Transcripts For BLOOMBERG Bloomberg Surveillance 20200210

good morning, good afternoon and good evening. welcome to "bloomberg surveillance." i am francine lacqua. european stocks are fluctuating. exactly what is next in the corona visor -- coronavirus and the impact. if you look at bonds across the u.s. and europe, they are pretty much unchanged. coming up, more from our interview the chief executive of unicredit. he talks about negative rates being the biggest risk for the eu economy. let's get to bloomberg first word news. news, karenaking bauer is stepping down as leader cdu.rmany's she will not run for chancellor in the next election. now to ireland where left-wing nationalist party is one of the biggest winners of this weekend's election. state broadcast ejecting it will come in second with 37 seats behind siana falls with 45 seats. all are short of the 80 needed for majority. today the final tally is expected. over to the u.k. where boris johnson gearing up to announce a boost in infrastructure spending. it is a part of a campaign to follow through on campaign pledges at of september's general election. here in the united states, donald trump proposing billions more in defense spending. his four-point ho you dollar budget will also see steep cuts in social programs. a u.s. mission to mars, the budget shows the president's moving up way -- moving further away from his pledge to eliminate debt. the big winner from last night's oscars, parasite. 14 -- one four best picture. other big winners include joaquin phoenix for his portrayal and the juncker, as well as renee zellweger for her betrayal of judy garland. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. francine: the u.k. has declared the coronavirus is serious and imminent threat to public health. the global death toll is higher than sars and the number of confirmed cases have surpassed 40,000. it is the biggest outbreak outside of china. 136 people have contracted the virus and they are concerned could spread further with more than 3600 passengers still on board. 90 foreigners attended a conference in singapore. a cluster of cases have emerged in france, spain. anding us is iain stealey athey.0 -- james it feels like the virus -- i don't know the virus gets better. have we all become virologists? >> it is very difficult. clouded.hina is it seems now that the bodies that deal with these kinds of things as a matter of profession are saying things that don't tally with the official numbers we are getting out of china. an mortality rate of 2% and the steps that have been taken by chinese authority there is a recognition. francine: if this gets worse, -- the flight to quality bid has been in the treasury space and that is going to continue in the time being, continue to deteriorate from here. francine: who will get treasuries and european effects? they are pretty subdued. james: it hasn't been a mad scramble. they have done what they have normally done, taken negative news in stride. think wereason i don't are seeing the most extreme kind of treasury event. ,ased on how we view the world it is just yet another potential negative, another reason there is an asymmetric outlook for treasury yields. francine: does this look like the event that could hurt world growth to the point where you can see a downturn? iain: it is early to say. if you look at the economic data , it looks like we are starting to see recovery gore -- recovery growth this year better than last year. the reality is more people are going to be focusing on how quickly we bounce back from this. is this going to be a drawnout period? it has some of the containment that the chinese have in place. are we going to be able to live through this in a decent recovery during the second and third quarter? we are not going to know that for a while until the economic data comes through. francine: what is the first data point you look at? is it the chinese data? or do you see numbers in the u.s.? >> that is going to be the first indication, the problem with the chinese data is not only have we got the shutdowns but we've also got the new year. it will probably be a few weeks before we get a grasp on exactly what is going on. francine: what do you look at for data? james: chinese data is going to be shrouded with uncertainty we get volatility. when you look at the european wheree have seen from q4 the market was working with this recovery thesis, that was concerning to me. the u.s. can shut this off more easily. i think european data is really the one to watch. youcine: how worried about -- how worried are you about germany? still hasn'tmp ruled out extra tariffs on the germany economy. >> germany was hurt by what went on last year with the tariffs. the german economy is so reliant on its export engine. if you see a slowdown in china, it is going to have an impact on germany. moment it is likely to stall for a bit. how quickly do we bounce back? francine: thank you both. now bloomberg anchor tom mackenzie joins us from beijing for the latest on the coronavirus. what do we know about the pace of infection? tom: we know the number of deaths have reached around 910. the number of infections, 41,000. we are seeing some signs is it has stabilized. model looking at the pace at which this virus is spreading. they say it could start to peek in mid to end of february. we did get a warning the world health organization chief saying he is concerned about the infections he is seeing outside of china who have no history of traveling to china. a super spreader who seems to have pretending -- the world health organization but the numbers we have seen out of the pacem to possess of infections is starting to stabilize. half a looking at the million infections when this speaks. optimism that things are starting to stabilize. it comes down to how effective these quarantine measures are. francine: what do we know about mortality rates? the number of spreading cases? tom: that is a good question. it is something we think about a lot. the mortality rate comes down to the transparency and the quality of data that the international scientists are getting from the chinese scientists. seems like the what healthy rate in one hot -- in wuhan. outside of the province, it seems the mortality rate is much 1%.r below that alleviates some concern. most of the cases in terms of death seem to be elderly men and women who have had underlying conditions. on the economic front, china will be spending $10 billion to fight back the virus. francine: tom, thank you very much. up next, our interview with the chief executive who talks about shareholder payouts. this is bloomberg. ♪ francine: economics, politics, finance, this is bloomberg surveillance. the biggest risk to his business plan is rates stay lower. we talked about the impact of policy, the italian banking sector. willether the economy remain weak or weaker, the ecb cuts rates again, we don't think it is the case. the ecb will normalize. francine: have you had discussions with european central bank? do they understand the plight european banks are going through? >> on the monetary side when they interact with us, the regulatory side, we have to see that the new head has been very transparent which i think is a plus for investors. we should bring more capital into european banks. francine: does tearing work? >> it works a little bit because negative rates in general is an issue. francine: what is your take on the italian banking landscape overall? are you seeing the light at the end of the tunnel? >> it has made a lot of progress in the last few years. we reduced our nonperforming loans by 50 billion. that is quite a large amount. other banks have made progress. francine: italian banks outperformed european banks, why is that? >> italian banks are very good. francine: was there a discount before? >> people can see value in italian banks. the framework might be more hasle with a country which a lot of positive. very competitive which a very good. -- only goodn prospect for italy in coming years. think it is more positive. francine: do you think the reconsolidation --? >> it is not for me to command. francine: asking about consolidation, do rumors about consolidation make a difference to your strategy? >> it does not. m&a, we work on an organic plan. transformation of a bank is much more important than acquisition. francine: last time we spoke, i was asking what would trigger m&a? you told me the share prices. still the case? >> the regulation is improving this day. the impact of regulatory headwinds and pollution. for banksnsformation today. low for thewhich is banking sector in general. it is difficult to consider any combination. francine: that was the chief executive of unicredit speaking to us. coming up, angela merkel's succession collapses. her heir apparent plans to step down at what that means for the cdu and germany. up next, we talk negative rates. this is bloomberg. ♪ francine: this is "bloomberg surveillance." i am francine lacqua. we discussed the your economy and the negative rates with iain stealey and james athey. how much more can the economy take negative rates? iain: we are going to see negative rates for a long period of time. the question is are rates going to go anymore negative? is there isreality a flaw and a sort of reality is kicking in. how do we get them back up again? that is going to be challenging. in my mind it would be additional messages for easing is we -- if we continue to see weakness rather than that rate negative. francine: do you agree we cannot going to negative territory? uncomfortable.y james: i really don't know. bcb has gone from a -- the ecb has gone from a quite easy story to predict. -- a change of narrative around what is most appropriate in terms of policy. there's been scandal around president draghi's last package. if you read all of the papers and research come from within, there is no suggestion that they agree with that analysis. when push comes to shove, i don't believe ecb is going to stand by the divide. i don't think they will be as active as pushing rates lower. ?rancine: more fiscal spending will christine lagarde managed to convince more politicians they need to do so? >> fiscal spending would help with the margin near-term. it would provide an offset. economy.a more robust there is no suggestion we will get the kind of reform which is necessary. there is not much suggesting that we are going to get spending where we needed. francine: we are doing a bit on structure. if you look at france, reform is going through. italy is doing a little bit. seeing little bits of it but it takes time to get through. i don't think it will be the big structural reform in needs to fix the differences between the different countries of the eurozone. i would agree, fiscal spending would be good. they've got the ability to do it , specifically the countries with low debt ceilings. to getual enthusiasm fiscal spending out there is not there at the moment. you are going to continue to see -- personally, i would try to buy something with a positive yield. i do feel the areas like italy that we have political uncertainty, you can get a yield close to 1% which is not obvious and other places. francine: james? james: not the kind of quality you would expect when yields fall. -- you pick up more yields than headlines suggests. very difficult to fight that wall of money. 