beirut is rocked by a massive explosion, injuring thousands. commerzbank cut its outlook. the german lender abandons its portfolio target. and as dependent threatens traditional businesses, disney plans to release new titles on disney+. we will spend quite a lot of time looking at the disney business model to try to understand exactly what that means going forward, as less people go to theme parks and stay in more. i guess the only thing they can do is try to bet on the streaming service. tom: it was a really interesting call yesterday. one of our producers is going to hit.t seven times, $29 i

me, it was a real pandemic overlay. this is serious stuff. you can bring it right over to the urgency in washington on the stimulus, where yesterday, just as everyone pretty, there was a panic, and maybe they jumpstarted those talks. francine: yes. just so you know, the subscription model is actually that you buy for disney+, and you don't have to buy each time. we will have the experts on that. lebanon was, already on its knees. this will just push it further into difficult territory. let's get straight to the bloomberg first word news in new york city. here's ritika gupta. ritika: the pictures are incredibly intense. that explosion at a warehouse in beirut was felt miles away, and field hospitals with casualties.

reports are at least 100 were killed and some 4000 injured. almost's government says 3000 tons of ammonium nitrate was stored in the building, but they are not saying whether the blast was caused by an accident or an attack. the white house and democrats are trying to strike a deal on virus relief legislation i the end of the week, according to treasury secretary steven mnuchin. the two sides aren't close to a deal yet, but did agree to a timeline. one of the main sticking points is still the extension of supplemental unemployment benefits. health and human services secretary alex azar will arrive in taipei in the coming days to discuss the global response to coronavirus. taiwan's response has been widely recognized as among the most effective in the world. in the u.k., a panel of

lawmakers has issued a report that is scathing about the way prime minister boris johnson's government has handled the virus. it said the march 13 lifting of all restrictions on the movement of people arriving in the u.k. was explicable -- was inexplicable. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. tom: thanks so much. it is a really interesting data check on a wednesday, with claims tomorrow and jobs day on friday. nasdaq leading the way, etc. the vix comes in with a vengeance, 23.13. we will see how that settles out in the next hour. yields plunging yesterday and coming back today. still sitting here with much lower yields than where we were a few weeks ago. tip we talk about

comes in ever more. in gold, i can't afford it. francine: european stocks are climbing to a one-week high. gold staying above $2000 an ounce after touching a record high. i'm also looking at investors and what they are focused on with u.s.-china trade discussions. thathere's also the fact lawmakers are making a bit of progress on this economic aid package. yields edging up, but they are still near the lows since march. i want to look at pound, just because we have the bank of england tomorrow, so it will be a fairly big week for the u.k. lawmakers in washington are under pressure to act, agreeing to treasury secretary steven -- and according to treasury secretary steven mnuchin, lawmakers agreed to reach an agreement by the end of the week. joining us now is paul donovan, ubs wealth management global chief economist.

great to speak to you as always. are we going to get a deal? are we going to get a meaningful deal? paul: i think a deal is quite likely. after all, it is in both sides' political interest. you do not want to be blamed for weakening the economic bounceback. if we don't get some kind of deal which offers some additional support to the millions of americans who are currently unemployed, than the economic bounceback is going to be severely compromised. so i think that it is in the interest of both parties. they are taking it right to the last minute, but that is politics for you. i do think that some kind of deal is likely. francine: a deal that would include what? what does it actually mean for the u.s. economy? are there going to be blind spots? paul: one of the problems right from the start is there is a trade-off between efficient

policy and quick policy. you could have a perfectly crafted, really targeted piece of policy, but if it is not there quickly enough, if you are not getting the assistance through in a speedy fashion, it is going to be useless because the economy will have collapsed while you are dithering around. so what we really need to focus on is something to deal with the unpleasant benefit because this drop in under benefit we've had since last week, from $1000 a week to $400 a week in round numbers, that is cataclysmic. it is really damaging, obviously, if you are unemployed. but from a macroeconomic sense, if you are in work, but afraid you are going to lose your job, and you see the consequences of losing your job be in hundred dollars a week, not $1000 a week , that is going to change the behavior of millions more who are in work, but are afraid.

