everything comes back to the price of a bond for me in the United States of america. Stimulus, prevarication what does it do to the dollar, good morning . Annmarie the dollar is in focus. Putting outole research saying the tail wind be the u. S. Election. You and i wake up so early, we got to see some of what is going on in politics. The dnc kicking off its convention. How does this impact the market . That is what we will need to discuss. Will come off the top of the s p. I have get my one favorite line of the day. My quote of the day. Bondholderso says are like boiling frogs. A small kick in rates and they jump out of the pot. Boiling frogs. What an image. There you go. Whoever put that together, high marks on our show. Annmarie we are going to go down this path. My favorite this morning has to be from the ny blog, mark cudmore. Talking about the as if you 500. He said the better analogy would be monty pythons black night. Knight. Ack let us look at the markets. As a p futures relatively flat. Msci asiapacific pushing higher. Dollar index, another day of weakness. And bitcoin. We are past 12,000. The first time in more than a year. I think it was you that said to me, bitcoin is a millennial goal. As a millennial, i felt the need to bring that up today. Manus this show is age differential free. I was the one that brought up that gold is for me and bitcoin for you. Lets talk about futures. The vulnerability of the s p 500. It failed to break a record. Chances for as the a new stimulus package before september diminishes with each day. We have the democrats and the republicans focused on their Party President ial nomination and convention. This week is the turn of the democrats. Everyone who supported other candidates in the primary and to those that may have voted for donald trump in the last election. The failed federal government that watched new york get ambushed by their negligence and then watched new york suffer and all through that learned absolutely nothing. Six months after it began, the nation is still unprepared. Imagine if we had a National Strategy so everyone that needs a test can get one for free. And that everyone has access to the vaccine. Shamblesonomy is in because of a virus that this president downplayed for too long. The truth is that even before trumps negligent response to this pandemic, too many hardworking families have been caught on an economic treadmill. Manus they are lining up behind biden. Bertoni is the senior Portfolio Manager at Gulf Investment Corporation. The polls show a resplendent for biden. Are markets sufficiently pricing the probability potential of a bidenharris victory. Good morning, raffaele. Raffaele good morning, manus. Are the markets are the bond markets come equity market, and dollar markets pricing in the risk of a harrisbiden victory . Raffaele i think so for a number of reasons. The first one is that historically polls have never been right. Time fourr the years ago. And trying to anticipate the results of the election now is probably too early. And secondly, because i do not see a victory a potential victory of the democrats as negative for the markets. I think there are a number of reasons why we should be more focused on the economy, the response to the virus, and the monetary and fiscal policies going forward. Was clearraffaele, it overnight that one of the main topics of all of the dnc speakers was the economy. We still do not have a stimulus relief bill. A lot of these measures like the 600 other check, they were helping with consumers and retail spending. What happened to the u. S. Economic aid that if we are still waiting another 3, 4, 6 weeks for relief from d. C. . Raffaele that is a good question. I think we are already seeking some flattening in the recovery in the west. News from thatd side will continue to support consumption, consumer confidence. But obviously, we need something more than that. We need some kind of resolution for the virus. I believe that any improvement on that side is really important. From al and Monetary Policy point of view, we are close to the peak. But the government in the u. S. And the rest of the world have taken this opportunity to take control of money supply. Reason why wee saw a spike in Inflation Expectations recently. It is believed that quantitative easing is supported by fiscal reform. And therefor we should see the mainstream benefiting from quantitative easing more than what we saw in the past. Manus translate that into your core markets which is bonds. We were jesting about what Roberto Gallo said. There are people out there holding 70 trillion worth of bonds. It is like boiling frogs. Haver or later the frogs to jump into other assets. What is the provocation all level what is the provocation that causes the frogs to jump from the bonds outwards . Raffaele it is difficult to disagree with roberto on this point of view. Government debt trading close to zero in terms of nominal rates and in deeply negative territory in terms of the real rates. This is a situation that is unsustainable in the mediumterm. What is going to be the trigger . I think probably, inflation. Central banks have been fighting hard for the past 10 years to try to inflate the economy without any success. As i said before, this time quantitative easing is different because it is supporting fiscal expansion almost everywhere in the world. And this is the way to translate the monetary supply to the real to the, to consumers, low income part of society. And therefor, Inflation Expectation has already been on the uptick since april. Points. 