from entering our shores, we will be suspending all travel from europe to the united states for the next 30 days. alix: no trump put. president trump fails to deliver stimulus investors want and offers a travel ban from europe instead. markets in freefall. bear markets wake up around the world. analysts/earnings outlook, and the fed throws money at the repo market. christine lagarde under pressure to deliver stimulus after a surprise rate cut from the fed and the boe. the spotlight now on supercheap liquidity. welcome to "bloomberg daybreak" on this thursday, march 12. it is going to be a painful day if you are long equities or you are trying to find a bottle in the market. ,&p futures hit limit down which mean they were down by 5%. take a look at european equities. they are going to hit very hard,

between 5% and 7%. that kind of sets you up for your morning. dollar-yen, safe haven bid full in play. the yen and this was see the safe haven of choice. the long end of the curve taking more of that safe haven demand. crude rolling over now. you have the virus, what is happening between opec and russia, and now a travel ban, which is going to destroyed jet fuel demand. really taking it on the chin. time now for global exchange. we are going to bring you today's market moving news from all around the world. our bloomberg voices are on the ground with all of this morning's top stories. we begin in washington, where president trump suspended travel from europe for the next 30 days, effective friday at midnight. the been excludes the you could -- the ban excludes the u.k. pres. trump: to keep new cases from entering our shores, we

will be suspending all travel from europe to the united states for the next 30 days. the new rules will go into effect friday at midnight. alix: joining me as kevin cirilli, bloomberg's chief washington correspondent. kevin: the president delivering that oval office message in which he laid out how the administration is going to combat not only the health impacts of the coronavirus, but also the economic impacts, by restricting travel for a large magnitude of travel to europe. the european union releasing a statement within the last half-hour. headlines crossing the bloomberg terminal in which they say they were not consulted and criticizing that move, which obviously is reverting -- is reverberating this morning. the president also saying he will be calling on congress and his administration to increase small business loans and using the small business administration and others to try and free up liquidity to not

just big businesses, but also small businesses. the president also calling on congress to take swift, bipartisan measures, including lifting the payroll tax and trying to inject some type of consumer confidence. i can tell you quickly, i was up on capitol hill talking to republicans and democrats. they are craving for there to be some type of nonpartisan vehicle , congressional vehicle to get through that would inject confidence not just to investors, but now all across the country on main street, which is dealing with everyday impacts of what the world health organization is calling a pandemic. alix: thank you very much. let's stay on the virus. the world health organization declaring the virus outbreak a pandemic. the number of worldwide cases top 120,000. joining me from rome is bloomberg government reporter

john -- walk me through the situation in italy, as well as the rest of the world. reporter: -- reporter: we had the prime minister giuseppe conte under pressure from the areas hardest hit and within his coalition to tighten restrictions, and the screws were tightened again last night. now we are in a virtual lockdown. there's a curfew through the country. all shops are closed apart from essential activities, so groceries and pharmacies. gas stations arts still open. you have to stay one meter from other people. the experts are saying it will take about two weeks to establish that. there's also hope that perhaps the warm weather will have an impact on the virus, but the possibility is there will be further containment measures in the future. alix: thank you very much. now we turn to the markets,

where global stocks are on course for a bear market. you check us through the rout is bloomberg's annmarie hordern. annmarie: the bloomberg flashing red throughout the night any morning. futures down 4.5%. we are limit down again today, once again. only have totures drop 5%. the selloff is really widening. 18 benchmarks around the world are down in bear market. s&p briefly touched that level intraday yesterday, now set to open deeper in bear market territory today, ending the longest gain ever for american stocks. stoxx 600 travel and leisure also doing terribly. the havens, that's where the money is going into. we see a stronger yen, a lot going into gold, as well as treasuries.

