Moves higher on reports that saudi arabia and russia could cut global output by 10 Million Barrels a day. This comes as the u. S. Cuts its Production Forecast ahead of tomorrows opecplus meeting. Welcome to bloomberg daybreak europe. After the rally and equities yesterday that took them above the march low, the cac 40 and the ftse in europe also into bull market territory. You have to ask yourself whether this is the biggest bull market trapped in history or the shortest bear market on record. When it comes to credit, you have howard marks saying maybe now is time to move from defense into offense. Cautions saying cautious positioning has served its purpose. Waiting for a market bottom. You look at bernanke and he talks about a gradual restart to the economy. Maybe we are all running before we can walk in that regard but it is not going to be the Great Depression according to ben bernanke area good morning. Nejra we were seeing futures negative in the asia session. Seeing some green on the screen in asia. U. S. Futures higher by. 5 percent. European futures remain a negative territory. The 10 year yield is steady after two days of moving a little bit higher. We are seeing Dollar Strength across the board so the dollar resuming its gains. The aussie dollar underperforming after s p cut its Credit Rating to negative and we are seeing oil bounce back after two days of declines. The u. K. And new york state have their deadliest days since the pandemic began. New yorks number of new cases slowed. It reported its fewest new infections in several european nations say they plan to ease restrictions. China ended the 76 day locked down in wuhan. Boris johnson spent a second night in the intensive care unit. He is receiving oxygen although he has not been diagnosed with pneumonia. Dominic dominic raab describes him as a fighter. Best is receiving the very care from an Excellent Team at st. Thomass hospital. He is receiving standard oxygen treatment and breathing without anysense does assistance. Manus joining us with more is bloomberg rosalind mathieson. Great to have you with us. What do we know about the u. K. s approach from here with Boris Johnson still in intensive care, particularly as we are in a third week of lockdown which was supposed to be thats right. We saw the highest fatalities in the u. K. Yesterday with 786 be losing their lives. The government is saying there are some signs for optimism in the numbers in the u. K. Because seem to beon rate stabilizing. They need to stay stable for a number of days beyond that. That said, there are forecasts that the disease will still have a large fatality rate in the u. K. Through the next week, including from the Imperial College of london saying that the u. K. Could be the hardest hit through the next week and as that is happening, we have a government that is without its Prime Minister. Boris johnson spent a second night in intensive care. He is still said to be stable, on oxygen, but not requiring a ventilator, but the longer he is in intensive care hospital, recovery from what has been a very serious illness, the bigger the questions are for how the government makes decisions going forward. Yesterday for the u. K. In new york, they both reported their deadliest days. What is the latest update in the United States . In new york, it has been the hardest hit state in the u. S. From the coronavirus, although Coronavirus Infections tapered off for a Third Straight day there and in new jersey, which is the second most hit, and the government said that they are looking at the new hospitalization rate and demand for intensive care beds. They say fatalities are trailing for where the virus is at and they believe social distancing is actually having some effect because you are seeing a slowing of the curve in terms of the new number of infections. Yesterday, it was below the High Water Mark which was almost 11,000 last friday. Down to around 8000 a day. The new hospital admissions rate is under 700 so the pattern that we are seeing is emerging both in new jersey and new york, the two hardest hit states in the u. S. Fatalities are high but the infection rate seems to be slowing. Theres some small signs of optimism there. Manus thank. Rosalind mathieson, our government and international editor. Breaking news coming through on sweat bank on this bank. Credite going to see impairments of 2. 2 billion Swedish Krona in the first quarter. This is specifically to do with the virus. This takes us back to what jp morgan and jamie dimon talked about yesterday. He is concerned about a recession similar to 2008. First quarter credit impairments of 2. 2 billion and they saying their total expenses this year are going to be higher mainly to do with the antimoney laundering probes as well, so guidance on credit and the reality of q1 for the bank. Narrow. Ejra nejra European Finance ministers are planning they failed to bridge the divide. One Sticking Point is the idea of joining debt. Talks have been continuing through the night. A final News Conference has been pushed back to this morning. Wuhan is seeing a mass exodus as the city relaxes its lockdown. 