At 1. 27. We hit the record low and we are sinking. Aboutl speak to kumar where he thinks this could be. And to be vicks future curve is in backwardation. Its elevated right now at 32, getting into the danger zone. 46. 40. E oil at the 10 year yield is actually off the chart. Guy off the chart is how these markets feel right now. I think the action is shifting, what we are seeing in germany is 75 for the german twoyear right now. Bit,uro is catching a really a big move in the euro, its another currency against the dollar, is this the end of the dollar run . Is it no longer the safe haven . I suspect the answer is that it probably still is, but we will see. Arere down by nearly 4 , we in correction territory for the stock 600, 400 is a really big line, thats going to bring us belownto resistance with the major moving averages, and we are now below the 200 day moving averages. You can see this is down 4 . Kumar with us, joining us now from los angeles. Year issee the 10 making new lows right now, with a fresh forecast, reversing the trend. Stephen is saying that definitely two fed cuts by june. What say you . I had been saying for some time that the 10 year yield is going down. I think 1. 5 is my target. We beaten that end on below. Blowing the 1 figure for the 10 year is there in terms of expectation for the 10 year yield. I think these will be unprecedentedly low figures. Concerned,he fed is i always believed that the fed reacts to the stock market, its not really oriented towards the economy or inflation. When the stock market corrects as it did in 2018, the fed talked about three rate increases and it did three rate cuts. So im expecting three rate cuts, one of them could be 50 basis points, and the fed man some point restart quantitative easing in terms of starting to buy bonds, pushing the 10 year yield even lower. So look for 75 basis points to 1 as the next target for the 10 year. Thats a phenomenal forecast, if that happens does it do the feds job for it . Would they need to cut in that scenario . What is theight ask fed doing . What is its function . You think that because they exist they have to do something, and they did not do all of the quantitative easing after 2008, the economy would have come back, but they did. And i think that worse into the situation in a number of ways. As you have correctly said, even though the market is going to push down, they believe they need to add stimulus, quantitative easing. It doesnt make sense to me either, but we are talking about what the fed would do, not what would make sense. Guy when it comes to stocks, are we enable market quest in a bull market . Komal i dont think so, you knew the bull market was going to end and you always wonder what was going to end the process, that was not the coronavirus it could eventually be high valuations. But i think we are in a veritable bear market and theres more to come. Guy what kind of levels are you talking about . 3000 on the s p is the level people are watching carefully. By the end of this year, are we significantly below where we are . How much of a selloff are we going to see . Have 43 points above the 3000 figure on the s p. My expectation is that she would cross 3000 before too long. I dont want to say what day, but if the coronavirus spreads in the United States and it happens to be verified, and what we found yesterday in california, unrelated to any travel related person, and if thats how it spreads and its more into the society currently existing, none of that is discounted. Which is why my expectation is that if we go below 3000, and its hard to say where it drops, but 3000 is an easy number for me. Selloffthis is the 34th 1953, andan 6 since obviously not even very many of those resulted in a stock market lower a year later. If there is an outbreak in the United States, is everything priced in . Or is there a further selloff . Komal i think you get a further selloff when you find out the spread. But there will be a bottom. It could be bonds at some point becoming a cell, but where would that come . I suspect it will be six to nine months, i stick to the forecast i made to your program that the u. S. Recession will begin in mid 2020, not too far away. And once that happens and we have six to eight months into , thats when the bottom will be reached on the equity market and it will be a tremendous by after that. If you take away coronavirus the date is been quite good, including this mornings data. If you take this black swan event out of calculation, would you still say we were heading for recession . What would you base that on . Komal thats a good question. All was not good in terms of the overall u. S. Economy. The Housing Market has been strong, but there are signs of weakening taking place with the consumer. The Unemployment Rate has been low, but the real wage increase year on year has just come to a zero figure at the end of 2019. Meaning you have a job, but your real wages have not been increasing. Thats been decelerating over the years. This is the crux of the problem of the economic recovery since 2008. The stock market has done fabulously. But wage earners have not done well at all. Thats a big issue. When you look at capital investment, that was already being hit by all of the trade related uncertainty, and even without the coronavirus, the trade and wouldve continued. Remember, there is a threat of tariffs on on mobiles, cheese, and wine with europe. You can have trade uncertainty brought back. All of these matter for the economy, its not just the coronavirus. Thank you. And youre saying there will be no Earnings Growth this year, do you agree . Komal that looks like a good batch. With the slowdown in the economy, and the fact that earnings were already under pressure, no change looks like a good call for 2020. You soay with us, thank much. We are back in just a moment with a conversation about whats happening in the markets. Let me show you the picture in