00 basis with stocksnue moving outside government bonds into other assets. Goingie raffaele, we are to get more into your strategy calls. Raffaele bertoni with Gulf Investment Corporation. This chipmakers plunged morning after the Trump Administration announced further sanctions on huawei. Joining us now to break does all down is bloombergs stephen engle. What is your take on this . How much harder will it be for huawei to source these chips . It will be more troublesome for huawei and more trouble for the supply chain in places like taiwan. That is why we are seeing Companies Like mediatech going down today. The Trump Administration is putting more restrictions on huawei. Chip suppliers that use american chipmaking equipment and software to apply for licenses if they want to work with huawei. Why does the Trump Administration have that sway . Or assemblyab Company Including in taiwan all use u. S. Equipment from Applied Materials and Software Makers including cadence and synopsis. That is what mediatech uses. As wilbur ross, the commerce secretary mentioned, this is closing a loophole from the initial export order rules apply in may. This is a step to make it much more difficult for huawei to operate at a time when stockpiles of storebought or totheshelf chips are set expire perhaps as early as the beginning part of next year. Manus good to have you with us this morning. Oracleg that headline is in a race to buy tiktok. There really freshens up the whole story. What is oracle doing in the social media space . They are the world number two Software Maker on the enterprise side but they dont have any consumer apps or social media. This is in addition to the only other company that has mentioned it would be interested in the u. S. Business of tiktok, microsoft. Anding oracle and microsoft perhaps even twitter. There is a tight dance for by dance. Bytedance. We will be interested to see. Oracle has yet to respond to a request for comment. And Sequoia Capital have declined to comment. Annmarie twitter possibly. The financials may not match up but larry ellis is throwing his name in the ring in the tiktok conversation. Thank you for joining us, stephen engle. Coming up, we stay with this story and more as the u. S. Ratchets up trade tension yet again. This is bloomberg. Annmarie good morning. This is bloomberg daybreak europe. Manus cranny joins me in dubai. The u. S. Has announced further restrictions on tikto huawei. An latest move in increasingly tense relationship. Many of chinas Big Tech Companies alibaba and tencent. Its founder and president spoke to bloomberg about why ongoing tensions will not affect their holiday. Their quality. Amazon is an amazing company. Faangs. Zero amazon is in the potter half of the top 10. Outperformn able to on the long side of our book. Not being overly exposed to the faangs. That said, i do not think it is a bad place to invest. I think your general consumer could do a lot worse than having stocks. Sure to faang these are some of the bestperforming companies and businesses in the world. We are not afraid to have a little faang exposure. Specifically on amazon, they have had the number one ecommerce in the world. Quite dominant in the u. S. , in continental europe, as well as other International Markets like india. That he, business that ecommerce business is worth about half of the companys value. The other half is the continued business with aws. We see that as a giant leader in the business. It is growing 30 . Margins are close to 30 . They bounce around depending on the quarter. We think that will continue to be a great leader. That is why it is one of our largest holdings. A lot of your peers also sold that. A lot of the tiger cubs getting out of netflix. Amazon and facebook. Why do you think so much of the industry is starting to sour on some of these big names . It is probably a rebalancing in terms of looking for Companies Whose valuations are more stretched and reducing some of those holdings. We have done that in some of our big winners. In then you rotate companies that look especially attractive. It is a normal course of investing, and being a Portfolio Manager. Yourre than 40 of portfolio is outside of the u. S. And some of that is in china or in Chinese Companies. What is your feeling about investing in chinese firms amid all of the tensions between the u. S. And china . There has been increasing tension for the last 1020 years. There is tension specifically around Chinese Companies that list in the u. S. What we are seeing happen is many chinese internet firms are now dual listing. Having an ipo in the Hong Kong Market which gives them optionality perhaps to in the future only be listed in hong kong. These are such incredible businesses. , Tencent Alibaba these are incredible companies that have real dominant presence on social media and ecommerce. Between thenk a row u. S. And china will change the quality of those businesses in the longterm. To no exposuree in our markets here and we are quite bullish on them. Annmarie that was light street ,apital management founder glenn capture. Still with us