To the importance of signal of folding below a 1 year yield. The twoyear is many people will be discussing emergency fed action. Francine yes, i think that will permeate through what we look at everyday, bond markets around the. World lets get to the first word news first word news in new york city with vienna or title. Viviana we begin with the first moving developments to the coronavirus fastbreak. The japanese island of hokkaido went quiet after the governor declared a state of emergency. New zealand and lithuania putting their first infections. South korea has more than 2000 cases. The u. S. Is moving to expand the number of people being tested. Health Authorities Say they will test anyone with unexplained severe respiratory illnesses. J. P. Morgan is joining other Corporate Giants in restricting travel, the bank saying International Business trips will be limited to a social travel only. Previously they had limited travel only two regions hardhit whether coronavirus. Oil is on track for its weekly 2011. Ince crude prices are down at roughly 14 . There is speculation opec and its allies will strike a deal to shore up prices. We finish with tensions between turkey and russia. An airstrike in syria killing at least 33 turkish soldiers. Rest is denied involvement but it has been backing up syrian forces. Turkey is asking allies in the west for support. Neither the u. S. Nor europe has shown in the willingness to help. 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. Tom watching the vectors right something. Quite lets look at equities, bonds, currencies and commodities. 54 on the espn x. Dow futures down. We are on the cusp of 24,000 print on the dow. Critically, we have the curve steepening against a general lower unit market clearly signaling that lower yield market clearly signaling a global slowdown. We are watching brent crude. On to the next screen with livex, 46. 02 on to the next screen with the vix, 46. 02. Most single important points should be the read on the screen, eight basis points on the twoyear yield. Well below 1 ,. 9783. It was weaker moments ago, lower moments ago. The yen for the second day in a row catches up with everything else. Francine it really does catch up with anything else. Fear is tightening its grip on global markets. Clear by one metric. The stocks europe 600 tumbled more than 1 . It is headed for the worst 2008. Performance since every sector on the gauge today is dropping more than 3 . The stoxx 600 tumbled more than 4 , headed for the worst Weekly Performance since 2008. I also looked at the vix. The figures are incredible. 45. 77. Tom let me show the chart right now, the two year yield, to give you perspective. I have a great vix chart. It goes back to the Lehman Brothers failure. Under 1 on the twoyear yield. The great triumph was managing this policy of, here is the trump presidency, and managing the two year yield to a better place. Higher yield may be linked with the hope of an american or Even International reflation. We have given up on that. , was the twoyear yield coming in with the recent lunch now we are dust recent plunge. Now we are below 1 , a huge benchmark for the Global Financial system. Francine it certainly is. Lets get to our guest carsten , brzeski , and Rupert Harrison. From blackrock. There is just one story, and it is the fear in the markets. I have a simpler chart that just looks at the s p 500, falling below its 200 day moving average. You look at any chart, and it screams sell. What will it take for the market to stabilize . Guest if this was a normal general markets, they would be looking oversold shortterm. We have seen yesterday was a real panic selling. Dysfunctional markets in highyield, pretty low liquidity even in s p futures, the lowest in a long time. The problem is that while you would normally expect people to step in, the problem is it is not a normal driver. We are being buffeted every few hours whether news flow on the virus. I dont see any reason why that will stop. Where we were at the beginning of the week on italy, we know our with germany, france, switzerland. One of the significant things is very limited news in the u. S. A lot of people are word that as we head into the weekend, we wake up monday morning dealing with italy news this week, what are we going to be dealing with on monday. So we are very defensively positioned. We see this as a fastmoving situation. Francine how do you monitor it . What are the selling signals . In affected cases . Guest this has been a massive transition. Last week everyone was fixated on the china data. We have put together a huge effort in blackrock to look at the realtime indicators on activity in china whether that flows,tion, traffic china is not the story anymore. The market is trying to price a global pandemic. We are dependent on news from governments and Health Authorities about cases, about policies. In look at these curves countries like france and germany, the big economic europe, and increasingly the u. S. , we are still on the accelerating phase of these curves. Tom i want to ask the same question to two of you. Carsten, with all of your great work in economics right now, we have a two year yield under 1 . I mentioned many are talking, chalokata about the fed, lets go lets go lets go. Does the fed sign of the have to look at these markets and act. Carsten it is hard, because as a report said, it has been a crisis. Driver of the in normal times you would think this is the time the fed should step in to build up confidence. But even if the fed were to act right now, would it stabilize markets, if we continue having this news flow out of Continental Europe and maybe even the u. S. . Tom rupert, as a public official, particularly with your work with the chancellor of the exchequer to the u. K. , theres a point where politicians and their ministers step in and say, lets go. See,at what were going to where the Central Banks are reticent and may be unable politically to deal with this crisis, gave way to the power of the chancellor of the exchequer and others . Rupert both are very limited. I think we will see the fed act ing. This is a very dovish Federal Reserve. Tom come they get there, can they get out three weeks . Carsten at the moment, i would say yes. I think we have still seen a dramatic tightening of financial conditions. But i think we have not seen the tightening in credit markets that they are particularly sensitive to. I suspect we will see action on on balance at the moment, i expect that to be the normal timetable. Federal banks will act. Governments will act. We are seeing from asia, fiscal packages coming out. We have a package in the u. K. In the next few weeks. I am certain will see fiscal action in the u. K. In response to the violence. The issue is that response to the virus. The issue is that permits will be limited in what they can do. To. Ng demonstrate that you have a grip at the same time, if you look at the playbook that em governments have, there is a lot of Public Information on how governments will respond to a widespread pandemic. We will not see in most em countries attempts to close down activity. We may see some restrictions, we may see schools in particular closing. There is evidence of that. But we will largely get a message off, carry on as usual. Work from home. No impositions of lockdowns from governments. Tom francine, i would