22. 11. Amazing. Vonnie isnt it just . In the u. S. , we saw a bit of a fluctuating session overnight. Futures is rebalancing, and lots of movement into equities, where there had been selling earlier in the month. Primarily, Health Care Companies and all of those Companies Whose ceos appeared with President Trump in the rose garden are leading the market higher. Deller index the dollar index at 99. 15. Guy lets get more insight on what is happening today and what can happen next. Joining us on the phone from london, Morgan Stanley chief cross asset strategist andrew sheets. Jp morgan thinks the lows are in for stocks. Goldman sachs isnt quite so sure. What do you think it Morgan Stanley . Likely we do think it is that we saw the lows on march 23. I think certainly, some level of a retest is possible as you get through tuesday, some of those monthend flows are going to go away. The Economic Data is still going to be bad. Case trajectory in the u. S. Still looks bad. Case we certainly some could go back and retest that, but i dont pick investors should have to think about this by trying to catch the absolute bottom. Aboutk it is taking whether these are risk where word or not. Where we think the real opportunity is the best, thats where we have moved overweight. Guy corporate credit. Can you be a bit more specific . Int week, we saw a issuance the primary market when it comes to the ig market. We are clearly going to see a lot of Companies Going under or becoming stressed. Would you see the opportunities . Andrew i think that is what is interesting about the credit market. It is often when default rates are lowest that it is at its most dangerous. The market valuations are the most expensive. Is usually when the market and really unusually short period of time. I think you are right, we will see a quite bad recession in the u. S. , and globally, we think we will see a large default rate. But for the credit markets, what matters is what is already the expectation of the market, and we think that quite a bit is already priced in. I think you also will have, as you can see some new deals get done in the market, i think that will actually help confidence shows that the market isnt shut for everybody, that you do see the ability of some companies to that has some positive ramifications. Vonnie how concerned are you about places like mortgage bankers, for example, or consumer facing companies . Is there the possibility that there will be some kind of event in those areas of the market where the fed cant guess, and that will have an impact in the market overall . Andrew i do think you raise an important point. I think there are elements of this that are not as bad as 2008 and 2009, and there are elements which are a lot more challenging. It is more challenging i think for governments to support the people because many cant leave their house to spend, or it is more difficult to spend, or people dont feel competent to spend because of what is going on, and maybe also a lack of confidence in some governments response. And also, there are parts of the market that i think are easier for the fed to support and provide liquidity to, and there are pockets that are more difficult. I actually think that if you look across some of those more i satiric parts of the market parts of the market where it is harder for the fed to provide support, we think some of those are parts of the market that are now off of the that are now offer the highest risk premiums, so the parts of the market with the most aggressive support have been the first to heal, and ultimately, those areas will get better. But i think this is an important part that i think investors need to keep in mind. Be a drawn outo recovery. This is not going to get better overnight. We do think the risk reward is improving, and that is especially true in mini pockets of the credit market. Vonnie what do you foresee for the consumer globally . Do we see a wave of defaults starting in china and moving here . Andrew we dont think it is so much a story of consumer defaults, but i do think you are going to see an enormous level of consumer retrenchment. I think unfortunately, this is going to lead to very high on employment rates in the u. S. , and europe. I think this will lead to a real hit in Consumer Confidence because people will feel less confident about the job, less confident generally about when all of this will be over, when life will return to normal. I think even though governments are trying to provide stimulus and inject money into consumers, we think that the consumers are really going to say that surplus. They are really going to be remiss. They will try to avoid spending it both because it is more difficult to spend, but also because they want to build up more of a cushion on that uncertainty. We dont think the risk is necessarily widespread mortgage defaults like you saw in thousand 8, 2009, but i think the risk is that Consumer Spending takes a lot longer to come back then people expect, and ultimately people will have saved up and we expect them to feel more confident, but is a to turn thee economy back around this year. Guy it sounds like you think things are going to be choppy for a while. Vix is trading just sub 60 right now. Do you thing volatility remains