Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240713

Up for today. Were going to look at all of todays market moving news from new york and london. We want to begin in washington were the Trump Administration stoc struck a deal on a rescue package. Mitch mcconnell says it is an historic plan. At last, we have a deal. After days of intense discussions, the senate has reached a bipartisan agreement on an historic relief package. It will rush resources onto the front lines of our Nations Health care fight and will inject trillions of dollars of cash into the economy as fast as possible to help american workers, families, Small Businesses and interested and industries make it through this. Alix joining me is kevin cirilli. Walk me through what is in the bill and what to expect. The deal will likely pass within the next 48 hours. They are bullish to get this done. 500 billion for Large Companies as well as corporations bailout cash for industries that have been impacted by the economic effects of coronavirus. 350 billion for Small Businesses. Democratark warner, from virginia, as well as republicans working together to provide not just low interest federally backed loans, but grants for Small Businesses. Many of which will be utilized in a Small Business administration kallum hospitals andor other health care providers. That is something democrats pushed for in the past 48 hours, to boost funding levels for hospitals. 1200 checks for lower and middle income earners. 500 checks per child. For families that have been impacted by this, that is something that will help. Either way, through a lot of political discussions, they have a deal. Democrats and republicans i anticipate this will be signed into law sometime within the next 48 hours. Procedurally is where the hiccup comes. Whether or not Speaker Pelosi can garner unanimous consent or reconvene the house. That is the timetable we are working on. Alix what about any potential rollback of tariffs . I have heard rumors that may go down to help alleviate the world economy. Can you tell me what the tariff debate is . A host ofre are different debates on tariffs. What i am told is that they are going to wait to see how other governments around the world handle this. Inning,ld be the fourth so to speak, as secretary mnuchin alluded to. The trade and International Trade to be increasingly larger component of this. Alix thank you so much. Kevin cirilli. Pushing measures to boost credit to companies and revamp tools to combat come to economic shock. Here is michael mckee. Tie these two things together. Michael officially it is roughly eight to trillion roughly a 2 trillion stimulus bill. Larry kudlow confirmed it could be as much as 6 trillion. The treasury is going to get 425 billion in its Exchange Stabilization fund to lend out to companies, probably through the Federal Reserve. They have been lending through the fed for the bond buying programs the fed set up this week at about a 10 1 ratio. If they give the fed 425 billion, the fed could turn that into 4 trillion or more. How would that work . We dont know. Purposee special vehicle stay set up for commercial bond buying is a template. We will see if that works. We do not know who would run it or how. The fed is set to play a big role. In europe, the stimulus talk continues with germany getting work on a program to sell bonds, raise money and spend money. European finance ministers have tentatively agreed on a program to help bailout countries like italy. Support,broad according to the eurogroup president martino, for allowing 2 ber states to borrow about of their gdp from the stability mechanism. Leaders have to agree to that thursday. If they get a conditional credit line from the esm, they would be eligible for the European Central banks outright Monetary Transactions Program which would allow the ecb to buy as many bonds as necessary to put money into the economy and control Interest Rates. Drowsys the peoples bank of china reportedly considering a rate cut to its deposit rate. It is currently 1. 5 . That has not been done for a long time. It would not have a direct stimulus, but it would make it easier for banks to lend by widening their margins some. A lot going on around the world as Central Banks continue to deal with the crisis. Alix thank you. Bloombergs michael mckee. Now i want to turn to overall markets. We could have had a two day rally which we have not seen in a month. We are seeing futures and european stocks pair those gains. Danny, walk us through the morning. Close to getting that second day of gains. It would have been the First Time Since midfebruary. We started on the back of that historic day yesterday, the dow soaring the most since 1933. It was the hope of stimulus. It got into a real rally. Ago, we minutes or so saw stock futures and european stocks in the red. All down nearly 1 . It is hard to put a finger on what exactly this is. Perhaps more traders coming online, or the headlines coming out of spain. One of the most deadly days for coronavirus. Fiscal like to see stimulus, but in the same vein it is treating the root cause of the problem fears over the coronavirus. As it spreads, the economic hit that is taking. Volatility remains high. Goings something that is to hold back investors from jumping back into stocks. A lot of volatility sensitive investors. It is important to look at positioning at these times to get an idea of investor capitulation. Bloomberg has learned one of chinas nearly chinas wealth fund dumped about 50 of their assets. Risk parity tends to be a whipping boy for equity market selloffs. Everyssentially hold asset and weight based on volatility and have a lot of leverage to the returns. The theory goes they exacerbated selloff. The good news is, if a lot of funds had done this, in general they have less to sell. A lot of positioning indicators show us that capitulation, the extent that these funds could sell, we are not quite there yet. Alix it did not help the targets. They are not doing share buybacks. I think target is a fascinating one to look at. Sales surgedh because people are stockpiling. Not just target, but grocers as well. There stocks had done relatively well. Their, in strapping guidance and canceling buybacks, they said there is so much uncertainty. We dont know what is going to happen. Even companies you think are safe as we get the economic hit from coronavirus, they might be under threat as well. That is something that weighs heavy on markets. Then you look at a tech heavyweights like facebook. This is what we were discussing about twitter. Even though there has been a surge in uses of these social media companies, they dont have the ads they once did. These add Companies Need to retain their money as many are dealing with the effects of the shutdown. One high note is nike. Nike beating estimates at the height of coronavirus in china, sales in the region only dipped 5 . That is better than strategists had thought they would do. Their playbook, a heavy concentration on the confit ecommerce. Alix thank you so much. Dani burger. Watching,story i am Weekly Mortgage applications fell 29. 