Of that will be technical selling. The bond market is a little bit unusual not so much happening in yields here, but in europe you are seeing pretty strong support. The time now for the market moving news from our new york team. We want to begin with china and that historic economic slump. Ae first contraction in backdated. We have our correspondent with all of the details. Mike it was actually worse than you expected, 6. 8 decline, the worst since they started reporting quarterly in china back in 1992. The economy has not contracted the fullyear basis since 1970s. We will watch that. One reason the numbers were not worse, if you look at the second number, smaller than expected, Industrial Production of on. 1 , factories returning to work. The problem for them is with the rest of the world unlock and there is nobody to buy their stuff. Consumers are not buying. Lockdowns were lifted but people are still reluctant to go out and spend. Retail sales down 15. 8 this is important because this is the problem we are going to have even if you open up the country, will people go out and spend money . In japan meanwhile overnight the Abe Administration widening the Emergency Declaration was just around tokyo and now the Prime Minister says he is willing to toe about 926 dollars everyone in the country. Originally it was just to those who were needy. More bad news from europe, a week ago e. U. Countries reached a deal for aid to the countries that need it, but spreads in italy and spain are rising, so that means more bond sales. Market testing that promise seems to be a concern that most of the aid is going to be financed by borrowing which will add to the National Debt of countries already seeing very height National Debts. Some worry about whether all that paper can be absorbed and then this morning the french president telling the Financial Times that unless they reach some sort of deal for joint financing, the project will collapse. He is continuing to push for that. Spain is continuing to report the biggest relapse in cases and more than a week. Alix one interview talked about the debt at some point as well, and mike will be sticking with me for a few minutes. Oil continues to take a beating. Concededps are being considered, and we have my guest joining meet with more. Is this a real belief that russians and Saudi Arabians did not do enough . I think after we had the really devastating report showing the biggest consumption record, andon a then how horrifying the situation, opec probably felt the need to come out to do some sort of intervention. It is not working. Know this is also having to do with contracts, there is a lot of volatility. About,ng i want to talk First Quarter results down 4. 8 from the year prior and includes the pretax charge and it cuts the dividend. This is the big news, that cap not if. About how much, i think is the first time in 40 years berkeley says for Oil Service Companies the First Quarter really will not matter. It depends on how about the next couple of quarters will get. It will get more dire out there for them. That is want to watch. On top of that we will have , becauseon on monday schlumberger is a bit more of a consumer base, but i think this will be interesting to watch. Alix we will be aches speaking to ryan lance later on in the hour. I want to highlight pg e, the company this is there core earnings estimates but they reaffirmed the forecast. Part of this was because organic. Ales came in light, up 6 this is the guy that you will go to, you got toilet paper, paper towels, this is a gold mine for pg e. 4 stock now down by about. Also looking to pay over seven and a half billion dollars in dividends. They will buy back some stock. You do not hear very often about buybacks. We will have more of your morning trait analysis coming up right after this. This is bloomberg. Happy friday, guys. Alix time now for your bloomberg first take. Isning me for our discussion Damian Sassower and michael mckee. Happy friday. What is the most important thing you are looking at today . At thejust looking potential for a serious deleveraging cycle. Coming into the crises, world debt was at two 42 of world gdp. If you look at some of the recovery rates, they had been calling for 14 prepandemic versus the historical average of as much as 60 per you can expect that to be way lower. It could be twice the historical average of 6 so i think theres a lot more pain ahead in the credit markets and that makes sense given where we are now. Week on the flipside, this u. S. Highyield funds about 7. 66 billion, maybe the fed l not have things the market is already doing it for them. The fed probably does not have to buy anything at this point because they have accomplish their goal of a secondary market for highyield yield. The problem they face a couple of weeks ago, people were not buying, and in the secondary that she want to getu involved in that . Probably, no, that would be bad for companies that cannot borrow or have to pay more. The fed announced we could if we want to buy a little bit of highyield debt and that sent people flocking to it. They probably are off the hook at this point. It keeps them out of the concern of whether they will face losses from taking on debt that is not Investment Grade. To pivot off that in terms of what countries are doing with the rhetoric is, i want to point out that there is talk about the butomy has great resilience they want to widen domestic demand and they urge stronger macro policy to counter the impact. Will will be talking about seriously Major Chinese stimulus coming down the pipe here . I do not think we expect them to throw the kitchen sink in. Given all the u. S. Has done, i expect stimulus in the u. S. Something on the order of the percent of gdp. It china, ive got them on something of the order of 13, and they are no longer a growth or commodity story. It looks more like a Service Oriented economy today. If you look at ordinary trade, it is 58 of exports in china. 