there are reports that xi jinping may shut the u.s. consulate in chengdu. stimulus breakthrough. the white house and republicans reach an agreement on spending measures, easing the way for opening discussions with democrats. and the electric carmaker finally meets the criteria to join the s&p 500 as -- after 12 months of recording profitability. this is "bloomberg surveillance ." tom and francine from london and new york. we try to get down to -- we look of course at the u.s.-china spat and the flaring up that we saw yesterday. we expect retaliation from the u.s., and then we look at the markets. tom: we are going to china in a moment, it is really front and center here. it is all about stimulus. what i would say, francine, is look at the markets, and the markets are speaking this morning. you have further dollar weakness, and the surge in gold is well out over two standard

deviations. it is an historic surge in gold. francine: it certainly is, at we have been spending a lot of time on that and we will spend more time on gold. let's get to first word news with ritika gupta. ritika: good morning. the fight over the chinese consulate in houston shows that hardliners now have the upper hand in the trump administration. president trump has allowed a small group of advisors led by michael pompeo to push u.s. policy toward its most antagonistic in decades. u.s. officials say china has a history of espionage and intellectual property theft. the trump administration and senate republicans are considering a short-term extension of extra unemployment benefits. it is unlikely the white house and lawmakers will agree on a broader stimulus deal before the benefits expire. millions of americans receive supplemental payments that were included in the last laurent virus package. way for paving the soaring stock to join the s&p

500 index. the electric carmaker reported thirdve earnings for the quarter in a row. elon musk thinks tesla is not growing fast enough. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i'm ritikauntries, gupta. this is bloomberg. tom: thanks so much. equities, bonds, currencies, commodities, all of them important this money. equities continue to surge up. i cannot convey enough how the 24 .0.coming in, we had a 23 handle on the vix. this is a changed equity market from a week ago, and certainly from 10 days ago. with that, the bond market sustains lower yields, and that you get to the dollar, which shows further dollar strength today. looking at the trade-weighted dollar, strengthening. and gold, gold, gold.

$2000 an ounce is not out of the thinking given the gamut of the velocity, rather the acceleration that we see right now. 1881 per ounce on comics gold. francine: european stocks advancing, investors looking at earnings pouring in, and today seemed to look past the latest tensions between beijing and washington. the dollar slipping for a fifth day, gold advancing significantly. strengthened, treasuries pretty much steady. so investors taking stock of these escalating tensions between beijing and washington. according to the south china morning post, china is moving to close the american consulate in chengdu. that threat comes after the u.s. forced the closure of its houston consulate, and president trump indicated more such moves may happen. ," as far as ash pres. trump: as far as closing

additional embassies, it is always possible. you saw what's going on. we thought there was a fire in the one we closed. i guess they were burning documents or burning papers, and i wonder what that's all about. sharon chen now joins us from chengdu. as you look at the escalation, is there appetite from the chinese side to escalate the significantly that escalate this significantly because they feel wronged? chinese willnk the have to respond. i don't think they want to see a significant escalation, but like a lot of people in china, i think the u.s. has said that shutting down of the houston consulate was really kind of an unprecedented escalation, one of the worst actions we have seen in many years, and china will most definitely respond. i mean, the question is how they choose to calibrate that response.

is onengdu consulate option. there is also a consulate in wuhan, where the virus was first discovered, and the editor-in-chief of the global times, a closely watched communist party tablet, he wrote on chinese social media suggesting one option could be for the u.s. -- for china to make the u.s. cut as fast in hong kong. tom: sharon, good morning. tom keene in new york. does the agra fee matter here? chengdu is to the south -- does geography matter here? chengdu is to the south, and of course there was a terrible earthquake where condoleezza rice visited years ago. ,oes geography matter between with chengdu out in the west? sharon: the bigger consulate we visitedu.s. --

the consulate here in chengdu today, and people were telling us that really they haven't been processing visas anyway since the u.s. shut down those services during the pandemic. the impact is really that the people will not be able to go, it will not affect travel in the country. the diplomatic ties with people being able to go there, not just tourists, but to work and study. deciding on the size of the consulate to be shut will be the way that the chinese calibrate that. francine: the china-u.k. ties are also deteriorating. they are about to touch soccer if you are american. the state tv has blacked out english soccer, or the premier league. who at the moment supports china? who are they closest to you?