is raffaele bertoni, senior Portfolio Manager at Gulf Investment Corporation. Raffaele, i want to stick with the trade tensions. People like to compare it to the cold war. But the United States and the links to china are much stronger than those between the u. S. And the soviet union. Tensioned about how the is on the tech center where exactly could this really hit the Global Economy . The tech sector is obviously the main driver of growth going forward. What this has done is accelerate what was already established. The tit for tat between the u. S. And china is potentially very damaging for the Global Economy going forward. I believe this this willn reason why impact the economy in the mediumterm. The two Major Economies in the world, not sharing the same impact the way we live and work going forward. I suspect a preview in the trade tensions on the manufacturing side. Both parties are interested in finding a solution. I think there are a lot of rumors at the moment. Solution. Ill find a raffaele, if we tie the strands of risk together, one is prevarication and the other is the ratcheting of trade tensions. Credit and across equities, you still think that equities can run higher i want to get your credit view because you are still overweight u. S. Is that more manifest in a credit tilt then and equity tilt . View,le from my point of it is a better opportunity than bonds in general. Within bonds, credit had a very strong run into march. They do represent value compared to government bonds, a risky asset in general for the region as we mentioned before. Is morey, the upside limited if you consider the breakeven spread. At the moment, they are historically low. Only 50e bonds have basis points. Aa the single a or amount of spread is even lower. There is room for spread tightening. I believe credit in general represents a better value than government bonds. But the upside is more limited. And it is important to be selective and in particular to be liquid. Ng to purchase assets rally you have been reading the Goldman Sachs review. Bertoni, the head Portfolio Manager at Gulf Investment Corporation with Annmarie Hordern and myself. Coming up, the traders are bullish. This is bloomberg. Manus it is daybreak europe. The bulls are bidding up the euro. Raffaele bertoni is the head of debt Capital Market at all the investment corporation. What an amazing record bullish bet on the euro. Is it a crowded trade . Raffaele it is a very crowded trade. And some fundamentals. The main reason is the difference in Inflation Expectations and negative rates between the two regions. But more importantly manus we will pick it up shortly. Raffaele bertoni. Annmarie good morning from london. I am with manus cranny in dubai. This is bloomberg daybreak europe. Global stocks look for direction amid an impact over u. S. Stimulus. Mitch mcconnell says virus relief discussions are still going on but the s p 500 struggles to set a new record. The u. S. Announces new restrictions on huawei amid reports that oracle are in talks over the tiktok business. Steady Group Reports underlying earnings on a surge in iron ore and maintains its dividends. We will hear from the ceo this hour. Manus, good morning. You and i are equally obsessed with different quotes this morning. Im looking at the s p 500 and what mark cudmore said. Impervious to some of these. It is more monty python like. Another fresh will that can take it out. I know youre looking at the bond market and what roberto had to say about that and the analogy is for a. Manus roberto talks about the bond market and if you are a bond holder of 70 trillion and you are exposed to any small risks at the long and. Long end. Boilingner or later frogs jump into other assets. Markets, you will be glad to know there is another 10 years left in the oil market. Deliveringllys their numbers. Oil remains attractive for at least another decade. The dollar is a little bit better offered. Hedge funds turning negative on the dollar for the first time in two years. That backslide will continue. The question for the bond market is what a fiscal agreement take yields higher . And take the dollar lower . That is the question that we debate. Have a look at the asian equities. Techdoes not have as much or maybe it will have more after the trade wars and that huawei story is really dominating the theme from asia. Chipmakers falling. The Commerce Department has announced additional restrictions to huawei about its expansions. Juliette saly has been looking at the nuances and machinations. Spdl . S as pdl what is juliette a supply chain. The storytalk about in mediatech shares. They have fallen by as much as 10 , the biggest drop in 10 years. Is aies says this loophole surprise but not unexpected. A ramification in terms of the tech players in the asian region. Particularly in taipei. Realtek, also have alsoawei, dropped significantly. Mediatech has been downgraded to neutral. Cutting the targets. 