dubai. we had record highs on wall street late friday and all that positive momentum is carrying into the european equities story, as well as into u.s. equities. the s&p 500 mainly. you are looking at lighter liquidity in london markets, which are closed for the holidays. bloomberg commodity index is another highlight as you try to craft the narrative for the coming hours, extending a rally after hitting the highest since 2018. most of it has to do with the ailing dollar. that is what they have in common. u.s. 10 year yields, drifting low were. -- drifting lower. it is the end little bit weaker after traders are on long positions prompted by news that the prime minister is going to be resigning. let's get you some of the other stories we are watching. the bloomberg first word news with leigh-ann gerrans. saw then: this weekend third death in less than a week amid racial equality protests. a man was shot to death in portland, oregon on saturday night, a supporter of a right-wing group of counterprotesters. president donald trump weeded his condolences. he plans to visit kenosha, the site of two other fatalities, despite the objections of the state's governor. conservative lawmakers are criticizing the idea of increasing taxes to plug the country's budget deficit. that after news reports over the weekend that the treasury is considering the move. toe say officials are trying raise 20 billion pounds a year. one idea is an income tax. the race for japanese prime minister shinzo abe is getting underway. according to media reports, the candidates are a longtime cabinet secretary and a former defense minister. opinion polls point to the defense minister, as the election process involves mostly lawmakers, so momentum could swing. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm leigh-ann gerrans. this is bloomberg. yousef? yousef: thank you for that. economic data hitting the ticker from italy. the italian economy contracted in the second quarter from a year ago. 8%t is a 12 point contraction in the second quarter from the previous quarter. about a-dollar 118.92, 10th of 1%. in terms of the other data we have been getting, it underscores some of the signs that asia's biggest economies are recovering in the interim. china's economic activity continues to rebound in august ath nonmanufacturing pmi's the strongest levels since 2018. they softened slightly to 51.1 the month earlier. joining us is the global chief economist at unicredit. welcome back to the program. in terms of those numbers, the pmi, do they fully confirm that the chinese economic recovery is underway? guest: good morning. i am not sure that is the right interpretation. as you had hinted, it is not so clear. it is good news, for sure, overall. is the things i worry about the pmi showed that the smaller companies are still struggling. they are the ones that get some push or help from governments and the chinese economy seems to struggle a bit. is other issue i worry about you saw it is driven more by production while demand is lingering behind. this is the first part of the v recovery we saw. demand is hesitating. demand doesn't pick up, it will be short-lived. i think there are a lot of question marks out there. yousef: i look at the trade and we are at the lowest level since january, since pre-covid. ofthat really an indicator reduced u.s.-china tensions, or a reflection of what is happening with the economy? it is a surprisingly low level. yeah, it is tough to say because i belong to those who it not completely sure that is a green mark. the chinese are watching it quite carefully. we we are in a period where see general dollar weakness, as we have seen in the euro-dollar also. this has to do with the u.s. economy, about u.s. policies and politics, and the fed being very aggressive. mehink that is probably for the key story globally now. a quick thought on these u.s.-china tensions, because they are now saying that the u.s. needs to get approval or that chinese approval is needed for this tiktok sale. they are throwing a wrench into some of those plans. will we see more of those kinds of relations as we get closer to election day in the united states? guest: yes, without a doubt, and beyond. identify trump with the tensions between america and china and technology, but it is much deeper than that. he is a proponent of that it.rlying move toward i don't think there is any reason to believe a biden administration would be soft on china. but obviously they would speak differently and try to cooperate in a more systematic way. but fundamentally, we are in a major multi year phase of tensions between these giants and it plays out in the technology world. i hope it does not blow up with the sanctions against each other too much, but that is a big risk obviously. yousef: erik, we have a lot to get to. that is erik nielsen. he stays with us. u.s. stocks keep hitting record after record, driven by gains in tech stocks. is a rally really sustainable? does it reflect a certain level of a reasonable view of the world? we will get into that next. this is bloomberg. ♪ yousef: economics, finance, politics. this is "surveillance." let's get you up to speed with the bloomberg business with leigh-ann gerrans. leigh-ann: another roadblock to a potential tiktok deal. sources tell us that due to a new role in china, they will need government approval for the sale of tiktok and its technologies in order to analyze data and make personal recommendations to an export