Dow than in any year since 2008. That is not just a week, that is in a whole year. Any year since 2008. That will give you some idea. The tenure yield dropped down. At 117ff of its low waiting for the fed to speak. The vix up to 45. We thought we were high yesterday at 33, we are much higher than that now. Crude Oil Continues to settle. We are just about 45 per barrel. Gold is also selling off today. Down 1. 3 . The stoxx 600, 372 which is down by 4. 5 . Continuing in the german tenyear. I want to show you what the gma looks like. Just to give you an idea of the magnitude of the selling that we have seen around the world over the last few days. This has been since monday morning to now. Greece, 20 . Netherlands, 14 . Yen is up by 3 . Do norwegian is up by 1. 65 . The Australian Dollar is down by 1. 5 . Year, a 45 basis point move this year alone this week alone. It is 100 chance according to the fed funds. Crude is up by 14 . Gas is down by 11 . The market is going crazy. This has been an absolutely epic week when it comes to the markets. Good for bonds, bad for stocks. Vonnie lets go to our specialist here cross acidwise. Is a micro strategist macro strategist. You have followed the markets for a long time now. You are the market recession tracker. Talk to us about what it is telling you and whether we can see a recession from an event like this alone. The implied probability of a recession is still in the signals from Financial Markets has gone through the roof. Like 75 , 80 hing chance of u. S. Recession within the next year is what markets are pricing. Importantly, we have gotten to a , where thise 2018 price action is feeding on itself. We had this exhaustion is stock of the coronavirus. But now it has become internalized. That is something we did not see in 2018. We did not see it in 2011. It is not as bad as 2008 but it is worse than anything we have seen since then. Vonnie explain what you mean by internalized. The prices that you see on your screen and form your reaction function to any new marginal piece of news. 2018, we did not really have something to the equivalent of virus headlines. How you choose to react to every new headline on the virus is informed by what you have seen over the last week of trading. Panic isling you that actually the right course of action. Lets bring another voice into this conversation. The managing director of global macro and eu economics. What do you make of what cameron is saying . What do you think about where we are in terms of what the market is signaling about the economic trajectory from here . Should we expect a recession this year . That is what the market is signaling. Whether we do end up with a recession depends on a lot of moving parts. Usually it depends on a lot of moving parts, this time around volatileptions are so and so nonlinear. What we do know is that panic breeds panic. We do know that the Global Economy is highly interlinked to ande and financial linkages if uncertainty persists, it can be quite significant. Where does it end . On one side you can say policymakers can intervene. Either they can cut Interest Rates, will that be effective, we do not know. This is especially so for the fed. Sentiment destabilize which is important at this point because we are all grappling with the outcome, the big unknowns. We need some sort of stability in the market. Measures would be more effective this time around. Encouraging forbearance, for instance. Making sure that credit flows into the economy. , you can seede more tax relief, tax rebates. This stabilizes the demand side. Wouldntral bank steps stabilize the supplyside of credit and we could end up in a better situation then we are at the moment. If we keep pushing, things good escalate quite rapidly. The relative experience of the relative parts of the world are going to be as a result of this. We have already seen the impact and understanding what the impact is in asia. In at 30ome into or 45. We do not know. Howdoes europe stack up and does the United States stack up . Again, a lot of unknowns. A working assumption for china was that the cases, the coronavirus cases in china have peaked and that we will gradually see an easing. Towere expecting rates close 80 by the beginning of march. That is still tracking quite well. It is difficult to get where pmis would be. We would see a big drop in chinese activity. That would have ripple effects on the rest of the world, europe in particular because it is so exposed to china supplyside linkages. The assumptions have changed radically over the last week. Global cases for coronavirus which is a big slowdown from around 7000 at the start of february. What happened with the last week is that cases have started to rise again. It is back to around 1. 4 thousand 1. 