30 , assembly,at they do not really manufacture anything, and that is down considerably from 45 today. A is acting a lot more like Service Oriented economy. Rising, andare those are the issues you got to look at getting back to work in china. Alix that is a good point, particularly when that is not the thing that they have ever done before. Mike, you mentioned that in some cases that the finance minister in germany is saying that the public debt will rise and that it must be reduced again after the crisis. This feels to me like the europeans are in a debt crisis, sure, we will help you, but how does that cut at this time . It looks like we have a real problem there. You have the germans and the dutch Still Holding out against any kind of joint financing, and have the periphery country saying we need help and we do not need to increase our debt significantly we cannot do that. How can we sell more bonds to pay for all of this ourselves . And you have the germans coming to goday saying weve got back to austerity after this. That did not work very well for the rest of the countries in the European Union. It works well for germany but has not worked in other countries. Morning said if we do not come to some sort of agreement, European Union is going to collapse. He looks to be trying to step into the political void, and this will play out for some time hasr this coronavirus issue cooled down. Everybody is dealing with the disease right now but they got on the mental problems that they have papered over after the financial crisis. They will have to deal with this Going Forward. Alix i feel like you lived in greece for a few years when that was unfolding. I wonder, theres no way that the ecb can stem that dysfunction when you are in this kind of crisis. Eventually it will become sidelined. They can patch the holes and they are doing that theyll have to buy a lot of bonds. If you look at the spreads between germany and spain and italy today, they are rising again even though the ecb said they will do whatever they need to, and the you put together a package for their are people who are starting to get worried about what is going on and whether or not these countries can afford to rescue themselves. They will have to figure out something sometime soon. You can kick the can down the road, but eventually the road hits the dead end. Alix exactly. China ned this, but as well as rate cuts. Question, Td Securities had a note out on capital flows saying they see tremendous pressure of outflows already putting pressure on countries that have currency issues, reserves are doing doing dwindling as well. How does that shake out . Thats whats everybody is actually this isike mentioned not lead to an increase in the money multiplier [indiscernible] of this money supply, we are throwing at the issue, does not mean an increase in lending to those who need it. Just in terms of emergingmarket , we are seeing a little bit of flows back into the asset class, which is different this time around is that the pace of downgrades, it is so much quicker. Agencies are on the front but this time. Back in that financial crisis, they were reactive. That changes the feel for a lot of emerging rockets operating within this space. Anything that can be said or done to change any of this . , there will bern a handsoff approach to all of this stimulus, let domestic economies decide how the money gets allocated. I am not convinced that is the right approach. Nevertheless, that seems to be there belief and that to me can be a concern. I am just saying emerging markets do not have the tools and the systems to get that money to those who need it most. They can use some assistance. To take a handsoff approach may not be the best thing. Alix developed rockets are even having a hard time doing that. Have not talked about the potential guidelines if the states would like to choose to use that to reopen the economy. If that is being credited for the risk rally and i equities, but you heard what a lot of official said yesterday, it does not feel like they match up. You have a situation for the president would love to take credit for the economy reopening. Run on a strong economy, which we will not have in november. He has this planned that he says the states can use, no evidence that states are necessarily going to follow his guidelines. They will develop their own and they have divided into sort of regional packs because they do not want to open statebystate. They want to make sure that if workers are crossing lines, that they are not at this point bringing the disease with them. Epidemiologists have weighed in on the plan and heres the bottom line for whatever plan you are looking at, whether it is from the president or for individual governors, testing, testing, testing. Predicated on their dad that you can test people. Right now there are not enough tests and it takes too long to get the results. Until they can do that, theres no way you can safely open the economy. That will be the issue could how soon can the tests get to the hands of the people who need them . That will be even more of a question. What position would you want to be taking in the middle of the risk on sale at equities where Everything Else is more cautious . I could speak about my book in emerging markets. Universal debt, i would rather play em dollars in local currency debt. That is safer at this point. 