Monday. Alls p 500, nasdaq, and dow solidly higher. Sectors tell you investors really do want in on stock s a bit of a reli a bit of a relief. That comes in what is a bear market. You were mentioning there is hope around health care treatments for the coronavirus tragedy but there is still uncertainty about the economy. We are seeing the pushpull but the bulls are winning. We look at a three chart of oil. We are going to see a sharp decline. Crude is flirting with 20 a barrel as the follow from the coronavirus is really going to eat into Global Demand. That could be a longerterm concern for stock because oil is less liquid. Tell on whatier the Global Economic picture could be. Another reason to think the rally for stocks could be a rebound. We will be watching but hoping the indexes will continue. Higher, microsoft up by 5 . They have seen a spike in cloud views on working from home. We also have apple popping higher and look at j j. Sharply higher since 2008. They have announced a leading vaccine possibility. News of a fiveminute coronavirus test as well but bringing more uncertainty we have the risk on stocks rallying. We also have haven bonds rallying in the flat is up slightly. Mixed signals but overall it is a bullish day. Vonnie thank you for that. We are joined by Gina Martin Adams at bloomberg intelligence. Rally due to sentiment and how much is . Andated buying gina it is more of a continuation. We were pretty vocal suggesting the equity market was bottoming. Extremely negative sentiment is usually her only indicator a bottom is forming. Less than 1 of stocks on the s p 500 were trading above the average. That is only happened four times in the last 25 years and usually represents the starting process of the equity market bottoming. A couple of interesting things popped up but gave a little ease. The first we noticed was stocks rallying on bad news. The stoxx experiencing the biggest negatives are getting more returns. You like to see that continue to confirm we have passed a significant bottom. We also sell rotation into less profitable stocks which is usually something you see. Vonnie as we head into earnings season, it is likely to be a recession season right . Gina it is. Earnings will probably decline over the next three quarters. The july season is expected to be the worst. Analysts are anticipating earnings will decline in the third quarter. When we do calculations we anticipate the s p 500 priced for a 12 month decline. The indexes already prepared for very significant declines that, though we may be rocky, we are relatively prepared for that scenario. Vonnie how are companies positioning themselves . We have oil around the 20 a barrel mark. Then you have the dollar which has been strengthening like nobodys business. Orare often the last day two. Those two factors could change the bottom line significantly. Gina depends on what industry the in but oil prices drag is on the industrial sector. Energy stocks are 2 of the s p 500 market cap. Lower oil prices are generally stimulative and helpful. Once the economy gets running, that should help them produce margin growth. Depending on with the economy does get running again. I think it is a company by company basis. When you look across the s p 500, more than half of companies are expected to produce Earnings Growth in the first half of this year. Youve concentrated weaknesses. A lot of those are the international companies. The company is not in technology, health care, places where spending money. We are still spending in those areas but there are significant weak spots. Energy earnings are expected to cryract 80 which is a far from the index contraction of 6 . Vonnie the indexes being punished. Banksre down 51 but the are down almost 40 . Are there any industry areas that are more immunized, if i can use that word, in earnings possessions . Gina i would suggest technology. The top five technology google,s, amazon, microsoft, and apple are absolutely shelter. They are expected to continue to produce growth. Some of the financials are going to continue to produce a decent amount of growth. It is a story of pick your spot. Health companies are producing growth, Consumer Staple Companies are producing growth. You want to avoid the industrial materials and Energy Companies experiencing the biggest and deepest contraction or look for a turnaround pending over the quarter. It is very much a sector by sector industry and stock by stock. Vonnie thank you for your time. That is Gina Martin Adams of bloomberg intelligence. Lets check in with first word news with Mark Crumpton. Mark president is defending his decisions which send social distancing guidelines through the end of april. The president said the worst that could happen is you do it too early and it comes back. The governments top Infectious Disease expert warned the u. S. Could see up to 200,000 deaths from the pandemic. In new york, enable hospital ships with 1000 beds arrived to help relief. A grim prediction from the german government. They say the coronavirus pandemic will likely give the nation its worst recession since the Global Financial crisis. The expect output to shrink by 2. 