europe. , anotherpretty grim significant selloff being delivered by the European Equity market. Well below the 400 mark. Alle 100, and the down. Many of these are heading into the negative territory and are below the 200 day moving averages. This is bloomberg. Guy im guy johnson. Vonnie im vonnie quinn trade lets get to the bloodbath, with the details is abigail doolittle. Abigail taking a look at equity indexes, we are down for the sick stay in a row with the s p 500 in a correction. Following the dow transport, down a couple days ago and the 600 and europe, the stock 600 and europe in the stock 600 stoxx 600 and europe. Downestingly, the me k was , but a lot of the indexes are up, the nikkei is not in correction. More thank at this, 10 , the worst going back to august of 2015. That was that black monday china selloff where we had that huge volatility. We are seeing that today and the s p 500 has not just followed into a correction, but its also on the 200 day moving average. If you look at the chart, here in blue is the 200 day moving average, its a phenomenal move to the downside. Had anlong ago, we alltime high for the s p 500. Despite the coronavirus and being out there at this point, investors thinking it was going to be more like stars, but its more clear that its not known what the impacts will be on the economy. We are now hitting onto the 200 day moving average. If we look at what has happened over the last couple of years, for the most part the s p 500 has kept the 200 day moving average. Buyers have stepped up but in 2018 that was not the case. It will be interesting and this couldo watch, be reason to think that buyers may not step up. And just to bring it into perspective, we are looking at a bondslloff for crude oil, and 10 year yield at another low, rushing into the safety of bonds and also the haven. And the vics the vics vix could go back above 50. You wonder if that will be the moment of stabilization. Thank you. Sri,e back with komal, the president was blaming the democrats on the market selloff, is there anybody benefiting . Komal i have been asked that question again and again, its a timely question. Even before the coronavirus expanded in the last five or six days, Bernie Sanders was clearly in the lead, he had been expected to win the nevada context contest, which he did. And the market took it to be a positive. They say if hes going to be the candidate facing trump, trump is likely to get reelected, the chances of his reelection were greater facing Bernie Sanders and the markets were feeling good about it. Dont think that sanders domination is causing the market because my expect tatian as they think this is the situation in which trump can win easily. It reminds me of the first u. S. Election that i saw in the United States, it was important to recall, when Richard Nixon was looking for reelection in 1972, he very much wanted to have a democratic candidate of his choosing, if possible. To be george out mcgovern who lost in all 50 states with nixon. If you have a Bernie Sanders type of situation, that is the kind of thing i think republicans are salivating over. But maybe not the possibility of a recession in 2020, that would undermine the president s position. What will he do if that turns out to be the case, as you are maybe predicting in terms of the policy response . Could we get one on between now and november . Komal hes already indicated a tax cut, and i think larry kudlow had mentioned that there might be a tax cut and campaign season. They will try to do that, whether democrats in the house will allow that to happen is a different question. But they will try to increase the fiscal stimulus. The pressure will be on, in terms of cutting rates and renewing. And what that will do with will temporarily give some support to the equity market, whether that can save the day and help on the election side is very much an open question. You are correct, if there is a serious recession as we go towards november, and it becomes apparent in terms of unemployment and slow down in the figures and even the voters can see it, it will have important political and legations. Vonnie sri, take us through the psychology, that might be the only thing President Trump can do if this continues, pitch economic growth. Why would that push the market higher . Wouldnt the market suddenly be concerned that perhaps President Trump would be changing his strategies, or that another term would not be the same as the first . Komal for the markets, they only have the first president ial term to go by, and the stock market has until recently benefited and normally enormously. Equity holders have done well since the 2016 election. The expectation is that this will continue as long as the Trump Presidency gets a second term. So especially if its trump versus sanders, i think from the market point of view, the move would be to say lets assume its clear that a trump win will take place, and that would be much better for the market than otherwise. I think if you have a trump versus biden or bloomberg as a possibility for november, then its a different story. Its not clear that it is so hed for President Trump, if were to face Mike Bloomberg or joe biden in the election. But if you dont have that trump looks think good, other than the fact that guy mentioned before that the recession becomes very severe and noticeable. Vonnie so all sorts of correlations are breaking down, and all sorts of assets and commodities are maybe becoming attractive or valued more attractively. What are you telling your clients to do now . 