4 . The most since 2009. The shutdown and related turmoil is pushing costs higher. Take a look at the 30 year mortgage fixed rate, increased eight basis points despite the fact that the fed has cut Interest Rates to near zero. The government trying to take steps to alleviate that pressure to consumers, until that happens rates will likely remain elevated. We will break that down into the program. We are going to talk about more good morning news. Happy wednesday. This is bloomberg. Alix welcome back. News, trade analysis. Joining me are our inhouse team. Mcglone, and mike mckee. You explain why we are not seeing continuation of the rally today. Is there Something Else to be addressed . Volatility levels are still elevated. You are actually seeing some of anse auctions spain had 11 billion bond sale. Nestle, some of these bigger corporates passing the bond market. That is a bullish sign. You need to see a lot of this taken down. Youre seeing obviously spreads coming in a little bit but in the short end of the curve, we still have reasons for alarm. Are still seeing commercial paper treasury elevated. That does not seem to be going down despite some of the feds best efforts. That is one reason to take a pause here. Upx mike mckee, it rings for the clocks are. Take a look at japan. Down 5 billion in swap lines in terms of japanese banks are these are huge numbers. Michael the dollar funding market is a concern although it is starting to loosen up. The fact that the japanese can take that money is good news. It shows swap lines are working. If we are getting money to the markets that need it that is important. Spread inerns about some markets, but most are coming down at least slowly. 0. 3ercial paper bit was this morning. We are waiting at the moment to see what happens with the fed buying commercial bonds Corporate Bonds with that program gets set up. We were talking about what is going to happen with the main Street Funding facility. That will be important as well. You mike mcglone, what are looking at today . Damian i think what michael we are seeing the end of the beginning of the stock market shakeup. What is happening fiscally now is a known known. It is a reflection of the extent of the global recession which seems to be just kicking in. At is historyok of stock market corrections. The probability of the low being in his very low. The probability of the low being in in gold and bitcoin is high. We have stimulus right now we have never seen before. Had a sharphave rally in the stock market is itlly bad because when happens that quick, typically with a 50 correction, maybe 2500 and the s p 500. We would be lucky to get up there. We are not doing buybacks anymore. We are seeing mass amounts of wealth destruction. The end in sight for this stimulus to support golden bitcoin . Thats not going to change. I dont think until the dollar starts ticking down. Thats when i turn it back to my colleagues. Why would the government consider to stop priming the pump until the dollar or bond yields tell them not to . I sit nexte and which other in the office. Full disclosure, he knows as well as i no one is going to tell you where the dollar is headed next. If you want to know where you put your money, i put it in stayathome stocks like amazon that have done rather well. With asia reopening for business stocks that have not. Casinos, etc. If you are indeed looking to put a toe back in the water, look at the guys who got hit the worst. The reopening asian equities are probably the first place to look. Alix i think it is important to think as we try to stabilize in terms of fiscal monetary stimulus, what is the right question for everyone to be asking . Two. One, what is the status of the disease . We notice our problem here and in california but it is is it going to start breaking out in other places . How does that delay a return to normal . What kind of relief are we going to be able to get . The most important thing to me in the stimulus packages the lending to Small Businesses to keep them going so that people have jobs to come back to. I will be interested to see the details of the package because the question is if you lend money to companies to keep people on the payroll, what about companies who have already fired everybody . Which is the status quo for restaurants and bars, and Small Businesses in the new york area and probably around the country. Alix 100 . Mike mcglone, the right question. Mike when can we get back to work . When can we get back to work and not have to worry about relapse . Our trip our president is trying to dangle carrots, but if we look at hong kong as an example we could do it soon but right now it is not on the radar. I think we need to see some optimism and it is not there yet. By april 12,ening doesnt totally seem to be cutting it. When are these longshore carries going to work again . When our offshore credits going to put their pill back into markets which are all 15 here today . The low yield is relative to the high rate of currency. Ruble are all down relatively speaking about 20 . We need to see them rally or come back. I think you are seeing a bit of that now. Alix to that point, you said yesterday damien we are getting to the end of the quarter. In equitiesso much they have to buy so much in treasuries to offset that. Can we take these moves seriously . Thean i can tell you what data says. Despite the fact we had a rally yesterday, hedge are down 9 . You look at Asset Managers what is interesting as Asset Managers use etfs their liquidity sweep. That is why you saw the in all these etfs. I think the first day in over two weeks of inflows into all of those etfs has got to tread back in. We need to be watching that. Catch ups, so good to with you. Always appreciate it. Thank you so very much. Coming up, the weird thing happening in the gold market. This is bloomberg. Is is bloomberg. This is bloomberg daybreak. We begin with billionaire , he laid off roughly 40,000 people at his casino. He is calling on the government to allow businesses to reopen. To avoid economic disaster. Mr. For tita owns the Golden Nugget casino and restaurants including boeing will reportedly resume production of the 737 max jet according to reuters. It was grounded a year ago following crashes. The plane was boeings best seller. Shares in nike are higher. Online order growth helping push sales past estimates. That suggests the company is weathering the pandemic. Your Bloomberg Business flash. Alix thank you so much. Now more on the pandemic and what it is doing in markets. Some really weird dislocations. One is in gold. The whole thing has forced the main u. S. Exchange to take action. Shutlobal pandemic has down physical trading routes as investors are raising the middle. That makes it harder to trade. The result is that gold futures shot to the highest premiums to the london spot price in four decades tuesday. The difference was still nearly 40 an ounce. You just dont see this in the gold market. The last time the spread was this big list the 1980s and there was an oil shock and the iranian revolution. Experts who have been in it for decades emailed me like, this is crazy. This is so robust for safe haven assets. It felt like we were going to do better today, but it didnt work out. We were looking for two days of gains but lost that. Target cutting guidance as well and scrapping buybacks. None of that holding up for markets. You still see a bit in the treasury market. 