Contraction for the australian economy. Worse than anticipated, but investors with a moment shrugging that off. Chinese markets under pressure. Quickly moving it along, having a look at what else is going on out there and doing that, of yvonne. With yvonne lets start with that aussie gdp number. The second consecutive quarter for the three months through june. And thee first first technical recession in 30 years for us trail you Australian Household spending well by 12 as lockdowns and restrictions shut out consumers. The aussie dollar against its u. S. Peers. Theres a new warning about the u. S. Economy with a fed governor ating there is uncertainty head. She told the Brookings Institution that america will be to depend on the fed and policymakers in d. C. As the economy continues to recover from the coronavirus pandemic. She says Monetary Policy must pivot from stabilization to accommodation. Treasury secretary seems to agree with the fed governor, saying the u. S. Economy urgently needs extra fiscal stimulus to rebound from covid19 and had opened talks with democrats about a relief package. The u. S. Is rising from shutdowns and job losses, but mnuchin said parts of the economy need additional support. However, he stopped short of offering specific fresh proposals. President trump has saluted the police force and National Guard during a controversial trip to kenosha, wisconsin. He visited the city where protests erupted after the shooting of jacob blake last week. The president travel despite pleas from the state governor and city mayor to stay away. We talked law and order and sidestep the racial issues that sparked the protests. A chinese professor has been sentenced to 18 months in a u. S. Prison after being convicted of trade secret theft and economic espionage. He was charged in 2015 amid a crackdown on the chinese theft of intellectual property. It began under president obama and has continued under the Trump Administration. Tensions between the u. S. And afterare ratcheting up President Trump repeated the sale of tiktok must be closed by september 15 or he will close the video app down in the u. S. He also said americans should be compensated from the deal. That they told them have till september 15 to make a deal. After that, we closed it up in this country. I said that the United States has to be compensated well theensated because we are ones that are going to make it impossible, and so we should be compensated. The treasury has to be well compensated. Our Senior Editor joins us now to assess this. Where do things stand on this tiktok deal . Think,biggest mover, i in recent days has been the idea of china needing to sign off on some aspects of this because before that came in, the expectation i think fairly widely was that tiktok was going to have to get sold and that bytedance was going to have to figure out how, and the option 20 billionry to find or 30 billion or maybe lead with nothing, and now, the question is if that is necessarily still going to happen or if another option has emerged that this could stay past that september. 5 deadline it has injected a fair bit more certainty. Trump has said this stuff about ading what one might call finders fee. Theres not really a great sense of how Something Like that would actually manifest in practice. Rishaad theres tensions also being heightened by the pentagon achievingat china is ,lobal Nuclear Ambitions joining the u. S. And russia. How big a deal is this socalled Nuclear Triad . I think it is a fairly big deal. Youre talking about the u. S. And russia that had this capability to do that. There has been some thought, counter as it might seem, that that has been a somewhat stabilizing factor in World Military relations for the last couple of decades because both countries assess that each other could go and blow up the world if they needed to, so nobody wants that to happen. Its called mutually assured for short. Or mad i will let you read into the acronym what you will. Be a fairly big step in how the countrys military is perceived. China has been trying to get him into that top league of military nations for some time. It is an enduring goal, and getting it there would also change some geostrategic calculations. The other thing i want to mention real quick is if you are thinking about this from a market perspective, the solution to countering that that is often recommended is to invest in hightech new weaponry. Hat means defense contracts that means boeing, raytheon, lockheed, etc. Rishaad good stuff. Miss our exclusive interview with one of chinas bestknown private equity groups and the geotechnical issues affecting his strategies. Got nowhere weve to hide. Even australians are coming to a covidinduced growth slump and its first recession in 29 years. We will be digging into that later this hour. This is bloomberg. Rishaad asian Equities Trading u. S. R after tech lead markets to another record. Interest rate six vector to remain lower for longer while valuations art alltime highs with easy money policy adding fuel to the flame. It seems that what goes up still goes up. Yes, that is indeed correct. Valuations are at historical highs, but the underlying conditions remain quite positive. Things are not too bad for asia in that sense. Rishaad tell me, dollar weakness how did that play into all this . I think the dollar weakness is a very big factor. Below are bond yields we have seen since the beginning of this year and the dollar weakness are i would say account for 90 ,f the rally we have seen particularly after april, so those are the two big factors. Upgrades, so a lot of things are coming together. Yvonne talk to us a little bit action. Ut the price theres one camp that says they dont want to miss the rally but another camp says the valuations are too extreme and the correction is upon us. Where do you sit now . I can hardly hear you. You