4 k. This is a paradigm shift. A lot of countries have not really started testing. What does this mean for europe . It is really bad news for europe because as it is, it is struggling and suffering from lack of demand from china and supplyside linkages. He could face a second round of demand disruption. The same flow through to the u. S. Would you describe selling like this as indiscriminate . Is this market looking for a bottom or is this just the liquiditydriven . A i think at the moment it is largely liquiditydriven. Yesterday with the correlation to theirdual stocks performance over the Previous Year was zero. You could not say that people were selling the stuff that had done the best or that they were buying the stuff that had done the best. I think there was a lot of indexlevel hedging. The 1. I would make the one point i would make is that there is an aspect of this that policy can impact. We have had the news that disney is closing its tokyo park for a couple of weeks. That has nothing to do with the price of credit or the level of Interest Rates for the level of the s p 500. Venice closing, canceling withval has nothing to do anything that the ecb could do. The uncertainty is so manifest because we do not know what the spread of the contagion is going to be. We do not know its mortality rate. What we can say is that the measures that governments take to minimize the human cost are likely to maximize the economic costs. Those that would minimize the economic costs will exacerbate potentially the human costs. We do not have quarantines and lockdowns and shutdowns. That is a very difficult tradeoff to make and to anticipate. Unfortunately a lot of it is immune to the traditional on theakers particularly monetary side. As always, thank you. We will carry on the conversation with ts lombard. Vonnie lets check in on the first word news for an update on all things global. A number of developments in the coronavirus outbreak. A president says rate cuts may be necessary if it turns into a pandemic. Acting white house chief of staff Mick Mulvaney says School Closings are likely. Re may be an impact until on transportation but he added, we now have to handle this. Spending in the u. S. Closed down but it rose to tens of a percent. It suggests that the mention among American Consumers eased so much. Biden is banking on a win in tomorrows primary. The front runner in the race for the democratic president ial nomination has seen his poll numbers fall. But a new poll shows biden with a 20 point lead in South Carolina over bernie sanders. Turkey is threatening to release a new wave of refugees. Called in allies were thee of the deadliest latest escalation came after more than 30 turkish troops and dozens wounded in airstrikes in northwestern syria. The syrianh backs president has denied any role in the attack. Global news, 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Are continuing our market coverage ahead. Lets take a quick look at where we find u. S. Majors. It has been a tough week and continues to get tougher. The s p 500 down three and two quarters percent. The nasdaq down 3. 2 . The 10 year yield right down to almost its alltime low at 1. 163 . The vix is at 48. Ladies and gentlemen, this is bloomberg. Live from new york, im vonnie quinn. From london, im guy johnson. This is bloomberg markets. Another brutal day for stocks around the world. The seventh a down day in a row. Take a look at the s p 500. The stoxx is down hundred four a half percent. A couple of mix days with some grain. Investors worried that the coronavirus could really shutter the Global Economy. Something interesting happened on todays action. If we go into the bloomberg terminal we are probably headed lower. Yesterday we were looking at the daily chart. The s p 500 going below that daily moving average. We are loathly hundred week moving below the hundred week moving average. We were going down to the 200 week moving average which is near political critical support. More downside could be ahead. Action,t sort of brutal the worst week since 2008. The bloomberg dollar index which is a haven index getting a tiny bit on the week up to traction. Take a look at oils. We have copper down and we even have a gold down. That is more than what we saw in 2008. Lets take a look at those haven assets. We are seeing a big dig on the week appeared that 10 year yield down sharply. Down 30 basis points, near a record low. The yen is up 3 on the week. The dollar against the yen down 3 on the week. The casetechnically can be made for well above 50. More selling from risk assets might be ahead. To be the thing coming out of this week. In other economic news, volkswagen is posting 2019 19. 3rs coming in at billion euros. That is significantly ahead of estimates. Reactionhe share price we are getting in volkswagen. It has been a very tough week for the auto sector at demand concerns manifesting themselves there. Lets go back to the conversation we were having before. Thee is lots of talk in market that the meltdown is going to generate an emergency policy response. Possibly as early as this weekend. 