Banks and Energy Companies leading. The tenure u. S. Yield back up to 50 basis points. It was below that all morning. Nymex crude down about 20 . As you know, saudi and russia in a bit of a war here. 33. 22 is the price. The dollar and Oil Currencies are mostly trading with big ranges right now. Lets get to our second board to see more action. You could look anywhere today and see a lot of action. Highyield, that Circuit Breaker was triggered as well. We are down about 5 right now. Dollaryen at 1. 0240. All of thelooking at markets throughout the next hour. Guy the best way of doing that is to take a look at the gmm, the function on your bloomberg which will give you an idea of what is happening around the world. The brazilian markets halted, limit down. The ftse is off by 7. 25 . The dax down by 7. 1 . The s p now down by 5. 88 . The russian ruble, oil prices the center of this story, down by nearly 9 . Brazilian real off by nearly 3 . The euro catching a bid. The dollar on offer against currencies like the yen. Brent crude wti getting hammered. Up by 64 basis points. China up 20, australia up six, russia climbing as well. Even the german cds up a little but as well as we continue to see the market focusing on what is happening at a macrolevel. Clearly, a very difficult monday market for everybody to try to deal with. Bonds bid, stocks on offer. In some ways, the virus not the center of the story. It is actually that oil trade. Vonnie we are definitely seeing panic selling, liquidity issues, and obviously coronavirus still in there. We are joined by feifei li, Research Affiliates head of hansen, and ole sloth Saxo Bank Head of commodity strategy. Is this the end of the bull market . Are we seeing a protracted bear market, or is this a panic scenario . We expect a very significant slowdown in economic growth. If not handled well, this could trigger a recession as well. I wouldnt make a definite call at this moment. I would say, based on Research Affiliates expected return model, even before the coronavirus outbreak, would we ,ook at longterm indicators the ratio of price to the cyclically adjusted 10 year average earning come at the beginning of the year, it was at 31. At the end of last week, it was at 28. Buzz of them were significantly higher than the historical norm. The historical averages around 16 to 17. So we know the market was priced high, even before the outbreak. The credit spreads sims to be fragile. In this scenario, typically some big shock could totally shake it or even destroy it. So i think it may just take coronavirus to make the market do think thend we market has further room to adjust downward. Vonnie are we in danger of seeing credit markets sees up like we did in markets seize up like we did in 2008 . Feifei i think that is a potential problem. There are several factors on consumption and production side. We have already observed due to the travel ban the airline industry, lodging industry, travel. Related with large events being called off, sporting events canceled. We dont know if the summer olympics will even occur in japan. Those things have really heard the consumption side, business spending and consumer spending. On the production side, we also was at levelpmi 40, new orders 35. Again, both of them went down further than the lowest level of Global Financial crisis. We know china leads the Global Manufacturing cycle, so this disruption in supply chain is likely to spill over to the rest of the developed world, and will slowdown as a result of the anduption in those consumer business spending, under significant pressure. Guy lets bring you into this conversation as well. 36. 15. Ude trading at whats the downside . Ole the downside is quite a bit more if we dont see these announcements we had over the weekend get somewhat reversed. This does make sense to me. 42, saudirobably 80 plus. We have to remember it is very easy to extract out of the ground in the u. S. Whether it is u. S. Shale or something internal between russia and opec remains to be seen, but in the short term, if we continue to see rising arabiaion today, saudi once to go back above 10 million barrels, then the short amount is for lower prices the shortterm term outlook is for lower prices. Guy some see brent with a 20 handle. Do you see that . Ole theres a shortterm risk that that could happen, but on the other hand, i dont think ,ny participants last week obviously with saudi arabia going out and cutting somewhere in the region of six to eight dollars to their main trading partners would obviously have e kind of impact, but as again, on that basis, is it really worth the Additional Market share . Vonnie just hang on one second. I want to bring in Michael Regan in new york from our mliv team. We saw something this morning we havent seen in 12 years, Circuit Breakers across the board, everything from highyield to u. S. Stocks. Put this into context for us, doesnt mean theres a lot of panic selling out there . Michael theres a lot of selling right at the open that decline in the s p 500, which caused