Number for the company. Quarterly sales were down 43 year on year. The stock is pretty much flat, though. The bad news now, just how bad would let actually be . Sales roseommerce about 74 . They still need people to come into the store to really make a lot of money. Their comp sales were up by over 10 , if you backout fuel. Clearly a lot of stocking up. Clearly good for walmart. Kohls suspended its Share Buyback program. That stock now off by about 1 in the premarket. Overall, no doubt we are obviously going to take a bit of a pause as we digest earnings and that monster rally. The question is whether the new was that or a bear market rally. Is that really being reflected in equities . We need the Economic Data to really match. Lets get to the news from overseas, as well as here in the u. S. We want to start with the walmart numbers and look ahead to fit your jay powell. Michael mckee has more. Just in case we werent sure that people were hoarding toilet paper, we get walmart. Michael i think theres a headline out on the bloomberg from the Earnings Report from walmart that tells you everything you need to know. Walmart online e retail sales up 74 in the First Quarter. Remember, this lockdown only started in the beginning of march, maybe even the middle of march. So 74 rise shows people went immediately to the web to try to get toilet paper and whatever else they could get. Kohlstrast with couldnt be starker. Outart has started to build a real competitor to amazon with online sales, and doing much better. Comparable their store sales without gasoline, of course, youve got to take out the price drop, they just did very well, what you would expect. Kohls struggling. Interesting headline that they are going to discontinue jet. Com, though. I guess they have just decided to consolidate everything they are doing under the walmart brand. Like they got the talent they needed from that, so they might not need the brand. Near 9lated to covid million, as walmart had to hire a lot of factory workers, raise pay for some. I just wonder, at what point are we going to be talking about these operational structural changes in margins for these retailers that are still trying to pivot to get more sales online, but still have destructive score still have to stock their stores . Michael this is the deal with amazon as well. Everyone is going to have to do that. Anyway, covid is going to be the full employment act for Harvard Business school professors. It would be interesting to see, obviously walmart, like amazon, is spending a lot of First Quarter money on this. Do they have to keep spending it . Do they really redesign things, or is this a shortterm medication issue . That is something shortterm mitigation issue . That is something we will have to watch. Alix we will also hear later today from a nguyen and powell. The from miniature and powell. Andgotten from miniature uchin and powell. Michael jay powells message on 60 minutes, it will be a much less interesting message in congress today, at least during the opening statements. The cares act requires the treasury secretary and Federal Reserve chairman to report four times a year to congress. This is the first one of those. Not a lot of excitement in their prepared testimonies, which were released yesterday afternoon. Pretty much the classic opening statement. We are glad to be here to answer your questions. That is where we will look for some news. Both have said they will keep rates near zero until the economy has weathered this crisis. He goes on to say we are committed to using our full range of twos to support the economy in this challenging time, even as we recognize these actions are part of a broader Public Sector response. About as close as he came to discussing future policy, and his suggestions on 60 minutes that congress has to do more. His remarks just outlining the programs they set up. As for the treasury secretary, stop me if you have heard this one before. We expect Economic Conditions to improve in the third and Fourth Quarters. That was the highlight from Steve Mnuchins testimony. We will have to wait for the q a for any discussion about what the fed is going to do next. One thing that may be interesting is the main Lending Program that is supposed to support small and mediumsized businesses is not up and running again. We dont know exactly when it will be, so congress may want to know what is up with that, especially as we continue to see initial jobless claims rise. If a i would love it senator actually said whats up with that. Michael, thanks very much. Thanks for breaking down walmart as well. Walmart stuck up over 4 in premarket. We want to touch on what is happening in europe, with significant embers that came out earlier in the u. K. The coronavirus really taking a toll on the economy. Jobless claims rose the most on record. Maria tadeo has more, especially with some overnight tariff announcements as well. Unemployment numbers were bad. You are now starting to see the impact of coronavirus on the economy in the u. K. , but you are also seeing how quickly the government is trying to change the narrative here by focusing on trade and the world after brexit. At at thew seeing th end of the year with or without a deal, that is still a big question mark. 60 ofnt to do over their trade with no tariffs. I love this will depend on the details and whether or not the eu does get a trade deal with the u. K. That is the conversation that is not going to go away for the next few months. What is interesting is that the announcedyesterday they are looking to create a rescue fund, a Recovery Fund of 500 billion euros. The amount, if you compare it to the u. S. , does sound a little tiny, but it is a significant move because he would now say the European Commission tagging the markets for new money. This is new, fresh cash that would be used to help the countries in europe hit by the coronavirus. Those that really want to see a corona bond, a joint debt instrument, are looking at this saying, this could be the start of it. It is a small step, and no one was expecting this. It really came out of the blue. You maria tadeo, thank very much. I want to go back to the breaking earnings from walmart. That stock up over 4 in premarket. Revenue earnings really crushed it. Tore did have withdraw their outlook for fiscal 2021. 9 had to issue about million, but saw killer comp sales. They were up about 10 . Sales rose 74 in the First Quarter, and their average ticket rose by about 16 . People were buying more, buying more online, and spending more money when they did that. Different story when it comes to kohls. They are suspending their buyback, and they also dont have any visibility for the rest sales year as they posted down by 43 year on year. Really the have and havenots of the retail landscape. Coming up, much more of your morning news, trade and analysis of the markets in todays first take. This is bloomberg. Now for bloomberg first take. Want to give you the news, you get the trade and analysis of the market, as for my daughter gives me her morning hug. Going us to discuss is Michael Mckee joining us to discuss is Michael Mckee, and Kristine Aquino joins us from europe. With what we are hearing from walmart, comp sales up superstrong. People buying more online and buying more when they actually bought. So as you look through the bulk of earnings season and evaluation conversation we continue to have, what is your take . Kristine there really is a lot of doubt as to whether the momentum we have seen in some companies is going to continue throughout the Second Quarter because that is in the context of a record jobless claims amount. That is in the context of the worst unemployment in the u. S. s postwar history, so these are very big numbers that companies will have to overcome, especially coming into the Second Quarter and through the rest of the year. So while firstquarter results have been good for some retailers, walmart in particular , primarily because of people preparing to