Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240713

Despite fears that continue to permit. The bait in the bond market continues. Down five basis points from the 10 year. Out, 47. Ly wiping you will have a lot of paper from banks that lend to producers. We will bring you the latest market moving news from all over the world, from hong kong to washington to new york, our bloomberg voices are on the ground with this morning stop stories. We begin with asia. The death toll is climbing, cases worldwide are above 82,000. Saudi arabia halting religious visits, well japan asks for all schools to shut from march 2. Stephen engle joins us from asia. Stephen it is significant because it is the first time we have had more new confirmed cases outside of china that inside of china. It could be because china has a great, on this or, more sinister, that the virus is spreading faster than the who and others are expecting elsewhere in places like south korea, japan, in the middle east. As you mentioned, saudi arabia does not have confirmed cases, but they are taking the precautionary step to temporarily suspend pilgrimages to mecca one month ahead of ramadan to the holy site. An auth korea, we just got revision in the last hour or so, another 171 on top of the 374 they previously announced today. In one day, 505 new cases in south korea. It suppresses chinas new case count that surpasses chinas new case count that surpasses chinas new case count. South korea beat that. Japan also has more than 200 cases now. That is not including the more than 700 cases from the diamond rinses cruise ship princess cruise ship. A duty just heard from shinzo abe, the prime minister, he is not only taking steps to close schools in hokkaido, which has a cluster of infections in the last couple of days, the is going to cancel or at least suspend for about a month, through mid april, all schools across japan. Alix thank you so much. Bankay in asia, where the of korea is leaving rates on hold while warning of the virus impact. The view is that the Economic Impact of the coronavirus will be focused in the First Quarter and it will be bigger than have been. We think the micro level policies will be more effective than a broad rate cut, while also considering that the Household Debt level is still high. Alix joining us from hong kong is sophie kamaruddin. Sophie the bank of korea opted to take a more targeted approach to support the economy and Small Businesses instead of a wider reaching rate cut which is what was expected, even we saw similar steps taken in 2018 when is thought to limit the impact of the mers outbreak. The be ok turning to its lending facility, relying on cheap loans as it has done in previous downturns. The governor keeping the door open for easing. But this surprise move demonstrates the Central Banks reluctance to use the same o. Licy m along. With high Household Debt, you have the property market, coupled with other factors keeping the be ok on hold. He downplayed the potential for unconventional measures being used. He does expect a recovery for the economy after a temporary slowdown. I would like to point out, the session bys sunshin livestream on youtube, but attempt to limit exposure to the virus. Alix interesting turn of events. Sophie, thank you very much. We want to stay with the coronavirus. More cases are reported in countries other than china, including the first u. S. Case reported without ties to the outbreak. President s trump tried to ease the fears yesterday. Done,ause of all we have the risk to the American People remains very low. We are ready to adapt and ready to do whatever we have to. This one is much different, this is a fluke. This is like the flu. I think the stock market will recover. The economy is strong. We are ready, willing and able. Alix from washington, kevin cirilli, bloombergs washington correspondent. Walk us through the task force that was appointed on this. Kevin good morning. Vice president mike pence would be taking the lead on the response here to the coronavirus. The president yesterday saying that the threat still remains americans. On capitol hill, 2. 5 billion worth of a package that lawmakers, bipartisan, are trying to move through to assist with the response. However, the department of health and Human Services said,ary azar has testifying a couple of days ago, that there is concern in terms of the funds needed to combat any type of pandemic response. The president and his allies trying to get out in front of this. What you are hearing from a political standpoint is that democrats are now raising concerns the president has cut funding levels to a host of different agencies, and therefore, that they would not be what to combat this with the full force they would like to have seen. It is getting wrapped up into some politics, but the white House Republicans are trying to push through and say that essentially, they are staying ahead of this. Alix thanks so much, kevin house. Out either white on the company front, you have microsoft, ab inbev, Standard Chartered, joining others in warning of a hit from the outbreak, warning of lower estimates. Joining us now is dani burger. Dani seems like every Company Seems to mention the coronavirus to some degree when they report earnings. The latest is Standard Charter this morning saying that their hong kong business is weak because of the Economic Outlook, then you add in the coronavirus and they missed a key profitability target. This goes for any asiadependent business. Say if you sold alcohol to restaurants and bars in asia, so someone like ab inbev also read the alarm, on track to one of their worst orderly profit declines in nearly a decade. Ricard, thesenod other uncle companies also taking a hit. Other businesses say hotel. They did include the coronavirus forecast, their marriott, saying they could see a hit of up to 25 million a month should the Coronavirus Impact continue. Finally, the darlings of the bull market rally, tech has not been immune. Last week it was apple and hp issuing warnings. This week it was microsoft, saying production is taking longer than expected to get back to normal. Sales have also been weaker as well. Thesealyst saying that results from apple and now microsoft, confirm the worst expectations of the street. Alix thanks so much, Bloomberg Dani burger. Finally, a busy day for u. S. Economic data. We will get a second read of fourthquarter gdp along with durable goods, pending home sales at 10 00. Joining me is bloombergs mckee. Mike, what can we look for . Michael for the first time, we have the numbers not just the coronavirus rumors. Problem is they dont tell us much about whether economy is going now that we do have the virus, because they are from january. The number of the day is adorable goods orders, particularly capital goods orders outside of defense and aircraft, often seen as a proxy for business spending. Taking a look at a chart of the numbers, the chart of the quarter. We were expecting to see capital goods orders rise now that we have the tentative phase one deal. May be kickstart a little business spending. Whatever it shows may have been overtaken by the coronavirus. The most timely number, jobless claims, though in this case, it may work in the favor of workers, because we dont know what is happening with the virus, so why lay anybody off at this point . We also get as you mentioned, the revision to gdp. No change expected from the 2. 1 and will rate reported for the Fourth Quarter. Sales, one thing the feds rate cuts over the past year have done is boost housing. So we should see that gain. If you want a number that does show may be some impact to the tease your, i will show tomorrow, tune into murder because the university of michigans Consumer Sentiment up somerobably picked virus and stock Market Reaction. A lot of people will be following that. Alix that is my favorite economic indicator, my desert indicator. Omic. Michael mckee, thank you very much best buy jumping 2 in premarket come after fourthquarter earnings per share and enterprise, sales beat estimates. Also boosting their dividend by 10 . We will watch on that stock particularly as the call gets underway later today. Coming up, we have more of your morning news, trade analysis on the markets in todays first take. This is bloomberg. Alix time for bloombergs first take, the news, the trade and analysis on the market. Joining me now are my guest, a former fx and rates trader, a bloomberg emerging market chief exantegist, and the exam ceo. Er and people keep trying to catch this, as we talk about the other day, until you get this thing to flow through north america, the last gasp of it, the riskoff will continue in fits and starts. Stepping in front of it is never a good trade. This is not the typical buy the dip type of market you have seen in the past. A longerterm Portfolio Manager, you might see some bargains in certain stocks you had not get an opportunity to be involved in before, but i think you have better opportunities to go forward. Contracts are a point inverted. Alix contracts are more highly priced in a month, so it means you have more volatility extended for a longer period of time. Guest exactly, you just took it from my mouth. [laughter] alix so what do you do . Guest i think right now we are on an inflection point. We had six weeks where we were china, is china going to shutdown, are the supply chains going to break, are they going to stop consuming because of the situation they had when they were fighting the outbreak. Now, the focus is clearly on the international front. We have way more cases outside china than we have inside, and it is many countries at the same time. A lot of new cases. When we looked at the numbers so far today from korea, it will move worse today than yesterday, literally accelerating. Obviously, italy is very dramatic. Middle east is very dramatic. We have this acceleration, shifting the focus from this big issue around china that potentially is getting resolved, to a global issue that is impacting travel and tourism in a dramatic way. And we dont know about the korean supply chain. And again, when talking about the rest of the world, u. S. , wey here in the dont have the capacity to detect and measure the virus at this point. We dont have the kits to go out and say, someone has a temperature or doesnt, do they have it or do they not. So there are more cases probably than the one detected in california overnight then are out there. Unfortunately, people will panic and will see this aggressive selling. I was surprised overnight with south korea, the fact that they left rates on hold come very mature thing to do in this environment. Alix which is unusual. Guest interesting that they also announced they will reduce the cap on loans. What they are doing is like fiscal stimulus. We saw malaysia last night announcing a special package, taiwan increasing its budget. We are starting to see the fiscal stimulus and it makes sense. I personally dont think the impact will be shortlived. If you look at microsoft and google, they are looking to take the supply chains and move them to taiwan and vietnam from china, the impact could be longer on china. So i am more concerned about that. Guest like korea, we have to be careful with the Central Banks. I think the revised their gdp forecast down by. 02 . So it is very hard for Central Banks to deal with. We heard it from Richard Clarida couple of days ago like, oh, we need to have some data. This is the kind of thing where you need to look at alternative data to get a realtime feel of what is going on. If you wait for the official data to loo come out with a twomonth lag, you will be late. Guest danny makes a good point about fiscal policy. When you look at Central Banks come up more liquidity will not cure the virus it will not have more people step up right and spend money. What may happen, and they think something you will see a Democratic Congress and trump agree on, politics aside, you could see middleclass tax cuts brought forward to put money in the hands of people, even if it is nothing more than to shop online. Alix we just had a chart companies. Ferent a taxcut and also fiscal stimulus, Central Banks, is not going to help microsoft not getting its stuff. Nothing can solve that. That will be an earnings revision estimate. All the banks are relating their s p target. Nobody knows what to do with earnings. I have no idea how to value that. Guest on the microsoft thing, what was surprising was that it was not expected. It is not exactly a secret that we had an issue in china the last two months. May have said, ok, we have some issues on business, and the stock was down 2 immediately. I would have thought those types of things would have been already embedded. It was interesting, not the news, but the price still did not seem to have it embedded. Guest they came out and admitted it, maybe they had not been forthright or helps in saying that this is really impacting our business. Speaking of impacting business, in china, do we start to see going forward, permanent shifts in the supply chain . What does it do to the chinese economy . To their financial ability to maintain the loans to the states . To maintain the entire structure . Will the current be pulled back and we finally see what chinas liabilities really are. Guest it takes me to the monetary stimulus point. Asian equities were a big overnight, then all of a sudden the pboc came out and said, we might cut the rrr rate, and all of a sudden, equities rallied. My colleague put out a call for potentially in a worstcase scenario, the u. S. 10 year below 1 . Standard chartered calling for two cuts, not at the end of the year, april and june. Monetary stimulus is still there. If you are an Institutional Investor looking for an investment it is still down in quality. Get longduration. Where do you get that, this is like cmbs where you still get some spread volatility. Out along the curve on the 10 year, you could pick up doubledigit returns. Alix also, to your point about volatility thank you there is a story out there that the option hedges have done this. They did all the equity selling but the actual fundamental people Institutional Investors, are still waiting on the sidelines, on fears that if that shift and they start to true . Tion is that guest it probably is, but i think one of the biggest fears is what people are talking about, Central Banks two or three cuts. That does nothing for the overall economy. All it will do is inflate asset prices. That creates an even bigger downdraft if the situation continues. It is not a Central Bank Monetary policy issues. There is sufficient it liquidity there is sufficient liquidity. If microsoft cannot get products, if south korea shuts down and you cant get product, what does monetary stimulus going to do . Guest on the bond issue, everybody looks at the bond screen and say, the bond yield looks low, maybe it moved too much. We do a lot of tracking of what the different participants in the market are up to. If you look at how investors are positioned duration, they are actually short duration. We look at this market, we can see there is too much price for the fed, but a lot of people are scared of low yields and they are not on board with the bond trade yet. I think that is something you can see in volatility in the yield. There is almost no volatility in the yield. It goes down. Even with spikes in equity market, it is huge. Guest it is not coming back. Guest i think that is to do with the real money being slightly short. Alix does it unwind, what does it do . Guest it will lead to a. Of consistent buying. Every time we have a spike in the yield, they come in because they dont want to be short anymore. If the fed delivers, we will have the yield curve resetting. It will be some important meetings. March might be early, but i think april is a key meeting. Guest can you imagine them saying, we will cut rates. But if we cut them come at once everything returns to normal, we will raise them againp can you imagine what the Market Reaction to that will be . Guest people will know that anyway. They are cutting for the pandemic potential. Same with the pboc. We are putting all of this liquidity in, if this goes away tomorrow, we will take it out again. That is why i see Central Banks in a big way adding to the problem, not fixing it. Alix we will talk more Central Banks in a second. Guys, thanks a lot. Jens nordvig stays with me. Any charts we used throughout the show, if you go to gtv on your terminal, you can browse them in check them out. This is bloomberg. Viviana this is bloomberg daybreak. We begin with ab inbev forecasting the worst quarter in at least five years, because of the coronavirus. The Worlds Largest beer maker saying firstquarter earnings will drop about 10 . Fourthquarter profits, more than estimates, blaming that on the biggest drop in Raw Materials in a decade. Now to the Worlds Largest Advertising Agency for it expects no sales growth. Wpp continues to suffer from competition with big north american brands. The firms fullyear revenue forecast missing estimates. The ceo mark reed is trying to stop companies from using influence the us losing influence to tech giants like google. This company is considering assets sales and mergers. Fierce competition has put pressure on the equipment maker. Before yesterday, and no ps shares over the past year had lost roughly a third of their value. That Asia Bloomberg business flash. Beforeey ashares sharesay, nnokia over the past year had lost roughly a third of their value. Alix you will see enough to know deals this week. Wall street went through days in a row without any highgrade offerings. That are must never happens. Same thing in europe as well as asia. Europe has been enjoying its strongest ever start to the year. I think last friday their dump on spreads hit a record low. The junkbond market has been its busiest in a decade. Will those investors and up coming in and looking for yields if the bond market opens a little bit or will they stay shy until we get some clarity . Coming up, former fed chair janet yellen says the coronavirus could through the recession. O how should central bank is respond . We dig deeper into that next. this is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Alix this is bloomberg daybreak. Steel. X taking a look at s p futures, still down. We tried a riskon bid yesterday, and we continue to roll over today. If we close lower, it will be the sixth straight day. European stocks