Bailey and also to chairman powell. Yesterday, the continued inflationary trend and the outright deflationary trend in switzerland. The numbers in europe in inflation on price change are simply grim, and you are dead on about unemployment. Overnight, Goldman Sachs readjusted their Unemployment Rates, and they get Steve Englander of Standard Chartered bank, a stunning statistic, francine 25 Unemployment Rates modeled out now by Goldman Sachs. And of course we get claims at 8 30 this morning. Francine we will have plenty more on that throughout the day. Its good to first word news with richie good lets go to first word news with they take a to first lets go word news with ritika gupta. Ritika wanted to play all sides of the equation, reopening the country too soon could lead to coronavirus flareups. He warned about the impact on children in schools reopened. President trump called that comment unacceptable. Has seizedortedly the mobile phone of the intelligence committee, richard burr. After a closeddoor briefing on the threat of the coronavirus. His office has denied any wrongdoing. It is prime Minster Boris johnson is facing more pressure over his handling of the coronavirus crisis. Exchequerllor of the warns that the country faces a significant recession. Gdp fell almost 6 in march, and johnson was criticized over the spread of the disease in care homes. More than 8000 people there have died of the virus. The International Agency Energy Agency sees the oil market improving. Demand is a little stronger than expected. Production is on track to decline this month, the lowest level in nine years. 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, retake a group to. This is bloomberg. Francine . Tom . Tom thanks so much. Equities, bonds, currencies, commodities. There is a churn in america. Asia and europe catching up with that ugly day yesterday in america. Spx red, spx dow. Green, the nasdaq. You see a Real Movement on the 10 year. And the 30 year bond, a solid four basis points,. 6 1 make it. 62 percent. Up ninetrength, gold dollars, 17. 25 an ounce on gold. Looking at u. S. Futures, treasuries are gaining , on american jobless data. That will give the market latching onto gains or matching onto losses, and that is another deep selloff on wall street. I am looking at crude oil. Picking up from wednesdays drop, seeing a little more of the parable iea report. We will have plenty more on that throughout the day. Now lets get straight to what we are talking about, and this is fed chair jay powell, who says the u. S. Faces unprecedented risks from coronavirus if fiscal and Monetary Policy makers do not rise to the challenge. Todays view on negative rates really has not changed. This is not something that we are looking at. The evidence on the effectiveness of negative rates is very mixed. It is an unsettled area. Of thethere are fans policy, but for now it is not something that we are considering. We think we have a good tool kit, and that is the one we will be using. Meanwhile, vanke of england governor Andrew Bailey has hinted more it is clear that investors expect more quantitative easing in the u. K. Joining us now, jane foley of rep. Banks . Rate to have you on the of rabobank. Great to have you on the program. For theyour target dollar on the year . Jane it depends on which currency you are talking about. For eurodollar we could potentially get down to 1. 05, and that would maybe in the three to six month view. It is got to be stressed it has got to be stressed that where it is going to be most obvious is not against the euro, it is going to be against emerging markets. There is one headline this morning that really puts that into perspective, and that is the yuan headline that covid19 could push 34 Million People into extreme poverty. For a lot of those people, it will be emerging markets. From that point of view, from the point of view of investors, they are not going to be wanting to get back into these emergingmarket. I think a lot of the flow is going to stay that certainly within the dollar. We might have is going to stay certainly within the dollar. I do think this is going to be a story against a broad basket of currencies for some time. Francine jane, what happens to dollar if we have negative rates in the u. S. . What are the chances of that . Jane it is very interesting because yesterday we did see powell talk down the chances of a negative Interest Rates, so i think we can assume this is not going to happen right now. It is not going to happen perhaps in the next year, the next two years. Will it happen in the next downturn or after that . I dont think anyone would want to stick their neck out and say definitely not because we have seen so many changes and Monetary Policy over the last 10 or 12 years that none of us would have thought it would be imaginable in so many different countries. Policymakers are never going to say no forever, but we do know that the money market is so important in the u. S. Clearly, with negative Interest Rates, that could have a Significant Impact on peoples want to invest in money market funds, and that could lead to additional sets of problems. We dont think it is going to happen anytime soon, i think we know that. Whether or not it happens in 5, 10 years time, who knows . But for now, the fact that we still have negative Interest Rates in the ecb, negative Interest Rates in japan, negative Interest Rates in other countries, too the fact that new zealand could go negative that is probably another factor regarding the u. S. Dollar. Tom jane, i put out on twitter today i could not do it logarithmic because of the swiss rate. Folks, i am not going to minutes words, this is a i am not going to mince words, this is a grim chart. We follow the swiss into deflation, or do the swiss react