Rally and 30 points on the s p 500. There arent many things that story thanter the market rally in. Lisa you said it before, fiscal support, more fiscal support, lower rates. This is what is driving it. I wonder at what point fundamentals catchup because we are not seeing the Economic Data to justify this, and yet, people are looking forward to data they are expecting as we see reopening start to take hold. Clearly, what we see in the next few months is common sense sense, an economy that goes from shut down to reopening. You will get that month on month sequential improvement. July will look better than june. August will look better than july, if we can keep on reopening. Part two is the limit of the recovery, the limits of normalization, how dependent we are on a vaccine, on improvement from the science side to really adjust the limits of that normalization. I think at the moment, were focused on the sequential improvement. At some point, youve got to get your hands around the longer term, how quickly we can normalize. Lisa also, people are talking about a vaccine, yet i dont see much from the mark executives the merck executives coming out and saying we cannot commit to this timeframe, and did not sign onto President Trumps pledge of a warp speed vaccine. You have to make sure it can get bulk toor in enough create herd immunity, and that it is safe. Jonathan theres a ton of hope, and theres nothing like the equity market to put on rose tinted glasses to start seeing the world in a better way. Hope about stimulus, hope about the science. We all want to live in a better world, and this equity market is encouraging that hope at the moment. Lori calvasina of Rbc Capital Markets joining us now. You have been far more conservative than most as we have rallied from the lows. We are looking at the drawdown. What are you looking at now . Lori nothing has really changed in our view. We are not looking at daytoday trades. For us, theres enough valuation in this market. The rally is very new slow driven, very fragile, and our opinion. We think you will see choppy waters now through yearend. I would say that tape is tempting to chase, but not when we think we should be chasing right now in terms of getting right now in terms of getting more bullish. Lisa so lets [indiscernible] performance this month versus the s p in two years. I am wondering whether that has run too far in your view, or whether this is catchup given how much it has lagged behind. Lori i think it is the latter. I used to be a focused smallcap strategist. During the qe era, i was exclusively focused on small caps. When i hear people talking about the market not matching fundamentals, that is exactly what we heard about small caps in the qe era, and they ripped. Even though this is a fed liquidity driven rally, the small caps havent really ripped. Look at the russell 2000 against either the nasdaq or the s p 500, and just take it back back take it back a bit. It has really been more range bound than a breakout. We had a couple of these melt ups like weve had the last few days where it felt like they were taking off, and they petered out. The price action underneath the surface is still telling me that while the market is in very risk off mode, it hasnt really been there throughout this rally. The market is still indecisive if you look under the surface. Lisa if you take a look at the russell 2000 so far, are you saying you would consider going into certain areas of these small and Midsized Companies . Lori the last big smallcap piece we did last month, we said we would be market weight the small caps relative to large caps. We thought very much it would be the pendant hump on the trajectory of the Economic Data, whether or not that trade could be sustained. I think you brought up a great point on normalization. Frankly, as ive talked to investors over the last six weeks or so, theres a lot of doubts about whether we will be back to normal anytime soon. That is a limiting factor on smallcap performance. That being said, if you think we have seen the worst of the itnomic data in 2q, and starts to get a little bit better here, you dont want to be underweight. So we think keeping a balance between your small caps and large caps makes sense at this point. Jonathan the problem a lot of people have got right now is the realization of missing out. The nasdaq has basically filled the gap. The russell hasnt come up but it is still 40 off the march lows. What do you say to those people that have missed out on the rip . Lori one of the things people are struggling with is that the rip is really driven by a lot of stuff that people that you and i talked to, the institutional community, dont like to buy. When we look at prior recession recoveries, it is short in names, the really distressed parts of the market that tend to work in these recovery trades. It is lowquality companies by any measure that you can pick. I think the frustration i sense from talking to investors is not just that the market is ripping and might not be there. A lot of people i talked to did try to get positioned for recovery, but it is not the kind of stuff they want to begin longterm that is doing well now. That creates an additional layer of