Return. Cellent huge samestore sales beat at home depot. Now walmart out with a digital 97 at theirup online stores. Granted, it is a different a different mix than home depot. A stunning statement from the traditional of england, where i believe one and in will be shown the door. Anna they are hoping to do this through voluntary redundancies and retirements and the like, but they got to get to that number. Food was a bright spot at marks spencers. Obviously, the online shift on all of these retailers has structurally been dealing with prepandemic comes with costs as well for retailers. They need to reposition their businesses for a new world. Tom it is a really complex tuesday here on our simulcast. We welcome all of you on Bloomberg Radio and Bloomberg Television. Futures up eight. The vix is a stunning 21. 22. Unimaginable weeks and months ago. Really noting dollar weakness at 92. Ith the dxy give us the themes that you see this morning. Get to the week as well. Weve got an fx voice coming up later in the program. I am very focused on the rising level of infections, particularly in germany. We are seeing the highest number in some four months, and the focus in europe is ongoing moves at the margins to restrict Peoples Movement to stop the further spread. Plenty of people want to take holiday across the continent, and many people taking actions to stop the spread going with those tourists. Lets get to the morning brief and look at what is coming up this morning. 8 30 am, we get u. S. Housing starts for the month of july. Today we are going to hear from President Trump. There might be a big focus on the democrats this week, but President Trump certainly not being silent. Yesterday accusing joe biden of being a socialist and a fascist, i think. Anyway, he visits iowa and arizona. Then the dnc at 9 00 p. M. We have a host of household names, even in london. Many people have heard of both of these people, Chuck Schumer , bill clinton and joe biden will be speaking. Biden will be speaking. To markets. T speaks ive got to speak to my bowtie here. For those of you on radio, the bowtie needs adjustment. Is at federated investment. He writes really important notes of the International Balance is out there and what to do with your investment capital. Steve, i look at your note, which is basically everybody wake up. Does that mean that you and your team at federated stay you did stay hugely u. S. Centric . Steve no. Actually, for the first time in a while, we have closed some of our underweights internationally. Collectively, large parts of the world are exiting recession. The stayathome recession has most likely ended in a lot of places, and we are entering a recovery. In that environment, value parts of the market are likely to catch up. When you look at european indices, when you look at , it is not aus story about growth rolling over and dying. Tom lets review it right now. Tech down andt value up. It is on a relative basis, just the value starts to do better, right . Steve within value, you have to survivorshat from the and the dyers. Those companies that dont survive are going to be rerated higher when they are no longer being priced for pandemic and recession, so we think theres a lot of output to be generated if you can engage in Good Research and pick the right stocks. Anna good morning to you. What is the catalyst that drives that move into value . Is it a vaccine . What will be the definitive vaccine news . Vaccine is part of this, but lets make no mistake, it is not an Investment Strategy to pray for a cure all. Any vaccine we are likely to get is more flu vaccine than smallpox vaccine. I think the big catalyst is just the end of the recession. If you look at pmis, retail sales, housing activity, they are all showing economic recovery. That in and of itself is a catalyst. Is if we confirm it continue to see the 10 year yield remained firm. Thats what was different in this past value run. Youve got 20 basis points of 10 that you didnt get before. Weakening is a sign of normalization. Youre taking off the safety trade in large part. And we will get to the dollar shortly. I am just looking at your today to moves on some of these big stock indexes. The nasdaq and the s p have notably have notably turned positive. Europe really drags behind. Is that just a function of being driven by more value than growth, or does europe deserve that kind of discount right now . Steve i think it deserves a discount, largely because of the sector exposure. The s p 500 has significantly more tech. When you look at the euro stoxx, you got a lot more financials, a lot more energy, a lot more big pharma. But i also think there have been some overhangs in europe. You are seeing a little bit more fiscal cohesion. Up until the last day or so, the virus data has been willows woodley has been relatively well behaved. What are you actually doing to deploy capital . I want to talk about a broader institutional i hit institutional idea at federated on what sectors matter now. Tom it is going to be steve it is going to be an interesting answer, and it is small caps actually. Small caps is a way of playing the cyclical rotation, but