Lots of earnings coming out. Ups is the latest. They are withdrawing their 2020 forecast for revenue, as well as eps, as we have seen from Many Companies trying to estimate the impact. Theirre withdrawing forecast. They are suspending the Share Buyback for 2020. We want to get you all of todays top moving news from new york and our london team. We want to begin with the volatility in the u. S. Oil market. Wti at one point falling below 11 a barrel. Bps ceo, after the Company Released firstquarter results which showed a 2 3 drop in profit. We have a situation where we have excess supply, and storage is filling up. Cushing is 70 full. People think we will reach completely full sometime in may. We are very fortunate to have a large trading organization, and they have been able to find a physical home for our crude, but not everyone is that fortunate. What is happening here is a very simple case of supply and demand, and the market really isnt going to find some stability until that comes back into balance. Alix bloombergs Annmarie Hordern has more. Walk us through what is happening in the oil market. The bp ceo really speaking to what we see in the market. What bp was doing with the results today is really outlining the plan to be able to deal with this slump in prices. Are barring more, cutting spending, and driving down costs. One thing that did remain intact for bp is the dividend, which you and i both know is considered sacrosanct for the industry. Bernard looney did say it would be a quarter by quarter decision. Analysts say serious questions still remain about its affordability. Last week we heard from equal the firstm equinor, ones to slash the dividend. For now, it is remaining intact for bp. One thing is unclear, whether or not this will work. Bp is pegging the oil price next year to 35 for brent. Where are we trading the right now . 20, clearly well below that. I want to talk about what we are seeing in terms of volatility in the market. This week, brent will be in focus. That trunk that contract expires thursday, but uti is where all of the volatility and action is. Etf and indices are now fleeing the front month june delivery contract. Yesterday is the u. S. Oil fund. Today it was the s p commodity index. They said this was due to concerns and risks that prices could go negative. We will continue to see strain on the market as we have consumption collapsing at the same time storage is near running out. One thing tomorrow to look forward to is the u. S. Stockpile. Really a lot to look out for this week for oil. Alix great round up. Thank you very much. Turning to more earnings, european banks also out with results. Hsbc, ubs all making Loan Loss Provisions as the pandemic has roiled economies. The hsbc ceo doesnt see those challenges easing up soon. We still think europe and the u. S. Is going to go through a very difficult secondquarter, and i think it will depend very recoveryhe degree of that we see into the third and Fourth Quarter later this year. Alix bloombergs dani burger has more. As you say, hsbc reported today. We also heard from banco santander. It is the same thing we keep hitting over and over with banks this quarter, possible defaults and bad loans. For both hsbc and santander, they have so far the biggest amount they are setting aside for loans. ,sbc setting aside 3 billion specifically for losses related to the virus. One of the numbers to throw out is 11 billion. That is how much hsbc says bad loan charges might rack up. That is by far the highest of the financial crisis. It is a little different from some of the u. K. Banks in that it is very asia focused. For example, they had a really big loss this quarter because one of their clients in singapore, an oil trader, had a loan of 600 million that failed. But for hsbc, that also means it is going to benefit from the recovery in china and hong kong taking place sooner than the rest of the globe. One of the things they said on the call, which i think is absolutely telling of the times, is they are trying to calculate the losses they see from bad debt. They say it is part science, part art. Thanks are in the dark terms of what their forecasts should be. Not to mention, they are also getting significant government support, which also complicates the task of forecasting. A different beat completely was ubs. It gained as 5 in todays session so far. Really confident it can dodge what is likely to be a waterfall of defaults in the market. They say they can avoid some of the pitfalls of leverage lending that other banks have done. It has only put aside 268 million for bad loans. Again, that compares to 3 billion from hsbc. Strategists like their results. All the otherlike banks, another key part of why the forecast does not look rosy is falling prices is going to hurt any income to get from their Asset Management develop data Asset Management division. We get barclays tomorrow and standard chartered, followed by deutsche bank. It will be interesting to hear the Details Behind that beat. Alix lets recap more u. S. Earnings as they come out before the bell. Ups higher. The company beat revenue estimates for the quarter, withdrawing this 22 any forecasts for revenue, as well as earnings, and suspending Share Buybacks for the year. Harley davidson rallying, but saying they are looking at motorcycle sales for retail in the u. S. Down by over 14 in the First Quarter. Caterpillar shares also touring a negative also turning negative. They are shelving their 2020 outlook, saying you could see all revenue pieces could reach doubledigit decline in 2020, so a pretty ugly forecast. Higher. S are growing the company is cutting capex alix time now for bloomberg first take. Joining me from our inhouse team of wall street veterans and insiders, michael mckee, Bloomberg International economics and policy correspondent, and damian sassower, Bloomberg