francine: u.s. equities -- u.s. and european equities plunge. below $30 as barrel. oil majors in europe trade down some 20%. in theing on overall markets. we have extra data checks. this is what i am looking at with brent crude as well. this is "bloomberg surveillance." i'm francine lacqua and london. tom keene is in new york. it is a huge day for the markets. we have headlines from the iea, seeing for the first time since 2009 demand dropping this year. tom: demand dropping, you are exactly right, francine. this is about supply shock and demand shock as well. we see it across all sorts of stories. we will touch on each of these stories, but after javier blas's global leadership on the oil store, i know francine will start strong with will kennedy this morning. francine: that is shortly, tom.

do you want to go through the data? tom: yeah, let me go through the data. the news is in conversations. limit 12.55 with a massive curve flattening, oil down at the bottom, speaking volumes. next screen, please. the vix is a good litmus paper, not moving here with futures down, 40.94. i am not sure what the implied 5.0is, but i'm guessing will be a good place to start. that is the yen. what is absolutely telling, there is persistent yen strength through the japanese day and the london morning. the 30-year bond. third screen -- and i know francine has a more europe-centered view. this is the chairman powell screen. what will they do before the market opens? this is what they are looking at. the two-year yields from the

u.s., u.k. that is stunning on the united kingdom, maybe near a negative yield in japan and down to germany as well. francine? francine: first of all, we did have the iaea headlines crossing the terminal moments ago, oil demand dropping for the first time since 2009, which means the agency slashed that forecast by 1.1 million barrels a day on the virus. this is what i am looking at across the board. there is a lot going on across the market. when we woke up this morning and you see some of the -- one of the main european indices down 9%, you sit up and take notice. u.s. yields are cratering amid the oil shock. if you look at the pound holding up at 1.3149, the vix elevated. i have a second data screen so we stay across the markets -- so we see across the markets what is going on. the swiss franc, futures falling

about 5%. franc,e strongest swiss 1.05. the 2015d go to strength in the swiss franc. i am doing this chart today for will kennedy and for javier blas. it was truly world-class coverage, picked up by all sorts of news media. this is inflation adjustment ofdi oil, back to the time daniel yergin and the prize. price of oil is a controlled source, opec one, opec two, the 1996 collapse. this is the persian gulf war, adjusted for inflation. 2020here we are set at

dollars. it is extraordinary how weak oil is this morning on an inflation basis. francine: it was sliding the most since the gulf war in 1991. this is how the oil markets are doing. this was triggered by an all-out price war between saudi arabia and russia. our executive editor for energy and commodities at bloomberg news joins us. these are market moves. >> i think it is dead for the time being. we have these negotiations that failed and the alliance broke apart because russia was not willing to do these things with saudi arabia. saudi arabia came back with a bigger shock over the weekend, essentially saying we are going to cut the price of oil so everyone has to buy. we are going to flood the market to meet that demand.

it is an all-out price war. we have goldman sachs saying prices may go into the 20's this quarter. it is an enormous event. what it will do to the shale industry will be one of the big stories that place out over the day and the coming weeks. francine: overall, if the price $30, by cash falls to could automatically the alliance not get back on? will: i think ultimately may be economic interests will say they should get back together, but it becomes very difficult. the last time this happened, in 2014, it took two years of pain before we bought russia and -- brought saudi and russia back together. this has become personal between nbs and putin, what nbs decided he should do in response to pressure's decision to walk out in vienna -- two russia's decision to walk out in vienna. i don't think the russians will

come easily back to the table after what the saudis did over the weekend. and congratulations to you your team. your coverage this weekend was world-class. who got caught going the wrong way here? will: thanks, tom. we are still trying to work that out. i can give you a couple of pointers. one country that will be very happy this morning as mexico, one of the world's biggest companies that could hedge. those hedges are massively in the market this morning. they will have a lot of production that a lot of other othertection a lot of oi countries don't have. so in shale, there will be some producers that are hedged, some that are not. one of the stories we have to watch is which companies will be in real trouble and which have the position to see this through. tom: i was thinking of the great all ofeminski for years,

the work for public institutions, out of russia, and the supply-demand dynamics of russia. so nbs does this in saudi arabia to crush russia. what actually happens to russia? they have oil relationships worldwide and they assume mostly with europe? is that right? will: that's right. russia has pretty strong defenses here. it can allow the ruble to feel some of the pain to protect its oil industry. it has a much more diversified economy, a much lower fiscal break-even rate. it is in quite good shape to withstand this. there are lots of stresses on the saudi economy which is much seendependent on -- it has its foreign exchange reserve deplete steadily. when you look at it at first glance, i would say russia may be in a stronger position than

saudi arabia to withstand this crisis. francine: let's bring in our -- thank you chief the virusoining concern that is affecting everything else? >> i think it is predominantly. i would say the virus concern and the energy complication has been an overlay because in essence, both of which the concern is that something short-term and's up in a credit event. i think the risk has been that the virus is leading up to a short-term slump if there was not sufficient policy response, there would be credit problems there. i think the virus still dominates. francine: could this go to a point where we are seeing a financial crunch? decline inthe

liquidity that we are seeing in the financial markets will be something that will affect emerging markets for sure, but there are countervailing measures, likely easing we have seen from the fed and easing measures likely to come from emerging markets policymakers themselves. there are certain countries with oil where it is right now which are going to feel credit stresses. tom: i want to go to the linkages that could be affected through foreign-exchange in your world of emerging markets. we ignore them here. we have the news of the mideast, the virus that karen talks about. how does foreign-exchange help these emerging-market nations right now? is it going to be one mass depreciation? fxin: i think that the flexibility is a key measure that will help emerging markets sovereigns shore up their balance sheets per there is likely to be appreciation

pressure given what we are seeing particularly in commodity exporting countries. that is likely to be a very normal, gradual pace of depreciation that you would like to see from these types of shocks to it however, we should not forget there are other countries, particularly commodity importers like india, turkey, where you may see weakness in fx, but the beta adjustment of that weakness may be less than what you would expect. tom: i want to point out -- bring up the standard & poor's chart, if you would, the futures chart. this is how bad things are this morning. futures, notice the trading. at 10:00 last night new york time, it goes flat. it is not that the machine is shut down. it is limit-down. they are not trading futures right now, which is why the vix is pegged with a 41.94, nothing going on. i don't pretend to know the inside baseball here like others

at bloomberg have. nevertheless, there it is. veryvicks chart is inaccurate. my guess is that we blow back out to the 54 level or higher. karen ward, bonds are priced for perfection. what do you do at jp morgan? karen: i think appreciate that historically if you have thought these deals are low and cannot go lower, you have been wrong. so learn from your lessons and remember that the core bonds play an important role. tom: come on, we are in the middle of a world crisis, the prices move, move, move. do you move duration today? what does your team say? karen: yes, you do have to move duration. you have to go longer out, longer curve, but it is not just treasuries. if we look at the returns from other european bonds, you would have said that bunds could go to

these negative rates. it shows you that core bonds -- you are right, we have to take longer duration for them to do that role. but core bonds are still doing what we want them to do, go up in price. francine: what does shale do in this? at $30, shale operate -- can shale operate? will: it is going to be a very distressing situation for the shale industry, but it will take time. some things have changed about the shale industry since the last time they tried to do this in 2014 and they ultimately fail. they tried to shut the shale industry out and failed. the oil majors are much more in shale than they were, and they have very different balance sheets to a lot of the shale producers that will withstand the pain. we should always remember that be. banks allow assets to