to the european disinflation . Jane well, switzerland has been grappling with this inflationary pressures or deflationary pressures on and off for the last couple of decades, for a very long time. One of the big reasons for that is because it has a hugely overvalued currency. Anyone who has ever been to switzerland in the last 20 years will note that there is a very overvalued exchange rate, and there is very little that they can do about that. They still have got negative Interest Rates. They use foreignexchange intervention, and still they have this ridiculous foreignexchange rate. And from my point of view, there is only one thing that will really change that story around, and that would be harmony in the euro zone. A are far from having harmonious situation in the euro zone. Tom really well said. Frankly, mr. Draghi wanted harmony as well. When you see the glide path of disinflation right now in the aveyear in europe, is that smooth and gradual and controlled function, or do we set ourselves up for junk conditions in the clear and present now . Goingi dont think it is to be smooth, and i think if you look at some of the little indicators of inflation, you will see different patterns emerge. We are already talking about food Price Inflation in some areas. Shortages of perhaps food commodities. We are talking about borders being closed, having an impact on food prices. So we might have food Price Inflation. Generalix of the disinflation or deflationary pattern. Then you get onto the question about what is going to happen in three or five years time . The financialr crisis, when quantitative easing was introduced, people said we will have loads of inflation. We did not have inflation, we did not have consumer Price Inflation, but we did have asset Price Inflation. Is that going to happen in three to five years time . It is difficult to know. But again, this is why the whole inflationary backdrop will not necessarily look smooth. Seecine jane, how do you behavior changing because of this . Jane that is a very interesting question because i think the answer depends on which country you are in. For instance, if you are in the u. K. , there have been 32,000 deaths because of this awful virus. And you have a situation where there has not been an awful lot of testing, so we dont really know how far the virus has spread in the broader community. Even when we have the lifting of some of the restrictions, consumers are going to be quite nervous about sitting in restaurants, leaving their homes, etc. If you contrast that with new zealand, where they have had very few deaths, very limited amount of cases, when the which its wrapping up, is significantly now, it is likely you will have consumers much more confident because they are not worried about the risks to their health of leaving their house. I think Consumer Confidence is going to behave probably quite differently in different countries. Thank youine jane, so much. Jane foley of rabobank. Later we will speak with the bank of the london chief executive officer. We will ask about insurance and what that does to prices and premiums. John neel joins us at 10 30 a. M. In new york, 3 30 p. M. In london. And this is bloomberg. The dollar may reign supreme riskwe have this risk off, on. That is where we are at the moment. We are going to gravitate toward one of these letters and when we situation on foreignexchange changes and the dollar will weaken a little bit. I would not be premature. The dollar is still king. Tom i just had a surveillance nightmare, folks. Could you imagine james foley as boisterous as david loom, or david blum having the gentle grace of jane foley . I cannot get there this money. Mr. Bloom and jane foley are very much on the same page. They have been dead on on dollar resilience. Jane alluded to that moment to go. She is with rep. Banks she is with rabobank right now. Hatzius at Goldman Sachs, u. S. Unemployment rate of 25 , correlate in your call on dollar resilience with dr. Jan hatzius Unemployment Rate. Jane i think the dollar may wobble a bit when we get bad u. S. Data, but really this is the safe haven currency right now. From that point of view, the dollar tends to gain when there is bad news about the u. S. Economy, generally speaking, and it goes with that news with Everything Else as well. This is why the dollar is the safe haven, because it is the global Payment System currency. People need dollars. Right now no one wants the yen. People are moving out of the yen. Can outperform, but it is going to be a dollar story, i think, until people are ready to move back into emerging markets in a big way, and that could be some way off. Tom right. I am not yet, jane, on the sixth watch. I am brazilian real. sdont know rabobank relationship with brazil. But you know we are all watching brazil, the horrific pandemic realities. But all of a sudden, everyone is looking at an ever weaker and unwinding brazilian real. How unwinding is the unwind . It very muchgain, depends on the news flow, but i dont think that brazil is perhaps maybe not as sensitive as some of the currencies or currency sectors of turkish lira. The South African rand, i think those two are going to get their share of negative headlines. In a crisis, we tend to have risk on, risk off, and it takes perhaps a braves or a very detailed investor to look at the intricacies of these markets. I think generally speaking, in panic mode, all of these countries are going to be charged with this risk off low. I think it will be sometime before they really want to go back to these Asset Classes as a whole . Francine what will we get with i think we will get more quantitative easing. It will be a shock if we did not. The last bank of england meeting, the market knew that we were going to get an increase in