frustration. Lisa youre making jonathan you are making the case to stay overweight consumer staples. Lori we like it better than consumer discretionary, which we are underweight. We are overweight utilities, industrial, and health care. I mentioned the concept of balance in small versus large. We also want to be balanced in terms of are sector exposure. Health care is our favorite longerterm growth play. I will tell you that with staples, we actually think the sector looks quite cheap again if you look at it against next years earnings, which we think are too high for the broader market, but with think are pretty reasonable for consumer staple companies. Consumer staples has also been a part of the market that has been so deeply hated. That is usually, when it is as hated as it has been, it has been a good three to fiveyear outperformance signal. If you are going to play the consumer, we think it is a better way to go than the discretionary stocks. Lisa we are speaking with Lori Calvasina, head of u. S. Equity strategy at Rbc Capital Markets. I always love speaking with lori, not only because she is really smart, but because she is also experimenting with this homeschool situation, which has led to questionable productivity of all of the parents out there. John has done a really good job highlighting how people are moving to cyclical stocks, financials and energies seeing a real gain recently. I am wondering how far this rally can go if we dont see momentum continue in the amazons and netflix. What is your thought . Lori i think it is a limiting factor to some extent. These are the biggest in the market, and you need them to go up if we see the market continued to climb higher. If they dont, you have to see a lot of the other big sectors in the market do a lot of heavy lifting. That is just because of the disproportionate market cap share of some of those big tech companies. Other areas like financials are just going to have to work even harder. Ive watched the financials. It is another trade that has only taken off recently. I really question the outperformance ability of financials on a longerterm basis if rates are going to stay low for a long time. We really need to see 10year gilts move up for that sector to outperform. Im not a bond market person, but it really have some doubts that this is a longerterm outperformance trade. It feels like a shortterm move off the bottom to me. Jonathan you are an equity Market Strategist that spend a lot of time thinking about positioning, so talk to us about positioning, and whether the path of least resistance right now is some of these names and financials these names in financials that are so underground. Lori what is interesting on positioning, we spend a lot of time looking at Hedge Fund Positioning because they are some of the most important dictators of price action in the market today. Financials have been a deep and chronic underweight for hedge funds for a very long time. It is like postfinancial crisis, we just saw a lot of hedge funds decide they are not going to play there. They decided to play in i. T. Services as opposed to the banks. Theres a Pressure Point for hedge funds if we do get a real long, true outperformance. They are going to be underexposed. It is going to hurt them. It has the potential to sort of drive them back into that sector and drive the prices up substantially. But i have been saying the same thing for three or four years, and it hasnt happened. All we really tend to see our shortterm trades driven by Value Investors and long only investors. They get to a certain level, and the hedge funds never pick up the baton. So the potential is certainly there, but the willingness i am not sure is. Jonathan Lori Calvasina of rbc capital, always fantastic to get your thoughts. Send our best to the whole family, and thank them for letting us borrow you for a couple of minutes this morning. This is the issue for financials, isnt it . I think it is the number one issue. What happens with rates, and how low will we remain where we are with rates at the moment . If the fed has got to go through with yield curve control, does that mean they try to flatten the whole curve, or do the appreciate some of the benefit that comes with a much steeper curve anchor the . End, keepthe front the long entire. Lori i was actually looking this morning at the gap between two year and 10 year u. S. Treasury yields. It is hanging in at about 50 basis points, and it has bring pretty stable, not surprising given that we are talking about yield curve control. Theres also the question of credit losses. Jamie dimon raised this yesterday when he said that they could possibly see a faster recovery than some people expected, leading to lower credit losses. A big wildcard people arent talking about as much as we head towards reopening. Jonathan what was the jamie dimon line . The fed could get out of bazooka, it deployed the old military the old military. On the s p 500, positive by a little more than 1 . Next up on the program, we had down to washington, d. C. To catch up with our colleague on the latest in congress and their next move as they look to hong kong. From new york, this is bloomberg. Ritika with the first word news, im ritika gupta. In hong kong, hundreds of protesters returned to the streets, demonstrating against chinas plan to take more control of the city with new National Security measures. Right have police fired pepper spray and projectiles. Meanwhile, the richest person in hong kong has come out in favor of the chinese law. The billionaire says it is every countrys right to address its National Security concerns. The European Unions executive arm is coming out with an unprecedented stimulus package to deal with the worst economic emergency since world war ii. It calls for spending 823 billion. 