's chosen angela merkel air will step down. what happens? does it change how you see german bonds developing? iain: i don't think so. safety. the core in europe i don't think it makes much of a difference at all. we have it -- we have a downturn in europe again. we going to rescission and we talk about -- recession and we talk about ecb cuts. francine: do you see any value in buying something there? >> the supply is heading in the wrong direction if you want to own them. the ecb is buying some of the margins. the scarcity is the only truly liquid space, high-quality asset euros. i'm sure we are going to see a huge bond rally. francine: james, if you look at the ecb review, are you expecting -- what are you expecting it to come up with? christine lagarde said we are not on autopilot. james: she is doing quite a good job of buying time but the review, i don't think is going to achieve an awful lot because they don't want to go back to square one. and admit they were wrong all along. maybe in the margin we see a bit more symmetry but packing the economy with policy will be next to nothing. iain: the one thing that might be interesting from the rate standpoint, we talked about the fact they would be losing rates stopping the quantitative easing when they were looking boosting the size of support. may move rates first. there might be a slight difference. thank you both. let's focus on brexit in the future of scotland and the u.k.. let's go to brussels and to maria. maria: we are now joined by nicola sturgeon. thank you for being with us. the obvious question, brexit has happened and we are moving into the future. have you heard anything from the prime minister in terms of what he is thinking or hoping to get out of this question mark -- in aboris johnson very hard brexit retreat with the european union economy much more difficult. it seems to be a choice of a hard brexit or an even harvard -- hard brexit. that is not in the interest of scotland. influence the process in a way that keeps trade with europe as pretty as possible. making sure that we do not have -- worker rights and environment protections. i want to see scotland coming back into the heart of the european union as an independent country, able to have influence and protect our place in the single market. maria: i am wondering if you have had any conversations with the prime minister at this point. ideau think it is a good -- fishing if that means access to the market? nicola: the prime minister is in a difficult position. his party has made very big promises. the fishing community is very big in scotland. the conservative party has promised that brexit will lead to much greater freedom or control of scottish and u.k. waters, the ability to catch more fish without any compromise on the ability to get fish to market and to export. that is going to be difficult to square but boris johnson is leader of a party and i think the fishing community will be looking to him, to have more freedom in terms of catching fit -- fish but also the ability to sell fish in european markets. maria: having access to the single market is worth the fact that you do need a deal? the promisesola: that were made to them, i was always a voice saying the conservative party were making promises to the fishing community that perhaps cannot be delivered. the promise was control over waters but without any compromise on the ability to export into european markets. the ability to export is crucially important. producers talking about the negative impacts on the about the negative impacts on the salmon producing industry with a greater bureaucracy in terms of the ability to sell into european markets. i want to see an agreement that delivers on both of those things, and i come back to this point. i am not the proponent of brexit. i am not the person who told fishermen that brexit would be a guarantee of all of these benefits. that was boris johnson and his party, and i think the fishing community are looking for him to deliver. maria: when you look at the political line, they say we had a huge election victory. the party wants to move forward, and we have not given a mandate to break away from the e.u. i want tore staying stay close to the line of the european union, and the bank of england, the u.k., and also scotland -- ultimately you'd you have -- you do have the united kingdom, but ultimately they want to do something very different. p.m. sturgeon: scotland as a nation is being taken in a direction with brexit that we have not chosen as a majority of people in scotland would still prefer to be in the european union at not have all these implications of exit to do with. boris johnson points to the election as a mandate for his move to brexit. -- equally, there is a mandate in scotland, i believe, to try to stay as close as possible to the european union and as close to the single market as possible. scotlandfer the people a choice of being an independent country so we can stay at the heart of the european family of nations. maria: the prime minister has said going back to the second referendum is out of the question. and we need to move forward how do you deal with that? he is claimingif a mandate on the back of the general election, it is not possible for him to deny a mandate that i have to offer people in scotland and alternative choice. ultimately, public sentiment and public opinion will win the day here, and boris johnson's position will prove to be completely unsustainable. we see in scotland rising support for independence. opinion polls in the last week -- that a that the growing number of people want that choice. that is the reality of democracy that will ultimately avail. you cannot stand in the way of the right of the people of any country to choose their own future. maria: but if he continues to say no, let's not focus on this, i wonder how you go about this. is it something you go about with lawyers? p.m. sturgeon: going about it with lawyers is not the best way to proceed. the best way to go about this for all of us is with democracy. disagree onn and i the idea of democracy, but it should not be for us to decide. it should be for the people to decide. boris johnson knows that as well. he is talking about spending lots of taxpayer's money to convince people in scotland of the case against independence. somebody who things he can stop people from making that choice think he can do that. but ultimately, democracy will prevail. the people in scotland will have the opportunity to decide whether or not they want to become an independent country. when that moment comes, i believe people will choose for scotland to be independent so that we can shape and determine our own future path and not have that decided for us by boris johnson and his colleagues. maria: when do you see the vote happening? p.m. sturgeon: i could see the vote happening this year. that is what i am planning for. we are planning for the rules and regulations required in the scottish parliament. but the most important thing of all is to make sure that that referendum has a soundly legal basis and that it is legitimate and recognized because i do not want to just have a referendum, i want that referendum to lead to scotland being independent in a way that the european union and the international community will recognize. the deadline for you? p.m. sturgeon: i want to see a referendum later this year and that is what i am planning for, and i am continuing to build a case for that to happen. whenever that happens, the key point is that it must be legal and legitimate. otherwise we can have a referendum i catalonia, but would not necessarily lead to -- maria: so it is not out of the question? p.m. sturgeon: i believe the path that we are on right now, with more people supporting referendum, for a the referendum is something we should stick with. maria: they do worry about the type of fiscal policy that you would put in place. they worry about how do you go back to the euro-yen how do you go about that, too? goto the your, how do you about that, too? alreadyrgeon: there is a very strong business environment in scotland that encourages investors and businesses to see as a good place to do business. we have a skilled population, we've got an infrastructure, and are building an infrastructure that helps to grow business. independence will not change that negatively, but having more control over our economic willrs will have to b -- -- sweden, within the european union, cannot be forced into the year against its will. but part of the benefits of being an independent country -- if you look at countries of similar size to scotland across europe, many are more prosperous and economically successful because they have the benefits of being able to shape their own economic destiny. maria: prime minister, thank you so much. francine, that was nicola sturgeon, prime minister of scotland. back to you. let's get back to ian staley and james athey. -- iain stealey, and james athey. , whatk. announcement effect does it have on the e.u. economy? >> i think people are getting a lot better about brexit and about what is going on, but as reality kicks in throughout the year, and we all know it takes a long time for these trade deals to come into play, and we might not quite be there by the end of by the perceived deadline, the market will start waking up and say this is causing some stress. i think we would get an extension if required. asks: i'm not sure we will explicitly for an extension. think there is a kind of copout for both sides, but to go back to your original question, massivelyntinue to be underestimating the impact on the european union at a time we have overestimated the potential impact on the u.k. economy. another negative shot that he could do without. can this be survived? will there be a sharp downturn? james: potentially, yes. not just because of the possibility of a hard brexit, but because of things impacting germany. it is so heavenly -- so heavily reliant on its export machine, if the economy is weak, it cannot easily withstand that. iain: i think it takes away some of that cliff edge view that we had late last year. i do feel that it is going to come, as we know, the market can only focus on a few things as once -- at once. but we will be back looking at this and saying what are the negative impact and how will it sort itself out if we don't get to some kind of agreement. francine: thank you both, james stealey.and iain coming up, the chief executive of unicredit. this is bloomberg. ♪ francine: this is "bloomberg surveillance." hovering at oil, $50 a barrel. a special opec plus meeting to decide on further production cuts. let's get the latest with annmarie hordern. annmarie: good morning to hovering around $50 a barrel, wti a few cents above $50. a very simple chart, but i think you get the point. we are seeing a dire oral market -- dire oil market in terms of the prices. azerbaijan oil minister over the we can say he does not see the negative rates continuing to happen. -- thethe wrist is an's resistance comes from russia. we will hear from russia relatively soon there is a technical committee saying that what they would recommend is a 6000 barrel a day cut, on top of the deal that they struck in december. the saudis want it to be a bit more urgent, the russians want a way to see an approach so far it looks like there is no emergency meeting yet, and that is putting pressure on oil prices. francine: annmarie hordern with the latest on oil. let's focus on the race for the white house. pete to judge appeals to have sealed a victory in iowa after the democratic party released corrective results from its caucasus. attention turns to new hampshire and its primary, each takes place tomorrow night. jay powell confesses it is very hard to understand china's economy. the coronavirus outbreak has made that exponentially more difficult, but it is something the fed chair can hardly afford to ignore when he addresses lawmakers later this week. still with us, iain stealey from jp morgan, and james athey from aberdeen standard investments. there are a million things going