tv Bloomberg Surveillance Bloomberg February 21, 2020 5:00am-7:01am EST
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surveillance." i am francine lacqua here in london. the coronavirus enters a new phase of the epidemic as cases outside china multiply. global stocks drop. a bio project will have a major negative impact, expecting the first annual decline in traffic since the financial crisis. an economic activity in the euro area unexpectedly accelerates, but factories are hit by coronavirus. good morning, good afternoon, good evening, everyone. this is "bloomberg surveillance ." i am francine lacqua and london. tom keene in new york. tom, i love going on in the market after we had the unexpectedly better-than-expected data out of the euro area, and you look at u.k. productivity, and we try to measure the impact that the viruses having worldwide. tom: it is very important, the low yield, the correlation right now, gold in the yen, yen it's a little more stable, but the yield moves in the last 24 hours is absolutely remarkable.
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end --into the weekend, major curve flattening. francine: yes, major curve flattening. we will analyze that during "surveillance." for first word news in new york city, here is viviana hurtado. hi, viviana. viviana: the coronavirus epidemic has entered a new phase in cases outside of china is quickly -- are quickly multiplying. south korea and japan closing in on 100 cases. china, though, still the center of the crisis. roughly 75,000 infections have been reported, but the new number of cases declining. intelligence officials reporting the u.s. congress russia is trump to get donald reelected. the president was angered by the disclosure, reportedly claiming the democrats will use it against him. donald trump said he will not immediately pardon his former associate an ally, roger stone,
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still, if courts do not overturn his conviction, president trump said he will intervene in the case. mr. stone was charged for lying to congress and witness tampering. wells fargo, bloomberg learning it is set to pay billions to end investigations into consumer abuses. the bank will be fined $3 billion. the settlement will put an and to scandals it led to billions of dollars and operating losses and also to the departure of two wells fargo ceo's. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine, tom? tom: viviana, thank you so much. let's go to equities, bonds, currencies, commodities, if you are on data in wall street, this is taking your time. equities are correlated, they are down, but not down like the move, futures -14, dow futures
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-109. we come from 14 beads in a to a 10 -- wee on the two- 10e from a 14 beat into a handle on the 2-10. nine basis points, that should be red on the screen, lower by five basis points command that n,rrelates massively with ye renminbi, and gold. good morning, dennis gartman, gold and a weaker yen is like palladium right now, it is a moonshot, and that key confirmation of what is going on in the pacific rim with the isdemic is renminbi at 7.03 at a solid three basis points over the week, francine. francine: we did some analysis, and we also saw some declines in manufacturing data in australia and the pan -- and japan.
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we had weak south korean export data. european stocks overall were actually dropping. there is renewed concerns about the impact of the virus as cases increase outside of china. europe, economic activity in the common currency area actually set up unexpectedly into gold, up 1634. tom: thank you for doing gold, francine. i use chicago gold, others use london gold, etc., but the answer is gold is surging, particularly setting euro and even more so setting yen. i'd put togethereight -- i put together eight charts today. president trump and his election, i have shown this many times, here is his election in 2016, a massive curve flattening over the length of the presidency. here is the hope and prayer, we have seen the curve steepening recently. you can see where we are now at
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11 basis, rolling over. it is a vector, a path to a version. we are not -- to inversion. we are not there yet. tony crescenzi in the next hour, francine. francine: this is not my chart, but it comes thanks to "bloomberg intelligence." this is a chart that tracks global stocks, compared to stocks that are almost exclusively or extremely impacted by the coronavirus. because the data only goes back to january 31, that is the blue one, really shows you that global stocks are bouncing back, still under a lot of pressure, because concern is growing over the pace of the coronavirus infections outside of china. the world health organization says of countries do not respond , it could become a greater threat. over 2200 have died. joining us now from beijing is
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bloomberg's china correspondent selina wang. youra, it is great to get insight. i know it is still a ghost town when you walk in the street. overall, our people focused on what is happening in beijing, or are they focusing on how this is spreading outside of china? francine, it is interesting, here in beijing, there is a concern over more cases, there has been a significant uptick in cases. this is the central area of beijing, where the central government is headquartered, and the city is now tightening restrictions even further. about 500,000 households. if you look at that data that is just coming out, it does seem to show a destabilization. they are reporting 631 confirmed cases, but that is after they forged that methodology counting cases three times adjust the past month, so that has been bringing questions about how the arrival is, the
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as you saidin, earlier, the big focus is that rise in cases outside of china, the significant increase in japan, south korea. japan now being one of the most concerning places outside of china. you are aa, are a great student of this. i look at the word "pandemic, at worldhe cdc and the health organization as well could how close are we to calling this a pandemic? whona: it depends on you talk to. as you mentioned, it is difficult for health officials to wrap their heads around, especially since we saw the case count, the methodology keeps on changing, but the fact that you are seeing a very fast surge of infections does point to increasing fears of that pandemic. i mentioned japan.
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cases they are have tripled in the past week, and you also have cases emerging in several unconnected cases, and south korea, that case count is singapore past0, 85. it depends on who you talk to, but you have the world health organization saying this is the priority, countries need to be on high alert and step up. selina, very quickly, when they say "high alert" and "step up," is it isolation, or have we figured another way of tracking this? selina: actually, the world health organization praised china for his quarantined efforts. outside of china, it spread to the three weeks, so that is one method, though there has been a spotty track record historically of how those quarantine records are. but we have seen across china, at airports, transportation hubs, those are all important places to be trying to monitor for this, but of course there is
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no perfect way to analyze and contain this. soncine: selina, thank you much from our selina wang in beijing for us. hour,g us now for the themos fiotakis of glen point and jonathan fenby. jonathan, first of all, do we underestimate the severity of this? many places in china are on lockdown, and many more that will be. jonathan: absolutely. there is no question about the data, as we just heard from selina, and how widespread it is, and the apparent length of the incubation period makes it much more serious. this implies that maybe there, and we don't really know about it. francine: ok, what does that mean for what pboc can do next?
