How oil fits into the microeconomics of this great contraction. It is remarkable, francine, to see how the markets churn yesterday after you and i were justen we saw the fed simply come to the rescue. There is no other way to put it. Francine and the markets keep saying dont fight the fed. That was a Good Opportunity for market participants. Expecting a 60 figure, better than expected. Bloomberg first word news in new york city. Here is ritika gupta. Ritika good morning. President trump is weighing an infrastructure proposal worth nearly a trillion dollars to spur the u. S. Economy, according to bloomberg sources. The plan would reserve most of the cash for traditional work such as roads and bridges, what funds would also go to 5g wireless and broadband. Existing funding is up for renewal at the end of september. It is one of the largest of occasions north korea has made to south korea in years. Grownnguns regime has that blown up an entry Korean Liaison Office on the side of its border. In recent weeks north korea has issued an escalating series of threats against the south. He is unhappy that south korea backs the u. S. Led sanctions campaign. Fed chairman Jerome Powell is expected to give another downbeat view of the u. S. Economy today. He begins two days of hearings on capitol hill with an appearance before the Senate Banking committee, at 10 00 a. M. New york time last week rates were held near zero. And they will stay there until 2022. The u. K. At European Union believe they are a step closer to a brexit deal. They say a video call between Boris Johnson and the e. U. Leadership has injected momentum into deadlocked negotiations. The you inferred johnson is willing to soften his position. European officials said they are willing to do the same. 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 thank you so much. We are going to look at equities, bonds, currencies, commodities. I will let francine quote on brent, nudging just above 30 a barrel. We have moved 10 big figures in the vix from the gloom of about 24 hours ago. 34, even with4 to a 33 handle right now. That is extraordinary. 426,000, just a remarkable equity turnaround and riskon the cross other data points as well. Francine overall stocks are advancing. I am looking at the american stimulus, and it is reviving investor sentiment. Also in europe i am looking at the dollar weakening against almost all of its major peers. There is hope that a deal could be reached in july. I also wanted to show you the price of oil. I put it in my latest data check but i will send it again. Oil will not fully recover until 2022, according to the iea. That is a significant headline. What we found out today from the International Energy agency, it warns that fuel usage will remain 2. 5 lower next year than in 2019 due to the dire situation of the aviation sector. We are delighted to be joined by fatty be role, the by fatih birol. We are all with our we already seeing global oil indices starting to drop . Gettinge seeing demand stronger. Wasess weaker than it before. Mainly driven by china. Chinas oil demand come as we , is basically equal to what they had before the crisis. Are gettingountries out of the lockdown, and what we are seeing is demand is getting stronger, and if you put aviation aside for moment, we believe that mid next year, equal oil demand will be to what we had before the crisis. Aviation put aside. Is a different context. Consumption is about 7 of the total oil consumption. There are two uncertainties here. The economic rebounds and also there will be a second wave of coronavirus or not, but in the absence of the second wave, with a decent economic rebound, we aside,l see aviation put 2021 come in mid next year, oil demand comes to the same level as it was before the crisis. Francine i was going to ask you, how dependent is that on Economic Activity not being stocks because of a second wave . Is there worry that your forecast could change quite quickly . Can change. It two things can change our focus very quickly. Economic rebound as foreseen by all the major Financial Institutions. If it does not take place. The second thing, if there is a second wave of coronavirus globally, a major one. This puts of course demand rebound numbers in question, but of course it is out of our with the coronavirus wave. We hope not. But one thing is clear. Demand is coming back. A strong rebound. 2021, well see next year, our focus shows that next year Global Oil Demand may increase 5. 7 Million Barrels per day, which could be the largest increase in recorded oil history. In Million Barrels per day 2021. Tom good morning from new york. This is tom keene. Could you give us an update . You are one of the most wired people i know in the global oil market. Could you give us an update on the tensions between saudi arabia and russia . Countries are the doing a good job in terms of bringing the opecplus countries saudier, especially leading a group. Pushing fortime, additional cuts, rebalancing the markets. But this is all the credit is to opec plus. They are doing a good job, led by saudi arabia and russia and others, but also other states, canada, those countries also had to rebalance the markets. The opecplus agreement, very important. U. S. Canada, very important. But also rebound off the demand is very important. All three together are leading to a rebalancing of the oil market as we see now. What would you predict price will do, given the demand elasticity that you describe . I dont want to quote to the pennies, but give me a sense of what oil does from 40. Higher, lower . I have no idea. There are so many uncertainties, but if the is expectedunds, it by all the Financial Institutions if there is no second wave of coronavirus, i would expect the oil