on with the u.s. -- coronavirus, which has not early spread there yet, or it may never do. there is a looming u.s. election. how do you trade the u.s. election, if at all, with treasuries. james: i'm not sure you be should be -- you should be trading the u.s. election. the democratic primary race is more complex and confusing than normal. i think the market has taken it in its stride considering how extreme bernie sanders a policy -- bernie sanders's policy prescriptions have been. the economy is ticking along fine and that is probably somewhat correct, but there is also a correlation. if we did see the market pricing in a marginal chance and he market took a dip, suddenly you start to see people are not quite so happy and are may be prepared to vote in a more extreme fashion. it is certainly complicated. we will learn a little bit more tomorrow when we have the new hampshire primaries, but i don't think it is that done and dusted regardless of the results. francine: do you trust the polls? iain: i think you do. at the moment the market is basically discounting a sanders victory and saying trump is going to go ahead. but let's think of what happened with the u.k. as a roadmap. at some point i think the market will have a bit of a whiff that sanders can do a bit better, like the market got with corbyn in the u.k. and suddenly some of those policies might c because a bit of uncertainty. in the near term, i think -- might cause a bit of uncertainty. hopefully they can get stuff counted on time and get an outcome. but as they go through this, i think it will not be as straightforward as a trump victory and it is done. francine: thank you both, james athey and iain stealey. both stay with us. germany's political future is up in the air after the leader of the cdu party announced plans to step down later this year. saysret kramp-karrenbauer she will not run in the next election. crating uncertainty. our guest joins us from berlin. he is also the author of the book on angela merkel. who comes after akk? .> well, we won't know that it could be as much as 10 months until the cdu party normalizes. it may go to her opponent at the time. she was backed by merkel and what you would call the right wing of the party supporting another candidate. they are very quick to come out this morning and say that they want him to become the party leader again. but it is by no means clear that the party would lurch to the right. --may stay with a sense of to the center -- it may stay to the center. .ut we don't really know yet the cards are still being dealt at the moment. when do we find out who the next cdu leader is, and in the meantime, what kind of alan?es will change daca not expectld policies to change. this is a bit of a blow for merkel because she obviously backed annegret kramp-karrenbauer to succeed her. but the timing of this is quite good for the party. we have known for a long time that akk is not performing very well. we have reported before she lost the trust of the chancellor, and so we are still 18 months out from the general election here. arguably, the party has done the right thing and it has enough before theroup election. francine: thank you so much, alan crawford. we are back with ian and james. we were talking at the margin as to whether that changes -- if the politics in germany change economic growth. does it matter who is in charge of the cdu at this point if you look at the economy? possible extra tariffs dealing with brexit? james: potentially at the margin, the cdu, picking something from the right side of the party, i think that reinforces their belief and that makes any sort of fiscal expansion in a proactive sense that much less likely. whereas i guess somebody toward the center of the party would be taking up leadership, they would be -- there would be some softening. by 10the ship has sailed months out. iain: you could probably do with german politics, from a period of strength. brexit, it is just another thing which is sort of weighing on germany. it looks like it is going to continue for another 10 months or so. so there will be uncertainty. i don't think it will have a huge impact on the overall german economy. i think we have seen the market reaction today that is fairly muted. francine: where do you see value in fixed income in 2020? we talked about the fed, the emerging markets, europe, and we touched on asia. year, ourng into this thought was that global growth would rebound in a modest pace. yield,ld still get leading us to places in the emerging market. at the moment that is being hindered somewhat by what is going on in asia with the coronavirus, but i do still feel there will be an element where you want to buy those rates because the central banks are going to be -- other parts, we have the central bank of mexico likely to cut. be --k you also want to as we get a continuation of the news flow and it continues or deteriorates from here, then u.s. treasuries will be well. there is a better approach of owning what i would call high-quality duration and then finding parts of the market where there is still yield. i think that is an approach i will take at the moment. the -- i amnot of not a fan of the mbt at all. in south africa i think there are attractive trades there, but areweight of the -- there pockets of value, but realistically i want to be exposed to the easy central banking policy, and weakening global economy, and falling interest rates everywhere, so treasuries are far and away the best value. highest quality, most liquid. with the highest yield in the g10 as well. to me, the dollar block and specifically treasuries are most attractive. francine: thank you for joining us. iain stealey, and james athey. coming up, our exclusive interview with jean-pierre:'s j. ustier. jean-pierre moose this is bloomberg. politics,economics, finance. mary lou mcdonald, she is one of the biggest winners in ireland's elections. let's get from -- let's get more from our dublin bureau chief. take us through the results. a lifetime ofn change on the irish political landscape, a shock to most people, sinn fein has won the popular vote. it is a bit like the u.s.. it does not mean you have the most votes in parliament. that seems to be the case in sinn fein. , bye will be a second party number of seats one. it makes them a key powerbroker of coalition talks. we have seen a seismic shift in the irish political landscape. sinn fein is a potential member of government. for --e: what went wrong dara: the quick take is that leo tried to put brexit and his success of brexit talks at the center of his campaign. looking at exit polls, voters were not that interested. thef voters put brexit at top issue. when dominated the election and the campaign was the issue of homelessness and health services. they were the two key issues. the bigger picture here, cineworld gala has been in for . it did not really represent change. sinn fein, they moved into that space and became the party that said it would change to reap the benefits. ireland's people decided there should be change and sinn fein was the biggest winner. bloomberg surveillance continues in the next hour. tom keene joins me out of new york. we will be talking with kit about the overall european banks because of the european banks. we will also talk about what your markets are doing right now. a lot of the focus is on the coronavirus, whether the economy can withstand it. i am looking at u.s. futures. they are drifting. treasuries and european bonds are edging higher. a lot of chinese factories are now restarting, so we will have a closer look at the impact. this is bloomberg. ♪ francine: annegret kramp-karrenbauer quits. angela merkel's leader of the cdu steps down and says she will not be the leader of the german chancellor. infections for coronavirus top 40,000 per unicredit chief executive jean-pierre mustier tells us low interest rates are the biggest risks to his banks up business plan. good morning, good afternoon, good evening, everyone. this is "bloomberg surveillance." tom, the bombshell about an hour ago with angela merkel's heir apparent actually says she will step down from the leadership of the ceu -- from the cdu, that she will not run for chancellor in 2021, really making the race wide open and we are looking at some of the possible successors. tom: the wide open in ireland, in the new hampshire primaries, the political team -- i focus on the markets and em really gives way with oil on the cusp of $49 a barrel. francine: and for the moment saying they shan't meet. let's get to bloomberg first word news in new york city with viviana hurtado. viviana: we begin with a grim milestone for the coming of iris pretty global test -- the global -- for the coronavirus. china says the number of confirmed cases is more than 40,000. the number of deaths has hit 910. 50 more cases have been found it in all, 130 cases of coronavirus have been discovered on the ship donald trump new budget would spend billions more on defense. it would also cut social programs and at almost $1 trillion to the debt. today the spending plan is unveiled. the president's budget is more of a political document. congress has to appropriate the money. lawmakers are not likely to finish work on the budget until after the presidential election. now to germany -- that is where chancellor angela merkel's designated successor is stepping down as head of the country's strongest party. on a great kramp-karrenbauer also says she will not -- on a annegret says sherenbauer s will not run for chancellor. and a historic night at the oscars. parasite becoming the first foreign language movie to win best picture. it was a disappointing evening for netflix. it's movies had 24 nominations but won only two oscars. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. this is bloomberg. francine? tom? tom: it was so emotional seeing frozen done in a language or whatever they do. i'm sorry, folks. "frozen 2." bay overwith willow "frozen 2." there is the data check right now, equities, bonds, currencies, commodities. we have two wonderful guests this hour. equities not part of the story, euros not part of the story. there is oil with a 49 handle. on to the next screen with the vix, disassociated from the equity market. great chart on that over the weekend. the major stories done below, which is where em is just kind of giving it away. francine, it is a great day to talk to kit juckes, isn't it. every day is a great day to talk to norman and ju ckes. traders are monitoring the restart from chinese factories and the possible chaos, meaning several hundreds of thousands of people returning to work at companies like foxconn, which makes components for apple. we keep a close eye on what is happening in china. extraordinary effort by our chinese team in print and television and radio. stephen engle joins us from hong kong. what did you observe this uniqueness of this moment for hong kong and china? stephen: hong kong is beastly having all kinds of challenges on the three big events, the u.s.