Friday coming off the exhaustion of all of that central bank news, the analysis of the markets, the big tech earnings. I would focus on this may day, on the persistent theme, the dawning awareness about a seriousness a pandemic continues to be. One lighter note, there is a beach war in america. The governor of california is shutting down the beaches while alabama and texas are talking about opening the beaches. That is the distraction in a very difficult virus statistics. Howcine it is interesting in the u. S. It differs from state to state. With the bloomberg first word news in new york city is Viviana Hurtado. Viviana we begin with u. S. Federal reserve expanding the scope of its main Street Lending program. Now businesses with up to 15,000 employees will be eligible, so will those with up to 5 billion in revenue. The central bank is expanding its paycheck protection facility. This after the initial round of funding was spent in under two weeks. European central bank looking to ease money market stress. It is introducing pandemic emergency longerterm refinancing operations. They are to ensure sufficient liquidity. China may have chosen not to contain the coronavirus. Speculation from donald trump. He says he has seen evidence a lab in wuhan was the origin and it got out due to a lab mistake. The u. S. Intelligence Officials Say they are investigating the exact cause. Says that is unfounded. Boris johnson and it is his pledge next week that he will set up details on how businesses can reopen. People will be encouraged to wear face masks he says the u. K. Is passed the peak and is on a flow. Rd 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. Im Viviana Hurtado. This is bloomberg. Much. Hank you so equities bounce. It is really simple, a mayday pullback and want to emphasize, in the confusion of global volumes and trading, it is a different friday at futures very solid. Different friday. Futures very solid. Level. Ack to 38, 39 francine, what i would focus on today is shortterm yields. Dissemination of power in lagarde is longer and short term paper comes in this morning. Francine we also which i wanted to point out has some huge forecast from the ecb. They say the euro area economy could say below 119 level through 2022. I will go through some of the specifics. Overall, u. S. Stock futures are down. A similar story for european stocks. The markets are focusing on pretty gloomy corporate news. The persistent economic turmoil caused by the coronavirus is giving them angst on this may the first. A riskoff mood prevailing. It is a holiday in many major markets. We will have a look at that. Lets get to paul donovan, ubs. Paul, great to have you on the program. I have 1 million and one questions. What kind of recovery will we see . How patchy will the recovery be . Will central bank have the final power to deal with that . Paul this is where we run into one of the prevalence. This is a conventional downturn. Byally a downturn is caused imbalances in the economy. The Central Bank Source out the and balancing and then we have the recovery. The problem we got now, a lot of the reasons we are seeing these enormous in terms of forecast is we have never been in a situation where government is deliberately trying to lower gdp in their policy. They will try to raise gdp again. It is very uncertain, the nature of what the recovery will look like. An forced savings going on. They are not able to save money. They still have income coming in. That money will be spent and we get into the recovery phase. We have some evidence of that from the listing of lockdown lifting of lockdown in china. Clearly we are going to see sectors like travel, transport which will be affected for quite a long time. Those sectors are not going to go back to normal. It is something completely new. Francine what happened to inflation or disinflation or of adeflation at the end period of lockdown . In recovery, we are going to see a pickup of inflation or is it going to be deflationary . Isl the problem weve got the numbers are nonsense at the moment. Do you measure prices and a lockdown . That is impossible to do. We are flying quite a bit blind in this. You are going to see relative price shift. There will be prices they go up and some that cannot be calculated. There will be some prices going down. I think we have to regard this probably as being a disinflation force, at least for this year. That does include in the recovery. You will get some price increases. For the most part, think this is a disinflation force. The oil price could push wti negative so that is not deflation. Deflation is a general decline in pricing. Not going to get lots of prices falling, but we will get a negative cpi relative to the oil prices. Tom paul, six weeks ago, everybody was modeling may. Right now, we are modeling june. I am really taken by what justin will for his of michigan said, look, this is a lot of talk. If we dont get this we cannot move forward. How much of that is true . The foundational idea is we have to beat the virus, beat the pandemic before we can economically and politically move forward. Problems, whene we are in an extreme crisis, particularly where we are now, the horrendous death rates around the world, we forget that people are extremely good at adapting. We always underestimate the resilience of