control list. we are told the rule is aimed at delaying the sale. now a deal to create a world leader in wastewater services. a company is offering 2.9 billion euros into suez and un-attempt to overtake the company. suez says the board will meet to discuss the takeover. if accepted, veolia says it will make an offer for the rest of the company. credit suisse is accelerating its business in china. sources tell us credit suisse wants asia to make up one quarter of its overall revenue, up from 17.5% now. that is your bloomberg business flash. yousef? yousef: thank you very much. we have more breaking news hitting the bloomberg, this time from a flight from tel aviv. an airplane headed to abu dhabi as we speak. we understand the pilot has said the flight to abu dhabi will fly over saudi arabia, and that will be the first public a knowledge meant of an israeli aircraft going through saudi arabia and airspace in decades. for is part of the rush ongoing negotiations between as rail and the united arab them let's. -- between israel and the united arab emirates. follow this as the plane gets closer to its destination. the fed's new policy goals ripple through markets. s have provenet popular. they now face tougher odds. a test of the reflation trade. erik nielsen still with us. gtv for our clients. e s.en-year breakevens are back to pre-covid levels. therelks at vanguard, could be more momentum in that. it is not just the fed talking. you need the economy to do the walking as well. agree or disagree? guest: for sure. wayre in a very peculiar where markets on the one hand seem to believe that the economy is coming back, the v-shaped picture, and the market also of pedal anticipation, to the metal monetary policy. that explains a lot of where we are now in terms of the equity. for the time being, it seems the right one. i am more worried about the economic recovery. i am more convinced about the continued commitment by the central banks. going tos the fed continue being more aggressive than the ecb, and what does that mean for euro-dollar? guest: my view would be that what we learned from the fed last week was that we are beginning to approach the end of inflation targeting and moving more toward a judge mental call to support the economy. the ecb called it something else, but they will do something very similar when their review is concluded. i think when you come to the issue of euro-dollar, you want to think about which of these major central banks will be more aggressive and which one will be better at explaining and convincing people they are in that game. my money would be on the fed, and that means the dollar moves higher. i think we are heading into a period of euro-dollar in the 120, 130 range. it may happen very soon, but that is where we will stay for a long time. yousef: as we look to some of the u.s. equity futures in the united states, pointing again towards fresh records in many cases, then i look at the size of u.s. tech. this is another chart our clients can pull up and compare that to europe's stock market. all of europe combined is as big as u.s. tack in terms of market valuation. at some point, that has to become a liability to the stability and proper functioning of these markets. guest: it is stunning, isn't it? i agree with you. let me say two things. in terms of the tack, which has -- in terms of the tech, which has been phenomenal, i would caution a little bit. there is no question that tech is the future and american companies are amazing companies. but we are as we talked about before the break, we are almost certainly entering a long period with lots of tension between america and china, and it will play out almost certainly in the tech industry. for the then plays out few amazing companies in america, i don't know. there is a big question mark. number two is if you get a biden administration, i wonder if a democratic president and members of congress would sit back and relax as much as the president and previous governments have done in america with these monopolies in these areas. there are a lot of question marks. amazing companies, but i think people are a little too blindly following the logic that technology will be the future. it will be, but how it pays out with these companies has a lot of question marks, for me at least. yousef: you bring up the u.s.-china tensions and talk about u.s. stocks, and the question becomes, is the ongoing weakness in the greenback going to be a catalyst for additional upside? it has become the trade de jour. everyone seems to be a dollar bear. are you one of them? guest: moderately so. it in ahink about fundamental economics way, i think most people would agree the equilibrium between euro-dollar is somewhere around where we are now. butmight get 117 or 120, many people would say it is far away from that range. now you look back and basically swing away 2018, you from that fundamental value. you then project from that point itview the periods where th would be very normal and in line with history. we are heading for a period where the euro will be overvalued. that is why i am saying you will probably easily go to that 120, 130 ratio. you mentioned just before, the on aggressive rules than the ecb. so i am in that big fundamental camp of dollar bears. yousef: as we look for opportunities in these markets, you mentioned european equities. arguably better valuations than their u.s. peers. you could also argue that the commodities complex has quite a bit of