8 but that is only if restrictions are lifted. The chinese city of wuhan, with the outbreak began, is taking steps to return to normal. Opened0 to 80 of shops doors for the first time in two months. Many imposed limits on how many people could enter. Shopkeepers set of dispensers for Hand Sanitizer and checked customers for signs of fever. The bus has resumed and automakers and manufacturers are getting back to work. Day onnews 24 hours a air and on quick take by bloomberg. Powered by more than 2700 journalists and analysts in over 120 countries. I am Mark Crumpton and this is bloomberg. Vonnie another day of risk off. We bring you special coverage here on bloomberg television. This is Bloomberg Markets and i am vonnie quinn. Corporate clients and consumers are pouring in as they seek shelter. Joining us on the phone is mike mayo at wells fargo securities. Thank you for joining us. I was just speaking to Gina Martin Adams and banks are down almost 40 . Changing . That ke dont get too excited. This is a wonderful time to be a buyer of bank stock. Today, banks are part of the solution. Yes, there is a Bank Earnings recession but not a Bank Balance Sheet recession. Let us talk about the earnings recession. These are sobering times. We expect credit losses to increase by double. The debt interest margin to decline in earnings down over the next two years. That is bad. Shortterm profit are less important. Layoffss are suspending and banks are waiving fees and showing forbearance. Regulators voluntarily give buybacks. They are higher up in the priority order that shareholders and shortterm profits. That will be seen in the results of the next couple of quarters. Do you want the good days . Vonnie i do. Mike it is not a Balance Sheet recession because banks enter this recession in the best shape anytime in the past halfcentury. I said this before but it is worth repeating u. S. Banks have one trillion more capital, 2 trillion more cash and more deposits than before the Global Financial crisis. Lets talk about one more area. The Banking Industry is open for business. Banks literally are using secondary data centers. Bank of america has 150,000 employees working remotely and Goldman Sachs has 98 of their workers working remotely. Incredible. You have the operational resiliency, capital resiliency, liquidity resiliency, the Bank Balance Sheets are there to support the economy. They can handle throw downs of loans. Anything that is thrown at them by their customers. What a night and day difference a decade ago. Vonnie probably because of measures put in place, you mentioned the workers working remotely. To have any idea how many we are talking about and whether all of the banks are as resilient . Is there a competition for operational resiliency . Mike i think it is less of a competition against each other then to serve the customers. It could be a nice rebel addition of the Banking Industry. Therapy negative perceptions for the last decade. There have been negative perceptions of the last decade and i was one of the biggest critics. Now, they are trying to see who can serve customers through these difficult times. You have management meetings that are once or twice a day. You have workers connecting in different ways than in the past. While there is a medical crisis, banks are doing their part to prevent the Economic Crises that individuals and businesses feel. A lot of the banking employees are on the front lines. They are soldiers in this war. Mentioned the idea that net interest margins will decline by one fourth. Kindmists dont know what of recovery are going to get. Could even be an lshaped recovery. Can banks withstand these . Mike we ran over 50 earnings models. Like you said, the most important conclusion is that bank capital still grows. They can take their lumps, they can take these loan losses and still grow capital. Therefore, they can still support the economy. If we are right, banks will demonstrate they are a pillar of strength and stability for the economy. Vonnie is there a risk that u. S. Banks will have to eliminate dividends . Mike well, i think that would be one of the worst moves possible. I think that would cause a major dilution to confidence not only for banks but in the stock market as a whole. It would be the worst move that could possibly happen. We have done the math many different ways and capital still grows. It would undercut the work of the banking regulators. We are going to cut Bank Dividends even though we said it was safe. I think that would cause a massive freak out by Bank Investors in the stock market. And me personally having analyzed this for three decades. Im only saying this to lend credibility. I was the first analyst to testify on the causes of the Global Financial crisis. We have done the math. Ands can withstand this congratulations to washington, d. C. Thank you treasury, thank you fed, thank you congress for the proactive moves you have made but the required to cut dividends would dilute confidence so much it would be a terrible move. U. S. Banks are different than european banks. If u. S. Banks better returns the european banks dont do