Really germane this morning. I love how the french call it a move to the confinement confinement. In america, yesterday afternoon, there was a real understanding of confinement at the white house. Dr. Fauci worrying about origin, and also the Vice President of the United States worried as well. That was sobering on mothers day. Francine it certainly was. Lets get straight to first word news in new york city with ritika gupta. Take a coPresident Trump ritika President Trump has a tough job this week, trying to convince americans it is safe to go back to work and socialize. At the same time, he is fighting a coronavirus scare that closed his own office. On friday, Vice President mike pences press secretary was diagnosed with the virus. Neel kashkari says americans should brace for more bad news on unemployment, and he says congress should provide more help. News emmaalled abc saying fiscal efforts will need to be put in place. And the plan for lifting the countrys lockdown. Expected to release a 50 page document. Last night Boris Johnson announce what he called the first careful steps come at telling people who cannot work at home, like those in manufacturing and construction, to return to work. That is facing resistance from labor unions and politicians. Saudi arabia has announced a number of austerity measures, trying to cope with the coronavirus pandemic. And the historic collapse in oil prices. The saudis have tripled their value, and costly cut the cost of living for their workers. More than 26 billion. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, ritika gupta. This is bloomberg. Francine . Tom . Tom thanks so much. After the jobs report and we will talk about it on surveillance today a reassessment of the level of grim in the american report. Most economists think it was far grimmer than expected. The markets churn with a little bit of a riskon. I dont want to sell that i dont want to oversell that. Yields churning with a little bit of the curve steepening right now, and the dollar weaker. Francine . Francine i am looking at a similar data check. I am looking at dollar, and i am also looking at what we are seeing in oil. It is dipping further, and the european stocks that started on a high are now down to 0. 3 percent. Joining us for more on the markets and what we can expect in the coming weeks and months, is john hardy, Saxo Bank Head of fx strategy. I guess the thing people want to know is what happens to dollar from here until the end of the year. Don most certainly. Hedging towardn support here, in many cases, if you look at how the dollar has performed versus emergingmarket currencies, with the currencies against the likes of the aussie, the Australian Dollar and the canadian dollar, were seeing it down and support as well. That has coincided with the broadbased recovery. I suspect it will continue to serve against those currencies, and if you are going to if risk sentiment rolls overcome a part of that will be that the dollar is firming up. Longerterm question here, how much of the world can the fed put on its balance sheet, and at what point is liquidity pumping only in not addressing the key issue here, which is the risk of solvency more than just liquidity. I still think there is some risk that the dollar goes higher and has one more major surge before we see the fed and the Global Economy getting over this and rolling back to some sort of recovery mode. Francine do you worry about inflationary risk . John i think that is the once we startsk to get toward a policy response, and override money printing to stimulating the economy, i think the first impulse is this is deflationary. In a credit crunch, it is always deflationary, and the risk of deflation asset markets as well. I do see an eventual inflationary shift, i just struggled to see the shift. In the near term, all the market seems to want to price in aggressively in this case. Thisin the literature weekend, there is a little bit of a look out to the future, as you say, toward some form of inflation. But away from that is the idea of debt crowding out private debt. This is a concept taught in schools, and then you forget about it. But here we are with all this debt coming on. From where you sit, does saxo bank see a crowding out of private debt by the amount, the magnitude of public debt . Mean, part of the crowding out is simply a function of all the debt that is being created in order to fill a hole, and that whole has been created by the shock into the economy from this crisis, so at some point, yes, it is simply moving from one side of the ledger to the other. But i think the overall problem is the amount of debt in aggregate and how that lowers the value of money. Themore you lay on debt, lower the Growth Potential is, and it drops. So yes, it is key. Tom let me give the chart, folks. Fiveyear,kingdom, with the stability of guesstimate on inflation. The United States was down, but it has really come back quite nicely. John, that is not true of europe. The disinflationary vector of europe is absolutely tangible, and extraordinary. Should that be front and center for institutions and political elites . Should they focus on the disinflation or, may i say, deflation to come . John what they need to focus on is how the piling on of debt ends, more than the inflation itself. Deflation is externally value as with the real debt continues to grow. How is the question. Europe has an especially difficult time addressing it by the fiscal route because of their difficulty in creating mutual debt and their difficulty agreeing on fiscal measures. The problem is particularly acute in europe for political reasons. I would certainly agree with that. How we get out of this is what everybody is trying to understand. Eventually, i think it is through some sort of overt financial repression and expansion of the fiscal side of things. John, we were speaking with a german mep at length