2 3 of that will be in the form of grants to member countries. The rest would be in loans, paid for by borrowing on financial markets. The u. S. Is considering a number of ways to punish china for that crackdown on hong kong. The Trump Administration is weighing whether it will declare whether the former colony has lost its autonomy from beijing. Amongst the possible sanctions, freezing assets from chinese officials and businesses. There could also be visa restrictions for Chinese Communist party authorities. A defining moment for elon musk and spacex. Spacex. If all goes well, a spacexs rocket launch this afternoon from cape canaveral, the first astronauts have traveled on a commercial vessel. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. This is bloomberg. I went directly to the president to get an answer on this, and he said to me that he is displeased with chinas efforts, and that it is hard to see how hong kong can remain a Financial Hub if china takes over. Jonathan the White House Press secretary weighing in on the situation with the United States and china. That situation breaking down, tensions flaring, doing nothing to this equity market. We are positive on s p 500 futures by 33 points, up by 1. 1 . Treasuries just a little bit lower, yields higher, up two points to 0. 72 . The dollar weaker against the stronger euro. Eurodollar coming up just 0. 1 . You and i have been talking about this. Slowly, quietly, and the background, the chinese currency slowly breaking down his these tensions continue to build. Lisa i am struggling to understand the trigger point here because we are seeing these tensions build, and they are expected to only increase ahead of the election. As you pointed out, this is a bipartisan effort to try to punish china for some of the trade measures, for some of the issues and the lack of transparency around covid19. That definitely seems to be out there, weighing on the currency, but not really anywhere else. I am struggling to understand what it would take for that to change. Jonathan lets bring in bloombergs Kevin Cirilli for the latest out of washington, d. C. I understand theres a bill going through the house that the president carefully taking a look at. Can you give us some of the details . Kevin it has bipartisan support from republicans and democrats. Both parties are in agreement here, one of the rare geopolitical issues where republicansee and democrats agree. That institutions in china could be sanctioned. The u. S. Could put them on a sanctions list. I am told this is just the first step in what could be a longerterm process, so the punishment could get increasingly worse if beijing does not back off. Therehow much emphasis is on responding to chinas encroachment on hong kongs independence, versus the recovery we are seeing ahead of the election . How much does President Trump really want to see a china tension story play front and center as he tries to rejuvenate the economy . Kevin politically speaking, the president views it as an asset politically speaking to be tough on china. Both former Vice President joe biden and President Trump have both said that they would be the more aggressive resident in terms of dealing with xi jinping. So it is not that one particular party is saying that there should be a different handling of how to deal with china. That is a stark contrast, mind you, to how russia played out in the 2016 election. , both 2016 in russia democrats and republicans are in agreement. There has to be a more aggressive policy geopolitical approach to dealing with china. Bidens campaign is saying that he would know how to do it because he would be able to rally european allies. The Trump Campaign is saying that President Trump has proven to be xi jinpings worst nightmare. Jonathan lets talk about next steps. Beijingscussed whether has actually talked about the special trading status of hong kong to the degree that it would back away if it was threatened with it. The administration, according to our reports, looking at the ,ussian route of things sanctions on individuals, businesses, and maybe not necessarily Going Forward with rescinding the special trading status of hong kong. Kevin that is really where all of this is headed. If china can say in the shortterm that perhaps that would not have significant economic decline for them or negative impact in the short term. However, what we have seen over is this two weeks steady, incremental approach from u. S. Policy from both parties taking little steps against china. I think the next step is not just dealing with china, but other countries. As should look at india another. One state Department