mean, china, i obviously is fighting on -- african countries, loans are given to help them with a vaccine. the u.s. mays that not have focused on that much. tom: sharon, thank you so much. our vision bureau chief in chengdu. this is 850 miles northwest of hong kong. hong kong much further south then you normally think. we greatly appreciate that report. coming up next, we are bringing you george saravelos, deutsche bank's global head of fx. for global wall street, that will be must watch, must listen. george saravelos next.

us. with this is bloomberg. futures up 12. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. joining us with some of the smartest research notes around is george saravelos, deutsche bank head of fx research. tom and i love reading the things that come out, targeted to their clear -- they are always smart. you put out something asking how high euro-dollar can go. what are the dynamics there? george: thank you for your kind words. i think we are undergoing a

regime break with the dollar. these are broad dollar dynamics. we have had positive european news which we have talked about. what we have here is the end of dollar supremacy. february-march, and the first one is the end of yield supremacy. er, dollar was a high-yield now down to zero. hedgevery cheap to american assets. second, the end of growth supremacy. the virus economy trade-off has not proven accurate. the u.s. has not managed the virus as well as the rest of the world, so we expect more downside, more surprises from america compared to europe and north asia. and also policy supremacy, i would argue. in the u.s., we are having negotiations on the big fiscal cliff coming up in a few days,

while europe has provided a sizable fiscal backdrop to the next two or three years. it is all these things falling into place. driving the weaker dollar, and i think a stronger euro. 1.20ink it can climb up to this year, and beyond that for the next one. francine: how optimistic are you that the e.u. recovery fund will lead to more european integration? george: well, francine, i think it sets a huge new precedent. it is a very important development. in the near term, the direct economic impact is not going to be there. it will take time to raise funds and disperse them, but you have three important innovations. the first one is, you have fiscal solidarity for the first time, and that will improve political stability, especially out of italy. and people claiming the amounts are quite small, but you cannot scale them by accurate -- by aggregate euro area gdp.

you have to scale them by the countries that the money is going to. the second thing is it creates a task based -- a tax base. for the first time, europeans have agreed to tax across the e.u. to provide new powers to the european commission to do that, and that is extremely important from the near term perspective. the last one is, it creates a permanent structure. yes, they're calling it entry, but you have to remember the steps. they are paid out to 2060. if they don't want to pay the money back, they will keep rolling that deadline. permit debt issuance is also very important. tom: george, where does strong german exports? do you have a number on that? george: i think it's a very important question, tom, and what i would stress is when the

ecb looks at the euro and when economists look at the euro, they would look at the trade far,ng, how is -- so because the move hasn't just been a euro move, it has been the dollar moving down, the trade-weighted appreciation hasn't been as big. but roughly speaking, i do think as we get to 1.20, the ecb will start to pay more attention. it is a bit too early for that. tom: i agree it's a bit too early. i looked very carefully at the trade-weighted index, george saravelos -- i think maybe you invented it, or alan ruskin did, i can't remember -- but i look at the trade weighted index, and dollar has not broken down. it has been abrupt, but it is at the low end of a trade-weighted range. are you presuming the trade-weighted u.s. dollar of your wonderful trade weighted index will break down and signal

weak dollar? george: i think so. i think this is the only -- this is only the beginning of a weaker dollar move. as we go through the summer months, we will see a few things. number one, create a divergence so that the u.s. has better data over the last couple of months because it opens too early. all of the high-frequency indicators are saying that the u.s. is down while the rest of the world is accelerating. if you look at restaurant bookings, german restaurant attendance is now up year on year. i think the state of diversion is between the u.s. and the rest of the world will continue, and there should be more policy uncertainty and risk with the dollar because of the u.s. elections. are we going to see inflation in the u.s. and in the e.u. because of the stimulus packages? george: francine, i still think that is very unlikely stuff we are seeing these big packages,

