A fairly strong currency move this week. Time now for global exchange. We bring you todays market moving news from all around the world. From hong kong to london, frankfurt and new york come our bloomberg voices are on the ground with this mornings top stories. In asia, the coronavirus continues to spread, with south africa reporting a surge in was also inand that south korea. Joining us is stephen engle. Give us the latest. Stephen you have another revision out of china as they get previously unreported cases out of five different prisons in three provinces. You have those supposedly isolated clusters adding to the total again. They revealed the numbers and then added more. In some cases, more than 200 ands in chengdu province another in hubei province. More provinces could report outbreaks as well in those supposedly isolated ecosystems like prisons. As well, we are seeing additional clusters in other parts of asia, not just china. You are seeing a surge in cases of another 52 in south korea. They have now 208 cases, as well as one death. We are seeing another cluster in the central city where the virus has gone through a religious sect. There is heightened concern in south korea. Japan, they are seeing areas of infection in previously unconnected areas as well. Cases, as well27 as three deaths. Is Economic Impact continuing to rise. We are getting warnings from the japanese government, the to 46. 7. Ing the Economic Outlook not looking great as japan is looking forward to the summer olympics in just a few months. We are also getting news out of germany that the pmi might have been up more than expected. However, export orders plunged more than expected because of the virus outlook. Finally, the International AirTransportation Association is seeing a likelihood of its first big revenue drop in 11 years since the Global Financial crisis because of diminished air travel in asia, and in particular, china. Alix thank you very much. The spread of the coronavirus did spark some Foreign Exchange traders into action, and the dollar emerging as a winner. Laura cooper joins us from london. Not only the dollar, but also yields moving relentlessly lower. Walk us through the reaction since yesterday. Laura i think we are seeing the dollar bid testing those threeyear year highs. Andook at the dxy treasuries continue to grind lower. Yesterday we did see risk off moving into equities. That did pare back in the later part of the session, but we are seeing treasury yields sink to lows like we saw last september. With a risk off day likely today on the back of the spreading coronavirus fears, that certainly looks to put yields under pressure through the session. Particularly as traders pervak positions as traders pare back positions heading into the weekend. I was going to mention the european pmis. We did see this provide a temporary bounce to the euro, so there was some dollar weakness, but ultimately, when we look beyond the headline figure of this up beat report in germany, certainly there are signs of deterioration for the trajectory. Ultimately, we are seeing that the coronavirus supply chain disruptions are underpinning the headline number right now, but we do expect this to turn lower because new export orders actually plunged. That does tend to be quite a prominent leading indicator, so something to watch there as well. Alix thank you very much. We want to stay on that topic, where the eurozone economy shows some virus resilience on the top line, but youve got to dig a little deeper. Euro area pmis unexpectedly accelerated. Paul gordon has coverage of western European Central banks. That is the headline. If you dig a little deeper, walk us through what you have seen. Paul it has been a somewhat difficult report to get to grips with because you have to look at your Previous Report be on the headlines. Numbers out of japan and australia, the idea was that they were dismal, and you would see a dismal picture in europe as well. It hasnt turned out that way. The numbers were strongerthanexpected. Economic activity is at the highest in six months. However, that is largely services. Those are doing at least robustly. Manufacturing continues to face weaknesses. Coronavirus has messed with the report, but the bottomline, the one to remember, is that export orders are down. Expectations for future output are down. Generally, the Manufacturing Sector remains pretty tricky. Coronavirus adding to longstanding structural lows in european manufacturing. The hope was that was bottoming out. That could still happen, but at the moment, uncertainties about the coronavirus remain preeminent. Alix thank you very much. Stay with us because in the next hour, philip lane, ecb executive board member, will be joining us. Now we turn to u. S. Earnings. Deere beating Sales Estimates and left its forecast for the year unchanged. Joining me is Brooke Sutherland of bloomberg opinion. Was this a surprise . Brooke i think it was surprising just that we have not had good news out of deere for quite some time. I should caution that this is not necessarily a return to growth, but at least theres no longer deterioration. That extends to the overall market. They are still looking for Agricultural Equipment sales to be down 5 to 10 globally, but that is not any worse than they expected in november. That includes the forecast for asian Equipment Sales to be flat. It is unclear if they will have to update that given the spread of the coronavirus. Right now, they are seeing at least an uptick in former confidence. They are seeing people start to come back to the market again. Whether or not that holds will be a question for the call. Construction industry are still seeing pretty broadbased weakness, looking for a 10 to 15 decline in that market globally. That is the same as november, that they are implement involuntary layoffs there and cutting the operating profit for that division. Alix thank you very much. Finally, we end with the race for the white house. Bernie