Dow than in any year since 2008. That is not just a week, that is in a whole year. Any year since 2008. That will give you some idea. The tenure yield dropped down. At 117ff of its low waiting for the fed to speak. The vix up to 45. We thought we were high yesterday at 33, we are much higher than that now. Crude Oil Continues to settle. We are just about 45 per barrel. Gold is also selling off today. Down 1. 3 . The stoxx 600, 372 which is down by 4. 5 . Continuing in the german tenyear. I want to show you what the gma looks like. Just to give you an idea of the magnitude of the selling that we have seen around the world over the last few days. This has been since monday morning to now. Greece, 20 . Netherlands, 14 . Yen is up by 3 . Do norwegian is up by 1. 65 . The Australian Dollar is down by 1. 5 . Year, a 45 basis point move this year alone this week alone. It is 100 chance according to the fed funds. Crude is up by 14 . Gas is down by 11 . The market is going crazy. This has been an absolutely epic week when it comes to the markets. Good for bonds, bad for stocks. Vonnie lets go to our specialist here cross acidwise. Is a micro strategist macro strategist. You have followed the markets for a long time now. You are the market recession tracker. Talk to us about what it is telling you and whether we can see a recession from an event like this alone. The implied probability of a recession is still in the signals from Financial Markets has gone through the roof. Like 75 , 80 hing chance of u. S. Recession within the next year is what markets are pricing. Importantly, we have gotten to a , where thise 2018 price action is feeding on itself. We had this exhaustion is stock of the coronavirus. But now it has become internalized. That is something we did not see in 2018. We did not see it in 2011. It is not as bad as 2008 but it is worse than anything we have seen since then. Vonnie explain what you mean by internalized. The prices that you see on your screen and form your reaction function to any new marginal piece of news. 2018, we did not really have something to the equivalent of virus headlines. How you choose to react to every new headline on the virus is informed by what you have seen over the last week of trading. Panic isling you that actually the right course of action. Lets bring another voice into this conversation. The managing director of global macro and eu economics. What do you make of what cameron is saying . What do you think about where we are in terms of what the market is signaling about the economic trajectory from here . Should we expect a recession this year . That is what the market is signaling. Whether we do end up with a recession depends on a lot of moving parts. Usually it depends on a lot of moving parts, this time around volatileptions are so and so nonlinear. What we do know is that panic breeds panic. We do know that the Global Economy is highly interlinked to ande and financial linkages if uncertainty persists, it can be quite significant. Where does it end . On one side you can say policymakers can intervene. Either they can cut Interest Rates, will that be effective, we do not know. This is especially so for the fed. Sentiment destabilize which is important at this point because we are all grappling with the outcome, the big unknowns. We need some sort of stability in the market. Measures would be more effective this time around. Encouraging forbearance, for instance. Making sure that credit flows into the economy. , you can seede more tax relief, tax rebates. This stabilizes the demand side. Wouldntral bank steps stabilize the supplyside of credit and we could end up in a better situation then we are at the moment. If we keep pushing, things good escalate quite rapidly. The relative experience of the relative parts of the world are going to be as a result of this. We have already seen the impact and understanding what the impact is in asia. In at 30ome into or 45. We do not know. Howdoes europe stack up and does the United States stack up . Again, a lot of unknowns. A working assumption for china was that the cases, the coronavirus cases in china have peaked and that we will gradually see an easing. Towere expecting rates close 80 by the beginning of march. That is still tracking quite well. It is difficult to get where pmis would be. We would see a big drop in chinese activity. That would have ripple effects on the rest of the world, europe in particular because it is so exposed to china supplyside linkages. The assumptions have changed radically over the last week. Global cases for coronavirus which is a big slowdown from around 7000 at the start of february. What happened with the last week is that cases have started to rise again. It is back to around 1. 4 thousand 1. 4 k. This is a paradigm shift. A lot of countries have not really started testing. What does this mean for europe . It is really bad news for europe because as it is, it is struggling and suffering from lack of demand from china and supplyside linkages. He could face a second round of demand disruption. The same flow through to the u. S. Would you describe selling like this as indiscriminate . Is this market looking for a bottom or is this just the liquiditydriven . A i think at the moment it is largely liquiditydriven. Yesterday with the correlation to theirdual stocks performance over the Previous Year was zero. You could not say that people were selling the stuff that had done the best or that they were buying the stuff that had done the best. I think there was a lot of indexlevel hedging. The 1. I would make the one point i would make is that there is an aspect of this that policy can impact. We have had the news that disney is closing its tokyo park for a couple of weeks. That has nothing to do with the price of credit or the level of Interest Rates for the level of the s p 500. Venice closing, canceling withval has nothing to do anything that the ecb could do. The uncertainty is so manifest because we do not know what the spread of the contagion is going to be. We do not know its mortality rate. What we can say is that the measures that governments take to minimize the human cost are likely to maximize the economic costs. Those