talking about the legality of the Constitutional Court and how this could hurt the judgment we had last week and how it could hurt future programs of the European Central bank. How much do you think about that on talking about fx . John it is really important because we have been focusing on a telling politics. We have been focusing on the whole issue of usual debt issuance, and whether the politicians can agree on this. It is like we are opening up a new fund with this extension with this existential question, to what is said is this the to what extent is this the supreme law of the land versus constitutional . This heads inere a productive direction. It is kind of a slow burn crisis, but the heat could turn up rather quickly at any point. Lets call it starting with the june council meeting. This is a very important issue. Tough to price in the short term. Francine do we need to start thinking about a breakup of the euro like some people are, or is that too farfetched . John i dont think it is too farfetched. But the question is the path, the timeframe. Tradebecause of the free union with parallel currencies . All of these things are in play, but the tendency in the near to medium term is the crisis and coming up with a solution, a bit like 2012 with the ecb, but this time the problem is too big for it is through political funds that we need to see this solved, and the ecb is not up to the task. Tom one final question here, and i were to have you back here to continue this discussion to frame out monday morning. You mentioned before, financial repression. The negative Interest Rate guesstimate is pulled back from thursday in the United States, but are you suggesting europe will experiment with a greater magnitude of negative Interest Rates . Repression financial does not have to come over negative rates. It can also come from massive youal stimulus, where control the yield curve from zero out to however many years aimed at enforcing the Inflation Higher by the printing press, keeping not only yields lower. That is another route to financial repression. It is moreue that going to be on the side of fiscal stimulus. Tom some of the economic questions we face, folks, one of our themes for the week. Off a jobs day, it is always somewhat of a clumsy and quiet week, but this time around that is not the case after the shocking statistics we see out of too many nations in this month of may. We will continue with mr. Hardy. Withg up later, speaking mr. Summa devaney and from london and from new york, this is bloomberg. Tom good morning, everyone. A reset for a fiveday work week, monday through friday. We will talk to you about economic, finance, the politics of the moment, and touch upon this continuing pandemic. We are in london and new york this morning. With us, john hardy of saxo bank. I want to dive into euro dynamics. Everybody is looking at the dollar, the resiliency you mentioned earlier. What is the saxo bank call for euro on 12 months . John i think out 12 months, it looks like an awfully long time in this market, but i think the risk is we set new lows for the cycle, and i think he really just depends on the path for this year, existential crisis. Base cases, you go to 1. 05, maybe 1. 03. You know, there will be a risk of parity. That is not our lets say base case, 1. 05, 21. 03. Tom is the basic theme of the four Exchange Market a range bound market given the crisis, given the unknown unknown . Or can you trade with some confidence . John i think there is some smaller stories of footwear there is some confidence, Something Like which could find some port. I just feel like we have gotten into a little bit of false complacency here across markets. Bigink we need to see more policy move. A dollar spike higher, and we do to solve this we need to solve this problem. What is the new reserve asset . That question needs to be answered, all these things. Theas well with so many of Central Banks moving to more or less marked down there yield curves. The yield curve control, that is the escape valve in pricing, as long as the Exchange Rates are there. We could see extremely, a much larger rise in that volatility at some point down the road. Callnk it is too early to for range bound currency at this point. Francine what do you do with some of the emerging markets. Are there any emerging markets that you think will struggle right now, or where we will see controls . Where we are think focusing right now in terms of risks is the turkish lira. You have a backup where rick sentiment is very strong and you see the dollar moving lower where the risk sentiment is very strong and you see the dollar moving lower, you have seen various moves that amount to sort of softer or not so soft capital controls out of turkey. Not necessarily the canary in the coal mine, but something that could trigger risk if we see something. With the brazilian real, a similar situation, where they have cut policy rates, so there is not much carry left there. A lot of the emerging markets are flipside on the dollar question that i just mentioned. That is where i think emerging markets will be the place to go the dollarw that highs are in. Francine how money that how many countries will need how many countries will need an imf program . Don i cannot give you a number, but a duopoly something needs to be focused on because so many of these countries are in dire straits and in need of help. Very important point that francine brings up. To your point in the last section, john, we always need a clinic on this. It is liquidity and solvency. Getting the idea that solvency is about the piggy bank has run out. Ava at the imf, or at the world bank, how close are we to tangible solvency issues . Depends on the industry and on the country. In terms of the industry, one of the most that has been one of the industrys heavily affected is the oil industry. Is the question we now if there is a solvency