Summer friday. Really extraordinary, like the thunder south of manhattan overnight. The thunder out of washington. I know we are talking china, but the republicans simply went down in flames yesterday. No other way to put it. Jonathan it doesnt look good not having a deal before the weekend. You need some kind of agreement within republicans for the weekend. We might not see it until monday. Not just the size difference between republicans and democrats. If it is just size, we can work some thing out. But if its concepts, we got a struggle. I think weve got a struggle on enhanced on it limit benefits. If this economy and the recovery is still constrained and people cant go back to work because these industries cant normalize, then you have got to have a tradeoff. If you want to remove those benefits, here is the tradeoff. You are going to have softer consumption through summer. Tom and big business this week, you see it in diminished revenues. It is a number you could never imagine. The bond market move yesterday on the republican disappointment to lower yields. Lisa you see lower yields on the suffering side, but in the corporate debt market, yields tick a little higher. This comes in tandem with the risk off field we get today. We also got the jobless claims yesterday. We really cant overlook that. The u. S. Economy is stalling out, and this comes at a time of incredible policy uncertainty and a rise in u. S. China tensions. Tom i am just trying to get to the sunday talk shows. You wonder what the political message will be. What is the Economic Investment message you are looking at for the real yield . Jonathan the most important question now, building on what lisa said, going into summer, are we losing momentum or going in reverse . If we are just losing momentum and we can get some positive growth, some decent data for the months to come, that might be sufficient for risk assets. If we are going in reverse, if this is the doubledip people feared, weve got a bigger problem. Tom the linchpin we hear in every conversation is the real yield. Look for jons show this weekend. I will give you that quote right ounce. Gold, 1891 an for you to reset into august, Christopher Harvey joins us. Hes the wells fargo head of equity strategy, where he writes a blindingly clear one page note. What is the distinction now in the equity markets that has your attention . Christopher i hear all the negatives, but really we are talking about a rate of change, and it is a less bad story. Things are getting less bad. You named a few Companies Come about what we are hearing is the worst is over in the quarter. We have seen linear progression. What i am not hearing is the fear and the commentary. I am hearing people being conservative, but i am not hearing the fear. That is very constructive. The equity market is up 4 to 5 month to date. We thought we would have an equity market mode top. We think we are halfway there. Jonathan that phrase, melt up, has always been a big theme for you coming into the month of july, going deeper into summer. What is your conviction that we are halfway through a melt up . Chris it is exactly what we were talking about. Now we are getting tangible evidence of that story. You have Interest Rates basically had zero. Credit spreads are tight. Funding markets are liquid. People are positioned. Yes, there are covid hotspots, but some areas are very difficult. Two to four weeks, we think those are much more lukewarm. We think this is a pause. This is not a reversal of the momentum, and we walk higher consequently. Lisa less bad being the key reason perhaps behind the lack of urgency in d. C. No deal going into the weekend. Mitch mcconnell trying to wrangle republicans to get some kind of cohesive plan to expand the enhanced on employment benefits. How much has policy backstopped this melt up, and how much does that get stopped if we dont get some kind of extension by the end of next week . Chris the amount of accommodation on the table is phenomenal. The fed Balance Sheet may be at 10 trillion by the end of the year. That is just hard to comprehend. Billions of dollars in fiscal stimulus. A significant amount is related to that. But really, what happens is the gears of the machine sees up of the machine seize up. The answer to your question, if we dont get additional stimulus, it will impact the markets. But theres more going on than just stimulus. Jonathan how do you think this market is going to respond to data that shows signs of an economy slowing . How do you think the data changes around that, how investors will be change around how that data changes . Chris the answer to that is always how bad. The claims numbers, we took a step back. But we are in the middle of earnings season, and earnings and the commentary from the csuite are much more important at this time. Right now, that commentary is still pretty constructive. If it gets less constructive or terms negative, then i think we have a problem. Jonathan we are hearing from the airlines they are losing momentum. They are not going backwards. We heard it from the banks. Ofarly, we made a lot mistakes in this country in the sunbelt. We are paying for that. We are seeing signs of the admin station change course. I put this out on twitter yesterday. If the loss momentum in the born out ofa is the states several months ago, when we trade out of that or on the ministration changing course . The administration changing course . Chris we will have to agree to disagree because we are seeing the fedexes of this world, the transportation, we are seeing a pretty constructive course. Yes, there are situations where things arent great. If we are going to lose momentum, it is going to be hard to get equities higher. I think the biggest fear we have isnt around this. It is the negative rates scenario. You alluded to rates a few minutes ago. Interest rates on 10 year continue to come down. They are getting u. S. Financial eternity before they raise rates. That is a difficult environment if you get that negative rates narrative. That is the biggest fear for us. That fear i think will materialize at some