Google ad demand although previrus quarterly was of. That march was difficult. Started. Ts get you we are seeing u. S. Futures coming online, flat, a bit of Downside Pressure. We have u. S. Stocks in the regular session wally. The Downside Pressure on big tech, really leading the declines. The nasdaq composite reversing two sessions of gains. U. S. Consumer confidence dropped in april to the lowest since 2014. There is a big week of earnings not to mention centralbank decisions ahead of the fomc meeting. We have the dollar falling because it has been weighed down. Rising wti rebounding, in the overnight session, above the 13 a barrel level. It felt in the new york session fell in the new york session. There were some swings in the u. S. Oil fund, saying it will sell out june positions. Haidi our next guest says the next turning seasons will not offer much to investors but they are bullish on u. S. Stocks. Jim macdonald joins us. Great to have you with us. You are more bullish in the u. S. , not surprising given how much support the u. S. Market is getting not only from fiscal measures from the government but all of the fed action and perhaps even more this week. That is right. He differentiated the response to the crisis, the u. S. Has been the strongest out of the gate. We knew fiscal policy would be the most aggressive, able to move faster than europe, for example. The fed has positively surprised. Coming into the coronavirus downturn, the u. S. Economy had the most relative momentum. So we are in favor of them over emerging markets. Bery there seems to concerned about how much the fed is doing especially when it comes to backstopping credit. We have seen junk bonds doing well. The markets rallying despite the fact some of the facilities are not set up yet. How much help is too much . It is an interesting illustration of the feds power. All they do is say we are coming into a market and it gives investors to come in ahead of the fed. We have built a majority of the increase in credit spreads was tied to a deterioration of liquidity opposed to a fundamental credit concern. What the fed has done is help to address liquidity concern. The primary objective is to avoid this liquidity crisis from turning into a credit crisis. The score looks good. Does that mean the fed will have to keep strongly signaling its status quo in order for the market to month maintain momentum . Isi think so but there little question they will do that through the question we sometimes get is will they need to do more, and that is dependent on the outlook and if there is deterioration in the coronavirus risk case. Do we see a big second wave, governments unprepared for that . That is a risk case, but that is what would be required for the fed to have to do more than what they have done. The action they have done has been effective. Their multiple pockets which is showing strain, but the improvement we have seen in the treasury market liquidity, investmentgrade bond and highyield has been good. Haidi is the question not how long how much these shortterm government fiscal side will be able to support the Global Economy . Are we better off talking about the major short stroll implications with Inflation Expectations and dislocation within labor markets, permanent changes with Consumer Behavior . That is an interesting question. There are two things to look at, the shortterm and longerterm applications. Whether it is the risk of a secular upturn in inflation, whether it is the cost risk from deglobalization. Whether it is markets acting cautiously with risk of return, we are debating those things. Outlook everyh a summer. This requires study, deliberation and research. The primary question, is there going to be an inflationary cycle to come out of this pandemic . The markets dont seem to be worried about it. The 10 year breakeven rates has been steady recently. We have got time to make that call. Probably not going to be a secular upturn but that is the most important question after the huge fiscal spending not only in the u. S. But in many countries outside. Structural if the shifts are related to labor rights . We have seen pressure on amazon, being probed about labor practices during the pandemic about by new york. Could we see this pressuring margins for the company . Say that is a risk and a full employment market. With u. S. Unemployment up to a 15 kind of level in a short time, i dont think it will become an economy wide pressure. It could be an issue for individual companies. Haidi Northern Trust chief Investment Specialist john. Cdonnells jim mcdonald we will have more analysis on the fed policy direction in 20 minutes. We are joined by the Wells Fargo Securities analyst. Lets get you in the meantime a check of the first word headlines with karina mitchell. Karina saudi arabias foreign reserves plunged in march at the fastest pace in two decades as the oil crash hammered the economy. It was 460 billion, the lowest since 2011. Last week riyadh said it would draw downs by 33 billion for the whole year. Brent crude crashed 50 in march and has fallen even further since then. Latest pictures from north korea and the capital calm operating despite speculations of the health of the leader. He has not been seen in public since april 11 and the and missed the celebrations for his grandfather birthday. Some say he could beal although it could be ill. Seoul says it knows where he is very John Joe Biden has Hillary Clinton endorsing him and saying he will be a real president. Said heclinton shed would listen to science and bring the u. S. Back together. Writing has already biden has already won the backing of barack obama and nancy pelosi. 