Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Gaining stoxx 600 are 0. 7 . Trying to still digest moves from the fed at super tuesday. We are getting data out of the euro area. It is coming in instead of the 52. 8 we were expecting. The eurodollar is unchanged. Lifts foring similar the s p future. Lets get straight to first word news in new york city. We begin with an update on the coronavirus. More than 50,000 people have recovered from the virus more been released from the hospital. The number of infections has risen. Now, to the spring meetings of the International Monetary fund. Will use a virtual format instead of holding the conference in washington dc. The two organizations have said they are fully committed to maintaining the coram. Japan is saying it could be possible to delay the summer olympics to later in the year amid concerns the coronavirus could cause the games to be canceled. Late may is seen as the latest a decision could be made. Is pressingapan ahead. Experts from opec and its allies recommended deeper cuts to combat the hit to demand from the virus. Ministerial meetings are set for thursday and friday in vienna. In the United States, Bernie Sanders is winning the biggest prize of super tuesday. Joe biden staged a strong comeback, winning nine states. His wynn of massachusetts is a and elizabeths warren. Global news, 24 hours a day on air, on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you so much. Fed. Basis point cut by the their dramatic action of central tumbledl flat investors , unconvinced the move will prevent a slowdown. Yieldile, the 10 year plunged for the first time in history. Equities have certain in positive territory with travel stocks selling off further. Cooper andis laura neil duane at Allianz Global Investors. Dont know how you would describe the markets. They are struggling with the fact that it feels like the economy has been strong and yet panicking. I think the markets are trying to work out what the fed has ives but also i would say they have got the bit between their teeth. To giveets are saying them more rate cuts so we could see a move in march which would tell us the economy is in dire trouble. Francine how do you explain the selloff . The fact that it the statement that they were in for action provided a shock to markets. We did see a significant tightening in financial conditions that warranted some kind of action. Reason we saw what we saw an equity markets was because of what powell said in press conferences. We have yet to see the full Economic Impact in the u. S. Francine what can banks do at this point . They are keeping liquidity and credit available to the supply chains and companies being affected. The cost of money is irrelevant at this point in time. Yourself ife to ask you were going on holiday just yet. Francine are we going to the point where we talk about helicopter money . I would argue we are nowhere near there yet. Hong kong is in arguably a different position and i would question that if you gave me 100 pounds, if i would go out and spend it. We are all struggling with the economic consequences, but travel is becoming a voluntary. All of the knock on effects. I think chevron has closed its offices in london so everyone will be working from home. We will have plenty more from chevron, but the ecb nonessential travel has been restricted until april. What Central Banks will follow suit, if any . Centralnus is on other banks to follow the feds aggressive move. Shifting. Cus is inkets are already pricing full hikes in march. Were going to need to see coordinated action to keep this floor. What will it take to go back into markets . You buy gold . You stay longduration treasuries. I think we are way too early to be going a risk on. Theicularly, the u. S. Has has not got the valuations. Treasury yields below 1 . What does that tell us . That the 10year is headed in exactly the same direction. The bond markets are telling you it is a very, very dark outlook as we look into the next 36 months. Francine thank you so much. Neil stays with us. Plunges treasury yield below 1 for the first time in history. And joe biden bounces back. His campaign the denomination stepped up a gear. We will have the results from super tuesday later this hour. This is bloomberg. Francine this is bloomberg surveillance. Lets get more on the coronavirus and the markets. U. S. Yesterday, the tenyear had never yielded less than 1 . This is half the amount it yielded at the end of 2019. Allianzus is neil from global investors. We were talking about what that means. He was saying that if you compared to other countries, it means it will go lower rate does it scream recession . Neil theres the issue we are not looking at treasuries like we used to. It does scream recession, no doubt. The valuation kicker is no longer supportive to the fundamentals. Francine what does that mean for your appetite for any fixed income . Where do you go . The regardless of the fact dollar has been slightly soft, you can get a reasonable yield and accommodative policy. I think the market is a hedge for other risks, but clearly, the market has to be anticipating more quantitative easing. Be playing the game of what we can buy. Francine when would you go in . Have your risk assets of treasuries and gold. Then you have your risks of emergingmarket debt information. Positions, i still would be taking risk off the table. Francine i know you have been trying to take risk off the table for quite a bit. What i find interesting is, if china is recovering, it will be good for some suppliers. We were all shocked by how far china has fallen, but maybe they will be supportive of energy or other markets. Issue isychain something were going to have to watch. We have a factory activity slipping to a low. The number of infections is slowing down. But i dont know how much worse the economy can get. Neil they are going to get the production backup relatively quickly. How quickly that flows through into sales is moot. Cheap, but im not necessarily wanting to pile in this fits the theme of uncertainty if the coronavirus starts to spread again, clearly, we could have a second leg down as people weigh the tradeoffs. Francine thanks so much. , joe biden stages a surprise come back. We get the latest from super tuesday up next. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to your Bloomberg Business flash. Thousands of jp morgan employees are working from home. Thats as the bank has a contingency plan for closing offices. Thousands of staff are working remotely aired banks are trying to ensure their businesses continue running. Boeing is postponing a summit for later this month in washington dc. The seattle area has emerged as a virus hotspot in the u. S. Now, to chevron. The company boss says he is open with discussing fracking with the winner of the president ial election. Bloomberg is also asking him about the impact on the oil market. There is no doubt demand is off right now, certain regions more than others. Prices really reflect that. That is your Bloomberg Business flash. Francine lets get to one of our top stories. Sanders one of the biggest prize of super tuesday but it was joe biden that staged a stunning comeback. Upsets,f the biggest biden also one massachusetts. It is a blow to sanders was expected to win and to Elizabeth Warren, who did not win a single contest. You whatreat to have does this mean . Dont count out Bernie Sanders. You were smart to mention he also had a decent night. Are tkeaway is that there wo clear frontrunners. What this means for other candidates is it is a time to decide within the next few days. There has been discussion around consolidating around progressives or moderates. Strategists are saying Elizabeth Warren could surrender her votes back to Bernie Sanders. Bloomberg, the owner of bloomberg news, perhaps could give his way and put some votes over to joe biden. Thats all speculation. We are hearing the campaigns will reassess in the morning, but it is clear the frontrunners are in it to win it. A great night for joe biden. Bernie sanders saying he still thinks he is the candidate. Francine how united is the party . Like i said, there are two very different candidates here. Two very different visions for the country and very different economic policies. Think,ket response, i was very telling. The market perhaps was not very excited about a Bernie Sanders win or a president ial candidate nomination. It looked like joe biden was getting that strength and moving from a big win last weekend. That is when a futures really started to turn positive, so the markets are perhaps more confident in a joe biden candidacy then perhaps a Bernie Sanders president ial nomination. Disclaimer, Michael Bloomberg is also seeking the nomination. He is the founder and majority owner of bloomberg. Are the markets discounting the fact that we could have Bernie Sanders as the candidate . Neil i would interpret it slightly differently. The markets concluded overnight that trump will probably still win even if it is a biden or sanders. Again, many ofs his voters will think the Democratic Party has fixed it. The lesson from the election was that they did not vote. So i think the Democratic Party is still quite divided. It will be interesting to see who biden moves with to see if he can bring supporters onto his ticket. Francine how do the markets feel about a centrist or Trump Presidency . Has been offering lower taxes but biden will sound clintonesque. So the work for biden to differentiate himself from sanders will be rather easy. What would you be expecting from President Trump in a second turn . Does the market take notice of Foreign Policy . Arguably now. No. I think we will get some lower taxes and hopefully some info spending. Infrastructure spending. Francine can they afford that . Neil the budget is already over 2 billion. Pumping, there is a buyer of treasuries at the moment. Francine what moves under President Trump . Is it dollars, treasuries, or both . Neil he would clearly like to see a weaker dollar and he will put lots of other people under pressure. Francine wouldve the market not worry about extra trade wars . President trump definitely thinks that tariffs work so we will see more. Thats not good. Neil is not good for the Global Economy either. To arguably, we are going see some rebalancing of supply trades. Were going to need more resilience. Coming up, as biden bounces back, we bring you more analysis from super tuesday, plus your european stock movers. This is bloomberg. Francine the feds emergency cut fails to ease concern over the coronavirus. The u. S. 10year yield falls below 1 for the first time. Uncoordinated action other g7 Central Banks are yet to follow suit. We will hear from Incoming Bank of england governor Andrew Bailey today. And the comeback kid joe bidens campaign surges into front runner territory with super tuesday wins, though Bernie Sanders clinches the lead in california. Well, good morning, good afternoon, good evening, everybody. Im Francine Lacqua in london. As pmisserves upcoming unit 52. 