Economically but really to the health crisis. Is norancine, there question about the extension of the virus. The cases of the virus are rolling over, but i will tell you, if you look at it graphically, it is ever so slight. The dawning awareness here in the pandemic in the last when he four hours is a primal scream for testing. In the last 24 hours is a primal scream for testing. There is a new awareness that Going Forward we need testing, and that is not so much to get people back to work but to stop the job losses. Remember, we have jobless claims this morning at 8 30. Francine what you are talking about is two different tests, right . Both i hear more and more people calling for action, testing on whether you have covid and testing on whether you had it and have developed antibodies. Thats get to first word news in new york city. Lets get to first word news in new york city with evian hurtado. Viviana President Trump will a lack will talk today about whether to relax guidelines. He talked about the number of cases plateauing yesterday. He spoke with 200 business leaders. He has been told that more testing needs to be in place before people feel comfortable returning to work. President trump is issuing a warning he may use an unprecedented power to make both houses of congress adjourned. His goal, to make appointments without senate approval. The president complaining that jobs are being held up. But according to the washington post, most of the jobs have been open because President Trump has not appointed them. A drop in the Energy Department ld effectively make the 300 55 Million Barrels of oil we end with u. K. It is inspected to extend its nationwid lockdown. Dominic raab will make the call. He is standing in for Boris Johnson while he recovers from coronavirus. Health Officials Say there are signs the u. K. May soon be past the worst of the coronavirus pandemic. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in im than 120 countries, viviana hurtado. This is bloomberg. Francine . Tom . Tom thanks so much. Lets look at equities, bonds, currencies, commodities. It is up, down, up, down, up. The fix coming in, a little bit that the vix coming in with a little bit of a risk the fix coming in with a little bit of a risk. Persistently under 20, but the idea of where the dollar is is extraordinary. It is just flat out a resilient u. S. Dollar. Francine . Thatine i like the fact we will spend a lot more time talking about dollar. That dollar kind of resilience as you say means a lot for emerging markets, but also for euro. We are also looking at pound pretty much unchanged, but we do need to spend a bit of time on at antill under or 18year low. Stocks in europe with u. S. Futures. To talk more about what happens next, the unemployment figure, joining me now is andrew sheets. Thank you so much for joining us. How much loss in gdp will we have . Or is soon to say because of to say the lockdowns easing up around the world . Andrew . Im not sure we do have andrew. If we dont have andrew, we will get andrew in a second. What has been significant to me, when you listen to ray dalio, and we also spoke with Joseph Oughourlian today. The views are very different. This is because you do not really have a rulebook. No one has ever really seen anything like it, and a lot will depend on testing, on whether even if the economy is not in lockdown as it is now, people go out and spend. That will make a huge difference for markets and currencies, tom. Tom not only floating the pandemic in, but i would notice yesterday with this idea i dont remember what days of the week it is, i can barely understand it is the middle of april. But what i would notice right world,h an andrew sheets is the partition we are seeing between selected successful equities and Everything Else getting absolutely crushed. It was stunning, francine, yesterday, to combine in the new dawning of where our economy is with trying to price it forward, whether it was earnings in the banks and Morgan Stanley, mr. Sheetz, Morgan Stanley coming out here later this morning. Parsing of xssive number of selected chosen stocks obviously amazon front and Center Versus smallcap and value getting absolutely crush. There is a lot of dynamics in the market right now. There is a lot of dynamics, tom, and if you look at the companys you look at earnings and people are saying what do earnings actually mean . It gives us an idea of forecast whether they are brave enough or not brave enough to give us some kind of forecast. But it is also difficult to know who will need some kind of bailout. Bailout could just be loans and cash, but in the next couple of weeks, and couple of months, we will have a clear idea of exactly who is struggling and who is doing a live bit better. Erik schatzker yesterday on bloomberg invests speaking to ray dalio. Somewhere inate the vicinity of 5 trillion. And the whole the hold in the World Economy is probably somewhere in the vicinity of 20 trillion. We look at particularly who has what holds. And how who has what holds and how they will be filled. The economy as a result of this, the real economy, which is goods, services, production, and all of that, in the world over the next year, will probably 4 or 5 ,l of maybe which is a bigger fall. This is a bigger event than the 2008 financial crisis. Theit is most comparable to 1930 to 1945 period of time in terms of the size of the whole, the unemployment rates and the size of the impact. And we will adapt. One of the greatest things about the greatest force in humanity and the greatest force in productivity is the capacity of humans to adapt and change the way they are doing things. We are doing that right now. And so i am pretty confident that the inventiveness, the adaptation will bring us to a new way of operating, and lets say if you take that decline, that will be a peak to trough