point in time because you cant get rates higher. Youre telling the market we are not going to raise rates. Eventually that scenario is going to come back, and it is going to be hard in that environment. Lisa another risk for markets markets isfor the that tech valuations have gotten ahead of themselves. We are seeing the nasdaq start to perform on a number of risk off days. Wondering how much we are relying on tech to continue to lead the charge upward from here in order for u. S. Equities to melt up. Chris we think the rally is going to broaden now. We think we are not losing momentum. What we also think is people have taken a ruler, and with tech companies, growth companies, they have put the ruler down and drew the Straight Line up. With think that is wrong. We want people to start taking ubercaps andour more mispriced names. Eventually you have to have the rest of the economy and the rest of the stocks participate. Tom on a friday, by the dip is in place. How do you know when to buy the dip . Where are the dips you step in and buy . Tom we told people in march chris we told people in march below 2500. Tom that is not now. Jonathan thats more than a slip. [laughter] chris it is really hard to call a 1 pullback a dip. Tom thank you. [laughter] chris we would hope you are fully invested at this point in time. If you are not, this would not be a great time to really start buying your uber caps and put on a ton of risk at this juncture. We would be a little bit more cautious. We have been saying if we do get that melt up, at some point we want to shift to a more defensive stance to your low vol. Fell off their chair in st. Louis when you called a 1 pullback a dip. This is where we are. [laughter] jonathan chris, great to catch up. Chris harvey thereof wells fargo. What you just heard from the south side, youll never hear him talk about a trade that went wrong five months ago, but you will hear them say a trade that went right from five months ago. Tom well, that is the nature of the beast. This is all just vectors. Defectors went straight up since time began. It is just amazing how we have removed ourselves from 10 correction, 18 bear market. Jonathan something that slipped under the radar this week, tied on highyield five percentage points. I think it is important in credit right now. Credit remains really supportive, even with what is happening with the data as we lose momentum, even with the jitters in the equity market. Into wednesday, the types post covid, five percentage points. Lisa some exciting we could see record low yields on junk bonds. My question is, are we just worsening our situation on the other cited this pandemic, given the fact that companies are going to come out with much more indebted Balance Sheets . Jonathan dont you think this is the pain trade in europe for the last decade or so . That the ecb was just buying credit and yields kept coming in, despite the fact that the economy wasnt looking great . Lisa the fed hasnt bought that much corporate debt relative to the rally we have seen. This has been investors piling and. Theres a question of whether investors have gotten ahead of what the fed is willing to do. Jonathan we saw this coming out of the euro crisis, with the with everett takes speech with the whatever it takes speech from draghi. Coming up on this program, bloomberg chief washington correspondent Kevin Cirilli on the latest in d. C. Tom hes working friday, really . [laughter] jonathan give him a rest. From new york, this is bloomberg. Karina with the first word news, im karina mitchell. Goldman sachs has agreed to settle the longrunning case involving malaysians when mdv malaysias 1mdb fund. In exchange, malaysia will drop all criminal charges. Malaysia has alleged some of the money raised ended up in fraudulent Shell Companies run by corrupt officials. China struck back. To close the u. S. Consulate in chengdu is in response to the u. S. Decision to close the chinese consulate in houston. China says its action is legitimate and necessary response. President trump has given into worries about the coronavirus. He has canceled his floor nominating convention his florida nominating convention, the biggest event of his campaign. The president says he didnt want to take any chances. And it is the latest sign that the coronavirus is wreaking havoc in hollywood. Disney has canceled the august release of the widely anticipated mulan, and delayed future star wars and avatar movies by one year. Meanwhile, the largest u. S. Theater owner amc has delayed its opening until midaugust. 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. Im karina mitchell. This is bloomberg. Much more to come. President trump has made very clear we need a strategy to protect the American Economy and our weight of life. The free world must triumph under this new tyranny. Jonathan secretary mike pompeo on tour, and he keeps swinging and swinging at the chinese come is party. Good morning the Chinese Communist party good morning. Alongside tom keene and Lisa Abramowicz, im jonathan ferro. In your equity market, one hour and 12 minutes away from the cash open this friday, slightly firmer. Down 0. 3 on the s p 500. , 1. 1608. R came back yield higher by a single basis point to 0. 