-china trade war, the protests, and now coronavirus, the outbreak there it the thing that it's very interesting about what we are seeing with the the lunar holiday with china has pretty much ended, and people are trying to get back to work. we don't know how much longer these factories will be idled or when they will get up to full capacity because, keep in mind, wuhan is right back the middle of china and the north-south trains go through it, the east-west trains go through it, and no one is going through it right now because it is on lockdown. the impact of that shutdown of two thirds of manufacturing capacity in china and output is still going to be constrained, and it opens up another can of worms because if you think of it having it somewhat contained, as outside ofspread hubei province, a lot of people will be on the move this week? francine: to the authorities have a handle on this? , andy be spreading less th what about the mortality rate? confirmedhe number of cases is probably underreported like it was during sars time, but there are now 40,000 plus reported confirmed cases. but it is probably underreported because of the lack of testing kits in china. but still, if you have 910 deaths, 908 in china, and more than 40,000 confirmed cases, that is a mortality rate of just above 2%. that is much lower than sars. so that is a positive sign it also, the world health tellingtion's china ad bloomberg television this morning the pace of confirmed new cases actually has slowed rate but again, we have to throw a lot of caution at these numbers because, again, people are going to be on the move again and we have not necessarily seen the peak of this virus yet. engle, thankphen you so much. joining us with more on market reaction, kit juckes and john normand. thank you both for joining us. john, i'm not sure whether the we don't haveer enough information on the virus -- ore an estimate whether the market is large and ignoring it. which one is it? is it a bit of both? john: it is a bit of both. there is an inability to pry something so unique as this outbreak because the sponsor is unprecedented. is also this anchoring effect that investors have where they feel like they hike in the general demand shock. they have seen these shocks only last quarter. the marketnk reactions are completely irrational or complacent. francine: do you agree? go: the market likes to back to a playbook and then say we do not know. you would have thought that typically the bounce back, once it does happen, is quite quick. the policy response is lower rates, the bond market knows what to do quickly. but there is still a huge amount of uncertainty. tom: i want you to look at the j.p. morgan index, the john normand index. let's bring it up now. this is back to 2000. this is a solid 20 years of data. we have broken down a new weakness in the emerging-market foreign-exchange space. i know it has got to be china, but it is more than that, kit juckes. tocuss the factors leading this new weakness and the j.p. morgan index. i thought that emerging markets were going to be under pressure this year more than anything else. the u.s. economy continued to slow and slowed ultimately more than the market expected. i think that is the biggest single danger to the global emerging markets bloc. but if we get more of a slowdown in china and in the united states, there is a lot of emerging market economies that are going to be under pressure, and i do think when you look at emerging-market currencies, more than anything else, it is all about growth. that is going to be what drives their currencies. so anything that threatens that keep does this -- keeps this trend going. tom: john normand, let me go to you on this. show the chart again, anthony. this is long linear weakness, a persistent trend. john normand, is this where it is urgent that china provides fiscal stimulus, and frankly, chairman powell help out, or is it something we can live with? john: i don't think it is urgent. it does not have to happen this week or emerging markets go off the rails. i think it has to happen next quarter because if china does not return to a 6% growth path, there will be a more permanent markdown of commodity prices. i am encouraged by the fact that the chinese have already started to ease monetary policy and they did that last week. i'm sure they will do more of this over the quarter. i think we will get back to the 6% growth rate, and you can see a bit of nem currency revival. -- of an em currency revival. -- if we if we paired compare coronavirus to sars, the economy is bigger now, but how have the tools changed? do they have more tools to fight this off with? john: i think it is the same set of tools. it is a range of monetary easing mechanisms and physical supports. what is different is the willingness to use those measures to stabilize the economy versus make it accelerate over the next year. in the olden days they would have aimed for acceleration, meaning a pickup in the trend rate of growth in response to stimulus, and now i think it is getting back to the old trend. that contains your upside on these markets even when they rebound. how much more can they do? kit: the easement at policy by the least amount possible over last year, the best description. there is a reason the chinese bond market is flying at the moment. they are going to do more this year. they will come up with something and fiscal policy that possibly for christmas people were not expecting. so we will get more. the one difference with china is not just domestic. they are way, way bigger in terms of their interaction with all of the rest of the global economy. francine: kit juckes there. john normand from j.p. morgan. they both stay with us. merkel's, angela succession plan collapses as her heir apparent steps down. that is coming up next and this is bloomberg. ♪ >> with a view to the next year, election year 2021, the cdu needs to have a new structure, new people, our chancellor will no longer be available, so in 2021 we need a future-oriented team with new faces, and we will put that together during the course of this year. that was annegret kramp-karrenbauer, speaking earlier this year. she is stepping down and says she will not run as germany's next chancellor. chad -- isnext is fiasco, to do with the and will it lead to the next leader of the cdu? certainlyfiasco accelerate the move from akk, but she has been under pressure since she took over the party just over a year ago. thee is this slip with democratic party in terms of what to do in terms of cooperating with the far-right party, and also with the left party, the former commonest here in germany. akk has taken a position that she should not, the party should not cooperate with either of those two parties. there are others who say that when it comes to the far-right there are cases where it makes sense to do that, and this really did unravel over the last week with the surprise announcement coming today from akk. there are a number of people who have previously said they might be interested in leading the party. none of them have come out yet to say that they actually will -- to lead the cdu, which probably suggests they also were very much caught by surprise by her shock announcement this money. tom: chad, what does the forward view look like? we had an extraordinary conversation with david folkerts-landau of deutsche bank last week, deeply emotional about this far-right victory and all the tinges of a germanic past. what do the people want forward? hi, tom. you are so right that this is such an emotional topic in germany, more so than in other countries because of the history here. that said, the far-right has done particularly well in the eastern german states, and ultimately these other parties are going to have to find a way to deal with them, or to somehow somea way to attract back of those voters, many of those use to vote for angela merkel's party. the party backve to the right is one view, whereas it shifted back to the left under angela merkel. this is a very emotional topic in germany, and it has dominated the news here for the last week. it is the only thing people here are talking about. francine: thank you very much, chad thomas, reporting from berlin. with us, kit juckes and john normand. does this change the economics of germany, or is it just another wave of uncertainty? kit: i think it is another layer of uncertainty, in terms of what most of us would like from germany in terms of easing of fiscal policy. , not sure what to do, more likely to lend money than to borrow any peer not enough investment going on. you have to feel that green investment or car companies making electric investments will be how this economy gets moving. i am not sure the government is doing much unless the e.u. comes to help with that. this does not change, this does not help. francine: how difficult is it for germany at the moment? you still have the trade war, you're looking at a possible hard brexit, or at least a hard break. then you have it. john: it should be dead easy if you think you have a country absorbing shocks from the rest of the world, and they have the latitude to ease fiscal policy to offset this. they should not be in the predicament that they are in. you have this absence of policy leadership, both in terms of merkel or who her successor might be. it should not give you very much hope that they can deal with these sort of shocks. tom: how do negative interest rates for into gdp? if you are michael feroli and looking at the potential gdp in america, how does the pernicious and this of negative rates fold into what any given politics can do with economic growth? john: if you're the ecb, you look at negative rates as being good for the economy because it motivates corporate activity and does not have much crimping effect on consumption. if you are most investors, you think at some point there is going to be an increase in savings rates, i.e., a reduction in consumption, that this is going to hurt the economy. economies have not moved lower because of negative interest rates, but is -- but it is still a very open question. tom: this is a huge research theme kit juckes, your thoughts on this as you listen to john normand. now, iom where we are think you could establish pretty clearly that cutting interest rates really has not done very much for the last bit to help anything. so at the very least, further easing of monetary policy by the european central bank is going to be almost totally ineffective at this stage. so we need a better plan from here. i think we can defend that one. there is a 300-page ecb paper on the subject, on their feelings about it. i think it is running out of usefulness. both, kitthank you juckes and john normand. both stay with us. coming up, this is what we are watching for tomorrow. the second test of the democratic race in the u.s. kicks off with the new venture primary. jay powell will reveal his policy on capitol hill with his report. and the chief executive of credit suisse. all of that and much more to come, right here on "bloomberg surveillance." ♪ viviana: this is "bloomberg surveillance." we begin with french insurance companies co. vea. come in talks -- co. it is in business talks. the price could be $9 billion in cash. the holding company for fiat chrysler and for ra. tomorrow the parent of mercedes-benz will announce reportedly as many as 15,000 job cuts, according to a german newspaper. i'm already saying it would eliminate 10,000 jobs -- daimler already saying it would eliminate 10,000 jobs. and oil hovering around $50 a barrel, and it is now looking less likely that opec and its allies will cut production in response to the coronavirus outbreak. russia has been resisting saudi arabian efforts to reduce out but the virus is negatively impacting the chinese economy. china is the world's biggest oil importer. that is your bloomberg business flash. francine? tom? tom: let me do a data check right now. it is all very subtle. you need to know oem currencies weaker, oil set nicely below $50 a barrel. it has been there 1, 2, 3 times in the last few days, but nevertheless kyra his -- nevertheless, there is a whole way to the tape, not seen in equities. francine: investors are trying to gauge the economic hit from coronavirus. the market is in a weight and see mode. -- in a weight-and-see mode. tom: you have your primary tomorrow. for our international audience, this is very, very different important.nd very the summary is simple. there are two leading candidates with adjacencies to new hampshire, and a few struggling. 