109, there yen at are some ewaste to go. Komal there are some anyways to go which is why i think in our earlier discussion, theres further to go in terms of correction on the equity. I will say the same thing for commodity prices. And on the oil side that you may preference to, even though there are supply problems out of venezuela and libya, major producers who cannot produce as much as they want to, you still have the situation that the demand is falling so sharply, that oil prices will continue to drop. But there will come a time, six to nine months from now, if you have oil prices at 46, perhaps five to 10 more to go depending upon the severity of the crisis, but its going to be a good. So some of the excessive valuations will be removed. No point in being perennially pessimistic, but i think the turning point should come because of the operation of the markets. In, you bring the fat the fed in, they will artificially provide stimulus for a short while and worsen the problem because then the price has to go down further before it can rise. A final question, the ufc is off 11 points, the euro is up over 1 against the dollar, if the dollar no longer the safe haven . Komal thats a good question you asked earlier as well. I believe the dollar will continue to remain a safe haven. What has happened in the last three or four days is more than exception to the rule. As you look forward, when the crisis continues, i think there will be a reversal of the trend with money flowing back. The dollar and the treasury and the bund will be safe haven assets. Guy we will leave you there, always a pleasure. As we spoke about the u. S. President ial election, Michael Bloomberg is also seeking the democratic president ial nomination. He is the majority owner of the Parent Company of loom berg news. This is bloomberg. Vonnie i just wanted to point to this charge, the vix, thats about 30 today, a big difference from where we were yesterday, below 20. This is the chart going back to 1995, to give us perspective. You can see the financial crisis and the massive spike above 50, and a major indicator of how much in crisis the yield of capital mike its where markets were. If you look at the financial crisis, we are now spiking like we were at all other moments of serious market volatility and nervousness. And to make the point even further, we look at the futures curve, showing backwardation. So nervousness right now is much greater than three months out. Stocks here in europe trading at 35. At 2016 we had the brexit referendum, the last time we had a similar spike. European stocks continue to move lower. Currently down by. 5 percent. This is fascinating. An 11. 5 basis move in the u. S. Two year, 11. 3 to be precise. A. 05 move in the german twoyear, this is a chunky eurodollar move, the dollar is certainly on offer and we will continue to see what happens. Remainedng us that he he things the dollar remains a safe haven and the european stoxx moving lower. This is bloomberg. Hi were glad you came in, whats 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 . Lets 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 cant do, but come in and see what we can do. Were here to make life simple. Easy. Awesome. Ask. Shop. Discover. At your local xfinity store today. Vonnie live from new york, im vonnie quinn. Guy from london, im guy johnson. The coronavirus continues to spread around the world, that is fueling a selloff that we have been talking about all morning as investors search for a model to understand what happened. By our guest. Now professor, we are starting to see a spread of the coronavirus around the world. How does that progress from here . What to expect nation . Crystal ballve a more than anybody else, if we are able to contain the virus, we will slow the spread. But as you can see, its coming in many Different Countries. If it can be traced back to the for come allows its when you cannot trace from the source that you worry more. More casesly to see before the epidemic disappears, but we dont know how many. China had a very strict quarantine policy, and to a certain extent, that has been seen as slowing the virus down in terms of its spread. Borders atporous best in the United States has no borders. How do you handle a situation with those regions . In italy they have followed the example of china, they locked down around the epicenter of the disease. Its very dependent on the , what you would do is the down the epicenter, first line of defense is prevention and the second is containment. Virus, to contain the its been successful in that it has contained the majority of cases. They have not spread at the same rain around china, and the mortality is different in hubei, its higher in wuhan and hubei than the rest of china. Turnpidemic has started to the corner. I think we can learn a lot about containment from the lessons in china. We could take those lessons and apply them geographically. You talk about the Different Countries in europe and the different states in the u. S. Its about the local geography and containing the disease within that local geography. And for china that means not getting reinfections in certain areas that have already been locked down. How has the response has the response been better than the response to sars . Yes. Not as welcoming and information did not flow as well. Wethe early days of sars, had the information coming out of china and it was only when it spread to hong kong in february and march that we understood the nature of the disease. Updatess nothing daily and there was not the openness. At is whatked lessons could be learned, because in the heat of the moment you are making the best decision at that point in time with the Information Available to you. When you look back you can say did you make the right decision . We could say that overall, many of the right decisions were made, but the response was not adequate in many ways. Did recommend greater investment in Public Health and disease research, greater preparation and the availability of protective clothing, Running Drills and how to understand how to respond. All of those lessons were shared , and many of the lessons from s in hong kong and other countries like canada. They are very similar lessons. Better prepared. The major difference is that this is a much more