>> good morning from london. i am tom mackenzie. this is bloomberg daybreak europe. a cloud of beijing's crackdown. wall street looks to revise talks with chinese officials. access to the world's largest second economy. president biden resists mounting

pressure to delay the final put out of afghanistan but asks for a contingency plan instead. the delta variant spreads. goldman says you will need a mask and a vaccine to go back into the office. we had another record a on wall street. the baton has not been handed over to the asian session. it has been relatively lackluster after two solid days. the best gain since february, but that has not been sustained in today's session. there may be a few catalysts people were looking at. this report that wall street executives will be starting a roundtable with some officials in beijing. there is the overhang from the regulatory push plus the

concerns about growth in china that have continued. the eyes of many investors still on jackson hole. whether or not this is a view that seems to be increasing among some, whether or not jay powell will indeed delay any communication on the timeline for tapering. we are talking about a disconnect between the s&p 500 index. this is what the chart is showing. there is a widening spread between high-yield, investment-grade bonds in the u.s. that spread has been widening. the s&p 500 index, the bond market investors, credit market investors, are they seeing concerns that equity investors are yet to price in? what is that telling us about sustainability. even though that baton has not

been handed over to asia. the msci asia pacific is currently at gains of about 1/10 of 1%. some modest gains, up 25 points. in the u.s., following that record gain, virtually flat. the greenback, three days of weakness, so maybe some pressure on emerging markets. you are seeing that crude oil down 0.6%, giving up some of the gains we have seen in the last few days. a contingent of wall street looking to reopen talks with high-level chinese officials. business leaders are looking to work outside of the biden administration's channels. it comes as concerns as well about investing in china. cathie wood says she is more

optimistic than pessimistic in the long run. cathe: i am not pessimistic about china longer run. they are an entrepreneurial society. i don't think the government wants to stop growth and progress at all. tom: alongside cathie wood, we have heard from u.s. regulators. the sec is requiring the more than 250 chinese companies trading in the u.s. to better inform investors about political and regulatory risk. the sec chair said the new rules will come into effect early next year. for more, we are joined by bloomberg's equity and capital market reporter. we heard that the clock is ticking. >> he said the clock is ticking.

this is in relation to the accounting issue, an issue that has spanned two decades, chinese companies listed in the u.s. that do not allow u.s. regulators to inspect their audit books because of national consider -- because of national security concerns. this should result in potential delisting. gensler said he will start implementing that rule, so the clock is ticking. at the same time, he is pushing for more disclosure of the political risk that chinese companies face and the regulatory risk, in the wake of what happened in the past few months, the various policy moves which have led to sharp losses in many chinese stocks. both those looking to list in the u.s. and those already listed, alibaba, baidu, and so on. tom: how should we be thinking

of how the act will play out for these chinese firms listed in the u.s.? julia: the bar has been raised significantly. the sec is not green lighting any ipo's by chinese firms. this is in response to what happened basically in china, where a cybersecurity review was announced just a couple of days after it listed in new york. right now, chinese companies are starting to enhance the disclosure and basically putting the risks they face and the risks to the structures they use, offshore structures, they are on the front page of the prospectus now. will that be enough to pass the test? we are not sure yet.

gensler did not offer many clues into how long this would last. tom: certainly the mood music of what we are hearing from chinese officials, maybe they are more willing to engage with u.s. counterparts. we are hearing of reviving of talks with chinese officials. what more can you tell us on this? julia: chinese officials are looking to revive these talks. in 2018, when tensions between beijing and washington was turned to escalate. the aim was to help preserve wall street access to china's financial market. obviously, those -- a lot of money at stake. now, obviously, there are issues that range from the listing by chinese companies abroad and

obviously wall street's ability to access the chinese market. barriers still remain. so wall street is essentially hoping to have a new meeting later this year to be able to speak to chinese regulators. tom: bloomberg's julia fioretti breaking down the latest. this meeting between wall street executives and chinese officials. let's bring in caroline simmons, u.k. chief investment officer at ubs wealth management. thank you for joining us. i want to get your views and the house fuse at ubs on these development. you have not turned bearish. you are neutral, it seems, on the china story. what do you need to see to change your conviction? >> obviously, the sort of

