ago, american beat sugar, it was dropped from the dow. in 2020 it is exxon that is shown the dow door. the new dow -- it is digital dom is. amgen, honeywell returns. and salesforce.com. equities surge higher this morning. it will be a virtual jackson hole. chairman powell will speak and rationalize a growing and negative real yield. and it was not that freshman year in college, western civilization course, the one you slept through. republicans lineup for "the bodyguard of western civilization. good morning, everyone. frommberg surveillance," new york, from london. fromedwards holding court london, over francine lacqua, on a much needed break. we were talking with holders meeting earlier on germany. --with holders meeting holger's meeting earlier.

interesting enough. we have the gdp numbers, the contraction in that economy, which is awful, obviously, but relatively good to compared to some other parts. getting the test and trace progress going very efficiently. fester --e talk of an of investor outlook for another year. tom: the dialogue on furlough and income substitution over there versus what we see in america. with a briefing, our first word news with ritika gupta. ritika: president trump and speakers at the republican national convention put a positive spin on trump's handling of the coronavirus pandemic. the president thanked frontline responders and said the virus is going to be fading. others warned what would happen if joe biden was elected.

>> there is more work to do, but there is a light at the end of the tunnel. jobs gains are outpacing what the so-called experts expected. but biden set by radical left-wing policies would stop our economic recovery cold. he's already talking about shutting the country down again. it's madness. broadly, ae procession of speakers set out to counter the democrats' portrayal of the president as incompetent. u.s. and chinese negotiators have discussed the fate one -- the phase one trade deal, and negotiators say -- trade is one of the rear areas of cooperation between the world's largest economies. still, china is far behind in his promises to increase purchases of american farm, energy, and manufactured goods. isgermany, angela merkel pushing for transparency -- it

german medical team determined that alexei navalny was likely poisoned last week. to kremlin has not responded calls for a full investigation. exxon mobil is out in the biggest reshuffling of the dow jones industrial average in seven years. pfizer and raytheon have also been booted in a signal that tech companies have gained even more dominance. the new members of the dow are self force -- salesforce, amgen, and honeywell. a stock split was announced i apple. -- by apple. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i am ritikantries, gupta. this is bloomberg. tom: thanks so much. let me do a data check here. i don't think enough has been made about the equity market, one day up, two days up, three days up. led by tech but dragging others up as well.

futures up 12, dell futures up 152 points, 28,391 on the dow. honeywell, amgen, salesforce.com. did not play yesterday, they play today. yield, 10-year are we and chairman power watching closely. it has been -- chairman powell are watching closely. churning a little bit weaker. anna? upside bring you the reaction to the trade news overnight through europe. on european percent stocks. the dax is doing pretty well compared to the others when you look at year to date performance. we watch that one very closely. where we see optimism from german businesses, better mute music -- better mood music between china and the u.s.

we sell the dollar and buy currencies, and the euro and the pound both go higher. tom: it is a second night at the convention, our coverage beginning at 10:00 p.m., scheduled to speak tonight, the comments asill make well as secretary of state mike pompeo. some controversy there over the controversy -- over the pompeo speech, scheduled from jerusalem. we look back at vice president pence on the economy. >> the economy is on the ballot. order is on the ballot. our most cherished ideals of freedom and free markets are on the ballot. that is why we need four more years of president in the white house. from indianaleman last night. right now the gentleman from

washington, are bloomberg quarter -- are bloomberg reported joins us. did night one open as expected? jack: more or less as expected. there were two main themes that they vacillated between. one was basically the pre-coronavirus economy, which gave them a a lot of talking points that are positive, that are relatively substantive about what they see as the advantages and, whichp overbite you heard from donald trump, jr.. the next was race relations, which nikki haley and governor scott were focused on. -- and tim scott were focused on. they stuck to a list of accomplishments pre-coronavirus versus waiting -- versus waiting into territory where they make take a different tone.