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how much does this shave off chinese growth? jonathan: it will shave -- it depends on how long it goes on for, obviously, but it will shave growth down. it will be a big fall in the fourth quarter, but that will last throughout the year, depending of course on how quickly the revival comes about. a v-shaped recovery with stimulus and things getting back to normal in terms of recovery at the end of the quarter. tom: jonathan, thrilled to have you on. it has been way too long. we have been trying to get you on for weeks, it seems. jonathan: [laughs] tom: i want to look at the china victory. they seem to have been knocked off the big picture throne. they have got to get through next month. do they have the operational structure? do they have the political and logistical structure to get through march? jonathan: uh, i what's have to say the answer is rather on the
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negative for that. it is a work in progress. the essential thing for xi jinping and leadership is to demonstrate that they can contain and master this virus outbreak. then they have to deal with the economy at the same time. and balancing those two is going to be a major, major political issue, i think, and at the same time, we have had political centralization shown in firing of local officials, the appointment of trusted figures from beijing. all of this is a very, very complex story. mind off dominating the world for months to come. tom: themos, great to have you on today. themos: great to be here. tom: the dark side of the hedge fund industry with glen point capital. can thei would ask you, markets be the police here? do the markets have the power to
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adjust china's response to this crisis? themos: to some degree. i mean, many ways, as you can see, the response has been proportional to the equity market question. you can see that in the injection of liquidity being targeted in the places where the bond market has experienced the most stress. you could see, conspicuously come i would say, the labor market holding up in china a lot better than the equity labor market. it has been adjusted despite the fact that the dollar has been very strong, the currency has been adjusted very, very gradually. all of these things are signs of the essential plan, that central authorities are looking at markets. the main point, though, you made and was made earlier as well is that economies don't just shut down and then switch back on at demand or on demand, right? that is the point of uncertainty, that markets are now trying to address for the next 20 days here. francine: themos, we have not
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even seen the worst of infections now. we don't know, right, so how difficult is this to model a market? themos: look, the loss of life is tragic, and we are all very worried, particularly those of us who travel internationally, but the main problem here is not the virus itself. if you look at previous cases, the viruses had a lot higher mortality rate, like the swine so on and so forth. the markets weather that very well. the biggest contributors to global growth in the chinese economy have been shut down, and it is not coming back on within a day. and i think the uncertainty now, we are beginning to realize how complex supply chains are, which perhaps markets and a lot of observers did not quite grasp to begin with, but getting the workers back into the factories is one thing, you know, the estimate is
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73% will be back by the end of this month. but once they are there, you will have the inputs into the factories, you will have the transports of the goods made in the factories going out, that means trucking resuming. abolishedighway tolls for the moment as a result of that. and that means ships waiting at the port, and all of this is highly complex, and this goes way down to things like having enough cardboard for packaging of goods and where they go. i mean, this is a next ordinarily complicated system -- an export in a really complicated system which has been broken down, perhaps without much planning, and will have to be rebuilt. francine: thank you very much, jonathan fenby and themos fiotakis stay with starting this weekend, g20 finance ministers will meet andrea. -- meet in riyadh. on tuesday, hong kong will release its budget as the city
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tom: "bloomberg surveillance." good friday morning. lots of news flow, particularly in china, spread of the virus outside of china, i love going on and wall street -- a lot going on in wall street investment management. right now, talking with us of glen point capital, themos fiotakis, jonathan fenby of tsl research. i want to go to a chart that correlates to a chart that correlates too many attributes. in yen,this is gold set
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and you can see it is parabolic, there is no other way to put it, where just goesup, up, them os, do you want to correlate this as well into yield, with sort of a vengeance it has come in within the last 12, maybe 18 hours. what does that correlation of these last three ss signal? -- assets signal? themos: that is a great question to your used to it -- tom: we are. you are here for the morning. view, there, in our are a few things going on, the first is typically when you have a risk off situation, you have the safe havens rallying against the risky currency. when you have global growth decelerating, which means global central banks may take a more different stance, that is something that is gold-based, that is one layer.
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the same thing applies to global bodies, which is not a relative story. you look at treasuries and the curve, what has happened has been that real rates have been collapsing, a real rate curve flattening, and that is what ten to correlate mostd with gold prices. the most curious case has been the yen, which has been caught between its safe haven status but havinglar bid, said that, i think we have not yet seen too risk-off, which tends to spark the yen to live to the most. tom: why are equities not part of the discussion? is the dow jones industrial average a safe haven? themos: look, i think this is a very subtle point that needs to be made clear. first of all, there are different reasons for different assets. for some equities, this will be a level adjustment and a gradual
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recovery. for some equities, it will be a small adjustment and a quick recovery. some of the equities are not affected by this at all, and a lot of those equities, a lot of those companies are -- all of those sectors are in high demand at the moment. inthermore, the damon decline yield that comes together with this slower growth benefits those companies against others. if you see in the chart you guys have put together, they have been in the equity market, if you look into the guts of the equity market. francine: there has been. in fact, we are still at record highs. is this price to perfection? can we really gain from here? themos: there are two separate strategies. the first is -- can risk pick up because of fear? yes, it can pick up. this is a highly tradable event. the other question, which is more subtle, which is -- where are the highs?
