well. good night from new york. lauren: it is 5:00 a.m. here are your top stories at this hour. investors breathing a sigh of relief as markets make a comeback from the worst selloff of the year, after pointing the finger at the fed, president trump could be extending an olive branch to another market disrupter and that is china. cheryl: as the 2020 race is tightening up, why democrats may not want to bank on a recession to help win back the white house. lauren: jeffrey epstein's autopsy has been released and more theories are brewing as to how he died. cheryl: would you hack your own body to make your day go easier? the growing new trend that has

some scratching their heads. it is thursday, august 1 -- au" starts right now. sno♪ it's a brand new day. ♪ cheryl: welcome to "fbn: a.m." and good morning. i am cheryl casone. lauren: good morning, i'm lauren simonetti. are you feeling calmer this morning? cheryl: well, a lot of pepto bismol yesterday. futures are actually moving -- we've seen this almost every day this week. you've got a big selloff and the next morning in the futures market you get a boost or vice versa. right now we're seeing green arrows, the dow is up 113, s&p up 15 and a quarter and nasdaq

up 37 and-a-half after that 800 point selloff yesterday. lauren: and what caused the 800 point selloff was when this happened. if you look at the yield on the two and 10 year treasury bonds, they inverted yesterday for the first time since 2007. it really spooked investors. taking a look right now at both spreads, they are very, very narrow. cheryl: we're going to take a look at oil. there was a big move in gold yesterday. oil is still the story. there is weakness in the oil contract, about worries about a global recession. we are down fractionally on oil, $54.63, the last read on that contract. lauren: in asia we continue to look at the situation and the protesters in hong kong. that market up three quarters of 1% today. and the chinese market is up a quarter of 1%. cheryl: some of the asian bond yields were down a little bit overnight. but it wasn't as severe as the

united states. we are seeing weakness in europe. that is a little bit of the continuation of the u.s. selloff from yesterday. the ftse, the cac and the dax all fractionally in the red. lauren: let's go back to hong kong. president trump is linking the protests in hong kong with efforts to reach a trade deal with china. this is what the president tweeted l. i know president xi china very well he's a great leader who has the respect of his people. he's also a good man in a, quote, tough business. i have zero doubt that if president xi wants to quickly and humanely solve the hong kong problem, he can do it. personal meeting, question mark. thousands of people staged pro-democracy demonstrations at hoppinhong kong's airport. some of the protests did turn violent. that prompted china to say the behavior at the a airport and in the city was close to, quote, terrorism. cheryl: we'll have more on that story coming up in a little bit. the protests in hong kong are

showing no signs of ending soon. president trump wants this personal meeting with the chais niece president. tensions escalating in the city, it's now been months. benjamin holly joins us from holland as the u.s. issued a new travel warning. benjamin, good morning. >> reporter: good morning, cheryl. after 11 weeks it seems as if there's two ways the protests could end. one is if the protesters get the demands they've been seeking. the other is if they're somehow stopped and worrying signs on the border with china as the military blo buildout continues. last night police and protesters faced off with riot officers firing tear gas as their response to demonstrators hardens. yesterday president trump spoke out again, calling on china to deal with this humanely. even suggesting he was willing to meet president xi to discuss the crisis. we'll look at the tweet one more time. he said i know president xi of

china very well. he's a great leader who very much has the respect of his people and he's also a good man in a tough business. i have zero doubt if president xi wants to quickly and humanely solve the hong kong problem, he can do it. personal meeting, question mark. chinese forces continue to mass at the border including large numbers of paramilitary personnel and armored vehicles. it is a clear and visible threat to the protesters and it's led to warnings from other u.s. politicians. >> remember, this is the 30 year anniversary of tianemen square. it was a defining moment when we watched the tanks roll in as we watched people stand up just for the idea of freedom of speech. >> reporter: that travel advisory from the state department urges caution for all americans in hong kong, warning that the protests can pop up anywhere at any time and they will most likely continue.

