Deflationary europe feels than america. Francine this is also because the pandemic hit italy first, so in terms of curves, you are a couple of weeks ahead in europe. It is a different set of numbers. The packages and loans that european governments are giving is different from what the u. S. Is doing, largely because you are at different stages in europe compared to the u. S. We are looking for that leaders summit, more stimulus coming from the commission and probably to give a strong voice to the commission that europe is united and in solidarity with country most affected by the virus. Tom a lot of different opinions. We will talk to Dennis Gartman about how to fold in a weaker euro call with gold. Here is viviana hurtado. Viviana donald trump signed an executive order to curb immigration. Green cards are currently on hold. They allow foreigners to become permanent residents. The governor the president says that will limit competition for jobs. Expected tose is approve today the 484 billion rescue plan. The Senate Passed it. The bill adds more money for small businesses, hospitals, and coronavirus testing. Nancy pelosi says her next priority is a major aid package for state and local government, at conflict with Mitch Mcconnell who wants to slow the doling out federal money. Europe is inching its way towards a 2. 2 trillion coronavirus Recovery Plan that may never happen. European leaders participating in another Conference Call but there is a Sticking Point how to allocate the money. Italy and spain want joint debt issuance to spread the physical pain but germany and the netherlands do not want to be stuck with that bill. Oil extending its recovery from the record plunge this week. The market shrugging off data that shows u. S. Oil stockpiles have risen to a threeyear high. 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. Tom thank you so much. Equities, bonds, currencies, commodities, gold with a leg up, not to record highs. The rest of the market, for the first time in ages, is exceptionally stable. That is what i see across equities and bonds and within the litmus paper of the global system in currencies. Showing some yen strength, a symbol symptom of the weaker euro. Emergingmarket currencies are ever so fragile. We spoke to Jeffrey Currie about a weaker brazilian real. The turkish government pointing to the istanbul operation, really front and center intervening to hold the line at seven lira per dollar. Francine . Francine crude oil surging above 15 a barrel in new york. Looking at what european stocks are doing because they drifted as private sector activity plunged more than economists anticipated. Flipping and taking a 1 billion right down for provisions on bad loans after the pandemic. Markets are trying to figure out exactly what Coronavirus Impact on the Global Economy will be. I stand corrected, the european stocks were up, down, down, and now they are up again. Tom we are thrilled to bring you Dennis Gartman. He is on a golf course somewhere in the south. He is supposedly retired but i dont believe it. He continues to follow the market daily and sends out messages to fancy people. Like the disinflation and some of the great house calls from global wall street, mr. Gartman has nailed the call on gold. He says own gold but against a weaker yen, particularly against the euro. How can i have confidence to hold gold at 1700 an ounce . How do i effect that in euros and where is that heading on a percent change basis . Guntram owning it in euros is the only way to own it. Nonusin u. S. Dollar terms because the dollar the global currency. The dollar will continue to rise relative to the euro and one wants to own gold with a currency that is deflating, not inflating. Turnship of gold in euro terms is a far better trade and has reduced volatility of intraday and intraday moves of day and intraday moves of gold. The easiest thing is to hold gold etfs and be short of the euro on the cme. Futures are short versus the euro on the interbank market, or you could use an etf that is short euro transactions. It is complicated but it works. Tom i noticed yesterday out of our istanbul shop they had a fabulous chart showing the Global Reserves of the central bank. They are up to their eyeballs in gold. Why do Central Banks want to own gold . Guntram they doubt the value dennis they doubt the value of their own currency. The Russian Central Bank has been a major buyer, the central bank of turkey has been a major buyer. They doubt the validity of their own currency and want to hold something that has historical longterm value. I am not a gold bug and there are times one should be short on gold and times one should bill should be should be long. Banks are buying it, not selling it. Francine what is your expectation for inflation or disinflation or deflation . Dennis i think we are starting to see the incipient signs of inflationary pressures. Look at the grain markets. They have stopped making new lows and have turned higher. Commodity markets have showed signs of turning up. The only problem for deflationary pressure has been the collapse of oil prices. Here we are moving june, we have june wti trading at 15. 62 and everybody is talking about the but weat is up sharply, were 37 for may. Can we get to 20 a barrel for futures over the course of the next several weeks . As a bounce, yes. If someone told you three weeks 20,rude was trading someone would have scoffed and laughed. 