>> markets in europe and asia go risk up as coronavirus cases and political tensions rise. california shuts down again. merkel and giuseppe conte come together at a crucial eu summit saying a massive response is needed to counter the virus. jp morgan, citigroup and wells fargo kickoff reporting season for the u.s. banks.

welcome to surveillance. -- off to a firmly risk off footing and then remain so. additional wobble coming through after news china is slapping sanctions on lockheed martin. barely holding onto gains here. up by one whisker but the losses are heavy into deep in europe and asia. looking at key earnings including the banks but also delta reporting numbers in a few hours. euro-dollar up, this is the story of dollar strength. you have treasuries play big after the open on monday. when california reintroduced some restrictions to stem the virus. 1.2%.en brent crude down looking ahead to that monitoring committee meeting and the

expectation is there's going to be some additional action. let's get to the bloomberg first word news and get you the round up there >> -- round up there. >> china has called the u.s. a troublemaker which is undermining regional stability after the trump administration rejected beijing's claims to large parts of the south china sea. the u.s.s china -- previous policy of not taking sides in the area. mike pompeo said china's ambition in the region is unlawful. the world health organization could be worse in the coming months and it's unrealistic a vaccine -- a perfect vaccine be readily available immediately. restaurantslosed and cinemas. in asia, hong kong tightened restrictions to contain a

resurgence in cases. face coverings are to be made in england from july the 24th. the move after pressure from unions and opposition politicians who have accused the government of lacking clarity in its guidance. england made face coverings on public transport compulsory but left them optional for shoppers. for a100 is to call percent clean electricity standard for the u.s. by 2035 according to people familiar with the plan. the democratic nominee will also commit to investing $2 trillion in clean energy over four years. while fightingan for the nomination. global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you very much for that.

let's schedule our top story. relations between the u.s. and china are deteriorating. the u.s. senate -- the chinese settable poke -- impose sanctions on lockheed martin after washington rejected beijing's expanded maritime claims to the south china sea. the world health organization's warning a coronavirus pandemic won't disappear in the coming months in total cases of topped 13 million. you've got california, they closed indoor dining and bars and hospitalizations hit a record. multi-asset at memorial london asset management, trevor, in terms of the escalation we are seeing between the china and the u.s., this is beyond heated rhetoric. how does that take the footing from under the buildup in equities in the united states

especially out? that was really a side effect of the mechanical reopening phase. larry summers describes the recovery, he was talking in march is the same recovery every monday morning when things get back to work. a very strong mechanical reopening phase. people back in the shops. that only goes a certain level. what we are starting to see now particularly in the u.s. is a flattening out of global activity numbers and credit card usage. iople are voluntarily saying go this far and no further because the virus is picking up again. market --e why the knots -- lots of bad news but also loads of stimulus. we've also had the china data

early on in the day with the detail on trade figures. were you impressed by any aspect of the numbers? >> china has been generally impressive. the chinese stock market has been one of the strongest helped by some government action, but china definitely seems to have a much better crisis so far than other places because it tracked down in the local area. numbersy the activity suggest they've got back to work in china, what seems to have happened is production has recovered before consumption wears in america, consumption recovered first. basically the chinese factors of producing stuff for americans in lockdown to buy online and that is happening and it's benefiting chinese companies. some expert into

advice when it comes to portfolio construction. we've looked at the data and the risk adjusted returns over the last three decades make it clear this 6040 approach worked very well, but given where we are with some of those yields and they would likely hover for quite some time to come, doesn't necessarily mean it's good to work in the future. something on the minds of a lot of people in our audience, are you thinking any changes in that strategy? multi-assets, we've got a mixture of asset classes not just stocks and bonds. durationsof shorter fixed income exposures or duration hedge credit funds, we are not relying on bonds yields. you've also commercial property. and commodities. a range of asset classes makes sense. fund wethe strategies

launched what we are doing is saying if we think something is not coming go up, we don't want to earn it. more of us are trying take that approach. generally speaking, with the amount of stimulus, the fact we cleaned out the economic cycle restarting investment block with high unemployment. difficultnk it's very with the geophysical tension and with covid come what we know is we will come out of this, we will be the virus. and what will be left is the stimulus. quite positive longer-term to get control. but in the shorter term may be more uncertain approach makes sense as well. global advisors talks about the irrational level in u.s. stocks entering a new bowl phase.

