Shortly. Onhave got hopes of progress a vaccine and signals that they are making progress in terms of the u. S. China trade tensions. Both of those really firmly supporting the risk rally that we are seeing. Let me show you the state of play with the stoxx story. The back ofming off record highs in u. S. Stocks. The good times might not last, according to morgan stanley. They are saying the market is vulnerable to shocks, especially rising rates. Treasuries are on the back foot as we speak. We are looking at a weaker greenback. 830. Dollar at 1. 1 yeah,ps a little bit of a strange one given the wider risk appetite. The folks at pimco saying the gold rally is it played out yet is not played out yet. They believe gold remains attractively valued, especially in the context of low Interest Rates. Here are some of the stories we are watching. Both of the u. S. And china are seeing progress under their phase one trade deal. They are committed to the success of that. Senior officials from the two sides held discussions to review the six month old agreement. The u. S. Says they discussed steps china is taking, including greater protection for intellectual property. Beijing is still a long way off in terms of meeting its promise to increase purchases of u. S. Goods. New york is investigating president Donald TrumpsCompany Falsely reporting the value of his assets to secure loans and tax benefits. The problems triggered by the president s former personal lawyer and fixer, michael cohen. He handed congress a series of trumps financial records from 20112013. Chancellor Angela Merkel is demanding for transparency from the kremlin full transparency from the kremlin over the case of aleksei navalny. A German Medical Team has determined he was poisoned likely poisoned last week. He is in serious condition and may suffer longterm damage. Global news 24 hours a day, onair and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Lets get you some breaking lines coming through. The key line being the august german Business Confidence index at 92. 6. 92. 1. Rket had pencil in lets get straight to some additional context here. Some of the key voices leading some of the research. We had the german gdp on earlier. We are now joined from munich by the Ifo Institute president , clemens fuest. Welcome back to the show. Based on the indicator we got from the german gdp figures moments ago and now from your survey as well, is the recovery stalling . Would say the recovery is more or less on track. With the gdp figures, they are slightly better than the ones we had a couple weeks ago and the revision. In the revision. The Business Climate index continues to increase, to recover. This time, it is not just of the expectations, it is actually the Current Situation that is improving. We are still far from normal. The recovery, i would say, is on track. What about the labor market . Over the summer, tens of thousands of jobs have been cut. Is that going to continue . Clemens yes, i am afraid we will continue to see job cuts. We do see a lot of shortterm work still going on, so large part of the company that is roughly 40 still on shortterm work. We see that we are not back to normal yet. Things are improving. They are improving slowly but they are improving. You mentioned the shortterm work. Are you an advocate for it . Does that need to get extended, in your view . Clemens i think it is a good instrument to deal with shortterm crisis. Weending it would mean extend something that would last until march of next year anyway. I think it is too early to extend it. There is the danger that in areas where we need structural change, where we need people to move to different jobs, we prevent that structural change. Its really a tradeoff. The longer we go on and the longer these companies do this shortterm work, the more likely they are going to have to change. I dont think we should have Companies One and a half or two years on the shortterm work scheme. From what you are seeing in the data, should the ecb offer more stimulus as we go into the end of the . If so they year . The year . R if so, what would help sustain the green shoots of an economic recovery . Clemens we need to see that the german situation is better than the average situation. The european economy suffering with difficulties with tourism and travel. It is a fragile situation. I think it would be too early for the ecb to enact further stimulus. I think we should observe how the current measures work and then see. There is a lot of stimulus in the economy. There is a lot of fiscal stimulus. I think what needs to happen now is the european recovery program. We need to get these projects going. Thats more important than more monetary stimulus, in my view. There has been a lot of backandforth and the press breakwhether or not the on some of the debt regulations should be continued. Do you think that that rule should stay suspended going into next year . Clemens i am afraid it has to be. There is no way in which we will return to a balanced budget in the federal at the federal level next year. It will have to be suspended next year. I am not even sure we can get back to it in the year after it. At the same time, i think the signal is important that there is a strong commitment to fiscal solidity and consolidation in the mediumterm. There is no return to a normal budget next year. As we look forward, what should the priorities be for the government, in terms of bringing together the right tools for a fiscal package to really sustain some of what you are talking about . Again, a lot of fiscal stimulus has been decided. The challenge now is to make sure it really happens. Deciding