they are just rallying. alix: thank you very much. let's drill down into airlines and cruise liners, plus credit markets. all of that in freefall this morning. joining me from london is bloomberg's dani burger. walk us through what we see. so severeselloff is for travel and leisure stocks in europe, the last time they had a day this bad was september 11. that really puts things into context here. already they were dealing with reduced traffic and reduced footfall over coronavirus fears. now with the travel ban between europe and the u.s., these companies are in freefall, tumbling 10% or more. american airlines premarket falling more than 13%. one of the fears this really races, especially when you look at stocks like norwegian come over the balance sheet was already questioned by investors, will this because

companies to default on their bond covenants? will they even have to go bankrupt? we heard from a company that operates a lot of cinema chains saying that under a worst case scenario, they could violate their bond covenant. for some companies, this just means the borrowers will waive that violation. for others, it could mean restructuring, it could mean bankruptcy. we are seeing that priced into the credit market, which is experiencing a lot of pain now. the index in europe which tracks the cost of insuring for high-yield companies on their debt has surged. it has doubled over the past five days, seeing the biggest hiccup on record. we are seeing investors cast aside week balance sheet companies in favor of strong balance sheet companies. the cost of borrowing has also skyrocketed in asia and the u.s. investors now starting to price in a recession here. alix: thank you so much for that recap. finally, after the fed and the boe cut rates, investors now

watch the ecb. joining me from frankfurt is bloomberg's paul gordon. we've got an hour and change until we get this decision. what should we get? what do markets expect? paul: president christine lagarde effectively pre-committed to action when she spoke on tuesday. that is highly unusual, speaking to the severity of the crisis. things only got worse with the down and the travel ban to europe. investors fully expect at least another 10 basis points, possibly 20. there's a good likelihood that the quantitative easing program, which was controversially resumed last year, will be escalated again. the real focus is on what measures the ecb can come up with two direct liquidity towards small and medium-size companies, which really risk defaulting or failing because of problems with cash

flow. there's a lot on christine lagarde's shoulders. it is the first big test of the presidency. let's see if she can deliver. alix: thanks so much. we will have complete coverage of the ecb decision, 8:45 a.m. new york time, followed by the press conference at 9:30. the outbreak is now rocking the sports world here in the u.s. the nba now suspending its season. the announcement was made after a player on the utah jazz tested positive for coronavirus. now the nba says it will use the hiatus to decide what steps to take next. meanwhile, there will still be march madness, but there won't be any spectators. the ncaa has decided to hold its men's and women's basketball tournaments and empty arenas. only staff and a few family members will be allowed. there were over 100,000 fans expected for the final four. atlanta was expecting $106 million in economic impact.

now they have to strip all of that out. coming up, more of your morning news, trade and analysis in today's first take. this is bloomberg. ♪

alix: time for blumer first take -- for bloomberg first take. joining me from our in-house team of wall street veterans and insiders, damian sassower, mike mcglone. have we hit capitulation? is this what that looks like? damian: i don't think so. we are finally seeing evidence that liquidity pressures mating in the u.s. are heading off for markets. i've been talking about this for .he wife -- for a while libor is spiking. it is hitting the g3 cost

currency basis. they are plummeting. that is making it harder to borrow dollars from offshore. that is going to increase liquidity stress in my opinion. mike: i think the fact that we agree means we should maybe get a little more bullish. [laughter] mike: but i still see unfinished business in the s&p 500. if you look at it, that's the only thing that matters now. once the stock market stabilizes, everything else can trickle down from there. that's look forward a week from now. the fed is going to be at zero. it is priced in. if we look forward a year from now, we are probably going to have a new president. it is a virtual guarantee we will have a recession. typically, we are supposed to get at least 1/3 correction in the stock market. i see the s&p 500 getting around 2000. that's right where it's word -- where it was when trump was elected. then i look over at bonds. 1% in the thirty-year mothers not a lot of room. i look at commodities.