lock and stockpiling what they needed, the question is whether this will continue throughout the rest of the year. Companies like walmart have really have withdrawn guidance, so the jury is really out in terms of what is coming from the future. Alix i think that is what we will see unfold. When it becomes really busy, the winners consistently become the winners. Walmart, and target comes out tomorrow before the bell. Michael it is almost like momentum daytrading has taken control of the markets, but what else can you expect at the moment . The tech names are going to do well because of the work from home thing Going Forward, and we like our iphones, even if we might not buy as many. The question really, and you might see this put to jay powell today and may be stephen mnuchin, is what about the rest of Corporate America . I mentioned the main street Lending Program. What happens to all of these mediumsized companies, the ones that supply parts that go into electronics that people are , and into cars and things like that . Are there still going to be jobs for them . Go into any city, and the malls are closed, and stripmall stores are closed, and all of those dont get the publicity. They are not public companies. They dont report earnings. But they are really at risk here. If they dont come back and people dont go back out right away and start chopping, a lot of those are going to go away. And when they got away, that is when they go away, that is jobs, and you get this cascading effect. So that is an open question over the next couple of months. Alix we heard yesterday from United Airlines ceo that we dont even know if this potential bailout will be enough for the industry, after they tapped payroll protection. That is an interesting point also. We look at what has led the rally in the u. S. , it has been health care and those big tech names. Some say when the cyclicals join in, that is going to push the s p much higher. That game from socgen overnight. Others are saying the small caps arent participating. How do we possibly get the growth . Kristine absolutely, i think theres a lot of fragmentation in equity markets, both in the u. S. And globally. I think this really sells it for investors in terms of what could be the winners moving forward. I think it would have to boil down to companies that maybe are showing more of an effort to adapt to this new world order where much of the workforce is working from home and how they cater to that, and also just kind of taking stock of efforts to cater to those customers. On markets live today, we are asking our readers how investors would trade to the work from home idea. We are asking about which companies would tend to do well in this sort of environment, and the insight we have gotten so far would be really those companies that are able to adapt to consumers changing needs in this sort of environment, so giveer they are able to access to Online Marketplaces and the like. This is a theme that could separate the winners from the losers moving forward. Alix and to that point, winners and losers, and taking a look at the bond market in europe, were you still have a nice rally in portuguese and italian debt because of that macronmerkel agreement. Can you tell me how that is playing in europe, as well as when you still have brexit headlines hanging over everything . Kristine it has been a mixed reaction because initially, it was very much in optimistic the hopeto this, as that there is finally an eu help coming was buoying the start of the session, but very quickly, as we have seen in the past, it turned negative because once you get insight from the rest of the European Union, particularly some corners from austria and the netherlands, we have seen some opposition to the idea in the specifics of the proposal. That is when investors start realizing this is going to be a long slog, as it is with a lot of European Union level type responses. It will take a lot of time, a lot of discussion for consensus to be reached. So whether that is sure optimism from merkel and macron was probably warranted at the time, more details emerge that show this is going to be a long road. It is not going to stop here, and there are bound to be more discussions. For mike, round this out us. What ifs are we looking at today . Michael it was reported in a turkish newspaper the bank of england and bank of japan might establish swap lines with turkey. We know the turks have had a lot of trouble recently with the economy, and the turkish lira has struggled. The lira is moving quite a bit this morning on that report, but no news from the bank of england or bank of japan, and no word on why either bank would do that. I am kind of curious, modernity yesterday, big news curious, moderna yesterday, big news that they vaccine might work. Then they announced they would sell 1. 3 billion in additional shares in the company. You have to wonder what the ftc and others are going to thing of that. Is that the smartest thing to do when everybody is locked down and youre trying to get Government Support to help you with your Vaccine Development . I am just not sure. Alix that is a fair point. We are watching that stock as well. That stock is down in premarket by about 3. 75 . Next so much. Every busy day evolving on wall street. Mckee and Kristine Aquino, thank you very much. Any charts we use throughout the show, go to gtv go under terminal and check them out. To gtv on your terminal and check them out. Gtv. This is bloomberg. Ritika this is bloomberg daybreak. First Quarter Sales grew more than 7 at home depot, its best in five quarters. Homeimprovement change homeimprovement chain says sales carry over to the Second Quarter. Still, there is much uncertainty around the coronavirus and its impact on the economy. Walmart posted its quarter profit and revenue that beat estimates. Comparable sales were better than expected, too. The Worlds Largest retailer says it is discontinuing its jet. Com Online Service because of the continued strength of the walmart. Com brand. That is your Bloomberg Business flash. Alix thanks so much. Lets get two more on walmart earnings. Chuck grom, Gordon Haskett senior retail analyst and managing director, joins us. What is your reaction to the numbers . It looks like we are going to be looking at a new high for walmart. Chuck pretty solid number here on the top line. 74 , up 10 , ecommerce up and the flowthrough was respectable given the mix that we expected from consumables. Not surprising at the back half of april and may is off to a good start, given the stimulus checks sent out the middle of last month. Overall, pretty solid results from walmart and home depot earlier. Alix i guess the question is, can they replicate it . 76 , but itales up is a real sliver of their business. They still need to get people in their stores to truly make all of the margin they need to make. Chuck it is almost impossible to accept late 10 comp over the next several quarters. For all of the customers that have come into the stores and chopped online, what percentage of those customers can you keep . That is the big question Going Forward. Alix and also what ticket pricealix can you get the map can you keep them at. We saw ticket price up 16. 