sanders remains the candidate to beat in tomorrows nevada caucuses. David westin has more. Where do we stand . David tomorrow is another day in the quest for the democrat nomination for president as we had to caucuses in nevada. Bernie sanders now has a athibitive lead in the polls 30 , joe biden number two at 16. Unionized allele it is a heavily unionized state, and one of the biggest unions in the state is not happy with Bernie SandersHealth Care Plan because it would eliminate jobs in the state. We had to a debate again in theh carolina, followed by south carlotta primary, and super tuesday after that. The former head of the dnc said, given the way the rules work and where polling is right now, you get a Bernie Sanders coming out of super tuesday with Something Like 200 delegates advantage leaning towards milwaukee, so it raises the specter of whether anyone can slow down Bernie Sanders. That is the story right now in the race for president. Alix wonderful stuff. Thank you so much. A couple of other stories we are watching today. In china, the coronavirus has kept consumers away from car dealerships. Auto sales plunging 92 in the first two weeks of february. Even before the outbreak, auto sales in china were headed for an unprecedented third street annual decline due to a slowing economy, as well as trade tensions. The Chinese Government says it will come up with some measures to stabilize sales to reduce the impact of the epidemic. Meanwhile, the virus is also hitting the airline industry. You have a trade Group Warning that global traffic for this year will drop for the First Time Since 2009. Thousands of flights have already been canceled because of the coronavirus outbreak in china, so two really stark warnings when it comes to transportation. Coming up on the program, more of your morning trade and analysis of the markets in todays first take. This is bloomberg. Alix time now for bloomberg first take. We give you the news, you get of thede and analysis markets. Joining b is vincent cignarella, voice of bloombergs micro squawk, gina martin adams, bloomberg chief equity strategist, and joining us is david lebovitz, jp morgan Investment Management bubble market strategist. You could have occurred lows on the 30 year, and you still have dollaryen bouncing off of 112. Vincent what we are seeing is some good buying demand in this area, up to about 112. 20. Nappanees banks on the offer between 112. 20 of two about 112. 40. They are short a lot of calls at to blowif this starts out, we could see a big run. Folks are looking at when 15. Alix and that would happen looking at 115. Alix and that would happen fairly quickly. This is also crazy because you have 115, and then you have the dollar stronger, and then yields at record low on the 30 year. That has to mean something for equities. Is most think what interesting about equities is it feels like the rally has been technical in nature. If you look at call premiums data,paid, positioning everything is elevated, so it feels like this bull has momentum. If you look at where the 30 year is, where the 10year is, it really feels like this is evolving into a tale of two markets to an extent, with equities pushing higher, but obviously theres a risk off trade also happening at the same juncture. Gina i think if you look at the dynamics of what has driven the equity market higher, it is tech and utilities. Youve got this polar opposite story. Weve had billions in inflows into low vol this year. So theres very clearly this defensive trade underlying the equity market that is very consistent with what is happening in the 30 year, with what is happening in gold. Theres not a lot of risk tolerance out there despite the fact that stocks are at new highs. When utilities is leading that roar, it says something. On the other hand, you have tech , and tech is very vulnerable to what happens with the yen. If the yen breaks out higher, you will see that impact tech stocks. I would expect in the equity market, youre going to see a lot of churning, a lot of rotation. You got this big defensive trade telling you investors are not risk on. They are actually still risk off, but theyve got to find somewhere to put their own capital. They are struggling to find places, and the equity market is, by default, one of those places. David if you look at the market cap of the s p 500, 60 of that index is gross and defenses. Coming back to some of the technical aspects, everybody who is passive and buying the index, that is exactly what they are buying. Vincent speaking of technicals, gold is really at an Inflection Point. Look 1635 level, if you , it is right at this level where if it doesnt hold, you are going to see a big blow to the topside and you may get that goldman call of 1800. With that, you will probably see level,yen at that 115 and i dont know how equities hold up, to be honest. David you can talk about gold in a portfolio given where rates are, and part of what is also driving this narrative is the realization that if you are yearng paid 1. 6 on the 10 , you are losing money in real terms over time, so people need to think how they play defense within their portfolios. Clearly, bringing things like is underlying that risk off exposure they have. Alix i dont know what is different in the story we are talking about that wasnt here six months ago. Vincent it is literally just the virus. We were talking about it offcamera. When you really look at it, it is more hype than reality. We dont know. You have to look at what is the mortality rate over the people that have been infected. I imagine it is not a terribly high number. We lose more people to the common flu. Alix it is much less than sars. Vincent until this, and hopefully it never does come a reach a population that can not really handle it because of the way their hygiene levels are, if you will, and it really spreads, it is nothing more than really a controlled virus. Alix can i offer another option . I was reading this article that