Washington has been demanding transparency and threatening to delist mainland companies. Australia is ramping up tensions with its top partner. You a quick get track of the markets. This after we saw another record high for u. S. Equities. The s p 500 and nasdaq composite soaring to another record high for a fourth consecutive session. The s p gaining ground for five sessions. Tech and communication stocks leading the gains. We are up about 55 since the march lows. We had some positive data. The u. S. July durable goods orders meeting estimates. All of that boosting optimism that the fed will keep Monetary Policy loose. With the dollar weakened, due to the strongerthanexpected eco , take a look at what oil is doing. It is gaining ground. About 43 per barrel. In around five months, the highest level. We have hurricane laura. More than 80 of oil output and nearly 3 Million Barrels have been shut down in the gulf of mexico. Haidi continuing to watch the oil patch for those disruptions. Lets take a look at the asian markets after this, does that of headlines driving stocks higher . It comes toen trading in new zealand. That market close to a record high after two days of cyberattacks that took it out of action. We will have to watch and see whether that happens again today. The nikkei 225, flat start to trading in that part of the japanese market. Sydni futures up about 1 . Some interesting earnings and afterwell worth pay as well. The aussie dollar at 72. 35. A little bit of an uptick. Tensions against between china and the United States over the South China Sea. China has conducted drills while the u. S. Is imposing sanctions on Chinese Companies with ties to the expansion across the region. David ingle is taking a look and joins us now out of hong kong. We know this is a broader part of military drills conducted by the in terms of the u. S. Reaction, it is a separate set of moves. Right. That is it is difficult to comprehend whether this is political theater from the white house and in response to the domestic audience by china or whether this is indeed more ratcheting up of tensions between china and the United States. Any time you have these military actions, there could be miscalculations and something that could lead to more deadly. Let me give you the facts, we had china, according to the s military, firing Ballistic Missiles into the South China Sea as part of drills. Of what these drills happened between the islands. We did get vietnam as well complaining and asking china not to do these provocative moves. The United States has condemned these. Separately the United States has announced as well trade and visa 20 chineses on some companies the United States alleges have been responsible for this expansion in the South China Sea. You sound that quote from wilbur ross. It came from the commerce department. These companies on the sanction list including state owned construction companies, a big state owned contractor as well as a Communications Group which makes Digital Communication equipment that the United States says is helping to build out the Chinese Military outpost in the South China Sea. Overwrought says the International Community have rebuked the sovereignty claims to the South China Sea and have condemned to the building of artificial islands for the Chinese Military. He goes on to say the entities designated today, this 24 companies, have played a significant role in chinas provocative construction in the artificial islands and must be held accountable. Another Company Caught in the crossfires is hsbc. The u. S. Blasting it for allegedly siding with beijing. What do we know . Stephen this is an interesting one because the timing. We know hsbc was blasted several months ago when the National Security law came out at home and abroad for at least initially not signing on to support beijings law. Then it finally did. It signed a statement with other signing the wong document in support of National Security. Now as we approach september, the United States and mike pompeo is blasting that move by peter wong as well as siding reports hsbc has stopped executives from accessing their credit cards and personal Bank Accounts following the arrest of jimmy under the National Security law. Continue to they provide services to those individuals sanctioned by the United States. Mike pompeo says the bank is maintaining accounts for individuals sanctioned for denying freedom for hong kong while shutting accounts for those seeking freedom. Hsbc has declined to comment. Stephen engle with the latest on that chinau. S. Relationship. Staying with those ties, china says theyve made concessions to let regulators audit some of the most sensitive companies. The vice chairman of the Regulatory Commission says beijing is sincere in wanting to resolve the standoff over accounting issues. In an interview with bloomberg he says more open chinese Financial Markets benefit the mainland and foreign investors. Opening up has always been a strategy of chinas growth over the last 40 years. That is also true for the financial sector. Tensionsll of these thetalks of