5 . They are actually buying more. How do you sustain that number as well . Is solely the result of stock up activity, but that is something that could be a postpandemic trend across retail, as consumers look to consolidate their trips at the store. We will see that across retail. We saw at home depot. Traffic was down about 4 , but tickets were up 11 . Alix do you get a sense of where they are getting their customers from . The First Quarter, half of retail was closed. The pandemic is like nothing we have ever seen, see you are seeing people shifting to the discounters, warehouse clubs, and dollar stores. I think it is a little bit of bulk up rising, but walmart is getting more people to adopt their digital businesses. Grocery pickup, delivery services. Those are integral to the longterm walmart thesis. Alix just quickly, who else is this going to be good for . Chuck i think laterally, we have heard from a couple of retailers already with updated numbers. Goodow that target had a First Quarter, costco has had good sales over the past couple of months. We suspect it will be good for bjs as well, and one other company we like would be dollar general. Discounters are doing very well during this pandemic period. Alix really great to catch up with you, chuck. Thank you very much, chuck grom of Gordon Haskett. Stay with bloomberg. David westins interview with Brian Moynihan, bank of americas ceo, will be coming up at 11 00 a. M. At 9 00 a. M. Coming up, we speak to Paul Richards, Medley Global Advisors president come on what is raising tensions for the overall market. This is bloomberg. Alix welcome to bloomberg daybreak americas. Im alix steel. U. S. Equity futures really trying to turn around. S p still a little lower, but dow jones flipping into positive territory, along with nasdaq. You have super positive numbers out of walmart, although the outlook is withdrawn for the rest of the year. This comes on top of yesterdays monster rally. The question we are all trying to digest, is that a sustainable bull market rally, or a rally within the prospect of a bear market . We will break that down in just a second. I want to hit on european autos as well, the worst sector on record for april. If you switch of the board, eurodollar, one to watch. The cable rate also want to watch. The u. K. Is taking off tariffs on a lot of goods after the exit the eu. That was a headline out this morning. Keep your eye on btps, still managing to have a rally underway. Down modestly after yesterdays blowout announcement of micron and merkel coming to agreement to really of macron and merkel coming to agreement to really help fight the virus fallout. Joining me now for his take is Paul Richards of Medley Global Advisors, where he is president. He joins me now. The price action yesterday and then potentially followthrough today, how do you interpret it . Paul i would view that move yesterday as a very big relief for markets. I was getting quite concerned last week. There was a lot of negative commentary out there. I was particularly concerned about trump and thing the rhetoric on china last week. I was little concern for a while that he may tend to try to rip up the january deal, and that would be a disaster for markets. But everything stabilized. We got through to friday. Critically, yesterday we got back to the core of the issue. This is a science issue. With the hope of a vaccine, and at the end of the day, this is what it is. Markets are rallying again, and i would expect markets to probably do ok today. I think on the help of a vaccine come on hope that the world can get back to work, but at the end of the day, there is going to have to be something concrete before too long. I think the market has about three to four months before we see definitive progress on a vaccine so that we see more days like yesterday. In essence, yesterdays rally was real, and it was based on hope. Earnings,1 times forecasted earnings, what kind of Earnings Growth do we need to see delivered to justify that if we are not going to trade on hope forever . Paul when it comes to earnings, when it comes to data, i am largely ignoring everything, which is why i think Forward Guidance is probably for the balance of the year a thing of the past. To me, this is hope, and it is really hard to put any kind of metric on what a valuation is when we dont know whether we are going to have a v recovery org go back to serious lows or even a depression. When people try to put pe earnings trying to predict Economic Data, etc. , i think it is a somewhat redundant exercise, but the problem is wall street, that is all it has been trained to do. So dismissed the traditional valuation scenarios and think a vaccination was announced tomorrow. Think about what the rally would be. Recovery would be so significant. To me, it is not about the numbers right now. I am largely ignoring it. Alix it is also about trading the reopening. How do you play that . Will we also see more volatility if we have a good announcement and the no followthrough, for example . Paul i think the volatility element, if you take trump out of it, we probably get a reasonable two to three months. A lot depends on Society Coming back. I think society is relaxing. At the end of the day, i think it would be helpful if reopening were more focused on social masks, and testing and contact tracing, but i dont think we will see letter to the extent that markets or society really need, but i think it is enough to get us through to the summer. The biggest risk to me is china. Trump has put that back into his playbook. Hes itching to have a go at them because he knows it is so politically advantageous. However, what he take the risk on tariffs or dare criticize presidency directly criticize president xi directly . It is about the reopening trade, and we are going to see what people are going to do when we see the likes of new york reopen in the next three to four week, but it is going to be very slow. It is all going to be a about the breakouts we see with with back to this pandemic. We are not there yet, but still i think we are steadily moving higher, and the market can withstand this kind of volatility. Arguably, volatility will go down in the next two to three months. Alix what is the best approach to that, keeping into account then is like u. S. china trade relations, for example . Paul i think my gut feel is that a lot of people are still looking. You just need to listen to the commentary for some pretty serious market commentators and traders last week to know that a lot of people are disbelieving of this rally. I understand that, but theres also a lot of cash sitting on the sidelines. To me, equities are likely to continue to push steadily higher as more hope comes out. I still think equities do quite well. I think the bond market remains relatively benign. Theres obviously a lot of debt to be able to fund, but youve got the fed prepared to gobble up any excess. Excitedurope, i am about the fact that we are finally looking at a european Recovery Fund, innocence, debt mutualization. Essence,ry fund, in debt mutualization. But keep your eye on trump. Alix fairpoint. I want to highlight the bank of managerfund survey. One highlight is that 68 are still expecting a bear market rally, do your point that overall sentiment is still very cautious, and also bond allocations are at the highest since 2009, but it is the long u. S. , short europe trade really dominating that. I wonder if you have to reverse that. Look at europe, look at european debt. Or do you stay in u. S. Equities . Paul i think it is a really good point about u. S. Versus europe. A lot of people have look at this trade over the last five years, and it keeps hurting because under trump, u. S. Markets have done so well, but europe knows that this is their moment. They really need to get something done, or they are really risking populism when hopefully, this whole pandemic is really over. I think what we are seeing with france and germany leading here, i think this is a very positive development. , you cank to an extent see the way euro has rallied very well. I think that was really critical. The Pound Holding 1. 