but we have to remember they are in the context of a huge shock. if we look at where output gaps will be, the difference between gdp and potential, we think the outlook cap by the end of the year will be just as big as it was at the beginning of the 2008 crisis. unemployment rates will be very high. you also have a lot of fiscal cliff coming up. andu.s. we talked about, gradually that fiscal support will decline. the u.k., the same thing. furloughs come to an end in october. i don't see inflation coming at anytime soon. very low real rates, keeping asset prices supported, and low volatility in general. tom: let's continue with george saravelos. $17, $18.82. futures up 13. coming up in the next hour, an

important conversation, the president of the new york fed. he has really put a lot of thought into the scenarios. the sense of outcomes within our financial system and this horrific pandemic. bill dudley in the 8:00 hour. this is bloomberg. good morning. ♪

tom: good morning, everyone. " fromberg surveillance london and new york. we are focused on dollar with george saravelos and we will get to that in a moment. focused on a huge moving gold. 1882. the stock market really sustaining well here in this earnings season. we will do a lot more on earnings today. i believe intel later today as well. s&p futures up 12, dow futures 126983. -- 1.2 693. one of the great hopes and prayers here to go to the bloomberg and look for the presumed economic recovery of 2021 -- george, filter in the work of peter hooper, matt luzzetti, and the rest of your great economic team, on the

presumed recovery into november, december, into 2021. do you buy it? george: well, it is great that work,ised my colleagues' because they just published a piece overnight focusing on a much does the fed need to do to be able to achieve a mandate, and the conclusion is they need to get fed funds down to -5% at least, and if they cannot do that, they need to do extreme amounts of qe around 12 trillion. are looking at why gold is rallying, it is really this brave new world of extreme amounts of quantitative easing. i think as we go into september, the risks are very much skewed toward a more aggressive fed, which compresses yield, flattens

the u.s. curve, and in turn that will be an additional negative dollar dynamic be on some of those we already talked about. tom: this is beautifully explained. what this comes down to is a statistic georgia bank came up with which -- came up with, with how much umph is needed. it is a drop in the bucket compared to the stimulus that will be required if we don't get a recovery. so i think you are right that the aggregate amount of this recovery fund that was agreed was fairly small. if you look at the proportion of gdp. we have to look at it as a proportion of the gdp of the countries we are rick -- that are receiving the support. it is do that, because concentrated in a third of the economy, you essentially have to triple it. looking at a latitude of 3%,

some of the bigger countries, some of the smaller countries such as greece or eastern europe, we are talking about 10% of gdp. these are sizable amounts. is it enough to create inflation? i don't think so, but is it enough to stabilize the politics in italy? reduce euro skepticism? i think the signaling power there is extremely important. and in turn, that can be quite supportive for investor confidence and inflows into europe, which we are starting to see again. francine: george, what do you do with renminbi right now? we saw the flaring up because of the consulate, and there could be a closure of a u.s. consulate in china. does it move on the back of it? george: so it is interesting because the u.s.-china tension has been dominating the headlines. but if you look at the market, it doesn't seem to care. china is having very small moves.

equity markets are not moving. what we are seeing at the moment is a war of words, but the market has high skepticism as to whether this will escalate. that skepticism is probably correct because the defenses i don't think are aligned for a huge economic disruption into the u.s. election. tension,calation and yes. actual economic escalation with large impact on markets, unlikely into the u.s. election. thank you sorge, much. george saravelos of deutsche bank. coming up, the former ambassador to the e.u. we will talk about the foreign policy, spat between the u.s. and europe. we have been looking at gold, we are looking at gold with tom. we have also been looking at some of the economic toll from the virus. now, this is what the markets are telling us. if you look at european stocks, equity futures are up. investor earnings from all sides. they are looking past the

tensions between beijing and washington. the dollar actually flipping for a fifth session, and i know, tom wants to talk about gold. it is advancing for a fifth day, and we were just asking george saravelos about the you want. the renminbi strengthening offshore. treasuries pretty much steady. i have heard a couple of research notes from some banks saying that actually when you look at the asset, because we had white a lot of news, the stimulus from central banks mean that they could be range bound, and a lot of the rickets -- of these markets. we will explore that shortly. this is bloomberg. ♪

