says businesses, including theaters, beauty parlors, and casinos, can reopen from tomorrow. backlash. palestinian authorities push back against the israeli agreement with the uae to normalize relations. plus, hong kong tycoon jimmy lai tells bloomberg he was arrested on "trumped-up charges." we'll hear from our interview with the next digital owner shortly. good morning and welcome to "bloomberg surveillance." happy i'm francine lacqua in friday. london. lisa abramovitz stepping in for tom keene in new york. it has been an eventful week. theill get covid-19 and news out of hong kong. lisa: it should be slow. we are in august. everyone should be away and people are away, but where are you going to go if you are going to go on vacation? my focus is the economy. there is an improvement, but it is still pretty bad. we are getting information on how terrible the employment picture is in the european

region. in the u.s., the senate has gone on vacation. it cannot get over this? -- it cannot francine: get over this. let's get to bloomberg first word news in new york city with ritika gupta. ritika: good morning, francine, lisa. president trump hasn't delivered the deal of the century he promised in the middle east. he can claim a foreign-policy victory after israel and the united arab emirates agreed to normalizing relations. even joe biden called it a historic step. with joe trump clashed biden over masks. the democratic presidential candidate said every governor should require masks for the next three months. he said that would save more than 40,000 lives. biden'st trump rejected approach, saying, "we want to have a certain freedom. that is what we are about."

vacationers will be unable to get back to work when they come back from their holidays. they must be quarantined for 14 days. china, the economy continued to bounce back last month. industrial growth remained steady, rising 4.8% from a year earlier. still, output and retail sales haven't reached last year's level. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i'm ritikauntries, gupta. this is bloomberg. lisa? francine? francine: thank you so much. this is what the markets are looking at. in europe there is a slump and this is largely due to travel and leisure stocks because of the quarantine from the u.k. we are seeing pressure on those. you can see the european stocks are down 1.8%. we also saw euro area gdp falling 12%, written much confirmed the earlier estimates.

-- pretty much confirming the earlier estimates. the dollar drifting. i'm also looking at euro remaining pretty much on track. the old edging lower following two days of gains. oil headed for its second weekly advance. lisa: there is a turn to the markets, and you are seeing that -- there is a churn to the market, and you're seeing that. interesting to see a bid into treasuries today after a pretty failed auction yesterday of 30 year treasuries, raising concerns that there would be investor pushback to the unprecedented supply of treasuries. meanwhile, the selloff in gilts, u.k. government debt, has continued. and there is a haven play here you are seeing into the yen strengthening versus the dollar. francine: let's get more on the markets, on some of the trends and dynamics out there was joyce chang.

she is the j.p.morgan chair of global research. thank you for joining us. joyce: great to be with you. francine: if you look at some of the stress points out there, it is stimulus. it is what the market is looking at with the u.s. elections. where do you see the biggest challenge of a correction in the markets? joyce: i think there is disappointment that congress went on recess without coming up with an agreement on fiscal stimulus. executive orders we think provide only about 100 billion dollars of stimulus versus the trillionion to 1.5 that was expected. the focus is now turning to the u.s. elections. you have the democratic national convention that will be starting next week. you have all eyes on the presidential debates in september. this weekend, i do think the focus will remain on u.s.-china tensions because there is supposed to be a check in between the u.s. and china on the status of the phase 1 agreement.

all of these are turning into election issues as we head into september. francine: does the market think that president trump is a two-term president? if we have a biden administration charge, what does that mean for china and tech stocks? where will we see the biggest shifts? joyce: i think the market is now asking whether there could be a democratic sweep. there previously had been questions about the presidency, now there are even questions about the senate. the markets will focus on that. mean higher tariffs, but will the democrats mean higher taxes? that kind of debate will come out in the coming year. the impact of rolling back some of the tax cuts, we have tried to weigh that against what the cost would be of higher tariffs as well to the marketplace. we come out thinking that you have a number of forces that