41 billion dollars worth of 5year notes coming online later today. Safell see what kind of haven demand there is now as the seven years the outperform or. The 10 year yields are down two basis points. Is 9 of gdp stimulus for the u. S. Enough . Can the European Union match it . Is it enough to offset the declines . We will break things down including portfolios that include banks and oil. Bloomberg. These days you need faster internet that does all you expect and way more. Thats xfinity xfi. Get powerful wifi coverage that leaves no room behind with xfi pods. And now xfi advanced security is free with the xfi gateway, giving you an added layer of network protection, so every device thats connected is protected. Thats a 72 a year value. No one else offers this. Faster speed, coverage, and free advanced security at an unbeatable value with xfinity xfi. Can your internet do that . Alix welcome to bloomberg daybreak bloomberg daybreak americas. It looks like we were set up for a two day a two day rally but gave up those gains. The dow slipping into positive territory but it is all relative. The dow had its best day since 1933 yesterday. I did want to highlight, banks inthe dow had europe potentiallt see them say no more dividends. Tat is what jeanpaul moves if you switch of the board, you see the dollar is a little bit weaker. He also see a bit into the bond market. We have 40 billion coming into the bond market. The two year yield a little be casted a. Sincethe biggest 2009. It means there is a lot of oil right now and nowhere for it to go. Upt do you do when you wind having a huge stimulus package and have to real reallocate your profile you . Coal, it is going to that up so early for us. What fee have seen in strategies is that scrapping there 2020 guidance, they have no idea what the s p is going to be at the end of the year. How do you model it . Ceo of merrill was up there giving his numbers and targets. He is probably not far off which is that the market is probably not going to end up more than say 10 10 20 max. Now intaposition we have equities is such that we are setting up a dash for cash all over again. Arere starting from we not starting from the worst recession in 70 years, we are starting from a vague hiccup. Same time, households and consumers are doing wonderful. It couldnt be better going forward. I apologize, i had my fiveyearold sitting next to me. When you take a look at earnings revisions, at what point do we hit the bottom . How do you look at that in terms of or downside to come . Cole we came into this with a high personal savings rate among u. S. Households. The ratio was incredibly high. Ready for this. Businesses were not. Thats what that is what we are seeing left and right. That is why a lot of the stimulus packages tied to Companies Getting more cyclical business. You saw the news overnight about facebook. Is what wego wrong are likely to see. The weakness could already be seen. The cyclical businesses already is a lotto where there of upside in cyclically oriented economic stocks that have been tied to what is going on in places like travel and oil. That is where a lot of insider buying has been in comparison to other parts of the market that have not had insider buying. Have an interesting take. Target is your top holding. He saw them scrapped their buyback as well as their 2020 guidance. Do you still like the stock . What do you do with it . Cole if you can go back a little more than two years, target was left for dead. Weathered thiset storm really good. Obviously there businesses impacted in the shortterm. Those are not the best opportunities from a 1224 month perspective. The long bets are going into places like where you can find all the insider buying you could have dreamed of. Pessimistic as possible. You came into this negative, now they can tell you there is no foot traffic. The problem is, what is going to be going on in two years as markets reprice . There is going to be money made in cyclically rented businesses like that. In other parts of the market we could see quite a reversion in value versus quality. That would be quite a conundrum for the market. That is why a mentioned earlier, higher numbers going would not go much higher. Higher would not go much higher. Things that are the cheapest are so small in the market today. Alix can you like a stock like target without buyback . Cole we have the biggest demographic and history. We are their best consumer. That demographic is in good shape. 3040yearold family. That is a lay for target business. That is their single biggest demographic currently. That is wonderful. Things tied to older age would be more interesting here. We might be peaking Health Care Spending when you talk about the total federal spending, this might be the peak because we know we are not growing any new baby boomers. To cause a lot of stimulus on the side of health care. This is going to aggravate where the growth in the economy is going to be by ages. Alix lets go to your number six, occidental petroleum. Oil prices, the other is idiosyncratic. You have steve chase going back to the board. White do you still own this stock . Cole the Energy Business in general is a cyclical place. Use peter lynchs interview last year. He was talking about threebaggers in the space. That was much higher oil prices. Warren buffett bought occidental. People said why are you doing this . He said it is a price bet on oil. How does that look . The question is, are you dumb for 10 years . It just means you have egg on your face. We also have been buying chevron in our portfolios. The energy world is going to produce great economics because price regulate price and all this is going to do is shutdown capacity. The 50 Largest Oil Producers in america produce 80 of the volume. I not only expect that to consolidate further, but on the other 20 we will see far less players. Some of those businesses from a debt market perspective will not make it. Think i mostly would agree with you. Not pioneer . N eog or pioneer, we like occi for particular reasons. Up to the friday of the saudi oil shock, they had insider buying although we have to the day before. Punch it was a 12 punch. Whatone is trying to guess magic looks like in these businesses while they dont have a clue what traffic is going to look like. We are theorizing this will be the summer that no one will be home. Demand we are up building up in the economy, people are not going to do exactly what they did, walk around their neighborhood for weeks. They are going to want to get as far away from home. That is not all through autos, that is going to be through airplanes. People are more likely to tell t ishow the oil supply glu going to dam things. Demand from up consumers. Just 35 a barrel would make peoples heads turned not even going back to 50 or more. Up with yourrap it other top holdings. Bank of america, j. P. Morgan, a lot of bank exposure. How do you view banks right now when you have a 10 year under 1 and the economy on lockdown . How do you model what those earnings are going to look like . Just one of the best ways to own businesses coming out of this. Here rage they have housing in january and february posted numbers that were knockdown drag out type numbers. All this has done is put a hold on what is going to be the biggest spring we have ever had since 2007 in the homebuilding world which directly affects those banks. Banks werend that not lending at lower rates. You could not get the best mortgage at the best price of all time because the banks were not willing to lend at those prices. They also like to were practicing price stickiness on mortgages for refinancing that we have not seen going back quite a ways. The new Mortgage Business in that world is going to be very attractive. To if some lenders will get their years pinned back. Mortgage part is the most attractive type of housing. No question. See you. At to thanks for getting up early with us. I want to give you an update on what is making headlines outside the business world. Viviana we begin with the Trump Administration and the u. S. Senate reaching an historic rescue package to help the economy battered by coronavirus. Almost 2 trillion. Most americans will get checks, a number of industries will get bailout money. Small businesses will get aid to keep workers on the payroll. The Trump Administration debating a temporary deferral on tariffs of imported goods. A threemonth delay is being discussed but Domestic Trade associations are pushing back. They say differing tariffs could hurt u. S. Businesses. We ended in the u. K. Where bloomberg has learned to the British Government plans to close parliament temporarily. It is the governments latest attempt to slow the growth of coronavirus. Parliament was scheduled to take an easter break. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg one other story, the waffle house. How bad the pandemic actually is. The restaurant is closing 365 locations. More than 1600 remain open. It isain rarely closes, what makes the waffle house awesome. Is known as to what the waffle house index. You heard that, thats my daughter saying waffle house. Former agency heads said if you can get there, and the waffle house is closed, that is really bad. President trump is set to enlist the help of Hedge Fund Managers to revamp the economy. If you have a bloomberg terminal, check out tv graphics,eck out a or anything you missed you can scroll through. This is bloomberg. This is bloomberg. Viviana this is bloomberg coming up, Deutsche Bank chief economist. Viviana youre watching bloomberg daybreak. Moodys downgrading its longterm Credit Rating. Moodys says the Japanese Investment firms plan to sell off 41 billion threatened value of its entire portfolio. Facebook, the giant warning its advertising business is taking a hit in some parts of the world. At the same time, the social networks as coronavirus outbreak has led to an unprecedenteds and precedented spike in usage. Spent on facebook has jumped 70 . Hamilton medical and talks with an automaker to increase production of ventilators. They could open a factory in reno, nevada. They wont say who the automaker is. They knowledged there have been recent talks with general motors. Alix thanks so much. Wall street beat, three things wall street did this money. Ben, the fed tapped blackrock to shepherd debt buying programs. Julie joins us now. President trump meeting with hedge fund guys, do you have any insight into what actually happened . Explained thates the conversation centered around the economy. As trump is looking at reopening the economy and assessing the muche being done, while so business is closed. Who did he call upon . Ken griffin, paul tudor jones, john paulson, who has played a big role in investing in the last financial crisis, and Stephen Schwarzman who has already had a relationship with the president. Ken griffin as well we have seen pop up a couple of times. It is interesting. Ed issue. Two prong on the one hand, the public really does not love it looks for washington to be on wall street. s saypeople stay they wish prior administrations were this open with wall street to make changes quickly. Is, we heardstion yesterday about President Trump saying he wanted to reopen the economy by easter. Did that come from wall street . Or, can we not make that correlation . Not necessarily. The thing is, opening the economy by easter as the coronavirus is surging that could cause more harm. I do not think there is anyone on wall street saying the economy needs to be open. That said, everyone is feeling the damage caused by a lot of closures. Also, a lot of had Fund Managers are able to capitalize on volatility. That isst of flourishing. Technology, for example. The ability to go short some companies. Are ableet best minds to process it at any scenario. Alix lets go to the secondstory, apollo snapping a Portfolio Company debt. Investing a lot of opportunities at this point to scoop up distressed assets. I have heard this story before. This is a classic apollo playbook. According to my colleague, it has a private call that says the coheads of private equity kept saying it is time to shine for apollo. They are looking at more than 250 ways to benefit from buying into distressed assets ended two ways to buy debt of existing portfolio companies. Classic apollo playbook. They have a mixed bag right now. Theirave hits on some of portfolio companies, especially the Energy Industry and the consumer industry. That does not mean they wont play a big part in a lot of the Distressed Companies in the bailouts we are seeing. Come flipside, this will with markdowns in terms of what is in their portfolio already. Do we have a read on how bad that could be . We dont. There is a report out by mercer betweenrivate equity 2016 and 20 be the hardest hit. There will be markdowns. That does not mean again that people wont be looking at the longerterm outlook for how much apollo will be ready to pounce. Among their peers, they are the largest credit manager. Alix lets get to the story, fed tapping blackrock. Can you walk us through how the fed is going to use blackrock and why . This is an extraordinarily distinct story. We have been hearing for a while that the fed and the treasury would be looking to the private sector for facilitating a lot of these unprecedented programs. This is in regards to the bond facilities for corporate debt and commercial mortgagebacked securities. They are using a unit of blackrock called the Financial Markets advisory unit. Tot was created in 2000 date address a lot of the problems 2008had been created in to address a lot of the problems that had been in that crisis. Appreciated. Good to catch up with you. Here is one story that caught our eye as well. If you need insight into your next trade, the answer might come on your instagram feed. Social media has become a gauge about how policy measures affect the outbreak. And ups at traffic gps data, officials can see if people are actually staying at home. United aired up and up to alix talk about trying to get a leg up. Bonds to, from fx to stocks, volatility is elevated even if we have found some kind of base. If youre jumping into your car, tune into bloomberg radio. This is bloomberg. Alix time for traders take. Were looking at volatility levels. For me, it is currencies, equities and bonds. What is most interesting is equity of all has spiked to 2008 levels. It is currency which is interesting. It is coming off, but at its peak it was nowhere near 2008. We only just touched euro debt crisis levels. Yes, things are looking better, but for me, if things turn worse the ceiling is higher than this. I remain cautious for sure, but it is good to see the balls are coming in because that refutes is introduces hedge costs. That reduces hedge costs. Alix have all the carried trades unwound . Have we fixed all that yet which might help volatility . Damian on this quarter, the long short basket getting on the shoretel yulia damian that is a massive move considering that in each of the last eight years it was up. Long short carry in emerging markets has not been working. I do not see investors moving not into tha certainly with the yen indicating a lot of hoarding of dollars offshore. Alix fair enough. The second question, is a possible to get a world where equities dont selloff anymore but you still have elevated volatility . Mechanically that would be difficult to do. There are certain levels for you could see that but we are still very elevated in the vix. Even a stagnant market would cause to come in from these levels. Equity vault 7 summer to move. Equity is going to be the first to recover from this. It is bonds that are less liquid and it will take time for asset classes. Alix always good to catch up. Bying up, we will be joined to give you a good portfolio allocation. We look like we may be able to extend the two days of climb we have not seen in a month. Points. Res off by 47 it is mixed in europe as well which may also be needing indicating indecision. Asset classes is into the bond market. It is a weaker dollar story put off of low secession. Commodities keep rolling over yet again. Oil had a nice surge but now we are up by about three Percentage Points within the market. This is bloomberg. Alix welcome to bloomberg daybreak americas. Here is everything you need to know. At last, we have a deal. Strikes ainistration deal with democrats and republicans on a rescue package reaching over 2 trillion. It will pressure resources to the frontlines of our health care fight and inject trillions of dollars into the economy