7:00 p.m. on tuesday. this is bloomberg. ♪ >> bloomberg surveillance. good morning. thrilled you are with us this morning. we have a really interesting week wrapped around the politics of new hampshire and on from there. right now, viviano with the news. viviana: we begin with the coronavirus. it could end up affecting at least half a million people in the chinese city at the center of the outbreak. of 20ould be one in out residents in wuhan. that is according to the london school of hygiene. the global death toll is now at least 910, that is higher than epidemic.econd -- amy klobuchar is making a late surgeon new hampshire. in -- lineave her this is one day before the primary. bernie sanders and pico are running too. -- pete buttigieg. and now to ireland. the election has upended the nation's traditional two pari -- party power structure. it is on track for second place in the number of seats won. now a left-wing nationalist party. the two major parties have kept the party out of the government in the past. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in >> this isuntries. bloomberg -- >> one of the joys with working jacob.y is the view from kilis joins us here this money per jacob, i want to focus on one thing in the news that is the why of the struggle of the former vice president joe biden. how come he can't get the nurture among democrats in that open election policy of new hampshire? >> i think there are a few things happening. biden is very much a man of the parties past. he had been in the senate since the 70's. he was a popular vice president during barack obama's term, but he represents quite consciously, his strategy is very much about bringing the party back to the days of the obama presidency. he is casting himself as a return to normalcy, a return to sanity. i am not sure that is necessarily the pitch that the bulk of the party is looking for. there is a general sense that the party needs to offer something new, 2016 is behind us and there be -- there should be something else. >> something else may be is the senator from vermont. we are not going to show this, we will do it with kevin, but the idea -- the quit -- the equivalency of jeremy corbyn and senator sanders, discuss that linkage. >> i do not think it is a close leakage -- linkage notwithstanding the fact they are both left-wing from their perspective countries. i think corbyn cap's himself as a return to a 70 sarah british politics. -- 70's -- 1970's era. dealrs is more of a new democrat. that in some way has more currency and consistency with american political traditions. less --sanders also is than corbyn. i think his foreign policy in particular is -- while certainly representing a great bipartisan consensus, would be a less radical of -- a less radical shaping of america whereas corbyn's would be -- there are similarities, there are ideological similarities but i do not think the two are all that comparable. >> who can actually win against trump on a national level? is that what the democrats will be thinking, will lay vote tactically? >> they will vote tactically, the problem is nobody knows who would win against trump. certainly there is head2head pulling that tended to show bloomberg, sanders, word, buttigieg all meeting trump by more than -- a substantial margin. maybe not enough to beat them in the electoral college all within the popular vote. it is still 10 months out. the economy is strong. trump's approval ratings are ticking back up to 50%. heato not know how in the of a campaign, when donald trump is going to be throwing everything at them, how these candidates will stand up. moreiden certainly holds -- certainly polled more strongly, but he has been at the center of the impeachment inquiry. we are seeing republicans talk -- >> jacob, thank you so much. should point out that michael bloomberg is the founder of bloomberg lp. candidate of the democratic nomination, of course bloomberg television and bloomberg radio as well. norman with jp morgan, we hear the political scientists there say the economy is strong. is it? >> etiquette is the same economy it has been which is a u.s. economy that expands at roughly 2%. headline number is more or less two, and i think that it is what it is going to be. with the wildcard around tax policy, regulatory policy after the u.s. election. fascinating, i agree with everything john said except 2% is not politically acceptable. 4% in china is not acceptable as well. is there a tension here? the mathematics you guys model this isn't politically appropriate for each party echo -- party? >> there is not enough income being created even though unemployment rates are very low. that is a political dissatisfaction, but when we look forward to the election the economy becomes relevant. the pace is under 1% by the time we get to the election. i think that feels different to the voter. steady pacecurrent of employment growth in an economy that is growing at what , inow a new slower trend think the economy is not part of the driver of the election. it does not need to slow that much before it starts being debated more. are people going to the ballot for? >> people vote on all kinds of things. what i think is interesting is -- theh the despite us dissatisfaction is with trump despite the stock market. what will motivate people come november is probably not enough to have a robust jobs market behind the back of the president that is not moving his numbers at all. >> how do you position yourself ahead of the election? anything could happen. >> anything about the different paths out of the primaries and the presidential race and the senate races, you have a number of paths that would make investors rethink profits and policy. yet, evaluations are high whether you are looking at credit or equity markets. i think that is some argument with going into that electoral typicalor having your hedges on whether that is gold or the yen. you have scenarios of negative a general lack of risk premium around those markets. >> market price for a really good market outcome, but it is underpricing risks for sure. >> they can so much. john normand of jp morgan. up next, we will hear more from the -- this is bloomberg. ♪ >> we do not think it is the case. we think that ecb will normalize. >> that was jean pierre mustier speaking on negative interest rates in the european environment. every time we speak we talk about capital requirements, regulations, but also we talk about what it would take for european banks to merge. that was unclear at the moment, but we have a good voice to talk about that shortly. >> we do. elisa martinuzzi with us with bloomberg opinions. good competitors across all continental europe. has there been a cultural change yet? the culture of one year ago, the culture of five years ago, the culture of european banking 20 years ago, has there been any change in cross-border transactions? pointed to the fact -- i think jean pierre mustier pointed to the fact that most banks have focused on transforming business and making the business more efficient for technology. as far as consolidation in europe is concerned, you do have the way oft get in making the most of what those ofls achieve with the lack banking. the sense i get from what he said and speaking to other executives is not withstanding a push for a banking union to go is not much help this is going to happen. is the is important here recent recovery we are seeing in shares. how would you color the overall share bounce we have seen in these european banks? >> what we have seen is the fourth quarter numbers on the whole were better than people were expecting. there has been a boost from trading across the board. also, more broadly there is a peak that there might be a of regulatory demands, a peak of -- that of course means the -- they should be able to pay out more to shareholders in dividends and buybacks. we are seeing that that is actually happening behind some of the bounces. >> does that help in consolidation amongst the banks? evaluationshelp if were higher and these banks were trading at deep discounts. >> is there any appetite? do we know that the ecb -- how much of a hand to does the ecb have been trying to put two big banks together? has beenically, there a concern that ecb would, much like other regulators, demand greater capital from institutions getting together. is -- andre recently the sense recently is a recognition that banks would benefit from some consolidation and perhaps get more flexibility from regulation. i want you to talk about the european wall of money. there is a perception of -- perception even in america that there is a ton of money over there that is going to go into equities. what does the wall of money due in europe? what is the behavior of europe when they have dollars they don't know what to do with? >> that goes to emerging markets. you normally think that cash would be deployed into european assets is -- if yields were higher, but because there is not a lot of confidence about where rates are going to go, even as the economy picks up and they bounce around how much momentum the economy can withstand given europe is one of the biggest victims of globalization, i feel most of this money is going to go where it has been going -- the u.s. it is going to go increasingly into emerging markets. i do not think european assets are going to be a big beneficiary, i think that has already happened and it is more about you and -- u.s. assets. -- it is aclay story cliche but it works, how much ammunition do they have left the echo that can --? >> john normand mentioned the money is going to go out of europe. what is the limitation that lagarde has? >> there has been bond issuance since they set the level the first time around. there are bonds they can buy. they can cut rates another time, another 10 basis points or so. they are not out of ammunition i just do not think it is powerful. the quantitative easing of negative rates at the beginning of 2015 that collapsed the currency was brilliant. that bazooka is gone. >> thank you for joining us on bloomberg opinion, and also normand of jpn morgan. up next, we will hear more from nicola sturgeon. or two to sayg about brexit negotiations. this is bloomberg. ♪ >> i don't think it is the best way to proceed. the best way is to proceed for all of us is for democracy. boris johnson and i disagree on british independence but it should be for neither of us to decide, it should read -- it should be for people in scotland to prove -- decide. i think boris johnson knows that as well. he is talking about spending lots of taxpayer money to try to convince people in scotland of the case against independence. somebody who thinks he can stop people in scotland having that choice, who feel they need to do that. phony -- thata went into the right to choose, ultimately democracy will prevail and people in scotland will have the opportunity to decide whether or not they want to be an independent country. when that moment comes, i think people will choose for scotland to be independent so that we can shape and determine our own future path and not have that decided for us by boris johnson and his colleagues. happeninge that vote this year. that is what i am planning for. we have legislated already for the rules and regulations required in scottish parliament. the most important thing is to make sure that that referendum has a sound legal basis and that it is legitimate and recognized. i don't wanna live forever have a referendum, i want that referendum to be able to lead to scotland being independent. sturgeonas nicola speaking to bloomberg over