decoupling, opening up of the market has accelerated in the last year or two. Since the beginning of this year, in terms of lifting the cap of foreign Financial Firms in china, we have made a huge stride. Do you think that pace will accelerate . That is a good question. Forink it will accelerate several reasons. One is the chinese economy despite the challenge of covid19 has actually recovered quite nicely. So iast three weeks or to four cities. Just based on my own observations. The economy seems to have quite fully recovered. Had a vacation and all the hotels were full. It was incredible. So the Consumer Power of the chinese economy is amazing. I have a sense in about six months or so, the chinese economy will again be the locomotive of world growth. Marketsnk the capital in china will continue to be at active and also continue to expand. That is one reason. The other reason is for all come to reallyrkets progress and develop into an effective market for highquality growth, we need foreign participation in our market. We need Higher Quality financial services. That is something firms can provide. And in terms of the stock market, the interesting thing, china is a very high saving economy. That was behind the active trading this year. Investors are not very good at determining the value of a stock. We need a lot more Institution Investors in our market. And the foreign money is usually coming from Institution Investors. We have seen may have a much better sense of what a stock is worth. Provided kind of an anchor in the market. That will help promote the quality of our stockmarket. We welcome more participation. Both from a demand and supply point of view, i do expect foreign participation, whether providing services or capital, will accelerate. Fang speaking to jeanluc. Will discusspeter the outlook for the largest Mining Operator in the far east and the prospects for commodities. Coming up, we speak to someone about the look ahead to the virtual jackson hole meeting. Jay powell expected to unveil the fed framework review. This is bloomberg. You are watching daybreak australia. The storm system rated as the worst in 160 years is approaching the coast of texas and louisiana with warnings of a dangerous surgeon half a million being told to leave. Hurricane laura surprised by gaining 70 in strength and is now a category four storm packing winds of more than 200 kilometers per hour. It is expected to hit land thursday morning. The latest numbers on the coronavirus showscases rising in europe, forcing the World Economic forum to delay the dav mid2021 at the earliest with italy, greece, and france reporting a surge in new infections. California state senate halted its session after someone in the chamber tested positive. Trade chief is resigning after criticism about his attendance at a golf dinner in ireland that violated restrictions. Undermined response public confidence. His exhumation comes as the eu faces the fallout from the coronavirus. He had led the eu part of the u. S. Policy. Headliner at the day three of the Republican National convention. He will make the case for they second term for himself and donald trump, capping a night designed to emphasize the andtary, law order, patriotism. He will address the convention the baltimore that inspired writing of the starspangled banner. Most talk as policymakers is not opposed to overshooting the 2 inflation target. The president of the Kansas City Fed spoke with bloomberg. 2 as anever thought of ceiling. To really stay focused on what anchors Inflation Expectations wethe economy, so i think will be talking about the kinds of things that help us do a better job of achieving our objective. Georges comments come on the eve of a symposium normally held in jackson hole, wyoming. This year it is held online. For more kathleen hedges is with us. The virtual nature of the meeting as well as just the kind of policy framework we are dealing with here. So many issues and of course this is an event in central banking and markets that is watched around the world. Joining us now is a special guest, Thomas Hoenig, president of the Central Reserve bank. He is now a senior fellow at the makeda center. He was the vice chairman at the fdic and brings a lot to the table. I want to get into this. Lets step back. Online or at the jackson lake lodge, why does the world watch . Why is the fed symposium so important . Good question. Its important for several reasons. Ofhas been a Center Discussion among Central Banks for over 30 years. It has become recognized as a place where you can discuss policy and the chairman of the Federal Reserve will be speaking again. Issuesyou said there are around the policy framework thereforward and because are central bankers throughout the world listening at the same time, it has drawn interest given the importance of the topic. The possibility we might be discussing and the implications of policy going forward. Very good reasons to Pay Attention at this conference. Over the years, starting with Alan Greenspan and beyond, the chairman has taken his opening remarks on the first morning