in their worst slide since 2011. Other asset classes, it is a rush to safety when it comes to commodities and when it comes to the bond markets. The currency markets are a little odd, the eurodollar is actually up. If you are unwinding those carry positions, you might be trying to buy more euros. Boris johnson pushing hard back on the e. U. , that is an idiosyncratic stories. The curve continues to flatten. The swift and flat reversal for the curve. Crude is off a whopping 3 , and unbelievable slide for crude, going through levels were a lot of producers had hedged, which means banks now have to unwind those hedges. It can get really ugly for the commodity markets. Markets continue to weigh the impact of the coronavirus. We have been tracking activity indicators in the country since the outbreak started. I will just bring in jens nordvig of exante. What does this show you . What do you tell clients . this chart is tracking movement of people in china. After the shutdown of the economy, we went to around 30 or 40 normal, it massive shock to the economy. The last couple of weeks, as we have seen some normalization, people are returning to work and so forth, activity is down 30 yearoveryear. So it is still a massive shock, but it is moderating. Havingggests china is some success getting people back into the shops, to the manufacturing sites and so forth, but there is still a long way to go. For the need 12 months current trend is back to normal, but the gap is very real. Alix do you have data showing how much people are going back to work . Are they actually going to work, Capacity Utilization at 7 . Kens we essentially track activity within cities, that can be a proxy for retail sales. That migrantng is workers, around 300 million of them in china. Are they coming back to the manufacturing sites . That was very slow, but it is starting to accelerate. This week has been very key in a lot of money fracturing sites he opened. The government is offering free flights to make sure people get back to those sites. I think a lot of the Migrant Workers will be back by the end of march so there is no doubt this has been a massive shock. But it looks like it is easing. The big picture we are having on , weglobal economy is that have two legs in the global economy, we have massive damage to the china led, and that is starting to heal, now we have leg,ve damage to the other essentially everything going on in korea, italy and so forth that is dampening confidence right now. Alix the china led was much serious given how it is embedded in the Global Supply chain. But it in these is not as integrated into the supply chain world. Is there a different perspective elsewhere . Iss i think the italy issue really making people very cautious about traveling anywhere. Gdp,sm in italy is 13 of tourism and france is about 8 of gdp. This is a big thing. Everybody is getting very cautious about travel. You can see how Much Airlines are down. This is a major, major shock. It is a global issue. The problem is that even if certain countries get it under control now it will not be sold in a couple of weeks. Goings something that is to linger for months and have material damage on the tourism sector. We dont know whether supply chains in korea are going to be really affected, but everything to do with travel, tourism and commodities as well, because it is related to how people are moving around, it will have sustained damage. Alix which leads us to Central Banks. Ask fed chair janet yellen, heres what she said about Monetary Policy yesterday. Scope. Fed does have some it is not a cureall, but it will provide a little bit of support to Consumer Spending and to the u. S. Economy and to financial markets. Of course, if it becomes very serious, fiscal policy good play a more active role top. Alix but is it a signal we still need . Jens i think this is a different type of shock. We have been used to, for the last 10 years, that we had some underlying demand issue that we could address by low Interest Rates, qe. Here we have the supply chains. A sudden stop in the tourism sector. And will be hard from an atari policy to have an impact. Doesnt mean they will not try very hard for Monetary Policy to have an impact. The fed will have to think over the next couple of months whether it is appropriate to react to this. The data will catch up with them. Alix it is the cost of war for banks. Central this is the june cut expectations for the fed, the ecb and the boj. Bit. Oj rerating a little is this explaining why the dollar is weaker today because we have no cuts in the u. S. . Jens they are two important points of their. The bank of japan is essentially maxed out, the ecb is maxed out in terms of rates, maybe they could do more on qe, but the fed has room to move. That could raise the potential for the dollar to weaken. The other thing related to the chart you should earlier, issuance. We had a lot of issuance the last several months. It creates euro selling if you use that to fund global operations. If issuance shots down, it could move a portion of the euro selling and need to a euro rally. Things. E two important the other thing is if we track what is going on in terms of systematic participants in the currency market, we essentially have maxed dollar long. So it could be nasty if we start have a turning point that people have to step out of those dollar longs. It could be the case in the euro and a lot of other g10 currencies. Alix is your base case for that . If we havethink that further spreading in the u. S. , we have the first case in california that we saw last night, if that starts to morph around the whole country, then we will have a real issue in terms of consumer confidence. The fed will probably move. I think that price action we saw today in europe could extend further and then the systematic stuff will kick in. Alix jens nordvig will be sticking with me. Jcpenneys earnings are out, up over 5 . Fourthquarter earnings beat estimates. They said their fullyear bitda is 5 . Ii but they are still looking at fullyear sales down the most, 4. 5 , yet that does not incorporate the virus. They will to closing also six store locations in 2020. We will get into jcpenney in the next couple of hours. Begin our title is here with news. Word viviana President Trump wants to within his administration over the threat from the coronavirus. Last night, he and Government Health officials speaking to the nation acknowledged that an outbreak in the u. S. Is possible, but they say that the risk to the average american is low. Mixed messages from the administration wetterling wall street. The u. K. Will play hardball to get the trade deal it wants with the e. U. The government is saying it may start preparing fordeal departure from the Customs Union in january. Of aweek, negotiations post brexit deal begin. Moderate Congressional Democrats and capitol hill are trying to separate themselves from 2020 front runner Bernie Sanders. Their goal, to keep the House Majority. Mr. Sanders has embraced policies that are unpopular in republicanleaning districts. 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. I am Viviana Hurtado. This is bloomberg. Alix thanks so much. Ens, do your clients ask about the election yet . Jens there is a lot to track. The main focus is the coronavirus, the global dimension. One issue is, is it possible that we have this outbreak the approvalging rating of the current president , in which case that opens up the election in a way that was not conceived of a couple of weeks ago. That is a big thing. Especially my international clients, they are very focused on what is going on with sanders and so forth. I think domestic clients here in the u. S. , they would be viewing the politics a little bit differently and perhaps looking at what trumps Approval Rating. It was quite high up until recently. Therefore, not giving leftwing candidates much of a chance. I think people who manage bid for for use around the world, it is something they are thinking about closely. I think they are putting hedges in place. What if we have a Major Political shift in the u. S. That we have essentially never seen before in modern history . International investors are looking to put hedges on that. Alix will it be on the health care sector, will it is something along a broader buy . Jens it could be bearish equity market hedges. The big debate is whether there are safe haven currency trades you can do. Is the yen still is safe haven currency trade or is the swiss franc or gold . Alix this chart here shows the it should show the rise in sanders in the polls. If you look at the s p, as it rolled over, it was one sanders right. Is there a part of this that has to do with the politics . Jens i think the coronavirus is factor. The dominant all the big swings in the market have been when we had new faces in this epidemic being established. The trigger for the market ,ollapsing although last week, this became an International Outbreak as opposed to a china issue that looks like it was being result. I dont think we should be underestimating that this is a global issue now and it will not stop anytime soon. Alix when do you think your investors your clients will get more focus on the election, pricing in some kind of risk and