To the importance of signal of folding below a 1 year yield. The twoyear is many people will be discussing emergency fed action. Francine yes, i think that will permeate through what we look at everyday, bond markets around the. World lets get to the first word news first word news in new york city with vienna or title. Viviana we begin with the first moving developments to the coronavirus fastbreak. The japanese island of hokkaido went quiet after the governor declared a state of emergency. New zealand and lithuania putting their first infections. South korea has more than 2000 cases. The u. S. Is moving to expand the number of people being tested. Health Authorities Say they will test anyone with unexplained severe respiratory illnesses. J. P. Morgan is joining other Corporate Giants in restricting travel, the bank saying International Business trips will be limited to a social travel only. Previously they had limited travel only two regions hardhit whether coronavirus. Oil is on track for its weekly 2011. Ince crude prices are down at roughly 14 . There is speculation opec and its allies will strike a deal to shore up prices. We finish with tensions between turkey and russia. An airstrike in syria killing at least 33 turkish soldiers. Rest is denied involvement but it has been backing up syrian forces. Turkey is asking allies in the west for support. Neither the u. S. Nor europe has shown in the willingness to help. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. I am viviana hurtado. This is bloomberg. Tom watching the vectors right something. Quite lets look at equities, bonds, currencies and commodities. 54 on the espn x. Dow futures down. We are on the cusp of 24,000 print on the dow. Critically, we have the curve steepening against a general lower unit market clearly signaling that lower yield market clearly signaling a global slowdown. We are watching brent crude. On to the next screen with livex, 46. 02 on to the next screen with the vix, 46. 02. Most single important points should be the read on the screen, eight basis points on the twoyear yield. Well below 1 ,. 9783. It was weaker moments ago, lower moments ago. The yen for the second day in a row catches up with everything else. Francine it really does catch up with anything else. Fear is tightening its grip on global markets. Clear by one metric. The stocks europe 600 tumbled more than 1 . It is headed for the worst 2008. Performance since every sector on the gauge today is dropping more than 3 . The stoxx 600 tumbled more than 4 , headed for the worst Weekly Performance since 2008. I also looked at the vix. The figures are incredible. 45. 77. Tom let me show the chart right now, the two year yield, to give you perspective. I have a great vix chart. It goes back to the Lehman Brothers failure. Under 1 on the twoyear yield. The great triumph was managing this policy of, here is the trump presidency, and managing the two year yield to a better place. Higher yield may be linked with the hope of an american or Even International reflation. We have given up on that. , was the twoyear yield coming in with the recent lunch now we are dust recent plunge. Now we are below 1 , a huge benchmark for the Global Financial system. Francine it certainly is. Lets get to our guest carsten , brzeski , and Rupert Harrison. From blackrock. There is just one story, and it is the fear in the markets. I have a simpler chart that just looks at the s p 500, falling below its 200 day moving average. You look at any chart, and it screams sell. What will it take for the market to stabilize . Guest if this was a normal general markets, they would be looking oversold shortterm. We have seen yesterday was a real panic selling. Dysfunctional markets in highyield, pretty low liquidity even in s p futures, the lowest in a long time. The problem is that while you would normally expect people to step in, the problem is it is not a normal driver. We are being buffeted every few hours whether news flow on the virus. I dont see any reason why that will stop. Where we were at the beginning of the week on italy, we know our with germany, france, switzerland. One of the significant things is very limited news in the u. S. A lot of people are word that as we head into the weekend, we wake up monday morning dealing with italy news this week, what are we going to be dealing with on monday. So we are very defensively positioned. We see this as a fastmoving situation. Francine how do you monitor it . What are the selling signals . In affected cases . Guest this has been a massive transition. Last week everyone was fixated on the china data. We have put together a huge effort in blackrock to look at the realtime indicators on activity in china whether that flows,tion, traffic china is not the story anymore. The market is trying to price a global pandemic. We are dependent on news from governments and Health Authorities about cases, about policies. In look at these curves countries like france and germany, the big economic europe, and increasingly the u. S. , we are still on the accelerating phase of these curves. Tom i want to ask the same question to two of you. Carsten, with all of your great work in economics right now, we have a two year yield under 1 . I mentioned many are talking, chalokata about the fed, lets go lets go lets go. Does the fed sign of the have to look at these markets and act. Carsten it is hard, because as a report said, it has been a crisis. Driver of the in normal times you would think this is the time the fed should step in to build up confidence. But even if the fed were to act right now, would it stabilize markets, if we continue having this news flow out of Continental Europe and maybe even the u. S. . Tom rupert, as a public official, particularly with your work with the chancellor of the exchequer to the