like to introduce a chart to report on the phrase get a grip. This is a flowchart. The vix, which we all know, the volatility index. This is during lehman time. We are almost there on a percentage basis. We were at a low race when we came off this. Report, i get the idea that we came from mass complacency, but we are at a percentage change of vix that approximates the failure of Lehman Brothers. What are we waiting for . Rupert the problem is that the policy was once in response to Lehman Brothers desk lucy the policy response in response to Lehman Brothers was addressing the crisis at the time. Governments have limited ability to deal with this kind of fundamental health emergency. It is about containment and management. The real focus of governments will be, how we got enough hospital beds . Can we push it too late in the year, spring and summer, one hospitals are not so full . That will be the nuts and bolts in focus. When it comes to the economics, this is going to be very dependent on the length of time the disruption lasts. For every extra week, the higher the risk that you get, the irreversible damage to the economy either through Small Businesses going bust and the knock on impact on the sector. Is it something we can recover from quickly, when life returns to normal, or will things have fallen over between now and then that are difficult to rebuild. Francine one of the other things that we read was that there may be some leniency from brussels over fiscal deficits, because this is huge. Your assessment is that europe can weather a recession or is it all to be seen . Rupert i think an ecb will be externally hesitant to do anything at this next meeting, than two weeks from now, we will see the reaction out of brussels that there will be more flexibility when it comes to fiscal policies. But this does not mean there will be room for a big fiscal stimulus package. We all need to somehow cushion the budgetary impact from the measures that italy will have to in these special circumstances, which always great room for flex ability. Tom i am thrilled both of you can be with us. Carsten brzeski from ing and blackrock. Ison from the two year yield is under 1 , brent crude near i49 handle as well. Dr. Mohamed elerian had a four d essay on this pandemic fourpart essay on the presumed pandemic. He will be our guest at the 9 00 hour. Stay with us. Futures are at 52. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york as always, just trying to make sense of the markets. New cases of the virus keep appearing outside china. New zealand and is when you have reported their first infections, so has nigeria. The number of infected in south korea has gone over 2000. Lets go to Stephen Engle in hong kong. Seems like the narrative shifted on monday. There are a lot more infections around the world and china is stabilizing. Is that right . Stephen that is what the data in china is telling us. Now we are seeing reaction from regional governments as well as around the world. Japan in the last hour, the northern prefecture of hokkaido announcing a state of emergency. They have had a few clusters of virus outbreaks there. Yours truly was headed to hokkaido tomorrow. We were on the phone, trying to figure out whether i could even go now because the prefectural government is telling everyone to stay indoors. This is coming from a government that up until now has taken, according to a number of critics, kind of a relaxed approach to banning travelers. They have not had many bans. Have only band people from Hubei Province and wuhan but other chinese could go there. Seems like it could be a kneejerk reaction to the criticism, and also getting their head around that this might be a more serious problem than anticipated. Tom you are a next month on north asia and particularly japan as well. Are we seeing these actions in japan, to get out front of the unthinkable for them, which is a cancellation of the summer olympics . Are they playing catchup with trying to get to the end of july . So. Hen it appears obviously, she once the games to go forward. Japan has spent shinzo abe once begins to go forward. Japan has spent billions of dollars banking a lot of their economic recovery on the boost from the olympic games. It is in jeopardy. It does not take off until july 24, but you cannot cancel it the week before. You have to start canceling or postponing right about now. Keep in mind, they did not have sars, no bigk of outbreak of mers. They dont have the experience to handle an outbreak like this with the novel coronavirus. And they dont have ac dclike japan. Celect body in tom Stephen Engle, thank you so much. We thank all of our team across the pacific rim, under real duress, assisting us today. The markets are on the move. 48. Es are Carsten Brzeski with ing and Rupert Harrison from blackrock with us. What are the signals we should interpret from the market . I dont mean to single yield like the two year yield, but the sophisticated yield dynamics you look at. What does it signal . Gulstan it signals recession carsten it signals recession. There is no real hard Economic Data on what the impact would look like. We are based on fear. Look at the eurozone for example, the only data we have forar is indicators february. The whole thing means that the Economic Impact on europe will probably only emerge in february , in march, going into the quarter. We will probably have it spreading of the negative Economic Impact over at least two quarters. Francine rupert, when is the good time to go back into the markets . Are we far away thinking about that because we have not touched the bottom yet. Carsten that is a good question to be asking. But i think now we are still driven by the news flow. You have to look at the viral numbers. Whenave to wait and see the secondary stuff starts falling off in these new exposure countries. Maybe we might see that happening in korea if they manage to control this. That would be a small positive sign. The risk is that europe is now a much bigger problem. You look at the extent of movement in europe, in my view, it is unlikely the scenario will be contained in europe. Is a matter of spread. I dont think the endpoint is so certain anymore. Tom how close are we to closing borders, specifically in the u. K. , with the comfort of a different border . How close is the United Kingdom to shutting down movement . Rupert i think that governments will be reluctant to do that. It is unlikely in europe. If you look at all the evidence from the studies that have been done on the flu, on milder versions of the flu, there are published documents around Contingency Planning on this stopping flights closing borders, buys you three weeks. The evidence suggests it is not effective. We are at a have a number of cases in the u. K. , a new case in wales today. The suggestion that that will be shutting the stable door after the horse has bolted. The government will try to keep mobility going and trying to damage. The economic tom if you are just joining us in the United States, Rupert Harrison with us is the blackrock session with blackrock, and Carsten Brzeski is with ing. We follow on to a further 38. Ff, with futures, please stay with us for more conversation on these markets. This is bloomberg. Se markets. This is bloomberg. Tom it continues and things change. Let us see the data check right now. Francine has a careful eye on the european action. I am focused on the continued dissent of oil, american oil at 45. 