55,000 people had train tickets out of the city today and flights are resuming from the international airports, but fear of a resurgence in infections means some restrictions are in place. Housing compounds will retain the power to put residence under lockdown again. The Worlds Largest Oil Producers are inching closer to a deal after the u. S. Senate sees production dropping dramatically by over one Million Barrels a day. That forecast helps pave the way for saudi arabia and russia to coordinate their own output plats at tomorrows virtual opecplus meeting. They could agree to reduce global output by about 10 Million Barrels a day. There will not be a rapid recovery according to ben bernanke. He said the u. S. Will have to restart gradually. He sees the economy 30 or more in the Second Quarter. All goes well, the economy should be in a better position in a year or global two. News, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Manus. Dalio coming up, ray thinks there are better assets to holla bend cash. Rates low and respond to the coronavirus pandemic. That is coming up. This is bloomberg. Manus particularly those that will increase in value during reflationary periods. Us. Guest joins you do not believe in all the conditions for a sustained equity market are in place yet. Turn to howard. He is talking about credit and he said cautious positioning has served its purpose. Waiting for a market bottom is irrational. Between you and howard, what do you need to see . In order to have an improved sentiment, we will need to see two things. First that the measures regarding the epidemic are know,g well, so as, you today is today that in wuhan, they are starting to reopen, so we need to monitor quite closely what is happening in asia to make sure there is not a second there and wemic also need to see a continuation of improvement in the curves of the epidemic in europe and the United States. The second thing that we need is data, that the economic and more importantly, the indicators, are in line with kind of a vshaped recovery. If not, i would say we would have to switch into a second scenario where we could think that the economic shutdown could extend beyond 2020, in which case it will be positive for the market. One thing is crucial is the ability to test people that are going back to work. Need to see improvement in the ability to provide testing. Nejra in terms of the eventual recovery, you are in the camp, which i found interesting. One of the things you emphasized in your outlook is having liquidity in the portfolio. How are you maintaining liquidity in your portfolio . Stephane that is a Crucial Point in our strategy. Because the environment is a little bit uncertain, and we are kind of at any point in time, analyzing data to determine if we are in the vshaped type of recovery, meaning we expect the recovery at the second half of 2020 or if we are in the nike swish scenario, as we say. In this case, what we want to do is be flexible in order to protect assets. That is very important that we stay in the good assets and in order to do that, during the first quarter, we have reduced exposure to the less liquid segment of the market, meaning high yield and emergingmarket debt. We have been reducing our exposure to those two segments and we have been replacing that and buy andcash exposure to gold. An exposure to gold. Manus with this lack of conviction that there is a foundation of a true base, you are recommending a number of quite defensive positions. You said you are adding additional forms of protection. Of course, always drawn to a put spread. On thee the put spreads additional levels of protection youre taking . It is basically a strategy in which we are selling a put. 20 below the market level, and the closer to the market level. Lets say 5 , which means our client portfolio are protected 5 andrawdown between 20 , and clearly, that reduces the cost of the straight put strategy and we have implemented this strategy for 10 of the for ourllocation portfolios. The big advantage of that profile is it gives a to the performance of the portfolio, which will we are keeping the equity exposure. We participate on the upside but we will be protected for the more negative scenario to unfold. In a in nejra cautious stance like that, why are you underweight for dollar . The dollar, think before the crisis, had a huge advantage in terms of the Interest Rate, you know, because Interest Rate in u. S. Dollar was positive when close to zero, with most of the other currencies. The fact that the fed have cut quite aggressively Interest Rates, these kind of advantages in terms of yield for the dollar disappear, and theres also the element that we think the dollar is a little bit overvalued from a longterm perspective. Our guest stays with us. Now, as we help you navigate the coronavirus news cycle, here is a look at the key events to watch out for today. We will track the impact of the pandemic in retail with releases from Companies Including tesco after 12 30 u. K. Time. We will bring you our exclusive interview with the ceo. That is after the giant suspended a Share Buyback at the end of march. We will get an update from the British Government at the Daily Briefing with Boris Johnsons will in hospital. At 7 00, the fed releases minutes from its special march 15 meeting. Testing times as europes finance minister struggles to come up with a united plan to limit the Economic Impact of the coronavirus. We will discuss the measures being discussed. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london with manus cranny in dubai. Divisions within the European Union are threatening to derail or delay attempts to put forward a united strategy to mitigate the Economic Impact of the global pandemic. Talks during an emergency teleconference went on through the night as finance ministers struggled to agree on a plan. They are due to hold a new, News Conference at 9 00 this morning. To get your thoughts on european versus u. S. Equities given that, in europe, firmshan 100 stoxx 600 have canceled or delayed dividends and theres far fewer than that, less than 50, i believe, that have done that in the u. S. Equities make european more or less appealing based on dividend payouts . First, we do not base our investment process on dividends. For us, it does not matter so much. We focus on having, you know, Quality Companies that are, kind of orientated for the longterm. So because, you know, dividends can