20. Think there is a need for businesses to start looking at businesses again to start looking at europe again. But i do like the fact that germany is finally on side. If you can get the northern states engaged in this Recovery Fund, to me it is going to be very real. To an extent, i think there will be a very small move into european equities and bonds, but is going to be a very slow move. Jeffreys is turning bullish on spain and italy. Underex is the biggest performer compared to equity markets. Where do you need to focus, even if you are staying cautious . Paul let me start by saying, now that asia is starting to return to work and it is going relatively well, i think the focus is now on europe getting back to work. What does it look like a society reengages . If we can get through the next two to three weeks without significant breakouts in this pandemic as we reenter society, i think we see all of the periphery really start to stage a rally. I think they are a test case for how the u. S. Starts to react, so i am watching europe very closely. I am quietly optimistic, but equally, the problem is i am optimistic. Theres a lot of people out there that really think this experiment of getting back to society again will fail, and i respect that. Frankly, it boils down to your view on where you see this pandemic. At the end of the day, it is a medical issue, and not economic. Pickers now, all stock and asset allocators have to turn to vaccine experts in such. Thank you so much, Paul Richards of mentally global advisors. We want to give you an update on the headlines outside the business world. Here ritika gupta with first word news. Ritika Federal Reserve chairman Jerome Powell says the central bank is prepared to use its full range of tools, and plans on leaving the benchmark lending rate near zero until the economy is back on track. Those are some of the remarks prepared for powells virtual hearing today before the Senate Banking committee. President trump is taking the antimalaria drug he promoted as a treatment for coronavirus infection. That is despite government warnings that hydroxychloroquine can cause serious side effects. The president says he is big on the drug says he has been on the drug for about a week and a half. Pences vice Vice President mike pences press secretary tested positive for the virus on may 10. Teachers are demanding clarity over plans to reopen schools next month in the u. K. 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. Im ritika gupta. This is bloomberg. Thanks so much. Stay with u. K. For a second. Want to focus on one report from the united kingdom. One report said that british children from brighter off from better off families are spending 80 more time on education activities per day than those in poorer households. One out of five workers in the u. K. Are afraid of losing employment within the next six months, and those with lower income tend to be more vulnerable to reduction in hours, pay cuts, or permanent layoffs, something we here in the u. S. As well. More to come on that. Coming up on the program, it is not about being an asset allocators. It is about being a vaccine expert. We will talk to former who , dr. Dent advisor Jonathan Quick of the Rockefeller Foundation. Watch us on tv. Check out anything you may have missed. Tv. This is bloomberg. Ritika this is bloomberg daybreak. Almart posted its quarter profits and revenue that beat estimates. The Worlds Largest retailer says it is discontinuing jet. Com online because he continued strength of the walmart. Com brand. Delta airlines providing a hint that there may be an increasing traveled. Delta still estimates that this quarter, Passenger Capacity will be 85 below last year. Moderna hopes to pay for a Coronavirus Vaccine with a share sale. The plane to raise as much is 1. 3 billion. Shares jumped 23 yesterday. The Company Revealed positive results from its experiment to vaccine. Im ritika gupta. That is your Bloomberg Business flash. Alix thanks so much. Joining me now is dr. Jonathan quick, Rockefeller Foundation managing director for pandemic response, preparedness, and prevention. He has he is a resident advisor for the who and author of the end of epidemics a looming threat to humanity and how to stop it. Really great to catch up with you. Obviously, want to focus on the news yesterday from moderna, working on a vaccine. If something will work on a small group of test patients before it gets to us . Dr. Quick what we need to know first of all is that it works in the smaller group, and it is exciting that the immune response has been a robust one. So we need to increase the number of patients to first of all see what kind of shortterm, mediumterm side effects there are, to see which is the best dosing, whether it is a single dose or double dose, and then we need to do an even larger group of people to see that we get that protection. Finally, we need to actually compare the virus in a real setting, where we are seeing people who get the vaccine and who dont, and see how protected they are. In the end, this is usually a many years process. This is going faster. We need to know that it is safe and effective, and those are the key things. Shortcut either the effectiveness or the safety part of that. Alix how do we get there . If lockdowns continue in different areas and people get the vaccine, they cant actually test it. Do we see a situation where they are exposed to the virus on purposeo see the on to see the progress of the vaccine . Dr. Quick there will still be communities where there is going to open where you have spread. So there is opportunity. But there is another approach called the challenge model. Take a carefully sought fit group of younger people that are very healthy, and you purposely expose them to the virus. There is considerable discussion about that. There are obviously ethical wecerns involved, but actually have an article under consideration for publication that argues that in this situation, that is indeed the approach, and an approach we seriously need to to speed the process of determining [indiscernible] alix to can you give me your bt on when we feel confident in the actual vaccine . How quickly to we get it to people to me or you . Dr. Quick indeed, it is exciting. There are six new clinical trials, and two moving on. Normally it is a years long process. You do the clinical studies, then start scaling up, and down the line you get there. You finish each step before you go to the next step. Right now, we are talking about overlapping steps. Plannings is already to build seven factories before he knows which vaccine it is going to be. So if we do all of that fast tracking, it would be spring next year at earliest that it is out, and more likely the fall. That it will take much longer than that to get enough vaccines for everyone that needs to be immunized. So it is a bit of a haul, but we are going much faster than we ever have. Alix when you have this disagreement between the u. S. And china, the u. S. Threatening to pull back to be uh of funding , does that hurt that development at all . What is the transmission mechanism in the process . Dr. Quick there are Many Organizations that are working together on vaccines. It isill press ahead, but not a good thing in the middle to start raising questions about the organization that has run the alarm, that is ahead in terms of already places thatut other need support, and exchanging information. The World Health Organization has played a Critical Role here, and exactly the role that needs to be played. They are the organization of 192 countries. It is our organization collectively. That cast doubt on its effectiveness and thatbility, we really need leadership voice with everyones confidence to help lead us through this pandemic. Meantime, the middle step, which is i am not going to work from home until next fall because i wont make it, and my daughter wont make it, and my husband wont make it. Testing at home kits, for example, what is the best calculated risk people can take to start resuming parts of their life while still being careful . Dr. Quick first of all, we need to realize that as we loosen up, and i think you sort of indicated it, the virus hasnt changed. 