42. Brent crude is not at the 49 handle by that would be a huge deal for the global oil markets. The two year yield comes in under 1 . To me, that is a significant item of the day. 0. 98. 9763 on the twoyear yield. Francine . Francine i am looking at the markets like you are, european stocks really under pressure. If you look at how much they have been plunging on the week, a fiveday basis, it is the most since 2011. The vix is at 44. 19. A couple of things, germany quarantining 1000 people. Switzerland, banning big events. Britain and the netherlands also reporting new cases today. So we will have a full roundup of any virus updates, a full roundup of the quarantine and the impact this has on stocks. The stock route is continuing. We have extra market checks every 15 minutes. 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. Francine this is bloomberg surveillance. One of the worlds biggest building itsrial Companies Posted earnings and is seeing no impact from the coronavirus. Sridhar a roger natarajan joins us. How much will the coronavirus be a headache going forced forward . I think we have some difficulties so we will get back to him shortly. Still with us our Carsten Brzeski and Rupert Harrison. We are trying to figure out sector by sector, company by company how much the impact is. Outthe first ones who came and said it is difficult to predict, apple, do they have a first move advantage, or will the sector be hit the same . Rupert we dont know. I think we are shifting the focus away from the supply chain disruption, something people were beginning to understand well last week. We are definitely seeing activity in china. The direction of travel is positive because china was so aggressive in its lockdown early in the process. The issue has shifted from supply chain concerns to demand concerns. If you are if half of your market is at home not going to work, not traveling, it is something that people are joking about but it is real. The stocks that are up, netflix. We havent had that kind of dramatic temporary demand reduction so it is difficult to know. Francine lets go to a chief executive who has to deal with this day in and day out. Sridhar natarajan, when you look at coronavirus, you said no material impact. Ton do you expect an impact go through your numbers and revenue . Sridhar let me say a few words about the results. They were excellent results, a great performance, not just financial but nonfinancial. A 50 jump in free clap free cash flow, 11 increase in earningspershare, and 30 basis point improvement in operating margin 30 basis point in operating margin. What we are doing is transforming the culture in a radical manner. This has clearly helped us to deliver more synergies at the country level, look at the Cost Reduction, 130 million euro Cost Reduction in 2019. Underperforming businesses yeah. Francine i understand that. You are the largest producer in the world of old in materials and roofing of Building Materials and roofing. How will Coronavirus Impact you . Sridhar i am happy to say that none of our employees in china are impacted. We took a lot of proactive steps. , only twos we have sites are not functioning. , china is 2 of our sales. As of now, we believe it is going to have a limited impact and we have to watch. This is something you have to be keep a watch on this. Just gettingare news that the geneva car show has been canceled, according to the organizers. I imagine it is because of the coronavirus because a lot of people said they would scale it back. Can you tell us if this continues to spread in europe, even if your exposure to china is limited, how can it not hurt you . Sridhar people are taking a lot of precautions, which is very sensible. We should not have large gatherings because we should be cautious. The way of looking at this today, the dependence of other businesses is we buy from china 1 of our total raw materials. Model,ow, the business we have a local business. We produce and sell in the country, so at this point and the time i dont expect to have a big impact. Tom one final question. You have 181,000 employees including your acquisition of norton of wister, massachusetts. R, mattheste massachusetts. You have workers in vietnam and thailand. Will your workers show up for work . Sridhar we have to keep an eye out. We do not have such issues in other parts of the world. That, this is evolving every single day and we will have to keep a watch and see how things evolve. Not seeing, i am anything in our operations other than china. Tom thank you so much. Huge global abrasive operation. Abrasiveith us are the Carsten Brzeski and always abreast of always abrasive Rupert Harrison. Is managing the message right now, you have radar on whether there is panic or hysteria. Panic radarharrison saying . Is the public ahead of the ceos, cfos, or are they behind them . Corporatelot of the communication will be backwards looking and people will be riskaverse about saying anything forwardlooking until they have data, but the markets will not rely on what companies are saying. In terms of panic, we are not yet at full panic, but yesterday in the markets we saw the first signs of indiscriminate selling and signs of dysfunction in high yield markets. Big equity markets are a lot lower than normal. People are looking for ways to lighten up on risk across the spectrum. This will be driven by the data. The normal Market Dynamics to fall this quickly and sharply, you would see people looking to buy. It was quickly overwhelmed yesterday by news and i expect that dynamic will continue. Tom Carsten Brzeski with us and Rupert Harrison. We will regroup and come back with major moves in the market. Futures,tures, 33 dow 299. An exceptionally timely interview into South Carolina and into super tuesday. Saturday andis into that super tuesday, the genet and gentlemen from illinois, senator durbin. Bloomberg surveillance. We are talking all of our market team at bloomberg. This em currency has really given way. Go away from what we see in the twoyear, away from the collapse in oil, and futures a little better, 37. Rupert harrison and Carsten Brzeski with us. It is an easy phrase in a less panic driven time, central bank to the world. Should the Major Central Bank care about the turkish lira, the brazilian real and other collapsing em fx . Carsten Central Banks should care about what is happening and financial markets. This widespread turmoil, we should keep a close eye on it. Most of them are running out of powder so the only one i see is the fed, which has room for maneuver. We need to cut. I dont see how the ecb could do anything, especially not in times in which this new ecb is currently more aware of the adverse effects of the unconventional measures, so why should they do more of the same . Tom hong kong under huge duress. It is generating helicopter money. You tell me madam lagarde cannot get out the helicopter and deliver fiscal stimulus with a collapse of tourism in europe . Carsten i will make a distinction, she cannot do direct find it just fiscal stimulus. Fiscal stimulus. We have seen no European Companies chipping in. She could start helicopter but i dont think she will get a majority within the ecb. Francine what is your take . Rupert Christine Lagarde was sensibly very