Hong kong Police Arrest a media tycoon and prominent activist jimmy lai after the u. S. Penalizes the citys chief executive carrie lam. 15 ,s in next digital get dip 50 only to reverse losses. The inflation debate. Investors look ahead to u. S. Ppi and cpi as global debt with subzero yields top 16 trillion. A ton of negative that out there. Bob prince tells bloomberg a pickup in inflation would be mind blowing. Frome under an hour away the start of cash equity trading in europe. Lets take a look at futures this morning. Looking at gains across European Equity indexes,. 8 of the gains you seen on the widely traded euro stoxx 50 futures, also on ftse futures. In london. Dax in frankfurt. Looking at games on the u. S. Futures picture. Tradings p minis stronger than nasdaq futures, but you still see green arrows, so it could be a risk on monday to kickoff the week. Lets get the first word news with laura wright in london. Gates billionaire bill says it is mind blowing the u. S. Has not improved u. S. Testing. He described the process as slow and lacking fair access. Speaking on cnn, he cited long lines at commercial labs. He says it means wealthy people have quick access but others have to wait. Gates says no other country has such insanity. It is the most senior visit by a u. S. Official in four decades, health and Human Services secretary alex azar is in taiwan, a move likely to fuel tensions with china. He hailed the islands democracy and praised the governments response to the pandemic. Beijing last week said it was firmly opposed the trip. Hong kong police have arrested rating themmy lai, offices of his flagship newspaper. The latest action under the new security law passed in late june. It came weeks after the white house sanctioned carrie lam. Blast,ast weeks deadly World Leaders are pledging almost 300 million to help rebuild beirut after a Virtual Conference cohosted by Emmanuel Macron and the united nations. It comes amid mass protests in lebanon. Demonstrators are calling for the resignation of the government over its role in the explosion. Global news, 24 hours a day, on onir end at bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Matt thanks very much. Laura wright in london with your first witness. President trump has signed four executive orders related to the Coronavirus Relief fund. Expandednu, Unemployment Benefits company temporary payroll tax deferral, eviction protection, and student loan relief. As for the stimulus negotiations between the democrats and the republicans, the two are trillions of dollars apart on overall spending. The parties are still disagreeing on aid, state and local government, and the added jobless benefit. Lets get into markets with mark cudmore, our Bloomberg Live managing editor. Are the markets satisfied with the executive order as a stopgap measure . Mark they seem to be at the moment because they interpret it as a stopgap. There is broad assumption there will ultimately be a stimulus deal and this is buying time and it puts pressure on there being a bigger stimulus deal and before because there is no point in them agreeing to something not much different than what trump offered so the overall investors are taking this positively at the moment. Im concerned there is complacency we wont get a deal, but that is not a narrative people are worried about today. Matt speaking of complacency, weve got inflation indicators coming out this week. And weve heard warnings from bob prince notably of bridgewater but also from citi and others that the amount of negative yielding debt and ig could cause a real problem for holders if we do get inflation. Is there any possibility of a pickup in measured inflation . Dont see it just as an imminent threat myself but you are right. Many people are worried about it. For many, it is one of the biggest risks. Other things to be concerned about, particularly the u. S. China tensions, but people think it is there. Pickup, andflation i dont see it coming, but if we get that pickup, the world is badly positioned for it. The general policies and stimulus weve got have been enacted on the basis we would or any inflation soon severe consumer inflation and that is why we are seeing extreme asset price inflation. I understand why people want to keep an eye on these figures in case. Matt what do you think about the u. S. China tensions . Now a lam sanctioned and media tycoon arrested . What do you expect in terms of escalations, in a really important week, mark . The review of trade agreement at the end of the week, it is a tense week. It seems china is not inclined to respond to aggressive actions and therefore is taking opening they can tide it out until the election. The White House Administration at the moment is pressing aggressively on many fronts and i think that pressure may provoke reaction, or at least creates the risk. That is where i am really worried. If china responds on u. S. Tech companies, for example, in response to a Clean Network initiative, that would be a big blow to some of the Biggest Companies in the world and see severe market loss across the board because of the spillover chains. Cross supply people are sticking with the positive narrative this is posturing ahead of the election and nothing to severe will be done, but that may be the right base case but when you are trying to derisk your strategy, there is a risk things can be misinterpreted. That creates the danger. Speaking of china, you are writing on the blog today that the longterm case for china exposure grows in 2020. At the same time as dr. Copper told us things dont look good on friday, right . Argument you are making, that we are looking at a cold war and the u. S. Could be a loser . Mark not exactly. You mentioned the copper