buybacks which they voluntarily suspended. That is an undercurrent that u. S. Banks would have to cut dividends. That would be a horrendous decision after moves by washington. Vonnie how much have you heard about smaller banks, regional banks getting into trouble particularly last weekend with the liquidity issues . Mike it is not onesizefitsall. You have seen a russia deposits to the largest banks rush of deposits to the largest banks. Ts to the largest banks. The smaller you get and bank size you have a chance of bank could get hurt by other issues. For the first time in several recessions, you will see the benefits of diversification. I think the smaller you go, the more chance there is for an idiosyncratic event to really hurt more. Vonnie thank you for your time. That was mike mayo. Still had, Johnson Johnson says it identified a live vaccine and starting tested with people in september. We will talk with dr. Paul spiegel next. This is bloomberg. This is Bloomberg Markets and i am vonnie quinn. Johnson johnson said they commit to supply one million vaccines worldwide. Ceo alex gorsky says he expects the first batch to be available early next year. Spiegel,s is dr. Paul director for the center a few minute Hearing Health at johns hopkins. What do we know about this vaccine and its ability to actually work a year from now . Dr. Spiegel these are very early days so they are in different stages trying out this vaccine. Effective butl be it is too early to know. Vonnie it certainly sounds like it would be an amazing solution if it does indeed go through all the steps and get passed. I know you work on medicine for immigrants and refugees. It can be a bit of a hot potato. What are you seeing on how those populations are being treated right now . Dr. Spiegel in the united states, it varies depending on immigrant status. The current administration, for health reasons, has stopped asylumseekers from entering the country which is concerning from a refugee law point of view. Speaking thedly key issue will be, will undocumented immigrants be able to access the Health Services . Vonnie what is your research telling you so far . Have they been able to . Dr. Spiegel it varies according researchbut most of my is focused on refugees abroad. We have been looking at various of refugees in myanmar and uganda and have some concerns that these populations, particularly those that live in conditions,health and we are concerned if covid19 becomes prevalent. Vonnie exactly. What does a population without a government do . Is the u. N. Trying to take care of these populations . Dr. Spiegel yes, the United Nations has the overall ordination but ultimately it is the governments themselves who are responsible. Support them. If thecern is that pandemic grows, will governments still allow refugees access to district hospitals where the very sick need to be treated . Vonnie you mentioned a couple of populations but in europe, the epicenter of the virus was italy, spain, becoming germany and turkey now. Ofre is massive populations immigrants, asylumseekers, and refugees in these countries. Are they being taken care of . Dr. Spiegel i think it depends on every country every country is different. There have been many migrants and refugees in germany and sweden who will be receiving health care. There are some concern, as you ece and thee, in gre restrictive camps where they and the many People Health is very poor. That is certainly concern will they receive proper care . Then you have a million or so refugees in turkey. Turkey has been very generous for the Syrian Refugees but the capacity to provide care for such a Large Population when a government will also have to provide, and perhaps prioritize, their own citizens is concerning. Vonnie thank you for joining us. That was dr. Paul spiegel of john hopkins university. The Bloomberg School of Public Health is funded by bloomberg. Governor cuomo of new york is holding a News Conference from the Dells Convention center in new york city and you can tune in on live go. This is bloomberg. Live from bloomberg World Headquarters in new york, im taylor riggs. Live in toronto, im amanda lang. We are joined by our bloomberg and Bnn Bloomberg audiences. Here are the top stories we are following from around the world. U. S. Stocks gaining ground. The s p 500 climbing for the fourth time as investors see optimism in efforts to deliver faster Virus Testing and candidates for a vaccine. This after a string of negative on surrounding the coronavirus. Infections above 140,000 in the u. S. Plans tonouncing furlough the majority of its workers starting this week. Crude oil plunging to an 18year low. Prices dipping below 22, amid cratering demand and a ballooning surplus. Saudi aramco is weighing a stake in its pipeline unit in an effort to raise 10 million in cash. Quick check on the u. S. Averages. Reversing there Global Trends which had been for weakness. We are seeing strength today. Subgrouphowing every in positive territory. You mentioned west texas, 18year lows. We are seeing some in energy Group Getting a relief. Also some optimism that President Trump says he will try to broker some