Weaker as you have no agreement over finance chiefs on what to do over the crisis. Russia doesnt think a 2 million barrel a day cut is enough to get anyone to the table. In the bond market, 17 billion worth of supply coming online at about 1 00 today. It is time for todays market moving news from our london and new york offices. European Union Finance ministers now failing to reach a deal on a unified strategy combat the economic damage of the coronavirus. Germanys finance minister olaf scholz did give a press conference shortly after talks ended. I think it is absolutely clear that the recovery of great will be a very activity. We have to organize together. As anyone knows, i think it is absolute possible to do this within the framework we already have. Alix bloombergs Michael Mckee joins us now. I couldnt believe it, but i could believe it this morning when i woke up and saw they could not agree, and it was north and south. Michael it seems that way to a lot of people. Talk is cheap. It is the countries of the southern half that dont agree this is going to be easy. They did spend more than 16 hours on a Video Conference yesterday and failed to agree on their plan to mitigate the effect of the crisis. This is big news for europe because the southern hardhit countries are pitted against hawkish northern states, and be doesnt seem to agre there doesnt seem to be agreement on the horizon. They would offer credit lines of up to 2 of the countrys gdp, create a paneuropean liquidity guarantee fund, as well as an implant as well as an reassurance scheme. The european stability mechanism that lends money up to 2 of the gdp is supposed to come with conditions attached because it is usually granted when a country has run into Financial Difficulties of its own making. The netherlands once italy to agree to conditions, but the italians dont think it is their fault and dont think the eu should be running the country right now. Germany remains opposed to financing this whole deal by a ornt method, corona bonds Something Like that. You heard olaf scholz making polite noises about confidence. Another call is scheduled, but right now, hard to see how they get through this. All of this comes amid the backdrop of a german think tanks and the economy there is going to shrink this quarter at the most at more than twice the pace of the worst quarters of the financial crisis, 9. 8 . That would be the most since records began for quarterly gdp in that country in 1970. For the year, they say german gdp will shrink by 4. 2 . The bank of france out with its economic forecast, and they say the economy shrink the most since world war ii during the First Quarter. That would be 6 . Across the atlantic in the United States, the Trump Administration making plans to reopen something they didnt close. The president reportedly frustrated that the virus is crimping his reelection plans and once the country to get back to work as soon as possible. Business groups are arguing for may 1. He seems to want to do that. The nascent plan at the white , if they have be the antibodies, let them go back to work. Medical experts still say that matt knight that might not be possible, and there are enormous risks that we could get a second wave. There are also a lot of bottlenecks in testing, so it is not clear they could even do this. Trump had no role in shutting down the economy, so it is really going to be up to the governors of the states to make they protect their populace. Alix thank you for that come brands of wrap up. Thaty, the comp comprehensive wrap up. Dani burger joins us now from london with more. Dani the narrative at the beginning of week had been that that is a slowing rate driving markets higher. Turned. Kly things have europe falling more than 1 . Some of that is what michael was failureabout, the of euro area ministers to agree on a package. Many companies are scrapping payouts. Then you look at the data positioning, which suggests a lot of what we have seen over the past few days when it comes to rallies was just technical, just shortselling. People buying back shares, hoping to lift up markets, which means there are a lot of investors still on the sidelines. Data shows that last week, shorts had started to reach an extreme. All of the u. S. Equity index thationing had flipped to shortselling. Euro data says that a type of leverage quant had to reduce their short positions in some indexes up to 45 over the past few days from very extreme levels. That would certainly be enough to power markets higher, but again, this is technical, not a change in sentiment. Jp morgan also saying something similar, saying that short measures on etfs have been reduced from extremes. The most shorted stocks have been outperforming. All of that evidence stacks up to say we are not at the point where we can say that sentiment , whichned a corner brings up the frightening reality that even though u. S. Today, are up 0. 5 another bottom may well be in store. Alix thanks very much. I really appreciate that. One other story i am watching this morning is what is happening with the oil market. Yesterday you had the Energy Information administration out with their forecast. They saw 2020 now cut by 22 Million Barrels of oil a day. 1. 6 also cut next year by tommaso plummeting demand all hitting the nations producers so plummeting demand all hitting the nations producers. On friday, theres going to be a group of 20 Energy Minister meeting. Russia out this morning, saying that this cut from the u. S. Is not going to be enough because they were going to have to do it anyway because prices are so low, so it doesnt really count towards a global coordinated cut. Coming up, much more of your morning trade, news and analysis in the markets in todays first take. Happy wednesday, guys. This is bloomberg. Alix time now for bloomberg first take. Here to discuss, michael, plus Damian Sassower Michael Mckee, plus Damian Sassower. Mike, theres so much economic information coming out, whether its france, whether its germany, whether its the u. S. Here. What is the most important thing on your radar . Michael at this point, we are still looking at jobless claims in the United States because it still has the potential to shock. When we get that, the question turns to where unemployment is going to be when we get the payrolls report because it will give us an idea of the depths of the recession to come because it happened so fast. 10 Million People so far applying for unemployment. There are forecasts for 7 million more tomorrow. If you get that, youre looking at unemployment north of 15 . We only got 10 during the financial crisis. Predictionsl these from the think tanks in germany, from the difference from the bank of france. Us an idea of what we have to do on capitol hill. N, what are you watching . Damian for me, it is this shift of fundamentals that should take place. If you look at the whole of developed market economies globally, debt to gdp is going to rise something on the order of 140 . What economies had to do following world war ii. They had to inflate their way out. All of this talk about Deflationary Forces bringing rates down, we may see inflation where its ugly head at some point. Alix thats a great point. It also raises the question that all think a lot of people are trying to talk about, that we are at some point going to have to forgive these debts. The companies arent going to be able to pay the loans. They dont have sales. Forget about the actual countries, particularly when it comes to emerging markets. Damian it is not necessarily about the level of debt. For the past 30 years, weve levered up so much that it is going to be a relative gain. A bunch of people flexing their muscles this morning. I think Morgan Stanley is technically bullish on a number , so people ares definitely taking the rally in beta assets and trying to run with it, certainly in emerging markets. Alix alix mike, what do you think . Michael interesting column this morning from bloomberg traders notes. Traders really dont know what they want to do because they dont know what is going to happen, but they are doing what they have to do. I think that comes into what damian is saying. People are looking in emerging markets and saying we can say this one is going to be better than this one on a relative basis, but at this point it is just a guess on everybodys part. We dont know where the next outbreak is going to come. The msci emerging market index weighted heavily to china. China going back to work, underperforming u. S. Large caps. U. S. Large caps have been the ones rising the most over the last week or so. In a real recovery, you would expect emerging markets to lead the way. You would expect the russell, the small caps to lead the way. People are trying to differentiate, but still staying with safety. Nobody really knows what to do at this point. Alix totally. I had to laugh when i came in this morning. We saw qatar was raising 4 billion, but there was 45 billion of orders for their 10 billion bond sale. Damian you beat me to it. We are seeing em primary activity recovering. Credit spreadse have really performed rather well in the last few sessions. I think we are down to 263 basis points on the Bloomberg Barclays investmentgrade index. Inwas as high as 373 bips midmarch. Raisingare right, qatar 10 billion, 4. 