humans ability to react to different circumstances. Yes, if you want to get back to the economy that we had six month ago, you have to be the pandemic. We are not going to go back to the economy from six month ago. That is clear. People will adapt. More working from home. Production. Ation of i would question some of the negativity in that. I also think, if you can get to a stage where you have not beaten the virus but you can treat it. You can change the risk around it, that will change fear of the virus. It is fear that has hurt most of the economic balance. Tom well said. Is epidemiology of smallpox one example, the need for that vaccine. Paul donovan, we are good to speak later to the gentleman from heathrow. The airline business, one industry beleaguered. With all of your work over the years, should we have a complete Government Support of ryanair and the rest . Or should we let them combine their way out . Paul this is a very difficult question, because the politics of this is really quite gritty. Have,ve had airlines that perhaps, done a lot of Share Buybacks and someone. And now they are asking for government assistance. You can say, did you manage the way . And an improved in a prudent way . Or has Business Decisions not allowed for contingency . At the same time, what we are looking at, a policy induced slowdown and where policy is going after the Airline Industry for the best of reasons, but still with a direct effect, then the arguments around government assistance take a softer shift. This is something which is a political and social decision. It is going to vary country to country. Different societies decide what the role of government and business is going to be in the future. What penalty is to be paid for past corporate decisions. Tom well said. On this may day and into this weekend, there will be a lot of political recalibration. Paul donovan, i should point out he is strong, strong, strong out on linkedin. We are going to get stronger in our discussion on Central Banks. Usually controversial hugely controversial. Suggests we will get to negative interest rates. Chairman paul will have to look to that later this morning. From london and new york, this is bloomberg. Tom bloomberg surveillance. I say good morning to all of you from london, new york. It is may day and that means so many Different Things to different nations. Some of them are shutdown today. A celebration of mayday and all lacqua and incine are happy to have with us paul donovan of ubs. We booked him for one single reason. Particularly, francine, it seems in america there is generally worry about food shortages, even in the last 12 hours, mcdonalds has weighed in with serious concerns about flow of food. We booked this morning the sheeps former, paul donovan. Your broods out of of lambs and sheep. You are out there doing it. Tell us how the food supply looks from the donovans farm. Paul on the donovan farm, it is fine. The World Economy is also fun. Worry covid19, my big was food price inflation, because we had a really bad harvest in the united states. He had those terrible fires in australia. We had those terrible fires in australia. So, we were already seeing food Commodity Prices going up. However, when we were worrying about food supply in the united states, it is worthwhile remembering depending on how you measure it, between 30 and 50 in america is thrown away. Food waste has been a big problem. Twice as muchng food as you need to because people are throwing it away. One thing that may come out of the lockton situation is potentially a reduction in food waste. People think more about meals and how they budget. Consuming so much and restaurants. In restaurants. Theres the possibility we get smarter about how we consume food and that efficiency could mitigate some of the problems. Ared i am still worried we do get emerging markets and pressure on food prices. Francine what is your biggest concern . In terms of unemployment . In terms of the impact of the livelihood of emerging markets . What are the biggest concerns of this secondary effects . Paul i think there is a concern around labor markets. That is the focus. So, one of the concerns that comes out is i dont think people are going to lose their jobs. Bearing in mind a lot of the furlough. The Younger Generation coming out of university, are they going to be able to find jobs . Are we going to see another increase in unemployment . In part, because in a locked down, the infra structure for hiring isnt necessarily there. That presents a significant generational problem. There is a risk that people start to become longerterm you split fromre the longterm unemployed to permanently unemployed. Concern. Lso a i think these are risks. They are risks we have to be very sensitive to. Francine are they anything is there anything governments can do to medicate that . To mitigate that . Can they extend that to cushion the impact . Paul further can help. It is quite furlough can help. It is quite expensive. You dont want to furlough people indefinitely, because we have long, complex supply chains. If one part of your supply chain is furloughed then another part of your supply chain is going to struggle to reopen, and people who are working in that area are not come to have jobs. The furlough thing helps because it does give people confidence