cautious. The big problem is raising expectations of ecb policy action. They have run out of options. What you will hear from Christine Lagarde with the politics of her agenda is squaring up to the european governments and saying it is time for governments to act. Francine when you look at the various is there anything the ecb can actually do . What do words do . If people fear, and this is the problem, it is not like a fancy pants economic crisis, it is like people dont want to go out and buy stuff. Will we see cash flow directly from the ecb . Carsten no, talking about helicopter money, the ecb the could start a tltro and link it to current accounts, but we are not there yet. There is very little the ecb can do. It is not that lagarde can tell the public, go out and buy stuff, so all the ecb can do is caution financial markets, we are aware and monitoring the situation closely, and we are slightly more concerned than before. Francine this could become a consumer problem. Rupert it is not a financial problem for now, so the ecb and regulators can do forbearance, liquidity, make sure nothing falls over during the financial system, but they cannot address the root of the problem. That has to be government, and even governments have to be careful. Give people money and they do not leave the house. Tom how do you deploy fiscal stimulus . Building a fourlane highway is not going to get it done. What is your experience of how you actually deploy a shortterm stimulus . Rupert in the u. K. , the only way to do it is to cut, so there are not systems in place to give everyone a check. You can see that happening in singapore. It is actually Monetary Policy, but we cannot do that, most em economies do not have the economy to do that. You will get action like that. You will get money put aside for planning, contingency compensation for Small Businesses, tax relief and pension relief for Small Businesses to stop them from going under for cash if occult these. Cashood for taft difficulties. Summeroes blowout by the , the weather gets hotter, the pandemic blows itself out, there is the possibility of getting a strong bounceback. As long as you have not had permanent damage, corporate Balance Sheets are the main vulnerability, but if you havent had that and have governments and Central Banks do what they can do to loosen, the markets can bounceback. It is too early to start thinking about that dynamic. Tom i want to circle back to where we were at the beginning, futures advance 57, we are now 29, a 43 handle on the vix. Be fed rationalization will they need to see disinflation or outright deflation tendencies before they can act. If you have a global slowdown from a supply shock from a medical event, how quickly does it filter through into identifiable disinflation . Carsten we have Lower Oil Prices now. This will be disinflationary. Due to the supply chain disruption, prices have come down so this can go very quickly. Plus, we have financial and when they start to tide, and the central bank models, we will see inflationary pressure. This can go quickly. Francine do you agree, and how quickly . Rupert deflation is the overall impact. I think you will get supply chain bottlenecks and bits of inflation, but i dont think the overwhelming i think the overwhelming impulse is deflationary. Francine later today, we speak to the bundesbank president about the Central Banks annual report. A lot of the questioning will be on deflationary pressures and coronavirus. This is bloomberg. Francine bloomberg witheillance. We are back Carsten Brzeski and Rupert Harrison. We went through a number of regions and the huge swings in markets. What do you do with emerging markets . They seem to be on better footing but if this pathogen hurts emerging markets, what does that mean for investors . Rupert the Market Dynamics and em have changed. The outperformance of em in equities has been extraordinary but i guess that was because they were hit much more earlier in the month. They were under owned. Everyone has been long u. S. Equities. In a couple of sessions, you have seen the liquidity impact where people are running for the exits and no one can get out. Case wherea classic this is an illiquid market and people are trying to get out. You see the currency remarking dramatically and the shortterm effect on em currencies is what we are seeing. The interesting thing is the focus has moved on from china, and we are seeing the delta coming back in chinese activity. That will be something people will touch that there is some positive news coming from parts of that complex. Francine thank you both, Rupert Harrison a Carsten Brzeski. On to italy where the coronavirus cases have surged. Isning us on the phone now lorenza bonaccorsi, the italysretary of minister of cultural heritage. How worried are you that this will impact travel and tourism in italy which is about 30 of gdp . Lorenza good morning. Of course we are a little bit worried. Measures, ofhealth course, but it is a serious all can italy has take all the measures to avoid an infection, a very bad infection. We had closed the red zone in north italy, but you know the 0. 1 one, it means that if of the italian town and if 0. 0 89 of the population, so it is very, very little the red zone in italy now. We have to focus on this. Francine do we need to make that zone bigger . How many cancellations have you had . Can you give us a sense on the numbers and how this is impacting trips to italy, or number of hotel rooms book . Do you think the red zones will have to become bigger . Lorenza the red zone dont become bigger, but we took some course, avoid the expansion of the virus. , the number of the italian towns closed in the red zone are really small. Example, it is coming back to normal life from tomorrow because there restriction their restriction finished sunday. On monday, this zone and all the other zones except the red zone are back to normal life. Sector, thisrist sector has will have a lot of problems because of the somellations, because of information,e bad because we had coronavirus cases in a little part of north italy, but not in all of italy country. Francine understood. Thank you so much for joining us, lorenza bonaccorsi. We are also getting breaking news out of barclays and qatar. If you remind yourself, this was some of the funding that qatar had given to barclays during the financial crisis. We will have plenty more on that throughout the day. Tom let me set up a data check and we will revisit this. Futuresare watching, 28. Oil, 45, already four 45, at the bottom . 44. Worldwide, cutting both ways that we will see with cheaper oil. This is right near lows, to year yield. In thegood conversation next hour. We are thrilled to have with us professor louise easing gails with luisi Luigi Zingales. 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. Tom this morning, markets signal that any fed cannot ignore. Oil continues its collapse. U. S. Two year the yield slips below 2 . They reprice for pandemic. Japan will close schools. Let the waning reports a first case lithuania reports a force case. Says it spreads slowly in the United States. Fiscal stimulus or outright helicopter money . Ingi zingales helicopters this hour. Tom keene, francine back in the saddle in london. It was fascinating to talk to Rupert Harrison about what fiscal, treasury, the chancellor of the exchequer of any government can do given this crisis. Francine it depends on how long this crisis will last and you need to make a distinction about stabilizing markets and trying to figure out what it means for financial stability. What can you do if people stop buying . The consumer is the basis of a lot of economic stability in europe and also asia. It has been pretty strong, so with people stop buying it will be difficult for Central Banks to deal with that. Tom a lot of data checks, a summation you need to know as but not asntinues bad as the last hour. Oil continues to decline, 44. 