issue, it is not helping, and you are miss piping assets and it is difficult to reality is not pricing that asset as an appropriate level, and therefore you have dysfunctional markets. At some point it becomes disruptive, this liquidity. You are seeing some liquidity pressing into liquid assets, and concentrating in the u. S. Market and elsewhere. It is just a broadbrush concern that we are not addressing. We are not addressing the solvency issue with liquidity, and Central Banks that are driving, mispricing. Once again, it is about the mispricing of assets. Francine is sachsen predicting more into may and into june . We saw the Colombian Airline go out overnight. Do you civilly say there will be more bankruptcies . Definitely will be more bankruptcies. It is a mistake to prop up everything at all times. Clearing old wildfire argument, that if you dont , it becomes contagion. Every cycle needs its clearing. The question is how much the Central Banks and the policymakers do to sort of keep things alive as they were before, or allow some degree of solvency to transmit through. In the meantime, making it difficult for asset markets to price even. Francine john hardy, Saxo Bank Head of fx strategy joining us this money. Coming up, this Southwest Airlines chief executive officer, at 10 00 a. M. In new york, 3 30 p. M. In london. 2. 2 , even 2. 4 in some cases. Boris johnson says yesterday he is looking at quarantining people coming back in the country. This is bloomberg. Ritika this is bloomberg surveillance. Stepping up efforts to bring german buyers back to the showroom. The biggest automaker will offer improved leasing and financing, and buyers can also get payment protection in case they lose their jobs. Saudi aramco is talking about again delaying their payments to the petrochemical giant. They are trying to see if the 69 billion ties price tag can be reduced under pressure because of the collapse in oil prices. Shanghai disneyland has reopened after an almost fourmonth coronavirus shutdown. They have to have their temperatures scanned. Are have to show that they using a Smartphone App for tracking infected persons. It is disneys first theme park to reopen. That is the Bloomberg Business flash. Tom thanks so much. There was green on the screen come a little bit, a day after the jobs report in america, sort of a turning around. Right now, read on the screen. We pulled back with the exuberant vix on friday. Still under the 30 love, but a little bit of a churn here as the twoyear u. S. Yield comes in fractionally as well. That gets my attention. I also put up brent crude right at the cusp of 30. I cannot make a thing out of it, other than the report that Francine Lacqua survive mothers day. Francine . Francine i did. I survived mothers day. This is what i am looking at, european stock turning lower. We had of a that we had a bit of a mixed session we had a bit of a mixed session in asia. Trying to look at what relaxed Restrictions Mean for the coronavirus economy and the number of people being infected. Coming up, we talk more about your markets with the head of Asset Allocation and mac it and market research. That is coming up shortly. And this is bloomberg. Which doesnt create as we said one minute ago, but on the impression we create somewhere and in asset classes, especially in equity markets. ,nd probably we have liquidity which is pouring into liquidity havets, explaining why we such a stretched valuation in equity markets. We are very in terms of consumption, in terms of investments, in terms in termsnterning of job cuts. The markets are very very resilient. Just to say that markets are reassured by a very strong intervention of Central Banks, and also equity markets are supported by the liquidity injections. Tom christophe, as a time literally back to napoleon, i am fascinated with your take and the banks take on the swiss conundrum, of all the money the negative rate experiment in zurich. How is it going . What do you perceive for the swiss economy in the next 12 months . Expect the rest of the Global Economy slow down because even in switzerland, the situation wasnt is tough. May be compared to the rest of europe, as the economy, i would since the beginning of this coronavirus crisis. But dont forget that the swiss oriented. Very export more than 50 of the gdps is exported. And because of a slowdown in the theal economy, it affects swiss economy. This is why we expect the maybeg in switzerland, going straight to 10 . Compared to 3 as a starting point before the coronavirus crisis. We dont expect inflation in switzerland like for the rest of europe, and also because the swiss franc is very strong, as an asset of people, with investors, appreciate a lot the oftiment currencies including the swiss franc. And this is another reason of the strengthening of a lack of inflation in switzerland. Switzerlandation in is very much supported by the combination of government interventions and of the swiss thel bank, which first one is like for all totral banks, but liquidity help the economy, and also thanks to government spending. Francine thank you so much for. Oining us, christoph donnee lets go straight to the bloomberg first word news in new york city with ritika gupta. Ritika Vice President mike pence has been selfisolating from the white house. On friday his press aide was diagnosed with the coronavirus. That brought the virus into President Trumps inner circle. New york has reported its lowest daily death toll since the end of march. Over 207 fatalities from the coronavirus. Governor andrew cuomo lands to announce more details for the states gradual reopening today. That is expected to d2 to do with details upstate. Giving no indication new york city is near being able to reopen. The Supreme Court is set to hear what could become the biggest case yet involving donald trump as president. Tomorrow there will be back to back arguments. The preside