fiscal stimulus programs is one thing but getting them to go is another. Getting Public Investment to be realized is a challenge, because there are so many bureaucratic procedures. We have to make sure that these things really happen. There is a danger that the Public Investments, where we have the money ready right now, that they happen in two or three years from now and the crisis is over. At the moment, it is more a question of implementation. We need to make sure that we do not need to return to a general lockdown. We see infection numbers rising everywhere at the moment and that is a challenge. It could be handled if we act decisively when there are local outbreaks. What should not happen is another general lockdown. We need to avoid that. One of the tools that has been implemented is the suspension of some of the insolvency filings. That may make a lot of sense, in terms of trying to fasttrack some of the bureaucracy. At the end of the day, you also run the risk of creating a lot of zombie companies. Is that something you are beginning to think about as well . Clemens absolutely. That is a tricky question. I think it was right to suspend this. We dont want institutions to be overburdened with insolvencies. There is the danger that they become overburdened once we get back to the old rules. I think its time to think about new procedures to facilitate the restructuring of some companies. The rules i think should remain suspended for a couple of months. We need to think about new procedures making this entire insolvency process more efficient and quicker. Really appreciate your insights. Ifo is clemens fuest, the president. Coming up, progress. U. S. China negotiators discussed the phase one trade deal as washington says both sides are committed to committed to success. We will break that down. This is bloomberg. Economics, finance, and politics. This is bloomberg surveillance. Lets get you up to speed with the Bloomberg Business flash headlines, starting off with the biggest reshuffle in the Dow Jones Industrial average in seven years. Exxon mobil, pfizer, and radeon are out raytheon are out. It is a stunning fall from grace for exxon especially. It was the worlds Biggest Company as recently as 2011. Tiktok has asked a federal judge to block the white house from enacting a ban on the video up. President trump says tiktok is a Security Risk for user data, but the company says the decision was made for political reasons and it is unconstitutional. Virgin atlantic is set to find out if as enough support for a 1. 2 billion pound rescue. It has already won the backing of three other creditor classes and now has to commit suppliers. If it votes against of the plan, the airline can take it to a judge to overrule it. Lets circle back to one of our top stories. Senior u. S. And chinese officials held a routine call and they say they are satisfied with progress on the phase one trade you. The ustr says they addressed steps china has taken to ensure protection for International Intellectual Property rights. Besides say they are the two sides say they are committed to success in the deal. Lets get to Julian Chillingworth, cio at rathbone. To what extent were you surprised that they were able to make progress . Not just this past, but at a testing time . Julian good morning to you. Yes indeed. It is positive news that they held the meeting. As you may recall, less than taser go 10 days ago, the meeting was postponed. Thats good news and they are making progress. We should also bear in mind that, if my memory serves correctly, as of the end of june, the chinese had only completed 23 of the amount of u. S. Goods that they said they were going to buy this year. There is a lot of work still to be done. I think it would be great to see some fresh orders coming through. I am sure donald trump would like to see some purchases of agricultural products, for instance. Lets see where the talks today move on to, actual buying of u. S. Goods and giving u. S. Companies access into the Chinese Markets more openly. There has been a very heated breadthround the market and s p 500. Members are00 Index Trading above their 200 day moving average. Last time we had this was right before the internet bubble burst. Your Research Underscores that there are still significant risks that remain. What is going to derail the momentum that we are seeing . Julian i think that i dont have a simpleou pchart. You saw massive overvaluation techech sector in the sector. We are nowhere near that now the u look at yes, they are high. We are in a much higher rate environment, lower growth environment. It is a very different environment. Youve got Companies Making good profits from a generating good cash flow and i think they will sustain their higher ratings. What will derail some of the bubblelike valuations we have got is if they do not deliver, these companies cannot produce profits in the near term or the next 12 to 18 months and are just rated on a bunch of sales or not even sales. It is the ones that have been inflated and dragged along by this momentum that we are more worried about, not the Larger Companies that are producing profit. I would say to you that i dont think unless you are very optimistic about a strong balance in the economy bounce in the economy, you will see the value names come to the fore anytime soon. It is a question of trying to mitigate risks. The rather we are seeing in these assets is a crossborder rally for the most part. Credit suisse underscores the pain that a lot of Portfolio Managers and Fund Managers are having to deal with. Bonds no longer work to diversify stock risk. How do you go about that . Julian i think you obviously, first of all, youre absolutely right that yields have fallen back. Say, is little, shall we shortterm mileage in the bond markets, as far as we are concerned. Although i would always emphasize that we say to our clients that you need an element of Government Security in your portfolio to give some access to easy liquidity and a degree of diversity, it is not going to be the driver for gains. That is going to be through equities. We continue to believe that. In terms of diversity, obviously, people have been buying gold. This is all about the debate about whether you do or dont believe in gold and also whether you do or dont believe that we are going to see some measure of inflation a year or so down the road, which would be helpful for gold. There are slightly other ways of looking at alternatives. Infrastructure is an interesting play, particularly with the government stimulus. There are other elements that you can look at within your portfolio for diversification. Hold that thought. We still have a lot to talk about. That is Julian Chillingworth, the cio at rathbone. The German Economy shrank 9. 7 in the second quarter. We will get deeper into the data from the euro areas biggest economy. Thats next. Calls from Jozsef Varadi from Julian Chillingworth. This is bloomberg. You are watching bloomberg surveillance. Fromve some breaking lines the key voice of the german cabinet. He is speaking at a News Conference and vienna in vienna. He says there are signs that the German Economy is developing better than expected. German companies and consumers cut spending sharply during the virusrelated restrictions. The German Economy contracted 9. 7 in the second quarter. Initial estimates for 10. 1 is what had been penciled in. The numbers show the scale of the slump at the height of the lockdown restrictions in the euro areas biggest economy. Lets get back to Julian Chillingworth from rathbone. Your initial reaction on these figures . Julian i think it is good to see a slight improvement on the first estimate that we saw, but not a surprising number at 9. 7. I think it is all about how quickly the German Economy bounces back in q3. The flash pmi numbers we had on friday were slightly disappointing for the euro area more generally. There may be concerns that the bounceback would not be quite as strong as some people have been estimating. Obviously, with the pickup in the new virus cases across europe and concerns about localized lockdowns, that will obviously hit growth across the region more generally. In germany, i think they are doing the right things. Angela merkel has handled the covid19 crisis well to date. I would hope to see a regional balance in q3. Obviously, we need to wait until the end of the quarter to see how that pans out. Where is the opportunity in europe at the moment . If it will not be so much germany . You highlight that sterling is already pricing in a lot a lot of very negative scenarios. At the same time, u. K. Stocks are trading at quite a notable discount compared to their global peers. Julian they are. I mean, its also partly due to the makeup of the u. K. Market obviously. Heavy energy component, along with materials has an effect. Obviously, the domestic consumer waiting as well. I think whether where the u. K. Is concerned, obviously it is all about now how quickly we see the u. K. Calmly recovered. The leisure sector is making some positive signs. See quite aould surprising q3 in the u. K. Economy. Thank you very much. A little squeezed for time. That is Julian Chillingworth, the cio at rathbone. We are going to get into the u. S. Elections next. 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. He scores stanley cup champions touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. Yousef economics, finance, and politics. This is bloomberg surveillance. Of lets get to first word news. Drug. S. Food and administration is walking back claims over an experimental plasma therapy. Sunday the Agency Commissioner said it has dramatic benefits and could save a huge number of lives, but last night the fda was forced to clarify numbers. There are promising signs but the benefits are not fully known. Wisconsins governor has deployed the National Guard after police shot a black man in a city south of milwaukee sunday. Troops are being asked tasked with guarding infrastructure and protecting firefighters. Criticizedu has me the move, calling it militarizing policing. A hurricane is set to make landfall on the gulf coast thursday. Another storm, marco come has lost so much power, it has weakened to a tropical depression. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more that is thentries, news update. Lets get the story around the Republican Party in more detail because they formally nominated President Trump for a second term. Trump has sought to paint a positive picture about his response to the pandemic. His family has sent out has set out to pres. Trump these are the incredible workers that helped us so much with covid. We can call it many Different Things from china virus, i dont want to go through all the names because some people may be insulted, but thats the way it is. s radicalthat biden leftwing policies would shut down the economy cold. Law and order is on the ballot. Our most cherished ideals of freedom and free markets are on the ballot. When it comes to what joe biden says hell do, look at his actions. Look at his policies. Look at what he already did and what he didnt do. The Intelligence Community recently assessed that the Chinese Communist party favors biden. They know he will weaken us economically and on a world stage