Transcripts For BLOOMBERG Whatd You Miss 20240713 : comparem

We did just get the closing bell on u. S. Equities, which have been trying to break free of the range they have been in for some time. 2971 is where we are ending the day on the s p 500 the nasdaq indices up 2 on the day. 2 . Russell 2000 gaining energy, financials, and Communication Services leading the charge. Twitter among those names. And along to Analog Devices also with an interesting rise. Royal caribbean loses a little ground. Scarlet i want to jump in with breaking news. The regulator of fannie mae and freddie mac has come out with a plan that calls for more than 200 billion in capital. The regulators proposing the mortgage giants be required to hold hundreds of billions of dollars in capital to guard against potential losses, and this could eventually have an impact on Mortgage Rates and the Trump Administrations efforts to basically free the companies from government control. We are keeping watch of this as are needed fors existing government control. Is ben still with us mandel, jp morgan Asset Management global strategist in the multiasset solutions group. When we talk about looking for opportunities here in this market for those folks who do believe in a rally, i guess the question is, where do you look . Do you look at the trendlines and momentum we had prior to covid19, or do you start looking for more fundamental shifts in the economy and try and match up the companies and industries that may benefit from that . Are definitely more of the latter. We think about fundamentals and policy as being paramount here. There are three basic tenets in deciding do you want to be taking risk and where to take it. Are inst is that if you an environment with a pickup in growth and the risks around that slope roughly balanced, in other words, we can imagine things going worse than expected, but they may well go better as well, that is an environment where we are adding to risk incrementally , may somewhat gingerly at the margin. The direction of travel is adding to risk carefully here. That we have no interest in fighting the fed. We think policy is an important backstop to an array of markets. As we are adding risk, we are adding equities with the upside exposure. We are also adding a balancing item in terms of credit markets where we think the Downside Risk is somewhat capped. These different facilities by the fed implicitly or explicitly. We arentioned earlier, not making heroic bets on Regional Equity markets. This is exactly where you tend to see large style rotations, value versus growth, cyclicals versus defenses. We have longstanding underweight markets like europe that given those dynamics, we are not betting as aggressively on at the moment in the same way as our u. S. Preferences a little lower at the margin. No big relative value bets to speak of. This is an environment where you are adding risk and doing it in a diversified way against equity and credit and also within equity markets as well. Scarlet moving along gingerly and there are some key themes, dont fight the fed, and adding to risk slowly. Ben mandel, thank you for us. Ing he is the global strategist at the jp morgan Asset Management multiasset solutions group. That does it for the closing bell. We will be looking out how covid19 could be morphing into something different, at least in the northeastern part of china where they are seeing a new outbreak. This is bloomberg. Romaine broadcasting live from new york to viewers worldwide, i am Romaine Bostick alongside scarlet fu and this is whatd you miss . Scarlet lets get a snapshot of how u. S. Stocks closed on the day. Major indexes climbing to 10 week highs. Investors focusing on the reopening on parts of the u. S. Economy even as the fed minutes show policymakers acknowledged the severity of the coronavirus pandemic, indicating they need to add more clarity to their forward guidance. Within the markets, one area we are keeping watch is oil. Oil has rallied for a fifth day. It is back at levels not seen since march 10. By the way, i just got word from my producer that i need to give you the headlines here on the white house as well. The top court has backed President Trump and blocked the house access to materials related to Robert Mueller, the special counsel investigation. The top court has backed the president and blocked the house access to Robert Mueller materials. We will give you more details as we get them, but it looks like this would be a victory for the president. Let me turn back to oil prices. It was a bright part of todays trade and really for the last month when oil has been recovering strongly. The data that has come out has shown crude Oil Inventories have been declining for a second week in a row. To give us perspective is the head of Global Commodities and Derivatives Research at bank of america. Francisco, thank you for being patient as i came in with the news on the president and the white house. There seems very much to be this consensus that the worst of the crude market is now behind us. What could tip the balance back to the negatives . Francisco . Yes, sorry. Demand has recovered from here into the summer months. I think we have seen consumption up by about 30 from the low points in terms of gasoline. Very importantly, remember, demand peaks around july 4. Because of that, it is likely we will see demand pull back in the next few weeks. Things important to consider, a lot of the supply shut ins, the beginning of the month, and throughout april, we will likely reverse as well. Again, the tightness, the drawdowns in inventories for wti and everything else, it will start shifting in the next month and a half. We think prices will head towards 35 a barrel, maybe a