could be in play if biden is elected. tax cuts, but the he also probably would put in infrastructure spending, minimum wage increases, things that actually could be positive for the equity markets as well, so it is a little bit early to say, that i think you will see these issues play out. in the coming weeks as we turn toward what will the first is initial debates look like, will we see that there is still a recovery that remains in place in the u.s. with three openings and schools, is there some normalcy that is returning. that is going to fuel a lot of the discussion questions in the debate. result,fore we get to a we have to have an election and a result that does emerge perhaps days and weeks after the election. a number of analysts are saying the cards be not in after disputes are already lining up with president talking about, as a potential for

disruptions in mail-in ballot think. how concerned are you about no result for a long period of time and the potential turmoil in markets that result? joyce: you could have up to 70% of the votes coming in by mail, and taking a look at new york city where i live come a lot of these results did not get put on the june primaries until just days ago. you may not have election results on the first day. what everybody is looking at right now is, what are the margins in the polls, which show biden with a sizable lead so far. i do think that you will look at elections that have delays to them because the in-person voting is going to be hampered by covid-19. so we look at the primaries as an example of how long it might take to get the full results reported. soa: joyce chang, thank you much for being with us. joyce chang of j.p. morgan sticking with us. i find it so fascinating, this

idea that you could get a result, and that would be the best outcome. it is some certainty of what we are going to get by way of leadership in the united states. francine: something that we will see playing out in the markets. lisa: and a lot of option trading coming out in the result. coming up in the next hour, ron temple, head of u.s. equity managing director. that is at 6:00 a.m. in new york, 11:00 a.m. in london. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

lisa and francine from london and new york. let's get back to joyce chang of j.p.morgan. we are talking about the u.s., how you model a biden administration versus the trump administration that we have currently. we talked about trade with china. where do you see the biggest economic shift with covid-19? we had data out of europe as well. is europe on a better footing because of the recovery fund, or does it depend on what covid-19 brings come winter? joyce: europe, it was never as bad as it was in the united states. between all of the subsidies and people -- keeping people on longer, you did not have the unemployment depth that you have in the united states. but the european recovery fund is significant because it allows large-scale debt issuance from the e.u. budget and that means it will be possible to do the transfers from north to south. europe has recognize they need

the fiscal space to sustain the physical market. they also -- i also think that the ecb will do more asset purchases as well. on the number of metrics, european recovery, in some ways it just is further along than the u.s., but the u.s. has been surprising on the unemployment numbers. i mean, they have not been as bad as they were initially forecast a number of months ago. francine: how do you look at gold at the moment? what does gold depend on? joyce: i think gold makes sense given the amount of uncertainty that lies ahead. we think gold should be used with other hedging tools as well . japanese yen in particular. that stands out. but gold still provides a hedge on the geopolitical risks that we have been talking about. we talked a bit about u.s.-china, and some of the uncertainty that is going to lie ahead there. i think that it also -- if you

think that inflation could be an issue over the longer-term, it also provides a hedge. i would not rule it out right now. what we have been recommending is that you look at other hedges along with gold -- so gold is not used on carry trades. there is no buyback element during periods of market stress. but still, given the range of scenarios that we are talking about on business cycle weakness, on a second wave virus, higher inflation, in a few years' time or geopolitical tensions, we still think that owning funding currencies as well as gold makes sense. lisa: as you talk, there are a lot of risks out there, and yet people dismiss all of these risks and say the fed is printing money, it is going to be ok, liquidity will continue, let's keep buying risks. under these risks start to matter? joyce: it is hard to not look at the face of -- the pace of the

not says and say -- and it is jaw-dropping. we estimate balance sheets that are going to be about 67% of gdp next year, and we think that is still going to continue into 2021. so the combination of increasing geforce central bank bank -- balance sheets, not just the fed, by $6 trillion, the markets are not going to bet against that. that is really what has been staining the markets, this extraordinary policy support that has been coming from central banks, not just from the fed but across the board, from the developed countries and from a number of emerging markets countries as well. what is going to stop that? we are starting to see the first signs of just the focus of the cost of this on the fiscal side and on the debt burdens. what is the congress concluding without getting the fiscal stimulus through? that kind of debate will play