2, a touch below expected. Preliminary figures, 53. 3. It is an important day, because for the first time we will hear from Andrew Bailey, at 2 15 u. K. Time. He is the Incoming Bank of england governor who will take over for mark carney on march 16 for march 16. He sees Monetary Policy working for a money markets not pricing in h now cut. Ng a chance of a 50 1. 5 hours into the trading day, lets check in on european stock movers with Annmarie Hordern. Annmarie i want to kick it off with xor this morning. Another major deal for the family in italy, selling off a Business Partner for 9 billion or they will pick up 3 billion for the deal. Doing a lot of m a, pushing up the stock more than 3 . Hostelworld down more than 3 . First in asia, now they are seeing it in europe as more travelers are canceling bookings of hotels, flights, and the like. We see the impact on the travel leisure index as well on the stoxx 600. Retail Property Company in london struggling to raise money. There pulling their equity raise. You see the stock plunging today, down more than 1 . If they are not able to raise money, what does it say about the london and the u. K. Properties seen . Francine thank you so much, Annmarie Hordern with main stock movers. Joe biden has revived his campaign with a stunning comeback on the biggest night of the democratic president ial campaign. Bernie sanders picked up big wins as well, including the biggest of the night, california. Have beense who knocked down, counted out, left behind, this is your campaign [cheers and applause] just a few days ago, the press declared the campaign dead, and they cant stop south carolina. We are going to win because the people understand it is our campaign, our movement, which is best positioned to defeat trump. You cannot beat trump with the same old, same old kind of politics. What we need is a new politics that brings workingclass people into our political movement. Francine joining us now for professor of, International Relations from the London School of economics. I have a million questions. Because Bernie Sanders got california, is it not really that clearcut . Butt is not that clearcut, joe biden had a huge night last night, a huge day yesterday. His task was to keep the delegate map close, and he did that and much more, picking up nine states, basically running the gambit across the Southern States with large numbers of africanamerican voters as well, picking up some supplies in states like minnesota and massachusetts. And in the allimportant delegate count at this point, he leads Bernie Sanders. Sanders had a good night. Winning california come as you point out that in general across the western states, he did well with hispanic voters. But biden is back from basically the dead. Biden, everybody was counting out. This money will come into the coffers today. Aancine how did he stage comeback . Is it because democrats are trying to vote tactically, or is it because he did something that rallied spirits . Votingdemocrats are strategically at a level i have not seen for some time. So the calculation that was made was that biden is the best that. And that really is the difference. Francine so that would mean he would get the nomination, clearcut . Peter not necessarily. A lot of the Democratic Party has moved to the left. There is a strong progressive base, and the question is, do you go to the convention, hit the majority number that you or do you come in short . If you come in short, you have a contested convention, probably between these two. You can probably assume that these two and possibly warren the question is whether she stays in for some time. I will not be surprised if berg steps down today. There is no lane for him. It has to be if bloomberg steps down today. It is no lane for him. I would not be surprised if he throws his support to biden. Elizabeth warren will be under tremendous pressure from sanders people, they be not from sanders directly. Sanders needs to expand his base. A lot of warren voters not all of them, but a substantial version of her voters would go for sanders. What he needs is for her to get out of the way. Having said that, in some ways, a benefits for having her around because there is a debate coming up, and that debate is on march 15. Joe biden is not a good debater, and she is awesome. Francine we were talking about Market Reaction with neil dwane. He said markets, how they did yesterday, was giving President Trump a second term. Priced at. Who has a chance of beating President Trump november 1 . Biden or sanders . Neil i would say that both peter i would say they both have a chance. It is going to be a close election. Bidens problem is, if he ends up being the front runner, he has to find a way to reach out to Bernie Sanders voters. He has ways of doing that. He has to be very strategic about who the vp choice is he could also make some decisions and some announcements about who he would pick for the supreme court, who he would put in his cabinet to be able to signal to a broader base of the Democratic Party that it will be ok with joe biden. He will be passing the torch along. The key thing at the end of the day is who is going to win those industrial midwestern states. That is what he has got to pick up. That was the difference last time, and i think it is doable. Neil i am curious at the political level. The democrats are still playing the russian story from the President Trump perspective. Will he be playing the ukrainian story against biden . Peter i think he will, and everyone of these Democratic Candidates has a liability, and that is one of his liabilities. Having said that, donald trump has a huge liability going into this election, and i dont think it is the russian connection, although there is that. It is health care. When you look at the exit polls, that is the single most important issue for democratic voters, and it is the case for independent voters. The is the story of 2018, 2018 midterm, and donald trump is vulnerable on that issue. Francine peter, thank you so much, peter trubowitz. Neil dwane from Allianz Global Investors stated was with us. Michael bloomberg is also the is the founder and lp,rity owner of bloomberg Parent Company of bloomberg news. Lets go to first word news with viviana hurtado. Viviana do whatever it takes to support the Global Economy this pledge from Global Finance ministers and central bankers. The Federal Reserve taking action. It cut the benchmark rate by a halfpoint, the biggest reduction and the first outside the scheduled meeting since 2008. Legendary em investor mark mobius doesnt think that tackles the core problem. Bottomline is that they are pushing on a string. The problem is not so much Interest Rates. Interest rates are already very low globally. Look at europe and japan. The problem is the supply chain coming out of china. This is the big difference between what we have now and what we have with sars and these other problems we had in the past. Viviana now to oils rally, extending after opec and its allies recommend deeper production cuts to combat the hit from the coronavirus. Officials suggesting 600,000 to 100 million to one Million Barrels a day. Morganthousands of j. P. U. S. Employees are working from home as the bank has a contingency plan for closing offices if the coronavirus spreads. Banks around the world are trying to ensure their businesses continue running. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in im than 120 countries, viviana hurtado. This is bloomberg. Francine . Francine stay with bloomberg surveillance. Coming up, in less than two do weuntil the what know about the bank of england new governor . I ag warns it can no longer issue Profit Guidance for this year. We will talk coronavirus and the impact on earnings. And the interview possibly of the day with a managing director of the International Monetary fund. That is that 5 30 p. M. London time. This is bloomberg. Francine this is bloomberg surveillance. We are getting breaking news out of opec in vienna. Yesterday we found out opec will actually not keep the pricing limit the spread of coronavirus. Saying the oil minister russia will wait to decide on oil cuts. This goes back to the alliance between saudi arabia and russia, dubbed opec plus. Russia needing a Different Number to balance the books, thinking about not continuing this agreement. Coronavirus and the focus on iran mobilizing around 300,000 soldiers, but that 2300g the news mps had been infected from coronavirus, mr. Zhang and assaying there are no iranian mps accompanying him in the visit to vienna. In less than two weeks, bank of england will have a new governor. Andrew bailey takes over the top job at a difficult moment for the world Central Banks, as they weigh how far to intervene in the coronavirus. Wider policy issues as he takes questions from lawmakers from u. K. Parliament. We are back with neil dwane from Allianz Global Investors. We were talking about a couple of things before. The u. K. Money markets are pricing in a really big chance of a rate cut. Would he be going too soon . Neil i would have said possibly he needs to wait until he sees what the u. K. Budget delivers the we dont know how governor may be and how much borrowing they wish to pursue. We dont know how brexit is going to unfold. The opening salvos been fairly harsh on both sides, so he may be sitting there thinking i may be concerned about the liquidity and the credit issues around coronavirus, what i may have bigger economic problems to come once i have seen the budget and the brexit progress. Francine a great chart that hilary clark sent me on money markets with the bank of england. A pretty busy december, january, where markets were pricing in a cut which never came. Neil i would have said everyone in the money markets is now playing to force the Central Banks to cut rates, so i am not surprised that the u. K. Is doing the same thing. We are clearly going to have an Economic Impact, and therefore improving the cost of credit is one way of keeping the lights on. But i dont think the base rates, where they are, will make a lot of difference. Francine do you see a scenario where we have negative rates in the u. K. . Neil know, i dont. I believe the fed, and the bank of england believes that the ecb and the bank of japan made a mistake, and i dont think we will follow through. They will be more aggressive with punted data easing and other things. We are a long way from that yet. Francine what do we know about Andrew Baileys stance on Monetary Policy . Is he a bit of a mystery when it comes to Monetary Policy . Newco i wouldnt say he is a mystery, but he has to be cocked neil i wouldnt say he is a mystery, but he has to be cognizant about how he can facilitate some of that new policy that they can serve the conservative governments are going to have an the next five years. Francine do you see them not doing much because they worry about not having enough ammunition if there was a new deal . There is a school of thought that things they always think about the firepower they will have. They say we