it has characteristics of the froth in 1999 with a twist. as we look ahead to these reporting in the coming hours come what are you looking for? ideasort of agree with the there are some similarities of the late 90's. you've got such lose policy out there and you got a very strong fundamental story around technology. this would be an earnings driven recovery in technology stocks over the last five or 10 years and that's all shown very strong earnings. we are neutral broadly on equities of the moment. more overweight consumer discretion and technology sectors come we've been underweight for materials. the growth versus value trend of carrying on whichever way the market seems to be going, we think that will carry on.

so these companies can demonstrate strong growth when the cost of money is so low. we like the emerging markets in u.k. markets and a broader multi-asset arena we like bonds more than commercial property. there's lots of things to watch out for in the earnings. i think what will see his continued strong steady growth in the growth sectors and that will drive it higher. francine: -- >> we still have a lot to get to. trevor from the royal london asset management team. he stays with us. a united front. angela merkel and giuseppe conte ask european nations to back a recovery fund. this is bloomberg bring ♪ -- this is bloomberg. ♪

>> economics, finance come politics, this is bloomberg. let's get you up to speed with the business flash. >> good morning. china says it will impose sanctions on americans lockheed martin. the move is in response to washington's approval of the possible deal to buy parts to refurbish defense missiles of private company, a foreign called themkesman to cut military ties. huawei. is poised to ban from its networks reversing an

earlier go ahead. both companies -- copies not be allowed to add huawei components by the end of the year. all existing equipment will have to be removed by 2027. they're expected to set up plans in parliament later today. is noan union justice doubt and luxembourg are set to release two rulings. first is on the irish back tax bill and in a separate ruling, they will -- on shipping across the atlantic without applying to rules. at your bloomberg business flash. >> thank you very much. let's talk about angela merkel who is showing a united front with italy ahead of a crucial eu

summit. the two leaders have warned the block needs a massive response to tackle the pandemic. still with us is trevor at the royal london asset management team. size and scope of this undertaking, we put together a graphic that shows where countries are currently at when it comes to fiscal responses as a percentage of gdp. the bigger european countries, quite a front. germany, italy, the u.k. in france, they are in the top six and then you have much smaller percentages. i wonder if 750 billion euros is going to be enough in terms of a one-shot go here. >> it's a good question. it's a good start. something we been saying for very long time that at some point you needed to have some

kind of fiscal transference between the stronger countries in the weaker countries in the same way you do in america or the united kingdom. it really is to be welcomed. i think if it hadn't been happening, covid kind of destroyed the euro. the physical tensions that were building up because of that sense european countries weren't really helping a great deal given the italian financial situation anyway. i think it's quite serious. fiscally it was needed, economically it is needed. the numbers look good enough to raise the level of gdp maybe five years out by more than 2%. a lot of the actual graphs as opposed to loans look at they are heading in italy's direction. >> much of the effort is towards trying to prevent a liquidity problem from turning into a solvency challenge and that's something we've seen around the

world. what kind of price is being paid? as much as you think it's a encouraging start, it's a lot of money by european fiscal standards and that's can have to get reflected in risk spread. not necessarily in risk spreads because it's money that's being borrowed essentially and being dispersed to countries that seem to be weaker credits. if anything spreads it may narrow a bit. but you are quite right. there's a question about solvency. central banks in these fiscal bailouts can step in and prevent a liquidity crisis from the covid lockdown and turning into iteke economic -- turning from a deep economic collapse.

further out, this is a real economic shock. it depends on what happens with the virus and the lockdown. if the virus in lockdown persist for a long time, governments will have to rack up more debt u.k. --with this so the with this. i think markets will be quite nervous. markets want the government to take all the risk on their balance sheet but at some point the government has to step back. for now they are seeing this a bit like a war on covid. they've asked us to stay-at-home so they have more responsibility. and i think markets are wrong to worry about the solvency crisis. >> you mentioned the u.k. and the economic recovery there is also a disappointing start.

survey economists predicted a 5.5% gain. when you look at what's happening in the u.k. and broadly in europe, how does that fit into asset allocation? allocation, the u.k. has had a disappointing recovery. in may, the gdp level was probably down 34% from where was in february. we've only recovered 75% of where we should be which is still gonna feel like a horrible recession. loads of difficulties in the u.k. economy. around the world you got some different experiences. america's retail sales recovered faster. this is a long haul. if you think about covid itself, immunity via antibodies less than 10% in

major economies. this covid in situation on and off for the next year or more. to allocation, you've got her river the composition of each stock market. the u.k. is very underweight. it's got a lot of resource sectors that are doing poorly. we are overweight in the u.s.. because of the growth in the defense sectors in the stock market. china in particular has gone through this much better. >> i really enjoyed this conversation. thank you for that. the head of multi-asset at royal london asset management. we are going to look -- be looking for prime spots. some investors are pinning their

hopes and strong investment banking results. this is bloomberg. ♪

>> you are watching bloomberg surveillance. to the jp morgan and citigroup as well as wells fargo development. investors largely expecting lousy results, but there may be positives. joining us to discuss is danny.