in brussels. what is your base case when it comes to u.k. trade negotiations? are we going to see an extension or could the u.k. actually crash out? sortt's all agree to some of free-trade reform agreement before the end of the year, but how comprehensive it will be you never know. whether it does result in heart break that is reasonable probability as well. market that isa complacent around the risks. best case, i personally think we will get an extension. this is just starting. we are setting out our stores, both sides of this. his is the way negotiations work. >> i have a tendency to go to the basics. recently, i have seen -- i guess i'm not surprised -- there is all this mumbo-jumbo about technology and such, and one of the tension points his fishing as well. is this going to be an argument about fancy stuff for ancient things like fish and the channel and the north sea? >> fish in the channel into the north sea are going to be a good thing. definitely a big topic. the british, in an old-fashioned way, do not eat many of the fish caught in british waters. they need to be able to export the manned imports different fish. you need a deal, otherwise it is hopeless for everyone. -- that plays out will be that will be a good indicator of where we are with real life jobs at risk. this is going to drag on. the idea that this could get done in one year is absurd. >> let's pick that up with the gentlemen from louisiana. i am not going to ask you about fish in the north sea, but do we have a timeline here that one year is a dream? dreamhink one year is a to negotiate the range of issues on goods answer is that need to be addressed. i think that is why it is difficult to reconcile the idea of getting it done by the end of 2020. -- with the idea of having something that minimizes the impact on the economy. your negative tail risk on this is reasonable. >> what does it mean to u.s. assets? >> i think if you recognize there is a skew in terms of investor positioning, we have gotten long of sterling by a few measures because they think hard brexit will be avoided, fiscal stimulus is going to be impactful. that is a mispricing. to me, the client should be short sterling to hedge risks. >> boris johnson has once again said if we don't get a deal, people just go under. >> i think we will get that isotiating -- negotiating becoming more worrying to us within the next six months. i could easily sterling tread below $1.25 in the next six months. if i am going to see $1.60 again it will be two or three years down the road, not this year for sure. >> i know you do not do shorts, but again, do you play it through the pound or something else? >> play through the pound. you have an environment which is supportive of the dollar given the rate differential. if you're in an environment for the dollar is going to be firm, and you have a country specific risk in a non-dollar currency like sterling, short cable as the hedge. cable, the dynamics here is you want to play the game. trade i establish a discussion that is going to go out years and years? it is impossible, is not it? >> i would project so. at the moment, we worry about the market being complacent in the face of what is likely to be mounting concerned that a good deal cannot get done as the two sides talk. end, from wherever we come we can set up a sound base and probably the country and the currency will start rebuilding and should be stronger two or three years down the road. >> i want to circle around. quickly, how idiosyncratic is e.m. right now? does it surprise you they are all bundled up on the china virus? >> it is more of a systemic issue because china is the bank driving vehicle -- the global economy right now. i don't think there is idiosyncratic movement in e.m. and i do not think there will be until the china situation. trade?- the is there some way to play this cm weakness? >> if we start worrying more about china, you get into more concerns about south africa, latin america and in particular, both of which are the areas where correlation with china's economic activity is huge. america is almost latin china in economic terms now that such a big part of their economy. >> this has been a great way to start my monday. we will drive for this discussion coming up. a little bit of a tilt to the equity market with our two next guests. ith our two next guests. hi! we're glad you came in, what's on your mind? can you help keep these guys protected online? easy, connect to the xfi gateway. what about internet speeds that keep up with my gaming? let's hook you up with the fastest internet from xfinity. what about wireless data options for the family? of course, you can customize and save. can you save me from this conversation? that we can't do, but come in and see what we can do. we're here to make life simple. easy. awesome. ask. shop. discover. at your local xfinity store today. >> this morning, e.m. cracks. theish leader puts six to dollar. brazilian real admits weakness despite slowdown. a third week of complete shutdown, its industry is the size of sweden. good news from quarantine crew trips, meanwhile president trump looking forward to/the cdc budget. begins in the grand resort hotel, dixon notch in new hampshire. the primary is tomorrow. candidates already fighting for their political future. good morning everyone. francine, in germany, real simple. the heir apparent to chancellor merkel says enough, i am done. was askedld argue she that after the fiasco with the afd last week. what it does tell us is that the race is wide open. this comes at a difficult time. if you look at germany, economics are not great. also are -- they are threatened by tariffs, and a hard break from britain. political stability is probably not the greatest for the biggest economy in europe. will look at political stability in new hampshire in a bit. meanwhile, in new york is viviana. viviana: the coronavirus global death toll is at least 910. that is more people than died during the sars epidemic. china says the number of confirmed cases, more than 40,000. a cruise ship quarantine and japan, 60 more cases have been found. in all, 130 cases have been discovered on that ship. washington, d.c., president trump's new budget would spend billions more on defense and would cut social programs and add $1 trillion to the debt. today, the spending plan is unveiled. still, the president's budget is more of a political document because congress has to appropriate the money. lawmakers are not likely to finish work on the budget until after the election. in germany, angela merkel designated -- is stepping down as head of the country's strongest party. she says she won't run for chancellor this coming after her christian democratic union was criticized for joining forces with the far-right afd. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. >> thank you. the oscars have rattled me. there are subtle movements in the market. the vixen on court, elevated 15.91%. if you look at corporate earnings, it will probably take the limelight tomorrow. today, investors trying to gauge the economic hit from coronavirus, which is why we are seeing european stocks fluctuate. european bonds turning higher. there was one move i wanted to highlight, which is the yield on recent 10 year debt fall into a record low. >> interesting to see those moves. why don't you bring in mr. mackenzie in beijing? , we were toldoll moments ago from the coronavirus, has reached 910, higher than sars. recent reports of four more cases, and one serious threat to public health. joining me is tom mackenzie. what do we know about the spread, the infection, but also the mortality rate? tom: the world health organization's concern predominantly because this is being passed now person-to-person, to people who have no travel history with china. inhave seen additional cases the u.k., france and spain. domestically, the total number in terms of debt is at least 910, infections are at least 40,000. we are starting to see the numbers being reported by china in terms of total infections have started to stabilize. maybe then we are getting to the point where the numbers are going to start to peek. -- pete. -- peak. this is a crucial period right now, the first day back to work for many people here in china. i went out during rush hour this evening our time, it was still very quiet. many people working from home. concerns about the infection rates are still there. experts in the u.k. have been modeling this, they say it could potentially start to top out towards mid-february. about what pboc can do? do they have better tools to deal with this then when sars happened in 2003? >> the central break -- bank here has more than they had in 2003. overall, the government says they are going to spend about $10 billion trying to tackle coronavirus. haverms of pboc, what they said is they are going to put in place additional liquidity for 10 of the major banks with the target that they will lead that on two smaller businesses and private enterprises manufacturing goods focused on the battle against the virus. that is part of the emphasis. the pboc already lowered rates, they are trying to stabilize markets. bloomberg intelligence thinks we are getting more cuts to prime right here and more fiscal support is read -- as well. >> what we're are doing on surveillance is resetting on a monday giving the -- given the shocks out there. last that with -- in our hour. john stole sis joins us, executive officer of oppenheimer. of the pacific rim where he is he -- how is standard chartered or recalibrate your research. look at thed to markets in asia that are relatively resilient. we talked earlier in the hour about emerging markets all behaving as one, and we do not think that is correct. the good news is investors are differentiating. it is not a preference for markers like indonesia at the expense of places like thailand. we are seeing relative performance. >> the guy next he was one of the giants of invest on america, john stolnis, you saw the international last that list in q4 as well, do you want to stay resilient on international, or do you skew back to your comfort in the u.s.? >> we want to remain meaningfully exposed to the international both developed and emerging. we are overweight u.s. since last year. we did not change that. capability tor's be a safe haven assets, and at the perspective of u.s. investors, a strong dollar makes international investing more costly. get to the emill in a moment. this is so important. and gaugingat china from your economists, i have got goldman sachs 4.0%, jp morgan 2%, do youning under feel this is a v shaped event or is this what growth is going to be? >> i do not think it is going to be v shaped. our baseline view before the health crisis emerged with that global growth was stable but low. at low levels, you do not have the resilience in the event of a shock. we just had that. you pointed out, you will see incredible stimulus out of china and you will see stimulus from the rest of the world. our view is that the growth recovery in the second half of the year is going to be underwhelming. >> why is that? theverybody likes to use sars template as the framework for analyzing or think about -- thinking about how we move forward. we do not think that is correct. 