a 15 minute market wide Circuit Breaker. It is somewhat encouraging to but it is a fastmoving market. It is not until 13 that you would hit another level to Circuit Breaker, i 13 drop on the day that would trigger a pause again. A 20 drop on the day i dont think anyone is that worried about come but that would cross trading that would cause trading to stop for the day. After that first one hit in the initial minutes of trading, it is unlikely we will see another one today. Vonnie that is the credit risk surging, the Investment Grade credit default swaps surging their. Guy can we talk about how risk managers are going to be managing this . Weve already been through onestop level. Get into another would be relatively difficult. ,ut if you are a trader what are those risk officers saying about how much value you can have on your books right now . How big a shift have we seen in terms of how positions were friday versus how they are today in terms of value and risk . Michael to some degree, i think a lot of the risk off trading had already gotten started last. Eek and into today obviously, it is very hard to predict exactly how all of that feeds off of each other. I think it is a risk of that today. It is going to be a long trading session, and i think that it is really difficult to predict whether this could be the type of capitulation that gets more longs back into the market, and speculating that this might be the worst of it for now, or as you can say or as you say, we could get this derisking effect across the board. It is just going to be a watch and see how it goes type of day. Vonnie let me ask if you anticipate a wave of bankruptcies. When things are this extreme, it is not that long before Companies Start to default and confidence gets lost. If thats the case, who needs to step in here . Does it need to be the treasury secretary . Does it need to be the fed again . Feifei i think the fed has already taken the action, trying to save the economy. It would likely cause further closers of business in the u. S. And the rest of the developed world. Unemployment rate is a big risked on the horizon. Could handled well, this trigger a recession. Coronavirus is just the triggering event, and given forward, i think the fed is also. Unning low on its ammo i think we can still go down further. Theres the possibility of further reduction in the march meeting, and another in april. So likely the first half of 2020, the fed will lower the rate close to zero. Guy are we priced for a recession now . Feifei thats a really good question. We look at categorical growth, as well as valuation change. All of the changes coming out at the end of february, we expect largecap market to deliver close to zero real return over the next 12 years. So the forecast on the short horizon, i would say if recession is actually hitting us over the next six months, the return can really enter an routine. Vonnie thank you. Staying with us is ole sloth hansen of saxo bank and mike regan. Abigail doolittle is with us. Abigail take a look at the selling action we have here in the u. S. So, theast halfhour or s p 500 did hit that first Circuit Breaker, down 7 off of come of the worst day since 2008. That is the degree of selling we are seeing. Investors just want out of stocks. We also have the nasdaq lower, x, and take a look at , with thoses airlines that are so sensitive to the coronavirus fallout, now down 7 . Confirmed for at least a 40 decline. That probably suggests more selling is ahead. If you switch of the board and look at what is happening, the stoxx 600 having its first dem a down day. G the nikkei down 5 , along with the hang seng. Investors want out of stocks, not knowing what the Coronavirus Impact will be for the economy. Pressure, another this crash we are seeing in crude oil. Lets take a look at a fourday chart. You have a bear market in a day. I cant room for the last time i have seen that for crude oil, down 28 . You can make the case that that area of congestion could cause a rally, but longterm, crude oil is confirmed to go below 20. As a going to the bloomberg and use the imap, what is remarkable be on the fact that we have all look atrs down, take a the worst sector, energy, down day going back us far as 1989. Theres nowhere for investors to hide in this. Surprisingly, investors are going into havens. As we take a look at the 10 year yield, really incredible. Take a look at that, over five days come of the 10 year yield in the u. S. Has lost more than 60 basis points. The dollar against the yen has lost almost 6 , and extra ordinary move in the currency. Finally, rounding it out, take a look at the vix, close to 60. Guy incredible numbers being posted across the board. Thank you very much, indeed. We are back with ole sloth hansen, Saxo Bank Head of commodity strategy, and mike regan come our senior markets editor. Let me pick up where abigail left off. Talk to me about where gold is going. Do you expect to go through 70 through 1700 . Ole i think what we are seeing today was the next step up in. Olatility