tom: rand paul scheduled to speak tonight, a libertarian many would suggest, from kentucky. what will dr. paul say? jack: i don't know what is on his speech, but i would not be paulised for senator rand to double down on what we have heard about, you know, for example, joe biden, talking about repealing the trump tax cuts, the pre-coronavirus thatmy, the recent news some russian officials prefer trump, that there are chinese officials that preferred biden. that is one area where the senators on deck, i would be surprised if they didn't focus pretty heavily on economic issues. . anna: do you since this is a

party that is trying to hold on to its appeal or hold on the senate? jack: in trying to -- in some cases, running the appeal, although they may have to take a ontoer appeal and holding the president. when you hear about tim scott talking about his background and race relations in south carolina and things like education policy , criticizing joe biden for treating black voters like a monolith, that is a very different tone than what we have heard from the president. i think if they are focused on suburban voters and anyone who you would classify as a swing voter rather than the base, that probably serves a dual purpose of expanding their appeal and helping in any competitive senate races, although i think what really probably matters the most is what we hear from the president when he speaks, and when he spoke earlier in the

day, that was much more sort of railing against mail-in ballots and things that would appeal to his base supporters. so a bit of both then. jack, in terms of how this event is coming across, how away from the tone of the event or the actual message has been communicated? the way it is being held, this is very virtual, just as the dnc was very virtual, but i would imagine the difference is at the margin. what are the differences? jack: it is largely similar in that it is very virtual. they are not speaking to a crowd. every once in a while you saw speakers who almost seemed prepared to speak to a crowd. maybe the biggest difference that we saw yesterday, and that i would look for going forward, as there are some speakers on the republican side, including donald trump, jr., and i would definitely expect the president, who often tend to play to the

crowd, who take a much more restrained approach when they are reading their speech from a teleprompter with nobody giving that feedback. that was the difference that we saw when donald trump, jr. spoke , and it is usually a significant factor for the president when he sticks to the script rather than shooting from the hip to try to get cheers from a crowd, which won't be there. looked carefully at the real clear politics summary, the polls that are occurring. can you state that mr. trump is tightening the race within the swing states? difficult to say within the swing states. i think overall in some of the national polls, we may see tightening, but so much of that comes down to determinations of who is a likely voter. there has been some bouncing is where everyone's in a while you see biden up in a poll

significantly, and another when shows only a four-point lead, and that could tighten the average. although if we are talking about the swing states, it is so hard to say in the aggregate what the effect is. it is possible it is tightening, but really what that is going to come down to is who is making a hard and fast plan to get there mail-in ballot, who is motivated to vote as they say they are, that kind of thing. i don't know if i could totally characterize it on the whole there. tom: what you just heard there, folks, is really important, from jack fitzpatrick or kevin cirilli, how crowds look at the polls, with less certitude than many in the media. how coverage continues. david westin leading our coverage tonight, 10:00 p.m., the republican national convention. the first lady is scheduled to speak. this is bloomberg. good morning. futures up 12. ♪

tom: good morning, everyone. "bloomberg surveillance." tom keene in new york, anna edwards in for francine lacqua in london. i am guilty and anna is guilty, too, of big cap buy ins. this is an area we don't look enough at. david, let's do a quick look back, and i mean quick. why is small-cap, and mid-cap underperforming since 2016? david: simply, they have not had the same kind of free cash flow margins that large companies

have had. people sought safety in large-cap stocks, but calm roughly since may, yusor a slight move to small caps. tom: you could clearly see that in the -- do you get a sense that mid-cap, small-cap, that there is a digital dominance to take advantage of? david: i do. i believe that. at the same time, save some dollars for the consumer part of the economy. i think that is still going to be very good. i will give you an example. ownshill downs, which churchill downs as well as online gaming -- all really -- only three analysts follow the company. they have seen their ebitda, their cash flow, improve. , that it's a digital play. anna: david, good to see you.

looking at some of the bigger names, it has been described as a k-shaped recovery. kicking off with the recovery, and other stocks being laggard. is there a k-shaped to that recovery, too? david: even more so, anna. the overused term may be bifurcated, but this market, whether large-cap or small-cap, is very reminiscent of what i experienced firsthand in late 1999, early 2000, where there was a great degree of separation between winners and losers. what you saw was the market turn itself on its head in march of 2000. i get the sense that we are -- we have got a bit longer to see that unfold, but it will unfold because the valuation differentials between companies that are generating good free cash flow and free cash flow margin and those that are getting price perfection is getting very stretched.