Intelligence chief emerging market credit strategist. Imian, i do want to ask, when read the headlines, oil rolling ,ut of bed, 11 a barrel earnings continue to come in suspending dividends, halting buybacks, and yet stocks are rallying. Is a market person, how do you understand that . [laughter] alix. thats a mouthful, i think the first order of business is to look at volatility. What we are seeing is normalization across most Asset Classes. I think a lot of the short strategies have been flushed out of the market and we will probably see them regained popularity in the near term. For me, it is identifying where vol has risen the most and that what points you can take advantage of that. Side, and this kind of speaks to commodities and where you live and breathe, you look at the steep vol surface in gold, that is something that is unusual. As markets normalize, i probably can see markets see that steep vol curve flattening in the nearterm. I think that is one area of focus for traders this morning. Alix i wonder how much of that will then depend on what Christine Lagarde and jay powell say this week. Can they basically keep the volatility curve flat . Michael i think they can. They probably wont say a whole lot. That may be enough for traders at this point because the real focus is on the virus curve, and the fact that some countries in europe in particular are starting to talk about opening. We are supposed to get plans from spain and perhaps france today. That will keep people feeling a little bit better about the outlook. The fed may be giving us more guidance about how long it intends to keep Interest Rates low, although it may not be in their best interest to be too specific yet. The ecb could perhaps increase Lending Program, but Central Banks have done so much so far that it doesnt appear they need to do a whole lot more to keep the market satisfied for right now, until we have a clearer picture of what is happening and where we are going. Alix before we leave off oil for a second, to your world, this is obviously going to be very difficult for some of the gulf states. You have a couple of options if you are a huge sovereign wealth fund. You are going to have to sell reserves or sell out of stuff that you own. Yet, they still have been able to sell debt. Damian the u. S. Dollar appreciation move in march triggered a wave of reserve selling from large Central Banks across em. China and brazil alone each sold over 100 billion of u. S. Dollar assets in march alone. That could be a function of reserve rebalancing, but more likely due to fx intervention. We are going to see more extraordinary measures by emerging market Central Banks to keep their fx in line. We have talked about qelike measures, but we we but what we are also seeing right now is mmt, modern monetary theory. We saw purchases in the market effectively monetizing debt last week. Qe is one thing. Buying bonds in the secondary market. But literally inflating your rate by per does baiting in the primary market is an area for emergingmarket Central Banks that could be devastating if things go wrong and inflation picks up. Alix will it . What would have to happen for that to go wrong . Well, i think it is safe to say that u. S. Inflation has a stronger growth sensitivity than the eu. If growth were to pick up, you would probably see a sharper rebound in cpi swaps. For me, the market right now is pricing inflation to be very low , offering the opportunity for a lot of Central Banks to put his fate in the stimulus we are seeing. I think that is not going to change in the near term, but who knows when inflation recovers . About the weaker dollar, how significant that my did not be into all of the countries trying to support their economies. Damian at some point, you would have to think that the weakness we have seen across these emergingmarket companies, eventually ceos say 50 destruction, 50 at some point you have to look at the currency and say, you know what . Maybe it does make sense to take advantage of those cheap labor costs, those cheap input costs that come handinhand with a declining currency in a place like brazil. At some point you are going to see corporate take advantage of some of these moves in fx. Alix mike, what do you think . Ishael i think damian right. The only question is how bad, how quickly does the virus get a foothold in latin america as the weather cools down. There are predictions that we will see a real outbreak, and of course, and brazil, where bolsonaro has pretty much denied the existence of the disease, that could change some minds very quickly. Again, so much depends on the progress of the virus at this point. One thing you are hearing over the last couple of days is not just talk about opening up again, but what do we do if and when it comes back in the fall. Now we are beginning to develop a consensus that it is likely to do that, and until we have some sort of treatment or vaccine, and a vaccine is still a long way away, there is this possibility you are going to get and seeo the markets things start to improve, and then all of going to have to pull back again. Maybe not shut all the way down, but pullback some. I look at contango getting steeper in oil markets. People are really thinking something is going to turn around quickly, and i dont know if that is necessarily going to be true. Alix i love it, contango at 7 17. You know the way to my heart. We are going to leave it there. See. To you both a reminder, any charts we use throughout the show, go to gtv on your terminal to gtv on your terminal 2 browse the features and check them out. Coming up, we were just talking about an oil plunge. We will talk about what it means for companies next with Christyan Malek, jp morgan head of em ea oil and gas research. This is bloomberg. Viviana you are watching bloomberg daybreak. Ubs expressing both confidence and