We look at Dollar Strength and yields moving. Taylor if you blink, you missed it yesterday we had the fourth halt on the s p 500. Down p fell 7 and it shut for 15 minutes or so. We were able to close off of the lower bound. The bloomberg Dollar Strength also hitting a record. Cash is king. Francine we will talk a lot more about that. Its get straight to the bloomberg first word news. Senate passings. The second major Coronavirus Relief bill, President Trump signed any it into law signing it into law. Lawmakers are rushing to come up with phase three, a comprehensive rescue plan the administration estimates could cause cost 1. 3 billion. The u. S. Federal reserve and a dramatic late night step to help funds havets, the been under pressure because people are rushing into cash. A surprise move from the European Central bank, launching dollargency 820 billion Bond Buying Program to battle the coronavirus outbreak it will allow the ecb to focus purchases on italy and other struggling governments. In the u. K. , Boris Johnson is shutting down schools and threatening to impose strict restrictions on those in london if necessary. Critics say he should have taken stronger measures sooner. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Much. Ne thank you so the markets are trying to take it all in, the stimulus and packages, ands the lockdown. That is why we are seeing volatility and on top of that story with oil cratering. Dollar extending its rally. European stocks climbing a touch after the ecb announced a boost in its effort to stabilize the economy. Also looking at highyield bonds in europe dropping from a sevenyear high. Ands get to sovereign bonds german and french ones. They are soaring after the central bank stepped in and they seems to be on the market a belief that the ecb will do whatever it takes to make that spread not widen. The yen often a haven expresses a slumping in an extraordinary sign for dollar. Taylor i will do something i rarely do, talk about the dow jones. We closed below the 20,000 mark for the First Time Since 2017, the first time in 2, 3 years that you are seeing the dow which is a price weighted index drop below that key level. The s p market, we have hit the trading limit and the futures market does not look any better this morning. We talked about the bloomberg Dollar Strength and that index hit a record high yesterday. Gains extend further. In the gold market, we are seeing a little selloff. Investors digest that cash is all that they want and they want it now. , we were the ecb saying, launched a 750 billion euro Bond Buying Program. Christine lagarde said extraordinary times require extraordinary actions. Joining us is jay bryson, wells fargo acting to for economist. Does ecb action help the u. S. Economy . It it does in this sense of starts to calm the Financial System down in europe. It has direct effects on the United States. U. S. Exports to europe, we are talking to percent to 3 of gdp, pretty small, but there is a lot of tension in markets, people moving into dollars. Anything the ecb can do to calm Financial Markets has an indirect benefit on the United States. Francine how quickly will we see a recession in the u. S. . I dont know if you think there is a chance of avoiding it, but what is the timeline and what would it look like . Jay we very well may be in one right now in march or april. We will see how this plays out. What we may see starting today with jobless claims, they will move higher. What we have is a. Inthe economy a full stop the economy. What does it look like Going Forward . It depends on how the outbreak progresses. If in six or eight weeks we have peaked out in terms of new confirmed cases and we are not locked down anymore and hotels are filling up, then we will come out of it in the summertime , but if in july we are still locked down, that is a different story. It depends on how it progresses from here, but the nearterm looks like Economic Activity will take a huge hit. Taylor i also want to bring in jack albin for his analysis. As you take a look at all of this volatility, how much is debt,cal, margin calls on or a deterioration in fundamentals . Both i think it is some of , but a lot of the violent action we are seeing, which is certainly nerveracking, is a lot of the technicals. The fact that there are institutional players who are forced to sell. Volatility rises as markets fall. It does tend to feed on itself. Talkingwe have been about centralbank action and how that is contributing to volatility. You mentioned the need for dollars. Ecb, but lot about the everyone wanting to get their hands on dollars sort of making us wonder if jay powell is more of a central banker to the world. Jay in a sense, they are because the dollar remains the worlds premier reserve currency. Institutions around the world borrow and lend in dollars, so this is what these swap lines with Central Banks are about. Germany, younk in are lending in dollars, so you need dollars. The ecb does not have a good way to get dollars, so what the fed is doing is by lending to the ecb and other Central Banks, ugh Central Banks lend those Central Banks lend directly to counterparts. In some sense, the central the Federal Reserve is the worlds central bank. At what if you look the Central Banks have done so off ofe they based financial crisis or is it too soon to tell . Jack they have done a lot so far. The emergency move the Federal Reserve made overnight rattled markets, the equity markets, but i think that they need to keep liquidity flowing, need to keep dollars in the hands of those that need it. From that perspective, they