dont really think about it that way. Neil i think it is quite clear that there are shorter term longerterm pressing issues, and given that london is one of the worlds Financial Centers, something that i think is at the top of his twodo list is to hand over libor at the end of the year the new money market rates that we are going to have going forward. Londons Financial Center retains credibility as we split from one system that was capable of being rigged to a more market open system. He has a lot of things on his plate right now, even before we worry about the Economic Impact of coronavirus. Francine neil dwane from Allianz Global Investors stays with us. We bring you live coverage from later today, Incoming Bank of england governor Andrew Bailey will be taking questions from lawmakers. That is from 2 00 p. M. London time. Watch it right here on bloomberg. Coming up, ryanair says bookings ine dropped more than 25 recent days. I ag warns it can no longer issue Profit Guidance for this year. And we will talk coronavirus and. He impact o that is coming up next, and this is bloomberg. We have seen bookings declined by on average 25 to 30 on a daily basis over the last seven days. The decline in traffic has been significant, over 50 . The shortterm effect, particularly around bookings in northern italy. Of thehern italy, some areas we serve and double digits. We are seeing it gradually recover, but it is still significantly down. I think the people right now fragility inlready the market with coronavirus. We think it is going to put more pressure on some of these weaker carriers. Francine those are Airline Executives we have been speaking to this week, speaking about Global Impact on earnings by coronavirus. I guess the concern is this is specter based and we are seeing the market up today, but in some areas they are still down. At one point will it affect anything everything . Neil at some point it will affect everything because the individuals and companies we are working for are beginning to respond to the news flow. In the short term there is going to be a demand shock. For the markets, we have to work out, is it a vshaped shock or a ushaped shock that leads to the potential for recession . The longer it goes on and the more uncertainty lifts, the more nervous that you have to become that this is the Tipping Point. Francine how do you track the Tipping Point . Do you look at data, earnings, guidance, or the number of infected cases . Neil im not sure the infected cases number is informing us. Francine i have to cut you off because the u. S. 10year bond point have fallen to zero 388 . A flightould call that to safety. People are definitely wanting to stay invested. 20 you can make about 8 . Francine at some point will we see negative yield . Neil i think at some point we will see negative yield in the market. Negative what does a yield in the market mean for an investor like yourself . Neil returns will be low and we should be planning, investing for a recession because i think that what is that is what the bond market is selling us. Francine this is one thing we were asking because of the trade war. Does the coronavirus plunge us into recession, or does it bring impossibility of a recession . Neil i think it is accelerating the possibility. Can germany and italy, you now say that those economies look very recessionary, if not going to be in a recession any day. Whatine and that means do you weigh as a signal to go back in the markets . Neil you are going to need to see a sense of how far corporate earnings can fall. In a classic recession, earnings fall 20 to 30 . Multiple on the market the pe multiple on the market falls three to four points. The u. S. Is at 20 times, then clearly the scope for downside is significantly higher in more highly valued markets. Francine so do you look at markets sectorwise or by region . Neil i look at it by regions because europe and asia are significantly cheaper than the u. S. They have less expectations in them. At the stock level, the stock i am looking at, other than things like the airlines, is a realworld company. When the world wants to feel more confident, you will start to see it going up. Francine any other companies you will be looking out for . Neil as i said to you offcamera, i think the vshaped coverage or the coronavirus is a shortterm hit. When oil starts to bottom and we start to think that china will start thriving again, then you will start to see the equity shares picking up that momentum. Francine neil dwane, thank you so much. From Allianz Global Investors. U. K. 10year bond yields actually falling to a record low, 0. 338 . This is significant in the 10year yield that we saw yesterday. Emergency point cut from the fed. This is what i am looking at and what your markets are doing. Treasuries are gaining, pretty much steady, but look out for the u. K. Bond yield. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Francine the feds emergency cut fails to ease concern over the coronavirus. The u. S. 10year yield falls below 1 for the first time. A record low for the u. K. Yield as well. Uncoordinated action other g7 Central Banks are yet to follow suit. We will hear from Incoming Bank of england governor Andrew Bailey today. And the comeback kid joe bidens campaign surges into frontrunner territory with super tuesday wins, though Bernie Sanders clinches the lead in california. Well, good morning, good afternoon, good evening, depending on where you are in the world. This is bloomberg surveillance. Francine lacqua in london, tom keene is in new york. We will spend some time talking about yields, treasury yields in the u. K. , just moments ago the 10year yield in the u. K. At a record low. Tom that is the way to go as a world reaction from what we saw from chairman powell. The major message this money besides the zombie apocalypse, with everyone in america staying up late for election results, is the yield continues to work lower. The major message is that there is in no way a change in the yield structure of the historic moment we saw yesterday afternoon. Francine neil dwane is expecting yields to go lower. Lets get to the bloomberg first word news in new york city with viviana hurtado. Viviana tuesday was indeed super for joe biden. The former Vice President reviving his campaign on the biggest night of the democratic primary campaign, winning nine states including texas, massachusetts upsets. California. Rs took he also won in colorado and vermont. Sanders seems to be on the way to win unsurmountable leads. But now biden has momentum. Michael bloomberg is hearing calls to drop out of the race. His campaign wants to look at the results from all the tuesday primaries. Omberg winning America American samoa, but he lost virginia and oklahoma. The founder and majority owner of bloomberg lp, the Parent Company of bloomberg news. The number of u. S. Deaths from coronavirus now rising to nine, all but one of them taking place in the seattle area. Global infections have risen above 93,000. The World Health Organization says the coronavirus does not transmit as efficiently as the flu, but the mortality rate is higher, 3. 4 based on reported cases. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in im than 120 countries, viviana hurtado. This is bloomberg. Francine . Tom . Tom there is a lot today. The screen is pretty calm right now, but nevertheless, nuanced off what we saw yesterday. Upures up 56, dow futures 536. Let me give you that level, 26,400. Oil with a bit of a lift as well. Lets go to the Second Screen with the vix 32. 93. The yield structure, as francine yield,ed, the 10year and26 on the u. S. 10year, that is the german tenyear. The backstory, is how the german and european rates have been affected so rapidly. Francine the one thing we need to watch out for is money markets suggesting there is the chance of a rate cut in the bank of that yields, many were expecting quite a big number, record lows of 0. 34 for the u. K. 10year yield. We are looking at pretty much everything to see whether we are riskon, riskoff. I dont have a data check, but i will get to you. Huge pressure. Tom were forget about the new slow with the virus. Let me show you one chart with the virus. Francine has a good effort on the United Kingdom as well. This is back to paul volcker, used to be the benchmark, the 30year bond minus inflation. You have the massive distortion and the 1970s and 1980s, then these dips of crisis. We are there again, not at the crisis of 2008, but we have a negative real yield on a 30year bond. That is really something. Francine . Francine mind is very simple. You are looking at the 10year yield, and the u. K. , and it is ever lower. John, i dont even have to tell you about my chart. It is kind of all there, like toms chart. Our yields going to go from record lows to record low, or is there a bottom at some point . I think there is a bottom when you see a peeking out of recession rates, driving Central Bank Rates lower. You can go even lower because it is not obvious to anyone that these infection rates are going to peek in the next months to ak in the next months or so. Francine the market yesterday was kind of unexpected in some regards. Did they just freak out because . Here was a 15basis point cut, john one is just admitting that the problem will not be cured because of the fed is not considering alternative measures per they are not considering alternative measures, they only really have the policy rate at their disposal this year. Everybody knows there is limited space to cut policy rate. There it is why that is why there is concerned that ultimately they will be able to do that, but the market is pricing in the possibility that the fed will not be able to do that, that they will fail to revive the economy. I want to take the holistic approach of your wonderful research, and frankly all of your shop. I spoke with vicechairman alan blinder yesterday afternoon, and we spoke with milton at we spoke of Milton Friedman and giants of the past. None of this is in those textbooks from another time in the past. Are we adjusting yield because of disinflation realities, or are we adjusting because of a prediction of slower Economic Growth . Shockthere is a near term issue in terms of how much the fed has to slow down and ease to deal with that. Once rates reach the lowest point in terms of fed funds, is the fed ever going to be able to lift them again . That is what people fear. You might think the economy is going to revive from this temporary slowdown, but it is not obvious that rates are going to move up that much if inflation is going to stay low and the economy is going to be set by shocks over the next few years. Tom what you said, with the famous john normand holistic view, is the Financial System at risk with the artificiality of these low rates, or do you assume it is a normal compression of the yield curve given stress . John i think the issues in the Financial Sector are first of all around profitability if there is slower growth, but if youre talking about systemic credit risk, that is