francine: president donald trump signs executive orders blocking u.s. residents from doing business with tiktok and wechat. shares in tencent plummet. no deal. the white house and democrats failed to agree on a stimulus. the president's chief of staff says the -- are still significant. job figures are out later. good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua here in london. this is what the markets are doing.

we are also getting some breaking news out of china for end of july foreign exchange at $3.1 coming in trillion. it is a touch above that. the markets also focusing on the stimulus in the u.s. that may or may not be coming. president donald trump's latest attack on chinese companies also stoked tensions with beijing, which is why we are seeing treasuries and dollar actually rising. the president signing an executive order prohibiting u.s. residents from doing any business with wechat, tiktok, or the owners of these chinese apps. now, let's get straight to the bloomberg first word news. >> there has been no headway in talks between the white house and democrats over a new virus relief package. there are still major sticking points and both sides are accusing the other of refusing to compromise. one key difference is the top line number. the democrats want $3.5 trillion of aid. the republicans want $1 trillion.

another round of monetary stimulus is expected from the bank of england. policymakers yesterday said the hit from the coronavirus was shallower than initially thought, but that was lost on the markets. driving the doubts, expectations of a more flareups for the virus and a messy brexit. governor andrew bailey says he is ready to support the economy as necessary. >> there is a very big downside skew. i think there is a lot of hard work to be done to get the economy back to where it was. we had a quite rapid recovery so far, which i am not surprised about, as restrictions get lifted. the reason that we issued the guidance, in my view, is to say look, the forecast can sometimes look beguilingly straightforward. there is an awful lot of risk and it is obviously distributed in one way. we will be there ready to lean in to support that. u.k. prime minister boris johnson has pledged 355 million pounds to help with brexit red tape in northern ireland. it will fund a service to

complete the declarations on the icrossing receipt -- irish sea. the government repeatedly said there would not be checks on goods from great britain to northern ireland. the announcement of a program to pay for the paperwork confirms there will be. there are still hopes of a speedy economic recovery in germany. industrial output gained nearly 9% engine. factory demand is rising -- in june. factory demand is rising, largestng europe's economy may bounceback sooner than others. 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. this is bloomberg. francine: trump moves to ban tiktok and wechat. he sighed an executive order prohibiting u.s. residents from doing any business with tiktok or its chinese owner, bytedance,

in 45 days. let's focus on how these tensions are moving markets. joining us now is andrew sheets, chief cross asset strategist at morgan stanley. how does this escalate or does it escalate? andrew: well, i do think that you have a really tricky period that we are heading into ahead of u.s. elections, where you have the ongoing question of compliance with phase one trade deal, which is an open question and where we will see another meeting later this month. election i think an were trade policy towards china is likely to be an election issue for both candidates. both are out with a message that they think they will be relatively tough on china on trade. ongoinge you have an risk that if the trump administration feels like their current message on trade is not working with electorate, maybe

they will try to change that, become more aggressive or switch it up in another weight to gain more traction. i don't think this is the biggest news of the day. i think probably the jobs number on the stimulus package are likely to be bigger market movers but it is a very important ongoing issue. francine: does it get worse from here? or is this really only election rhetoric? andrew: i do think how the reaction to the phase one deal goes is important. because i think at the end of the day, you could say that this is limited to some individual companies, a very specific issue. but i think the perseverance of the phase one deal is a much kind of bigger issue. in some cases some of the purchases of agricultural material from china slow or be a little bit behind the schedule. we have obviously seen kind of

ongoing rhetoric from both sides , so given that the phase one deal was supposed to be the easy part, that both sides put all the issues that they previously agreed to in the phase one deal, if that is running into trouble, then i think it would pose, suggest kind of far less progress down the line. francine: what does it actually mean for the markets? what would you be buying right now? if you look at the way gold has been doing but is now correlating with may be things we have seen in equities, does sign it willit's a be stopped? andrew: the question is more about selling than buying. i think this is a good opportunity for investors to reduce some risk. we have been more optimistic in our allocation. we have recently lowered that exposure. and i think a big reason come in

tot -- reason, is part due the strong gains that we have and in part due to the fact that the coronavirus is spreading worse than our initial forecast expected. you have some specific risk events looming over the next several months, whether it is on trade, whether it is on the stimulus package, whether it is on other factors. i do think it is an environment where i think it is looking tougher for markets. i actually do think corporate credit looks relatively better in that context, given we actually think the supply of new corporate bonds is going to slow a lot over the next several months. that could lead to a relatively attractive supply and demand balance. i think overall, we are expecting a much choppier market over august and september. francine: because of coronavirus tensions or because people are positioned where they shouldn't be? andrew: i actually think it is a combination of both.