5 times oversubscribed. Israel was five times oversubscribed. We had slovenia issue eurobonds this morning. Primary market activity appears to be coming back. Issuerst em highyield looking to come to market with bonds. Lion in fiveyear theres definitely activity and a bit of a rebound in technicals here. Airbnb also raised 1 billion. The money is there if youre willing to pay for it. This is as the government tries to rollout the Small Business Administration Loan program to funnel money through. Michael we are seeing some banks take a lot of applications, and other banks take fewer. There are still questions about whether or not you can get a loan from a bank unless you have a strong business lending relationship with them. A lot of people complaining that is not happening. There seems to be a problem with the financial crimes enforcement network. It is supposed to protect against Money Laundering and terrorist financing, and they have very strict rules about business financing. You have to investigate the true identity of everyone who is an equity owner of a business. That can take up to 30 days. The banks have asked for relief from this. They said this is going to be a problem. It has not done anything at this point. People are kinda frustrated with Stephen Mnuchin and the treasury department, saying they are holding all of this up. The other issue is if all of the applications that have gone through get approved and the money goes out the door, they are out of money. So they are talking about tomorrow come on capitol hill, voting for another 250 billion dollars for the Small Business program. This would not be phase four. This is topping up the glass so they can get through this, and then they will work on the phase four issues. In terms of stocks and things like that, we really havent seen money going out the door to the Big Companies yet. There are arguments about whether the government should take equity stakes. Mnuchins to wants to take equity stakes in airlines. The airlines do not want that. A lot of money passed by congress that is yet to go out the door and hit the economy. Alix and hence, why you end up having futures sitting nowhere. Really appreciate it. Thank you very much. Coming up, you have oil trying to figure out what it is going to do and if we are going to have a coordinated opec cut. Be joiningf rbc will me next. This is bloomberg. Viviana you are watching bloomberg daybreak. The company that assembles most of apples iphones is going to start making ventilators in the u. S. Foxconn will work with medtronics on the develop at of the devices. No word where the ventilators will actually be built, but foxconn does have a factory in the state of wisconsin. Now to heineken, abandoning his forecast for this year. The dutch brewer sees demand falling 2 . In the Second Quarter, it expects the fallout to be worse. In thewith Oil Companies u. S. Warning there could be widespread insolvency in the industry. Near 30 aes remain barrel, about 40 of oil and Gas Producers may be wiped out according to a new survey by the kansas city fed. Energy Companies Say they cannot keep pumping oil at a loss. That is your Bloomberg Business flash. Alix thanks so much. Lets stay on oil right now. The u. S. Energy information industry she warning that crashing prices and plummeting demand will be shuttering production. Joining me now is michael tran, Rbc Capital Markets commodities strategist and managing director. They are looking at a 1. 2 million barrel a day cut for this year. Do you think that is a little optimistic . Michael u. S. Producers can either come willingly and volunteer now with a cut, or they can come with a whimper in several months after feeling the wrath of Lower Oil Prices for longer. Like you said, the eia put out their Shortterm Energy Outlook yesterday, and they are essentially saying that by the end of the year, we could see crude production dropped to 11 Million Barrels a day. That is nearly 2 Million Barrels a day from where we are now. What we are seeing in the u. S. Camps,ow is to divided diametrically opposed. On one hand, you have the texas commission. You did a fantastic interview with Scott Sheffield last week, with Matt Gallagher yesterday. Their companies have been publicly advocating for a cut. The other hand, super majors have been pushing for free markets. It is extremely difficult to handicap how this ultimately plays out, as trump is certainly finding out right now. I think a lot of what it comes down to later this week is how the u. S. Energy secretary dampers the ability to get thetive, really branding cuts with current shutins. Is that enough to get a deal done, to get opec to a table . May, particularly if the u. S. Offers sanction relief as a sweetener to the deal for russia. Maybe that is what gets it over the finish line. Alix what is your expectation opec sday, when the when the g20 ministers meet on friday . Michael several countries have seemingly rhetorically answered the call, so countries like norway, brazil, canada, and others. The key question is what is ultimately going to please the russians . Russia wants to things, one of them being sanctions really for some individuals and some russian corporates that have been heavily sanction since 2014. The second thing is u. S. Shale to come to the table. Make no mistake, when we look at what the deal was contingent on, it is really all about the u. S. Other countries like canada, brazil, and others are nice to have. The u. S. Is an absolute must have, and it is a potential dealbreaker if they dont show up. I think we really need to get the u. S. To come to the table. We will see what those numbers ultimately looked like, but there have certainly been large numbers tossed out there from some of the producers in the camp of advocating for production cuts, and some of those companies are talking about 20 from the u. S. Those get to be pretty large and meaningful numbers pretty quickly. They are basically from the well capitalized ones. You get the really bad drillers is too much leverage that will get the majority of this cut. That arehave the parts willing to cut. How does that ever come together . Michael well, that is what makes it so difficult. The u. S. Generally doesnt participate in discussions like this with opec, but this is ultimately what comes down to now. Are tired, and perhaps the saudis are tired, of further production cuts to make room for u. S. Cheo for u. S. Shale. From that perspective, this is what it is really coming down to , seeing whether or not they will be able to put together some kind of deal to be able to satisfy the russians. I thing a lot of it comes down to the u. S. Energy secretary ability to get creative in terms of highlighting some of these numbers, and given that the eia came out with the Shortterm Energy Outlook with pretty drastic numbers coming off by the end of this year, i think that gives them more ammo to be able to put together a deal potential he. Alix really great to catch up with you. Thank you for joining me. Coming up on the program, it is not time to give the all clear forfor market markets. That is according to Mark Mccormick. He says it is time to take a little bit of offense. We will break out of that down. This is bloomberg. Nowadays you do more from home than ever before. The xfinity my account app puts you in control with Digital Tools to give you the help you need when you need it. Get fast and easy answers with personalized help 24 hours a day, 7 days a week. Change your wifi password to a phrase thats easy to remember. Even troubleshoot your services on your own. Were working to make things a little easier for everyone. Download the xfinity my