25 basisance of a point cut next month and a 45 chance that we get 50 basis points. Says there is no need for a policy response. We spoke with the lenders banks. I would expect that we would have to press downwards our forecast. The most likely assumption is that this is a vshaped effect. The coronavirus will have an effect. , theit is contained normalization will happen quite quickly. Sounding quite sanguine. Joining us here in london and joining us in new york, bloombergs chief economist. The market is pricing your 100 chance that the fed goes next month. Possibly its biggest, 50 basis points. Everybody in the market seems to be telling me that this is a shock with the policymaking on the monetary side will have very little impact. Why are we in the situation where we expect the fed it do this . Disagreed completely with that. The central bank has ammunition to help deal with the crisis. The fed does not have the power to control contagion but the fed has the power to create financial buffers and offset some of what we are seeing happening here. My own team trimmed our first half Economic Forecast by 50 basis points based on the equity route alone. Of priorured analogies flu epidemics. We do not know what the numbers look like around that type of situation yet. We can draw a clear parallel that the equity market rout in q4 of 2018 when the market declined 20 , we can match that into map that into the current route which would imply for consumer spending, Business Investment and it gets us to a gdp growth of 1. 5 in this quarter. 1 next quarter. That is going to convince the fed that they do need to step into the picture sometime soon. Vonnie will fed cuts help . 50 even get 50 paces basis points if there is a cut. To themee not going parks. The fed cannot do anything about that. The fed cannot do anything about going to a theme park. They may have to stay home from work or may have lost business opportunities. If they have a home equity line, lower rates will help their cost of financing small businesses. Lower rates help their cost of financing. We cannot impact what is happening at disneyland but in broad terms, the fed has powerful tools at its disposal. In the last market update, we heard this flight into quality assets away from risky assets. That is a tightening of financial conditions. Can forcetting rates some of those investors to look back at those assets and move out of treasuries and gold and cash and move back into riskier assets and that has very powerful economic consequences. , what do you make of this . Main impactink the will be that it signals the market that the fed is still very much here. That is a stabilizing sentiment. We know that the funding curve, the distance between the federal funds rate is negative. It had already been negative for a month. If it stays negative for another two months, that makes it easy and even less profitable. Not just heard Credit Conditions in the u. S. , but it has Global Implications because u. S. Banks are the big suppliers of dollars outside of the u. S. That is one channel. Credit will flow through the system. Assures will also help such easing capital restrictions on banks and ratios on banks. Taking sure that credit keeps flowing through the system effectively. The data servicing costs is a big source of worry right now. If the fed does cut, it eases constraint on that side. There is clearly a demand story to it. It encourages consumption. Thank you for stopping by to give us your insight. Ts lombard managing director. Thank you very much. This is bloomberg. What a week it has been. Etfs have been stretched like never before. Bloomberg intelligent joining us now offset. Give us the skinny on what kind of a week we have seen in etfs. It has been tough everywhere. I think where etfs standout is trading volumes have set records. Highyield etfs, it has been really high. This is going to put to rest a lot of things that have never been tested. The selling has been aggressive but it has been in etfs. Nothing is a sticking out. If you look at the spreads, they are really tight. The discounts are really tight. Selling is aggressive, but it is orderly. Whereeing areas of we expect. More safety stuff, gold, treasuries. It is been what we have expect it but it has been orderly. Vonnie to get exposure to companies, is it retroviral . It does not exist. Trackeduld have companies that try to protect bio threads like this one. If you look at the names, they are up quite a bit this week. Thank you very much. This is bloomberg. Live from new york, i am vonnie quinn. Guy this is bloomberg markets. Vonnie lets get back to global equities. Lets get to our panel. A reporter iss as with us in new york. Another editor joins us from princeton. Let me start with you, katy. Is there support for the 10 year yield . Keep making new lows. We keep making new lows. We are in unprecedented territory. The analysis goes out of the window. By most measures, that yield has gone too far, too fast. We are in an unprecedented situation with this virus. Maybe we will see more measures taken by the u. S. There is no place else for investors to go if they want yield but also safety. That is why you are seeing these twoyear yields fall right now because investors are looking for cover and the u. S. Market is still a bright spot. Is a credit market still orderly, is it functioning . Is it working as we would expect it to . Is it working better than we would expect it to . I think you are on the right path. It is working better than you would have thought it would. We are seeing record volumes in the bond market. Everything seems to be orderly. We are not seeing these huge gaps up or down in price. That tells you that things are orderly within the bond market. We are seeing people run into bonds because it is