you have the removal of some of these positive catalysts that we have recently had, whether it is earnings season or the european recovery fund. it is the emergence of new risks, whether it is trade policy with china, the u.s. election moving closer, whether it's the fact that the second stimulus bill in the u.s. does appear to be running into some trouble. i think to your earlier point on positioning, i think it is just very interesting and i think this links a lot of teams together, as i think actually a lot of investors have all moved to very similar positioning, and the sense that they are overweight or favoring things that benefit from lower yields and lower real interest rates. that could be the nasdaq in the u.s., gold. both assets are behaving in very similar, you know, fashions. i think if one's view is that rates will continue to move lower, gold will be a great asset, the nasdaq will be a great thing to hold. i think it is important to

acknowledge that something like a golden might not be as much of a diversifier for a portfolio as people is expec -- people expect it to be. it is behaving more like the nasdaq. francine: andrew sheets from morgan stanley stays with us. we will talk about stimulus and jobs in the u.s. rates are part of the toolbox but they are no plans to use them yet. that is the view from the bank of england governor, andrew bailey. we will bring you our interview a bit later in the program. this is bloomberg. ♪

♪ economics, finance,

politics, this is "bloomberg surveillance." i'm francine lacqua here in london. let's get straight to the bloomberg business flash. >> for the time being, made more made more money delivering food than it did from transporting people. that failed to offset a steep decline in ridership. quarter sales fell 29%, ending a decade of growth for the company. t-mobile is officially number two in the u.s. mobile market. its merger with sprint has helped the company overtake at&t to reach over 98 million subscribers. it is expected to add up to 1.9 million customers per month this year -- customers this year. standard life aberdeen has lost its title as the uk's largest

asset management firm. that is your bloomberg business flash. francine? francine: congress is still struggling to agree on a new stimulus deal a week after the $600 a week payments expired. republicans are looking to president trump to take executive action, house speaker nancy pelosi slammed the offer from the administration is not going far enough. support --ays to applications for u.s. unemployment benefits unexpectedly fell last week to the lowest since march, but the july jobs report, out later today, could also show the effect of further lockdowns and uncertainty. still with us is andrew sheets from morgan stanley. andrew, how do you see this playing out? are we going to get some kind of stimulus package? if we don't get it at the end of this week, does it kind of died

down or could we get it a week or two weeks from now? andrew: well, look, i think a lot of the risks here are kind of negatively skewed. we don't know exactly where the negotiations stand. all indications are that agreement on any major part of the deal still remains elusive. these are talks that are still a long ways away from reaching an agreement. i think the indications that the administration might try to address this with executive actions, while it might sound initially attractive, i think is also a potential problem. because if that happens, you might remove some of the impetus to reach a larger deal. and in that case, you could really miss out on the types of stimulus that i think are in our economic base case and in a lot .f people's economic base case i think that is especially true for state and local government funding, which is a huge part of this story and a huge part of what happened in

2010, is that state and local governments employ a lot of people. they need more support from federal government. if that is not forthcoming, you could see a second round of layoffs that could really hold back the economy. francine: if you look at regions, the u.s. versus europe, how much does that put the u.s. economy on the back foot? and again, what does it mean for your strategy, andrew? andrew: i think this is a live situation, so we will know a lot more in 24 hours, both from the labor data and from the d.c. negotiations. so one has to be somewhat flexible here. these are risks that are skewed against the u.s. if you look at the u.s. versus europe, i think europe does have a better handle on the coronavirus. i think the european data has been recovering more strongly in many places than the u.s. data.