sound like you are from the moon, but i think were looking for value across the region. Yes, valuations are very high. We also have to think about some of the risk factors that might next 12n maybe the months. At the moment, where we think we like markets that are cheap and relatively small. Yvonne rishaad mentioned the Growth Stocks. It seems at this point, the real risk is if we see rates starting to rise. Is that likely in your scenario right now . Really,e moment, not but, yes, there is a risk. So far, it is a reflection of some kind of synchronized economic recovery coming through. Im initially not so worried about that. Rates grow and bond yields grow, that could be a positive for markets. We could translate into higher Earnings Growth as well. I think it is only really at later stages when Interest Rates really go up and Growth Stocks slowed. Its not that i am particularly worried about this, but what we see is as theres low Interest Rates, there is not a lot of growth around the world, so whatever does grow and has kind of a structured story to it is something people are chasing. These can these Companies Continue to go up, and the valuations can sometimes be very high on a historical basis, but that does not mean we are going to see an imminent kind of selloff in these stocks. have you been adding any recommendations on cyclicals, and what would that entail . This goes back to what we mentioned earlier. In an environment were bond yields go up, where growth is improving, cyclicals perform well. Seen a bounce back in industrials, for example, in some transport company sectors, but that is something we have been talking about since june or so that this might well happen. I dont see that particular scenario changing any time soon. Ond yields could go up we see earnings upgrades starting to come through across the region. Analystseen a lot of have cut their numbers, but a bit too far, so they are working to increase holdings at the moment. Things continue to be pretty good for asian equities. Rishaad you wrote at the beginning of july you expect value to come back to the fore and value could outperform Growth Stocks, certainly for a period of time. That has not happened yet. What would be the trigger for it to happen . It has happened, but only on a selective basis. Growth stories in the longer run continue to be very attractive, but as bond yields rise, earnings rise, cyclicals, some of these have performed very well. What we have seen is that people have moved from very high growth to lower or value growth, so we have seen korea performing very well in july, so there has been a bounce, but its not really from growth to value. People stick with growth but lean towards the value sectors in growth if you want to put it like that. It has been a little bit different than what weve seen in the past. I think in general, investors want to get away from the growth sectors for pretty good reasons. Rishaad there is much talk about what this post covid world looks like. Many people are suggesting it has accelerated some of the trends which were there already. Others are talking about a brandnew paradigm. What is your take on that and how does that inform what you will be doing in terms of Investment Advice . Weve looked at post covid a couple of months ago. There will be certain shifts that are very visible. I spoke yesterday with a friend whoine in the netherlands says Everyone Wants to go cycling instead of taking public transport, so there are Consumer Trends that are saved that are changing. I think we are also seeing post covid, we will have the reintensification of the antagonist unfolding between the u. S. And china. That is something to think about while china is trying to create selfsufficiency in a large but thoseindustries, are some of the kind of themes we are looking at in a post covid world, but i think the time to look at that is actually thesenow before some of scenes are unfolding. Yvonne harold, have to leave it there. Go forward, rish. Rishaad i was going to ask you quickly, you have written a book on indonesia and i wanted to get your basic thrust about jakarta, i think it is, jakarta misunderstood. Tell us about that very quickly. We have written a book. I have family there, i lived there a long time. Most of the people i talked to say they hate the traffic, and i can fully understand that. Isexperience in the city very different. I wanted to write something about the city, and i found out bit by accident that some of my family members had a rather questionable history, i must say. The first arrived in 1650. Some of them might have been involved with genocide, even, so pretty awful. My own history came that i was interested in the city. I think its a much more enjoyable city if you know where to go, so i decided to write a book about it. It just came out. Yvonne we look forward to reading it. Thank you. Next, we talk a bit more about japan and the race for the next Prime Minister. We have the latest up next. This is bloomberg. Yvonne heres your latest business flash headlines. Tesla aims to capitalize on its status as the worlds most profitable automaker by offering stocks to fund growth. It was sell up to 5 billion in shares to double manufacturing capacity. Tesla already has a plant in shanghai that is building the facilities in texas and germany. Giuliano is considering a share sale in shanghai that could raise up to 3 billion. Last month, it reported a 3. 