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 because a lot of people are working from home and people will continue

working on holiday. when you look at the markets, they are probably range bound and that is where the nudgyness comes from. we have earnings in europe that will give insight and you have the spat between the u.s. and china, which is significant but is not translating into concrete market movement. tom: we will talk about china and a moment. airlines front and center. right now, with our "first word news," here is ritika gupta. ritika: china may retaliate for the closing of its consulate in houston by targeting the u.s. consulate in hong kong. that is according to the editor of the chinese communist party newspaper, global times. he writes the u.s. has over 1000 staff and that means it is a spy center. the editor's comments have

regally been a tip-off to what the government does. they trump administration says republicans are considering a short-term extension of the unemployment stimulus. millions of americans received several mental payments that were included in the last coronavirus rescue passage -- >> -- rescue package. president trump is expanding federal law enforcement operations to chicago and albuquerque. that sets up a showdown with state and local democratic leaders who denounced the presence of federal agents in portland, oregon. the president says his goal is combating violent crime and to appeal to his conservative base. britt -- british from minister boris johnson is trying to head off growing support for scottish independence. he will stress the value of the united kingdom today. tensions have been growing, issues include the coronavirus

pandemic and calls to hold another independent referendum -- independence referendum 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: thanks so much. equities, bonds, currencies and commodities. equities surged up 16. stunning -- bonds are turning -- churning. gold surging. up $18. silver with its own story as well. i will let francine talk to the dollar after a nice roofing from george sarah bellus -- a nice briefing from george saravellos. francine: investors monitoring

earnings pouring in, they are looking past the tensions between the u.s. and china. yuan strengthening and treasuries are steady. press presidential conference the other day, i believe it was tuesday, maybe it is a different president trump. here he is on houston and the consulate. additionals closing embassies, it is always possible. we thought there was a fire in the one that we did close, and everybody said there is a fire, and i guess they were burning documents or papers. i wonder what that is all about. tom: this story advances the point that i saw yesterday, a little bit of reuters speculation and a sharp bloomberg story out of china, which showed that wuhan was in some kind of consideration. and then this speculation on chengdu to our -- our bureau chief was chatting with us and

then over to hong kong with a very large consulate, what will they do? -- executive editor for speculation for bloomberg and we welcome her today. but ita joke about it, is really all speculation isn't it? thereis, indeed because are five consulates the u.s. has embassy innd the big beijing and the one in hong kong as well. the reality is that china has to consider a proportional response while xin because jinping cannot let this slide, -- cannot let this slide, you cannot escalate. cons for alls and of them, including wuhan.

wind we find out? what exactly is president xi's game right now? >> right now they are confining themselves to rhetoric, saying the u.s. has to think carefully about where the relationship is this will bleed into a bunch of other things including trade and so on. that,r side would want protected -- potentially. media in china -- but there is nothing formal as of yet. tom: sometimes it is what is not mentioned. you know shanghai well. why is shanghai not part of this discussion? >> possibly because of the commercial impact it might have on china because just like shuttering houston not only

affixes -- effects china, it also damages the u.s. because you can imagine all the big energy companies in china, u.s. companies will never get av said there again -- will never get a visa there again. wuhan, where there are only a few u.s. diplomats left at the moment, that wouldn't affect china so much but it could damage the u.s. because it would further cut off any access america has two ground zero in the coronavirus. hong kong equally would have a huge impact on the u.s. and less so on china. it is all about that calculation and in that regard, shanghai is possibly off the table. francine: how linked is it to andident xi's leadership, i think he needs to contest it again in 2022? >> it feels like it is a long

way away but every five years, china has a big party congress where they essentially reaffirm the leadership and in some cases unlike thehanges, one in 2017 where he essentially got a mandate to rule indefinitely. if the economy is still in a bad place, the coronavirus is out of control and he is not seeing -- he is not being seen as strong a leak -- strong a leader -- it is possible you could see some questioning of his leadership and even a split. he has a strong incentive to continue to show his assertiveness both at home and abroad. tom: you mentioned australia. you are encyclopedic on this, so i can be unfair and ask a question about this.