out through the elections as the through 2021.e go for the market to really turn, you would have to see more harsh statements coming out. if anything, we are learning -- looking at the average inflation targeting in the reviews that they are doing with the results out in september. lisa: what you're saying is making complete sense, but here is what i am confused by. people are talking about fiscal support and why bet against it, that there is no deal in washington and the senate is on vacation until next month, as well as congress. they cannot come together for a , a sign of coming to some sort of consensus on how to provide an additional stimulus. why is this not more concerning for markets? joyce: the markets are looking at this and saying able get folded into the september funding agreement because they government funding runs out at the end of september. there are only a few weeks left for you head into the election

cycle, and i think what markets are looking at is that trump will do what he has done, using executive orders. those executive orders do fall short. we think the executive orders that were signed provide only $100 billion or $150 billion of the one point trillion dollars that was needed in the marketplace. -- of the $1t - trillion was needed in the market place. as far as having the real discussion that will take place. lisa: they will figure it out one way or another. hobble along until some new policy comes out. joyce chang of j.p.morgan, you're sticking with us. coming up in the next hour, we are going to get word from liz ann sonders from charles schwab, 7:00 a.m. in new york, 12:00 p.m. in london. from new york and london, this

is bloomberg. ♪

francine: this is "bloomberg surveillance." alisa and francine from london and new york. we are back with joyce chang. we will talk china in a second, but what is your take on the u.k. it seems like it is one of the most complicated central banks. they have done a lot hand-in-hand with the government. if the -- is there value for

u.k. assets right now? joyce: we still have a u.k. facing one of the biggest contractions due to covid-19, and we still have a more bearish view on the currency as well. so i don't think you are going to see worst-case scenarios play out with respect to brexit. we still only have a 35% chance of really sort of it falling apart, but i think that is one that is more of a muddle through right now, and where there have been concerns about covid-19 and what the impact will be and whether that has actually come under control. that is one where we still have a note of caution right now. see it goingyou into negative rates? one of the biggest debates in the last two to three years -- i know it depends on cycles and what kind of economy you have, but can any good come out of negative rates? joyce: i don't see much good that will come out of negative rates, but you're so close to negative rates right now. if we took at the -- if we took

a look at the development of government debt at large, 83% of stock now yields 50 basis points or less in our global government bond index. that is $33 trillion of developed market debt. i take a look at the term premia for u.s. treasuries, near historic lows. yields are now 200 basis points lower than they were on average in the 2012-2014 period. the negative rates, i don't see much good that comes out of that. that basically being near zero rates, that is the real dilemma that investors are facing right now, just taking a look at u.s. aggregate bond index. it yields only slightly above 1%, and it is set to produce under 1% return now and over the coming decade. that has really been the whole debate that we have been hearing -- are we going to have to see a 60/40 equity bond allocation that has been this classical allocation for

investors for the last 45 years, given how low yields are? lisa: do you think that is something people will have to do, go into gold and alternatives other than bonds? joyce: you will have something more like 80/20, meaning that hiing equities, owning more fixed income, and i would not suspect -- we see the debate playing out right now, but rather than saying this is a one-year phenomenon, this is a paradigm shift as you look at the next decade. with so much low yield, no yield, or negative yield assets. we have been talking about 80/20, we have been looking at when you will you have something that is more hybrid fixed income? that means there will be some emerging market debt, are you owning more high-yield, as well classesof the asset reads that can offer higher returns over time. lisa: when you talk about

emerging markets, some people say it is time to buy china because right now they are contemplating buying government bonds, basically engaging in quantitative easing in a way that they have not in the past. do you think that will be a policy measure of the people's bank of china going forward? joyce: i think there is a case for buying chinese bonds for a couple of reasons. they are going into the mainstream indexes. apple plus started with bloomberg last year, and j.p.morgan has it going into the index as well. even with the noise that is going on, they are part of the instrument x. -- of the index. there is a case whether it goes toward zero yield. the increase in china's debt has been enormous this year. we think 25% to 30% increase in debt over the year, and they will have to bring the yield lower as the debt increases. we see more easing and room for