recycled very quickly. will shale production slow or fall? quite probably. somey be a harder war than people in moscow are expecting right now. tom: i have one basic question. what is emerging-market? what does -- what is needed from chairman powell? what do they need right now from the central banker to the world? lupin: what emerging markets are looking for is a sense that financial conditions are going to be backstopped by the global central bank. here, the emerging markets can rely on several tools that the fed can offer them, including said swap lines if we get a severe liquidity crunch. much to: thank you so will kennedy, who oversees our

energy coverage. italy is introducing far-reaching measures to contain the coronavirus outbreak. a near-complete travel ban for about a quarter of the population for the economic powerhouse of the north. assets are selling off this morning. drastic,ad that panicky press conference by the prime minister on saturday -- well, sunday morning, 1:30 a.m. on sunday. what is the government doing economically to alleviate some of the quarantine? >> good morning. you can see i am not in the studio that is my home because everyone is being asked to work but home, stay inside, still, they announced a lockdown saturday night, overnight. people were trying to leave milan, which is the epicenter of

the crisis. they are going south. locally, they were trying to announce last night, much weaker than the initial plan. airports aree still open. at the moment we are really facing a moment of uncertainty. you can see for today it is reflected on the markets. they announced last week, friday, 7.5 billion euros of friday, to have -- last looks like one year ago for what happened over the weekend, let me just update you with the numbers of deaths. they rose 50% yesterday in italy. mostly in the milan region.

francine: in terms of stimulus measures, they are pretty drastic containment rules, and a lot of people are worried about enforcement. economy, $7ctual billion -- is it enough? do they have the money to get a lot more? morning, they will do more, the 7.4 billion euros initially. these are not normal times, they are exceptional circumstances. europe hopefully is open to help italy and give more flexibility, but it is difficult to understand which will be the impact and which could be the measure that we will be taking in the short time to help alleviate the situation.

clearly business is going on at the moment, but economically, the finance minister said this morning that -- to avoid a longer crisis, which will also be an economic crisis. tom: what does seven italy do, what does the rest of italy do that is not shut down? you look at a map, and northern italy is a lot smaller than northern italy. what does the rest of italy do? tomasso: the rest of italy is saying do not spread the virus. secondly, there are some national measures, restrictive measures, which include banning the opening of museums, cinema. area, the measures are much more stringent. we have to say that the business as normal.somewhat

business activity can carry on in the north. there is no restriction of food at the moment. we will see how it goes. people in the south, the big worry is because the system in the north is much richer. the infrastructure is better than in the south. there is fear that the virus will spread in the south and it will be difficult to contain. ukulele over the your right shoulder. go play the ukulele. i am sure it will be great today. tommaso ebhardt with us in milan. glad both your with us -- glad both of you are with us. karen, what are you writing about? the theme, if you will, of your strategy on e.m..

focused on is're understanding the facts, separating what we know from what we don't know. data werun through the want to focus on, and specifically what is the real-time data. partly that is the infection rates, and clearly i will be providing those forecasts, the way they are going come as anyone should be. what we will then be focused on is trying to, in a calm sense, work out how that will impact economic activity, whether it is via terrorism, which countries will be most affected. where we need to spend most of our efforts is understanding policy response and taking a judgment on whether we think it will be efficient or not. i don't think any of us need to see anything more from the fed. they can cut rates. that would certainly help the core bond market. what we need to see is the fiscal authorities step up. we just spoke about the italian

authorities there. this is a fiscal response that we need. -- theyaction that will will be able to manage down their costs as the revenues full, and therefore they will be supported short-term. that will drive that confidence back. on emerging markets, is a recession in the cards in 2019? can ruledon't think we it out certainly for asia, for europe. recent energy news does not help that story. beyond that, what type of recession? small recessions that are relatively technical because it is a temporary shutdown? that is manageable. francine: are you starting to price in a recession? is a distinct

possibility there will be a recession across many emerging markets. with the disruption and supply production chains, it usually hits emerging markets with a one quarter to two quarter lag. then you have to add in the possibility that you have internal virus implications within emerging markets. there is a distinct possibility of a recession within emerging markets. what we actually anticipate is that there is likely to be more shaped curve in the markets. this should be a temporary shock, and as we come into the summer months, we should see some of that impact dissipate, essentially economic recovery coming back. tom: francine lacqua and tom keene, "bloomberg surveillance," original brick coverage, an extraordinary day, particularly oil harkening back to 1991. the futures are on, shut, limit

down, and they do not give us much information. to be blunt, things are worse than what you are seeing on the screen. but we do see it in other areas, particularly in foreign exchange, and in the litmus paper, to put things in perspective, the u.s. curve is entirely under 1%. the u.s. curve setting -- .9076 onut there with the 30 year bond. , it is really simple, people have to plan out and institutional money has to make a movement. what is the movement in institutional money? do you go to cash, reaffirm positions? what is the strategy? lupin: i think right now it is a time to be relatively cautious and take a stand back and assess

where risks are and where risk positioning actually is. to that, i would wager that being much more cautious and looking at where there is greater downside risk in one portfolio is where the focus should be. tom: i just looked at yen and if youollar, out at jpy as gd, it is eight standard deviations of trend. everything in my body and soul says reversion to the mean. does reversion to the mean work this morning? lupin: this morning is too short of a time period to think about that, but on the horizon, given how large price changes have been in emerging-market asset classes, we should also be thinking about where the opportunities are. it may be too early to take advantage of those

opportunities, but essentially a lot of the work we are doing now is assessing where things have moved, perhaps beyond fundamentals. have thingsere moved too much? lupin: i agree -- will: i agree that -- aren: i agree that things difficult and it can be a great opportunity next week. at the moment it is still very much focused on where within core bonds you still have upside, where yields can still be cut. it will be interesting to see where the ecb goes this week and how that changes the dynamic in the european space. as the dust settles and we get it to next week, we will start to be thinking about where things are over discounted. francine: is there anything in the emerging markets that makes you worry? is there a country where if they are hit by the virus then they have a very low chance of recovery? lupin: i think we have to be

concerned about many of the sovereigns on the african continent, per share clearly given the state of the health customs -- particularly given the state of the health systems there. chinesewhich faced the demand slow down, you can see a number of shocks exacerbating themselves. tom: we have futures trading. let's come back with karen ward .nd lupin rahman up we go with the biden surge, and then we rollover over the last two days. it is really simple. we have seen this little tick up. this is the beginning of futures trading right now, and we will see where that goes this morning. pretty much flat with a little bital -- with a little bit of a lift as well. strong in, 102.71.