difficult to generate in this kind of environment out of the Banking Sector. You have higher capitalization ratios, the central bank meant to provide whatever quiddity Central Banks need to intermediate credit, so you dont have to worry about the Banking Sector being the source of the stress, although there is a profitability issue. Ofncine what is the source concern . Is it the consumer, anything short of helicopter money helping that . John for consumers it is pretty clear that one of the ways to deal with the virus is for households to become more cautious in their interactions and activity. Unfortunately, that can driving ain terms of depressing impact on activity and corporate profits. That is the main channel by which the virus causes credit stress. It is basically less activity on earnings recession. Tom we are thrilled that you are with us. Jim caron will join us in the next hour, some other guests scheduled across all of surveillance today. This is an exceptionally important interview coming up later this morning. This is a gentleman who speaks of regime change. Is that what we saw yesterday . The conversation with James Bullard of the st. Louis fed. Look for that later today. The 11 00 a. M. Hour. This is bloomberg. Francine lets have a look at oil, tom. The saudis are pushing for a cut of over one Million Barrels a day. We heard the Iranian Oil Minister touching down moments ago in vienna. ,aying that he thinks russia opec plus, the plus part of the opec plus agreement, will decide at the last minute whether they will stick to cuts or not. He also tried to reassure reporters on the ground that he not ring any iranian mps not bring any iranian mps with him. Up 62, dow futures up 580 right now. It was the beginning of the election cycle last night there there are four states, onto six states next tuesday. It is always the beginning of it all. Let us listen into some of the events last night. Have beense who knocked down, counted out, left behind, this is your campaign [cheers and applause] just a few days ago, the press and the pundits declared the campaign dead. Carolina. Ame south they had something to say about it. We are going to win because the people understand it is our campaign, our movement, which is best is issue to defeat trump. You cannot beat trump with the same old, same old kind of politics. What we need is a new politics that brings workingclass people into our political movement. Kevin cirilli joins us now, our chief washington correspondent. You will be with us in the next hour as well. I will go narrow there in the next hour. Let me go broader here as well. We had Vice President biden take a traditional south vote, including a huge africanamerican vote, and we had Bernie Sanders, the libertarian, far west. I know that is not quite accurate. How does that set up a week from now and those six states next tuesday . Kevin it is a showdown. This is a twoperson race. For former Vice President joe biden to be able to pull off a win in texas is a massive, massive sign that he has momentum. So that would have been something that Bernie Sanders would have wanted to have won, and joe biden had the best night that he could possibly have had last night, period. Tom he had the best night he could have now, but now he has to follow on. The critics not the critics, but those and analysis would say he was advantaged by the geography of super tuesday. Will the Vice President be advantaged by the geography of six days from now . Kevin not necessarily. The question comes for Bernie Sanders, can he win states in underdog tohe is an win in . For joe biden to win in texas was something Bernie Sanders wanted to have won. To move forward beyond that, because sanders neither biden nor sanders are in the position to get the 91 delegate threshold that they need to get the nomination, but sanders is going to have to prove that out of the convention he could close the deal and unify the party. Biden right now can say that he has had former of his political opponents back his campaign. Bernie sanders right now say that. How does that unify how do they unify the party is the best question. Great question because the Biden Campaign is saying that they can do that. They will point to sanders, klobuchar, buttigieg, and contrast that with sanders. All of the candidates who dropped out of the race will crisscross the country campaigning for joe biden. Exit polls this is very quick exit polls suggest the lastminute voters who were undecided broker biden, and most of them listened to the candidates they had voted for, the klobuchar voters ended up going for biden. Tom Kevin Cirilli, Greg Valliere published moments ago, he called it a huge nightmare and that the what does joe biden mean for the president of the United States . Be a it will definitely more difficult election cycle for them, but they also feel, based upon my reporting, that former Vice President biden agree with gregs vote. But based on my reporting, Vice President biden, they believe is a weakened candidate because of the bruising primaries he has been in that has occurred. Cirilli, kevin bloombergs chief washington correspondent. Lets get back to john normand of jp morgan. I had someone from allianz earlier, and he said if you look at Market Reaction overnight, it was a second term for President Trump, that they were pricing in. Is that fair . John i think there is a consensus view that as long as sanders was leading in the polls, the president s reelection was assured. Down the leaderboard, you get a relief rally, but at the same time i think there is a wrong perception that trump is better for the market than biden. I think eitan, with the republican senate, is the best i think biden, with the republican senate, is the best because you get no change on the domestic side and you have better Foreign Policy. Francine so a second term with President Trump would add more tariffs and trade wars . John i think a second term of trump who has been vindicated through the impeachment process, will be even more aggressive on the Foreign Policy stage, whether toward china or europe, and this is why i feel that the disruption if you the disruption issue warrants here, and thisy goes to next tuesday and the politics of america, is the hope of a vshaped bottom. Is a vshaped bottom evaporated for the economy . Think what is slipping away is exactly what is quarter, that the vshaped rebalances the curve. The whole idea with the vshaped is that when demand is depressed, inventories get bogged down. As soon as the risk happens, you have low inventories and stimulate financial conditions, and that gives you a big sharp uptick in growth. A moving target over time, and you really cannot predict when you will get the upturn in growth. I still do think it is going to happen this year. Tom what will the other Central Banks do after what we saw . Explain it to somebody out in the street that is not as sophisticated as mr. Bailey. Francine mentioned mr. Bailey taking over for Governor Carney in a bit. How do the Central Banks react to what we saw yesterday . Going totral banks are do whatever they can, and whatever they can is going to vary by country because some places some countries already negative rates already have rates already at zero and they cannot cut. The boj and the ecb, some people would go with that strategy. The fed i guess has more policy space to cut rates because they are above zero. It does not seem to be willing at this point to be talking about restarting qe. Know letsnt say that President Trump rises in the polls, or biden rises in the polls. What does it move first, treasuries or the dollar . John i think it actually is going to move the equity market first because to the extent that you get a stable outcome on the elections, biden leading, i think people will mark down all the risks around regulation, and that is good for the equity market. The reason i dont think the treasury market reacts so much to this is because there is such a dovish set of centralbank reactions now over the next several months. It is tough for the bond market to selloff that much even when growth comes back. It is good on the growth side. Playing through equities, not necessarily through bonds and currencies, really more of a relative play at this point, thetary policy, and that is focus in terms of this issue. Danceoming up, we will across the conversation of the Asset Classes and economics, also the response from institutions. In the 12 00 hour today, the managing director of the International Monetary fund. They announced yesterday they will do a virtual spring meeting. That of course due to the virus. Stay with us. This is bloomberg. Viviana you are watching bloomberg surveillance. Lets get to the Bloomberg Business flash. Jp morgan is testing a coronavirus plan for employees, thousands being asked to work from home. Bloomberg has learned that 10 of the staff in Consumer Banking will work remotely. That division has 127,000 workers. To at t the company reaffirming guidance for this year. The Telecom Giant also announced it speeded up a 4 billion Share Repurchase plan. At t says by the end of the Second Quarter it plans to have nationwide 5g service. We end with robin hood. It has recovered from its technical woes. The system closed all of monday and for two hours yesterday. Blaming it on increased stock volatility and volume. The company may offer compensation to some customers. Francine . Tom . Tom what you need to know in the data this morning, green on the screen, stocks up as well. Yields are subdued and stay subdued. That is really all there is to it, francine. Francine i want to show you the u. K. 10 year yield, because we touched a record low, traders speculating now that the bank of england would follow the fed with an emergency cut in march. It will be interesting to hear from Andrew Bailey a little bit later on, the first time we really hear him talk about the economy since his appointment at the bank of england governor. He takes over march 16. Im looking at similar things as you. You have the u. S. 10 year yield, the vix at 32. 