22 that most. Francine is it symptomatic of a much worse economy . Is there anything more Central Banks can do . Do you expect them to do more because of wti . Dennis the Central Banks have no choice but to remain manifestly inspection expansionary. Ppp as weoduct of call it in the u. S. Will be expanded again and again and the Central Banks have no choice but to remain manifestly expansionary. In the United States and europe and around the world, it is egregiously week, depressionera circumstances. With some help, i hope we get which willaccine change the markets dramatically, but until we do, the propensity of people to step up and buy and businesses for Capital Expenditures is greatly reduced. Tom a rookie investor out of florida yesterday by the name of out a paper int 1987 about john templeton. He said just look at history. Speak to the people watching and listening to this who are scared stiff like we were in october of 1987. What does history tell Dennis Gartman . Ofnis first of all, october 1987 was a oneoff circumstance from black friday to black monday and black tuesday and after one month, we were out of that problem. I remember how violent the moves were to the downside and how quickly they reversed. History tells me take a look 1929at 1972 to 1974, and to 1933. The rally in stocks, a bounce predicated on the models everywhere will soon run its course, and if we look at history, markets tend to bounce from their lows and then go back and test those lows again and again, and then get quiet before we see sustained strength. My fear is that we will see the lows in march, i am afraid we will see them again. Tom dennis, congratulations on your call of gold and yen, without question the trade of the year. Mr. Gartman is very nonretired. We will come back with a very nonretireds evita Savita Subramanian. Bloomberg. This is good morning, everyone, bloomberg surveillance. It has been an extraordinary day. Our team is spread out across the United States and united kingdom, and to go from Jeffrey Currie to Dennis Gartman, now to Savita Subramanian is just what this is all about. Subramaniy and is an is here to drive the equities conversation. I have never seen the concentration in a select group of stocks within the s p 500 and i have never seen so many people saying same thing, buy quality, you know the drill, etc. , etc. Radaroes the subramanian say that we are focused on seven stocks . Savita it is an interesting point. There is a herd like mentality in the market that is pseudobullish but only on quality. I think that we are in the beginnings of what could be a Recovery Process for the essence the 500, but it is a little bit early to call for the s p 500, but it is a little bit early to call it soft valuations soft. On a pe basis are back to february highs, which is disconcerting given we are about to enter the worst postrecession war ever. U. S. Largecap stocks look expensive to everything except two asset classes, bonds and gold. Only bonds and gold look more expensive. This suggests market persists up ands participants are betting on deflation which benefits bonds or inflation which benefits gold, but nothing in between. In that environment, maybe stocks do relatively well. Are you on the inflation debate . Thisuch deflationary will be, especially if you see wti at these levels . Savita there are pockets of inflation we are starting to see, but our economist are forecasting a 6 gdp. That means a lot of Business Activity is wiped out, lots of capacity and excess capacity. Deflationary,term but longterm if you think of the forces at play, it looks like the world is shifting from a global to a more localized economy. Thehe u. S. , we are in process of bringing supply chains back to the u. S. Some morelizing supply chains, so closing borders and a more closed economy could pose longterm inflationary threat, not to mention that the fed and other banks have been printing money at what feels like the fastest pace we have ever seen. There are longerterm inflationary risks, but for the short term there is excess capacity that needs to be realized over the course of this recession. When do you have more visibility on the government loans and whether they are working . Savita government loans, that is the stopgap solution. Period ofs that this inactivity lasts longer than expected, so most companies have enough capital, at least on the s p 500, to get through a couple of quarters of completely stalled activity but beyond that it is problematic. Similar story for Government Spending. If we continue to see Government Spending at this rate, we have to wonder how much this really does. Where we are now is a point at which policy and fed spending have gotten us through problematic patches, but this is one where i think early depends on the length of the down really depends on the length of the downturn. Another reason to be concerned about equity returns is the fact that corporations have basically stopped providing a floor on the market. If you look at the last 10 years , we have seen buybacks contribute materially to pershare Earnings Growth and today, that story has vaporized. That presents a risk as well. , onejust because of time more quick question. You are definitive in putting together a 20 page Cogent