>> good morning from bloomberg's middle east headquarters in dubai. i'm manus cranny. these are your top stories. it is a mixed monday for stocks as investors mull delayed trade talks between beijing and washington. china equities paying no attention jumping after a hefty

injection of liquidity from the pboc. house democrats will cut short their summer recess to work on legislation and on shoring up the u.s. postal service. this after it warned states of mailing ballot delays are ahead of november. and japan suffers its biggest economic slump on record. this comes after a state of emergency and lockdowns hammered consumer spending, production, and exports. we have just gone 6:00 a.m. in london. it is 9:00 a.m. in dubai. it is always an inauspicious start when i have the wrong but i from the very start am laser focused on you. -- what if the bond market started trading like a v?

the ratchet in the bond yield --what would that do? are we under assuming that narrative? fed all come back to the doing more. good morning. it is alwaysy, monday and things happen with the cameras. i like that you brought up scott minor. atsees the 10 year yield cap 1% and he says it will go lower to 0.5%. is this record issuance we are seeing a enough to derail the rally? i think the market is pricing in d.c. getsgets its -- its act together in terms of stimulus. a lot of politics happening and not just in the united states. a lot of governments are grappling with the question of should they inject more stimulus?

many are starting to dry up. let us take a look at some of the markets. mixed session across asia regionally. -- it has to do with the pboc in check in cash. u.s. 10 year yield just under 0.7% which was what we saw at the end of last week. the biggest week that climbed in more than two months. it is one of our biggest stories this morning, the six month review of the u.s.-china trade deal that was due to happen over the weekend was called off. -- thesident has president has said the u.s. has been unfairly traded that treated by beijing. esty dwek,now is

head of global macro strategy at natixis management. risk assets already priced in a prolonged stalemate between beijing and washington? leave so, where does that in terms of catalyst for direction for these markets? esty: good morning. what we have seen is a ontinction between the tough china stance and actions that can really hurt the u.s. recovery. and maybe there is a question mark about when they will have the six-month review. all of the negative headlines on china, the one that has not been so much is president trump saying the chinese are doing their part. they be this is a way of not having to go back on trade deals or go back to tariffs. we can still have a tough on

china stance in the headlines but not risk the imposing tariffs that could really hurt this nascent u.s. recovery. , great to have you with us. looking through your language it is one of caution, don't be too aggressive. is it right to assume that you have a little bit of hesitancy? and what are the consequences of that caution? talk me through the cautious move. esty: there are a number of obstacles to the next few months including if you look at risk assets until the end of the year. we are slightly overweight so we are still optimistic but you had a pretty big run-up. you have the u.s. china situation. you will have a very contentious u.s. election. you still have -- we had at

least through july some momentum in some of the economic moves. it looks to be getting better again but you have to see how many quarantines -- mini quarantines or different steps are impacting the recoveries. this, weghout all of have not yet seen the breadth of recovery in some of the markets. the tech leadership has been great and i'm not questioning that. more cyclicals or value centers perform in this rally as well. and with all of these obstacles, it is a function of not chasing the rally just to chase it but to take our time. >> i like how you brought up the ..s. election and covid there are catalysts coming from

all different angles -- a potential vaccine --as an investor, how do you rank these? esty: that is a good question. we talked a lot about the second wave or not or what will happen in the fall and in the u.s. it looked like it was the first wave making its way across the country. we have seen mostly that you are not going to have renewed mass lockdown. that was one of the biggest fears that if we do not have any more than you know you can keep moving forward. the momentum could ebb and flow a little bit in the economic recovery but as long is it continues on its way, the risk assets should be supported. -- from myes perspective it is more a question of bringing volatility and then a big selloff. it is too early to tell what

kind of results we are going to have but we are going to have these headlines. there is a risk of a contested results. we are seeing some of this stress around the u.s. postal service as well. u.s.-chinaually rank relations as a higher risk than a globalions from economy and corporate earnings and keeping this recovery going issue. that is where we are seeing we miss in the sentiment. china, u.s. elections. s: we will dig into that narrative in just a moment. look at what warren buffett and in histching'is

filings. the narrative is very defensive. a lot of people are surprised by his commitment to gold. is this the personification of dissent? more gold for you or cash? is that what goes through your psyche? gold is thehink only defensive position. have held some in our portfolios for a number of months and we continue to hold it. real yields remain low and we see the bottom of it on the real yield side and i think that is what has caused some of the move in gold. you don't have that loss of income or it does not count as much as it usually had. whether it is about disinflationary moves or