Official pointed in that direction. I would also note these types of International Standards around different sectors, 5g, as well as the energy sector, and trying to get europe in the u. S. Back more on the same page. That is something the president has struggled with. It is not viewed necessarily as an asset come but that could start to change over the next couple of years. Naively, previous administrations have focused on shaping and influencing the behavior of the Chinese Communist party, and i think you get to a point in time where youve got to recognize, times up. Actuallylity to shape the coming is party is really limited. As we look at this administration, i wonder if we are witnessing the shift now, that there is a realization that they cant influence and shape the behavior of the Chinese Communist party, and with got to focus on what we can do at home, focus on the supply chain, get on board, and create a wider sphere of influence with the United States at the center of it. Kevin further, this is a realignment of the Foreign Policy approach. Democrats and republicans are in agreement. To your point, the u. S. Policy for the past two decades has been engaged with the chinese coming is party. Sometimes, silence can speak volumes. I would argue that the president has forecast that in the last three weeks because hes not said that he once to get on the telephone with xi jinping at all. This is a president who has with kimrequently jongun and other foreign adversaries, and now getting a bit of the u. S. Cold shoulder and saying, you know what . If you are not going to play ball, we can find another country to invest in that will. Kevin cirilli with the latest in washington, d. C. Thank you. Always great to catch up with you. I think it is absolutely critical. Are we moving away from trying to influence the behavior of the Chinese Communist party . But i am struggling to understand the political will right now. Yes, kevin is saying it is a bipartisan issue, and yet it is unclear how we get there. We have been talking about the idea how theres a lot of pushback in revoking the special trading status of hong kong. Tom also really struggling understand the economic pullback in increasing tensions ahead of the election. I dont know that President Trump wants to see that. Jonathan it is a good point. I wonder as you go from shutdown to reopen, whether that is a focus at the moment. Maybe these politicians not just in the u. S. , but elsewhere feel aggressive only aggressive on the trade channel when theres not much trade going on. A little later this morning, we will be catching up with the new york fed president. Next, we will catch up with jordan rochester of nomura. Good morning. We are live on bloomberg tv and Bloomberg Radio. ,onathan from new york city this is bloomberg surveillance. We are live on bloomberg tv and Bloomberg Radio alongside Lisa Abramowicz, im Jonathan Ferro. 60 minutes away from the cash open in new york city. Here is your price action. We push higher more than 1 , up 33 points. Obsession highs. Off session highs. We had big time to yesterdays gains. Lisa and i have been talking about the action in Foreign Exchange through most of this morning. 25 , optimism around the euro stimulus story and a weaker chinese currency again. We keep coming back to this. I am calling it the quiet selloff because it is not generating attention. It is not causing chaos elsewhere. If you saw a selloff off the back of this, it would get all the attention it warrants. Right now to so isolated hardly anyone is talking about it. Lisa people are saying it will be contained. A biger hong kong is area for dollar trading and im wondering if any kind of motion on the part of washington, d. C. Could restrict the dollar funding to china. Could that lead to an accelerating of the weakening in the yuan . People brushing this offer now. It is risk on. Jonathan lets have that conversation with jordan rochester, our fx strategist conversation of the morning. We have this chinese currency weakness, trying to establish how much weakness the authorities in china will tolerate. What is your take on things at the moment . We have the tweet from donald trump suggesting therell be something announced by the end of the week. When itmoment comes to levels, we are talking 720, 730, that is not out the bounds of possibilities. It is quite isolated. Ive a chart in front of me. Odollar versus dollar they are usually perfectly correlated over the past does go to three months. They have broken down. Youre getting dollar weakness elsewhere and Dollar Strength against china. Jonathan what is your take on why it has remained isolated, why we have seen that isolated weakness and hardly any of it has played out in the rest of the market . Jordan it is a slow grind rather than a bang. You have optimism playing out in europe. Naturally euro would be higher thanks to the recovery package. The china story is a china story. It is not a reason to sell everything. I think markets are being a bit picky when it comes to why they are doing such a thing. I focus on a few things in europe which is banking stocks start to show some signs about performance, and you are seeing steeper curves. Curve versus the u. S. Curve, it is rising slightly. There are reasons to be buying euro. That is why you had that break down. Lisa one reason people are buying the euro this morning is because of that 750 euro package the European Union is proposing. Im wondering how much of that has been priced in as a done deal, such as asam were pointing out the frugal four has not signed on yet. Jordan i feel like a negative nancy when it comes to this because i would like to be helpful. We had that when the market was trading around 108. The move from 108 to where we are now is pricing in some of the package. We all looked at the details from today. Slightly bigger numbers. 