hedging even more so . Jens i think it will happen if we have a leftwing candidate, looks like, he or she is going to be nominated, and at the same time, trumps Approval Rating is going down. Alix both. Jens that combination is the key. Alix in terms of overall growth, if it happens, what position does it put the central bank in . Reno President Trump will end up blaming the fed for not bring something if his Approval Ratings go down and the economy starts to weaken. Jens it is very difficult for the fed to respond to an unknown threat from a virus and supply chains. Alix or elections. Jens elections would be more difficult because politically, they are not to take a stand ahead of time. They can only react to a dynamic like that if it hurts financial conditions. They would have to see credit spreads, and the equity market really move before they take any action. Alix is liquidity still ok . Jens i think the current market is the thing to watch credit watch. Is the thing to we have been many years where there was no hick up in the credit market. I think the key thing to watch is where the credit market is damaged. The could be also important for the credit market, because we have this buyback situation supporting the credit markets. If the equity buybacks are damaged by less credit market issuance, that could be another leg of this change in psychology we see playing out now. Alix good point. So great to catch up with you. Program, donte travel, dont meet clients, dont even shake hands. These are precautions banks are taking a midst the coronavirus outbreak. If you have a bloomberg, if you go to tv , you can watch us online and look at our charts. This is bloomberg. Goods and within our powder coming to you live from the principal room. The Goldman Sachs chief u. S. Equity strategist, david kostin, is coming up. Viviana you are watching bloomberg daybreak. This company is printing a grim scenario involving losses over the roundup weedkiller. For the first time, the company says it might need to sell assets, issued new stock, or borrow money at an unfavorable rate. In the u. S. , it faces more than 48,000 lawsuits. Now to a warning from aston martin. The british luxury car company saying revenue will continue to slide. Aston martin is marking time until it can get a boost from suv. Ew dbx the company is also for the impact of the virus on demands. Chesapeake energy is tumbling toward oblivion. The Natural Gas Company touching ones and shares falling, after the ceo is nothing that is survival plan that includes a sweeping Divestiture Program that must be completed within months. Test epic is also going ahead with a reverse stock split to avoid the least and delis ting. Alix recover three things wall street is buzzing about this morning. Standard chartered bank says its revenues will fall this year and. Ikely miss key profit bank leaders are taking precautionary steps in case of the potential pandemic. And aramco is said to be starting early preparations for a national listing, just months after its record domestic ipo. Joining me now is bloomberg sonali bostick. What they warned . Sonali they are warning that profit to be impacted. By the way, them and everybody else. This is now impacting so Many Industries retail and technology. Standard chartered has almost 70 of their revenue coming in from asia. Hsbc has about half. Good and for Standard Chartered is they are not saying that it will impact their buybacks. Hsbc has a different story because of their restructuring. Alix as banks pivot to asia, because that is where the growth is, they pivot to asia because that is where the growth scare is. Areli by the way, they not the only two banks feeling the pain. We have seen ipos in the region impacted, bond deals impacted. But more so, 70 of the revenue area. From the alix in the second story, we have seen companies in different sectors taking extreme measures. Chevron told its workers to. Tay home quarterback thing, go to meetings but do not touch anybody . Sonali videoconferencing as much as possible, fist pumping instead of a handshake, which were a banker, that is the iconic thing to do when you go to meetings. Sequoia had to move a meeting over from new delhi back to silicon valley. So you are seeing this impact not just banks but also their constituents. An interesting part of this glassis the bulletproof at retail banks is one reason retail banks are able to still keep their windows open. Alix interesting. I was talking about this in the break, does this come from a broader structural shift . Banks saying, we can actually do things remotely. It works. Sonali the people who want to expand in asia, they really do ultimately need the facetoface interaction. Alix lets wrap up the last story, the saudi aramco ipo. There are lots of layers in the oil world. But what is the readout . Sonali fish matthew martin, they have a great scoop saying that it will not happen this year, but they are starting to lay the groundwork for an overseas listing. Remember when they did list initially, it had to be scaled back and done a mystically domestically. The banks involved were paid a lot less than initially everyone had thought they would get, 3. 5 million per bank. I had bankers tell me they did not even break even on the deal. So how many banks this will involve, their commitment to the region and two big oil at a time when everyone is going ill commitment to big oil at a time when everyone is going ill. Alix also, do you really want to tell mbs i am sorry, that valuation is not going to cut it . They are picky about the banks they use, and the bankers region. To stay in the they do want to diversify the economy so there are more deals to be done. But part of that means getting on the saudi aramco deal. Alix in the oil market, that is one of the many reasons why analyst say saudi aramco will continue to cut, and opec will have to cut. Because this is not just a matter of they want to ipo, they have to ipo to promote vision 2030, to keep everyone happy. Which means they cannot have oil at 40 a barrel. Alix also, how many local investors are opposed to them when they get into the indices. Aramco is here and they are in reality that the globe has to deal with it. Alix they will push it on you, no doubt. [laughter] sonali bostic, thank you so much. One of the stories that caught our eyes, several major developments involving nmc health, a middle eastern hospital operator targeted by short dollars. They dismissed their ceo, plus a advisers have found potential discrepancies in bank statements. sanwhile, Richard Chandler clam group is purchasing shares of nmc, the first and the billionaire has taken trades on muddy waters. Chandler became the biggest shareholder in one company before it went bankrupt in 2012. Interesting little involvement there with all the key players. Coming up, the euro climbed higher today in the markets. That is coming up in todays traders take. To the into Bloomberg Radio heard across the u. S. On a serious xm channel 119, and on the bloomberg channel radio app. This is bloomberg. Alix time now for traders take. Joining me is the voice of the bloomberg audio squawk. Looking at the euro, i was puzzled as to why it was up today. Guest we are seeing some trade unwinds, some dollar selling, big equity selloff, but what i wanted to bring o his, germany is about to go into recession. You can see where the gdp is the driver of Economic Growth in europe, so goes the euro. While this may be a shortterm blip in the euro, dont get married to this trade, because of the trend continues, there is no way that euro stays. Alix at the you were talking about parity being a bad word for you. Guest it is, but 1. 05 is not bad. 11 is a stretch. Parity is a stretch. But you never know with how the virus affects europe. Germany is saying, we are thinking about stimulus soon. Alix 21 billion and they have to actually getting through. Guest that is a big problem. I believe you need two thirds to sign off for that. Alix the idea is that the ecb might not have room to cut, but if you actually get them releasing their debt ceiling and their budget fiscal caps, that could actually help. Guest but it is going to be a big stretch for germany, with 20 billion euros to carry the rest of europe. Alix good point, i cannot argue with that. Fine, you win [laughter] thank you so much, always a pleasure. Coming up, david kostin from Goldman Sachs, key u. S. Equity strategist will be joining us. They just came out with a note this morning that says s p earnings will see no Earnings Growth in 2020 due to the virus, and a 6 growth in 2021. We will break down of that call and how you position your portfolio for Something Like that. 1. 