53. Withvery important, along esther baileys conversation, along with mr. Bullards as well. In the corporate world, it is important to speak with lawrence culp, ge chairman and chief executive officer, really welltimed to speak with mr. Culp, not only about his resurrection of general election but also on jack welch. This is bloomberg. Tonight, i tell you with absolute confidence, we will win the democratic nomination. [applause] and we are going to defeat the most dangerous president in the history of this country. For those who have been knocked down, counted out, left behind, this is your campaign. [applause] just a few days ago, the press had declared the campaign dead. Tom interesting from last night. Driving the conversation this morning, nuance, domestic and international about this president ial race. John norman with us on the markets and the newer lower interest rate. Former u. S. Ambassador to the eu, anthony gardner, we are thrilled he can be with us, because he was early in austin. Please explain, why you felt it was so important to get out front early for joe biden. Candidate aown the long time. I saw a lot of him in brussels. Characteristics, the ability to bring people together. On key, difficult issues we had, trade, data privacy, when there was a Single Person from the Obama Administration i wanted to bring in, it was joe biden, time and again, because he could convince the hard left and the hard right to come together. We got things done for the u. S. He has the right qualities. Tom ambassador, one of the delicacies of the moment is the age of the candidates. Mr. Bloomberg, the senator from vermont and others, including the president. Speaking of the vitality of the Vice President , there has been questions about whether he can stand the test of four years. All i can say is, i saw a lot of him, a vigorous person then and now. I was with him a few months ago, i will be within next week for an event. He has incredible energy. What can i tell you . After a grueling schedule, he would arrive in brussels with a packed schedule. I do not share the view of those who say he cannot serve four years. Quite the opposite. Francine does president obama want to endorse . I think he is appropriately not done so now. Four years ago, the criticism made of the dnc was they crowned Hillary Clinton too early and it was not fair. He is probably thinking, we need a candidate. When that candidate emerges, he will clearly campaign. Francine Bernie Sanders now and joe biden. What president obama endorsed . Does he need to come out in the next couple days . Ambassador i think he needs to wait. If he comes out now, the criticism will be the establishment chose one person. It will bee biden, hugely important to have a former President Campaign for him. Tom in the time we have with you, perhaps more than any american, you are conversant on venicen is italy, and the guggenheim. Venice is on its back. It has been there before. What kind of government assistance do you perceive for the people of italy and of europe being crushed by a lack of tourism, even a substantial recession . Ambassador it breaks my heart to see what is happening in northern italy. I had to cancel a trip i was going to make in a few days to tuscany, even though i did not think it was necessary to cancel. Italy took some drastic measures early. The right measures. Locking down those towns. They were criticized. They were right. They announced financial support, important to get industries back on their knees. Whether it is sufficient, we dont know. Maybe there will be a further package coming up. They have done the right thing early. Francine world upside down. Francine wanting to talk about the u. S. , tom wanted to talk about italy. How does joe biden unify the party . Ambassador there are now two candidates. One who has a record of achievement in the senate over decades, joe biden, who has brought people together. Another is promising revolution. Not much achievement in the senate. Despite long service. With my fellow democrats in europe, london, this is a man, joe biden, who can bring people together. Look at the past. It is not just promises. He has brought people together from both sides to sponsor legislation. Bernie sanders has not done that. Questionlar, one final ambassador, a delicate question. Mayor bloomberg is the founder of bloomberg lp, television and radio should the senator from massachusetts, the former mayor of new york drop out of the race this morning . Ambassador i have huge admiration for mike bloomberg. I voted for him. He has had an incredible career. I think it would be the honorable thing to do, in my view, for him to withdraw now, to throw support behind joe biden. This is partly a race between a moderate and someone who is not a moderate, who in some instances, is an extremist. Mike bloomberg is a moderate. I think it would be the right thing. I dont know what Elizabeth Warren will do. She will probably withdraw. I think she may support Bernie Sanders. This is a moderate against someone promising revolution. We dont need to run that risk. My view, we need to focus on who can beat, jump. It is not an extremist ticket. Who can beat donald trump. Francine are we sure about that . Polls are undecided. Ambassador of course. It is a risk to run a candidate who will scare a lot of americans about policy proposals. People i speak to in business, back in business after my diplomatic career, people say, look, we may not vote. If it is Bernie Sanders versus nonjump, we may not vote. Donald trump, we may not vote. Senator sanders doesnt believe in the trade. There is not a single freetrade he has liked in the past. Anyone who believes in a market economy, should think twice about supporting Bernie Sanders. Francine thank you, ambassador, anthony gardner. John norman of jp morgan stays with us. Viviana coronavirus causing travel bans and canceled events. Amazon, nonessential travel. Ecb. Ford, all Business Travel banned. Vns grabbing their largest medical conference. Itmp Administration Says will be covered by medicaid and medicare. The Tokyo Olympics could be postponed from the japan olympic minister, saying it is possible to move the games to a later date this year. Right now, it is set to begin july 24. Japan has spent 26 billion on the event. Saudi arabia pushing opec and allies for deeper production cuts. They want the cartels to cut more than one Million Barrels per day from output, more than recommended by a technical committee. Opec meeting this week in vienna, the coronavirus battering oil prices. One more event canceled. Google scrapping the Conference Schedules for may, i o, bringing together thousands who build websites for the company. Google will try to hold sessions digitally. Global news 24 hours a day on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Tom thank you so much. Futures up 61. Yields, still, trying to find a bid, lower than what we saw yesterday afternoon. Important interview, Kathleen Hays with James Willard of the st. Louis fed. You have to ask about regime change. Jim bullard on the american economy, emergency rate cut. This is bloomberg. I see another 15 decline, maybe more in stocks. Bond market, we continue to see the fed ease. Target, 25 basis points on the 10year note, a quarter of 1 , 10year note, 1 long bond, almost inevitable at this point. Tom thinking scarlet fu for that wonderful moment yesterday, across the shock of the emergency rate cut. Great job of different voices, including the former vice chairman. John morgan of jp morgan. Ralph, thrilled you could be with us today. Did you adjust the call on Interest Rates off the emergency cut yesterday . Ralph they have revised. They were looking for march. They nailed that element. Two more to follow. 25 basis points each at the next meeting. On the back of that, we have to revisit the official forecast. We have not done so yet. Tom at davos, the idea of Business Cycle returning ancient and quaint because of the dampening dow. Now, back down to the zero bound, what would be the ramifications to the greater Financial System, cyclic ebb and flow . Ralf we are seeing that in the action today. Yesterday, another day of meeting. And he of the u. S. Curve, now it is starting to fall flat another day of the steepening of the u. S. Curve, now it is starting to fall flat. Clearly, we are moving into the more of revisiting forceful liquidity, Forward Guidance and potentially asset purchases. To sum it up in one word, financial repression is coming back, if not directly, then certainly indirectly through the impact young curves have on investor behavior yield curves have on investor behavior. Francine give us a range. Ralf we have been slightly surprised by how forcefully indicative the 1 level yesterday was. That was a big attraction point. Technically, the market is starting to look overboard. We thought we would stabilize. Given the market ended up being disappointed by the fed yesterday, from here on in, it is a question of whether the fed can convince the market if what they have done is actually effective. Monetary policy at the end of the day, is probably not the most effective tool. Francine what is effective . Helicopter money . Fiscal . John it has to start with the Public Health response. It is a Public Health issue. Testing, quarantine, social distancing. Typically asia, this is causing a big slowdown in the infection rate. At some point, those policies will cause a change in the infection rate. First response has to be Public Health. Ralf i fully agree. Sure thered to make is a policy element, financial side. What we want to avoid is a situation where companies that are otherwise healthy and up running into liquidity problems end up running into liquidity problems. I would argue, going back to italy, the things italy did over the weekend i meaningful and important for the right direction. Regulatory forbearance, extending to corporate, all these kind of things are in my mind at this point much more likely to be effective then Monetary Policy. That they are all really going to achieve at this point is to make sure the rebound, when it happens, when infection rates start improving, is to make sure that rebound does better than it otherwise would have done. Tom log chart of the twoyear. John and ralf, the two year yield logarithmic, 1 , down we go. John, let me start, this begins to show a dampening of the animal spirit. If the yield indicates real gdp plus some form of inflation, horrific nominal gdp, does it signal a dampening of what we will see over the next quarters . John either trend growth will be lower for a long time or you are going into recession. That is what the twoyear is reflecting. That is the scare situation. Tom we heard this from scott earlier. What is the optimism on bank of america that there is a release from the soap 1 yields . Ralf it is a question of policy response. Effectely, the economic of the virus will largely redistribute gdp from hopefully one quarter to another, first half of the year to the second half. Obvious it is fundamentally changed. The underlying growth picture. The market ought to be pricing in confidence of the long run outlook remaining intact. We have been bullish since the beginning of the year. I dont see any reason to change that yet. There is a difference between trading and making it the essential scenario. Front end of the curve, i see a market discounting a recession probability roughly two thirds. If i look at the curve, i see a market discounting a recession probability somewhere between 30 and 40 . If you average those, are those unrealistic . No. I dont think any of us can disagree to a meaningful degree. Francine thank you both. Us. Staying with some of the events you need to watch out for. Imf managing director, News Conference in washington, 9 00 a. M. New york. Incoming governor, Andrew Bailey set to speak at his hearing, 2 p. M. London time. Thank you canada bank of canada could be the next to act after the fed yesterday. 