decline of somewhere in that magnitude, that will that we will get past that, but it will be a total new world order. World will not resemble the world that we are used to. It is going to change in various ways. It is a big hole, it is not an unsustainable hole because the andcity for producing money credit is unlimited. It means we have to look at what is the value of money and credit, ok, that new world. What is the value of money and credit . What is a store hold of wealth . You just cannot produce it without it having an effect on its value. While we talk about production, we will adapt and we will get past it. What how wealth will change will be very, very big and different. Erik im going to come back to that in just a moment, and i keep saying i am going to come back to the things that you are mentioning, but i promise i will, ray. In your opinion, is what we have seen thus far, in the way of fiscal stimulus, from the federal government, and monetary stimulus from the Federal Reserve, appropriate . Are both of those organs of the u. S. Government doing what they should be doing . And if they are not doing quite enough yet, what else should they be doing . Reaction, there is no choice. Like in the 2008 financial crisis, you are faced with a choice. Do you want those banks to exist in the future, or do you want to get rid of those banks . They may have gone broke and they may not have had enough savings and they may have done even things that they should bear the consequences of, but you want to save the banks. So this is a crisis that is similar, except it goes way beyond the banks. So when you start to think who do you want to save, you have to think about, do you provide them with income, and how much do you deal with their Balance Sheets . If you do not do that, the consequences are enormous. So the reaction needed to be of the sort we have to think about the consequences, though, of producing all that money and credit. Where does it come from and what does it mean . We will turn to that in a minute. You will need to do more, and we will argue over what we should do and who gets what, and that will be our big discussion. But, yes, there has to be more money and credit and you have to operate in a way where you save important things and you only impose a certain amount of suffering on people that they can bear, otherwise you will have a revolution and you will not have productivity. Dalio in conversation with erik schatzker. Coming, james gorman will join us later in the morning, of course after earnings. For more importantly, a conversation with mr. Gorman. Coming up, andrew sheets of Morgan Stanley. Please stay with us. This is bloomberg. Francine good morning, good afternoon, good evening, everyone. This is bloomberg surveillance , your insight into politics, markets, and economy. Lets get to andrew sheets. Good morning to you and thank you for joining us. We were talking about market reaction. They are looking at infections, a lockdown easing. Are you worried that the markets are getting ahead of themselves . Andrew i dont think the markets are getting ahead of themselves. I think risk premiums across a lot of Asset Classes are still attractive. Obviously we have rallied back fast, but i do think broadly the valuation picture is fine. But i do think actually the biggest risk is that it is tempting to think that kind of a faster reopening is a good scenario for markets, that the faster that things can kind of get back to normal, that will be a better market outcome. I think the real risk is that the better market outcome is that the opening is sustainable. I think what the markets are not priced for is that you get an attempt to reopen the economy that does not work out, that force is another kind of very fast lockdown, and so i do think as we think about these issues of opening back up, as the focus really does turn to testing, i think that remains incredibly important for thinking about how the market will perform Going Forward, especially in the next month or two. Worse, andrew,at than actually keeping it closed for longer . Ont know the impact our hearts are always with the families suffering and people who are sick in the hospital. When wei do think that think about how the market has responded to prior economic shocks, i think the market can be quite resilient and can actually put up with quite a bit if it knows that the worst is behind it. If it knows that the peak is in. And i think that that is where kind of the opening back up of the economy and doing it right is so important, because i think if it can be done in a Sustainable Way with plenty of testing, then i think the markets can say, yes, look, growth is still going to be weak for much of 2020, but the worst is behind us, the trough is in, we can look ahead to 2021 and we can actually give 2021 quite a bit of benefit of the doubt. I think the risk is that if you open back up without significant measures in place, then the market starts to worry, well, maybe we have not seen the peak. Maybe there is another one of those that we need to go through, and i think that would bring much more valuation pressure to the market. I think you are drawing a line under what the worst of the disease numbers are, i think that is very important for drawing a line under the lows for the market in march. Tom andrew, we are seeing a real partition in the market now. We are seeing value, small caps absolutely crushed. What we are seeing is a select group of world stocks reassert itself. Do i want to buy the resilient movers now, or do i want a bottom pic bluechip do i want to pick to bottom pic bluechips that are value, value . Andrew what we are focused on right now is small caps in the u. S. I think as you go through a recession, you reset the Economic Cycle. That is what we are doing. It is often very early in an Economic Cycle coming near