quantitative easing targets is time or next time around. That was going to have to happen because of the pace at which the assets were being bought by the banks. Reaching itsto be target anytime soon. There is more from the bank of england that is impacting sterling right now. There is a lot of politics. Embattledon has been with the handling of the crisis. Yesterday, we saw the leader of the opposition asked johnson to come back to parliament and clarify his previous statements about people in care homes. He previously indicated that be subjected to, or vulnerable or be vulnerable to the crisis. There are u. K. Headlines about the u. K. U. S. Trade deal. Again, an awful lot of scaremongering in the u. K. About lowering agricultural standards to u. S. Fs are reduced food imports. Perhaps bigger than that, we have not yet had any progress on the e. U. U. K. Brexit talks or postbrexit talks, and that , ins that there could be the wto rules on trade at the u. K. And the u. K. , the government has not backed down on its claim that it will ask for an extension of the transition phase. Have an awful lot of negative tors coming together, and francine what happens to overall the deficit, jane . What happens after the 119 . Happens be honest, what then depends on the prospective news. Tohink the market will start worry more if there isnt, particularly if the government is still under pressure for its handling of the coronavirus crisis. And also i think as we move into the middle of the year, as we willtoward the market be taking hold of the economic news, and there is quite clearly in the u. K. A significant reluctance of workers to go back to work because of this fear about coronavirus, and this perhaps is the most sensitive illustration of how badly the government has handled this. People in the u. K. Are frightened of going back to work, of getting on the train. This is because of the huge amount of deaths and the lack of testing in the country. And that means, of course, that the economic side of this crisis could be quite prolonged because activity will not resume at all for quite a long time. You so much. Ank jane foley of rabobank. Always good to visit with you, particularly on the comments of the dynamics of disinflation in europe. In the next hour, i have really been looking forward to this. David sayed off is the guy who exclusive tod retail. He is a really interesting guy, with a history of saks fifth avenue. We are thrilled to catch up with him. The future of department stores. We will do that in the next hour. Stay with us. This is bloomberg. Ritika this is bloomberg surveillance. Lets get the Bloomberg Business flash. France says it is unacceptable that sanofi would give the u. S. Priority if it developed to the coronavirus vaccine. The ceo told bloomberg the u. S. Will likely be the first in line because the country was the first to fund sanofis research. Sa bloomber has learned that airbu is preparing for a job cuts. Cap has warned labor units that labor unions sayed needs to rein in production. The number of jobs to be cut has not been decided. The coronavirus outbreak that is the Bloomberg Business flash. Francine thank you so much. This is what the markets are doing. They are waiting for an implement figures, and the u. S. Will give a sense of where the economy is going and how much damage we have seen out there. Also coming up on the open, fiscal chief executive chuck robbins. That is coming up at 9 00 a. M. In new york. This is bloomberg. Tom good morning, everyone, bloomberg surveillance from london and new york. Goldman sachs with an unenjoy ,ement with an adjustment taking the Unemployment Rate to 25 . Clearly that folds into the jobless does this jobless statistic. Split a remarkable between president and anthony found she. Fauci. Fauci said that reopening the country too certain could lead couldther outbreak and it affect children. Be u. S. Labor market will gloomier than originally thought. Goldman has raised its forecast for the Unemployment Rate for 15 to 25 . By the end of the year, the jobless rate still be around 10 . The coronavirus may have led to a 30 fold jump in a serious blood disorder in children. There was an increase in a kawasaki like illness in children under five. Some cases have been reported in new york and the u. K. In germany, mixed news, the niacin highest number of new cases but the number of cases dropped below a threshold. Angela merkel has slowly been lifting restrictions on daily life. 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 amrita k group to i am ritika gupta. Tom one thing we have seen as the blending of titles, economist to strategist, strategist to economist. No one has done this more successfully than peter dixon, over to an acute analysis of equity strategy. Peter dixon joins us this morning with commerzbank. I am fascinated by all the graham economics, gold grim economics, Goldman Sachs on unemployment. How havethat adjust, you amended your equity call on what we see in economics . Peter we changed it significantly back in march. Take into account the fact that the economy is going to tank, numbers will look karen this, and we numbers will look horrendous, and investors are surprised how quickly the market rebounded after hitting the bottom. We have been trading flat over the last four weeks. I do think the risk of the markets to weaken a little bit from here, but i dont necessarily share the pessimism from a number of the big name investors that we see. Tom years ago, tim oneill what the bank of montreal talked about the border bias read it is easy badr border bias. It is easy for u. S. Strategists to say to buy u. S. It is difficult for commerzbank. Do you take a different tact . Peter for the risk of sounding like a guy who is following the herd, under the