10 00 a. M. , new york. This is bloomberg. Tom bloomberg survillance. Tom and francine. Thrilled, ralf, these Industry Leaders could be with us today. John norman knows this. This is what norman does everyday. Something different. Ralf, folding rates with great ambiguity of the dollar call to, how do you take your world at bank of america and folded into beliefs on what the dollar will do . Bearish thee been dollar this year. Trade has finally started working yesterday. Tough. Upsetting forces. Expectation of monetary action by the fed, where they have more room to maneuver than other Central Banks, especially developed markets. You have the Asset Allocation trend favoring the dollar over the course of the year. Not a lot of sympathy for my colleagues in fx but we remain bearish on the dollar, including em. Francine gold . More negativego if you could have a more extreme Monetary Policy environment in the next few years, you want to be long on dollar reserve assets. Gold is one of those. Yen is another one. Same basket, best safe havens. Francine what do you do with dollar . A lot going on. Does the dollar strengthened from here until the end of the year . Ralf we have the dollar continuing on the more recent path, since yesterday. Some weakness versus euro versus sterling. Francine even after the general election, the president ial election . On, given everything going that is too far for a call. [laughter] tom i want to show a chart right now to both of you. U. S. Differential between and the german tenyear. Norman, weyear, john have really closed the gap, rapidity of the u. S. Yield down as well. What is the significance of the narrow gap between the u. S. And germany tenyear . Fed the idea that the could have to go to zero, to keep rates there for a long time. Terminal rate around zero, you could be there for a indefinite time. That is how the yield curve completely flattens. The bond yield goes to zero, just like we saw in europe over the past year. The advent of that in the u. S. Financial markets, driving the spread. Tom i will steal that from you, john norman. If we see a slowdown in europe, what are the constraints madame lagarde has . Ralf what constrains does she not have . Personally, i would argue, are economists would agree, the fed will look for another rate cut from the ecb very high. We dont see that is the first course of action for the second. We are likely to see more targeted in terms of liquidity operations to make sure uppanies affected dont end developing problems. We potentially could see tweaks to Forward Guidance or to asset purchases. Rates are not front and center. Tom thank you so much. Up, jim karen of morgan stanley. When you move homes, you move more than just yourself. Thats why xfinity has made taking your internet and tv with you a breeze. Really . Yup. You can transfer your Service Online in about a minute. You can do that . Yeah. And with twohour Service Appointment windows, its all on your schedule. Awesome. So while moving may still come with its share of headaches. No kidding. Were doing all we can to make moving simple, easy, awesome. Go to xfinity. Com moving to get started. Tom this morning, super wednesday, Elizabeth Warren and Michael Bloomberg will regroup. Days, six more states on the road to milwaukee. Super wednesday. Emergency rate cut. Get used to yields below 1 . Mr. Caron of morgan stanley, this hour. Guess what . There is a jobs report this super friday. Tom keene and Francine Lacqua. Im sorry. All eyes are on the next governor of the bank of england, mr. Bailey speaking with us today in a unique position. Francine dont be sorry. Big repricing in the money markets. We know Andrew Bailey. He has come on surveillance a lot. First time we have heard him talk in quite some time on Monetary Policy. The fed cut by yesterday. Boe expected to cut in march. Now, after a busy evening, first word news, viviana hurtado. Biden onsuper for joe tuesday, reviving his hopes on the biggest primary night of the democratic president ial campaign, winning nine states, including upsets in texas and massachusetts. Bernie sanders taking the golden state, the biggest prize of the night. He also got colorado, utah and vermont. Just days ago, he seemed insurmountable. Now biden has momentum. Michael bloomberg is rejecting calls he would drop out of the race. He wants to look at results from all the primaries of super tuesday. He got American Samoa but he lost eight where he was expected to be competitive, including virginia and oklahoma. Mr. Bloomberg says no one will lock up before the convention. Is a majority owner of bloomberg lp, the Parent Company of bloomberg news. Nine,virus deaths, u. S. , all but one of those taking place in the seattle area. 93,000 infected worldwide. Transmit asdoes not efficiently as the flu but the mortality rate is higher, 3. 4 based on reported cases. Global news 24 hours a day on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado, this is bloomberg. Thank you so much. Currencies,nds, commodities. The curve all over the place. Euro stronger. Oil lift. The vix at 43 a couple days ago. Down in 4 big figures this morning. Yieldited states 10 year under 1 . The german is a big story, catching up in the last 24 hours. Distancear bond, the from 1 , the former benchmark u. S. Francine volatile session in asia. Europe, less volatile. Stocks are up. Travel stocks down. Euro dipping after posting the best rally since january, 2018. The pound edging lower. Possible emergency rate cut by the boe, pricing and. In. Tom eventful day yesterday, not just super tuesday, much more in the land of economics. Matters is not the epidemiology but the risk to economy. We saw a risk to outlook and chose to act. Boe rule to help u. K. Businesses and households manage through an economic short that could prove large but will ultimately be temporary. A global problem. Coordination and interaction is so much more. The bank will take necessary steps to support u. K. Economy consistent with statutory responsibilities. That is one option, a rate cut, available. The other is supporting the markets by liquidity. We dont have all the answers. We believe our action will provide a meaningful boost to the economy. Tom economics, the view from 60,000 feet. Nice to speak to someone who has to manage real money, who actually has to do, not so much make the coupon or clip it, whatever that little coupon is, but maybe try to not lose money. James, a zillion Years Experience of strategy and managing fixed income instruments, surviving yesterday, joining us from morgan stanley. Bill gross of the Pacific Management Company clipping 6 coupons, gone. How do you manage with no coupons . You dont have cushion to be wrong. It cuts both ways. Up,hings recover, yields go you stand to lose a lot of money. If you get too invested, there is a risk. Was the 50 basis point rate cut appropriate . That could be debated. The fed is a model driven, framework oriented institution. They will look at markets through the lens of financial conditions. For them, that is specific. Short rate, intermediate rate, 10 year yield, triple b bond spreads, the equity market. The fed can do half their job. They can lower Interest Rates, we can the dollar, which they dollar, thaten the can help financial conditions. They cannot impact credit or equity. Credit is the main story. Very few people are talking about that. That is the key. Address the credit markets. The spread widening. Liquidity. Like,his is real world, you got money at work, not just mumbojumbo economics, although we love it, lets go longterm, with what you see right now, Longterm Management of investment, does it have to lower assumptions . 10, 20, 30tics, years out . Absolutely. We have to accept lower rates will be here to stay for a while until we get through the virus, and then some. Reality is, risk, deterrence, we have models. We can look at japan, germany. The one thing i say is, careful. When Interest Rates and coupons get low, duration gets along, which means the bond market can become more volatile. Higher Interest Rates can destroy your return. Jim, we are talking fixed income, mirroring recession. What are the chances of recession . Jim a lot of this will depend on the path of the virus. Recession, right now, we are not seeing high probability for recession within next 12 months. Recession models typically work within next 12 months, not much beyond that. Yield curve is steepening. Central banks are getting easier. Goes back to i said, credit. If we start to have cracks in the credit area, more liquidity, repo markets, if that become stressed and we cannot transmit credit to real economy, where this creates a bigger problem for Weaker Companies that cannot refinance, that becomes more systemic. Right now, idiosyncratic shock hitting markets, it becomes more systemic if credit gets impeded, then recession probabilities go up high. We are not seeing that yet. That is what the fed has to address. Francine what about the consumer . If people are fearful, they dont go in spend. What does the fed do . Smalle have to go toward and midsize businesses, which account 65 employment in the u. S. More facilities need to be put in place for smaller businesses and midsize businesses. The fed addresses Large Corporation issues. Issuance in the market, Interest Rates, things like that. We have to look at more supportive facilities for those entities in the marketplace to keep the job market robust. After all, they account for 65 of employment, small business, in u. S. Tom so important. We rip up the script and really talk about the credit market. Lisa has been way out front on this over the last number of days. The spread widening. Crediting the government paper we constantly talk about. The different Credit Ratings going out to the junk space. Jim, lots more coming up. We delve into super tuesday, the results, as we look forward to six states in six days. Hays, up later, kathleen important conversation with a gentleman of the regime change, James Bullard of st. Louis. This is bloomberg. Tonight, i tell you with absolute confidence, we will win the democratic nomination. [applause] and we are going to defeat the most dangerous president in the history of this country. [applause] for those who have been knocked down, counted out, left behind, this is your campaign. [applause] just a few days ago, the press have declared the campaign dead. Then came south carolina. [applause] tom extraordinary evening. Great pageantry in america, super tuesday, maybe more super than any we have seen. Kevin cirilli. Our chief washington correspondent. Bigger, broader, now more narrow. The Washington Post. Five point wrap up. I picked one as a starting point. Biggest reason democratic electorate not expanded was the lack of young voters. Exit polls showed one in eight youth showed up. Contrast, nearly two thirds were sort of old, like kevin, three in 10 voters were simply ancient. Kevin cirilli, i am thunderstruck 30 of voters were over 65 years old. Surprised . Kevin no. Heres why. Data before this, we also spoke to that notion. On. Es argument, spot this could be a problem for democrats in a general