Shortly. What do you observe this morning, nejra . Nejra im observing headlines coming through right now from andrew bailey, in the core with journalists he is having right now, that it is clearly a commitment to take action, saying the qe program is highly aggressive and appropriately is so. Also saying there is no evidence the boe is targeting any part of the yield curve, but what is really interesting is we did see a little bit of differing views in terms of the decision today. There were policymakers that wanted to extend qe today, but the reaction to the fact we have had no change in policy today is coming. Analysts say we will get more qe in june or august or both, and the pound catching a bid off the back of the boe forecasting the vshaped recovery. That is what i find staggering. A 15 rebound in 2021. Tom i think you are dead on in that, nejra. There is no question what six out within all the excel spreadsheets and the heroic language at this moment, really with depressionera economy contraction and unemployment, this vshaped hope that we see. In this case, i believe off the top of my head, 14, down to 15. You wonder if tomorrow we will see that in the american jobs report and also in jon ferros conversation scheduled with Lawrence Kudlow of the white house. Right now, a briefing. Your first word news. Here is boutique a good death. Trade top u. S. China negotiators will speak as soon as next week, trying to make progress in implementing a phase i deal. President trump threatened to terminate the agreement if beijing was not sticking to the terms. The trade deal was fined in january just before the coronavirus hammered the worlds to biggest economy. Looking at what is called the academic trip to find the animal origins of the coronavirus, there is a joint controversy over how the virus started. The Trump Administration said it likely escaped from a laboratory in wuhan. China has denied that claim. U. K. Could start easing its lockdown on monday. Prime minister Boris Johnson will unveil his plan the day before. He is under pressure to get the british economy moving again without another surge in deaths. More than 30,000 in the u. K. Have died from coronavirus, highest number in europe. Blackrock Ceo Larry Fink has delivered a grim outlook for corporate america, foreseeing mass bankruptcies, and the Corporate Tax rate rising as high as 29 . Is the Worlds Largest asset manager. 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, ritika gupta. This is bloomberg. Thank you so tom thank you so much. Looking at equities, bonds, currencies, commodities, sterling is fractional but we will go with it. Equities drive higher, and the critical kis distinction over te last 30 hours is the yield curve. The shortterm paper is what you are seeing is the price of the longerterm duration paper is going out like this with a lower price and a higher yield, and that gets you to a steeper yield curve. Nejra . Nejra we are seeing a bit of a riskon tone today. You showed it in u. S. Futures, but also european equities, green on the screen. Recouping losses. We edge up on a 1. 23 handle after a fourday decline, and a twoweek low. What is striking is the vshaped recovery the bank is forecasting. Even if they say there is risk to the down show to the downside that could show more theng, we have a cup from norges bank. Perhaps it is the guidance that is leading to that strength, the 10 year yield dead study ahead of jobless claims, and of course nonfarm payrolls tomorrow. Tom a hugely busy day for bankers, we may have a conversation with the Norwegian Central Bank later on in surveillance. Let us do this. Let us try to gain the history at the moment. We know in the state hates we have known these statistics and reports were coming, but nevertheless, the absolute shock of depression statistics. Andrew sheets, the student at the history of economics, finance, and investment at Morgan Stanley. Andrew, we are finally here to depression statistics. How is Morgan Stanleys strategy adapting to that . Andrew it is really remarkable. It is not often that you feel very confident that you know what the headlines of the paper are going to be when you wake up on saturday, and it is going to be that u. S. Unemployment is going to be the highest level that we have had on record, since 1947, the highest level by a lot. U. S. ,ief economist in the ellen zentner, is forecasting 17. 7 , which compares to a prior high of 10. 