yields to come down, and a real debate on whether china itself will have to go to zero interest rate like the rest of the world. there is a structural case for owning china particularly as it goes to the mainstream indexes. francine: a final short question on where you see the biggest borrowing in the economy coming from. is it employment? is it bankruptcy is? joyce: the bankruptcies could be held at bay. the fed just put out second-quarter data and we did not see a big uptick in bankruptcies because you had all of these things that were delayed. closed, and you have not had the filings. i'm not so sure bankruptcies will play out as rapidly, particularly if these kinds of programs and policy support will continue into 2021. where i think you still have the sort of known unknowns is is there a second wave, how long

does it take for a vaccine to be produced that can be used on a wide scale -- on a widespread scale. you have this incomplete recovery, but how big is that gap? we are looking at the end of 2021 that you are still 3.5% to 4% below where you were pre-pandemic. i think it is going back to the health of the science of the pandemic and how long it carries on before you can get back to something that is more normal. francine: joyce, thank you so much. j.p.morgan chair global research. coming up, we will do a big data check and speak china. ♪

>> this is "bloomberg surveillance." i'm ritika gupta and let's get his word news. in the coming weeks, president trump plans a white house signing ceremony to celebrate

his biggest foreign policy achievement. israel in the united arab arm there it -- the united arab emirate came to an agreement. .hey promised to hold off the uae will become only the third arab country to have diplomatic ties with israel. the battle vaccine, against the coronavirus is likely to be a challenge for years to come according to pharmaceutical and public health byerts at an event hosted bloomberg. they say a vaccine will provide some measure of protection but expect the virus to flareup from time to time like the flu. authoritiessays made the determined -- determination before allowing yield to vital information. the government is threatening to

sue yale unless it changes it process immediately. several accused china of arresting him on trumped up charges. on an interview, he pushed back against that legislation. he denies that he backs independents. global news, 24 hours a day, on air and on quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta and this is bloomberg. lisa: let's continue with that story. an activist warned investors not to bind to next digital because the fundamentals don't justify presents of almost 400 -- 400%. he spoke with bloombergtv's stephen engle. >> most people bought the share

to [inaudible] knew you jump back because the value is not there. by buyingt to support up the stock. people, the first semi came out from the police station, i said don't buy because you lose money. ,ike they but our newspaper 1:00 in the morning, they lined up at the newspaper stand to wait for the publication of this. hong kong people support. -- support for the newspaper in at theion of the anger rest of myself. >> the rally seems to be

short-term. did you consider the last couple days -- i know you are preoccupied but possibly is suing more shares to -- possibly issuing more shares to take care --this and do you people suggest that issue new shares. most honest is the way to do it. i think cheating is not our business. >> what is the future of apple daily? >> we will proceed. >> you serve a role in this community. you have been critical of the government, of china. an international financial center, many people say you need dissenting media, you need a platform for these kinds of voices to be heard. since theacticing

national security law is monitoring what you're saying on your neck digital platform? >> we can do that because national security law is very weighted in general. to tow the once line. there is a long line and we cannot change when we have been doing. we don't think what we have been doing is wrong. we are just practicing freedom of speech and that's it. letting the community here have a voice of their own. that is the crime? we can't do anything else. todo you have plans at all divest any of your holdings? like i said it, at least for march of 2019 is the latest data we have on your chair holdings on the bloomberg terminal. 71% and changed. do you have any contingency

plans to divest boards although shares? >> now. i don't of s my holding -- i don't divest my holding. we have our presence in taiwan. we are the biggest newspaper in taiwan. the paper and online. future -- what is the contingency plan? say if you are convicted, we have to talk about the prospect. >> yes. if i'm convicted, business will go on without me. my laia passionate jim speaking with bloomberg. interesting to see how these newspaper shares surged as the

founder said don't it it, you're going to lose money. joining us now is stephen engle, who is celebrating his birthday today. terrific interview, stephen. i want to start with the idea that we got dated today showing that hong kong is putting a 2020 gdp for best -- forecast between negative eight and negative six which is worse than expected. how much is this as a direct result from beijing and how much is this from the pandemic? wellen: a lot of this was before the pandemic started. we had the u.s./china trade war. there was already limited dampening effect -- a limited dampening effect there. he had a more than a year long protest that turned violent. chinese were by far the biggest theyapita spending,

