This is bloomberg surveillance. These are what the markets are doing. U. S. Stocks and bonds closed today too today due to president s day. We are edging up a bit with buoyancy on the market on the backs of investors taking encouragement from china. They will do more to support their economy which is why we in gold down and yen down. That is a good litmus that we are on a risk on. Spoke the yousef managing director of the imf about the outlook on the Global Economy and the active the coronavirus. All hear from the interview early. First, let leanne erin. Leanne japan is it possible for sex after taking another battery the sales tax hike in the last and that economy at the low end as the coronavirus it activity drunk 6. 3 in the final three months of the year. That would be the biggest slide since the previous tax increase in 2014. Tensions between the u. S. And europe over huawei ramped up another notch this weekend. The u. S. Ambassador to germany tweeted a warning to countries that use the Chinese Telecom giants technology. He said it would risk intelligence sharing with the u. S. Hopes for an emergency opec plus meeting are now fading. Saudi arabia has given up on its push for a gathering this month, but russia is not keen. The alliance is likely to stick with the scheduled meeting in march as the outbreak continues. Goldman sachs has cut its crew demand by almost half. The eu is set to launch a grand plan for technology and a challenge to the u. S. And china on the many new rules for Artificial Intelligence. And plans to make data Centers Carbon neutral as a part of the eu digital strategy. It will serve to rein in u. S. And chinese companies, potentially to the benefit of european businesses. And, the u. K. Is setting up its goals for postbrexit trade talks. Brexit negotiator speaking in brussels today. That is as the two sides of work to flesh out an agreement by the end of the year. The u. K. Says it is not seeking special treatment, but wants a deal similar to those agreed by the eu with other countries. Global news 24 hours a day on air and on quick take, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you. Lets bring you an update on the coronavirus situation. China says the number of situations climbed above 70000 and considering delaying its most highprofile political meeting for the first time in decades. Selina wang joins us from beijing. If you look at what we heard overnight, have the number of cases gone down or the number of deaths actually can gone down . Selina wuhan hospital is expecting a turning point. Over the weekend, we saw the number of new cases starting to fall but today the virus has not reached its peak. Hubei reporting 1993 new infections today which is slightly more than yesterday. I want to point out that has been more than 10,000 people that have been discharged. You can still see the effects of the coronavirus across china. In beijing, the streets are very quiet. Many stores and restaurants are still closed, but this little more activity more recently as people slowly start to come back into the city and resume work. Travel restrictions do remain. Local officials are under a lot of pressure to try to prevent the spread of the outbreak in their area, while also trying to get the local economy up and running again. Bloomberg economics estimates china has only been running at 40 to 50 capacity in the past week in beijing. The government has ordered anyone returning to the city to go into a 14 day self quarantine. You are starting to see the effects on the government in beijing, with china considering delaying its most high profile of annual political meeting for the first time in decades. It has been planned for march 5 with 3000 members gathering for two weeks. They discussed some of the most important issues around annual economic targets, defense spending and other key policy decisions. Even though this is not a complete surprise, it shows an acknowledgment the virus is disrupting basic government activities. Francine thank you so much, selina wang. Joining us for the hour, chief strategist at ubs investment bank. Great to have you on the program because i have a million questions about the coronavirus, the impact on the economy, and how you see the strategy going forward. First, we come from the premise that pboc can do a lot more than needed . No. The pboc did not want to do a lot last year. It is not just the pboc, it is also the state council. Three global cycles. Thethree of them have been checkbook of the chinese state. Last year when they were going through the shots on tariffs, they did not increase their stimulus in a big way. There will be more stimulus, fiscal stimulus this time. There will be a massive easing of property regulations. There will not be massive stimulus. Growth is how you quantify, you will probably move up by 1 to 2 . Thats comparable to six percentage points. Francine this is much worse than trade, is it not . Or is it worse because of the timing, right after the trade war . Bhanu the second shock makes it much worse. They dont have that much room to give you more stimulus without pushing the Property Market into a bubble. That is something they dont want to do. They will give you stimulus, but i dont think we should expect the same kind of stimulus as 2016. That spreads in some parts of the market. Francine is there anything a lot of the analysis i see brings it back to 2003. Pboc also has a very different tools to deal with it. Bhanu at least three differences. At first, the acute impact is much higher than sars. Wean in november of 2002 and began talking about it in march of 2003. This has been cut relatively early, but it effectively shut the place down. The impact of the economy is going to be much stronger. Number two and perhaps most important, china stature in the Global Economy trade, liquidity, credit, tourism has increased a significant. Third, china does not have the same policy room available as a 2002. The impact is much higher and the policies available are much lower. We can only hope the fatality the same lower and cases outside of china and that gives you room for hope. If this persists, the shock to the Global Economy would be much higher than sars. Francine what are the data points you look at . The number of cases, number of deaths . When it starts affecting the economy . Bhanu the flow of cases on a daily basis is what you look at. So far, 65 of the cases are in one province in china. 