elevated during this period . In the past, Massive Central Bank intervention has repressed volatility. Do you think that happens again, or do you think we stay north of 20, 30, and maybe close to where we are now . Andrew i think that is actually a really important thing to focus on. We think those volatility levels are a funk and of the norm us volatility we saw in march, but arent sustainable, and i dont even think are levels are a function of the enormous volatility we saw in march, but arent sustainable, and i dont the type of movement that that, even in recessions, has been unusual for more than a couple of days at a time. I think that actually come a volatility markets are compensating investors quite well for the uncertainty. Yes, there is a lot of uncertainty, but it is priced for that. From across asset perspective, that is something we like quite a bit. We are generally sellers of volatility across asset classes, and that is one of the risk premiums we expect to come down first, and that is also most attractive. Vonnie vonnie stay with us staying with us is andrew sheets, chief cross asset strategist at Morgan Stanley. Now with more on the markets is kailey leinz. Kailey we are right around the highs of the session in the u. S. Obviously come of stimulus passed on friday brought some optimism. Steam seems to be lifting. Europe getting a nice lift as well. 0. 7 ,oxx 600 up about there. 4 for the ftse 100. The vix is a little bit more subdued today, about a 60 handle. Still elevated volatility, but not at the levels we have been seeing. Even though we are seeing a bid into equities today, we are still seeing a bid into the bond market. The u. S. 10 year yield is down by about six basis points today. Obviously theres been a lot of whipsaw action in treasuries. The 10 year yield is down by nearly 60 basis points. We had a lot of liquidity issues , but right now, there is a bid in the treasury market. Speaking of whipsaw, i also want to take a look at the dollar. It obviously fell for three days in a row. Last week is the worst week since all the way back into thousand nine. Youre seeing some strength back in 2009. You are seeing some strength come back in. On the year, it is actually up by more than 5 . Theres a lot of liquidity , and a bid for safety. That didnt seem to be the case last week, but is at the moment this morning. I want to check on one other asset, and that is oil. Wti is plunging today, down by that 6. 6 , flirting very carefully with single digits, below 20 a barrel earlier in the session. Got supply issue on the one side, but the ongoing demandussia price war, on the other side. Energy not getting quite hit as hard as you would expect. It is the worst performing sector in the s p 500, though, down 1. 4 today. Vonnie thank you for that. Coming up later in the hour, we taleb,peak with nassim risk engineer at New York University. This is bloomberg. I am guy johnson with bunny quinn. This is bloomberg close. Lets begin with a bloomberg first word news. European officials are warning against loosening lockdowns. This that is after the coronavirus outbreak claimed more than 3000 lives. The total death toll for the two countries is now over 17,000. The pace of infections is showing signs of leveling off. Officials are warning against complacency. Experts are warning italy to learn from the mistakes china made when it comes to the coronavirus pandemic. With mild symptoms instead of having them isolated at home. Producing a strain on chinas overburdened healthcare system, what experts say they did not realize how infectious the virus could be, even in those who do not seem very sick. The Prime Minister Benjamin Netanyahu will go into quarantine. He came into contact with an eight who tested positive for the coronavirus. Netanyahu and his staff will stay in isolation as they await the results of their test. Date has been chosen for the tokyo olympics. , the gamesotester will kickoff july 23 of 2021. The Olympic Games has been set to take place in tokyo this summer. Postponed because of the pandemic. S more than twice its billion dollars to get tokyo ready for the game, according to some estimates. 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. Thank you. Were back with Morgan Stanleys chief asset strategist. Oil prices below 25 and out a barrel. In terms of inflation or disinflation and Everything Else that goes along with this . A think you have a really where somedynamic, of the weakness in oil prices is due to disruption caused by the coronavirus, due to the fact that people are not traveling or flying as much as usual, but it is also a function in the change in strategy by opec. There used to be a school of thought that low oil prices are and for the economy large portions of the economy because it means people pay less of the pump. Economists have been discovered for the u. S. That while consumers get a benefit that could easily be outweighed, because you have a lot less investment in Energy Related activities, so even if we did not have the current problems related to the coronavirus, we think Weaker Oil Prices would also be a hit to growth. It is another challenge that the u. S. Economy is going through and it is pushing down inflation expectations. I think where the market has it