cheryl: the satellite images of military forces on the chinese side, any new updates on that? >> reporter: no, we've seen those continue to build up. we heard reports of paramilitary personnel as well. the big question is whether china could go into hong kong, that remains to be seen. cheryl: benjamin, thank you. >> thank you. lauren: cisco systems waving a red flag about the trade war. the company projecting disappointing growth this quarter because of weakness in china. that prompted a major selloff in the stock, tumbling in the premarket. so this is after the big selloff yesterday. it's down 7 and three quarters percent. the ceo said chinese firms are no longer asking cisco to bid on their projects and chuck robins attributes that to the current trade dispute. cheryl: breaking news overnight, a gunman develop deering with his hands up -- surrendering with his hands up as a standoff came to an end in

philadelphia. six police officers were hurt in the shootout. the suspect barricaded himself inside his own home with several hostages. lauren: jillian mele joins us live from near the home with exactly how the police got the suspect to surrender. jillian, gone. >> reporter: good morning to you. we're a block away from the scene. we have new information and new video to show you. let's take you to that. this video shows the alleged suspect coming out of the house shortly before midnight, surrendering to police with his hands in the air. he is identified as maurice hill, he was identified by an attorney, part of a four person negotiation team to try to get him to surrender. this moment is after police fired tear gas into the home. the combination of those two things is what led this suspect to come out of the house with his hands in the air. the attorney by the way says he represented him on a prior case so the two had a relationship.

that's how he knew him. let's backtrack to when this went down, around 4:30 p.m. yesterday afternoon this started. narcotics officers were serving a warrant when the man inside the house started firing. we want you to take a listen to this see desperate dispatch cal. >> we've got shots fired from the second floor. we need s.w.a.t. asap, long gons -- long guns, asap. >> reporter: what you're looking at right now is one of the officers who was injured being saluted by his fellow officers. there were six police officers in total who were injured who were shot. one with a graze wound to the head, two officers by the way and three other people were barricaded inside the home as this was going on. they were in there for about five hours as the alleged gunman continued to fire throughout the day. the police captain tells me there was so much smoke in the house from the gun battle that

at times the police officers inside the house could not see anything. eventually all five of those people who were inside the house five hours later were brought out unharmed. the mayor said the focus is on the injured. during this time, temple university was on lockdown, there were two day-care centers, one across the street, that was on lockdown. it is a miracle that people are waking up in philadelphia this morning and there was no loss of life. it could have been a much different scene, could have been a much different conversation. lauren: and for you jillian, you are in your hometown. we prio appreciate that report. thank you very much. cheryl: new questions about jeffrey epstein's death as an autopsy reveals he had broken bones in his neck. the specifically injury is commonly seen in people who have been strangled. lauren: with that we bring in griff jenkins, live from washington this morning. you have more on that report, griff and a new lawsuit coming from one of epstein's alleged vivictims.

what's the latest? >> reporter: under new york child's victim's act, allowing a one year window for filing civil claims for child abuse, an attorney is speaking out about learning about epstein's death. >> initially she was angry, a little frustrated. she was hoping that mr. epstein would face justice in a criminal courtroom, that she would be able to stand up to him, see him face a judge that would ultimately lead to his jail-lead to him going to jail but justice begins now for her. that's why she filed a lawsuit today. she is fully intending to see this through to the end. >> reporter: the story gained national attention when she claimed she was lured to epstein's new york mansion as a teenager and raped. >> very forcefully, kind of threw me into the table.

i did what he told me to do. i was really scared. he forcefully raped me. >>knewexactly what he was doing. >> reporter: you mentioned the autopsy. a new report in the washington post unconfirmed by fox news offers details of the atop circumstance finding he suffered breaks in his neck bones, raising questions about the cause of death according to the president of the national association of medical examiners who said this, quote, if hypothetically that bone is broken that would generally raise questions about strangulation. it is not definitive and does not exclude suicidal hanging. the medical examiner's office is not commenting. the new york post reports epstein's last words to his attorney were i'll see you sunday. there's a lot more to come on this. cheryl: griff, thank you. lauren: the 2020 democratic field is about to thin out a bit. cheryl: we've got tracee carrasco on that story.

