Report tomorrow will be backwards looking and will include the worst of the coronavirus outbreak, but gives ead before the pandemic hit us. Romaine youre talking 13 billion shares swapping hands, well above the average, but in line with where we have been. The sectors prior, energy, utilities, consumer staples. You strip out a lot of the names and we would be more flat on the investorst looks like will take it anyway they can get it. Today, they will take it. Strength, the bloomberg dollar spot index moving higher by 0. 5 . Gains inespite some the currencies overseas. In the treasury market, a modest selloff, but 10 year yields 0. 62, but that is where it has been for some time. Backet lets bring Stephen Dover with Franklin Templeton in san mateo. One thing is dividends, we have sectors,anies, suspending or halt dividends. One group that isnt are the big citigroupdman sachs, Morgan Stanley confirming dividends. That is in contrast to banks in europe. How much does that give them a natural bid as we move forward into earnings season . That is positive for the banks. Noters need to know this is to thousand eight, not a not 2000 crisis eight, not a financial crisis. Im personally more concerned about what i anticipate to be a very large drop in stock buybacks, which accounted for 40 of the volume last year. For companies to receive any benefit from the government, they cant do buybacks. Companies want to conserve cash, and the optics look bad for buybacks. I would guess the political environment will not look good, primarily in american phenomenon. One of the reasons the u. S. Is outperformed other countries, and that will mean that eps growth will be at the same rate as earnings growth, rather than how it has been, which has been a bit leveraged, because there were fewer shares for the same amount of earnings. Romaine we have breaking news. On u. S. Is holding off extending aid to Mortgage Servicers. A lot of Mortgage Service companies had been asking to be compensated out of that to trillion dollar stimulus bill. To trillion dollar stimulus bill. U. S. Regulators are holding off on helping those firms at the moment. It doesnt say they wont be help at all, but for now, they are holding off. I want to pivot and focus on the housing market. A lot of folks look at where Mortgage Rates are, the idea that if you have capacity and the willingness to buy a home at this stage, you will make out well, in terms of getting financing to do it. When you consider the general fear in the economy, the uncertainty, how much of an impact will this have on home sales, Household Wealth in general, and what type of impact on the longerterm economic prospects for this country . I think this will have a longterm impact. People will have to have larger rainy day accounts, if you will, because the psyche will be that Something Like this could happen from, so that moves justintime to just in case, if you will come true for individuals and companies. Mortgage rates have not gone down as much as we might expect, but if they do, that is an opportunity for those who can afford to buy housing, but most people dont have that extra expenses,meet their so that will have a downward effect on the housing market, particularly at the lower end of the housing market. Scarlet we appreciate you joining us today. That does it for the closing bill. Is up next. Miss . This is bloomberg. , i ame broadcasting live Romaine Bostick with scarlet fu. Scarlet Joe Weisenthal will join us shortly. Here is a snapshot of u. S. Stocks. They rallied along with oil prices, energy leading, treasurys decline, and the dollar gained. Breaking news from tesla, coming out and giving First Quarter production numbers, 102,672 vehicles, down 2. 1 versus the previous quarter, but beats estimates and shares are moving higher after hours. Tesla says its production of the schedule, ahead of and its shanghai factory continues production. Deliveries overall at 88,400, that be estimates, deliveries, when alice were looking for 78,052. The production numbers of 100,000 102,672 is down quarter on quarter. Anyine we are watching economic recovery, wind, and how strong. To get more insight into what could happen and where we are now, we want to bring in the Global Economic advisor for pimco. Lets start off with the general idea that we are in uncharted waters. There are not a lot of parallels we can make to compare it with past events. I want you to give us a general sense of what your outlook is for not only the u. S. Economy, but the world economy, and how soon we could potentially recover from this . Thank you for having me. As you say, there is no precedent for this recession, so there is no good playbook. This is the first ever recession by government order, right . Severe because we are shutting down important parts of the economy to fight the virus, but it could also be potentially very short, and there are two reasons. The first, we did not in most countries, including the u. S. , we did not see Major Economic imbalances that would have required recession, so that is first. And we lift the lockdowns the curve has been flattened sufficiently, we can go back to normal. There is a second reason why this recession is severe, but short. We have seen a staggering speed of response. This is why our outlook is for a Global Economy that will soon transition from hurting to talkng, so if you want to letters, we think this will be a useshaped economic recovery. At the moment we are still in the i phase, but soon we will enter into the l phase where things start to bottom, activity bottoms, and we are seeing this in china now, which got into this earlier and is getting out that this earlier. Eventually, once the stimulus takes hold and that lockdowns are lifted, you will go into the upward bend in the u during the second