>> there might be some bright spots and one of the things that might come out as a winner are the big investment banks. lossready have this credit baked into the picture here. we know trading results will come out somewhat stronger. so this beacon of hope and surprise on the upside is investment banking. that means ahead of this earnings season, you should be buying the big capital market base. things like goldman sachs, morgan stanley, jp morgan. it might help reverse some of those mark to market losses and private equity investments and they have more flexibility to stack up on their loan loss reserves to help them battle someone off. expectations don't look great, but the positive thing is when expectations are so low, it gives us room to price these stocks once they report earnings.

that.nk you very much for the preview on the bank side. here's what's coming up, we will be entering the endgame. derailed themic transition? we will be hearing from the bank of england's governor as well as the new york fed president on the bigger picture at play. all of this is u.s. equity futures continue to hold ground with a wider negative backdrop. this is bloomberg. ♪

yousef: economics, finance, politics. is "bloomberg surveillance

"bloomberg surveillance secretary of state pompeo says china's ambitions in the region are unlawful. there world health organization says covid-19 probably won't disappear in the coming months, and it is unrealistic to expect that a vaccine will be available to everyone immediately. in the u.s., california declares a sweeping rollback of nearly closing businesses -- bars and cinemas. in asia, hong kong tightens restrictions. in england, face coverings are to be made compulsory in shops

from july 24 come after pressure from unions, business groups, and opposition politicians who have use the government of lacking clarity in defeating the pandemic. pandemicade coverings last month but less optional for shop -- -- for shoppers. standard for the u.s. by 2035. the democratic nominee will also commit to investing $2 trillion in clean energy over four years. the proposal button proposed well fighting for the nomination. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i'm 120 countries, leigh-ann gerrans. this is bloomberg. yousef? yousef: thank you for that. the u.k. national debt has

topped 100% of gdp for the first time since 1960 three. the treasury has shattered its annual record for government bond sales, but how is the u.k. pay off all this new debt? anna edwards takes a look? anna: the government is spending huge amounts to protect the u.k. economy through the coronavirus lockdown, if history is any guide, britain could be paying it off for decades to come. the u.k. has had a national debt since the reign of william the third. the king sold government bonds to lenders that later became the bank of england. it hit an all-time high after the napoleonic wars, shifting above 200% of gdp. when it needed to come of the u.k. has paid off debt quickly. borrowed nearly $4 billion from the imf, the largest loan ever requested come in 1976. in the end, it paid it off by the end of the decade. but that isn't usually the case. as really as 2014, the u.k. was

still talking about paying off debt, associated with the bubble o 1720 and world war i. and after world war ii, that only got paid off at the end of 2006. and that may the best way to look at this pandemic debt. some lawmakers are urging the chancellor to treat it like more debt. that means it may sit on the books for longer than usual, and that is possible in part due to the bank of england bond buying rates, and low interest but governor andrew bailey has warned this scale of intervention cannot last forever. as the economy recovers and support is gradually withdrawn, the u.k. may need to make tough decisions to bring its debt load back down. anna edwards with a look at how the u.k. is going to pay off its national debt. let's stick with the united kingdom. at the peak of the market meltdown, guesswork played a

vital role in stemming borrowing costs, according to andrew bailey. lenders and companies are supposed to make the leap away from libor, those efforts have stumbled. francine lacqua spoke to bailey and the new york fed president, john williams. no doubt, a lot of steps need to happen. what i would say to the industry to stem the clear deadlock. you may have heard my remarks there is no reason that after -- i shouldt year say we expected that. at the end of the calendar year -- it is quite logical to extend that. , these are 18 months

the sort of timelines. the infrastructure is now there to be able to put these in place. a cutoff for new instruments, it means that all thefocus is on dealing with -- yousef: mr. williams -- francine: mr. williams? me, it is enough to start writing libor's contract. with the progress that they have been making on that, that is something we need to focus on. is, debt toe second repair away from libor, backing