even if the value story doesnt materialize as much as we think it may, small caps have another way of winning. In the first year off of a recession bottom, smallcap equities tend to outperform large caps by about putting 5 , which is a big by about 25 , which is a big boost. They benefit from a cyclical pickup, and we think longer term, they benefit from manufacturing right in the center of the United States. Caps, we have closed our underweight internationally, and we remain overweight equities. Those are the big calls we are suggesting that client simple meant through their portfolios that clients implement through their portfolios. Anna what drives that manufacturing renaissance in the United States . It is is it as simple as that come or does that not play well with our esg credentials . Steve i think population is a big driver. It is not the only one. The drivers of Economic Growth are population growth and innovation. Remember, Companies Went to china primarily for cheap labor 10, 20 years ago. But when your factory is more technology and less labor in terms of input cost, what youre left with our higher shipping costs, Higher Energy costs, not enough intellectual property protection, uncertainty on the peninsula, and there have been some transparency issues, at least around the beginning of the pandemic. By contrast, when you look at the center of the United Statesk easy shipping routes, one of the lowest tax rates in the world, geopolitical stability, even in these kind of crazy political times, and we think that for a t with us. Really interesting nuance there on the equity markets. We are going to do that in bonds as well. Futures up seven, dow futures up 100. If you are just tuning in, home depot with spectacular samestore sales, and walmart really not bad as well. It gives a lift to the market. I am not going to overplay that, but nevertheless, a lift to the market. On fixed income, robert tipp will join with pgim, their fixed investment strategist. Anna edwards and tom keene. Good morning. Ritika with the first word news, im ritika gupta. Bernie sanders all but begged his progressive followers to vote for joe biden last night. He spoke on the Opening Night of the democratic convention. Sen. Sanders let us be clear. If donald trump is reelected, all the progress we have made will be in jeopardy. At its most basic, this election is about preserving our democracy. Ritika sanders acknowledged that bidens Health Care Plan fell short of his vision. President trump added a trip to iowa to his schedule today. His support has been slipping in on in 2016,w suggesting it is up for grabs for joe biden. The Trump Administration moved to curb huaweis access to commercially available chips to prevent adoption of the companys 5g technology. President trump told fox he doesnt want huawei equipment here because they will spy on us. Canadas finance minister has resigned after a rift with Prime Minister Justin Trudeau proved impossible to repair. That leaves trudeau with a major hole in his cabinet in the midst of a recession. He confirmed that the position will not be filled by bank of England Governor Mark carney. In expanding a bet its physical offices in six u. S. Cities. The company will be adding thousands of corporate jobs in those places. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Four years later, the state of this nation is very different. More than 150,000 people have died, and our economy is in shambles because of a virus that this president downplayed for too long. Obama tom michelle with quite a statement to end the first night of the Virtual Convention. Joining us after virtual sleep, Kevin Cirilli, our chief washington correspondent. We could go for an hour over the political experiment last night. Lets start with the theater of it. Was it successful . Kevin i think former first Lady Michelle obama, from the details of the vote on her necklace to her eyes glossing over when she spoke in passionate terms, really was one of the only individuals and i would argue set the template for how these Virtual Conventions ought to go. She didnt play to a stadium. She played to your cell phone. That could be replayed oneonone, and it was very inviting. If you are not going to have a crowd, take the Michelle Obama route and do that. I thought every other speech was somewhat interesting, but really, you could get the sense that they wanted to speak to a crowd, and they just werent there. Tom i want to jump forward to what republicans are going to do to respond to this. I know it is only the first night as well, but how do you envision the republican exercise that we get after a virtual milwaukee . Kevin weve seen a little bit of the murmuring behind the scenes. Many of these speeches were pretaped. I think the president is going to be speaking from the white house, so we dont know whether or not there will be any supporters there, and a socially distant supporters there. The president has given several addresses over the last several weeks, both at his golf courses and in public appearances, and which there have been small crowds gathered. That, to a president who really does like to speak