8 . What is equally important is this idea that markets lead the economy, not the other way around. I do think markets can be somewhat forwardlooking here. I do think what we see in the unemployment data is obviously striking, it is obviously terrible, but it is also somewhat backward looking. I do think markets can look ahead, can ultimately care more about the rate of change that the level. Tom lets start with bonds. I mentioned the 41year guilt offered, i believe may 19, by the government of the United Kingdom. There is talk of longer duration, 20 year, even out further in the United States as well. Is that an indicator of desperation . What does it signal when we see 30, 40, 50year debt being issued by governments . It is maybe ak combination of factors. You are looking at some of the largest deficits that we have seen in peacetime, in many of these countries. So given that art amount of insurance, certainly can make some sense, to spread it out and opened up new maturities to that issuance. Some of these governments might be opportunistic, saying we can ros can long rates and actually borrow at some very long rates and lets take advantage of those low borrowing costs and spread those costs out. I think you have very rational acting from those treasuries. I think as you mentioned, this is starting to steep of the yield curve, and i think that makes sense. I think the bond market is catching on to the fact that nearterm growth is going to be very weak and your term policy is going to be very supportive, but 2020 1, 20 2023, these years could look different from where we are today, and that will support us with a steeper curve. Sayingcho you were moments ago that markets could look ahead to the rate of change, and so many have been saying to me the reason equity markets are priced where they are is that people are looking through not just the Economic Data but also earnings to the recovery on the others and importantly, to the stimulus on the other side. , andwhat you are seeing investor, positioning levels of cash to support that view as well . Paul it is interesting andrew it is interesting, actually. While i hear a lot from investors that the market, as we say, is expecting a vshaped recovery, or is expecting things to normalize, i think talking to investors, there is a lot of skepticism. Investors themselves are or hesitant about that view and are more skeptical that growth will bounce back. I think investors are reasonably cautious here. We see that in many different measures of positioning. We see that in high cash balances, as you mentioned, and a lot of investors for very understandable reasons in march and april, sold assets, tried to get more liquid in what they were holding, but that is that has left them with unusually high levels of cash, which ultimately i think helps limit some of the downside in the market and over the longer term i think should be supportive. Nejra if that cautiousness among investors shifts and we see cash coming up the sidelines, what is going to benefit more come equities or credit . Andrew i think at the moment credit will. Corbett management teams i think have moved into a creditfriendly mindset Corporate Management teams i think have moved into a creditfriendly mindset. Havenk with credit you less uncertainty, or you are less vulnerable to exactly where earnings and up, or, tom, as you mentioned at the opening, some of these discussions, where the tax rate might ultimately move up, credit will be less stimulus to that. Ultimately, i do think this will filter into equities as well, and ultimately i think that is especially true if we start to see more layer signs that the data really is bottoming. Tom my reading of history here, mr. Sheets, is simple. With a contraction like this, there are combinations. Address how Morgan Stanley sees the future of transactions, combinations, general m a, wrapped around what we are observing now, which is a new wave of bankruptcy. Andrew so i think it will be a really interesting environment, because you will, like we see, a pretty severe default cycle at Morgan Stanley. We are forecasting a u. S. Highyield default rate of somewhere between 10 and 14 , which will be on par, if not 2008, than what we saw in 2009. I think it will mean that companies that have strong cash positions and strong Balance Sheets will be in a very advantageous place to take advantage of that, to make to do transactions that might otherwise present themselves. I think that also goes to this point of it is not just investors that are trying to raise cash. I think, needs are doing that as well. Ultimately, i think that will be a supportive factor because that cash ultimately gets released at the market. At the moment, those companies are focused on liquidity and trying to make sure that they can make it through. Continue tom lets continue with andrew sheets of Morgan Stanley. This string of conversations we have been having has just been extort in every. On this historic day, where there is discussion that has been extraordinary. On this historic day, there can be only one conversation of the debt, and that will be Francine Lacqua in conversation with governor bailey of the bank of england. That is scheduled for 7 00 a. M. New york time. That will be required listening for global wall street. Stay with us. From london and new york, this is bloomberg. we welcome all you view all of you. Bloomberg surveillance, in new york and in london with nejra cehic. Yorkonversation, 7 00 new time, with the governor of the bank of england. Stunning dayay, a of Economic Data, Economic