tracee: former colorado governor john hicken loop every ihickenlooper isexpected to droe presidential race. he discussed the possibility of running for senate in colorado against cory gardner. a former blackwater contractor gets life in prison for a deadly shooting in iraq. in 2007 he took part of a mass shooting in baghdad that killed 14 unarmed civilians. he was convicted of first degree murder. now he will spend the rest of his life behind bars. he told the court he was a victim of an unjust prosecution. amazon will now donate unsold warehouse merchandise. the unsold products from third party marketplace sellers had been going to the garbage dump. the products will now be sent to nonprofits and charities in the u.s. and u.k. and four loco is getting craze

yesterdaierwith a new hard selt. it will have triple the alcohol content of its competitors, 14%. the cans proclaim it to be the hardest seltzer in the universe. and that is what's happening now. cheryl: we've got a lot of news that we are covering this morning. we had that big selloff yesterday. we'll be covering your markets and this story coming up. president trump fighting battles on multiple fronts, a trade war with china, a fight with the fed over rate cuts, what winning those fights would mean for 2020. and google is under attack by its own employees, why the company is facing pressure from within. you're watching "fbn: a.m.." ♪ don't call my name. ♪ don't call my name. ♪ alejandro. ♪ $4.95. delivery drones

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but i feel like you have the potential to do so much more. can we build ai without bias? how do we bake security into everything we do? we need tech that helps people understand each other. that understands my business. we've got some work to do. and we need your help. we need your support. let's expect more from technology. let's put smart to work. ♪ ♪ cheryl: the hacker accused of breaching capital one was on a hacking spree when she was caught. prosecutors believe paige thompson stole data from more than 30 other companies and organizations. investigators are working to identify everyone that was affected. thompson was arrested last month for allegedly accessing more than 100 million credit card applications from capital one, one of the largest data thefts to hit a financial services firm. lauren: one day after the dow posted the biggest loss of 2019, we have a recovery this morning.

futures rising just 33 points on the dow now, so there is not conviction behind any sort of recovery we are seeing in the bounceback today. nasdaq gaining 12. the health of the economy discussed by the former fed chair, janet yellen with john hilsenrath. she says the u.s. economy isn't going into a recession and she added this about a closely watched bond market indicator that's flashing red. >> historically, it's been a pretty good signal of recession and i think that's why markets pay attention to it. but i would really urge that on this occasion it may be a less good signal and the reason for that is that there are a number of factors other than market expectations about the future path of interest rates that are pushing down long-term yields.

lauren: rebecca wallser and craig dismuke join us now. good morning to both of you. >> good morning. lauren: craig, you just heard what yellen had to say. why is this time different when we're looking at the inverted yield curve that preceded the last five recessions, why is now different? >> well, i think there's a perception that because there's so much global liquid at this, because central banks pushed rates around so much that markets are distorted and trading va value aren't reflecte of the real risk-reward. there was the same mentality in 2006 that perhaps market dynamics the changed and the inverted curve in 2005 and 2006 wasn't preceding a recession. lauren: i want to talk about, rebecca, the 30-year yield because for the first time it went below 2%, 1.96%. i compared that to 30-year bonds

in japan, yielding 0.15% and in germany, negative 0.2%. so rebecca, my question to you is, you know, will the u.s. go to negative yields and analysts at jp morgan chase says it's possible and it's possible in the year 2021 and i 2021 and tht would be the trade war with china. >> that is really awfully scary. it's not even normal financial concepts to have negative yields, to pay the government to keep your money. it does not make sense. but obviously germany and japan have had negative yields for quite some time and i guess technically speaking the economics could be there, that it could be possible, although much harder in the world reserve currency, the u.s. dollar. so it's a stretch, i think, but yes -- i also think we are going to get resolution with china before 2021. whether it's no resolution and

so multinationals adjust accordingly or whether it's an actual deal. lauren: as we deal with this china trade war, slowing global growth situation, a lot of folks are saying there will be a rate cut next month, craig. but if you look at the fed fund futures, just 20% are calling for that 50 basis point cut. where do you stand on that? >> well, look, i think it's important they get out in front of this. they're in a tough spot right now because the market's expecting at least 25 basis points of cuts and then potentially 50 basis points of cuts. what they want to do is surprise the markets by being assertive, being aggressive. to do that it's going to require them cutting 50. it's not going to change the cost of capital but hopefully can stabilize financial markets. it will be hard to not disappoint expectations. lauren: i thought the number for the 50 basis point cut would be bigger but rebecca, you know, as we've seen selloffs, we've seen recessions in the past.