with all of these leverage funds targeting fixed volatility, you have to reduce across the board whether it is a profitable position or not. I think that is once again hurting gold today. Theres a disinflationary impact in oil prices which some may worry about as well, but i think at the same time, look at the overnight. It just highlights the reason why gold is still part of an investor portfolio. Guy 1700, do we get there . Ole i think we get there. We need to consolidate once again. I think we probably will find some support here soon. The only thing im a little bit worried about is not following suit, silvers discount to gold is at a 40 year plus. The ratio almost reached 100 today. That does indicate this is purely safe haven demand right now. Vonnie do the saudis will and ability to withstand lower oil prices, the russians thought this was going to be a temporary shock and were willing to play it that way . You have to wonder whats next because even if we go back to the old agreement, will that be enough to calm arc its . Calm markets . Ole russia is used to pay note two taking a lot on its chin. Think what is probably helping is a budgetstate around the 42 level, but we have term member that the ruble is down 20 year to date, so that is a mitigating factor in terms of revenues coming in. Just looking at those numbers, is closer than saudi arabia. Earlier, this is both a demand and supply shock. Producers can control supply. They cannot control demand, and thats where the problem is right now. Regan, Diamondback Energy down, apache down, pioneer down. How long to these Companies Last . Michael thats a good question. But when you talk about drops like that, one other thing i would point out is that we did have that market wide Circuit Breaker at 7 . We are also seeing many individual stocks hit their Circuit Breakers. The price action feeding into the index is being impacted by a wide assortment of stocks. I think the Energy Concern has obviously morphed this whole issue into a big credit concern throughout the market, and i think thats a big part of why the reaction is so dramatic today across the board. Vonnie why is highyield and investmentgrade getting hammered . You would think that if one was getting hammered, the other wouldnt be. Michael remember the high with the lowest level investmentgrade bonds, the big concern before all this started was that a little bit of economic shot could cause a rereading of that bbb sector. I think that is front and center for a lot of investmentgrade investors right now, as well as highyield, because it will also increase the cell of highyield in the market. With any riskng to it is getting sold, and obviously getting to the point have investmentgrade people wondering if that is the next place to worry about. Guy can i talk about some of the Oil Companies as well . I am going to ask you the same question vonnie asked mike. Shale pack the u. S. Companies go out of business as a result of this . Ole thats a question i cant answer, but im sure we will see some consolidation over the course of the coming weeks and months. We have already seen today notthing like natural gas up on the day in anticipation that we are going to see some of that overproduction being taken out of the market. It has become more dominated by big players, and they would probably pick up what is ever possible to pick up. It is a bit like whackamole because it doesnt take five years to get a project online. It takes five months. It is really a question of where the pain threshold is. Guy fair enough. Let me ask a different question, then. Im looking at the mining stocks in particular. Huge consumers of energy, can these guys deal with their hedges . Obviously, the Airline Sector is another one. Miners get some pick up off of this, or is the demand story so great that it doesnt even matter . The demand side probably going to halfway with any uptick in lower costs. It also depends on how far out the lower price regime is going to stay with us. But obviously from the mining companies, they need to see the pickup and demand, and with that, the focus is really on china. Something like copper, which is a bit of a benchmark on the metals side, it didnt challenge hasvery key level that it held since 2017. We still look to china for a massive boost in stimulus. Saying that itis will start to sell more currency if the price stays below 40. What are we expecting to see with the u. S. Dollar as a result of this oil trade . How much of the trade in dollar is oil . Amount,is a significant but the main strength towards further due dollarization will once again be the focus of the middle east, so basically, they are not benefiting from any currency weakness at the price of oil drops. If you look at Something Like realj the saudi ial, that is probably the big focus right now. There could be any renewed. Peculation vonnie this oil war that i dont think anyone was really expecting, how much of it is becoming a self with filling prophecy at this point . Michael i think you have to look at how much