105 handle ass well. please stay with us through the morning. extraordinary historic moment linking the crisis of the virus with an oil war. there is no other way to put it. -- putting again those stories out on social. .avier blas seeing world-class levels as well. coming up next, from deutsche bank, tiina lee. this is bloomberg. ♪ w?w?uhió'ñó

this is "bloomberg surveillance."

sea of red across stoxx -- the sea of red across stoxx today. tina lee is the deutsche bank chief executive for the u.k. and ireland and still with us. ais was meant to be celebration for international women's day and the markets dictated otherwise. how has the virus and fear in the markets changed your day to day life? tina: i am really trying to be as proportionate as we can in terms of what we do with employees and clients. toare looking to actually go sites and we have moved investment banking personnel around various offices in london and particularly into our disaster recovery site. that is not particularly because we have a confirmed case in the

u.k. continue ourcan operations and continue to service our clients. francine: there is no other way to put it then panic appears to be gripping financial markets. what needs to happen for this to be reversed? tiina: it is early days and given we have a confluence of events, the global economies will deal with coronavirus and the news around saudi arabia. i think the real question is i think the focus will return to ofernments and what type fiscal action governments are going to be able to take because if you think about where interest rates are globally and the key economies, there is very little room for maneuver. it is around fiscal stimulus. it has been slow until this point. i think that will be a key focus going forward. tom: congratulations to deutsche bank and finally getting a lift

off the stock. i know you rollover with the latest crisis. give us an update on the position of going to bank -- deutsche bank in london. what is the story forward for 2020? i think recent events notwithstanding in terms of the macro environment, the mood has been positive. there has been a stabilization of market share across key markets. results.ur q4 we made good progress with regard to executing our strategy . are we there yet? no. everyone understands this is not one quarter. we have to keep executing quarter by quarter. in the u.k., i would say the mood has been remarkably

resilient. tom: what is the strategy forward? what will london deutsche bank focus on moving forward? what is the thing you want? anda: in the u.k. particularly because london is a key financial center, that will not change. continue to have a considerable operation in the u.k.. london is a global financial center, so we have been here since the 19 century and we will be here in the 24th -- 21st. francine: how much equivalence do banks need? tiina: clearly as much as possible. i think we are very early days in terms of negotiations between the u.k. and the e.u.. there is a lot of sound and fury, which we would expect in these early days and ideally we would like an equivalence regime that does not have it taken away

at 30 days notice. whether we get to that point i think is difficult to forecast. if equivalence is the model we have to work with, we will work with equivalence. francine: there is a new bank of england governor and he may have to cut. we have a new chancellor with the budget. how tricky is it having you charge-- new people in at a crucial time for the economy? isthe incoming governor clearly somebody who lived and breathed the bank of england. i would not say he is new to the organization or what is going on. i think what is really interesting is what does happen with monetary policy. markets are forecasting something like a 40 basis point cut. there is not that much room in terms of cutting rates in the u.k.

we are trying to mitigate short-term impacts of the coronavirus, but at the same time, we cannot forget the u.k. is going to be leaving the e.u. single market. when do you use that lever and is it better to use other central bank tools? whether that be more targeted liquidity measures or whether that be reducing countercyclical offers. there are other tools other than monetary policy. delicate brings up a question. let me go to karen ward. are we going to see a rate cut this morning? i don't want to put you in an uncomfortable position, but we have gotten use to emergency rate cuts. why not do it on a monday? karen: i think the emergency cut did not do what it was hoped to do, which is provide a clear support to markets. if it was coordinated, perhaps

so, but it is hard to coordinate when we are at the limits of ammunition and every central bank has complicated decisions to make. the ecb this week, what will they do and maybe some very targeted liquidity measures, it is hard to put out an emergency statement. they are all doing lots of different things. i think the fed going alone will not necessarily help. i would like to see an emergency g7 finance ministers meeting and something coordinated come from that. that i think would be much more meaningful. francine: what are the chances of a recession? tiina: i think the chances have definitely increased. we are already beginning to experience supply-side shock and how that feeds into consumption i think is something which we

are going to have to see over the next few quarters. i think the question is in the early days of this crisis, we were hoping there would be a recovery. i think now that is probably unlikely. i think it all depends on what happens in terms of government action and the coordinated response. muchine: thank you so tiina lee, karen ward. getade an extra effort to more females on air to talk about international women's day. because we are talking about a pandemic or pathogen which is scaring the markets, i would like to remind everyone there is andgh percentage of carers nurses fighting this that are female. tom: very good. oil down 20%. let me give you the prices. cents --s $33 zero six

$33.06. harry tchilinguirian, what a day to have you on. let me cut to the chase, this is different than other plunges we have seen, 1986 after the persian gulf war, gets history today as well. in what way is this different? what is the distinction you see this morning? harry: the big difference in relation to what was discussed is there is a signal coming from saudi arabia through the cutting of selling prices it may increase production after the collapse of a plus plus talks on market and the market is in no guessing mood considering there is a negative demand shock induced by the covid-19

outbreak. that combination is bearish for prices and the market reacted off of that. until such time that we have more guidance as to what saudi wants to do, the oil prices will remain weak given that not only we have the potential for supply surplus, but you are in the environment of a negative demand shock. tom: i look at the negative demand shock right now in the price war. have we ever seen a price war like this? have they ever gone after anybody like they are going after russia? 2014: after the november meeting, that meeting broke down as saudi arabia was incapable of getting cohorts to help reducing supply to face-off with the emergence of u.s. shale oil production. it was every producer for themselves and they thought they could ride out lower oil prices while evicting u.s. shale surprise.

that strategy failed miserably and ended with the dismissal of a long serving energy minister. told essentially to reinstate supply management and that is what they did and oil prices stabilized and recovered thereafter. there has been an instance of a market share war that leads to lower oil prices rather than the necessary price war. if you follow a policy of market share overpriced stability, this is what you are going to get and that is what we got past the november 2014 meeting where oil prices ended below $30 in 2016. stay the how long course with the price of oil at $30? they basically had a strategy of trying to squeeze american shale

producers, which flooded the markets in recent years. at some point, i will align myself with opec because i cannot take this much pain. harry: this is the interesting question. are we in a game of chicken if we are you -- if we use game ?heory parlance over theargue russia last five years has built fiscal buffers, adapted especially in light of u.s. sanctions imposed on the country. russia is in a much better position to have lower oil prices and they have conservatively budgeted in terms of oil price consumption. i do not think a month or two or three or four will be impacting rush up position right now. at the last meeting on friday, at best, russia was prepared to discuss an extension of supply cuts, but not in any position to go beyond that and implement

further supply reduction as saudi wanted it to do. at 30,e: the oil price does that mean shale producers -- will some of them go bust? harry: the thing with u.s. shale supply is the fact they have to systematically hedge. in 2019 when oil prices were higher, they were hedging 2020 production and you have a fair amount in terms of the hedge being and therefore relatively well hedged for 2020, we are not looking at a disastrous impact. to feel the pain of $30 because that would be significantly below the bake -- breakeven price. the u.s. shale industry being well hedged for 2020 will only be moderately affected. hedging for 2021 will be

compromised because why would producers hedge at these prices? the growth risk on u.s. shale supply happens in 2021 because they cannot hedge productions at levels desirable for them. tom: you said something a couple isstions ago which is russia psychologically and financially prepared for this. what happens to saudi arabia if this doesn't work? harry: the interesting thing from past experience, the sort of pursuit of market share following the disastrous saudier 2014 meeting was arabia at one point, even the dollar reserves could write out oil prices. in the end, none of this is productive for consumers or producers because if oil prices

remain too low, you do not have investment or supply and you are setting yourself up for the next price spike. given the lack of official guidance from saudi arabia, we have to see whether or not with a couple weeks remaining, whether or not there may not be some last-minute discussion. if that is not the case and this will be followed, saudi arabia need a fiscal breakeven price in oil which is much higher. tom: where is that breakeven price? do you and bnp paribas have any idea where the royal family's breakeven price is? harry: i don't know about the royal family, but according to the imf estimates in terms of , saudi arabiaens needs an oil price fiscally in order not to have a deficit above $80. of course, they could keep operating without because saudi

arabia can borrow on the international capital market. it is more so the rest of opec where a lower oil price will be a lot more detrimental. francine: who is talking to who in the coming days? is it ministers? oil majors talking to each other? what is the secondary effect of all of this? harry: i am not privy to those conversations, nor should i be. i could only surmise there will be further bilateral discussions between saudi arabia and russia possibly intermediated by the opec secretary general. at this juncture, now that we have this slashing of saudi official selling prices, it is your move next to russia and there may be discussions, but i am only speculating at this point. screen,king at the data harry tchilinguirian from there.