circumstances it makes sense to follow the u. S. Because i think u. S. Will be less badly affected economically from the coronavirus than europe. It will probably rebound more quickly. The numbers will look pretty awful, just according to goldman. They may look less awful on a one to two year horizon than they will in europe. The amount of economic scarring will be more difficult and you would expect u. S. Equities to rebound and corporate earnings to look better on a one to two year horizon. Francine what kind of economic scarring will we see in europe, and how long will it last . Duration,terms of the typically, lets give the you example u. K. Example, it takes four years roughly to get back to precrisis levels. That has been the case over the last recessions over the past 40 years. That is what im looking for in the u. K. And i dont think it will be significantly different in europe. I think there will be a huge labor shakeout initially. It will continue for a few months to come, and as Companies Find themselves unable to generate decent topline growth, they will think about cutting inir costs, and under other words, unemployment rises and it takes a while to absorb those people back into the labor market and we get a stagnant economy with very high unemployment. Central banks and perhaps even governments will have to francine will we see countries in europe needing bailouts, and what does that mean for where you want to put your money . Sure we needot bailouts per se. I think governments will become a lot more active in terms of their management of the economy. We have seen that already. The german government, french and italian governments, support to varying degrees which will help the economy. Somexpectation is that point when this has passed there will be reform and i am not sure about that governments will have to remain active for a long time to come. That will support the economies and will give a floor under markets. You dont necessarily have to bail out of europe altogether. It probably means the rebound in europe will be slower and you will probably find better investments in the u. S. As a consequence. Tom what is the correlation, if of will, or the glide path disinflation that we see in europe . What is the character of the trend in disinflation we see right now . Thing,basically, for one it will be difficult to measure prices because a large part of the infrastructure necessary is down so we do not know what is happening. My guess is once we start to appear through the fog, we will get to a situation where it becomes more difficult for them because demand is slow and obviously wages will remain under significant pressure. The whole scenario is going to unfold in a picture where you off. Sluggish drop tom you go right to the heart of it, at the end of the day politically it is about wages. The commerzbank model in parts of europe or all of europe in aggregate, and brussels, can you model outright wage decline . Peter i think in the short term, you can. That is certainly what most models will tell you, because to a large extent you were talking demand collapses, labor demand collapses. You generally do get a shortterm collapse in wages, but thereafter as the me economy starts to mobilize, you will intentionally see a see a downward spike in wages and then a upward spike. Tom peter dixon will continue with us, from commerzbank. It our in america, economic interview of the day because he is a guide that everyone thinks he is nuts but he has been right, narayana kocherlakota, the former president of the fed, at rochester now, and it is absolutely shocking how he has nailed the negative Interest Rate trend in america. That will me will be a must listen update. This is bloomberg. Francine bloomberg surveillance, tom and francine from london and new york. We have the iea saying today things are looking a little bit though it is slow for the price of oil. What do you think of oil majors . Is there anything where you can find value now . Peter i think most investors are looking at sectors and saying, i am not sure where the value is. I think the problem is once we come through the other side, we are not entirely sure which Business Models will survive. The likes of oil, i think we probably emerge from this in reasonably good shape on a six to 12 month horizon, but at the moment they are not entirely sure where the price is going, but there are indication that the demandsupply balance is coming back on track. Hopefully we can stabilize the price of oil and majors will benefit as a result. Our technologye stocks overvalued . Technology stocks overvalued . Peter on major convention metrics, yes, but they will be one of the winners of the crisis because what we have learned is that many of these Technology Companies are providing the kind of services which enable us to stay connected at a time when the overall economy is significantly disrupted. I do think that certain parts of the Technology Sector will perform strongly over the course of the next year or so. Tom peter, i am absolutely fascinated what your thoughts are on our new actuarial assumption. I think of the actuarial assumption that Pension Plans have about guessing future growth. In america, i guess it will be fine. Maybe we can rationalize it in the united kingdom. How do you come from commerzbank with an actuarial assumption for german pensions . Peter with great difficulty, i think. The story we have been having for 20 years or so, and i think to be fair, the german system has held up rather better than 20 years ago. With anare faced increasingly aging population as the baby boomers retire in droves. We have an economy that is likely to grow more slowly. Trend growth remaining under pressure and probably not coming out of this crisis in good shape at all, so it