In the u. K. , Prime MinisterBoris Johnson defends his handling of the crisis. Phillips is set to produce 15,000 ventilators per week to ease shortages. This phillips number coming through. In terms of what we are looking at, 4. 2 billion euros. Estimate 4. 16. A little bit off a beat. Phillips said it wont provide 2020. Pecific guidance one of the questions, whether they would suspend that guidance for the rest of the year. They could not really quantify the impact or duration. Manus they had gone for a comparable target this year of 46 . They are aiming for cfg. Rise in 2020. In First Quarter comparable sales, what they are doing in terms of the respirator business, then there is the rest of the world to think about. Comparable sales are up nearly 23 . Billion,arly 44 significantly below the estimate of 289. At 6 30, he will join us for that conversation. Lets set the agenda. It is about oil, about the banner headline, crippled by 20 at the nearly open. If you want to understand demand from chinathe demand has had the biggest slump since the financial crisis, down 8 . A drop on crude, but we are in the rollover maneuvers at the moment. It is the china data that i think really personifies the demand implosion. Of u. S. Drillers are now offline. Some buyers in texas offering as little as two dollars per barrel. American producers may soon have to pay customers to take oil off their hands. We have talked about the prospect of negative oil prices. In china, the cut, less than 20 basis points. The march meeting was delayed. Also interesting how it has become such a political hot potato. The pandemic issue in the u. S. , the fact that president trumppence pointed to china, and also an issue to do with the election. We are seeing some red on the screen in asia. U. S. Futures, we were seeing them a little bit weaker earlier. 10year treasury yield not moving a lot. Basically steady. Bound been very range compared to march and april. We have already talked about oil , showing the brent price that is not doing what wti is doing. There were some positive signs in the u. S. Coronavirus fight over the weekend. The countrys hotspot of new york appeared to be on the other side of the break. Trump kept thed pressure on china for its role in the outbreak. He said there should be consequences if beijing is seen to have started the outbreak deliberately. Pres. Trump if they were knowingly responsible, certainly. If it was a mistake, a mistake is a mistake. If they were knowingly responsible, there would be consequences. Nejra take us through what we heard over the weekend in terms of the political rhetoric. Outlined,st thing you President Donald Trump saying that if china knowingly did this, there would be consequences. This is of course one incredible thing to be watching in d. C. Republicans have been trying to paint the blame on china. He praised china and president xi in february for its handling of the outbreak. Some ofrah birx was on the weekend shows and she could not say whether coronavirus was created as part of a lab accident. She said that the general consensus right now is animal to human. It all comes down to testing. This is something that Governor Andrew Cuomo said, that even though we are potentially passed the peak, testing is needed. We have heard from governors around the country that they cannot reopen their economies unless there is widespread testing. This is something that finance executives have also said to the administration. On monday, Vice President mike pence will be having a call with governors to talk about some of the shortcomings in testing. Donald trump said himself he will use the defense production act to increase swabs protesting. Aid, theentially more dire need for Small Business aid is something to watch. Nejra absolutely. Amid the politicizing of the pandemic, with it being split along bipartisan lines, the majority of americans say they dont want to rush a return to normal. Coming up, we speak exclusively howarry kudlow about americans can get to work. P. M. U. K. View at 3 00 time. The central bank lowered its prime rate. Beijing is expecting around 140 billion in bonds after the first contraction in decades due to the coronavirus. In the u. K. , the government is furiously defending its handling of the coronavirus crisis. It comes after a sunday times story suggested that Prime MinisterBoris Johnson failed to take the outbreak seriously in its early stages. The government said the article contained falsehoods. Italy, spain, and france reporting the smallest number of fatalities in weeks. Francis says it will unveil plans within two weeks. The current lockdown could see the French Economy contracted by 10 in 2020. 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. Manus coming, more about how the cleveland fed president saying the central bank, the market concerns. This is bloomberg. Nus it is daybreak europe with anets dealing implosion in crude, a number of calls saying cash. Bank of america saying there is a disconnect between what is going on in equities and what is going on in cash. The index retreating quite aggressively. Oil quite literally imploding on the day. That is a may contract. The june contract, five times the open interest. Oil is at eight 99 year low. You are seeing a little bit of a movement on the dollar as well. Dollaryen up. Now, forget about the earnings season and by u. S. Stocks. That is according to jim mcdonald. Season the earnings wont have enough information to have confidence about what 2020 numbers should be. He is favoring the u. S. Over others in light of the huge policy response from american authorities and the prospect of even more fiscal measures. The understanding that the economy will get back on its feet once restrictions ease, to keep an eye on is the lockdowns from europe. Joining us, multiasset strategist at Societe Generale. Youeflect on your research, talked about the soft, hard, and intermediate recovery. You have two vshaped. What is your thinking at the moment as you look at the three scenarios you have outlined . I guess, from a liquidity standpoint, what we try to understand is what is priced in at the moment. If you compare scenarios, it is around 2. 