Contraction out of london, jobless claims coming up at 8 30 in the United States, another 3 million scheduled with tomorrows jobs report. Widely anticipated in america. Andrew sheets with us with Morgan Stanley. I want to talk about the mathematics you knew at brown. Are we going to see glide paths . Are we going to see abrupt jump conditions in the markets as they adapt and adjust to the pandemic and the economy of the pandemic . Andrew i think the really crucial thing here is holding a positive rate of change. There is a lot of debate, as you are aware, around what letter does this recovery look like. Is it a u, a v, a w . Ultimately i think the debate vshaped is a bit of a red herring. I think both of those recoveries imply that the worst is going to be behind us, that the worst is happening now, or the worst happened in april, and that there is a recovery after that, and it is just debating over how fast that recovery is. I think in both cases the market can be quite forgiving to that recovery even if it is slow because you know the worst is behind you. I think the scenario that drives a lot of volatility in the wrket, it unsettling, is that shape, anything that hints, you know what, we might have to shut the economy in a bigger way again because the reopening was not successfully executed for cases are spiking again. That is the event that i think the market is not priced for. It is not our base case at Morgan Stanley, but it is something we are keeping an eye on. Tom andrew sheets, back to the historic moment we were in. What will you listen for from governor bailey today . U. K. , i think in the again, i think it is a question of willingness to do more, and we do think that will be there. Think theagain, i question around the forecast, and whether or not they are overly optimistic, i think in our view, they are reasonably in line with what we are expecting. These are forecasts that roughly bring the economy back to where it was prior to the crisis, not until the end of next year, so that is still, i think, consistent with a very gradual normalization process. I think the bank of england and i think we have seen this similar tone with the ecb and the fed, that Central Banks that really are willing to act very aggressively, to kind of do what it takes to act very rapidly, even relative to some of the big interventions we have seen over the last 10 years. W shape that, the you say the market is not priced for in terms of a recovery, if the market starts to price for that, what would you change in your strategy . Andrew i think we would have to change a number of things, if im honest. We would have to reverse our constructive view own the market. I think we would have to reverse a belief that Credit Investment grade and highyield can continue to tighten here. I think we would have to reverse our view that i think volatility could fall, and i think we would have to reverse this idea that we could see expectations for inflation rise, a steeper kind of curve in the u. S. I think all of those things would be at risk. It is a very crucial debate. Obviously we need to take some view on what shape that will be, and at the moment we are not in that w cap. We are watching that very closely, and that w camp. W camp. At we are watching what that could mean for the overall economy. Tom very good, andrew sheets, thank you so much. We have much more coming up. Here in less than two hours, Francine Lacquas conversation with the governor of the bank of england. Fromwe move onto a view the west. California, with some really changing dynamics within the pandemic. Bloomberg will speak with mary daly of the San Francisco fed. Futures evaded. Stay with us. Futures elevated. Stay with us. This is bloomberg. Ritika this is bloomberg surveillance. Telefonica and Liberty Global will create the u. K. s largest phone and internet operator. Libertyss 02 and virgin media will combine. The new value of the company at 38 billion. In march another industry defining merger. Makerrlds largest beer warns the Second Quarter will be much worse than the first. Ab invev says april shipments fell 32 because of bars and restaurants being closed due to the coronavirus outbreak. The First Quarter shipments are down 9. 3 . Cashing in on the nationwide cashing in. Loton is has lednavirus outbreak thousands of americans to buy the stationary bike to work out at home. That is the Bloomberg Business flash. Tom thank you so much. Lets look at equities, bonds. Equities lift right now, the curve steepening. More evidence yesterday, a little bit this morning, and i dont want to overplay that. What i am really seeing his continued Dollar Strength and euro weakness. Joining us now in london, Francine Lacqua, with a data check. Good morning. Francine with a guest appearance. Good morning, tom. I was at the bank of england to talk with governor bailey. That interview is later on. If you look at pound, it has had volatility on the back of what we heard from the bank of england. This morning if you