95 of us are still vulnerable, so we will have some recurring outbreaks. First, we need to keep to those good habits of handwashing, wearing masks, keeping our distance to the extent possible. Then we are moving with tests that will give us faster results , and in the rockefeller from rockefellerthe foundation, we have a plan to get us from one million tests a week to 30 million. Millionllion to 30 climb will happen with new technologies, which make accurate, fast, convenient tests. Part ofade it a large our lives. So you can imagine that before here, you arets tested. That is going to be an important , and so we do not get overflowing emergency rooms. We need testing. Alix appreciate that. Dr. Jonathan quick of the Rockefeller Foundation, great to catch up with you. Would love to have you back. Coming up on the program, appetite for treasuries among emerging market economies, particularly in this pandemic. They are seeing the biggest drop intreasury holdings ever march. More coming up. This is bloomberg. Alix time now for traders take. Going me is Damian Sassower of bloomberg intelligence. You are taking look at emerging markets and what theyre are doing with treasury holdings. Damian good morning. In em, we must remain unabashedly bullish. Todays chart illustrates the magnitude of ethics river serve of ethics reserve depletion of fx reserve depletion. Me crystallizes the magnitude of central bank reserve sales across em over the period. Of the 23 economies with available data, 18 drew down reserve dollars in march, with saudi arabia, brazil, and india with the single largest decline in returns, over 23 billion per country. We all know most of these economies are looking ahead. We even think these three, as well as those with more ample reserves, are willing to let their currencies decline in an attempt to replenish these reserves. That is something we are looking t, probably more so in brazil. Alix but at the same style but on the same side, still looking for 73 basis points on the 10 year, so clearly investors able to soak up other investing. Damian sassower, thank you very much. Coming up on the program, ubs wealthmonetti, management portfolio manager, joining us. This is bloomberg. Staying connected your way is easier than ever. Youre just a tap away from personalized support on xfinity. Com. Get faster internet speeds with a click. Order xfi pods to your home in a snap. Or change your Xfinity Services with just a touch. All in one place. Youre only seconds away from all of that on xfinity. Com. Faster than a call. Easy as a tap. Now thats simple, easy, awesome. Alix welcome to bloomberg on this americas tuesday, may 19. Heres everything you need to know this hour. Lets take it from the top. The backrprising that half of april and may is off to a good start, given the stimulus checks sent out the middle of last month. Overall, pretty solid results from walmart and home depot. Alix target will report before the bell tomorrow. We shouldnt let this go to our heads forever. I know there is a school of thought nowadays that you can run deficits and make them larger forever. Alix goldman senior chairman and former Ceo Lloyd Blankfein s customers will regret y pandemic Steve Mnuchin due to the pandemic. Steven mnuchin and jay powell will testify before the Senate Banking committee. Michael both men repeating things they have said before. Alix outgoing united ceo says existing aid might not even be enough. The Company Already received 5 billion in payroll support and could borrow another 4. 5 billion from the government. The worry here is the unleveling of the playing field. And emmanuelmerkel macron agree on a 500 billion euro aid package, the majority of which is covered by germany. We are now really starting to see the impact of coronavirus will have on the economy and the u. K. , but you can see how the government is trying to focus on trade in the world after brexit. Alix this is all part of britains global tariff regime as it breaks from the European Union. Lets get a check on your markets. I want to highlight what is happening with United Airlines. They are basically saying that scheduled capacity for july will be down about 75 . Bookings for april were down 95 . These are numbers it is really hard to get your head around. S they say theye dont knowe how much money they. Ill need to survive that stock actually still up by 2 in premarket. In the overall market, we had that monster rally yesterday. A huge move in equity indices in europe, as well as in the u. S. Now we are on hold for a little bit. Will we see a new bull market, or was that a rally in a bear market . You continue to see the steeper curve in the u. S. , and eurodollar gaining, cable rate gaming, and oil responding as well. Some numbers saying production cuts in the u. S. Are much deeper than we thought, adding support to the overall market. Joining me to break it all down is Katerina Simonetti, ubs private Wealth Advisor and portfolio manager. Is this a rally in a bear market . How did you see it . Katerina thanks for having me on the show. It was good to see a nice update. To me, a nice up day. To me, it is investors getting excited about the reopening of the economy and the adjustment. We hope that it will eventually lead to normalization in the market, but we have to keep an eye on reemergence of the virus cases. This process will have to be gradual, but we certainly do not expect that this is the beginning of the bull market. We think theres going to be a tough road ahead with a lot of volatility that will eventually lead to the recovery, perhaps toward the Fourth Quarter of this year, but having said this, we would expect that by the end of this year, we are going to be we cannot expect that by the end of the year, we are going to be at precovid levels, even if anything goes well. We would expect it to take before the precovid situation emerged. Alix on the reopening front [indiscernible] that have been penalized by this market in many situations unfairly. So we see a lot of buying opportunities in both equities and credit space. Specifically, a number of companies that are extremely ,ellpositioned in this time and some Digital Transformation companies. , generice, fintech therapies, food. We also focus on the fact that we have to be rethinking the supply chain situation. Widelyial firms are planning on shortening their supply chains, and therefore, automation and robotics present some buying opportunities. Having said that, as much as we are focused on the equity sectors, we realize theres a lot of volatility in the space. Our highest conviction at the point is late in the credit markets, highyield as well as investmentgrade. Had a note yesterday jumping on the sentiment we saw, saying that they are initiating their preliminary s p target for looking2021 at 3160, for that improved economic performance. Dont want to chase the market, but they are interested at buying at lower levels. What is the sentiment like among your clients . Do they want to look for good news, or are they convinced it is all bad . How does this sentiment play into all of this . Katerina what we see is that clients are cautious about the shortterm, the reemergence of cases, and what the reopening of the economy will bring. At the same time, you see this great level of optimism for the long run. We know what successful investors are doing and how they handle the situation, and this has been a meaningful equity strategy, gradually entering this market, looking for opportunities, and implementing their Investment Strategy gradually. Alix when you mention highyield, how much o that is the fed pushing you out . Katerina i think there are going to be certain increased levels of defaults in the highyield space, and support from the fed certainly plays a term in this role. At the same time, the reason we have such High Conviction on high yields is we see extremely attractive valuations in this space, both highyield and investmentgrade credit, but specifically highyield. We think high quality highyield in particular is a great buying opportunity at the moment. Alix is that based on the fed also buying the corresponding etfs and looking to enter the primary market at the same time . Katerina of course, this plays a tremendous role. We are in this new phase that has never happened to us before. The fed now having to do so much more than they have before, this plays a tremendous role in our conviction