5 fall in profit as coronavirus hammered demand for new cars. Honda sales in the u. S. Slumped in august as fallout from the coronavirus continues to drag on demand. Deliveries were down almost 22 year on year with truck sales falling 16 and cars down 30 . Honda aims to strengthen its , launching bids after having won approval from regulators. American express is breaking with tradition and will let Small Businesses borrow more on their cards. Amex lets users payoff cards in full each month and will let make certains purchases over longer periods with interest. Customers are expected to start seeing changes in november. Looking at markets right now, it is a pretty mixed picture, but we are seeing some equity gains through the likes of australia. Seems like they were not too shattered by that gdp we saw in the Second Quarter confirming that recession. You are watching u. S. Futures not doing a whole lot right now, but we are watching, of course, some markets like japan heading into that lunch break still slightly higher by about 14 . The euro has been a focus as well, losing a bit of momentum after touching that 1. 20 mark we saw overnight. The dollar still seems to be on the downtrend, but keeping fairly steady today. We are watching, of course, how that plays out for other currencies as well. Your offshore renminbi saw the biggest two day gains since about 2018 or so, and gold actually hovering around that 2000 mark, but we are seeing a bit of a mixed picture across the board. Rishaad lets quickly tell you about what is going on at the moment on live go if you are a bloomberg terminal user. Of Asia Pacific Association summit taking place. Speakers include Virgin Australia ceo and Qatar Airway Group ceo as well as the australia trade, tourism, and investment minister. Airlines really suffering, trying to build up flights at the moment. I have been idling fleets since coronavirus has made them ground most of their aircraft. Many of these airlines are flying airplanes halfempty. The most lucrative Services Remain grounded as well. Traffic down almost 80 in july compared to a year ago. Those figures came out on tuesday. The International Transport association saying the slump is steeper than expected at a time when carriers are trying to rush flights back. Looking at whats going on in japan, all of our political intrigue currently is people are vying to take the job of shinzo abe after he stepped down last week. We have at the moment certainly japanese equity markets moving to the upside. Part of that is down to some yen weakness as the yen has gone above 106 against the dollar. Have is a narrow list of contenders to succeed shinzo abe. The top of the list is the key the chief cabinet secretary who has to overcome at least two for control of the ldp. That is what is happening in japan. That is a look at equity markets as we had toward the lunch break. Dont miss our exclusive interview coming up with one of chinas best known private equity groups on how geopolitical tensions between beijing and washington, beijing and other countries as well are affecting strategies. Thats coming up in a short while. Do watch it. This is bloomberg. Is 10 29 in hong kong and shanghai. This is Bloomberg Markets asia. President trump has confirmed that tiktok must sell u. S. Operations saying the u. S. Should be compensated from the deal. He repeated the sale must happen before september 15 or he will close the video app down in america. It would remain unclear how the u. S. Would collect compensation on the sale of tiktok. With china posing new rules, any deal remains distant. Relationswarned that with the United States are facing difficult problems, saying hardliners are increasingly driving policy. The Foreign Ministry and beijings embassy said they are in a most testing time, with the u. S. Going to Great Lengths to portray china as a rival. The embassy tweeted that the u. S. Is resorting to every possible means to suppress chinas development. Washington says chinas rapid middle military buildup poses them as along with russia and the United States as one of the top nations of being able to Deploy Nuclear weapons. Expects china will double its Nuclear Forces in the next decade. Relations between china and with seem set to worsen reports of a new standoff on their disputed border in the himalayas. India has moved forces into the area saying it is in response to provocative actions. Beijing said they are taking necessary actions without giving details. More discussions are expected in the coming days. Rishaad ok, lets have a look at how markets are doing at the moment. Taking a look at the hang seng. One market that is under a bit of pressure. Stocks may be down in hong kong. Moment, 337. 20 hong kong dollars. Situation where we are seeing the cost. We see retailers doing rather well today. Certainly not the case for the hang seng which saw that dreadful reading for hong kong retail. They were not as bad as had been feared. Here he go. Here we go. The economy nostril yeah is having economy in australia is having its worst technical recession in 20 years. The u. S. Dollar against the aussie, 73 u. S. Cents. The yields on the 10year inching fractionally lower to 93 basis points. Weve got the u. S. Government also struggling to pass a stimulus bill to support its economys fragile recovery. Kathleen hays. That negative gdp in australia was expected. What are the odds of a rapid recovery . Kathleen people are optimistic that we have seen the worst for the australian economy. Lets start by putting up a chart that we can look at the numbers. That 7 drop in the secondquarter gdp, more than 6 forecast. It is the worst drop on record. It does confirm they are in a recession. Certainly not a surprise. You can see the chart, the big line down. In fact, it was down 0. 3 the quarter before. This is two quarters in a row of negative growth. Australia, u. S. , wherever you are, you are in a recession. Government spending managed to rise 3 . We saw investment in housing down 7. 3 . 23 . Avings rate up that could help the economy moving forward. ,peaking of moving forward Bloomberg Economics says if you look at highfrequency data we have been seeing, it does point to the idea that the recession and the recovery is going to start in the second half. There are a couple of thin