little higher into the end of june. Then probably we will see prices back down into september. That is our view at the moment. We think we are capped on the upside here. Romaine ok. Thats a little bit of a focus on demand. When you look at the supply side of that equation, what is the price we need to pull the market out of that upward sloping contango we have been in now for you weeks, for month really . Thats right. To your point, we have extremely high inventory levels. Even though we have seen a decline for a couple weeks, it is a drop. Of course, we dont know if we will have a second wave of covid19 cases in the second half of the year that may lead to further lockdowns. I think thats of major risk to the markets. Our view store remains that we will see higher prices into the peak window of july 4. People are getting back to work. We are seeing states across the u. S. Reopening. The same is happening all over the world. China and other regions is already back to levels in many areas, so i think thats already happening, but we are going to see production coming back into the market as soon as prices get to a sort of threshold. I think it is important to understand that limits the upside given the high and between levels. Degradation will not happen for a while. Maybe six months, maybe 12 months on a sustained basis in our view. Scarlet scarlet great perspective in terms of not getting too ahead of ourselves here. Clearly what happened in april had scarred a lot of people and gives us a new sense of what could happen in the global oil markets. Obviously, storage concerns have started to fade a little bit ine, but what has the crisis april inspired in terms of the physical market for oil . You hit on a very important point here. Toember, in the month prior the monday on april 20 when oil prices traded negative, we had essentially prices in candida in the low Single Digits. Prices ins in north dakota low double digits. When prices went negative, producers went in and shut production down pretty broadly and started to pull barrels out of cushing, oklahoma because nobody wanted to send barrels into a negative price contract. That is what is cleaning up inventories. Also, we have seen opec going out and deepening the cuts, but it was saudi arabia with an extra one billion barrels. Emirates also helping out. As i said, all of this capacity, all of this Spare Capacity will start coming back pretty quickly. I think the bigger impact is probably going to be in 2021 and 2022 when the deep cuts start to be felt across the energy sector. We are not very constructive for this year. We think are we think we are at the top end of the range. Once we go into 2021 and 2022, things can get a little complicated if demand comes back to some kind of normal level where we saw the same in 2019. That will be quite challenging given the drain on capex in the last couple months. Romaine definitely going to keep watch of this. Really great for you to be with us today, be well. We will talk to you soon. Francisco blanche is head of Global Commodities and derivatives at b of a global research. Coming up, a new cluster of covid19 cases in china sparking concern over the mutation. Patients taking longer to show symptoms and longer to recover. A doctor fromto Johns Hopkins university, a specialist in infectious disease. Dont go anywhere. This is bloomberg. Scarlet the pandemic has delayed u. S. Economic growth. Michael mckee spoke with the dallas fed president Robert Kaplan to get his expectations on when the economy can start to recover again. With businesses reopening, i think you can see a good, slow, steady recovery in the third and Fourth Quarters. What im worried about is despite what the government may ,ay or what the guidelines are there are certain behaviors that consumers will be reluctant to engage in. Whether its shopping, going to entertainment or arts, anything where people are gathered. Me, whatn example for the feds have done for the lending programs as helped stabilize markets are the fiscal policy is key. I think this stage to recover faster, Health Care Policies are central. What do i mean by that . Ubiquitous testing, contact procedures, and i am one that a little concern we are doing more testing in texas, but i would love to see a National Initiative Manhattan Project to really emphasize testing and quick testing in front of stores, restaurants, other facilities so people have more confidence that when they walking intore not a situation where they could be at risk. Myhink until we have that, concern is there will be limits to how fast we can recover and that we will recover, but without certain types of activities fully recovering. It will limit gdp growth and it will mean the Unemployment Rate will get more elevated than it would be otherwise. Reporter i cant let you go without asking you about the oil patch. You are in the center of it. The Federal Reserve bank of oil as far as most people are concerned. Do you have any kind of forecast for where the industry goes, how Many Companies might go bankrupt if oil stays under 40 . They expected 40 bankruptcy rate. Is that realistic . It might be. Whats happening is we are seeing here in texas and seeing it globally, we are seeing lots of drillers shutting in. Meaning, it is not economic to drill and they are just shutting down. Believe total u. S. Production will go from the Fourth Quarter of last year, 4. 8 Million Barrels a day, and will end this year closer to 10. 