sort of a deal, talk to russia. Questions about how far that may go. Health care is one of the groups doing very well. Tech is also doing not too badly. Anything related to covid19, rapid testing, vaccine. Abbott labs and j j both beneficiaries there. Matthew mclennan is head of global value and the Portfolio Manager at first eagle investment management. In terms of what youre are seeing in the markets today, the fourth day of gains in five. What do we do with these rallies that keep on adding to previous game . Matthew i think one has to avoid jumping to conclusions here. The market has priced so far what it has seen. The market was vulnerable before this correction began, trading at high valuations. When the virus statistics started to turn very bad, the markets sold up sharply. We had extreme illiquidity, and then we had unprecedented physical fiscal and monetary stimulus. The market has responded to that. It is too early to say that we are out of the woods. We are not try to predict the path forward, but its fair to say that the market has priced the odds of a recession, but not necessarily pricing further complications. It is trading as if it is one and done. It is not clear that that is the case. Amanda one of the things that will happen in the days and weeks ahead, matthew, is we will start to see the measurement of the depths of the recession. As we start to get those for the u. S. And world, do we see the markets responding to them, or as the markets priced in a worstcase scenario that it can hover around for a while . Matthew if we look at all the recessions in the u. S. Going back to 1960, the market tended pricing for the worst of all circumstances. It has penalized, as you referenced, certain sectors of the market, where the damage is the most obvious. Energy, financials. What we still have not seen it is the emergence of Quarter Results and guidance from companies. The market will have to digest that. What the markets will also have to digest at some point is, when you have a hit to employment as large as this one is going to be, there is no way to avoid this metastasizing into a credit crisis of sorts. The market will have to kick its way through that. We have the emergence of potential sovereign credit issues here, given the size of the fiscal stimulus, unprecedented in peace times, and given the Balance Sheets around the world, they will have to look at which reason families will have credit issues going forward. Taylor talk about those credit issues. We have seen spreads come back in on a bb, blown out to over 900 basis points on treasuries. Now coming back to about 710. Have we seen the worst of the high yield spread blowout . Matthew we saw the spread blowout responding to the lack of liquidity in markets in general, and the unknown fear factor. Tighten helped spreads is the promise of the fed not just providing liquidity to treasury markets, but through these things that will be provided through fiscal stimulus, provided direct me to the corporate loan market. For theook at the etf investmentgrade bond, they treated off 20 into the sheet of the crisis, and that has rebounded. A lot of that is reflecting the possibility of liquidity coming from the fed. The problem that markets will have to digest at this point is less about liquidity and more about an assessment of solvency when we see what economic fundamentals are. This is a gut punch for the world economy. This is the largest demand hit we have seen in the post world war ii period. We will see the market shifting overtime to scrutinizing carefully individual company results. It is too early to tell whether we have seen the bottom or not. Taylor high yield could return to 20 this year with fallen angels performing. Do you agree . Matthew we dont try to forecast where markets will be. Making a specific forecast like that tells you more about the model of the forecaster than whether it will happen or not. Behink it would probably preliminary to call a bottom in the markets here. You can look at the other recessions we have seen historically. The market tends to find a level after a period of time. Typically, that time is not a month. It tends to play out over half a year, a year. It is too early to say we are out of the woods yet. What markets are responding to come as i mentioned, is the extent of the stimulus, but markets have yet to digest what happens company by company, sovereign by sovereign, musicality by municipality, as the demand finds its way through the system. Taylor now we want to get a check on the bloomberg first word news with Mark Crumpton. In madrid inolled a day of mourning as spain races to build field hospitals to treat an onslaught of coronavirus cases. The countrys Prime Minister tightened restrictions on the public with nonessential workers order to stay home during the easter period. Over the weekend, the number of patients who needed intensive care surpassed the number of available hospital beds. Greece cost Prime Minister is calling on lawmakers in his Democracy Party to donate 50 of their salaries over the next two months to fight the spread of coronavirus. The funds will be deposited into