that is the real thing we got to address as quickly as possible. tom: where are we within the continuum of austerity? you have done such a good job of engaging austerity throughout the years. some want austerity, hugely concerned about deficits. where are we on the austerity meter? paul: we are not contemplating austerity for a while. what we've got to recognize is this is an extraordinarily severe crisis, but it is also hopefully a relatively short-lived crisis because fear, which is what is driving the economic damage, does fade over time. we always underestimate how good people are at adapting in the face of adversity. that is what people are doing. so even though u.s. caseloads are going up, the economic reaction, the fear is less than

it was two or three months ago. that is the benefit. so it is a short-lived problem. i think while we have to regard this as a step change increase in government debt levels, a one-off increase, that does not require austerity. it requires long-term planning. but it doesn't require a shock of austerity to do with it. tom: really important insight. does that bring over to a step decrease in yield? can you take the step in this, the continuous sense of it right over into markets, into yield? paul: the problem here is that alongside the increase in debt, you are also seeing an increase in financial repression. so what is giving the right signal about the economy, the bond market or the equity market? the answer is neither is giving a signal about the economy.

economists are giving signals about the economy. the bond market is reflecting financial repression, central-bank manipulation, interest rate expectations, and that as a whole different set of policies. effectively, financial repression is acting as a new form of discrete taxation. the equity market are present a tiny subsection of the economy, and a part of the economy that is least affected by the covid-19 crisis. it is your local mom-and-pop store. it is the beauty salon or the hairdressers. it is the local bar. those are the companies or the businesses that are most negatively affected. they are not represented in the equity market. francine: what is your biggest concern about scarring of the u.s. economy? is it companies going bust? does that lead to unemployment? what is the one metric that will give us a shock to the downside in three months? paul: i think the issue here is

that we've got obviously a large number of people who are temporarily unemployed. we need to make sure that does mean temporary. we want to stop good business is failing unnecessarily. that has always been one of the number one objectives. but in this process, we are going to have some good , andesses that have failed we are accelerating structural change. the fourth industrial revolution has been accelerated. that, what you are doing is essentially closing businesses in a 12 month period that would normally have been spread out over a longer time. that combination means we are going to be tackling spare capacity, higher unemployment throughout 2021, 2022.

that doesn't give us a downside stock, but what it means is we are still in a disinflation environment, and policy is going to have to be directed at trying to reduce that spare capacity that is going to be hanging around the u.s. economy, the global economy at least for the next 18 months. francine: paul, thank you so much. paul donovan their of wealth management. power,"p on "balance of dr. anthony fauci. you don't want to miss it. this is bloomberg. ♪

♪ tom: good morning, everyone. "bloomberg surveillance."

an extraordinary week. back to back weeks of terrific news flow. the adp report claims tomorrow. some saying that is a key statistic for the week, and then the jobs report without question the greatest mystery of my years here at bloomberg. sometimes the stars align. it is always good to have paul donovan with us of ubs wealth management. was a real focus on china and the dynamics of the political economy or the economic politics of said china, and today, a really historic moment is the cabinet officer of the united states of america is scheduled to visit taiwan. this is a reach back 40 years as well. how much of an affront will this visit be to beijing? paul: i think beijing is unlikely to take it terribly

well because the language around this, which is related to the covid-19 pandemic, has also been quite pointed about transparency , so one and so forth. this is coming as we are also hearing that next week or the week after, the u.s. and china are going to be reviewing the phase i trade deal. so i think we probably have to see it in this context come up -- this context, that this is a sort of saber rattling ahead of these review meetings with lighthizer and vice premier liu he. on the domestic politics of taiwan. i know it is very nuanced, very original. give us a quick brief on the state of the political majority in taiwan. taiwan obviously has a very complicated relationship