europe does not have this big, overhanging uncertainty of the u.s. election. i think that is generally relatively favorable for the european story. it is one of the reasons we have been constructive on italian bonds versus german bonds, been constructive on the euro. we see better risk-reward in european stocks. francine: what do you do with dollar? andrew: we think the dollar continues to weaken against the g10. that has been our view and continues to be our view. i think it is for a variety of reasons. i think the dollar remains relatively expensive. bigdollar has lost two reasons to own it. one was this idea that the u.s. economy was this very strongly outperforming economy and i think that has not been the case or is no longer the case to the same extent. and then, the u.s. market have disagreed yield advantage. .t was where investors could go

i think for both of these reasons, that has undercut some of the reasons to on the dollar. i think over the next 6-12 months, we still expected to weaken. francine: i think i ask you inry time, but is anything bubble -- a bubble right now? tech came out with stellar earnings. is there something that makes you nervous about where the market is headed? andrew: as we mentioned just before the commercial break, i think the real kind of challenge in the market is, i do think you have a number of different assets that are all very sensitive to interest rates, and especially kind of real interest rates, at a time when those interest rates are very low, at some of their lowest levels ever

recorded. in some cases, like with technology, there is still a strong fundamental story there for the time being. in some cases, central banks have articulated an extremely accommodative policy. i think anytime you have a lot of market sensitivity to something as its -- at its most expensive ever valuation, that should be naturally concerning. we kind ofnk as stepped outside a little bit, the view over the next week or months, i think that big picture, you have i think central banks that need to be somewhat careful in that they are not making investors too confident about owning a lot of exposure to something at kind of exceptionally expensive valuations. francine: would you buy vix right now? andrew: i wouldn't on the vix side. volatility is really fascinating. because actually, stock

volatility has remained stubbornly high. interest rate volatility is very attractive here. it is very low. i think it is interest rates that are the key here. if they stay where they are, then the markets are fine. if they move more, that can be more disruptive. those are the two most interesting markets for investors looking to own volatility exposure. francine: andrew sheets there, chief cross asset strategist at morgan stanley. the lira tumbles, hitting record lows. we are live from istanbul with the very latest. this is bloomberg. ♪

♪ is "bloomberg surveillance." i'm francine lacqua here in london. we have been talking a lot about the executive order that president trump put on tiktok, but also wechat. tiktok now saying that they will pursue all remedies available on that trump order. we will see whether there is an escalation of this, but certainly took the markets a bit by surprise, as it seems that the escalation between the u.s. and china is firmly back on the agenda. if the options market is any guide, the turkish lira is in for a rough ride.

traders bets for volatility for next month jumped by the most since january 19. the currency fell to a record low on thursday, despite intervention by state banks. joining us now for more is our reporter in istanbul. why is the lira weakening so much? >> down for the third day in a row, which took the turkish currency to a record low against the dollar. the depreciation is fueled by a massive credit boom. that is because historically, real interest rates [ indiscernible] -- in the local currency. francine: what are authorities doing to stop the slide? they have tried a couple of things. it has not worked. >> you are right. they have done a variety of things.

banks pretty much abandoned the market as of yesterday. that is kind of unexpected. you expect just the opposite. addition, restrictions on liver liquidity abroad is being -- lira liquidity abroad is being loosening. regulators seem to be leaving behind the policies that they've had for the last three years or so. so what does it mean for international investors, onur? >> first of all, it means it will be easier to access liver liquidity after that -- lira liquidity after they have been pretty much cut off from the market for a year now. the lira has been in a freefall

in the last few days. it usually takes stabilization of the lira for investors to erasing their positioning in turkish lira. francine: thank you so much for joining us. with the pretty incredible move that we are looking at in turkish lira. we will have plenty more turkey throughout the day. precious's biggest metals etf now holds more gold than the bank of japan. we will dig deeper into the gold story and europe's exchange traded fund market. this is bloomberg. ♪

economics, finance, politics. this is bloomberg surveillance. europe's the latest on