china is getting a little play in the american press with woody island triangulated between taiwan and vietnam. these little islands in the south china sea, would you anticipate that they will become an important discussion? >> they have been an important discussion for about 15 years. they are important trading centers, so a lot of shipping goes through, including around the spratly islands which are two separate island chains in the east china sea -- south china sea. what they have been focusing on is building up their military capacity, essentially turning the low-lying reefs into bases that can house fighter jets and oftnot, putting quite a lot armory on them as well. there is an incentive for china

to turn this into a military fight and the -- the risk is that because no one is pushing back against china in the south china sea, we will wake up one day and realize 10 years from now it has militarized the entire area. rosalindk you so much, foreson, executive editor federal governments. -- scheduled to be with bloomberg later. we speak with a former president of the new york fed, liam dudley in the 8:00 hour. this is bloomberg. ♪

francine: this is bloomberg surveillance. new yorkrancine from and london. let's get straight to markets. marvin, what do you do with the dollar right now? -- it has moved a bit, we have to look at the liquidity being put into the system, and still making its way into it with real yields collapsing and there is not a lot of support for the dollar, particularly around the euro where things are improving a bit. francine: are some of the risk at -- are some of the assets -- are some of the risk assets range bound?

valuation is certainly very high, but they have held and they are able to absorb a lot of ongoing news with regard to the virus, china, etc. i do think a range bound type of market is something we will look at going into the end of the summer. tom: marvin, the fact that will affect careers on the buy side is the shift from the seven tech glory stocks, somebody was kidding me on twitter, how many it is, but this one way bet in the equity market versus everything else. when do we get to the everything else? marvin: i think we need clarity on what the economy is going to support. certainly the amount of liquidity is making its way into the equity markets. bets around the 10, 12, whatever

the number is is an easy bet. there are companies that can grow in this market that are going to be around after that. we don't know what the after that is going to support, until we are there. tom: do you believe we will -- is this see oscillation going to continue through the summer? marvin: i think it does just because the commentary and the degree of uncertainty is still as great as it was months ago, even though we are tens of percents above a valuation perspective. i think that continues as we try to parse through this information coming at us. francine: marvin, how much higher can gold go from here? theoretically that there is a limited amount of resources and it plays into a bit of the concern with

inflation at some point in the future, as well as monetary debasement. it can continue to go higher and is one of those asset that becomes a bigger part of your asset allocation as we look beyond whether it is the next six months or a year. tom: marvin loh, thank you so much. state street global strategist. really remarkable to see the vix coming in. that is stunning. it will be a better place for those of you that desire a central-bank analysis. the former president of the minneapolis fed in the 10:00 hour. futures up, continuing up. this is bloomberg. ♪

ritika: this is bloomberg surveillance. i am ritika gupta. tesla is possibly paving the way for its soaring stock to join the s&p 500 index. the carmaker reported positive earnings for the first quarter -- for the fourth quarter in a row. that is not good enough for ceo elon musk who says tesla is not going fast enough. unilever reported better-than-expected revenue in

the second quarter that was fueled by consumers buying hand sanitizer and ice cream. unilever also signal the pandemic hasn't hurt its appetite for acquisitions. ceo alan hope tells bloomberg tv the company has been looking for purchases the last six months. mercedes-benz expect to make an operating profit this year. the company is counting on the economy improving. that is your bloomberg business flash. tom: ritika, thank you so much. we had been speaking with marvin loh of state street global about the clear and present dangers, clear and present opportunities, but what is out there? but 2024,an 2021, 2026, with all of this debt building up? marvin, there has to be a price to all the free lunch of

stimulus down the road. how will that affect the trillions of dollars of assets in state street global? marvin: i think you are seeing some of that thought process make its way into asset classes. real yields, if you will, given that only a few months ago, we worried about deflation and pushing real yield into this inflation protection zone where those concerns are starting to arise. it is often said that this pandemic is going to change everything and i believe that a lot of how we approach work, each other, how society integrates is part of that process. this is brave new ground. we are all guessing as to how this is going to occur, but the time is to think about how that all comes together. of moneyinvention market funds, to me, the single

u.s. distinction is money market funds. what do money market funds do with negative rates in london? what do they do with a massive negative real rate in new york? marvin: it is one of the reasons why i think the fed has pushed back as much as they have on negative yields. zero yield is certainly not great, better than a negative yield. having said that, i think that reach for income remains a key part of that investment thesis and it has pushed into high-yield a bit more aggressively, as volatility has stabilized, but we have to think about all those different blocks and how to build the type of portfolio that make sense for us. francine: you mentioned inflation. do you worry that the stimulus inflation?he way to -- runaway inflation? marvin: not necessarily runaway.