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. I am karina mitchell. This is bloomberg. Shery earnings season is in full swing with more big names after the bell. Alphabet reports stronger than expected prepandemic revenue but these a sharp slowdown in march. Topping oneases million as President Trump orders meatpacking to stay open. We have a look at the supply chain in an exclusive interview next. This is bloomberg. Shery coronavirus cases in the u. S. Have topped one million. The rate of new infections continues to hold below previously seen levels. The states work towards reopening with andrew cuomo laying out the criteria for some areas of upstate new york. Our governor reporter joins us from washington. How much progress are we seeing in the states trying to reopen . Emily it is different depending on which state you are looking at. Some states are going full speed ahead trying to slowly get stuff to open up. A variety of things, parks, movie theaters. Other states are applying the blanks the brakes saying we are not ready. We need to keep restrictions in place. We are seeing 50 different reactions from 50 different states. And that is the way it is supposed to be. That is the way the white house wanted it, for governors to take the lead. There has been some criticism there is not enough detail how the white house and Task Force Land to scale up testing to the point we could see safe reopenings without a second wave . Emily there has been some criticism. You have seen a number of governors sort of go out of their way trying to get testing. Maryland goes all the way to south korea. You are seeing states struggling to get enough tests and supplies. Yesterday you heard donald trump say they are going to be doing more testing, that efforts have been scaled up. But it is taking time to get there and to get testing out and make sure people can receive the testing. Shery the big news has been President Trump ordering Meat Processing plants remain open. How controversial is this given it involves the safety of workers . Emily this is something where Companies Might interested in seeing the processing plants reopened. The average american would be interested in making sure there will be meat on the table. For workers and unions this is a big deal. We have seen around 6500 employees either test positive or have to go into quarantine who work at these plants. 20 have died. This is something where unions have said it is not safe, they are not essential, they dont need to be here. The move in the white house could set up a conflict with the workers and the union groups. Haidi thank you for joining us. The congressional governor government reporter Emily Wilkins in washington. The commodities trader said the u. S. Supply chain is under strain but not broken. We spoke with the cargo ceo Dave Mclennan about the impact of the virus and what it is having on their bottom line. Supplyproved the food chain is under strain but there are a lot because of what is happening. Certainly there have been Food Production facilities in various parts of the country that have had to close because of illness or supply disruption. The ability to produce food is still there. There are going to be momentary closings. Momentary is not the right word. We have one facility closed for 17 days but it is now back up and running and it has been the last week. I think the Food Industry and the food facility, the people that work in our resilient. I think it is under strain but dont think it is broken. Him, theponse to president issued an executive order saying of the defense commandon act, he will Food ProductionCompanies Stay in business and make workers go to work assuming they have appropriate production. Protection. Well make sure they happen of ppe to operate safely. Are you aware of that executive order . I am aware of it. I saw that for we set down together. I dont know the details but it will call to question keeping the American Public fed to keep food on the shelves but also balancing that with the health needs and concerns and the Emotional Health of the workers in the plant. We will have to find the balance between the two. If you have illnesses at a plant such that you dont have a choice, certain vital functions in the plant that are ill and cant come to work, you cant run the plant either. So far we have been able to run. We have had support from the usda in terms of having inspectors onsite. You cant run a plant without usda inspectors. It remains to be seen how we will manage the health, physical of theand mental safety workers in the plants and the executive order. Lets talk about for people who dont understand how meat is produced, it is with people working closely together. Is the problem because they are so close together, you have to make certain they will not get this virus . How will you do it under the executive order . We have taken different steps in the last few months since the virus began to expand so that everybody is temperature checked before they come in. If they show any symptoms of covid, they are asked to leave quarantine for facilities