750 billion overall. 500 of that will be in grants. That is the good news. That was in the realm of what we expected. I thought it was priced in and that is why the move has been not much of a big move. Euro in a 108 to hundred 10 range. I do not see it breaking that today. What would changes if the netherlands, denmark, or austria would say we want to change our minds on this. The paper they put out yesterday does not suggest they are going to do that. If one of them does change their minds, that might start the chain reaction. Some things to watch out for. Market is not long euro not short euro. Is there should be massive reasoning why you should buy the euro the ecb might increase the kiwi package. The qe package. The ecb next week might surprise us with the big stimulus package. And yields more qe pressed again and the euro goes back down. Im a bit of a negative nancy. I think we are still in this range. I advised to be short. I will change that tune if we. 50 or 110. 78. That is when we get a position unwind. Lisa this is fascinating. A lot of people yesterday i was speaking with said part of the risk rally we are seeing is because of the weakness in the dollar. You have to wonder if the euro starts to weaken, we see more strengthening in the dollar, what that will do the risk asset balance. It has been a hard call. Jonathan im interested in what the ecb can actually do in terms of doing more. What does moore look like at the ecb . It comes at an interesting time as we get some pushback from the Constitutional Court in germany. They turn out and do even more qe. Jordan i thought it was fantastic. We had the announcement from the german court and then the ecb did not slow things down, they pick things up. The kiwi they are doing the be lesswant the ecb to like their past selves and more like what the fed did for the bank of england is doing. Just to give you some numbers come every week the ecb is purchasing around 4. 3 of gdp. That sounds like a good number, but the bank of england is doing double that. The fed was doing at least 15 times that. Increaseo see the ecb the package. Something like 500 billion would be towards the top end. If they went even further, that would be more fantastic for spreads. That would mean risk on in terms of equity markets. You debt spreads narrow. Higher qe leads to a weaker currency. Jonathan that is what i want to jump in on. I think that is critical. Increase europe and an of flows into the comment on the back of optimism results in a weaker euro. That would be intuitive for a lot of people outside of europe. That is what we are used to. Im wondering why that would play out inside of europe . Jordan it is wrong if the curve does not flatten. If we get qe where the curve steepens, which would be bizarre, then we would see higher yields and the euro goes higher. That is not going to happen. What should happen is higher qe, flatten the curve, less attractive risk rates in the euro area and therefore less inflows into the euro area. That dynamic does change if you somehow see Foreign Investors thinking i know Value Investors told me european banks are cheap and i know theyve been saying it for years and i have ignored it, but nows the time to do it. You found inflows on the equity side into european banks and other asset classes, that could be a dynamic change in europe. That will be the restaurant dynamic. Qe packagee the making everybody buybacks by banks. Lisa given the fact that the u. S. , europe, and japan are all engaging in unprecedented rescue rescues and monetary packages and monetary easing, how much will this eventually benefit we have not seen it . Jordan until we know when we get an endpoint. If there is an antiviral solution, that will be the day we can all truly say the worst is behind us. In terms of the word stimulus, we have to bear in mind it is for theimulus government to order everyone to stay home and work from home at they can. The stimulus we are seeing is trying to offset the damage done by the social distancing measures. It is about getting the balance. When we know we will not have a second wave, we will not have a third wave is when you can start thinking about these emerging markets are overexposed to certain sectors such as trade and tourism more than developed countries are. That is why those ems remain under pressure until we get the Big Questions answered. Jonathan good to catch up with you. Fantastic to have you with us on the show. Jordan rochester of nomura. We had a big couple of days for european banks. Deutsche bank up 4. 