up things like that. there is a need to be proactive around communicating and the broader communities that they work with about the transition from libor. a lot of the discussion so far in the banking sector naturally come in the financial industry, getting the word out that in the banking sector naturally, in the financial industry, so that they can also prepare for that transition. i think that is another particular area. listeningr everyone -- francine: for everyone listening in, can i ask everyone to mere yourself? when you talk about these legacy contracts, do you worry that we will have --

thatw: i don't think unreliable is a feasible concept. if it gets to that point, that test will have to be applied, structured, and designed. but it is there in the legislation, so i think zombie libor is not feasible. to deal with that. -- with that situation, which i very much welcome. as i deliberately said in my remarks, don't put yourself into the hands of that, as it were, when you have an option not to. that is there for the contract. so firmly in the structure, there is no way out and i need legislation to get out to that concept -- that contract. if you have the choice to get out, the free choice to get out, then get out on your own terms

because that gives you the freedom to design the contract around what is inevitably going to be an all-time approach. yousef: that is andrew bailey and new york fed president john williams speaking with francine lacqua. the office of budget responsibility has a public -- has published its updated report, and they are saying the economy in the u.k. is going to shrink 12.4% in 2020. there are a lot of business -- bits and pieces, but the key line is that they are seeing borrowing costs running to 322 billion pounds this fiscal year. and an unemployment rate of 8% in 2020, 10.1% in 2021. cable at the moment under broadly, at 1.2512 in a risk-on market. oil traders remain nervous.

opec-plus is expected to announce plans to taper historic cuts. we will discuss the outlook for the crude markets next. this is bloomberg. ♪

yousef: you are watching "bloomberg surveillance." i'm yousef gamal el-din in dubai. let's get to the bloomberg business flash headlines again. leigh-ann gerrans has that. leigh-ann: china says it will impose sanctions on america's lockheed martin, in response to washington's approval of a possible deal for taiwan to buy parts to refurbish defense built by the company. a spokesman called for cutting

ties with taiwan in order to avoid further hurting relations. u.k. has banned huawei from -- phone companies will not be allowed to add new huawei components to the 5g network by the end of the year. all existing equipment supplied by the chinese firm will have to borisoved by 2027, and johnson is expected to set up the plans and parliament they are today. softbank has said to be considering options for a stake designer onhip holdings. chip design company could go public as soon as next year. softbank in 2016. that is your bloomberg business. yousef? yousef: thank you for that. let's get to walmart now.

the company has kept its 11,000 stores worldwide open amid the virus pandemic and expects to continue doing so despite our resurgence in cases. bloombergllan told the impact the crisis is having on business. doug tolan we sold consumables -- : in the u.s. and countries around the world, we have stayed open mostly throughout the crisis, selling what people need in stores and online. i think e-commerce has grown during this period of time, and that has been the case with us. watching, howe many total stores does walmart have? world, 11,484.e in the u.s., we have around 47 stores that are walmart supercenters and they were hood markets, and we have 600 sam's

club's in the u.s. >> ed you have to .50 4 million employees, or associates, and your revenue is about -- you have to .50 4 million employees, or associates, and your revenue cash and there will be a decline in sales after we get past the covid-19 situation. doug: what happened is, as we started in the covid period, we created a leave policy for associates that needed to stay home. if they had a family member to take care of or a concern, we created this three-tier leave policy, and hundreds of thousands of our associates that needed to or wanted to stay home have, so we had a need for a lot of people to run the stores, serve as it relates to e-commerce, and respond to the demand that has gone up. about 60% of the 400,000 we have hired since the middle of march are temporary in nature, so we will retain a big portion of them, but certainly not all of

them. >> your biggest competitor in the online business is amazon, i assume? doug: correct. >> have you learned from amazon? did they inadvertently teach you certain things that will make your online business better, or did you do some things that you wish they had done? doug: the goal is to apply what should be applied, and definitely the customer has spoken. they want convenience and a broad assortment and it timely delivery, so in some aspects, they're trying to do the thing -- the same things they are trying to do. differences as it relates to kind of a digital view or e-commerce view, is how we are using our stores. the fact that you can go on your app and purchase items or reorder items that you bought before and swing by the store later that day and open up the

trunk and somebody will drop it in there for you is super efficient. americans in particular like that service. there are unique aspects to our strategy, and i think the stores underpin those. the book up it is rumored you are going to announce some sort of -- >> it is rumored that you are going to announce some sort of prime, walmart plus, i think it's called. is that going to be out soon, or you can say? : we are going to launch -- we have something called delivery unlimited, but we will launch something called walmart plus. thes really delivery from supercenters, which can include back-to-school items or even apparel items, done in a really fast manner come as part of a membership program, something we think is going to be compelling for people. based on the success we have had with pilate unlimited, we have