momentum was in the market for this coronavirus shock hit. Even after the correction we , what historically would have been considered a pretty richly valued stock market even after that big drop, it is kind of like a black swan hitting the market at a very complacent, optimistic time. I thinkat risk there is so much uncertainty about how far the virus will spread, and with the oil situation, i wonder if investors are not really pricing in this alsove shock in price, but the geopolitical tension that goes handinhand with that. It is a very different world today than last week given what saudi arabia has just done and he worries about that tension between russia, saudi arabia, and the u. S. I think it goes beyond how ugly the Oil Price Action is to something a little bit bigger, that the whole world order seems to be at a very tense point in time. Guy which banks are most exposed to the oil patch if we are going to see failures . We are going to see some of those highyield bonds cracking. Which banks are the most exposed . Michael certain banks are more in texassmaller banks especially, but i think the worry is at some level, it becomes more than just highyield Energy Credit situation. Aboutrts getting worries credit scattering through other industries. The hotel and leisure industry, and howne industry far that goes is a very big concern right now. Vonnie if you look at this , you in your bloomberg will see that fiveyear fiveyear forwards are down. The breakeven down as well. We are looking at deflationary territory here. Michael there was a lot of question early on, with this because an inflationary shock or deflationary. There was concern about inflation in certain sectors. I think that is still probably going to be the case right now, that we will see costs go up for certain goods come about this massive drop in Energy Prices and demand for travel and leisure, so many sectors of the , it poses it focuses on the deflationary aspect of it, for sure. Guy you mentioned china before. In the background, we have kind of taken our eye off of what is happening in china. It seems to be getting the virus situation more under control, starting to shut down some of the temporary hospitals. What comes next in terms of the stimulus and commodities . How big of an impact is that going to have . Thele ole we way some thing like copper is indicates new building projects being put online. I think that is really where the market is focusing. But also, a lot of these small and mediumsize companies, that could be another area where they step in. The commodity market is such that we are certainly looking assisted building ability. Vonnie thank you for joining us. That is ole sloth hansen with saxo bank joining us, and here in new york, bloombergs mike regan from mliv. Guy the stoxx 600, if it closes where it ends right now, will enter a bear market. We have to get to the close to confirm that. We will potentially see that happen. In terms what we are seeing, and europe, the stoxx 600 has got five stocks in positive territory ended an awful lot more in negative territory. Theres the charge that shows you everything happening as we watch the numbers take lower and lower. Heres an idea of some of the numbers and what we are seeing. Those of the headlines from the major markets. Ftse 100, dax, and the cac 40 off the lows, but still sharply to the downside today, and it looks like we will be seeing potentially that 6000 mark for the ftse 100 turning into a key area the market is going to be paying attention to. In terms of the stock sector ,ritedown, every single sector the bond proxies, the more ,efensive end of the market take a look at the european oil and gas sector. Down 14 today. Miners down. Vonnie im just going to show the index right now, the bk acts. It is down 9. 5 . Theres more of the regional banking index. If you look at the dow, you can see the worst performer is dow, but jp morgan is down 8 . Who better to be joined by now than mike mayo the wells fargo Senior Analyst . The banks are getting hammered today. It is the regionals, it is the majors. What is the lasting fallout of todays price action on the banks . Mike in the near term, it is earnings held for the banks. It is a trifecta of misery. , oil,ve the virus Interest Rates, and we have taken our numbers down by 1 5 over the past few weeks. Today we said that the barricade scenario could be an earnings hit not just 30 . We increase that to 35 earnings hit to bank. If you are looking at the shortterm, it is rough days for the banks, and most of that would be known as duke netted. Nterest margin banks have to come out and say the expectations, the guidance we gave you before is wrong. Sick leaveis as a for bank profits. Vonnie we dont know how long it is going to last. Theres a couple of black swan events out there. How convinced are you that we are going to start to see defaults at banks, and some of these loans are going to go bad . That Interest Rates are going to go may be as far as zero or into negative territory. How can you be so sure . Mike we