38 on west texas and brent crude just above 50 a barrel. Lets move on to the second 42. 47, ah the vix, stunning statistic. I will do a chart on that. The two year yield, 9. 644. 9644, below 1 . The yen shows substantial yen strength. Francine i am looking at the european stoxx 600, tumbling at one point more than 4. 5 . It is headed for the worst Weekly Performance since 2008. Almost every sector dropped more than 3 . It seems a lot more indiscriminate compared to monday when the main correction was towards travel. Tom just put twitter and linked in, this is the vix. I had to do this for Luigi Zingales, but i will go to Marcus Ashworth with us in london. With the present agony and what is so important is the movement of the vix on a percentage basis right now nears where we were during the lehman low crisis. It is absolutely extraordinary. Muchdoes it signal, not so the numbers, mumbojumbo, data check, but the Second Derivative . What does the gamma of the moment signal . Marcus we are overdone and overreacting into where people are getting into cash and worry on monday. It is accelerating on a friday as the equity markets of have finally woken up, signal the markets have been telling us for weeks now. I dont think we are going i think we are going a little overboard and that is a natural reaction. We ought to look at this as a friday ahead of a weekend where viruses do not take days off. People would rather lose money. Any form of liquidity that comes in, even if the stock is down 5 , 10 , you will have to hit some shares out. Wherecausing an effect the passive etfs are i hope. Tom i cannot say enough about his books on america and american capitalism. One was my book of the summer several years ago. Are you not in italy because you cannot go to italy . Luigi for the moment i am teaching, but im scheduled to go at the end of march. Tom all of your acquaintances and family across northern italy, what have you learned that is not in the media reports . Luigi what most people dont fully appreciate is how much northern italy is integrated with china. Both my brother and by x brotherinlaw were in china ex brotherinlaw were in china in january. This is a normal thing in northern italy to go to china on a regular basis. The interaction is very intense. You mean byat do the interaction is very intense . Luigi i dont think im surprised that the virus showed up in italy because there is so much contact with china. People underestimate how much the economy of northern italy is integrated with china. The most surprising thing is why you dont see that in germany because also germany is quite intergated integrated with china and we have not seen a major outbreak in germany. In italy they say it is because they dont test for the virus. Francine i think germany is reporting quite a few more cases this morning, but what does it mean for the Italian Economic situation . We had a number of calls from toiticians asking brussels loosen the purse springs and not ask italy to adhere to the budget deficit rules. What that help . Luigi it will help. It will not help the fact that some of the politicians in brussels reminded us of the constraint. Lets go fact lets go down the Italian Economy. What we are fearing is a slowdown in International Trade that was in the making because of the ties. With the coronavirus, this will only get worse. We know there is a very stable andtionship between growth trade, and growth of italian gdp. Leastde does not grow at 3 , italy does not grow. The prospect of just a slowdown in the economy by trade, that is a given. You add to this the tourist part, which will be hit, and you add to the fact that we are integrated with china, so the slowdown in the supply chain will slow down the economy. We will have a significant slowdown of the Italian Economy and it needs to be addressed with some form of stimulus. The right way to do it is have europe intervene, because the problem we have so far is that europe has been completely missing in action in this. If we want to demand the european spirit, we have to have some european institutions stepping up and thinking about a stimulus or some help for the most hit part. After all, if louisiana was hit by a problem, the rest of the United States will come and rescue. If we want to talk about united europe, we need to have united help. Tom on the markets right now, the clarion call is a two year yield below 1 . This is extraordinary and a rare occurrence. Is that enough to begin a debate at the eccles building about an emergency rate cut . Marcus the last time i saw the real power of the fed, he said yesterday i believe, powell the fed, he said yesterday i theeve it is important fed is not reacting quickly. The markets are bullying the fed perhaps into three cuts, perhaps more. It might be nice to have a further insurance rate cut, but practically speaking, this is not a thing that Monetary Policy can solve. This is a supply and demand shock, like how a trade war would pan out. This is a fiscal response, a jeep 20 response rather than a Federal Reserve g20 response rather than a Federal Reserve response. Francine thank you both, Marcus Ashworth, and louise easing gails Luigi Zingales stays with us. Anduania, new zealand, nigeria have reported their first cases. South korea has over 2000 cases. Thank you for joining us. What do we know about the virus . People say this is nothing much more than flu. What is the case fatality rate and do quarantines work . We need to talk about the virus in two different ways. If you are unlucky enough to be infected, what happens then, and how many people are getting infected and how quickly. We know it is substantially more severe than flu. At the individual level, it is not like seasonal flu. We are messaging this very strongly. The consequences of being infected with this are substantially greater than seasonal flu. After how many people are getting infected and around the world, that is a more complicated picture. Francine what is substantially worse than seasonal flu . I dont know if we are looking at symptoms or how much of a burden will this put on Health Services . Steven from observation, from the first affected city in wuhan , a relatively short period of weeks they did not know it was there and when it grew rapidly, it placed severe demands on their Health Services in a way they probably had not experienced. It is a potential with than anyone city to present significant challenges to health care services, very high. We can think of that in different statistics and growth rates. We observed that in the first affected city. Tom we are thrilled to have you on. You are the expert in how things happen in cities and move out to the country, the dynamics angiography of viruses. Extrapolate wuhan to northern italy and florida or a first case in with