be quite, i would say, do it, it could be just precautionary measures in orders in order to keep liquidity. It does not mean it is a bad thing for the long run. Now, what i find interest in that, in terms of valuation, european stocks have been suffering for quite a while, since the end of 2018, where we were at the time expecting a recession based on the Monetary Authority raising rates. What you would observe his european stocks have lost in terms of valuation, when actually, the s p 500 is no at the same level despite the big pandemic. Highly know, from a pure valuation point of view, stocks of a little bit more attractive. It has been the case for quite a long time, i must admit, so theres also some aspect in the u. S. Stock composition, especially everything which is regarding technology or telecommunication, where the best companies are located in the u. S. Stock market, so altogether, we do not have a strong view in terms of preference between u. S. And european. We are slightly overweight europe versus the u. S. Due to the valuation argument. Manus thank you. The dax is back in bull territory. Coming up, all about oil. To help you stay informed of the latest news just say coronavirus into your xfinity voice remote to access Important Information and special reports from around the world. And to keep your kids learning at home, say education to discover learning collections for all ages from our partners at common sense media, curiosity stream, history vault, reading corner and many others. For more information on how you can stay connected, visit xfinity. Com prepare. Manus good from bloombergs middle east headquarters in dubai. I am manus cranny. Nejra cehic is alongside me. Your top stories this morning. New york state and the u. K. Reports their worst daily tolls death tolls since the coronavirus pandemic began. Prime minister johnson your area finance ministers struggled to Recovery Plan amid euro area finance ministers struggled. The conference is at 9 00 a. M. Oil meals higher on reports saudi arabia and russia could cut the global output. This comes as u. S. Cuts its Production Forecast ahead of tomorrows opec meeting. There you go. If you look at the volatility in the oil market, it has global consequences. Is that the tokenism that perhaps the u. S. Will say we are already pitching in with cuts . My favorite line of the day is cautious positioning. I am in the cautious positioning camp. Served its purpose waiting for a market bottom is irrational. I can be highly irrational some days. Good morning. Nejra never, manus. On the volatility point, i was reading a note yesterday. He said the vix is elevated compared to the move index so when you get volatility like that in equities versus treasuries, it can be better return for equities. Yesterday, we saw some powerful moves to the upside. The s p 500 briefly more than 20 above a march low and also the cac 40 in europe, the dax, and the ftse in bull market territory. The question you have to ask yourself is whether this was the recordt bear market on or whether we are in a bull or value trap. Manus lets take a look. Is there a certain level of irrationality in terms of the buybacks that have been canceled, dividends suspended . We are assuming some sort of normalcy that ben bernanke sets will take time. They personify the story of the markets this morning. It drove this 20 rally. Warns the Second Quarter of 2020 could go into q2 of 2008. Efg says they are torn between green and fear. Put strategies to the downside and to the aussie dollar. You are looking at a potential downgrade. They are cut to negative by s p from stable and of course, it was disappointed by the qe program in australia. Brent up. Look at the emfx complex. Our guests said they are scaling back some of the em exposures. The emfx board for Morgan Stanley said it is time to get bullish. 6 upside. This is just three out of the basket. 3 upside. They say buy a highyield ors. That has begun to normalize highyielders. That has begun to normalize. Nejra the latest on the coronavirus. The u. K. And new york state had their deadliest day since the pandemic began. New yorks number of new cases have slowed. Av reported its fewest infections they reported their fewest infections. Boris johnson has spent a second night in an intensive care unit. The british Prime Minister remains in a stable condition and is receiving oxygen although he has not been diagnosed with pneumonia. Dominic raab described him as a fighter. He is receiving the very best care from the Excellent Medical Team at st. Thomass hospital. He remained stable overnight. He is receiving standard oxygen treatment and breathing without any assistance. He has not required any mechanical ventilation or noninvasive respiratory support. Thes the very latest on p. M. , who remains in icu. Lets get the latest on the oil market. The hope is for opecplus to deliver cuts to offset the demand destruction implosion, whatever superlatives you choose from coronavirus. According to a delegate, saudi arabia and russia are looking to create a reduction in Global Production of 10 Million Barrels a day. Meanwhile, the u. S. Has cut it 2020 outlook forecast output forecast. Nejra and i. Ith we are rushing toward the close of the week toward an opecplus meeting and g20 meeting. The are the consequences of demolition and implosion in oil prices . We have seen a recovery. Talk me through what it has meant in the past three weeks. How does that play out in portfolio analysis . Stephane this is one of the rational predictions in emerging debt because the indices on emergingmarket debt are very much geared towards oilproducing countries. With thehe opecplus u. S. Reach an agreement in terms theutting a little bit of supply, and in order to have a material affect, we will