that rubber band is stretched pretty tight. interesting, looking at tech evaluations. do you think tech stocks look too expensive, or when you consider there valuation electives other asset classes, relative to other asset classes, does that change her outlook? you ani will give example. broadcom is just a company that has 25% of its revenues from software after buying semantic and computer associates. 4% dividend yield. they are going to grow their free cash flow this year. broadcom is a tech name that i think large-cap investors can own. i would throw accenture in there. you can make a small case for apple on a free cash flow basis. you can still own those tech stocks to feel like evaluation, as i said, is not priced for sainthood or price per -- priced

for perfection. tom: what do you see in mergers and acquisitions? if the revenue growth is not there for the glory stocks you are mentioning, for churchill downs, but for the ones not getting it done, is emanate -- is m&a confirmation the only way out? strongbear markets, the will get stronger. those that kept a balance sheet intact -- m&a will re-accelerate. an example, back into the small-cap area is houlihan low-key. they do m&a activity but they also do restructuring on bankruptcies. that is a barbell play to balance out a more cyclical stock like churchill downs. watch like we saw in 2008, bankruptcies are accelerating, courts are reopened, and houlihan low-key, which does m&a and restructuring out of bankruptcy, i think that is a very good plan going into small-cap.

tom: are we heading toward a chemical rollup of 20 years ago? is roll up going to be the new phrase for 2022? more sickish i had a synced and perfect answer, except we know out of these crises, companies that have kept their balance sheets intact can get on a better buying spree. when i saw second-quarter earnings get reported, most companies were pretty positive on what they saw in may and june and even into july. but they still give that cautionary tone. i think that is going to give way. we will see emanate pick up and roll ups pickup as well. -- we will see emanate pickup and roll ups pickup as well. anna: we will look out for that. david, when we look at the democratic national convention,, ad now the rnc, they seem little light on details so far. what are you looking for this week to give you clues about the next four years ahead? david: sure, anna.

greetings from battleground state michigan. in the month of july, michigan's on a plummet rate fell to 8.7%, -- michigan's unemployment rate fell to eight point 7%, 1.5 points below the national unemployment rate. that starts to set up people looking at these battleground states like mine in michigan, where the economy was in pretty good shape before, improving, michigan is much more competitive from a tax perspective than it was 10 years ago. i want to see more policy discussion, and frankly, what i don't want to see is what i saw in 1993 when we raised marginal tax rates, raised corporate tax rates, raise the payroll tax rate, raise the capital gains tax rate. that is what i think the stock market and u.s. business is not -- does not need. they need the type of environment we saw in 1986, 1997. i hope we get that coming out of both conventions. tom: david, thank you so much.

ankara -- of an cora. upures up 12, dow futures 1.54. most people when they look first thing in the morning is the real yield. is a pretty big number to the negative side on that inflation-adjusted yield. that is one of the themes of bruce kasman, of j.p.morgan, chief economist. a brilliant note by his team on inflation, disinflation, and deflation dynamics. we will do that in the 9:00 hour. this is bloomberg. good morning. ♪

ritika: this is bloomberg surveillance. filed for what could be a record-breaking -- and shanghai. $29 billion raised by saudi aramco, it plans to use the money to bolster its lead as china's largest online payment platform. buy agroup has agreed to company at $5 billion. 4.5 billion on the deal will be paid in cash. it will be funded in part with a $3.5 billion rights issue.

it is based in california and is backed by softbank. that is your bloomberg business flash. anna: thanks very much, ritika gupta with the business flash. let's get to the data and have a look at where we are on european stocks come up by half a percent today, tom. leisure is really flying. tom: no question about it, huge moves in the market. dow futures up 150 points, 28,380 six. coming up, from southwest arkansas, bruce westerman on the republican national convention. this is bloomberg. good morning. ♪ businesses are starting to bounce back.