political uncertainty we are having at the moment that is leading into the sort of regulatory crackdown, if you like, is why we brought china from a most preferred back down to a neutral. we would need to see that abating before we see if chinese equities outperform the rest of the market. we have got over 10% upside forecasts over the next month. the overhead dynamics are good. the valuations are obviously attractive after the pullback. the longer-term growth prospects are pretty sound. it is just that we have these uncertain days at the moment which are causing a lot of volatility and weighing on appetites for wanting excessive exposure. tom: so more transparency, more

clarity needed. i just want to pull up a chart which shows what is happening in terms of the chinese stocks, and how they are lagging. the most since 2006. you are not ready to increase that exposure yet but do you get this sense -- valuations as you say, are looking attractive. >> i think you certainly can invest in sectors that are least likely to have the regulatory experience. focusing on green energy, some of the consumer areas probably less likely to face potential interference. other areas that might still come into scope for restrictions , could be property, could be health care. people who are trying to increase their exposure, i would

focus on the industries least likely to be impacted by potential regulatory issues. as your chart showed, there are significant periods in the past, where the chinese equity market has corrected 30%, 40%, and has gone on to recover from that. i think it will be a volatile journey given the different discussions going on. tom: where we have not seen a lot of volatility is within the chinese bond space. high-yield, we are seeing some pressure. in terms of the currency being relatively stable, and in terms of the sovereign debt as well, the chinese 10 year. that has seen quite solid foreign inflows. our chinese bonds an area where you can still get yields and shelter yourself from some of this volatility?

caroline: it is less volatile from the equity market. we have seen some people switching from equity into the bond. the diversification benefits of the chinese bond market. as well as the equity market, to be fair, are quite high relative to the global indices. from a diversification portfolio perspective, it is very helpful. from a long-term growth perspective, having chinese exposure is helpful. we did bring down some of our property bond preferences to neutral because of some of the potential pressures. but i think there are still some very high yields in the asia space. tom: caroline simmons from ubs global wealth management. the record that we saw overnight of course, looking ahead to the fed as well. us get the first word news now.

>> president biden says the u.s. is on pace to complete the evacuation from afghanistan by august 31. but, he has ordered a contingency plan if a delay is needed. the u.s. president earlier rebuffed the calls to extend the deadline for troops to remain in the country. he also warned there is a serious risk of deterioration in the country and says the world will judge the taliban by their actions. the rolling stones drummer charlie watts has died at age 80. he is known for defining his drumming style as subtle but with swing and a solid groove, had been a member of the rock group since 1963. it was announced he would miss the band's forthcoming u.s. tour. he died in a london hospital surrounded by family. 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. sad day for rock 'n' roll, tom. tom: what an icon. absolutely. thank you very much indeed. coming up, another record for u.s. stocks amid optimism overgrowth. we will dig into the wider market story next. this is bloomberg. ♪

tom: welcome back. we have seen another fresh record for stocks. futures pointing up again this morning. the jackson hole symposium is just a day away. investors preparing to scrutinize the event for any signals about when the fed might start scaling back. let's get more with caroline

simmons, chief investment officer at ubs global wealth management. let's stay there with the question of jackson hole. there seems to be an increasing number of market watchers now, suggesting that may be given the situation around covid, the question marks around efficacy. jay powell not saying anything about the timeline for tapering. does that align with the ubs view? if that is the case, which assets are likely to react mostly to that? caroline: that is our view. we think it is more likely we will get in announcement for the september fomc meeting about where they will taper. they start taper in december or january. this is highly subjective to the evil lucian of the covid case counts and global growth

backdrop. that is essentially the timelines. in terms of what is being priced in the market, there was a lot of sort of hype, i suppose, that it was going to be announced and jackson hole. it will probably be next month now. i is -- i suspect that is already in the price. we would expect the bond yield to rise once the taper is starting our forecast is for that to reach 2%. we also still have the technical factors on the bond yield. that should be working its way through the system by the end of september, early october. tom: let's stay on the yield story. it is fascinating what has been happening in the bond markets, how investors have not been able to get to grips for the u.s. 10