inflation coming back. holding some gold in the medium-term makes sense to me. i don't think it needs to be the biggest position. and weu talk to people talk to our clients about what could be the winners and losers of this crisis, a lot of those businesses remain top of mind. thes not surprising that defensive positions are staying on the minds of investors. natixissty dwek from investment management on her calls on caution. nancy pelosi has recalled members of the house earlier than scheduled to work on urgent legislation to address the postal service crisis. alarm bells went off in recent days after the postal service warned 46 states that it may not

be able to deliver their ballots on time for the november election. president donald trump has said repeatedly without evidence that voting by mail is subject to widespread fraud. joining us now --. what exactly did pelosi say? put out a letter to democratic colleagues and in it she said -- we are coming back early in the middle of the conventions to take up legislation that essentially would block the post office from making widespread changes like they are making right now. obviously a bit of a moon shot at getting something done because donald trump would have to sign that. or you need to thirds of the house -- or you need two thirds of the house for the veto.

conventions are virtual but the degree to which there is unrest about the current state of the postal service cannot be overstated. what people may not realize is that the post office is literally specified in the u.s. constitution as an essential function of the u.s. government. running a postal service is a foundational thing for the country and the idea that it is not going to work for stewarding the u.s. election for mail-in ballots cast from everyone from the military to the president is unthinkable to a lot of lawmakers. >> it certainly is. we will be hearing from you through this week. we also have the dnc this week. isan's economic recovery expected to be slow following a record contraction in the second quarter. we have a chart that measures

that. this is bloomberg. ♪

manus: it is "daybreak: europe." i m&s cranny in dubai. sanofi is purchasing biopharma in the united states of america paying $100 a share. they are paying up and looking large. this is a san francisco-based company. it is the pipeline. the autoimmune disease pipeline they are paying paying up 10% on friday's close. to japan, the economy did not

read well. a record in the last quarter in terms of the shrinkage of the economy. this as shoppers stayed at home. .actories were idle the consequences came through in the numbers. our market reporter, juliette saly has been looking at the numbers. everyone is expecting a bad number but 1955 was the last time we saw something as bad as this. take us through it. >> even when you look at what happened during the global financial crisis on japan's economy, it was a contraction of 18%. a massivee are seeing drop of 28%. it has had huge ramifications. let us have a look at what it looks like on the charge. we are -- we think we are used to seeing these huge drops coming through but this chart shows the huge impact.

it was widespread. business investment, private consumption, housing all falling. bloomberg intelligence is expecting a rebound to growth if there are no more lockdowns because that would hopefully mean people would get out there spending. do investors mind? they do today because we have seen weakness coming through in the japanese equity market. a lot of momentum going into japanese docs particularly on the topix index. nikkei 225k at the index over the course of the year it has broken out of its range it has been placed in since june. barring the weakness you see coming through in today's action, we could see the nikkei 225 try to erase some of its losses for 2020. it is down about 2% for the year. manus: ok, thank you very much.

in singapore, juliette saly breaking down the data and the move on the equity market. esty dwek is with us from natixis investment management. think withent do you the topics being the best performer this month and nikkei being just below breaking even, where does this fit in the asset allocation matrix with that kind of data and the policy response in play? esty: the data is backward looking. we knew the second quarter was going to be quite bad because the first quarter had not been as bad as a lot of other regions in japan. there is still potential for japanese equities to continue to move forward. we have an overweight japanese equities. we have overweight to european equities. thinking a little bit of this catch up can continue.

over the summer. europe should be able to pick up again. mostly neutral on the u.s. for the shorter-term basis. medium to long-term, i still think the u.s. is going to do very well. but in the shorter term, a little bit of catch-up potential in japan and europe. annmarie: you are also looking into emerging-market debt and less exposure to latin america. is that in asia? where exactly, esty? across emerging markets, we have a preference for corporate where you have more exposure to asia and less exposure to latin america generally across the benchmark indices. we don't have specific country preferences but we do think asia has managed the crisis better. number of countries

including china where you can get a nice pick up and carry in the debt and you are staying in hard currency so you are limiting the currency volatility. that is one area where we think there is still quite a bit of potential for compression. you see a lot of compression in developed markets including u.s. and europe grade. there is more potential there as well. we are seeing some interesting currency moves. aussie kiwi trading on the differential. australia versus kiwi. as you look forward, what is going to drive the currency narrative towards the end of the year? is it the perspective of who goes negative first? in the back quarter of 2021? esty: oh, at the moment we are