oil is probably going to take out that low. then you look at gold. there's unfinished business at $1900. i don't see how we will not get above there. damian: i'm still focus on the move in spreads. these are high-yield emerging-market spreads. really big moves. the highest levels on record across all of those asset classes. intold not be going illiquid asset classes at the current point. i agree, you've got to be making your christmas list right now. which companies, which securities, which asset classes you want to own. but i would say sit on your hands now. alix: joining us on the roundtable is should heed a lot , bnp is a shahid ladha for g10head of strategy rates. hahid: the risk remains skewed juste downside here, not

for the immediate downside to the economy, but also the possibility of liquidity impact. we see potential working from home, potential shutdowns of central liquidity centers that could affect liquidity worse, could draw calls for the fed to add liquidity more and more as could addterday, and to dislocations in the market, particularly in credit, which seem to be the focal point of stress and how the coronavirus crisis can impact the economy. alix: just to play devil's advocate, yesterday we saw the fed throw everything at the repo market. i was talking to ira jersey of bloomberg intelligence, and he was saying we are not actually seeing the stress within overnight rates. we just want to make sure everything is moving smoothly and it is more preemptive. but that is a good thing, right? it is not a response like we saw in september, no?

damian: certainly we are going to see the ecb today. the fed has never disappointed. we are pricing at all was 100 basis points of cuts by the 18th of this month. why not go with the ecb? wouldn't that be best for the markets? may be alongside the ecb, it might be helpful. the ecb is probably going to cut 10 bps and do a bunch of other things. this is what the market is projecting. but to do some thing along side the fed would have a greater impact for investors today. mike: unfortunately, it is not really profound because we both agree it is priced in. fed funds futures this morning, already priced in for zero. alix: what would actually make a difference? mike: it shouldn't really matter. the problem is if they don't do it. they need to make a statement like carney did that we will do anything it takes. we should expect quantitative

easing. we should expect as much liquidity as possible. until bond yields start taking up, we should just flood the market with money. just helicopter. why not? the bond markets should be the determinant here. until yields spike, why not? shahid:? my think this is different to september. that was an acutely quiddity -- that was an acute liquidity issue. flooding the market with liquidity may not help. i think we need to bring down the massive increase in high-yield ig pretty quickly. alix: does the fed made to buy corporate bonds? shahid: we are getting to qe quicker than anyone could have imagined as we started this year, so that seems like the eventual outcome, but i am not even sure that alone is enough. i think we need a much more

,oordinated monetary, fiscal plus regulatory response, a bit like we have seen from the u.k., hopefully like we will see from the ecb later today, and in the coming days from congress and the fed. that, two build on point $9 trillion of bbb u.s. corporate credit outstanding, one third of that is in bbb-. saying if we do go into recession or we slow down, we start to move into the third quarter, all bets are off. you will see bbb's falling like a rock. mike: look at the fiscal side. we look at what our president did last night, and kind of failed. as much fiscal stimulus as possible so he can blame it on the democrats. alix: to that point, if you cut the payroll tax, which is what the white house talked, that is not going to help the credit market.

does it? shahid: no, i don't to get does help credit directly, but it does start to try to build a floor. it does start to try to offset the potential downside risk to gdp we see now in the coming quarters. touted,taxes, it was could be as large as 2% gdp. that is very unlikely to get through given democratic opposition. i think it can help, but it shouldn't be the starting focus. i think the starting focus should be more about paid leave and small businesses, where it is hurting the most, and then provide a backstop once we get through the inflection point of coronavirus infection. alix: if we take a look at the bond market, if treasuries are supposed to be a risk-free asset, and they are not reflecting that right now, how do we price everything else in the world? damian: for me, i am really more concerned about some of the structural -- so i am going to

talk about emerging-market debt. emd saw the biggest record outflows yesterday. that is comprised of illiquid securities right now. buyers?t are any damian: i don't know, but a huge money that gets sucked out of a illiquid asset class, some of the structural breaks in these products that everyone considers safe, that could be a very damaging on the psyche, on the impact of markets. alix: and you end up selling because, like yesterday when we saw the selloff inequities at the end of the day, you also saw a selloff in bonds, which made no sense. some are saying that is because of sovereign wealth funds. damian: and muni yields blew up because people are selling their be visible bonds to meet their liquidity needs. that's insane. mike: i think the key for investors is don't lose money, and i keep going back to gold.