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that's why we're helping you stay ahead and adapt with a network you can count on, 24/7 support and flexible solutions that work wherever you are. call or go online today. passedblicans, however, president trump's tax bill that

low or taxes for single moms, working families, and those in need. so when it comes to what joe biden says he will do, look at his actions. look at his policies. look what he already did and didn't do while he has been in washington for 47 years. tom: the gentleman from south carolina last night. right now a really interesting congressman joins us. he is a football player for the razorbacks who did not waste time getting a degree in engineering and grabbing the most prestigious degree in the nation. bruce westerman representing hot springs in arkansas, the southern, western corner of arkansas, texarkana. thrilled to have you on with us

today. you are from the land of clinton. what do you perceive mr. trump has to do to extend his voting majority in your district, and in the state of arkansas? what does he need to do? rep. westerman: i think president trump is very solid in the state of arkansas, in my district. i represent the town of hope where bill clinton was born, and hot springs where he graduated from high school. we have seen a dramatic change in arkansas. we are more red now then we were blue in 2008. we have every federal office that is republican. all statewide offices are republican. we have super majorities in the state house and senate. seen a big change as far as the politics. i think president trump is very strong here and he is on the track to be reelected. tom: describe how you see this

american uniqueness. the popular vote versus the advantages swing states have with the electoral college. how should the president attack his reelection where he needs that electoral college strength? rep. westerman: he has got to go into the states that are going to give him the victories. he asked me all the time how i'm doing in arkansas. i say you are doing great in arkansas. we have your back on the -- down there. he's got to get the michigans and wisconsins and make his case there. he's off to a good start with the convention last night. he was talking about football. how about herschel walker and the comments he made? anne tim scott from south carolina? -- and tim scott from south carolina? there were a lot of highlights.

anna congressman, good morning from london. do you think the people of arkansas will regret a lack of progress made on a fiscal stimulus as we get towards the end of this particular four years? should more be done before november? rep. westerman: i definitely think there is more that should be done. i think there are problems that need to be solved. i am an engineer, a problem solver. the issue is that the focus is not on the actual problems. the heroes act speaker pelosi put out solves a lot of issues but not the problems associated with the coronavirus. we need real solutions for real problems. we don't need made up problems so we can come in with a solution like this postal bill the speaker put out last week. we need to fix the ppp. we need to do something with

liability protection. the $600 per week on employment insurance, the speaker wants to extend out until march of next year, that is too much money. it is more muddy than the average household income in the state of arkansas drawing state and federal on employment benefits. republicans are already there. folks are happy with the way the recovery is going. our unemployment is about three points lower than the national on the planet. tax revenue -- than the national average. we have a lot of front-line workers here. people who are exposed. they have to get out and do their jobs. if your party wants to increase its appeal into the election, what is a crucial message that needs to be delivered this week?

rep. westerman: the message is america. this is the land of opportunity. this is where people get to determine their own outcome. we have to put out there the hope, a bright vision for the future. i think that started last night and it will grow as the convention continues. contrast that with the convention of opposition. it seemed like everything was negative. there was no talk about a brighter future. i think republicans have a solid record we can run on and propose policy solutions to fix things like health care, the environment, and all those things that are important to americans. we're going to do that with the policies we are putting forward. tom: the financial times does a great job of aggregating state-by-state deaths. you have lived college football and the heart of college

football. should we be playing college football? arkansas has great covid data. florida and texas don't. should we be giving up college football until florida and texas get control of this mess? rep. westerman: no. we should play college football. we should play high school football. we should look at the data and make the smartest decisions we can. i have a son who is a senior in high school. he doesn't want to miss one single game of football. he's already had his first game don't thinkause i the correct protocols are in place. they had one coach test positive. most of their coaches that half the team has been quarantined. rapid antigen at testing. it is a low-cost test. it can give you the results in 10 minutes. it tells you if you have the concentration of the virus or if