confidence that people do want a membership from us. when you think about it, there is a delivery cost, and basically what the membership is fundamentally in the beginning buy in bulky to deliveries that are discount in the form of an annual fee. that is the form we have taken. that was walmart ceo doug macmillan speaking with bloomberg. futures are clearly higher after settling -- suffering a wobble after chinese sanctions on lockheed martin. also across what is happening in the fixed income market, especially when it comes to the u.k.'s two-year bond yield. offering lower returns on debt whichhe japanese peers, are already known for their low rates. the spread between the u.k. and japan's bond rates has fallen below there, and it is the

demand for safety bonds that will come through clearly. stay tuned for more surveillance. remain nervous. we will discuss the outlook for crude markets next. this is bloomberg. ♪

yousef: economics, finance, politics. the joint minister and monetary committee meets tomorrow by videoconference at 1 p.m. london time. to assess policy in a fragile market outlook. joining us now is amrita sen. they have made a lot of progress in terms of trying to get a footing and a clear floor under oil prices. but it is such a nascent, fragile recovery. what do they need to do to convince you that more upside is in play? fact thatthink the they are starting to ease right from the start

from august, we do expect opec-plus to start bringing back some production. i think that is exciting in itself because as you said, they have been very cautious and they are trying to make sure prices do not go down. they are seeing the demand recovery. everyone agrees it is very early days and it will not be a straight line recovery, with the u.s. in particular, but stocks are drawing everywhere. we are expecting draws tomorrow. that.an see i think it is the right time to start increasing production, gradually, of course. yousef: it is a difficult balance to find, isn't it? how can you make sure that you do not ease too much in terms of getting oil back online? absolutely, a very tricky balance. but if you look at demand versus

supply, the curve in may and early june, right now demand is above supply, about 4 million barrels per day. because of cuts in u.s. production, which are marginally coming back, but most of it, there huge amounts of losses there. more importantly, dave might be -- the headlines that they are bringing back is $2 million per day. they need to over comply to make up for the loss. change andtual actual increase in production that is close to one million barrels per day. that is why i think opec are comfortable. it is not going to be 2 million barrels per day. you mentioned iraq and we understand that the saudis have been on the phone with the leaders there, and they commended them for their compliance, a rare statement from the saudis given iraq's

track record, basically ignoring the quotas that were agreed on. is that going to be sustainable? do you see a more unified opec-plus at these deliberations at 1:00 p.m. tomorrow? amrita: i think that is going to be the case. one of the biggest achievements for opec-plus is that unity. iraq -- there revenues are much lower than -- you can see with lower exports, prices are higher. overall revenues in june were substantially higher than april and may. so saudi has been able to communicate that if we are unified, we are all in this together, all of this is a better outcome. that is why they were lauded for their efforts. into yourwant to get more specific columns. in your latest note, you argued dubai, time is spent with the biggest potential and

upside. run me through that. amrita: the biggest thing in the market is the lack of heavy crude. venezuela production is barely 300,000 400,000 barrels per day. iraq is over complying. it is getting more acute as we go forward. the new career -- the new refining capacities, from these heavy crude barrels -- that is why dubai is a heavy benchmark. one of the things that opec said is that dubai, everybody is already long the contract. it does provide a flow to spread as well. in general, if the oil market is b -- in general, the opec market -- the oil market is being driven higher. yousef: we are going to leave it there. at read us and oil analyst

energy aspects. we have a situation here in the equity markets that is clearly lower in the u.s., in the asian, and european session, not so much in the u.s. session. a tale of two stories, which is a little bit bizarre given the amount of the nature of the headlines over the last few hours. the euro 600 -- destocked zero are -- the stoxx 600, we down. in the fx base, dollar strength rains. dealing withays of the coronavirus impact is of course the other front. this is bloomberg. ♪

tom: this morning it is

japanification. will the bank of england buy loads and loads and loads of debt to avoid dreaded negative interest rates echo mind to yield curve control. asool is out for september hong kong, tehran, and they now in los angeles say kids stay home. -- theuggested dr. fauci president suggests dr. fauci made mistakes. the opposite of loan gain profits. look for the boosting of big banks' loan loss reserves. in morning, everyone. this is "bloomberg surveillance ." i'm tom in new york. two, too muchay excitement, and for francine lacqua. we will talk about this on "surveillance."