wrong is the market is expecting this to be the new normal. We do not think that is the case. We think eventually oil prices will also rebound. We think Market Expectations of inflation should be higher, over the next five or 10 years. Does the fed eventually begin to unwind what it has done, and there will there be a necessity to do that at some point . Think the fed will have a challenge here. I think the incentives are to take it slow because you have not dealt with this type of crisis before, because back in 1918 during the spanish flu pandemic, the bulk of fatalities in the u. S. Happened with a second wave of infections that hit in the autumn in the winter. I think that will be on policy makers mines. Even if you could control it now, do you have another wave of it later . So i think that will mean that to undol he reluctant the policy action. I think what that means as you look at 2021, you have this intentionally interesting or challenging set up where there will be a lot of support for the economy, the federal deficits, a lot of Federal Reserve support. Consumers will have saved money because they are not spending it now and if conditions get could seethink 2021 potentially more growth or acceleration when people are expecting. Though the yield curve is stable because ultimately the yield curve should speak stephen as the market looks forward toward a different environment in 2021. The ecb bought a record amount of debt last week as it tried to deal with the implications of the virus. Howd you see the longterm trajectory of the italian on market . Italy will take on an awful lot ifdebt on its own shoulders we do not get some sort of sharing. Germans are pushing back very strongly. Do we end up in a similar downrio where two years the road, we end up with the euro zone crisis because countries like italy do not have sustainable debt loads . I think this is the thing we should be talking about. To 2009, theack Global Economy was recovering shock, theerrible terrible excess that you have in the banking system. Was startingarket to recover, you have something that slammed the brakes on it, that decided the Government Debt so youwere sustainable, saw it here in the u k, in the u. S. , with a very damaging budget fight in 2011. That ultimately meant for a lot of the last eight years, government policy, instead of filling a hole in demand, was it self helping to restrict growth. Hope is the lesson of that is learned that if you are facing a big deficiency can demand, the response should not be to pull back and engage in austerity. The response should be to fill the gap, especially when their own cost of borrowing is extremely low. It wasnt that long ago when conventional wisdom was different, but i think we are somewhat encouraged that the current approach to allowing governments to step in and provide support seems to be very different from what it was eight or nine years ago. Guy andrew, thanks very much for your time today. Andrew sheets, Morgan Stanley chief cross asset strategist. This is bloomberg. Vonnie live from new york, im vonnie quinn, along with guy johnson in london. This is the european close on bloomberg markets. Easyjet is grounding its entire fleet of planes. The airline says it is looking for ways to cut costs to cope with the impact of the coronavirus epidemic. When will the flayer was implying . They say it depends on government restrictions and demand. The coronavirus pandemic is adding insult to injury when it comes to u. S. Household Balance Sheets. Not only are millions of people losing their jobs, but the link would see rates had already been on the way up before the outbreak began. That is especially true when it es to lets get a quick look at where we are now in u. S. Markets. We are higher on the s p 500, but those gains are actually increasing as we get through the session. It is up 2. 25 now, the dow up 2 , and the nasdaq flying away with things, up more than 2. 6 . In the s p 500 now, we have the drug distributors and viacom cbs up about 8 , abbott labs the top performer in the s p right now. A bit of breaking news you can see on the righthand side of your screen. Saudi aramco is said to be weighing a potential pipeline stakes sale as the Company Looks to raise money. Clearly, what is happening in riyadh is having a massive impact. Is pump, pump, pump strategy dragging oil prices down, and may be looking to shore up its Balance Sheet a little bit. Crude is at session lows, trading down or very close to session lows, down by nearly 12 . In new york, we are just above the 20 mark. European equity markets are heading into the close. The ibex down in spain. The big spanish bank acting as a big drag. We will get the details in just a moment. This is bloomberg. [ one more time by daft punk ] woo [ laughing ] woo play pop music no way dude, play rock music yeah woah no matter what music you like, stream it now on pandora with xfinity. And dont forget to catch trolls world tour. Lets party people one more time guy 30 seconds until the end of regular trading in europe. Thats take a look at where we are in terms of the session and how it has developed. More and more positive throughout the day. We areting wild swings, incrementally pushing up higher. We are only up 1 , it used to be a lot, but we are in positive territory, which is a better way to start the week. Lets take a look of the individual breakdowns in give you an idea of the spread across europe. There is some today. Not seeing markets moving across the continent. The spanish market is under more pressure, down 1. 