the most liquid market you can find globally. Whether you are in asia, europe, latin america, bond market is where you will go to get price discovery. Many people might feel that they are over, but you do not have much of a choice when you end up in a situation where you need to adjust a portfolio, move some money around, parked some cash. Bonds are the easiest way to do that. Spiking, we are nearly at 50 today. Does that describe orderly markets to you . Yes it does, it absolutely does. It is not just the vix, it is what you see in equities. Your prior gas was talking about the etf market and all of the cell orders and movement going on there. The markets are not disengaging here, nor are they leaping around from spot to spot. They are trading down, coming back up. Thankfully the regulators are letting market discover price. If you go back 20 years ago, we had trading collars in place and a 5 drop might stop trading. When you do not allow markets to discover prices, that is when you start to end up with disorderly movement and you end up with orders sitting on desks waiting to be executed once the market reopens. That is not happening now. I think that is a good thing. Prices might seem irrational but this is what has to happen to markets. Buyers and sellers have to find one another. We are doing that. Katy, is the Market Action a useful guide to possible fed action . We are clearly seeing a flow story, here. People are rushing into bonds and seeking safety. Defect does it affect the feds decision to make a policy change . The market is priced potentially 100 chance we get a cut and a 45 chance we get a 50 basis point cut. Can i extrapolate from what the bond market is into that decision . Seen. Remains to be we have about three weeks ago and traders are aggressively pricing in those cuts. Those would be the first since 2008. It would be surprising to see that. If they did move in march and june. It would be surprising because we have not seen u. S. Data deteriorate yet. There is not a lot of new information that we are going to get between now and that march meeting. Folks like ubs coming out and saying, given the potential shocks to the Global Supply chains and how far the equity market is falling, that may force the fed to do an emergency cut here. We will know in about three weeks. He is calling the situation fluid and says it could turn around fast. We will monitor events right up until meeting, he said, which is by the way, march 18. He says, forecast adjustments do not look severe but we are willing to react. It sounds like the Federal Reserve is reserving judgment at least for another few days. If this continues, how much leeway does the fed have . We are at an interesting point in time. The fed has one week until blackout period. They cannot really talk before the fomc meeting. If they wanted to shift market expectations, now would be the time to do it. You see more voices like his coming out and trying to guide the market. Can i take you to the credit markets and ask you what is happening . In theory we find ourselves in a world where supply chains are very stretched or they are falling apart. A lot of companies are peeking down toward the bottom end of supply chains and have task Flow Management issues. I wonder if you find ourselves at a situation with these supplychain stories, whether that story that we talked about for so long, the fallen angel story finally has the potential to become a reality . Makes know, this is what the bank of koreas move interesting. It makes them move out of china interesting. Those parties there are pushing cash into the Banking System. They are not cutting Interest Rates because as we have discussed with our guests and on the live blog, cutting rates is not going to do anything. If you want to Keep Companies afloat through this time, you need to do Something Like inject money into the Banking System and tell the banks to use it to Keep Companies afloat and pay payroll through this temporary supply shock that we are going through. Fed to her point, is the going to tell us that they will cut rates or are they going to come out with some idea that the companies that rely on the banks. A rate cut may be the wrong thing to think about entirely. I think the fed was not going to try and cut rates which is pushing on its strength, but try to do Something Else and perhaps even push governments globally to do something. So much in seen stock markets. There was an effort to decrease panic. What do you make of this 7day selloff so far . Does it reek of anything else to you . Had just run some numbers on the relative strength index of the s p 500, it is now down at about 17. You need less than two hands to count how many times that has happened in the last 20 years. 10, 15, 20, 30 date period i looked at, they are all positive. And positive by 10 . This is crazy, frankly on a historical basis. Markets do not go from optimism to complete pessimism within the space of a week. I cannot say that that is the low, i cannot say that it will go back to highs within a month. Looking back in history, these kinds of selloffs cannot keep going. It has to balance somewhere. Today seems a logical place but we are heading into the weekend so perhaps monday will be the logical time. Thank you. Our thanks to here in new york to katy. Coming up, we are taking you to turkey. We are watching the coronavirus, a serious situation is developing in syria. 