A new flu strain in china is seen as another potential pandemic. Investors dont seem to care. U. S. Markets close out their best quarter since 1998 with the s p 500 up 20 . Gold trading near 1800. Picture when split it comes to these gains we are seeing across equities and the continued gains we are expecting to see in asia. Havens still seeing those gains as well. Above 1800 for the First Time Since 2011. This is what we are setting up for in terms of the first day of the new quarter. Up by 1 10 of 1 as we get some analysis later of those numbers. Atwell as dollaryen trading 10 75. A little bit of Dollar Strength at play. Weakness when it comes to trading in the aussie dollar despite the jump above 69 u. S. Dollars from the back of those better than expected u. S. Pmi numbers. We are continuing to watch out for Market Reaction as to the geopolitical headlines to do with hong kong. Right. Lets turn to the city marking 23 years of chinese rule with the president signing a Landmark Security law for the city to quell dissents. It promises secret trials and life imprisonment for some cases of terrorism. Its expected to prompt retaliation from the u. S. Lets bring in our chief north asia correspondent stephen engle. We finally saw the text of this law after weeks of speculation. What are your Key Takeaways . Yeah. This is really staggering. We got the full text just eight hours ago. It went into effect seven hours ago. There was one hour from the time the full text was released to implementation. We had that unanimous rose vote yesterday on this National Security law. Basically approving it. Kongmplementing it in hong effective today. Across 1866 articles pages. , all four main issues dealing with National Security and National Defense including subversion of state power, secession, terrorism, collusion with foreign forces. We have to dig deep into those 66 articles to see some of the more concerning issues. To make, one of the biggest issues was, china claims it can do this under annex three of article 18 of the local basic law which allows them to add to the basic law here, pretty much at their discretion. They also have to consult the Hong Kong Basic Law Committee as well as the hong kong government. By all accounts, the local officials here, including carrie secretary, justice did not have the full text. They just have drafts of this leading up to this point in time right now. Here are the Key Takeaways. It applies to actions after the laws implementation. That was a key issue, whether it would be retroactive. It will not be. It also covers hong kong residents are companies and nonresidents anywhere in the world. It gives beijing power to calm prosecute complex cases related to foreign influence or other circumstances. Circumstances, there could be extradition to Mainland China or beijing to handle those cases. It also allows for closed trial for cases involving state secrets and also the Justice Ministry can opt out of jury trials. Thats part of the bedrock british common law system here in hong kong. It also provides, this is a key point, immunity for chinese mainland agents operating in hong kong. Thats one of the big points of contention in the prodemocracy camp. Mainland china and the communist party will be setting up separate investigative Law Enforcement bodies to investigate and potentially push through these cases of National Security in hong kong. As i mentioned, some of those more serious cases that involve state secrets could be repatriated or extradited to Mainland China for trial. A prodemocracy lawmaker here saying, this law, now that we have seen it in the fulltext hours,er the last seven is worse than she had feared. Expecting to see protesters testing these new security laws today . By all accounts, yes. The protest movement, how many people will come out, were not sure. They put out statements on social media, saying many come plan plan to come march. They feel it is their constitutional right. This National Security law supersedes many of the articles in that basic law. I dont have enough time to go through all those examples of that. That might be the case. By all accounts, this National Security law does take affect as of today. It could be applied to any type of march today. The police have banned any demonstration today, on fears of possible unrest, fears of coronavirus, etc. It could be a stormy daytoday. We saw the United States preempted that security law being enacted. Really banning those technology sensitive exports to hong kong. What else are we hearing from the rest of the world . We know that the United States is going to take a piecemeal approach to the various levers they can do in retaliation. We saw that in the last couple days, whether it was revoking special trade privileges that hong kong has. There are some currency issues. Theres a number of Different Things the United States could do. That can also harm the United States. Hour,ur guest in the last senator pat toomey, his first take away was that the Financial Security law is very disturbing. Boris johnson says hes deeply concerned. We are also getting news that theres a new bill on capitol hill being introduced by republican senator marco rubio called the hong kong save harbor act. It would designate potential those who feel they are being persecuted in hong potentially seek Refugee Status in the United States. Stephen engle in hong kong, our chief north asia correspondent. Withon the citys future michael 10. More tension between the u. S. And china. Says the Tech Companies are a threat to National Security. The best quarter for world stocks and stu thousand nine. Of view on whats ahead. This is bloomberg. Youre watching daybreak asia. Lets get a big check of the headlines. Anthony fauci has told lawmakers on capitol hill that the country is going in the wrong direction over the coronavirus. Adding that infections could more than double to 100,000 per day. Cases are surging in the southwest with several states putting reopening on hold despite president trumps calls for a return to mortality. The numbers themselves. Officials in victoria are reinforcing lockdowns in several suburbs among a spike in virus infections. The measures take affect wednesday evening and will last until july 29. People allowed out only for essential reasons. Cases,orted 64 new continuing a trend of days of doubledigit increases. International flights may be diverted for the next two weeks. Barclays is warning of a gathering storm over the u. K. Economy as government virus support comes to an end. The ceo told bloomberg, there has been a slight recovery but new upheaval is coming with the economy under severe and rising pressure. Were 9 million u. K. Jobs funded by a government furlough program. Unemployment is seen jumping when the plan eventually winds down. We are not out of the woods yet. We recovered more right now than we would have thought a little bit ago. The reset second storm coming in a couple months. Emergingmarket stocks are headed for the best quarter in over a decade. The msci emerging market index is closing out the Second Quarter up over to 17 . Thats the best run since 2009. 