assesses possible. Likely pass in 48 hours and beyond the president s desk. 500 billion dollars for these industries that have been so incredibly impacted by the economic effects of coronavirus. The plan equals about 9 of gdp and would bar any business owned by trump or his family from getting loans from the treasury. Finance ministers in europe inch closer to the bailout fund while refraining from settling differences. Stimulus talk continues in germany. We are getting word on a program to sell bonds, raise money and spend money. European finance ministers have tentatively agreed on a program to help bailout countries like italy. This as italian authorities report another 700 people died in the past 24 hours. Despite strict rules keeping people in their homes. Pres. Trump i hope we can do this by easter. I think that would be a great thing. President trump fis governors by floating the ability for the economy to open by mid april as Companies Manage the fallout. Guidance andpping canceling buyback. They said there is so much uncertainty, we dont know what is going to happen down the road. Even companies you would say are economic hitt the from coronavirus, they might be under threat as well. Its best dayd since 1933. Alix it doesnt look like we are going to get that back to back again but you saw equities a little higher. Target cutting guidance as well ask happening buybacks. That is weighing on indices as well as futures now. It is a typical rush to safety. We are still buying bonds. The dollar is off the low but getting relief after the monster ride we have seen. Againrolling over once and gold still in demand. Whether or not they see fluctuations in gold, which is bananas. The you have higher stock prices then you do which is it shows how strong the demand is for safe haven assets. Joining me is Deutsche Bank chief economist. The big story of course is to trillion dollars stimulus package. I want to quote catherine man who said go big because it is going to be worse then you think. Go now, later might be too late. Learn from the lessons of the financial crisis and the european sovereign debt crisis. Too little too late yields a long period of sluggish growth. Plan p on a stimulus is a big enough . And somef it is loans of it is relatively quick. There are are different components to where the money is going, but the short answer is that america is essentially closed. Companies do not have any revenue. Workers are not getting salaries. From that perspective, it is correct to say we need support to household and companies to make sure we can build a bridge over the virus. Some say that loans are not going to do it. Tosome point, companies have repay loans and Interest Rates could go up. Is that going to be a longerterm hindrance than any recovery effort . I think it will be a support. The signal here is that there is a willingness to do something, and a willingness to do something quickly. We have been frustrated with markets over the last 710 days. Now it is here and it will start to work. It should be helpful both in terms of lifting wages and salaries with temporary measures alsopport households, but measures including activity the treasure is doing with the fed in terms of helping both small and large businesses. It is true the loan part could have issues in terms of creditworthiness, but i think the most Important Message is they are doing what they can. More might be coming if more will be needed. Background is by far the coolest work from home background. To the equity markets, when you consider when we are looking at a bare rally, or the end of the route and we are basting and finding support. Bit about. Is little with all the help from Central Banks has helped with liquidity. Of the extreme panic you have seen last week has faded out. Stimulus package should help. A lot of it is in the detail. I think loans will help on the margins, i think there is other things that could be done specifically helping them keep their employees would have done that a lot more help. In terms of citigroup, yes. Go big and do it quickly because the longer you leave it the bigger the package has to be. The other thing we have seen in many countries as they have to repeatedly go back to the drawing board and increase spending because whatever seemed ok a few days ago is no longer that. It does not seem like this seems like you want to be taking on a new more risk. There are three requirements we need. At the moment, two look like theyre being fulfilled. Starting toy is come through. The final thing is still going to be the rates. Until we have that, i dont take markets will feel confident enough to start to kick recovery. I thick helps helping us get to that i think this helps. That leads to two issues. One is as President Trump said, we are going to get to work by mid april. The other, the willingness for those in washington to go back to the drawing board every time and ramp up the stimulus we need. What do you think we are most likely going to see . The difficult thing about reopening the economy soon is then a lot of households and businesses will be very cautious in terms of going out. Bigs doubtful you eoc a rebound in it is doubtful you will see a rebound in Hotel Bookings if markets open up prematurely. It would be a muted rebound if we would go and say should no longer worry about the virus. To the second part, with the package today, we have now managed to flatten out the recession curve. What we need to see is a flattening out of the virus curve. We need to build that bridge and make sure we dont have overcapacity constraints in the health care system. We are back to watching what is going on with developments in terms of the spreading of the virus. Unfortunately, we are not we are seeing that in europe. We are seeing that elsewhere, but generally speaking it still uncertainty and the risk on risk off problem is back to watching what is happening with the spreading of the disease. Now the Economic Impact is at least being somewhat dampened by political actions around the world. Kevin thats a alix unless you flatten the virus curve, it is going to be harder to take on that risk. Is there going to be a sector or asset revoked asset reallocation you need to think about . As we would typically expect when you do have a recovery you tend to see everything shifting back to cyclical assets. I think there will be an element of that. Have that we will still destruction of productive capacity, it means people need to think about which companies have the strongest balance sheets. Which ones are going to last through the decline. There are still going to be measures in play, restrictions and activity even after the peak hits. It is about concentrating on strong balance sheets. Also, increasing exposure to cyclicals. If you are a medium to longterm investor, we think this is a transcriptional stage. There will be a recovery. At these levels, there is still some attractive positions, you just need to think about it as averaging in and holding. Targeto that point, getting rid of its buyback and taking away 2020 outlook. Can you only companies that are going to be slashing buybacks and dont have outlooks . That is a tough one. Stuff like Energy Companies which have been more than others. I would be cautious about those. Things supported over the years have been buybacks. They need to have exceptionally strong balance sheets. You need to have almost a deeper analysis of different sectors at this stage. Alix stick with me here. Coming up, we will talk about real estate under pressure. The fallout from coronavirus and some morning the cash crunch and we willffects the discuss that next. This is bloomberg. [please stand by] alix the Federal Reserve is trying to unclog the plumbing in the system. One area that needs help is