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that means we are at an expensive level, which once we correct, we never come back. tom: wonderful. themos, thank you. with us of glen point capital. taking notes is jonathan fenby. aboutl talk to mr. fenby china and maybe get a little france in there as well. very important. coming up on "bloomberg markets: the european," a conversation with eric cantor, the vice chairman that served two tours of duty in the house of representatives. look for that at 10:00 p.m. new york time. -- 10:00 a.m. new york time. ♪ time. ♪
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viviana: this is "bloomberg ."rveillance i am viviana hurtado. let's get to your bloomberg business flash. hp is trying to prevent a hostile takeover bid. the company is trying to make an acquisition more difficult to carry out. hp says it would require xerox or any other potential buyers to negotiate with the board. tesla got the legal go-ahead to begin clearing in germany. a berlin court overturned the injunction that blocked the electric carmaker from building a factory there. the ruling split a lengthy delay for the project there that is the bloomberg business flash.
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tom, back to you. tom: viviana, thank you so much. the data is in. brilliant, saying we have not had a cathartic move in all of these correlations. that is a big move, renminbi weaker as well, francine. francine: we have seen that before, tom. i am also looking at european stocks go down. we did have some disappointing manufacturing data in australia, disappointing data in japan. a slower economic growth partly to do the virus, also with the trade war in 2019. coming up, michael mckee with philip lane. ♪
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that can be rate cuts around the world, and you are seeing it with a real yield adjustment. we will get back to our guests in a moment. here is viviana hurtado. viviana: we begin with a number china,na to -- cases in over 75,000. concern is growing over the pace of infections and other asian countries. south korea has over 200 cases. turkey is waiting for the u.s. to respond to a request for antiaircraft missiles. they want the u.s. to deploy patriot missiles on their southern border, freeing them to attack russian backed syrian troops. to shrugloomberg tries off his widely criticized first debate performance.
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the day after he was campaigning in salt lake city. he was morning if they nominate bernie sanders -- morning -- warning if they nominate bernie sanders, they would hand the election to donald trump. willd trump campaign ads take over youtube's homepage. stop on youtube is kind of like a super bowl tv ad. three quarters of u.s. adults use the site. 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. hurtado.ana this is bloomberg. francine: thank you so much. euro area industrial activity unexpectedly falls this month at the fastest pace in six months. if you look at germany, the
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power struggle within angela merkel's christian democratic union has descended into what say is chaos. themos fiotakis and jonathan fenby are both with us. i don't know whether political chaos and journey be -- in germany translates to weaker gdp but the gdp is not doing well in the first place. thethan: that allies with political under can test atertainty -- uncertainty the cpu party. is,hat its economic policy it is divided for the need for some kind of stimulus and the old german conservatism. francine: what does this mean for german carmakers? what does it mean for the german economy, especially if president trump imposes tariffs? themos: i think not much, to be frank, because i haven't seen any side come up with any kind
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of a plan that has any response to the structural global headwinds that are hitting the manufacturing sector in germany. you have the technological disruption. you have esg. germany is trying to respond to that but it is not at the forefront as it used to be, and the debate is whether we go to moderate stimulus. as somethingre that distracts from the real issue as opposed to something that takes this a step further in either direction. tom: you need some weekend reading. it is jonathan fenby on france. it rolls right over to our analysis of the present state germany as well. the history of france, there is two coverages -- covers as well.
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you finish your book with the weight of history. angela merkel has the weight of history. how does germany move on from the ghosts and skeletons of the past? jonathan: with some difficulty. and has already made a transition to a new kind of state, particularly after reunification. the ghosts of the past are always there and germany needs strong leadership. germany is afraid of having strong leadership and others are afraid of a strong germany. one of the problems as there is so much to be based in germany on the economy, but in a world where trade is not what it used to be on german terms, they are going to have to rethink that economic basis. tom: what is the capitalism model that you see for germany in the next five to 10 years? half a business generation, what is the capitalistic form that
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germany wants to take? jonathan: greater competition protectioness self than has been the case for the last decade. francine: what does that mean for -- if you look at opportunities in europe, i used to follow the greek crisis and then there was italy and ireland, france. are we in a much stronger footing, or does brexit, could it derail the great european project? themos: many things could derail it but probably won't. arereality is that there excellent investment opportunities even in europe, but they are just not in the areas where the rest of the world is showing growth. and some of, credit those peripheral economies, is it a good source of returns?