you are infectious. the technology is there. we just need the fda to approve the rapid low cost tests. i have a letter going out to the fda this week. i hope we get some movement on that soon. tom: thank you so much. greatly appreciated from the fourth congressional district of arkansas. much more to talk about here. we will go through the markets today and what we see getting ready for the powell speech on thursday. our convention coverage is tonight at 10:00 p.m. the republican national convention. look for that with david westin. futures of 12. morning.ood a rare reversal for the food and drug administration. the commissioner has backed off his claim that extreme metal therapy has provided a dramatic benefit to coronavirus patients. at a press conference with bloodent trump, he said

plasma could save huge numbers of lives. he now says he misspoke. in kenosha, a second night of violence after a black man was shot by police in an incident caught on video. police fired tear gas to try to disperse the crowds. they also deployed 125 members of the national guard. tropical storm laura is set to become a powerful hurricane before making land on wednesday. the storm poses a threat to the region's oil and national gas infrastructure. several companies have shut down 82% of the oil output and more than half the natural gas production in the gulf of mexico. hong kong will relax social distancing rules starting friday. people will be allowed to eat at restaurants in the evening and they can remove masks when exercising outdoors. just seveneported new locally transmitted coronavirus infections

yesterday. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna: thank you so much. up next, stephen stanley joins us. we looked at thursday at virtual jackson hole. this is bloomberg. ♪

anna: this is "bloomberg surveillance." let's get your bloomberg business flash. pimco says the gold rally is not over yet. nicholas johnson says it has

room to extend gains while interest rates remain low. gold set a record above $2000 an ounce earlier this month. they have given up some of that increase but it is still up 27% for the year. -- due to an error. they mistakenly transmitted to revlon after an employee did not manually select the correct option and system software. they said revlon was in default and other than the money. old media giants are making money from streaming. disney will generate $11.2 billion in direct to consumer revenue this year. that's all most 20% its total sales. the disney plus streaming service has attracted more than 60 million subscribers. that is your bloomberg business flash. tom: thanks so much. right now on chairman powell and

this important speech to come. stephen stanley joins us. he's at amherst. that does not describe his work at rbs where he won award after award for the art of forecasting, including a huge claim in the year 2007. that was the most difficult year to get right with huge volatility. mr. stanley joins us this morning. i want to get the jay powell. i have to ask about your fabulous research note on how difficult it is now to figure out jobless america. how unemployed is america right now? what is the real unemployment rate? steven: it is a tough one. whoink a lot of the folks were laid off have come back. there is still a terminus number who have not. some of those people will be called back over the next few months and there is a subset that are just not going to be and have to find jobs in different industries.

i think we are still in a period of transition with the labor market is improving but there will be a lot of structural change in the next two years. tom: what is the true stanley statistic? somewhere in the vicinity of 14% right now. what is your statistic? stephen: that seems a little high but it is certainly above 10%. the good news is that the federal government has taken very good care of households. household income is higher today than it would have been in the absence of the pandemic because of the federal support we have gotten. iscourse the future there quite a bit of a question mark at this point. stephen, you talk about structural change coming for the u.s. economy. where does that leave reliance on the service sector? sector, retail? what kind of structural change

are you anticipating? stephen: there are two things to think about. is the economy going to look different because of the virus? thinking to yourself, let's say. our restaurants configured differently? are there fewer employees? air travel. anything that has high contact. i don't think we know the answer to that. if we get a vaccine and treatments, we could get back to something close to normal. the second one, which is a little less uncertain is a lot of the structural changes that probably would have taken place over time anyway have been accelerated by the virus. i'm thinking about things like the way the retail sector has changed towards online. the fact that more people are working from home. there are certain changes i think will be persistent no matter how the virus evolves at this point. we talked about the

unemployment, the difficulty in measuring u.s. unemployment right now. to what extent does a high level of an employment, wherever it sits precisely, how must have that -- how much does that limit the ability of central banks to push up inflation? we talk about whether policy will produce inflation. we go round and round thinking about this. do you think the unemployment rate will make it impossible to push that much higher? stephen: i don't know about impossible. we will see an interesting test of the strength at efficacy of monetary policy here. central banks around the world, in particular the fed, have injected an incredible amount of liquidity into the system and given us every indication that liquidity will stand for a long time. there is a big debate about what the nature of this downturn looks like. it is a classic demand-led