probably means the pressure on the german state will remain fairly high, but in fairness, germany has much more space to deliver on pensions than a number of other european countries. A countryrmany is not we will have to worry about too much. Wherespain and italy pension liabilities are high and rising that you start to think about where the real problems are. Tom one final question if we could, governor bailey speaks watch boy,on the does he have challenges ahead. How does he deal with the negative rates debate . What will be his distinction versus chairman powell . Peter Interest Rates tend to distort the problems facing the banking sector. The bank of england has said, we do not want negative rates and i would expect that to continue to be the case. As we look at the eurozone experience, negative rates have been in place for so long they have caused more damage than help. The experience of the ecb has formulated the use of the fed and the bank of england but it is not necessarily a path we want to go down. Francine thank you so much, peter dixon. We have plenty more coming up. On leadership live with david arr David Rubenstein 4 00 p. M. New york, 9 00 p. M. London. This is bloomberg. Ritika this is bloomberg surveillance. California, tesla police went to test was u. S. Teslas only u. S. Factory. Elon musk dared officials to arrest him and said he would reopen the factory decide despite orders. A thereout with fiscal fourthquarter revenue is likely to fall 11. 5 from a year ago and the recession may limit spending on corporate and government networks. Has fallen to a that traveleports will fall to prepandemic levels that is your Bloomberg Business flash. Tom thank you so much. He is german. He isd is from oxford but the gentleman from madison wisconsin. He now holds court at Goldman Sachs, where he has done a superb job, a cautious view on the american economy. He has stunned with an update looking for 39 annualized gdp decline and even with that, av type recovery, optimistic a number time a number of quarters out. Our expectation is that q2 sees a deep equine at my decline at 39 quarter to quarter annualized and we have strong goals in the second half. Perspective, it is a fairly rapid recovery. If you look at the year on year rates that might give you a better sense of the underlying third we are at almost 19 13 in the Second Quarter so a decline of more than 5 year on year in the Fourth Quarter. 5. 4 in the Fourth Quarter would actually be the weakest on a year ontory year basis if it were not for q2 and q3 of this year. Faster partial recovery, in some sectors than others. The industrial sector and construction will probably recover more quickly than Consumer Services that involve a lot of facetoface operation interaction. That will be a disrupter until we find much better medical options, perhaps a vaccine. You model weh do need to see see from the government in terms of backstopping to support the economy to get to your forecast . Jan we need additional fiscal support. We are building in a phase four, which would deliver a number 500 billion to 600 billion another 500 billion to 600 billion of stimulus in 2020 and additional numbers beyond that for 2021, that are probably well above that, another trillion, trillion and a half. That is our expectation that we will get. In particular, a significant amount of support for state and local governments. What is inassuming the house package that passed yesterday. They have a trillion but we do not think it will be as big as that. The expanded Unemployment Benefits will be partially extended and we are expecting another round of rebates to households. Substantial amount of additional help to build on the effort that has already been made, which is very substantial. We have seen a large amount of fiscal support, both in absolute terms and relative to other countries that have been hit by the same shock, so that is clearly one of the ways in which the u. S. Is better placed than others for an economic recovery. There are also ways the u. S. Has bigger problems. The virus situation, if you look at the confirmed active members, while improving, that is not proving improving as quickly as some other countries, but on the fiscal side, the u. S. Has done more. Francine this is what your markets are telling us. If you look at some of the fluctuations we have seen, european Stocks Holding onto their losses. A lot have to do with what we see in the unemployment figures in the u. S. The iea looking at a more rosy picture, the pressure we have on the price of oil over the last couple of months. Crude oil at 26. 56. Eurodollar, 1. 0i26. 1. 0826. Tom the banks really having a difficult morning. Left, andit of a tech as i said, dollar dynamics. I am watching em, particularly brazil. The pandemic in brazil, there is only word for it, grim. No question, rizzo is the worst vector brazil is the worst vector. Russia is bad, but brazil is really challenged. You see that in dollarreal. Numberless claims expected to be below 3 million. That is a constructive number of what we have seen the last 4, 5, well. Ings as Ebrahim Rahbari will join us from citigroup. This is bloomberg. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Tom this morning, it is without modern precedent. 25 man sachs adjusted Unemployment Rate for america. We will bounce back in a vshaped form. Another 2 million to 3 million jobless claims expected. Without modern precedent, the disinflation of europe, the outright inflation of your switzerland. What is a European Central bank or to do . Ebrahim rahbari with us and moments. President trump finds dr. Unacceptable on children and the virus. The good doctor is hopefully humble. Surveillance, we are seeing glimmers of life in our
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