3 . Tures are off by europe is rolling over. Money continues to move into the bond market. This is bloomberg. This is bloomberg. Alix will come to bloomberg daybreak, on this thursday february 27, i deal. X there is every indication that the world will still enter a pandemic phase of the coronavirus. Alix australia issues emergency plans. Japan closes its schools thailands industry shrivels. This is the first time we have more new confirmed cases on a daily basis outside china than inside china. That could be because china has a grip on this, or more sinister, that the virus is spreading a little faster. Alix china will also suspend retail and government on sales. I think the microlevel policies will be more effective than a broad rate cut. Alix the bank of korea surprised the market and does not cut rates, while warning of the virus impacts. Luckily the potential for unconventional measures being , even as he said outlook might be dimming. Alix the number of south koreas infections have spiked to over 1500 in the past week. After that, we will probably come through in march and beyond. Alix Standard Chartered warns of the coronavirus. Asia accounts for the majority of its earnings. Their 2020 Revenue Growth will fall short, the latest in a slew of companies to lower their growth estimates. Seems like every Company Seems to mention the coronavirus to some degree when they report earnings. The latest Standard Chartered this morning saying that their hong kong businesses were already week because of the Economic Outlook there, and when you add the coronavirus and they target. Key outlook alix apple ceo tim cook also called the coronavirus a challenge. Jcpenney and best buy reporting earnings. Jcpenney apparel showing some strain, the retailer planning to close six stores this year. Whatever happens, we are prepared. We have the best people in the world. Alix we are assurances come, as the u. S. Identifies the first case of the coronavirus that does not have ties to the outbreak. Vice president mike pence will be taken the lead on the United States response here to the coronavirus. The president yesterday saying that the threat still remains low to most americans. Alix the cdc raises the threat of Community Spread in the u. S. Taking a look at the markets, we are rolling over today. S p futures are holding on to the lows of the session. Still a roster safety in the bond market. The fiveyear is outperforming. The fx market is attached different, the dollar is one of the weakest in the g10 space. Unwind, the position and crude is rolling over, down almost 3 , off the lows, but merely. Markets are weighing the unknown, because the virus. They are also keeping an eye on fundamentals. We will look at how corporate earnings good beef faring in the face of the rake had be faring in the face of the outbreak. Last wednesday, the s p 500 was at a record high. Now we are hearing that this might be the end of the bull market. The effect of the coronavirus. We are 2 away from the 10 incline correction. Are we seeing when you look cantor ands city, they seem to imply bull market. Shortterm momentum once are done selling, and we might get a shortterm bounce at the year and close. Areoverwhelming majority starting to see negatives. You have to imagine that much of this comes from what companies are saying, from what is happening on the ground. One of the things we have heard thrown out there is a vshaped recovery. Look at the cbs chart, Earnings Growth chart. Recovery. P instead, companies are starting to see a slower climbed up. Earnings forecasts have fallen, and the coronavirus, this would imply a 2 reduction across the board for the eps. Cyclicals should help to slowly lift Earnings Growth up. But because their earnings are starting to pull back, because the economy looks like it might take a hit from the coronavirus fed watchers have been paying close attention to what is going on in the markets. You can see the on fun april caught in the white, april cut in the white. This is where we start to get the big selloff. Now, april rate cut is fully priced in, 25 bit rate cut in april. You can see how much it drops off. We heard Richard Clarida say that there will be a spillover effect from the coronavirus, not just in april. June is priced in as well now. You have fed watchers. You have earnings. A lot of things adding up over fears of the coronavirus. Alix thank you so much, Bloomberg Dani burger. Joining me now is david kostin, Goldman Sachs chief u. S. Equity strategist. I heard you were up all night writing some notes for my show. Thank you. [laughter] alix so basically, no or Earnings Growth for the s p this year and only 6 next year date. This correct. Previously we had anticipated 3 . The broad expectation is that economy growing this year and next year. That still remains the expectation, Economic Growth this year, just the earnings for corporations are likely to basically be nonexistent this year. The expectation now is no Earnings Growth in 2020, then we rebound faster growth next year. Shapedhat implies a vs recovery as well, right . Have seen the market falling to 2900 women the middle of the year than rallying back to 3400. There is an for that is the interplay between the prospects for Economic Growth and also Interest Rate levels. Wwhile there is no earnings haveh forecast, we Interest Rates actually falling quite a lot and probably will finish the year close to 1. 5 . It could get lower in the middle part of the year. The interplay between the rates and the level then as you look into 2021, we are still likely to get some level of Earnings Growth. Alix we have this chart on the bloomberg. It is the forward earnings estimates for sector within the s p. You can see what has been hit by the virus. Tech Still Holding up. Consumer discretionary a bit. Energy getting berated the most on a sector level. What is the worst best energy getting berated energy most. G rerated the on thwhat is the worst . Forecast is that Economic Growth is slowing for a lot of different reasons, but there is also lower Interest Rates. The Interest Rate environment has made it challenging for a lot of financial institutions. The sectors that are most down on the margins will be financial. One thing about companies that are likely to do better in this environment real estate, particularly longer duration, more visible cash flow, more domestic revenue, less associated with issues involving step why Chain Disruption and market uncertainty. Last night, microsoft announcing that it is withdrawing its guidance in terms of Sales Activity for the First Quarter, their fiscal thirdquarter, which corresponds calendar year to the First Quarter. Many companies have indicated that they have withdrawn guidance. Alix . Too. Across sectors, david the Technology Space is the area with the most revenue exposure overseas. In particular, china. Almost 60 of the revenues of Technology Companies generate overseas. About 15 within tech. But tech is a story of different components. You have your hardware and your semiconductor stocks. Another big focus has been on the software companies, where you have much more visible cash flows. Alix for the highfliers like aangs, they traded premium to the rest of the market, yet microsoft got hit because of their warning after the closing bell. How much more do those kind of names need to rerate for the market . David you mentioned big cap 20 , they represent almost of the equity capitalization of the s p 500. The concentration that we have not seen since 2000, at the peak of the tech bubble. What is different this time, those are loaded words, but the characterization of these companies is that they are more visible, servicebased revenues from it confidence part of the investor. As long as there are two things happening, as long as the sales growth remains, and the margins are holding up, as long as those two terribles are there. What would cause those things to continue to grow is the idea that they are less exposed to china. I am not saying that they are unexposed, but they are relatively less exposed on many involved in the hardware side, where there is a supply Chain Disruption, where there are questions about the end market demand. If you are a social media company, it is a little different. Less concerned as a result from the direct impact of the virus. Alix i am also wondering in terms of. Alix positioning, there is a s and thehat the cta hedge option guys are selling, not really the institutional layers. The hedge funds stock index we have on the bloomberg terminal versus the s p had risen. Now they are getting hurt. Who is selling . Do you have a read on that . Who is selling their positions, what are the hedge fund and mutual guys doing . David a review would be that it is more retail as opposed to the hedge funds. Biggeste funds, their positions remain and have been consistently for several years, but if20 you look at the last six, seven, eight quarters, the same five stocks remain clustered. Well those are down, people look for liquid. Wireless those are down, people look for liquid. Alix coming up, activity is surging as investors are plunging into these names. More on what they would do, coming up next. This is bloomberg. Bloomberg daybreak, i am Viviana Hurtado with your Bloomberg Business flash. Ab inbev is forecasting its worst quarter in five years because of the coronavirus, saying firstquarter earnings will drop about 10 . Fourthquarter profits falling more than estimates. Ab inbev is blaming that on the biggest drop in rome materials in a second. Shares in modern. A are surging today, the drugmaker saying that development of a vaccine to a virus linked to birth defects is expected. It will now be used in clinical testing. We finish with shares of Virgin Galactic lower today. Morgan stanley cutting Richard Bransons commercial