that would minimize the economic costs will exacerbate potentially the human costs. We do not have quarantines and lockdowns and shutdowns. That is a very difficult tradeoff to make and to anticipate. Unfortunately a lot of it is immune to the traditional on theakers particularly monetary side. As always, thank you. We will carry on the conversation with ts lombard. Vonnie lets check in on the first word news for an update on all things global. A number of developments in the coronavirus outbreak. A president says rate cuts may be necessary if it turns into a pandemic. Acting white house chief of staff Mick Mulvaney says School Closings are likely. Re may be an impact until on transportation but he added, we now have to handle this. Spending in the u. S. Closed down but it rose to tens of a percent. It suggests that the mention among American Consumers eased so much. Biden is banking on a win in tomorrows primary. The front runner in the race for the democratic president ial nomination has seen his poll numbers fall. But a new poll shows biden with a 20 point lead in South Carolina over bernie sanders. Turkey is threatening to release a new wave of refugees. Called in allies were thee of the deadliest latest escalation came after more than 30 turkish troops and dozens wounded in airstrikes in northwestern syria. The syrianh backs president has denied any role in the attack. Global news, 24 hours a day, onair and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Are continuing our market coverage ahead. Lets take a quick look at where we find u. S. Majors. It has been a tough week and continues to get tougher. The s p 500 down three and two quarters percent. The nasdaq down 3. 2 . The 10 year yield right down to almost its alltime low at 1. 163 . The vix is at 48. Ladies and gentlemen, this is bloomberg. Live from new york, im vonnie quinn. From london, im guy johnson. This is bloomberg markets. Another brutal day for stocks around the world. The seventh a down day in a row. Take a look at the s p 500. The stoxx is down hundred four a half percent. A couple of mix days with some grain. Investors worried that the coronavirus could really shutter the Global Economy. Something interesting happened on todays action. If we go into the bloomberg terminal we are probably headed lower. Yesterday we were looking at the daily chart. The s p 500 going below that daily moving average. We are loathly hundred week moving below the hundred week moving average. We were going down to the 200 week moving average which is near political critical support. More downside could be ahead. Action,t sort of brutal the worst week since 2008. The bloomberg dollar index which is a haven index getting a tiny bit on the week up to traction. Take a look at oils. We have copper down and we even have a gold down. That is more than what we saw in 2008. Lets take a look at those haven assets. We are seeing a big dig on the week appeared that 10 year yield down sharply. Down 30 basis points, near a record low. The yen is up 3 on the week. The dollar against the yen down 3 on the week. The casetechnically can be made for well above 50. More selling from risk assets might be ahead. To be the thing coming out of this week. In other economic news, volkswagen is posting 2019 19. 3rs coming in at billion euros. That is significantly ahead of estimates. Reactionhe share price we are getting in volkswagen. It has been a very tough week for the auto sector at demand concerns manifesting themselves there. Lets go back to the conversation we were having before. Thee is lots of talk in market that the meltdown is going to generate an emergency policy response. Possibly as early as this weekend. 25 basisance of a point cut next month and a 45 chance that we get 50 basis points. Says there is no need for a policy response. We spoke with the lenders banks. I would expect that we would have to press downwards our forecast. The most likely assumption is that this is a vshaped effect. The coronavirus will have an effect. , theit is contained normalization will happen quite quickly. Sounding quite sanguine. Joining us here in london and joining us in new york, bloombergs chief economist. The market is pricing your 100 chance that the fed goes next month. Possibly its biggest, 50 basis points. Everybody in the market seems to be telling me that this is a shock with the policymaking on the monetary side will have very little impact. Why are we in the situation where we expect the fed it do this . Disagreed completely with that. The central bank has ammunition to help deal with the crisis. The fed does not have the power to control contagion but the fed has the power to create financial buffers and offset some of what we are seeing happening here. My own team trimmed our first half Economic Forecast by 50 basis points based on the equity route alone. Of priorured analogies flu epidemics. We do not know what the numbers look like around that type of situation yet. We can draw a clear parallel that the equity market rout in q4 of 2018 when the market declined 20 , we can match that into map that into the current route which would imply for consumer spending, Business Investment and it gets us to a gdp growth of 1. 5 in this quarter. 1 next quarter. That is going to convince the fed that they do need to step into the picture sometime soon. Vonnie will fed cuts help . 