of the symposium to send a message about policy. What do you expect from jay powell . I have not seen his remarks. Given some of the early indications, he will be talking or touching on the policy framework discussions that have been going on the last year and a half. Touching base on those. I know one of the areas people are talking about and speculating is this idea of inflation averaging. That may be part of his conversation. I hope it is broader in terms of the framework. I suspect inflation will be part of his comments. Lets finish with that question, because we just heard esther george, the Kansas City Fed president saying she is on board with the idea of instead of 2 , better start hiking rates. Let it go above 2 . Are you on board with that, Thomas Hoenig . I cant interpret her comments. From my perspective, i have said to exercisely get it is onlyct 1. 8 . Those differences in terms of what it means for the long run Economic Growth of the economy are not the critical point, as people would like to believe. It is the policy you are following that will have a much more dramatic effect over the long run. Haveour policies going to affect on resources in the economy . Are they going to spur an acceleration at some in the future . Create furthero miss allocations in terms of distribution of income . Those are the questions the central bank and policymakers have to Pay Attention to. Downer the fed has let you by 1. 8 inflation is not important. Lets follow that train of thought because we were talking ahead of the interview and you said im on board. You do what you have to do. The fed with your emergency lending program, Congress Passing trillions of dollars. He said it is when things get better and you have to normalize, that is when the rubber meets the road. What is your concern about the path of the fed is on and why this could be a problem . Think about it. The Federal Reserve and the government is on a very expansionary policy. I understand why. The pandemic has Health Implications and economic implications. You are all guns. There is a consensus that we should provide substantial stimulus into the economy. I understand that. I would have a hard time arguing about that today. The point is you are putting stimulus in and the economy will recover. That is when the hard decisions come. How do you judge the pace you should remove the substantial stimulus . Degree to which you should raise Interest Rates and what speed and what impact . Policy that is very accommodating is easier to say yes then it is to say no. Those hard decisions lie ahead for the fed. That is why i hope there policy framework that they are discussing today or tomorrow, and the policy framework itself is taken seriously because they will define policy for the next decade and the effects will be dramatic. The theme of the symposium, covid19, navigating the next 10 years. I want to followup on a point you touched on. The question of how the Federal Reserve policy having to be so stimulus is affecting this very key issue of income inequality. Wealthity in terms of and earnings, jobs, etc. , among various groups. In theare involved stimulus because you want to keep the economy from going completely into the ditch. What you want to be careful of already,s you see asset values are accelerating. That is inflation. Fairly rapidly. Housing, other kinds of real estate, certain types of commodities. That is inflation. Now you have to take that and say we are going to live with that because we want the economy to survive the pandemic. This will pass. You have this inflationary impulse. Values at 0 , the rich to get richer. If you want to hold assets, usually the wealthier, the uppermiddleclass have assets. You are gaining. If you are a laborer and you are program, a or on a Payment Protection Program and are thinking of the future, your assets are not appreciating. An unhappy endto if it continues as we have seen over the last decade. We have seen the impact of that. We have seen disgruntled individuals worldwide voicing their concern. That is a major concern. Final question. If you were at the symposium speaking with jay powell and everyone else, what would be your number one point about this review of policy and the framework and what to do for the next 10 years . Together to ben able to move rates back to a more normal level. Whatever that is. How you would approach it. This part of it is easy. The next phase will be very difficult. They should be spending a lot of time on that. Ok. The man who has been there and done that. Foras hoenig, thank you joining us today. And our thanks to kathleen hays. Stay tuned for our coverage includingnference Jerome Powells much anticipated speech. Lets get a check of the latest headlines now. Ofla touched an evaluation 400 billion dollars after wall street decided to be less skeptical. Jeffries doubled its price target saying the company will grow in multiple areas including Battery Capacity and industrial efficiency. The stock has gained since a low in march and its capitalization is higher than walmart and johnson johnson. Facebook jumped as analyst hailed a new shopping section. Multipleis enjoying customers with ecommerce. Digital shopping can generate demand and revenue. Shares have more than doubled since the intraday low in march. Better than expected profits on domestic demand from highend smartphones and a market in europe and india. Income more than doubled in the june quarter. Sales rising more than 3 . The cfo says overseas business has recovered to precovid19 levels with shipments to france and spain rising almost 65 . Equities climbal as progress on trade talks and hopes for the development of a Coronavirus Vaccine fuel investor appetite. Asian looking to build on those gains today. This is bloomberg. Businesses are starting to bounce back. 