stop shopping in the luxury shop, stop buying properties to a degree, and then we had the coronavirus outbreak, which has been a triple whammy to this hong kong economy. unemployment is surging quite fast on the retail sales are way down, and boards are down. -- exports are down. this is an economy suffering badly and there are you arrows in the quiver for the government -- to stimulated. there are 14 day period for people coming in to quarantine. the national security law added another dampening act to sentiment. hong kong is an international finance center and finances built on confidence. hong kong is lacking in confidence. did they say about the future of hong kong as an international finance center? stephen: he says if the rule of

law cannot be preserved, the data foronal finance hong kong will be gone. it is one of the biggest concerns and why he said he was surprised he was arrested under the national security law so soon. keep in mind, this was june 30, late on the ninth, before the july 1 anniversary. that was under a month and i have ago. he thought it would be longer. he wasn't under any illusions that he wouldn't come under the crosshairs of trying to but he thought it would be longer because of the sentiment in the international business community. there are many in the business community that welcome the firmer hand of beijing as they were tired of the unrest, vandalism, the damaging act on business, like i talked about. but then, there are others that say, what is the future of hong kong?

are the bankers and families going to pack up and get out of here? are the young people going to at their passport and get out of town as well? there is lots of uncertainty so surprised that they did this so soon. >> thank you very much. we will have plenty more on the hong kong. bloomberg takes a look at how beijing's national security law is changing business in the landscape in part series to of hong kong on edge two. by stephen engle. this is bird. ♪ -- this is bloomberg. ♪

pres. trump: this is a truly historic moment. /jordance the israel peace treaty was signed more than 25 years ago has so much agresta been made toward us in the middle east. >> president trump there touting the deal between israel and the united arab and there its to -- united arab emirates to normalize relations. our guest -- our next guest is joining us. think you for joining us. when you look at the region, how much is changing for investors? >> i think there are so many moving parts. the biggest factor continues to be which economies are going to

be able to come out of this crisis and this pandemic with resilient macro and political frameworks. we've seen across post the gcc others, quite a significant shift in terms of political allegiances. those are going to interact with the macro economic outlook outlk to assess which of these companies are going to come out of this. >> do you have any insight? where are you looking at as potential beacons of hope? lupin: i think countries that have been able to withstand this shock are the more high income, high net they've are in the region, so qatar, uae, to some extent saudi arabia. i think what we will be looking at is whether they will be able to adjust to lower the prices.

it is a lot to fiscal consolidation that needs to be done in the likes of saudi and united arab emirates, and it is likely we are going to see progress towards that, once the imminent shock of the pandemic -- we should see some physical could -- fiscal consolidation. lisa: there is some loop going heavyd, knots with levy nations. the bondholders don't even know who to negotiate with. huge principal write-downs that have not been seen in recent history for the emerging market sovereign complex, how do you price that in given the fact that a lot of alts shrugged off geopolitical risk and said central banks printing money? risk on. lupin: i think thinking about

inge risks as we are seeing emerging-market sovereigns is going to be a key factor of inking about credit risk. you would have seen essentially, in the em high-yield space, you had growth spreads which have not compressed compared to emerging-market investment grade space. essentially, the fact that spread compression has not occurred, signals to us there is a huge amount of uncertainty related to issues you raised. what the markets, however, is pricing in is reasonable support from the international community, whether it be through imf programs or larger, more broadly coordinated through the development banks. lisa: how sufficient have some of those backstabbed in, given the fact that or example the world bank and imf postponed some of the interest payments or suspended them for some of these

nations, but there has not been big talk about principal write-downs as of yet? lupin: i think there could be a lot more that could have been done from the ifi's point of view. in particular, we would have wanted to see in fdr increase, some of those who work for imf did, in the aftermath of 2008 crisis. that is a form of global qb for all countries that enable them to have greater liquidity support. necessarily in the camp that you would need to have sharp write-downs, but the bulk of the market but the pandemic is a liquidity shock because they lost tourism revenue, other revenue, or most of 2020 and past 2021, they are finding it difficult to generate dollars

where in the usual year they would be able to settle their easy.elatively the liquidity shock for most countries, rather than another stock which would require greater write down. lisa: we will turn our view to china. lupin is sticking with us. the ambassador to the u.s. at new york, 6:00 p.m. in london. coming up, a look at the china flash u.s. relationship coming up -- china/u.s. relationship. this is bloomberg. ♪