the bottom of an Economic Cycle where you do want to make that shift from the very defensive, high quality things that work amazingly well going into a recession to the smaller, more cyclical things that are often very cheap at the start of a recovery. So i think u. S. Small caps are one part of the market that we think is attractive and will look good here. It is also i think where the earnings season is going to get very important in a couple of weeks. A lot of those big cap kind of nasdaq names that have been leading the market, they report earnings around the end of the month. That is potentially where you could see a potentially larger market focus. Tom well said there on the calendar as well. Sheets, howard with us the other day, very optimistic on the analysis of Free Cash Flow and epic investments. Positive as well. Can you continue to use dividend flows and cash flow on a net present value basis versus yield , given the colossal absurdity of where yields are . Does the stuff you and i learned in school still work . Andrew i think it does. I think always the risk when you compare stocks versus treasuries or credit versus treasuries as a spread or a risk premium is, it is a relative measure. It says stocks are more attractive than bonds. The bond yield is very low, it still does not leave you with that much return. So i do think once you keep in mind that when one is looking at any sort of relative comparison to government bonds, how low, how expensive those government bonds are with the analysis. But the second question i think is important is when you think about valuing a business, you are valuing the present value of all its earnings from now through kind of the end of time. And so while what is happening this year is very severe, if the markets can get comfortable that we can see the trough, that are going tors prevent the worst of any sort of economic decline, then i think the market ultimately can kind of trade the higher multiples on the earnings that are further out, and that is very much what my colleague Michael Wilson has been talking about with raising the s p price target. He is thinking about discounting future earnings in the out years. You see any kind Debt Forgiveness in the future . I know there is talk about it, unclear about how that would work or who would fund that . Andrew i do think if we look at the cares act in the u. S. That was passed, i think it is interesting because for lack of a better name, Debt Forgiveness and that with some of the Small Business loans that were being granted provided the businesses, provided the businesses keep employees on the payroll. The potential issue is that what we will see in some cases is a normal credit cycle. I think if any sort of recession, you always see lower rated businesses default, that always happens, that in itself is not necessarily severe or unprecedented. The key, and i think this is where the feds action is so important, is what the system would struggle with is if large kind of otherwise very solvent Investment Grade companies were to face real issues because they could not access the market. In 2008 and we saw 2009. That is the thing that causes the Financial System to shut down. I do think that the speed of which the fed has moved to support the credit markets, to support the mortgage markets, i think that speaks to what the fed learned from the 20082009 experience is acting almost with four times as much francine andrew, thank you so much. Andrew sheets from Morgan Stanley. This is bloomberg. Francine good morning, everyone. This is bloomberg surveillance. This is what youre markets are doing. A lot of focus on new infections. We have that incredible figure, 2 million infected worldwide. A number of countries are also thinking of relaxing the rules. European stocks are rising with u. S. Futures, investors seeking time lookingsame at corporate earnings come economic data, the dollar extending gains. Oil is down. We speak with the head of global foreign exchange. That is next. This is bloomberg. Francine good morning. This is bloomberg surveillance. Tom had a great chart with a look at dollar dynamics. Deeper intoelve what it means for the currencies , including emerging markets and. Sian currencies joining us is the Goldman Sachs head of global foreign exchange. Thank you for joining us. When you look at the dynamics markets,ollar on the what kind of dollar do emergingmarket currencies need . Kamakshaya thanks for having me. From an emergingmarket currency perspective, a weaker dollar would be helpful from a currency appreciation standpoint and a broader emergingmarket financial conditions standpoint given the shock they are likely to face. One of the interesting points worth mentioning is how emergingmarket policymakers and central bankers what you have benign neglect of currencies and higher priority given to the local economy and debt market. Across the board, Interest Rate like qualitiesqe would support the local debt market but have allowed currencies to weaken on a broad basis. That is aexample of 100 basis point cut for the weakness of the currency but supporting the local debt markets. Francine are there any currencies you mentioned south africa and we could talk about the turkish lira what are the currencies in emerging markets that are the most vulnerable to this pandemic getting worse . General, then sequencing of the pandemic is that it has been affecting south later than inrica asia. It is getting worse in emerging markets. Would have an advantage. Capacity,heir policy Institutional Capacity response to the crisis, space to response to the crisis . Who is more likely to be affected . When i look at these crises in our recent research, generally emerging markets come out less well than developed markets and within emerging markets, you mentioned the turkish lira where foreign currency debt is still