etf market. for the first and this year there were net flows on fixed funds and stock exchange in the euro area in july. they had a record with -- etf's hit a record, hitting $4.6 billion. etf have hit their -- have increased their holdings for the first time in 30 straight days. for more, dani burger. really hoovertf's and up assets. we had geopolitical tensions. people are turning to gold and they are doing and more through these exchange traded vehicles. etsf is street spider the most popular among the bunch and it has added 50% more in gold holdings in just the past

year. in the past week, the first three days, he data 2600 metric tons of gold, putting its holdings above a lot of central banks. it holds more than switzerland and the boj. if it continues on this trend, it could be in striking distance of the pboc. this week has also become the most popular etf in the world. that is in terms of inflows, taking in $21 billion worth of inflows, beating up vanguard's s&p 500 etf and ishares investment grade etf as well. certainly a lot of popularity here. francine: is there any danger with having investors fed on gold through etf's? dani: it would depend on who you ask. one provider says it is a helpful mechanism to be able to buy etf's, to be able to buy and sell on gold. providing pressure to the underlying market. but according to ken harvey, he

takes issue with the etf's, he calls it the etf financial is asian of gold. now he sees a correlation -- the zation of gold. we might see more peaks and troughs in the gold. he also said we might see in stocks because of etf's, you can see irrational exuberance within the gold market. much.ne: thank you so great reporting therefrom dani burger. joining us now is howie li. great to have you on the program today. when we go back to looking at etf's, when you look at what is exactly going on in gold etf's are we going to see a lot more of these flows? thee: yeah, as long as volatility and uncertainty is there, it is not going to be a surprise that investors will look to gold, whether it is in physical gold or even in

gold-mining stocks. there are opportunities to be had. that being said, what everyone is waiting for is to understand when is the volatility going to end and when are we going to see more certainty? if we look at historical events, gold has always been seen as a store of value and a flight to safety. francine: what does it mean for etf providers? have they been doing more gold etf's? how will he change the actual market? etfe: we don't expect the or the atc structures to change the gold market at all. bear in mind, etf's are doing what they are supposed to do, which is to track the underlying assets. many people are buying gold and other ways, whether it is through futures. etf's up it is another way to access them, whether you are an institutional or retail investor. francine: what can you tell us about how etf's have been affected in the volatility we saw in march and what that means for the markets in the future? did they play a kind of soothing

role, or did they exacerbate some of the moves? howie: we are definitely not of exacerbatedt they the moves. the etf's gave a lot more transparency to what is happening in the underlying markets. a lot of times when we look at additional pooled funds, we get a pricing for the value of those etf'sonce a day, where's are traded all the time throughout the day. what etf's have been able to do is give you a sense of what the underlying liquidity is in the market. i think act in march, there was a big spotlight shone into fixed incomes, and you had the bank of international settlement confirming that etf's did what they were meant to do and really this was just transparency and real-time data that was coming to the market. it was a fantastic place to be for investors to realize, understanding a little bit more.

francine: is europe ready for active etf's? howie: a great question. bear in mind, active etf's already exist in europe. one of the big question is whether nontransparent active etf's should be hitting the market. i am very much of the view that active or passive, they all have a role in the market here, and really, they should actually be allowed to trade on exchanges. at the end of the day, this is about access. if accessing an investment strategy, whether passive or active discretionary, it should be about ease of buying and selling of investments for investors, but also the transparency and the real-time pricing that is able to be provided. francine: talk to me a little bit about the trends that covid-19 has changed. we are talking about the fact that this is not really a , justcement or a crisis

accelerating trends that are already in the market. apps, technology, cybersecurity, things like that, and what role etf's can play into starting the trends and playing these trends. howie: it is a great observation, because what covid-19 has been able to do is shine a spotlight into some of these newer sectors that are coming into the forefront. before when we were speaking to investors or clients about cybersecurity, let's say four or five years ago, it was not as obvious. e-commerce was another thing that we had started talking to investors a lot about, what is happening in the e-commerce logistics sector. when the lockdown happened, people started to realize and also feel real-time how this was going to effectively change their lives, looking at some of these tech solutions, looking at how things were going to be