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Some good news when it comes to the virus numbers out of australia. 23 covid19 deaths the past 24 hours and 113 new cases. We have seen some cautious optimism that the Strict Lockdown will go another two weeks and then it is working with those numbers. Just steadily trending lower. Lets get to the first word headlines this hour. Missilesrising as the were fired into the disputed South China Sea. Reports say they launched rockets during military drills. It is not clear if military warships were in the area. 24 Chinese Companies have been sanction for Building Military bases in the South China Sea. China offered concessions in the latest talks with the u. S. Proposing to let regulators audit some companies. Washington has threatened to delist alibaba and other companies after inspections failed. Beijing says that some information would be held back for National Security reasons but expects foreign businesses to survive. U. S. Investors that have invested in these companies, they have made a lot more money than the average market has returned. It is good for the Chinese Companies because they have that success, International Capital and listing in new york helps raise the standard as well. So it is mutually beneficial. I hope there will not be a decoupling. They will allow the government to cancel agreements with foreign governments in a move seen is ramping up tensions with china. The legislation will be introduced next week and will cover trade, tourism, and other fields. It comes afternoon agreement to join the initiative against the wishes of kim jongun has returned to the public eye, warning about the coronavirus and a looming typhoon. The country has been hit by flooding and has wiped out wide areas of farmland. State media says kim ordered emergency measures and called on state workers to step up efforts to prevent the spread of covid19. Are boycotting games to protest the Police Shooting of a black man in wisconsin, putting the season and doubt. The Milwaukee Bucks where the first two say they would set out to game five against the orlando magic. The league confirmed all of the matchups were postponed. Lets get a quick check of markets. U. S. Futures under a little bit of pressure after the s p 500 and nasdaq composite sword to a record ahead of that jackson hole speech by chair powell tomorrow. Have kiwi stocks graining gaining ground, honing in on a new record high after coming back from those cyberattacks the last couple of days. The nikkei futures unchanged. Watch out for those numbers later today. We did have the aussie dollar at a oneweek high supported by higher Metals Prices and a stronger chinese one. Lets get more from our reporter in new york. We have seen emerging markets rally, raising this years losses. What is interesting is the gains came from chinese tech stocks. Whether you are looking at asia or the United States, it seems that growth story continues and the rally on those tech stocks. We are seeing a global rally. Look at the gains in four of the last days, the longest streak since early july. I will say if you look at the index compared to what was before everything related to the coronavirus, we are a little bit away from making up those gains. 2. 5 and in the u. S. We continue the s p 500 and nasdaq are hitting highs. Tech is just driving gains across the globe. In the u. S. Trading session, that was very clear. You look at the nasdaq up more than 2 today. To give you a statistic on how different this is and how forceful, the nasdaq up 2 . If you look at smallcap stocks, they were down half a percentage point. Thats only happened eight times in 30 years. All of those clustered around 2000. We are starting to see the global catch up. This is no longer a story about market exceptionalism. I am curious. It feels like every day the positive news has been so benign. And yet you continue to see these notching up of record highs. It is true. We are at the end of august. It is a month in which a lot of people are out of office, on vacation. We have seen that in volume. Very low volume and at the same time there has not been any incremental news or significant headlines markets should key off of at a macro perspective. That will change when we hear from Jerome Powell very soon. As you mentioned, we have seen the rest of the world catching up. It was no longer