year. we have a chart of expectations for the 10 year yield. half a percent at the lower end. it seems torn, some of these views, at least on whether you get a strong labor market surprise versus lower growth risk. what do you think the bond markets are telling us? are you seeing enough from the data to support your optimistic views on growth? caroline: i think the bond market is the one that is sort of mispriced, if you like. the outlook is very strong. nominal gdp growth in the u.s. will be double digits at least until the second quarter of next year. labor market is the area that the fed is telling us still has excess capacity. obviously, the unemployment rate is falling and has gone from 10

to 5.4. i do think once you get through either supply demand technicals that i mentioned, sort of in september-october time, and as we get into not only announcing taper but actually tapering, that hopefully will coincide with a sort of realization that despite the covid case count increasing, it is not leading to any lockdowns which therefore does not affect the economic impact. we have already seen from the consumer data that it is not affecting sentiment. if they are allowed to go out and about, they will, or they are actually. from that perspective, we don't think that covid is sort of derailing the global growth backdrop. but in some of the emerging markets were perhaps vaccination rates are not as high and we are

seeing some local lockdowns. we really have seen in the past a positive correlation between bonds and equities around times of monetary policy change. with the start of a taper. i think that over time, once we have come through that and the direction of the change becomes more apparent, that will probably abate again and we will see the bond yields moving up, the prices of bonds going down. tom: where does that leave you wanting to be positioned? caroline: position for reflation. within equities, we like financials, energy, materials. japanese equities, we have a preference for equities overall. 5% to 10% upside over the next six months. tom: thank you very much for joining us this morning. caroline simmons from ubs global

wealth management. coming up, as the u.s. house adopts a report $5 trillion budget resolution, it is a major boost to president biden's economic agenda. the details are next. this is bloomberg. ♪

tom: welcome back. this is "bloomberg daybreak: europe." the u.s. house has adopted a $3.5 trillion budget resolution as democrats unite to move ahead on the core of president biden's economic agenda. for more, we are joined by bruce einhorn out of hong kong. what are the key takeaways here? >> the where you just used unite. that is a relative term. at the moment, the democrats

united enough to get this through but there are a lot of divisions and speaker nancy pelosi does not have a lot of margin for error because her majority of the house, just a handful of seats. there still will be a lot of negotiations in the weeks ahead before any of this gets to a conclusion. >> it seems like nancy pelosi managed to bridge some of the divides in her caucus, the moderates and some of the left of the democratic party. is that unity expected to hold? >> she used a parliamentary maneuver that honestly i am not quite sure i understand myself. but she was able to get a vote on rules related to the infrastructure bill and the voting rights bill, and use that to then deem that the overall budget revolution -- budget resolution was passed. as a result of that there is now

a timetable for voting on the infrastructure bill, which is what the moderates wanted. that is something they were committed to voted on by the end of september. enough to finish the work on the budget resolution. there are a couple of weeks that the committees have to get the done. they have to make sure the liberals stay on board. that liberal say, don't take us for granted. there is still a lot of work we done for nancy pelosi. nancy pelosi has been at this a long time, she is very good at her job, so i think there is a good chance she will make it all work out. tom: the latest in a long process. bloomberg's bruce einhorn with the details of how that budget process is unfolding. let's check in on the markets. another record day on wall street. modest gains in the asian

session. the msci asia pacific up. the s&p futures are flat after that record gain. in terms of the bloomberg dollar index, you are seeing a little bit of strength coming through for the greenback after a couple of days of weakness. how much of this strength will be sustained as we look ahead. what we will be hearing of course from jay powell, willie dana to avoid the topic, given the concerns about efficacy, and the mixed data. in terms of oil, a drop of about 0.4%. looking a little more sanguine today on the back of some strength yesterday. coming up, while afghanistan's economy is about $20 billion in

