Increased spending for italys health care sector, and moves to extraordinary layouts. Damage from the virus to the Nations Companies will be serious and widespread. A top olympic official says there is no way to cancel the Olympic Games in tokyo. As of now, they are set to begin in japan as scheduled. Official said a decision would be made at the end of a. May. 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 ritika gupta. This is bloomberg. 1 00 in new york, five 00 in london, 1 00 in hong kong. Im taylor riggs. Welcome to bloomberg markets. From bloomberg World Headquarters in new york, here are the top stories on the bloomberg and from around the world that we are following. The Federal Reserve going all in, slashing Interest Rates by a full percent, promising to boost its bondholders by at least 700 billion. But those moves failing to stop the run in global markets. Equities plunging the most since the 1987 crash, triggering Circuit Breakers at the open. Stocks now looking to rebound off of those lows. Turbulence ahead for airlines. One official says that they could be facing bankruptcy by may, if the government does not step in. Kailey leinz is here with the markets update. Not much improvement from this morning. Kailey we are off the lows but also still will session highs. Fear in thist of equity market about the spreading coronavirus. It was also spooked the emergency one percentage point rate cut. What does the fed know that we dont, is the central bank starting to panic . You starting to see that in the equity markets. The dow is now down to thousand points. If we look at how it has performed since its record high, it is down by roughly 30 from its record high. The biggest drag on that index dow, exxon, and boeing. Boeing is down 50 in the past month. Are under pressure, but it is really the entire travel complex. Take a look at gtv on the terminal at the coronavirus trade. Travel is not doing well. Index, cruise lines, that relative to the food industry. You can see with food stocks outperforming. As people rush into grocery stores, that is benefiting packaged foods, like conagra, which is the best performer in the s p 500 today. Take a look at apparel retailers. On pays for their worst day on record. This as Retail Locations and malls are closing. L brands down by 30 . Gap is down by more than a quarter. Simon Property Done by nearly 16 today. Taylor our thanks to kailey leinz. For more analysis on the market, i want to bring in john porter. Your take on the equity price action today. Is this because our in spite of the cuts by the fed . John i think it is despite the fed. Is a new reality that investors are starting to come to grips with. Been optimistic that this was going to pass relatively quickly. We were looking at past precedents of other viruses were the market absorbed the impact quite well, quickly recovered. This is sort of a new reality that this is a different situation than we have done what before. We see it in our everyday life. I am here in downtown boston, i went out for lunch, and there is nobody in the stores, even those that are takeout only. It is just a realization that ae economy has come to complete stop. We dont know when it will start to resume any kind of normal behavior again. Taylor our markets functioning property properly, is there liquidity . Equity side, we see no issues with liquidity. On the fixed income side, talking to my partner, there were some issues last week, but that is where the fed stepping in has largely resolved those issues. This is not a financial crisis. We are all looking back to 2008 as precedent. While there is some market behavior day today that is similar to 2008, the catalyst for those problems were very different than today. That was a financial crisis. We are in good shape financially. We are not at risk of losing major banks like we did 12 years ago, but consumer confidence, behavior has hit a wall. In some cases, has been forced to because of the actions we have seen governments take in the last 36 hours. Fall didntou bother analysis to your world of Equity Analysis i know you are talking to everyone cross asset. Take a look at the chart in my terminal. Bbb and the bb sector. 521 basis point spread over treasuries. Some are giving that needs to widen out to 750 before we see a bottoming. What level of spreads on the bond side makes you comfortable dipping your toes back in on the equity side . John great question. Now,f the things right Equity Investors are focused on liquidity of companies. In addition to being cio, im also the Portfolio Manager on smallcap growth strategies. In particular, we are sensitive to company liquidity, Balance Sheets. You have seen small caps in general outperform large caps, those with leverage have performed even worse. The question you are asking is important. I dont have a great answer. We are starting to see some signs where we are trying to bottom in some of the areas that went down the hardest initially. Lines,ike hotels, cruise any of the leisure sectors. On the margin and i am squinting here you see them behaving better today than they have been, so maybe that is a hope that we are reaching a morem for those operationallyleveraged companies. But it is impossible to call a bottom with any foresight. Taylor are you having to pull back and withdraw your earnings forecast . How can you even forecast what an earnings quarter could look like . John you really cannot, taylor. The question. No one has any idea. Great question. Nobody has any idea what the next few weeks holds for us. We are longterm, fundamental investors. Pms said it good. I have much better vision for my companies. It is a bit of a cliche. You try to take advantage of market dislocations like this to focus on where there is quality longterm Value Creation stories that maybe you have not been able to get comfortable with because of valuation or some other factor, that