thing, that is a shortterm warning and i am worried for the next few weeks. Im worried august, we will see more terminal turmoil. China is one of the few in the world he was going to grow this world in a world of shrieking economies. Its share of the Global Economy will increase. Impact,t get currency but at the start of the dollar bear market, that will be exaggerated but at the moment, stable. Ouan is its economy shrinking at faster rate than the world average and the dollar bearishness, dollar weakness. You will see china becoming increasingly relevant and the world is underexposed to china, underexposed to the yuan. 2 of global fx reserves. It is 7 of the economy. The argument the convergence is going to get wider as china grows in relevance in the world economy. Matt fascinating stuff. You point out that these shifts maydp that we are seeing be, in some cases, compensated by shifts in the currency like the eurozone. I recommend viewers check out our mliv blog. Type mliv geoeye your bloomberg terminal. Join this question of the day. It was about copper. Is copper warning of a broader turning point . Reach out to us and the team if you type ib tv. Mark or someone related to mark on that team is going to get your answer and use it. Bridgewaters bond warning. Prince says that could out risk gains if inflation picks up. We will discuss next. This is bloomberg. Matt welcome back to bloomberg market the european open. We are about 48 minutes from the start of cash equity trading across europe and in the u. K. , looking at green arrows in terms of futures. May be a risk on monday. I want to get the Bloomberg Business flash. For those, we go to im manus cranny laura wright in we go to laura wright in london. Pressingudi aramco is ahead with plans to pay 75 billion in dividends despite slumping profits and a surge in debt. The income fell 73 from a year earlier, but the worst may be over. The chief executive says it is already seeing a partial recovery in the energy market. Have helpedtiktok the limiter he talks about a merger according to dow jones. Not clear if twitter will pursue a deal, but the social network is smaller than microsoft and probably wouldnt face the same level of antitrust for me. Berkshire scrutiny. Berkshire hathaway bought back stock in the second quarter. It saw a 10 drop in operating profit. That was not as bad as expected. Aside from buybacks, Warren Buffett grew his cash pile, now over 146 billion. That is your Bloomberg Business flash. Matt thanks very much. Laura wright came london with the business . Investors are underestimating the risk, the Downside Risk from your zero Interest Rates according to bob prince, the bridgewater cocio. He says bond losses could far outweigh their potential gains if inflation should pick up or real yields rise from the current depressed levels. Joined by the Portfolio Manager for globally multiassets at pine bridge investments. To some extent, you agree with princes statement. Hes talking about investmentgrade debt. Do you think there is a possibility inflation would really hurt Investors Holding this kind of paper . Good to be with you. Inflation would hurt, not just investmentgrade debt. It is the risk for fall all financial assets. There are few exceptions, but within fixed income, we would say to investors, focus on real returns and real yields. Is very few options on that front and that is what has led us to shift our focus toward emergingmarket debts as really the only meaningful remaining worthve real yields taking some risk on. Matt what emergingmarket debt that you like . We saw local currency and dollardenominated debt spreads came down pretty drastically. For in ayou looking emergingmarket debt as the right choice . The spreads have tightened across the board, but it has done more so in the backstopped markets, if you will, where there has been direct central banking intervention in the u. S. And europe whereas in markets like asia, you havent seen the extent of that spread tightening yet and that is where there is from spread gain tightening as well as carry. I would focus on emergingmarket corporate debt and in the sovereign space, hard currency. We dont think the currency risk is attractive at this point and in corporate debt, you get a higher spread premium with lower risk. There is lower duration, lower Interest Rate risk, higher credit quality and higher spread. You have to give up a little bit in liquidity but that is good riskreward profile and i would agree with the focus on yieldion in terms of real terms and that is what you get from emerging markets at this point. Matt what are your expectations on inflation . Ppi and cpie are numbers coming out of the u. S. And while certain items in the basket very, for example, food stocks people cant do without, are climbing in price, other things are falling and it doesnt seem there is consensus for a real pickup in in in inflation. It is the debate we hear being discussed out there. Say we point, we would are in the early stages of a multiyear expansion beginning widea position of a very negative output gap. It is virtually impossible to generate sustained inflation with regards to the extent of slack in the system so we would say it is more in the risk ledger rather than the base case at this moment but it certainly has the ingredients to see deflation. Perhaps the most important ingredient is the fact we expect the Federal Reserve begin to adopt an inflation makeup strategy that would intentionally allow the economy to run hot for some time, allowing inflation to catch up. That does pay the ground for inflation to eventually arise, but we would be factoring into expectations at this point. Matt i want to get your dollar outlook, because it is key to these issues but it is also key to what we will talk about next so ill save that. Hani redha from Pinebridge Investments is our guest cohost for the hour. Twoday losing streak as saudi arabia predicts demand will continue to improve through the rest of the year. We will talk about that next, as well as king dollar. This is bloomberg. Matt welcome back to bloomberg market the european open. We are looking at gains across the board. Ftse futures, up almost 1 . Dax futures, gaining nine point. 