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it is sort of like mispriced credit still. italy could potentially trade ok for a while although it has its own problems. a very big and interesting trend going on in a number of sectors at the forefront of switching to more green, eco-friendly business models, they comply with esg, showing substantial capacity to gain ground against competitors in a different market landscape, but europe, the industrial side is having a major challenge. francine: where do you see opportunity? themos: in terms of sectors? francine: sectors, markets, asset classes. i am not sure how you would look at it from an economic point of view. themos: there are parts of credit that still makes sense. the negative rates will stay there for a while. there are a number of companies
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in the utility space that have a very good business model, switching to a more esg friendly environment. they are very much involved. at the same time, a lot of banks are doing quite well because you were opening up room for the banking mergers. what you do not have in europe is a violent upswing that brings growth, yields, the tide up together. francine: we will continue with themos fiotakis and jonathan fenby. news out of dime, daimler -- daimler, daimler talking about the diesel probes, saying they may maintain the collateral damage, and the coronavirus may affect the output and supply chains. we are on company watch as a lot
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automakers, all of that at 9:00 p.m. tom: she made me sell my home or. alix steel was with us as she looks at electric vehicles. belli remember clear as a as my accident, not even knowing it, getting into an electric taxicab at heathrow and i was shocked at how superior it was to anything in america. london, i had the u.s. behind. how far are we? alix: quite, and i don't know how that will be catching up. this goes into the european growth conversation and that ev's are part of the solution and problem for europe and their growth. it is a different kind of scene in terms of shareholder needs, it pushed into diesel. that was a european thing. when diesel emissions did not work out because of the scandal,
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the shift to ev's was more quick. tom: i get it that big oil is petrified. his big auto in america ahead of the public or chasing the public? alix: they are chasing. afford buttle ahead they are all in the same spot. billionsto shell out and billions of dollars to the shift to ev's that have to happen. tom: don't they sacrifice profit? to, and you will see jvs or tieups between these companies because if you can tie them together they can move more fast. francine: how quickly will the
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transformation come? is it sooner than we think? alix: if you can answer that, you should quit your job because that is literally the question. bloomberg nef is the source that everybody cites, but the batteries have to get cheaper so the cars have to get cheaper and the carmakers have to make more of them which they have to do profitably. if you don't get battery costs down and get the models out and if the capex can't come out for european card companies, and may take longer. that perpetuates it down the road. francine: so it could be anything between two and three years, or 25 years? alix: 2024 is when the price of ev's could be comparable with
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the combustible engine. then you see a rapid uptick of ev adoption. if that delayed in any kind of way, then you see a longer move higher. tom: where does musk fit into this? you are tooling around in are such a hit on ev. does someone buy them? do they keep building? are they niche from this debate? alix: they are 100% winning. i was surprised to find out about it. i learned quite a bit about that. they are even winning in china. tom: jonathan fenby with us in london and he knows the london electric taxicab. i went down the road from heathrow. bentley,ke i was in a the engineering was so good. jonathan: you are normally in a
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bentley, i suppose. if i could pick up, i think the china market is going to be vital in this because in china, you could have a big switch to ev's and the size of the market so the government is behind it, purchasing ev's. that will give an enormous push-up to the whole sector, which could enable china or made in china ev's to become competitive worldwide, or when the market develops. tom: are you assuming government subsidy to jumpstart this, or can private microeconomics actually work in the shift? jonathan: it is government subsidies or let us say government support. if the government woke up tomorrow morning and decided all official cars in china were going to be a certain make of ev's, that creates an enormous
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market immediately, guaranteed sales, and take off. francine: who is really good at making batteries? is it all u.s. players or is it international? alix: battery players are all chinese. you have seen some tire ups with the and volkswagen, but partnersips are making with china. there are hundreds of niche players in the industry that could be competitors to a tesla and main automakers. they have the technology, the battery, and the money, but none of that goes anywhere without chinese subsidies. if you do not have government subsidy in china, this will not work and will take a lot longer than 2024. francine: volkswagen and daimler are trying. if you look at the fact that for
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5g, huawei is being ostracized across most of the world, are we going to see a lot more electric battery powered things being made elsewhere because we will be afraid of buying chinese technology? jonathan: i think china is ahead of this. whether batteries and ev's become designated as a matter of security in the case of huawei, that may be more difficult. tom: jonathan fenby and themos fiotakis, and alex steel with dutch alix steel with us. -- alix steel. the brink of change," look for that tonight at 9:00. further discussion on the brink of change with david sandalow of columbia. this is bloomberg. ♪
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institution, this is a no-brainer. i want to see this thing get done, get implemented, and be around for a few years. is the next thing as it should be. tom: james gorman right at the top of that video making clear of earningsuarter or whatever is showing the price of this historic trade. sonali andring in lake --sonali bass sonali basak and marcus ashworth. how much did they overpay? sonali: some believe they will only make half of what they paid
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, a $3.5 billion premium. they paid a lot of money, but for morgan stanley the only way to figure out if this is worthwhile is watching it over time. there are cost savings associated with this but that is with james gorman saying he is not going to cut -- trade sothey buy somebody else wouldn't? sonali: goldman considered this in the past. why they passed, the price. it could be seen as a defensive deal in many ways. their cost pressure in the e*trade business as well, is gorman worried about that? he looked at this 13 million customer base and said, i can make a lot of money from it. francine: is this a trigger for more?
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mr. gorman was intimating he is expecting rivals to do more pulls on acquisition. sonali: we do expect more m&a from the large u.s. banks. in europe, it is tougher. the ub ideal is on the wings but we have to see if the ecb approves it. whether they will buy a big u.s. banks, that is more uncertain, but whether they will buy a fintech company or wealth manager or wealth manager abroad , it will be interesting to see a goldman or jp morgan do an international deal. those are the kinds of deals we are expecting. francine: marcus, there was a lot of focus on the fact that intesa sao paulo did this -- intesa sanpaolo did this deal and it was a catalyst. marcus: it was a surprise but it
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was not a big deal. the biggest bond issue this year was from ubi. it shows you it was a bit of a bargain and everyone expected ubi to buy something like monte dei paschi or something bigger scale in italy. , in you go cross-border don't think european mergers yet. tom: i got eight things to go to and no time to do it. help me with the barclays soap opera. week and. staley's what is his margin? marcus: it is not good. it looks like the comeback on detail and perhaps they miss their man -- missed their man last time and hope to redeem themselves. the whistleblowers scanned her in the past -- scandal in the
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past and this time it is something much more deep. the story is the investors wanted to stay. -- want him to stay. in a few years he quietly disappears maybe. tom: what does the board say? when you see in, ubs, all the meeting going on, -- mating going on, how are they taking this? marcus: they have seen the activist investor. the new chairman, whether he has quite the same desire to keep on staley. months, a year, 18 quietly staley will hang up his boots. don't be too surprised. francine: what do we do with the swiss banks? two new chief executives. marcus: i think ubs is turning the way it is going.