how is this one any different? is there panic out there when you look at the volatility, the fear index, is there panic or is this a little bit different? >> i think it's a little bit different because we obviously have global trade and we definitely have global factors. yesterday we found out that china's manufacturing was less than expected, we found out that germany has contraction. those two things really he let us know the global slowdown is happening. on top of a trade war that is going on, this is the first time in really the united states since china's been our trade supplier that this has happened. so it is different. but the economic fundamentals are still there. so we have to remain calm, take a deep breath, understand that unemployment is low, inflation is great and the u.s. dollar is the safest place to be. lauren: on that note of positivity we will end. thank you for your perspective. tune into the klam a an countdown at 3:00 eastern time. edward lawrence will have his exclusive interview with the st. louis fed president, james

bullard then. cheryl: google workers are urging the company not to work with immigration authorities. more than 500 employees signed a petition arguing that border agencies violate human rights. the petition prompted by w0rd that customs and border protection was preparing to request bids on a massive cloud contract. last year google dropped out of the bidding for a pentagon contract after protests by its own employees. lauren: coming up, president trump possibly extending an olive branch in the trade war with china but will xi-jinping grab it? and we've all seen our fair share of, well, odd support animals from peacocks to snakes. but why some lawmakers are now saying enough is enough. keep it here on "fbn: a.m.." ♪ somebody, somebody, somebody,. ♪ can anybody find me. ♪ somebody to love.

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cheryl: president trump ups the pressure on beijing as the chinese communist government wrestles with an explosive situation in hong kong. president trump floated the idea of a personal meeting with xi-jinping. that was on twitter. let's turn to our asia expert, gordon chang. if this personal meeting takes place next month in new york during the united nations general assembly, will it be fruitful? >> i don't think so, cheryl. you have to remember that xi-jinping is under tremendous pressure in beijing. he owns the trade war. it's also his hard line policies that caused the problems in hong kong. if he doesn't have 100% wins on both of them, he could lose not only his political position, but much more. he's not going to be in a position i think to take a reasonable deal from president trump either on trade or on hong

kong. cheryl: the big story this morning and we don't know where this is going is the satellite images of the paramilitary troopers over in shinzen. there is a bridge over to hong kong and the concern is the chinese military will step in, how likely is that? >> if we were talking a year's timeframe, i think it would be likely. i don't think we'll see any movement from the people's army for quite some time. got to remember, october 1st is the 70th anniversary of the founding of the people's republic, it's supposed to be a big celebration inside china. they do not want problems in hong kong to mar that. it's unlikely that there's going to be any harsh activity before then. we also have to remember, cheryl, that you have probably the people's armed police mixed in with the hong kong police in hong kong police garb.

there's video evidence suggesting that's already occurred. beijing doesn't need to formally bring in the troops. cheryl: let's talk about the trade war between the united states and china. a lot of analysts are saying the president blinged by delaying the 10% tariffs on $300 billion. i want to get your perspective on that and what do you think the chinese are thinking right now? >> yeah, certainly the president blinked by saying that some of those additional tariffs won't be put in place until december 15th. peter navarro on fox business has given some good reasons why they deferred that but the question is why did they place the tariffs in the first place. so i think it was a mistake on the part of the president because it did make him look weak and it certainly undercut his argument that the chinese are paying the tariffs. i think the president had some good reasons to say that the chinese are absorbing the cost but he op he optically undercut

everything. cheryl: i want to ask you real quick, trade war with china, 2020, yes or no a deal? >> not a comprehensive deal, no. cheryl: gordon chang, thank you so much for joining us this morning via skype. thank you, sir. >> thanks, cheryl. lauren: no more peacocks, turkeys or snakes. alabama now cracking down on fake service animals. the new law set to go into effect september 1 will penalize anyone who miss represents their a -- misrepresents their pet as service animals. it will limit the animals to either dogs or miniature horses trained to perform a certain task for a person with a disability. cheryl: let's take a look at your money this morning. we were up 150 about an hour ago, now we're up only 27.