catching up to do, and we are seeing it right this moment across the board from brent crude all the way to iron ore. is that where the next leg up could come from? guest: i think that is exactly right. there are not always consistencies between markets, but usually there is, and this is not a good example of it. you have a fundamental weakness on dollar and i am still in the camp that thinks it will be a bumpy road back to the levels we had before in gdp terms before the pandemic started. but we are headed that way over the next 18, 24 months. you have dollar story, the upside in a lot of commodities space. i think that is the way to think about it in a solid economics way. erik, i enjoy our conversations. chiefelson is the economist at unicredit. we will be talking about the tiktok challenge as the u.s. changes its rules. they are now considering it's best move. this is bloomberg. ♪ watchingou're "bloomberg surveillance." let's get into more detail around bytedance, because they will reportedly need approval to sell their tiktok operations in the united states. that is after beijing added artificial intelligence technologies to their export control list. let's get more from jodi schneider. disruptd this really the plans for the bytedance transaction? jodi: it really could either delay it or throw a wrench into the whole deal because the new areas that have been added to these tighter restrictions on artificial intelligence exports are the very technologies that uses to make tiktok this viral sensation. it would be required to seek the government sign off on a deal. a person familiar with the matter says they don't think it would stop it, but it could delay this deal. we are seeing several bids that have already been put in. we saw the bids from microsoft and oracle. they sent in rival bids. there also was another pitch on friday. andourse, president trump the trump administration once the sale done pretty quickly. that is something they said they would require if they were to ban tiktok in the u.s.. yousef: as we think about the implications of those rules going forward, is the risk that we move out of the risk to some of the software developers and more toward hardware and chip manufacturing? is that the real threat? yeah and it also, raises the stakes further with the tensions between china and the u.s.. china is saying they are looking at these technologies for security reasons, and the u.s. is saying -- president trump is saying he wanted to block tiktok's bytedance from operating in the u.s. over national security concerns. you can see how this was continue to spiral. each side is saying you cannot do this because it is about security. yousef: thank you very much for that. it is a little bit squeezed for time. jodi schneider, our international editor in japan. this is bloomberg. ♪ look here, it's your very own all-in-one entertainment experience: xfinity x1. it's the easiest way to watch live tv and all your favorite streaming apps. plus, x1 also includes peacock premium at no extra cost. this baby is the total package. it streams exclusive originals, the full peacock movie library, complete collections of iconic tv shows, and more. yup, the best really did get better. magnificent. xfinity x1 just got even better, with peacock premium included at no additional cost. no strings attached. yousef: this is "bloomberg surveillance." i am yousef gamal el-din in dubai. >> good morning. the head of the u.s. food and drug administration is promising any review of potential covert vaccines will be transparent. the commissioner said the decision will be driven by the data alone. the president said the fda was moving too slowly. critics say it will cause it to rush a vaccine. ,housands gathered in belarus capturing a third week of protest against president alexandria lish ankle. moments, -- the baltic state will start sanctioning individuals in belarus. berlin face protests against the government's coronavirus restrictions. 200 demonstrators were arrested after protests turn violent. 38,000estimated around people took part. politicians expressed shock after protesters broke through fences. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. yousef: let's turn to the political situation in japan. the ruling party will decide picking a new prime minister tomorrow. resigned forr abe health reasons. his right hand man is a favorite for the job. here is what experts have to say about the race to find japan's new leader. whoever takes over what continue on. isi think policy continuity key from a market standpoint, from a yen standpoint. the -- monetary policy has yield curve control, bond buying orchestrated by the bank of japan and he has a couple years on his term left. mayolitical uncertainty raise concerns and markets about japan's leadership. we don't see big shifts in the near term and policy. is not much that the japanese economy can deviate from the mainstream strategy. >> i don't blame him for not defeating deflation. i think he has done a terrific job. >> whoever takes over for fry mr.ster abe -- four prime abe is likely to maintain the relationship. by our we are joined guests. let's get to the list of candidates and potential successors. there is a lot we don't know about the selection. a lot is being kept under wraps. media reports suggest because of the coronavirus and the desire to avoid a leadership vacuum, the party will take a fast-track, a crisis version of its normal protocol. members around the