5 months of lockdown. Recovery,ook at the the bottom of the 23rd of march, it has been driven by tech, health care, longduration sectors. For the equity rally to be important, you would need the other sectors to perform as well. In,now, we prefer the first first out mentality where we think asian equities will do better than u. S. Peers. Nejra on the u. S. Comedy imf saying that basically the u. S. Is expected to lead subtraction in global gdp this year. I wonder whether that affects your view on equities. You have upgraded credit exposure. My question, why not increase the exposure to equities, it of equities, because some have said that it is not that big a leap to see the fed buying equities next. This point,hat, at is a more gear to expensive fiscal and monetary package. And it is mainly through equities versus sovereign bonds. On the other hand, if you look at credit versus liquidity, for now by a lot of headwinds in buyback them, like questions during earnings season , how long the lockdown is going to last, because we dont have yet any indication of that. The earnings impacts for first half of the year. Out, will depend on the shape of the recovery and we think that anything else could lead to liquidity to perform well in the second half of the year. But we are still looking for a way out of the woods at the moment. Nejra manus i like the way you said sell down was indiscriminate. When you talk about the rally being quite discriminatory, you talk about a longduration. Just expand on that concept. What is longduration . Is there more mileage to go . You look here today, nasdaq is just 1 year to date. And s p midcaps are still 25. If you look at the sectors that have been performing well. Tech, health care, sectors that basically benefit from a lower Interest Rate environment. Market isent, the sort of pricing in more Monetary Policy like low Interest Rates. Run us through where your preferences are in credit and where your preferences are in sovereign bonds. 523 , which is quite significant. So, highyield. So it is quite a bold call we have here. Reducedsignificantly u. S. Treasury exposure, which is the First Time Since 2008 that we have such a significant downgrade. That with 10 year treasuries and the g9 peers, the difference is only 30 versus 100 in the past. Point, fort this safety, and taking up treasuries of this point, prefer to gear to performsets which will during low Interest Rate environments, credits but also gold. Nejra interestingly, you are looking for kerry in peripheral debt in the euro zone. Much more to discuss. Cleveland fed president Loretta Mester says it will take time for the u. S. Economy to reopen. She added that the central bank was too busy to be concerned about excessive risktaking. Take a listen to some of that exclusive interview. Real are in a unprecedented, deep shock to the economy. I think it behooves us at the fed to really use our tools as best we can to get us through this shut down period, mitigating the impact so the recovery can ps deft as it can can be as deft as it can be. We are moving into unprecedented territory but we are trying to lend to firms that through no fault of their own were impacted by the virus. We are going into, for example, corporate debt programs that we have not done before. We will include some fallen angels that had Investment Grade rating before the virus hit. You are right that we had not we are doing things that we had not done before but at this point, i dont think we can be that concerned about that kind of moral hazard. This is a hugely impactful and negatively impactful shock. We have to do all we can to make sure we are not doing permanent damage to the underlying fundamentals so that when the time comes we can get a decent recovery out of this. Where people struggle, buying bbb beforethat were this might make sense to people who are huge employers. Credits, exposed to a shaky Energy Sector does not make sense. Part of what we are doing and all of the things we are doing are twofold. We are trying to make sure that the markets stay functioning. Some of the efforts that the fed has done are really geared at market functioning. Some of them are geared to make sure that we mitigate the negative effect on households and businesses to make sure we have credit flowing to those businesses. I look at that as the market functioning issue. I would say that some of the efforts we have taken already have improved functioning in the market. There are two things going on. One is making sure that we have markets that are wellfunctioning so that credit can flow and do what it can to help shore up the economy and prepared for the recovery. We can disagree on what the right way to do that is but part of what we are doing is making sure we have functioning financial markets. So that everything we do can flow through, so there is a transition to the households and businesses that need that. Point,ow that, at this the fed is all