9 . The dax is trading up strongly. Deutschesmes like trading strongly. We are starting to see the market come back. Earlier on i noticed hammerson, which had been very volatile in the london market getting knocked allowed getting knocked around a low bit more. Up 50 points on the ftse 100. In terms of the breakdown of what we are seeing, it is worth focusing on some of the names. Spanish banks have been under pressure. We will be talking about italian banks and a moment. Unicredit is down 7 . Buybacks do not go. Ious other institutions airbus is under pressure. Vonnie was talking about easyjet scrapping all its fleet. It grounds this these aircraft and is looking for ways to save money. To of these will be talking airbus about future deliveries. Airbus under pressure, down 10 . Some of the oil stocks are doing better despite what we are seeing with oil prices. Total and france trading up over 4 . We will wrap it up with a look at the bond market. We are seeing variance across europe in terms of how the different markets are performing. You are seeing bgp bund spread widening out. Bund anda 52 on the p plus 147. We got a downgrade friday. The bond market does not seem to be taking it badly. We are four basis points on the move today despite the downgrade towards the back end of last week. Vonnie in the u. S. We are seeing treasuries move higher. We are out of the range we saw last week, at 62 basis points on the 10 year yield. Stocks are higher but we are rebalancing today and tomorrow. We will take the temperature of the market at the end of the week to know more. We saw horrible virus news and some news at the end of the week, the president of the rose garden talking about companies trying to get masks to hospitals, trying to make ventilators, trying to put all sorts of practices to work so that the virus is mitigated or at least the effects. Many of the companies are leading the s p higher. It is at 2602 right now. Oil has recovered a little bit. 20 20. 48. We will see if we get any readout on what the president and Vladimir Putin are speaking about. He said earlier on fox he was going to talk to Vladimir Putin about the oil industry. The dollar index is rallying, up. 7 . Guy lets get back to the banking story. I just mentioned unicredit spending dividends, spending buybacks, this follows an ecb recommendation that banks will restrict payouts until october. The unicredit ceo spoke exclusively to francine lacqua. I welcome the recommendation of the ecb which will help relieve 30 billion to support the economy. I hope that banks will follow investing of other banks following the recommendation this morning. I think it is important for banks to be here. Banks are part of the solution in this crisis. Francine well be the conditions to improve buybacks . Jean pierre if the environment is stabilized sufficient sleep, our board will reassessed if the conditions are right, i see no reasons why we would not pay the dividend. Francine is there anything regulators should do to make sure banks stay afloat . Jean pierre from the regulatory side, the regulators did a lot already. They reacted strongly and very fast. The monetary side has been doing a good job as well. I commend the ecb. Quantity objections have been taken by the ecb and the new president. What we need to do its work with the theme of the ecb along with the theme of the different treasuries in the countries to it is more process driven than policy driven. The processes are extremely important. Focus, it has been the focus last week and continues this week. Francine how difficult is it for Smaller Banks to face this crisis . Jean pierre what is important is to offer a strong operation. That might notks of been it might be a little bit more difficult to get up to speed. , and ithe banks today spoke with my clients [indiscernible] i may say sums process i may say some process has to be worked out. Francine when you look at the debate on the corona bonds, do we need those to make sure europe is united . Jean pierre we need to be sure there is a strong message from europe on the clinical side that europe is united and helping the different countries. This is difficult to process the decisions. The corona bond is a very important one. There might be other solutions as well. Side n the political work as one europe. That is of tremendous importance. The corona bonds could be a big thing to do that. Talking to francine earlier on. Unicredit is not the elite institution that has done this. Sharen see significant price reactions around europe as a result. Lets get commentary on what is happening. Columnisterg opinion joining us to give us her take. Is the ecb worried about theyes banks, is it worry do not have the Balance Sheet to get through this . Europe relies on its banks to keep up with the transmission mechanism. It is accommodation of things. The ecb wants to do everything they possibly can to ensure the banks are prepared for what awaits them. , it is a question of signaling