country will not get a say. it will be down to the sitting lawmakers. they are tightly bound by loyalty. that is bad news if you are someone like the former defense minister, popular with the public, but he is not one over those factions. the reports we have seen suggest both factions coalescing behind him. the decision about who will take over for abe is being made right now. man has had the position of chief cabinet secretary since 2012. you see him explaining government policies. there is a side we don't see, which is about maintaining party discipline. we can argue about how well he is done, but the proof of the pudding is that abe is still here after eight years. only his health run him down. yousef: a lot of investors we spoke to appear to reach a consensus that we will see more of the same when it comes to monetary policy and fiscal policy. that raises the broader question about how will he differentiate himself from abe? sophie: that is right. when it comes to economic and fiscal policy, we expect him to inherit a lot from his predecessor. some of the pillars of economics have more to do with the bank of japan. i can't say enough about what a difference this would make for the japanese political world and the liberal democratic party, which is held power for most of the postwar period. if you want to hold power, you have to be family. he is one of the few self-made men in that party, hailing from the rugged north. for the party to be rallying behind someone like that might mean some change could be a foot in what seems like a static political scene. yousef: in terms of the domestic picture, what are some of the other challenges that abe's successor will have to deal with? sophie: whoever it is will obviously inherit an economic crisis. the abe administration's response to covid-19 has been less popular domestically. the prime minister, whoever it is, will have to prepare for election of japan's lower half, the more powerful house of representatives. that will happen no later than october of next year. cabinet secretary, he has proven himself that he can push through domestic policy, negotiate domestic policy. but we are winning to see is how diplomatically he will handle the relationship with the u.s., with the incoming administration and with china. he is looking to lead a country that is stuck in between those two giants. it remains to be seen how he will do that. yousef: a lot of insight there. thank you for that. live fromphie jackman tokyo. up next, or exclusive interview with a guest who speaks about china's economy. this is bloomberg. ♪ yousef: you are watching "bloomberg surveillance." i am yousef gamal el-din. the giant of the industry, they are coming through with comments that bloomberg had conducted with a chief executive officer. they say the objective is to 2022 $.70 upnd in from $.50. this is china trying to get to pre-pandemic levels. investor focus is on economic reality of the country. down .9%.is both get you some other key stories we are watching in the bloomberg business flash. >> good morning. another roadblock to a potential tiktok deal. china,a new rule in government approval is needed for a sale. ai technology was needed. to an export control list. the rule is aimed at delaying the sale and is not an outright ban. makes fda approved treatment for peanut allergy. almost triple its market value. expanding,been shedding slower growing business. $6kshire hathaway is betting billion on japanese trading firms. the giant has taking a stake in the five biggest trading companies in the country. 5% inakes include about mitsubishi. that is your bloomberg business flash. yousef: thank you very much. the billionaire founder of one of china's biggest conglomerate is optimistic about the country's economy. exclusivelyng spoke to us. first of all, it covers a wide range of business but we concentrate on family consumption, we focus on health, wealth. we have been focused more and more. i am confident in china's economy. china has a large middle class, so there is huge domestic demand. china's industrial chain is strong in competition. chinese business will be the priority in the most important. we sense there is huge growth potential. >> we are sensing tension between china and the u.s. rising. headwind are those tensions for business like yours? i don't believe some extreme voices during the election campaign can represent the future of the u.s.-china relationship. i think they will find a solution in the future. the company complies with local laws. we are friendly to local communities. all of our investment and business developed meant -- development are welcomed. willrms of investment, we focus more on strengthening our redustry in the futur instead of expansion. have debt to capital ratio of about 56%, that has increased a little bit. are you comfortable with that level? are you looking to raise additional funds either by insurance, bond issuance or loans? maintain a prudent financial policy so we are comfortable with the existing debt ratio. we will not aggressively change our financial policy but we will not be too conservative. we have tried to get a balance between investment and debt, which means we have investments but we also have exits. of multi channel financing, we have bonds and stocks. we have financing in u.s. dollars overseas print that gives us safer sources of funds. important most challenges is maintaining adequate cash flow. tom: which parts of the world look most