Signaling that it may need to do more to the boe, signaling that it may need to do more to combat lower growth. Bloombergs Francine Lacqua spoke to andrew bailey, the bank of england governor, following that policy decision. Gov. Bailey we are keeping options open on that. Im very clear on that. Other members of the committee thought it was a sensible decision to take in our next meeting, when we may have more information. Francine are we any closer to negative rates, or is that not an option right now . Gov. Bailey we are not ruling anything out because it would be unwise of us to rule anything out in terms of responses. I dont want to say we are nearer to negative rates, but we are not ruling anything out. Francine under what circumstances will we get negative rates . Gov. Bailey its a complicated question. You have to view it in the context of the times, also in the context of the financial structure we have, and what are the consequences of it. I just want to caution, we are nowhere near that. Francine you assume a recovery in 2021. Why are you more optimistic than the ecb . Gov. Bailey we are all using scenarios. I want to be quite clear that all of us are finding theres a much bigger gap between the judgments and decisions we are having to take and scenarios we is using, which is why it the first time in any Inflation Report we havent published a forecast as such. These are very much scenarios to guide us. I was looking at the scenarios the ecb published earlier this our worldyou can cite economy scenario that underpins our forecast. In theetty much sit middle ground of what the ecb published. Francine what does it do to your thinking if you have a slowdown that is not as severe this year, but then a much worse number in 2021 . If theres a second lockdown, for example. Gov. Bailey we obviously have to reevaluate. Theres a new scenario we would use in that case. We have an assumption that will voluntarily be quite cautious about the way they reengage, so a degree of caution pushes the path of our recovery out into next year. Obviously, if the whole disease he evolves in a different way, we will have to come back to that. Francine is there still a risk that this becomes a financial crisis . Gov. Bailey if you go back into the middle and second half of march, we were looking at severely difficult conditions. Very disorderly markets. We end the other Central Banks had to step in. We all stepped in and very big ways. A lot of firepower has been brought to bear. And it has had an effect. But i would say this. We are still in very high alert because, i will give you the example of what happened in the oil price the other day, the west texas price. I got home to find the oil prices negative. You just think, how can this be . Interestingly, of course, you have talked a lot about this, you can say all sorts of things about how this is idiosyncratic, but i would , we caution that history can always tell stories, but to dismiss this as just an aiosyncrasy, there is always canary in the coal mine that says actually, there are wider fragilitys here. That is certainly our view. It is not because we have a particularly different story about the oil story. It is because it points to the fact that we still got fragile markets. Alix that was bloombergs Francine Lacqua speaking to bank of england governor andrew bailey. Going me now from london is stephanie flanders, bloomberg Senior Executive editor for economics. What was your biggest take away from what the boe did today . Stephanie we werent necessarily expecting policy to change, but there was recommendation from the bank of england that they may need to do more. That was one key message, quite a clear signal that if the Economic Data come in as we are expecting, that they could well announce more quantitative the meeting on june 18. I think the other one you have to take away from it is that he that they is recognize Monetary Policy is not the biggest game in town right now. It is fiscal policy doing the heavy lifting right now, and they have to be thinking about the future trajectory for the economy. My question is, what is going to change between now and june that will allow them to expand their Asset Program their asset purchase way thatn a meaningful they didnt this time . Stephanie you can tell from the statement that there were more members who had perhaps been considering supporting more quantitative easing now. We asked the same question to the governor, and his argument was we already have quite a lot to do even just to emblem of the purchases weve announced to implement the purchases weve announced. That would take them through to early july. They want to continue the same pace of purchases. But i think they also wanted to underscore that there is uncertainty, and they want to be able to have that kind of announcement power if it starts to look like the scenario is going to be worse than we currently expect. Alix and you saw what happened to gilts. Part of the rhetoric is we have so much issuance coming down now in the u. K. That that is why you are getting that kind of pressure and the upward move on yields. Can you talk me through the dynamic of issuance, and how much the boe is going to have to buy to absorb all of that . Stephanie i think every central bank is keen to avoid making the linkage youve just made. We have debt issuance pushing out more gilts than could possibly imagine, and we had the governor saying that perhaps people could be doing that from home. That system has stood up pretty well, even with the enormous scale of purchases. Back, wewhen we look can say a lot of those were paid for by the Central Banks in the short term. They dont want to be making that link explicit or talking about direct financing of those debts. So it is helpful for them to have these things talked about in a different way, and to be honest, they are supposed to be two different policies. Debt is goingat into the market before. What is extreme areas we have ,een the demand by and large for gilts and government bonds, generally has held up very justgly because it is not one country in this bind. It is