the way neah. Lithuania. How does a virus merv move to an urbanuhan city . Steven they used stringent social distancing and the evidence suggests they have turned it around without policy. It was an extremely strong intervention that seems to have turned it around. If we want to extrapolate to other places, we have to think about how people will react to voluntarily reduce social contacts and how governments may choose to encourage them or not. Those are the key factors with any extrapolation. Tom we would love to have you on again, professor riley. One final question what would you advise heathrow and jfk . They are the road to canterbury of the modern economy. What do you tell singapore . What do airports do . Steven there are levels of screening that are going on that will be somewhat helpful, but the general consensus among the Scientific Community is it is likely that seating has occurred seeding has occurred in many countries. Tom are you telling me we should expect in the next number of days and weeks we should see a first derivative or Second Derivative movement in the persistency of the virus . Steven i think in the u. S. Already you have observed a case in San Francisco that does not have a direct travel link, so i would not want to extrapolate massively, but with the testing have observed a locally local case. Tom professor riley, greatly thrilled with your time with us today. Steven riley of Imperial College london. Bitvix has come in a little. The 10 year, not the two year yield. Luigi zingales thought that was the 10 year yield. There is the twoyear yield. The twoyear chart, below 1 . He has a different view of the micro data of china, a gentleman , whelen miller. Stay with us. Leland miller. Stay with us. This is bloomberg. There is a general recognition that globally we are not ready for the big outbreaks and we are really playing catchup right now, trying to accelerate our preparedness. The United States government must address the deadly coronavirus and a smart, strategic, and intelligent way. We have done an incredible job. One day it will disappear, and from our shores it could get worse before it gets better but maybe go away. We will see what happens. Tom we will be doing that throughout the day, giving you a summary of what is going on with this presumed pandemic. The markets are taking that, futures 55, right now 22. The rout deepens. Zingales of the school of chicago. Sit up straight. And has expert on italy two books on america. Joining us now, i started screaming, get the guy out of washington via virginia law out of oxford studying chinese history, i am bored, so i will study china data. Leland miller, we are thrilled he could join us. The phone is ringing off the hook. Leland busy times. Tom you are expert at saying, no, the pitch is wrong, this is what is happening. What are happening on the streets in shanghai . Leland the headlines will be firms are reopening but about two thirds are not working under normal operations. Downr so are still shut and another 30 have workers or management who have not showed up, or they are open technically but do not have the input to do their business. China is not up and running. Tom what do you observe in the chinese Language Press that is different from what we see from any other voice . Leland there is an enormous amount of cheery love stories of how the virus has brought together and how people are standing up which im sure is true. In wuhan there are some stories of courage and heroism, but this is a disaster in the making. The government is unwilling to report what is happening which is why pmi numbers could be interesting. They will be tempted to tweak that. Francine is there anything we learned in china that governments around the world can implement . Leland from a medical standpoint, what they have been doing is fairly draconian. I dont think most countries could get away with the restrictions china has imposed, particularly in wuhan. The overall lesson should be dont lie about the initial outbreak, dont put people in furnaces and say they died of lead poisoning. This is a serious epidemic and as soon as information comes out, it should be reported. Hopefully that is happening around the world. Francine in terms of what works and what doesnt, something we were trying to figure out, Monetary Policy and a lot of authorities are used to dealing with financial crises and conditions, but how do you convince Chinese Workers to get back to work if they are fearful . Leland that is a good question. You can get them back to work at the first time someone sneezes on the production line, everyone runs for the exit. They are talking about monetary and fiscal policy, but the most important lever the government has is do not call in loans and keep rolling things over. That is what they have started to do. Tom youre a claim is looking at electricity bills and usage youre a claim your accla im is looking at electric bills and usage. Leland electricity tells part of the story, but the second you start relying on a metric, the chinese start manipulating. Tom what is the metric on medicine . Leland we are flying blind in terms of the medical side. Tom this is not a good thing. Leland milla Leland Miller with us, thank you so much. We always protect the copyright of our guests research. We will come back and doing the 50 seven, that was now 27 on futures. 1. 18 , the yield, twoyear yield below 1 . Please stay with us. Worldwide, this is bloomberg. It ist is friday and when friday, politicians and jobs messaging into the weekend, the Prime Minister of the United Kingdom to chair an emergency meeting monday on the virus. I love what the spokesman said we will respond based on Scientific Evidence scientific advice, i should say. Terse. Francine they do not want to add fuel to the fire and they want to focus on containment and how to deal with it if something goes wrong. Germany quarantined about 1000 people and the Geneva Motor Show has been canceled. Equity markets tumbling in europe. And treasuriesn maturing in two and five years sliding to the lowest levels since 2016. We will have more data checks and virus updates throughout the day. Good morning oh no, here comes the neighbor probably to brag about how amazing his Xfinity Customer Service is. Im mike, im so busy. Good thing xfinity has twohour appointment windows. They have night and weekend appointments too. Hes here. Bill . Karolyn . Nope no, just a couple of rocks. Download the my account app to manage your appointments making todays Xfinity Customer Service simple, easy, awesome. Ill pass. A rate cut is on the table. If they see credit freezing up, a further selloff and the market, further increase in volatility, further inversion of the yield curve, and bond markets are really pressuring the fed to move, more likely than not they will deliver even if they dont see the hard evidence in the economy. Tom Michelle Meyer of bank of america, truly expert on the American Housing market. That is wall street week at 6 00 tonight, important to speak dashdavid westin about the to saturday and onto tuesday. What is so important with the overlay we are dealing with, things are moving very fast. David the basic fact is we dont know and we have to face that we dont know. We also had jim tisch who owns lows and there is a cat six storm off the coast and we dont know if it will hit us. Right now, they