Listen to the exchange. Sen. Harris i do not believe you are a racist. It was hurtful to hear you talk about the reputational two ors whostates senat built their career on the segregation of race in this country. This campaignhave litigated on who supports civil rights, im happy to do that. David number one, you dont want to be saying im not a racist. Number two, the thing that struck me as i think a lot of democratic voters in the primaries are saying, who can beat President Trump . Joe biden did not come across as someone who can beat donald trump on the debate stage. Alix it is the optics of a split screen like that. It just shows how much the Democratic Party has really changed in the last 30 years. David that was pointed out very explicitly, saying it is time to pass the torch. Alix which they kind of already said it some point before. In the markets, nothing is happening. Wait till sunday, when markets start opening for trading. Maybe a little volatility because the russell rebalancing at the end of the trading day, but really it is going to be about the g20 and any headlines overnight. Inflation holding up in the euro zone. Core coming in at 1. 1 . Crude pretty much goes nowhere. It is a wait and see after an unreal six months for the markets. David its time now for bloomberg first take. We are joined by Sarah Ponczek and mark cudmore. Mark, its been a pleasure having you from singapore a week long. Lets start with the g20. President trump saying he hasnt promised he wouldnt put more tariffs on chinese goods. [indiscernible] mark i think hes retained very much the same line all week. It is not that much ebb and flow. Hes been very consistent that hes going to take a hard line on china, and china has been consistent that they want to negotiate on equal terms. I do think that actually, despite the fact we are hyping up this event, it is probably not as binary as people are thinking. Most likely would get that base case handshake statement, and we dont know whether or not there will be more tariffs or a trade deal. Sarah it feels like its been going on for a long time. At least the g20 is finally here. Maybe we will get a little bit of substance, but it is hard to know if we will actually get a true outcome. Investors have been woodland down there base cases to say we are probably not going to get a deal. Theres probably a 0 chance of that actually come to fruition this weekend. What we will likely get is potentially a resolution, potentially just another kicking of the can down the road, and no further hike in tariffs. If we do get a further hike or a warning that we are going to see one in the near term, then we could see markets finally take that in and come back a little bit. You look at the recent performance we seen for semiconductors, materials, tech, we seen a build up in the markets up until this point. Alix mark, you played to the bear case in an article. Heres the bull case. Is it is a good thing for the world when america has good momentum and a resilient fed, no matter what comes out of osaka this weekend. Mark i think that those savings steer quite fast when the leverage markets start coming down. Argument that andy made, and it is slightly unfair to attack in here [laughter] seeing pmisnot slump, but the pmis are already way lower than when the recession started in 2007, and the big come later on. Alix in the meantime, it was rally, everything definitely in june and the first half of the year. Total returns for the first half of the year the highest since 2010. Sarah, does that continue, and what is that contingent on . Sarah many people have been trying to reconcile the fact that stocks and bonds are rallying together. Seam time, there are many people out there who are going to bonds as a hedge, but also seeing i need to get yield somewhere. If bonds are yielding so little, i really have no other option than to stay in stocks. However, something i found so interesting this year is if you look at etf flows for the first half, they are so decidedly defensive. On the equity front, you have really only seen flows into the very defensive areas of the market. It is all about low volatility and dividend yield. Weve also had a record first half or bond inflows as well, which goes to show you the s p rally. David all of that is because both bonds and stocks went up. If one has to give, which is it going to be . Mark i think the first stage will actually be bonds a little bit. Stocks will probably trade around highs for a little longer until we know it is deftly turning down. Stocks tend to turn down a little later, but once they gain momentum, they will go much further. David we got the second round of stress tests out yesterday, and basically everybody passed. It is pretty extreme nearly it is pretty extraordinary if you look at it. Alix it is almost like everyone gets a trophy. [laughter] david at jp morgan, look at that. It is up 10 billion. Pretty extraordinary come overly pretty extreme area, really. Sarah this is where we are, i guess. The worries about the Global Financial crisis may be starting to move to the back burner. Every single bank passing, and you have a record amount of payouts. Analysts were expect and 150 billion. Around the space, you are seeing a rally in the premarket day from jp morgan to Goldman Sachs to bank of america, Deutsche Bank in particular. Good outcome for the banks. Alix based on that, if you are going to buy banks as a payout, how much more can we actually get . We are a quebec we are at a record 170 billion. Mark certainly it seems pretty extreme at the moment. I do think it is an important take away that banks are much more resilient. We are not going to have a repeat of the 2008 crisis. Many traders work on the psychology that they look for the last thing they are used to. Because of this experience of a systemic financial crisis, they are looking for the next thing to be similar. It is not going to be similar. David one thing i am interested bair onad sheila yesterday, and she said when you are late in the cycle, assets are high, defaults are low, and there is a false positive been generated by the stress tests. Should