>> a breakdown in relationships with china is not a good thing. fitting certainly

within the fabric of a structural deterioration of the relationship. >> we have moved from strategic cooperation with china to significant strategic competition. that is on every front. >> it is certainly as if china is losing every external -- we will have to see what happens after the presidential elections in the united states. >> i think the trump administration has been stronger with china than any other previous administration in many years, and i think that strength is very important to be demonstrated. >> if pompeo thinks this is going to change china's behavior, he is gravely mistaken. statements like his and others very much we can their hands in china. >> we expect this to accelerate over the coming years,

regardless of which party controls the white house. >> being sure that our own house in his -- is in order. voices ininteresting this interesting summer of 2020. of note, gold surging. we see the u.s. dollar still weaker and futures up their team. right now, a voice we have been so advantage -- so advantageous to speak with is anthony gardner. to say he is a former ambassador to the eu barely describes the competency in diplomacy and education toward foreign policy for america. we are thrilled the ambassador could join us. i've got a really dumb question, which is incredibly rude and francine will ask you a polite question. do we just assume that every country's consulates have spies

in them? not china and the u.s. but is it just understood that any consulate out there in the world has quote, spies? but in the oldl, days of the soviet union, we certainly believed that and it was correct to believe it. in the case of other countries, it would be prudent in normal to assume that, but not in every country. tom: thank you so much. let me ask a more polite question. which consulate would we expect would go? does china go with a regional consulate to take out or do they affect us with a very large presence that we have in hong kong? anthony: hard to say. i suspect they will play tit-for-tat, meaning they will take out a regional presence of the united states, not to escalate. that is what they have seem -- that is what they seem to have

done in the past. bad will the tensions between the u.s. and china escalate now? is it one-for-one, are we almost over the worst? anthony: there is a lot more that can be done, in terms of restricting chinese access to the u.s. market. i hope that is not where we are going. things are moving so quickly. just look at europe. i have lived in london for more than 20 years. the shift in the u.k. has been from and does. -- has been tremendous. looking back in the day of david cameron. it is a completely shift. it hasn't quite happened in the rest of europe yet, but there is a growing skepticism incoming to europe about china, not just hong kong, but there is significant movement.

there is an opportunity now, which there has not been for a long time for the united states and europe to work for to -- to work together. i hope we do it, especially if joe biden wins. francine: what would that look like? working together on what? anthony: trade is a good example. the trump administration has concluded, i think incorrectly, that the eu does not have leverage in regard to changing chinese trade practices. superpower in a couple ways but certainly is a trade power. if the united states in the eu were to sit down together and joined to put truck -- pressure on china to change their behavior and change the rulebook, i think we would get somewhere. and on the european union, your commitment for america over the last decade, given the

weekend's activities, it was on that britain wasn't there. were you taken by the fact that the united kingdom was not part of the festivities of that four-day marathon session? anthony: no, because these are decisions being taken post-january 1. to all effective purposes, the u.k. is out. it would not have been appropriate for them to be there. i wasn't surprised. tom: give us an update on the new austerity. aboutis a great debate fiscal stimulus, whether it is in europe or the united states. give us an update on the austerity we are trying to avoid. are we succeeding? anthony: if you are referring to what they decide over the weekend, i think this is the

biggest step forward. it is the opposite of austerity, it is more stimulus. eu will now be issuing significant debt in euros, and will be one of the biggest issuers of debt in europe. transferredill be to the worst affected countries, including italy and spain. crossed to has been some extent and the eu will have its own jargon for more taxation powers. tax on start modestly, a plastic and so forth, but it will grow. now we have significant eu more thencreased to sing -- more than initially forecasted. if it is not austerity, it is further stimulus.