look at oil, it is pretty much unchanged, but the pound fluctuating after the boe held rates that signaled more stimulus to come. Coming up, we speak to the former boe mpc member. We will talk to him also about why not move now. The big debate is first how you unwind all this extra stimulus, but basically what the government has been doing is saying we will have a better plan for the lkdn whethat eases by sunday. The bank of england really wants to wait to have more of these on furloughs when that ends, and also the lockdown, to put more stimulus on the table. We will touch on that 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. Francine tom and francine from new york and london. It bank of england signals could expand Monetary Policy in june to help battered u. K. Economy. They have left rates unchanged and have boosted their bond buying program. With spoken with governor bailey. Byare delighted to be joined ian mccafferty. Thank you so much for joining us. Why wait until june when they could have acted now . Ian i think part of the reason will have been they want to take stock of what is going on. We will have a lot of information of best on the economy over the last couple of weeks on the economy of the last couple of weeks. There is another issue which is of course the emergency quantitative easing that was announced a few weeks ago was largely in response to the clear signs of faculty in the gilt market and given that it has stabilized on the back of that additional qe, in spite of the likely government issuance over the course of the Second Quarter , they have the ability to wait and see. If the gilt market starts to show signs of indigestion as the government issues debt, they will step in but they do not need to immediately. Francine if you look at the projections, they are expecting , aterms of gdp a vshaped big dropoff in 2020 and a strong recovery in 2021. This seems different to other Central Banks. Who has it right . Ian it depends on the assumptions you make and their assumptions are that the lockdown is eased relatively quickly over the course of june and into the third quarter, and by the Fourth Quarter much of the economy is back to functioning. What they then assume is there is some lag in terms of pickup in demand as a result of caution on the part of consumers and business investors, which means that while a good deal of the economy returns to activity relatively quickly, we dont get back to the precrisis level of gdp until the middle of 2021. It is a vshaped in the sense that as we open up, a lot of activity can start quickly, but we dont get back to where we were before the lockdown for a little time. Tom what will business do in the United Kingdom . Your heritage is to be very sensitive to finance and sensitive to the business spirit of the nation. What will business do as they react to these Economic Statistics and the actions of the bank of england . Ian clearly, Business Confidence recently has shown signs of falling sharp we alongside falling consumer confidence. The speed of the lock down and the speed of the transmission of the virus that we have seen so thatand it is also clear some indications recently have suggested that activity is stabilized, and as the lockdown starts to be eased, we should see a resumption of confidence for both businesses and consumers. From that point of view, it is likely that activity can be resumed and the Business Investment that has clearly been held back as a result of the recent lockdown can be restarted as we go toward the end of the year. Tom the media makes a big splash today about a compare and contrast with the time of queen and in 1706. In 1706. Anne what is the character of this Economic Contraction . Ian we can describe it as a short sharp contraction short and sharp contraction. Unprecedentedp is in either war or peace time. Gdpbank of england suggests in the Second Quarter will fall by 25 and on the hall by some 30 because on the whole by some 30 because we are operating at some 65 to 70 of normal levels. You can expect a sharp and sudden fall in gdp as we shut things down. The economy started this lockdown in a better position than we have gone into with previous recessions. We did not see the balances on did in the as we Global Financial crisis in 2008, so the bridging action the with jobs has taken and the furlough scheme and protection against unnecessary bankruptcy as a result of Business Loan schemes, which can the economy, out of this economy come out of this we could see a out of this. Incould see a good recovery 2021. Francine what if it is much worse than we expect . Negative wti and trade, that makes us nervous. It is people who are furloughed now will have their job back, wrong . Ian judging by the number of a good deal of that employment can be projected to go back there will be go back. There will be a number of sectors that will not go back to prelockdown conditions. The airlines will find a good deal of time before they go back activity, and the level will