delivered as easily as possible. and of course health care solutions being at the forefront of this, we can talk to investors about health and how you can actually solve a lot of problems just remotely by essentially being able to consult patients through digital means, rather than clogging up the health care system through traditional kind of in-person meetings with doctors. francine: what about esg's? how has that changed things in the etf world? howie: i think that is definitely going to be an evolution. if you ask me this question esge or four years ago, was something that people did not consider too much. what we certainly see is that esg is going to be integrated into all types of investment strategies. it will kind of leave a lot of existing strategies that don't consider esg potentially not as

attractive or interesting to investors. as you can see, in some of the numbers that come through, more and more products are being d focusing on at least excluding investors or stocks that are not suitable for the portfolio full we are seeing investors have the appetite to allocate capital toward companies which are essentially scoring better or having a much more effective approach to esg. another component within esg investments, whether etf's or traditional funds, the engagement with these companies to get them to really behave better and think more importantly about corporate governance, etc., those are important developments that are here to stay. francine: a question that we often get from market participants is actually esg was a lot of unsustainability.

had you played -- how does that work in etf's? howie: as it relates to diversity of the portfolio, obviously a multi-asset approach is extremely important to have. whether you are holding just a .ollection of bonds or equities a lot of investors hold the etf's as traditional funds. the important thing here is always to have a diversified portfolio, but also more importantly, to make sure that we are keeping an eye on the future. yes she of course is looking forward as to whether -- esg is of course looking forward as to where capital is going to be allocated to esg. trying to identify tomorrow's sectors, rather than looking back to see how businesses or industries were developed in the past. though everything that we certainly believe in is to really look into the future and understand where the opportunities are.

that is really how we believe a lot of the etf's going forward should really construct a portfolio. francine: thank you so much for li, hefic reason, howie had of etf's -- head of etf's at lng. and we will bring our interview with the bank of england governor, andrew bailey, next. this is bloomberg. ♪

francine: you are watching "bloomberg surveillance." let's turn to esg and particularly the s, which has risen in prominence in the last few months. according to bloomberg and msci

data, companies with the highest esg rankings, in particular social, outshone the broader market. investors now want to see greater ethnic diversity. companies have pledged to do better on racial equality. what steps can they actually take? our guest joins us now. first of all, how much has that changed in the words of investors? esg used to be about climate change and sustainability. is it now more about diversity in the workforce? >> hi, francine. yes, we have seen the rise of pandemich the global and the black lives matter movement. the good news is that esg has outperformed for the second straight year, and done particularly well during the crisis. as the msci u.s.-europe, leaders have deepened their benchmark in

the first half of the year, and there outperformance is partially due by the exposure which tends to be about a mix of low volatility and high quality stocks. esg tending to invest agile,g more inclusive, -- to have investors navigate that. the second point i would like to make on performance, ore flow, n earlier segment, is that esg and etf's have seen inflows come and interestingly enough, in march and april the flows were mimicking goals, which sends a strong signal because there were only two asset classes to see if tf's inflows.

-- to see etf's inflows. francine: thank you for joining us. the bank of england says it won't tighten policy anytime soon despite the u.k. showing signs of a faster rebound than initially expected. governor andrew bailey showed negative rates were in the toolbox, but there were no plans to use them. we spoke after policymakers voted unanimously to keep the benchmark interest rate at a low 0.1%. bailey: forward guidance, potential negative rates -- those are the things we have ruled out. francine: so they have not been discussed? >> i have seen controls -- controls discussed in the european central bank. look atpreferred to quantitative easing and -- i would make the point that we

would go on looking at the toolbox. fixed forever, but it is not in our planning at the moment. francine:go into negative rates? gov. bailey: lots of central banks have gone in, come out, gone in, not yet come out. very helpful and fascinating conversations. i draw two points. one, as you get into this territory, there is much bigger interaction with the structure of your financial system, particularly with the structure of the banking system. has really sent retail deposit rates negative, and i can understand why. obviously it means the bigger share of retail deposits in the bank system funny, the more attenuates -- we have a quite share of retail funding in the banking system. that is one thing. the second thing, i would