Space Company from overweight to equal weight. Earlier this week, Virgin Galactic reporting quarter earnings, and sales that were worse than expected. The company is preparing to resume ticket sales for future spaceflights. That is your Bloomberg Business flash . We want to stay on virgin collect and Companies Like tesla, all the names driving surging activity for retail investors. What happens when you have this selloff . From Goldman Sachs, chief equity strategist, joins me. Psychology . David the best strategy is to own stocks that hedge funds and mutual friends collectively overweight mutual funds are collectively overweight. If you look at the stocks that are most consistently their largest positions in a portfolio, then you look at mutual funds, core growth or value, relative to their respective benchmarks. Stocks that mutual funds are overweight and stocks that hedge funds own consistently as their biggest positions, if you look at them, they have a has a version in terms of outperformance over time. That is the strategy. Alix what happens when you have a selloff . Is it reverse . You have the mutual funds positioning, like visa. Will you sell the visa on the coronavirus . David if you take a longterm view, the investment thesis behind owning these companies, we look at the hedge funds. To turnover has continued decline quarter after quarter after quarter for more than 10 years. The argument for that is, the horizon arbitrage, owning those stocks consistently has been the right strategy. They tend to have circular growth. We have been in a Growth Market economically speaking for 10 years. The company has been expanding at a modest pace. In that environment, that economic act drop, Growth Stocks do well. When value does well, value typically does better than growth when the economy is contracting or when the economy is growing rapidly. But right now were in that. Ish percenthly 2 growth for the next few years. Alix i know that you want to look at industrials and financials and lower your rating on that. When would we see growth in cyclical trade kick back in . The are smiling. [laughter] david that has been a question we get a lot. When does one by those . The economy is not necessarily recovering in terms of in of fact, it is going in a different direction. We worry about Manufacturing Companies with their supply Chain Disruption. The revisions in terms of the Revenue Growth and in terms of earnings are coming down for a number of Industrial Companies. Alix dont they have inventory to help them with let . David they do. There is a lot of inventory that companies can draw upon which is why the nearterm risk is more modest. The idea of a path forward from here is a question of what is the extended duration of the disruption to the supply chain . There are inventories you point out that they can draw on for a month or two months. We went through and looked at the transcripts of all the companies in terms of their commentary. You have companies who are starting to in terms most recent fourthquarter earnings calls, which extend from the third week of january 2 the third week of february, really that time the virus was becoming more issue. Nt and a bigger buddy are starting to see more lockdowns. Less travel. More traffic restrictions. That will have an effect even if you have your inventory. Alix david kostin from Goldman Sachs. We will have much more on volatility coming up next. This is bloomberg. I think Speaker Pelosi is incompetent. She lost the congress once, i think she will visit again. All they are trying to do is get a political advantage. We are all trying to do the right thing. They shouldnt be saying, this is terrible, President Trump isnt asking for enough money, how stupid a thing to say. If they want to give us more money, thats ok, we will take more money. Alix that was a president speaking yesterday. Anding me is david kostin, the anchor of bloomberg balance of power. How much does the virus lay on the election and a economy . David it depends on what it does to the economy. People tend to really around the president when there is a national crisis. At the same time, president yesterday owned the crisis and said we got it under control. He said it is not about politics at all, but then let me say some nasty things about nancy pelosi. Alix it feels imminent. You guys had it not talking about this. Economic growth in the Second Quarter of election years has in past predictor of president ial elections if the virus affects u. S. Economic growth and we increase the likelihood of a Democratic Victory in the 2020 election. David that was a point david just made, that the risk of uncertainty rises a lot in terms of the election outcome. Gdp growth ine the Second Quarter, that is coming up exactly where it is congruent with where the concern is most acute about the Coronavirus Impact on corporate activity. D economic it raises the probability of the president not winning reelection. Statistically, looking back over the last number of reelection campaigns going back 70 years, gdp growth rate in the Second Quarter was highly determinative of probability of getting reelected. David and there is a potential wildcard here. Nobody will blame the president for the coronavirus. But he made certain cuts in his staff including the National Security council, the people responsible for the pandemics. They havent filled those jobs because he said, we dont need those jobs filled. We hope he is right. If it is a big problem and it turns out they needed those filled, people will point the finger at trump and the at administration and say, you did this. Ovide for alix i wonder what the effects will be between people word their friends will get sick versus they actually stop spending, their confidence in future earnings and how they feel about stuff declines. I wonder where the transition mechanism for Something Like that works. David there is a third element which is also Interest Rate environment. It has come down dramatically. The market is rising in increasing probability that the action. Take but they way we think about it as an equity strategist is to think about what the path of the market between now and the end of the year, the expectation that we have is that the s p 500 will be somewhere around 2900. Still down another 7 , concentrated in the next 36 months. But it will ultimately rally back. One of the arguments for that is at the economy will be growing back in 2021. And growth into next year leads to Earnings Growth and leads to a higher stock market. Alix this shows the probability of the next democratic nominee and then the s p. The green line is the s p. What do we make of this . Sanders rises in the over. The s p rules david to date as Bernie Sanders has gone up, the market has said, that is just fine. I think it is because they thought he would not get elected. Know that it is really possible, i think you are starting to see some change, saying, wait a second, it could be rougher than we thought it was. David you want to focus less on the probabilities of elected candidates and focus instead on the outcome. What will the market likely look like given the various outcomes that would take place . Rather than look at the probability. The biggest concern we have had or prepared for a number of months and let is the potential reversal of the trump Corporate Tax cut that took place at the end of 2017. If you look at this drove 25 earnings increase between 2017 and 2018. That, asthinking about a permanent Portfolio Manager that i respect highly, imagine you are in a joint venture with the government. Every business with the government. When the effective tax rate was 27 , that was the government share in terms of your partnership. As a result of tax reform, suddenly you are the owner of 81 of the company and the jv partner is going to 19 . If you reverse that, 800 basis tonts of revenues suddenly your partner as opposed to you as the investor. I think that is a very effective way of thinking about the impact of tax reform on the Positive Side and also what is the risk . Still coming back to the question of the election outcome, the risk of a more polarized outcome is you actually get one or the other of those candidates, the parties controlling all three branches of the government. That is a risk. The risk is greater if you have one or the other outcomes. Alix david, thank you so much. David kostin from Goldman Sachs, thank you as well. This is bloomberg. When you move homes, you move more than just yourself. Thats why xfinity has made taking your internet and tv with you a breeze. Really . Yup. You can transfer your Service Online in about a minute. You can do that . Yeah. And with twohour Service Appointment windows, its all on your schedule. Awesome. So while moving may still come with its share of headaches. No kidding. Were doing all we can to make moving simple, easy, awesome. Go to xfinity. Com moving to get started. Alix this is bloomberg daybreak. I am alix steel. Alix this is bloomberg daybreak. I am alix steel. We are waiting for economic numbers in the u. S. Lets take a look at where we are stepping up in the markets. Looking to be an ugly day. Rolling over in europe as well. European stocks enter correction territory. You are seeing the move into the bond market continue pretty ferociously. The dollar a little bit weaker. We are hearing about the hedging thing unwinding kerry trade. The Economic Data is dropping. This is the second read of the Fourth Quarter gdp. You are looking at an annualized basis, coming in online at 2. 