be much more longlasting, or will take longer than for other sectors. A good deal of the economy, we can see things come back relatively quickly and i think we will see a good number of those jobs protected. Francine when should we start thinking about how we exit all of this extra stimulus . Ian we have to see quite how the economy recovers, to what extent we will see the big unknown is how people will behave as the lockdowns are eased. The supply side of the economy, production can come back relatively quickly. What we dont know is whether there will be voluntary social astance thing thereafter consumers remain cautious about going out, going back to the shops, and resuming their lives, because of the persistence of the virus. Grows well be that demand more slowly than the resumption of supply and that would mean the recovery would be slower. Once we know that, and for the time being it is a big unknown because the general view now is that there will be some caution, epidemick to the flu of 1919 1920, that was followed by the roaring 20s, the relief is high spirit. Long we will see consumer caution remain. Once the economy starts to recover and inflation starts to ise back toward 2 , which over the course of the twoyear horizon, we can start easing back on stimulus. And with all of the shock the stunning Economic Statistics , we have all known it is coming, but to see the numbers in the United States and around the world is just extraordinary. We have a changing of the guard at the bank of england. How will governor bailey be different from Governor Carney . Ways, weink in some will see some differences and particularly when mark carney started the bank, the bank was in the process of making a structural change. He has been in charge of Monetary Policy and was also taking charge of Financial Stability through the committees, and was being handed a good deal more responsibility when it came to Bank Supervision , so the bank was moving from one pillar to three. Structural change to the bank has been completed and as a result, it is moving into a new era where we need steady progress rather than structural change. Andrew bailey is an extremely experienced bank old hand, if you like. He spent a good deal of his movingat the bank before on other paths and coming back, and he will provide a good deal of continuity. Francine thank you for joining us, ian mccafferty. Do not miss our interview, conversation with the bank of england governor andrew bailey. I just stepped out to do that interview and we will play it out in about one hour 20 minutes. We talked about inflation, oil,lus, and the price of timely given what we have heard from saudi arabia. Brent crude rising 4 as saudi hikes their oil prices to asia. Tom to asia, a huge surprise. This has been the backstory of the week, west texas intermediate and brent crude, the global price go out over 30 a barrel or something. Francine it will be interesting to see what this means in the coming days for brent and wti. Lets get to the first word news. The world issigns starting to open, the u. K. Is set to ease its lockdown on monday. There will be more freedom for people to leave their homes but no changes for businesses. In germany, shops will be allowed to reopen and the netherlands will begin a phased reopening starting monday. Auto part makers in the u. S. Want access to federal loans to begin making cars again. Democrats and republicans are urging the house to help. Automakers shut down their factories in march because of the outbreak. Lure more than 1000 businesses out of china, one being targeted as abbott laboratories. Auto hopes to attract parts makers. Justice Ruth Bader Ginsburg has been released for the hospital, being treated for maybe nine gallbladder for a condition. Bladder she took part in arguments yesterday by phone. 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 ritika gupta. This is bloomberg. Tom thank you so much. In america, we focus on the bank of england and francines conversation coming up with andrew bailey, but in america, there is so much going on after the shock of 16 or as Morgan Stanley says 17 unemployment rate. David westin in conversation with the speaker of the house on her california. Look for that later. This is bloomberg. Tom good morning, everyone, bloomberg surveillance. I want to tell you about the conversations that will be really important for global wall street. Francine lacqua with governor bailey, look for that and the 7 00 hour. Will have a lacqua the ecb and with the cdc. E very special it will be very special. I look at all we have got going on today, and right now we need to look back a little bit at the extraordinary effort of gm yesterday. Here is david westin with their chief financial officer. Inventories are something we are watching. We are wellpositioned positioned on most car lines, and we came out of the strike last year, and we have had lower and leaner inventories. It will be helpful in a scenario where it ramps up slowly looking at it, and from a pickup perspective, we find ourselves in a position where we have no inventory, but the dealers have and how to dig. Eep into inventory as we think about the plant returning to work, we are targeting may 18, that should help address the shortfall. Announced its earning and announced it took money from some credit lines. Some 33fter amassing billion in liquidity. As you look forward, what tells you you will need that extra money . Liquiditynk about our , we have always said we want to run a very strong investmentgrade Balance Sheet, and that has come in handy in these kinds of times. We did and the quarter with a strong Liquidity Position of 33. 