everybody. So where are investors going to go . Alix totally fair point. Looks like a duck, like a duck looks like a duck, quacks like a duck. Stephanie flanders, thank you. Earnings coming out this morning teva this morning. Teva reaffirmed its outlook. Via also topping estimates on the top and bottom line viacom also topping estimates on the top and bottom line. Bristolmyers up about 3 . They reaffirmed their fullyear earnings forecast. It does expect the peak impact of covid19 to be in the Second Quarter. It is a continuing story of the Health Care Sector and drugmakers holding up pretty well. We will have an exclusive interview with rob lynch, papa johns ceo. For your Market Analysis in todays for stake todays first take. This is bloomberg. Alix time now for bloomberg first take. Joining from our inhouse team of altered veterans and insiders is Michael Mckee and damian sassower. Mike, just want to start with you. We got a lot of centralbank action in the last 12 hours, with boe, the surprise cut in norway, huge cut in brazil. What was your take away so far . Michael Central Banks are on the job, and they are reacting to numbers that are as bad or worse than the anticipated. Norway certainly a surprise. They said they didnt think zero, and certainly negative rates, work. But the contraction in the norwegian economy is going to be so great, they have to do something. They are hit by the oil shock as well as the that was a surprise because they were leaning so strongly against it. Brazil was kind of expected, except the government pushing back on the whole idea of the virus, so theres a little bit of Political Tension going on there as well. Alix and you flagged this headline for us, the bbc saying that Boris Johnson going to announce a route out of lockdown at 7 00 p. M. Sunday. I am really struck by the fact that we are rallying so much, and i cant quite tell why. Do you have a better read on it than me . Damian rallying in what asset class . That is the real question. We had some fairly optimistic data out of china overnight with regards to the trade surplus and exports, but you can draw that down because it was really delayed shipments which boosted the shortfall. Commodity prices obviously hit on imports, but beneath the surface, the real data point for me was reserves. Reserves rose in china. They havent been cutting as aggressively as some other Central Banks you are referring to, but rest assured, as china struggles to reopen its economy to levels we have seen previously, it may very well need to tap its reserves to defend its currency. Alix theres also some nuances in the export data as well. I feel like it was more about cleaning out old orders and getting new orders. It also sets us up for how we are going to look when we reopen. Michael a certain amount of the export orders in china were ppe,he stuff we needed to buy manufacturing goods that are laborintensive. That helps boost the manufacturing side of china. But the big collapse in import demand in china, now 14 , suggests theres no real domestic demand there yet. The reporting we have seen from wuhan is it is not really open. People can walk around, and they do, but nobody is really shopping and going to restaurants. That is going to be the real question everywhere. How quickly do people go back to what they were doing before, which is all about Consumer Confidence in the health system. That is all about testing and making sure we have some sort of at least treatment, if not a vaccine. It will be very hard for anybody to give you an accurate picture. All of these numbers we are getting from the Central Banks in terms of their forecast are a little better than guesses, but not a whole ledbetter. Alix which leads me not a whole lot better. Alix alix which leads me to the rally. What are we actually trading on right now, if we are not trading on the numbers or the data because we know it is going to be bad . Damian. Go ahead, [laughter] damian it is really hard to say what has got equities attention. I would say it is probably earnings. Arend large, equity markets a beast unto themselves. If you look at options markets, particularly in rates and extend come, youve got option rates targeting 75 basis points. Based in some of these poor numbers in germany overnight and in the u. S. , youve got people calling for negative rates here. Youve got eurodollar options trades that are basically targeting some of those levels that we never thought we would ever see before. The zero lower bound is still in place. The fed is going to do every thing it can to defend it. The markets have a tendency to pull on some of these threads until they snap. Alix mike, what were you going to say . Michael i was going to say it is a trade of hope over dont have an experience or accurate forecasts. But global wall street seems to be looking at what is going on in picking we are going to ca v and thinking we are going to see a v still, that we will get back to normal. But if we perhaps have a second round of this, we may realize we skis. T over our pe at this point, it is hard to say how much you are going to be able to make and how much profit there is going to be. Theres a lot that goes into it. We talked about this before. We dont know what Energy Prices are going to be, and that input into corporate expenses. We dont know what employee expenses are going to be because we dont know how any people are going to get hired back. We dont know what the cost of mitigating your office or factory is going to be. Certainly when you get into the service sector, youre going to be able to serve a lot fewer customers at once, so can you make the kind of money that you need . Owns arity chef who number of restaurants in new york says what is going to happen is when we reopen come all of the restaurants are going to reopen, and then find nobody comes, and then we have a second wave of businesses going out of business, declaring bankruptcy, and nobodys expecting that at this point. That is going to be a real shock to the system. Alix it is such a good point. The second round of layoffs. Just because you furlough them now doesnt mean you will not fire them later. Our emerging markets taking a different kind of you than if you were developing in developed markets assets . Damian definitely. Obviously we have seen some strength off of the back of some spread tightening in u. S. Investmentgrade and highyield bonds, but the relentless march of Foreign Investors out of emerging markets on a local mean, record bond outflows in countries like indonesia, mexico, and south africa. Many of these countries have never witnessed outflows of this magnitude before. I think its worst year was an inflow of 2. 