2003 china was much smaller percentage of global growth. their impact on regional and global tourism was much smaller than it is today. if you think about regional economies like thailand, korea, sorry, even if sars -- the new coronavirus gets under control, the hit to tourism industry is going to be with us for several quarters. is it to modelt it? what is worst case scenario and best case scenario? is extremelyng difficult. best case scenario would be -- as we heard moments ago, the statistics around the virus stabilize in the next week or so and start to come down dramatically. best case scenario, all of the central banks in the reason -- in the region are adding liquidity or both. recoverye a meaningful and quickly. worst case scenario, this lasts for another month and a economies struggle to get going. >> we are just getting some huge news on the bloomberg terminal. is --erstand this automobile considering murdering with of volvo cars. merging with volvo cars. what is clear is that there is a push to consolidate more. chrysler,t with fiat but this feels big because it is cross worlds. gili has been inquisitive. >> it is interesting to see. john stoltz is on the desk at oppenheimer asset management. with eightvolvo iterations of volvo since the time it was a little car company. the first thing i saw when i saw the headline was scale, scale, scale. that is one of the things elevating equity prices. there is this battle, in this case a troubled auto business merged to get stability. irony of it is it as a result of overcapacity around the world which is developed in the last 20 years as the result of the affordability and easy access to technology. we think it is positive. the merger makes for a stronger company, hopefully end up -- and offers opportunities to expand the capabilities of the company. -- to rethink gili is the best place to land? getting an electric cab in london is like coming to work on a bentley every day. we will have much more. in new hampshire, kevin cirilli has snowshoes on. he has by dixville notch trying to figure out who is going to vote. he will be with us in a moment. the new hampshire primaries, 7:00 p.m. tomorrow this is bloomberg. >> bloomberg surveillance, good morning worldwide and across america. interesting monday morning. one day away from new hampshire primary. cirilli, ourvin chief new hampshire correspondent is with us. cut to the chase, it is midnight tuesday, are42 people actually going to drop out of this love fest based on the vote that people see tuesday night? slug fest in new hampshire. i think you are going to see candidates drop out. i have got my eye on amy klobuchar, she seems to have some momentum. the question becomes whether or not the other candidates have sharpened their attacks against pete buttigieg, whether that will stunt some of his momentum we have seen and have since the iowa caucus. bernie sanders still very much in front. it still appears to be bernie sanders' primary toluse. >> -- primary to lose. >> explain the electorate. there seems to be less so new hampshire, who is this electorate and how are they different from four years ago? >> they are more independent. the thing about new hampshire is that independent voters who are not registered with parties are able to vote in the primary. beyond that, they tend to be more suburban. independentave this streak that is different in the sense of where things stand in iowa. the race remains fluid. hadmonmouth university poll the electorate still making up their mind. many voters said they are undecided still. >> why? why are so many people so undecided? [laughter] >> i don't mean to laugh, but you are right. they have had months, what more do they need? iowa, now here in manchester, one of the things that comes up is they want to d.c. to the incumbent. they are trying to look at all of the candidates into figure out who will beat the incumbent. i was at elizabeth warren's rally, they also have certain issues they want to learn more about like childcare. sandersit is bernie very much leading the pack, but the pressure on who drops out, can buy and it -- can bite and finish third? he tried to reset expectations. we are getting into this thing and if bernie sanders comes out out of the early primary states, that is a good sign for bernie. >> again, are we still asking ourselves who can beat trump on a national level? is that true the democrats will choose? will they vote for the person they think will beat president trump, or the person they like most? would push back against the pollsters is that everyone who supports their candidate thinks they can beat donald trump. bernie sanders supporters are not voting for bernie sanders because they think he can lose. ditto joe biden. that argument becomes a moot point in terms of that. that where, i think it goes from here is you have to remember the same criticisms being lobbed against bernie sanders are the same parallels were drawn for donald in 2000 -- in 2016. guy who sayscal ditto, we show the door to. getting ready for special coverage tomorrow night. too.stolnis is here john, let me go to you. do you link any political analysis in the echo --? telling people about 64 in goldwater, do you link any of this in to what should i do in the markets? >> we have to consider it in the sense of broader space, business friendly or business unfriendly? to what level higher taxes ahead? i think with either party or we are going to wind up with higher taxes based on the demographic and the unpreparedness of a generation to retire. at the current picture, it looks to me -- this is not a political statement, i am politically agnostic, i think socialism is impractical as an option. trade policy and theory will not be an burning issue. america? a mercantile from a standard chartered view and your influence on the pacific rim, how is phase 1, 2 and three working out? >> i don't think people are thinking about phase two and three. i think they are still thinking about phase one. will phase one even be executed with the current health crisis? will china be able to purchase the products that have been selected in phase one the echo intern --? we are watching these democratic primaries with an enormous amount of apprehension. if you were to see the emergence of a business unfriendly candidate, the resilience of equities gets called into question. those -- what does the violence -- what does the virus change for the phase one deal? >> i think it would be a step too far. china has been explicit saying that even with the health crisis, they will look to maintain their commitment to the phase one deal and the purchases. athink both sides have recognition or understanding that holding hard and fast black-and-white lines does not make a lot of sense as everybody comes to grips with the economic impact. terms see some delays in of purchases, but i do not expect anybody on either side to back away from that phase one commitment. >> thank you both. and erictolnis robison. we will have special coverage of the new hampshire primary tomorrow starting at 7:00 p.m. new york time. this is bloomberg. ♪ >> you are watching bloomberg surveillance. let's get your business flash. --nch insurance company bloomberg has earned the price could be $9 billion in cash. anort is controlled by italian family, it is the holding family for fiat chrysler. tomorrow, the parent of mercedes-benz will announce as many as 15,000 job cuts. that is according to the german newspaper. saying it would eliminate 10,000 jobs. the automaker wants to reduce the amount it spends on projects outside the core business. oil is hovering around $50 a barrel. it is looking less likely opec and its allies will cut production. this in response to the coronavirus outbreak. russia has been resisting saudi efforts to reduce output. the virus is negatively impacting the chinese economy. china is the world's biggest oil importer. data check, it is very subtle. we will get to this with eric robinson in a moment. real simple here. you're out turning, equities churning, the em has given way as well. >> i think you are right. there is a lot of nuance in the market. corporate earnings will probably dominant -- dominate later. >> headlines out of china, president xi is speaking on the virus in the economy. we will do more on that in a moment. we are thrilled to bring you for another time peter hotel of baylor college and there tropical medicine division. he will join us from hebrew university in jerusalem. this is bloomberg. ♪ >> good morning everyone. looking at the markets and of course the global economy. we will touch on germany here. we have done is theto get straight talk on virology and immunology of this chinese crisis. peter hotez has joined us before and we are thrilled the gentleman from the national school of tropical medicine at baylor to join us today from hebrew university. peter, what has changed in the past 24 hours? there is a dynamic of number infected, what is the rate of change you are focused on? >> one of the big unfortunate developments i think for the first time the number of people who died in one day has approached 100. we are seeing an intensification of the epidemic in central china and wuhan. we are seeing two china's, where the rest of the country -- a lot of it is business as usual. within central china and wuhan, it is almost like an apocalyptic situation where people are being locked into homes, and a lot of big increase in the number of people dying. a lot of this is because china is trying to wall off the epidemic. a vaccineely, without they are using 14th-century methods. that is why it is important to accelerate to new technologies for infectious diseases. a behind you you have got cartesian into graham showing a graph or you are trying to figure it out. and then you have an in a gram with an an exponent in a numerator, what bothers me is you have a cubic function in the denominator. wiseguy, do you know the mathematics of this virus? were is tangible mass, do have any handle on that equation behind you? >> this is actually unrelated to this particular virus. lot of there is a emerging information about this, including how transmissible it is. we like using this figure called the reproductive number, which means the number of people who will get infected if a single individual has. the new number coming out of chinese epidemiologists is 2.2. that is pretty infectious. that means an single individual is likely to infect at least two others. that makes it really challenging to wall this off and quarantine patients. are notese i think doing a bad job but they are taking draconian measures to make it happen. i think the consequences are high if this would work to spread across china and asia. we are already seeing cases in singapore. i think it is all hands on deck to keep this complaint as -- to keep this contained as best we can without the benefit of a vaccine. i'm worried about -- not so much a country like singapore which has the means to identify isolate or quarantine, but some riche less resource countries. what you do if this goes into laos or cambodia? at ank we could be looking situation that might resemble wuhan. president xieen -- 's goldman road initiative, we chinese working in africa. i think that is the rationale by the world health organization declared a public health emergency of international concern. focusing --are we should we be focusing on how this spreads, but should be also focus on the mortality rate? how much more dangerous is it that the common -- it than the common influenza? look at the values, about 40,000 cases so far approaching 1000 deaths. roughly 2% mortality rate. are they are thinking there a number of unaccounted for cases with low grade or mild symptoms. it is probably nowhere near 2% but likely still higher than what you might see in a flu season. it really all depends on your level of exposure. if you are a health care worker on the front lines, you are at risk. if you are an individual older than 50-60, or have underlying diabetes or hypertension, for reasons we do not understand you are also at greater risk. we are developing coronavirus lab, we developed a first prototype and now a second one. what is