8 Million Barrels a day. The Permian Basin may shrink by as much as one Million Barrels a day. You will see bankruptcies and failures not only in drillers, but those who service them. Having said all that, it is our own view that as demand returns, people begin to drive, activity resumes, which it must and we will work off the excess inventory as early as sometime in the second half of 2021 or early 2022 depending on the rate of growth. We actually think that you could see, and its not surprising you are seeing and affirming in the price of oil, but in the meantime this year, you are going to see lots of restructurings and bankruptcies and challenges. Reporter how quickly do the people who shot in those wells turned back on . Thats what the price goes to. A lot of folks in the industry explained to me, once you shut in a well, it takes some time to unshut it in. The magic price is probably in the neighborhood of high 30 or in the 40 range. It is our own forecast here at the dallas fed, even with that reduction of u. S. Production by 2 Million Barrels a day, the actual daily production right now is much less than that and would even have further reduction. Some of those shutins will come back by the Fourth Quarter. That is our view. We think the shut ins at the United States will be at their peak as much as 2 Million Barrels a day. We think a lot of that will come back. Why will u. S. Production decline . Because of the decline curve. Even if you start drilling again, even without a lot of new drilling, you will have a Natural Production of output because you need to drill a lot more wells to decrease the rapid decline curve of shale, but a lot of that reduction will be by the end of the year. Romaine we were just listening to the dallas fed president Robert Kaplan speaking earlier television. He talked about the coronavirus. There is some concern out there about potential mutations in that virus, raising concerns about how much of a handle doctors and scientists have on this pandemic. Joining us right now is dr. A mesh doll joe, senior scholar at Johns Hopkins University Center andinfectious diseases practices Critical Care and emergency medicine. Great to have you again. Give us a sense of how much we know about the virus and based on how much we know, how realistic is it to expect a viable vaccine or treatment in short order . Dr. Adalja you have to remember that this is the seventh human coronavirus we have discovered. Four of those coronaviruss because about 25 of the common colds every year. And we know about the viral family as a whole. Its important to know also that mutations are something that naturally happen. All viruses mutate. Not every mutation will have a functional significance. Most mutations dont do anything. We have vaccines against coronaviruss and animals. Cowexample, there are coronavirus vaccines, and avian coronavirus vaccines. We dont want those mutating to setting. E veterinary i do think we can develop a vaccine, its the timeline that matters. How quickly we can do it. I think we have to be prepared we do not meet an artificial deadline of 12 to 18 months or the end of the year, but i think it is something biologically plausible and we will get a vaccine eventually. Scarlet from where you sit, do you believe or do you see that there are two different kinds of covid19 . One that hit the u. S. East coast from europe, from italy, and other one that hit the west coast a few weeks earlier from parts of china . There have been discussions of how they travel differently into the United States. Dr. Adalja there are different strains of the same novel coronavirus, but they are not different in the sense that they behave differently. We can look at the lineage of a virus and understand where it came from, but it doesnt mean it acts differently. It just helps us understand where it came from from an epidemiological perspective. The year new york strain did come from europe whereas the west coast strain came from china. Its important because a lot of our Public Health is focused on travelers from china when the virus was spreading from europe as early as christmas time. Romaine theres a lot of focus on these day today infection and onin various states a country by country basis. What data do you look at as being both important and getting a better sense of how bad ohio good essentially the recovery from this how bad or how good essentially the recovery from this can be . Dr. Adalja dr. Adalja there are two things i look at. One is the percent positive of tests, meaning how hard you have case . K to find a positive if that is going up or staying flat or if its decreasing tells you where you are in the trajectory. In the country as a whole, we are declining, the percent positive is in the low Single Digits now. Thats a good thing. Earlier in new york city for example, it was over 50 positive. We didnt have to look too hard. The other thing is hospital capacity. That is what social distancing is about. Flattening the curve to preserve hospital room. What percentage of patients are admitted that have covid . Scarlet i want to get your thoughts on hydroxychloroquine. Brazil Health Minister says it is to be used for all patients in the first day of coronavirus symptoms. The government also recommends hydroxychloroquine, a sister drug President Trump says he is taking as a preventative treatment. Is this a case of using these treatments can only help and not hurt you . Dr. Adalja no, its not that. It is never that case with any medication. All medications have a side effect profile. You have to think about who youre giving it to and what the riskbenefit analysis is. Theres no data showing chloroquine or hydroxychloroquine is beneficial prophylactic. Or we are doing controlled trials to understand that, but we dont have definitive david to recommend it universally. It should be done in a measured way with monitoring, proper consent, and watching with the riskbenefit is in individual patients. It should not be done routinely. Romai