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♪ tom: it is 6:30 a.m. in this the of london. this is bloomberg daybreak: europe. here's what you need to know. china's rebound fizzles. all streak -- wall street looks to resume talks. greater access for the world's second-largest economy. president biden resist mounting pressure to delay the final

pullout of afghanistan but asks for a contingency plan instead. vaccine concerns. another report points to waiting efficacy as the delta variant spreads. goldman says he will need a mask and a vaccine to go back to the office. we are under an hour away from the open of trade in the european session. it was another record on wall street. profit taking after some strong days in china. the msci asia pacific with modest gains. the continued spread of the delta variant. some of the noise we are hearing out of central bank of china, liquidity injections today. looking ahead to jackson hole. as the s&p continues to notch up record after record. you can see that reflected in

the white lines. the spread between high-yield investment grade over u.s. tenured. that started to widen even as the equity markets in the u.s. continue to break through the records. is that setting us up for a correction? the bond market signaling that things are overdone when it comes to u.s. equities. let's switch focus now to the events in afghanistan. president biden is resisting mounting pressure to keep the u.s. in afghanistan past his deadline of the 31st. he's ordered his national security team to come up with a contingency plan if the delay is needed. for the latest, we've got bloomberg's -- how has the biden administration managed to resist the international pressure that has been mounting from their g7 allies to stay the course longer

in afghanistan? >> it is something the biden ministration has been saying consistently since they started pulling out last month. the august 31 deadline was something that they were going to stick to. from their vantage, the problem with extending the deadline is that it may never be enough time. of course, the entire team on the ground was very poorly planned. the g7 of course was hoping to pressure biden to a short extension. there is some bitterness that that thousand happen. there's less than a week left before the u.s. has to wrap up evacuation's. one of the employees, to pull

out the remaining troops from afghanistan. that's a really short timeframe given what we have seen on the ground. tom: we obviously have to assume a lot of uncertainty. in terms of how the next few days unfold, do we have a sense of what will be happening on the ground at that airport in kabul? how will these nations enact their plans as we head towards that deadline? >> what -- a lot of this will play out as it does. what does appear to be true is that effectuation's will come to an halt sometime soon. there will be diplomats and troops to be pulled out of the country. at some point, civilian evacuations that are happening will have to stop. that is something the taliban has indicated to the local population. they are stopping them from

getting out of the country. whether there will be more desperation and couple, as we have seen, that remains to be seen. it is not -- there will be no easy or quick solutions. tom: ok. thank you for the latest on the situation that continues to unfold. let's get more on the future of afghanistan's economy. the country's annual gdp is only $20 billion. the nation is sitting on vast quantities of valuable minerals such as lithium, a key ingredient in everything from smartphones to ev's. afghanistan has $1 trillion of unexplored deposits. the afghan government says they are worth much. >> because of the geology of afghanistan, some of these deposits are remarkably

accessible. especially rare-earth elements. >> afghanistan is not going to be a very pleasant environment to be in. it will be very corrupt. >> that's just the geological point of this. afghanistan is very undeveloped. the infrastructure. >> you have these vast resources sitting there. it's going to turn into a curse more than a blessing for countries like afghanistan. you have a norma's amounts of corruption happening in the future. tom: joining us now is our chief asia economics reporter. what kind of afghan economy is likely to emerge after the taliban takes over? >> at the moment, all the evidences that the economy is in freefall. we know that a pms run out of cash, farmers don't have jobs.

prices are going through the roots -- roof. afghanistan has been cut off from currency. assets are cut off. there's a view that to stop that spiral, for the taliban to grow the economy, they have to ply by international best standards. they will have to adhere to human rights in particular, women's rights. by doing so, they can then perhaps try to pass to engaging with the international community or get them access to foreign capital. as i say, the bar is being set high. it all depends on what kind of political system and standards that the incoming government adheres to. tom: it seems like all the major

nations that are reaching out to the taliban, china seems to be making significant overtures. what is the attraction for china in engaging with the taliban? what are they looking at in afghanistan? >> as a security story, you know it well. there's an economy story here. we've had explicit signals. we've had an opinion piece in the new york times who explicitly drilling between afghanistan's one trillion worth of mineral resources and the role that china complained there. we've had commentary in the china media making this point. these minerals are significant. you are talking about the world's largest reserves of lithium. we are in a very different world economy now compared to when the taliban last ruled afghanistan. we are in a world of smart phones and electric vehicles. there's a premium on lithium in