and the fact that we see opportunities in this space. Alix Katerina Simonetti of ubs, thank you very much. Coming up, stand with the fed and what it is doing, it is the pandemic fallout balancing act. That is what fed chair jay powell and treasury secretary Steven Mnuchin will do when they testify today before the Senate Banking committee. Jeanne zaino will be joining us. This is bloomberg. And fed chair jay powell treasury secretary Steven Mnuchin will virtually testify before the Senate Banking committee today on the 2 trillion coronavirus rescue package. Fed chair powell noted that he will use all tools necessary for the recovery. Joining me is jeanne zaino, professor and bloomberg contributor. Always good to chat with you. What is the biggest thing you are watching for today when powell and mnuchin testify . Jeanne number one for me is how much powell pushes congress to act. The democrats have been taking up his remarks in interviews and Public Statement in the last few days. His opening remarks are going to talk about a Statement Released about how dire the impact has been on the economy, and the fact that while he can act from the central bank, congress has to play its part. This is coming at a time when congress is trying to agree on another relief ill. I think from mnuchin, i am curious to see how he stays the Fee Administration line, which is focusing on the fact that we will see a strong recovery, and the fact that a lot of aid has been distributed so far. So i think we are going to see a division not just between democrats and republicans on the committee, but also between his two that are testifying. It is fascinating because becauses said havein has said they spoken 30 times a day since this began. Alix walk me through the intricacies of their relationship and how they maintain that working relationship, as the fed still has two unveiled four of its nine programs, and how are they going to disagree as they go forward . Jeanne i think theyre are going to disagree agreeably. This is going to be a remote testimony, so i dont expect they are going to be physically together, although on the screen and testifying at the same time. But i think we are going to see questions about what the administration is doing to help workers, particularly essential workers. I think we will see the chairman, who is focusing much of the gop questions come on defending to a certain extent the gop, mcconnell, and the administrations wait and see attitude. So i think one other thing i am looking to see is do we see a response from the president. He has not been particularly happen with particularly happy with Jerome Powell, and i am not sure if this is going to make him any happier at this point. Alix what about the distribution of the Small Business loans, the payroll protection program, etc. . They are still trying to tweak get on capitol hill. What could we hear from that . Mnuchinsniature big knowledge and the criticism is there. We have seen this from the committee that was put together, saying that has not gone the way it was planned to go, that a lot leads have not gone out yet, but i think the ppp is going to be a big focus here. I also think we are going to see on the other hand a lot of focus from democrats on the main street Lending Program as well, so i think those two aspects are going to get covered. We have seen powells release testimony that they have already made some changes on the main street Lending Program, and i think he is going to both defend that and talk about what they are going to do Going Forward, and particular the fact that they are going to be as transparent as possible, which was a criticism after the 2008 crisis, about who that money is going to, and they made steps in that direction. I think democrats in particular would like to see more of a context of transparency on that. Alix i feel at the big elephant in the room is going to be state and local aid. Powell is probably going to address that in a broad sense in terms of we need people to stay employed and have money. How does that come up today . Jeanne that speaks right to the bill that democrats passed on friday, and that the senate is not yet taking up and doesnt seem inclined to pass. Of thatat a lot focus on state and local aid, and democrats say that is where it is needed. I think it will raise the specter as to are we going to see agreement between democrats and republicans on the relief package. I think powell has been pretty clear that while he has certain powers and is going to use those , congress has to allocate the money for them to act. If so i think powell has been pretty clear in his Public Statement about what he expects and would like to see out of congress, but again, republicans have not seemed willing to take that up. Of course, he is also talked about the fact that as we see a recurrence of covid in the coming months or the next year, that could have even more dire impact if congress doesnt act now. So i think hes going to use that as well to say you need to act now. Alix thanks so much. Always good to catch up with you. Really appreciate it, jeanne zaino. Coming up, walmart up over three point had percent in premarket. First quarter revenue as well as withdrawing the outlook for 2021. We will have more with stacy would lets with stacey w idlitz. This is bloomberg. Ritika this is bloomberg daybreak. Pay for thes to manufacturing of a Coronavirus Vaccine with a share sale. The biotech firm seeks to raise 1. 3 billion. Shares rose 23 yesterday. Sales grew at home depot, its best mark in five quarters. The Home Improvement chain said sales carried over into the Second Quarter. Still, home depot has suspended its fullyear forecast, saying there is much uncertainty around the coronavirus impact. Walmart is one of the few retailers to thrive during the pandemic. The chain posted strong quarterly sales, fueled by consumer stockpiling. Inparable store sales rose the u. S. At walmarts fastest pace in growth in almost two decades. That is your Bloomberg Business flash. Alix thanks so much. For more on the state of retail, stacey widlitz, swbt live visors president , joins me now. Stacey widlitz, s w retail meisors president , joins now. What are the takeaways so far as we get the big box retailers and some of the Specialty Stores . Stacey i think the big take are was that the bigs ticking away and winning. Walmart, 10 points from ecommerce, walmart is talking about lower losses in ecommerce. That is a big difference between what you are hearing with walmart and target, and some others like coals that are ls thatcing like koh are experiencing that mix in ecommerce that is bringing down profitability. That is really important. The other thing is you are talking about, while traffic was down, even at the essential guys that were open, the average. Asket is way up so people are buying more when they buy online or show up for that purchase. Alix i guess i am wondering, can they sustain that . Whether it is the margin improvement, whether it is just the actual traffic improvement. Stacey i think on the traffic front, obviously it has been intentionally restricted. While at walmart, you saw traffic down midsingles, down 4 at home depot, that is intentional to keep everybody safe. As long as Health Concerns last, that is kind of the new reality. Were,ose traffic declines i think, better than expected because if you think about some of the restrictions being put out there now, retailers talking about only allowing 20 of fire code in their stores, that is a total change in the game. We dont know how long restrictions will last, when bute will be a vaccine, until things loosen up, you will see permanently the work traffic. Working on thes margin side are way ahead of the pack. Outcome . T is the we have talked about bankruptcies coming, consolidation could become an, which leads me to all of the space that is already there. How does this wind up playing out over the next 12 months . Stacey i think the mall will be under more pressure