enticing to you as an investment opportunity? guo: we have taken a position in brazil. we are optimistic about its future development. southeast asia is a place we do not have strong investment but we will strengthen their. has madent for malaria a great contribution in africa. i think africa has been facing a huge challenge from this coronavirus pandemic. we hope we can do more for africa. tom: 10 years from now, where do you expect the company to be 10 years from now? guo: it has a plan to grow 10 times and 10 years. see bigour company will growth. we will bring them better products and better services. yousef: the founder and chairman guo guangchang. let's go back to the market action. we have a rally in equities and that comes off the back of what we saw with record highs in the u.s. late friday and a lot of positive momentum being carried into the asian and european session. leading gains, about .8% higher. the other highlight comes from the bloomberg commodity index. as the dollar weakened, that helped give a commodity complex a lift. the dollar has reversed some of the earlier losses. we are higher on the bloomberg dollar index. the 10 year added basis points. we will not see the same kind of issuance from the treasury. remarks that some the managing director of the imf is giving an online address. she is saying she is seeing a revival of trade and also some commentary on a potential second stimulus that should go into climate and education. we will keep a close eye on the remarks of the managing director who is speaking at this very minute. coming up, the rise and fall of wildcard. this is bloomberg. [indiscernible] ♪ yousef: economics, finance and -- this is "bloomberg surveillance." a plane from israel has entered saudi arabian airspace as the uae and israel continue to firm up the initial agreements and what was an absolutely landmark treaty,reach a peace that is the ultimate goal. it has never happened before that there is an israeli commercial aircraft that has gone through saudi airspace. not one that has been publicly acknowledged. we will continue to keep a close eye on this. let's get to wirecard. u.k. will sell its card business. that technology, assets, transfer the clients to another bank. deutsche bank has submitted a bid to some of wirecard's german assets. tracking the period from entered the index up into the arrest of the company's ceo. dream,card was a german it gave hope to the country's beleaguered finance industry and showed it could do tech. in less than two years, wirecard was insolvent at it ceo was under arrest. the financial times reports an executive in the singapore office is expected of forging contracts. arman financial regulator first for a single stock in germany. two month letter, the ban was lifted. but by the fall of 2019, practices had piled up. kpmg for aned independent audit. something is missing. over $1 billion of revenue. the reason? internal shortcomings. rejects reports of irregularities. by june, the company's defenses are starting to unravel. isriminal investigation launched and police raid the office. missing $2.2ts the billion of assets does not exist and the next day brown is arrested. from darling to do liquid, wirecard caused scandal in germany, with the political repercussions still playing out. the regulator is accused of being asleep on the job. the scandal was called a wake-up call. with questions continuing about the government's oversight, wirecard could still prove to be a political nightmare for berlin. let's stay with that subject and get some more perspective. bloomberg tech reporter. you have an insolvency administration that was a part of wirecard's assets. andu.k. solutions operation associated assets were sold to a bank when an agreement was made. a small open mobile banking platform. sure of theuite sale price. to administrator was keen make sure nothing would into liquid. yousef: let's turn to germany now. what is the latest on the front when it comes to bids for the wirecard assets there? sarah: bloomberg news reported last week that deutsche bank, germany's largest lender, had submitted a bid for some of wirecard'ss -- german assets. according to our report, all of the nonbinding bids were considered well below the 100 million euros the wirecard administrator sees. yousef: you have the finance committee that will hold its sessions today on wirecard. high in termste of them coming out with clear guidelines, is intent? sarah: absolutely. there are a number of institutions for a potential theing for not spotting fraud of the century. it is a bit of a blame game focusing on the question of why authorities, including germany's banking authority, failed to take a harder look at the payment company. yousef: thank you so much. plenty more coverage ahead. this is bloomberg. ♪ abe hasmorning, resigned and warren buffett will participate in the future of -- he buys into the centuries old trading houses. an earthquake, it is still in jackson hole. the aftershocks being felt. the real yield ever more negative. will 1960's inflation return? the summer of our discontent is not over. from kenosha to portland, protest and death. good morning, this is "bloomberg surveillance." from new york, i am tom keene. so i amy is off today here by myself, which is a good thing. i am looking forward to this terrific news flow in the final week of summer, a lot of kids back in school. you see it in the celebration
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