quarantine for 14 days. No visitors are allowed in the plant. We have appropriate physical spacing in the lunchrooms. We have put up plastic dividers if people cant have appropriate physical spacing. A lot of people in the facilities, brave and courageous people who come to work every day and take your obligation to putting food their obligation to putting food on the shelves very seriously. One person has said thank you to the employees at this facility, you are feeding 22 Million People a day. So the amount of production out of one facility is substantial. Many steps have been taken to ensure the health of the employees. Are eatingly people about the same amount of food they ate before but in different places. Explain to people who are watching what people now have two lets say not produce as much food in certain areas because restaurants are not open in places like mcdonalds dont have as much traffic as they used to . How has this true this changed the Manufacturing Business . There is a shift from food service to retail. With fast casual and all of the categories, they have been impacted by stayathome orders. I would say this. The orders for food service in the first three weeks lets go back to march 1, showed significant declines. There has been increases in the last three weeks. Ceo ofthe chairman and cargo speak carville cargill. Apple predicts sugar than expected prepandemic revenue but sees sharp declines after that. This is bloomberg. This is bloomberg. Haidi alphabet shares climbed in late trade after posting stronger than expected firstquarter results. Lets go to our reporter for your details. What was a standout in what was a very strange time to be looking at these earnings . Wasor one the net revenue 33. 7 billion. The fact they beat that, it was in the to send a positive signal to the market. Saw that described as a alphabet described as a tale of two quarters. They had a sharp slowdown in the as business in march. They said they saw 52 growth in google cloud which is something the market is pretty happy about. You saw the company did not give guidance. They said q2 will be a difficult quarter for the as business. Ads business. Shery the ceo said they did ea slowdown in march given the usage trends area they remain optimistic about longterm trends. We have to just ignore what is happening, given the broader pandemic and how everybody else will be infected. People are looking past earnings. What is important for the rest of the year to see if Google Alphabet can make a comeback . They talked a lot about a shift the companies are having to digital, whether virtual showrooms, more towards ecommerce and Cloud Business. Google Cloud Business and its g suite products is competing with microsoft, zoom and facebook. They certainly have over 100 million of cash on hand. Seems like they are in a position to ride out the storm as long as possible. Talking about this on the call. They say the search business reflects macroeconomic trends. If we see a larger recovery in the macro economy, expectations for Google Search will spring back. That is producing a lot of position of the stock price. Haidi i am wondering if this kind of accelerates plans to diversify they have diversified into clouds, looking at the breakdown of revenue, possibly not enough. Certainly not enough. It is still an advertising business. They mentioned they will be prioritizing a bit of the g suite and cloud. Hiring towards the cloud. They have been saying that for many quarters now. This gives them a stronger urgency. They talked a little bit about youtube the descriptions. Youtube, the watch time and viewership has gone up tremendously. It has been a slowdown. A slowdown in advertising. We will see them build up the subscript in business whether it is through the app store, youtube, to offset losses from search and the rest of this way advertising. Mark bergen, thank you so much, bloomberg technology. Starbucks says it has reopened almost all of its cafes in china but it sees the coronavirus pandemic cutting sales in the mainland up to 20 this fiscal year. A slump by half in china. Starbucks says the virus impact on Current Quarter sales will be significantly greater. And we will have a live interview with the ceo of starbucks 10 30 a. M. In new york. Construction industry bellwether caterpillar is warning the fallout from the coronavirus will last sometime yet. The company said the current time will be more significantly impacted by the pandemic. They shelled the traditional fullyear earnings forecast as a disruption offense in building, mining and injury industry. The British Airways owner said hedging writeoffs as intricately to a firstquarter loss. Iag says that will mean a restructuring, a loss of 12,000 jobs. The forecast is for a secondquarter loss that could be significantly worse than the 580 million shortfall through march. Coming up next, the fed decides. A wells fargo security strategist tells us what he is watching for in the fed announcement and what you should be watching in the weeks ahead. This is bloomberg. Saw a risk to the outlook for the economy and acted. Rangereduced the target for our policy Interest Rate by one percentage point, bringing it closer to zero. We are deploying these lending powers to an unprecedented extent. We will use these proactively and aggressively until we are confident we are on the road to recovery. Chairmanderal