need Cutting Supply between 10 to 15 Million Barrels a day, which is quite a big number to achieve. The issue is not so much on the supply side than on the demand side. And what we think is that the equilibrium price for the oil in the future, lets say in 12 months, will be around 40 u. S. Dollars a barrel, which caused a lot of problems for many countries. Oil producers usually have a budget that is at equilibrium between 50 and 80 a barrel. In equilibrium price for oil at 80 a barrel. You recommend against Holding Energy companies both from a credit and equity perspective. Is that based on your oil outlook or on a broader strategy . Stephane there is a combination of things. The oil outlook plays a role. But also, there is sustainability. It is a little bit that Oil Companies are facing two issues. One shortterm issue, which is the imbalance between supply and demand, but more importantly, in the long run, they are facing a lot of issues regarding the environment and sustainability. Up bp i have just pulled and i have gone to i am looking at dividend yield of 9. 49 . 10. 98 . I could go on. Risk in buying 9 . What is my risk in buying total . You are not a dividend buyer, so does not of that tempt you . Stephane no, because when you are looking at that, you are looking at historical data, you are looking at what the dividend of bp was historically compared to todays price, right . You have no information about what the bp dividend will be going forward, bp or any other of those companies, so what you have to do is to focus on Good Business models that are Quality Companies that will produce a lot of cash flows going forward. Not focus on historical data. It provided a lot of dividend in the past to be able to maintain those going forward. Nejra i hear the phrase strong Balance Sheet, strong Balance Sheets, strong Balance Sheets, over and over in terms of credit and equity at the moment. In the equity space, where does that mean you would want to advocate if you start redeploying more cash into stocks . As we were just saying, there are sectors that interested. Y more health care is obviously one. You know, we are also focusing our allocation to utilities because very often, you know, they have a resilient business model. Communications services, as i said. Pharma, biotech, and also consumer staples. In terms of sector, what we tried to avoid, as manus was companies, energy, nejra thank you so much for joining us this morning. Now, nissans top priority is to conserve cash. We have been talking about Balance Sheets while making better use of assets as the pandemic has the auto industry. That marks a shift in strategy for the carmaker which had previously tried to find buyers subsidiaries. Ie take a listen. In our pensacola prioritization and focus about indonesia, the closer is not the end of the business. It is the start of the rebirth of nissan branded indonesia, and we are getting into indonesia with our original dna of suv and suv. With venue we need to serve the 300,000 customers which are driving the nissan cars in indonesia. The plant is concerned. We do stop the plant for the time being. However, with this strategy, we do hope we come back with a facility in indonesia. Nejra when it comes to your u. S. Business, we have seen nissan now putting 10,000 u. S. Workers on furlough. You have called this a temporary layoff. Does that mean you will be rehiring all of them after the pandemic is over . Absolutely. The plants are closed because we want 50 of the people first, and this is what we did in europe. This is what we did in the u. S. , and now, we are following the regulation in the practices in each country. What doest about the current environment mean for the introduction of new models, in particular, the muchhyped rogue . The new models are for our growth. Model continuing our new development because we do believe that once the Customer Confidence in the market confidence comes back, we will be utilizing our new production, the new technologies, that get the momentum once again in the business. The pandemicll of concerns, it feels like the evergreen worries like brexit have taken a backseat. What are you doing to prepare for brexit . At thence of trade talks moment. Would you be looking at a closure of that side . Ashwani basically, one month before i had the opportunity to they have a great history for nissan. We are there for the last 32 years and we have produced more than 10 million cars. Out of this plant, we have created a new segment in europe, which is called crossover suv with kashkari. Duke, whichlaunched is really doing great. As far as nissan is concerned, we are continuing with our regular business in europe, using the plant. Follow the local business practices. The impact on brexit. Hange the landscape, we do the business in europe. However, we do believe that anticipating the impact it can have on the automotive industry, knowing that nissan is the biggest automotive manufacturer in the United Kingdom. I do believe that the talks between europe and the United Kingdom will be business friendly conditions for the auto market. Nejra when it comes to managing cash for nissan, we have seen you struggling a bit when it comes to issuing papers since september. We have downgrades raising the cost of capital. How will your Balance Sheet look if this pandemic goes for much longer than the summer or the fall . Obviously, these circumstances are all putting a challenge on our financial situation. However, with the support of our banks, the government support, we are continuing with our cash management. Isdo believe, with what happening today, it is challenging, but it is not impossible, and we are continuing with our regular under the circumstances. Was the nissan coo, ashwani gupta, speaking exclusively with shery