Italy pare down its economy to essential services. The United States tells citizens to reconsider travel abroad. 125,000. Ses to pass manus warm welcome to daybreak europe. A spectacular implosion in confidence in structures, government response, and the fiscal response from the United States. We have recovered some of the ground, 1. 5 . Australia edges a bear market. Travelstaring into a no edict from the United States of america. 17 trillion in aussie response mechanisms on stimulus. Trying to avoid a recession for the first time in 30 years. To the bond market, jp morgan warned very clearly about the threat to the bond market. 0. 5 is on the way. Trump spoke and they shredded the treasury market. Down by 15 basis points. The fed is galvanizing itself. , 175 billion. O global headt is the of flow Strategy Solutions at societe generale. Good to have you with me. First take, i would say it is an implosion of trust in confidence in response from the u. S. It clearly is a major issue. When we look at the infection curve in italy, it is expected that the u. S. Could also go through a similar curve. Particularly when you think about the fact 30 million of the uninsured andare the Health Care Coverage has to be less exhausted than when you get in european countries. Clearly the market is selling first and asking questions later. You have this massive rotation into safe haven. I think the shortterm trend will be more of the same. One thing to bear in mind is that the selloff is different to that of 2018 when we have in february bonds falling and equities falling. Today you are seeing the bond a shockcting as absorber. It is sort of like a more logical selloff. Manus logic and velocity. I love it. The velocity of people is as important as the velocity of money. We will discuss. Donald trump has promised to boost market liquidity by 200 billion and has asked congress to approve immediate payroll tax relief. The travel ban excludes the u. K. He has also extended tax filing deadlines. Pres. Trump to keep new cases from entering our shores, we will be suspending all travel from europe to the United States for the next 30 days. New rules will go into effect friday at midnight. Manus joining us from hong kong, jodi schneider. We also have david ingles on the markets trading. The details on trumps announcements were utterances and rollbacks. Thats right. The big headline obviously was the travel ban from europe. He said it just that way, that it would be for 30 days, take effect friday. He did not give many of the exemptions. It exempts american citizens, it family the immediate members of american citizens and those who are permanent residents of the u. S. They will have to go through certain airports and have health checks. Then they would be let in if they were to pass those checks. He also made it sound as though there may be cargo, that it would be anything. He later tweeted and Homeland Security secretary iterated it would not involve cargo. The president said he wants trade to continue. In making these statements about the virus and about europe, he basically blamed europe for allowing chinese residents, chinese visitors, into europe. He said that because the spread of the virus and that he did not want the same thing to happen in the u. S. He called it a foreign virus. Clearly this was the headline he then mentioned other measures like the tax extension and things like that, that they were more limited than the markets i hoped for. It is very much a foreign virus according to the president and that is an America First president with the borders going up. What stands out for you, david . David the timing of the price action. When donald trump was mentioning the foreign virus, the other was when he mentioned the travel ban from europe as well. Markets seem to take that as he is protecting u. S. Citizens. Nothing wrong with that as far as the economy is concerned. It is a definitive answer to the question, is there a policy response that curbs the infection curve but does not slacken the yield curve as well . When you look at markets right now, u. S. Futures broke through a key. They recovered a little bit. Thee through a key level in 200 week moving average, which for all intents and purposes means the u. S. Market opens later on. The s p likely falls into a bear market. We have a lot of these markets especially in Southeast Asia like thailand and the philippines that also have their own local virus problems. Manus as you say, could be one of the fastest returns from hero to zero we have seen on record. Thank you. Our Senior International editor jodi schneider, r bloomberg anchor in hong kong, david ingles. Toou, you made a reference 2018. I want you to look at a trifecta. Oil, treasuries, and the markets. We are seeing oil and treasuries linked by the most since 1998. We see this relationship between really the bond market in deep syncopation. I this the hallmark of know it is largest language, but is it the beginnings of a potential doom