Crude down, and participating in that risk on rally as well. Time now for global exchange, where we bring you todays market was a news from around the world. From hong kong to brussels, jahans burke and washington, our bloomberg voices are on the ground with this mornings top stories. , the death toll is now over 3000. Joining me is yvonne man. Heard of newst infections in south korea, iran, and spain. Germany, as well, and additional 188 cases. This virus has spread in 13 countries and 16 federal states. At this point, the threat level is at moderate, but could quickly change. Deathstioned the global now topping 3100. Theres also the corporate fallout we continue to watch, with nissan now saying they could be preparing for deeper cuts. The carmaker has been struggling ever since Carlos Ghosns arrest. This virus only exacerbates the troubles. There are signs of life returning back to normal in china. Just heard from han hi from honhai, apples biggest supplier. They have been dealing with severe labor shortages. There are signs now that workers are streaming back to these plants, and they could begin ramping up production. The end ofrd that may is when japan is deciding whether to go ahead with the Olympic Games on july 24. Alix thank you. The reserve bank of australia cutting rates by one quarter of a percentage point. Joining me now from hong kong is enda curran. What was interesting was the rhetoric also around the rate cut. Thats right. This was something of a stunning turnaround. The central bank hadnt been expected to move, but they did cut rates by 0. 25 . It pushes them closer to qe and signals that other Central Banks may be about to follow them. They signaled in a Statement Today that they expect easing around the world, including by the Federal Reserve. Clearly, australia has factored in other support. The central bank also signaled that there may be fiscal support coming for their economy and iran the world. The worlds biggest economies are starting to do a uturn on where they were headed with policy, and they plan to roll out some kind of support measures of different and varying kinds to try and offset economic shock from the coronavirus. Vincent thank you alix thank you very much. G7 officials are holding a rare conference right now in response to the virus. Bank of England Governor Mark carney spoke about the response. The bank of englands role is to help u. K. Businesses and households manage an economic shock that could prove large, but will ultimately be temporary. The bank will take all necessary steps to support the u. K. Economy and financial system, consistent with its statutory responsibilities. Alix joining me from brussels is maria tadeo. Any word on what this conference will mean . Yet, and dont know the conference should be underway now. The market was very excited about the idea we could be headed into another cycle of easing. The market was also very excited about the idea of global action, but the mood does change this morning. Perhaps the language in the statement from the g7 may be if you aree, and hoping to see a full package announced today, you may not actually get that. What is interesting is that bruno le maire, who leads the action from a european perspective, did say he is still hoping for strong coordination, and he said he spoke with kristy lagarde. We are also told the language in the statement does tend to change a lot. The fact that you dont get it it in earlier version does not mean you wont get it in a final version. Theres already reports that perhaps Christine Lagarde a not be inclined to cut rates to help the european economy. She would prefer other measures, such as shortterm loans for companies. That could make sense for a country like italy because it is not really about rates or helping the banks. It is about helping the companies which have been shut down as a result of the coronavirus. Alix thank you very much. We now turn to south africa come where the economy slumped into a recession in consecutive years. Isning us from johannesburg our correspondent who leads bloombergs coverage of african economies. Reporter data showed south africas economy slumping into its second recession since the president came into power to use ago. Into power two years caused by power cuts that intensified in the First Quarter, and expected to continue, and Business Confidence near a three decade low. Recession news some k some say could add pressure to cut rates at the next meeting this month. While the Central Bank Projection models still showed only one more 25 basis point cut in the Fourth Quarter of this year, easing could now be sooner and more aggressive. Thank you very much, were naval graph thank you very vollgraaff. Joining me now is Brooke Sutherland. Brooke they dont necessarily call out specific reasons, but i would wager that the coronavirus is a factor here. Target was supposed to host an investor day meeting in new york today, and canceled that event because of the coronavirus. It is now hosting that online. The numbers for the Fourth Quarter coming in line with its holiday forecast. Demands more on the side, but the worry with the coronavirus is you could see supply Chain Disruption for those categories and others, as well as disruption in Consumer Behavior as people stock up on food and dont make the purchases they would otherwise make. Alix thanks very much. We are just hours away from super tuesday. 14 states, one territory will hold democratic primaries. The field changed dramatically yesterday. Both Pete Buttigieg and Amy Klobuchar pulled out of the race and endorsed by endorsed biden. I believe we can do this together. Rallying the country together to defeat donald trump. To heal this country and to build something even greater. In the name of that same goal, i will be casting my ballot for joe biden. Joe biden. We need you. We want you. And theres a place in this campaign for you, so join us. Alix joining me from washington is emily wilkins, Bloomberg Government reporter. Walk us through the state to through the stakes today and how we are looking. 1 3 of delegates are going to be up. The big states are california and texas. Sanders does have the lead in california, but there is a lot of hope that biden might make a strong showing their end in texas, as well as other states, nothing more moderate wing of the party is beginning to coalesce behind him. Democrats in washington are widely hoping that perhaps bidens momentum can carry him through super tuesday, carry him through future elections, and that he can either go to the convention as the clear pick or perhaps to a contested convention, which would be the first time we had seen Something Like that in about 70 years. Alix that is a staggerings sister stick. Thank you very much. Thato that a race is a staggering statistic. Thank you very much. Tune into our super tuesday coverage. Layer,peel back a Bloomberg Opinion columnist john authers points out the majority was because of a weaker dollar. If you check out this chart of , p denominated rally in euros it was good, but no longer remarkable. Keep that in mind if the dollar winds up picking up any steam after falling below a 200 day moving average. Coming up, more of your morning trade and analysis of the markets in todays first take. This is bloomberg. Alix time for bloomberg first take. ,oining me is Gina Martin Adams Damian Sassower, and also with us, Stuart Kaiser, Ubs Investment Bank macro equity and derivatives strategist. Have we found a bottom . Damian can we just reverse everything i said yesterday . [laughter] alix lets backtrack. Damian if you look across currency basis, theres a little bit of premium back from the dollar, which is what we needed. We saw a big move there. Libor was very low. I think that is kind of a normal thing, a healthy thing. Stress in the plumbing in Central Banks globally. Going forward, i think it is a Playing Field to see where equity markets are going next. Im curious to see what gina has to say on that. Gina thanks for that. [laughter] gina friday was a pretty significant buying opportunity. Extreme oversold levels. You dont see a 10 correction in five days. You also dont usually see a 5 rally in a day. We are in new territory, and i think we are going to stay there for a little while until we get more assurances from Central Banks, the g7. A lot of news coming out today that could be pretty impactful. I do think yesterday was largely about we are going to get some form of policy response. So today will become a what is the policy response . Be market may or may not disappointed. No one knows where coronavirus is going. Volatility is the name of the game. Alix good thing you work and derivatives. What do you think . Stuart i think we are a little skeptical of the bottom being put in. Points was down seven monday, but still in the 95th percentile since 1990. The rest of the curve did not move, so that