crisis remain at these levels, giving a the shaleven some of producers in the united states. Others, we give a lifeline to several shale producers in the united states. Francine thank you so much for joining us today, thought to be role, the iea director. We talk next about the markets, about covid19. This is bloomberg. Francine this is bloomberg surveillance. Onures firmly higher today infrastructure plans helping to boost sentiment. Despite the latest optimism, investors are bracing for more volatility, the emerging of a possible second virus outbreak. Joining us now, and richards, richards,ways anne who has always made us smarter. When you look at the potential for a vshaped recovery, how difficult is it to gauge it right now, given the possibility of a second wave . What kind of recovery do you respect the world to go through . To 2008, 2u go back thousand nine, the financial crisis, what you had was unconventional Monetary Policy and conventional fiscal policy. We knew that meant a long, slow recovery. What we are looking at today is unconventional Monetary Policy again, but you might argue unconventional fiscal policy and we have this Government Intervention from many countries around the world, which effectively is buying us time, trying to make this quarter of Economic Activity go away in the back on, and it is a big gamble, like unconventional Monetary Policy was back in the financial crisis. I think it is way too early to say that fiscal intervention is enough to generate a rapid vshaped bounceback. That is a bold statement and it has certainly helped a lot, but it is too early to expect we can be confident about a vshaped recovery. Francine this is because we dont know what kind of damage or scarring the covid19 crisis will due to the economy, or because there is a high probability of a second wave . Anne i think actually a second ina secondary effect the first instance, we just dont know. Governments around the world are still paying so many peoples salaries. It is quite hard to see what the underlying economic damage to employers has been. We dont even know the results of the first order effect. Clearly if there is a second wave and we go back into another lockdown situation, that could be a double whammy on top of that. It is not even the second wave risk that makes me less confident about a sharp vshaped recovery, it is more we just have not seen the impact of the first set of economic damage that we have just been through . That is really where i would put this answer. We dont know what the recovery from that will look and feel like . Tom i have been dying to talk to you. I loved your splash at the ft a few days ago. Engineer for us the mathematics of an Emergency Action by the fed to buy corporate bonds. 500 is aard poors correction or so away from record valentines day highs. The philadelphia the fill their lady the Fidelity Bond fund where is the emergency for the fed where they have to go out and compete with you to buy bonds this morning . This it comes back to unconventional world that we are in. We have seen buying equities and etfs, we are seeing by direct corporate bonds, just like government paying wages for individuals, this is all about buying time so that the very deep trough of the v or whatever shape you think the economy is going to be, effectively smooths out. Because bonds ultimately going into the fold, no amount of bond buying is going to help in the long run. The question is, is it enough to smooth over the liquidity crisis . Which means you evolve which means you avoid the solvency crisis and the like. Bondve talked before about markets and qe turning it into a micro issue, not a macro issue. You mentioned that earlier today. I think everything is becoming microeconomics. ,t is about demand and supply buying a lot of stuff, that is where we are. Richards, what she said there, folks, is critical, where you shift from a macro analysis to a microanalysis of supply and demand. Thatrichards, ring microanalysis bring that microanalysis to the equity markets. There is retail, a frenzy, there is the unlocked small and midcap, and then there is the microeconomics of our lovefest with 12 different stocks. Youve ever seen anything like this before . An intenset is like a concentration of all the trends that we have been seeing growth over the last 20 years. The market, Public Markets have been shrunk relative to the total equity. So we are seeing a lot of companies in distress, but that distress being smooth over by government activity. I think the shakedown and the need for fresh capital into the equity market is just the beginning of that. We are not even halfway through that. Equity markets undoubtedly are supported primarily by the confidence injection by that by the time that i mentioned that by that biding time that i mentioned by the Central Banks. That are some companies have done extraordinarily well as a result of the pandemic. Francine what does it mean for equity markets Going Forward . Times, do we do a correction at some point given all these factors . To predicte trying the absolute direction of markets because as we all know, so much hinges just on the level of confidence that the fed and Central Banks choose to give us by their huge buying programs. Betnst the fed, you dont against the fed. We all know that. I think the degree of subjectivity you need in individual stocks and sectors is huge now, because businesses in the same industry with different Balance Sheets can have a very different set of problems than they are facing right now. Industries appear to be in a growth phase, which appears to be relatively immune to economic downturn. Business models are completely thrown up in the air. You have to be really selective and Balance Sheet and cash flow