98 of the cases are just in china and that gives you reason for hope. Francine what happens if it impacts the emerging economy . Outside ofhis goes china you can still think of them as a developed emergingmarket. Heaven forbid, if it goes to other countries which have Poorer Health venture Structure Health infrastructure, that could be a major catastrophe. I dont think we are there and i hope we dont get there. Francine we keep on thinking about the tragedy and the huge lossoflife, but away from that, could this tilt the World Economy into a recession at this point . Bhanu not that far from a recession. En that china is basically we will see negative growth in q1. On the yearend term, it will be 300. It is possible Global Growth is close to 2. 9 . 2. 6 . Reshold is around make no mistake, you could be close to a global recession. You were coming off a shop of traders. Francine we will talk next about the tool Central Banks have at their disposal to try to counter that possible shift. Bhanu stays with us. We spoke to the managing director of the imf on the outlook of the Global Economy and the impact of the coronavirus. We will hear from that interview next. This is bloomberg. Francine economics, finance, politics this is bloomberg surveillance. The managing director of the imf Kristalina Georgieva says the lack of deeper reforms in the Global Economy is hindering the outlook for growth, especially now that the coronavirus is digging prospects of a pickup. Askedoke in dubai and was of the virus could cause a downward spike in economic activity. We expected to be notable, yes, because today, chinas share in the World Economy is quite significant. Gdp, 19 of the world. Chinas tourists are an important part of the tourist industry. On every dollar spent on tourist, . 80 comes from china. 28 offacturing terms, manufacturing. A month of reduction in activities negatively would have an impact on china. Some of this would be translated to the rest of the world. Again, we need to give it a bit of time. On the more positive side, we have seen china taking very aggressive measures in terms of containment of the virus domestically, but also in pouring liquidity into the economy. Billionvalent of 115 from peoples bank of china. Cutting Interest Rates. Driving stimulus already in the direction of affected regions. Herest Important Message is actually a broader message. Ofdo live in an era uncertainties. We just saw a reduction of trade tensions and the coronavirus hits. Yousef i was going to follow up on that. If i may, flesh out more detail. You came off the backs of these trade tensions and then you have the coronavirus to deal with. On the imf level, what kind of tools are you looking at for a potential synchronized response to mitigate the downside . Fact very much valley the that when 2019 shaped up to be the worst year since the financial crisis, Central Banks synchronizedh a rate cut and more monetary easing, what they had done is the equivalent of half a percentage point boost. We also saw some fiscal measures, around 2. 3 . Boost coming from countries that have fiscal space and used it. What is missing however is the ine aggressive swing Structural Reforms. Expect moree we attention. Obviously, Monetary Policy space is shrinking. And, the reliance of fiscal measures as well as Structural Reforms to boost growth ought to be stronger. Bhanu that was the imf managing director Kristalina Georgieva. Francine still with us is bhanu from ubs. We are hearing the imf managing director talk about the World Economy. Wes not like you are saying be on the cusp of a recession. If you look at the markets, are they behaving the way they should be . Bhanu we are 2. 9 Global Growth. We have a little bit of buffer. Q2, we will is in see a decent rebound in Global Growth. We are not forecasting recession. If this persists, we will go into recession. Across asset classes, bond markets are telling you we are heading there. The equity markets are not. The base metal arena has been hit the most. That is telling us copper is struggling to rebound. Commodities and rebound, oil is struggling to rebound. Equities are telling you this is a shock. The very dissident messages. Francine is this because equities are much more difficult to price . If china collapses or significantly slows down, it impacts the demand for Oil Straightaway or is it because they are looking at fed . Bhanu i think they are looking at liquidity more than anything else. If you look within equities and the stocks more sensitive to liquidity, have done much better than the valleyue stocks. The value stocks are Energy Prices rising, auto sales going up . Those stocks have been going down. The growth stocks, tech and liquidity driven, have been better. I think the market is looking for much more liquidity. You have seen fed pricing change