mediumterm uncertainty has not come out of the market. Andnd ethics of all ticked up. Expectation is very high for what the Police Response is going to be. I think there is still a risk that weve almost bounced too much after falling too much, and that is what the market is telling you. Damian in fixed income, other factors are going to drive total return for the better part of the next few months. When we are talking about dollar credit or any sort of u. S. Dollar fixed income asset class out of treasuries, if you look at the bestperforming segment this year, it is swiss denominated government debt, which makes perfect sense that this was he would rally. Im not sure how long that is going to last, but i think it is pretty evident in this market it is not going to be u. S. Yield. It is going to be eddie of syncretic factors that are going to drive fixed income total returns going forward. Gina one of the things i thought was really interesting is theres not capitulation insect their leadership, which is very rare. Even with the 10 correction that was so vicious, you would have thought we would have some ,otation into value, higher vol and we really didnt. What was leading before the 10 correction is now leading again, and that gives me a little bit of suspicion. Investors are still chasing the same themes, which to me means the market is vulnerable. Stuart on that point, the rotation actually rotated. The first half of last week, you had defense is really outperforming. You had extreme sector moves over a five day period. Our read on that was earlier in the week, you had a high risk dynamic. Later in the week, it felt what people were taking down core positioning. Thats when the stuff that has led underperformed, and it amost felt like you had lot of options and index level hedging, and the last couple of days, it hit felt different. Is a bit of aeek snapshot of what a bigger risk unwind could look like. Alix does that mean now we are seeing those positions being added back on . Stuart yesterday, would you have big moves like that, it is kind of hard to tease a signal out of it. I would say we had an index level hedging for three days, but looked like portfolio derisking thursday and friday. I think it is very interesting to see, if we get policy response today, everyone just whistles past the graveyard and we are back to where we were precrisis . Or do you need to manage this a little bit different . How the market prices whatever policy response get is going to tell you. Alix but we might not get anything. A macro strategist for bloomberg wrote, there are fiscal policy jay powelleploy, and is our obiwan kenobi. Hes not our only hope. We might find out that the care is the disease. I wouldnt hold my breath for fiscal stimulus. It is very difficult to get all parties moving in the right direction. And where are you going to put your money . Dont get me started, but i think all of this clamoring for fiscal stimulus is another way of saying Monetary Policy is limited at current levels. We are going to have to take a little bit of pain here. We are starting to see crocs of weakness in highyield markets cracksrting to see of weakness in highyield markets. Isme, what is interesting highyield spreads snapped back yesterday. Ig didnt. I think that is an interesting dynamic because ig spreads now comprise over 50 of yields. That is a pretty big move in a week. It just shows to me that there may be more idiosyncratic risk that you have to be cognizant of in this market. Stuart i think yesterday was interesting along those lines as well. Credit spreads widened a touch. Close to close, it was basically a two basis point move. Vol on the equity side gets hammered. But the safe stuff didnt move very much. It tends to give you the impression that maybe things havent sorted themselves out yet. Damian i just read something in thing Something Interesting about gold being a hedge against inflation, but if we are in a deflationary environment due to coronavirus, you would think gold should underperformed. I think that is kind of working against it, in the same way the yen hasnt been performing the right way. Haven, but i think people are skeptical resorting back home to u. S. Treasuries. Gina you are seeing that in u. S. Stocks, too. Precrisis weres trading at a 45 premium. They are still trading at a 45 premium. Safety is still at a premium. You are seeing the same with utilities. It is very consistent. Nobody knows what to make of a lot of these asset prices, so they are hiding where they can see the longest duration of safety. , stuart,seems like maybe you are not convinced we havent seen the last of the derisking. And regardless, we saw a microcosm of what happens when we have a real pullback in the market, and its not pretty. Stuart i think thats right. People have been hiding in a safe stock. That is the core holding of most pms. E by the fedped up statement and this rally we had, so that is a small snapshot of what it could look like if things unwind more broadly, but it hasnt happened yet. Alix guys, thanks a lot. Gina martin adams and Damian Sassower were of bloomberg , really great. Stuart kaiser of ubs will be staying with me. This is bloomberg. Viviana you are watching bloomberg daybreak. U. S. Lab equipment maker thermo foragreed to buy about 10 billion. The Company Makes tests for diseases. It represents a 20 premium to qiagens Closing Price yesterday. Now to amazons warning because of the coronaVirus Outbreak. Demand overwhelming amazon fresh and prime now services. It shows that customers are avoiding brickandmortar stores. Teslas modelo three is a batterypowered car called the i4, reminiscent of bmws bread and butter. Breadandbutter three series. We expect growth in china, and also expect growth for the rest of the year. Whether that is true for the coming weeks, i will not be able to confirm, but i think it is far too early to make productions for the full year. Bmw is still a growing brand. Viviana car sales in china plunging 92 . That is your Bloomberg Business flash. Alix thank you so much. I want to stay with autos for a second. We might get a look at the impact of coronavirus on autos today. One analyst told me that eventually, all automakers will be hurt by the disease. The Auto Industry is so diversified, the ultimate Global Supply chain. At this point, it is just degrees of how much you are hurt. Everybody is exposed. Theres no one auto company that is invincible to this. Alix alix that is adam jones of morgan stanley. He is still bullish on tesla for the longerterm switch to evs. Super tuesday, with former Vice President joe biden getting that last minute boost. We will talk about the broader race with Greg Valliere of hef investments of hef investments of Agf Investments. You are seeing a rally across the board, and europe as well as here. A bid into the bond markets. This is bloomberg. W . W . Uhiono alix this is bloomberg daybreak. Im alix steel. Lets check in on the markets now. Building on that enormous rally we saw yesterday, one of the four biggest moves we seen in the last 10 years. Europe following as well. Leisure was the hardest hit in europe, now one of the areas rallying the hardest. A snapshot of other Asset Classes, i want to point out the twostens spread because we are still bull steepening here. The yen and the swissie are also well bid in the fx market. It still feels a little bit like a safe haven hold onto those trades. Crude up over 3 . Opec meeting today and throughout the rest of the week, so maybe some centralbank action there as well. It is also super tuesday, when voters in 14 states now had to the polls. Former Vice President joe biden getting a boost with endorsements from former candidates Amy Klobuchar and Pete Buttigieg. The odds of biden winning the nomination is now catching up with Bernie Sanders. 