of a crowd, that could change things in terms of the contrast. From an ideological standpoint, tonight, freshman congresswoman alexandria ocasiocortez is set to address the convention. Contrast that with some of the speakers next week. It really is an interesting dynamic between the Economic Vision of the two parties. Anna good morning. It is really interesting what you said about Michelle Obama mastering the medium, and perhaps a challenge to move from stage to screen, and it is a very different artform, i suppose. So what do we get today . Last night seems to be the Democratic Unity on display. Parts of the left trying to look more center. Tonight we hear more of the progressives. Will they also try to keep with that slightly more centrist line . Kevin in addition to alexandria ocasiocortez, she speaks after senator Bernie Sanders, who in his remarks, said he does have differences with joe biden and does have differences in terms of their Health Care Plans, and that ultimately it would be a better choice from the democraticsocialist perspective. I was struck by how senator sanders laid out the vision, in particular with what he had to say about this notion of fascism. Look to see how aoc tonight, whether or not she adopts those and makes the case in that way. Former president bill clinton will speak, as will dr. Jill biden, joe bidens wife. Even with bill clinton, i think active two conventions ago when he got up there on the stage and gave what was interpreted as a barnstormers speech, went off ,cript and really let it rip and the Political Class applauded it on both sides of the aisle. It was a sense of here is a former president who can break through the convention for the crowd. How will he play . And cirilli are from battleground states. Who in your pennsylvania where they speaking to last night . Articlehere is a great called what joe biden can learn from conor lamb. I thought governor kasichs statements had republicans more nervous last night and senator Bernie Sanders. Republicans i spoke with throughout the day said they are going to type Bernie Sanders to joe biden. They are going to tie aoc to joe biden. But governor john kasich, a republican governor speaking on the crossroads, so to speak, and really making a pitch. For his part, President Trump yesterday telling reporters that he thinks kasich is a total loser. Tom is mitt romney going to speak to the democrats . Kevin senator romney you have to remember, senator romney and President Trump, they relationship as it dates back to 2016, we all rumor the photograph of whether or not he was going to be secretary of state. Then you get to the notion of President Trump endorsing senator romney in utah. They have had a storied relationship. Tom give us the rest of the me, anna. , excuse go ahead. Anna i was just paying up on exact what you were discussing, the republicans coming out for a democrat contender here. How usual is that . How often do we see this trick played . I think that is where the Virtual Convention medium has to be frustrating for democrats because here you have a governor speakingleground state in a field shot by a drone. I think that on this Virtual Campaign trail may be didnt have the effect they were going for, but it is still incredibly notable, nonetheless. Tom thank you so much. Anna, im sorry i cut you off their. I usually do that to ferro, and hes not as polite as you are. [laughter] anna thats ok. It happens when we are working transatlantically. Shot by aa field drone, but it was a very symbolic crossroads he was standing at. Tom that concept of play into a cell phone, my earliest memory 1960is soiree is the convention, where i was allowed to stay up until 8 00 p. M. And , thehe black and white tv jfk soiree which transfixed boston at that time. Anna but playing well on a cell phone, that speaks to your skills that. We are used to staring down the barrel of a camera. Tom well, we will see. David westin with our coverage there on the convention, and of course, Kevin Cirilli through the day as well. I really cant say enough about how we are approaching this at 10 00 p. M. With topics that are a little bit different then you will see other places. Robert tipp will join us with pgim. We need to talk about the real yields out there. We do that with the 10year in just a basis point. The real yield i miss the show, the real yield. I miss it a lot. This is bloomberg. Hike Simon Pagenaud takes the lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. He scores stanley cup champions touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. But what if you could stdo better than that . K. Like adapt. Discover. Deliver. In new ways. To new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back. But bounce forward. Thats why were helping you stay ahead and adapt with a network you can count on, 24 7 support and Flexible Solutions that work wherever you are. Call or go online today. Tom Bloomberg Radio and Bloomberg Television with the data this morning. Buts in august churn, nevertheless, some interesting trends out there. 21. 32. To s p futures up six points. I want to point out significant dollar weakness. It is maybe not what it was two hours ago, but nevertheless, yendollar printing a 1. 