Research paces Research Piece on esg. How are we doing on esg . Has the fed pushed aside . Savita esg has actually been a better strategy in this bear market that we have lived through than it has in prior years of a bull market. What is coming to the fore our social ideas with like employees with better satisfaction, outperforming those with weak satisfaction by about 5 there are signs investors are paying attention to esg. Tom Savita Subramanian with bank of america. Please stay with us. Morning, my conversation with David Malpass of the world bank, not only on the world bank effort within this pandemic, but his view of their institutional thrust forward. Please stay with us. This is bloomberg. Are watching bloomberg surveillance. The top u. S. Aluminum producer cutting costs and output. Alcoa will suspend production, suspendingex and pension contributions. Royal caribbean is in talks for ainancing, trying to package may include up to 600 million of bonds. Royal caribbean has considered selling convertible bonds and equity. That is your Bloomberg Business flash. Francine thank you so much. We have plenty more of our interview with the Credit Suisse chief executive that took one billion in terms of charges for loan provisions due to coronavirus. If you look at the virus up date and the impact on the markets, we have some pretty difficult economic figures out of the euro area, u. S. Futures fluctuating with europe stocks. Include crude fluctuating around 15 a barrel. This is bloomberg. Awesome internet. Its more than just fast. It keeps all your devices running smoothly. With builtin security that protects your kids. No matter what theyre up to. It protects your info. And gives you 24 7 peace of mind. That if its connected, its protected. Even that that petcamera thingy. [ whines ] can your internet do that . Xfinity xfi can because its. Simple, easy, awesome. [ barking ] good morning, everyone, bloomberg surveillance. At eight 30 this morning, jobless claims will be painful to look at the ramifications of millions of claim numbers on the american economy, what it means for washington politicians and chairman powell. On the equity markets, Savita Subramanian is with us, from bank of america, with a quantitative bent as well. In the equity market, the value dacian valuations of largecap stocks seem to be based on a belief in Revenue Growth. How should we approach our study of future Revenue Growth . Savita it is a great question. I think longerterm Revenue Growth is likely to remain for some ofecially the new economy stocks, but i ourk are the next 12 month models and estimates are sitting at something close to flat Revenue Growth, where you have some recurring revenue stocks, but you have a massive downturn in oil and energy, which is a big offset. Through a will ride flat year of revenue and will see that start to pick up. Topline growth is a serious resource and we have seen it concentrated in just a handful of stocks, leaving the market very oligopolistic. Stocks are big cap taking share and everything is thinning out and falling to the wayside. I expect that is a similar environment that we will be in over the course of the next few years as well. Francine given the price of oil drop, does it change everything for renewable and Sustainable Strategies . Savita i think it does and doesnt. If you look at the implications of oil, it is reflecting a very weak economic environment, but longerterm i dont think this [indiscernible] one thing we have written about his Climate Change recording, the emphasis on companies to become club Carbon Neutral over the next several years, and that does not know away because of a recession. This is a cyclical shock, where the shift from traditional to clean energy is more of a trend that remains in place. Tom thank you so much, Savita Subramanian with bank of america. We have much more coming up, too much to talk about. A conversation with the new leadership of Credit Suisse. Here is viviana hurtado. Viviana donald trump has put immigration on hold, signing an executive order to curb the issuance of green cards for would be permanent resident. His reasoning, it will protect american jobs, but the order is less inclusive then what he announced. Economy, ites suffered a massive low. Blow. Activity falling by more than half. Government restrictions to contain the coronavirus leave European Companies struggling to survive. Six coronavirus vaccines are in the human testing stage. China. Those are in all are in some stage of development. 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. Tom thanks so much. Coming up, william lee will join us from the Milken Institute on the asia watch, the International Monetary fund, and struggling em economies. Mexico and turkey make emergency in the last few days. Lets talk about european financials. We spoke to the new chief executive of Credit Suisse, setting aside one trillion 1 billion in loan assistance. Here is thomas got stein. Thomas it was baptism by fire, as you said. Id not expect that role that when i took the role on the 14th of february. Everything changed. I am pleased with our results. Billion, return on tangible equity and im pleased with the fact that we managed to incorporate the reserve build of of billion, which consists 400 600 million of credit provisions and 400 of unrealized market losses. Reporter, onecap