20 me from washington is Greg Valliere, Agf Investments chief policy strategist. Also, Stuart Kaiser of Ubs Investment Bank is still with me in new york. Can you walk me through what everyone is expecting today, and what you think is actually going to happen . Greg everyone is expect in this huge biden bounce after what happened yesterday, but ive got to tell you, the biden operation in california is pretty lame. Underfunded. He hasnt been there much. He will be there tonight. I think Bernie Sanders is going to win a substantial victory of delegates in california. When we wake up tomorrow morning, i think we will see Bernie Sanders ahead in delegates by 200 or 300. That doesnt mean he will be the nominee, but i think all of this talk about his sudden demise has been overdone. Alix greg, we are not sleeping. What are you talking about . [laughter] say thats the case. What happens after that . Greg after that, theres a couple of minor primaries, but theres a major circle on the calendar. That is seeing patricks day, march 17. In those primaries, you could see biden do a little bit better. Cant rule out him doing well in the upper midwest. It sure looks to me as though this is going to go right to milwaukee. We may not get a clear nominee until early july. Alix most Market Participants any , but have theresvasina says that a surge in the polls. What do you think . Stuart i would agree with the logic that the odds of sanders winning have been very low from a wall street perspective, probably below but the actual odds are, even if those are less than 50 . There is room for the market to have to price in a larger probability of sanders winning, which will probably be negative for a wall street perspective. They have been pricing this semiaggressively. Voles about a 2 or 3 premium, so risk managers are paying attention to this. It is hard to know. We had so much else going on in the market, it is hard to know how much the sanders and election odds have played into it. Alix this is where the vix curve was a month ago. This is where it is now. You did have a bump on both around 2020 in november, and it was also the back of the curve that we rated a lot higher. Ask if youwant to feel like the markets are appropriately prepared for what could be more confusion, or perhaps Bernie Sanders really moving ahead. Greg if Bernie Sanders moves ahead after tonight, in an odd sort of way, that is a plus for the markets. If he is the nominee, i think you will lose to trump fairly convincingly. It also means the house could flip back to the republicans, the very liberal house. That would be a plus for the markets. If, on the other hand, the democrats gang up and deny bernie the nomination, i think a lot of his supporters a stay at home in november, so either way, it is a tricky one for the democrats, and potentially not a bad story for the markets. Alix this might seem like an obvious question, but why is the rhetoric that president will be good for markets . I understand the s p has rallied x amount since he became president , but there was the trade war and other issues. Why do we think that . Greg primarily taxes. Even biden has promised to raise taxes. Bernie would make taxes confiscatory. I think taxes are a big issue that the markets would have to be concerned about. Alix stuart, do you need to hedge yet . Stuart weve said to be pretty tactical about this. It is hard to hedge election events months and months in advance, and it is almost prohibitive to do this, so i twok you need to identify to three weeks ahead of those. It is hard to do this far ahead of time. Alix where is volatility at all cheap, or hedging at all cheap . Stuart it is a relative value argument now. We think nasdaq vol is probably the best value from a benchmark perspective, so we focus on that. Canerms of the vix, you probably own four to six months futures. Even though they are high, the curve is flat, so they are going to carry well. We have seen people looking at that. It is probably going to remain pretty flat, and if things go crazy, it could rise a little bit. But the nasdaq is where we are most focused on. Alix greg, if you are taking a look at different sectors, regardless of who wins the white house, are there sectors that investors need to start focusing on that will be changed, no matter what . Greg i think you have to look at the tech sector. If a democrat wins, there will be more antitrust activity. You have to look at the drug stocks. There could be harsher legislation for them. Maybe even the financial sector. A lot of democrats are talking about increasing regulations. One other real quick point, i think the ultimate volatility is obviously coronavirus. It is not enough for trump to look good and handle it well. He has to avoid a recession. I think the jury is out, even with stimulus coming from the fed and fiscal policy. If we have a recession, the incumbent would suffer. Alix how quickly does Something Like that play out . When would we need to see the recession to actually impact the vote . Greg i would say by early summer. If there are signs that the Unemployment Rate is starting to rise, if gdp is looking really soft and the markets still looked choppy, fair or not, i think trump would get some of the blame. I think that is why he is working so aggressively now to pull out all the stops to avoid one. But this is one that is really hard to handicap. Alix is there fiscal stimulus that could help . Tom porcelli at rbc said you could have a tax moratorium for a bit to give some relief, for example. Greg i think there will be the possibility of loans to companies that are hurting, may just flat out aid to companies. There may even be talk about lifting tariffs temporarily. That would be a big story for china. Alix would that matter to the markets . Stuart i think it would. Focusing on liquidity provisions in china in particular would help markets. Some form of Corporate Tax cut would probably help the markets as well. Trump as a candidate, even though he has done the tariff stuff, theres something of a trump put on the markets. Any and all of these things can help come up with the question ultimately goes back to is this a Global Pandemic where we are shutting down u. S. Cities because of coronavirus, or something that looks more like the flu . If it is a Global Pandemic where we are shutting down cities, the tax break for corporates isnt really going to help the markets very much. If it is something more minor and you get a policy and tax response, then you are adding a ton of stimulus to a more moderate risk. Nodding . G, you were greg i agree. The jury is still very much out. In the next few weeks, there will be a lot more infections, a lot more fatalities. I think iran is going to be the center now. I think the epicenter is shifting from china to iran. Theres a lot more bad stuff to come, and that does represent a wildcard in handicapping the election. As for right now, you have to make trump the narrow favorite, but he is not be certain favorite. Alix it is so curious, just how quickly the coronavirus changed the narrative. I was talking to david westin yesterday, anchoring the special tonight. This is a whole new ballgame now. Greg it is not like a hurricane or something that is more conventional. It has lots of uncertainties with it. Knowing how this city loves to spend money, we spend money in washington like there is no tomorrow, im sure we are going to throw a lot at this, including tax cuts and Monetary Policy. Alix and all of that leads us back to volatility. This is our favorite chart, and it is the vix, and Global Ethics volatility the global fx volatility movements. How much more volatility we need to see, and where is fx vol in relation . Stuart fx vol has always looked low. It is hard to get fx vol to move. Vol did move lower today, and that bears watching. If you are able to get that isss asset volume moving, it alix how quickly does it come out like that . Stuart the way the markets are moving now, it could have been pretty quick. If we get a large policy response, that probably keeps fx vol well contained. But as youve seen, the dollar moved yesterday. Anything can happen in these markets. What if we are disappointed by the policy announcement . From our perspective, the cross asset markets are telling you that there is still risk in the system that needs to be dealt with. But also looking at something outside the equity market can give you a clue whether this is calling down coke of the or if this is an isolated pocket. Alix thanks a lot. Really appreciate it. Greg valliere of Agf Investments, thank you for joining us. Stuart kaiser of Ubs Investment Bank. Tune in fair our super tuesday coverage starting at 7 00 p. M. Eastern time. Some breaking news now on the g7. They are ready to take action, including fiscal tools, where needed. They will continue to fulfill mandates. That is all we know so far. Reaffirming the pledge to use all policies for strong growth, including fiscal pools when needed. The boe end ecb money Market Pricing is holding steady, so no real change there. They are monitoring the spread of the virus. It seems like a lot of talk and not a lot of doing yet, so we will see. S p futures taking a leg lower, now pretty much flat on the day. I am going to take a quick check on the treasury market here. You have the 10 year yield down by about three basis points, so still a little bit of buying. No action, just a lot of words from the g7 teleConference Call. Lets get an update on headlines outside the business world. Viviana hurtado is here with first word news. Viviana the u. S. Death toll from the coronavirus has now climbed to six, all in the see lateral in the seattle area. Local authorities are buying a motel to quarantine what could be scores of patients. More than 90,000 people have been affected worldwide. The vatican says that pope francis tested negative for the virus. Benjamin netanyahu is edging closer to victory in israels third election in 11 months. Polls showing that netanyahu two seats of a majority. And we end with longtime msnbc host chris matthews. Hardballaving his program after accusations of inappropriate behavior. He says they reached the decision mutually apologized for making comments about womens looks. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Alix thanks so much. And the g7 communique coming out here, saying they are ready to take action, including fiscal tools where needed, but no action yet. Touch,ies firmed just a and equities around the lows of the session, yet still in positive territory. Ready to take action, including fiscal tools. They are monitoring the situation and will fulfill their mandates, but nothing also far. Here we go. Potentially, we are going to see coordinated action for growth and stable markets, yet nothing officially delivered. Coming up, Sergio Ermottis next job. That meanst and what for succession at ubs in todays wall street b. Plus, check out tv. You can watch us online, and wrecked with us directly. Go to tv on your terminal. This is bloomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, ceo. Las pinchuk, snapon viviana this is bloomberg daybreak. We begin with twitter. It is strongly urging its 5000 global employees to work from home. In the midst of the coronaVirus Outbreak, it is the latest step the company has taken. Twitter already making it mandatory for employees and hong kong, japan and south korea to work from home. Aw to a study that says majority of the most promising Artificial Intelligence startups are based in the u. S. The Top Ai Companies focus on health, retail, and transportation. The top 100, 65 were based in the u. S. Still, some of them had headquarters in china were elsewhere. We end with alphabets selfdriving car unit come of the first time taking outside funds. Waymo raising 2. 2 billion from private equity, venture capitalists, and auto companies. Waymo has been pushing ahead to commercialize its autonomous driving tech. Waymo could eventually spin off. That is your Bloomberg Business flash. Alix thanks so much. We do want to recap those headlines out of the g7 for you. They talked. They all agreed that they stand ready, including fiscal support. To use all policy tools for strong growth, yet nothing is actually done. A little stronger bid now into the 10 year treasury, yields down by about four basis points. The expectation was big that they were going to do something. They say they will do something, and to support the markets as well, yet we dont know what that actually will be. Off the highs of the session. We will give you more on that. We turn now to wall street beat, were recovered three things wall street is buzzing about this morning. First, ermotti sto take over as swiss be chairman. Outrage. Hood sparks the free stock trading at saw an outage, now back up and running. Joining us is sonali bostic. How many ceos sonali basak. How many ceos are left in their spots . Sonali it is exhausting. Theres shuffle all over the place. We were looking at changes at hsbc, now Standard Chartered. All of these banks say they have been planning for succession for a very long time, but after years of tough performance, things could be heating up. Alix why . Why now . Sonali Standard Chartered in particular, and this was a great scoop by my colleague, the fiveyear stock chart looks pretty laggard. There are all these problem and hong kong layered on top of that. Didntd chartered hold buybacks the way hsbc did. By retail model is pressured the low interest rates, and the retail environment is tougher. Will they see mergers . They are tough to do. As you mentioned, nice to see Sergio Ermotti land on his feet. Alix lets go to softbank. This is the roadshow, right . Basically . Planned thisey had investor outreach before even elliott had taken this big steak and pushed for change. The shares are reacting somewhat favorably, so they did like the fact that Masayoshi Son is being more open. He made statement that he would be more open with investors and listen to their suggestions. Will that buyback be on the table . He also said that, listen, im a big shareholder. Underway. Changes alix fair point. And he is here now talking to investors and bankers. Sonali Goldman Sachs held their main conference yesterday. Alix lets get to the last story, which is robin hood. This is a bummer. A sickly, if you are just a retail guy trading stocks, you didnt get to do that. You are aly, if retail guy trading stocks, you didnt get to do that. Sonali after a down week, traders took to twitter and said that they could lose customers over this, people losing money over this, and it doesnt come too long after other glitches we have seen at robin hood. For example, last year we had that infinite leverage glitch where they were actually only they were accidentally allowing borrowers to borrow too much money at against the capital. Regulators have taken a look at that. Not to mention them a they have been very slow to roll out some of the banking products they wanted to. Alix how do you fix it . You need better tech, right . Sonali well, how do you compete with fidelity driving their fees to zero . I think the big guys in the room saying finance works this way. The new guys will have a hard time getting in. So the ultimate state of robin hood is that question. Alix thanks a lot. Street,s women of wall we focus on women shaping the world of business and finance. The picture really isnt getting brighter for women in management. Looking globally, womens share was the same as it was in the year 2000, 14 . Customers may be the biggest losers. Funds run by women outperform those run by men. Coming up, we will talk more about the g7 and the commitments they are not making come of it saying. If you are jumping into your car, tune into Bloomberg Radio on sirius xm channel 119 and on the Bloomberg Business app. This is bloomberg. Alix lets recap headline from the g7. The countries do not pledge any specific actions here. They do talk about supporting the markets. They talk about stable growth, stable markets, coordinated for a stable economy. They talk a lot, and they do nothing. That is what the market is reacting to. They do include fiscal tools as something they could be doing where needed, yet nothing actually pledged. As a result, s p now off the highs of the session, rolling over into negative territory. European stocks also off the highs. About are still off by four basis points. Nothing really new there because we already had a safety bid coming in. Overall, you are seeing the yen extend gains against the dollar. Not a lot being done, but a lot being talked about. The fed funds futures still shows bets on for rate cuts. Joining us now, Damian Sassower of Bloomberg Intelligence and elaine initially to of a and andinitially to ava yelena shulyatyeva. Damian yields are trying to find their way through. This is better for treasuries off the back of the news, but you knew it was going to fall short of what the markets were expecting. It wasnt going to be enough. Certainly, i think this is going to be more monetary stimulus ahead. I think candidate is next. Alix why . Yelena what are they going to do . Alix i dont know, im not at the meeting. [laughter] yelena we have some room to cut, but europe, do they . Looking for some sort of coordinated action was actually not quite feasible. Alix why couldnt you do like a plaza court . Plaza accord . Yelena it is probably too premature at this point. Does it require such a massive coordinated action . I dont think so. Alix does this give any pressure to fiscal . I think the markets are out of thefiscal ecb, for sure. Not really, we are seeing that is much, ty because the fed hasnt committed to easing yet, which is inevitable. At the just looking back financial crisis and how Central Banks reacted to that, there was coordinated action on currency dont need that this time. They have all the tools in place, and i am sure they would be a custom, but it is not time to bring them up. Damian i agree with you. Alix if dollar funding is ok and the credit markets are functioning like they could and people can get money where they can, there is no credit crisis. You should expect some Central Banks to keep looking at the situation within their economies and acting is appropriate. Thats exactly what they said. The fed is monitoring the situation. They will get some Economic Data between now and before they meet in a couple of weeks. We will get some first indications of what is happening to consumer sentiment, to business sentiment. Payrolls will be totally irrelevant because they were killed for because they were collected just before this outbreak is starting to evolve in the United States. Alix i further question is where do we need to price out more action . Ive read multiple bank reports now talking about four rate cuts, zero bound. Are we going to rerate that