in doing everything it can to support the economy. When we are getting to that Third Quarter maybe reopening, is there more that you think you need to do or can do, and what might that be . Loretta left to see what that looks like when we get there. Appropriately,d waydly, in an unprecedented , really because of the recognition of how deep this shock was. And engineered because of the investment we were making in public health. Support some of the programs we are doing and be prepared to use our tools is appropriate to make sure markets function and we are supporting the economy as we always do so we can get back to normal, Sustainable Growth with full employment and price stability. That is what our goal is going to be. That is what our goals always are. We are going to move those things around as appropriate to make sure the economy can recover and get back to a Sustainable Growth path. Cleveland fed president Loretta Mester. Coming up on the show, chinese banks lower the benchmark rates. Aimed at thepboc impact. Nejra this is daybreak europe. Chinese banks have lowered the benchmark rates in an effort to cushion the coronavirus damage following a series of easing steps by the pboc. Chinese regulators said last week that the nation is facing unprecedented and that more stimulus is in the works. Sophie, you have greeted portfolio greeted commodities in the portfolio. Especially metals. Is that based on a base case that we will see a recovery in china . Sophie despite the data for gdp, 620 , we think that the that it isulus going to be a vshaped recovery that is clearer. The basespecially on metals case, the specifics we have been highlighting for a while. Nejra manus can i ask you, in regards to china, the fiscal mulus they bring to bear the rest of the g20 is 11 . Are you expecting a second wave of stimulus into your china trade . I think it is more waitandsee mode. If you look at the recent data, the production is already in vshaped. For now, the issue remains more ie side of the picture guess that no one could really expect nejra we will pick that manus we will pick that theme up in just a moment. Up next, phillips ceo. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Manus good morning. I am manus cranny from to buy. Nejra cehic alongside me in london. Your top stories. A mixed picture for global stocks amid signs that Coronavirus Infection rates are slowing in some nations. Oil extends losses. China pledges more stimulus. Another jump in daily deaths. On. Leaders say an agreement new aid is closed. U. K. Prime minister Boris Johnson defends his handling of the crisis. In phillips plans to build ventilators to reduce shortages. The ceo, Frans Van Houten, joins us shortly. Nejra welcome to daybreak europe. Wer the weekend in the u. S. , really started to see even more the politicization of the pandemic. Both down bipartisan lines but also with regards to president trumpss comments on china. The majority of americans say they do not want to rush the return to normality as they consider how to ease the lockdown measures. We have gotus Frans Van Houten standing by. Is numbers come through. He top line is cash comparable sales declined by 2. 3 . The estimate was for a drop of 1. 2 . Lets get to the ceo, Frans Van Houten. Thank you for giving us the time. Guidancein from giving for the rest of the year. I suppose how i want to get a sense from you, other ceos say they have a supply crisis, not a demand crisis. What is your current demandsupply conflict . It is a tale of two stories. At phillips, Strong Demand for diagnostic equipment, ventilators, patient monitors, but those are for telehealth that aid the treatment of critically sick patients in hospitals. At the same time, you see that hospitals have postponed socalled elective procedures and therefore the demand for image guided therapy is down. We also see Lower Consumer healthfor our personal business. We saw a 2. 3 decline in revenue in the First Quarter. 5 impact on the corona pandemic. In the second quarter, we expect that to be a little bit more severe. In the third and fourth quarter, we actually have some leaders expectt positive year on year growth. We expect the second half to be that much better that we expect a modest increase. In connectednd. Are and precision diagnosis elective procedures, for example, for cardiovascular patients, they really dont want to postpone too long. Ithave not made quantitative, and i think that is what your headline is referring to. Overall at phillips we are working very hard to deal with the customer demands. We call it our triple duty of care. Supporting Business Continuity and of course ensuring the health and safety of our 80,000 employees around the world, many of which are working exceedingly hard, 24 7, in order to cope with the Strong Demands for Critical Care equipment. Nejra on that Critical Care equipment, one of the big things of course you are working on is gearing up to produce 15,000 of a new easytouse ventilator. As far as i understand, hundreds of components are needed for the ventilators you are producing in the u. S. Around 650. The fact that there are nonmedical equipment makers stepping in, is that making it more difficult for you to source the components you need for your ventilators . Frans we have three factories for ventilators in the United States. We are adding production lines. We are investing over 100 Million Euros to add capacity to make as many as we possibly can. We are working with partners to do so. Ventilators are not simple products. Besides the components, you have sophisticated