i am not getting futures -- we had a glimmer about 20 minutes ago, but nothing moving. i don't have a legitimate vix quote. the two year yield is about as close as i have got to a u.s. proxy with fluid nist -- fluidness. oil doing a little better. maybe harry tchilinguirian lifting the market. with us, karen -- karen ward, lupin rahman. , his cat is named limit down. what does limit down do? why do they shut down markets like that? lucas: i have no idea and i think this has gotten out of control. --s oil surprise has take it taken bond markets down to a new level and stock markets with it. some very strange things going

on. you look at france, which is underperforming, but it also has -30 basis points. we are looking at a certain weak -- weak links across the world. countries are going to struggle if they don't have a protection buffer in place and it is causing everyone to buy yet more protection. , the market moves particularly in treasuries are something i have not seen ever, certainly not since the global financial crisis. rahman, let me talk to you about your em skills. what do you see in terms of solvency liquidity issues within the em space? we have the bank in india last week challenged to say the least. is that what we begin to see is banking institutions in your world challenged?

think in thed sovereign space, we are not going to see a huge amount of credit risk coming up in terms of the ability to refinance in these markets. most sovereigns have issued in the first quarter already and the run rate going into the first of this year looks relatively solid aside from one or two cases. i think we are likely to see more risk in that perspective from the corporate side and the liquidity measures we are expecting took, already from central banks will alleviate that somewhat at least in terms of rollover risk. francine: we have a great bloomberg story talking about this historic day. theyou worry about vanishing liquidity? >> with the new regulations, liquidity has been a concern for quite some time.

we are testing that and i think it will give us more -- markets. we are clearing that -- seeing that on the screens today. it is one feature alongside the unpredictable nature of the that willthis shock lead us to more dramatic days as we are seeing today. i think what is really important in these days is to focus on forces of support and we are coming back to what are they going to be whether that is the central banks backstopping liquidity. the signs from them will prove critical. know you follow the bonds, but this guest has written into saying given that emerging markets seem to be falling into a recession trend, is there any sector that could save us from what we are seeing? this viewer suggesting internet

services, e-commerce. i don't know if you look at corporate bonds there. lupin: given that this is a global demand shock with potential for supply disruption, it is difficult to see one sector being able to lift the rest of the emerging-market economy up. there will be some winners and losers in terms of sectors that will benefit from the virus scare. in terms of being able to lift economies out of the session or potentially dipping into technical recession, it is hard to be -- to see one being able to do that. tom: we don't have brazilian real trading yet. 4.00 real to the dollar was the benchmark. we are enjoying 4.63 and we don't have a quote. how do you measure when enough is enough for a given emerging-market? what do you use to measure the tension domestically in these nations? lupin: there are quite a few

models we look at including thinking about the current account and how capital flows are covering the current account deficit, if there is one and in addition, we look at market technicals and the real rates of return from investing in a given currency. looking at all those factors, you really can build up a sense of whether the valuation of an economy's currency is rich or cheap relative to fundamentals. on days like this, technicals overshadow fundamentals, so you have to take a lot of care in terms of thinking about reversion to the fundamental equilibrium values. tom: if we have limit down and not getting price discovery in equities, how do you utilize fx in bonds to understand equity dynamics if we cannot observe direct equity data? question.at a the dollar is weakening to a

large degree, which is excellent news for wider emerging-market worlds. i am not too stressed. or deeppens in iran saudi. the reality is the euro is trending when it does not need it. it is an appalling move for the european central bank who has no ability to ward off this stronger economy. be sold by a confluence of people putting their heads together and sorting out some overregulation, which has created this liquidity tightness . indeed, stocks are looking at the limited tools they have built themselves, but if you have to go buy equities, do it. cleverereeds to be

parade. here.ality -- cleverer we talked about the g7 earlier. g20, whatever, they have had months and years of meeting each other. it is time the world coordinated and saw this out. tom: what about -- francine: what about fiscal spending? marcus: germany is the critical point in europe. and need to do something really do it now to help themselves, let alone the rest of europe. this is -- can be coordinated and can be done. this is christine lagarde's moment. she is put there for a purpose, let's see if she can be allowed to do what she does best. today and the german fiscal stimulus according .o wolfgang is 0.008%

i don't even know what that is in scientific notation. what do you need to hear from adam lagarde and her team this morning? what do they do to show leadership? marcus: i want to hear that she has met -- she has met with merkel and macron. there is something coordinated going to come out because of the ecb thinks they can wait until point cuta 10 basis would make things worse not better. if they have a package of events along with fiscal response, the u.k. is about a deal on wednesday, almost certainly, maybe we can look at this as worryn localized areas of and the rest of the market -- the rest of the market will move on well. tom: karen ward, thank you so much and lupin rahman, always.

i want to show this chart. we are showing a number of charts showing the massive moves in the market, this is the german ten-year and two-year. the two-year down to record low, almost -1%. -0.93%. this abruptness in the way they have come together shows the nature of the crisis. let's go back to the data. limit on the futures, we are getting no information from u.s. equities or vix. curve flattening is very important for the last two hours at 14.69. really shows economic slowdown. oil, i am not used to that pricing. crude, $37.05. i thought harry tchilinguirian was outstanding. francine: there is a sweeping selloff across stock market dragging equity markets to the

bear -- equity prices to the bear market. looking at energy shares, the lowest since 1997 after the collapse of talks between opec and russia. saudi arabia is launching a price war. overall, if you look at -- futures you mentioned. for the moment, there are trading curves. if you look at the litmus tests, you have the treasury yield falling below 0.5% and the yen seeing sharp moves. i am looking at yen, up almost 3%. strengthening 3% before coming off session highs. we continue the conversation amrita. reed is then -- this is bloomberg. ♪

[ fast-paced drumming ] [ fast-paced drumming ]

tom: this morning of a pandemic

and an oil war. plunges, as last seen in 1991. the virus spreads worldwide. will the united states become like italy? price discoveries in oil -- in order, futures down. 1.01 -- twoens to a a 101 handle. and politics -- michigan, there is an election tomorrow. six states. will the virus lesson turn out? this is "bloomberg surveillance." francine lacqua is in london. it unbelievable what japanese yen and swiss franc are doing. swiss franc is really beginning to get back to the crisis levels of early 2015.