reserve Jerome Powell will have comments on his Monetary Policy and emergency actions later wednesday. The macro strategist from wells fargo will be listening in closely. Great to have you with us. There is no great surprises we are expect to hear from jay powell, but what level of assurances of you need to give to markets . Bewe expect the message to they will remain accommodative for a long time especially with the policy rate and the different measures they have taken. What we are looking for is details on some of the measures that have been announced but are not in operation yet. The Corporate Credit purchase facilities, we are expecting we could hear details on that and perhaps a start date. This is more of a fill in the to steal the notion from my colleague. , butnt need new measures we will get more information about things previously announced. Longevity . About do you think jay powell will be signaling the fed will be staying the course . Yeah. I think the big message is they will be accommodative until they start to see the economy turned the corner from the effects of the virus which we are quite a long ways from. If you look at Market Pricing and expectations for the fed, very accommodative for a long time. We dont expect that change. Perhaps he spends time with reassurance for markets but if you look at what they have done so far, it has been remarkable whether it is emergency lending programs, asset purchases, you name it, they have done it. We think of what they could do going forward, you look at justice today they announced more details for the Municipal Liquidity facility. They reduced the restrictions on that so that more counties and cities will have access to it. The message all along is these are huge measures and they are having the desired impacts already. There is more room if certain market sectors show strains we have not seen recently, if they were to crop up and increase the amounts, increase asset purchases, they could be ready to do it if they need to. Done already so much and they are ready to do more. How much do you think the fed is factoring in the moral hazards and risks involved with all of this especially when it comes to backstopping risky corporate debt . Is somethingat they are considering. To this point i have focused on they have focused on the downturn of the virus. Now some of the measures have come into play, things are starting to work as Risk Appetite has improved. Credit spreads have come down, equities have rallied. You are certain to see generally healthier market. With that, we think they will be pleased with the progress so far. If they do see things start to break down, they could shift tack and add to these facilities. All we have seen his improvement as some of these have come online and there is more to do from here. As we get more details and more timelines on when those things are going to come into effect, that will support the market further. For the timest being, given the need for cash, the fact that they have to keep financing growing deficits, are we going to see a continuous how will that change the dynamics in the bond markets . That is one thing we have been looking at and saying for a while, with all of the issuance from treasury, the fed will need to start buying pills at some point. We think that happens in the second quarter. You think about these emergency relief programs that they are doing, requiring them to raise cash quickly. They have done it through the bull market. Trillionoint the 1 the treasury has taken from the market went well. Investors are looking for the safest and most liquid assets. Have both of those characteristics. You have seen the market digest a lot of treasury supply. That probably starts to shift. The fed is not going to wait until you see some disruption before they start adding bills to their portfolio. We expect that to happen this week. That is consistent with the goal of getting asset purchases back to nearer the treasury debt outstanding. They have not been doing this up to the point and instead focusing entirely on coupon note and bonds. It kind of fits the broad goals and addresses the massive supply of the front end in treasury bills. The 10where do you see year on a longerterm basis . As we think about the dynamic of treasury issuance, we expect the 10 year yield to rise over a shorter timeframe, two or three weeks. Could go back to 0. 8 there by the year end, it is 1. 5 on the 10 year as we expect that purchases to come down on an aggregate basis and shift to the front end of the curve. They are taking supply out. At the same time it is shifting issuance to the back end of the curve. Done in coupons across the curve. We think they are going to rely heavily on the backend of the curve as well with the introduction of a new twentyyear security at the may 6 announcement. It is the fed coming in and doing less in treasury coupons and at the same time treasury is going to be issuing debt at the back end of the curve. That means higher rates in our opinion and a steeper curve. Thank you. The micro strategist at Wells Fargo Securities. We will have special live coverage of the fed decision and subsequent News Conference along with a suite of special guests. 2 00 in hong kong thursday. We are seeing Downside Pressure for u. S. Futures which are down now around. 