had an earnings cut of a missed 1 5 so far that does incorporate some higher credit losses, but compare this to the financial crisis. It is night and day, so while it might be earnings health, to some degree it is Balance Sheet heaven. Bank Balance Sheets are the strongest they have seen in a generation. Banks that have 1 trillion of additional capital, 2 trillion of additional cast, 3 trillion of additional deposits, banks can absorb a blow. And you have something known as the fed stress test. For almost a century, the fed had no stress test. The last decade, banks have to incorporate a theoretical armageddon scenario, and only if they can survive Something Like that, they can return capital. The foundation of the Banking Industry is strong. Are the banks going to implode . No, they are very strong. Having said that, earnings are at risk. They are going lower. They could go lower still, and that impacts stock prices in the short term, and we cant escape that. Guy nice to see you in a tie. Second thing, i am wondering which banks are most exposed to the oil patch . Mike we started off the year with a sell rating on chimeric the banksrica, one of most exposed to oil. I will say the industry as a 2016, thece underwriting standards have been tightened up some. You had the oil decline, you had a lot more regulators, the banks themselves reexamining the assumptions theyve had. We already had in our models credit losses at banks doubling over the last four years. It is not new that credit losses might go higher, but they might go higher a little faster given this trifecta of misery between the virus rates and oil. Guy lets bring another voice into the conversation, bloomberg opinions Marcus Ashworth in london. U. S. Banks come into this crisis , they fix their Balance Sheets. Marcus mike mayo, that is exactly spot on. Guy walk me through how bleak this look for europes banks. Marcus they are looking into the abyss in terms of a Business Model that has never recovered. The reality is the economy has never given them a break, and they got negative rates. The ecb has got to think very carefully what it does here because it is not about cutting rates or even necessarily qe. Flow andcific cash forbearance required. Theres a lack of trust in european banks. You play with that at your peril. Guy talk to me about italys banks in particular. Marcus it is not actually just italys banks. It is germanys banks as well. They do not have the ability to react to this. I suppose it is china. As an awful lot of problems. Look at deutsche banks share price, the giant of germany. One chart tells you all. Vonnie credit is vulnerable. It has been vulnerable. Do you see some can todd some consolidation among the seller players . The smaller players . Large banks have better scale and diversity, and you might see the banks exposed to particular segments. I think the window for some consolidation has passed for some of the smallest banks. Powernow, the negotiating is in the arms of the acquirers. Im shocked we do not see more consolidation, especially since you had to of the top 10 banks emerge over the past year to over the past year, bb t and suntrust, to form truist. Vonnie weve upped the daily fromance to 150 billion 100 billion and someone come up with the lowering of Interest Rates isnt helping the banks. What can the fed do to shore up confidence in the Banking System . Mike i think the message the fed was sending with the rate cut is that they are there to support however they can, and theres many tools they can deploy. It relates to how they treat banks and how they treat capital and how they treat Interest Rates. I am sure they are looking at all the options around. But theres also fiscal policy, so the fed cant do it all on its own. When you look at i, growth, its usually a twopronged approach, but as far as the banks right now, the reality is there will sibley be less growth, more control on expenses, more risk oversight, less earnings growth, and kind of protect yourself until this passes. D passes, theio unknown, who knows what happens . Banks are just as strong to reignite the technical growth we had seen over the past couple years, and that is a big difference versus 2007 through 2010, when banks didnt have that core strength. Guy that is true over there, but not true over here, marcus, and europe marcus, in europe. Marcus in the u. K. , we are about to see exactly what should be done with the muska were needed fiscal and monetary response. Thus the Previous Bank of england governor pointed out today, fiscal is not a magic wand, and clearly monetary as an tither. Requires more about small cash flow, sme Companies Making sure they dont go bankrupt. I have no idea how they expect to deliver that. The french government has said they want to do a massive stimulus plan. I cant see how the every with germany on this. Some nice words coming out. It seems to be arriving in dribs and drabs. We need a coordinated g7 response, and we need it focused on shortterm cash measures. Guy you got a Small Company that doesnt