not looking as much at who might go negative. interestingly, all of the central banks that had been in negative rates before the crisis have not actually gone further negative. that should put something of a question mark on how committed or how successful a lot of the central bankers think these policies have been or how far you can push it. or have been question marks about the u.k. and that has pushed -- pulled back a little bit. and the u.s. we don't think the u.s. will go into negative rates. there will be a question of risk appetites in general. we will see if the euro will continue to implement efforts. finally seeing some kwok rate integration across europe. we are going to

have to leave it there. thank you for joining us this morning. esty dwek. coming up, the route in long-term -- we will discuss this next. this is bloomberg. ♪

annmarie: this is "bloomberg daybreak: europe." good morning, manus. manus: let us get the day and the week set up because it is all about politics. the democratic national convention gets underway today. he entire that will be virtual because of the pandemic. opec plus ministers will meet online tomorrow to review strategies for compliance when

it comes to the oil supply. better make sure that no one is naughty. annmarie: and on wednesday, we get u.k. inflation data. and on friday, pmi for both the u.k. and the euro area. the long-term treasuries is flashing a buy signal to scott minerd. the fed has made it clear to us that they do not want to see long-term rates rise. i would expect in the policy statements in september that we will see some commitment to keeping rates lower and so i think the weakness in bonds especially from here would be a buying opportunity. from natixisy dwek investment managers is still with us. scott minerd saying 10 year

yield will be capped at 10% and then in the next 18 months they will go to -5%. do you share that? cap. i would agree on the i think the fed will want to keep rates limited. i'm not sure about how the negative we are going to go. i don't think the federal reserve will move to negative benchmark interest rates so i'm not sure the yield would go that much lower than what we saw during the march lows. but i do think there is a will to keep this treasury market well behaved and yields capped. they will continue to support the housing market which is a huge component of u.s. growth. statement,art of the maybe. i'm not as convinced about the latter part. manus: ok. we got all excited with one week's move in the bond market.

thereis a narrative out which is -- what is the bond market really begins to trade? toleranceu think the level is at the fed before we yield curve control? to have been ams feeling that even though the fed was not doing yield curve control, it was sort of acting like it without a net. in such ad the yields range for so many months now. i do not have a number in mind of what would be the trigger. we have seen that the fed has been able to slow a bit in some of its support over the last two months as the market has stabilized. i would not be at all surprised that they ramp that backup relatively quickly if they find

that the market is disorderly. we are going to come back after a quick commercial break. oil this morning trading above $45 a barrel. talking about that next. this is bloomberg. ♪

annmarie: good morning from bloomberg european headquarters in the city of london, i'm annmarie hordern in for nejra cehic. mixed monday. delayedtors mull trade talks. house democrats will cut short their summer recess to work on legislation aimed at shoring up afters. postal service

states were warned about mail in ballots ahead of november. in japan suffers its biggest economic lump on record. this after consumer spending was hammered as well as production and exports. manus, good morning. the meeting that was never to be had. shrugging seems to be it off if you look at china and u.s. equity futures. but talking to esty she ranks trade tensions of of the vaccine and the november election when it comes to catalysts for direction in the market. good morning. manus: good morning. but the chinese did come in with liquidity. the pboc.idity from liquidity from the fed. novgoratz andng

warren buffett. annmarie: and on the monetary policy front, central banks standing ready for action. on the fiscal front, we spoke about the fact that the u.s. does not have a fresh stimulus deal and the u.k. has stimulus measures drying up in october. germany is considering adding more fiscal support. this is really going to be the discussion for the rest of 2020, isn't it? absolutely. for the week it is all about the fed. equities up, liquidity is driving the csi. will the fed discuss yield curve control? the s&p 500 up 0.25%. it is about the bond markets. what is the tolerance? yields go bid up. looks like we have done some

real permanent damage to the economy. going back to -.5. aussie-kiwi is flying high. negative rate differential between australia and new zealand. brent is up a bit. i fully expect you to be on the phone this afternoon getting some decent oil interviews. no pressure. that would be nice. thank you very much. good morning. annmarie: anything for you, manus. manus: he is waiting for your call. annmarie: maybe this is our pitch right here live on bloomberg television. andsters from israel united arab emirates plan to meet soon following a landmark call. says the agreement

to begin normalizing relations will change the paradigm in the region. leader, a visionary netanyahu. he understands what is important to the israeli people but also what is critical to israel's security and economy. he believes it is much more important to strengthen the relationship with the united arab emirates and other regional arab countries to figure out how to create cross-pollination between the populations. when he gives his word on something, i take his word. noted thattt -- he there had been some optimism or hope in terms of how palestinians and israelis were working together on covid-19. not all the way but some areas. the medical situation in both israel and palestine. that has forced them to look at various issues.