or wait and see . Damian i think the market is struggling to rerate that. For me, what youre going to be looking at his libor up on the spread. The move is pretty indicative of additional credit risk being back into the u. S. Market. I think it is something all investors should be keeping an on. Keeping an eye alix thank you for breaking down all of that market action. This is bloomberg. Alix welcome to bloomberg daybreak on this tuesday, march 3. Im alix steel. Lets take it from the top. The risks to the American People of the coronavirus remains low. Alix Vice President mike pence says a vaccine could go to Clinical Trials in six weeks. Seattle confronts the deadliest u. S. Outbreak. We just heard of new infections in south korea, iran. Spain adding an additional 120 or more, and in germany, and additional 188 cases. Globalal crisis cases now reaches 90,000. The government absolutely expects the four big banks to come to the table. Alix the reserve bank of australia becomes the first g10 central bank to cut rates in response to the virus, and it may not be one and done. It pushes them closer to qe and signals that other Central Banks may be about to follow them. They signaled that they expect easing around the world, including by Federal Reserve. Alix this comes as g7 finance ministers and policy makers meet. Maria we could be headed into another cycle of easing. The market was very excited about the idea of action. Alix moments ago, g7 finance chiefs said they are ready to shelter their economies from the spreading coronavirus. They stopped short of selling what specific measures they would be putting in place. Is really a story of the guidance of both companies, coming in below where analysts were expecting for 2020. They dont necessarily call out specific regions, but i would wager that the coronavirus is a factor here. Alix it was a lukewarm outlook from target and kohls. Both expected to get more details about the impact of the coronavirus. Joe biden. I will be casting my ballot for joe biden. Alix former Vice President joe biden gets a string of endorsements from once rivals. Senator klobuchar ending her endorsement ending her campaign for president 24 hours 1 3re to super tuesday of delegates are going to be up. The big states are going to be california and texas. Sanders does have the lead in california, but theres hope thatbiden make make biden might make a strong showing. Alix in the markets, we were looking for a confirmation of the rally from yesterday. Off by about 1 . Use to have a safe haven bed. The income of the swissie at the front end, the tenure down by three. G7 finance leaders convening on a Conference Call this morning to discuss their response to the coronavirus impact, promising to act if necessary, but making no firm commitments. Joining us in new york is bloombergs michael mckee, Brooke Sutherland of Bloomberg Opinion, and Michelle Girard of natwest joins us remotely. First, what actually happened . Michael very little happened compared to expectations, and that is why you saw the reaction up to this point. They said they would use all appropriate policy tools to achieve strong, Sustainable Growth and safeguard against downside risk. They didnt say what those tools are. They didnt say when they would be applied. It market that had basically come into the morning expecting some kind of announcement of rate cuts or at least a promise to cut rates in the future is disappointed in that. The important thing to keep in mind is this doesnt rule out a separate announcement from the fed or the ecb. We know the bank of canada is going to make a decision tomorrow anyway. It does stage some disappointment because they let the Communications Get ahead of their communications. Alix isnt that what always happens . Hows today any different . Michael it is definitely not the markets not what the markets were expecting, and they had to have known that. You lookichelle, as forward, does the Market Reaction put more pressure on the fed to react at its march meeting . Michelle i think that is the case. I am sure that the Federal Reserve and other Central Banks would like to wait and take action at their respective meetings. The question is whether or not markets will allow them to do so. When you look at the price action last week and what that potential he means in terms of generating even greater economic risk, i think it would be very difficult to see a repeat of that kind of move in financial ,arkets and not have a response that is indeed what ends up happening. Alix you had a note out overnight that said you are looking to a zero lower bound by midyear. You could see 11 basis points between now and the end of march meeting from the fed. This anything change with the g7 . Michelle a review has been that we would see a 50 basis point. Ut actually at the meeting i think if they can, policymakers would like an additional two weeks of information to shed a lot of insight about what ultimately the impact may be, so i think it to be moree measured. Our base case was 50 basis points in march, with the possibility we could see something sooner. In terms of going to the zero we willund, it is just see a greater impact on consumer demand in the u. S. , and ultimately, the fed will be forced continued continue to provide support for the economy or alter the spring. Is still so much unknown about this coronavirus crisis, and there is a possibility we see a rather short Term Economic disruption. Is there a clawback mechanism for the fed if they were to go to a 50 basis point cut in march . Michelle i think this is really interesting because after we all sort through what we think the Immediate Response will be, the question will be what happens next. Arguably, that is perhaps the most important question in terms of, will the Economic Impact to shortlived, and where the and will there be a rebound . Will that translate into a rebound for rates . Our view is that the fed, similar to last time in terms of moving off the zero bound before inflation was at that target, we think the fed will stick it to the zero bound and wait longer to take those rate cuts back, so even if we get insurance moves now because of the coronavirus, we actually think, even once those fears pass in the economy resumes and starts growing again , this Federal Reserve will not be quick to take this back. Michael which leaves us with a dilemma. You can understand why the fed is reluctant to act because if youre going to go back down to zero, what all that implies for rates, for barring and the possibility of overvalued assets , and the lack of policy tools going forward, that is a big step for them. A reason whyely they would want to slow down, why they dont want to be forced. Theres no impact we can see at the moment on the u. S. Economy. We are just projecting. Really, the fed would be reacting to the markets alone, and their idea would be if the markets crash, people stop spending. That is why we have to react at this point. It doesnt seem to be a systemic problem. So do you want to make that major step based on just the fears in the market, or actually have some sort of fundamental underpinning . That is the issue i think they are discussing around the table. I know a number of them would like to have the fundamentals underpinning. The question is, is this statement going to buy them enough time that the markets go down a little bit today, not seven or 800 points . Brooke there were some rumblings about fiscal stimulus out of europe. Is there any possibility of this in the u. S. . Michael if you go back to george w. Bush, they did cash rebates. They cut the withholding tax, and what they saw was people took the money and put it in their savings account because. Hey are worried [laughter] michael she is singlehandedly going to save the economy. So you could do fiscal stimulus, but it takes longer and doesnt necessarily work. It doesnt necessarily give people money. So how do you design something that will work there was a big deal in 2009 when president obama took over. You have to have shovel ready ifjects if you are have youre going to have infrastructure. In real thing that kicks in these situations is automatic stabilizers, but they are still really low. Alix rbc had an interesting could help boost financial conditions, especially with the fork patch. What do you make of those options . Michelle i would say that was likely to be more needed his help for the business side of the economy rather than the consumer side. I think, given the kind of impact we expect, there will be a hit to consumer demand, but that feels like it can rebound more quickly once the fear of contagion dissipates. The business sector which was already quite weak may struggle for a longer time, but supply Chain Disruptions and general concerns about the broader global outlook, i would sort of agree that targeting any sort of fiscal action more toward