francine: you have a new book out, called stars with stripes, the essential partnership between the eu and the united states. if the united states needs to stick to one person in europe, who do they call? it used to be the u.k. but who is it now? anthony: that is an interesting question. when i was ambassador under obama, the u.k. was our bridge in understanding what was going on in the u.k. -- in the eu and u.k. served as a megaphone for u.s. interests but that is no longer the case. who do we go to? it would be germany. country in theer 27 that ticks all those boxes. it will be berlin. francine: ambassador anthony

gardner, thank you so much. former u.s. ambassador to the eu . let's get straight to the bloomberg "first word news." here is ritika gupta. ritika: the world has gone over 15 million coronavirus cases. the u.s., brazil and india account for nearly half of all infections. texas reported 197,000 deaths, the most ever in one day. in florida, governor ron desantis says schools may delay reopening if they need time to protect against the risk of the virus. in the u.k., a panel of lawmakers say boris johnson's government has no economic plan for the pandemic. according to the committee, the economic response to the coronavirus is quote, rushed and reactive, despite it being identified as a top risk for years. -- hardliners now have the upper hand in the trump administration. president trump has allowed a

group of advisers led by secretary of state pompeo to push u.s. policy toward antagonistic -- to war its most antagonistic in decades, saying china has a history of spies. joe bidentrump mocked for holding virtual fundraisers from his basement what the vice president is laughing all the way to the bank, taking more than $86 million in the last quarter. meanwhile, the president took less than a quarter of that from his high dollar donors. he has declined to appear on live-streamed events. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. tom: ritika, thank you so much. bill dudley with us, later today. former mathematician and

admin of the minneapolis fed. stay with us. futures nicely up 13. this is bloomberg. ♪

tom: bloomberg surveillance. good morning everyone. francine lacqua in london, i am tom keene in new york. there is a trust that the transaction will get done. there is the ultimate trust which is trust being in raising money. williamcheck company, ackman, the acclaimed pershing square capital fund -- founder

and ceo is out raising money on the trust of his back. here he is with vonnie quinn. >> this is a company that has $5 million of capital, and we designed the most investor friendly structure without any form of compensation for the people doing the work, which aligns our interest with our shareholders. we are happy with the reception we got during the process and we put together i think, one of the greatest collections of investors in the world to partner with us, and what we are trying to do which is to buy minority interests in growth companies which we will take public. we have done some other things to design a structure that is both investor friendly, to shareholders but also merger friendly to our potential partner, and that will enable us to make a deal that is good for both parties. francine: let's move to the

targets. >> -- let's move to the targets. that you are using this time where the pandemic has maybe given you more of a discount on certain assets, potentially to do your due diligence now that you can, very quickly to get to some kind of target. what kinds of areas are you targeting? we know you have given a list of the elements you really want to see and that you are looking at. can you give us more details? >> absolutely. we think the target universe is probably 150 companies total. there are more that we are not including, subsidiaries of large but the list is broader than 150. the top third will need our quality structural's. very highking for

barriers to entry with minimal exposure to what we call risks, we are looking for the super durable great growth business for the next decade. that is the target. the list is a list we have in mind that maybe others are not aware of. we are going to comb through that list. we are going to look at every deal, see every deal over the next six months. what is interesting about this transaction is every investment banker is aware that we just raised the largest blank check company in the world. $5 billion in capital. we are looking forward to committing to buy a common stock interest. i refer to it in a way, it is its own unicorn and basically we are in a unicorn meeting. we want to marry a very attractive unicorn on the other

side that has are characteristics. we designed ourselves to be a really attractive partner, and that is what we are going to do. of companies, i would not want to name specific companies. >> for example, you say a company that is not exposed to extreme risk. would that take airbnb out of the equation? >> every business is exposed to intrinsic rest nash risk. -- intrinsic risk. hilton today is exposed to pandemic risk but it is a business that survives through a crisis like this and becomes more dominant after. we would take a look at a company like airbnb. i always admired their economic characteristics. friends who make a large amount of their income by renting out the ground floor. certainly a business we would look at, very economic -- very

attractive economic interest -- characteristics. has extremely attractive characteristics and we can predict how those cash flows will grow over the long-term, and that is the kind of business we are looking at. ackman speaking to vonnie quinn. up next we talk covid-19 and the pandemic. this is bloomberg. ♪

ritika: this is bloomberg surveillance. i am ritika gupta. microsoft comes up short. the company failed to meet lofty expectations of 49% growth in its cloud computing business. still, overall sales beat estimates. demand for the subscription software remains strong.