conclude looking at the experiences of some of the central banks is, negative rates depends on what point of the cycle that you're using them at. that is interaction with the financial system as well. francine: would you see yourself using negative rates post covid, in the recovery phase, to help the economy then? gov. bailey: i don't know the answer because we are not facing that situation today. i think it is true that when you look at the experience of other appear to they operate more effectively in the recovery phase. i would, however, qualify that by saying i think there is a tricky identification issue at that point as to what extent it's negative rates that are driving, for instance, recovery of the banking system, the lifting of the release of provisions, and therefore the is aty to land because it

cyclical point. it is a rather tricky issue in that respect. the evidence is there, but it is a little hard to identify the causes. francine: in terms of sequence, it is not something you would rule out? it could happen at that phase? gov. bailey: definitely the message that we have today is they are in the box. there are central banks that are not in the box because their financial systems have different properties and they draw different conclusions. i can understand that. they are in the box. we are not considering using them at the moment. francine: that was bank of england governor andrew bailey speaking with me yesterday. more on the markets coming up shortly. this is bloomberg. ♪

economics, finance, politics. will tip biggest battery maker, c sales, showing resilience. spokeief executive exclusively to bloomberg. some --usly we saw

especially in the first half, especially in march, april. but we have seen demand coming from europe countries. we have not seen any slowdown in european demand, and we have some more production to boost in the second half of the year, so we do not have a complete tally yet, but i think it is very close to our -- originally that we have had. if there is an impact, it will be relatively small. >> any of the things that you are hearing that you just mentioned there, any of the things making you rethink your targets for production capacity for the battery business? i believe the initial one with 100 gigawatt hours is up to 120

by 2021. do you need to look at that and increase that, or does that still make sense to you? >> pretty much we speak to our friends to continue to invest in our capacity. about 1100 gigawatts capacity by the end of the year. 2022, we should have about 220 gigawatts. i think the penetration is relatively low, about 2% -- 2.6% last year. marketth the robust growth of 40% for the next five or six years, we would have to continue to invest in our that over 220cure gigawatts by 2022. we have close to

$125 billion, so there that is a lot of batteries to be made. >> your cap expanse, is it five-point trillion -- do you have a plan for what you expect to spend in the next year or the year after that? >> we will be spending about 3 billion this year. from was a slight increase what we had in the plan. and i think that ratio will continue in the years to come. >> the markets, taking a look at your stock, obviously you would know as well play your stock has gone up substantially. you entered either the top five --the top sixth orders largest company on the south korean exchange at this point. the partnership with tesla and the battery business is doing quite well. can you talk about the engagement now and how you look forward to fending off

competition? >> we should be able to signal inflection capacity for 125 gigawatts, which is equivalent to about 400,000 eb's by the end of this year, so i think we will meet the demands of various customers, including the customers you just mentioned. enough.enough, fair what is your assumption, then come on how quickly you think the battery business overall will grow every year, and do you expect as a company that your sales will exceed that industry growth? about $13 we expect trillion from our battery business here. $30 trillionbout by 2025. variable market

growth. our business will grow at the speed of the market. our goal is to maintain or strengthen our market position in many years to come, so we hope to grow faster than the market. lg chief that was the executive. with the stimulus, it is not going to plan, but we will see if there is an 11th hour agreement. and of course there is u.s. jobs data as well. bloomberg surveillance continues in the next hour. this is bloomberg. ♪

francine: president donald trump signs executive orders blocking u.s. residents from doing business with tiktok and wechat. shares in wechat are on a 10-cent plummet.

no deal. the white house and democrats fail to agree on stimulus. president trump's chief of staff says the differences are still significant. and it's jobs day. july jobs figures are out later as the return of lockdowns and uncertainty weigh on the u.s. labor market. good morning and welcome to "bloomberg surveillance." i'm francine lacqua in london, tom keene is in new york. tom, it is really d-day because it is friday and we were hoping to have a bit more of an agreement on stimulus package, and now it seems we could not get anything by the end of the week, and a lot of the benefits, a lot of americans had come have expired. of: it is d-day in the sense depression. ringing is reinhard and reinhardt in foreign affairs magazine, calling it the pandemic depression. we will learn a