half of this year, so very deep, but i think we are transitioning from hurting to healing. Scarlet ok, i like the way you put that. Recovery gives us driving, but what is it . I think what we are watching our two curves, if you will. The first, the virus curve. The big question is whether the lockdown of the economy will be sufficient, whether it will be sufficient to flatten the virus curve sufficiently. China was ahead of the curve on this. South korea was ahead of the curve on this. They relate managed to flatten that curve very aggressively. A will have to see whether similar thing will happen in europe and in the u. S. Will be in lockdown place longer. That is the first curve to watch. The second is the default curve in the corporate sector. Crisis we haves been worrying about cracks in the Corporate Credit cycle in the u. S. We are seeing important points, the most cyclical parts come in the corporate sector being highly leveraged, so the question is how many corporate defaults will we see during this recession. This is something that could face in this recession and recovery, so these virus inwo curves, the the default curves. These are the two uncertainties we should be watching. About thealk to us types of changes we could see in this economy. We came out of the Global Financial crisis, and there were massive changes that were tethered to what happened in the crisis, but how we responded. This idea that once we have recovery, you have households that will not be made whole, even with the stimulus packages. You will have people allowed to leave their homes, but afraid to go into Public Places where there is a lot of people. Do you see major structural shifts and how People Like Us go about our business once we get to that recovery stage . I think there will be some lasting scars. Is individualtant saving behavior. People will have experienced a shortfall in , seeing their jobs lost in this recession, even if it is only a short one, so you will find over time that people will want to hold more precautionary savings, and probably want to hold more of these in relatively liquid assets so they can liquidate them when the next shock hits to next crisis hits, so maybe people will hold more money in cash or near cash assets and in bonds. I also think that in the corporate sector you will see important changes, so average leverage on corporate Balance Sheets will go down, because Many Companies are now experiencing this a problem and they have difficulties rolling over that debt, so you will see more precautionary savings, both on household Balance Sheets and on corporate Balance Sheets. This means that the private will increase tother, and that is likely offset the Public Sector and the higher deficits we are seeing. One lasting consequence is we will move to a world of even lower interest rates, call it the new neutral 2. 0. Scarlet we will have lower interest rates, yet companies and individuals will be saving as much as they can for a rainy day or emergency. Where will they put all those assets . Part will golarger into somewhat more liquid assets , so i think people would want orhold higher cash balances substitutes for cash, short dated bonds. Inre may also be more saving home equity. Homes are viewed as a relatively safe asset, where prices are less volatile than prices of other risky assets, so you will see people try to build more isity in their homes, which another way to say they will be reluctant to take on mortgage debt or try to pay down mortgage debt faster. That is another way of building precautionary savings. You talked about this ana of the potential for even recovery around the world. Talk about the dollar and put this into context for us. We have seen some distortions that has less to do with people betting on the u. S. And more to do with funding issues around the globe. Do we see more balance in the fx market between the dollar in the world, or do we have to get comfortable with the performance of the dollar . You saw the typical response of fs markets to a crisis like this fx markets like this. The dollar is still the most important currency in Global Transactions and reserves. There was a shortage of dollars. Companies were drawing credit lines. So that pushed up the dollar, which is the usual move you get in a crisis like this, however, in the meantime, you have seen important responses from the fed and Central Banks. The fed reactivated many of those fx swap lines they introduced in the last crisis. So those were reactivated, which orns that the Central Banks the counterparties can offer dollars in their domestic markets to financial institutions. The latest step yesterday or two days ago was that the fed is now allowing foreign Central Banks that holds treasuries with the new york fed to repo those and obtain dollars from so basically the fed is opening up the floodgates, giving the global markets, Global Financial institutions and corporates, the dollars they need, and that probably means that we are at or at least close to the peak for the u. S. Dollar. We have seen some currencies depreciating very rapidly, very far, particularly in emerging markets, and we may now have seen the worst of those. My expectation would be the dollar will not appreciate further, but rather will not appreciate further, but rather depreciate. Romaine thank you. China, and why china is taking advantage of the drop in oil prices to boost its reserves, next. This is bloomberg. Omberg. ,omaine breaking news on tesla deliveries for the First Quarter , 88,400, down 21 , but better than what folks were looking for. You are seeing test issues move higher in the aftermarket, flirting with that 500 mark, up 10 . Lets talk about oil. We saw a huge bump up in prices earlier today as donald trump talked about a potential deal between russia