have the cash buffers necessary to deal with what it needs to do right now to make payroll, whatever it is. How are the banks going to treat these kind of companies right now . Mike look at bank of america. They were already underwriting customers as if it were already a recession. So the credit standards for u. S. Banks have already been lifted dramatically over the past decade. Banking 101, make s ofyou have the four c banking, cash flow, collateral, ce customer, and the last is out there, but this is banking basics. Vonnie j. P. Morgan chase is the worst performer today. It is trading in concert with the other banks, a little bit worse. Is there a jamie dimon trade in here as well . Mike certainly, we wish jamie dimon a speedy recovery. Having said that, we also have a deep encz. Pinto, and our view come around the daytoday operations. They wont miss a beat in their term. Vonnie mike, thank you for are contributions today. A big day for banks here and on the other side of the pond. That is mike mayo of wells fargo. And of course, Marcus Ashworth is with you in london as well. Guy absolutely. More on the selloff now. We are going to go to taylor riggs. Taylor take a look at some of the major averages. Here in the u. S. , we opened up at 9 30. A few minutes after that, we had that 7 limit, the first limit we tested. The markets then closed for 50 minutes and reopened around for 15 minutes and opened around 9 49. The next limit we would have to see is around 13 . It seems like we have come off the lows, recovering, only off about 5 , 5. 5 . Weyou flip up the board, have oil seeing its biggest drop since 1991. Goldman sachs saying oil could test a 20 handle. Youre seeing all of the Oil Companies and producers really get hardest today, off as much as 30 . The story is perhaps they were cutting their spending, and how they are profitable with breakevens at 38 a barrel very questionable. I want to dig a look at a chart we are showing inside the terminal. We are talking about the s p selloff in the spread on a percent basis, relative to the 200 a moving average. Today pretty in the red. We are off more than 5 , 6 or so to two that 200 a moving average. That sounds bad, but not as that is where we were on to summer 24th, the Christmas Day selloff on december 24, the Christmas Day selloff in 2017. Things are bad, but perhaps they could be worse. Thats flip through the boards. Cross asset is not just about the equity market, but todays story is all about the bond market. We are down by 30 basis points or so. This is very, very significant. You now have every yield in the under 0. 5 on the 10 year. Is no longer forecasting tenure moves because he says no one will care. Vonnie taylor riggs, thank you for that. For more on the moves in the bond market, lets bring in one of our experts at bloomberg, brian chappatta. Where do we stop with yields . It looks like we are dipping right into negative territory. Brian 0 maybe . The general feeling is the fed is not going to want to go into negative rates anytime soon. Taylor was talking about not really forecasting yields at 0. 5 . Leo brainard was talking about deals caps is what they might institute before they do negative rates. It will be interesting to see what happens, but we are pretty clearly headed for the zero bound, and just about every strategist out there is revising the calls. Goldman sachs sees us at the lower bound of the fed funds rate by midyear. Ago . Where does the 30 year the curve is bull flattening really rapidly come up at the biggest action is at the back end. Give me a sense of where the long bond is going. Brian the fed cant really control the long bond. They do short rates. So the long bond is really indicating real fears about inflation and the prospects for growth going forward, the fact that we are going to be headed towards low growth, low inflation environment like japan , like germany, like the rest of europe. That is a pretty scary prospect, but for the treasury market which now has all these low yields, as well as for a lot of companies that have taken out a lot of leverage over the years. If theres no inflation, thats not a great sign for issuers of bonds. It is better for people who own bonds, but for those who are issuing debt and need to issue more debt, it is not a great situation. What are you hearing strategists say about the wave of bankruptcies that we might is trading yield pretty badly now. The cdx on both markets went up like a rocket. There are bonds that are maturing in 2021 that are dollar, 600on the yield. Things like that. It is basically saying oil prices have collapsed so much that defaults are inevitable in that space. The thought is going to be is that going to trickle over into the entire universe of high yields, which is quite large . Will that spill over bbb and Investment Grade . Vonnie after energy, and maybe even before energy, you have retail, tourism, travel. There are so many sectors that highyield has a place in. Brian i think one of the big issues is there is such a reach for yield, it is all