s&p us 6 and-a-half, nasdaq up 9 and a quarter. this is playing into concerns about a recession. we'll talk about it in a moment. also this, some democrats may be calling for a recession to oust president trump. why they may want to come up with a plan b on the debate stage next month. and you may want to call her a teenage genius, how one girl used her smart home to possibly outsmart her own mother. you're watching "fbn: a.m.." ♪ t decision ever. i switched to geico and saved hundreds. that's a win. but it's not the only reason i switched. geico's a company i can trust, with over 75 years of great savings and service. ♪

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lauren: as president trump prepares to face his supporters at a new hampshire rally today, he also faces disapproval from voters. take a look at this fox news poll, it shows 56% disapprove of the presidents' performance, that's a 5 point increase from just last month and it is 1 point lower than his record

disapproval rating of 57% as you can see there. that was back in october of 2017. does this disapproval help the democrats? joining me now, washington examiner commentary writer, brad polombo. what do you think? >> what people don't like about president trump is not as policy as much as it is her persona. this new poll shows the disapproval up 5 points, it's what has the president been up to the last month? he hasn't spent enough time talking about the economy, he's been getting in feuds with congressmen and bickering about baltimore. the poll should tell the president maybe what he's messaging right now maybe isn't working. lauren: speaking of the economy, how do you expect democrats to address the economy. you almost have democrats wanting a recession, telling people your financial situation is awful, things are terrible.

is that a good strategy as they go up against the trump economy, even if it is slowing down? >> you do have a few democrats saying crazy things. by and large i think what you're going to see is the democratic candidates misrepresent the economy on the debate stage because they have to. they can't sell the american people on free socialist everything if they admit that right now, athlete right now, things are -- at least right now, things are actually pretty good. we have low unemployment, good jobs numbers, good growth. that's what trump should be talking about. he's only helped when the democrats sprint to the far left and trip over each other to make each other seem more radical. he's banking on the fact they'll be so crazy, he'll win anywhich. lauren: bernie sanders says a $15 minimum wage isn't high enough. i want you to listen to his interview. >> we have tens of millions of

people who are earning what i consider to be starvation wages. can you imagine somebody earning $9 an hour. >> that don't make no sense. >> legislation i introduced that was passed in the u.s. house would raise the minimum wage to $15 an hour. lauren: here's the thing. senator sanders' plan to raise the minimum wage is slower than a potential president sanders plan to boost the minimum wage to $15 an hour. does he have a magic wand that we don't know about? >> no, he doesn't. the same problems with raising the minimum wage are still here. i have to ask, cardi b, what are you doing? we saw on his twitter rant that the taxes are too high and now she's supporting a man that's an open socialist. celebrities don't always know what they're talking about. lauren: bernie sanders isn't rising in the polls either.

brad, thank you. first time on the show. we appreciate it. >> thank you. lauren: you're welcome back. cheryl: her hair looks good. lauren: it did. cheryl: there may be some problems for some members of the squad. benjamin netanyahu is considering barring congresswoman ilhan omar and rashida tlaib from israel. they're scheduled to arrive in the country on sunday for a private visit that's been organized by a palestinian lawmaker. the washington post is reporting the israeli government told democratic leaders they would officially deny entry but later postponed the decision. officials are upset over the congresswomen support for the boycott movement against israel. lauren: the founder of bar stools sports firing back at congresswoman ukcongresswoman oz after joking that he would fire employees that would tri to tryo

unionize. >> let me clarify real quick. we are a comedy site. we're pretty clear about that. lauren: he says unionization is not an issue at his company. he doubts that aoc will debate him and s claims she used the feud to fund raise for her 2020 re-election bid. cheryl: well, talk about a teen genius. an areanna grande had all of her electronics confiscated by her mom. what did she do? allegedly she used the smart fridge in the kitchen so she could keep tweeting. she got this message out, i do not know if this is going to tweet. i'm talking to my fridge. what the heck, my mom confiscated all of my electronics again. lg who makes the fridge joined in on the free dorothy hashtag sweeping social media. there's some doubt as to whether or not she's telling the truth. it's a good story.