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i don't read anything at hsbc. right in front of us we have got quinn. worldwide for ceo's at hsbc, it will not happen. swiss banks will do ok. they are high quality. tom: thank you for the briefing. in the next hour, we will try to do a wonderful interview with anthony crescenzi at pimco. it is usually a good interview but maybe has a little more oomph today because of the yields coming in and the curve flattening. i am not on the inversion watch on the 2-10 spread, but i am close. this is bloomberg. ♪
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epidemic to pandemic is unclear into the asian week. -- korea andth south asia on virus alert. gold surges up 3% from valentine's day. yields priced in further and more rapid accommodation from the fed and maybe the ecb. james gorman can do the shrinking pie math. franklin templeton, legg mason, td ameritrade, and now e*trade, who is next in the great wall street roll up? this is bloomberg "surveillance." it is almost a cacophony of news out of europe. what is the single part of the thator five europe stories has your attention? francine: if you don't kickstart growth in a meaningful way, we
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could see a shift in politics. we are seeing the quicksand when it comes to politics, angela merkel having trouble finding a successor. that could have a longer-term impact on growth and that is something the markets are ignoring. a lot of news out of afghanistan, out of kabul. will.s. and taliban actually sign a peace plan, or sign -- plan to sign a peace plan on fibroid 29th. this -- february 29. this is something that was rumored to happen because the u.k. press was saying the deputy leader of the taliban was saying they would find an agreement with the u.s. to reduce violence because military commanders were committed to this historic accord. paris 1968. not
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what is extraordinary is in america, we are hardwired to long sixr and maybe a year war. we do not do long wars and this has gone on 17, 18 years. i cannot convey the doubt of that headline we see across bloomberg now. francine: what is significant in this, and this could be something that will play out in the political sphere, if the piece stays, it could also -- toce stays, it could lead the withdrawal of u.s. forces from afghanistan. viviana: that is where we pick up. the u.s. and taliban will sign a peace agreement on february 29. it has been expected. a partial truth taking effect tomorrow -- truce taking effect
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tomorrow, a major condition to the u.s. agreeing to the peace deal. thatng the u.s. congress russia is meddling to get donald trump reelected and the president was angered by that disclosure, claiming the democrats will use that against him. the corona epidemic has entered a new phase, the cases outside china quickly increasing. china is still the center of the crisis. roughly 75,000 infections have been reported but the number of new cases is declining. 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: i want to get to the data check so i can get to anthony crescenzi of pimco. spread,n the move, 2-10
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next screen. onto the equity markets, somewhat resilient. not is the 30 year bonds, the 10 year bond, from a 2.00 2a1.99. that should be red on the screen. francine: european stocks and american equity futures dropping concern aboutfter the coronavirus. gold up. tom: the 2-10 spread, we see a new bout of inversion on the right side. down we go, up we go with curve steepening, and that is where we are. that is the wrong banner. francine: i have a great chart, and both of our guests in the previous hour wanted to know the number of it because it tracks
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global stocks, compared to if they are virus exposed or not. this is a wonderful chart hillary clark did. in blue is basically the world stock performance and the rest is the stocks hit by the coronavirus. crescenzioked tony ages ago and we are lucky to have him on a day that yields have moved. anthony crescenzi is definitive on the short rate market. you have a pimco call. pimco looks brilliant. even if you didn't know a virus was coming down the pike, you lethargy 24 months of and slow in about eight weeks. how do you adjust my new get your two-year plan in eight weeks? anthony: it starts to change. we are thinking of a long-term three to five-year story.
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happening with great acuity and speed, but we expect the interest rate climate to stay benign for five years at least ofthree with this high level confidence, five most likely. we expect zero to be the highest level the ecb puts its policy rate at in the next five years and the same for bank of japan. tom: what are the distortions? you go on the acclaimed pimco road with jerome schneider and the long-term guys. long-term guys worried about 10 year and 30 year yields and equities, for lethargy, what are this to tort -- distortions we get? tony: let's think of the coronavirus issue which has had a horrible human toll. as investors, we have to put that aside although we all do care about the human side. things have developed at market of late telling us something
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coming from the virus, but it could have been anything. the markets are worried that global growth is slow and anything could tip it into recession because economies are close to stall speed, europe growing at less than 1%. anything less could be recession. japan is leaning toward recession. the lack of policy buffers, what can central banks do to fix problems in economies? what can fiscal authorities do to fix economies? the coronavirus issue is just one thing. it is a very big thing. , a silveromething lining to the story, and what we see happening in financial markets lately. days ago the equity markets were at all-time highs. pboc, theago, the central bank in china took
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actions to help the chinese economy to mitigate problems related to the coronavirus. there is a new global monetary order that exists where there are two central banks on the beat, two central banks to act as circuit rakers around the world, and -- circuit breakers around the world, and the problem being in china, the pboc cannot and the federal reserve can do very little. the central bank that has fermentable resources, 3 trillion that could help the world economy, -- formidable resources, 3 trillion that could help the world economy. francine: the flight to yield seems to be on in europe. what will happen to treasuries? tony: looking at a two year treasury note, trading in the 1.30's. the fed funds rate is trading closer to 1.60.