5 decrease from where we saw it close yesterday. You can see it has been on an absolute terror so far in the last year. Investors that have followed abrams recommendation have received a return similar to what you have seen or a little higher from what youre seeing coming through on mediatek. Is 245. N see, there this is having a lot of impact on the chip suppliers. Annmarie thank you for joining us, juliette saly. Il jumped to a fivemonth high crude stockpiles are easing. This comes before the gathering tomorrow of opec plus. Turning to emerging markets, turkey has expanded its money supply and spent its foreign reserves faster than any developing economy. Slide seems homegrown. This is prompting investors like to consider itty separate from the rest of the asset class. With us still is raffaele bertoni. Thank you for sticking around with us. I know one of your allocation recommendations is for emergingmarket debt. Where exactly around the world in em do you like . Isfaele emerging markets one of the two good opportunities left in this income space especially now currently. Are tradingkets better than the local currencies. Asia is the most interesting one in terms of geographical areas. The bestperforming economy in the world at the moment is china and all of the economies in asia related to china can benefit from the strong economic recovery there. Likehe other part that we is the gcc space. In the short end of the curve, there are still very good opportunities. 3 which islose to difficult to find anywhere else in the world. What exposuresk then what you picked up . Can i ask what exposure then would you pick up . Moreou prepared to take china credit or sovereign risk on the back of those liquidity moments from the pboc and perhaps more easing . Raffaele that is right, manus. By the way, the Chinese Government is still yielding about 3 . Especially because of the Economic Situation in china. Pboche central bank, the come is seen lagging behind the other major Central Banks in terms of supporting the economy. We expect another 50 basis points of Interest Rates cut this year. Bankslly, the central leave much more room to support the economy if needed going forward. Annmarie i just wanted to ask you about you like several bs. Are you worried you could see some potential bankruptcies . Raffaele we have already seen some pick up in defaults in the u. S. Much more than in europe. Probably in terms of a highyield market, europe represents a safer bet than the u. S. Prefers of credit, we because they are less at risk. That is a good point. Cycle end of the credit and therefore credit quality still needs improvement. Manus the full rate will be more robust the u. S. Or europe as you go into 2021 . Raffaele probably u. S. Expect a pickup around 7 by the end of the year. Europe is more protected on this side. For a number of reasons. In europeedit quality looks better at the moment. Bertoni raffaele senior Portfolio Manager for gulf corporation. Let us get you up to speed with your first word news. Canadas finance minister has resigned. Rift with the a prime minister, Justin Trudeau over the response to the coronavirus and the ongoing scandal. Bloomberg sources say it will not be the former bank of england governor, mark carney. The u. K. Government has been forced into a uturn over downgrades. Resultseed to let the be determined by future assessments. It downgraded thousands of results. It comes in the face of outrage from both parents and students. The education secretary admits there were problems with the system. Carrie lam says she is having trouble using her credit cards. That is after the u. S. Imposed sanctions on officials from the city. It was in retaliation for the new National Security law. Carrie lam says the restrictions are totally unjustified. Says bahrain and sudan will likely be the next countries to make peace with israel. They are expected to follow the lead of the United Arab Emirates towards normalizing relations. The israeli president has invited the leaders to visit jerusalem. No other senior golf leader is known to have made since the finding of israel. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am available for that flight. Coronavirus led to a green revolution for minors . Theill hear from the ceo of hp on plans for a greener future. This is bloomberg. Manus it is daybreak europe. I am manus cranny. Minor, bhp Group Announced steady profits despite the pandemic but it is cautious about the future. Ceo, mike henry about how the minor is looking to go green. The recovery continues to be underway and appears to be strong in china. I think we will see white a bit of volatility and uncertainty in the way the rest of the world recovers. Our broader Economic Forecast is it will take about a year for the world to get back to precovid levels of economic activity. And 23 years to get back to the trajectory it would have been on. In terms of iron or, demand remains high in china. Rates are high and that appears to be holding up quite well. On the supply side, we will see more supply coming from our competitors as they get past their challenges. Our strategy of being the lower lowest cost supplier is to deliver continued improvement year in and year out. That is a winning strategy. Prices toexpect average 100 a ton next year . I dont want to give an exact prediction. Resourcesiversified company and we have got other commodities in the portfolio that as the rest of the world recovers, we expect that will result in more favorable market dynamics. We feel the resilience of the portfolio we have which has helped us get through the last six months will stand us in good stead despite the uncertainty out there. The resilience of our portfolios and our people