are playing it safe and they dont know what to do. You cannot plan for this. It could be awful or could be nothing. Tom it could be awful, that could be Vice President biden in South Carolina. You are doing this with kevin cirilli. Can he come in second place . David secondplace is not good. Polls had him well up with 10 points or more. The real question is, he is not running against Bernie Sanders, he is running against the other moderates to knock them out so he can compete with Bernie Sanders. Francine good morning from london. Protection irus prevention playing out in the debates . David it did come up in the debate on cbs some. It is coming up in a debate between the president and the speaker of the house and the minority leader. It is getting political. One issue is is it getting too politicized too quickly and should we be rallying together rather than trying to point fingers across the aisle . Francine i know it is very early days, but one of our guests from blackrock was saying what happens if they cannot hold the democratic convention. Is anyone talking about that . David we are not that far down the road, but people are making contingency plans that we cant get together in large groups. I dont know what they would do. That is a great question. , an Luigi Zingales with us exceptional student of the american political fabric. Super tuesday, they dont do that in italy or europe. What do you think of this process away from smokefilled conventions over to the endless derby with both parties . Luigi it is a healthy process even though sometimes it delivers outcomes we dont like. It is a democratic process. Parties, people want to go back in both parties, people want to go back to the smokefilled rooms and that is not a good choice. There is too much money in the process so there are too many candidates who can survive and go on. Part of the story of the past is people were deciding based on the fact that they could not go ahead, and now everyone can go ahead and there are too many candidates. Tom you are a student with humphrey kennedy, i believe, a storied fact. I am kidding. This goes to the odds of a brokered convention, the Washington Post about the article about 1962. David that is impressive. Is there some chance we would go back to the smokefilled room . Tom 1952. David it looks like Bernie Sanders would have a plurality but not a majority and he said he demands the nomination. Tom a brokered convention is a tangible discussion. Luigi it would be difficult for the Democratic Party to deny Bernie Sanders the nomination if he won a substantial portion. If it is a little bit ahead, maybe, but if he is close to getting and not there and they organize a coup against him, that is a sure way to lose the election because half of the Democratic Party will not vote. Tom my essay of the week was from m. I. T. Writing on the distinction of the scandinavian democraticsocialists of the senator from vermont versus the social democrats of scandinavia. Is Bernie Sanders remarkably different from what you observed growing up . Luigi i dont know. It depends on which Bernie Sanders you hear. Sometimes he has some slips like with fidel castro that remind me of the communists in my old days in italy. When you come to many of his supporters, they are much more in favor of a system that is similar to denmark, not very radical. Even if he wins the election, he is not going to pass anything radical because congress will not change so dramatically. I do not think that would be so devastating as people make. However, i do think the stock market fears it and part of the rout as people realize he is going to win. The nevada caucus was in my view the enlightenment from this point of view because he can win a substantial amount of the hispanic vote which will give him a huge advantage in california and texas, to the point he will be difficult to beat. Donald trump in 2020 has a very dedicated base but a limited base. Question, ivid, the guess a followon to what you were mentioning is, if Bernie Sanders gets the nomination, how will he perform on a National Level . Can he actually beat President Trump . Are theylls say so and right . David he cannot be President Trump. Some say the math might work where he could beat donald trump a practical matter, so people are readjusting their thinking. The thinking in the Democratic Party is he cannot beat donald trump. Boomer vibe. Aby luigi a lot of kids dont know what socialists used to be. Tom they dont know who keith alber was . David they dont know who karl marx was. Luigi what we dont know yet is how bad will be the Propaganda Machine against him from here to there, and what is going to turn it back that is hard to estimate. If the election were tomorrow, i think he could win. Tom david westin, balance of power, how is the senator from vermont going to play in the obvious geographies of wisconsin and ohio . David not particularly well, but im not saying that cannot be turned around. We thought he had a particular appeal to unions, important in my home state of michigan. I would not rule him out. Tom i was stunned how i had forgotten the shortness from 9 00 p. M. Saturday night South Carolina to win the polls open. David we have 14 states, an awful lot of delegates. Tom wash wall street week, you will see it this evening with Michelle Meyer. The markets clearly doing better than an hour ago, but a difficult continued week in the markets worldwide. This is blue. Super to bloomberg. 7 00 tuesday march 3 at a. M. Tom bloomberg surveillance, thank you so much for being with us. Luigi zingales with us. We have to go along and second we have to go log and Second Derivative. 2017 tolly across 2016, the peak height of 3 in autumn of 2018, and then we come down and have a pandemic drop. I set this up fancy. What is the signal that we are under 1 . What does it mean to chairman powell . Luigi this drop is clearly a result of flight to quality. At a moment of tension and fear. Continuef this were to the repercussions on the markets , powell should intervene, but at the market the most important at the moment the most important thing is trying to understand the implication of this pandemic and what fiscal stimulus can do. When Interest Rates are low and they decrease Interest Rates in a moment of fear will not revive the economy. Tom what is your best estimate of what the gdp will be . We are not at a run rate of 4 where you take a little bit of a hit down. We are at such a diminished rate for so many people that three tents of a percent down is a big deal. 3 10 of a percent down is a big deal. Luigi it is a big deal. Francine, save us. Francine i will save you. What is the one thing we misunderstand about the World Economy . If you look at the linkage between economics, concern about the crisis, and the way the markets are going, what are we misunderstanding . Luigi i think im stating the obvious, but we underestimate our how global we are and how the repercussions will go throughout. What we heard earlier about china not working properly yet, not for a while, this will have natural consequences on the entire World Economy, both direct in terms of slowdown in demand and through the supply, slowdown of the initial part of manufacturing. The combination of the two will slow down the global economy, regardless of the strength of the coronavirus. Then you add the spread and you have a