account app today. Alix welcome to bloomberg daybreak. Im alix steel have a divergence happening between the eu and the u. S. Agree on how not to handle the virus fallout, different from the u. S. I have to wonder if that is playing into it, or this is just how we are going to roll. If you switch of the board, you can see Something Interesting as well, and that is eurodollar. Euro is one of the worst performers in the g10 space. The you are losing some steam against the Australian Dollar and the cable rate come eights the performer of the day. Seeing some moves in the bond market in the u. S. We have 30 year supply coming on, so definitely watch that. Oil still trying to find its own base as we head into an opec meeting tomorrow and g20 Energy Ministers on friday. Ray dalio says cash is trash. He says that while it doesnt move around in value as much as other assets, there is a costly negative return to it. Cash is trash relative to other alternatives, particularly for those who will change their value during reflationary periods. Ith us now is Mark Mccormick do you agree . Mark yes, we are seeing extraordinary investment on the fiscal side. The alphabet soup of all of the things we see from the fed come of the ecb, and ill of the other Central Banks to pump liquidity and cash into the system, i think we need about the market response to these things, we are in a world we have never really seen before in terms of the magnitude of the fiscal and monetary support. If you think about how that will play overtime, look at what you are getting from gold, that is a significant push away from a world looking for alternative forms of cash. Thats fair, but still within the g10 space, is there anything that is going to supplant the dollar at this point . Mark not immediately. One of the things on peoples radar screens is thinking about a broader framework when we emerge from the end of this crisis. How does asia set up as an alternative performance currency, the renminbi . Has performed relatively well. We have seen flows into chinese fixed income instruments. Weve also seen chinese equities outperform on a relative basis. With think about the g10 come of the euro is still kind of a counterweight to the dollar. Think about the fiscal fragmentation we have across the euro zone, and the fact that the dutch dont really seem very for on debt mutualization the italians. It doesnt seem like we are moving towards anything like a european style corona bond any time soon. Until european fragmentation is solved, which has been a problem since 2012, it is likely the euro is going to be ready to really supplant the dollar and the very short run. Alix what is the downside, though . Mark the conversation with clients the last couple of weeks in terms of options, thinking about option touches, our view 1. 09een, especially around levels, we are more likely to touch 1. 15 this quarter. That is best expressed through euro put spreads, which gives you optionalitys which would reinforce our view that the market has not seen the extent of the economic damage that is coming through. We havent really seen that much data to understand the severity of the situation. When we work through the data over the next two of three months, we are going to see probably annualized contraction in the euro zone around 7 . I think once the market starts to internalize that, we will see a leg lower in the euro. Alix and germany saying 10 for Second Quarter, france seeing a deep contraction in the First Quarter. We have a headline crossing. The democrats are seeking at least 500 billion in the next stimulus bill. Counting the 250 billion more that we now need for the Small Business fund in order to distribute that money as well. At what point does this way on the dollar, does this weigh on the dollar, weigh on yields . Mark i think it is important because we are stuck in this hammer and dance interplay. The hammer is the suppression phase, and after that there is this dance. I hear a lot of conversations ,bout a vshaped, ushaped lshaped recovery. I think mostly the dance phase of it is understanding the testing, the tracing, and tracking those things throughout the economy until we get Something Back to what resembles normal, but i think that is more of a w shape. Where we are heading in the u. S. Strongerhave much more fiscal, but we have a much higher on employment rate. Scenario, wease see this picking back up in the summer. The euro is a better place for that environment because they are not laying off workers, and stabilizing their corporate environment. If this is a more prolonged dance where we are kind of going through fits and starts of opening back to Global Economy, that benefits the u. S. , largely because of the credit expect the credit effects coming through, the weight is being channeled directly to the consumer, and the u. S. Market is just a little more viable and much more competitive, which would benefit something a little more prolonged. If you think about the fiscal numbers, another 500 billion coming in the form of potentially infrastructure, along with the 1. 2 trillion the tolerated been a handed out, that would be beneficial for the dollar, but i think that would reinforce some of what we are of thenow in some emergingmarket currencies, but it is too soon to price that in. Alix that is such a good point. The penning on what letter we see depends on which government actually is going to be a winner when it comes to how they are handling the virus. You brought it up, so where does that leave em . Does asia have the infrastructure to deal with the Health Crisis . We have seen how many countries go to the imf and say we need billions of dollars to support us already . Mark i would say theres three things that tied up together. It is the coronavirus, the hammer and the dance related to that, the fiscal liquidity issue which has been the most acute, which it seems that policymakers have addressed to some degree to open up the liquidity channel. Then theres the trade shock. We got oil and opec, and if you think about what impacts a lot of emerging markets, they are smaller, open economies, and a bulk of them sell oil and other natural commodities. If you think about that environment, if you are a commodity producer with a current account deficit in dollardenominated debt, this is kind of the perfect storm. If we use the 2008 playbook, it seems like we still have at least another two months of more volatility and more stress, which is more vol, lower equities, a double or triple bottom in global equities, which would reinforce the stronger dollar. Even if we get the opec deal and we get oil may be moving back to 40 a barrel, that is still not going to benefit some of the emerging markets at colombia, that run a current account deficit and is an oil producer. Butight help russia more, this backdrop is still looking at a Global Economy that is going to have negative growth this quarter. Look more viable are the ones that are the commodity producers like india that could benefit from the terms of trade, at some other countries that have a current account surplus tied to the chinese economy. And india buying oil for their spr, case in point. Mark mccormick of td securities, thank you very much. We want to give you headlines outside the business world. Viviana hurtado is here with first word news. Viviana eu finance ministers were on an emergency teleconference that lasted more than 16 hours, yet they failed to agree on a strategy to mitigate the impact of the coronavirus pandemic. They couldnt reconcile contrasting visions to help economies recover. U. K. Prime minister Boris Johnson is still being monitored in an intensive care unit. A statement says he continues to receive oxygen while being treated for covid19. The u. K. Coming off its deadliest day yet. The latest reports stating that thewhen he for our white house developing a plan to get the economy back in action. Bloomberg has learned this involves testing far more americans for the coronavirus then has been possible up to now. The effort would start in places that havent bitten that havent been hit so hard by the virus. Other cities would remain shuttered. 