4 billion. It is difficult to say what will happen but we are taking steps to protect ourselves, whether it andusterity or revolver pending dividends and Share Repurchases as precautionary measures to make sure we have additional layers of liquidity. We are comfortable with our Liquidity Position that will take us well into q4, even with a scenario that is onerous with zero production. The liquidity levels will recover when we have a recharge. These actions are recovery and proactive to make sure we have liquidity buffers in place. We are focused on restarting the plant safely and getting production going. David the pandemic comes along at a time that the Auto Industries were making a fundamental transmission to autonomous vehicles. Are you changing your Investment Plan on that . Do you have to put that aside as you deal with the pandemic . Dhivya absolutely not. We are marching ahead with our plans and we are committed to an all electric future. All the plans we have outlined recently in our Capital Markets day as well as our eb day, the problem products weibel we will be rolling out, we see little to no action impact on these. We are fully committed to that, and the Balance Sheet we have been maintaining and Financial Flexibility we have allows us to continue these investments as we go forward in these challenging times. David one last issue, the pace of the introduction of new vehicles. Put aside avs and evs. Vehicles, will that slow down . Dhivya we are committed to putting products consumers are excited about and you have seen recently with our trucks. We put customers at the center of everything we do and you will see that continue in the product cadence that comes out of here. Francine that was the General Motors cfos to david westin. Liveon leadership speaking to the qualcomm chief executive. 4 30 p. M. In new york, 9 30 p. M. In london. This is bloomberg. Good morning, everyone, bloomberg surveillance, from london and new york. An extraordinary moment you are seeing in the Economic Data and the markets. Oil, i have lost so much money in oil i dont know where to begin. We begin with javier blas covering our energy. Saudi arabia is raising prices to asia. Are they raising prices to others . Javier there has been a big move by saudi aramco effectively raising the price of most of their crude to every customer in the world. They are moving to prop up the market. They usually offer deep discounts and you remember when the price war broke, what the saudi people offered was huge discounts in crude oil, sending the prices down. They are reducing the amounts of the discount and effectively increasing the price of crude, and some of those increases are spectacular. Saudi crude in may in europe was sold at about 10 a barrel and for june the discount has been reduced to about four dollars a barrel, so that is an indication that the saudis are looking to prop up the market. They see the market is recovering and they are trying to help. Francine how risky is this if it hurts demand . Javier it is risky because demand is fragile, but what the saudis are trying to do is send two signals, a political signal the price war is over. We reached and opec less deal that included we reached an opec plus deal that included russia. That is a signal to everyone saying the saudis are doing the part. They are indicating to the market they are confident the demand is there for crude. Noticevier blas on short as saudi raises prices to asia with a nice elevation of brent crude up to 30 a barrel. And anage will join us hour from now, francine the clause interview with governor bailey of Francine Lacquas interview with governor bailey of the bank of england. This is bloomberg. Tom good morning, everyone. It is the worst british economy since 1706, and the war of the spanish succession. Governor bailey and the bank of england will provide a total commitment, the United Kingdom government will offer 41 year gilt. Anotherolonies, thursday of 3 million additional jobless claims. The president considers depression era unemployment. Higher. Lloff, yields after the pandemic, there will be on inflation. This is bloomberg surveillance, from london and new york. Bloomberg news tries to advance the dialogue this morning. We will do that in washington. Mary daly of the San Francisco
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