apple would be interested in bidding for a chip designer. the firm had discussions but apple isn't planning to pursue a with their hardware -- hardware focused business model. -- the swiss drugmaker says they are rick nash drugmaker says they are recovering and have a positive outlook for the year. that is your bloomberg business flash. francine: thank you so much, ritika. reported cases of coronavirus have topped 15 million across the world. the three worst countries, the u.s., brazil and india account for nearly half of all cases and 40% of fatalities. we are joined by ucl principal research fellow, jennifer rohn. we also spoke to the rosche

chief executive early on and he said we have to be careful about the use of coronavirus test because they are pretty scarce. are we testing to much in certain countries or are we test -- or are we not testing enough? jennifer: in an ideal world, everyone would have the testing capacity they need, but if we have shortages of things like agents and apparatuses, we have to prioritize and it is not an easy decision and not necessarily a scientific decision. what is the ideal situation? antibodiesen know if in vaccines will work. should we act as if there is no vaccine for at least two to three years? jennifer: that would be the most prudent course. we have vaccines in development that are front runners and looked good on paper, but there is no guarantee that any of them will work.

although governments are pouring money into buying those and hedging their bets, trying to make sure they have something, the safest approach is to assume that they won't work. tom: jennifer, good morning. i want to go back to your original work in cell biology with your interest in virology and something that is a sickly cell death -- that is basically cell death. bring it over to this virus and young people. they are not going to die, i believe that is the generalization, but what happens to their cell biology while they are sick and after? jennifer: i'm afraid we really don't know. it is not something we have been able to study much because there were not that many cases -- there are not that many cases of this virus. we have a very strong immune -- immune response that can sometimes backfire and cause problems for our own body.

there simply haven't been enough studies long-term because the virus has been around since january. cell death is a serious issue but more the problem here is the reactionsponse, the people are having to this virus in our bodies. tom: i would state as a generalization, and america, there is a feeling that young kids get the virus, whatever that age number is, they get sick but they get better. do they? get aer: some children very rare sort of over inflammation that can put them in the hospital, but they tend to not get very ill. it could be that their immune systems are not yet mature, but what we don't know -- but we really don't know. francine: do we know if they can still pass it on?

there were so much conflicting information. certainly in the u.k., the schools reopened and there was an understanding that it was more difficult for kids to transmit, the young kids to transmit the disease. jennifer: the bottom line is, the more secure, the more virus you are going to shed. ill,ne who is not feeling given that kids are less likely to suffer from effects of the virus, it is unlikely they will have a high enough viral mode to spread it. but again, i would not rule this out. more studies are needed. i don't think kids are necessarily safe and i think it is right that schools are taking social distancing measures. jennifer rohn, ucl in london, principal research fellow. i love that we have been doing this, trying to bring in experts

in medicine and virology. coming up in the next hour, always a joy to speak with martin low. equities, help with gold,x back to 23.96 and marvin loh in the next hour. this is bloomberg. ♪ hey, kids!

welcome to camp tonsafun on xfinity! it's summer camp, but in your living room. learn how to draw with a minions expert... how to build an indoor obstacle course! plus... whatever she's doing. and me, jade catta-preta. the host of e's the soup! camp tonsafun. it's like summer camp,

but minus the poison ivy. unless you own poison ivy. in which case, why? just say "summer camp" into your xfinity voice remote to join. tom: this morning, the surge in gold continues and with

persistent dollar weakness, there is hope of economic recovery that has extended out and well into 2021. what will over the republican party look like after the president leaves? it is red state hand-to-hand combat on the stimulus. -- speculation abounds from wuhan, west of chengdu, to hong kong. good morning everyone. this is bloomberg surveillance. from our world headquarters in new york and london. francine, one of our staff said it is a nudgy newsday. it is almost august. his europe, like every year going to shut down, or is this year going to be different? francine: i think this year is going to be different becau