caution. The swiss bank says it can survive an increase in bad loans, but warns the coronavirus outbreak will put pressure on its Wealth Management business. Ubs says falling asset prices will erode fee incomes. Hsbc took its biggest charge for bad debt in almost nine years. Europes largest lenders saying in the First Quarter, affected credit losses soaring to 3 billion. For the year, that could lies to 11 billion. Ceo noel quinn had a plan to increase profits. The coronavirus outbreak has derailed it. Bp building up its financial reserves to write out the coronavirus outbreak. The British Energy company taking on a 10 billion credit facility. It also sold 7 billion of bonds. In the first three months of the year, bps profit plunging. Bloomberg asked Ceo Bernard Looney where the company has to be to breakeven. Are breakeven in 2019 was around 56, so going to 35 by next year i think is the right thing to do. We will drive it lower if we can. The Economic Uncertainty here is immense on how this recovery is going to play out over the coming months, but we are very focused on the basics of the business. Viviana as you know, bp already announced this year it was cutting costs by 25 . That is your Bloomberg Business flash. Alix thanks so much. We are joined now by christyan emea, jp morgan head of oil and gas research. What did you make of the quarter , as well as questions now around the sustainability of the dividend . Christyan i think the most surprising part was the breakeven. Theas a solid quarter, but cash breakeven into 2021 speaks to that resilience in terms of being able to manage over oil, even if it does get extended to next year. So what about the gearing . That is probably the negative, that we have seen a larger increase in the gearing. Having said that, i think triangulating cash breakeven one side, gearing on the other suggests to us that although Dividend Payments are still a large part of their cash flow, they have been able to buy time in the context of what the demand backdrop is. Alix buying time really seems to be key. Each company is going to have to recalibrate their Free Cash Flow and dividend based on how long this goes on for. Walk me through your production of where the bottom is in oil, when we start to have some kind of recovery, and what the supply outlook looks like in nine to 12 months. Christyan you are absolutely right. Youve got to think about oil as the backdrop in the next steps for majors in terms of decisionmaking. There are two major milestones in the next few months. One is demand in terms of inflection. Second is negative growth year on year and month on month. The third order of that flowing, because once it slows, we can then start to see what demand looks like. Going to cuti is much more. Before the opec deal, we were very skeptical. We think theyre going to be serious this time with coming through with a cut, potentially down to 6 Million Barrels. The key take away from the last is that if saudi were to go to six, russia would do the same. But notwithstanding the line of sight on demand. So those are the things that together serves a very important purpose for the boards of these majors to decide what we do with our capital frame now that weve got a bit more visibility. Though, the meanwhile, youre still having indices, etfs in the u. S. Changing how they are allocating future contracts. How do you think about that in relation to the medium to longer term picture of the oil market . Christyan the indices changing contracts, to some extent, you got oil going to buyers who dont need the oil because theres no throughput, and that is very unusual, but also specific to this period when no one is driving, no one is doing frankly anything. I do not think that is sustainable. Thesesee demand, so conditions are probably transitory rather than permanent. Weve got to see where the dust settles around demand before we can make conclusions around how the mediumterm, which is why i think coming out of this locked down looking at feet,demand finds its that new equilibrium i think will set the course for the oil market of the next 12 to 18 months. Alix always great to get your perspective. Thank you so much, Christyan Malek of jp morgan. Bp shares now flat of the day. Earnings, shel l and exxon come on thursday. Coming up, more with megan greene, harvard senior fellow. This is bloomberg. Alix welcome to bloomberg daybreak. Lets get your check on the markets. We have a slew of earnings. The majority of them withdrawing their 2020 guidance with no visibility into what the virus means for their business. Yet, you still have a rally pushing higher on the s p. Same thing over in europe as well. Taking a look at big oil earnings. Bp is pretty much flat on the day. For europe indices is higher. Eurodollar moving higher. Not a lot of move in the 10 year. A lot of supply came online yesterday, and it was relatively well digested. We have more coming today on the seven year timeframe. Take a look at volatility. That is moderating as well, even though oil is now 11 a barrel. You can blame it on contract roles and decision by indices, but nonetheless a significant point highlighting the lack of demand picture in the economy. Was an the u. S. , there relaunch of a Small BusinessAdministration Loan program yesterday that got off to a rocky start again. The administration said it faced unprecedented demand. Do they need to expand it for a third time . Megan greene, Harvard KennedySchool Senior fellow, joins me now. It all boils down to the supply and demand for money for Small Businesses. How big does that need to get . Megan i think they definitely need to expand this again. It probably needs to be at least another 600 billion, but it is not even just the size of it. It is also the question of getting the loans out the door. If your systems crashed yesterday, it is a shame we didnt have this in ad