to gdpely large relative compared to other emerging markets, and where policy credibility is questionable. Those are the places most likely to be vulnerable to further bouts of currency depreciation. I would put the turkish lira in that, the South African rand. Many of the higheryielding emerging markets are part of the more remote vulnerable group. Tom i want to go to Oxford University and the study of economic history. They are small curves until they are not. What are the catalysts and where the catalysts to where we see junk conditions in the em currencies in the underlying economics . What is the set up you see that could knowledge em toward crisis nudge em toward crisis . Kamakshaya a couple of things i would mentioned. Thing that could towardmerging markets crisis is the oil shock. If we did not have coronavirus, that would be the primary thing we are talking about in this interview. Exporter, thisil is a huge shock and not just a liquidity shock that can be rendered with credit lines for three months. This is a substantial hit to your earnings potential and business model. ,or a lot of those countries many of them in subsaharan sustained you see a period where oil stays at these levels, you could see more crisis like situations. Another possibility or catalyst is where we started this, on the dollar, and other significant surge in the broad dollar would tighten financial conditions pretty strongly for emerging markets and create crisis like conditions. There is some upsetting good news. When you look at the surge and the broad dollar last week, it incorporated distinct and related elements. The rush to the u. S. Dollar for risk aversion, that is likely to claimsace with jobless and other cases, but you also have the acute dollar funding shortages that have built up across the world. Been arrestedhave by the Rapid Actions by the fed and other central banks. If you see an equity market drawdown, i see the dollar with a bit more upside but it should be less, the velocity should be lower and less extreme. The funding stresses are very acute. Tom the rate of changes have been extraordinary. Right now in new york city with our first word news, here is viviana hurtado. Fast. A not so before people feel comfortable returning to work, more coronavirus testing needs to be in place. Donald trump has consulted more than 200 Business Owners about reopening the economy. President blasting the for having what he calls temper tantrums. The presumptive nominee calling for President Trump to set a better example for the country and to calling to further mobilize the country to fight coronavirus. In israel, a fourth round of backtoback collections is looking likely. They failed to reach a powersharing deal by last nights deadline. Israel has three weeks to find a candidate. If no one can build a coalition, an election will be called. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Much. Ne thank you so coming up, we speak exclusively to Robert Kaplan at 12 30 p. M. New york, 5 30 p. M. London. We will ask about dollar dynamics and treasuries. This is bloomberg. Surveillance, from london and new york. Abless claims out at 8 30, of theber, a shock retail numbers we saw yesterday. Goldman sachs has done a nice job in phasing in and guesstimating the forecast. I want to go back to em. What is the best outcome for the International Monetary fund and the fed combined . How is that tantamount in terms of fx stability and what we need from the imf and the Federal Reserve combined . Has alreadyhe fed acted extremely rapidly in trying to put a lid on those acute dollar funding shortages that we saw in march, and some of the extension of the swap line and the facility to allow emerging markets that have reserve to liquefy into dollar funding, those measures have been helpful, and you are seeing tangible improvement in shortterm market stressors. Part has beene addressed by the fed. Where the imf and multilateral institutions and bilateral creditors come in, this will be a deep earnings and income shock for some of the poorest countries in the world, and that will raise real issues when it comes to get repayments. To the extent that for many of these countries need to have to a standstill, repayments stand still, and income replacement being put into place, that will be crucial. Critical, it is real simple. We need a debt holiday. Holiday from debt beleaguered economies . Kamakshaya there is a real coordination problem because there are essentially different sets of creditors. There are bilateral creditors in other countries. , the majore imf multilateral coordinating body, and the private sector, the owners of hard currency dollar credit across the world. I think the key is when you have a repayment holiday, how do you get the different players to coordinate . That is why the has such a in being able to make sure that if this turns up turns out to be a very deep but ultimately temporary income shock and we dont see that as a result there is much more lasting damage across the social and economic fabric across the whole host of emerging markets. European will we see countries needing a bailout . Do we extend the debt relief to more than just merging emerging markets . Kamakshaya the european institutional architecture is a different issue and there is longstanding concerned about if you did see as a result of this a surge in debt to gdp across many of the european economies, how that is likely to be funded. Promptly inacted terms of setting up the Pandemic Asset Purchase Program that is helping to keep volatility low in the sovereign spread market, but i think the question about where the policy backstop is credible and where it is not ishin the g10, the euro area the place where things look vulnerable on that count. Does that require a debt holiday or perhaps a common funding mechanism or issuance mechanism that