the moment. there will be a drive to try to get some of that. as we said at the start, all of this goes back to and depends on what kind of political system comes out of the taliban. it's all about adhering to human rights and women's rights for any kind of international engagement. at the very least, that would make it difficult for china to engage with the taliban if they are not doing so. tom: you've got the optics, the lack of infrastructure, the risks. you talk about the fact that you have $9 billion of reserves that have been frozen by the u.s.. what does the taliban need to do right now in terms of accessing foreign cash? >> they don't have much by way of exports that will generate currency overseas. it goes back to the role of technical support and assistance that has been a big chunk of change for the economy in recent years. we know that overnight, the world blank said that they will

put a pause on sending any money over there. the imf has already done so. it goes back to this core theme. no matter which expert we spoke to, they made the point that this will come down to how the taliban wants to do this. in 2001, there's no engagement. if they maintain improvements that have been made in afghanistan over the past 20 years, in particular women's literacy, if they tried would hear to international standards, there's a chance of engagement. that may open the door to getting some foreign currency. it's all on the taliban. it's all in what kind of system that we see emerging in the months ahead. tom: early signs are not looking positive in terms of their treatment of minorities and women. thank you for breaking down the

economic challenges and opportunities. let's get the first word news with simone foxman. simone: thanks. a new report from the u.s. cdc says vaccine efficacy among front-line workers dropped from 91% to 66% after the delta variant became dominant. researchers say the findings should be interpreted with caution as vaccine effectiveness wanes over time, backing up the recent findings of the u.k. study. the u.s. securities and exchange commission is demanding that more than 250 chinese companies better inform investors about political and regulatory risks. it's an expansion of the mandate imposed last month on china-based firms to get use -- u.s. ipos. it comes as a further response to beijing's ongoing clampdown on private industry.

meanwhile, arc investment ceo and founder kathy woods told bloomberg radio that she doesn't believe china's government crackdown will stop progress in the world's second-largest economy. >> i'm not pessimistic about china in the long run. i think they are a very entrepreneurial society. sure, the government is putting more rules and regulations and. i don't think the government wants to stop growth and progress at all. >> tiktok and shop if i are reported to be working together to add the ability for consumers to shop directly in the short video app. the pilot program will allow merchants to add a shopping to to the profiles and link to products directly from tiktok for the very first time. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. back to you. tom: thank you.

coming up, germany's election race tightens with a new poll putting the social democrats ahead of chancellor angela merkel's coalition. we get the latest from berlin next. this is bloomberg. ♪

♪ tom: this is bloomberg daybreak: europe and i'm tom mackenzie. the bavarian premier heads the key faction in chancellor unger merkel's conservative block has conceded that the alliance may fail to hit the goal of comfortably winning next month's election. this comes as a pull put the social democrats in the lead for the first time. maria tadeo joins us from berlin. how is the election shaping up? a lot of twists and turns in the

last few days. >> yes. we were heading into the selection thinking, it is german politics, it will be a boring election. when you look at polls now, they point to an election that is much more open and volatile than we initially thought. we had a pull yesterday which is being presented as a shock pull. the cdu now gets overtaken by the spd and the social democrats for the first time in 15 years. yesterday, we spoke with the head of the csu, the bavarian unit. he conceded that the numbers right now are not ideal for the union. let's take a look at it that. >> i would say that we are at halftime. we were out in front and had a few small mistakes and than the others picked up. now we have to pay attention. this will be a head-to-head

race. this head-to-head competition will continue up until the last day of the campaign. and then it will decide what sort of coalitions are possible. >> that was the head of the sister party to the cdu. at one point, it's interesting that he defended him, saying he's the right candidate and germans will come to that realization. tom: pulling has fallen off noticeably. in terms of the cdu, what are the issues they are facing? why are they under pressure at the polls? >> this is a story about many different elements. on the campaign trail, he's not a very effective candidate. you have a number of missteps that he's done. the idea for many germans that the cdu does not have a forward-looking plan for the country.