gold is the new bond vigilante. going upgoing about -- a lot, but it is still well below the all-time high. gold has got a lot of room. shahid: we start with bond yields close to their all-time lows, so i don't think they are reflecting at all some premium for safety. however, i think the bigger issue is more about liquidity in the near-term, and that can affect even the risk-free assets, as we saw with tightening swap spreads yesterday. i think broad-based liquidity plus this coordinated effort can get us through what is a very acute rough patch, and hopefully start to look past that sooner rather than later. alix: do you still think we are in a v, or is it a u? all the investors so you do want to buy stocks, just not today. there will be a recovery by the

end of the year. damian: if you look at breakevens in europe, they blew through 1%. that is an all-time low. if these disinflationary pressures persist, when does it become deflationary? when do inflation expectations get anchored that much lower, and what does that mean for the markets? we are heading there quickly. point,hat is a great especially when you have oil at $31. super contango, by the way. mike mcglone and damian sassower, thank you. shahid ladha of bnp paribas sticking with me. this is bloomberg. ♪

♪ viviana: you are watching "bloomberg daybreak." twitter employees working from home is numb editorial for all of them. previously -- is now mandatory for all of them. previously, the company only recommended it. it will continue to take

contracted an hourly workers to weekly hours. madoff wants what is called compassionate release because he is dying of kidney failure, saying retribution alone isn't enough to keep him behind bars. prosecutors say he doesn't deserve a break. wynn resorts struggling to deal with the coronavirus impact on its revenues. bloomberg has learned the casino operator plans to drive down a portion of its $800 million revolving credit line. macau,s operations in closing for 15 days in an attempt to halt the spread of the coronavirus. that is your bloomberg business flash. alix:. that's stay with the impact -- thanks souch -- alix:

much. it let's stay with the impact of the virus. value of assets around the world is in doubt. ability to trade without substantially moving prices, that has now plunged to the lowest level since the financial crisis in 2008. that means you are seeing a big difference between the bid and the ask spread. plus, the cost to trade treasuries is spiking. bonds2/3 of 30 year trades are taking now with wider spreads. slumping to the lowest level since february 2016. super contango. francisco blanch of bank of america will be with us area this is bloomberg. ♪ hi! we're glad you came in, what's on your mind?

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that we can't do, but come in and see what we can do. we're here to make life simple. easy. awesome. ask. shop. discover. at your local xfinity store today. alix: this is "bloomberg daybreak." it looks to be a very tough day for market participants. s&p futures hit limit down twice, which means they've been down by 5%.

you can trade above that, but not below it. it looks really grim. european stocks down by 6%. the travel and leisure section getting hit hard. industrial goods as well. that wraps in aerospace and defense. if you have a travel ban, it is going to hurt jet fuel and the airliners as well. in other asset classes, still looking at the rush to safe haven. dollar-yen down 0.8%. in the bond market, i want to highlight a 30 year, down another 17 basis points, the long end getting bought the boat. more options -- getting bought the most. more options coming out today. the volatility index, huge spike here. accrued up an unbelievable 6% -- crude off an unbelievable 6%. that would be horrible for a lot

of shale producers. still with me is shahid ladha of bnp paribas. when you took a look at the market, one thing i wanted to highlight was the change in volatility. if you come inside the bloomberg em vol, whatus does that mean for the market and how you trade? shahid: if you think about this as an external coronavirus shock, the eye of the storm, we have it now really in europe and just growing very quickly with more testing in the u.s. the eye of the storm currently is in g7. we are also looking at g7 to provide leadership during the financial crisis. , theys., europe, the u.k. essentially had more coordination between fiscal, regulatory, as well as monetary

authorities. so far, they have not been convincing enough to provide an adequate policy response for. . the depth of shock to me, this leadingion is perhaps into the eye of the storm, it will possibly be seen across other markets as more in the storm. alix: but would actually make a difference? one is helping to backstop companies sectors getting hit, and the other is making sure the market is functioning properly. there are two different kinds of response mechanisms. it would be the most helpful for you to see? financialthink on the liquidity side, we are thinking about two things. one is some type of moderation in credit spreads or limit to credit spreads. even though 30 year yields are going down like a stone, mortgages are not. that is a problem for the wider