we worry about where we are in the cycle . Sarah that absolutely makes sense. I dont know if we should be worried about where we are in the cycle. Cycles dont die of old age. However, we are at this point where now, the Federal Reserve is supposed to lower Interest Rates once again, and that is only going to put more pressure on the banks. Alix did you see that goldman and Ally Financial are lowering their deposit rate now for some of their high yield products . So much for that deposit beta we were super jazzed about for a little bit. David let the good times roll. Alix i guess. Bloombergs mark cudmore, it was so great to have you here. Sarah ponczek, thank you very much. We have some headlines from the iraqi Energy Minister ahead of saying theeting, opec cut may not deal with the glut. They may need to deepen their output cuts. Should also point out that all of the countries are producing less than their actual cut. So if they even went to target, theyld be creasing would be increasing the production. David by question for you in the opec plus dynamic, how big a role does iraq play . Do we will listen to iraq . Alix now. I think no. I think iraq is going to pump whatever they want to pump. Saudi arabia is going to tow the line and get an agreement from russia in some capacity. Coming up, its showtime. More on the highly anticipated meeting between president s trump and xi that could determine the next chapter of the trade war. We will speak to the asia policy institutes Vice President. This is bloomberg. David President Trump and ahead of xi are just their meeting at the g20 in japan, with both getting lastminute posturing. We welcome from osaka shawn donnan. Prison trump hasnt committed on no new tariffs, but thinks something President Trump hasnt committed on no new tariffs, but thinks something could happen. Who is he talking about bullying . Shawn theres been two features to todays events that they g20. One has been done on from building suspense ahead of the big show tomorrow, his meeting with xi jinping. Himself and xi himself referencing bullying and unilateral practices. We also saw him reference in keeptically the need to Global Supply chains intact, which seems to be a reference to huawei and the u. S. Blacklisting. Weve got the stage set for a pretty important meeting tomorrow. The world is watching. Here in osaka, certainly the suspense is building. David and we will be watching you over there in osaka. Thank you very much. Of course, there is some other business being done over there. We are also focused on the g20 meeting going on. There are some discussions with japan, india, things like that. Alix you had a great photo of the three of them, trump, abe, and modi, all happygolucky. This is a photo which, to me, was staggering, the picture of mbs stark in the middle. I year ago it was like saudi arabia because of the murder of khashoggi. David and he is the one that stands out. Alix exactly. It is interesting to see if you end up getting some kind of deal with china in some capacity, does that make trump go a little abe or europe, or is it happygolucky . David he hasnt made edge much he hasnt made as much a deal about japan back home. Its been all about china. President trump is thinking about his position before 2020, and china is front and center. In the meantime, we are going to go back over to osaka now to stephen engle. Talk to us a little bit about what is going on with india and japan. Thats right. Donald trump earlier this morning did mention he expects big trade deals with both of those countries. Disputesed various with those two allies come on auto tariffs those two allies, on auto tariffs, and to which india has responded with tariffs of its own. Both xi jinping and donald trump have both had bilateral today with india and japan, with the russians. It is all setting up the stage for the big meeting tomorrow. That is what everybodys looking at. We are trying to read the tea leaves and find out what Robert Lighthizer possibly talked about with liu he. Right now, the big leaders are all behind me at a cultural castlearound the osaka in preparation as we are all waiting for what is going to happen tomorrow. Alix thank you very much. Joining us now, wendy cutler, Asia Society Vice president and executive director. Oft do using we will get out tomorrow morning . We will seexciting a resumption of the trade talks, and then a truce imposing further tariffs and trade related action. Im going to be looking closely at how they characterize any resumption of talks and whether we sense that both sides are really into a successful conclusion, or they are both little holding back and trying to figure out their own politics and seeing if they can get a deal based on their own terms and not caved to the other. David lets talk about what they are unlikely to agree upon and what they could agree to. President trump apparently doesnt want china to be number one. Thats not necessarily something china would agree to. On the other hand, china once to continue to develop the way it has been and retain economic sovereignty. Those are things they probably wont agree to. What could they agree on . Wendy they could agree to proceed with the talks in a way that produces balance, that produces followthrough, that is based on mutual respect. Theyhe key will be how do sort through those remaining issues, which some have characterized the 10 remaining issues . Those can all be solved. However, you really need the political will and the willingness to giveandtake, and we are just not seeing that. I think both sides think they are coming from a stronger position and they can wait the other out. Alix based on that, do you think the tail risk are underpriced . Guest certainly. I definitely dont think there is going to be any concrete agreement, and i think the best we can hope for is a resumption of talks. This is a battle for global hegemony. If we do end up getting a trade agreement this year, i think it will end up being temporary in nature. I dont think we can get a lasting deal whatsoever. David a lot of talk has been about the trade in soybeans and theres a lot of