What an interesting market. It is not a normal july, and simply, it is not a normal friday. Gold almost touching 1900, better markets in the last minutes off the better than good pmi data in europe. Francine we had betterthanexpected pmi in europe, but also the u. K. It is not moving markets that much, but it is something to keep an eye on. Lets get to first word news with karina mitchell. China has dropped back, ordering the u. S. To close its consulate in chengdu because of the u. S. Decision to close the chinese consulate in houston. China serves as a key u. S. Listening post. China says its action is a legitimate one and necessary. President trump has given into worries about the coronavirus. He canceled his florida nominating convention. That was going to be the biggest event of his reelection campaign. Florida just posted a Record Number of deaths from the pandemic. The president says he did not want to take any chances. There are still differences between Senate Republicans and the white house over the next pandemic relief plan. Majority leader mcconnell says it will not be rolled out until monday. White house agreed to drop its demand for a payroll check holiday. Republicans are backing another round of 1200 checks, plus expanded Unemployment Insurance. And the u. K. , the lockdown eased off in Retail Stores last month. Sales volumes are almost up 14 in june, the most since records began in 1996. Sales are approaching their prelockdown levels. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more im karinauntries, mitchell. This is bloomberg. Tom thanks so much. Really appreciate it. Equities, bonds, currencies, 12. Dities futures are the vix back, but the vix is not back up to the range we saw 10 days ago. That 32 to 28 range. We are at what he 7. 26. They have come we are at 27. 26. 1894. Ne mentioned gold, price, 41. Ude it is friday and i have run out of energy. Francine gold is close to an alltime high, so i am looking at that almost every couple of minutes in case it changes. The dollar extending the week slide. Are falling in u. S. Futures because markets are worried that the recovery in the u. S. Has stalled and they are worried about escalating tensions between china and the u. S. Beijing has fallen through has followed through on its threat for retaliation, ordering the u. S. To close its consulate in chengdu, this after the forced closure of the chinese consulate in houston. Joins us from chengdu. The retaliation was a closing of a consulate as expected. It was not the one that would have hurt the u. S. The most. Is that it, or are we expecting a further escalation . Well, i think it is a response to the closing down of the chinese consulate in houston. Things, the many escalation on any front at any time. Francine sharon, when you look at exactly what this means for trade, you had some pretty strong words from mike pompeo on china. How will the chinese leadership take that . Obviouslymean, it was withinflammatory, and even the antiamerican sentiment that is already spreading in china, we are talking with people in chengdu today about how they feel about the consulate closing, and a general or kind of curious or they dont really know what is going on. But they do know that tensions are rising. Resident,o a chengdu and she thought it was great that there was a proportionate response. Tom sharon, there is a backstory, and that is that chengdu is north of hanoi, and that is north of bangladesh, betctly west of and to is north of bangladesh, directly west of chengdu. That is how you get to to bet. Foron is diff difficult ambassadors to access it. Tom one final question if we could, with the connection that we have got, and i believe we will see you in the next hour as well. The turmoil into the weekend eggs for another response. Begs for another response. From where you see china and your reporting on china from beijing, is this the final response, or do we assume there will be something next . Sharon it is hard to tell, but i dont think anyone thinks this is the end. Tensions are really firm right now, and this closing of the theylate, this is the most have seen in many years, and i dont think it is going to stop here. Francine thank you so much, sharon chen, bloombergs beijing bureau chief. Up next, Patrick Armstrong we will talk to him about the u. S. China tensions and talk to him about gold. This is bloomberg. Tom good morning, everyone. Francine lacqua in london, tom keene in new york. We just spoke with sharon chen in chengdu. Elizabeth economy will join us later. Ambassador haass will be with us in a few hours, and that important story with the stimulus issue in washington. We have the follow on from the stimulus in europe. Right now on the markets, they have been front and center here. Patrick armstrong joins us. With the market turmoil, with the new agitation, a better than good market, and the pullback we have seen over the past two days, have you made any changes to your portfolio, to your allocations . Anyick we have not made changes. We are sticking with what has been winning, the quality companies, the growth companies. We think they will continue to rise because when a dollar in 10 years is worth the same as a dollar today, companies can double their earnings a lot more than companies that will see their earnings flatline or deliver low growth and negative growth. We are long on health care companies, technology companies, and we are short on indebted cyclicals, autos and banks that dont have the Investment Bank divisions. Believe,e is a whole and certainly francine and i have seen this through the week, people flat out afraid to participate. We see it in the flows, the retail flows, the institutional flows as well. What do you say to people who . Ay im out of the market i can totally understand that because people think that is what i have to do, and then i look for alternatives. We were getting big credits reds that big credit