infectious disease. Its much more infectious. Because its much more infectious it spreads more quickly. You are less likely to die if you get it, frankly. So it is a different scenario and a different picture. So are we kidding ourselves that things are improving until some company or government comes up with a vaccine . Or an antidote . Or in antiretroviral . We are trying to delay the spread. In the u. K. , the secretary of state land at laid out a four talking about containment and research, the need for continuing research into this outbreak. Then he talked about delaying , sodisease, slowing it down you dont have these outbreaks. If we end up with a more widespread disease, mitigation will alter our plans for dealing with the disease, we would need to look at whether we need to open up other facilities. So we have plans, but it depends on the number of cases. And it also depends on the weather. Hoping that there is Better Weather in the Northern Hemisphere which will decrease the flow. Companiesu think drug need a publicservice mandate so that we are better prepared and can act more quickly when it comes to these outbreaks . The actionin china were stateick, there companies and private Companies Working on developing vaccines and drugs. They will take about a year to develop, different people are working on it and the antiretrovirals are already going to trial. And they may be available in the future, but not soon enough to contain the disease. The main thing is prevention, personal hygiene, social distancing, should you be in the vicinity of a case. And all of these are Public Health measures that will help contain the disease, rather than the drugs that may become available. Onnie our thanks to you up, discovery shares are mayling, the coronavirus affect the plans to stream the olympics. We speak to the cfo about details next. This is bloomberg. Open,s is bloomberg, the in a moment we will speak with discoveries financial chief funding officer. Vonnie live from new york, i am vonnie quinn. Guy in london i am guy johnson. Vonnie discoverys fourthquarter earnings beat estimates, this is one of the worst performers today, joining us is the cfo, welcome back. , obviously drop being masked by the market dropped today but something in your earnings did not sit well, what was it . Not a great day to report earnings, this week has been tough for the market in the industry has not been getting a lot of love. We have delivered a strong i do view this chair price reaction is a great investment opportunity, but the industry is going through significant change and investors are wondering who is positioned and how well. We feel good about the hand that we have, we have strong economics and we will continue doing the work. How are you managing forecasting with the coronavirus . On the one hand people may stay home, watching the content more. On the other hand the olympics are in danger and that was going to be one of your rise possessions in terms of content, and then there are the scenarios which are important for discovery. Gunnar thats why we end spent a lot of time on the earnings call. The number one priority is the wellbeing of our employees, and we are taking precautions in the highrisk locations and encouraging people to work from home. Perspective, il did point out that what we are seeing now is not material in the shortterm bookings. Facingare a consumer company, there may be an aspect advertisingp but has affected global gdp development. We are monitoring that. We arethe olympic side in close contact with the ioc and are following their lead, moving forward. Weve also done what we can to protect from financial adverse impact. Done . O what have you pan just closed all of its schools. Japan just closed all of abe sees a risk. What action can you take . What we have done, a while back actually, is take out insurance to the extent possible to cover for sunk costs on the expense side, for now we are communicating with the ioc, and continuing our preparations. We are more focused on what we. Re doing luckily we are not as dependent as many other industries on the globalface work or supply chains. So we are in a better position in this situation. You are hoping a lot of people will use your euro sports will allow people to nationalize the content they get, there are an awful lot of options. Those come with thousands and thousands of miles of cabling. I have a few buddies working at ,he olympics doing that cabling could the olympics be moved . Gunnar i dont want to the ioce on that, its making those decisions. On your point of cabling, we have delivered the first olympics in 2018, the winter games. And we have put to work a new set of technology set up, where we are delivering what you have just described, a central feed localizing and using a virtual studio. That has been successful. And this has cut back on a lot of the manual labor and redundancies. So we are feeling strong about the technology set up. Overall, through our inhouse solutions, we have been getting a lot of positive feedback. A veryk we can deliver good consumer experience. Its a little sad, given that content is your thing. We are waiting on hbo max, and apple plus is paying for content, why would you forecast peak streaming . Can she do more . Gunnar i forecast peak investment. Perspective,asing and we are going to spend 300 million more dollars than last year. Out, andoing to peek we will expect some significant operating leverage, keep in mind that we can use a lot of the content that we produce anyway, 8000 a year. And we have Central Technology that we can start leveraging for all of the products that we have in place that will come to the market. Has been putting together a brandnew Technology Team to be leverage for whatever else we are doing. My point was that from 21 on we should be seeing some traction on the revenue side. This year we are planning 40 growth in that space, but from 21 on we are expecting operating costage from lower p n. L. As well. And where you see opportunities . Gunnar we will look at every opportunity, you will see us involved in whatever is going on. At the same time, where we are in the industry, i dont have a lot of hope that we will find Great Solutions on the inorganic because theres a lot of stuff growing nicely, and priced toely, but what we need is transform our existing traditional business into a future business, where we make great content that Everybody Loves available to anyone on any platform. That is something we will have to get done ourselves, thats why we are making those investment. The great news is that we are still generating 3. 