real estate and mortgage markets. Investors worn they may not be able to meet cash calls. E are joined by claire boston all theyesterday it was talk about these mortgage leap year. What happened . What we have been seeing from Mortgage Rates is if you are meeting margin calls related to how quickly the value of securities have dropped, a lot of rates that have fallen into trouble our nonAgency Mortgages. Those mortgages have been punished by the credit crisis. A lot of loans to homeowners that we thought were going to be good suddenly looks like they might go bad simply because there are so many people out of work. That has caused a massive repricing. Like how does something this wind up playing out . How does it affect the broader Housing Market . There is a lot of concern about ability to lend for a lot of lenders. We have been hearing from mortgage lenders that are shutting off originations dani part of that is that in this environment demand is lessons these mortgages to play a role in keeping the plumbing of mortgages going. The biggest chunk of mortgages our Agency Mortgages backed by fannie and freddie. That is what the fed is buying. That system is still running relatively smoothly at this time. Alix when you take a look at what is happening with the mortgage world, can the fed fix it . One important aspect is that because some markets have been frozen for a while, credit markets for example, there was a rush to sell everything liquid. The first thing that was liquid was treasuries, than it was equities. Once those markets started to drop a lot is when we saw equities go down and rates go up. The next thing that was liquid turned out to be mortgages. That is why Mortgage Rates have moved up. They have moved up over the last seven days to more than 4 at 50 basis points. This is something that is worrying. That is why think the fed has been installing initiatives and attempts at trying to make sure Mortgage Rates do not go up too much, particularly when rates are low because that would be not helpful. Like the fed can only by about half of all the property loans. Others wont be eligible for purchase. Does that make this problem semipermanent . It is a difficult challenge for the fed interns in terms of how much credit risk they should cake this they should take. They ideally do not want to take any whatsoever. It comes down to individual markets, the question is how fast should they go. Themnk it makes sense for to think about this incrementally. Everything they do is extremely safe. Credit losses are likely to be low, but it makes sense that they go incrementally. If there is a need, they may do something later. Gradually saying, lets try to help markets a little bit is something i think is the most meaningful approach. Alix which leads us to the credit market overall. We have seen range open up a little bit. Claire, has the fed fixed or helped unclog the pipe when it comes to Corporate Credit . On the Corporate Credit side we are definitely seeing a bit of a relief rally. Just the fact that the fed is going to be buying a lot of those securities did give the markets some comfort. That said, it creates a winners and losers dynamic. We have seen junk bonds continue to come under pressure. That is for a lot of investors are concentrating and saying there might be pain and that alix . Indeed. What kind of default rates do we need to be bracing for the highyield markets . Mike this when we think about how this is going to affect the economy, one of the key areas is the credit market. The fed can help on the liquidity side and sovereignty inside, but you cannot change and improve the Economic Outlook then youre going to be looking at defaults and bankruptcies rise. At the moment, this could well be a very sharp and short shock. If we continue to see deleveraging, bankruptcies rising, then you are looking at potentially a multiquarter process. The fed and the government need to be directing a lot of their work improving Economic Outlook as well as starting to hone in credit spreads. Alix great point. Claire boston, thank you for joining us. See mesh this is bloomberg. Alix this is bloomberg daybreak. Moodys has downgraded softbanks Credit Rating from ba1 to be a three. Moodys says Japanese Investment firms plan to sell off assets and flatten the value of its entire portfolio. Shares of nike are higher. Online order growth helping push sales past wall street estimates. That suggests the company is weathering the pandemic. Quarterly results covering the early days of the outbreak. We ended in europe, the top banking lobby is asking lenders whether it should scrap dividends. The idea is to use the capital to keep the economy going rather than rewarding investors. The European Banking Federation is headed by jeanpierre me torsten slot of Deutsche Bank. Is this going to happen in europe . , as you have covered so well all these discussions about corona bounds have come out. As you can see on your bloomberg screen, they instead talk about out the firepower. This is not intended to be used for a virus as we have at the moment but the ideas that this gdpbe used for up to 22 of for up to 2 of gdp. In that perspective, 2 does not sound like a lot given the other number you quoted, in the u. S. 9 . A lot of this also has to do with guarantees and other things. See this as a first step which would be the europeans also coming along with the esm being supportive on top of what is already being done at the National Level for all European Union countries. Alix it comes with strings. Out . O you see that playing that is why i mean, the drafts are coming out as we speak. The end of the day, that is a smaller wrinkle in this debate. The issue is also, policymakers this is a turning point. Policymakers are proving they are on top of this. The u. S. Came a little behind everyone else in terms of what has been happening in europe, but we are now seeing politicians doing what they can to try to make sure that with the economy being closed, how do we make sure we have money still going to workers . Comingsame time, money to the benefit of consumers to be sure that we flatten out the economic curve and get through this without enormous damage to the global economy. [indiscernible] i think this is all helpful. I think it is going to be important to see what is in the details. When we look at how we are going to invest with regards to europe, i think you have to look at the economic downturn at the moment, it looks like europe is going to be worse affected. Clearly, Central Banks and governments are working as hard as they can. I am worried it is not going to be enough and we will need another paradigm being crossed before markets feel confident. Alix what would that be . It is the question. Purchasing equities. I would have said never that would happen, but given the way some have handled the crisis, may be that is where the ecb needs to start looking to pump up more confidence into the economy and start giving people a reason to start looking at europe again. Of testrson, what kind it still remains difficult to come up with an exact letter. Some markets are also seeing an i. Mosthe economy, it is reasonable to expect a u, or a muted rebound. Once we come out on the other side, households need to rebuild savings. Corporate need to rebuild savings. There is also a chance we will begin to see more discussions on the political side in terms of how can we make sure we dont get into this situation again. That debate will take place once we finally come back. The answer is we do expect a more muted rebound which is why there is a sharp decline in gdp. Q4. Re muted q3 and alix thanks so much. You guys are going to stick with me. Cameg up, preliminary data out a few minutes ago. The focus will be tomorrows jobless claims numbers. Point 4tanley had three million last week alone. It could get brutal. Welcome to bloomberg daybreak americas. Equities cant decide if we are to do a twoday rally for for your going to end in the negative. We are pretty much flat as we head into the report good numbers. There was some buying on the back end of the curve. The dollar is coming off its high level here. Flipping as well. Oil keeps rolling over. Durable goods for february coming in at 1. 