a special account set to tackle the disease. Greeks will also have to forgo orthodox easter celebrations to slow the spread of the virus. The United Arab Emirates says allowing private companies to temporary lower employee salaries and extend paid or unpaid leave, that as the coronavirus its businesses there. They must agree to any changes. The gulf nation has already , andd flights, shut malls rolled out a 35 billion stimulus package because of the virus. More than 600 cases have been reported there, though the death toll remains low. Prince charles has ended his period of isolation after testing positive for the virus. He is reportedly in good health after completing the sevenday quarantine recommended the u. K. Health authorities. Official said last week the 71yearold was displaying mild symptoms. His wife camilla tested negative but will remain in self isolation until the end of the week. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Taylor this is Bloomberg Markets. Im taylor riggs in new york. Amanda im amanda lang in toronto. Oil is hitting an 18year low today as the coronavirus craters Global Demand and surpluses rise. Now set to bes weighing a stake in its pipeline unit in an effort to raise 10 billion. With us now is the person who leads our oil coverage. , the saleo clarify price on this could be 10 billion. Why does saudi aramco need to resubmit cash . Obviously, for a long time now, even before this most recent oil crash, they have been trying to move away from oil as the main source of their revenue. Oilthe problem for them is prices are going with seemingly no bottom. Their budgets still rely quite a bit on oil revenue. The ipo of aramco is already done, the stock is down not surprisingly because oil has crashed. Now they have to look at asset toes to raise some cash, support their budget. Now we are hearing that they are planning this asset sale. Trumpputin call give you any relief that a short supply may abate . There was speculation that putin was targeting the u. S. And the sale industry by extension, more than wanting to start a price war with saudi arabia. Because the u. S. Has imposed sanctions on russia for a while, several companies, e especially in the oil sector. Even if trump negotiates with putin to drop the price war, what we can guess is maybe putin will seek some reduction of sanctions. Happen, trump will need congressional approval, and in this environment, that will not happen. Russia have not shown any signs that they will back off. Taylor thank you. Took a pause today after the best week since 2008. Atestors remain cautious policies aimed at mitigating the coronavirus. Standard chartered sees more to come for the precious metal, ope phone from new york. I want to get your analysis on what we have seen in the gold price dynamics in the last few weeks. Selloff asy had a people wanted dollars and cash. We have seen gold return to its status of essays as a safe haven. Is that matching up with the price dynamics you have seen in gold . It was really the dollar benefiting from safe haven flows, and as you mentioned, the need for cash has pushed gold prices low. The current floor seems to be materializing around 1450. As equity markets have stabilized, we have seen aggressive policy moves in terms of monetary easing, it has created a favorable drop for gold. Investors who were maybe not moving out of gold not because they needed a short edition, but because of reallocation needs, have started to rebuild. Much of that demand is returning to the market, even though we see weakness in the jewelry side. That safe haven the Precious Metals space, we are seeing supplies affected pay someone is happening with covid19 globally. Suki we see the Global Economy and Precious Metals market in particular experiencing both a supply shock and demand shock. We had seen a drop in demand from the auto side impacting platinum and palladium and rhodium, or the jewelry side, impacting gold and others, we have started to see supply shocks as well. Those have been in major precious metal producing countries. It is having quite a large impact. The biggest supply shock for the moment, platinum and palladium, but it means we have seen some shortterm dislocations in the gold market. Taylor has any of this changed your call on gold longterm, any new targets . Suki we continue to expect more upside risk. We think youll see a retest of 1700 in the coming weeks. Our quarterly forecast remains 1725, so we see more upside risk for the gold market. The macroe to think environment is supportive for gold, especially as recessionary fears build. The big factor here is the investor side. A built inve seen etf flows and tactical positioning, what we have been missing over the last year was response on the retail demand side. Over the past week, we have seen a sharp increase in the selling of bars and coins. Some retailers mention shortages there. We think that will be the factor that the next leg higher for gold. Of course, we have the unprecedented actions of global Central Banks including the federal reserve. You rethink how high we go with gold, even as we think about negative yields in the