of the few european banks, and that included a meaningful portion of our credit provisions , just shy of 400 million of related writedowns, which are not single name writedowns, but much more writedowns for entire lending book. With respect to assumptions, we assume a significant resumption of gdp in the Second Quarter of roughly 20 in the u. S. And the high Single Digits in europe and switzerland, for the full year europect recessions in and to the less extent, switzerland. Francine is it the assumption reflecting the current implications of the lock downs being eased and government functionings work amy working by may or june, or a bigger stress test . Thomas we assume a recession for the u. S. , europe, and switzerland. We have done this through the end of march assumptions and we have removed lockdowns based on our current knowledge. We work withly various scenarios as part of these calculations lower. How has transaction income and trading held up or april . Actually. Ite good, valuations are decent but have come down a bit. It has stabilized. Transactional revenues are still quite strong. Francine do you worry about anything being systemic . If there are defaults in the , could it become systemic or something that looks like a financial crisis . The firstis is in sense a Health Crisis and a broader economy crisis. This is about transportation, retail, and everything, and so far if you look at the First Quarter results of the u. S. Banks, i think banks have held up very well. I think we are far away from a financial crisis, but clearly we have to stay disciplined going forward, both in terms of our capital and liquidity management but also in terms of cost and intimate. Management. I am confident the position we have puts us in a strong place to do that. Francine that was the Credit Suisse chief executive talking earlier on. Tom very good, thank you so much. Joining us now on the International Economy formerly with the International Monetary fund and now with the Milken Institute, william lee. I will be talking to David Malpass of the world bank later about institutional integrity of the world bank, of a beleaguered World Health Organization, and every nation for himself. Em is distracted and does not care. Many countries seem to be fighting for their financial and economic life. How does this play out across may . William great question, because this is a great time of challenge for Financial Institutions to do the job and provide the needs of liquidity to not only pay their debt but strengthen their structure. My colleagues at the era the how to gearing towards spend money in wall Street Health systems. Emerging markets face a huge challenge of imported infections because with the underreporting so severe, we dont know how the emerging markets are. Money is leaving the emerging markets like crazy and coming into the u. S. And other economies. Tom we look at mexico and turkey adapt thing as well adapting as well. Is there urgency for the imf to act or chairman powell to act, or can they observe as we let this unfold . Bias,m i hate to show my but the best thing policymakers can do for emerging markets is get the great reopening as fast and effectively as possible. What is hurting emerging markets the most is the lack of remittances and you are not likely to get them abroad unless you are fully employed. That will help the emerging markets experience a less bad outcome than otherwise. Francine bill, good morning from london. Who of the emerging markets seems the most fragile now, not only because of Health Systems but because of big debt already . William the crisis will clearly be in africa. Invasions by only locusts and damage to the food supply, but the Health System in africa is nearly nonexistent. That is what the World Health Organization and everyone is putting out. The underreported vulnerability will probably be Eastern Europe because the Eastern European economies where the Growth Centers for the entire e. U. , and my concern is like russia, the amount of outbreak in those countries is going underreported and we dont know how bad they will be hit. Back, thoseomes emerging markets will be at the center of the supply chain as people look to diversify outside of china. Francine do we need to split the debt . Split the debt into post covid and precovid . William i think the debt restructuring is one of the huge challenges facing the economies, and any kind of debt forbearance because inroblem this post 2008 world, i dont think it will be easy to get bondholders to agree to that kind of forbearance. Especially in a world where we are taking hits in the highyield area with the oil sector, a lot of people will be careful about sticking to the covenants. Tom file it under be careful what you wish for, but without question the western zeitgeist is one big pile on china. James mcgregor out on twitter saying be careful here, but in our rhetoric, we are following an antichina feel that seems to be universal and complete. What is our risk in doing that . William the political gains we have had in trying to have some kind of local agreement where the u. S. And china essentially split the Global Economy as the two largest economies, and try to not modernize the idea of glover and his globalization so supply chains can be taking advantage of cost differences. This is what china was