and saudi arabia. We have reporting from sources saying china moving forward to take advantage of the drop in oil prices. Ahn will more, shery break it down. What chinasabout thinking is moving forward with these purchases. Is trying to take advantage of cheaper barrels. Oil plunging 66 in the First Quarter. Beijing instructing government and companies to fill tanks. The initial target is to hold ytockpiles equipment to 90da levels. This could be expanded to 180 days. China planning to announce the fourth batch of the expansion project to create larger emergency reserves. This wille saying take some excess supply off the market, but the move would fall short of offsetting the overall glut. We continue to see tensions between saudi arabia and russia. Scarlet the report that china 4 that china will buy tweetingident trump about protection cuts, the response and saudi arabia did not confirm that, did it . Neither the response from saudi arabia nor russia. Saudi arabia not confirming the production cut, instead calling for an emergency needing to reach a fair deal that would restore balance. President trump in his tweet talked about how mbs spoke with president putin of russia, while the russian spokesperson said the president has not spoken to the crown prince. A lot of skepticism about the tweet, not only about who spoke to whom, but President Trump did cuts, 10 to 15se Million Barrels per day. Scarlet right. A lot of details to sort out. Thank you for the latest on oil in china. Coming up, we continue that conversation. Ian bremmer believes the pandemic might lead to a new cold war between the u. S. And china. Details next. This is bloomberg. Because you cant get to the theater, were bringing the theater home to you with xfinity movie premiere. Such news. I know what this is. This is a real thing. Our Brand New Service that lets you watch movies at home, while theyre still in the theater. Oh, mister elton. Ahh he has figured out a way to be invisible. They picked the wrong woman. Just say xfinity movie premiere into your voice remote to bring the theater to you. Romaine when we talk about the , wect of the coronavirus have to talk about geopolitical relationships and how they might be reshaped. The u. S. And china, the u. S. And the rest the world, ian brenner knows about this, the president of eurasia group. Good to have you. We appreciate it. I want your thoughts on china, but i want to start broadly. Can you give us a general sense, when you look at the populism, nationalism that has started to reshape politics, how much of an effect that had, if at all, on the Current Crisis now . It didnt cause the crisis. That has more to do with the fact that china with poor control over data in an authoritarian system is increasingly large come the second largest in the world, and integrated with our supply chain, creating lower quality Global Growth in more risks, including pandemics. They are 17 of the Global Economy. So that is the driver. The response function and ability of governments to rally around the flag for their leaders, there is no question populism got you that. After 9 11, before the popular search, the rally around the flag for president bush was 92 . Today, President Trump, bigger crisis, 46 , half of what it was. You see that problem not only inside democracies, but also the lack of coordination and alignment between democracies around the world. It is a big problem. Scarlet it is a big problem. When you talk about response function, chinas response is ahead of the world, and for the most part has the virus under control. It is exporting critical medical supplies to other countries, essentially peddling soft power. This is a pretty transparent effort, but will it work . And who is china trying to influence . Of course it will work. Countries are desperate. They need the support. Theyre not getting it from anyone else. The u. S. Is not providing global leadership. Lets also keep in mind the chinese are the reason for this crisis to begin with. The original sin was the chinese covered up the original human to human transmission, lied about it to the who, and refused to allow the cdc in, while 5 million chinese were traveling around the world. Having said that, you are right. Once the chinese economy took it seriously, they used their Surveillance Society to , tokdown on it, to stop shelter everyone in place, and that meant that people really did listen, or else. Now we are looking at may when the american and european economies will be shut in the chinese economy will be at full functionality by then, certainly on the supply side. That together with the fact the fact that chinese are taking ability tof their provide support, given what is otherwise a geopolitical vacuum, will clearly turn political arent haitians of many countries, including american allies, more towards beijing. Romaine what is the outcome of that . Tot can we expect the world look like once that transpires . If the americans are saying you cant use huawei for 5g, other countries who have benefited from chinese largess will tell the americans to go scratch. The United States will be engaged in more decoupling on tech, but also bringing jobs back to the United States and reducing their chinese footprint , certainly in terms of essential medical equipment, but more broadly in manufacturing services. We dont expect that to happen nearly as much from other countries. So you will have more interdependence between the rest of the world and the china and less between the u. S. And the rest the world. That reduces resilience in the relationship, but makes it plausible that you end up in a cold war between the two countries especially because President Trump, who was saying chinese virus, now isnt because he talked to president xi jinping, was his Approval Ratings turn