58 . The focus now on washington, d. C. I got a message from a bloomberg subscriber moments ago, sending me a video of nomar. All you had to say was that he was playing with his baseball glove. Tom i said his batting gloves. Jonathan i didnt understand the hand signals. Now i get it. Tom on radio, folks jonathan i didnt want to do this, but we are going to do it. Pitchu see the fauci yesterday . Tom it was well done for a virologist. [laughter] jonathan it was pretty awkward. Tom let me suggest, this is dr. Fauci we welcome all of you on radio, particularly in boston and washington dr. Fauci out there with the great symbolism of the pitch. All i can say is it is a lot farther to home plate and the , even zone than you think if you come in from the pitchers mound. We forget how incredibly gifted these pictures are. Pitchers are. We bring in Kevin Cirilli, our chief nationals correspondent. It is great to see come about all of it was in the debris of a Republican Party in massive disarray. Much of this is out of the secretary of treasury. What kind of friday morning is mr. Mnuchin having . Kevin i think from the policy standpoint, yesterday was a significant step forward, that secretary mnuchin was able to get to an agreement with leader mcconnell. They have taken two points that i would add. First and foremost, a tiered approach in terms of targeting Economic Relief to individuals who need it, in terms of more stimulus in midaugust. The second item is these tax credits for businesses, particularly those who are able to hold onto employees who otherwise might have to be furloughed by the end of the year. Tom you sound like a beltway guy. It is the 23rd or 24th and we get through the weekend. I dont even know what date monday is. Come on, kevin. The clock is ticking. Kevin hopefully they can exit you better than dr. Fauci throwing the baseball last night they can execute better than dr. Fauci throwing the baseball last night. They want to get this done by next friday, but in terms of the conversation with democrats, there likely will be some more political theater. I keep making this comparison, but it bears repeating, this is what washington does best. Any time there is a government shutdown, they go right up to the deadline and then kick the can down the road. That could be the situation right now. Before the august recess, there doesnt seem to be much urgency to get it done right around then. They could extend and work into recess, and that is something i have heard from lowerlevel staffers who, quite frankly, are also adjusting plans in preparation that that might happen. Jonathan the president standing there, facing the camera alone, trying to take back control. Is this changing the direction of travel . The polls out in the last one to four hours, biden topping the president in michigan, pennsylvania, minnesota. In florida, the president , 38 . Joe biden, 51 . Is it making a difference . Kevin it is resetting the palate. I spoke with a senior were republican strategist who advises the reelection campaign. What this source told me was whether it is the president now embracing the use of masks or yesterday announcing that they will have a more pared down convention in florida, that is all an example of the president trying to reset from what has been a very turbulent political past few months for his administration. Whether or not it is going to have a longterm effect, we just dont know. But this is a resetting this week for president trump. Lisa when it is a reset for president trump, does that mean theres going to be more unity or less unity among republicans as they try to come up with some agreement and get reelected themselves . Kevin i think from the standpoint of unity, republicans are just as unified as democrats on economic issues. While the president yesterday backing off of the short from the payroll tax cut, he also essentially is embracing much more Government Spending than the conservative ideological base of his party would like to see. They have to iron this out, but as they have had to shut down and states have had to look at the data of the influx of cases come up they have come to the realization that more economic stimulus is not just needed. It was needed yesterday. Jonathan in ambassador boltons book, i think you referred to secretary mnuchin i think he referred to secretary mnuchin as a panda hugger. I think he would not say that about secretary pompeo. What happens going into the weekend . Kevin this is a largely expected move for xi jinping, to close the u. S. Consulate in chengdu. It could have been more significant if they had close to consulate in hong kong, but from a backandforth perspective, what happened with the u. S. Deciding to close the consulate in houston, this was a backandforth. Yesterday, pompeo delivering a blistering critique of u. S. China relations over the last 50 years at president nixons presence will library. Remember that historic trip that president nixon took in 1962, trying to suggest that engaging china what allow them to move into democratic way of thinking and cultural thinking. Secretary pompeo continuing as he has for more than a year in saying that that has been a colossal failure, and that a new type of dealing with china is needed. Jonathan kevin, great to catch up. Enjoy the weekend. Kevin called it blistering. Here are the words from secretary pompeo. Destined toisnt tyrannize inside and outside china forever unless we allow it. There is a message they are not just for the Chinese Communist party. It is for allies. I just wonder whether it is too late. Tom as you mentioned earlier, the tour of the secretary, the profound imagery of him giving this speech esther day at the Nixon Library is really, i just cant say enough about the symbolism of that. Jonathan good morning to you while. Equity futures rebounding from this mornings losses. We seen it a couple of time this week. Chinau. S. Tension gets lower, then we bounceback. Coming up next, former Labor Department chief economist betsy stephenson. From new york, this is bloomberg. Jonathan from new york state, this is bloomberg surveillance. We are live on bloomberg tv and radio. Alongside tom keene and Lisa Abramowicz, im jonathan ferro. Equity futures down. 33 . The underperformance is coming from the nasdaq. Negative followthrough from big tex. In the bond market, yields higher by a single basis points. The euro, better pmi out of the euro zone. Are we expecting a similar theme in the United States . The answer to that is not right now. A shift in the last several weeks, where economists are starting to look for a loss of momentum in the data. In the highfrequency stuff, we sought in jobless claims, will we see it in the payrolls report . Tom what we will do right now usually Betsey Stevenson darkens the door on jobs day and were worried about what happens at 8 30. We can speak to one of our leading policy analyst, Betsey Stevenson writing for Bloomberg Opinion and her work formerly with the departme