u. S. Exceptionalism. I will say looking at a chart of the emerging markets index, you can see the relative strength compared to one another and where we had seen emerging markets leading the way from june through mid july or so, that has changed. As we have seen tech lead the charge once again, so have we seen u. S. Markets leading the way. At least compared to emerging markets. Sara, a recap of the session overnight. The Franklin Templeton ceo, it is not worth a disruption when they leave. She says the era of the store manager is done. The reality is they were supported by a large team. Maybe it was easier for people to connect and may be from a marketing standpoint we would say this person is behind this. It was always a team. Number two, clients get nervous by managers. Then it becomes a succession issue. They want to know you can justessly develop the team as any ceo would be expected to develop a team behind them. That has been much more of a focus, talking about that team. Mark mobius was always tied to Franklin Templeton. If you dont have someone recognizable, people can turn to price as the primary driver and it is easier to go to an etf. Etfs are a vehicle. You can stay active. Our largest category, we just data0 billion in the smart multi factor. The next one is active. Category forllest us. Etfs are a vehicle. You are going to have to show value. We talked about that. Value. L have to show people like to understand the strength of the team versus a single individual. They recognize that is not credible, with all the information you have to gather. The deep understanding you have sectors. N individual it is not credible to say one person can do those things. Fund managers tends to be he or him. Why have we not had any female Fund Managers . It is something we are highed on and weve had as as 27 as weve done acquisitions. We were always a firm with a lot of strong women as managers. The industry is learning. Invest, get girls interested earlier in this business. My daughter said to me, i dont really want to go into your business. I want to help people. This business helps people. If we can articulate it in that way and get to girls earlier, you will find more are attracted to it. It is casting the net more broadly, communicating what we do in terms of a purpose. I think we will see more and more women into the business. Jenny johnson speaking to scarlet fu. Next, our interview with peter the russianscuss far east and the prospects for commodities. This is bloomberg. Iron ore has helped hong kong. It is reported results and we are joined by the chairman peter. Always a pleasure to have you with us. Let me get your assessment as to where the market is. There is some sign of the tightness that has driven prices high. We have seen brazil the highest in about a year. As well. Jolly do you see a pullback in these prices . Peter what we have seen in china is very important. The stimulus package has been driving the market. And demand has been very good for us. Particularly in the northeast. For a a slack period while. That has turned around. I think we are seeing also a big change in the value of the dollar. I think Commodity Prices in staying, are rising because the dollar is becoming less attractive around the world. Your view in terms of the strength of chinese demand . Do you expect these levels of demand to continue . Production will stay the same. As for the chinese government, it is a very regulated country. Of course we are going to get more iron ore from australia. We are going to get more from brazil. Life is returning more to normal there. Things have calm to down. , theovid operations pressures are easing a bit now. We will see more. There is still a good reason for people to buy from us. Closer to000 miles china than brazil. Talking about the chinese government, do you expect pushback when it comes to iron ore futures having rallied . Weve heard from the ministry of industry saying prices have become disconnected from fundamentals. Remember it isd not created in the sky. Levelk we are at a high now. The forward curve is looking more attractive. 100 since theer beginning of next year, which is very attractive. Cash costs are around 50. We have a good margin given the discounts that apply in the northeast of china. In terms of the Business Impact from covid19 on your performance . What sort of fundamental demand change do you expect post covid19 . Had a great effect on us. We have been very lucky. We are operating in a sparsely populated part of the world. Although we have had one fatality, which was somebody that had severe Underlying Health issues, in general, very few people have actually contracted the disease. And wedoing monitoring have a very strong treatment. It has not made a great deal of difference to our production. We continue to see the relationship between china and australia deteriorate. So far that has not affected demand or supplies of iron ore. If it does, do you have the capacity to benefit from that in terms of taking that business when it comes to the highgrade market . International politics are hard things to