loop . It makes some sense. Activity indicator of in emerging markets and china in particular. The demand there has gone down in the range of 4 Million Barrels per day. It is obviously a double crisis to have the complete lack of movement of people and also the collapse in the flow of money because of the supply chain disruptions. Paymente not receiving and are unable to pay their clients. I think that does make sense and the key point here is that the Lower Oil Price also can act as a shock absorber. Clearly the cost of producing and the cost of manufacturing is dropping. That could also alleviate some of that negative impact that the economy level, it is the reflection of a symptom of lower demand, but it can also be a driver for lower pressure on the cut side for companies and customers. I hear a lot of people use language, this could be bad or use than 2008. The warning shot to Christine Lagarde. We will deal with that later. Back in time, i decided to look at bond spreads and i look at this. This is Corporate Bond spreads over u. S. Treasury and asia bond spreads over treasuries. I take your mind back to 2008. I take your mind back to 2015, 2016. They are exploding, but is it appropriate to refer to gsc as a real risk . Are we looking at something as substantial as that . This is a ghc, not a gse. Spreadrly the level of when it comes to Corporate Credit is not as wide as it was in 2008. The main difference is Central Banks are owning a lot of the bonds, especially in europe. The stress is on the highyield side of things, not the largecap. This is why if you look at the russell versus the s p or strong Balance Sheet versus weak Balance Sheet, there is an epic divergence or dispersion we are week Balance Sheets continue to underperform strong Balance Sheets. This is something that is important, particularly in the u. S. , where the collapse in the oil price could be an extinction event for some of them given how and their breakeven prices how leveraged their Balance Sheet is. I think you have to look at the smallcap universe as opposed to the global level of Corporate Credit spreads. With spreadsl deal in highyield and energy in just a moment. Show, the 50he trillion question. The treasury market of course. Liquidity crunched. Does it spell doom for Financial Markets . Crisis forirst Christine Lagardes tenure as the ecb president. Decide force her to whether to fire a few Monetary Policy bullets. Does she have many left . To stave off the Economic Impact of the coronavirus. We have special coverage of the ecb decision News Conference on bloomberg tv. It is a comprehensive package, one we believe is well targeted. To ensure we can bounce back strongly. This is not a bailout. This is considering providing certain things for certain industries. A the virus is having destructive impact. To weaken materially in the u. K. The bank will take all necessary further steps to support the u. K. Economy and financial system. Our government will be creating a billiondollar covid19 response fund. Voicessome of the tracking the Current Crisis in markets. Policymakers around the world announcing the economic measures to tackle coronavirus. To the markets, thanks very much, martin malone, quick question. Dropping 8 billion 8 trillion. 8 trillion dollar wipeout. The speed of the implosion delivered a rally in the bond market, the long bond, similar to october 2008. Hence the echoes of 2008. This is the lack of policy response for the United States of america. Fiscal response. What comes next . The ecb. Let us see what can happen. 2. 6 trillion euros. Bond buying. What are the options left in the swag bag of the ecb to counteract this virus attack . Let us get to berlin. Matt miller in berlin. Good to see you. It is always a pleasure, manus. Let me point out im in berlin and not frankfurt, where i typically would be for the ecb meeting. They will be taking questions presshe internet and the the typical press gathering stembe put off for now to the spread of coronavirus. The ecb has much tighter security than any government building i have ever been in before. Number one, lowering of Interest Rates further into negative territory, a 10 basis point cut, some analysts for example are forecasting a 20 basis point cut. They can do targeted liquidity measures we saw from the bank of england. So important to the economy with the kind of funding for lending scheme, that is expected by Bloomberg Intelligence as well. Finally, asset purchases. Ecting a doublet of asset doubling of asset purchases to 40 billion euros per month. Still, i think people are expecting markets to be disappointed by Christine Lagarde because she has not got as much ammo as the fed and the boe. She will not be able to make those kind of firework cuts of 50 basis points, or really have the same effect on asset prices as the other Central Banks have. Manus . Manus matt, let us see what she does deliver. It is as much about the toner, the intonation, and the conviction with which you