software, what the patient really needs in terms of ventilation. The supply chain components. We need to make sure that we deliver as fast as we can. Gladat extent, i am also that we have been able to build an airlift between asia, europe, no the United States because day can be lost. With companies initiatives, to some extent that is distracting. I think they want to have a proven ventilator in the hospitals for both intubated patients and noninvasive ventilator needs. To hellhey say the road is paved with good intentions, everyone out there trying their best. Can we go back to the reporting side for a moment . The rhetoric you have just used in terms of a very confident dividend,f, with the you have gone to paying this in shares only. Do you anticipate getting back to cash dividends before the end of this year . We are announcing today that we will keep the dividend over the year 2019. We want to preserve cash. We dont know exactly what will happen. If everything works out fine, that is great. But if we feel that the conservation is a strategy we have to embrace, then we will see. If the dividend can be again in cash next year. See your business changing material early and permanently as results of coronavirus . Frans first of all, if i may observe, i see a validation of our strategy in the crisis. At phillips, we have argued that we have to leverage the message to connect caregivers to patients remotely, to make pathology digital. And now we see a Strong Demand for all of that. To enable hospitals the ability to share patients. I think that all of that will accelerate. There will be more demand crisis for our health strategy. This impact we see of high demand for intensive care capacity. Some countries were better prepared than others. I do expect a structural increase in intensive care but of course it drives a peak demand that over time will ease away. At the same time, we expect these elective procedures to come back and consumer demands to recover and overall we can go back to a normal business situation. We pursue the conversation on a return to normal . About 14, 16 . Forgive my bandwidth. Of your sales. I want to get a sense. Us, china is getting back to normal. What can you tell us about the normalization, the reopening, and the sales trend in china . I missed the last part of your question but let me talk a little bit about china. In the depths of the crisis in february, we saw that consumer demand was down some 80 , especially in the retail brick and mortar shops. It kind of had stalled completely. Already in march, we saw that consumer sales started to improve. For the whole year, we expect that china will get back to positive growth in the second half of the year. On the Health System side, hospitals, of course the First Quarter had a strong focus of Critical Care, diagnostic equipment, ventilators and monitors, and a postponement of anything else. In the second quarter, we start seeing a resumption of more normal hospital business. It is our expectation that the western world is at least a quarter behind that but we can expect a recovery, at least for andhospital business consumer demand and the second half of the year. That leads us to say that we expect stronger 2nd avenue business and if you add up first half, we expect modest positive Revenue Growth year on year. Nejra i believe you recently said that your factories in china are running about 80 capacity again. Come back to the ventilators. I believe you previously said that you were kind of prioritizing selling these ventilators to the countries that needed most colorado than those that are stockpiling in anticipation of the crisis. Are you still doing our you expect that to shift in the near future . Frans we are still applying what we call fair and ethical allocation. There is more demand than we can produce at this time. Capacity to the hotspots like new york, italy, spain, other cities is due to the logical human thing to do. Around the world, the understanding for that strategy. In the meantime, we are ramping up to build extra lines, work toh our partners and vendors get more components available so that we can build more products. Peopleally proud of our in pittsburgh, in carlsbad, in marysville in the United States that are working very hard to make as many possible product as i can. I still expect to be over allocation, but we are now able to produce 50,000 ventilators a week. Obviously a very contentious issue. All across the world. Reports,. S. Media there is a congressional subcommittee and they are questioning the federal decision to pay i think it is quadruple the price of a commercial version of a ventilator that you have developed. Do you have any response to that . Is this a serious issue . That let me say up front but therewill is a confusion here at play. Phillips produces a wide range of ventilators. The ventilators that they have chosen for the hospitals is a Critical Care ventilator for both invasive and noninvasive use. We are selling our ventilators below this price. We are not prices around the world. The specific collaboration that was referred to dates back many years when we have teamed up with hhs to develop a special version for the field that we will deliver later in the year. That special version at a special arrangement. We are focused on making as many as we can to support the patients that need it. Nejra Frans Van Houten, ceo of philips, thanks so much. The u. S. Is temporarily suspending temporarily postponing certain tariffs payments for 90 days. It is limited in scope to u. S. Duties on china steel, elementia, and aluminum. President donald trump says china may be knowingly responsible for the outbreak. Of viceechoes comments president mike pence who said china was not as forthcoming as they couldve been. Governmentf the u. K. After a sunday times story says that Boris Johnson failed to take the virus seriously. The government said the article contained a series of follows a series of falsehoods. Is coronavirus pandemic appearing to be easing in parts of europe. Plans says it will unveil within two weeks. Seecurrent lockdown could the French Economy contracted by 10 in 2020. 