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this negative carry, those that purchased at 1.30 and borrow at 1.60 lose money. investors only engage in that investment if they believe the cost of money will fall or if they are worried about the negative carry. yields are probably as low as they can go absent a rate cut, but they stood -- but they could stay here for some time because of the fears in the market. be aware of the other side of the v. the markets have been talking about the negative side and impact of the coronavirus on economies and such, but there is likely, we all hope from a human side, something else on the others of this. most likely, yields snap back at some point. francine: do you think investors are keeping risk premia to one side and economic fundamentals
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because they want yield? what does that mean for europe? tony: for europe, as i mentioned to tom, economic growth is so slow it is teetering on the edge of stall speed and the markets are worried the coronavirus issue, the economic impact in china could hit europe and tip europe into recession. we already see in japan very bad numbers on gdp. the question as an investor, itand being destroyed, is delayed or permanent destruction? in many cases, the economic activity is likely to be delayed and there will be a snap back, so the problems hitting nations because they have a big relationship with china, you can say much larger than the united states, the impact probably will dissipate over time and investors will get through it to some extent. -- tony crescenzi will
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continue to talk about yields, pboc, and china. the first quarter report is always a little thin. may, weuote from mr. are proceeding with a series of measures to create a more focused organizational structure that can operate with greater speed and agility. i think that means expense reduction. i think that's what it means, john deere out with a pretty vanilla statement, a little bit -4%, -5% on a, comparative basis. , on the, on yields central bank of china and what they can do, tony crescenzi. this is bloomberg. ♪
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♪ theseause a lot of chinese, we will come in europe. our also flying short flights. >> we are keeping flexibility. we are looking at grounding 18 aircraft. >> they are not here. it has been trapped. it sets us up for that rebound. >> for things to continue the way they are, we would extend that to june. >> we should see a recovery during 2020. asia should come back. >> we will be back when the situation is resolved. asia is an important market for us. tom: managing the message as
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they do in transportation and logistics, thanks to our team worldwide for those important bookings with airline executives all beleaguered and to this weekend. this is a special moment for bloomberg "surveillance." let's get somebody really good in full for -- full faith and credit paper, and then shoot in the credit guy, joel lovington, running all the shots at bloomberg intelligence. i want to do cross questions right now. what do you learn now from joel's world? and credit spreads, is it a bubble? tony: one should be comforted by the tightening of credit spreads and what it says about the global outlook. cash is the name of the game. it suggests confidence.
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it is something to worry about which is why we at pimco would be underweight generic corporate credit and would get credit from different places. we want to make sure the credit instruments have strong standalone attributes. you do not want." credit credit data -- you do not want pure corporate credit beta. tom: jewel, forget about alpha beta gamma. when you see his world, price up, yield down, what does that say to you to get long term low yield perspective? becausethony is spot on you are getting paid very little to take risk and when you have that environment you want to play defensively, you want to be with topline names, and not take corporate credit risks where
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events can happen along the way or cycles can decline and what you in a deep spot in a quick manner. tom: the only one who took greek, francine. francine: greek and latin. when you look at where we are in the cycle, how does the virus change the cycle? how difficult is it to model? joel, can you hear me? joel: can you repeat that. francine: where are we in the cycle? deere,or names like john you are at the bottom of the cycle largely due to china. 2016 imported $21 billion worth of food and last year was about $9 billion so that created a huge headwind for farmers including dna to industrial, adco, and john deal. -- john deere. tom: we have coca-cola headlines
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breaking. they go down to organic revenue. they see the organic revenue line coming at one or two points which is not negligible. tony, i want to go to you. central banks react and i know you were focused on the fed and the powell put. how does the central bank of china react? responds isy it similar to the federal reserve, ecb, bank of japan would respond, but it cannot have the same impact because china's economy does not get as impacted by a change in interest rate. tom: where does it come from? tony: through the credit channel because it can create more money , and the fractional reserve banking system. pboc puts more money in the banking system, they will likely have more money exist and more money for aggregate demand.
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two weeks ago, the bank of china injected 1.7 of its trill -- 1.7 billion of its currency and its market. that was the week when equity markets locally turned. just 10cy rate was basis points. they know that liquidity matters. it means there will be more money. they are planting seeds for future money growth. that is why the second half of the year has greater potential for a rebound in economic growth because there will be more credit growth, more money made available to businesses and households. francine: talk about how they would you -- use currency. do they weaponize renminbi? tony: it is likely to tread carefully on the currency because it is still dealing with
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the united states on trade policy and does not want to shake the ground too much. it would lean towards letting the currency weaken in terms of the range it has, but we would not expect the tolerance zones it has do change over this issue. china is confident about its long-term prognosis and it is a temporary problem so it will not change the tolerance span. tom: we all have bonds that we look at to see where the market is priced. pureabout your credit -- credit and i look at apple returns. apple is getting money from free -- for free from switzerland and and is almost priced to perfection. what do our viewers and listeners do whether they are in south korea were here, with your world and his world priced to perfection? joel: you have to be careful
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around corporate credit. you see deals coming where people have a huge amount of event risk. tom: a huge amount of demand. joel: subscribed by five times. you have to be defensive in this market because you are not being paid to take a risk. tom: pimco is on the phone, i will take all the otis i can get. joel: i don't know about pimco. other places, that is what they are doing, loading up. liquidity. tom: are you trying to sell books? joel: one will come back -- out at the end of the year. tom: this has been wonderful. tony crescenzi with us and joel lovington. this is bloomberg. ♪
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♪ viviana: you are watching bloomberg "surveillance." we begin with t-mobile and sprint taking a step forward to work completing their merger. t-mobile shareholders will get more shares of sprint for their shares. sprint's performance has deteriorated, adding pressure to redraw the agreement. tesla got the legal go-ahead to continue clearing a forest in germany. a court blocked the electric clearing the
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forest. check, futures that -13. yields come in with curve flattening. goldman sachs out with one of those friday adjustments, what is 400 million? billion from 3.3 2.9 billion. i cannot put that in context other than that is not a good headline. francine: we did have good figures out of europe. on the services side, manufacturing in the euro area not great, partly due to the coronavirus. michael mckee speaks with the ecb's philip lane. ♪
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when it comes to using data, everyone is different. which is why xfinity mobile created a different kind of wireless network. one that saves you money by letting you design your own data - giving you more choice and control compared to other top wireless carriers. now you can choose unlimited, shared data,
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they advance in a fighting on friday, their legal costs having to do with asia and the 1mdb scandal. 2.9l costs slide out from billion dollars to $3.9 billion. there is the story. all of you on global wall street can see that across bloomberg. alix steel has put her heart and soul into a really important show, straight talk on electric vehicles. we know we are going there but it is uncertain how we are getting there. "brink of change," that will play tonight. we thought we would wander in one of the nation's experts on our failure in electric vehicles. is here.dalow
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i was on a stake with professor stacks -- professor sachs years ago talking about ev's. is it here now? david: there are about 11 million electric vehicles on the road now, 2 million sold last year. the biggest market is china. more than half were sold in china. tom: hitters like me, we get in heathrow and we get in a taxicab , and electric taxicab that was magical. thecan't that magic come to united states or china? david: it is starting to. tesla has incredible sales and its stock price doubled this year and tripled since last fall. electric vehicle owners love their cars. battery prices are still relatively high and as they come down, the market will take off. francine: when will they come down? david: there are different projections.