equalizes the risk . This is clearly a common shock affecting the whole world and that is a matter for institutional design. In the case of the euros it euro area, the ecb can make sure that rollover needs and issuance needs can be kept contained. The thing with the emerging markets, there is not that sort of common and the coordination of the imf in the fed is much more crucial. Francine thank you for joining us. Goldman sachs head of foreignexchange Interest Rates and em strategy research. It was meant to be the second day of the imf meetings. They are still virtual. We speak more about those meetings with vitor gaspar, the Imf Fiscal Affairs Department director. This is bloomberg. Viviana you are watching bloomberg surveillance. Royal dutch shell is sending a bold target on setting a bold target on cleaner energy. Bulkwant to get rid of the of greenhouse gases. Follows similar moves by others. Longterm job cuts and travel demand is essentially zero. United plans to further cut at scheduled to roughly 10 of capacity. This had once been the plan for 2020. The parent of google will slow hiring for the rest of the year, the most drastic action alphabet has taken yet. The ceo says alphabet is looking at other ways to cut costs, among them rethinking travel and investments. That is your Bloomberg Business flash. Tom thank you so much, greatly appreciated. He is truly one of the worlds experts on this burgeoning debt, vitor gaspar, and portugal has never seen this. We are thrilled he could join us this morning. This is in none of your textbooks and nothing you ever taught and nothing you have ever seen. Debt wee pay down this are creating . I believe that you have a lot of information in the fiscal monitor. Startedal monitor during the course of the Global Financial crisis precisely to monitor the actions that countries were taking back then. The currentpare situation with the Global Financial crisis, you see it is not only this crisis, it is a crisis like no other. Actions taken by governments all over the world have been faster and larger than anything that has been seen before. It is a completely new textbook. In the fiscal monitors that the principles of Public Finance to apply to the Current Situation are clear. We have three principles. To enableancials Health Systems to enable tackle the pandemic and support containment measures aimed at flattening the curve of the spread of the virus. The second is to extend what i like to call emergency lifelines to households and firms to make sure that households are able to cope with the consequences of the shutdowns, that they are able to preserve, but they are able to sustain their livelihood , and for firms, it is necessary to sustain firms made vulnerable by the crisis because it is important to sustain wages and employment and keep capacity for the economy to be in a good position to rebound once the crisis is over. Principal the third principle is simply when the epidemic is over, the economy should support francine once we get to something that looks more normal, what do we do with this extra debt . How detrimental will it be . Vitor you know the World Economy outlook in the baseline twice a we have recession in this year, 2020, a partial recovery in 2021, and the fiscal monitor includes projections for deficits and debt in the underlying scenario. Whole, general government gross debt increases by 30 Percentage Points of gdp in2020 but it stabilizes 2021 at this higher level. If one would take out the United States and china and look at the it would beate, falling by one full percentage point of gdp. So what we have under the have theis that we levels will not jump up but a public decline in the debt to gdp ratio in most countries. Countries are very different so you will have countries with low and fast the climbing levels of debt and countries with that will be facing challenges. The debt originating across countries and country groups is very current and as a matter been the World Economy has dealing with those developments for a long time. Francine very quickly, do we need to talk about Debt Forgiveness for the countries that will struggle the most . Been so the imf has foring with the world bank a standstill for debt for the poorest countries. On initiative is focusing Bilateral Official creditors, the involvement of the private sector would be very much welcome. Yes, for the poorest and most vulnerable countries, that is a priority and as a matter fact, this crisis is an excellent opportunity for solidarity, not only within each country but across countries. Global cooperation. Tom thank you so much for joining us, and we will continue this conversation in the 11 00 a. M. Hour in new york, the managing director of the International Monetary fund on the actions of the imf the last 48 hours. 8 30 a. M. New york, jobless claims. This is bloomberg. Nowadays you do more from home than ever before. The xfinity my account app puts you in control with Digital Tools to give you the help you need when you need it. Get fast and easy answers with personalized help 24 hours a day, 7 days a week. Change your wifi password to a phrase thats easy to remember. Even troubleshoot your services on your own. Were working to make things a little easier for everyone. Download the xfinity my account app today. This morning, it took four months for one million cases of the virus. The next one million took 12 days. A primal scream from Global Health officials for more testing. 8 30 theonsider at best shortterm indicator of our economic collapse, new jobless claims tragically in the many millions. Marylandessman from calls it a banana republic. President trump desires the dissolution of congress. Everyone, this survivingnce. We are and thrilled you are with us worldwide and across the nation this morning. I look at all that is going on and i guess the update here is one