we have gotten used to low and stable inflation that we are not necessarily prepared for even what would historically be average inflation, getting towards 2% to 3%. i do worry about it and i think that if the fed goes into a mode where they lock themselves into metrics and can't raise rates, because of yield curve control or something like that, then it could get worse quite quickly. if we were to have quite higher inflation, where would you see at first? marvin: there is a lot of interesting research being done. some of our academic partners have worked on what goods people are buying. we are already seeing those baskets not drop as much as these broader inflation baskets

that we are used to. i think it is in things that we buy, food, the basic essentials. i used to love to shop for things on sale like paper products. they are never on sale anymore. i think you start seeing it there, and that is where the average consumer gets hit immediately. tom: totally agree on that observation. you so much,hank with state street global. really interesting on some of these cross asset dynamics we see. 12%, let me give you the levels on that 3277 on spx. dow at 27,000. the vix, 23.98, really an extraordinary statistic. the yield market goes -- 10 year yield to four digits. that bears watching.

the dollar is weaker. front and center is gold with a number of theories out there on what to do with gold, at 1881 announce. at 1881 an ounce. robert crandall has lived a lifetime of six deaths of the airline industry. my guess is he is optimistic. this is bloomberg. ♪ save hundreds on your wireless bill

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italian yield, the bond yield dropping to 1% for the first time since lockdown. it was seen as a big for refer the prime minister, giuseppe conte, the e.u. recovery plan was signed over the weekend and italy would get money. we are getting more detail on how they would spend the money, and they proposed 25 billion euros as they try to rescue an destroyed by the pandemic. tom: i really have got to say, i find the juxtaposition of italy 1% yield to be extraordinary. i have been so looking forward to this conversation. we are not going to's week with moderate -- robert crandall about earnings, revenues, the

doom and gloom of the moment. we are going to talk about the great pumpkin, the first 747 i saw i was aas at -- -- saw. and you werere flying the 747 from o'hare to lax piano bars upstairs. 747 was it like ringing the to the public -- bringing the 747 to the public? francine: it was a mistake -- robert: it was a mistake. airplane and reused it for flights that -- we used it for flights that were much too floor does short. -- short. we put piano bars upstairs which was unusual, to get people on

over -- on. smarter, as demand got we put the plane on the right route. tom: it is not even possible that a college student of the university of colorado would sneak up to the pmo bar. -- piano bar. declinet out with 89% in capacity. what should american aviation do? robert: american aviation should do it fast, and all the carriers or do it. we have one inner-city transportation system in the united states. covid has changed people's short-term behavior but not long-term desire to travel. in due course one may get a vaccine, get a cure, people will

go back on the airports -- airplanes and go see the world they want to see. in the short term, the airlines have got a big problem for the reasons you mentioned. they are burning trap -- cash. nobody wants to get on the airplane or get sick and die. term, they are struggling some. they are doing it in modestly different ways. some are putting more capacity up in the hope that some people will fly and others are doing their best to hunker down and cut cost without applying to their revenue. in the short-term term, they all will suffer and i think in the short-term term, they will get through it. in the long term, we will get back to something that resembles normal. francine: good morning from london. is it safe to fly now?

you hear about filtration systems and the airplanes. robert: you read about filtration systems, you are aware that the air turns over thecurrently -- frequently, airlines are doing extraordinary things to clean. do i think it's safe? it is safe. is it absolutely safe? it can never be absolutely safe. that is just reality. the airlines are doing all they can, and people who wear masks and two are careful in terms of how close they get to other people, they travel with relative safety. who knows? every person has to make their own decision. most people are saying, i can defer the travel, and that is safer than traveling and that is probably true. on the other hand, i think as

times past, more people will opt to take modest trips. francine: well business travel resume? vacations travel for and things like that, but is the business traveler that airlines need. robert: they don't need that. they just built a business plan that revolves around the fact that there is a certain amount of business. i don't think you will see as much business in the future. the airlines are probably going to have to modestly raise fares for personal travel, because in order to have a satisfactory long-term operation, they have got to have revenue, they have got to make money. that will probably mean in the