ahn and haidi stroudwatts. Coming up another exclusive for you. A man who knows a thing or two about bond markets. He joins us next. Manus this is bloomberg daybreak europe. I am manus cranny in dubai. Nejra cehic alongside me at home in london down next guest is the ceo of aviva investors. Thank you very much for joining us this morning. Context, you talk about capital preservation. You say it is a matter of design and not luck. You also say you have to construct portfolios with a variety of futures that may never materialize. What is the most important thing that needs to happen for you as you look at the context of markets right now, for capital preservation . Manus. I think what you are thinking about capital preservation and different futures, what you are really trying to recognize is with an element of humility that no one can put up the future and i think the situation we have entered into at the moment really underscores that. When we look forward, there is a multiple of possible futures and possible routes out of this, you know, so a number of Fund Managers at the minute might say it has suddenly become epidemiologists or virologists, and the fact is we do not quite know how long we are going to be in knocked down for different industries. We also do not quite know how much damage is going to be done to Underlying Companies the longer they have to live without cash flow, so we have to countenance a variety of possible futures area what we see at the minnen is it is time for balance portfolio, not taking aggressive directional risk, but looking within sectors, with inequities, within credit to find opportunity. We are not being very heroic directionally at the moment. And to be honest, in current portfolios, that is the way we tend to position our portfolios all the time, with not having a strong directional bias but trying to find opportunities to protect capital. So i think the episode we have seen in recent weeks and months playing out, it really underscores a philosophy of not being too arrogant about our ability to predict the future. That said, have you made changes at the moment to take a more cautious stance with less exposure to cyclicality . Euan we did. Simple in terms of more balanced fund type structures, we started the year two modest economic expansion and positioning their portfolios for that. Slightly overweight equities, a bit of credit exposure, that kind of obvious positioning when you hold that view. I think with the economic picture, we are looking at a couple of quarters of at least , economic 15 decline. A pieceoticed there was of data coming out from the International Labor organization saying 6. 7 of working hours have been lost globally in this crisis. Ofould wager that the rest the working hours are not as productive as we might they might normally be because a lot of them are being spent dealing with the crisis. We are expecting a Major Economic hit. That is obvious. We also felt that, particularly a few weeks ago, when you had the opportunity with treasury yields going up, at the same time, equity markets are going down. We think that was an effective hedge funds. We are selling the treasury positions and equity positions and traditional riskoff strategies purely at the same time as equities were falling. That gave us an opportunity to rebalance and buy more treasuries as well as slightly reduce their equity position. We were in a good position. Thats proved to be successful for the last little while. Selling we might regret out of equities in the recent rally. The policy response has been beneficial to treasuries for some of those decisions. Fromve actually benefited taking a more balanced position that allows us, with more confidence us we will take that pick that theme up in just a moment. Stay on the line. We have more work to do ahead. Aviva,th euan munro from nejra cehic, and i. Nejra this is bloomberg daybreak europe. I am nejra cehic in london with manus cranny in dubai. Still with us is euan munro, ceo of aviva investors. Instead, you are encouraging your team to look through shortterm uncertainty and identify longterm opportunities where markets are pricing asset wrongly. What dislocations have they found so far . Euan it is may be easy to straight with a stock example, we feel, and a crisis like this, there is an expression that the baby is getting thrown out with the bathwater. For example, in italy, obviously, because of intensity of the crisis, there has been generic selling of italian assets. But a stock Like Telecom Italia has been so aggressively as well. We looked at the leverage on their Balance Sheet, and we are looking at the fact that come in italy, as in the rest of the world, telecom type activity is skyrocketing. People are doing more videoconferences and calls, and we did not feel that that was justified. Telecoms are interesting. Chip stocks, people move on to more electronic means of communication and so on, changed the working prices. We have a basket of these memory chip stocks, and these can be small beds, if we are right and working practices change. We should not be impacted in the same extent as the generic stock market. Never we have to go quite got to credit but we know where they dislocations are and perspective from you and munroe, nejra, and myself. Lets see what happens. Matt and anna edwards takes you through the European Market open, right here on bloomberg. Anna good morning. Welcome to Bloomberg Markets european open. Londonna edwards in alongside matt miller in berlin. Say today, the markets almost there. Futures trade flat to mixed as the euro stock 50 is less than half a percent from turning to able market. The cash rate is less than one hour away. New york state and the u. K. Report there
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