francine: 100%. this is definitely traders trying to grapple with panic, selling margin calls. the currency is you are talking about, the swiss franc and yen, with traders that we have been speaking to, i have fantastic notes from people trying to figure out what the range is. not being able to give a precise range adds to fear. we have extra market checks every 10 minutes. tom: we are making this up as we go, folks. that is how quick it is. it helps to have people know what they are doing. one would be christopher nagy, on our equity team. he says here is how to look at the equity markets. this is not limit-down, this is the etf of the standard & poor's 500 trading premarket. go, up of work, down we we go with the biden rally, down we go the last three ugly days. we close with a lift on friday,

and the white circle is where we are down now. 6% level.st at that helps solve some of the mystery of the equity markets. let's go to the data check right now. equities, bonds, currencies, commodities. i am going through these because francine has a nice european tilt. oil, 33.20. futures do not matter. the yen, 102.41. there is brent crude, third screen weekly. havings bonds -- a two your is what i am watching us we watch the central banks. francine: panic is appearing to grip the financial markets as the world is heading for a full grown -- full-blown rice war. -- a full-blown price war. at $33.l at one point it was plummeting more than 30%. most sinceding the the gulf war in 1991. you have made reference to that

quite a lot. yen and swiss franc, i should have a second board. we had exchange rates, including yen seeing start -- sharp moves. a wonderful set of guest this hour. and read sn will join us in a moment. she is -- and rita send -- amrita sen will join us. right now, a guest with blackrock. multi-assetead of strategy and she has aged overnight. let me go to you. you had courage in 2008, 2009, to be in the markets. courage this morning, gina martin adams, to be in the markets? have to keep aou cool head with everyone else who is extremely panicked and think about where we are in the economic cycle, what the economic fallout of

extraordinary price margins is going to be and stick to your guns on the broader fundamental outlook. panic ensues, correlations all go to one. but ultimately the lower oil prices are very stimulative for the u.s. consumer and the u.s. economy, as are lower interest rates. the realities of the economic fundamentals are, yes, we are in the midst of a panic now. the consumer is clearly shutting down short-term with business travel, with a lot of short-term economic damage, but when oil prices fall this much and when interest rates fall this much, you generally see it is effectively a tax cut for the u.s. consumer. i do think the markets will try to price a degree of bankruptcy risk and small caps and mid-caps in particular, but when you look at the large-cap index, roughly three times the market cap benefits from lower oil prices

relative to the smallest percentage of the market cap of the s&p 500 that receives downside pressure from lower oil prices. so i think that investors still -- they look at this panic and they are going to be looking for opportunities to add to the stoxx when the equity risk premium is just as high. tom: i want to bring up the equity chart again. a major shout out for christopher nagy at bloomberg for helping out. this is the etf of the s&p 500. you can see we have come down, premarket down to 2.79 on the spx etf. isabel, this is such an interesting time with bonds priced to perfection like we have never seen. what does blackrock do with fully priced paper? thatl: look, our view is it is going to be a temporary shock, but the fundamentals of the extension are at this stage

not fundamentally damaged, and at some point we will see a recovery in the market will come to its senses, and certainly the current level of bond prices does not seem consistent with the base case of a temporary shock. but right now there is just a very one-sided market with everyone -- buyers, protection and safe haven than anyone on the others. the base case remains very much this will be a temporary shock. normal,ill come back to so this is not a time to run away from the market. francine: so you are not protecting a recession right now? not predicting a recession right now. francine: are the markets predicting a recession -- pricing in a recession? >> it is difficult to know where the market is pricing right now. we are seeing lopsided price movements.

i would caution against reading too much into this. right now the base case is this is going to be pretty severe but a temporary shock. we will see an impact on activity. but there will be a recovery. get assumes that we proportionate and adequate policy reaction. that has been slow in getting delivered, but hopefully we will see more of that this week and the market bullfight footing. this is what we have seen in previous cases of epidemics. now we have an oil shock and on top of that that adds to uncertainty. but as gina was saying, fundamentally this is not a bad shock unless you are an oil investor. tom: extraordinary markets. gina martin adams with us with bloomberg intelligence. that isabelled mateos y lago joins us. oil marketin

economics is amrita sen. she understands the supply and demand of oil like few. thank you so much for taking time with us today. how does pressure respond to war from saudi arabia? what are the tools that mr. putin has to say to saudi arabia, no, you will not defeat us? amrita: i think the biggest difference between saudi arabia and russia is that russia can sustain the oil prices for longer. they can sustain for about six to 10 years, which will require a drawdown, but they can do that however, the only caveat to that is putin was in barking on this big expansionary plan to boost fiscal spending, and he was going to push up a lot of interest up to spending. he is clearly not going to be able to do that, and that is why

saudi arabia is taking this gamble, suggesting russia will come back to the table to negotiate quickly if prices go down to these level. -- to these levels. herewhat is so important is the simplicity of saudi arabia versus russia. there are always leakages within the cartel. who will side with russia, and to the point, will the united states side with russia in this price war? well, i think the only way you can fight in this price for is if you have a strategy. the only oneis with spending capacity. we have been briefed by them, saying they are trying to raise production to 12. we know they cannot do 12, but they will push exports up to eight. the rest of the countries are already at max.

mucha does not have that capacity. this can only lift by about 200,000. i would say that the u.s. will be the collateral damage here. now, andouston right the producers will be suffering so much they were already suffering, and there is no money for them. this is really going to crush them. francine: is the theory here that they are just trying to push out the shale producers, and the opec-plus agreement comes back on? ironically, crude prices are back at levels that push the opec-plus agreement to come together in the first place. amrita: exactly, but i think the difference is, to your point, russia has been pushing the angle that because we need to get rid of shale and this is the time to do it because they are already under pressure. opec has never believed that.

they absolutely do not believe that. they believe shale will be -- you cannot kill shale. , very muchh more about opec, particularly saudi arabia versus russia. -- the saudis were glad to take a bit of the share of the cut. that is at the heart of this agreement. we have been telling our clients since wednesday, don't expect to deal because that is what we were hearing. that caught the market by surprise. now i will say, to your point, there is a bigger chance of a deal in the coming weeks and months as the market realizes this is very much teaching somebody a lesson to bring them back. the strategy may not work, but they don't want a massive oversupply. the saudis do not want that. francine: what happens two

months from now? i don't know if we can talk about who blinks first, but is this a game of chicken? amrita: it is. in our view, we do not think russia blinks first. putin really needs the money to spend, given the elections that are coming up. however, without that, it is possible that maybe opec gets back together and there are rate cuts. if we get millions of dollars in inventory, it will take them two years for than to bring that down. this is a demand shock, not a supply shock. tom: the view from houston this morning -- within the ambiguity always of a major move in oil, is this good or bad for america? has changed come hasn't it, in the past, with more consumers. right now it hangs in the

balance. a little bit better off because consumers are better off on israge, but production rising, and the reality is, the amount of job losses in parts of the midwest, but also a lot of consumption. all of it depends on shale. u.s. production is such a big part of the economy, it is almost 50/50 right now in terms of the impact on the u.s. economy. francine: thank you so much. sen, and we will call her throughout the week for more insight and analysis. complete travel north of italy. assets are selling off. down 8% -- down from 8% early on. let's get to tommaso ebhardt,

working from home. first of all, give us a situation on the ground. our people staying at home? are people angry? are people scared? probably the three of that altogether. the government has announced saturday night with a press conference at 2:00 a.m., a decree which imposed a lockdown to the milan area, about 60 million people in the north. that wasasure announced one day later, where it -- it was much less severe, but you had people trying to escape from milan saturday night. there are pictures and trains full of people over the night. but yesterday i reported all over to see how it was. mln, the train station was

almost empty. all -- in midland, the train station was almost empty. alitalia has just announced that it will cancel all international flights from milan. on the others, you have a real health crisis in hospitals. so people are asked to stay inside until the decree was passed saturday. milan clearly had too many people around, and the recommendation is to stay-at-home. tom: it is very important to have the aperitif, no question about that. are you telling me that somebody who needs to go to rome -- i don't know if rome is in the north or the south, i will let you tell me. they cannot drive to rome now. are there guards at the border? tomasso: absolutely not. there are no borders in italy. at the moment, there is no army

checking the roads from milan. rome is in the center. you can drive there, you can take a train, you can take a plane. but your asked not to do it. tom: we go to francine lacqua on this foolishness. i know you have done it a million times. are you kidding me? i am in milan and i cannot get to genoa today? francine: yeah, but that is the point of a lockdown. this is the seriousness of the conversation, and if you listen to a lot of people on the ground, especially the hospitals, you kind of try and match the economic impact, that we are not seeing yet apart from being quarantined, to actually what you are seeing in the hospitals. spent bymoney being the italian government. is it enough? what are they trying to target? you quarantine people, or at least when you tell people to stay at home, there is also a lack of business.