that their jobs will be there. Both of those things are very important psychologically. That will help with the recovery phase. There is a risk around furlough. You dont want people being used to being in lockdown. You want people to have the confidence to go into the wider economy again. I wouldnt advocate furlough indefinitely, but i think you extend this until some point the lockdown is lifted, at least partially, to allow normalization in the economy. Tom paul donovan, thank you so much. Weve got much more to talk about later this morning. That is very important. Coming up, this is something with a modest rebound in west texas intermediate. The executives of chevron will join us. We are really looking forward to that. On this mayday, stay with us. This is bloomberg. Viviana you are watching bloomberg surveillance. I am Viviana Hurtado we begin with the royal bank of scotland setting aside 1 billion. That is a must 10 times amount the amount it set aside last year. The industry bracing for a surge in the number of borrowers who are struggling to pay their bills. One billion coronavirus vaccines year. It is one of several partnerships between drugmakers. They are rushing to put a vaccine into the market. Administration wants to make shots available for americans. Scientists say it could take longer. Boeing is rolling out federal bonds. 25 billion of the company says it will inmates the need for more cash it eliminates the need for more cash. It is looking to shore up its finances are cutting jobs and production. That is your abf. That is your Bloomberg Business flash. Bit. Equities down a little 17. Under it is bonds and the big shift francine, is the steepening of the curve, but the two year yields, germany and the united states, really come in dramatically. Tom. Ine yeah, we look at that and the riskoff. We also had some injections from the European Central bank. In terms of what kind of growth gdp will see this year. European stocks down. As markets try to figure out what earnings brings next. Coming up, a conversation that tom and i have been looking. Orward we will be talking european economy next. This is bloomberg. 49. 50 daddy, i found you good job. Now im gonna stay here and you go hide. Watch your favorites from anywhere in the house with the Xfinity Stream app. Free with your xfinity service. Now any room can be a tv room. Stream live tv, on demand shows and movies, even your dvr recordings. Download the Xfinity Stream app today to stream the entertainment you love. This is bloomberg surveillance, tom and francine from london and new york. We listened to the press conference of Christine Lagarde and bonds moved on the back of it. One of the greatest minds of European Foundation of the economy, peter praet is joining us. Thought on what we heard madame lagarde talk about yesterday. Was it the right thing to do . Is there anything that could have been added . Peter i think it is a very important decision. Intermediate and to book ratios of banks is 20 and 30 which is extremely low, so a lot of action in recent weeks from the ecb to try to configure rate new markets, and the decision yesterday was quite a wharton because banks will be collateralproviding that is much more favorable than a few months ago. There is a big action from the central bank from the lending program, the lending of the banking sector. It remains to be seen what will volumesut by june, the that the banks will borrow from the central bank will be extremely important because there will be the refinancing of previous programs. It is quite a good measure actually. Is other side of the program the pandemic and there was not much news on that side. Program will have to be increased. And is extremely important, we didnt get much yesterday on this, as the reinvestment part of the program isnt clear because it is a shortterm program. Buying bonds in a very flexible way, but nothing is being said about what you do about the reinvestment later on. Bank kept the case constraint francine can i jump in . If we just take a step back, why do you think these paltrows are more efficient than cutting the main refinancing rate . Peter you here basically if you the main refinancing rate the banks will accept liquidity. Of the ecb [ indiscernible] slow markets directly and we will be able to refinance the book at 1 , which is favorable. The other issue the ecb has presently is not so much the risk curve because you have the [indiscernible] so i think that is reasonable on the curve. They have basically doubt with the Emergency Purchase Program and that is where i think this program will have to be when they areuse spending the money, the envelope will probably be gone by september. What is the policy and terms of the ransom reassessment of portfolios that you will find because it is a Short Program . The clarification has to be seen. At yesterdays meeting of the ecb, it is a very good measure i think because it really goes to the heart of the problem which is a Banking Lending market. I would be worried about the situation of yanking banking. Tom tom keene in new york, good morning. I think it is all a very careful and orchestrated policy. I love what Ambrose Evans pritchard did in the telegraph this morning, showing the urgency and focal point of italy. Catalystght now what tell us right now what