future, i suspect, a somewhat different their structure and different mix -- fair structure -- fare structure and different mix of passengers. tom: bob crandall, we just learned that ann taylor and lane bryant and their parent company have filed for bankruptcy. this is the retail apocalypse, rex brothers a number of days ago. you have -- brooks brothers a number of days ago. iu have seared in your memory am sure when american airlines took that path. is that an easy way out? is bankruptcy a constructive process given a pandemic, given a natural disaster? robert: i don't know the answer to that. costsptcy obviously poses on people in our society who

have made a debt. i don't think we want to create overall a business environment in which every time there is a depression, there is a wave of bankruptcies and people lose their money or lose some of their money. it is a matter of how society wants to be organized, this particular part of its enterprise. bankruptcy, i think, in the context of something like the covid pandemic has to be looked at as a somewhat different way than in a normal workflow of business activity. i personally don't think the airlines ought to have to go bankrupt. i think society as a whole has to recognize the fact that this is a unique business. it is the nation's only

inner-city transportation system. if we have to subsidize it for a while, we ought to do so, and the consequences are meeting the transportation. of: see you in the piano bar an upper deck of a 747, robert crandall. you see the value of frequent flyer miles, and some of that due to mr. crandall at united airlines dealing with that. we will drive forward the conversation with gary kelly in the 10:00 hour. stocks are down 40% from the pandemic. mr. kelly has his hands full. here is ritika gupta. gonea: the world has now over 15 million coronavirus cases. the u.s., brazil, and india account for more than half of infections.

governor ron desantis and florida says schools may delay reopening if they need time to protect from the virus. boris johnson's government had no economic planning for the pandemic according to the house. the coronavirus was "rushed and reactive," despite it being identified as a top risk. the chinese consulate in houston has -- they-line have allowed a small group to meet with mike pompeo. china has a history of espionage and intellectual property theft, according to the president. the president mocked joe biden fundraiserscampaign from his basement, but he is

laughing all to the bank. the president took in less than one third of that from his donors. he declined to appear on livestream events. he held his first one tuesday. we continueming up, our conversations on airlines and transport with the union pacific chief executive officer. this is bloomberg. ♪

♪ "bloomberg surveillance," a stream of stories out in london and new york.

one we have avoided, but front and center in washington is the desperation of the republican to get some coalesced idea of the next stimulus, and to do it fast emily wilkins is in charge of hand to hand combat for bloomberg congressional affairs in washington. it is an extraordinary moment for the gop. is this about the stimulus or future of the party? emily: probably both. everything is about the future of the party to some degree. republicans are in the process of getting their bill ready to come together. democrats passed their bill in may, and they will try to come together to negotiate for another package to help americans. tom: is it just they are having their moment, the deficit hawks are hysterical about the size of the debt, and others in the republican party?

is it just understood they are having their moment and in five or six days the story changes? emily: i think to a certain degree. there are people in the republican party who are not happy about doing another round of stimulus. republicans said, we will wait to see how the economy does we have waited and things are still really rough. republicans are under pressure from business leaders, fed chair jerome powell, from voters to move and get something done and bring more money into the economy. francine: what kind of stimulus will the u.s. get? emily: it will be interesting to see what comes out of these negotiations, but we have a couple of details of what republicans will come forward schools,0 billion for some to reopen, another round of stimulus checks for some to expand $25 billion

virus testing. we are curious about the payroll tax cut, something the white house has been pushing that has not gotten an enthusiastic reception on capitol hill. francine: is there a sense of urgency getting this done or is it politics above all? emily: there is a sense of urgency the. ago, jeromemonths powell told the democrats and republicans, if we don't get something done now the economy will be in a much worse place. you are starting to see that. think of the states where we see an increase in coronavirus cases where it is harder to reopen. a lot of those are republican states, and you see republican governors reach out and say, we need help with our budget and we need the government to act now. francine: through your

reporting, there was the news about the china consulate in houston. about the worried economy worsening because of the trade relations with china, and does that give them the extra gettus to get this through, the stimulus as soon as possible? emily: if you look at the senate , the bills they have been passing are critical of china. they have passed sanctions and bands on officials and things. they have come down on china hard as far as the laws in hong kong. this is something where senators and house members have not shied away at all from holding china's feet to the fire on some of the things they have done that the u.s. does not seek to be in good faith. francine: emily, thank you so much, emily welk ends. up next -- wilkins. up next, we speak about

covid-19, the fight and the treatment, with jason farley of new york university. this is bloomberg. ♪ -- johns hopkins university.