are key requirements. Tom we have a really extraordinary show for you this morning, folks. Youre listening to Anne Richards of fidelity international. Have an we just conversation with wonderful academics. Be with us. Ill and Kenneth Rogoff. That is a good morning of this is bloomberg. That is a good morning of bloomberg surveillance. Good morning. Ritika this is bloomberg surveillance. Lets get the Bloomberg Business flash. The secondbiggest tmobile shareholder says it is considering the sale of its stake. Softbank says it may sell some shares through a private placement or public offering. Record losses in its investment business. Last month bloomberg learned they would sell 20 billion of its tmobile stocks. Emergencyfice of financing for Virgin Atlantic airways. Bloomberg learned that kempner is now competing with a planned alliance of rival hedge funds and u. K. Investment fund. They will wait to see if the British Government will provide guarantees of a rescue package with hundreds of millions of dollars. It was a tough couple of months of ray dalio, the founder Bridgewater Associates seeing a 15 drop in assets under management during march and april because of heavy losses at the flagships trading strategy. That is the Bloomberg Business flash. Tom . Francine . With stocks are up stocks in europe are up, u. S. Equities are also gaining after looking at corporate desk risks debt risk following the most in two months. The pound climbing as much as 0. 7 after this positive talk around the frexit negotiation seems to have renewed hope that the deal can be reached by july. Tom now the data check has to do with a better equity market, no question about that. Citigroup increased apple price target to 400 a share. Wow is a while a statistic. Stay with us. With Anne Richards of fidelity international, this is bloomberg. Tom for the best in conversation, bloomberg surveillance from london. Later today, after our powell,tions, chairman a queuing day a with the senate. Tomorrow, a q and a with the house. Chairman will avoid being as grim as the tone was in the press conference. Scott Kenneth Rogoff with us. Richards is with us of fidelity international. She has a fabulous acuity about Investment Management and the trends we see in finance. I want to talk to you about the quiet thing out there, it is witnessed in the flatline at the zero bound out two year. Oil demand out two years will suffer. People like you have to recalibrate what we are going to return long term. Are you working at fidelity with an actuary return . What you are going to see is a wide dispersion of returns. We know in this environment, who can predict anything . I am not going to pretend to have the crystal ball. What we are seeing is a greater disparity with among those whove got the cash flow, the Balance Sheets, and those who do not. It is time to bring that to real life. At Insurance CompanyBalance Sheets right now and you proportion of higheryielding assets that will be on it because of the way the ounting allows them to get high yield equity, for example. The same action has a direct impact on how robust that the bond sheet looks. There is an awful lot on certain sectors within those sectors which makes it tom ok, it is a stock pickers market. I want to go back to longterm responsibilities of investment houses like your work with m and g years ago. Had a california bombshell where we decided we are were going to leverage up 20 to pay retirees. That is not in any of the textbooks . Anne it is not. Some of your other guests this and humbleonomists practitioners like me will have a good insight into the complexity of that. We already knew territory and there is a strong argument that and you can borrow long at practically zero interest rates, you can get a lot of productive capacity out of that. It depends what you put that into. Of thes back to the use s much is the single act of borrowing which will determine returns. Consumptionw how models will be affected by what we have come through. Until we know what job recreation is after this, it is difficult to see how the consumer is going to respond and how the consumer response is going to have a huge impact on where previously on whether previously viable Business Models are still viable. Are viable, then you have the chance to generate liquid returns. Francine talk to me about dividend cuts and how it impacts investor decisionmaking. Cuts thend signaling around dividend cuts is one of the most challenging things. Dividends have been a large proportion of social returned over the years. Ability to reinvest those dividends. Quite a lot of signaling from companies where they have cut dividends but in the recognition that it is not one and done, there is an expectation that has the broader economic picture normalizes we would turn to some level of dividend growth. Feeling that not all dividend cuts or permanent, but some will be. That comes back to looking at the resilience of the Balance Sheets, the cash that has been raised through equity, the underlying clash flow. Underlying cash flow. As we pulled out together into a portfolio, make sure we are selling our investors products and our investors are buying. Income being paid out through income true income or is there an element of Capital Distribution . When you look at are you sure you understand what you were buying . It is not an easy scenario here. Francine has active management shown is value during the crisis . Anne it has. Generalities are difficult. Of fundseen the types that have a stronger edge to them. With an esgr, funds tilt to the rating unquestionably outperformed on the equity side and interestingly on the debt side. There is a short time period to look at that in. That has been supported by data from other types of i