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 Viviana Hurtado. This is bloomberg. Alix thanks so much. For more on the economic fallout from the virus, we want to look at the labor market. Postings on job sites have slumped from a year ago. Jobseekers in the u. S. And canada really the hardest hit right now. Meanwhile, the diseases have the disease is having a deep impact on unemployment. More than one billion workers are at high risk of losing their jobs or taking a pay cut. Sectors,st risk , akinhotel, and retail to what Mark Mccormick was just talking about. Coming up, global asset sales deteriorate. We are going to speak to mark , next. Pp ceo this is bloomberg. Viviana this is bloomberg daybreak. Koch, up next hour, Katie Goldman sachs global cohead of fundamental equity. With your Bloomberg Business flash. Inuit in pin for cisco San Francisco accusing zoom of hiding flaws in its videoconferencing app. Usage of the app sword. The lawsuit accuses zoom of hiding the truth about its shortcomings. The ceo has apologized for security and privacy lapses. Up to a 30 temporary pay cut for tesla employees. The coronavirus outbreak has forced Car Companies to shut down some operations. Tesla employees who have been furloughed wont get paid at all, but they do get to keep their health care benefits. His stake in donationjack dorseys to coronavirus aid. The Payments Firm says it will likely take several quarters or even years to complete the transfer. I am Viviana Hurtado. That is your Bloomberg Business flash. Alix thank you so much. Global advertising spending could see as much as a 10 slump in 2020 as the pandemic slows economies. Joining me now in an extrusive interview with the man behind ceoscenes, mark read, w bp wpp ceo. You came out with a slew of steps you are taking to mitigate the virus impact. Knowe that, i want to how you see Global Advertising slumping this year. Mark clearly, companies that are most impacted are going to cut spending. There are areas where spending will hold up. People are watching more television than theyve ever watched before. Eeing a shift to digital channels, but Traditional Television is holding up relatively well. Believe they will earn disproportionate rewards in this environment. Alix do you see any difference in your margins or how much you are able to make when they shift to, say, more online than they would in print or in stores, for example . Mark ironically for us, Digital Media is more laborintensive in many ways than traditional media. Shift to digital helps wpps business. The two largest media partners, google and facebook, we make a lot of progress working with them. I dont think that is going to impact us. It is really making sure that weve made necessary investments in technology, which is something weve focused on for the last 10 or 15 years. Alix to that point, lets go through the steps. You guys took. In particular, i want to focus on your staffing. You freeze new hires, looking at freelance expenditures. You are going to cut discretionary costs, postpone any salary increases for 2020. How long does that template sustain you . When do you have to talk about job cuts . Mark coming into this, what is important to recognize is weve raised 3. 2 billion pounds over the last few months, so we come into it with probably the lowest net debt the company has had in the last 10 years. We are in a strong position financially. Our view is that those companies in the strongest position will come out of the best place. We face the same uncertainty everybody does. We dont know how long this will continue. Quarter, twoa one quarter, or threequarter, but the longer goes on, it will take time to sort this all out. We will look at tougher measures in the future. At what point we need to get to them remains to be seen. Alix can you give me a list of what those tougher measures are . Mark as you saw in the statement, a number of senior people across wpp, certainly my tells certainly myself, have taken pay cuts. We are looking at ways of people working for five days a week, and i think at some point, we cant rule out that we will have to roulette job cuts in parts of the world, like all companies do. We have to protect the company. My goal is to protect as many jobs in wpp as possible. Making sure our staff are our number one priority has been critical. To work 100,000 people from home three weeks ago, i would have thought you were mad. But we have and effectively working remotely. So our responsibility is to our people. We will take all the steps necessary to protect as many jobs as we can as we go through this period. Alix i know how you feel. Im broadcasting from home. The other steps ive taken the other steps youve taken, youve suspended your dividend and your buyback. Are you just being extra cautious with your cash buffer, or do you see something that the analysts hadnt seen . Mark i dont think we see anything analysts havent seen. It is this great uncertain period, as great as its been since 1945. I dont think we want to take a look back in a year and think there were steps we didnt take that we couldve done. We can revisit that during the year. But our view is those companies that come into this situation with the strongest Balance Sheet will come out of it in the strongest position. That is what we are determined to do for wpp. Alix do you feel like the steps that youve made, people working from home, for example, do you think there will be structural changes to the way you run the business when you come out of it rather than back to business as normal . Mark we seen 10 years of innovation squeezed into four weeks. I dont know about you, but my kids are at home. The way we work, the way we communicate, the way we have meetings, the way we shop, the way we educate has all transformed in ways we could never imagined for six weeks ago. Increaseeen a 60 fold in adoption in six weeks to something we have been trying to do for three years. Theres no doubt weve emerged in a world that is extremely different, and i think it calls for us to accelerate simplification, investment in technology, deleveraging the business. I think if we do the right thegs, clients do need services that wpp offers when we come out the other side, and we will come out the other side. What we do would be even more important to them then i think it is coming into it because Companies Need to communicate with people. Weve done research that says 84 of americans will judge companies on what they do during this crisis, so it is critical to thing about how they behave and how they communicate to customers in the right way. Alix thats a great point. I play hatchimals in between my shows. Have 5 of your net sales coming from china. Can you give me a sense of how that economy is opening up . Mark are people in china are coming back to work. Weve got about 75 to 80 of our people back working from the office. Seen pentup demanded some categories, but the recovery has been more gradual. Lesson usok at as a were in the world, those companies that maintain spending have come back more quickly and were ready. I think they are in a stronger position. We need to look through this and come through the other side. Alix i really appreciate talking to you, mark. Thank you very much for your candor. Mark read, wpp ceo, thank you so much. Goldman sachs looking to build a war chest of as much as 10 billion to be used to funny the compan could be used to fund the companys debt for cash. Meanwhile, Credit Suisse is turning to its richest clients to bolster its ability to lend. Billionaires, family offices, and others were offered 2 interest for at least a year as companies started to draw down credit lines to help with the outbreak. Coming up, we are going to look at the relationship between emergingmarket funding stress and ethics volatility in todays traders take. This is bloomberg. Alix some breaking news for you. U. K. Prime minister Boris Johnson is apparently responding to virus treatments, according to a u. K. Spokesman. Hes been in the icu for a few days now on oxygen. Time now for traders take. Damian sassower, Bloomberg Intelligence emergingmarket strategist, joins me know. Beatingwhen it comes to a dead horse, few are better at that than me. Spreads,t libor ois the g3 cross currency basis, and the em basis in dollar and euro, Morgan Stanley em funding stress index, a level above 20 would indicate greater stress. We are at 20. 5. 47 for me, it is the at 25. 