catalyst italy is to getting to a more constructive resolution for financial europe. What can the immediacy of europe mean to make tough decisions now . Peter i think it is a difficult situation. , theyvered crisis came were in a difficult situation so this is the weak point. That is why the ecb [indiscernible] very much in this program and it is shortterm but we are waiting for decision. , the 20at you need percentage point increase in indiscernible] for a long period of time and that is where the discussions are focusing and decisions are not coming for the month of june. Because ifore 20 ofn [indiscernible] indiscernible] at 0 , it would not be very [ indiscernible] tom we are going to have to leave it there because of time. Praet,ratt peter former economist with the ecb. Sciences mayad spend 1 billion on its new treatment, experimental treatment for covid19, but how much revenue can it generate . Gilead saying it is too early to discuss. It is giving away the first 1. 5 million vials of the future and plans a sustainable model for patients and shareholders. Apple for the first time in more than a decade is not providing a forecast, sparking concerned that performance will suffer despite reporting a 1 rise in quarterly revenue. This sent shares down in extended trading. Retail sales hit a quarterly record. A comprehensive plan in the u. K. To lift the lockdown, this is Boris Johnsons pledge. He will set out details next week on how businesses can reopen and is suggesting that people will be read encouraged to wear face masks. He said the u. K. Is past the peak of the disease and is on a downward slope. 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. Am Viviana Hurtado. This is bloomberg. Francine thank you so much. We will have plenty more on what happens next, lots of countries in europe starting to gradually reopen including italy on monday. You can catch our coronavirus critical challenge special tonight at 9 00 p. M. Eastern. As bloomberg. This is bloomberg. This is bloomberg surveillance, tom and francine from london and new york. Lets get back to peter praet. Thank you for staying with us. How worried are you by the lack of coordination of fiscal policy by european governments . Policy hasink fiscal been quite extensive and a number of countries, especially germany. The question of coordination is some countries have difficulties in having the budget space, the fiscal space to stimulate their economy. That is where it is important at the level where you use the boring capacity, a very good rating for helping countries with fiscal problems for cheaper terms. Trymain discussion is to and make 20 Percentage Points of increase of public debt that we have seen in the coming months, will be funded at a cheap price and the ecb alone cannot do it. The ecb has a program but it puts some control on the spreads. It does not create the easing conditions i think are required for italy to require system liquidity. Francine we also have an important german constitutional week ling on qe next on the legality of qe next week. How worried are you . Peter i am not worried because i look at the European Court of justice. I dont think it will influence ecb policy which will look at the European Court of justice, which has so far very much said policy has been in line with the treaty. I am not so much worried, but you can put noise and the markets and raise questions about if the opinion would be would be thee, how bundesbank in the Purchase Program evolve . But i dont expect this. Tom how japan is europe right now . There is 60,000 foot elevated talk about europe or america becoming like japan, but with a glide path and the relative glide path of disinflation identified, how close is europe to the habits and characteristics of economic japan . Peter to some extent, it is worse. I think before the covid shock, europe was a little bit in this issue about 1 growth and 1 inflation. Point, but to some extent it is worse because there is a lot of rigidity in the union and that complicates the situation where you see japan as a Harmonious Society where you have much more internal fragmentations in europe. That complicates policymaking. The question of Structural Reforms in europe is a permanent thing, so the covid shock came at a bad moment and what we expect of course is that fiscal policy will continue to be quite expansionary at the International Level so public that will increase by Something Like 20 Percentage Points, not only italy but everywhere, and the Central Bank Balance sheet will follow that. I see a big expansion of the Central Bank Balance sheet in the coming years, one and a half years, 20 to 20 Percentage Points of gdp which corresponds to the debt that will keep to the debt. That will keep financial conditions easy. The question is, how will this money be used in coming back, the problem of roof and coming back, the problem of reforms. Tom one more question, and i speak with Great Respect for the trials and tribulations of belgium over the many decades and centuries, belgium is schooled in the politics of getting along and of compromise. What is your measurement of the ability to compromise in modern europe . Peter that is a very good point. Basically it is true that in belgium, the president is a belgian, and i would not be too specific in the shortterm. There