will that be enough, or do they billion, $20 $10 billion, or $30 billion more? tomasso: the first measures were announced last night, 7.5 billion euros. an interview this morning, it was said that they were going to spend more. numbers, last week the of passengers was already down 50%. and a retailer that sells clothing said last week in italy sales were down 45% in italian shops. now take the restaurants -- --taurants can be open cannot be open after 6:00 p.m.

the business activities are locking down, and even if they are allowed to move goods inside, it was said this morning that we are building our cars, we have -- the reality is that we were already going into a recession. now we are going much faster into a recession. have asaid that you ukulele over your right shoulder, and maybe that is a bottle over your right shoulder. that over your left shoulder. i cannot say enough about his work over the years,. with us patiently is isabelle mateos y lago of blackrock. markets, etf equivalency in the united states gives way a little bit, and the bond comes in as well, the 30-year of 8640. if i am not going to buy fully

priced full faith credit, where do i find comfort in fixed income this morning? isabelle: that is a tough question because at these prices on government bonds, obviously these are eye-popping levels. know, there is not a whole lot to do at this stage. if you have a very risk-on positioning, you want to go back to a more neutral position, but it is a bit -- there is no great bargain in the bond market at this stage. the good news has been so far they have really played their role of diversifying, but obviously the closer we get to zero, the more there are governmentrks around 's ability to do that. portfolio movee to make at this point, assuming you have moved back to a risk control position.

tom: your past is one of institutions. what do the institutions do here? right now is not a talk -- a time for talking or photo opportunities, it is a time for action. how do you expect that to play out on the continent of europe? you are: assuming talking about central banks and other policymakers, it is fair to say that they had in very much on a wait and see stance, apart from the u.s., where we have seen action already from the central bank and from the fiscal side. in europe and the g7 generally, it has been more we are looking at -- don't worry, we are ready to act. but we have not seen much by way of action. our expectation is very much that we will see much from the central banks in europe this week, but exactly in one form is the ecbo say because at

it is very controversial to see whether it would do more good than harm to cut interest rates further. but certainly, it is highly likely that they will deliver some targeted liquidity to ports, the banks so that he keep that so that they keep rolling -- so that they keep rolling over. it is quite possible that we will see some -- it is quite plausible that we will see a corporate securities purchase program that will deliver straight where it is needed. francine: i know you think the market is oversold at the moment, but what is the chance that the u.s. treasury 10-year goes negative this year? you cannot rule it out entirely. but when you get this close to zero, there is nothing certainly to prevent it. that is something we have been saying for some time. while in terms of the policy is not policy rate, this

something the fed would want to take. in terms of the market determining yield, anything could happen. it is really the growth outlook is here your rating and a recession becomes more likely. then certainly there is nothing to stop it from going there. but again, our view is, unless this temporary shock is badly mishandled, we should see a rebound at some point in the not too far just future and things will normalize. francine: mishandled by who? is it politicians are central banks? isabelle: it is all the policymakers. the first thing is to contain the epidemic, which is the way we have seen in china, the encouraging news that if you take harsh containment measures it works and you can hope the economy goes back to normal. you have an economic shock that maximum twovity for quarters, but not more than that. if you are talking about really bad growth out of h one of this

year, that is really ok. if we see the epidemic is not complaint -- contained and you see this drag on and the economic damage into the third or potentially the fourth quarter, then we are in serious trouble. tom: i want to go back to masters economics at cambridge, and the idea of a computer disinflation or outright deflation -- the art -- the arch fear here is not the market but the idea that the idea that interest rate recess and global infuses an outright deflation. how close are we to that? isabelle: it is complicated because you have both deflationary forces and an inflationary one. you're seeing a bunch of productive capacity being removed from the economy, so for sure, that is not deflationary, that is inflationary. that is another complication for central banks and their policy

response that, right now, the priority is to deal with the collapse in demand. but as soon as this comes back on stream, we may discover that a lot of capacity has been taken away, and at an inflationary term. if you are a central bank, you say that i want to act quickly, but this for a combination of political reasons and uncertainty may be hard to do. our view remains that down the road you may be faced with inflation perking up sooner than you fear. but clearly, that is the only reason for not dealing with the demand shock right now. isabelle mateos y lago's with us as well. thank you for helping me get through a down market. that is a massive plunge, well below the low that we saw on february 28.

let's slide that into our data check, where you do not get good equity information, a limit down on spx, just 1% at least away from where we are, saying with the vix, the euro-dollar stronger. that is new weakness in oil, 32.49 as well, brent crude at the bottom, 36 point 07. that is stunning to see the 30-year bond. we have a real deterioration in the last number. the u.s.-two-year yield to four digits, .20 983. the united kingdom yield fascinates me. if we were to get a negative yield in the two-year piece. francine: there is a lot going on in the u.k. because march 11, have a budget by a new chancellor. the market was pricing in some kind of big fiscal stimulus, trump style measures, and then we of course have a new bank of england governor who picks up his job on march 16 with the bank of england meeting, and

possible rate cut. that is what the market is pricing in later. europeang selloff of stock markets, and if you look at energy shares, they have been hit, the lowest since 1997. if you look at oil shares, mining shares, they have tumbled the most in the period of february 19. and since favoring 19, which was the peak, they are down 20%. coming up on "balance of power," have more on the oil markets. the iaea executive director is coming on in new york. this is bloomberg. ♪

--: surveillance mistakes there has got to be those with

such market moves. francine, i just said the u.k. was coming down. what do i know? briefly, we had a negative rate of the two-year yield, sort of opening out of japan. i don't know what to make of that, but nevertheless, there is a negative rate for a moment on the united kingdom two have in your yield. what does that mean for the united kingdom? is a negative yield like you don't talk about it? what does it mean for the city? francine: people don't talk about it that much. remember, if you look at what it also means for the u.s., it is something we are keeping an eye on. i don't know if you want to say that after bonds have been caught in the whirlwind, but for the moment, u.k. government bonds are the last one to join the oil price wars, adding to concerns about the impact of coronavirus p could see more. a lot will depend on what will happen at the end of the month

and what we see on the budget march 11, two days from now. tom: let me bring up to one more chart to get to isabelle mateos y lago of blackrock. on the bloomberg negative yielding debt, things are great, things are not so great. and again, we are on the edge of not so great as well. what is the significance of this experiment now. what is the so-what of the theory of negative yields? how is that going? isabelle: the first is that i would say it is cheaper governments to borrow, so it is a good idea for them to do it. we are facing great uncertainty shock as well as a demand shock that is going to be a need to direct resources to health care systems, to people who cannot go to work because of the virus, to firms facing liquidity problems. boosting the level of interest rates means there is no

compelling reason for not doing this. i would say that is the main so-what. the second critical so-what is for all investors who -- a lot of long-term investors, pension funds, insurance companies, a number of official institutions that are structurally heavily invested in fixed income markets, it is a real problem. it is not just that we are talking about low yields being the new normal, it is that they keep getting lower and lower, pressureputs enormous on these institutions to try and preserve the kind of level of yields that they have been accustomed to or that they aspire to. it is increasingly pushing them into new asset classes, alternative asset classes in some cases. nobody really has a huge risk appetite in markets like this, so it is a huge conundrum for fixed income investors.