are doing the right thing. Jay powell himself said Monetary Policy will not solve the pandemic and we need a coordinated effort on fiscal. I do like the fact now that we are starting to see a global coordinated move, not just in monetary but on fiscal at the same time. Francine how do you model the economy in the u. S. Now . Do you look at the number of cases . How do you look at the data . Jay it is almost impossible to model. We have never seen anything like this before. There are things we will be keeping an eye on, highfrequency indicators like jobless claims, retail sales on a weekly basis. We will be keeping an eye on those. Guessnow, it is anyones how bad the contraction in the Second Quarter will be and we do not have a model for this. We will keep an eye on new and confirmed cases as we go forward , but there will be a lot of volatility in Financial Markets, and in the weeks and months ahead in terms of the Economic Data. Taylor ard about you have heard about difficulties and modeling. What does it mean about modeling earnings and growth . Companies are pulling their forward guidance. Motto whatmonitor this means for earnings . Seen is awe have variety of forecast, 5 Earnings Growth which seems a little stale for me, to essentially zero. If you take the market where it and carve it around 13, 14 times, how low can we go, i can use the financial crisis. We got to around 11 and a half times, so from that perspective it appears historically speaking we are probably somewhere between 5 and 10 from the bottom in terms of extreme selling. Modeling earnings is difficult. I think the other thing is investors need to take in mind that equity investing is not a oneyear proposition. Provides seveng years to get the certainty that you will make money. Say at context, i would fourmonth or a tdown of the economy will we will feel it nearterm but in the long term at looks like a speedbump. Francine jack ablin and jay bryson both stay with us. We talk oil and the crazy ride oil has had. Yesterday was quite brutal. Coming up on bloomberg surveillance. Viviana you are watching themberg surveillance. Coronavirus pandemic taking a growing toll on u. K. Fashion bands brands. Burberry saying sales have fallen by about half. 40 of the stores are closed. German Business Confidence is in freefall, sentiment plunging the most since 1991. It is chilling evidence germany may be headed for its worst recession since the Global Financial crisis. An offer reminiscent of world war ii, General Motors and tesla have offered to make hospital ventilators. There is expected to be a shortage of the devices. Says the gm Ceo Mary Barra floated the idea the automaker could help. That is your Bloomberg Business flash. Francine your markets, we are staying on top of them because there is a lot of volatility. Equities fluctuating but Europe Holding onto gains. A lot of people linking it as a bazooka. The linkage to the european stocks had a little bit of a turnaround which links back to what we are seeing in sovereign bonds soaring from france to italy. Taylor further deterioration within the u. S. Equity markets, s p futures down about 2 . It does not seem like yesterdays losses are helping us find a floor, but we have continued to talk about the strength of the dollar, jay powell being the banker to the world. Record Dollar Strength, extending gains. Go to cash. Selling out of a lot of the commodities we are seeing and all just going to cash. Yields have been all over the place, and we will bring you updated on all of the latest market news. If you have a bloomberg, check out tv to watch all of our live interviews and events. Just go to tv. This is bloomberg. Welcome back to oomberg surveiance, taylor and francine. Michel barnier, the chief brexit sa her has pat tested positive for covid19. He says i am doing well and in good spirits, and following all ecommendations we will get through this together. Probably a comfort to people at home. We are back with jack ablin and jay bryson. When you look at some of the modern monetary theory policies, this is something that was 20 or 10s pretty nuts years ago. Are we going to Start Talking about these kinds of theories again, mmt . Jack i think so, because quantitative easing was also similarly derided early on and proved pretty successful in achieving the feds goals. I think modern monetary theory is the next step. Money, building bridges, building hospitals, whatever is out there on the fiscal side. I do think that is next and part of the reason perhaps we are seeing intermediate and longer term treasury yields rise as shorter dated treasuries fall. Francine do you think we will get a lot more talk . Will we get some form of mmt . Jay it depends on exactly what we are talking about. Does the United States and other countries around the world have fiscal space . The answer is clearly yes if you look at the yield on the 10 year treasury. Is there a big fiscal response from the u. S. Government . Yes. Could it continue for a while . Yes. If we are talking 10 years of big emphasis, sooner or later there will be consequences. In the shortterm, next you years, we have fiscal space to bring out bigger spending programs, but im skeptical in a long run sense. Taylor the senate overnight approved a third Emergency Program over the money market usual funds to provide some mutual funds to provide some liquidity and stability. Has liquidity improved . Jay i do not have any realtime indicators on that, but if you go back and look 10 years ago, 11 years ago when these programs first rolled out, it definitely helped. In, lenderstepping of last