20 of that universe is now paying a yield of over 7 . Just think about that. Billion, and 500 many of this is in double digit territory. If you are looking for income, for carrie, i think that em does offer that. We need to see a fundamental turn for the better before guys really start to pile in. What is the one thing you want to be looking at here, mike . I am personally now focused on the european debt and also taking a look at the threat of protectionism that seems to be ramping up. Youll see a lot of potential problems on the rise. Said today, if we do not do something, the populists. Ill win i think it comes back to the curve. In this case its the disease curve heard i heard last night someone say, and i think this is correct, the economy is the disease and the disease is the economy and that pretty much sums it up. Until we get better news on the progress of the disease especially in the places that will havet hit, we this go on and on. The market can go up and down, but nobody will really be able to trade or do anything with confidence until we know that the odds of going out the door and getting sick have fallen. Alix right. Really appreciate the conversation. It was a great way to round up the week. Thanks so much. I just want to recap the china political ise excluding rrr as well as rate cuts and they are now into white domestic demand. Is that enough to boost the growth where they need it . Now rts we use this is bloomberg. You are watching bloomberg daybreak. Risingof juliet are after a report saying the that ishas a drug working for coronavirus. A trial is being conducted and one researcher says most patients using the drug have been this trooijen and only two died. The Financial Services firm run by this man will cut hundreds of employees since the coronavirus outbreak began. Reductions are the deepest in the industry. Other banks have pledged this year to hold off on dismissals. That is your Bloomberg Business lash. Onx i want to update you pg e. Forecastreaffirm their , and their organic growth just came in at 6 . We were looking at a percent, so that is a little bit light and that sales came in a little bit like because of that. That stock is now up over 2 in premarkets. One other store that caught my eye is just how big the Federal Reserve role is, and weve been talking about the monetization of debt. Monthlyone chart, treasury purposes purchases never issue would now the fed is on track to buy double the amount of net issuance. Meanwhile the stimulus plan is ballooning the deficit come and the short wise the shortfall will rise. Coming up, investor reaction to. Lans to reopen america this is bloomberg. Because you cant get to the theater, were bringing the theater home to you, with xfinity movie premiere. Theres a world full of other trolls. How different can they be . Our brandnew service that lets you watch all the latest movie releases from the comfort of home. Trolls world tour available now. I will protect you no matter what, pinky promise. Just say xfinity movie premiere into your voice remote to bring the theater to you. Inx lets get your check the markets on this friday morning pretty we could be looking at two weeks of gains for the s p. That u. S. ,ry here in triple dip in china i will just put that out there for everyone to think about. The underperformance feels like it is risk on the equity market and it is risk on in europe with money coming in as yields continue to go down. On the flipside, you wind up having a lot of pressure, talking about debt. Just to highlight what is happening in the crude market, we are down, with a contract rollover that puts pressure on the may contract. The june contract is performing a little bit better. You are still looking at crude around 20 a barrel. The president lays at his proposal on how to reopen the u. S. Economy in may. There are some difficult decisions. Joining me now is Jeffrey Kleintop from charles schwab. I feellook at the s p, like we have seen some recovery, and we still do not know when well be able to fully reopen. How do you put those two together . The market has gone from pricing in an economic freefall with no signed of ending with maybe aching about the timing of a rebound on the reopening. But that was the easy part. The hard part still lies ahead, what does the recovery look like . This isnt about a politician declaring it is over. It is about means of people and thousands of businesses deciding when they feel safe again. I think it will be tougher from here for the markets. It will be weeks before we know how the reopenings are going in austria and denmark and other places. All we have to gauge them is shapednd that has been v so far. The key will be to watch some data points like jobless claims, we can box office numbers, rushhour traffic, to see how this is going. That puts the market in a difficult place between maybe not heading right back to retest the load but not exactly charging up to new highs until we get a better sense of what it will look like. It begs the question, do you need to be playing reopening trades and if so what are those or do you need to look for that really beaten up ones for the longer terms like small caps . I think as we start to see the turnaround, i think the leadership may shift a little bit. I think some of the value stocks that have been underperforming may be a place to look at as the Economic Cycle maybe begins to turn around. We were just talking about the challenges of the banks in europe, but if we start to get a , that isield curve really good news for the banks and where they are. That could work out. Beyond that,u look oil is up today, and that is something that could be reassessed. We could see a shift in leadership after the nasdaq has leadin a lot of the heavy lifting lately. Alix does not mean that it is the right time to buy it . Jeffrey i think its time to have a balance in your portfolio. Im not saying only those stocks, but i think and we go through difficult times investors tend to look back at what had been performing the best. The problem is when we go through these times, we can look back at everyone of these global recessions, when we started to see the bottom, new leadership emerged. Many investors will miss that if they do not begin to rebalance their pope folios. There portfolios. Earnings are a tough thing to gather any particular insight from. How businesses are weathering these downturns, the decisions that some are talking about in terms of creating better redundancies in their operations and supply chains, important from a cost perspective. As far as the outlook, they do not have any kind of guidance they can offer. I think that is why it is more important to watch highfrequency data that i mentioned earlier for that will be more important to drive for earnings are headed more so than what ceos can tell us today. Alix six month ago i feel like if you asked someone where they wanted to be longerterm, it is dividend