5 . The optimism is real. I wonder the reality around the situation. The likes of austria and the netherlands, are they behind the package people are talking about . Has their position moved . That is what is critical. People can throw around bigger numbers, but if it does not have support the bigger numbers do not mean a single thing. Lisa there is also a question of whether these banks are coming off incredible lows. They have been in a bear market for a long time. European financials doing terribly, and Deutsche Bank yesterday saying part of the issue they are seeing is continued momentum in their trading revenues, particularly fixed income trading. There is that kind of tail wind underneath these already very beaten up credits. Timeig question mark in my is the potential credit losses. How much has been factored in, whether the accounting regime is showing light on what they potentially are, as well as the consolidation no one seemed to be talking about. The valuations are so beaten up, this is an increase, but off of a very low start. Jonathan that is the story in europe for the last 10 years. The valuations. It has been a value trap again and again. I have no idea if this time is different. A massive amount of people to answer that question. Alongside Lisa Abramowicz, im Jonathan Ferro. Will have a conversation about china, and then in about 40 minutes we will have a conversation with the fed president John Williams. This is bloomberg surveillance. We are live on bloomberg tv and Bloomberg Radio. Police in hong kong fired pepper spray at hundreds of demonstrators today. It is the first time in months protests have broken out. The protesters marched against the new legislation that gave beijing more control over hong kong. Around 300 people were arrested. Christine lagarde calls it the worst Case Scenario for the euro area economy this year. Output in the region is likely to shrink 8 to 12 , inline line with more pessimistic forecasts. Youre talking about an economy in the euro area that is going to shrink more so than it has during the great financial crisis. Ritika lagarde say estimates for a mild scenario are out of date. Facesmr. Boris johnson more pressure to fire his top aide. Polls show most think cummings broke lockdown rules and think he should go. The Prime Minister faces questions from lawmakers today. Bloombergs has learned russia wants to ease oil caps starting in july in line with the opec deal earlier this year. Saudi arabia tried to prop up the market with additional cutbacks. Coalition members are weighing whether to extend the cuts as planned. Has learned amazon is in talks to buy a driverless vehicle startup. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. Bloomberg. You think about the news flow over the years, it has been all bad stuff about breakups, default, credit downgrades. This is a game changer. It could be three or four times this. Jonathan steven major of hsbc weighing on the stimulus we could get from the likes of europe. That is giving the markets left. In United States, it means equities higher more than 1 . Eurox market, the stronger off the back of this. Eurodollar through 1. 10. A few days ago we were 1. 08. Up. 33 on the session. That is the stimulus conversation in europe. In the United States, lisa, as i get set to step away and prepare for the next hour programming on 9 30n tv and on radio at will be catching up with new york fed president John Williams on the next step for the federal reserve. Of a lot done a hell over the next couple of months. I wonder what we can expect for the months ahead . Lisa how much of their preparing to do more and how concerned are they about elevating valuations when they are not going to backstop solvency risk . Jonathan i do not think there concerned at all. Otherwise why on earth are they buying junkbond etfs . Lisa yes. Although they do discern the fact that it is just the highest quality junk bonds they are focusing on and not that much with respect to junkbond etfs. I have no doubt you and Michael Mckee will press him on whether they are starting to feel uncomfortable and put that question to him. We are looking forward to it. I know you have to prepare. I will let you run as we shift gears to china, also in focus right now. I am pleased to say Leland Miller of the china beige book ceo joins us now. So hard to parse the noise from the reality when it comes to the saber rattling between the u. S. And china. What measures being proposed by u. S. Congress traders should analysts be taking more seriously . There are a couple of Different Things happening. That is one of the reasons why people are complacent about what is in a normas Downside Risk to markets over the coming weeks and months there is an enormous Downside Risk to markets over the coming weeks and months. Thee is a presumption president will come out with sanctions and other threatening news. Congress has come out with a bill that is aggressive and that it sanctions individuals but also chinese banks and assists those individuals in cracking down on the hong kong protests. With the sanctions looming over markets, the bigger deal is special status for hong kong. Hong kong has a special relationship with United States and that we do not treat it like