judge at the moment. Relationships are frayed all over the world. Have that sort of problem. It is the sort of thing that makes it hard for everybody. Yes, we have the capacity to pick up some of it. Could begin to was a breakdown in supply, we could continue to build our production. Peter, thank you very much for joining us today from london. With the latest on his business and the iron ore market. Still to come, more on the industry. What dynamics are we seeing . Around 120 asices investors assess tightness against a supply from top producers. Cargoes from result the highest in a year and for the first time bhp areo tinto, shipping at rates above 300 million tons a year. Ups expects the prices for iron ore will boost to the forecast to 98 dollars a ton in 2020. Pulling up a chart, chinese demand has been a critical factor with record production on the mainland supporting prices above 100. Could the tide be shifting . Signals. 2 that tightness easing. And so gold rebounding after the dollar gave up gains ahead of the jackson hole speech. What is going on with that trade . Investors betting on rising inflation and lower rates, they expect gold has more upside, including pimco. He said gold is still attractively valued in the context of low rates. Pulling up a chart on the tailwind fort is a bully on. Another colleague points out even if inflation events are wrong. Up yields will set the metal for a winning 2021 with initial resistance for prices around 2100. Switching the chart, silver has joined the rally and now gold is trading at the cheapest to silver in three years. Furthers warning declines and relative value are risky for the bank. Recommendation to go short on a ratio. All right, breaking news when it comes to the coronavirus in argentina. That country has really struggled with several days and weeks of record highs. We are now seeing a rise of 10,000 cases. That is a daily record now for the Third Straight day as that country and economy continues to struggle with a sustained rebound after what we have had months of a lockdown. Those numbers are not coming down when it comes to argentina. The abilityeparing statesel agreements with and territories with foreign governments. This is bloomberg. The Australian Government is preparing a law which would allow it to cancel agreements between states and territories with foreign governments. It is likely to increase tensions with china. Paul allen joins us now. Likely to exacerbate the federal and state split we have seen . It is oneidea behind Foreign Policy should be set by the federal government. Weve had examples like last year of the victorian state notrnment greening aligning with the interest and in 2015 the highprofile leasing of the port by the Northern Territory government. For half 1ase billion. That was controversial. Rollback someould of those decisions and prevent new ones from taking place to bring the confucius institutes into focus as well. And to start a public register which would give territories six months to live or a take of what arrangements theyve got. This should be introduced to parliament this week and passed by the end of the year. How is the news of this likely to impact relations . We will have to wait and see. It is unlikely it will go down well. The relationships are already strained with a call for an inquiry into the origins of coronavirus. That was touched on yesterday when the deputy minister address to the National Press club. China was unhappy with the lack of consultation before that investigation was announced. Like into the betrayal of caesar being stabbed in the back by brutus. That was the first time china spoke publicly about the response to those calls. We have seen sanctions on australian beef as a result. The announcement of this law is a clear indication australia is not changing course. We will have to see what china thinks of it officially. Latest. Allen with the a quick check of the latest business headlines. Air new zealand reports a loss for financial 2020 as the coronavirus hammers aviation, of 57. 6 million. Deepened by the grounding of the boeing 777x fleet and it predicts another loss in the coming year. Google has ruled out buying the u. S. Operations of tictac tiktok. The google ceo said they are not buying it. Microsoft and other firms are working on bids after President Trump ordered the chinese owner to sell the u. S. Apps operations. Twitter has finished higher for the 11th straight day, the longest winning streak since july 2017. 12 days what he called the best run since going public seven years ago. In the past 11 days, the stock has gained 10 , more than double. A big interview later today. He joins us exclusively to hongss earnings at 9 30 kong time. Theg says white weight of tensions on her business. Plenty more on daybreak asia. This is bloomberg. Haidi a very good morning. I am haidi stroudwatts in sydney. We are counting down to asias major market opens. Shery asia is expected to extend the global rally amid expectation of loose Monetary Policy and optimism about the recovery. Oil markets brace for upheaval gatherscane laura