u. K. , theres a point where politicians and their ministers step in and say, lets go. See,at what were going to where the Central Banks are reticent and may be unable politically to deal with this crisis, gave way to the power of the chancellor of the exchequer and others . Rupert both are very limited. I think we will see the fed act ing. This is a very dovish Federal Reserve. Tom come they get there, can they get out three weeks . Carsten at the moment, i would say yes. I think we have still seen a dramatic tightening of financial conditions. But i think we have not seen the tightening in credit markets that they are particularly sensitive to. I suspect we will see action on on balance at the moment, i expect that to be the normal timetable. Federal banks will act. Governments will act. We are seeing from asia, fiscal packages coming out. We have a package in the u. K. In the next few weeks. I am certain will see fiscal action in the u. K. In response to the violence. The issue is that response to the virus. The issue is that permits will be limited in what they can do. To. Ng demonstrate that you have a grip at the same time, if you look at the playbook that em governments have, there is a lot of Public Information on how governments will respond to a widespread pandemic. We will not see in most em countries attempts to close down activity. We may see some restrictions, we may see schools in particular closing. There is evidence of that. But we will largely get a message off, carry on as usual. Work from home. No impositions of lockdowns from governments. Tom francine, i would like to introduce a chart to report on the phrase get a grip. This is a flowchart. The vix, which we all know, the volatility index. This is during lehman time. We are almost there on a percentage basis. We were at a low race when we came off this. Report, i get the idea that we came from mass complacency, but we are at a percentage change of vix that approximates the failure of Lehman Brothers. What are we waiting for . Rupert the problem is that the policy was once in response to Lehman Brothers desk lucy the policy response in response to Lehman Brothers was addressing the crisis at the time. Governments have limited ability to deal with this kind of fundamental health emergency. It is about containment and management. The real focus of governments will be, how we got enough hospital beds . Can we push it too late in the year, spring and summer, one hospitals are not so full . That will be the nuts and bolts in focus. When it comes to the economics, this is going to be very dependent on the length of time the disruption lasts. For every extra week, the higher the risk that you get, the irreversible damage to the economy either through Small Businesses going bust and the knock on impact on the sector. Is it something we can recover from quickly, when life returns to normal, or will things have fallen over between now and then that are difficult to rebuild. Francine one of the other things that we read was that there may be some leniency from brussels over fiscal deficits, because this is huge. Your assessment is that europe can weather a recession or is it all to be seen . Rupert i think an ecb will be externally hesitant to do anything at this next meeting, than two weeks from now, we will see the reaction out of brussels that there will be more flexibility when it comes to fiscal policies. But this does not mean there will be room for a big fiscal stimulus package. We all need to somehow cushion the budgetary impact from the measures that italy will have to in these special circumstances, which always great room for flex ability. Tom i am thrilled both of you can be with us. Carsten brzeski from ing and blackrock. Ison from the two year yield is under 1 , brent crude near i49 handle as well. Dr. Mohamed elerian had a four d essay on this pandemic fourpart essay on the presumed pandemic. He will be our guest at the 9 00 hour. Stay with us. Futures are at 52. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york as always, just trying to make sense of the markets. New cases of the virus keep appearing outside china. New zealand and is when you have reported their first infections, so has nigeria. The number of infected in south korea has gone over 2000. Lets go to Stephen Engle in hong kong. Seems like the narrative shifted on monday. There are a lot more infections around the world and china is stabilizing. Is that right . Stephen that is what the data in china is telling us. Now we are seeing reaction from regional governments as well as around the world. Japan in the last hour, the northern prefecture of hokkaido announcing a state of emergency. They have had a few clusters of virus outbreaks there. Yours truly was headed to hokkaido tomorrow. We were on the phone, trying to figure out whether i could even go now because the prefectural government is telling everyone to stay indoors. This is coming from a government that up until now has taken, according to a number of critics, kind of a relaxed approach to banning travelers. They have not had many bans. Have only band people from Hubei Province and wuhan but other chinese could go there. Seems like it could be a kneejerk reaction to the criticism, and also getting their head around that this might be a more serious problem than anticipated. Tom you are a next month on north asia and particularly japan as well. Are we seeing these actions in japan, to get out front of the unthinkable for them, which is a cancellation of the summer olympics . Are they playing catchup with trying to get to the end of july . So. Hen it appears obviously, she once the games to go forward. Japan has spent shinzo abe once begins to go forward. Japan has spent billions of dollars banking a lot of their economic recovery on the boost from the olympic