is work at the european level to find a common response in helping countries suffering more from the shock than other countries. From my understanding, the , in belgian tradition, take a lot of time and there has to be patients in the market patience in the market but there will be compromise. It will help to some extent. But inot a game changer, will not take it to negatively too negatively. Peter praet, former chief economist of the ecb. Marketsyday, different opened and different markets closed as well. We will have a lot more from america. From london and new york, please stay with us. This is bloomberg. Viviana this is bloomberg surveillance. S p downgrading its longterm rating on nissan to triple be fromple b plus triple b plus. The strong earnings recovery is likely why the pandemic and harsh Business Environment and cannot rule out another downgrade. The phone market suffered its worst contraction in history. Ibc strategy analytics, shipments totaled 175 million. From the same time last year, that is a double digit decline. Is cutting more jobs as part of an ongoing series of reductions since last years failed ipo. Permanentlyplans to shut its online effort called wework now. There is one location and it is closed due to the coronavirus pandemic. That is your Bloomberg Business flash. Tom there is something about the stride, the cadence, the walk of tech types. What dory growthy, but you do when you become a Bluechip Company . That was the confusion around all the news of the pandemic with amazon and particularly with apple. We welcome alex webb of bloomberg opinion. And the newstruck york times did a great job of highlighting it, the use of cash of this bluechip conservative company, they advanced and additional Share Buyback yesterday. They have bought back just under 24 of their shares in the last five years. How far away from a growth stock is apple . Alex it is a very good point. Ultimately, apple has not been a growth stock for some time. Graduallyre picking up. It is happening in some of its categories but its core category, it is stagnating. In the last year, it clearly drop but we did not know apple would be accelerating the pace is buybacks. We would expect to have, without giving a date, cash neutral neutral position in net cash in terms of 100 billion in debt and 100 billion in cash. Its cash position has the client its cash position has declined. Alex, thek at, problem commit probably everything was overwhelmed by the growth in services. Is that a linear function . Do you look out one year, five years, and is it just Straight Line of services . Alex the two feed off each other. The more phones you sell, the more services you will sell on top of it. In auld ultimately result more exponential curve. The other point is that at the ent, apple tv or tb plus tv plus is free for many people. If you buy a new iphone or ipad, you get a year for free. If that starts to convert into subscriptions and you get a stronger competitor to netflix, that is when they would hope to see an inflection point. I am doubtful that will come because the quality of shows on apple tv is not good. I have an iphone i have bought in the last 12 months and it is not something i am in any hurry to pay for. Until those sort of products start really hitting home, you have apple arcade, a gaming product as well, then fundamentally the growth in the Services Business still largely comes from google paying apple Something Like 10 billion a year to make it the default Search Engine on the iphone and that is a Straight Line. Francine talk a bit about amazon. Sales were up some 26 . Why are they not making money . Alex it is because they are investing heavily in making sure they can meet demand. Apple, as amazon, has an impressive logistics operation, not one that was quite ready for this pandemic and lockdown it required. The thing that is interesting, usually amazon invest to take tighter margins or losses on the chin because they know the company is investing for growth, or they expect losses now will turn into longterm stickiness. This quarter, we dont know whether the investments now will have a sustained impact or whether it is ensuring they have enough workers to meet demand, masks and social distancing in place, that is not fuel, which is going to longerterm growth trajectories. Very good. We are going to come back. Webb,you so much, alex greatly appreciated. We have much appreciate it. We have much more coming up. We will get a nice summary from David Blanchflower not so much on what we saw from the Central Banks this week but what is set forward from monetary and fiscal authorities from the challenging news we have seen from this virus. David blanchflower of dartmouth coming up. Gold well under 1700 an ounce. This is bloomberg. Good morning. Tom this morning, it is mayday and a mayday within pandemic. Alabama and texas will open beaches as california will close beaches. The copacabana in rio is closed, sort of. No word of a german beach report, yet this is not funny. Yesterday,lobally new jersey leading the nation in deaths. Oneon and Apple EmployeeMillion People and they adjust to the pandemic. Apple has bought back 24 of shares in the past five years. The singled july, best way to ensure a robust bug. Ry is to beat the this is bloomberg surveillance, on a mayday, on a friday