with the mainland. . shaped withinhave taiwan. this has been an ongoing problem exactly time about how the relationship between these parts of china are to come together. i think that is going to continue to be a source of tension. the issue that we have had more u.s. militaryound presence in the region, the fleets in the area, the south china sea. this has been somewhat compounded in recent months by the tensions between the u.s. and china, and that does bring taiwan into the mix. you look aten economic growth of china, where do you have the biggest concerns? paul: the issue i don't think

it's necessarily so much around where is china's growth going to be this year. what we are seeing is china is providing a reasonable amount of stimulus, and we all know the first quarter for china was devastating. global trade has been very badly hit, and that has been disruptive for china. they have lost six months in terms of global trade, three months in terms of demand, but global trade is slowly recovering. that is to china's advantage. i think the challenge is the structural changes being accelerated by the current situation, and what that means with regards to china's longer-term economic direction. china's economic model does need to evolve from where it has been over the last decade or so, and that is going to be more complicated with more tensions

with the united states, with other disruptions to the global trading model, and with just a general re-examination. the way the world has grown over the last 20 years, the structural of the gribble -- the structure of the global economy is been something china has benefited from enormously, but that structure is not going to work in the future. that is going to be china's challenge, i think. francine: what is the biggest challenge for the world in general? will it be job growth going forward, or is it going to keep the economy's not at different speeds, given that some economies will benefit, given our trend towards more technology, and others will lose out by quite a bit? paul: i think the big challenge now is not necessarily job growth, but making sure that your population has the flexibility to be able to adapt

to a radically changing environment, and that government policy has the flexibility to recognize that it is a changing environment, and to work with that. trying to cling onto the old ways of doing things, that is just not going to work in this environment. we saw this in the u.k. in the 1970's, where the government was trying to cling onto an industrial policy that was 20, 30 years out of date. it is disastrous when that happens. what you need is the flexibility to be able to help people adapt to the changing circumstances. jobs will be created. we will get jobs growth. but if your population is not able to take advantage of that, you are going to have serious structural unemployment, social unrest, so one and so forth. that is what we need to adapt. tom: paul donovan, thank you so much. greatly appreciated, particularly those careful comments on china and taiwan.

coming up, this is an interesting conversation. how about the first republican from louisiana since reconstruction? that would be william cassidy of louisiana. really looking forward to speaking to dr. cassidy. this is bloomberg. ♪

ritika: this is "bloomberg surveillance."

let's get the bloomberg business flash. disney posted surprise profit in its fiscal fourth-quarter -- in its fiscal third quarter. disney was able to defer payments for games delayed by coronavirus. disney+ will market ulan" as action "m pay-per-view. wirecard added to rising costs to cover bad loans. commerce bank is trying to emerge from a leadership crisis area both the ceo -- leadership crisis. both the ceo and chairman announced their resignation last month. bmw's automotive division posted a 1.8 lien dollar loss in their second quarter. the pandemic forced dealerships and factories around the world to close for several months area

one bright spot, bmw says sales volumes have started to grow in china. that is your bloomberg business/. -- bloomberg business flash. tom: thanks so much. futures up 15. i want to go to em. turkey continues to unravel this morning. 7.03. lire to i am really watching euro-lira. that is really something to watch, tangential to the horrific last in beirut -- horrific blast in beirut. francine: we will have more on that and what it means for the economy. european stocks are climbing today. on china are focused trade discussions, and that we seem to be a step closer to u.s. lawmakers making progress on an economic aid package.

gold, i know you mentioned it, continuing its assent above the ounce as000 an investors consider more economic stimulus and the u.s. treasury yield edging up. coming up, plenty more on emerging markets and lebanon pimcoacov arnopolin, emerging markets portfolio manager. we know about the blast in beirut. we still don't know exactly why this depot exploded. we will try to get to the bottom of it as well. this is bloomberg. ♪ experience the ultimate sports hub.

where you can find games, news and highlights. all in one place, right on your tv. the xfinity sports zone. use your voice to search every stat and score. follow the teams you love. and, even get notifications with breaking news alerts and more.