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you see anywhere between three to five years at the time electric vehicles reach the same upfront purchase price as regular vehicles. they are as cheap as a gasoline total life of the vehicle. people buy cars because of the upfront purchase price that needs to come down. tony: how do you think of the demand destruction that is occurring? my wife and i have an electric vehicle and i love it, open what , the fronthe frunk where the engine would be and throwing groceries in it. there are individual workers who would normally make things that would go in so there is creative destruction. what you think about the displacement of workers and what might happen as a result?
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david: this is a broader technological shift and it will cause effects in the workforce. there is also an issue around demand for oil. my colleague did an excellent study on this. that is less than many people think because oil is used for many purposes rather -- other than just vehicles. condition is a jump and climate change and global warning, but we have to effect a tactical response. how do we tactically get to ev? is it a slow evolution or jump conditions? david: one jump condition is bringing down the purchase price and getting enough electric vehicle chargers on the road. people are worried about being able to charge their cars. they doy buy the cars,
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not use those. they tend to charge at home. tony: i charge at my house so i have no so-called ranging. francine: let me talk about the conversations in europe, i want an electric car but i want to wait because it will be cheaper and it is in transition and i want to make sure i buy one i will not have to buy another one in two years. this is the new generation of electric cars that you can buy that you do not have to change in two or three years? david: it is partly manufacturers going into the product line. there are almost 300 billion dollars of announcements of investments that have been made by major car manufacturers that will be bringing out electric suvs and also electric trucks in enormous qualities -- quantities. tom: i look at this and i will
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take the analog back to the 1890's,s in the 1880's, they went down in flames financially, and 30 years later the railroad explodes. if electric vehicles and everything, and anthony crescenzi is in california doing his battery in his garage, is he in 1880 or in 1930 when things are about to explode? david: i think it will explode over the next decade. owner of anet's the electric vehicle sell its electricity back to the grid. these fleets of electric vehicles can become revenue-generating assets that cuts the cost of vehicles. tom: i am driving around in a beat up camry cab with 400,000 miles on it, and tony and i are driving in a bentley in london.
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when does america get its act together? david: the time is now. we have innovative companies working on this now. leader, general motors has done a lot on this front, ford has announced some things. it is about to take off. tom: do you buy this? tony: yes. value.ea of ranging my three daughters all have cars and they all have jeeps. tom: you have three daughters? can we have a moment of silence. tony: i said to my youngest, she is 18, would you like a tesla model three, and she said i would like a jeep because i am worried about the electricity. david: i have a granddaughter and when she gets to be driving age, these vehicles will be dominant. tom: thank you so much, david
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sandalow, and tony crescenzi will continue with us. news isw with our viviana hurtado. ,iviana: we begin with turkey waiting for the u.s. to respond to its request for antiaircraft missiles. they want to deploy patriot missiles on its southern border, freeing turkey to punish russian backed syrian troops. . turkishy disclosed two soldiers were killed. michael bloomberg shrugging off his debate performance. a day after he was campaigning in salt lake city, warning if democrats nominate bernie sanders, they could hand the election to donald trump. mr. bloomberg is the founder and majority owner of bloomberg lp. few dayson day and a
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before, donald trump's campaign ads will take over the youtube page. three quarters of u.s. adults use the site. 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: i am making this chart up quickly and i will make it thehmetic see you can see move in the 20 year bond. away from a low. has beeno important this great moderation. we have gone from the volcker 10% to 12% on down. is this a linear function and we will keep bringing our yields lower? tony: linear because there is consistency amongst central
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bankers to do something about the high inflation of the 1970's, and they have been relentless about it and have targets on inflation that suggest they will not allow inflation to accelerate like it did in the past. it is linear but will probably bottom out. one major force that will remain for decades is the demographic forces aging of the population. japan's population of 125 million will shrink to 100 million by 2050, meaning its economic growth potential is low. the united states forecasts .4% in the4% of -- next 30 years. fewer people to buy things, make things. it has been linear because of consistency amongst policymakers are the demographic forces, low productivity all keeping yields
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down for a low time to come. the only thing that could change is a change in the monetary policy framework. my former colleague richard clarida is working on an idea, something to shake markets up to make them believe they will accelerate and maybe this will cause interest rates to rise somewhat. francine: where do you see the thirty-year by december? tony: we don't look at too much. we care about portfolio production, but more likely yields move higher in the second half of the year because of a rebound in global economic activity due to the liquidity put in markets by the pboc, fed, and other central banks. tom: i have to go back to your comment on the vice chairman of the fed, richard clarida. is a dampeningt
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function down to the zero bound. in traditional monetary theory, including 25 years ago, can that be operative as we come down to the zero bound? tony: it is increasingly difficult, and this is what the main paper at the annual monetary policy form -- we think a cut in interest rates to zero and forward guidance, meaning what will the fed say about the future of interest rates, to make promises. they will make certain promises that compress interest rates, thethird, qe, these are only tools that remain to think about guiding banks and their own money toward esg. tom: this is so important to talk about the toolkit from years ago and we are basically out of tools.