19. Roach really calling for persistent weak dollar here off the larger macro trends of the nation. Anna edwards with us today. Jon ferro out, Lisa Abramowicz out. Anna edwards getting the short straw here. Really thrilled she could be here. Something for america that is so easy to ignore, but i think we need to speak of humans about our reporting with tori clark ,ut of moscow about belarus sandwiched between poland and russia, it is a critical point of tuesday into wednesday tension, isnt it . Anna absolutely. Yesterday, and critical yesterday, incredible scenes of resident lukashenko. The eu says the election wasnt valid. Heckled, told to resign. No sign that he is resigning, but certainly really interesting to see that risk assets did panic and we saw president put in say he would president putin say he would lend support to belarus, not necessarily to lukashenko. He said that moscow might be happy to see some transition away from lukashenko. It is not the same as ukraine, as we discussed yesterday. Tom really showing the manufacturing and business sector is on strike. Obviously the protests come of thoseages we see, and for of you on radio, i can only say that there is a loneliness here in the imagery of a leader, and you wonder where this will go forward. This is something our Eastern European team and those in moscow are monitoring. We spoke of equities earlier with steve sharon, and now with pgim ine awardwinning fixed income, robert tipp joins us, their chief investment strategist. What do i make of the real yield . What do i make of the inflationadjusted yielded america right now . Robert it is a difficult time for people to figure out their bonds, theres no doubt. Yields are low, real yields are negative. It is time for people to wrap their minds around what that means. Those are lesser to remain where they are. If the fed is going to succeed, that is going to be measured in terms of their pushing up Inflation Expectations. A basic seed right now in rake evens are below 2 , and the fed wants to tell wants to target a pce of 2 . Cpi is usually higher than the pce is 2 , thes cpi has got to be higher than 2 . So real yields are negative, and does the market believe the inflation is going to go to target . It doesnt believe it now. Tom what you just heard is an adult conversation on bonds. Weve heard this across the show. I cant say enough the value of john ryding at Brean Capital and what you are hearing from mr. Tipp of pgim. I dont know what else to say. It was literally the first logic i did for matt would clear at bloomberg for matt winkler at bloomberg. You take the nominal yield and then look at the Inflation Expectation and the residual is the real yield. With that said, what would you suggest nominal yields will do . My comments here have been the front end of the curve are little but expensive, but they are going to stay down here. We make it a little bit of a w intech recovery, a little but of a setback on growth. The middle part of the curve, the 10 is going to be in this 40 to 80 range. Whether people are a diligent that w, the back end of the curve guiding back inside of the yield curve, those forward rates , whats priced in terms of where treasuries will be 10, 20 give from now are way too high. They are in the mid to high 2 area. They were above, and we had a crash a few months back, but they are pushing to present with your bond yield is too high. So i am looking for a stable to flatter yield on average, which means treasuries are going to be outperforming cash. Thats before you even get to spreads. Spread product is trading ahead of the economy. Its not very optimistic. That is probably going to be the case the next 12 to 24 months. This is a bond market that looks fixed to people outside of it. But zero cash is a low hurdle in the bond market over the next way for months. Anna so you expect a steeper curve . What is the biggest threat of that view . Does a vaccine change that . What might threaten sorry, you inspect a flatter curve. What would change that from a vaccine perspective . Robert absolutely. When you have that urged of optimism on a vaccine, if we get to the far side of this, could you see tends shoot up could you see tens shoot up to 1 and higher . Nowhe end of it, right weve had not even a 50 recovery, and incomes are being sustained. What we know from past recession , even in this case if it is more rapid, it is going to take a very long time to get incomes elevated. Right now, consumption is at a record level. We printed record retail sales, but incomes are quite depressed. That speaks to a cap that is going to be filled, so theres going to be a lot of backandforth. Weve seen a lot of rapid fluctuations in the market. I think you can have bursts of optimism, but in the long run, the world we were in before this crisis hit, lets say thats what the world looked like. You are looking at sub 2 inflation in the treasury market. That needed to be a few tenths higher, so you are going to need a vaccine, and you may need boomhing like a renewables on energy platform. May be joining europe and