talk to markets sometimes. Thanks very much. Meanwhile, my guest host is the u, if i generale koko look at the menu sheet of what matt has just laid out, what is the most effective in terms of policy response . Or do we need all of them . Tell me what you are thinking in terms of that a la carte venue and the delivery of the courses. Kokou when it comes to the a la as a menu, think of it tltro targeted that smes. The lack of flow of money, the flow of cash is being disrupted, and this is creating a risk of bankruptcy for smes. Some of them are also Zombie Companies because they have been sustained by low Interest Rates and low funding. You are able to breach provide financing, bridge financing, or helping the working Capital Finance needs, that will alleviate the pressure shorterterm. You also need to have some kind of guarantee for the bank. Banks are clearly going to see the nonperforming loan increase and they will have a lower marginal propensity to them. China has done some measures criteria,reasing the but these are shorterterm. Longerterm, the question is whether these companies will survive or not. What is less effective is cutting more into negative territory. This is hurting banks, and these banks make less money than their ability to assist the economy is going to be impaired. What we have heard from the United States of america in terms of travel restrictions and recommendations to americans to restrict their travel, how much more of a Recession Risk does that bring react at all . Ou equity . N fx, credit, or kokou this is going to hurt more of the airline stocks. Any stocks that are exposed to the might have as opposed to the musthave are being hurt. Etc. About travel, hotels, the impact is going to be on equities first, then credit will clearly follow depending on the Balance Sheet of these companies. Companies do have a way to respond. They can cut dividends as we saw. They can do more share buybacks, etc. Flag. You raised the red for me, the biggest red flag of all. Italy could trigger another eurozone debt crisis. If it were downgraded, given the stimulus program, the debt load. Risk . The kokou this is sending us back to 2012. If we were to hit a recession, the ratio could increase significantly. Leading to abuse that italy case downgrade, in which asset manager could have to sell btp, the Italian Government bond, and that could create another cycle of euros on best practice. We are not there yet. This is another scenario which explains why european banks and financial have been hurt so much and badly in this recent selloff. It is interesting how we saw the doom loop was dead. Shelf, the u. K. In fired the first real shot the campaign against Economic Impact of the virus. Smoking. L barrels are we talk more about britains response to the pandemic. Manus this is bloomberg daybreak europe. The coronavirus is turning out to be bad for the health of the treasury markets. Liquidity is quite literally gripping the markets, not seen since your chart, it matters. We are seeing liquidity fears hurting markets. This is really a mindnumbing roller coaster ride for treasury yields. Have seenok platforms trades sink to a level not seen since 2008. This is a measure of market depth. If im going to trade in the treasury market, will it move the market . Thes at the worst since financial crisis. Jp morgan say it is the worst in the longterm bonds and we are also seeing costs widening. Still one ofet, the most liquid in the world. If you need a cash grab, you might have to sell. That is mission up messing up normal functions. They have had a difficult time trading, which causes their order books to fin. Thin. Trillion value themselves of the treasury yields. Thank you very much. Back to crunch time. Undergoes aengland stimulus program, the first interestrate cuts is the financial crisis. The move was coordinated with government fiscal response. Allianz chief Economic Advisor says the bank of england showed the path to start dealing with the global crisis. U. K. Could manage to punch well above its weight on financial issues. They might have lost the reserve currency status, they may have had a little bit of brexit, but they know how to give swag when it comes to policy response. What did you make of the Double Barrel . Smoking . Kokou absolutely. S is one of an interesting both having monetary and fiscal acting at the same time. The u. K. Has been running through more of an Austerity Program from the fiscal front and it is interesting to see how quickly it was able to switch into more stimulative package on the fiscal front. Clearly this is something markets have been expecting, and the issue is brexit. At the end of the year, whether the u. K. Could manage this is another risk. Manus we will pick it up very shortly. We talk oil next. From good morning bloombergs middle east headquarters in dubai. Charge. S are in global stocks fall as the u. S. President announces travel restrictions from europe to the u. S. For 30 days. He offers