tom: what happens if it continues? you can use any metric you want let's take swiss franc. a 1.00e bank is modeling swiss franc. thejust as one indicator of system, isn't there a point where it breaks? i don't know what it means that it breaks, but you just have to accept lower rates of return. if you are a central bank, for example, and you are going to get lower returns on your central bank reserves, it means you are going to pay a lower profit to your government. if you are a pension fund and you cannot generate the return people need for their pensions, you will have to reduce pensions or change the parameters. if you are a southern wealth fund, same thing. accept higher risk taking, you go into different kinds of assets. that is a decision that is

difficult to make. we are seeing and hearing from institutional investors that we are dealing with, that this is what they are in the process of doing, reconfiguring portfolios to more illiquid assets, riskier assets both within fixed income and outside, and that is the rational thing to do. is over a protracted period. we bring in dana peterson in new york with tom keene. great to have you on "surveillance." how do you describe the current economy right now? is there still a supply shock, or have we moved on to something were sinister? dana: potentially we have moved on to something or sinister. we have demand shock on the global it cairo -- the rv coronavirus in the global economy. certainly we are moving into new territory in terms of multiple shocks all happening at the same

time, all threatening global growth. francine: what is threatening global growth? what are the chances that we see global recession in 2020? i's global growth is in a 2.5% recession. it includes downgrades we have from our asian economists earlier this year, but it does not include further downgrades we have had out of asia, out of europe, and also financially downgrades from our u.s. economists. tom: i look at your powerpoint, and of course the huge honor of working with catherine mann may be -- must be cool. you talk about the weakest link in the supply chain. where is that? dana: definitely asia. the epicenter is clearly in china. it is a major supplier of goods for the globalist supply chain, -- also a major intake r of crude products such

od, you name it. tom: very good. dana peterson with us, and isabelle mateos y lago as well. from deutsches bank. thank you for taking time with us this money. essay on the swiss national bank was extraordinary. you say they will go stronger, 1.06, 1.05, even down to 1.00, and they will literally have to take the central bank balance sheet and move it over and create a sovereign wealth fund in real-time. what is the timeline on that? george: well, i think the timeline is being accelerated as we speak, given what is going on with global markets. and the virus, we have the opec

price down over the weekend. but i also think there is something big and important happening in terms of how the market perceives central banks. there is a massive credibility crisis currently taking place where the market is realizing the central banks can no longer respond to these new shocks. the outcome really is that you shepherd'sthe global asian yield. everything is going down to zero. the only thing we can rely on is the fiscal response, which if you read the headlines over the weekend, does not seem to be forthcoming, at least for now. as a result, you get to see all those currencies, where central banks cannot cut rates anymore, rallying substantially. -- also important, the yen and the euro. we think we are entering a big new dollar bear market. we think the dollar has much more to go because the fed is the only central bank that can

cut rates. i think by the march meeting, we probably have the fed potentially going all the way down to see -- cutting all the way down to zero. francine: do you worry about liquidity in the markets? george: i think liquidity is probably the most important issue at the moment. every crisis is different. in some sense, really of the 2008 crisis, which was a dollar funding issue. the problem this time around is how markets are functioning, especially credit, lack of liquidity, lack of absorbing supply. to some extent, central banks have to take responsibility recording some of this because part of the qe programs were intended to push investors into more illiquid assets. just this morning, we wrote a piece on what needs to happen in terms of circuit breakers, and it was really three things. one was a big fiscal response, bigger than what we are seeing.

two, central banks being .iquidity providers third, some honesty from central banks that they do not have policy space anymore because by insisting that they do, this does more damage to investor confidence, i would argue. francine: what can the ecb actually do? you say that the ecb should wrap up its corporate bond qe program this week. should they buy outright equities? george: i think ramping up the credit bond program is the easiest thing to do because they already have the parameters set up. but potentially also signaling that they could buy equities as well. i also think that it would be a mistake to emphasize that they have policy space in terms of cutting rates. all it would do is damage the financial sector and not really achieve much. that is why the honesty

component of communication i think becomes quite relevant. , thank you saravelos very much, from deutsche bank this money. perhaps he will be on later in the week. advantagedicularly because it is that time of the political season where strategists write out who the next -- is going to be. our guest is with us from critical head of strategy resource. kerry, mr.h john biden, and president obama. a two-hours for conversation. events are extraordinary come to say the least. what are you telling about the policy prescription? let us begin with the virus. thingsof the interesting is that washington is not moving quite as fast as the fed or

monetary policy or many otherd on this virus -- or many others on the virus. you saw the congress respond last week with an $8 billion health care package. however, you have not really seen anybody coalesce around what a real stimulus should be, whether it should be targeted. that is what kudlow was saying earlier last week, or whether it should be something more broad across the board in that regard. tom: what is so important here is, in this discussion of mr. adlow and others, it is nation that is reticent to do fiscal policy. it is a nation, republicans and -- it has become calvinist in the last 20 years.

when is it going to lose austerity? serco part of the problem -- sarah: part of the problem is that we have a government that is really fractured in washington. we have president trump and nancy pelosi -- their relationship has been shown to yield results. at aave also seen it record low right now, and you saw the tensions at the state of the union. some of it is really that tension and the politics going into it. tom: $8 billion. 8 billion dollars is like an eyedropper of work, isn't it? sarah: that was intended to shore up the cdc and other things. they are talking about a bigger stimulus here. washington is not working right now. it is broken. there is less concern about the deficit than about the ability of these two parties to come together to agree on something. that is what i think -- you saw oftarp in 2000, the crisis

2008. what you saw was people coming together even in an election year and passing what was ultimately -- tom: i know francine wants to jump into the market is not down enough today to get to a tarp stage. that was a joke. sarah: right. toncine: let me go back isabelle mateos y lago at blackrock. we are trying to figure out if the lower oil price helps the consumer. 10 years ago it would have come in the middle of a coronavirus. can it help at the margin? were is a global price war selloff, but could there be benefit from it? isabelle: definitely, but there is asynchronous in -- there is a sequencing issue. lower oil prices will not do much to help the consumer -- think of airlines, exactly the same. any day in the normal times, a lower oil price, airlines should be doing great. well, they are doing terrible.

because the impact of the oil price is completely overshadowed by the downdraft of the virus fears. so in time, if this level of oil prices is persistent, we will see a boost to consumers, to markets, oil importers, but right now it just does not help causeda to uncertainty this decision because everybody was taking for granted that opec could not do what it always does, and all of a sudden, oh, no, opec is no longer working. it is an uncertainty shock and a shock to the high-yield credit market that could have carry over to part of the s&p as well. right now it is not helpful. francine: this extra uncertainty, which is frankly another big challenge on the plate of politicians, the price of oil, do they realize that it can crater so much?