we talked about effectively, that now we are seeing the repercussions of that. People start pulling out, people start selling. If theres no bid, these prices just keep falling. If you cant refinance, if you are a highyield baller, that is a hard situation because theyve been counting on that for so long. Guy what effect wouldnt have if we started to see the bbb section cracking . Thats a huge portion of the market. Theres a lot of potential there for downgrades. Just give us a sense of the ripple if that starts to occur. Brian i think you would have to see credit markets dry up entirely for new financing. Aaas we, like you said, has been such a large part of the story in credit markets over the past decade, down more than 3 trillion in size. I think a lot of the bbb names are actually Bluechip Companies that can probably survive a mild down toward mild downturn, but youre going to have to start to looking name by name for comedies that bite be most exposed to the oil shock, or to any of the chronic demand as a result of the coronavirus outbreak. Guy we will leave it there. Thanks very much indeed. Lets carry on the conversation. Liz ann sonders to much east , chief strategist investment strategist, joined us now. The market is suggesting the fed needs to probably go to zero. There is some discussion today that maybe they step back in to buy mortgagebacked securities because letting them run off hasnt in pretty widespread between but the treasury yield was doing. Thats not the elixir for what ails us right now. In terms of what might happen on the fiscal side, we know last week was a drop in the bucket. Whether they can come up with a bigger package, and more targeted package, have fema resources, i think it has to be a bit of a shock and awe. Whether we get something definitive today, i dont know. There is some rumor that we might hear something, but i dont know. Guy do you think that works, though . Do you thing that works at a time when we see the number of virus cases expanding rapidly in the United States and here in europe . Liz ann i dont think it does much to improve economic prospects. In general, looser Monetary Policy does need to supply shock, not to mention this is also a demand shock. We dont have a sense of how many cases there are because theres so few tests out there. We are very much in the early stages of this. Eventually, we need to see stabilization in cases in the u. S. Like we eventually saw from china, but we are far from that. Whether or not the narrative is still there, that shock and awe stimulus sufficient to stabilize risk assets. That i think is the more existential question. Are we exiting this environment where all Central Banks had to do was step in with easy Monetary Policy and a boost to risk assets. I fear this may be a shift in that narrative, which is more of a longerterm concern. Vonnie this is right now it seems to me to be a rabbit market. It called for Interest Rate cuts, got a 50 basis point emergency cut. Then it was looking for more and more. Whatever rumor you say is circulating today, if that takes place, will that be enough to stabilize this market, or will it look for more . The short answer is i have no idea. The problem is we are not sitting here in an environment like, say, with a natural disaster, where it happens as a shock to the system, but it is effectively over, but we dont know what the damage is going to be on the economy. We know companies that are most affected arent just guiding wall street analysts down. They are simple withdrawing guidance. From a valuation perspective, the problem is both the p and the e are both in freefall. Those that attempt to look at value in the market when well get to some kind of freefal , we dont have any sense of what the damage is going to be. Could fiscal stimulus help . Yes. Is it going to be sufficient enough on a day like today to stem the bleeding . Probably not. Vonnie the other thing is we havent even gotten to the pink of the coronavirus yet. The peak of the coronavirus yet. We keep seeing the numbers go higher and higher as new cases are diagnosed and new test kits come out, and so on. What happens when there are more coronavirus headlines . Thats a good point. Numbers are going up at a declining rate relative to where we were a couple of weeks ago, but if china continues to push to open business backup, what happens if there are renewed cases that come as a result . Peoples a precedent for who how are free from the virus that contracted once again. Theres also a risk of a reversal in some of the trends we are seeing in china. But the impact in terms of the economy, theres this hope you would see a lot of vshaped recoveries. I think theres appropriate skepticism from much of what has been hit to look vshaped at any point where we start to see improvement in the data, but we are so early in the process in the United States that the best we can hope for is just getting some accuracy in terms of the readings. Guy i appreciate what you say about your crystal ball, but nevertheless, i have to ask, will the usb and recession this year . Liz ann i think it is a pretty decent chance, yes. Guy on that note, thank you very much indeed. Liz ann sonders joining us from charles schwab. Lets carry on the conversation. We are watching markets that are down and down hard in the equity space, if youre in the commodity space. Bonds obviously catching a huge bid. Lets figure out exec lou area going next. Vonnie we are going to get to Abigail Doolittle with a comprehensive view across asset classes. Abigail thank you. It is certainly an ugly day for markets around the world. The s p 500 down 5. 