1 after the s p 500 now. It was led lower by big tech giants falling. We saw the likes of we saw the likes of netflix, apple, facebook, reversing gains we saw earlier in the week. Take a look at what is happening with kiwi stocks. We are seeing a second session of gains. Now the new zealand economy is returning as they are easing the lockdown restrictions, more expensive around the world, going for five weeks. Wti rebounding after it fell in the new york session. We saw wild swings. Lets get to first word news. Karina we start in china where Scientists Say covid19 is going to return in seasonal form like lesser flu infections. It is unlikely the new virus will disappear the way sars did 17 years ago. A systematic effects make it hard to contain transmission. Beijing is lashing out at criticism from Peter Navarro who said china it the truth. D the truth. He is always telling lies. He has no credibility. What he is saying is nothing but lies and fallacies. Golden japan is entering week under a state of emergency in what is traditionally the busiest traveling time of the year. Airlines have cut flights, tourists are being urged to stick urged to stay away. Critics say the abe government acted too slowly at the start of the crisis. Some European Countries are moving towards lifting virus restrictions with plans for shops to reopen may 11 but cafes and bars will have to wait longer. Spain hopes to return to a new. Ormal in the next two months germany reports the number of new infections fell below 1000 for the first time in five weeks. They hope to relax curves. The u. K. Confirms more than 161,000 people have been infected with the virus and 21,000 fatalities are the figures dont include fatalities at care homes amid claims the in somen is rife institutions for the government says it is on track to test 100,000 people a day and will begin trials of existing drugs to see if they can treat covid19. 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. I am karina mitchell. This is bloomberg. We are seeing australias trade data and First Quarter inflation later on. Bloomberg economics says the region is set for a deep downturn. This is bloomberg. Get newe are going to zealands trade numbers any moment now. Expectingeconomics growth not expecting growth. There will be the largest contraction since the great recession. James mcintyre now. Australia and new zealand on track to contain the virus, new zealand coming off of the restrictions and now talks from individual states in australia in terms of loosening the virus restrictions as well. Is it too late in terms of the recovery . What are you expecting to see . But we have seen whether it is in new zealand, where they have had remarkable success with the lockdown, or in australia where there are signs we could begin to think about reducing lockdown measures, we will have a very significant hit to Economic Activity in both. We are forecasting for australia 6 decline in 2020 for gdp and decline. D for 4. 5 as we look forward now it is a question of what recovery can we expect and how quickly can economies belts . Relative to my expectations, earlier than expected success with the virus, and therefore an expectation that australias shutdown was going to last six months, perhaps reemerging sooner, has seen a slight upgrade how we think the economy will recover in 2021. It will be a long time, until we see the economies get back to even the same size they were at the end of 2019. We are not expecting australias to get back to that place until the second half of 2022. There is a long way to go to get the old economic recovery. Getting the trade numbers from new zealand. Expectations 5. 81 billion. Each one is slightly better than what we were expecting. 3400 56 million. We are seeing the trade balance when it comes to march coming in at 672 million, slightly below million we were expecting. In terms of the longerterm view, i am wondering if you had a look at conversations around permanent dislocations we are likely to see, whether it is behavior, labor market, in line with demographics . When we look at how longlasting will the damage being, when we think of these things, we have the a rapid deterioration in Economic Activity. The downturn and the lockdown has been a faster hit to jobs, employment, all through not only these economies but around the world, then we have seen in any other downturn. How long it takes to reemerge and get the people back to work, not every job will be saved. Not every firm will survive. It will take a long time to create enough employment the only get these people reengaged, those unemployed who have lost their jobs but also to create a chance for new people to enter the labor market every single day. We will require the economies to run hot to absorb the labor overhang. That comes with challenges. Thinking of the trade figures today, new zealand and australia are both very small, open trading nations. Industry,m is a Major International in particular. Until we find a longterm solution to the virus, it will be very difficult for those industries to get back to where they were with people traveling. There are some potential upsides there. We think about australia and new zealand having the trading relationship, both of them Major Trading partners for china. China is the most important source of tourists for both countries through the second source is each other. That is where the idea of creating a possible virus