quite a lot. Francine ok, are they right in doing it or is the market mispricing . Bhanu i think the market is impressed mispricing. If it continues into q2, equities would be very wrong. Francine let me bring in this chart. Thanks to hilary clark that brought me this morning. Correlation between gold and the dollar. A negative correlation that annette year low. What does that tell us . Bhanu the correlation is not as negative as it used to be. It tells you that gold and dollar are moving roughly the same direction which does not typically happen. If this is a strong dollar environment, gold selling off the the fact gold is rallying shows you this is not a strong dollar environment. We should be thinking this is a slightly weak euro environment. It is trying to because all this worry about growth and the rest of the world. This is not Dollar Strength, it is weakness in other currencies. The subject is not the dollar. We will see the dollar weakened. Francine this changes everything. Bhanu i do think so. If growth in the rest of the world because of the coronavirus, but because you are not getting support from the rest of the world, if that is correct, over the longterm that must impact the dollar. The dollar is going to react. It is not where the story begins. It is going to react to weakness in the rest of the world and it will be stronger over the medium term. Francine what does that mean for fed policy . Bhanu i think the fed will have to be more dovish. The market is already saying it is very interesting that after the coronavirus, the rba, the pricing did not change as much as it did for the fed. The fed is pricing close in two cuts which is quite a lot. We wouldnt be receiving. Within canada, switzerland and australia gives us better opportunities. Francine we had an important interview with Laura Metzger on friday. Bhanu stays with us. Coming up, zuckerberg in brussels. The facebook chief executive will be facing eu officials. What you need to know about that is coming up next. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua. Facebook chief executive officer Mark Zuckerberg is in brussels meeting with Senior European Union officials. The social media giant is on a Charm Offensive to ease tensions with regulators after coming under scrutiny over user data, privacy and taxation. Joining us now is maria tadeo. Expect, are will we we expecting from zuckerberg today . Know is this is the first time Mark Zuckerberg comes to brussels in almost two years. We know into years, the company has come under huge scrutiny from european regulators when it comes to privacy issues. Data, hate speech, freedom of speech on the web. Last time he was here, it was a rough trip for Mark Zuckerberg in 2018 when he ended up apologizing to european lawmakers for not doing enough. Operation ora pr you can read it as a Charm Offensive, but you can look at the trip as the weight Mark Zuckerberg is trying to preempt regulation in the European Union. What is clear is for european authorities, they want to go ahead with tax reform when it comes to Digital Services and they also want to go ahead with reform when it comes to data, Data Protection and industrial data and industrial data in the European Union. It is interesting that today he is writing an oped in the Financial Times where he is saying, actually, facebook is in favor of more regulation if it means a Better Service for the web. When you look at freedom of speech on the web and tackling hate speech that should be done in both cooperation with european government and authorities. These are decisions that companies alone should not be taking. It is a shift in tone from facebook. Francine why is europe so much more aggressive when it comes to regulation and regulating big tech and anywhere else in the world . Maria theres two reasons for that. When you speak to gary been a bit of european officials, they will say they are concerned that the u. S. Has total dominance in the market. When we look at china, we are concerned that some of the practices. They are bad when it comes to freedom of speech and access to information on the web. Of course, there is the issue of the digital tax. The third pillar is facebooks plan for its cryptocurrency which europeans find very concerning when it comes to the sovereignty of eu states. Secondly, the eu feels for a very long time, they had a very laissezfaire attitude towards legislation. In two days time, the eu will unveil more regulation proposals for Artificial Intelligence. Francine thank you so much. Maria in brussels. This is bloomberg. Hi were glad you came in, whats on your mind . Can you help keep these guys protected online . Easy, connect to the xfi gateway. What about internet speeds that keep up with my gaming . Lets hook you up with the Fastest Internet from xfinity. What about wireless data options for the family . Of course, you can customize and save. Can you save me from this conversation . That we cant do, but come in and see what we can do. Were here to make life simple. Easy. Awesome. Ask. Shop. Discover. At your local xfinity store today. Francine coronavirus cases in china climb above 70,000. Beijing considers delaying its march congress. The imf warns it could damage the Global Economy. Japans economy shrinks. The nation has its worst contraction in five years as a hike in the sales tax dampens spending. The coronaVirus Outbreak could tip the economy into recession. And, awaiting the overhaul as hsbc prepares a major restructuring, reports suggest leading external candidate stephen byrd has ruled himself out of the top job. 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