1 billion as of the end of 2019 funding those investments, thats why the board authorized Share Buyback of 2 billion worth of stock. And the combination of being able to generate that amount of crash cash and fund our investments is great so we can return capital to the shareholders. We will resume this another time. Thank you. We have discovery communicationss cfo. Its another ugly trading day in the u. S. , as we look at the major averages, we have big declines for the s p 500, the dow, and the nasdaq. Here we have microsoft down 2. 8 , the Stock Company cut their outlook on the coronavirus, and some of those major averages, the dow transport in particular is down sharply. This is the worst stretch since 2011. Stoxx is down and the investors want out of risk assets on fears around the coronavirus. If we take a look, and closer detail, what we will see down 4 on the day, and you can see slicing on the 50 day and 200 day moving average. 500, everybody is theering whether or not selloff in the level of fear and panic that investors see which could sometimes produce a move to the upside, however the transport is well below the 200 moving average 200 day moving average, suggesting there could be more serious selling action. You can take a look at the 10 r yield, vonnie continuing to march. Thats abigail doolittle. Around thetinue world. Perhaps its a little ironic that where it all started, and china, has been a down week. Chinese and hong kong shares are only down around 5 . Its not that much. Guy know, at some point you see a relevant trade option. Maybe this is where the weortunity actually lies, are continuing to see cases pop have and the world, we bank saying that an employee has tested positive, and they send home employees from the whole floor from that from where that person was working, that gives you the idea of the scale and speed. One person test positive on the whole floor goes home. A lot of businesses will be feeling it. A huge company is telling its employees not to travel. Several banks are stopping international travel. Tos bring in mike regan have more perspective. I woke up knowing it was going to be a down day. But there have been a lot of down days and it does not mean the year from then the market is lower, this somehow feels different, whats going on . That case in california has people afraid, the back of the mind fears that the viruses in the u. S. And we just dont know where, and if it is spreading. The news out of the cdc about the people they have been able to test, and the whole testing regime for the viruses very alarming. Abigails look at the 200 day average is important. This is where things tend to beingr, but they are overwhelmed by people trading based on other signals, or just investors worried about the outlook, people are basically erasing all of their estimates for companies up and down the market. There is very much an information vacuum about what to expect going forward. Its very alarming. Looks like it has a gravitational pull, when will the Circuit Breakers kick in . If the Circuit Breakers do kick in, could that provide a temporary floor . As long as the Circuit Breakers and forest, i suppose. It would temporarily stop this, for the market, but i dont think it would really give much confidence to investors to rush back in. I think 3000 is an important round number level, but the selling is so overwhelming, whether it be panic or legitimate concerns about the fundamentals being damaged because of this virus. The technicals kind of take a backseat, and its a headline driven market. Its hard to say were any support could be. Wes a we will know it when see it kind of situation. Theres been a lot of discussion about how i black swan event does not cause a recession but anything could cause a recession. What should we look at . Credit, i think this goes from being an ugly stockmarket event to a credit event that could rebound right back into the stock market and the economy. To mike fork you joining us. This is bloomberg. S bloomberg. Vonnie the selloff is deepening with major indices down more 27n 2. 5 in some cases, stocks are higher in the s p 500 with the 10 year yield at record lows, mirroring what is going on in europe. To see thenteresting euro catching a bit with the dollar tracking a bit lower. You can see the main indexes in europe. These have been tracking lower and lower, belgium, luxembourg, norway are actually the big losers. This is bloomberg. Guy coronavirus correction. European and u. S. Stocks are down more than 10 from their peaks. What impact does the virus having on Consumer Spending . We will speak to the ceo of the worlds one of the worlds biggest payment companies. Chinarica losing out to and will this expose the corrupt continent to the coronavirus . Live, im guy johnson vonnie quinn is in new york. We are counting you down to the european close here on bloomberg markets. Vonnie the route is picking up steam and we are six days into it. We were looking for this 10 year yield to go to a low and boy did it. It went to the low and continues to move lower. We are at 127, which is higher than seven basis points. Thatll give you some idea of how traders are reacting today. We pass the 200 a moving average on the s p 500. 32. 208, the index off