election if they are not able to mobilize younger turnout. Second point. If you are waking up this morning or trying to figure out status of the race, this is largely a twoperson race between joe biden and Bernie Sanders. Joe biden beat expectations last night. Significant gains, not just in the delegate threshold, but in fundraising, and he absolutely stormed, stormed through the south. Those of the states that will have to pick up if they want to beat trump in reelection. Tom first tuesday of november. About reporting analysis how the Vice President does against the president in november . Kevin look at pennsylvania. No mistake why the campaign decided to have Campaign Headquarters in philadelphia, a state that trump won in 2016, the first time a republican carried it since 1988. Democrats want pennsylvania back. They want to convince southwestern pennsylvania voters to go for them. Pennsylvania primary coming up in the next couple weeks. I say it not because im from there but because it is indicative of the Campaign Strategy for democrats and republicans. Look at ohio. The Biden Campaign began their campaign with an opening argument, they would be able to win workingclass voters. That proves to be true last night. Francine we are now headed toward the two man race. What is the biggest weakness of each candidate . Kevin one mans weakness is anothers strength. Great question. Senator sanders has to show he can beat his democratic socialist feeling. His supporters are behind him. He has to prove he can expand. Former Vice President joe biden has to prove he can take on trump. I want to say this respectfully, that you have the ability to not make so many gaffs on the campaign trail. That is something that has come up for the campaign. Tom thank you for the exhaustive coverage through the evening. Mr. Surreally, our chief washington correspondent. Our chiefin cirilli, washington correspondent. Wendy joins us this morning, we are thrilled she could join us from providence. Let me cut to the chase. What is the biden prescription forward . Wendy to keep that coalition he built over the last week. Importantly, independent voters, college, educated white voters and africanamerican voters. Young voters, it would be great if they turned out more but they dont. The last four president ial elections, 48 turnout among those between 18 and 30. You cannot rest on the backs of younger voters. They have not proven they show up. ,iden, built on a proven group that do show up, particularly africanamericans. Carolina, north democrats are not going to win, it is much more competitive if black voters get out the door. Tom if it is assumed they have a chance to win, of course this was mentioned last night with the swing states, is the Vice President winning ready for those states . Wendy great question. Arizona looks poised to swing. Competitive senate race in that state. A lot of money. You have a good turnout among latinos, you have to get their support. How does he translate that into the same kind of support we expect Bernie Sanders would get in a state like arizona . Francine professor, if you were to look at both candidates now, and if they were to go tomorrow, headtohead with trump, who would have a better chance of beating him . Wendy bernie has a magic potential coalition of a lot of people we have not seen get out the door. Young people, latinos, 47 turnout rate selections, plus ,he bluecollar, middleweight who swung to trump. Bidens toe to toe with him in that particular group. Matter. Think gaffs everyone knows who joe biden is. It is a form of sincerity. Will he looked commanding . Trump says he will do a. He does it. People like it or dont like it. He is definitive. Joe biden can be murky. That is the big question. If biden can be forceful on the campaign trail. We have not seen definitive evidence of that yet. Francine will candidates change policy together more voters . Does a Bernie Sanders become more centrist . Wendy great question. Absolutely not. You have to get to the dance with what you bring to the table. He is solid on what he believes. Health care for all, getting rid of student loans, college for everybody. He has run on that for years. He cannot back off. Look at what happened to Elizabeth Warren. It destroyed her campaign. You cannot do it. That is his trademark. Either all in and when or not and win or not. Tom you worked with senator moynihan of new york and Governor Cuomo on the hudson with, you worked realworld politicians time and time again. I want to go to the elections. President is going to respond to the news of last night, frankly, forwarding it to the other primaries. How should President Trump respond . Wendy democrats gave him an opening. Biden, impeachment hearings. We know there is nothing proven. It will come up. He will use it. He will use it as a cloud over joe biden, the same way they used the email scandal over Hillary Clinton. There is something there, they were not truthful, he will hammer that home. Does that put enough doubt in that bloc in pennsylvania of white men who defected from the democrats, trying to get them back, if they think hunter biden did something wrong, that will hurt joe biden. Trump has ammunition, given him by the Democratic Party. Tom professor schiller, thrilled we could join us to wrap up super tuesday. What do we got . Morgan stanley. Credit. Distresses within fixed income markets. Kathleen hays with James Bullard later this morning. Important conversation. The 12 00ng director, hour. Imf running virtual spring meetings. This is bloomberg. Tom super wednesday, bloomberg surveillance, thank you for being with us. Yields, lower today. Firmness now. Futures up 57. Second screen. Year,complex, 0. 96 , 10 30 year bond, 1. 58 . Francine looking forward to hearing from anja bailey Andrew Bailey. U. K. 10 year yield, record low, something getting markets food for thought. In possiblepricing emergency rate cut by the boe. David westin, coming up at noon in new york. This is bloomberg. Good morning oh no, here comes the neighbor probably to brag about how amazing his Xfinity Customer Service is. Im mike, im so busy. Good thing xfinity has twohour appointment windows. They have night and weekend appointments too. Hes here. Bill . Karolyn . Nope no, just a couple of rocks. Download the my account app to manage your appointments making todays Xfinity Customer Service simple, easy, awesome. Ill pass. Tom good morning, everyone. Bloomberg worldwide, tom keene and Francine Lacqua. We have been trying to get to the applications into equities, bonds, bonds, bonds, little currency as well. Logon. Erminals perspective. Credit. Jim forced me to. He is focused not on full faith and credit, government papers, but the distinction between junk and investmentgrade. Say, givend probably volatility in equity markets, even highyield is probably doing better than you might have thought. Next penny to drop radiating panoply,ross broad highyield. Tom high yield or low yield, whatever. Credit away, the dynamics of present credit or limitations to go out and rehedge, renew positions . Rolling over debt, exactly right. We have to think about this. Investmentgrade credit, Large Corporations, on yield, the borrowing cost, is lower. That is good. When we think about credit, even more smaller, private sector, this is more small and midsize businesses, these other guys that need to roll over debt. They dont call jamie dimon and say, i need a new loan. Somebody does. [laughter] it is not them. 10,000 businesses you have never heard of that are going to 10,000 local banks you have never heard of that are trying to get extension on a loan. That is the lifeblood of the american economy. If they start to lose the ability to refinance, you start to see pressure in the rebuild market, the funding markets, that is where the small and midsize banks start to have funding issues. September, 2019, there was a spike in the repo markets. That had a lot to do with it. Regulatory relief, large banks free up liquidity to get to the midsize banks, also to have ways for smaller businesses to get bridge loans, maybe the fed could backstop some loans for programs could be put into place to backstop some of them to keep that going. What we need is the patient alive and well, the u. S. Economy, that when things get better, these companies can turn on and thrive. If they die in the process, there is nothing to bounceback. Francine cameron, these are some of the measures italy has in place. Maybe there is pushback from insiders saying, it is not enough. Loans to small and Mediumsize Enterprises who do not have money, what do we know other countries have been doing well in dealing with this . Import and exports to u. S. Cameron it is a learning process. China, probably the country where the response is most aggressive in terms of liquidity measures, reducing bank reserve ratios, stuff like that, and obviously lowering rates. Isnsmission mechanism important. Just aot necessarily monitor issue. Fiscal side, in terms of broad response to impact, Economic Impact of the virus, is in many ways more important than the monetary side. Unfortunately, last decade or so, we have all become accustomed to relying on Central Banks to be the handyman, if you will, of the Global Economy. You might be able to hang up a picture with a screwdriver or fix your wiring with one, but you cannot fix your sink with a screwdriver. You have to acknowledge the wrong tools. That possibly explains the Market Reaction to the rate hike yesterday. Francine does it come through coordination . G7 failed yesterday. Do you think it is a failure to act together . Jim it will be more coincident. The fed sat around the room, everyone looked, brother, can we spare 50 basis points . They were the only one that could pony up in a big way. Other Central Banks like the ecb, dont have that ability to make that rate cut. I think there needs to be accorded native effort. Going with what cameron says, the response needs to be more fiscal them monetary. Some of it needs to be programs. Financial crisis. You remember all those things, lending facility, asset relief programs, we are not there yet. We need to have that as our toolkit, if smaller businesses get into trouble, or even larger ones, or the cuspy credit names, there is a place for them to go. Tom we showed this earlier. Really important. Inflationadjusted 30 year bond. This is the volcker era. Encouraged to bring down the great moderation. Jim, what is so important here is the unusualness of the 30 year yield. Stillamazing how it is castic. Is this a new and different territory . Jim it is symptomatic. A significant downdraft in nominal yields. Tom exactly. Jim the inflation rate has been sticky. 10year breakevens today are around the 1. 