50 even get 50 paces basis points if there is a cut. To themee not going parks. The fed cannot do anything about that. The fed cannot do anything about going to a theme park. They may have to stay home from work or may have lost business opportunities. If they have a home equity line, lower rates will help their cost of financing small businesses. Lower rates help their cost of financing. We cannot impact what is happening at disneyland but in broad terms, the fed has powerful tools at its disposal. In the last market update, we heard this flight into quality assets away from risky assets. That is a tightening of financial conditions. Can forcetting rates some of those investors to look back at those assets and move out of treasuries and gold and cash and move back into riskier assets and that has very powerful economic consequences. , what do you make of this . Main impactink the will be that it signals the market that the fed is still very much here. That is a stabilizing sentiment. We know that the funding curve, the distance between the federal funds rate is negative. It had already been negative for a month. If it stays negative for another two months, that makes it easy and even less profitable. Not just heard Credit Conditions in the u. S. , but it has Global Implications because u. S. Banks are the big suppliers of dollars outside of the u. S. That is one channel. Credit will flow through the system. Assures will also help such easing capital restrictions on banks and ratios on banks. Taking sure that credit keeps flowing through the system effectively. The data servicing costs is a big source of worry right now. If the fed does cut, it eases constraint on that side. There is clearly a demand story to it. It encourages consumption. Thank you for stopping by to give us your insight. Ts lombard managing director. Thank you very much. This is bloomberg. What a week it has been. Etfs have been stretched like never before. Bloomberg intelligent joining us now offset. Give us the skinny on what kind of a week we have seen in etfs. It has been tough everywhere. I think where etfs standout is trading volumes have set records. Highyield etfs, it has been really high. This is going to put to rest a lot of things that have never been tested. The selling has been aggressive but it has been in etfs. Nothing is a sticking out. If you look at the spreads, they are really tight. The discounts are really tight. Selling is aggressive, but it is orderly. Whereeing areas of we expect. More safety stuff, gold, treasuries. It is been what we have expect it but it has been orderly. Vonnie to get exposure to companies, is it retroviral . It does not exist. Trackeduld have companies that try to protect bio threads like this one. If you look at the names, they are up quite a bit this week. Thank you very much. This is bloomberg. Live from new york, i am vonnie quinn. Guy this is bloomberg markets. Vonnie lets get back to global equities. Lets get to our panel. A reporter iss as with us in new york. Another editor joins us from princeton. Let me start with you, katy. Is there support for the 10 year yield . Keep making new lows. We keep making new lows. We are in unprecedented territory. The analysis goes out of the window. By most measures, that yield has gone too far, too fast. We are in an unprecedented situation with this virus. Maybe we will see more measures taken by the u. S. There is no place else for investors to go if they want yield but also safety. That is why you are seeing these twoyear yields fall right now because investors are looking for cover and the u. S. Market is still a bright spot. Is a credit market still orderly, is it functioning . Is it working as we would expect it to . Is it working better than we would expect it to . I think you are on the right path. It is working better than you would have thought it would. We are seeing record volumes in the bond market. Everything seems to be orderly. We are not seeing these huge gaps up or down in price. That tells you that things are orderly within the bond market. We are seeing people run into bonds because it is the most liquid market you can find globally. Whether you are in asia, europe, latin america, bond market is where you will go to get price discovery. Many people might feel that they are over, but you do not have much of a choice when you end up in a situation where you need to adjust a portfolio, move some money around, parked some cash. Bonds are the easiest way to do that. Spiking, we are nearly at 50 today. Does that describe orderly markets to you . Yes it does, it absolutely does. It is not just the vix, it is what you see in equities. Your prior gas was talking about the etf market and all of the cell orders and movement going on there. The markets are not disengaging here, nor are they leaping around from spot to spot. They are trading down, coming back up. Thankfully the regulators are letting market discover price. If you go back 20 years ago, we had trading collars in place and a 5 drop might stop trading. When you do not allow markets to discover prices, that is when you start to end up with disorderly movement and you end up with orders sitting on desks waiting to be executed once the market reopens. That is not happening now. I think that is a good thing. Prices might seem irrational but this is what has to happen to markets. Buyers and sellers have to find one another. We are doing that. Katy, is the Market Action a useful guide to possible fed action . We are clearly seeing a flow story, here. People are rushing into bonds and seeking safety. Defect does it affect the feds decision to make a policy change . The market is priced potentially 100 chance we get a cut and a 45 chance we get a 50 basis point cut. Can i extrapolate from what the bond market is into that decision . Seen. Remains to be we have about three weeks ago and traders are aggressively pricing in those cuts. Those would be the first since 2008. It would be surprising to see that. If they did move in march and june. It would be surprising because we have not seen u. S. Data deteriorate yet. There is not a lot of new information that we are going to get between now and that march meeting. Folks like ubs coming out and saying, given the potential shocks to the Global Supply chains and how far the equity market is falling, that may force the fed to do an emergency cut here. We will know in about three weeks. He is calling the situation fluid and says it could turn around fast. We will monitor events right up until meeting, he said, which is by the way, march 18. He says, forecast adjustments do not look severe but we are willing to react. It sounds like the Federal Reserve is reserving judgment at least for another few days. If this continues, how much leeway does the fed have . We are at an interesting point in time. The fed has one week until blackout period. They cannot really talk before the fomc meeting. If they wanted to shift market expectations, now would be the time to do it. You see more voices like hi