spreads in march, and now that is gone. People with negative yield growth, equities are not cheap by any means. There is going to be pullback, there are air pockets because there is no valuation support on traditional members traditional measures. That is the one area well, not the one area, id like gold a lot, too, that is the one area where you will see real inflation created above gold. Francine when does gold get a breather . Patrick gold, if you wanted to write the recipe for the perfect backdrop for gold, you almost have everything right now. Spiking overmoney the past when he 4 . Over the period of the 1980s, it was growing at 15 to 20 per pound. You have zero Interest Rates, so there is no opportunity costs for moving gold. You have massive geopolitical risks, Central Banks who de who wantto to dedollar their reserves. You either have to have you have to have a debasement of currency to get out of those debt to gdps. You will not grow your way out of debt to gdp. Preserves value in that kind of environment. What patrick, so im not talking about fair value. Where does gold go next . Is the sky the limit, or is there a plateau . Quickly it depends how the debasement strategy happens. Seen withat you have negative real yields come you get no yield in gold. But you will probably will preserve your purchasing power. As inflation is generated and as monetary currencies are debased, gold goes up as measured in those fiat currencies. I dont think youre going to change or wealth, but you can preserve your wealth in gold. At 3000it to be within three years and from now, and that is just because governments and Central Banks dont have many alternatives except to go nominal gdp. Real gdp is going to be hard to grow. I think will be much easier to raise inflation and create nominal growth with their debt to gdp ratios. What does don what does the 3000 tom what does the 3000 gold price due to nontangible assets . It is hard to say. I think right now youre seeing quantitative easing, which is basically Central Banks giving money to institutions, to affluent people, people who have treasuries. Central banks say i will give you cash, you give me treasuries. On the fiscal side of things, you are going to see more direct transfers to individuals because unemployment is going to remain sticky. Generally, there will be a sense that there is a debasement strategy, and tangible assets are something you want and people will start to question intangible assets at some point. I think while you have the impression of zero Interest Rates, the intangible assets have attraction as well. Tom Patrick Armstrong, wonderful to have you with us today, and we will continue. It is shocking images, the images of a generation, if you were of my vintage, it is a secular turkey. Thel now and arguably greatest symbolism of my lifetime of the changes in turkey this is the grand mosque in istanbul. The 1453 switch from christianity to islam, and then the experiment in the 20 century of secular turkey. There is a change for the first time in 86 years. There are prayers of islam at the grand mosque. [chanting] Tom Bloomberg surveillance. Good friday morning from london and new york. We are watching the markets after the pullback yesterday, continued pullback this morning. Futures 12. With the business flash come here is karina mitchell. Karina shares from intel falling after production process suffered another delay, the news boosting shares of rivals. At issue is a method for cranking out smaller chips. The latest sign coronavirus is wreaking havoc in hollywood, disney has canceled the august live film the moulin. For the ninth quarter in a row, there were net outflows of hedge funds. Investors pulled out more than 42 billion from hedge funds around the world in the second quarter. For the year, where than 55 billion has been withdrawn. That is the Bloomberg Business flash. Francine thank you so much. Lets get back to the markets and back to Patrick Armstrong. We were talking a little bit before about gold that you like so much. Does that extend to silver, or is silver a slightly different function . Patrick it is something i looked at that i wish i would have bought. We started looking at it a couple of months ago because the gold silver ratio got blown out the widest it has ever been. ,ut i think any precious metal silver probably makes just as much sense as gold. What i like about gold is it will be used as an alternative to the u. S. Dollar for reserves. We will not get there with silver, but there is a loose link between the two. If you like gold, you probably like silver as well. Francine what are you constructive on right now . I dont know if that you Recovery Fund makes you by European Assets makes you buy European Assets more. Patrick it has change on the euro. Around the euro will end 1. 20 versus the dollar. Before that, we were expecting no change between the euro and the u. S. Dollar. It has removed some of the fragility and entered some of the questions, to be sustainable and viable hue need fiscal basically integration, and we dont have that. But it does show in times of stress when there is emergency, when it is needed, you have a form of fiscal integration, and i think that adjusts the weak change in the euro. That removes one of the . s, i dont know if that flows into the euro that removes one of the question marks. That is one of the questions it has now answered. Tom investing 101 with Patrick Armstrong. If you like gold and you suggest an inflationary tendency and the suggestion of a review of nominal gdp, not inflationadjusted gdp, does that mean by definition you like equities . Patrick i like equities, and i like the gross equities. Because when Interest Rates are zero, i think Companies Like alphabet, facebook, apple are going to grow earnings over the next decade. Companies like General Motors will see their earnings fall over the next decade. When a dollar 10 years from