47. For me, funding stress is really what is driving the weakness in em currencies, specifically those in high beta sector. Alix if you look at some indicators in june, it appears that the market is expecting more easing to come, more support by the fed. Does that play out in emerging markets . Do you see that . Damian oh yeah. Youve been talking to ira jersey. They are almost pricing in a very sharp recovery. If you look at just where spreads are today, forward expectations in his opinion, and mine as well, are somewhat mispriced. We expect spreads to widen from here. Liborois mean that is going to stay at these levels. It might come down. But certainly, theres a lot of room for both to compress in the nearterm. Alix damian, thanks a lot. Coming up, katie koch of Goldman Sachs with her calls. This is bloomberg. W . W . Uhiono alix the s p is able to eek out some kind of gain after closing and the red yesterday. You can see that playing out on the currency basis as well. Eurodollar right around the lows of the session. Eu cant come to some kind of deal, what does that mean . Youre seeing some selling also in the u. S. , but that might be due to supply. Find a baseying to here as we head to tomorrows opec meeting. The question for many Equity Investors is have we found the bottom . Do you play defense or offense . I am going to ask the woman who much knows everything, katie koch, Goldman Sachs global cohead of fundamental equity. You have to deliver performance and returns. What do you see . Are we at a bottom . That really is the question. That is. Thank for having me on. You sound well. It is absolutely a good question all of our clients are asking. While incremental news flow has been getting better, and volatility has reduced, we do think it is probably too early to call the all clear here. Two things quickly that we know, and one thing we definitely dont know. We know that, number one, investor positioning in equities is much lighter, which means there is less panic and forced selling ahead of us. Households were at their 92nd percentile of ownership at the peak of the market. Theyve now adjusted. Managed futures have gone from that long to net short. That is one of the reasons vol has reduced and we have less for selling ahead of us. They also look particularly attractive relative to bonds, as equity risk premiums have only exceeded 7 during that time. Those are the things we know. The thing that we definitely dont know and have to have a lot of humility around his we have no idea how long this will last. Andng all of that together concluding, our advice remains very consistent. We want them to stay healthy, most importantly. Stay calm, but also stay invested. That doesnt mean taking no action. On the contrary, investors should, number one, actively and equities toy rebalance strategic targets, and most passionately, this is an amazing time for active management. Use active managers that will help get your portfolio to the other side in better shape. Alix if you are talking to one of your clients, what do you advocate they are selling to than buy . Katie in the overall Asset Allocation scheme, we would either be telling them to, if they have the risk tolerance and the long time horizon, to use cash to go into equities, or parts of the fixed income market, to sell that to rebalance into equity. At the overall allocation level, that would be our advice. Within equities, to be highly selective because there are some parts of the market with a car challenged, but theres also tremendous opportunities out there as well. Alix lets talk about some of the opportunities. A be some of the structural opportunities that one saw six weeks ago are no longer there. Like the airlines. A few weeks ago, i was thinking they are trading as if they are never going to fly again. Now we have no idea what that actually is going to look like. How have you may be shifted your view . Katie we are quality oriented managers, so we always focus a lot on Balance Sheets. I would say the one area where we have a lot of heightened scrutiny is around Balance Sheets. Everything starts right now is Balance Sheets because strong Balance Sheets by you time. In dislocations like this, time is your friend. We are looking for a common nation of that Balance Sheet resilience, but also a secular growth driver that will remain intact or be enhanced by the current environment. I could give a couple of quick examples. Do you want me to do that . Alix 100 , go for it. Katie we continue to have a lot of conviction around the intersection of health care and technology. One example i would call out is a medical Device Company called zimmer. That company is down around 32 yeartodate, and we thick is being overly discounted due to delaying surgeries. They do robotics for hip and knee surgery. Can getan area that you much better recoveries if you use robots along with surgeons, and it is a very underpenetrated part of the market. This is been hurt because elective surgeries are being delayed, and in fact, and next three months, weve actually have zero surgeries in that space. But these are surgeries that people will need to have if they want to restore their mobility, which they will, and that should provide recovery for this stock. This is a graded sample of a company that has been near term dislocated, but has the Balance Sheet to survive. Really greata point. Shortterm dislocation, but longerterm structural confidence. Anything else specifically you are able to tell me . Katie i would also point to the millennial consumers. The millennial consumers is an area we like, and we think the pandemic is forcing more pill to adopt millennial behaviors. This would include tech enabled consumption and the desire for experience over things. That touches on travel, which i will come back to. Just to show you how powerful it is in this moment for clients to have a great digital strategy, i want to talk quickly about nike. Nike announced a couple weeks ago that despite shutting 5000 of their 7000 stores in china, sales were only down 4 . That is pretty remarkable. While they clearly have a few tough quarters ahead of them as major end markets fall into said itn, nikes ceo very well, that investments in digital were proving to be the foundation of nikes resilience. We think there is a lot of wisdom in that for other companies. A second quick example would be grocery. The interesting thing in grocery is that one of the growth demographics is gen x and baby boomers who are consuming more like millennials. We are seeing growth rates of 50 to 100 yearoveryear, depending on the country, so that is a great example of more people consuming like millennials. Travelfinal point around , weve had this longheld view that we liked the idea of experience over things. Theres a millennial preference for that. That part of the market is being hit hard for all of the obvious reasons, so we have really consolidated positions there, making sure we are focused on positions that can get to the other side. Chinese data is definitely telling us that is the part of the market that is going to recover last. But we do believe people will go outside again, they will have fun. One of the things i miss most during this crisis is being able to go out to dinner with my husband, or example. We do think those companies that survive should be positioned to take market share and do quite well. Alix i love that. We will have fun again. Very prescient. Relate to me how you look at the Balance Sheet versus things like buybacks and dividends. Volkswagen is looking at paring back its dividend. A lot of companies suspending buybacks, halting their dividend. Factor intot you how you value a company . Katie just to get people some context, we think share buybacks could be suspended by as much as 50 , or to give you the magnitude and dollars, about 371 billion. Dividends in the u. S. Could get cut as much as much is 25 . The market is pricing in a little bit more than that, but i will go with my partners estimate on that. I would say that this is not alarming to us because this is a rational move for companies to shore up Balance Sheets. The reason the market has some concern around this is that, number one, share buybacks have been the major source of demand that exceeded all other sources for u. S. Shares in the post financial crisis. Number two, theyve obviously been accretive to eps. What i would say is the fact that we have better balance of ownership and equity markets, Retail Investors already repositioning, we wont be as dependent on those share buybacks to stimulis markets, and pensions rebalancing could be another catalyst. But buying will be reduced. Other come atide, ease are going to have to do it through net income. Alix are we going to see more volatility and less of a floor without these buybacks, or is that a good thing for someone who is an active manager . Katie not having that buyer could