free bubble between australia and new zealand, allowing borders to be open to them could be an upside avoid,p get, or redeployed the slack in the markets and get recovery happening faster. Shery given what is happening globally, what about potential shift towards disinflationary pressures . We will get australias numbers later today. I think we know what some of the things, what the trends are going to be. Betweene similar things australia and new zealand, food prices will be an important contributor in the first order and administrative prices as well. Taxes in new zealand are similar in australia. The government, part of the stimulus measures, support measures, they have capped a lot of prices, insurance premiums, rate, all of these. It will be difficult where consumers have had a large income hit, those being in distress, to begin to think about lifting those prices again. The overhang in the labor market means whatever wage pressures, and they have been absent in australia for some time, whatever wage pressures are going to be dampened. Overlaying all of that we have the current turmoil in the oil market. Apple have a disinflationary impact in the short term. Moving forward it will be very hard to have a strong outlook for inflation with the capacity. It is a real problem for policymakers because we have already cut Interest Rates to the lowest for both countries. Real Interest Rates could rise if we do disinflationary pressures coming through. So that could be something Monetary Policymakers might have to be dealing with soon. In us in new zealands case we could see them moving to negative rates. That is a wait and see in the post virus world. Shery keep us updated. A 42 billiones dividend trap, copper tweeted between this is bloomberg. A quick check of the latest business flash headlines. Boeings 7 owings aircraft are going to be grounded until august because of ongoing Software Issues per the reuters report said this could extend even further. Southwest airlines, the biggest operator of these airplanes, has removed them from its schedule until november. There will be further criminal and civil scrutiny. Harley davidson jumped after its new acting ceo outlined plans to cut costs and focus on traditional strength. They will stop impeding in markets where the chances of success are seen as low. That could be the only a few manufacturers to grow in the coming months. Reliance industries is having its first rights issue in 30 years as it looks to pair debts. Indias Largest Company by market value will consider a share sale at the end of the month. The energy to Technology Conglomerate has announced three unfreezing efforts in recent billioncluding a 5. 7 tie up with facebook. Chinas biggest banks have released First Quarter earnings, reporting a small increase in growth as bad loans climbed amid pressures from the virus pandemic. Lets get to selina wang for more. What do we learn from the reports of the big banks . How badly worthy hit . Were they hit . Selina they got some growth, despite the climb in bad loans. And with the followup from the pandemic, chinas largest lender reported a 3 rise in firstquarter profits, the slowest since 2015. There is a 1. 8 gain. With agriculture, bank of china and China Construction Bank had 5 increases. Chinese regulators have posted a range of relief measures, injecting liquidity, allowing them to postpone Global Payments , loan payments. The government is calling on the big banks to bail out struggling businesses hurt by the pandemic and Analysts Expect these banks to face an unprecedented drop in profits. , bankshe Global Forecast in china faced additional credit costs of 226 billion. You are seeing the credit losses cascade through the banking system. The u. S. Lender setting aside 25 billion to cover bad debt. Hsbc warning its losses could reach 11 billion this year. The other big question is willanks will starve work for the rest of the year with the pressures that are building. Prediction for this year depends on how dramatic the slowdown in chinas economy is going to be this year. Investors are expecting the slowest growth in 40 years, flashing the forecast for gdp growth to 1. 8 . Listen to this estimate from ubs. They say chinas Banking Industry could face an unprecedented 39 slump in profits and without government for parents measures, earnings could tumble 70 to absorb the bad weight of debt. If you look at the data that is out there, the nonperforming loan ratio was up slightly at the end of march but we were seeing a massive hit on Consumer Debt that could get worse. Wang, our china correspondent. We will have more on Bank Earnings later when we speak to the cfos of Standard Chartered bank at Deutsche Bank and the birth the barclays ceo. This will be 1 00 p. M. Hong kong time. Riverfront Investment Group senior Portfolio ManagerRebecca Belton is with us on whether the u. S. Is the best ways for equity investments. Plots more to come. This is bloomberg. Haidi very good morning. I am haidi stroudwatts in sydney alongside shery ahn in new york. We are counting you down to the market open in australia and south korea. Welcome to daybreak asia. Lets get you our top stories this hour. Asian markets are facing an uncertain start to the day as u. S. Consumer confidence undermines the new york session. More Companies Pulling guidance as the coronavirus continues to muddy the waters