now is worth the same as a dollar today, you pay. 30 times is not cheap by historic measures on earnings, but that is where trading i think tom this is really important. I want you to rationalize the acquisition of shares today of a 30 multiple toothpaste company. How do you pull that off rationally . Patrick what is the 30 multiple toothpaste company echo tom i dont toothpaste company . Tom i dont know what it is. It is just a given stock. Whos counting . Company if i know the has a monopoly or all a gobble he position companies and health care, innovative treatments for cancer, for covid19, things like that, i would pay 30 times earnings for. So the consumer stable stocks do not so the consumer stable stocks do not attract me. Ple stockssumer sta do not really attract me. Tom based on what you just said, where is the next amazon . Patrick thats a very good question. People are pricing out tesla, if it will be the only auto company in the future. I dont know enough about the earnings and the cash flow, how we get to the multiples where we are right now, but the next one is a very big question. I dont know where it is right now. If you find someone else who does know, send me that link as well. Francine patrick, if you look overall at some of the evaluations in technology stocks, are we in bubble territory . Patrick i think we are in a bond bubble, and that has created very lofty valuations in technology companies. So i dont think it is a bubble because i can see why alphabet, at 30 times earnings, will be trading at 18 times earnings in 10 years time if we have a normalization and higher Interest Rates, so i can see how that gets there. Other companies, i think, are more expensive. I would much rather own a Technology Company that is growing, paying 30 times earnings, then General Motors or i almost said the royal bank of scotland. These kind of companies dont have anything in defendable in terms of Profit Margins in terms of growth in earnings. Defending earnings is the best it can hope for. I think traditional banks suffer massive head went from no interestrate margin, Central Banks are making Investment Banks very low on the baden trading side of things. But i think it is worth paying up for quality and for growth where you can find it. Francine patrick, thank you so much for joining us. Patrick armstrong. Stocks are definitely falling in europe, but u. S. Futures are feeling a bit of pressure. This is over escalating chineseamerican tensions. We saw the tit for tat in terms of consulate closures. There is also a bit of worry out there on the market that the u. S. Economy has stalled. Fiveyear treasury yields touching an alltime low. 1900 anding at near ounce. The offshore yuan actually dipping. Coming up, we will talk a lot more about tech valuations, and they later, the intel chief executive, bob swan. You dont want to miss that interview to talk about what is coming next for the tech sector as a whole and for intel specifically. That is 11 30 am in new york, 4 30 p. M. In london, and this is bloomberg. Hike Simon Pagenaud takes the lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. Touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. Welcome to camp tonsafun on xfinity its summer camp, but in your living room. Learn how to draw with a minions expert. How to build an indoor Obstacle Course plus. Whatever shes doing. And me, jade cattapreta. The host of es the soup camp tonsafun. Its like summer camp, but minus the poison ivy. Unless you own poison ivy. In which case, why . Just say summer camp into your xfinity voice remote to join. Francine this is bloomberg surveillance. Tom and francine from london and new york. We are looking at gold because it is trading near 1900 an ounce. The dollar extending the weeks stride. We want to show where we are on that, 7. 01. Stocks in europe are falling intend them with u. S. Equity in tandem with u. S. Equity futures. If you look at yields in the u. S. , they are touching lows, tom. Tom the bond market does it switch, and we have had two days of lower yields. 10year, 5. 92 rounded up past that Economic Data as well. I cannot tell you exactly when, but i am certain or than anyone that is associated, is a fed official. Kocherlakota has made it. The economic slowdown i have the clearest memory of 100 days or maybe 120 days ago, kocherlakota sticking his neck out and saying fed, do something and do it now. Here is the former president of the minneapolis fed. The fed should be doing all that it can to stimulate the economy in the current setting. Both the further current mandates in terms of trying to get inflation back up to 2 , and try to lower unemployment from where we are today. Itunately, i dont see see unemployment rising, not falling, even with that stimulus. So now, the point of my piece was, that would help on a third mandate, which is proposed by the biden campaign, which is to shrink the gap between black and white unemployment. Inhink that is a valid goal and of itself, but the pursuit of that actually would be beneficial for the economy because that gap tends to be low when unemployment is low. Francine good morning from london as well. It was a great opinion piece. And it shows what you think that the fed should target racial equality. How can they do that concretely . Has one tool,fed which is Interest Rates. Payingnt is that it is even if it paid more intention to the more attention to the pay rate that it has then it has over the past 35 years, it would do more to further blackwhite equality, in terms of lowering the gap between blackandwhite unemployment. The reason that gap tends to be high is only because unemployment itself is high. Willing tofed is have easier Monetary Policy to be concrete about it, i think you look at 2015 when the fed initiated the rate hikes, overall unemployment might have looked low, but if you look at the gap between black and white unemployment, that still was hi