lauren: it was clever. let's check the action on wall street. the inversion of the yield curve yesterday really sending investors for the exit and they are not coming back this morning. dow futures unchanged, nasdaq futures down 5 points. still ahead, big reads on the economy coming up this morning, retail sales. we'll get them in a few hours. plus, earnings from walmart, is the consumer still strong amid the trade war with china? and it's not even september. we're already into pumpkin spice. you won't believe the next product to jump on that bandwagon. keep it here on "fbn: a.m.." ♪ i want to run but she made me crawl. ♪ oh, the sweetest thing 48 bales. all before lunch, which we caught last saturday. we earn our scars. we wear our work ethic. we work until the work's done.

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we were on a break! we were on a break. >> i just wish we could be like on a break. [ laughter ] lauren: this contest could give you big bucks but no breaks allowed. one lucky person will be paid $1,000 to binge watch friends. you need to watch 60 episodes, live tweet throughout the entire 25-hour marathon. this comes from frontier communications, it's to celebrate the 25th anniversary of the show. cheryl: watching tv, doing shopping at the same time, it happens, folks. you know it does. in a few hours we'll find out if american consumers are still shopping. commerce department will publish july retail sales figures. we've seen four consecutive

months of rising sales. that suggests consumers remain a deep reservoir of strength the economy. we'll also hear from walmart, they've got earnings out later today. let's bring in brett flicki fli. you're watching the premarket action on walmart. that's putting a floor on dow futures this morning. >> yeah, cheryl, walmart was only down about a percent yesterday, it's up about a percent in the premarket. it's providing a floor to the dow jones average and the s&p as you referenced and very important, walmart's increased wages to give their workers more money to shop, better customer service, more shopper loyalty, so walmart under dynamic leader doug mcmillon is doing well on every month, online and in-store. cheryl: on the heels of what we got from macy's, which wasn't a good report, the online component for walmart and target

seems to be fairly strong. is that name recognition? is that execution? >> it's name regula recognitiond doug mcmillon is recruiting the best and the brightest from the industry. they're taking walmart.com and by the time of the presidential election, walmart.com will be able to deliver to 90% of the u.s. population. so check mate amazon, which is still going to do very well. cheryl: analysts expecting for a full year guidance boost from walmart as well. let's talk about the retail sales picture this morning. we're going to get those numbers out. they've been strong. all this talk about the weak consumer and the volatility in the market, the consumer seems to be hanging in there. >> the numbers will be strong. they'll be a little bit soggy because of record monsoon weather across the continental u.s. and people buying more preowned cars now as a percentage of new cars and

sporting goods have been soft for years as you and lauren have reported well. overall, you're right, shoppers still strong, making more money, spending more money. the michigan consumer sentiment index, bloomburg comfort index still near historic highs. cheryl: retail sales report, 0.3%. news on jc penney, that's the other stock, they haven't fared as well as some of the other fast fashion type of retailers, unfortunately. the turnaround story for jcp, what do you say. >> penny, good ceo, making all the right moves. they just need enough time. their debt maturities aren't for a few more years but they just need some forbearance from the financial markets. cheryl: you would hang onto jcp. >> i wouldn't hang onto it but i believe in the leadership and the leadership with sufficient time can turn the company around. cheryl: we'll see what the numbers tell us today. thank you. lauren: take a look at you futures, made a u-turn moments

ago, dow futures down 68 points, s&p down 4, nasdaq down 27. china planning retaliation against the u.s. for our tariffs set to go into effect in september. a story we'll have much more on in just a bit. and how weight watchers wants to help keep your kids healthy using 21st century technology. we'll be right back. changing wh. changing wh. for instance, we know how your customers shop. and what they've already purchased. like this lamp. and we use those insights to show you what they might consider buying next. mid-century modern, nice. that way, you can keep sending them offers for the perfect products. and that keeps them coming back. how's that for changing what's possible?