introduce additional volatility to equity markets. It is not our base case that we go back up to the peaks above 80 because at the core, we have a better balance of ownership, which we talked about with retail. I do think theres better existing balance, and Pension Funds will be strategic buyers of equities. They need to rebalance. Our estimates are anywhere between 150 billion to 300 billion dollars of buying a public equity markets by u. S. Pensions for 2020. That should be another great source of demand. Alix thats definitely not nothing. Just to rounded out, earnings revisions have gotten completely wrecked for the First Quarter, Second Quarter, Third Quarter starting to come down as well. As we head into earnings season, what is your best metric . What are you seeing . Katie earnings are going to be very bad, so that is some bad headlines that we should expect ahead of us. I would say because we know they are going to be bad, we are not going to assess over every data point on the earnings front. What we are actually come to focus on is, first, pushing Management Teams for more clarity around Balance Sheets and what theyre doing to shore up those balance Balance Sheets. In this environment, it all comes back to the Balance Sheet. The second is lets look through the Second Quarter. We already know the First Quarter was bad, the Second Quarter is going to be challenging. Lets talk about longerterm strategic things you are doing as a Management Team not just to survive, but to position yourself to take market share and come out the other end stronger as the economy recovers. As are going to be more important things to focus on. Alix katie, stick with me. We will get perspective on emerging markets as well as others to own, coming up. This is bloomberg. Alix Goldman Sachs says the japanese economy is going to shrink about 25 this quarter. In china, economists and officials are debating whether they should slash their growth targets. Katie koch of Goldman Sachs Asset Management is still with me. Do you still like japan right now . Katie yes, and theres obviously a lot of tough macro news flow continuing to come in around japan, but if you are waiting for the best macro environment to like japan, you would be waiting a long time, so our view there is very idiosyncratic. It continues to be our Favorite International developed market. I will give you three quick reasons why. The first, they have the strongest Balance Sheets globally. Of companies are net cash positioned. If you look at the u. S. , that number is around 17 , and europe around 14 . Activist investors have for a long time pushed on japanese corporates to spend more of that cash. Im sure theres a lot of japanese ceos right now that are pointing to this as a very good thing for them to have in this dislocation. The second thing is that japanese valuations came into this crisis more attractive. Doubled. Has you and i have talked about this before, these big improvements in corporate governance. We do expect some of that to continue. Third, theres is great secular growth opportunities, limited at the country level, but they are really abundant at the company level. We like electronic vehicle plays, robotics. China has a lot of workers, but there is wage inflation, so they want more robots. And then exposure to the chinese consumer. I could give one Quick Company example to illustrate if that is helpful. Alix alix always alix always, katie. Katie we would point to a company that basically, they make robots smarter and enable s, humansept of cobot and robots working together. They do things as simple as reading barcodes or as complicated as a 3d vision system that can identify and select individual items in a large box. You can imagine how important that technology is for Companies Like amazon, where they have to do the picking of items in the packing. This is a very high margin. About 55 margins, and back to our first point around Balance Sheets, they have 10 of the margin cap in cash. Not grossall, challenged, but a lot of opportunities at the stock level. Alix can you say the same thing for emerging markets in general . Katie if we go to emerging markets, we do believe this should be part of clients strategic Asset Allocation. The reality is, most clients, particularly in the u. S. , are zero weight to underweight this part of the world. We think they should be moving towards this strategic allocation. With emerging markets down 20 , so certainly under performing u. S. Markets, this would be a reasonable time to take advantage of dislocations and build toward those weights. On the bad news front, theres countries like india that have yet to feel the full scale of this crisis. Other countries like china or south korea that have recovered, but they are at risk for reimportation of covid19. Obviously, commodity exporters, still a good chunk of the universe, will continue to suffer in a world of 25 royal. On the good of 25 oil. On the good news front, more than 50 of this equity universe is china, taiwan, and korea, and they have already flatten the curve. That is reflected in some resilience of those market returns. Second, the sovereign and bank Balance Sheets are better capitalized than in the past. They continue to improve in emerging markets, and they are largely positioned to act counter cyclically. Finally, we are looking at high single digit cyclically adjusted pes for emerging markets versus the u. S. At over 20. S, this comes down to opportunities at the company level. Just to end on three quick three themes, three quick marketplaceil, and Solutions Providers to smaller businesses needing to get into ecommerce. So shopify would be a great example of that. Alix and we dont have a ton of time, but i want to get your take on esg investing. That was a big theme heading into all of this. I wonder if it has outperformed or underperformed because of the crisis. Katie i love that youre asking this. The headline here is that we passionately believe that esg is not able market luxury, but a bear market necessity not a bull market luxury, but a bear market necessity. I will end quickly by saying we think the social aspect is going to be very defining for companies. Im reminded of a maya angelou quote, which is come up in but when someone shows you who you are, you need to believe them. Are they prioritizing the health and wellbeing of employees of of shortterm profit motives . We can learn a lot in this crisis, and the companies that balance that are going to emerge on the other side much stronger. I will also end by saying alternative energy has held up well in this dislocation, and we think it is notable in a world of 25 oil that they are doing that. We continue to believe that Solutions Providers for alternative energy is a great place to allocate capital over the longterm. Alix such a good and important point. Katie, thank you so much. Really great to talk to you. Katie koch of Goldman Sachs Asset Management. Stay safe. Coming up, vocal economies grind to a halt. New york Lieutenant Governor basically saying the message to the fed is we need money. We will break it down. This is bloomberg. Viviana this is bloomberg daybreak. The company that assembles most of apples iphones will start making ventilators in the u. S. Foxconn will work with medtronics on the design and develop and have the devices. No word whether the ventilators no word where the ventilators will be billed. Foxconn has a factory in wisconsin. Vws cfo saying in a video to staff that the situation is fluid. Other Big Companies such as boeing and hsbc have slashed or postpone their payouts. That is your Bloomberg Business flash. Alix thanks so much, viviana. Bloomberg radio just had the new york Lieutenant Governor on, saying that new york needs a lot of help because the budget deficit is going to get hurt so much. State and city tax collectors are taking that hit. A few months ago, we are having minuteslosi a few ago, we are having into pelosi and chuck schumer. Joining us for more is daniel moran. Can you walk us through the crunch cities and states are finding themselves in . Reporter states and cities around the country are starting up due to the shutdown to prevent the spread of the coronavirus. Collectates and cities from hotel taxes and fees, highway, bridge and tunnel polls. All of that money has willie been evaporated as people stay in their homes. Alix how much of that is because weve seen a lot of selling within the muni market as investors had to meet margin calls and delever, and