economy. they are not benefiting as they perhaps should. on the more micro liquidity side, further repo from the fed, perhaps further qe to help supply. spreadrades across the are being affected. you have also in treasuries carry trades affected by the volatility we are seeing. that probability continues. i think on the liquidity side, some help from the fed, but also from the regulatory side, some understanding that banks may need to be flexible to provide the extra loan for the small business or medium-sized business, or even yesterday, some large businesses, where extending loans during acute crisis will not come with penalties. alix: so meaning that you need to see capital buffers for banks reduced to help them feel free to lend more? what would make the difference? shahid: perhaps. we've seen a bit of that in the

u.k. we've gone from a 1% countercyclical buffer, plans to go to 2%, now to 0%, possibly for a year. you got also have a different treatment of bad loans or larger loan provisions. temporary measures just to buy some time. this is seen, i think, as still a question of time and , we hope, and the summer from the coronavirus. we are trying to buy time in this ultra quick, ultra liquid spot for credit where we were at the start of the year. we need time to get through the next couple of months, and we need more coordination across these assets. alix: really insightful comments for that. is there a time when you start to think of it not as a short-term thing, and more of a systematic longer-term problem -- a systemic longer-term problem? shahid: absolutely. deflation risks from continued,

longer-term recession, we see this as a more technical type recession risk in the u.s. a global recession fell under 3%, but not global growth. the imf definition. but clearly, risks remain skewed to the downside as long as we don't see an adequate coordinated response across authorities and regions. we hope and think that is coming, but it needs to be quicker and more effective. alix: really great perspective. i really appreciate you joining us today. shahid ladha of bnp paribas. one thing that can lead to the deflationary feel is oil. president trump initiating a travel ban from europe. you now have print dropping to $32 -- you have brent dropping to $30. francisco blanch of bank of america says prices could fall to the 30's, very prescient on a day like today.

do you think that this is sort of a v-shaped thing like we are talking about for the broader market, or is this different? francisco: i think it is different because you have essentially two black swans coming together. you have the demand-side black swan where demand is cratering, and the supply-side black swan where we've restarted a price don't knowrankly, we when it will end. we are looking at the two sides, and on the demand-side, nothing looks normal in china, and his been like this for almost three months. the extent that we are going into the virus right is right now, we are going to come out of it may be in may, maybe june, maybe july, august, september. that is pretty long for demandtec a hit. and when week -- for demand to take a hit. and when we come out, will it

look like china? energy consumption doesn't look normal in china anyway you look at it, even if it recovers from the lows. on the supply-side, i think the move by saudi arabia to cut the asb, the average selling price, and the osb, the , mayial selling price signify something else. remember that they put 12.3 million barrels a day on offer after producing 9.7 million barrels in the prior month. they've also said, they it structured -- they instructed aramco to increase capacity. our the saudis thinking we are never going to get $60, we might as well be trying to get 50 million barrels a day at $40 a barrel? you get the same revenue, but it

is a very different world. alix: i have an unfair question to ask you. without saudi and russia, if they had actually cut, what should the price of oil be to try to get a pure read on-demand? francisco: i think we would probably be low 40's, high 50's, so still pretty bad -- low 40's, high 40's, so still pretty bad. and still going lower. inventories are going to start building over the next three months. we are going to develop a super contango we were talking about earlier. it takes about $1.50 to store oil in a tank every month, which is why people are focusing on the tanking industry. that's what is going to happen. we are going to start filling tankers. that will put more pressure. our projection is we will see brent in the 20's for a bit, and potentially we could see the teens.

it is going to be bad. teens,f you say in the even in the, are we talking that you're going to test it, or is there a possibility we stay at these levels for a while? francisco: i think you are going to test it because ultimately, saudi arabia and russia will realize this is not the best path to achieve whatever they are trying to achieve. you will take market share from shale. alix: fair. francisco: to that extent, you don't need to push oil so deep. whether it's equities or bonds or loans, it is taking a big hit. this saudi arabia is really increasing production from roughly 10 million barrels a day to 12, 13, 14, they are going to be grabbing market share away from shale. we just don't know exactly what they are trying to achieve because they haven't really told us. alix: do you think where saudis and russians can live with it,

is it 30's? francisco: with the movement in the ruble, the russian breakeven has to come down because they are getting more rubles per barrel. the russians can probably live around $40, $42. need $84 at 9.4 million barrels a day. at 13 million barrels, your breakeven is going to be lower. alix: but that is not sustainable, right? it is going to take a while for that capacity to ramp up, and it seems like the rhetoric is at 12 million, you're getting storage, drawing out capacity. francisco: right. maybe? we don't know. they are ramping up the neutral zone. strategy is not clear. of course, let's not forget what happened overnight, this attack on a military base in iraq.