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lauren: we've just had a change in the course of action here on wall street, just moments ago. take a look, dow futures down, had been up 150, now down 89, s&p down 6, nasdaq futures down 40. there are reports that china's planning retaliation against tariff that's are set to go into effect in september. in asia, the markets there closed mixed but mostly higher.

the shanghai composite up a quarter of 1%. the hong kong market which we have been paying attention to amid the protests, gaining three quarters of 1%. this is the action in europe. european stocks opened higher. they're now down 1% across the board here. craig erlim, is senior market analyst, he joins us from london. craig, we're looking at steep losses of 1% where you are. what are you pinning the blame on this morning? >> well, it's just an escalation in the trade war, it's not necessarily an unexpected one. we have to remember that there's problems in the market. there was a hope that by delaying the tariff increases to december, that was seen as thawing the tensions here. that is not the case as we heard this morning from china. cheryl: craig, it's cheryl casone here. this report, it's a pretty short one, it's breaking news that

we're getting, is that basically -- this is coming from the state council tariff commodities group, we don't know what the measures would be if the chinese are going to retaliate against the united states. this is a very short report. it was enough to sink our futures nearly 100 points in a matter of moments. we are now trending lower. if the escalation of the trade war continues and there is no deal, not a bad deal, no deal at all, craig, what does that do to global markets over the course of the next couple months? >> it means it's going to be extremely difficult. it's already been a challenging few weeks because of the escalations we've seen already. i think it's bad news for global markets. we have to remember, this doesn't just impact the u.s. and china. it is impacting the u.s. and china. let's look at germany right now. china's a big export market. germany is at risk of recession. look at singapore, a massive open economy, dependent on global trade, it's suffering right now. there are other countries the same or expected to follow suit.

that's why central banks are acting as they are. any further escalation is going to further fuel the fears and a that will be reflected in the markets. we're already seeing it affecting bond markets and markets tend to follow suit shortly thereafter. lauren: do you expect -- you were talking about the contraction in the quarter for the u.k., germany as well, the prolonged trade war with china, do you see recession in some of europe's biggest economies which would be two quarters of negative growth. >> absolutely. i think the u.k. will avoid it. i think it had a lot to do with stockpiling pre-brexit which was meant to happen on the 31st of march. i think the u.k. economy is stronger than the second quarter figure indicates. germany, this is the second quarter of contraction in the last year, just because it's not consecutive it doesn't mean that we're not seeing effectively recession scenarios kind of playing out and it could fall into recession in q3. i think other countries will be exposed as well.

it is linked whether we like it or not to the trade war and the knock i don'-on effects around e world. cheryl: craig, please stand by. we want to bring in asia expert gordon chang, joins us once again via skype. this new report, we just got this about five minutes ago that the chinese are planning retaliation against the united states over the issue of tariffs. that's all we know. give us any insight into this latest headline that we're seeing that's really sinking global markets right now. >> cheryl, we shouldn't be surprised. we think that if we sort of give them a concession, the chinese will reciprocate and indeed president trump mentioned that on his twitter yesterday. no, that's not the way the chinese think. the chinese think that if you give a concession, they believe that you think you, yourself, is weak and so, therefore, they press the advantage. cheryl: you mentioned this earlier on the shoarks yo show,k

the president blinked and the chinese think we're weak. you think this is connected? >> absolutely. xi-jinping looks at what president trump says and does and what he tweets and they react accordingly and we've seen this on a number of occasions, not only in connection with the trade war, but in connection with other matters. so this is the general posture. the chinese believe in his whole notion of comprehensive national power and when they think the other side doesn't have it, when they have an advantage, they move. so president trump should understand that really what the chinese are doing are reaction to his concessions. lauren: yeah, but gordon -- it's lauren simonetti. does china really have an advantage here when you look at the situation in hong kong? and now they have their military at the border, reportedly. we saw the satellite images. >> yeah, china's in an extremely fragile position right yo now. so no, they don't have an advantage but they do believe