u. S. . Suki negative yields continues to be a key driver. Over the coming quarters come it will be a factor, why investors continue to reallocate to gold. In the longterm, its a question of what sort of recovery we tend to see after q2, into q3. Riskss time, we think the over this year are likely to the upside, and thereafter, we may see prices moderate somewhat. Amanda great to have you with us today. Appreciate it. Coming up, aris lucid conversation with James Bullard, president of the federal reserve. This is bloomberg. Amanda this is Bloomberg Markets. Im amanda lang in toronto. Taylor im taylor riggs in new york. St. Louis fed president James Bullard says the u. S. Can well afford to add trillions in Coronavirus Relief debt, and that it will not hamper the countrys ability to grow in the future. He spoke exclusively to michael mckee. James i didnt want to see pandemic relief, i would not call it stimulus, but pandemic relief. What i interpret the program as trying to do is stabilize incomes, stabilize businesses as we work our way through this investment in our National Health over the next couple of months here. On the unemployment, we have a blog on this. If you read it carefully, there is a way to bound the Unemployment Rate. It will be somewhere between 10 , and the upper bound is 42 , and that is because we are just identify vulnerable workers in this environment. , somes going to happen is of those workers will have to seek relief so they can pay their bills through this printout. We expect the Unemployment Rate to spike. Lets call that pandemic relief. Then they can pay their bills. Once the virus goes away, we can return to normal. Hopefully, if this all works smoothly, and theres a lot in the legislation as well, we can come out on the other side and get the economy rocking again. Wednesday is april 1, mortgage payments, rent payments are due, utility payments. Do we have a problem if people cannot pay their bills on wednesday . My sense is, of course we are in a crisis situation, but my sense is everyone understands what is going on now. It has been topic number one not just in the u. S. But around the world. I think people pretty much that the relief is supposed to enable people to pay their bills as best they can. There might be some delays in things, you would expect that in a crisis situation, but by and large, there are plenty of resources in this fiscal package to handle what were going to go through here. Michael the Mainstream Lending Program you announced is in the package. How does that work and when does that start . James that is in the design phase right now. Point ofrom a firms view, there are two ways to handle the crisis. One would be the traditional way, which would be to shut down temporarily and send the workers over to the pandemic relief, unemployment line. That has already occurred. We saw the claims number last week. And that is ok. The Unemployment Insurance benefits is beefed up, so they will get closer to 100 or 100 of what they would have gotten, had they just continued to work. That is one way to go. If the firm goes in that direction, they might lose connection with their workers. To gor direction to go is to the Small Business get a loan, which is ultimately forgivable if you meet certain conditions, mainly you keep your payroll more or less intact. If you go that route as a firm, you might be able to retain your workers, and when the startup occurs later, youll be able to have the same workers, and you dont have to hire all over again and get your business ramped up again. That might be a better way to go for many companies. If companies decide to go that way, we will see lower unemployment and uptake on the sba loan side. Amanda that was James Bullard of the st. Louis fed, speaking with mike mckee. China rejoins the wave of easing. Shery ahn is with us for more. Shery it was surprising to see this largest of expected rate cuts. There talking about sevenday reverse repo being cut to 2. 2 from 2. 4 by injecting 7. 4 billion of liquidity. Why is this interesting . The pboc has not moved for the past month. Introduced cash. As this chart on the bloomberg shows, we have seen money market rates coming down to an 11year low. This . S a victim of it may be the pboc commitment to global coordination. Help theirey want to economy as well as the Global Economy. It may also signal more cuts to come. Taylor our thanks to shery ahn. From new york and toronto, this is bloomberg. Is 2 00 in new york, 7 00 p. M. In london. This is Bloomberg Markets the close. I am scarlet fu. Romaine bostick will be with a shortly when we figure out a couple of technical difficulties. I want to point you to what is happening in the markets. We see a rebound continuing from last week. Stocks gained last week. Despite a pullback on friday, we have resumed the advance. The s p 500 and nasdaq have been positive from the getgo. The dow dipped negative briefly. The dollar firmer as well. Against theloser greenback include the mexican peso and South African rand unconcern a number of countries may downgrade. Fitch downgrading the s
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