how much of that is they just dont have the cash . Danielle it is a combination of both. The muni market has been incredibly volatile. Investors got very worried when the shutdowns started, and there was all this uncertainty about what was going to happen in the market, so they started pulling money from mutual funds, which caused a massive selloff in the market. That has really led to sort of a stall in the primary space. State and local governments who had already planned bond sales are now just sitting and waiting until the market stabilizes a little bit and investors become more comfortable with credit, and they are on sort of a daytoday status right now. Alix how do they sell the gap . Where else do they get the money . Danielle a lot of state and local governments are considering shortterm borrowing measures to greece this to bridge this gap. They have no choice but to issue shortterm debt because of the tax date change from april 15. They still have a operating costs within that interim period. Slip because people arent driving on the highways as much and not paying tolls, so Analysts Expect this trend in shortterm borrowing to pick up as governments come to grip with exacting much money theyre expected to lose. Alix danielle, thank a lot. This is bloomberg. Alix welcome to bloomberg daybreak. I am alix steel. A little bit of divergence between europe and the u. S. Europe is in the red but the u. S. Able to eke out again. I have to wonder if that is relationship of fiscal versus the equity market. Youre seeing Democrats Ask the house wants 500 billion in more stimulus, irrespective of the fact we will get more money for the paycheck Purchase Plan for employees. The eu cannot get it together to get any kind of coordinated reaction. The eu finance minister meeting ends with nothing happening. You see eurodollar around the lows of the session and you see and 30ming in wider basis points. In the u. S. We are up four or five basis points in the 10 year and we are also getting supply chains back online. Keep that in mind as we head into the open. Central banks are struggling to respond to the economic disruption from the coronavirus and the fed is expanding its Balance Sheet. It also made large purchases of treasuries. I spoke to Daniel Tarullo yesterday on how large he sees the fed Balance Sheet going. , but i dore guesswork not think anybody should be surprised to see a doubling of the fed Balance Sheet. Depending on how severe and how long the problems continue, maybe more than that. Joining me is nathan sheets, pgim fixed income chief strategist. It is always such a pleasure to chat with you. I did want to start with what Daniel Tarullo said. How big could the fed Balance Sheet get and will it be enough . The Federal Reserve is moving with unprecedented speed and figure to address these challenges. Fed hasonse the powell put into place is far more aggressive than what the bernanke fit did during the what the bernanke fed did during the Global Financial crisis. They have started with huge operations in the government Securities Market and are ramping up facilities to address stress in a range of other markets, from assetbacked securities into Corporate Bonds and commercial paper. They will be doing something in the munis market. This is a substantial response. Daniel tarullo is exactly right. The numbers for the fed Balance Sheet on the order of 10 trillion or more are completely reasonable and plausible at this stage. Your question as to whether it is enough, the fed is bringing its tools to bear, but i think the answer is it is helpful but we need more. We need fiscal policy as well. That response is also substantial. Policymakers are moving in a significant way, but the chasm in Economic Activity is deep. Alix to that point of is it enough we have to be able to model what this will do to gdp, and you give me estimates as to what your Second Quarter outlook looks like and what it means for the rest of the year and 2021 . The Second Quarter is likely to be the worst corner for the u. S. Economy and the Global Economy of the postworld war ii era. We will be seeing numbers that are the weakest for the last 70 years. , numbers like negative for dean to 30 like the to 30 annualized for Second Quarter. Im expecting Global Growth to be contracting at roughly a 10 pace. These are going to be truly terrible numbers. The big question is what about the second half of the year . That depends on how successful we are at wrestling this virus to a standstill and getting stabilization in the number of cases, and more importantly, what is the psychology of getting the economy back to work . What will it take to get people out of their homes, back into their offices, and to get consumers back into the stores and spending again . Of all the questions out there, what is the Second Quarter, and what is the psychology of this even once the number of cases have stabilized. Those are the biggest questions we have at this stage. 100 , and how quickly that does come back. We will talk about the broad issue of debt to gdp. I want to talk about your understanding of how much treasury should have to raise should they do it on the curve, what does that look like in the coming months . Ratio inhe debt to gdp the United States is likely to move up this year to probably somewhere in the 15 to 20 range. Deficits astronomical and will require a flood of treasury issuance. It is also issuing into the market at a time when there is a lot of risk aversion. The demand for those securities will be high. This is a lot of treasury issuance. It would not surprise me if there were hiccups and challenges in getting all of this debt placed. Curve,s of where on the we have this much debt to issue, i think you would issue all across the curve. From the long end of the curve to the short end, the treasury will be a big player in all of the sectors as it tries to finance these unprecedented deficits. Alix we saw that with the options this week. A we saw that with the uctions this week. I want to turn our focus to europe. It feels like we are seeing the stimulus factor in the u. S. Versus what they cannot do in your. What is your base case for what the economy cannot do in europe. What is your base case for what the economies and do on a joint basis . Are seeing european struggle to make decisions at a time of crisis. Apparatussionmaking is imperfect. That said, what we have also seen with them over a number of while,s that after a after they negotiate, finally they are able to reach some kind of an agreement. I would expect over the next week or 10 days European Finance ministers will be able to reach agreements. I do not think we will see corona bonds, but we will see some liberalization of the terms under which esm programs are provided. Backstop be a helpful for some of the economies that are coming under pressure, and a nice complement to the powerful program the ecb has put forward. Judgehow are you going to which economies will come out better than others from this crisis . Is a very important question. Effectivenessthe of the measures that have been put in place to eradicate the virus. Plansl also depend on the they implement. We will see Different Countries come back to work at different times with different speeds. I think that we will be able to ,earn from that experience hopefully china will give us useful perspective as well. This issue of who will be able to do it most effectively, i think that is an open question at this stage. A really insightful answer, thanks so much. Nathan sheets of pgim will be sticking with me. I want to give you an update on what is making headlines outside the business world. Here is Viviana Hurtado. Viviana Boris Johnson is in stable condition and responding to treatment for coronavirus. That is the word from his spokesperson. He is still in intensive care. Foreign secretary dominic raab is stepping in for mr. Johnson. European finance ministers ron an emergency teleconference that lasted more than 16 hours. They cannot reconcile their of shouldg visions the eu issue joint debt to help economies recover. The white house is developing plans to get the u. S. Economy back in action. Bloomberg has learned this involves testing far more americans for the coronavirus then has been possible up until now. The efforts started in places that have not that have been hit that have not been hit heavily by the virus. Cities such as new orleans and detroit and new york would remain shuttered. 