resort to the Banking System and the overall Financial System. In the financial crisis it worked and it will probably work this time around. The fed was very creative. It has a toolbox and will continue to bring back programs like this as the lender of last resort to the Financial System. Taylor with this lack of liquidity we have been talking about there has been some talk of perhaps set shutting down the markets. Because of ther 5 swings, does that mean the market is not functioning correctly . Jack i would be hesitant to shut down the markets. Liquidity albeit difficult, is probably better than not. Where we could parse a little bit would be in some of the highfrequency trading and perhaps imposing a penny tax on shares or Something Like that could help slow some of the volumes down, but i would not be in favor of shutting the markets down. Francine thank you both, jack and j. Coming up next, we talk about the market. When you move homes, you move more than just yourself. Thats why xfinity has made taking your internet and tv with you a breeze. Really . Yup. You can transfer your Service Online in about a minute. You can do that . Yeah. And with twohour Service Appointment windows, its all on your schedule. Awesome. So while moving may still come with its share of headaches. No kidding. Were doing all we can to make moving simple, easy, awesome. Go to xfinity. Com moving to get started. Good morning, good afternoon, good evening. This is bloomberg surveillance, Francine Lacqua at home, taylor in studio in new york. A lot of bankers coming out for foreca for oil. Crashk about an oil because of the saudirussia fight and because of loss of demand from the virus. No one better to speak to one oil than harry tchilinguirian. Always good to speak to you, especially on days where we do not know where we see a floor on oil. If you look at the dynamics, will saudi and russia blink or are they in this for the longterm because they want market share and could oil go to 10 . Harry the possibility of having Oil Prices Dip further is there. Steadfastia appears to provide oil at the maximum capacity. This as demand estimates continue to revise lower, so there is Downside Risk in oil from here. Oil, like other risky assets, becomes sensitive to government measures to support the economy. Yesterday we had the ecb announcement for a sizable qe and the u. S. Past the phase 24 ssed the phase two, it is going to be difficult. Francine what will make it stop . Demand is being taken out because we are looking at recession and economies on halt and russiasaudi flooding the market. Will they continue to flood until they have market share, until we see shale going bust in the u. S. . What is the endgame . That is the most interesting question, what is the endgame of saudi arabia. There is a battle for market share and we will have fallouts in terms of price and closure of u. S. Production that has not been hedged for 2020. At the current juncture, both saudi arabia and russia remain intent on pursuing their supply policy of increasing production, which means in order to find the bottom we will have to have production shut down elsewhere like in u. S. Shale, or have response in terms of demand, and that response in terms of demand depends on government measures to stimulate and support the economy. Central banks have done their best. Now it is governments and the fiscal measures they put in place, and we will see how the markets react to those as a means of stabilizing the economy. This dynamic right now, saudi arabia and russia bent on producing additional supply which means the oil price will have to shut down large supply production in the United States and demand will it will have to come on the demand side. Taylor how quickly can u. S. And even cut capex look at a breakeven at 22, 23 a barrel . Shale the nature of supply is called short cycles by, very sensitive to price and can react quickly. Stopping production in this nonconventional supply is a lot quicker then sure deep drilling. Than shore deep drilling. It could come in a matter of months and then we can see production decline as a result. Taylor how much more do they need to cut in capex . Question,ifficult because that depends on the company itself. Making a blanket statement is difficult in terms of how much further they have to go. A lot of reports we had from 20 anies, they are slashing 2020 so itapex for depends on the company. Taylor harry tchilinguirian, bnp paribas on all things in this volatile oil market. I want to get an update on the first word news. Viviana the u. S. Senate is to turning to the giant coronavirus release bill relief bill that could cost 1. 3 trillion. Late yesterday, donald trump signing into law the second relief bill passed by congress, paid sick leave and coronavirus testing. Extraordinary times require extraordinary measures, from Christine Lagarde, the ecb launching an emergency Bond Buying Program worth 820 billion in an attempt to calm the markets. Government bonds surging and yields plummeting. The New York Stock Exchange will temporarily shut its trading floors on monday. An employee and person who worked on the flooroth tested positive to the coronavirus and the floor will move to fully electronic trading. No word on how long it will be closed. Global news 24 hours a day, on air and quicktake on twitter, wered by more than 2700 journalists and analysts in more than 120 countries. Hurta. Viana this is bloomberg. Francine hank you so much. Questions swirling around whether we should shut the markets are not. We heard from chief executives of the nasdaq and euro. It is