will allow us to continue to perform strongly. You were looking to make an exit from coal. Bhp is not alone in this. How confident are you that you will have enough buyers or is there enough appetite for a spin off entity . Four ofis an exit from our coal operations. As dealmakers move to reduce their carbon footprint, and they lived Blast Furnace utilizations as a means to do that, there will be more demand for hard coal. We remain committed to that part of our portfolio. We have also assets whose value will be recognized. As to how we go about doing that , we are open to all options. One of the reasons we have come forward early is to give us the ability to get out and explore other options. We will land the right solution in the next year or two and that solution will be the one that maximizes you for shareholders. Plans have also explored in australia. What is the longer term plan for bhp in oil . We see oil as attractive and that is on the basis of the ongoing demand for oil given its underpinning to human mobility and the industrial processes. Side,d with on the supply ongoing decline curves. There is going to be more oil supply needed. We think there is great value and returns to be generated in oil for the foreseeable future. The next decade and beyond that. We will continue to invest in oil and growing value in returns. Annmarie that was mike henry, ceo of bhp group. The beginning of the pandemic, it was a Mining Sector that hardd like it would be hit. Outbreaks in mines, closures and cutbacks. The global shutdown hit demand and surplus. Bestmining offers the outlook on recovery. Grant is here to talk more about the sector. I want to talk about the main challenges to the Mining Sector and how we have been able to really turn it around. When you look at the narrative for mining. Year to date for iron ore. It is an absolute stunning chart for iron ore and the sector in general. Part, regarding the first there were severe challenges for the Mining Sector in march. The initial challenge was the forntial ford demand demand. Most of the miners battened down there hatches. Of them have started to draw down on their credit lines to ensure sufficient liquidity. Start to recover and push a lot of liquidity into the market and be very accommodative, we started to turn around and very quickly the focus turned on their own operations. The main focal point there was his nest continuity. In the Mining Sector has performed very well and very robustly. Big Companies Like bhp were quick to implement testing protocols, isolation protocols, but they also cut down miners at work. Bhps operations are at levels0 of precovid and yet we have seen very little disruption. You mentioned iron ore. While Brazilian Companies have struggled particularly with covid, they have performed very well. It is a combination of really strong and supportive environment from china which has been supported by a lot of credit up 20 year to date. And Steel Production growth is up 3 year to date after a strong 2019. And the demand for iron ore has been particularly strong. Oute has been disruptions of brazil which has led to this rally. Dividends have been the perennial issue with oil and with the majors. How does the dividend, that stand in terms of what we expected . Grant that is a good question. Fullyear dividends that they 1. 20 and it up was just shy of expectations. The consensus at bloomberg was around one dollar 22 cents. It did not surprise on the upside. There are two components. Areng companies in general probably going to be a little conservative and they will keep Balance Sheets at the bottom end of the guidance. Because of the uncertainty we see out of the market. As far as the progressive dividend policy is concerned, i dont think the miners will want to come back to that because that put them under a lot of pressure in 2014 and 2015 where dividends became unsustainable. I think that debate is dead as far as the Mining Industry is concerned. Thankie grant sporre, you so much from bloomberg intelligence. Oil market this morning has some news. We covered this closely with the russian oil minister. But itcontracted covid seems he is still going to make that crucial meeting tomorrow. Manus it depends i suppose to what extent he is incapacitated. His deputy has arrived. It will be an interesting one in making athat we are lot of the drawdown of inventory in the u. S. But it is really about the rack and nigeria. What caught my eye this morning though is the libyan number. We will keep an eye on that. Annmarie coming up manus take it away. Annmarie elon musk. He keeps climbing the list of the worlds richest people. We are going to discuss all of that next. This is bloomberg. Daybreak europe. We are chasing oil story. Covid. I look at oil, no coalition cory for correlation coefficient. You . Is big from gmmc for ifmarie i just want to know they are going to continue to want to boost supply into the market. The cheaters, are they really going to start to come in line . How much can they get violent to get behind . It has been kind of boring in the oil market, no . Manus indeed. Nejra welcome to daybreak europe welcome to Bloomberg Markets the european open. Here are your top headlines. Deadlock in congress. Senate republicans plan a slimmed down stimulus bill. Joe bidens president ial campaign gets a boost