tensions are building in the background. , the geopolitics also come into play. we have all this volatility to the downside followed by geopolitics. so i would just say that we are going to be in a very volatile oil market for some time to come. i do think the lows will be in the 20's. maybe we could see a one handle for a tiny bit of time. eventually it will rebalance in the market. we need to see the light at the end of the tent, -- at the end of the tunnel. we need to see when demand will stabilize and what the world looks like once we've gotten through this viral phase we are going through, for lack of a better word. alix: just based on the travel ban and the jet fuel demand, is the sequence of events you have people are still going to keep buying because it is really oil, they areying going to make products and take

another leg down? can you walk me through the string of pain we will see? viviana: ultimately -- francisco: ultimately, there is no demand. so products get hit because there's no demand. therefore, things like jet fuel. we are still seeing gasoline demand, although in china, road traffic is down very hard. it is starting to recover. traffic innk road europe hasn't taken a massive hit. we saw italy shutting down, probably spain is next, may be france and germany have to follow through with similar measures. maybe the u.k. me, is what can hurt the gasoline, the diesel market pretty hard. jet fuel, travel ban. that is obvious. that compresses the margins initially. the crude market gets flooded.

eventually, demand recovers, and margins will really expand. i think refiners probably see the light at the end of the tunnel before the rest because there will be a demand recovery. eventually, at some point. and we will have plenty of crude. that's going to be the nice buffer that refiners will have. but in the short run, there's going to be struggling. alix: francisco blanch of bank of america merrill lynch hopefully sticking with me. let's get an update on headlines outside the business world. viviana hurtado is here with first word news. viviana: the european union blasting president trump's decision to ban most travel from europe. the eu officials saying they weren't consulted before the president made his announcement last night. it is president trump's most far-reaching step yet in his aims at stopping the spread of the new coronavirus. now to italy. normal life is on hold. the country shutting down nonessential services to stop the spread of the coronavirus.

all stores except bursaries and pharmacies will be closed until march 25. restaurants and bars will also be shut. italy has more than 12,000 cases of the disease. actor with oscar-winning tom hanks his wife rita wilson testing positive for coronavirus. they are in australia for a movie shoot. they say for as long as public health requires, the couple will stay isolated. 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. the on a hurtado. this is bloomberg -- i'm viviana hurtado. this is bloomberg. alix: coming up, company after company calling up bankers to draw on their credit. we will have more on the corporate -- for cash in today's wall street beat. for more, you can check out tv . interact with us directly. anything you missed and more, check it out.

this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, mike swell, global fixed income head of portfolio management at goldman sachs. ♪ we turn to wall street beat. we focus on what wall street is talking about, and that is credit markets. some are calling banks this week to ask for liquidity. joining me now is sonali basak. what are you hearing from your sources in terms of what they are telling their companies to do in private equity? sonali: they're really amazing skip yesterday for my colleague, blackstone telling banks to --

let's see if other private equity firms follow suit. this is not hurting the banks today, but it could hurt them in the future if these companies are not able to repay those obligations. but there's not only that -- for cash -- there's not only that dash for cash. there's also downgrades of a lot of credit also. so they are saying it is not a systemic issue as of right now. the banks are much better capitalized than they were before the crisis. but with that said, it could still be a significant strain moving forward. alix: not only that, but it is not just the banks that have exposure. it is a different fear than it was in 2016. but are we hearing about shadow banks or other issues? sonali: the shadow banking industry really stepped in when banks stepped out. you saw michael corbat saying yesterday that small and medium businesses will be hurt the most. that is where the private credit industry is really lumped in. that is longer-term monday, but with that said -- longer-term money, but with that said, they