have now come into a price point that is much more attractive. You try to focus on that. You cannot spend all your time focusing on 2022. You have to be mindful of this mine field we are trying to navigate. You are really scrutinizing the company that you own that have financial and operating leverage. The next few weeks, potentially few months, could be incredibly challenging. Taylor a lot of the problems is the discount cash flow model does not work. When can you look and say that we are at peak panic . That will only be clear with the benefit of hindsight, taylor. There are some signs of panic in the market, some technical measures of how oversold the market is, that are indicating we haveear levels that rarely, if ever, reached before. Just look at how quickly we got here. You talked about the dow peaking on february 12, other indices peaking post to february 19. That is not even a full calendar month ago, and now we are talking about being down 30 from their record highs. We had never seen a move like that. Hopefully, that means the lows are closer, but calling that is something that, again, people that it ends call up being the right timing, but we are really guessing in terms of calling that. Taylor our thanks to john porter. Of course, its all about the markets right now. Taking a look at the vix, watching some of those signals. In the russell 2000, small caps bearing the brunt. They lack the Financial Flexibility that some of these International Companies have. Apple analysts more trouble could be on the horizon. And it is all about the safe havens. Aussie dollar yen. 2. 7 . Dont forget, bloomberg subscribers working from home, from the office, you can see us at home using the function tv. Conversations,r only if you are nice. This is bloomberg. Taylor this is bloomberg markets. Im taylor riggs. Airlines are shrinking Global Operations as they fight to preserve cash. Flights. Ashing are we talking about a 2001 type of bailout if they cannot survive another few months . Airline said a few minutes ago that they are going to the government, looking for a combination of new grants, billions in grants and loans, whetherrelief to help this unprecedented financial storm. How much cash to they have on their Balance Sheet, who is the strongest . The big airlines like united, southwest, they are caring shortterm cash in assets. They have hundreds of airplane they own out right that they can borrow against if needed. The issue is that they are not cash poor at this point, but there is really no demand. Fore is no money coming in all intents and purposes, so the cash burn is what everyone looks at. It will be weeks, ok, but they are looking for government help as quickly as possible. They are seeing is happening throughout april, may, june, and probably through the end of the summer. Similarly, within the world of oil and fuel prices, going over to exxon mobil, which has now cut to the malay from aa plus by s p, maintain the outlook will be negative. We knew that shares were falling. We will see how the bond prices are doing. Exxon mobil has been cut to aa s p, maintaining an outlook that is negative. Justin, let me come back to you on the airlines. What sort of consolidation do you think there could be . The big guys swallowing up the small guys . Jason for sure, we will see the big four survive. American, delta, united, southwest. The you get to airlines size of jetblue and smaller, like . Oes demand look are people going to fundamentally change the way to travel for work after this is over . Are they going to change the way they vacation, places they go . It really becomes a case of not knowing what the consumer will do, once the virus situation is dealt with. That is a lot of the concern for the longerterm investor, longerterm person looking at that industry. What is coming out of this that maybe we dont know about now, but could affect the business later . Taylor final one to you. Are they prepared for any closing of u. S. Borders, no longer doing international flights, relying only on a limited Domestic Service . Are they prepared for that . John i think they have gone prepared in the last few days because the Trump Administration has, in a lot of cases, shut down International Business. Asia was bad before. Last week, we had the eu situation, with that being closed for 30 days. For all intents and purposes, International Business has shut down. The question is what happens with domestic business. There are still questions floating around today about whether the cdc and other say, should there be flying domestically. That is why airlines are planning around how we could shut that down. Then you get into a whole new ballgame, as it were. International is largely gone, but domestic, people are still traveling. I think we need to find out if that is going to stay as it is. Taylor our thanks to justin bachman. At a chart we are showing on gtv. Financials are getting hit the hardest today, but its a reminder to avoid some of the peak panic. This is a medical issue, not a financial one. We are looking at the libor. Nearsis points, nowhere where we were with lehman brothers, when that widened out to about 3. 