negative outlook. That is what the market is pricing right now. Francine can the fed or the ecb do anything to counter this . Luigi i think the fed or the ecb should act only if this creates major problems of liquidity in some parts of the country. But i dont see that happening immediately. I think the actions should be more on the fiscal front. In particular in europe, where the overall global position is the one wecountries, come from not particularly so, but in general the situation is better and they should act. Even in the United States, they should start acting now because the fiscal policy takes a while to have an effect, so in this great moment of uncertainty you want to run ahead rather than wait, see the damage, and counteract. The in your book, you take span of hydrocarbons across the 20th century. Is a drop in oil, does it have the same impact as 20 years ago, or 50 or 60 years ago . Luigi of course not. Oil andill use more well retired the movement retard the movement of the economy. Thiswe will move on throughout bloomberg in print and on radio as well. Luigi zingales. Yesterdays worse than in the beyond ugly close in america, but not as bad as this morning. Futures were 57 when i walked in the door. Curve steepening is occurring, mostly because the two year yield has plunged. A. 96, year yield was gotten to. 95, now. 97, rounding it up 2. 98 on the screen. On theding it up to. 98 screen. The yen is resilient. Stronger yen, confirming what we see in oil as well. The vix, a 43 handle has come in just below 41. Stay with us. Francine saudi arabia planning to sell more of its stake to aramco to raise money to fuel its plans for diversification. They spoke exclusively with David Rubenstein. David you are the chairman of saudi aramco, the largest publicly traded company in the world and the Largest Oil Company in the world. Absolutely, the Largest Company from a lot of levels, market cap, the profit we generate is second to none, and the ipo we had was the largest ipo in the world. David so you went public not long ago and the valuation was roughly 1. 8 trillion. Trillion and now it is about 2. 3 trillion. Now it is about 1. 8 trillion today. David no company is as valuable as that company, but it is traded on the local Stock Exchange. Have you thought about listing it in new york or london or tokyo . We only offer 2 of the company, so still 90 of the company is owned by the shareholder which is the government 98 of the company is owned by the shareholder, which is the government. We will have listings over the years, we are looking into it to have more offerings. These offerings could continue to be in saudi, and if we have a good Stock Exchange that we think can bring some Value Investors to us, we will consider it. Francine you can catch more of that exclusive interview on the David Rubenstein show on wednesday, march 4. Lets get some more on your markets. Fresh loads for a lot of industries. Paul dobson joins us. We have been checking markets every 10 minutes. There is a lot of uneasiness but if you look at the week, it was the biggest fall for european indices. As it new infections, a general panic mood, or do they look to the u. S. . Paul what is it that could stop this selloff . Is there any news that could come out . I feel like the answer is no. People are thinking, could Central Banks get together and say, we will try to do something to solve this or reassure markets. We have been writing a lot of stories saying this is the kind of thing Central Banks cannot provide a remedy for. More easing or money may not make it go away. Targets areects, building their own momentum and the only thing that will make it go away is when markets are done. Francine commodities are significantly lower, travel and tourism, that seems intuitive. If you look at the stoxx 600, every sector is down 3 to 4 . They are not pricing in a recession. Paul we are getting there as a broad base the curve and the bond market, the yields are so low since the nominal moves in treasury are looking at the u. S. , less so in europe but that is because we were at particularly low levels. The thing we have all been worried about for some time is the credit market, where the weakness is starting to show up. We have had the biggest widening in terms of spreads on government bonds since 2015 in europe, 2014 in asia. Companies need to refinance their debt. Francine are people just not issuing because there are new no buyers . It is something we have not seen for a long time other than in quiet periods, and not this time of year when you would expect issuance to be heavy. The markets are basically waiting for things to settle down, but things wont settle down until they settle down. If there is no confidence in the market, issue was issuers will not come. Francine crude oil below 50. Is this because they fear the travel impact or recessionary risk . Paul a bit of both, and the global circumstances and the fact that there is oil out there. It is Good Measures to be looking at in terms of the benchmark. It tells you a lot about the market. Itther thing to think about, is a measure of future inflation in europe or the u. S. , the breakeven coming down, and it is helping that rally. Francine what do you do with safe havens . Yen, will a buyer of you move to other havens that have not been at the forefront . Paul going to what you know in a situation like this, that is why the short government bonds are doing well. The yen is asserting itself as a haven after the big selloff we saw earlier this year. The swiss franc is appreciating against the dollar but it is stuck against the euro. People are asking themselves how much is the central bank trying to present too much appreciation . Nobody can look further. Francine if you look at u. S. Indices, do they follow europeans, or the other way around . The epicenter is here at the moment, but would you see it first in u. S. Indices . Paul in yesterdays trading, there was a bit of an asset late in the day in the s p to have a bit more stability, and the news out of california that a bunch of people were being tested and monitored. That gave the last hour of the u. S. Market a kick lower. I dont think one is leading another but it is a selfperpetuating thing. Bad news is breeding more bad news and making it harder to find a moment to stabilize. Francine paul dobson leads our market coverage team. Here is where we are on the indices. The coronavirus tightening its grip on the markets. Markets across europe plunging a day after the worst rout on wall street since 2011. This is blue. This is bloomberg. This is possibly the worst thing ive ever seen in my career. Alix global stocks face their worst week since the Global Financial crisis as Companies Keep abandoning profit goals. And here comes the gdp downgrade. Economists start to take down Global Growth forecasts as the virus continues to spread. Investors now see three fed rate cuts this year, and one from the ecb and boe. Can the cuts do anything . Welcome to bloomberg daybreak on this friday, february 28. What a week it has been. Tgif. The moves in the markets have been unbelievable. It feels like we are in a sell everything except bonds kinda friday. Asd inflows reaching as much 13 billion. We are looking at the worst week since 2008 for u. S. Equities. Eurodollar pretty much flat on the day, but begin is the out performer of choice in