7 billion from four years from foreigners and its 10 year history. You can understand why a lot of these are resorting to unconventional measures such as quantitative easing in order to stimulate liquidity in their markets, but the rate cuts are coming. We saw brazil yesterday. We may even see peru tomorrow. At the end of the day, they all fall back on what they know and what has worked in the past, and that is just straight rate cuts. Yesterday,azil stimulus and rate cut at the same time. I dont want to let you go without asking about turkey. Brazil has fx reserves. They have other options. Turkey is literally running out. What do you do . Damian capital controls, come on. In turkey, what youre going to see is tighter capital controls. They are going to stop speculation on shorting the lira. They are going to just tighten the range as best they can, if they can. But you are absolutely right, the liras plumbing to new lows. If you look at peers like brazil and mexico, mexico down 17 in march, its worst single month on record since the 1994 peso crisis, so you can expect more weakness ahead for turkey for sure. Alix alix mike, initial jobless claims. How bad . Michael the forecast is for 3 million. It is hard to really, i dont want to say care, but to put it in perspective, weve gone over 30 million so far, and this is probably going to be a little catchup for people who couldnt get through the system before. But expect a big number for may be another week or two, and then it sort of comes down. But we are so far above where we were, it is hard to even comprehend. Folks are going to turn to the jobs numbers tomorrow, which are going to be insane. At this point, as of said before, may is all about finding out how bad april was. Alix it is going to be so brutal. Guys, really appreciate it. Mikes interview later today with mary daly, San Francisco fed president , at 11 a clock a. M. Here in new york. A reminder, any charts we use throughout the two hours, go to gtv on your terminal. Browse the features, check it out. Gtv. This is bloomberg. Viviana ritika this is bloomberg daybreak. The Worlds Largest beer makers has the Second Quarter will be worse than the first. Ab inbev says because of bars and restaurants closed due to the coronavirus outbreak, shipments were down 9. 3 . Is cashing peloton in on the nationwide shutdown. Quarterly revenue soared. Peloton also raised its forecast. The coronavirus outbreak has led thousands to buy the companys stationary bike and work out at home. Received 371 million, including money from spain. Iag has nearly 1. 5 billion dollars in statesupported funding. First quarter revenue was down more than 14 from a year ago. That is your Bloomberg Business flash. Alix thanks so much. Heres one other story we are watching today, and that is oil. Oil is up because saudi arabia raised prices for refiners. Brent crude went above 31 a barrel. It does signal potentially stronger demand. Earlier this year, the saudis were dealing with a price war and offering big discounts. Now they and opecplus partners are promising a Production Cut to rebalance a glutted market. I dont know, i am still skeptical they are going to control the export market. We will see. Coming up, the pound strengthening after the boes unwavering pledge to support the economy. We will speak with jordan rochester, nomura g10 fx strategist come on what it takes strategist, on what it takes. This is bloomberg. Alix welcome to bloomberg daybreak. Im alix steel. S p futures continued to grind higher, right around the highs of the session. Similar story in europe as well. Most equities up by 1 . In the bond market, the bear steepener was they were yesterday as we got a lot of issuance coming out from the treasury department, knowing they are going to push the tenor out along the back end of the curve. We will see how long that actually stays. Youre seeing a little bit of selling in the gilt market as well, yields pushing higher. Part of that story is issuance from the u. K. Government. In the currency environment, the norwegian krone is most definitely the outperformer in the g10 space. They cut rates, but say they are not going below zero. Lets stick with the bank of england and the policy moves today. We spoke to governor andrew the bank hasaid total and unwavering commitment to act. Francine lacqua spoke to him earlier today. Gov. Bailey weve made a very strong commitment. Two of my colleagues on the committee voted to do more qe now. Other members thought it was an acceptable decision to take in our next meeting. We are not ruling anything out at the moment because it would be unwise of us to rule anything out, and terms of responses. So i dont want to say we are nearer to negative rates, but we are not ruling anything out. Nomuraordan rochester, g10 fx strategist, joining me now. Talk to me about the cable rate and what it means in light of the boe decision. Jordan when the decision came out to not expand the asset purchases at this meeting, you do see cable spike higher. 1. 24. Ke england we have to bear in mind, this is a new format, 7 00 a. M. Instead of a in there press conference, we thought we had ha bank of england not its t towards more information at the june meeting. So we expect it to be spend it upon to be expanded upon at the june meeting. It kind of runs out by july, and terms of what theyve announced so far. So we will be looking for extension and expansion of qe by about 100 billion sterling in june, bearing in mind they have done 200 billion already. So youve got this b