no details on an economic rescue package. Itbal response, the who says is now a pandemic. A rally in haven assets sees the yen climb. Bond yields tumble. The boj pledges liquidity. The ecb unveils its response today. And shutdowns all around. Down pairs down the economy to essential services. Cases surpass 125,000. Manus lets get to market coverage. We are reacting to an implosion in confident. Confidence. An announcement from the white house shatters the world travel concept. Saly, gargantuan selloff in the first wave. Is the nausea receding or are we still in full grip . Still a lot of nausea. You have to have a strong stomach because we have been seeing widespread selling from sydney to mumbai. It is as if trump actually launched a major trade war with europe with what indias market on the cusp of a bear market territory, australia extending bear market territory. This is the worst day for aussie stocks since the height of the financial crisis despite the morrison government announcing 11. 4 billion coronavirus stimulus. Hong kong on the verge of bear market territory. In korea we had a halt on trading on the kospi, falling by pare so then we saw a back. Very close to bear market territory in south korea. Manus the bears are certainly in charge. Dani burger, good to see you. The question as everybody reflects back to 2008, the credit spreads are not there yet, but we are seeing a deepening in market stress. Im going to refer to credit spreads again. It is remarkable what is happening. Have private equity behemoths telling their companies it is time to draw down on those credit lines, so what are we seeing . Exploding spreads. Not where we were at the financial crisis, but asia dollar denominated bonds, also the u. S. Certainly widening to a significant degree. The market here starting to price in the possibility of a recession. What do they want . Coordinated policy effort between Central Banks and governments as well. But it is not just the cost of credit that could help. It is also just the flow of credit. We are seeing Companies Like boeing pulling down their entire loan to try to get that cash to get them through the period. Look for the Corporate Credit market to really be exhibiting symptoms of the pain during this crisis. Thank you very much. Oil is plummeting again. President trump announced a european travel ban. Around a quarter of its value this week, deteriorating demand outlook from the coronavirus pandemic coinciding with price war between saudi arabia and russia. My guest is the chief executive at crystal energy. But to see you. Daily volume lows for the oil market, the travel ban from trump, another salvo. It restricts the ability. The industry is one of the Core Industries that consumes oil because oil in the transport sector remains king, unlike other sectors where it is competing with other fuels. Impact one a negative the market because of the travel ban. What the saudi said, what the russians did with opec plus, there are signals oil prices will remain low for the future. Disappointmentt there was no agreement. What does it take to get the russians back to the negotiating table . Will they come back . Who knows. You see at the beginning, theres always the wildcard. People did not expect them, but maybe they expect longer than what many people expected. The main storyline is that the is so littleeasing of the opec strategy. Higher pressure on oil prices, the higher the market share of the u. S. At the expense of opec. Russia does not see value in continuing with opec. There are rumors the russians were bluffing. That could be a potential for bringing them back to the negotiating table. The russians have to cut significant he to be taken seriously again. Credibility this is the argument i have been using. Why what i believe anything they say to opec or opec plus when they walk out through those doors . They have literally blown up their own credibility, havent they . It depends who in opec you are talking about. For the saudis, it is not the first time. If you go back throughout the history of opec, you can see what they did in the 1980s and 1985. Manus shale but then there was alaskan oil coming to the market, weaker demand. They did that. Again in the 1990s. The consequence was low oil price. I dont see that changing today. The russians, they have to confirm they are serious about providing service. Bunkers, oil tankers, and storage. Do you think it deepens from here . It arrives insays april. Can it deepen . The case. Oing to be you are not only talking about april, but the rest of the year. Before opec plus and last week, there was an estimate of 2. 