from the banks they have recognized the terminus have come from policymakers and regulators to ease the burden on Financial Institutions and therefore withholding a statement to , and potentially give those back. Quite unprecedented in terms of the speed at which policymakers have reacted to make it as easy as possible for European Banks to keep lending. Could we see certain banks in countries like ireland where we saw a big move today or peripheral countries get into trouble . The moment is one where these banks will be part of the solution and the real economy. They are not the cause of the crisis. The Capital Buffers they have built up are sufficient to whether what is expected from the stresses they are undergoing. The key will be how quickly these lenders can get these governmentbacked funds out to companies and the extent to which Companies Compete on payroll. That will determine how quickly. Hese economies recover European Bank stocks have been underperforming u. S. Bank stocks for some time. Im assuming this will only exacerbate that problem. You see the europeans reflecting the fact they were already starting at a low rate. Clearly the difficulties lie ahead. It is early days. We will see how the next few months unfold. We start with Different Levels of strength reflected in what we are seeing in share prices. Vonnie Bloomberg Opinion columnist, thank you for joining us on the European Banks. Lets get an update on the coronavirus pandemic as changes hisump views on when business can return to normal. Viviana hurtado is with us. Viviana easter is now in the rearview mirror. At least until the end of april. This change prompted by top medical advisor Anthony Fauci warning up to 200,000 americans could dive the coronavirus. Infection spiking and other areas of the u. S. , new orleans, chicago, detroit, but the epicenter is still here new york. The Hospital System preparing for a of covid19 patients. Temporary Field Operations at the Javits Center and central park. In europe, grim weekend. Spain has its most deaths reported in one day. , adiseased ravaged italy european coronavirus hotspot reporting fewer deaths seen as a sign the lockdown may be helping to flatten the curve. Israeli Prime Minister Benjamin Netanyahu selfisolating after and a tested positive for coronavirus. Casessia, 20 searching as moscow orders residence to stay home. Nigeria closing down its biggest cities. Chinaa, over to wuhan, where the viral outbreak begin. And manufacturing are restarted production. Businesses are opening Transportation Services like buses. In india, the lockdown of 1. 3 billion people continues. Migrant workers are being rounded up and quarantined. I will leave you with this. Pharma and Biotech Company abbott announcing a fiveminute test to be released early this week. Will start on a vaccine, a vaccine at least months away. This is critical for doctors and nurses on the front line. It is a race between the spread of disease and the immunization of patient. Guy viviana, thank you very much, indeed. Lets turn back to the markets and see where european markets have finished the days. These are the final numbers. A little bit down for the ftse 100, we finish very close to session highs. ,s you can see, the ftse 100 5560. The dax doing much better. The cac 40 up. 6 . Top of the hour we will have the cable show. Jonathan ferro is in new york. Back to five hours between london and new york so the team is back together. We are anticipating we will have the normal 10 downing street briefing. That is coming up of the top of the hour on dab digital radio. This is bloomberg. Guy from london, i am guy johnson vonnie quinn in new york. Ons is european close bloomberg markets. Vonnie time pure latest Bloomberg Business flash. Johnson johnson is teaming up with u. S. Health departments to supply one billion coronavirus vaccines by next year. It plans to launch studies by september of this year at the latest. J j says the first batches could be available early next year. Shares of abbott labs searching right now after the company unveiled a coronavirus test that can tell if someone is infected. The medical device makers says it plans to supply to thousands beginning this week. Abbott says it is so small and portable it can be used in any setting. The fda has given abbott emergency authorization to use the test. Jeffreys Financial Group says the longtime chief Financial Officer of its main subsidiary has died from complications of coronavirus. Of the first senior wall street executives to dive from the disease. He had been ceo since 2007 and before that spent 16 years at Morgan Stanley. He was 56. That is your latest Bloomberg Business flash. This is bloomberg. Erik many people are calling the coronavirus pandemic a black swan event. A statistical outlier no one could have prevented. We welcome back the philosopher mathematician who coined the term. Nasim talib. Good morning. Many know you famously predicted the financial crisis in your 2007 bestseller the black swan, perhaps overlooked in that book was another prediction. I will quote directly from the black swan. As we travel more on this planet, epidemics will be more acute. We will have a german population dominated by a few numbers and a successful killer will spread vastly