are not stepping in right now. they've lost a lot of money to these shadow banks as well, so this is more connected than people really think. the longer-term effects are not going to be seen right away. alix: which leads us to energy because obviously, blackstone got hit really hard yesterday because 10% of their distressed debt is in energy. what are we looking at? francisco: below $40 a barrel, pretty much nothing works in u.s. shale. we are going to have to see a lot of restructuring if we stay in the slow environment. as we said earlier, we don't know if this is saudi and russia's path. in other words, the saudis trying to pressure pressure to come back to the table. we do know that russia offered to extend the deal. saudi wanted a cut. in the end, it became a free-for-all. so how much pain can they take? can they take more pain than the credit names here, than the

show companies? -- the shale companies? ultimately we will see some rebalancing. the weaker names are not going to be able to withstand it, so i think we will see a rotation of weaker balance sheets going to the stronger balance sheets. see, unfortunately, a lot of companies probably fold. they are already taking action, bringing down rigs, hiring crews. sonali: this week, one of my banking sources said something very wise as well. how much of this is going to flow into the american economy right away? he said in the energy, travel and entertainment, lodging, that is the florida and texas economy. how long is it before jobs start to be impacted? it doesn't seem like it is too far away. other sources believe that restructuring plans are going to be in a liquidity crunch in the next two to four weeks. francisco:francisco: i think

there's also the potential the white house will pressure saudi arabia to maybe take it a little easier to give the industry more time to restructure. there is that possibility as well. it may not happen as fast as we think. alix: we got to leave it there. thanks a lot, bloomberg's sonali basak, and bank of america merrill lynch's francisco blanch , thank you as well. some big news now. will be joining ubs as ceo. the stock for ubs is doing something premarket ash i will get that to you in a second. that stock is now down by about 6% and change in the premarket. david abney moving over from the ceo seat to chairman, and carol tomei taking the lead there. as we get more headlines on that, we will bring that to you. carol tomei was the former cfo for home depot, now taking a

home at ups. coming up, president trump announcing plans to restrict travel from europe. if you are jumping into your car, tune into bloomberg radio on sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

alix: airline stocks getting crushed in premarket. president trump announcing travel restrictions from europe. joining me now is brooke sutherland. brooke: earlier this week, we had most of the airlines speaking at a industry conference. the warnings were very alarmist. all of those numbers now have to be completely rethought. you had delta talking about cutting put percent of transatlantic capacity. does that no go down in the asia-pacific range? they were talking about $113 billion in lost revenue. that is not banking on travel between the u.s. and europe coming to a standstill.

this starts to get really ugly very quickly. yesterday, you saw selling off pretty dramatically as investors came to the reality of the cash crunch, but that ultimately does filter down to suppliers as well. alix: boeing, for example, drawing down their credit line. what are the options for airlines as they try to stay afloat in terms of going bankrupt or getting loans or whatever? beoke: it is going to interesting because the airlines have been arguing that they are prepared for a crisis, they are running their businesses better. here is a time to test that. alix: which may be true, but not necessarily for travel ban's. brooke: we are talking about a situation that is way worse to him what after 9/11. you have to completely recalibrate expectations. i think most of the u.s. airlines will be ok. you were talking about the ones that are most indebted. american airlines, this will carry a lot of debt. in terms of bankruptcies and

failures, i think you are more looking overseas, but the question is how long does this last. right now the travel ban is in place for 30 days. does it get extended? even if these start to be lifted, what point do customers feel comfortable booking transpacific flights again? right now, the airlines are not offering refunds. they are offering waivers of cancellation fees to move your date around. i don't know if that is a lot -- if that is appealing for a lot of people. alix: that's a really good point. brooke sutherland of bloomberg opinion, thank you very much. coming up on the program, lori calvasina, rbc capital markets head of u.s. equity strategy. this is bloomberg. ♪