the corporate side of the economy than the consumer side may be what ultimately is necessary. Brooke in europe, theres a report talking about target longterm refinancing for small and medium enterprises. Are those the companies most at risk in the u. S. As well . Michelle i think as we look at the potential economic fallout, it is small and mediumsize risk. Ss that is at certainly, Global International companies will deal with the Global Economic slowdown, but Small Businesses in particular depending on the length of time you see economic disruptions, may be very vulnerable. You may have Many Small Companies that cant sit through containment efforts that last many weeks or months. Thosek in particular, kinds of measures targeted at small and Mediumsized Companies could be particularly impactful, given what is actually driving the economic slowdown. Stuart heres a michael heres a situation where the u. S. Stands differently from europe. Congress took away most of the feds ability to lend to companies in the doddfrank at because they lynched to aig and everything like that. The ecb can basically do funding. Er lending scheme tltro could potentially be a powerful tool because it sets up different interest rates, but that is Monetary Policy. On the fiscal side, maybe that is where the treasury could do something. A lot of these companies and so proprietorships are paying taxes quarterly. Maybe you give them a tax credit or suspend their taxes for a while. That might be something you could look for from the u. S. Brooke i wonder if you would see some of the Bigger Companies step in. You have seen boeing if cash injections to some of their most vulnerable suppliers. Theyve negotiated agreements with ge. Michael part of the issue is supply chain and where those Mother Companies are. It may be that youre getting apart from china that goes to a factory in pennsylvania that then goes to arkansas, that sends it to detroit or Something Like that. So who do you prop up . Thats part of the problem. We might see states actually try to get into the savior business if necessary, but again, this is all speculative because we dont have any data on this. Alix and we dont have anything concrete from the g7. It is a wait and see come already to stabilize markets and growth as needed and growth as needed. Dont really know what the coordination part is, but at least they are all talking. Thanks for joining us today. Michael mckee, thank you very much. Coming up, voters headed to the polls for super tuesday, with joe biden getting a lastminute boost. We will talk about what all of this means in terms of the coronavirus. This is bloomberg. Alix confirmation in the markets. Will we see continuation of that rally . Maybe not. S p futures turning negative on g7 headlines. So what do you do as a market for this event . ,oining us is Denise Chisholm Fidelity Management sector head of strategy. What do you do now . Denise lets first talk about the price action, second about the best case scenario, and about a mild recession option. The price action we have seen ticket trough, 16 in little over six days, is exceedingly rare. Interestingly enough, only one of them happened in a recession. Obviouslysion was 2008. That cataclysmic selling we saw come up with the exception of 2008, did to do you within a couple, and all of those situations after the betrothed 100 odds it is interesting to see a historical parallel that as much as this was a very sharp contraction, those sharp contractions tend to have more option more often in secular bull markets. Again, theres no historical analogue for the coronavirus, but the best case scenario, given we know that there will be economics and earnings impact, is a vshaped recovery that is temporary. Terms of ism, the decline was recouped 80 over the next three to four months. We have a dozen or so indices that actually give us data. What you see is something pretty unique come of the equity market can look through it in the sense that you will see an earnings hit, but multiples expand 86 of the time to cushion the blow. Even pass the trough, the equity market tends to look through that. Even the defensive sectors you were talking about in terms of staples, potentially health care only have 40 odds of outperforming going into that trough, even despite the fact that, given it is going to be. Emporary those temporary impacts of three to four months can be looked through with multiple appreciation, and with tractio contraction in the multiple 14 to 16 times. Ist you want to look at the credit markets. That is really the difference between something transitory and something that becomes more durable to the overall economy. I am looking closely at credit spreads, and i do it in a bit of a unique way. I look relative to equity market. Aluation spreads credit spreads are still below the 2018 level and in the bottom quartile of their historical ranges, while equity valuation spreads are in the top of their valuation ranges. Usually, credit ends up being correct in the sense that equity rally into that. That could change rapidly, but i think that is the indicator you want to be looking at. Alix that has to go down as the longest answer i think ive heard on bloomberg television. I have to give you some kind of weird trophy for that. [laughter] brooke i did want to ask about health care because he talked about it being a more defensive place, but we also have the election going on. Does that change the dynamic . Is that no longer a place to hide . Denise it is an interesting sector overall. Valuation spreads are exceptionally wide within the Health Care Sector, which is different from historical setups. This is in excess of recessionary whites we saw within the Health Care Sector. To the extent that that is predictive or contracts, you can see some of the Health Care Sector usually cheap, high beta stocks outperformed despite the potential for bad news. This is one of those issues are the equity market tends to discount bad news in advance. I think hmos and hospitals are an example of those stocks that tend to rally if we see fears decline. That said, i think the Health Care Sector overall does have challenges. When i go back in the data, i see the overall sectors expensive on earnings and free cash flow, and that is a problem. That still makes it the potential overall for a value trap, and my opinion, and doesnt make it set up for the potential for leadership in 2020. Alix a great distinction, Denise Chisholm of fidelity. You will be sticking with us. Coming up, we are looking at target dropping, missing estimates. We will break down more retail, next. This is bloomberg. Alix target and coals out with s outngs today and kohl with earnings today. Kohls actually up. Denise, where do you like retail . Denise Consumer Discretionary tends to look through any decline in a vshaped recovery to the extent that it continues. As much as it is extensive on a market capweighted basis, i am still pretty optimistic, but overall, you see a big difference in terms of leadership within the sector come over amazon and technology essentially tend to be leadership, and retail continues to struggle. As much as i think theres opportunity at the two digit gig level, the companies that have been under pressure will likely continue to be under pressure. Alix theres also the coronavirus and supply chains, but this is something different. Brooke right. Amazon was concerned they may not be able to deliver all of the packages people order. You wonder for target, can you source the toys, the clothes, electronics . A lot of that comes from china. You did have the new year build up a sort of buffer, but i think there will be a real crunch in the aprilmay timeline. Alix i also wonder, which ones can afford to eat the margins and which ones cant . They will maybe have to pay workers to not come in because the virus, for example. Brooke stores are already struggling significantly on that point. I a time like this, you have to get people in the stores as well, which is a lot of pressure. Alix coming up, we got a csuite view of disruptions from the virus and political uncertainty. Nicholas pinchuk, snapon ceo, will be joining us. Rolling over a little bit for the s p. Now we are up again, up by 13 points. We were down, then we were up again. How about that . The g7 disappoints with no announcement. Markets didnt like it at first, now taking it in stride. The bond market pretty similar here. Seeing a bid,also but not as much before. Yields of about three basis points on the twoyear and three or four in the 10 year. More coming up on that. This is bloomberg. Tv just keeps getting better. How you watch it does too. This is xfinity x1. Featuring the Emmy Awardwinning voice remote. Streaming Services Without changing passwords and input. Live sports with realtime stats and scores. Access to the most 4k content. And your movies and shows to go. The