more effectively. A strangerisk of acute virus spreading throughout the planet. That was you writing in 2007. If an epidemic was predictable, was the pandemic predictable . Nassim of course it was preventable. We have known from january 26 thatwe issued our warning you should kill it in the egg if you can act very quickly and of course people ignored it except a tiny bit, the Trump Administration by restricting travel from china. Swan. Not a black it was a white swan. We have had black swans. This was a white swan. It is no excuse for companies and corporations not to be prepared for that. It is no excuse for governments to not be prepared for Something Like this. A struggle is playing out right now and american society. A struggle between the common good on the one hand and individual liberty on the other hand. Thiser manifestation is debate over what we should prioritize. Should we Prioritize Public Health or the economy. My question is this. Who should people be listening to . The maximum lists or the minimalists, a camp that occasionally includes the president . Nassim separating the economy from the virus is extremely foolish. It is not like you have two different parallel universes. Having something spread like this is very damaging to the economy. To give you a simple thing, as or take a hitoney , the airlines would take a hit in january. The problem we have is too much connectivity. They did not want to spend pennies in january. Now they will spend trillions. If you delay more, you will spend even more. We do not know much about this disease. This is not the flu. It is much more intractable. We do not know enough. The tradeoff is a fake tradeoff. Erik it is a fake tradeoff. Delaying is something that was done and in many cases is no longer being done. In new york state, there is no delay. Theres a lot of social distancing being enforced and much of the economy has shut down here and across the country. What about sending people back to work as fast as possible . Think it makes sense to send people back to work. Even the president can say whatever they want. It would be irresponsible to have people in the office, in the elevators. The World Health Organization has been way behind. Revise that facemasks would be a good idea until recently, two and a half months of wasting time telling people not to wear masks. I do not think the Central Government has much to say. Erik you are highly critical of the Bank Bailouts of 2008 and 2009. Now the government is spending to rescue the economy before it collapses. Will these bailouts work better than the last bailouts . Nassim bailouts by definition have a problem. Out, erikailing you schatzker. They are not bailing out the listeners. There bailing out investors and corporations. Who are they bailing out . Those who do not have a buffer. Not having a buffer is a responsible, whether you are a corporation or an investor. You have to realize mother god made us with two boyeys, even to blue employees even to bloomberg employees. You have extra capacity because you may need it one day. If you do not have extra protection you may face difficulties. Equivalent of having cash on hand rather than debt. We favor the companies that spend their cash instead of keeping it in reserve. Over those, borrower who had a cautious attitude. Now we are bailing out those who made that mistake. We should bail out employees, we should bail out citizens, not the corporations made the mistake. At the level of portfolios erik can i ask you a question on that subject . Youve been reminding us since the financial crisis and before the financial crisis of the need to have catastrophe insurance. Tell Risk Protection tail Risk Protection is a term in the financial markets. Here we are down 24 from the highs in the u. S. Stock market. The question investors are asking themselves is is it too late or should we be buying insurance now against the potential for more market decline . Nassim the worst thing you can you have toce have your insurance at all times. We explain it to people and tell them i do not tie my car insurance, i do not hi my house insurance. I would not buy a house. If you do not have insurance you do not have a portfolio. Your portfolio will blow up. Erik im afraid we have to end it there. Thanks to author and New York University distinguished professor nassim taleb. David from new york to our tv and radio audiences worldwide, welcome to balance of power where the world of politics meets the world of business. I am david westin. We start with a quick check of the markets with taylor riggs. It looks good for equities at the moment. Taylor interestingly came in overnight and futures were negative. We seem to have turned that around. The s p 500 up 2 . Crude still heading lower. Still a lot of concerns on the supply side but also the demand side. Briefly last night dipping to a 19 handle on crude. They are trying to recover a little bit and hang onto a 20. 30 on crude. Bloomberg dollar index firmer. Four days of weakening on the bloomberg dollar index last week. Some of the funding pressures relieved but the safe haven turns around and further strengthens today. What that means is the vix continues to have lower. A 59 handle on the
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