9 . Thise getting headlines on u. S. Taiwan relationship. We have alex azar right now, u. S. Minister, secretary as we say, visiting taiwan. The highestranking official to visit taiwan since im going to say late 1970s. In a long time. That doesnt do anything to help u. S. China relations. Sign. S. Senate taiwan will a Health Cooperation agreement and there will be a press conference in about 40 minutes time at the market open. 1979. Time thethe last u. S. Sent such a highranking official. That was the birth year of the gclass, mercedes fabled offered cheap. Is pressing ahead with 75 billion in dividends this year despite a slide in profits and rising debt. Oil snapped a twoday losing streak as the oil giants ceo predicted demand will continue to improve through the rest of the year despite many regions across the world struggling to bring the coronavirus under control. If only we were all driving gwagons, that would be the case. Hani redha from Pinebridge Investments is still with us. What do you expect to see and what out of oil . Hani weve gone from a huge april to asurplus in sizable deficit in early july. Barrels to 4on Million Barrels a day deficit. That is really the extreme of it. Tweaking from this point, the demand recovery will start to normalize after the initial burst of activity from reopening and on the supply side, we are going to see additional supply coming through from opec plus and also the u. S. Shale players. The deficit level on a per day basis is likely to narrow to some extent so for the back half of this year going into next year, we think things will be fairly range bound and it is unlikely for us to see meaningful gains from oil prices for that period. After that, we are in a position where we think supply is more constrained than markets expect so there will be a slow grind higher in oil prices from where we are today. Matt i promised i would ask you about the dollar. Emis key to obviously the situation, em debt scenario you are looking at but also to the price of almost all commodities based in dollars. What do you expect from the greenback . Been on a downturn, but is it going to plateau here or go one way or the other . Hani the stars have been aligned for some dollar weakness for some time. It has been long expected. We are positioned for it. It is perhaps, but finally coming through and we think there is for the room for it to go. The ingredients of a very sharp whichse in the pace at of fed, and the backdrop concerns around u. S. Growth outlook because of mistakes made during the reopening really have reached their peak, so the fed will continue to grow its Balance Sheet that the ecb will grow it faster. In which thetial pace of Central BanksBalance Sheets grow is important as a driver. It means the dollar can continue to weaken for some time, but it is unlikely to keep this pace of weakness. Growth in the u. S. Is going to start to really firm up now that we have seen a wider adoption of the stimulusand that is going to be coming through, as well. That perfect alignment for the dollar weakness we saw very rapidly start to play out is likely to slow. For yournks very much time this morning. We appreciate your insight. Hani redha is a Portfolio Manager for multiglobal assets at Pinebridge Investments. Coming up on the program, prominent Democracy Advocate and arrestedoon jimmy lai, in hong kong under its controversial security law. We will bring you the details next. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Puts its customers a wiin charge . Rier well, the good news gets shared. And it gets rated 1 for customer satisfaction. But dont just take our word for it. Take theirs. Its your wireless. Your rules. Only with xfinity mobile. Call, click or visit a store today. Matt welcome back to bloomberg , this is the european open and we are 30 minutes from the start of cash equity trading. Still looking at green arrows. Ftse futures up 0. 9 . U. S. Futures also showing gains. Look like we could have a risk on monday. Some key events in the next few days. Fromng an eye out for news the u. S. After the democratic president ial nominee joe biden said he will be announced his choice for a running mate this week. Watch out for that. Tomorrow, we get the u. K. Unemployment rate. And of take in the figure is expected. And on wednesday, we will find out just how painful the lockdown was for the british economy. Showata is expected to that the economy fell in the first half of the year. Industrial production will also be published on wednesday. Analysts expect a sizable improvement in june that the numbers will still show that the recovery has some way to go. And the end of the week, we will see the second release of euro area bp data. The first publication showed the fell 12. 1conomies percent, the largest contraction salecord and u. S. Retail figures are also due out on friday. Expected to show the rebound to nude in july but economists are forecasting a smaller increase in last time. Police have arrested media type cone and democracy rating thejimmy lai, offices of his raiding the offices of his newspaper. Senior International EditorJodi Schneider joins us now. Why is this arrest so significant . Is it his age . His wealth . And what does it mean for other democracy activist .