best tv experience is the best tv value. Xfinity x1. Simple. Easy. Awesome. Xfinity. The future of awesome. Alix this is bloomberg daybreak. I am alix steel. News we are waiting for all morning was that the geez was what the g7 and central bankers would say. They said they were ready to support central bank but did not do anything specific. Building on gains from yesterday, the biggest gain for the s p in 14 months, the fourth biggest in the last 10 years. In other Asset Classes you are still seeing that bid into safety. A little bit of a flattening on the treasury market. Year andnds in the 10 the two year relatively well did. Well bid. Still seeing a move into the yen and the swissie. The question is when china can go back to work. This is one way to look at it. This shows the burn on china on a daily basis. Where we are in 2020 and is the arch line, and the orange line. Slowly and surely it is starting to pick back up. We also heard an apple supplier expects its chinese plans to Begin Operating normally by the end of march. Joining us as a man who also knows what is going on in china, nicholas pinchuck, snapon ceo. Nick, it is great to talk to you. You have workers in china . Are they working. . Nick they are working, but it are. Ds where they everyone went home for the Chinese New Year depending on where they were they made their way back to the place of work with varying speed. Some of our factories are 95 . Another one is 67 of the people are working. 25 of our people are in quarantine in that city because they came from another place when they entered 14 day quarantine. Another 10 to 15 plat present are somewhere else trying to make their way over the series of boundaries that requires quarantine. The Chinese Government has not covered itself in glory on not having a central policy. We make in the markets where we sell the product. It will create some disruption, but not like other companies. Any disruption getting supplies to europe or the u. S. . Nick it is still early days. People got ready for the Chinese New Year so they had supplied components. In the factories that have 69 workers back, we are looking at whitecollar workers as well. As long as we have components we will do ok. I think most Companies Like us, if you are exporting to the u. S. Out of the factories, they will be ok through the First Quarter. After that, how they get supplies from other factories through china . Brooke i know you have it increase in inventories to the Fourth Quarter. Does that help you . Nick is good now. It is one of the Better Things now. That is what we are seeing in china. In the United States we have a factory in italy. That is only a couple hours south of where they have down part of lombardi. That factory is working full speed. The cafes and the restaurants and the hotels are full. That is ok. The United States, we will see what happens. We are getting ready. We are establishing disruption committees in every location so people cannot come to work, we will manage that. If people have to work from home, we will have call trees where people can work on Different Levels so we optimize the situation. Brooke it feels like the concern has shifted from supply Chain Disruption to outright demand. What are you seeing on the demand front . Nick china is a basket case. Nobody is buying anything. The hits keep on coming. Brooke hard to do when youre in quarantine. It is unclear where china will go. In United States and other places, we will see. What we see is Larger Companies concerned. They tend to be more conservatives. Smaller companies, it is full speed ahead. Alix if you feel you are wellpositioned to manage the supply issue, for demand, if we saw the fed cut rates or a targeted stimulus, does that help you . Nick if you think about the economy and people about buying, it is psychology. The way people think of things is important. Why did the stock market go down . I dont understand. Arent the company is going to be every bit as valuable after it burns its way out . They are. Companies have to recession come out stronger. If youre talking about longterm valuations, i do not see a problem. It is just psychology. Brooke on the psychology front, does this start to hit Consumer Confidence . You have the photos of people stockpiling bottled water and food. Nick we are ready for that. That could be an eventuality that occurs. We are in repair and people usually keep driving. They need to repair their cars. We have solid performance. Not that we will not be affected. I do not want to say we will not be affected. Alix as long as Central Banks and governments can be seen as being supportive, and the markets reacting timed, you feel ,hat is enough react in kind you feel that is enough . Nick im not sure the market is the best barometer for the economy. We love great news. We would love the stock market to go up, but in terms of my customers, the people in the garage and the shops, they are grinding metal, even the bigger operations preparing trying to fill their order books, im not sure the market necessarily affects them. America, at least manufacturers, do not conduct their business completely on the basis of the market. Alix what would help you . Nick the idea of the psychology in general. If you lead the books of the 1920 flu epidemic, what becomes clear is confidence is from the leadership. If the American Government has solid leadership, solid positions, they are upfront with the people and they have a National Policy which make sure we know we are handling this, like a company should do, this is what we do with companies, that i think we are ok. American people react positively to this. I was in vietnam. Fallingam mortars were every other day and people kept their lives going. They accepted the risk. It had to do with their belief in society moving forward. That is proportional to the leadership. Business leadership and government leadership. Brooke i know you do not usually give guidance, but if you put any parameters around the impact . Nick we do not do guidance. If you look at us versus other companies, we are less exposed. We make in the markets where we sell. We sourced some things, but i think our First Quarter should be ok. After that it is a question. Our sales to china will be affected, our sales to asia. It will work its way out. Theres a lot of conversation about how people will change their supply chains. Home ratherk from than taking a business trip. Does that affect you at all . Nick that could happen. I think that is more shortterm thing. If it was efficient for people to work at home, they wouldve done it already. I think supply chain has been moving in that direction. This is an extension of tariffs. American business has been moving to reduce the vulnerability to China Associated with tariffs and this extends that effort. Alix always good to catch up with you. Nicholas pinchuk of snapon. Still what this is Denise Chisholm of fidelity. Industrials cannot seem to get a bid. Industrials down 7 . Where is the value for you . Denise when you look historically at temporary manufacturing shops, industrials is the factor thats out that struggles the most. That has not surprised that it has underperformed. What is important to think about is the duration of the shock. If it is three to four months, you recoup the vast majority of the losses within six months. Given the valuation levels i see in the industrial sector, to the extent this is temporary, that looks increasingly likely. Where it becomes a different risk reward is if this is not a three to four month shop, it lasts longer. That is when you do not the losses. It is important to think about the duration of the shock. I think the metric to watch is the credit markets. Brooke what you do with aerospace . This has been such a high flyer for the industrial sector and now it is on the front lines of the coronavirus. Given they are in the top quartile of their valuation relative to history, they have much more exposure in terms of valuation compression than the other parts of the industrial sector, even if they maintain solid fundamentals. That is the question of whether or not we will see that valuation compression. That tends to be how durable that temporary shock is. Alix Denise Chisholm of fidelity, great to see you. Another under performer is energy. Later today i will be speaking to the chevron ceo. So much to talk about. What do you do when oil is trading at 50 . We want to give you an update on what is making headlines outside the business world. Viviana we begin with a show of force by the Democratic Party establishment. Joe biden thing up the endorsements on the eve of his showdown with Bernie Sanders. Amy klobuchar throwing her support to the Vice President , so did Pete Buttigieg. Both dropped out of the race after saturday South Carolina i mary. Today 14 states and one u. S. Territory hold primaries. Bloomberg speaking to the governor of the reserve bank of india. There is space for further rate cuts. That is one option which is available. The other option is in terms of supporting the market by liquidity or using various other tools and instruments to deal with emerging challenges. That is the idea. Viviana inflation has kept indias Central Banks from cutting rates in january. We end with longtime msnbc host quitting. He is leaving his daily hardball program after accusations of inappropriate behavior. Msnbctthews saying he and reach the decision mutually. He apologized for making comments about womens looks. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. This is bloomberg. Alix thanks so much. Coming up, airlines got hit last week by the coronavirus. Now you have european travel stocks moving higher on the day. Well be talking to the air france Ceo Ben Smith about how the outbreak is weighing on airlines. Interact with the chart shown using gtv. This is bloomberg. Viviana im Viviana Hurtado coming to you live from the principal room. Coming up, james bullard, st. Louis fed president. Viviana youre watching bloomberg daybreak. Im Viviana Hurtado with your Bloomberg Business flash. Sign that in the near future target sees challenges. The discount retailer giving a lukewarm profit forecast. Target previous reporting disappointing holiday sales. Investors are focused on whether it can get back on track. The company is expected to talk about the coronaVirus Outbreak. U. S. Lab equipment maker agreed to by tie jan for 10 billion. The Company Makes tests for diseases including cancer. The price represents a 23 premium to the Closing Price yesterday. I am Viviana Hurtado and that is your Bloomberg Business flash. Alix time for bottom line. Today we will focus on european travel. Reboundinghe sector amid the coronavirus fears. We want to go to guy johnson, Bloomberg Markets coanchor joins us from brussels with air france Ceo Ben Smith. Guy . Guy we are here with ben smith, the ceo of air france. Thank you very much indeed. Good afternoon. Ben good afternoon. Guy the story is what is happening with coronavirus. Last week Airline Stocks had a very tough week. What is going on . What does demand look like on a daytoday basis . Ben in the beginning of february we saw a steep decline in demand to and from china. Many client suspended service to china, air france being one of them. We are working on our planet how we resume service to that region in the coming weeks and coming months. That has certainly bottomed out. We have seen a reduction in demand in italy because of increased cases in northern italy. , southt of our network america, United States, north america, south africa, and the rest of the african continent are pretty stable. How much was china down, how much are you seeing northern italy down . Stopped 100 of our operations. Guy before that, what to demand look like . Ben when the virus first came to be we saw significant decline. As soon as we got a good understanding of what was happening, we suspended. Guy was it demand led or you made the decision on what your staff and customers were telling you . Im curious where the motivation came from. Ben ben we had a flight from we want. This is the epicenter from wuhan. This was the epicenter in china. We have the last longhaul front longhaul flight out of wuhan. We had effort to make sure our customers and staff are safe. That was at the end of january. Immediately after, we suspended. Guy what are you expecting for europe . You talked about the fact you are seeing hit to italy. What kind of a hit is it. Elsewhere,utbreaks would you expect to see that replicated in other parts of europe . Ben we can expect an initial decrease in demand because of some of the events in the past. There was a big Virus Outbreak in africa. I lived during the sars event. These things are extremely worrying. We are hoping with more information that gets out there it gets more and more consistent in the various Health Authorities are working hard to ensure it gets contained in does not continue on the same path. How much of italy is down . Ben northern italy i would say some of the cities we serve are in the double digits. In our see the same partners and our competitors. Be ais there likely to change in the nature of the European Aviation sector as a result of this . The big five carriers have strong balance sheets. Others do not. One could argue that air france is one of the carriers that need scale the moment. Could this be an area you could be looking to come out of the coronavirus with an opportunity to acquire some of that scale . Ben even prior to the coronavirus, there were two air france competitors in france. They did go out of business. We see there is fragility in the market. With coronavirus, we believe it will put more pressure on these weaker carriers, which would be opportunities for us to have growth. Anic we see this putting pressure on weaker carriers. Guy will it change your fleet configuration . There is been speculation you may retire the a380s earlier. Earlier weounced s becausere our a380 of the expense of reinvesting into new cabins. Also the cost of running a small fleet of 10 airplanes. We have no plans to speed that up. All of the airplanes will be out by 2022, which is the original plan. We are taking advantage of the reduction in aircraft utilization to speed up other maintenance type work and other programs. We have not fully installed wifi. We are taking advantage of that. We have maintenance scheduled for a Third Quarter which will move up into this quarter. Other maintenance items we do not normally have the airplanes on the ground during the q3. What is the problem between air france and klm, what is the sticking point. Can you fix it . We are all trying to work out what the problem is. We are trying to understand why the dutch government still has the elevated state it has and why that cannot be resolved. What is your best expectation as to how this will get sorted out . The first nonfrench person since the group was created over 15 years ago. I have a different view on the situation. Predecessors, i do not have a direct role at air france. I am head of the group. My relationship from a management perspective is different than air france as it is from klm. If you start by what works well at the group, the commercial functions are merged together. The same with engineering and maintenance, the same with cargo, the same with i. T. The operations are separate. The brands are separate. The relationships with the staff is separate. There is a third brand. The bulk of the group works extremely well. We do have these are iconic brands and they play an important part in the economies of both countries. Place aetherlands, klm disproportionately large role in the economy, and historically has done that. For the dutch government, for dutch people naturally to ensure this continues, there is heavy focus on that and we want to ensure there is a line within the group to that level of support. What i can say positively is management views that exactly the same way. If you would ask me what are the future plans of the group when it comes to klm in the future investment, we have a great company, it is doing very well. We have no plans to change that. We do have a big challenge. For us to expand and to add flights, weve knocked gotten the opportunity to do that. Guy it will be in paris and elsewhere. We have to leave it there. Thank you for stopping by. Ben smith, the ceo air franceklm. Alix thanks to guy johnson. This is bloomberg. Alix time for technically speaking. Bill maloney joints me now. Wasnt a bill on the bloomberg if you type in squa. S p, what you see . Bill futures have been choppy. Currently up around six. 2850 with longterm support, now reporting a bit of a v. Is first retracement level 3097. Than those retracement levels, 50 , 3124. Those already levels in the s p. Alix can we do the dow and 10 seconds . Bill dow futures up around 80 points. We are up 300. Also forming av bottom. Retracement levels 50 . 61. 8 when he 415. Alix that wraps it up for bloomberg daybreak americas. Coming up on the open, joachim fels, pimco Global Economic advisor. This is bloomberg. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Jonathan coming up, stocks fading as g7 officials keep communication vague. On the super tuesday, the democratic field narrowing. 30 minutes until the opening bout, good morning. Here is your Tuesday Morning price action. Up nine points on the s p. In the bond market, there is your bid. Yields lower four basis points to 1. 13 on the 10. The euro showing more weakness. Eurodollar 1. 1119. Lets begin with the big issue. The g7 keeping communication vague. The group sang we reaffirm our commitment to use all appropriate policy calls to achieve Sustainable Growth. The lack of detail doing little to shape rate cut investigation. Worry the best of investor sim