talk on currency. The talk on the u. S. Dollar and remember and renminbis. I think the natural path for the cn why is much weaker for the cny is much weaker, so i think the natural path is to see that explosion through the seven handle and whether trump can convince china not to allow that to happen. Alix how do you hedge risk right now . Christian with difficulty. Volatility is low, so options are cheap. David let me ask you the unfair question from a bank of America Survey that says people think it is 65 likely that they will kick the can down the road, not impose new tariffs, but agreed to talk. What about the other 35 . What are the chances that it would be much better than that or much worse than that . Wendy i think the odds are higher they are going to resume and kick the can down the road. I would almost give it 80 , unless something goes really wrong. I dont think it is in either sides interest to leave without talks resuming, but again, successful conclusion is completely another thing. David wendy cutler, thank you so much. Christian lawrence of rabobank will be sticking with us. All 18 banks, including in battled Deutsche Bank, past the feds test. This is bloomberg. Mberg. Alix all 18 banks pass the second round of stress tests, good news especially for Deutsche Bank. Joining us is bloomberg intelligences senior bank analyst. What were your takeaways from yesterday . One is we think the fact that they are showing progress on their process in the ,. S. Is a key posture especially among some any negative headlines and concern over the past year or so. From the u. S. Bank perspective, goldman wellhead of estimates. All the banks basically meeting or beating. Goldman was the biggest surprise, especially its dividend was really positive, giving support to sustainable earnings confidence for them, and i also think sort of sending a signal to different types of investors that actually look at dividends, dividend yield that is more competitive with the other peers. Jp morgan, bank of america, still over 120 . I think the fact that their payout was better than expected is also positive. Bank of americas payout ratio perhaps still the most positive. There dividend was a little light, but still a 20 increase. Alix if you are wells fargo, youve got to have some kind of payout. Have we topped out in terms of payout . We are already at a record 170 billion. Is it the best it is going to get . Alison it will be interesting to see what happens over the next year or so. These are the indicated payout plans, so we also have to see what happens with earnings and the fundamental outlook. We are basically getting to a place where the banks are sort of managing to the capital ratios that they expect over time, so that sort of limits the potential upside. I think thats why you maybe want to start focusing more on the dividend yield than the gross in yields you are getting across these stocks. David this is no doubt good news if you are a shareholder in one of these major banks. What about for the activity of the banks . At the height of the stress tests, we heard you are really constraining growth in this country because we cant do things in terms of financing and lending that we should be doing. Does the passing of these tests indicate the willingness to take more risks . Alison i think the passing of the tests really just indicates the health of the banks. Obviously, their ability to withstand these stress tests. The banks came in with higher capital ratios last year, a lot of that related to the taxes, but at the end of the day, banks are still going to look to Investor Capital and healthy loan growth if they have those opportunities, but we are at a point where we are late cycle, so it is that balance between looking for healthy growth and being prudent. Alix thank you so much. Interesting, though, we were a week or two away from Bank Earnings coming out. That is going to be for the outlook. Fascinating conversation. David you wonder whether it will cause things to be overpriced and things come down again. Alix absolutely. Coming up, the dollar is an input for the fed, not an outcome of policy. Thats according to San Francisco fed president mary daly. We will bring you birds exclusive interview we will bring you bloombergs exclusive interview with her, next. This is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Wireless Network store. Its a look what your wifi can do now store. A get your questions answered by awesome experts store. Its a now theres one store that connects your life like never before store. The xfinity store is here. And its simple, easy, awesome. Alix this is bloomberg daybreak. You made it to the end of the Second Quarter, to the first half of the year, and the g20 is just moments away. S p futures going nowhere. It looks to be the best first half of the year in years for the s p. European stocks a little on the upfront. 1 . Dax up by 5 10 of jeremy hunt, the foreign secretary of the u. K. And running for prime minister, says he will not bring mays brexit deal back to parliament, and that it would be better for the u. K. To leave the eu with a deal. I mean, ok. Sure. [laughter] alix i feel like it is the same conversation. The cable rate actually moving a little higher on that. David but parliament says, are you kidding me . We are not going with that deal. Alix it is the same conversation that he says hes not going to bring the deal back, but we dont want to go without a deal, and we will bring some the key you. David how do you say groundhog day in british . Alix i dont know. I think thats an american thing. David its time for an update of whats making headlines outside the business world. Viviana hurtado is here with the first word news. Viviana we begin with less nights democratic president for debate. It had a breakout moment for kamala harris, putting front runner joe biden on the defensive over race. Pass forok biden to fondly recalling his relationship with segregationist senators. At one point, shes tried to step above the fray as candidates interrupted each other. We are going to let you all speak. Sen. Harris hey guys, you know what . Ameri