33 soldiers were killed overnight. We will talk about that and carry on the conversation about what is happening in the markets. Crude trading at 50 per barrel. Up, this is bloomberg. This is bloomberg markets. Coming up, we will hear from democratic senator of illinois, dick durbin. That is at 12 00 p. M. Eastern. Live from new york, i am vonnie quinn. Guy johnsonon, i am this is bloomberg markets. Vonnie with the s p 500 headed to its worst week, joining us is Abigail Doolittle. It seems like the selling was lessening, you said you felt there was more downside ahead. It looks like there is more downside ahead when you start to see this kind of panic selling, fear knows no bottom. It feels like the selling of 2011. These bearish gaps to the downside, something important happened yesterday. A breach of the 200 day moving average. You are asking me about where support was. The best support below 2700. It looks like we are headed that way. Women going to the bloomberg terminal, something critical has happened on todays silly action and that is the fact that we are now on a weekly basis below the 100 week moving average. This happened back in 2015 and 2016, went down to the 200 week moving average. To a declineint from current levels at about 7 and would point to a 22 drop in the alltime highs right at that support below 2700. Right now it changes, that is probably where we are going. It seems like there is no relief anywhere. Investors are truly panicked about what these current virus could mean for the economy. It is the end of the month. Is that a factor . That is an interesting question. I do not think so. You have this sort of fear, lets not forget the vix is higher. You also have a version on the curve that is lasting for a longer. Longer period. The fear is greater right now. That from a logical standpoint, it make sense. This does not have anything to do with the end of the month window dressing. It has to do with the unknown. Investors do not know what this means for the profit outlook therefore they want out and into the haven assets. Terrifying stuff, but thank you very much. Soaring between turkey and russia overnight. Biggestsh soldiers, the single day loss in decades. Istanbul, walk us through the situation. How is turkey responding echo . Since yesterdays attack which killed more than 30 turkish soldiers in the hands of the Syrian Regime forces backed by Russian Military inside syria, we have seen that president erdogan has been meeting and turkey continues its military deployment near the southern border with syria. We do not know when and how turkey might react. Some of the people that we have seen today, we can say for sure that turkey and erdogan is forced to act. How serious could this get . How much escalation do you anticipate and how fast . The worst Case Scenario would be a confrontation between russia and turkey. Both countries are seemingly trying to avoid this. In the wake of yesterdays attack, russia denies involvement and knowing the whereabouts of turkish soldiers. That account was later disputed by the defense minister. It seems to be the case with moscow at the moment, having said that, we think that we see that there is some weight between what we said now and the confrontation between the two countries. What seems to be the likely outcome from what is happening right now is that turkey might try to retaliate by an attack. On Russian Forces directly in order to mitigate the risk in light of what happened last night. Europe grows more nervous by the moment as to what could happen with the thousands of refugees potentially fling toward europe. Thank you indeed. To bloomberg turn news senior markets editor. You just heard Abigail Doolittle saying there is more downside and more to come. We could be looking at a 200 week moving average. Do you see this turning around . I hate to make the 2008 comparison. I keep being reminded of what was the starting bell of the credit crisis in 2008 which is when the bots came out and said we cannot value mortgage bonds anymore. The reason i bring that up is because so Many Companies have withdrawn their guidance for the rest of the year that i think the problem for fundamental investors is that they cannot value equity. Realityt have enough reliable earnings outlook to put into accurate multiple on the market because so many sales and guidance these guidances from Big Companies down to Smaller Companies have been withdrawn. If you remove that fundamental element from the equation as far , itnvestors valuing markets starts to crumble and it gets harder to identify one that would be trustworthy. That 200 day was a very reliable moving average that tends to turn episodes like this around. That acted as support for 10 minutes this week. 3000 is a nice round number. Weekly we heard on the moving averages, it does look like a place of support. It is very far away. We are looking at a bear market to get there. You have to call into question if anything will turn this around. The point earlier that today being