having said that, you can tell already that they are bringing out the heavy weapons. they are saying that they will undo everything that they've done and this will be a factor for the german economy. yesterday, that was the message. the idea that until now, the campaign has focused on triviality. it comes to substance, that's where the cdu will win back voters. have a look. >> the election campaign has been occupied the whole time with trivial matters. what is also in part very unfair for the public perception. in the last few weeks, it has gotten worse. i'm sure the polls will increase again. even if it's going to be a giant leap forward, i believe we can still remain at -- manage to remain number one. >> of course, that's the

expectation. whether or not that translates with the german public opinion remains to be seen. tom: great stuff as ever. maria tadeo on the ground in berlin with the latest on the election campaign. coming up, goldman sachs led the way on returning to the office. now they say they will require all employees to don masks and prove that they have been vaccinated. more on that story next. this is bloomberg. ♪

♪ tom: -- >> i think this market is priced to perfection. if i look outside the window,

life is not perfection. my team just started getting nervous about the equity market in the last couple of weeks. it doesn't mean we are going to be underway. we will certainly not be overweight going into the fall and jackson hole. tom: he's a little nervous about this equity market, saying that it's priced to perfection. doesn't expect much news out of jackson hole. we will be focused on the speech by jay powell. goodman sax led wall street's return to the office, pivoting to the question of vaccines. that's pivoting people's views. it's taking pages from the pandemic playbooks. the bank will require employees to don masks and proof that they've been vaccinated. for more, we are joined by michelle cortez. what is the progress on the return to the office? what does the mood by goat -- moved by goldman signal?

>> a lot of companies have started retrenching. they were opening up, trying to get people back into the office because they want that environment. they want camaraderie and bouncing ideas and information off of one another that we don't get as well when we are doing soon calls and whatnot. the reality of the delta variant is now starting to weigh on people. if you are at home and you bring the virus home to your children, you want doing anyone any favors. that's what goldman is realizing. goldman is going to require masks and vaccination. if you are not vaccinated, you have to stay home. if you are vaccinated, you need to wear a mask. they are taking a very conservative approach. a number of big banks are following that same process. they definitely don't want their

employees getting ill. tom: fda approval for the pfizer shop. the cdc has been warning about the effectiveness of the vaccines. what do they have to say? >> going back to your point. the fda has cleared these vaccines. companies now are respecting them to start mandating the vaccines. requiring them to get it. when we talk about the delta variant itself, there's a study that came out that shows that what we've been concerned about is happening. the protectiveness of the vaccine does wane over time, especially as the delta variant started emerging. the study looked from the end of december through this month and it showed that the mrna vaccines are about 66% effective at preventing infection. that is significantly less effective than it was originally against the wild type that we first saw when it was 91% effective. it's important to keep these numbers in perspective. 66% is still pretty good, at the top of the range that we were hoping for before we knew how

good the mrna vaccines were going to be. it's doing a better job at preventing serious infections, hospitalizations, and deaths. the idea that you can pass around the virus even if you are vaccinated is why you have to wear your mask. tom: indeed, to prevent breakthrough cases as well. thank you for the update. let's take a look at some of the things we are watching out for today. at 10:30 a.m., the eia releases its weekly crude oil inventory report. from 12:00 u.k. time, we will have u.s. data for mortgage applications as well. red-hot housing market in the u.s. still. 6:00 u.k. time, the world's largest gaming event kicks off. it will be held digitally again this year. that should not prose a problem for that industry. the u.k. offers its three week

review of covid travel restrictions. the infamous traffic light system. they will be watching for key markets added or removed from the red list. let's check back in on the markets. there's a mixed picture over and asia. the benchmark, the csi 300 and china is essentially flat. it's looking more positive in terms of the markets in korea. very modest gains there. the taiex as well. gains of 1.3%. hong kong is flat. the pboc did inject some additional liquidity. we had another record on wall street. we are an hour away from the open of the european market. there's plenty more ahead, including the open at 8:00 local time. the focus remains on the question of the fed taper and whether we get any more clarity. stay with us. this is bloomberg. ♪

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♪ anna: good morning and welcome to bloomberg markets. we will take you through all the market action this hour. the cash trade is less than an hour away. here are your top headlines. china's tech rebound fizzles. kathy woods says she is bullish on the long-term outlook for the world's largest economy. on the lives merkel's block trails the social democrats and polls for the first time in 15 years.