however, the palestinians to announced this deal -- denounced this deal. at what point do you have to put more pressure on israel? >> we don't want to put pressure on the palestinians. forle want better lives their children and they want to live in peace. they want security and economic opportunity. people are tired of conflict and war in the middle east. andident trump has come in recognized the realities on the ground and tried to sort them out. regarding the palestinians, we laid out the vision for what could happen. we got israel to agree to a palestinian state and borders. and we have created a conference theahrain where international community came together and endorsed our plan. their gdp andled

created a million new jobs. when you see this agreement, i think it is the israeli people and the palestinian people are much closer than perhaps where the palestinian leadership is. our hope is over time that the leadership sees they have so much more to gain for their people and are legacy. >> i have two more questions. from a gop political sense, you know democrats have been campaigning saying they would rejoin the iran deal. -- senatorhas said kamala harris says she wants to rejoin the iranian deal. iranmportant of a role did play in these negotiations? and what is your response to those that would argue that the iran deal would restore our allies? >> americans are smart.

-- the iran deal was one of the worth deals ever made. it is not like the next day they said that america is great, let us work with them. i am not sure what that agreement accomplished other -- the american people want to see our troops brought home. president trump has tried to end the war in afghanistan. he has reduced our troops there significantly. trumpk that president [indiscernible] that has not been the case. [indiscernible] that the previous administration

was not able to accomplish. you have to separate the media and the political jostling from what the president really does. he brings a commonsense approach. he is not afraid to say what he thinks. he brings results and that is what the american people want. rejoining the iran deal would be catastrophic for america, for israel and the whole region. the vision for what iran once to see is not consistent with american interests. -- jaredrrod kirsner kushner speaking to the team. minister -- in caught up with him friday afternoon and he has just tweeted this morning that there is a moderate obsession with the iran aspect. the deal is not against iran. it is about him

being the powerbroker of the region. sovereignt his decision made in isolation. they only called the other people after dirt the telephone -- after the telephone call was made. with him up on friday and he told me that the decision to bring help to the region -- >> this is a sovereign decision by the united arab emirates. this is good for us. and our calculation was on the regional front that this is something that we can actually get something done which is to do with annexation also. manus: do you expect saudi arabia to join you? >> i have seen a lot of speculation today at about this country or that country. are sovereign

decisions. we did not do this because we expected this country or that country to join us. our calculations were clear. dothe one hand, how can we something while at the same time achieving something with regards to stopping annexation. and i think this was very .uccessful rationally and realistically coming across and saying we are formalizing a situation that is developing. this is where this relationship is going to go. gete do it now, can we something in return to support and help the region? i think we have achieved that. manus: a huge three or four days. oil is edging higher. more so on the opec plus gathering this week.

the cartel will meet this week and assess the supply deal. contain the virus and that has impacted fuel demand globally. natixisk is from investment manager and she is our guest host this morning. look at the bloomberg commodity index. since on the best run 2013. seven weeks and a row we have been ratcheting higher. oil is in recovery mode. how does this play into the asset allocation for you? of howt is a question confident you are in the recovery? do you think demand is going to pick up? as you were saying, it is not easy to stay compliant with the cuts. they are trying to ease them but keep the oil market supported. oile is a lot of need for revenues in many of these countries. and given the complicated covid

situation. commodities a little bit separately. it does not factor in as much as into our broader asset allocations. it is a question of do we want to have more or less of a finish? do we think oil can continue to recover? supply at some point is going to remain -- it will be a slow process. eventually, prices will be capped. given where we started a few months ago for some of these companies, i am surprised at how they have rebounded. we are on our way to recovery even if it is a slow and bumpy road. we are on our way. america: esty, bank of saying brent will reach $60 a barrel in the front half of

2021. where do you see brent going? esty: it is difficult to have such a precise forecast. at the moment, we are look -- at the moment, we are looking for the recovery to continue to support the crisis. we dod to make sure that much inl or plateau too the recovery. q3ryone is in agreement that is going to be a nice, strong bounce after the of small q2 -- abysmal q2.f thi room on the upside for sure. we just need the recovery to into 2021.to 20 -- annmarie: i'm sure he likes the sound of oil to the upside.