24 drop in the First Quarter. Joining us now is emily weiss. Great to have you. Valuations are getting up there when it comes to you. Not a stretched is what we are seeing across developed markets. What scope do you see for further opportunity in the second half of the year . What are the main drivers . Where do you see the u. S. Dollar headed . Thats a great place to start as we and the Second Quarter here. We had one of the strongest recoveries after a truly dreadful First Quarter for emerging markets. It was a mixed recovery at best. You hinted at the em equity performance which shows significant improvement along with that broad rally we saw in global markets. We have not seen as much of a rebound, particularly for emergingmarket fx. Slightly more muted with around a 2 rise versus the dollar over the last quarter. That has to do with how we see the dollar evolving forward. It has been one of those things where a stronger dollar has been a steady backdrop for the last year or so. We are only starting to see that some of that strong dollar momentum is abating as the u. S. Starts to lose the high yielding status it has enjoyed for the past few years and also some of the safe haven appeal that it had, particularly at the start of the crisis. Thing, we dosting expect some of the countries in the em space, particularly in asia, to come out of this quicker and with more robust recovery than across the u. S. Is that where you would be focusing some of your attention gekko attention . We are still focused on those regional differentiations. Certainly looking at north asia as the first country that went into the pandemic and are starting to resume this post covid nobler normal life. We started to see that people are returning to shops, workplaces. Positive provide a signal for the rest of the Global Economy that we track. Yesterday a pmi come out slightly better than expected. We got pmi data coming out in the next few hours, ranging from malaysia, indonesia, south korea, also china, to show exactly how those recoveries are forming and whether it will be this bounceback that we see in the countries that first ended up being the ones impacted by the pandemic. We are looking to asia for that rebound. Who are the laggards across asia . Do they present opportunity . There are opportunities. Differentiated performance within the aipac region. In particular, two countries stand out to me. The south korean won has been an underperformer year to date in the asian space. Even the fundamental story and the backdrop there, theres a case to be made for further catchup in the korean won. India stands out to me as a country where they have lacked the rest of the rebound we have seen in the rest of asia. We would expect them to steadily improved, especially if the picture remains slightly more risk on and we have the smart, data backdrop on the economic side. Of a stomach do you have to have to invest in those economies, given the volatility and uncertainty in the macro environment right now . Unfortunately, the covid pandemic and subsequent impact on growth is a major headwind. We have seen that for all of this year. As the virus continues to have a heartbreaking toll, that is something we are continuing to watch. The dollar. It is turning into a net positive for emerging markets as it impacts everything from inflation to exports. You have this unprecedented level of liquidity coming from fiscal and monetary stimulus. That backdrop is still very much there globally. Global money supplies surged to the highest level in decades. It does provide a backdrop for investors to go further into risk and increase that risk appetite. There are a lot of potential risks to watch. Pmi, bettere china than expected. In control. Showing that the recovery is still underway in china. Does that suggest that china will continue to be that anchor within the em space . Anchor,s acted as an over this last quarter. We saw that the worst possible scenario that were being thrown out there for china never came to fruition. Given that china is one of the few countries where we have seen that vshaped recovery in the pmi space, where it bounceback significantly in the course of a few months, now it is hovering around 50. When you see that momentum, it does provide a positive signal for the rest of the region, given the close connection that many of the asian currencies and equity markets traditionally have with china. Onyou have a special focus the longterm. Thats a region where we you see very few Success Stories in terms of the Public Health story. How much does that go into how markets will continue to get pressured, particularly when you look at outflows . The uc opportunities . I think its a very good point. The situation remains very fragile. Looking to see how the covid pandemic is really impacting these regions, were only just getting the data. It reflects that pandemic impact. As we look forward, these are countries that have limited fiscal space to respond to these sorts of crises. The general packages announced by governments have been smaller percentage of the gdp compared to developed markets and other emerging market peers. That means that more of the weight has fallen on central bank in these emergingmarket economies, to provide some of that windfall and help cushion the blow. It is brazil and mexico that are far from out of the woods right now. Evening countries like chile, lockdowns has had to be reversed and subsequently. Its a waitandsee territory. Those currencies did benefit in the last quarter from that general risk on appetite and search for yields. There is still a possibility we could see those assets have a better next quarter, if the situation doesnt get worse. Great having you with us. Thank you. Coming up next, Anthony Fauci warns the u. S. Is going in the wrong direction and says cases of the coronavirus could double to 100,000 a day. More on that. This is bloomberg