gaining from, and when we talk about the need to diversify outside of china, that may become a movement that gets so carried away that people start moving things out of china just for the sake of moving things out of china. That is a rethinking of how the new globalization will take place, will be a challenge for any ceo. Ceo to say, i am moving things out of the u. S. Because of the costs. Francine thank you, bill lee from the Milken Institute. We have more on the virus. We will be talking to dr. Jason farley from Johns Hopkins university. This is bloomberg. This is bloomberg surveillance, tom and francine from london and new york. Every day we continue to track the virus. Bloomberg has developed a partnership with the leading authority on the disease. Johns hopkins has been at the forefront of the International Response and every day we will bring you what is most important on how to tackle the disease. Today we speak with dr. Jason farley, a Nurse Practitioner in the division of Infectious Diseases within the ghq School School of medicine. What more do we know about when these vaccines will be ready . Are we concerned about the side effects, and when can we have something that is viable for the population at large . Jason right now, the vaccine studies are working and what we call phase one. These studies are looking at the safety and whether or not we see a response. That is not testing efficacy, which is it effective at curbing the virus. Effects ands have that is why we are continuing to project timelines of 12, if not 18 months away. , the ragingley debate this morning is in your wheelhouse. You are one of the nations experts on staphylococcus and the resistance in hospitals. The arch fear of medical experts is a secondary bout of this virus down the road. Explain the likelihood and how it will demonstrate if we get a virus come september or december or even into 2021 . Jason yeah, certainly. We are looking at estimates of antibodies that are emerging that suggests that 5 of the population, the data out of seattle and Washington State suggests that 5 of the population may have been exposed and recovered. The first question, does recovering lead to attenuation in the future . That still leaves 95 of the population as immunologically naive, meaning no prior exposure or recovery. If we go back from something too fast, we propagate virus in the community that subsequently brings us into the season of cold and flu, september on in the United States in the northern hemisphere. Then we get other respiratory viruses emerging such as influenza, and it complicates clinicianso because are seeing patients with respiratory conditions scratching their heads saying, is this flu, coronavirus, or another . We know how to treat flu. Obviously, we know how to diagnose it and prevent complications in most circumstances, yet transition transmission parameters and dynamics affect the way we respond. We are concerned about how occurring respiratory cooccurring respiratory viruses during the season. Expectot that we do not coronavirus to return in the fall. We have specked we expect a second wave of infection as we have seen around the world. Tom we are going to run out of time. Dr. Farley, i really want to extend this conversation and i believe we will speak to you again this week or even next week. This is incredibly important, this idea of what the experts say about how these bacteria and viruses display themselves. John farley with Johns Hopkins medicine. Hool of we have a jobs claims report at eight 30, dont we . Francine we do. That will be significant to give an indication from the markets what we see. We had disappointing european pmi figures, almost half of what economists were expecting, so the markets are trying to latch onto corporate earnings and we will look at the jobs data. Tom greatly appreciated. Coming up, what we will do through the morning, we will have bloomberg surveillance, and then we will get the jobless claims at 8 30. There will be some level of grim and we finally get the pause today to reframe. One way we will reframe is with David Malpass, the acclaimed economist of bear stearns from years ago, selected the Trump Administration to take on the bureaucracy and institutional challenges and good of the world bank. We will get an update on how the world bank is doing as they look at a really extraordinary pandemic. What are they seeing in the markets . Weaker yen and fragile emergingmarket currencies. Finally some actual quiet. Please stay with us. At 8 30, we look at jobless claims. This is bloomberg. Alix europes pain. Pmis plunge in april. The uks economy shrinks at the fastest pace in at least 20 years. European Union Leaders discuss a 2 trillion euro Recovery Plan as germany moves towards its own 10 billion euro package. Aside moneyank sets to cover write downs and provisions for bad loans. More earnings coming from airlines, railroads, and drugmakers. Welcome to bloomberg daybreak on this thursday, april 23. Is, is lot of the action in the currency and bond market over in europe. I am watching eurodollar taking a leg lower as we are waiting for potentially more stimulus to come down from the eu. A lot on the table for that. Also picking you look at the treasury market. Not a lot happening there. Yields move lower after th
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