their push for green and decarbonization. It is something, whether you like it or not, that gets you a y2k type economic boom to get you sustainably over 20 . Otherwise, youre not going to see it between your stable to flatter curve grinding as these secular dynamics of high debt demographics bond returns. Anna we came from a low yield environment. The virus hasnt changed that sincerely. We got back still lower yields still lower yield environment. From the perspective of the bond market, should we see this is a very binary thing . Like, here is some news on a Vaccine Network or a western drug developer, and that is seen positively by investors . Moreould we get a ge bit granular than that . There will be a lot of questions once we see that nature reaction that kneejerk reaction. Tom right. Robert right. Dynamics, the longterm secular backdrop is going to remain unchanged area if anything, it is worse as we have gone through this crisis. The deceleration in the workforce, those things are really beginning. That dynamic is going one way. In the shortterm, you are getting these pops in optimism that will provide trading opportunity, but i dont think it is going to change your secular environment of being below 1 in the 10 year, and all likelihood. Tom robert tipp, thank you for that discussion. This debate, and it still just comes down to the inect fear in england and the United States of negative interest rates, and that idea is still out there given weak aggregate demand. Anna we saw some week data from the u. K. , and increasingly the market started pricing rate cuts here in the u. K. , and we havent got much to cut if you dont want to go negative. That doesnt seem to way people are assuming that we go. The 1. 3 170 doing to sterling in london . What is the effect in britain of 1. 317 sterling0 of a 1. 3170 sterling in britain . Anna interesting to watch sterling as we head towards the end of the year. I spoke to a guest earlier on who was saying theres going to be so much noise around sterling. Plenty of Trading Opportunities as we head towards the end of the year. Tom this is absolutely fascinating. I really cant say enough about the importance of these conversations. Dollar,ssume weak finally the resiliency of the dollar giving up, what are the strong euro, strong yen, strong sterling, what levels do they really begin on those nations . That has really opened the great debate. I have heard people say euro well out through 1. 20 to a stronger 1. 30, 1. 40. Oil, lets remember, 45 on brent crude. It is pretty much churning here. Gold buttressed right up against record highs. Weert doll of nuveen, continue the discussion this august. This is our simulcast. This is bloomberg. With the first word news, i medicaid im really could im ritika gupta. Michelle obama described President Trump as unfit on the first night of the Democratic National convention, blasting him for mishandling the pandemic. More than 150,000 people have died and our economy is in shambles because of a virus that this president downplayed for too long. Ritika obama said that trump is clearly in over his head. House democrats will propose funding for the billy gould for the beleaguered postal service, part of legislation that would prohibit cutbacks in service before the election. A vote is set for saturday. Democrats want the post office strengthened. In california, many avoided a blackout as temperatures fell area they may not be so lucky today. Rolling blackouts are designed to save the power grid. Is the first time california has resorted to blackouts since 2001. In hong kong, chief executive carrie lam says shes having trouble using your credit cards after banks imposed u. S. Sanctions on chinese officials and allies in the city. Am because the measures totally unjustified. Res of walmart ri lies shares of walmart arising, led by soaring online orders and its marketleading grocery business. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. The nontariff action hasnt primarily been republican, but bipartisan. Kind ofessures gradually push the u. S. And china part, particularly with regard to capital flows, i think will continue whoever is in the white house. Kelly, aberdeen standard, with an important comment on china. What anna edwards and i want to do here on Bloomberg Radio and Bloomberg Television was just ofse on a tuesday in august 2020 and recalibrate on hong kong. We can do that with karen leigh, our china government editor, to give us perspective on asia, on china, and also her hong kong. I think of the blue ridge of the seventh fleet visiting hong kong harbor, showing the flag of a year ago, or maybe it was 18 months ago. It has just become unimaginable now that a member of the seventh fleet, a ship of the u. S. Navy, would visit hong kong harbor. That is truly unimaginable, isnt it . Had a busy, we series of events over the summer. Especially over the last year. You and i have talked about a ,ot of times, but carrie lam and the latest twist here, she is having trouble using your credit cards after u. S. Officials are targeting officials here in hong kong. This is something that i think a year ago even would have