than, say, strip malls or stores that you can get in and out of, or stores like target and walmart, were you can do Curbside Pickup or they can get to your home same day, two days. Walmart is talking about a two hour delivery window. You look at the guys that are way out front and the mall players, the smaller specialty guys, particularly apparel, that is really hurting them. Nobody is shopping. Apparel is down 40 to 60 . So that whole shopping equation between rent, landlords, and , butts has got to change walmart, certainly target reports on wednesday, they just continue to leap out front with average baskets, and the really important digital piece of the puzzle. Alix what we also heard from walmart is that they had some added covid expenses, about 900 million. Not only do the stores have to refit for when they went up reopening on a broader basis, but they are also using two hour delivery, more Curbside Pickup, and more staffing needs. How does that all play into their structural and operating margin story . Stacey it is absolutely a game changer. You get your head around the fact that walmart spent 900 million in the First Quarter, home quarter First Quarter, home depot, 800 million in the First Quarter. Everything, and the cost of business is incredibly different because retailers are giving heroes pay. That is sticky. The labor costs are going up. Terrain of business is going up, and the way the customer wants to be served as a way for many. Onal like i said, big fish little fish here. That is what will continue to happen for this big fish here. Ttle fish that is what will continue to happen for this trend. Companyw will we see manage their inventory, cetera their inventory, etc. . Stacey you want to look for average ticket, average basket. And you want to see the retailers that can really manage down there expense structure and hold on as long as they can to manage through this. Certainly, we have heard just about everybody pull guidance, pull dividends. That is going to be the same for this year, to conserve cash and try to serve the customer as best you can. Of course, we have to look for a rebound in those discretionary purchases with the stimulus checks showing up. We did see a little bit of that, so we want to hear more about that. Tonight we have Urban Outfitters deporting Urban Outfitters reporting. So more of those trends is something we will be looking for. Ey, really get to catch up with you. Coming up, stimulus again in the spotlight. We will look at the feds toolbox being used to put the economy back on track. We will discuss that with lale. Opcuoglo of johcm this is bloomberg. Alix this is bloomberg daybreak. I am alix steel. A few moments away from the latest read on a housing. With a monster rally yesterday. Saw softness. Then we tried our rally after walmart earnings and now we are down to slightly negative s p. Also want to highlight european autos, the worst month in april for car sales in europe ever. In the bond market, looking for the spike from the 20 year. The curve steepening a little bit. In the currency market, watch the cable rate, watch the euro a we have a Angela Merkel at venue macron agreement on how to help weaker nations. And Emmanuel Macron agreement on how to help weaker nations. Housing starts month by month down worse than estimated. Higher were slightly than estimated as well. Nonetheless, still looking at a month on month decline. Is withgs Michael Mckee me as always. No stranger here. Youre not going to Start Building a home when everybody is under lockdown. We keep asking is this the trough, is this the base . Michael it probably is the worst and it was foreshadowed by the big drop in hours worked by construction workers in the march payrolls report. Building permits a sign of what is to come. Maybe the more interesting number. They are down quite a bit on the month according to the census bureau. They were off 20. 8 . Builders do not seem to have a lot of optimism, although that contrast with all builders surveyed out earlier this week that showed a slight rebound Going Forward. Maybe we will see them file for more coming up. Construction is very important to the overall economy. One of the most sensitive areas of the economy. If we see a rebound, that would be some good news overall. That apriloint out is what we normally start to see a pickup. The seasonal factors would depress these numbers worse than they possibly were. Yep like wet say have done with so many indicators and put it in the rearview mirror. We will see what happens next. Alix exactly. It raises the question does construction manufacturing rebound faster than restaurant and retail . Versuset to that data what is happening in the underlying market. We are joined by lale topcuoglu. What did you make of the rally yesterday . It looked like people want to see a followthrough today. We attempted the rally in u. S. Equities versus the underlying data, which is still bad. Lale sure. And is a strong feeling there is a difference the virus has a date, whether 12 months, 18 months, we know we will have a vaccine at some point in time. A lot of the markets, particulate the equity market, everybody says there is discounting mechanisms, i think marketllenge is, the wants to believe vaccines around the corner, it will be an accelerated timeline that we have ever generated vaccines, that will be off to the races. If you look at the rally yesterday, it was all the things that were beaten down. Cyclicals, tourism, it was a monster rally. The reality is, and this is the tricky part, we are bound to have some sort of a pickup as the restrictions are relaxed. The debate that gets forgotten is how much of it is stabilization, how much is an acceleration. We can stabilize at lower levels. That does not make a positive for the market. That is where the jury is still out. Alix on the flipside, if we take a cautious approach then we wind up missing out on a rally. How do we take advantage of the rally versus still having a fundamental markets view that reflects how you feel about the underlying economy . Ale i will steal a phrase a cockroach portfolio. A portfolio that survives whatever happens. We have basically split the offensives, collect where we are confident on this debility of the cash flow. They are not steep, they benefit structural growth. We have a bucket where we call them plays on a vaccine hopes. Focusing on companies that do not have leverage. Everage is the key our credit exposure is substantially lower. We are sitting at 20 to 25 cash. That is what i would define as a cockroach portfolio. Michael i had a thought while. Ou were talking maybe the market or the overall corporate economy is like covid in the sense we get hospitalization and then we get deaths and deaths lag. I wonder with all the talk of Zombie Companies, top of companies being over levered and whether or not talk of companies being over levered and whether or not they have the cash to get through, if other people are looking at Companies Like that and maybe people start to short them or the stock starts to go down and it is an early indicator of real problems ahead, a sorting of companies that will be in trouble Going Forward. Lale it is true. I look at the upgrade downgrade ratio. I think of it as if there is a fundamental deterioration that should get reflected in the upgrade downgrade ratio. That is at its lowest since 2009. If you map this with a 12 month highyield return, you will see there is a decent correlation between them. We are generally negative on high yields. One of the things you highlighted on the Zombie Companies alix knows how i feel about adjusted ebida. It has now gone further so you can add coronavirus related causes. It has gone ridiculous. Companies have all the flexibility in the world they are buying at . 50 and saying i feel comfortable. You do not know how many different ways you will get primed. Maybe . 50 winds up being a . 