♪ "bloombergs is surveillance." microsoft comes up short, failing to meet lofty expectations for 49% growth in its azure cloud computing business. microsoft still beat x test estimates. -- estimates. softbank approached apple to see if it would be interested in bidding for a chip firm. the two had discussions but apple is not planning to pursue a bid. it is a poor fit with apple's business model. sales took a hit in the second quarter but is confirming its outlook for the year. roche rolled out some of the earliest and most accurate test for the corona virus -- accurate

tests for the coronavirus. francine: bloomberg has developed a unique partnership who has beenpkins response,efront of public health, and emergency preparedness. joining us is jason farley, a trained nurse. this week, we had a lot of trials for vaccine. does it mean we will eventually get a vaccine, or could the antibodies not be sustained? jason: good morning. we are certainly hopeful with the news out of oxford, yet another vaccine that is showing the production of antibodies. thousand had overdue -- over 2000 participants. to thatreport similar

-- those who have come are dust recovered from the virus. the results that they produce antibodies after one or two doses, that is a good thing. again, they are in healthy volunteers, a far leap from preventing coronavirus infection. francine: are we better at treating the sick with covid-19? is there a better chance of survival now than two months ago? jason: it depends. yes, we know a couple of drug candidates reduce time in length of stay and symptoms. for oxygenated and mechanically ventilated patients, we have improvement with dexamethasone. those are modest improvements. we have recently seen details about inhaled medications, inhaled interferon potentially

to reduce patients. itt study is not clear and is a very small sample size, so the jury is out there weekend trust the findings for the inhaled interferon. gains ine seeing small therapeutic options which improve overall survival. francine: when you look at some of the numbers out there and how we have been able to treat, are you expecting a strong second wave as we get onto the colder months, and will this be tied to people starting to travel again and schools reopening? jason: it is important to realize that in the united states at least, i'm not convinced epidemiological he that we have ever left the first wave. do i see a worsening of this first wave?

i think the case is true in the beginning of the pandemic, we were having conversations that the summer will result in decreased cases, and we were saying there is nothing about summer that reduces viruses, it is our behaviors. our behaviors have not shifted that much. put our behavior in greater contact, schools returning, going back to work, reduced social distancing measures, all of those are opportunities to continue to spread and increase new cases of the virus, so it is centered on how we respond behaviorally. francine: children as far as we understand are less affected by covid-19. does it mean they transmit it less? jason: no. data is continued emerging that are age of new cases are

shifting to younger people, particularly adolescence to young adult. we are seeing severe cases among that age group, so i want to make sure everyone recognizes there is no such thing as a safe age in terms of covid-19. further, when we think about putting kids back in schools, we have to think about is that our best decision? there the economic impact by not doing so, parental stress, but schools are not designed to provide social distancing or help kids who touch everything including themselves and their face and each other from doing so, so we have to think long and hard about best practices other countries have done to send their kids back to school successfully. we have to think about how parents are engaged and involved in making this decision. they need to understand what their school system is doing.

francine: the best piece of advice in the u.k. is go and speak to your headmaster, your principal of the school to understand how kids would go safely back to school. beach sure to -- be sure to check out the rs go on the mberg terminal -- vrs for news about the covid. one -- 10 year bond yield dropping below 1% for the first time. this is an indication of how much italy will spend to get the economy out of the crisis. "bloombergmore surveillance" simulcast on the radio. ♪

>> fiscal stimulus gives us that

shot in the arm and buys us time to get there. >> the next may flatten out a bit because then you reach some social and psychological issues about people's confidence, and that will take some time to recover. >> we talk about a correction. at this point we are talking about a normal amount of turbulence in the equity market, which would be about a 10% correction. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: for our audience worldwide, good morning, good morning. this is "bloomberg surveillance ." alongside tom keene and lisa abramowicz, i'm jonathan ferro. the opening bid from the republican party on the fiscal front, that is the focus in washington, d.c. tom: hand-to-hand combat, and it is not only this or that. it is three or four flavors of republicans. the republi