with the xfinity sports zone everybody wins. now that's simple, easy, awesome. say xfinity sports zone into your voice remote today. simon pagenaud takes the lead at the indy 500! coming to the green flag, racing at daytona. they're 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. "om: "bloomberg surveillance from london and new york. these are images live from beirut.

for anyone within the investment business of a certain age, the agony of the collapse of lebanon's tangible. years ago, when i first studied foreign exchange, the lebanese pound was one of the four great currencies of the world, alongside the door to mark -- the deutsche mark, and a few other select currencies. those days are gone, and what we have seen over the last four hours is extraordinary, the tragedy of beirut. there is no one at bloomberg with more experience of that then riata mott -- then riata mott. this is a city damaged. do you gauge the damage is temporary or separate, or is this a city devastated? which is it? reporter: the city is

devastated, tom. there's hardly anyone who hasn't been affected, either directly through family being injured or people looking for a loved one. or at the very least, their apartments are damaged. i think they haven't seen anything like this, a single explosion doing this kind of damage. there was an ago, explosion in oklahoma city which changed how we look at security in america. i know it is complete speculation of accident or attack, but a common theme here is the chemistry of ammonium nitrate. were you surprised at the tons of ammonium nitrate in one location? so.: i would say i think if you listen to the lebanese government, the prime

minister, the president, they are all surprised at having this quantity of ammonium nitrate in one place. that also,ggesting ammonium nitrate should not really have been stored at the warehouse. it was not equipped to handle ammonium nitrate. , there haveoned been accidents before, one of them in texas as well. so there are a lot of questions. abouts a lot of questions what triggered this, but also why ammonium nitrate and that quantity was still being stored there, apparently for at least six years. already, lebanon was really struggling under the

weight of the economic meltdown we saw in recent years. how will the explosion actually affect the economy? how will it impact the need for food, medical supplies, and other goods? riad: that is exactly the a lot of people are asking themselves. whether they will be enough meat, whether there will be a wheat shortage. there was a granary next to the explosion. the question is, does lebanon have the foodstuffs it needs? officials are coming out saying there is some weed around, but there are some question -- some wheat around, but there are some port.on marks around the the port of beirut is pretty

much destroyed at the moment. the government has already said they are going to use the port in the city of tripoli. it is unclear if that will be able to fully compensate for the loss of such a major artery for the lebanese economy. francine: thank you so much, our bluebird middle east executive editor riad hamade. joining us now is yacov arnopolin, pimco emerging markets portfolio manager. should lebanon at this point ? how doesreign aid the economy look, given what we know about lebanon and the if closing yesterday -- and the explosion yesterday? yacov: thank you for having me on. first of all, this is a tragedy. our thoughts and our prayers go out to the people of beirut and the people of lebanon. this is probably the biggest

in the country since the civil war that ended 25 years ago. having said that, everyone is still puzzling over what exactly happened, whether this was an accident or a terrorist attack. , obviouslye latter it is very negative because this sectarian tensions among the various groups in lebanon. if it is with an accident, that may prompt the downfall of the government, which is already not particularly strong. as we have seen in the past, it takes a long time to form a covenant in lebanon. what does that mean for the economy? this was already an economy on its knees. the country defaulted in march of this year, before the virus.

now there are negotiations with imf. the negotiations are very slow because there are questions about the true finances of the central bank. how negative are there net reserves? thene government falls, you have nobody to negotiate with, so that would just push things out even further in terms of a large potential package from the imf. i am sure the international community will step up and give short-term economic aid, humanitarian aid to lebanon. before the economy, this is an even more significant hit. anecdotally, when i was in beirut in february, march, they were allowed discussions about how there are still gems in the lebanese economy. privatization will take off. one of the things mentioned was