games. It is in jeopardy. It does not take off until july 24, but you cannot cancel it the week before. You have to start canceling or postponing right about now. Keep in mind, they did not have sars, no bigk of outbreak of mers. They dont have the experience to handle an outbreak like this with the novel coronavirus. And they dont have ac dclike japan. Celect body in tom Stephen Engle, thank you so much. We thank all of our team across the pacific rim, under real duress, assisting us today. The markets are on the move. 48. Es are Carsten Brzeski with ing and Rupert Harrison from blackrock with us. What are the signals we should interpret from the market . I dont mean to single yield like the two year yield, but the sophisticated yield dynamics you look at. What does it signal . Gulstan it signals recession carsten it signals recession. There is no real hard Economic Data on what the impact would look like. We are based on fear. Look at the eurozone for example, the only data we have forar is indicators february. The whole thing means that the Economic Impact on europe will probably only emerge in february , in march, going into the quarter. We will probably have it spreading of the negative Economic Impact over at least two quarters. Francine rupert, when is the good time to go back into the markets . Are we far away thinking about that because we have not touched the bottom yet. Carsten that is a good question to be asking. But i think now we are still driven by the news flow. You have to look at the viral numbers. Whenave to wait and see the secondary stuff starts falling off in these new exposure countries. Maybe we might see that happening in korea if they manage to control this. That would be a small positive sign. The risk is that europe is now a much bigger problem. You look at the extent of movement in europe, in my view, it is unlikely the scenario will be contained in europe. Is a matter of spread. I dont think the endpoint is so certain anymore. Tom how close are we to closing borders, specifically in the u. K. , with the comfort of a different border . How close is the United Kingdom to shutting down movement . Rupert i think that governments will be reluctant to do that. It is unlikely in europe. If you look at all the evidence from the studies that have been done on the flu, on milder versions of the flu, there are published documents around Contingency Planning on this stopping flights closing borders, buys you three weeks. The evidence suggests it is not effective. We are at a have a number of cases in the u. K. , a new case in wales today. The suggestion that that will be shutting the stable door after the horse has bolted. The government will try to keep mobility going and trying to damage. The economic tom if you are just joining us in the United States, Rupert Harrison with us is the blackrock session with blackrock, and Carsten Brzeski is with ing. We follow on to a further 38. Ff, with futures, please stay with us for more conversation on these markets. This is bloomberg. Se markets. This is bloomberg. Tom it continues and things change. Let us see the data check right now. Francine has a careful eye on the european action. I am focused on the continued dissent of oil, american oil at 45. 42. Brent crude is not at the 49 handle by that would be a huge deal for the global oil markets. The two year yield comes in under 1 . To me, that is a significant item of the day. 0. 98. 9763 on the twoyear yield. Francine . Francine i am looking at the markets like you are, european stocks really under pressure. If you look at how much they have been plunging on the week, a fiveday basis, it is the most since 2011. The vix is at 44. 19. A couple of things, germany quarantining 1000 people. Switzerland, banning big events. Britain and the netherlands also reporting new cases today. So we will have a full roundup of any virus updates, a full roundup of the quarantine and the impact this has on stocks. The stock route is continuing. We have extra market checks every 15 minutes. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Francine this is bloomberg surveillance. One of the worlds biggest building itsrial Companies Posted earnings and is seeing no impact from the coronavirus. Sridhar a roger natarajan joins us. How much will the coronavirus be a headache going forced forward . I think we have some difficulties so we will get back to him shortly. Still with us our Carsten Brzeski and Rupert Harrison. We are trying to figure out sector by sector, company by company how much the impact is. Outthe first ones who came and said it is difficult to predict, apple, do they have a first move advantage, or will the sector be hit the same . Rupert we dont know. I think we are shifting the focus away from the supply chain disruption, something people were beginning to understand well last week. We are definitely seeing activity in china. The direction of travel is positive because china was so aggressive in its lockdown early in the process. The issue has shifted from supply chain concerns to demand concerns. If you are if half of your market is at home not going to work, not traveling, it is something that people are joking about but it is real. The stocks that are up, netflix. We havent had that kind of dramatic temporary demand reduction so it is difficult to know. Francine lets go to a chief executive who has to deal with this day in and day out. Sridhar natarajan, when you look at coronavirus, you said no material impact. Ton do you expect an impact go through your numbers and revenue . Sridhar let me say a few words about the results. They were excellent results, a great performance, not just financial but nonfinancial. A 50 jump in free clap free cash flow, 11 increase in earningspershare, and 30 basis point improvement in operating margin 30 basis point i