1 . Lighter than previous estimates, 1. 2 . Durable goods down. 2 . It couldve been worse. If you backout transport it was up. 9 . Capital goods if you backout defense and air, 1. 1 percent. Also pretty strong. Jobless claims holding steady. It will be hard to know. The data might be noisy. Joining me is Michael Mckee. What we have to Pay Attention to . Obviously the virus will whack out all the numbers. Michael you do not have to Pay Attention to any of this. Alix great. See you tomorrow. [laughter] the gdp numbers, not a change in anything we saw. That would be worrisome because consumers have been keeping the economy going, because of the coronavirus we can see it go down a lot more in the First Quarter. That is the issue. The chart we brought up earlier today that showed the capital goods orders x defense, big aircraft would have been the chart of the quarter because we saw 1. 1 rise in those orders. That was expected because of the phase one china trade deal. We thought we would see a big increase in orders as Companies Start to get back to investing. Now with the coronavirus, nobody knows if they will continue that. You get that uncertainty and many people are backing off. How far can we take that . It is hard to say. Alix or if you wind up backing off in the Second Quarter and you get a big ride later. Michael that could be. This could be a question of timing rather than impact. We have to keep an eye on it, which does not comfort anybody. Claims stay within their low range. They are up a little bit. We have not had a good clean read on jobless claims in a while. They have been volatile because we came through the Holiday Season and now we might start to get more of a read. Until that changes, the strengthen the economy is still there. It is a question of will this change and we just do not know. Alix the market is not moving in reaction to those numbers, although european stocks did enter correction territory. Futures still off 1. 3 . Lets dig deeper into an economic view. Compass diversified is a Holding Company that owns middlemarket tech, industrial, and retail names. It was out with earnings yesterday, delivered a solid quarter. Joining us as the ceo, elias savo. Elias sabo. The future is uncertain. What do you see . Elias let me talk a little bit about last year. We had a great year. Ended with a lot of momentum. Our Consumer Group was up 25 yearoveryear in even a. In ebita. 2020 we felt would be a solid year. So far it has been quite good. The first month and a half, booking data, shipping data felt good. Clearly the big risk we all talk about is coronavirus. The initial issue was a supply risk out of china and how will that impact our supply chains. For us it was relatively muted because most of our products are sourced in the United States. The stuff that is from asia is more of a secondary supply risk. We felt good about that. That seems like it is diminishing. A lot of workers are coming back. Plant for our workers in china. By the end of this month we will have 75 of our workers back. What happens for gdp . As this starts to move out of china, will we see demand depression . One of our Company Sells through the greater asia region we are seeing sellthrough data down 20 to 30 as people are not going to korea or japan or china. In some of these markets, fear has gripped people. They are not going to stores, they are not going to malls, they are not going shopping. If it becomes more broad through europe and the u. S. And through other consumer markets. What are your inventories like . Are people worried about inventories because that is what will Keep Companies afloat if there supply chains are disrupted. Elias this happened around Chinese New Year where we all bring extra inventory to start. We were all happy and probably had cushion in terms of our safety stop. Our safety stock. That started to dwindle. For us, it was unique in that we have very little primary sourcing out of china. Most of our sourcing done in asia is vietnam and other markets. Part of the problem is those suppliers may get their products from china. It backs up throughout the supply chain. Our inventory position has been in solid shape. We felt pretty good we would not hit a supply disruption, unlike some of the Technology Companies that are just in time and have very integrated supply chains that i think we are dealing with much more, we were in a much more favorable spot on inventory. Michael the other question people are asking about companies is what is your debt credit situation. If you cannot make the sales and you do not have the cash flow, that can cause issues. Have you talked to banks question mark what is the situation have you talked to banks . What is the situation . Elias we operate much like a private equity firm and that we are always looking at acquiring and selling businesses. Last year we divested businesses we did not add business. We were able to deleverage our Balance Sheets. Our Credit Facilities are wide open and give a lot of availability. We have not heard from our Lending Partners they are seeing this risk more broadly. Everybody views this as a temporary issue we need to get will get tot we containment of this at some point. It does not feel like it is becoming widespread. That is from the commercial banks we work with. What i will tell you is for us if credit market sees, this is a great time for us to be able to buy assets. Alix the last time we talked, you said there is labs lots wherewe want to buy you see the biggest dislocations and when do you know it is time to put money to work . Elias typically when everybody else is fearful. Alix you are trying to catch a bottom and that is difficult. Elias we are longerterm in terms of our hold period. We have held businesses for 15 years. When we have that type of timeframe, we are never going to hit the absolute bottom on a buy or the top on a sell. It is more about directional and buying the assets you want to hold for a long time. I would say people are getting nervous when people are getting nervous, sellers to want to execute on a sale, buyers say i have this coronavirus issue, i have an election, financing is starting to get harder. When we have no financing contingency, it gives us a huge leg up on assets we would like to buy. With all of the risks existing in there for great quality assets, this is a great time for us to be able to use our Balance Sheet. We have positioned ourselves to have the ability and the flexibility from a capital structure to put our Balance Sheet to work. We are cautiously optimistic may be able to execute on an acquisition. Michael lets change the subject and not talk about the coronavirus and talk about trade deals. Trade wars were a big headwind for a lot of companies over the last year. We had the phase one deal, we had nafta 2. 0 signed, has that changed your Business Outlook . Elias we came into 2020 more positive than we came into 2019, largely because it felt like some of the trade headwinds we were working on coming into 2019 were starting to turn into tailwinds coming into 2020. We felt good about it. We saw an acceleration in some of our industrial businesses, really the industrial side of our portfolio is where we see more of that global gdp and upward manifest pretty quickly into the Revenue Opportunities that our companies have. As we were moving through the year, our Industrial Companies were gaining strength. It did feel like the trade was going to become a positive for us. I know we want to stay away from coronavirus, but that positive has been put on hold. As we get beyond this, it feels like we have a lot of tailwinds that are starting to lineup. Alix what i want you to tell me is what you are going to buy, but instead if you could tell me the sectors you are interested in that might be the best dislocated. Elias we continue to like consumer businesses. Good, in each, aspiration good, niche, aspirational, branded companies. Similar to what we have done historically. Michael even with gdp showing Consumer Spending flattening out. Elias we are such a longterm investor, we are not worried about a three or four month potential disruption. We are looking over the course a companye can buy that has a great brand, has true aspirational bowing to it, a big upside, we are we we are willing to take a few month disruption in their earnings power for the longterm opportunity that presents. Alix i like that you related back to the data. It was a neat bow. That was awesome. Elias sabo, thanks a lot. Bloombergs Michael Mckee is sticking with me. We want to get an update on what is making headlines outside the business world. Viviana we begin with President Donald Trump who wants to close ranks within his administration over the threat posed by the coronavirus. Last nike and Government Health officials be to the nation. They acknowledged a broader outbreak as possible but the risk to the average american is low. Mixed messages are probably wall street. Now to capitol hill. Moderate Congressional Democrats are trying to separate themselves from Bernie Sanders their goal, keep the House Majority and swing districts in 20 and swing districts they won in 2018. Mr. Sanders is unpopular in swing districts. The u. K. Will play hardball to get the trade deal it once with the eu. Boris johnsons government says it may start preparing for a no deal departure from the positives union by next january if it is not clear by june there will be a canada style freetrade agreement. Next week negotiations on a postbrexit deal begin. 