weakness in the economy along the lines you suggested with the high unemployment rate? in which case it will be difficult to get inflation. supply-side shock? -- because of the virus and safety issues, in which case we are not necessarily immune from inflation coming back as the economy starts to return. approach third base we might get some further clues on average inflation targeting by the fed. if we move in that direction, the fed moves in that direction, what will it do to the feds to fed's reaction function? stephen: chairman powell talked about the last cycle and how we had low unemployment at the same time inflation was at or below the fed's target. i think the fed would like to stay easy until the unlimited

rate is back down to a low level. as i said before, i think what that means is we are likely to see a test once and for all if the fed has the ability to push up inflation. if they can, my guess inflation will be moving higher. stephen, thank you for joining us. events atead, jackson hole. we will be covering the events there. follow bloomberg for coverage of the jackson hole economic symposium that starts on thursday. this is bloomberg. ♪

anna: i am anna edwards with tom keene in new york. let's turn to global matters. we continue to track the virus. bloomberg has developed a unique partnership with a leading authority on covid-19. johns hopkins has been at the forefront. we will review insight from experts.

it is the latter we turn to today. ,oining us is carla freeman associate research professor of china studies. good to speak to you. thank you for joining us. recent signs between the u.s. and china look dire. we have been talking about the world moving into bifurcation, from tech to trade to financial services and beyond. overnight we wake up to a very much more positive statement from the u.s. trade representative about achievements on the trade deal. what is the temperature like in terms of this bilateral relationship at the moment? carla: i don't think much has changed. it took place against the backdrop of the republican national convention where there was a lot of harsh rhetoric about china and trump has been does --aying the u.s.

is not obligated to do business with china. there is a lot of tension still in the air. we are conducting drills in the south china sea as china roles manys own sea drills in maritime regions around its coast. tensions remain very high. a was surprising to hear fairly sanguine message about macroeconomic coordination between the countries. anna: do you think we are hearing different messages from president trump and other members of the republican party? we spoke with people analyzing the rnc, suggesting maybe on certain topics different messages are being allowed to come through to appeal to different parts of the electorate. is that true on international relationships? does everybody in the party think like trump on this? carla: i think there are diverse

opinions even within the trump administration in how to handle china. frankly, trump seems more willing to work with china in many arenas that other members of his white house. pompeo for example. the secretary of state has taken a strong stance on the issue of china's political system and has pushed for making sure the united states's presence in the region is clear to china. he has criticized the preceding administration as being far too weak on china. trump has certainly criticized the obama administration on many fronts, including on its china policy. he has been willing to talk to xi jinping, coordinate with him on north korea. it has taken a hard stance on the trade deficit, but has been willing to negotiate with china and still leave open the possibility that countries could work out some kind of trade deal.

for the long-term. anna: as china watches the run-up to the election, this china have a preference for trump or biden? i've heard many views on the subject. carla: this is a debate inside china. there are different public intellectuals weighing in. there are many who argue a biden administration would provide valuable stability to the international system and that would in the long run benefit china more than another four years of the trump administration. there are many in china that see trump as a gift because he has been willing to take apart a multilateral system that the seen ashave not always in their interests. it has given more space to the chinese to start to push for its own norms and preferences internationally.

seeover, many in china trump's policies as ultimately damaging to the u.s. economy and predict a soviet-style american collapse on the horizon. there are very different views ahead on two sides. anna: a real wide range of views. carla freeman joining us from johns hopkins. they quick check of the data as we headed to another hour of surveillance. european equity markets up .6%. upsidetures moved to the after the dow reshuffles. up 192 points. the dollar is a little weaker. coming up, more "bloomberg surveillance" simulcast it on radio and television. this is bloomberg. ♪

>> euro seeing a lot of virgins -- you are seeing a lot of divergence within the market. >> the base will probably slow down now that we see this quick rebound. >> we've got demand being stimulated, and that imbalance should lead to higher prices. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. onsay good morning to you simulcast. bloomberg television, bloomberg radio worldwide. it helps to have in august with a lot to talk about. today is so different. what i observe as the bond market finally confirms the higher equity prices. risk on, equity up,