talked about how fiscal stimulus has been coming on from other countries. Is that explain the dynamic we are seeing, where you do have money into the bond market in gold because you have countries moving more into fiscal and expanding their budgets . That is also able to fuel the equity rally. Is it that simple . David fairpoint, and i would take it one step further. If you look at what is happening within the u. S. Political sphere , that is usually a point of concern for investors and everybody gets uncomfortable, but it looks like regardless of who gets in the white house, the fiscal taps are going to be open. So theres expectation of fiscal showing up not just in the rest of the world, but the u. S. As well, and that is one of the reasons why equities continue to trend higher. Gina i think wouldve the biggest changes has been liquidity and Monetary Policy. If you flashback to six months ago, the fed Balance Sheet just started expanding. You didnt have all of this ,rovision liquidity coming on and Monetary Policy is significantly more meaningful for asset prices than fiscal policy. Maybe there is anticipation that we have ongoing continuation of fiscal policy, but it is a big maybe, and i dont think it drives allocation. Monetary policy does. Vincent to that point, china has definitely been driving it. We talked about that months ago, how everybody is looking at the fed. The pboc was probably going to be laced to watch. They takees of calm, that all away. It is not like the fed. They do that very quickly. So if this situation does pass, watch the pboc take that liquidity, and the market will have to find another stimulator. David the question is, what does the fed do . Thefed is signaling that Asset Program will probably one its course will probably run its course. That is partially would this ise easing partially what encourages me to lean into fiscal. That a lot of stimulus will be pulled not only by the pboc, but by the fed. Alix what does this all due to volatility . I will get back to the dollar with all of this. This is by far my favorite chart, volatility for fx, for treasuries, as well as equities. Ill of this is happening, volatility is not picking up. If we are seeing structurally lower vol forever, and the dollar is now going to be seen as the carry trade because it is higheryielding that anything else like, what . Vincent nothing lasts forever, and neither does low volatility. It will come back. Alix how do you know . Vincent because ive been around longer than all of you. Thats how. [laughter] vincent because i remember Mortgage Rates at 78 . All of this will turn, and we will come full circle again. Not to the levels we probably saw in the 1980s, but we will not stay at 1. 5 , 1. 6 forever, nor will volatility stay low forever. There will be points down the road where structurally, things change. Whether get an exorbitant amount of fiscal stimulus, which will wake up volatility and yields, and that will change. David the question is really about inflation. Central banks have been able to remain accommodative because there is no inflation. The big concern, to bring it back to what we have been talking to clients about, is what happens if that stockbond correlation that has been negative for the past 25 years flips back into positive territory like in the late 1980s and early 1990s. If the feds hiking rates because they see signs of inflation, the stock market is going to like that and is going to pull structural volatility back into this market. Struggle to hand, i see how Interest Rates can move above the pace of nominal gdp from a debt service standpoint. In the interim, i think there is to foot on volatility by policymakers, but inflation would be the key variable to watch. Gina i totally agree. I think you can have inflation start in a couple of ways. Man driven inflation is very good for equities over time. Supply driven inflation, probably due to some kind of policy error, is not good. I think you want to Pay Attention to what is driving that change, but a shift may change a lot of the dynamic we have become very accustomed to in the equity market, especially over the last 10 years. Alix which of feels like we have been waiting for for the last 10 years. Gina martin adams and vincent cignarella, thanks a lot. David lebovitz of jp morgan Asset Management will be sticking with me. For all of the charts we use, go to gtv under terminal. Browse the features, check it out. This is bloomberg. Viviana this is bloomberg daybreak. We begin with wells fargo. Bloomberg has learned it is set to pay billions to end investigations into consumer abuses. Officials announced the bank will be fined 3 billion to put in and to scandals that has led to billions of dollars in operating losses. Now to goldman sachs, preparing for more unexpected legal costs. The firm bumping up the number from 2. 9 billion last fall to 3. 3 billion. The firm didnt identify the cases involved. It has been trying to rake free of criminal probes related to the malaysian 1mdb scandal that has led to three goldman bankers barred from the industry. Tesla got the legal goahead to resume clearing for a forest in germany. Blocked then carmaker from building a factory there. It avoids a lengthy delay for the project. Alix if you want to learn more about tesla, tonight at 9 00 p. M. , you can tune into my new special, evs on the brink of change. Evs have been around for a long time, but this really feels like an Inflection Point for when they start taking over. What is going to stand in their way, and if you are a car company, how do you pivot while staying profitable with something everyone has been successful with . Coming, Nevada Democrats convene for their caucus tomorrow. More about hedging for political risk, next. This is bloomberg. Alix this is bloomberg daybreak. In the markets, this feels like a typical friday. Equities selling off as we tend to see into the weekend, although in europe, you are still having them hanging onto a rally