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. Lets get the agenda for the week. It is a busy one. First Quarter Results are going to come in a wave. Theets are bracing for worst numbers in years after Major Economies closed down. It is the tech firms, netflix, they will tell a different story. The streaming service is survivalto show strong strong growth. Nestleny announced announced on friday. On thursday, it is all about the banks. Credit suisse publish their earnings and the outlook of the bank. They look to buy back as much as 1. 5 billion shares. Instead, it will withhold part of the Dividend Payment until the second half of the year. Food manufacturer nestle reports sales and revenues for the First Quarter on friday. Are we buying ice cream or milky bars . That is the question you have to ask. 20 more to come. A been week for earnings. A big week for earnings. This is bloomberg. Nejra this is bloomberg daybreak europe. , ae will this in asia negative some weakness in slipping as. Futures 10th. Dollar strength across most g10 and across the yen as well. We area 20 year low but waiting for the rollover of a contract. The u. K. Government has issued a serious defense of Prime MinisterBoris Johnsons handling of the coronavirus crisis. After a sunday times story suggested johnson failed to take the virus seriously in early phases, the government published rebuttals. Activelynment said it misrepresents the enormous amount of work which was going on. Ministers added that there was no imminent progress no imminent prospect on lifting the lockdown. Firstronavirus showed the france and italy showed the smallest amount of fatalities in weeks and germany prepared to begin some economic activity. Smaller stores reopen monday and schools will begin admitting some students in early may. France says it will unveil plans in a few weeks. Spains lockdown is extended into may and italy has no plans to ease until may 4. Sophie from Societe Generale is with us. He raised credit earlier, including a european Investment Grade and high yield. I understand you are also in favor of peripheral debt. Is that a tactical or strategic move . For now, much more technical. That covid19 will be behind us and we will be back to normal if there is any more normality. We are hearing in advance for that. I just want to go back to your china call because often times we look at the supply chain of europe into china. Is that 50 equity exposure you would apply is that part of the equity exposure you would apply . Sophie if you look at the supply chain, i guess that is after covid19, there will be tremendous change. For now,s clear that the supplyside of things in china we have been ready to monitor closely what is going to happen. For now, we think that with all the stimulus going around, owning asian equities versus u. S. And european makes more sense. Nejra on the question of u. S. Versus europe when it comes to factoringhow are you in dividends in the two regions . Sophie if you look at the earnings season, both are going to be infected. One thing to keep in mind is the 60 of s p 500 are exposing you to the u. S. , which is not the case in europe, where there is much more export led sectors. , therms of earnings earnings season is going to be better looking than europe. The second question on dividends versus buybacks, it has always wherehis mentality buybacks are like dating and dividends are like a committed relationship. Buybacks is cutting the bade a given, given economic data. Sense for me Price Sensitivity perspective. Price sensitivity perspective. Manus a committed relationship, what does that do to the oil and gas sector . You said you preferred european to u. S. Oil and gas. Is there any marriage counseling for the european oil and gas sector . Sophie i think the sector is much more like something specific at this point where in europe you have much bigger companies. In the u. S. , it is much more smaller players, like 90,000 players, less concentrated. We think that in europe, they have much more cash on hand. On dividends, it is clear that in europe manus sophie, thank you very much for being our guest. , asset strategist at Societe Generale. We will see you tomorrow morning. This is bloomberg. Awesome internet. Its more than just fast. It keeps all your devices running smoothly. With builtin security that protects your kids. No matter what theyre up to. It protects your info. And gives you 24 7 peace of mind. That if its connected, its protected. Even that that petcamera thingy. [ whines ] can your internet do that . Xfinity xfi can because its. Simple, easy, awesome. [ barking ] nejra good morning from bloomberg. I am anna edwards in london. This is the European Market open on Bloomberg Television alongside matt miller, who is in berlin. Matt good morning. Today, the markets weather the storm. Oil markets collapse. The stocks mixed after china pledges more stimulus. European futures are higher ahead of the cash trade less than one hour away