friday, there is a lot of headline risk about the virus over the weekend that people do not want to be a hero in front of monday would be a logical place. If the new flow over the weekend is not as alarming as this panic selling indicates that it would be. If we get through the weekend without another surprise case or more being reported in the u. S. Or major outbreaks elsewhere, we could see that on monday. If it is a bounce or something real, it is headline to headline to figure that out. The issueou bring up of whether or not this is a fundamentally driven market at the moment. It feels orderly, that is what the price action suggests. I am curious as to if the computers are in charge, what does that tell us about trajectory . It is hard to celebrate separate the fundamentals from the computer driven. Trading strategy that is based on momentum is in disarray right now. Other strategies that target the level of volatility, the same thing. Underpinning it all is this massive uncertainty about the fundamentals. We do not know what to expect in the u. S. Right now as far as the economic toll. Had a great line this morning saying you can either maximize the economic pain to minimize the human toll or minimize the economic toll by maximizing the economic pain. Or vice versa. To ent trump is try trying to send a signal by putting larry kudlow and steve do not know how long that can last, that priority if the human toll starts to increase. Vonnie mike, thank you. Much appreciated. About what is happening, we will go to chicago. This is the picture. This is the day we are seeing. That is a 6 move. Gold is off but we talk about this a lot. Copper is down by 2. 22 . Losses across the week are absolutely enormous. Trading with a 9 dividend yield in london. We will go to chicago next. This is bloomberg. From london, i am guy johnson. Vonnie this is bloomberg markets. Time for futures and focus. Chris, interesting dynamics at play. The bottom is falling out of equities and so on. Not quite sure what futures will bring but lets talk about oil because one thing we can say is that Oil Continues to dip and dip further. Down 5. 47 . 43 can you believe that . The volatility is insane. I have been doing commentary for the last 10 years. Euros openeden the up, it is incredible. I can only imagine. Crude oil is getting crushed. It cannot catch a bid. There is no bids in the book until 4340. We have a ways to go before we see any sustained support levels. When you talk to people down there, what do they need to see for stabilization . What needs to happen to get the market under control . Iswhat needs to happen really a continuation of good news about the coronavirus being spread. What they dont want and coming off the desk, not one person said that the fed or any sort of monetary easing would catch a bid right now. Everyone is looking at the 10 year yield. If we dont get in the one 20s as far as yield is concerned, i dont think we will get the same bid. Been is friday, it has historically bad this year. A lot of people are on the sidelines. A lot of markets drying out in the s p. Thele are on the side, moves are really sharp right now. Where is there a bid for the 10year for example or the twoyear . Lows,these historical there is the bid . It is really incredible. I cannot tell you what the volume is down on the floor right now. It is really immense. 113 being a value play. I think things can turn around. There is resistance to the. I see a lot of offers popping in right there. There is really some slow to the upside. The biggest thing is the treasury is on the way down. Equities are being pulled in. Commodities leading the way down, we will need to see a bid in those areas on the treasuries and of the commodities before we see any sustained buying on the equities. Selling gold this week, is that a margin story . Yes. You hit it right on the head. I think you do have a margin call. For retail investors, there are three things. Down in thee vix is 25, 20 area. Stay away from purchasing on risk assets and do the threeday weight. It would be monday or tuesday before i start buying some risk assets. Vonnie definitely a red letter day. Thank you for joining us there. A quick check on the markets now. The s p 500 down. The dow is down as you can see. The Norwegian Cruise Line for ,xample, had such a selloff bids getting to the cruise line. Caribbean is higher. We are down by 3 or 4 . The dax is down by 4. 5 today. This is bloomberg. Guy mobile stocks have the worst financial sessions instead the financial crisis. Shop. Is shutting up the Geneva Motor Show is canceled along with serious sporting events. Jp morgan is the latest company to cancel nonessential business travel. Tensions soar between turkey and russia. Ankara is calling on nato for help. Live from london, im guy johnson. We are now counting you down to the european close this friday on uber markets. Bloomberg markets. Vonnie the most Immediate Response from the administration now. Lets get to the white house where larry kudlow is speaking to reporters. Exceeded expectations. That is why the atlanta fed thing is 2. 7. We have another month to go in the quarter, and then after that, so we will see. I dont think we will take at lea