the population we want to vaccinate, that would be the high risk groups, health care workers individuals over 60. >> what have we learned about the effects to bacterial or viral pneumonia? what have we learned about the knock on effects to pneumonia? >> this seems to be the modus operandi. it is causing a severe viral pneumonia. now because there is an absence of test kits in china, the understanding is they are trying to use vp scans to see evidence of pneumonia and making a diagnosis on that basis. thisis the reason why virus is so severe. it seems defined to receptors steepen the lungs. are looking at getting out new antiviral drugs. gilead has a drug that is being looked at. now we are trying to mobilize vaccines. sars,eloped a vaccine for a prototype back in 2016 that actually was manufactured and we are ready to move on that. interest is in coronavirus and we could not raise funds to do phase one or clinical trials. can move that vaccine in there. >> we appreciate the update peter hotez. begin with amy klobuchar, she is making a late surge in new hampshire. hopefuls, twoial polls have her in third place. this is one day before tomorrow's primary. bernie sanders and pete buttigieg are running. marks forgetting high her performance in the last debate. founder and the majority owner of bloomberg lp, the parent company of bloomberg. to ireland, then -- the election upended the power structure. the former political wing of the ira will feature in coalition talks after saturday's election and is on track for second place in the number of seats won. it is now a left-wing nationalist party. in the past, the two major parties have kept the party out of the government. in hollywood, a historic night. "parasite"n comedy becoming the first foreign language movie to win the academy award for best picture. won for best director and best original screenplay. had 24 nominations, but won two oscars. 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. this is bloomberg. >> [indiscernible] come up when you look at the impact this could have on germany, there is a lack of stability. i do not know whether there was more stability with atk in charge, but what is the prescription to fix germany? >> that is the trillion dollar question. i have got to say that what we are seeing in germany is a series of translations that are occurring as a result of the economic situation as well as the immigration situation that is of concern within europe. plates are in motion. that is about all i can say. >> eric, how do you see this evolving? >> i think germany is facing a perfect storm of negative factors at the moment. caught in abeen very severe global manufacturing recession, a decline in global trade last year even with the prospects of a phase one deal between the u.s. and china. unless we can see one of these factors start to turn more positive, germany's economic outlook is going to struggle. >> what does the euros symbolize about a fractious europe? if you run a fractious -- there are too many countries. what does the euros symbolize right now in this political conundrum? >> the euros symbolize his political uncertainty. we have political uncertainty and a number of countries in europe, but a second factor is the fact we have negative interest rates for the european currency. if you have political and economic uncertainty, but you get paid to hold that currency, you can live with that for a period of time. every day that nothing happens, you bleed money. the euros as a tough currency to hold for the time being. we are with eric robertson -- robinson. em.rd weakness for this week is going to be interesting. we heard from kevin cirilli in new hampshire, we will have our special coverage there on the evening of new hampshire, trying to get good international -- out of iowa. -- moving report by on to great interest. a final investor call from mr. dash, he is out the door. stay with us worldwide, this is bloomberg. ♪ >> bloomberg surveillance. we have two very patient guests with all the news, particularly on the virus. john stolnis and eric robinson. all of this thinking at the standard chartered bank, too with a huge pacific rim perspective. let me look at this chart. it is really simple. indexs jp morgan eem breaking down new weaknesses. let's begin with the linearity. there is a persistence here to ever weaker em, is that a given? >> there are a couple of factors. the strength of the safe haven of the dollar has been a persistent fact for the last seven or eight years. we have also seen a downgrade of global growth, even though we are not in recession. emerging market assets attend to do well because of their gross premium over dm. inhave seen a hit to growth places like china, india, and other large emerging economies. it is tough to change that. >> i could go for hours with you on this but it comes down to the impulse of strong dollar. where does that place chairman powell? does he have to worry about the dollar break dollar stability? >> he does, immensely. one of the things we have argued is that the dollar, when it is strong, titan financial conditions not just for the u.s. but globally. amount had an enormous of debt issuance in dollars. a strong dollar makes those liabilities more expensive. inflationary it is for the world, not just the u.s. and will ultimately hold that hurt corporate earnings. dividendt make that more valued? is this a stock bubble jump focus or is this based on the flows? >> i think that flow going from the robertson world -- i am flattered -- but to this dolphus world. the globalization, technology, that are so counter inflationary to start with and then you add an uncertain world, this coronavirus added a difficulty for the emerging markets. last year we began to see emerging market's currency strengthen. that was a good sign and some of those markets were doing better than european currencies. as a result, we were thinking we were going to get out of the woods. what we have got with this coronavirus is a risk of it spreading and to spread to countries that have less capability to deal with it than china does. it is worrisome. do centrale, but banks around the world have the ability to deal with it? at this point, they do. i think on an extended basis, that is what the question is. think the next step is for governments on a much broader basis then we have seen thus far is fiscal policy relief. be the model that has been set really by both the u.s. and china, which is what problems occur. fiscal policy is needed in addition to monetary policy and it is part of the world we live in. see more fiscal policy loosening around the world? >> some. we expect china to continue to loosen its purse strings. india we are hoping as well. there are other countries in asia that have the financial flexibility to do so like a singapore. signal -- whether that helps lift the global economy is another question. the billionaire of india manon mahindra, it to me it is fascinating that india is an idiosyncratic idea, or is it really looked into the standard charter world of the pacific rim? how do you fit india into what we have right now including the virus in china? >> historically, india has a couple of advantages during a time like now -- today. a spite of its size, as relatively closed economy, one of the things we would expect to see is admits to a mixed trade war india should be resilient. the economic slowdown we have seen has been homegrown. it has to do with financial tightening, lack of liquidity, nonperforming loans, etc.. that has been the challenge. idiosyncratic, but it stems from factors like oil prices. if you were to see a surge in oil, india would suffer from that. >> what is euro-dollar call? >> dollar neutral against g10. within em, we have a positive virus -- positive bias. 20% -- maybe 22% now of global bond yields are less than zero. the negative yield story. 60% gives you 2% or less. an international investor looking for yield anywhere, indonesia gives the you 6.5 indonesia gives percent. places that offer high yields with an unstable currency are -- >> 60% under 2% yield. francine. >> thank you all. coming up, we will hear from chief executive. we will talk negative rates. this is bloomberg. ♪ >> this is bloomberg surveillance. in an exclusive interview, we spoke to him about the impact of >> whether the economy will remain weak or weaker, negative rates are going to have a negative impact. we do not think this is the case, we think that ecb will normalize. >> have you had discussions with the european central bank? do they understand? isthe european central bank -- at the moment they need to decide whether to interact with us, but those on the regulatory side have to say that the new mr. -- has been transparent about headwinds which i think is a plus. they have better visibility toward european banks. we should bring more capital into european banks. >> does tiering work? >> tiering works a little bit because it has a little impact on negative rates but i think negative rates in general is an issue that will stay lower for longer. >> what is your take on the italian banking landscape? are you seeing profits, are you seeing light at the end of the tunnel? >> i think the sector has made a lot of progress in the past two years. we reduced our nonperforming loan by 50 billion in three years. that is quite a large amount. the system is in better shape. i thinkan banks outperformed european banks since the beginning of the year, why is that? >> because italian banks are very good. >> was there a discount before that people now see value in? >> i think people can see value in italian banks and the overall framework in italy might be more stable. it is a country that has a lot of assets and a lot of positive. , andcompetitive for sme's a population that is consuming and is a wealthy population. all, it could prospect for italians. when we get to this point of the gdp, i think it is only technical. >> do you think there will be consolidation? >> it is not for me to command. no nme. do rumors about consolidation make a difference to your strategy? >> it does not. 23.s clear for the new plan we work on an organic plan. isnsformation of the bank much more important than acquisition. >> left and we spoke, i was asking you what would trigger against two tier banks and you told me the share price. is this still the case? >> the regulation is important to the states and they said they want to be much more transparent about regulatory headwinds and regulatory devolution. one thing is transformation, the most important issue for banks today. iscourse, share price which -- for the european share price in general. o considericult t it not being competitive. >> that was jean pierre mustier speaking to me earlier. this is what your markets are doing. what the coronavirus means for the markets. global wall street, trying to figure out how that will hit the economy. we are also looking at a lot of corporate earnings starting later this afternoon. european bondthe are turning higher. angela merkel's succession line collapse. a lot of focus will be on lsrmany and ireland with pol putting a possible role in the government. ♪ ♪ >> china goes back to work. the country is expected to read production after companies are cautious as the virus lows. angela merkel's successor chaoss as there is more into a once political system. investors keeps buying bonds. welcome to "bloomberg daybreak." i'm alix steel. what to buy? that is the question. gold and the in treasury market. u.s. equities are weaker. u.s. dollar sitting at the key level. today, that rally is taking a break. time for global exchange where we bring you market news from around the world, from hong

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