mainland china. It is officially autonomous from china. We treated differently. The state department has to make an annual certification that remains the case. This has been pro forma for years and years. Now it is a big question. If the sedition laws are jammed through hong kong from beijing, there is a good chance we will see certification from the state department and the de certification will lead to special status removal, although the president will have the ability to make that bigger or lesser depending on how he wants to run this. A lot of risk coming from these actions. Lisa who will that hurt more, revoking the special trading status . The u. S. Or china . Leland it is not going to hurt china directly. It will hurt hong kong. That is the problem. Most people in hong kong are opposed to the fact that beijing is stamping out liberty and doing away with one country, two systems. That is why this is an automatic move in regards to article 23. I think the United States will have to move forward, particularly if we start seeing aggressive actions. When the National Peoples congress languages announced, there will be a question whether it will be softly introduced or whether you see the Security Services pulling people out of their houses in preparation for Tiananmen Square anniversaries, the huge political anniversary. Depending on how the chinese handle this, you could see a fierce reaction in a matter of days, or you could see a slow boil through the next couple of months. Lisa why is beijing doing this now . Leland it is tempting to look at this through the prism of u. S. China relations. Certainly there is an element. September, is in hong kong has legislature of council elections. Just like the lower elections held months ago, probeijing forces look like they will do poorly. If you are ever going to tighten the screws and put in some stronger laws to give beijing control and make sure beijing is not embarrassed, you have to act now in order to change the landscape so beijing is not embarrassed in september. A combination of what is happening externally and happening in hong kong domestically has created a window where beijing has to act if it wants to change what is going to happen in the fall. It looks like that is what it is doing. Talkinghn and i were throughout the morning about how markets are shrugging off a repeat of what we saw in recent years with respect to the rising tensions between the u. S. And china over trade. A lot of people saying phase one trade agreement still on, both countries needed. You are saying it is dead in the water. Why do you say that . Leland when people hear sanctions, they are right to roll their eyes. How meaningful will the sanctions be . Is president really dont distinction really going to sanction highlevel members, freeze their assets . Probably not. They are right to not take sanctions too seriously. The special status is a big deal , and if United States pulls that back, it changes the u. S. China relationship quite theificantly and reflects overall deterioration of the u. S. China relationship going into the fall. It is getting very toxic. My belief is it will be hard for the president to stand by phase one deal when he is not seen the deal fulfilled. He is going into a very rough election season. China is the topic of the day. Who is the meanest to china is the guy who will win this, and he will have to stand by the deal. I think phase one is in trouble. We do not see it survived the election. This is a reflection of the overall toxicity of the relationship right now. Lisa Leland Miller, ceo of china beige book, thank you for being with us and for your insights. I know you look under the hood as far as the granular Economic Data. We will have to have you back to talk about the reopening and what we have seen in terms of an economic recovery. Right now, we are certainly seeing a lift to equities across the board. S p futures not quite at the 3000 level, but inching up to 2991. The dow up 529 points. Seeing a bit of dollar weakness. The euro strengthening. Coming up on Bloomberg Television and Bloomberg Radio, a conversation with new york fed president John Williams looking at whether there is any unease about the fear of missing out trade. I am Lisa Abramowicz together with Jonathan Ferro and tom keene. This is bloomberg surveillance. Jonathan from new york city for our audience worldwide, good morning, good morning. The countdown to the open starts right now. 30 minutes away from the opening bell. We add weight to yesterdays moves. The s p 500 just obsession highs , rolling over a touch but still elevated 25 points. There is nothing like a change in price to rewrite the narrative. The price is changing higher. In the bond market, treasuries lower over the last couple of days. Yields higher. We are race this mornings move with the tenure at 7. 7 , and in foreignexchange we see a stronger euro on the hopes of a fiscal package coming together on the continent. Here is the big issue. The president of the United States leading the optimism and the optimistic point of view for a quick economic rebound. President trump we are making very Good Progress on the economy. The numbers are better than anybody would have anticipated