that they've got political will. xi-jinping is lashing out. he really has no alternatives. so he's going to do whatever he has to to keep himself in power. got to remember that the chinese leaders are now at their conference, they do this almost every august. this is the sea side resort near beijing where it brings together current leaders and former leaders and they discuss issues of paramount importance. obviously hong kong and trade are at the top of the agenda and xi-jinping has very little -- very low risk threshold right now. he could lose everything. that means he's got to win everything. cheryl: also, gordon, you've got this hard line chinese official that joined the negotiating committee. i want to say it was five or six weeks ago. that seems to be putting pressure on xi-jinping and taking his power away, if you will. he's got that more hard line group he's listening to over in china. you've also got the united nations general assembly coming

up next month and if hong kong does not calm down and that seems to be a carrie lamb issue, if hong kong does not calm down, what could his next move be? we talked about his early in the show. military action seems to be a very frightening possibility. >> well, military action in hong kong is a possibility but also military action elsewhere along china's periphery is also a possibility. xi-jinping can lash out. he's going to take us by surprise. this is the way that he thinks. remember, he's a mau student and he looks at mau's policies, basically if you're going to have a problem, you might as well enlarge it. and so this is what xi-jinping is doing, following the playbook of the first leader of the people's republic. lauren: i want to bring craig back into the conversation. were talking about china dealing with the hong kong protests. where you are in europe, there's also protests against the russian government, protests ongoing in moss you coul -- mos.

can you respond to that? >> it's a story that seems to have come out nowhere in many ways. it will be how they go, putin isn't necessarily prone to not lashing out. it will be interesting to see how he manages the situation, how heavy-handed he is with the protests. like i say, wouldn't be surprised if he did take a strong position on this. cheryl: craig, stand by, i want to go back to gordon chang. on the market and the economic side of all of this, as we watch geo politics flair up around the world, whether russia or china. >>,we have seen severe weaknessn the chinese economy. these are state numbers that show that whether it's manufacturing activity, unemployment now at near record levels in china, that also is a market story and something that you've got expertise in. >> yeah. if you look at for instance the official numbers that came out

for july, they show growth but they show historically low growth especially industrial output. and the purchasing manager's undindices for the manufacturing sector for july both flashed negative. car sales were down for the 13th straight month and maybe most important, imports were down and that's a real indication of declining domestic demand. you put all of this together, you show an economy that is maybe growing 1%, maybe even contracting, and this is weighing on xi-jinping. xi-jinping's got problems to his north. he's got the russian protest. he's got problem to the south, he's got the honk kong protest. he feels surrounded. he knows if he going to loose easy going to try to win by taking everybody unaware. lauren: and that's the situation and the he slowdown that we're seeing in the chinese economy and, craig, we've spoken about the slowdowns that we're seeing in the european economy.

the federal reserve right here in the u.s. is looking at all of this and there are calls that there's a big cut of 50 basis points at the september meeting by the fed. what do you think the response from central banks is necessary, what is that response, craig, at this moment? >> i don't personally believe that such an extravagant response is necessary from the federal reserve. we look at the u.s. economy, and there is pockets of weakness. broadly speaking, economy is growing at 2 and-a-half percent. we're not seeing real signs of weakness. it's not like europe where we have a recession in italy, where we could be at risk at. hillaryrisk of recession ingerm. i think the fed could be more cautious with this. i think they will be a little bit worried about the inversion of the yield curve and what the markets are telling them. they will be paying attention to that.

broadly speaking, looking at the data, it's positive. cheryl: thank you. that is it for us. lauren: "mornings with maria" starts dagen: good morning, ladies, breaking news, china threatens retaliation if new tariffs take effect on september 1st, futures raising earlier gains on the news, they had been up the stock futures here in the u.s. more than 100 points on the dow futures, this coming off, you can see now 45-point loss on the futures here on blue chips, dow suffering worst day of the year yesterday falling more than 800 points. all three major market gauges finishing down more than 2.9% on global growth and trade fears and welcome to, everybody, here with me this morning mainstay management capital david, cfra investment strategist lindsey bell, wall street journal assistant editorial