2 . Much better than estimated. Sequentially much better as well. Then you look at capital goods. If you back out nondefense, you are looking at. 7 . Perspective, the overall number coming in a little bit better than estimates. As well asee with me torsten. Moment before we get to jobless claims. It is your read on numbers for durable goods . It appears there is some sort of coronavirus effect here. The capital goods numbers, that is the one that everybody watches. It is twice as bad as forecasted. Course, the capital goods shipments down. 7 , also much worse than expected. The revisions were worse, at least in shipments. More weakness in the business sector in the First Quarter going into the crisis. Attentiongoing to pay to these numbers because it is a given that things are terrible. Alix a totally fair statement. Interesting what we have learned about pmis, obviously the Search Service sector is getting taken out to the woodshed. Manufacturing might not be as bad as we thought. I wonder how long that would hold . They are not holding up in the sense that many manufacturers of close the automakers have closed all of their plants. Which means that all of the suppliers are going to have to close their plants. You are going to have this Ripple Effect across manufacturing. Boeing shutting down for two weeks. They are one of the biggest suppliers in the world. Manufacturing is going to take it just as bad, it is that manufacturing is only about 11 of the economy now. We are not staring at factories all day whereas the restaurant going out of business is something we are familiar with. Alix its a good inside. How are you modeling secondquarter gdp hit . Sten in terms of the market, we have been looking at some of the data from home base. Homebase base provides payroll services. They have a survey of the companies they work with. That shows day by day that we have seen gradual layoffs of hourly workers. The amount of hourly workers working relative to january is 2 lower. Nationwide is out 80 million workers. The impact on gdp is going to be significant. What this could imply is that you could see the Unemployment Rate jump as much as 10 Percentage Points in the u. S. , which would be a very bad scenario. Due to is that you gdp . Torsten that pushes gdp down quite hard. The numbers we have been looking at have been a function of, will the lockdown last one month . Will the lockdown last two months . In china you saw gdp go down 50 quarter over quarter. Lasted in wuhan about 50 days. If you do that exercise and ask what that does for u. S. Gdp . If we were a little bit later, and if the lockdown last between one and two months, you also get to the impact on gdp water over quarter in q1 could be down as much as 20 , 30 . As mike just mentioned, airline factories are closed. All manufacturing is closed. The drop is going to be very severe. Alix its a great point. How do you look at it . It is a foregone conclusion that this is going to be a very sharp correction. The only question, how long it goes on for. This is why jobless claims are going to be so important. I think the government has an ability to restrain that. If they were to offer to continue look, we will to pay your employees, that is going to mean the Unemployment Rate does not rise as much as it could. If they can do that, you could see a sharper rebound. If youre going to see unemployment rising to the 10 level, it is going to be that much more difficult for the economy to get back on its feet. Thing is thatting europe has taken a very different approach. A sickly shortening hours in an attempt to keep workers on the payrolls to avoid the situation we have to lay off millions of people. We will find out which approach has been most successful. If the goal is to keep people on the payrolls, it is about limiting as much as you can the layoffs and Incentivizing Companies to prevent them from laying off too many workers in this temporary shock. It is interesting to think about, youre going to know that things are Getting Better anecdotally long before we get any data, since the data are delayed. Numbers foruary durable goods. Things are going to come back slowly. You will see Companies Start to start a. How do you trade a company if you dont know how much business they are doing . X has goneat company back to work, but you are not going to know how the economy is performing for some time. Seema you are spot on. Even earnings revisions it is difficult to have a grasp of where that is going. We see some numbers 30 decline. The market almost pricing and a 50 decline. At that point it becomes important to look at the country by country situation. Which ones are receiving Government Support . Europe is certainly trying to protect their workers. Once they start up and running that wont struggle as much. We will have anecdotal evidence, but that will give you a view into how quickly they will recover. The government stepping into pay wages, that tells us the u. K. Economy might be able to move faster. From the Company Perspective the u. K. Does look like a more attractive proposition than the u. S. Alix from that perspective, do you need to look at domestic equities if you were going to take this on a country by country basis . Seema maybe. With mastic equities you are avoiding the different speeds at which people are going to be lifting the containment measures. The strict assessment of how economies are doing. In that way you can see that this is an individual country perspective. You can adjust fiscal policies, zone out things going on outside. It means Domestic Companies may not have the complex supply chain issues that we will be seeing from the more multinational. Alix torsten, you do get a Company Opening its doors, can we expect them to hire everybody back . Is this one of the situations where each business will look different than it did two weeks ago. Is absolutely the interesting part of this. The labor market experiment of same, we are willing to keep people on the payrolls. In some cases there is wage compensation. In some Companies Government pays 75 of salaries and Companies Pay 25 . You have other designs. Versus the u. S. Where you completely fire people and call them up two months later and say, can you come back . It is interesting to see, what with this mean in terms of how quickly you can get workers to come back . Given that we already had unemployment at the lowest levels, also, can you find the right workers, can they become productive quickly . It is about figuring out what is the speed with which we can get back up again . It is clear growth weight will be high. Rates will be high. It remains to be seen which solution, namely keeping workers on lower hours and lower wages, or whether the solution of letting them go and then hiring them back. Alix mike, that is what i was thinking about too. We got to the point where we started talking about wage power and being able to leave one job and find another job. I feel like that conversation is off the table. If you are anl employee and you have Transferable Skills and companies are trying to ramp up quickly, you have a little bit of darkening power. Bargaining power. That may not work out that way, because people will be anxious to get back to work, but i wonder given the low 1 low Unemployment Rate what it is going to be like. The other side of that would be companies go out of business. So there is a lot of surplus labor. It is going to depend on how long this lasts. We were talking about the idea of, do they get a to companies who have already left their employees go . Alix really good conversation. Clearly, this will go on for months and months. Thank you also very much. I appreciate talking to you today. We want to give you an update now on what is making headlines. The Trump Administration and the u. S. Senate retain a package. Trillion up almost 2 in spending and tax breaks. Getmber of industries will bailout money. Small businesses will get a. Now to spain, the nation reporting its deadliest day yet. There were 738 fatalities. This bringing the death toll to more than 3400. We and in the u. K. , that is where Prince Charles tested positive for coronavirus. The prince is 71 years old. Mildort said he displayed symptoms but is in good health. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Alix thank you very much. Coming up, youre going to speak to a ceo for my food brand. That is going to be on supply chain issues, hoarding, and the overall food sector. Any charts that we use go to gdp go. This is bloomberg. Coming up later today on bloomberg markets, alan blinder. Alix s casino hotel and restaurant. He is calling on the government to allow businesses to reopen in a couple of weeks to avoid economic disaster. Mr. Pardo owns the golden egg casino. Golden nugget casino. Note to boeing. The Company Reportedly will resume production of the 737 max jet by may. The max was grounded following deadly crashes. The plane was boeings best seller. E end with facebook it is warning its advertising business is taking a hit. At the same time, the social networks as the outbreak has led to an unprecedented spike in usage for some services. In italy, time spent on facebook jumping by 70 . I am viviana hurtado. Alix thanks much. Time now for bottom line. Today were going to focus on the food sector and supply chains. ,oining us now is Adnan Durrani ceo of saffron road. You have also been in the industry for many years. From where you set, think you for joining us. What is the supply and demand picture looking like . Adnan thank you very much for inviting us on the show. Big fan of your program. It has been pretty crazy out there. To say the least. You are seeing tremendous demand right now. Obviously, in the supermarkets. It is not just toilet paper. Folks are loading up on a lot of frozen items, which is where we play. Had ales of been surging lot of the top retailers we are in. Alix have you noticed what type of things they are buying . There have been stories about how we are sacrificing carrots. Has there been some sort of rotation . Adnan there has been a shift. I have been in the business 30 years. I have been i have seen a lot of spikes during crises. Y2k, 9 11. In this crisis it is very different. People are not going to restaurants. They are not going to cinemas. We have seen a big shift that hasnt happened in other crises. People are seeking out healthier foods. They are increasing their inhome consumption because they know they cannot go to restaurants. They are either going to be cooking or buying healthier products. We feel that is where our mission is. Verynk people are concerned not just about this virus but about others that could come later. They are being much more discerning about the types of products they are buying. Shelfstable as well as frozen. In past crises where you have seen belly fillers taking off, we are seeing tremendous surges in natural, organic products. People want to fill their freezers with products that are healthier and restaurant quality. Really interesting insight. We have heard some conversation about hoarding. Not necessarily here in the u. S. , but other countries. Have you seen anything along those lines . Adnan we have seen that. It is happening in europe as well. We are seeing that surge. That has caused a bottleneck in the distribution and warehousing Logistics Operations of our products partners. Describe more about the disruptions . Sure. For example, one of the problems we are seeing as you see where houses filled up with inventory, but it may be very hard for them to get that to the supermarkets because of the surge in certain items. Maybe whole foods might have 40,000 products, a walmart might have over 100,000. They have a finite number of trucks that can make a finite number of stops to those stores. There is a bottleneck on the distributional, logistics side. Temporary, butis we are seeing that happen quite often. Alix in terms of your own aspects, are you hiring more people to do with all of this . Deal with all of this . What is the knock on effect from your business . Seeing somes we are nice, incremental increases in business. We actually predicted something this might happen to her three months ago, so we built up our inventories 200 . We had already accounted for that. Workingour staff is overtime, we are all working from home out of safety. We have been able to manage with what we have. We are one of the few vendors that can supply the retailers, because we did not flush our inventories aggressively two months ago. To operate full throttle currently. We are not only able to supply them but we are also continuing to increase our production, taking this may not last another two weeks. This may go on at least a month. I think you are going to see a change in lifestyle. Numberry proud of what a of Retail Partners of ours have been doing. Kroger, walmart, whole foods. They are setting aside funds to not only help we are doing we are doing a, lot of things to support them the retailers have stepped up, they have increased wages for their workers. They have set aside funds for health care heroes. We are seeing an increase overall, at least for now, in the waste cycle in our industry. Talk to was good to you. Thank you so much for your perspective. Up, stocks trying to eek out a second day of gains. If we havek about seen a market that has reached its bottom in todays technically speaking. Due to bloomberg radio, heard across the u. S. This is bloomberg. Time for technically speaking. Joining me now mike. Have we had a bottom . Had a bottom,ve which is unlikely, even the situation, the first thing you look for as a 50 retracement. If you look on the lefthand of his this chart, that is the highend. The highest falling distribution was around 2000. That remains a target for me. In times of severe stress you go to means. We still have more lower on the downside. Alix lets take a look at the second chart. It is the nasdaq. You seeing there . nothing, that is the problem. This is been a minor correction so far. I direct you to the upper part of the chart. It is a trendline. It comes in around 6000. On a normal recession correction basis, that is nothing. In 2001 it got down to around 50 . Me, that is the problem. We havent had a decent amount of shakeout daily the nasdaq. We havent even gotten below that in 2018. I think given the nature of this global recession is more likely to see a normal correction. Alix gotta leave it there. Thanks very much. And the open, up next. This is bloomberg. Jonathan from new york city, for our audience worldwide, good morning. This is the countdown to the open. We have a ray of light in washington dc. A 2 trillion package. In the bond market, a 10 year yield that is relatively unchanged. The story of the last couple of days in foreignexchange is a weaker dollar. It stays that way against the bulk of g10. A fantastic lineup of guests. I am looking forward to exploring through some of these issues, these complex problems with all of you at home. Lets begin with the news out of washington dc. Kevin, it was late last night but we have a deal. Kevin we have a deal. The white house and