5 mark. Inflation expectations have not collapsed. Nominal yields, u. S. Treasury nominally, this is the hedging vehicle, the preferred global hedging vehicle. It has scope. It is a good hedge. Tom critical. If it is the vehicle, and we give way, is that a jump condition to huge instability . Cameron your chart looks at the current nominal 30 year versus trailing inflation. If we look ahead, the 30 year tom we have to go, just because of the time. I cannot convey enough what you just heard from them, absolutely critical. General electric out. Reaffirming later today. Ge take a cost on the virus. Much more on that as they reaffirm 2020. Lawrence culp with us on bloomberg later. Right now, new york, we want to do this, particularly with super tuesday results, let us get to the first word news. Viviana coronavirus causing more travel bans and more cancellations. The partial list. Amazon, limiting nonessential travel, so is that ecb, for going farther, all Business Travel banned. TestsAdministration Says will be covered by insurance, including medicare medicaid. Saudi arabia pushing opec and allies for deeper production cuts. They want the cartels to cut one Million Barrels per day from output, more than recommended by technical committee. Opec meeting in vienna, oil prices battered by the coronavirus. Joe bidens path the democratic nomination,l winning nine super tuesday primaries including upsets in massachusetts and texas. Bernie sanders winning the big prize, california. When all votes are counted, senator sanders could end up with enough delegates to blunt bidens game. Global news 24 hours a day on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado, this is bloomberg. Tom thank you so much. A youngster. He was on his way to the Einstein Medical School of new york. Something happened. Howard dean transformed from md to democratic power. Something underpinning all this, so important. Former dnc chairman with us today. Mcgovern remember 72, and the 26th amendment. We will change american politics. The report did not show up last night. When is the Democratic Party going to get the youth of america to change the electoral republican bias of america . Howard they have. They elected barack obama in 2008. The only election in my lifetime where more people under 35 voted more than those over 65. They can vote when they want to. I am puzzled. I think that explains why bernie i was shocked that results. Completely shocked. This is my 11th campaign. I have never seen Something Like this, a comeback like this. Result bernies results, were not as respected. Im still scratching my head. Tom that language from dr. Dean, incredibly important. Thanks to Kevin Cirilli and aaron blake at the Washington Post highlighting this this morning. Howard dean, if that is the case, if someone as grizzled as you is shocked, what is the to do list for the Vice President to get out the youth of america . Howard he has to have a running mate, young, of color and female. No matter what happens, you have four people left, all of whom are 70 or older, three of whom are men. Our party does not look like that anymore. Elections, in virginia, the congress election, reflected what our party now looks like. Young, of color and female. How ticket has to look Something Like that. The top spot is not going to look like that. Francine who should they choose . Howard i toyed with that when i was running myself. I think it would be fun to do that. There are a lot of reasons not to do it. One of the reasons i chose not to do it is because if you have a brokered convention, you dont want to throw the person to the side to get the last few delegates you need to get to the top, that you have been campaigning with for two months. I dont think it would be a bad idea. Who is going to do it . Biden is on a roll. You dont break the mold of the past. Bernie could do it. Bloomberg has to make tough decisions. As does elizabeth. For the money bloomberg invested in the results he got, i think he will think twice. Francine a Bernie Sanders base, a joe biden base. Can these bases put divides in one side and come together . Howard i think they can. What you are seeing in part, kevin and i were talking about this before he did his last appearance on the show, i think some of this is about wanting to get away from the conflict and the noise level, so forth and so on. There are people i know who moved from warren to biden last night just because they wanted to put an end to the drama. There tighter trump. Trump, ise tired of drama and corruption. They want to go back to where we can have a reasonable political discussion. Tom your comments are very important. Fact is, there is no identifiable proof americans are ready to elect a woman or have a woman as a Vice President ial candidate. Early morning, topeka, glad youre watching, carl, says there is no obvious candidate for Vice President , that would be misses obama. Can you convince her to get into the race . Francine she could howard she could pick up every single delegate left, enough for her to get the nomination. Circumstances i dont believe she would consider running for a moment. I think america is ready for a woman president. Tom there is no demonstrable evidence. What is the difference this time . Howard first of all, elizabeth was not that wellknown, she was outraised, she is now well respected by a lot of people. We are ready for a woman Vice President. No reason not to. Tons and tons of capable women in senior positions in politics, governorships, the senate, at least in our party. I cannot imagine why they would not want to pick a woman, more than 50 of our votes come from women. About, weuch to talk look forward to speaking again, we are out of time. Much more coming up, the finance markets, futures with elevation 3, 2, one, elevation and the last halfhour. We will dive into this idea of hedging on rates in a moment. Later, hedging comments. The president of the st. Louis fed, jim bullard, 11 a. M. This morning, stick with us. Longterm point of view, equities, dividend paying equities, strong balance sheets, good earnings growth, is where you should be from the longterm point of view. Tom important comments yesterday in this. Multiasset,ing alltime. Jim of morgan stanley, what were doing here, instead of planned blocks and fancy charts, we are letting the dialogue go. We look to credit. We looked at the credit market and corporate yields. Now we go mathy on hedging. So important. You do things in the market, jim, then you go out and useful faith in credit and debt to protect yourself . Jim that is the right idea. Extending into equity, we think of risk clarity. 6040 portfolio. Highquality asset to hedge the risky asset and dampen volatility of returns. When Interest Rates go low, you were showing the 30 year bond low, when yields are that the bond correlates hi with equity. If bad things happen, yes fall, but only so much. There is not as much of a hedge. If rates rise, you have a significant loss. Equities go down at the same time. You get more high correlation, bigger loss, bigger swings in volatility. That is a big problem. That is the cost of these low Interest Rates. Tom cameron, the reason you are here is so jim does not get in trouble. Entire Hedge Fund Industry built on this. Bridgewater has a lot to do with it. A new world with rates under 1 . Cameron fair to say the expected return of every financial asset out there looks lousy. 30 year nominal bond versus trailing inflation. Looking forward, 30 year tips rate, you get zero yield over inflation for the next 30 years. You can buy it. The yield can go lower. You can make money on a capital basis. You will not beat inflation owning bonds. Equities, after the drawdown, still richly valued, longerterm perspective relative to the size of the economy. Profits still close to peak. Downside. World whereven in a the expected return of equities is low, a bonds is low, discounted rates are low, that is a risk for real assets. Tom i dont think cameron is worried if we dont say latin on bloomberg. Francine we do that on thursdays and fridays. When you look at the impact of the virus on the economy, a shock impacting demand or, there are a number of ways of looking at this. Cameron primarily a supply shock. Obviously, you have the manufacturing pmis in china collapse, pmis and china collapse. The rest of the world, particularly u. S. , uses china as a manufacturing center. The fact that they cannot make stuff means the supply chain, your apples, your other u. S. Companies that import, Global Companies that import components products from china are compromised. That does resound into demand shock. People sell stuff to china as well. When you have lockdowns in italy, korea, that sort of is radiating across the world. Tom final question. Is Dividend Growth the new yield . Jim i think it is. Looking to equities to get yield, real yield, dividend yield is effectively real yield without inflation. There is a flight into that space. Buybacks and equities, the supportedbeing well by people buying back their own shares. Tom thank you so much. Jim and cameron, early in the morning. Much more coming up. Ata check with futures up 61 this is bloomberg. Viviana you are watching bloomberg survillance. Bloomberg business flash. Another event canceled. Google scrapping the flagship conference, bringing together thousands who build websites for the company or who partner. They will try to hold sessions digitally. Jp morgan testing a virus plan for u. S. Employees. Thousands working from home today. 10 staff Consumer Banking will work remotely. 127,000 workers. Francine thank you. Stockmarkets. Futures, u. S. , climbing. European equities up. Investors taking a surprising primary, and responses to the virus, after the emergency rate cut. Andrew bailey coming up later. Markets pricing in a possible cut by the boe as soon as march. And your bailey will then be in charge. Look out for the 10 year u. K. Yield at a record low. Treasury 10 year yield, further after breaking below 1 for the first time in 150 years, that was yesterday. Coming up today on bloomberg tv and radio, jim bullard sits down with bloomberg after the emergency rate cut. Dont miss that. Bloomberg surveillance, continues on radio. This is bloomberg. Hi were glad you came in, whats on your mind . Can you help keep these guys protected online . Easy, connect to the xfi gateway. What about internet speeds that keep up with my gaming . Lets hook you up with the Fastest Internet from xfinity. What about wireless data options for the family . Of course, you can customize and save. Can you save me from this conversation . That we cant do, but come in and see what we can do. Were here to make life simple. Easy. Awesome. Ask. Shop. Discover. At your local xfinity store today. Alix global shut down. Ecb restricts travel, and depends olympics might be delayed and japans olympics might be delayed. The fed cut disappoints [no audio] alix wins nine states on super tuesday, revising his campaign, while senator Bernie Sanders holds firm after winning california. Welcome to bloomberg daybreak on this wednesday, march 4. Uncharted territory is something we talk about all the time in the markets, and today is no exception. As be futures up by about 62 points, but it is the bond market we continue to watch. Yields down another two basis points, hitting a low yesterday with fed cuts