esty dwek, thank you for joining us. we will look at what to expect from tech stocks in the second half of this year. stay with us this monday morning. this is bloomberg. ♪

manus: this is "bloomberg daybreak: europe." i am manus cranny in dubai. where would the world be without tech stocks? they are resuming their rally. the global pandemic is likely to keep consumers rely and on e-commerce. -- reliant on e-commerce. the risks remain with the u.s.

elections. dani burger has had a look at the risk-reward and the elongated faangs. can they sustain their rally? you talk to the tech bulls and they say it can continue. look at how tech has done versus the s&p rally. part of the reason why tech came off a bit last week. according to goldman's tax, it is false. they are still overweight tech. we see that in the earnings picture of why investors think this rally can continue to go. they are outperforming the rest of the index when it comes to earnings beating estimates. tech earnings grew about 3% year

on year. one of the few sectors to post earnings growth. annmarie: dani burger, thank you so much. dani burger here in london. with movie theaters around the world feeling the impact of coronavirus restrictions, walt disney will make mulan available for purchase. depending on who you ask, this decision to release its next big film online will guarantee that the movie will lose money or it could be a smart way to break even on a $300 million investment. joining us with more details is matthew. thank you for joining us this monday morning. what is the math behind this pricing? matthew: a few things going on. is the movie has been several years in the making. they needed to find a way to make some money on it. $30.e are thinking --

a rental. $10 million or so to break even when you take into consideration the marketing costs. lot.ems like a theater, live action $30 million-$50 million. i think they stand a good chance of getting that but not more. and on top of that, it is being released through disney plus. another reason to keep the 60 million customers or so you already have on that platform loyal and it could potentially bring in more subscribers. get were expecting to 60,000,000-90,000,000.

they hope to accelerate that growth even more. it is such a huge acceleration of everything they have planned for. such. accelerated at where does it fit in terms of the other offerings? the other streaming competitors? the other things i have on my television here? two if: most people have not three streaming platforms. this will not take numbers away from the other platforms. if anything, [indiscernible] taking some ofn its movies straight to the platform. some movieought releases that were planned including "the woman in the window." this potentially takes forward

all the streaming platforms. help all of the platforms ultimately. matthew, we will see what the release brings in terms of numbers and dollars. that is matthew, our media analyst. coming up on this show, japan severs its worst drop in gdp since 1955. lockdowns may have been lifted but policymakers say they can see no blanket returned to the pre-virus way of life. we discuss -- what does that really mean for the economy? this is bloomberg. ♪

annmarie: good morning. this is "bloomberg daybreak: europe."

speed of japan's recovery from a record economic contraction will depend on how quickly and uptick in virus infections can be contained. 27.8%ank by an annualized in the three months from june from the previous quarter. the worst drop in data since 1955. joining us is bloomberg's chief asia correspondent. what was behind the slow down? is it down to the virus and the fact that we had economies on lockdown? , yes.essence it was quite broad-based. , the consumption was down an annualized almost 30% from the previous quarter which made up almost 60% of the slide in gdp. we also had a big fall of around 6% in business investment.

and of course, when you add it all up, the net exports of goods and services took away 3%. it should be said though that japan has not fared as bad as the u.s. for example which shrank by one third last quarter. the u.s. economy contracted by some 40%. it is bad in japan but not as bad as the quarter that its major peers experienced. manus: the question is this -- what is the outlook from here? i look at dollar-yen. it is the most obstructionist intervention for the boj in this or is that overstating the currency aspect? in the near term come it is about getting a grip on the virus. another over 600 cases

over the weekend. is -- and if it spreads, they would have to impose new restrictions. isthe positive side, there stimulus of about $2 trillion including cash hands out -- cached handouts -- cash handouts. the view is that the next quarter should not be as bad. manus: thank you very much. that is the bloomberg chief asia correspondent. it is all about oil and the fed for me this week.

and do you trust scott minerd? 50 -- we zero stoxx will also see how sanofi opens up. you gave us details earlier about the breaking news. that is it for "bloomberg daybreak: europe." this is bloomberg. ♪ you doing okay?

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♪ anna: good morning. welcome to bloomberg markets: the european open. i'm anna edwards live in london. the cash trade is less than an hour away. here are your top headlines. tensions rise between the u.s. and china after trade talks were postponed. the four day democratic national convention begins. pboc's morale boost. chinese stocks climb