that there are foreign buyers for the port. obviously with the explosion, you wonder whether there will be for an interest in investment in the company. francine: we saw a rapid devaluation, soaring exchange rate on the market. economically, what kind of figures are in your forecast? where this is a country we have been reluctant to get involved. we don't have any exposure to lebanon. hurdle that is why the to invest is very high, because we would need to see the country out the default, figure damage to its banking system. they've had almost a triple whammy, the default, the virus, and now the explosion and its consequences. i think all, forecasts will have kind ofdone, but we are

going from bad to worse. has made veryan clear he wants to have an overt presence on a political basis across the eastern mediterranean , and frankly down to egypt and libya as well. it seems in total chaos. what is your interpretation of the economics of turkey and the , given whatlabonte ?e see within financial turkey yacov: and libya, it seems turkey wants to take on the forces of general have to are -- ftar, opposing

turkey's position. it does make you wonder what is the strategy. there does seem to be a lot of saber rattling and reluctance to reengage in anything that goes beyond the short-term and the minor skirmish because the reality of the turkish economy cannot afford that. it does make you wonder how much of this is a distraction for some of the stresses that the economy is going through. obviously, the lira is an interesting example. i think we would much rather see depreciation than the massive entrenchment we have seen of late. tom: well said. the adjustment will be either abrupt or not, but there it is, the depreciation of lira, particularly euro lira.

we will probably look at the pacific rim, coming up. and on washington, the politics wrapped around finance. former treasury secretary the united states jack lew and the lew in the 6:00 hour. this is bloomberg. good morning. ♪

ritika: this is "bloomberg surveillance." let's get the bloomberg first word news. the pictures are shocking, and so is the aftermath in beirut. the explosion in a warehouse is blamed for at least 100 deaths and some 4000 injuries. lebanon's government says more

than 2700 tons of flammable ammonium nitrate was stored in the warehouse for six years without safety measures. white house and democratic negotiators are trying to reach a deal on a stimulus relief package by the end of the week. they are under pressure to act. millions of unemployed americans just lost supplemental unemployment benefits. dismissed smaller scale proposals offered by the white house. promising news to some of the states hardest hit by coronavirus in recent weeks. california reported its fewest new cases since june. meanwhile, a bipartisan group of governors have joined together to buy millions in antigen tests. the u.s. and china plan to review the phase one trade deal there this month. that comes amidst rising tensions between the two countries. china has fallen behind on its farm andts to buy more

agricultural products. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. francine, tom? francine: thank you so much. let's go back to yacov arnopolin of pimco. we were talking a little bit before about lebanon. we mentioned turkey. if you look at the way covid-19 is ravaging a lot of south america, brazil particularly, what does it mean for an investor? yacov: a lot of eyes today on brazil because of the meeting of the central bank, the monetary policy committee. we may see another cut come potentially the last in a cycle. but it is quite remarkable to see rates in brazil at 2%. i think those of us in emerging

markets for a while are used to seeing double digits in brazil. examplethis is a great that reminds one of the disinflationary trends in the world economy in emerging markets, and those have only been exacerbated by covid-19. i think that is what we are seeing right now in brazil. we are probably going to see something similar in mexico, where we will also probably see an ongoing rate cutting cycle. francine: what do you do with the rest of south america? yacov: we are very country specific. it is difficult to generalize. is thezil probably still most interesting story because although markets are focused on , i think the more interesting story that will affect brazil on a three to six

month horizon is fiscal. there we will see this the one verytween much supported by markets, pushing for spending caps, tax reform. and we are seeing congress pushing for payroll tax, more stateng via extending the of emergency. so i would say all eyes are still on the school in brazil -- still on fiscal and brazil because that will impact asset prices. tom: we've got time for one last question. i am going to go back to your carnegie mellon economics of of years ago, and a guy named alan meltzer. ew that ther kn central bank was the lender of last resort. is there room powell going to get this done? -- is jerome powell going to get this done? , the: i think for now