this is "bloomberg francinence." lisa and back from london and new york. if you look at some of the other things that you want to keep an eye on, i don't know what to do with turkey. the lira has gone dry over the last couple weeks. what stabilizes turkey for investors right now? lupin: i think the central bank liquidityo reducing

in the system means you will see some stability going forward, so there has been a signal they are -- and they have done so much more than the market probably warrants it. however, if you look at the path and see it as a stable, the central bank is moving along the same ways as it has done in 2018. tightening liquidity conditions on shore and eventually moving affectivejing's interest rates, and hopefully they won't have the hike like they did in 2018. the risk here is every crisis that turkey faces results in ad hoc measures and it's a little too late in terms of tightening measures, meaning every stopping

point [inaudible] francine: moving on, because we want to get through countries with you. when you look at china, the recovery is led by industrial growth, but retail sales is undercutting some of the rebound. what kind of recovery do you see in china, and how do investors play that country? lupin: i think the recovery is going to be a bit more haphazard and you would have expected from a normal recession, because this is not a normal recession. the fact we are seeing in terms of momentum from retail versus manufacturing side of the economy is more or less what you would expect given services and retail is going to be a bit more smooth. however, the important thing to note is the economic recovery is underway, and it is more or less in line with our expectations. this should help the rest of the

asian economy, band recover as well. lisa: this is interesting to hear you say because some people say even china is recovering, it will not get back to where it was in prior years, at least not recently. this put pressure on nations in the region, especially as supply chains and start shifting. what gives you confidence there will be support in the area, given the trade tensions and economic pressure still remains from the pandemic? time: i think it will take for the world economy to recover from the pandemic. we are not forecasting a v-shaped recovery. shockou look at the gdp the world have experienced, it will take some time in terms of years to combat the precrisis level -- come back to the precrisis level. what i think will happen is recovery led by the recovery market will be a key factory in

driving emerging-market. the bulk of emerging markets that export to developing markets will be seeing that improvement in economic momentum. given the of that, pace of the virus in certain emerging markets like brazil and is likely risk in em to be a bit of a break to any economic rebound led by the trade cycle. lisa: meanwhile, we have tensions picking up between the u.s. and china. there was a meeting to assess the phase one trade deal, not necessarily negotiating phase two. and this be tradable? is this a tradable event or something to gauge her future measures? think -- gauge for future measures? lupin: i think it is something to watch for sure in terms of the way other areas may pan out. the media trade impact might be

more in terms of sentiment and in terms of currencies of the dollar, but there are much lighter -- much larger factors on both the dollar and general risk sentiment. francine: thank you so much for joining us. , pimco, global head of em sovereign edit. we speak with -- in the meantime, let's have a look at what your data is doing. the data is focused on a couple things. steppingk. government up some of these quarantine measures. that is having an impact on travel shares, which is why european stocks are down 5%. it treasury yields are declining after five days and dollar yield seems to be interesting. gold is always a good gauge.

welcome to 2020, we look at gold every half-hour. we also had data out of the euro area. euro currently remaining on track. i think it is the eighth straight week of gains versus the dollar. i don't know whether that is a dollar story or euro story, or maybe both. the trend seems to have sorted when we saw the em recovery front. on the virus front, we heard a joe biden, that u.s. governors should require masks for the next few months. this is bloomberg. ♪

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transfer your service online in a few easy steps. now that's simple, easy, awesome. transfer your service in minutes, making moving with xfinity a breeze. visit xfinity.com/moving today. 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. francine: backlash. alice tinian pushback abundance

-- against the is really agreement and normalized relations. businesses,n says including theaters, beauty bowlers, and theater -- beauty parlors, and movie gators can open. -- movie theaters can open. interview with digital shortly. lisa abramowicz is stepping in for tom keene in new york. a great oure had talking about emerging markets, and we look over to talking about not only possible bankruptcies but politics of the u.s.. lisa: what is interesting to me is how many risk factors there are. we have election uncertainty, trade talks kicking off over the weekend, and of course the pandemic. markets are looking at the wave of liquidity dominating the narrative. inin