20 recovery. There are a lot of things happening in the highyield market but i believe makes it negative. If you see defaults pickup, it may spill over the stock market. That is for sure. We do not know. How is that conversation going to play in with mnuchin and powell . Michael obviously there is a Natural Bridge into the question when the fed chairman might be asked about the secondary market facilities. Supposed to buy pollen angels and etf, and the etf can include highyield. If there is a member of Congress Smart enough to act about that, we may get something additional on that. I do not think if that is too in the weeds for members of congress who are more concerned going,e way things are but it would be an interesting question to bring up. Alix lale, what are you watching today with the testimony . Where will the market sensitivity be . Lale any questions around the purchase programs as might just highlighted, that is what is interesting to me. One of the things that pete my interest is if you look at the fed programs, you are seeing the discount window usage is low. Banks are in good shape. There is no liquidity constraints. What is interesting to me as commercial paper funding facility. The credit markets are open. Who are the Companies Getting a threemonth lending from the fed instead of going to the investmentgrade market and can get very attractive term funding for a longer period. That is the part i am most fascinated about. How we play that out Going Forward when we are looking at the state and local governments coming under fire, needing help and not getting it from congress . Lale local governments will need help. The other point where the market is getting confused is there getting confusing the fed can only land. What you need for local municipalities and some of the small and medium businesses, you need to literally write them a check to bridge the gap. Loans have to be paid back. You can give municipalities a loan. That may help them in the interim. Down the road, that means higher taxes, it has a lot of consequences. It is kicking the can further down the road and we will worry about that later. The markets will front run that. What you need from the fiscal point of view is strength. Alix we will see how that comes up during the testimony. Always great to catch up with you. Love having you on. Lale topcuoglu, thank you. To mike, thanks a lot. Tune hidden tune in to mikes interview with David Rosengren at 4 00 in new york. We want to give you a update on what is making headlines outside the business world. Ritika Jerome Powell says the central bank is prepared to use its full range of tools and he plans on leaving the lending rate near zero until the economy is back on track. Those are some of the remarks prepared for jay powells virtual hearing before the Senate Banking committee. Is taking thep antimalarial drug he promoted as despiteor warnings it can cause serious side effects. The president says he has been on the drug for about a week. Mike pences press secretary tested positive for coronavirus on may 8. In u. K. , pressure is mounting on Boris Johnson to be more open about his coronavirus strategy. Includedf lawmakers sentiment to publish the scientific advice behind britains actions. Teachers are demanding clarity of her plans to reopen schools next month. 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 ritika gupta. His is Bloomberg Alix . , restaurant ceos asked the white house for an extension of the Small Business loan program. I will speak to one of the ceos who was there, the ceo of Restaurant Brands international, that is going among up next. , browse theers charts we use, check them out and save the charts. Gtv. This is bloomberg. Alix time for the bottom line. We take a look at companies in sectors worth watching. Today we will focus on restaurants. President trump meant with restaurant tours at the white house to discuss eight. Joining ms. Joining me is jose cil. The company has over 26,000 restaurants in over 100 companies. Its brands include burger king, popeyes, and tim hortons. Good to catch up with you. Of theed an extension Small BusinessPaycheck Protection Program but President Trump talked about therapies and a tax cut. What did you leave the meeting thinking . Jose thanks for having me. It was an impactful meeting from our perspective. When we went in there was a number of us from the restaurant as well, independents as others that run bigger chains , and our focus and my focus was to be able to share with President Trump and the administration the challenges our franchisees that are Small Business owners, the challenges they have faced over the last days through the height of the pandemic. Appreciative of the work the white house and the folks on capitol hill did to quickly move to be able to get the cares act and ppp in place. One of the things that was important for us was to be able to see an extension of the deadlines to use those funds for payroll for another 24 weeks because we think it will be critical in order to allow restaurants to have the time to work through the reopening plans and then hire back all of their employees. Alix did you get it . Did you get assurances . You said it was impactful, but it seems like the rhetoric President Trump was coming out with was talking about vaccines and tax cuts. That is not the same as extending the program. The fullyou watch roundtable, i think President Trump and secretary mnuchin services arese available during the last 60 days. We had most of our restaurants open to some extent and have been able to retain most of our employees. ,s we move into the next phase which is reopening the dining rooms and interesting social distancing and all of the safety and security measures were putting in place in the dining rooms, our franchisees are beginning to look for additional labor in the process. So far, we feelso far, we feel y the progress we are making and look forward michael time for technically speaking. Joining me is mike mcglone. A break is taking crude, still up 3 . That that is one thing could be an indicator for the s p if the crude oil peaks at certain levels. The first chart is the brent chart of Weekly Crude Oil since it broke down. It is broking it is bumping up against the first retracement resistance. The question is how far can go. 45 is where the gap is high. Right now it is a bear market. Alix that was when it went negative and we are having the same contract rollover today. Obviously nowhere near as damaging as we saw last month. That has been the outperformance that closes the gap to brent. Mike wti the futures expectation could mark the bottom of the top. When it expired last time and put the alltime low of 40, now we have june expiring edits up at 32. 32 is where resistance get started. These could mark the bottom and the top. If we rollover tomorrow, that is a good sign the retracement could be over. Alix good to catch up with you. That is mike mcglone of bloomberg intelligence. That wraps it up for me. Coming up next on bloomberg tv and radio, dont miss Brian Moynihan, bank of america chairman and ceo will be joining david westin as we look at a market trying to see some kind of pickup despite good walmart earnings. You are still seeing s p futures down five points following european stocks lower. Yesterday was such a monster rally. Taking a break today should come as no surprise. 73 basis points on the 10 year is where we sit as oil holds on the gains. This is bloomberg. York to ournew bloomberg tv audiences worldwide, i am david westin. It will be talking with Brian Moynihan shortly. I want to go back to yesterday were i talked to Lloyd Blankfein about what the difficulties would be in bringing people back to work. We haven the long run to contemplate that people will go back to work. It, look when you do what happens to some of these aren countries where they new exposures. The second they go back to work, that will be an expectation whenever they do it. When we look back at this at some time in the future, if we go through that anyway, people will be critical that the official sector sacrificed