tina,m thrown around is there is no alternative. i think that is certainly very supportive for asset prices, and probably will continue to be so for the near future you i think the resulting melt up -- for the near future. i think the resulting melt was very much due to the fed support and ecb support. i think there is more firepower they could apply to support asset prices. tom: thank you so much, yacov arnopolin, pimco emerging markets portfolio manager. lira, 7.02. another bout of turkish week. i am really looking up to euro lira off of a strong euro. dxy under 93, the blended major country index, showing renewed

we this -- renewed weakness. it will be interesting to see what u.s. paper does as well. much more coming up. futures up 19. moreng forward to with lisa abramowicz and jon ferro as well. good morning. ♪

ritika: this it's "bloomberg surveillance." the trump administration is demanding that purdue pharma pay more than $11 billion in criminal and civil penalties relating to the opioid epidemic. that would be part of its bankruptcy reorganization plan. purdue is the maker of the infamous oxycontin opioid painkiller. richard branson's virgin atlantic airways is seeking bankruptcy protection in the u.s.. the airline filed under chapter 15, 8 loaves foreign companies chapter 15,sets --

which allows foreign companies with u.s. assets to file. sec reportedly is 765 milliong a dollars government loan and a stock surge. the investigation is at an early stage and may not produce allegations of wrongdoing. shares of kodak soared after the announcement, and that briefly lead to a windfall for some company executives who had just received stock option grants. that is your bloomberg business flash. francine: thank you so much. commerzbank has cut its goal for full-year profit after costs from wirecard related to covering bad loans. >> first of all, q2, we have are reallyprofits

important, and we set already in the q1 announcement it would become much more aspirational to reach positive net income, given but alsot on revenues, on loan loss provisions. now it is even more important. for theto book restructuring charges to really program,ress on the and that all in all brings us to negative net income for this year. >> in terms of the wirecard story, before you were ceo at commerzbank, journalists were writing stories about the problems at this bank and the amount of smoke coming from the company meant pretty much everybody should have known there was fire. the regulators certainly didn't

seem to wise up to that until far too late. neither did the government. what do you think needs to change so that we don't have another case where a german dax company misplaces more than 2 billion euros? >> the discussion is ongoing, say is a general clearly, one is a question on how you regulate the cost of payment providers. that is someone that needs to be discussed by regulators and politicians. i think everyone who is involved has to argue what are the red flags, and have we dealt correctly with the red flags which were out there. someone that will happen over the next weeks and months, i am sure. and a deeply troubled bank, of course, great challenges with

their second largest shareholder cerberus as well. let me do a data check right now. a really extraordinary data check into the jobs checks of thursday and friday. what i am watching more than anything is a fixed income space. right now, i would suggest that the litmus paper, we saw a really low yields yesterday. a bounce back here. i am going to call it almost knee-jerk in the 10 and 30 year space. . am watching swiss 20 year that has come back a little bit. we have seen some unraveling in the dollar. dollar weakness really out to a new level. i've noticed a vix of 23.17 is remarkable. francine: i am also looking at a couple of other currencies that we should be watching out for on the periphery. i did also look at pound just

because we are expecting bank of england to come up with something that could be unusual tomorrow. in general, u.s. futures are gaining. investors are focused on the fact that lawmakers are making progress on a possible aid package, and investors are also focusing on the u.s.-china trade discussion. tom: let's to come here. jacob lew to join us in the next hour, the former treasury secretary. dr. fauci later today on bloomberg. coming up, the chief economist for jp morgan. bruce kasdan will join us. stay tuned. this is bloomberg. ♪

♪ tom: be careful what you do not know -- it's early afternoon in

beirut, the day after one and then to harvick explosions. accident or attack? the risk of ammonium nitrate or the further risk of civil war and terror? ?s it suit soon to tell gold is surging as yields test new lows and the turkish lira is weaker and it's not too soon for panic in washington, suddenly installed talks on stalled. is there an explosion of public unrest? in this hour, jacob leew. jet -- bloomberg surveillance." extraordinary news flow. there is no way we are in the summer doldrums. francine: if you look at august and what we have seen in the past, quite a lot of volatility because traders are still away and europe is very quiet. the impact on the