6 . Some panic, but nowhere lows that we the saw in the banking sector. All of these charts can be found on the terminal. This is bloomberg. Taylor this is bloomberg markets. Im taylor riggs. Infections outside china surpassing those on the mainland europe reporting more new cases every day than china did at its peak. The u. S. Surgeon general predicting the nation will need eight weeks to get over the worst of the outbreak. For more analysis, lets bring in dr. Joshua sharfstein. He joins us over skype from baltimore. In your opinion, when could we see a flattening out of the curve, which is so often talked about . We can hope within a couple of months. We dont know whether we will, until we can take the actions necessary to actually flatten the curve. Taylor is it actions necessary or can we also hope for some relief in the warmer weather . Dr. Sharfstein we should not rely on that hope. It would be a pleasant surprise at this point, but we know the virus has been spreading in some pretty warm locations right now, including in the southern hemisphere. I think that probably should not be top of mind. Top of mind should be everyone following really critical things to do in their own life to reduce the chance of spread. Taylor one of the criticisms has been the mortality rate feels inflated because the denominator of that statistic is too small. What is a realistic mortality rate, when can we see that denominator become a more realistic number, in your opinion . Dr. Sharfstein here is the challenge with the mortality rate and the denominator. Every Single Person is susceptible to the spire is. Unlike the flu, where some people have been vaccinated, some help from the previous flu season that carries over, all of us are susceptible to the new coronavirus. Even if the actual rate of death stays lower, there are so many more people that the actual number of people dead can be quite high. I think we will have a better sense as we get a different kind of test available. We understand how many were infected but did not get clinical symptoms. We will know more about that in probably a few weeks. But it is a very serious disease. You look at ed lee, its enough to swat the health care system. Given how we are all susceptible, really, the death rate is immaterial to the urgency that we need to take action. Taylor what is the urgency of developing a vaccine . Dr. Sharfstein maxine is probably our best way out of this. There is tremendous urgency but there is only so much that can be done in the short term. Even to do a vaccine faster than its ever been done before, we are hearing probably 18 months, two years, and that is assuming it works. There are many examples of vaccines that are tried but dont work. ,ne important thing to know even a partially effective vaccine can be very helpful. What are the chances this reappears in the fall . First for the reappear, it has to go away. The concern is, because we are all susceptible, it could sweep through the population relatively quickly and in fact so many people up front that it swaps the health care system. That is the battle we are fighting now. We can win that battle over the next couple of months, moderate the cases. Then we may be dealing with a worsening in the fall, we may not be. We have to see where we are. The essence of this is the fact that we have never dealt with this before. We will be dealing with new information. We know how things work, we know how every person can protect him or herself. In order to make that possible, everyone should be focused on what we know. Keep in mind, things that we are going to learn, like what may happen in the fall. Taylor our thanks to dr. Joshua sharfstein. Publicomberg school of health is supported by michael bloomberg, founder of bloomberg lp and bloomberg p. I want to get another check on the markets. Markets continuing to deteriorate after hitting a Circuit Breaker in the open. You have the 10year yield firmly down 20 basis points, 77 basis points. It is all about the safe havens as the vix goes up. That means the dollar goes up. Crude oil continuing to struggle, barely 30 a barrel. The vix gets my attention. Closing in on lehman brotherer a. An elevated vix on this monday. This is bloomberg. Lets get to first word news this afternoon. The white house is taking new steps to protect president s President Trump and his staff during the outbreak. That includes taking the temperature of anyone who enters the complex, including members of the press. Only those with a reading of 99. 6 degrees fair in height or less are being allowed inside. In the press briefing room, several seats are being left unoccupied to encourage social distancing. The has canceled a courtroom session because of a Public Health scare. The court has postponed a twoweak argument session that had been set to Begin Next Week because of the coronavirus outbreak. The cases that were on the docket include a billiondollar copyright clash between alphabet and oracle, as well as President Trumps challenge to have subpoenas for his financial records. Leaders will meet be a videoconference to discuss their efforts to contain the spread of the virus, with italy reporting the most cases and deaths anywhere in the world except china. Neighboring countries have moved to slow traffic but other nations including germany and poland have also introduced restrictions. The different approaches are raising concerns that vital medical equipment may be blocked. 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 ritika gupta. This is bloomberg. Shery live from bloomberg World Headquarters in new york, im shery ahn. Welcome to bloomberg markets. Here are the top stories we are following. The Federal Reserve slashing Interest Rates by a full percentage point to near zero, promising to boost its bond holding by at least 700 billion. Those moves going to stop the route in global markets. Plunging by the most since the 1987 crash, triggering Circuit Breakers before reopening, with losses of 10 . Stocks now looking to rebound off of those lows but we are still done more than 8 . And the response from Central Banks around the world. How global policymakers are reacting to the spread of the coronavirus and its Economic Impact. That conversation is ahead. Lets get a look at market action. Kailey leinz is with us. Obsession those but a pretty steep decline. Kailey good news and bad news but we are still down 9 on the major averages. This moving the equity market coming because of our in spite of the fed . That is the question. You are seeing Decisive Action in the bond market. The 10year yield now at 74 basis points. No surprise with them move lower