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stagnant. for the economy, it is a bigger deal than it has been for the mark -- then it has been for the market. tom: mohamed el-erian. week" and"wall street that means david westin joins us talk about the events of the week. weharkens back to 2008 and have a game going on bloomberg radio, every time it is v-shaped we do a shot of tequila. david: that is what mohamed el-erian is working about -- worried about. he was drawing a distinction between 2008. and this isancial goods and services. tom: what else did we learn? david: he is concerned that economists are following the markets. withso had ian bremmer on
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eurasia group who is concerned about where things are going between the u.s. and china. he thinks europe's superpower is regulation, that is what they do best. be, but ishat may that a good or bad thing? unclear when you are regulating big tech if that is a good or bad thing. david: he said they are good at regulation and big tech needs regulation but they do not have an industry. the u.s. and china have some industry but europe doesn't. if they will develop an industry, they will have to back off some of the regulation or they will stifle it for they get going. francine: did he weigh in on huawei? of areas where europe has not played. europe is stuck in the middle. david: when they meant to
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munich, republicans and were saying, we are serious about huawei. he thinks huawei is a serious threat and the united states is united that we cannot let them go forward. tom: we have a caucus in nevada. correlate nevada for us right now. cand: the question is bernie sanders be stopped? it is bernie sanders against the field and there are interesting questions. he is well ahead in the polls in nevada, although there are issues with labor. stopped say stopped, from having the most delegates from anyone else going to milwaukee, but will he have a majority? tom: this debate with almost 20 million viewers really sets up the next debate which is on tuesday. do you assume in all your
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reporting that we see a redux on tuesday of what we saw this week? david: i will be surprised if it is a redux. i think everyone will recalibrate and take a look at what is going on. certainly michael bloomberg will have to recalibrate. tom: he was very funny in utah, a stunning performance. he was blaming it on you as well, david. david: we are going to cover nevada, the debate. we will also take a hard look at these the way you have, coming off a profound change in electric vehicles. tom: david westin, greatly appreciate it. much coming up and particularly with mohamedweek" el-erian and ian bremmer. founder andg is majority owner of bloomberg lp,
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the parent company of bloomberg news. tony crescenzi with the final thought in this hour. i look at the discussion on politics. politicians cannot handle your yield structure. it is not feasible to give up and assume lawrence summers secular stagnation of 2%. how do they jawbone up the economy and reflate it to an acceptable political level? tony: it is difficult. the best thing politicians can do is invest in people and things. there is nothing transformational happening in america or europe or japan that would trade -- change our mode of transportation. what is needed is investment in inngs and more investment things per labor unit. the government is more
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encouraging -- 30 million checks were sent to individuals for $200. where have they gone? meals, clothing, nothing that lasted. change the economy and they should look toward moving away from consumption oriented policies and look toward investment oriented ones. would an economy under bernie sanders or elizabeth warren look like and what would it do for treasuries? tony: we have to think about the potential for change or continuation in regimes, but we have to think about the other forces that drive economies, the capitalists in america and other democratic societies matter a great deal. i have my iphone.
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there will be another version of it, regardless of who is in power. most importantly, we have a constitution. this is a democracy, means checks and balances. nothing extreme really happens in america to the left or to the right. it tends to be centerleft or center-right and we should not worry too much about any candidate who should get in power because it is the capitalists, the people of america inch control -- in control. the margins matter a great deal. francine: thank you so much, tony crescenzi from pimco. oil recovery, the rally is faltering. things will get worse before they get better, that interview is next. this is bloomberg. ♪
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xerox or potential buyers to negotiate with the board. oilrussell hardy says the market is poised for recovery but will have to tackle a virus induced slump. expects prices to recover to between $60 and $70 a barrel. hardy speaking exclusively with annmarie hordern. russell: the expectations of how long the virus might last and his long-lasting impact, people have been reducing their worst-case scenarios over that period of time. viviana: that is your bloomberg business flash. francine: there is quite a lot going on in the markets. the markets are zigzagging, worried about what is going on with the coronavirus. the coronavirus accelerating outside china, korea reporting a surge in infections.
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china also adjusted the number of cases for the third time this month. let's look at your data in terms of volatility and currencies. there is quite a lot going on. european stocks are down, treasuries advancing. there is a risk off and move -- risk off move. gold is advancing. strengthening after data showed the economic activity in the euro area was stronger than expected. the interview of the date coming up, michael mckee will speak to philip lane of the ecb. he will have a question about negative rates and will see if philip lane answers virus modeling. ♪
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infections outside of china multiply. goldman says gold could hit ounce.n we speak to ecb chief economist philip lane on the virus impact. and how low can you go? lirts.s. 30 year f with record lows. welcome to "bloomberg daybreak" on this friday, february 21. tgif. as i like to say, we made it. no one wanting to take strong positions into the weekend, but the story continues to be the bond market. the 30 year yield down five basis points, under the 2% level. we are looking for a record low now on an intraday basis. crude continues to roll over,
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