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. Hurtado. Ana this is bloomberg. Alix thanks so much. I want to break some headlines. Paypal says their First Quarter revenue will be at the low end. 4. 78 billion, lower than the previous estimate. They also say the duration of the virus impact is difficult to estimate. No surprise on that end. They do see a stronger performance partially offsetting any kind of negative impact. As we continue to get the headlines and the reads from the companies, hard to estimate the virus. They do see First Quarter revenue on the low end and it is hard to estimate, all of that permeating throughout the market at the s p continues to wind up rolling over. S p, theoints on the lows of the session. We continue with the markets. Bloombergs dani burger is looking at the equity selloff in europe. Dani we are seeing the stoxx 600 work with entering your correction. It is looking at 9. 8 from the high. We are getting very close. Leading the way down our travel and leisure stocks. A lot of these consumer facing companies are starting to hurt. You see red across all the sectors. You would be hardpressed to find any company able to escape the noise of the coronavirus today. You do see utilities and real estate at the top, some of the safety shares doing better. Overall, we have seen the low volatility trade which captures investors interest. Still selling off today. It is a more extreme selloff than the s p 500. According to Goldman Sachs, the stoxx 600 twice as opposed as exposed as u. S. Shares. Luxury stocks and asian dependent businesses. We will keep an eye on the stock and see if it actually closes at that 10 decline at the close. This row number is significant psychologically for markets. Alix bloombergs dani burger, thank you for the update. Coming up, Tech Companies cutting their outlook. Microsoft and hp sing the virus will hurt their targets and supplies, we will break that down on bottom line. Any charts we used throughout this zero throughout the show, gtv is where you will find them. This is bloomberg. Viviana this is bloomberg daybreak. Later today, Discovery Communications cfo. Youre watching bloomberg daybreak. I am Viviana Hurtado with your Bloomberg Business flash. Bayer is painting a grim scenario involving losses over the roundup weedkiller. The company says it may issue new stocks or borrow money at unfavorable rates. Bayer is working to settle claims roundup causes cancer. Thane u. S. It faces more 48,000 lawsuits. Aston martin says revenue will continue to slide. It is marking time until they can get a boost from the new suv. The company is also bracing for the impact of coronavirus on chinese demand. Alix thanks, viviana. Time for bottom line. We look at three Companies Worth watching. I am looking at ab invev. Rbc says it is not great. There is no margin reset. They are blaming the coronavirus but there were still other issues they have as well. I wonder if this will be like the weather thing where retailers blame the weather, when it is maybe the weather but also the underlying product. Michael also the coronavirus and everything else. Pick a company to talk about. I could throw a dart and hit any company that is lowering its earnings forecast. I pipped mastercard because this is a company that is very much affected by Consumer Spending. Consumer spending has been slowing down already, and now if we get a demand shock, we will see it pullback. We have that in china. Mastercard does a lot of its business in china ecommerce. In theory, people could stay home and buy stuff, but theyve seen a big impact. People are not buying anything. They have not to percent off their prediction they may january 29. They think we could see, if this continues, a Significant Impact over the course of the year. You saw what happened to shares, down 14 in the two days since they made that announcement. It will only continue your it for anybody that has a retail connection, as long as we do not know whether people will go shopping. Alix or anybody. That brings us to our third story. Brooke sutherland joins us now. They warned yesterday and the stock continues to get hit. Brooke the problem is we just do not know. How do you price any of this in . Third quarter the outlook for their windows Computer Software will miss because of supply chain issues. You cannot get the parts to make the devices and that implies other pc makers cannot as well and people will buy less windows software. There are all of these ramifications we do not envision going into this. I think also of amazon with merchants paying less for ads because they do not know they will have the inventory to fill the orders from the demand. Getting your head around this is difficult. Companies are doing the best they can in terms of the dynamics they are looking at. If you think about the longerterm, it is anyones guess. Michael supply chains are so intertwined. I was talking with the fed official who said in his district there is a puppy that makes electronic products that cannot get them from china because they cannot get the power cord to plug it into the wall because the power cords are all made in china. It is a . 14 product but they cannot get them because so the whole line is held up. Brooke products depend on components from 3m, dow, dupont, already getting hit by the trade war. This compounds that. What i am worried about is you can have the slow down in manufacturing and not see the Consumer Sector get infected. If you have a slowdown in the consumer economy, it is inevitable you would get industrials dragged down. Becomeoes all of this deflationary at some point . Michael it could because the price will go up. Could it be inflationary fast enough that the fed worry about cutting rates . Probably not. It is probably not an issue at the moment. Alix it does wind up corporate Profit Margins would get even more hammered. Brooke it depends on the product. 3m sells facemasks. Other products, if you cannot get the parts to make them, it does not matter what you would want to sell them for because you do not have anything to sell. You could see costs to the Profit Margins. There has already been costs of companies talk of Companies Looking to ruth okd to taiwan Companies Looking to relocate to taiwan or vietnam. Obviously there is a cost of that. Alix brooke sutherland, thank you very much. Michael mckee, thank you for hanging out. Coming up, the u. S. 10 year hitting a fresh low. How low can it go . If youre jumping in your car, tune into Bloomberg Radio heard across the u. S. On sirius xm general 119 and the Bloomberg Business app. This is bloomberg. Alix time for technically speaking. Bill maloney joints me now. Listen to bill if you type in squa. Lets start with the s p. Rolling over again today. Bill futures under pressure. Down around 41. We talked about the 150 Day Moving Average yesterday. It will open up below that on the open. The first level you want to watch is 3061 which is a retracement level. Below that the 200 day at 3046 and below that 3027. The first level you want to watch is 3061 in the cash. Alix lets get to the 10 year yield. I asked you the question how low can it go. Where is the support level . Bill we do not have a support level become because in theory we have taken out the old support level of 2016. Yields are low again. Looking at imax chart on yields, we had a false breakout of 2018 but this has been a oneway tree going back to 1980. Below 2. 15 is your downtrend level. Below that you do not think yields will go higher. Alix lets wrap it up with one stock. Square came out with square came out with earnings. Bill trading higher of about 5 . Resistance level probably around 83, above that is 87. 83 looks like good resistance for square. Alix thanks a much. Bloombergs bill maloney. That wraps it up for me. Coming up on the open with jonathan ferro, Julian Emanuel will be joining him. We have a move into safe haven assets like gold and like the treasury markets. Yields down six basis points. This is bloomberg. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Jonathan america identifying its first coronavirus case of unknown origins, sending stocks towards the sixth day of losses. Microsoft joins a growing list of Companies Cutting guidance. With 30 minutes until the opening bell this morning, good morning. Here is your thursday morning price action. Lowes down one point 5 on the s p 500. Stocks lower, yields down six basis points. Record lows on the u. S. 10 year. The dollar is weaker, the euro is stronger. Eurodollar up. 9 . Lets begin this program with the big issue. Markets worried about one thing. If the epidemic becomes a pandemic. Pandemic. Global pandemic. Right now it is a panic. A lot of panic. If