5 Million Barrels a day of new supplies hitting the market. Not talking about u. S. Shale, im talking about conventional oil from norway, from canada. Hearot surprised to statements such as goldman sachs. Mobius said this is a phenomenal opportunity for emerging markets, for india, for china, the oil importers. We saw a red headline yesterday from china. By more oil, store it. Have ally whenever you crisis in oil markets, you think of the producers. Asia is a major consuming nation. Region. Manus i have had criticism from viewers who say im not talking about iran enough. My argument back to them was does notntribution move the dial on price. At this juncture. Why should i be talking more about iran . Social deprivation that arrives at their doorstep because of crude . Its relevance to oil markets today because of sanctions is very small. I would be worried about iran in terms of exposure to Lower Oil Prices. They will suffer a lot because we are talking about a price of 120. It has gone up because of when they are facing with the coronavirus. Thing, not just about the consumers, where there is an opportunity. Typically when we see a crisis in oil markets and prices decline, there is an opportunity for Oil Companies to negotiate a lucrative deal with companies all around the world because there is an increasing competition for global capital. This is where governments tend to offer more lenient terms for Oil Companies. Guest glad to find one with a silver lining. That is my guest host this morning. Show, this ishe what weve got for you. Sporting events under mounting pressure from the coronavirus. The nba, premier league matches, canceled all around the world. We give you the cover story right here on bloomberg. We have the assessment that covid19 can be characterized as a pandemic. That was the World Health Organization director general. It is the first time the World Health Organization called an upright a pandemic since the socalled swine fluid into thousand nine in 2009. Sporting events are under mounting pressure from the nba to premier league matches, sporting organizations are dusting off their playbooks. Events throughout the sporting world are getting postponed, canceled, or in some event, requiring fans to support their team from home. In u. S. , the College Basketball tournament will continue, but without spectators in the stands. When it comes to professional basketball, the nba has suspended its season. A player on the utah jazz has tested positive for covid19. Nhl shuffling the schedule. When it comes to football, matches will be played behind closed doors. The mass yesterday was the first to be postponed. The owner of the greek team who tested positive met with arsenal players two weeks ago. Unveil ais set to crisis plan without matches of spectators in the matches according to times of london. Pubs will be forbidden from showing the games and order to discourage large gatherings. Manus the very latest on what you need to know. We get you up to speed now with your business flash headlines. On s my sheets proposed one million free home tests for the virus. He had to backtrack the offer after chrysostom. There were concerns by japanese. Ealth officials change itsagreed to aftered 737 max regulators informed the plane maker modifications would be required. It is a measure boeing initially opposed. Blackstone and carlisle are telling Portfolio Companies to do whatever it takes. Business controlled by private equity prices are joining the wave of companies lines of credit. Amid the Global Pandemic and an oil price war. That is your business flash. A quick flash of how these markets are doing. You are looking at the bears in charge of the equity markets. An implosion of confidence in the response mechanism from the United States. The dow jones went into bear territory. The question is, as a bull ends without any warni where is the market where is the money flowing to . Preparingf japan is its response mechanism. You are looking at a wipeout of a trillion dollars on the equity market of the United States of america. Trillion on the equity market of the United States of america. May find a cheery note in the equity carnage. Who is that brave person on wall street . Maybe they are the most prescient of them all. I know you have been looking all day for a silver lining. I have it and it is one of your guest hosts at socgen. Strategist andy she says by yearend they see the s p 500 at 3500. This would be a 28 gain from current levels. Does that mean selling is all over with . She says in the meantime there could be more pressure. She calls for a range bound market until the spring at the highest end, 2900. As we get into yearend, we are going to get that economic bounceback, buybacks are also going to shore up the economy, the market rather as well. Shes a debt she says unless we should be in the clear until the end of the year. Kokou is still with the team. I want to reflect on a couple of points you made, back to the double punch from the u. K. Which was a surprising early rate cut and a fiscal boost. You look at that in the context of the bond market. Let me grab my chart and we will look at that. You have the guilt used spread in the gtv library. Gilt bund spread in the gtv library. Kokou this compressed the spread. The fear was brexit would have a negative impact on sterling