5 , its worst day since 2011. Right at the open, down 7 , triggering a Circuit Breaker. However, you still see the sellers very much in control, wanting out of risk assets on virus fears and what the fallout could be on this. We have the vix at its highest level since 2008 and 2009. We had complacency for such a long time last year. That is showing in the vix. The stoxx 600 down the worst since 1987, so no area is spared. Take a look at the italian equity index, its worst day since 2016. Northern italy is under lockdown relative to the virus. If we flip up the board, we are going to see what is going on with this. Yield in the u. S. Off of the lows, but nonetheless, 54 basis points. Investors are going into bonds. At 16 basis points, down four on the day. When we go to our next board, we are going to see a continued etf. E for the junkbond the worst day since 2008, down 5 . That is an extraordinary move for this. Probably more declines ahead. Finally, not surprisingly, if we take a look at currencies, we are going to see haven currencies are rallying. Take a look at that dollar against the yen. At the highs, the best. Day since 1998 that is the degree of the the best day since 1998. That is the degree of the haven yen buying. The swissie also gaining against the dollar. People want haven currencies out of the u. S. Dollar. Vonnie thank you for that. Abigail doolittle keeping us up to speed in this turbulent market. Lets bring in now from the cme scott bauer of prosper trading academy. Paint the picture for us this morning. Circuit breakers getting triggered all over the place. What is the dialogue down the right now . Scott i will be completely honest with you, it is actually very calm. It is a frenetic pace, butr trade frenetic pace, but traders are taking this in stride. What i saw last week was many trading firms shoring up positions. Thats one of the reasons we saw volatility spike in the last hour of trade, and then selloff a little bit. Today, the trade is very calm. It is active, frenetic, and it is calm. Guy what are risk officers telling the traders right now . Scott you know, the traders dont really know. Everybodys got their own opinion right now, but any expert you talk to, we dont know if we are going to see 25 a barrel oil or if we will go back to 40 a barrel if russia and opec get back to some semblance of an agreement soon. The volatility is what is driving the market right now. The unknown really of what is going to happen because what we have seen here is weve blown through any sort of support levels that weve seen. Any of that range we have seen over the last 12 to 18 months. We are really in uncharted territory here, where anything can happen. Vonnie scott, a bit of a bloodbath for some people, i imagine. Are you hearing any stories . Scott i did hear a few at the end of last week, especially some firms that had to cover their risk towards the end of the week. It hasnt been pretty, but by the same token, for just as many firms or Trading Companies you hear out there that maybe really took it hard, theres probably some that profited really heavily from this move. Vonnie exactly. Scott bauer of prosper trading academy, thank you for joining us this morning from the cme. Just want to point out that right now, the s p 500 is down 6. 2 . Diamondback energy the worst performer. We have a trio of stocks higher. Capital oil, autozone, and oreilly automotive. Presumably, people still buying provisions. All other stocks in the dow are lower. The dollar index is on the cusp of dipping below 95. We have the vix trading at more markets next. 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. David from bloomberg, im david westin. Welcome to balance of power, where the world of politics meets the road of business. We start on the markets was Abigail Doolittle in new york. From cirilli will join us washington on the trump of ministration preparing a possible response to all of this. We have to start with the markets given what is going on. Its bad. Abigail it feels like capitulation. We are having tremendous selling across all risk assets after an 11 year bull market for stocks , doing that emergency rate cut last week, but weve had this tremendous risk asset rally. There have been some pauses for the last two years last 11 years, but with this coronavirus and the impact on the global economy, investors simile want out of stocks come out of oil, that divide between commodities and stocks is very worr