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 Viviana Hurtado. This is bloomberg. Alix thanks so much, viviana. Still on the pandemic impact, commodities have been falling. Not all Raw Materials are marching in lockstep. Your prices of wheat and rice are up. They account for about one third of the world calories. The price of rice is at a six year high. Food inflation is something you cannot mess with and is terribly scary. On the flipside you have Water Futures in chicago falling to the lowest level in almost six years. Hittingtting cheese a low. Watch emerging markets. That could have repercussions. 2020. Debt set to rise in we break down what that means. Nathan sheets, next. This is bloomberg. Viviana this is bloomberg daybreak. Im Viviana Hurtado and youre looking at the principal room. Coming up on balance of power, former u. S. Treasury secretary jack lew. I am Viviana Hurtado with your Bloomberg Business flash. Loan applications to buy American Homes fell to their lowest level since 2018. The purchase index slumping more than 12 after 26 drop the week before. Stayathome orders cap shoppers sidelined despite 30 year fixed Rate Mortgage being down from last year a full percentage point. Up to a 30 temporary pay cut for tesla employees. The coronavirus outbreak forcing the electric car company to shut down some operations. Tesla employees who have been furloughed will not get paid at all but they do get a chance to get their health care benefits. 1 billion of his stake in square. This is jack dorseys pledge to fight the cobit outbreak. It is also the biggest the covid19 outbreak. Says it is 20 of his wealth. It will take several quarters or years to complete the transfer. Im Viviana Hurtado and that is your Bloomberg Business flash. Alix the longerterm implications of what is happening with the coronavirus. According to the International Institute of finance, they came out with a report that says the global debt burden is about to rise dramatically. Just last month, global debt issuance rose to a record two point one trillion dollars. Nathan sheets of pgim is still with me. A broad question. We will have so much debt in relation to growth. Are we going to have to forgive it, do we never pay it back . Nathan we are seeing a bold experiment with modern monetary theory, i believe. Hown where the virus is and it is impacting the global fiscal has had little choice other than to substantially ramp up the amount of stimulus. Other the circumstances, those actions are absolutely appropriate great as you say as , whatk out a few years are these debt ratios going to look like . I am particularly worried about , but to ther debt extent the private sector is impacted, those debt levels will rise as well. What are the implications of that . We are looking at a riskier Global Economy as a result. One withoking at investors more worried about solvency and more riskaverse. A are likely to be looking at Global Economy with a lot of demand for safe assets. Mean we canhat actually deal with it in terms of the developed nations. We will have to issue more. We talked about the treasuries. The implications is yields will spike higher because of it. It feels like that will not be the case. We will need treasuries because the world can be more risky. Exactly. My expectation is that the will perform with a Slower Growth rate because of the extensive debt. We will not see huge crises associated with it in the advanced economy. Obviously there are risks. How much debt is too much that causes investors to choke instead of fleeing to treasuries or jgbs, they flee to cash. Economies are likely to be able to absorb that. I am very worried about what this crisis means for emerging markets. Emerging markets are absolutely getting slammed by a huge capital outflow, by falling global demand. For many of them, by the oil shock. This will have very adverse implications for their fiscal and will leave these countries and this asset class of em debt and equities in a very vulnerable position on the others. It is imperative for the National Monetary fund and the g20, and the fed as well, to use tools to support emerging in this vulnerable period. Alix you took me where i wanted to go. We see many countries already go to the imf. They have not been hit that hard. That comes with a lot of strength and you have to repay that debt. We will will we have to forgive all of the emergingmarket debt . Of proposals kinds are already being put forward for some of the debt held by the very poorest countries. If we do not manage this crisis successfully, and i think part of that is having a good response for the emerging markets, we are all interconnected. What happens in emerging markets is going to blow back into advanced economies. I think if we do not move aggressively to support the bergingmarket, it will longer and deeper at their capacity to repay will be reduced. In that kind of environment, we may be looking at a need for these economies to seriously consider whether they can meet their payments. I am hopeful we do not get there, but i think that is a risk on the other side. If we do not move aggressively now. Alix such a good point. I want to bring up something i mentioned earlier. Food inflation is the farthest thing from our minds, but you hear about thailand and rice and russia and wheat. That reminds me of the arab spring in 2011, which had huge ramifications for emerging markets. Do you think we will be in that situation at all at some point . Is the food inflation single variable that best captures the pain of the average citizen and some of these lessdeveloped countries. As we see these prices surge, it has direct humanitarian effects. I think that can feed through into intensified populist pressures in those countries and other kinds of instabilities and disruptions. Highlights ahat firstorder global risk. More broadly, our capacity to be able to grow food seems quite robust. I think this ongoing situation with the virus is calling into question a lot of presumptions we had before about our capacity to distribute and transport and get it into the store and get it into homes for people to eat. Not if the virus is not wrestled to the ground in the next few months and it drags on for a year or longer, i think we will see challenges that now seem remote. Nathan, i really enjoy talking to you, you always make me think outside the box. Hopefully the next micu will be in person and in studio. Nathan sheets of pgim, stay healthy. Thank you very much. Coming up, is able market or just a bounce . We will try to break down the price action in technically speaking. This is bloomberg. Alix time for technically speaking. Mike mcglone with Bloomberg Intelligence joints me now. Youre looking at the price action. What you see about tech . Mike the bottom line for or abody is is able market bail mark is it able is it a bear market . R it is probably a bear market, and if it is not it has to stay above this line in the sand. This has been a key barometer for the market for quite a while. For anything but a bear market it has is disdain it it has to sustain above where it is right now. The market is doing a head fake and showing good resistance. Alix and if you look at the gold and s p ratio you would have found something similar. Mike similar. The next chart is something to look at the trend in the market. Gold hasek trend in turned down. Average thek average is trending otherwise. A global recession is good reason to keep gold going up and the stock market going down. Alix i appreciate that. Mike mcglone, Bloomberg Intelligence commodity strategist. That does it for me. Coming up on the open with jonathan ferro, Lori Calvasina will be joining him. Happy wednesday. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Jonathan from new york city for our audience worldwide. The countdown to the open starts right now. Equity futures positive, up 29 points on the s p 500, positive 1. 08 . Higher,es lower, yields the curve steeper through much of the session. In foreignexchange, the dollar showing a little bit of Dollar Strength through much of this wednesday morning. From new york city, lets begin with the top story. Stuck between hope and reality. Hope things will get better. Signs the mitigation effort is showing signs of success. The brutal reality is we have signs of how this economy will be open and when it will be open. The reality again is that the , the defaults, the earnings, that bad news is only getting started. Looking ahead to next week, and thinking about reopening this economy at