versus the euro. This is what you saw in the u. K. Much higher compared to europe. Andn the current complex the aggressive cuts by the bank of england, we should see a compression in that spread. The sort of europe going into the japanese japanification phase with more negative yields, we should see the u. K. Coming down in terms of yield spread versus europe. Nd spread is interesting to consider given the backdrop of coronavirus, oil, but also brexit at the end of the year. Manus you also reflect on the risk and many people have talked about this, the explosion of highyield credit in terms of the spread over treasuries. You are concerned about the downgrade that might come to play. Put some context around that for us in terms of the numbers and the risks of credit downgrade in the spectrum. Kokou i think this is a very important theme and topic as some people have talked about the highyield credit risk as maybe the next subprime crisis. In terms of numbers, the total size of Investment Grade in the b, if you looke at the highyield universe, it is over a trillion dollars. At the triple b level, companies dont need much to get downgraded. The risk is that you could see a wave of downgrades, particularly as we have an asset refinancing wall over the next few years. This is an environment where we could see more pressure on credit spreads if this crisis were to continue, in which case week Balance Sheet equities are likely to suffer as some of them could go to zero versus strong Balance Sheet companies. Stay with us. We have more work to do. Show, specialhe coverage today. It is ecb day. The decision from the conference will be on bloomberg tv at 1 30 p. M. U. K. Time. Manus this is bloomberg daybreak europe. Back to the ecb now. Event of today so far, first the crisis for Christine Lagarde in her tenure will force her to decide whether to fire one of the few policy bullets the central bank has stave off the impact of coronavirus. What are the options . Least 10 basist point should satisfy expectations, but the ecb may need to be more creative crafting a stimulus package bold enough to bolster the euro area economy from the virus affect. We could see a rebound of its program of longterm loans to banks. That includes tweaking it to target smaller businesses. The final option would be increasing qe, but it is unlikely given the hawkish policymakers on the board, unless there is evidence the virus will have persistent Economic Impact. Lets get to frankfurt and the chief economist for germany with julius baer. Trapped in the history of special measures . Is that what is containing our viewpoint of what the ecb could do . We are trapped in a prison of history . Well, the conventional measures, this is a factor. Interest rates are zero, even below that. We have to go in the area of unconventional measures. That is the starting point. Looking at the nature of the crisis and the nature of the demand for Monetary Policy, they are much more in the direction of providing liquidity and ensuring credit flows are not broken. It is a special situation not only due to the darting point for the ecb, but also demand from this crisis to Monetary Policy. A bit different than usual economic downturn. Here, the ecb is not only trapped by history. There is a chance to use unconventional measures they already implement it and tailor it to the Current Crisis situation. Manus so, negative loan rates to banks, so long as they are passed on to the real economy, is that a construct that floats . It floats, as you said, as long as they pass it to the economy. This is the challenge for the ecb. There is one instrument which is getting a lot of attention of Financial Markets, this is a negative deposit rate. The big question is, will the ecb satisfy the Financial Market by lowering or increasing for banks and at the same time trying to operate with banks to free some credit . This is the big question. We hope it goes rather by s for companies and see if it is arriving at the real economy. Manus given all the criticism about another rate cut, negative rates for banks, reversal rate igative rates, can she isolate Christine Lagarde, but can the ecb afford not to cut rates today . How about an impact with that have if they dont cut rates, even by a token amount . Is an interesting question. I would say the ecb, madame lagarde, the whole press conference will have to explain this move. They are not the only people in the market which demand negative Interest Rates, but there are a lot of choices which say negative Interest Rates are a burden for the economy. Manus thank you so much. David kohl at julius baer. The European Market open is next. [ fastpaced drumming ] [ fastpaced drumming ] anna good morning and welcome to Bloomberg Markets european open. We are live from our European Headquarters in london. I am anna edwards alongside matt miller in berlin. Bears, stockshe look to a major downturn as coronavirus rises 13 full. The cash trade is less than an hour away. Matt