been absolutely unimaginable. U. S. Backedaw the protesters, to see the change that has happened here in the last six of heaven weeks under the new National Security law, youve seen the leader of this city under u. S. Sanctions. It is really unimaginable for people, and speaks to how much change the city has gone through in such a short time. Out onhavent gotten it twitter yet, but esther culp but mr. Culp writing on huawei with a used technical with a huge technical band, but with the Trump Administration yesterday on huawei, again another shock. Karen it is almost hard to keep up these days when we wake up in the morning, but china had some pretty strong words for the Trump Administrations latest move to ad 38 huawei affiliates in 21 countries who an economic blacklist that built on restrictions they previously announced. China called it nothing short of bullying is becoming more and forum. Portant regular it said the government opposes the discrediting of Chinese Companies such as huawei. Trump told fox he doesnt want huaweis equipment because they spy on us. Huawei has repeatedly pushed back against those types of allegations worldwide, and chinas going to continue pushing back against these as we tension between the two rise. Anna good morning. When you look at the response from the Chinese Government, do you sense that the Chinese Government is expecting things to change in november . Is there a sense that they anticipate a change in leader in the u. S. , and if so, will that change the start to china . Or do they see that this will continue for any leader in the United States . Karen they havent commented very much on that. What they have said repeatedly as they dont plan to interfere in the u. S. Election, that the u. S. Election is in a tarot matter is an internal matter. At this point, it is hard to know what china is thinking about that. What is interesting is the optimistic notes that were struck on both sides by the u. S. The decisionpite not to continue on various the trade minister on various levels. Anna it didnt result in a big selloff in risk assets, which is interesting as well. We were hearing from Stephanie Kelly about perhaps what will look like separate financial systems, separate capital flows into the future. Is there a sense that in china, that is being prepared for. They talk for a long time about a bigger role for the chinese currency globally. Tom we would seem to have some technical difficulty there. Of course, you can have that when you go to hong kong by telephone. It happened not a few times. I look at this, and of course, it evolves back to london, the emotion we heard over the weeks from lord patten and others in the united kingdom. That the you perceive johnson government will adapt to this new hong kong . Big story herehe was around huawei, but also the opportunity for those living in hong kong to seek some kind of residence in the u. K. There had been a pathway to citizenship, but it wasnt open to that any people. Alsohas been opened up and highly criticized by the chinese. How many will seek to move away from hong kong income to london remains an open question, but interesting is that britain still does feel some emotional geopolitical reasons here to be involved. It, i havent adjusted to maybe with the way know it is traveling now, but it is certainly a new china, and something we will have to learn when we have the opportunity to go there and see a clearly changed hong kong. I want to reframe the markets on this tuesday because theres some real nuance out there. For those of you waking up on radio, on television, home on walmart killing it within their earnings report. These are two very different companies. Over the last decade, walmart has given you 12 to 13 return, way above nominal gdp, but home depot has been flat out apple like, with a 20 total return per year over the last 10 years. That is an extra ordinary statistic by the house of langone. Futures update, dow futures just four. Within that, theres been some decided movement, and part of that movement is a continued extent of the nasdaq and the decrease of the vix. Fascinating to see how that performs today. With dow futures up 32 on a percentage basis, the nasdaq points, up a solid 30 showing a great relative performance. 92. 5 two oneaker, dxy, is a major story. You see that from the pairs all morning. Eurodollar printing above a 1. 19. You look at the equity markets, particularly for those of you in the triple leveraged allcash fund. Oll will explain to us, for those of us who missed. I am looking for a point of entry. Maybe bob will have it. Stay with us. This is bloomberg. The market is totally divided from the real economy. Theres only so far that the market itself can go without the stimulus. Yes, we are printing money here in the u. S. , but we havent really seen that velocity of money actually enter the system yet. Every minute that goes by is compounding the losses. This is the end of the 39 year bond bull market. This is bloomberg surveillance with tom keene this is bloomberg surveillance with tom keene, jonathan ferro, and lisa brown whats. And Lisa Abramowicz. Tom good morning, everyone