is the realization from russia that we have created more panic, let's go back to the market and what it is expecting us to do? isabelle: i'm not sure they will get there quickly because the plunging prices part of the strategy. if you are trying to gain market share and push out of the market the shale producers, the way you accomplish that is by having a lower price. in that sense it is working. but where it is working, it is causing pain at the same time. the question is, how long they will be able to sustain that. tom: i am watching the etf from the standard & poor's 500, and it is down about 6%. bianchi is with us, isabelle mateos y lago. what is the citigroup model on real gdp? did you guys over the weekend make any adjustments out? remember the v-shaped that was

last week? and dr. mann modeling gdp this morning? this i think a lot of believe this is going to be a u-shaped recovery. definitely v-shaped with manufacturing. you restart the engines, v-shaped recovery. when it comes to oil prices, we pricesking for weak this year but a pick up next year. tom: cut to the chase. dana: l-shaped. v -- luv, i love that. what is your real term gdp statistic? dana: for the global economy? tom: for america.

there is no one watching. dana: u.s. economists have 2% growth, but you can sense some doubt when they are writing that, that there may be further downgrades. it is really a big question, do we get a big bounceback? tom: we could get a one handle. well,litical season as sarah says we may get a one handle economy. the president -- what does an incumbent president do with a one handle economy? >> i think the president has two problems here. there is a management question. like a democrat, but continue. i'm kidding. sarah: responding to these crises is difficult. it is difficult to coordinate all of the different parts of the government, all of the state and local. it does not have a lot of controls over some of the pieces, so that is really

difficult. there is a risk that this becomes like hurricane katrina was for president bush. and in terms of economic growth, one thing that has stuck with this president on is at least the economy is good, even if we do not always like it every day. i think we have a real challenge going into november if that is not the case. it is funny because just a week or so ago, maybe two weeks ago, we were talking about how difficult and may impossible it would be to beat president trump. we were looking at bernie, and look at how quick the politics can change. thank you so much. sarah bianchi with us, and dana isabelle mateos y lago from blackrock. i know you went up to the food court, the famed london food court. but other than that, what have you seen in the last hour? >> i did not, actually.

the point is, things are starting to calm down a little bit. levels,ill at extreme from what we expected coming in on a monday morning. it is obviously armageddon out there as far as trading. as the u.s. comes in, there is a slight expectation that perhaps things will level out a little bit in europe, but we are down huge as far as the stock market is concerned, bond markets making credible moves. a reasonable selloff in some of the weaker countries in europe. francine: tom keene has to get to radio, so, tom, good luck in radio and we will see what the market does in the next couple of hours. what is the market pricing and right now? is it liquidity concerns? is it that they cannot find in currencies, in

these safe havens? portfolio protection has been the secret for the last two weeks. properexpecting coordinated global responses, so again, that is the trouble, people are essentially backing away from the crisis. what you are seeing his reaction and people are jumping in on any form of liquidity. credit spreads in europe are out more than they were up. this is a big reaction. francine what can the fed do? is the fed the only game in town, or will we see a g7 policy response? isabelle: hopefully not. if the fed is the only game in town, i think we are in big trouble. but again, i think the coordination points that you mentioned is an important one because when you see what has

happened to currencies since the fed emergency rate cuts, you have seen the euro and the yen really surge, and again, in normal times that would make the central banks tempted to go into a rate cut war. obviously that is not what you want. to some degree you see that in the emerging market currency space as well. some countries have been happy to let their currencies slide. others not so much. and is creating distortion relative competitiveness. we need fiscal action and coordinated -- coordination for the better. francine: a russian energy company -- we had a headline across the bloomberg terminal saying that it is poised to increase all production from april. this is in line of what we saw over the weekend with russia trying to test that agreement. they will increase oil production from april. how quickly will this play out?

if russia floods the market with oil, do the shale producers in the u.s. shut down and the price stabilizes, or could we see the price of oil at 15 bucks? isabelle: the problem is, as long as demand is falling and you are increasing supply, the market will do what it does, and that is adjusting with the lower price. as previous speakers were mentioning, the issue for russia and the gulf producers is, what does that do to their fiscal sustainability and their aspirations to spend money on various things? clearly they are signaling we are prepared to take the pain for the time being. i think if we do not get the policy response to the coronavirus shock that we are all hoping for, and demand keeps plunging, then the oil price could crunch quite a bit more. francine: dean of peterson, -- oil priceson, what

does the market need? dana: immediately there is that positive shock, where you pay less in terms of the gasoline prices, but certainly once you get several months on, it is a negative shock in terms of investments for the oil sector. it depends upon where you are in that cost curve by oil play. francine: how does this and? the oil price is another uncertainty that politicians and policymakers meet. in certaines help sectors. look at the weak economies of china, japan, and india, char resource poor. it depends on how much they pre-bought. the shale producers will not go bankrupt straightaway because a lot of them have hedged. likewise, how much demand is there, particularly with china taking advantage of the drop in oil prices? if they were already bringing it as much as they need and they saw the man falling away, then

they would carry on. russiastion is whether and saudi continue beating each other up with a stick. then down it goes. the point here is that in the weakest economies, look at the euro, look at the yen. these are economies which have no ammunition in the central bank. they need lower oil prices but not in this way. they don't need strong currencies. the french finance minister was saying to prepare for a massive and coordinated fiscal stimulus. what is the chance we get something for the euro area? outside the ecb, policymakers coming together? >> there is one big country in the middle of europe that does not have appetite for announcing a big fiscal stimulus, and that is germany. frankly, the communication around this is almost counterproductive because the reality is you have substantial automatic stabilizers in most

european fiscal policy. that is money that will be spent just because people get sick or are out of work and the tax collections are lower, so you will get higher deficit spending, or deficits throughout europe automatically. saying this isue a strong coordinated response with a big number on it. this will be difficult to achieve for germany because for political reasons they do not want to go there. , each countries making their own own -- their own announcements going forward. thank you very much. it is a historic day. traders are rethinking about what is possible and what is not. it started with the biggest oil price collapse since 1991. equities plunging, currencies as bonds seeing wide moves

they world is headed for a full-blown price war. panic seems to be gripping the market. we have expert data checks. two things to watch out for -- futures on the s&p 500 falling 5%. that means it has triggered trading curves which would limit the most are medic moves while cash markets are closed -- the most dramatic moves while cash markets are closed. here in europe, really under pressure. if you look at the stoxx 600 as a whole, it has fallen the most since 2016. several of the recent stages are set to enter bear markets. you look at the exchange rates, and a lot of them are saying it is difficult to see the new ranges. this is bloomberg. ♪ tv just keeps getting better.

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>> oil armageddon. russia refuses to make a deal. crude stressed, reverberates in the credit market and companies. reaches half ald percent while the entire curve falls below 1% for the first time in history. ,s italy looks locked down central-bank scramble to help. looking to "bloomberg daybreak." i'm alix steel. it will be a tough deal for a lot of people. it might feel like 2008, but it is not. we will give you the insight into market reaction and how to protect yourself and take advantage of market opportunities. s&p futures are halted, limit down to 5%. you can trade above that but not below that. the i can tell you is that spy is now down by one point.

that is friday's close.