♪ alix: welcome to "bloomberg

daybreak" on this thursday, march 12. here's everything you need to know at this hour. pres. trump: we will be suspending all travel from europe to the united states for 30 days. alix: the words that shook the market. fears over a travel ban shake investors. kevin: the european union releasing a statement, in which they say they were not consulted, and criticizing that move, which obviously is reverberating throughout the world this morning. providee boj pledges to ample liquidity and australia unveils a stimulus package. >> it is a comprehensive package, one that we believe is well targeted. alix: about 130 billion dollars in budget support has been pledged by world governments. meanwhile, italy has now closed all businesses except pharmacies and grocery stores as fatalities

jump. >> now we are in a virtual lockdown. it feels a bit like a curfew throughout the country. all shops are closed apart from essential activities. those are groceries and pharmacies. alix: now investors look to the european central bank for support. >> christine lagarde essentially pre-committed to action on tuesday, and that is highly and usual. alix: companies and distressed industries like airlines and hotels have their credit lines dry up, and local stocks slide into a bear market. the death toll climbs to 4600. in the markets, it looks to be a very painful day yet again. twice, s&p futures hit limit down, and we are at that level yet again, so three times. you can't trade below this level. european equities continue to get hard as well, so expect the open to be really brutal. expect this to be in a bear market when we open.

dollar-yen down by 0.7%. the yen and swissie continue to be the safe havens of choice, at does the treasury market. 10 year yield down by 16 basis points. crude at one point very close to a two handle in the market. you have opec all denting demand. lori calvasina lowered her benchmark target down from 3460, and also cut her earnings forecast. she joins me now on the phone. it is kind of like downgrading on a moving target. how did you make the call? lori: that's exactly right.

it is an incredibly frustrating process. you're seeing a lot of paralysis. we seen a few strategists cut their numbers, but not recently. we very strongly feel that it is our obligation to try to make the best call we can on what we have at hand. we will continue to evaluate conditions, but basically, what we did is we sort of relied on the math. we stuck to our model. we spent the last few days running stress tests on our earnings model, and came up with $165 in terms of where we think things like gdp and a beauty i will head. we also made some -- and wti will head. we also made some assumptions about buyback activity. what really crystallized things for me was coming to the 2qclusion that two q -- that is likely to see the brunt of the impact. also, just listen to what companies have been saying. we feel like this economy started from a very strong place and will be able to recover pretty quickly. now we have course will reevaluate that, but we generally view this market is pricing in the pain that is likely to happen midyear. withing the market is pricing in

that pain now, so we do expect a recovery trade at the end of the year. alix: it is easy to say slash your full-year forecast, but you still expect recovery by the end of the year, so what needs to be on that shopping list? where do we end the year? lori: we think this is basically going to be a lost year for the s&p. is about 1%mber ahead of where we started the year. in the near term, we've said if the 27 mark doesn't hold, and it looks like today is going to be a brutal day, there could be downside to the 2600 range. right now we are in the middle of a growth scare, but markets are starting to price in recession, and the average median drop could take you back to the december 2018 lows. so what do we want to buy? we felt very stronger with sector recommendations that we want to have a balance now. buyyour favorite defensive,

your favorite cyclical that is going to do well on the rebound play, and have some exposure to growth. we are rewriting near-term portfolio insurance. we like it on the back half recovery play. health care is outgrowth pick. virus really doesn't have anything to do with our upgrade there. we think that biden ascending in the democratic primaries has really removed the political risk from a very undervalued sector. alix: the weekly rating on individual investors in terms of sentiment shows the largest bearish reading ever. are we at capitulation yet? lori: are you looking at investor intelligence or aaii? i haven't seen the aaii numbers yet today, but that is one thing we were looking for as a necessary, but not necessarily sufficient condition. basically, people hadn't gotten

bearish enough. the other thing i will be looking for later this week is giveftc data, which will you a read on institutional investor positioning. it has plunged the last two weeks, but still way above where 2016,tomed out in 2009, 2018. i think you need to see institutional capitulation as well. alix: thank, lori calvasina of rbc capital markets. joining me for the hour in new york is mike swell, goldman sachs asset management cohead of global fixed income per fully management, and from harvard kennedy school, megan greene. what do you tell your clients today? mike: i think people have to separate the personal from their professional and investment portfolio. this is taking a massive toll on everyone, but i think when you think about your portfolio, you have to look out three to five years. we are telling investors that

you have to look at your portfolio and make sure you have the right asset allocation, and then rebalance, number one. number two, be calm. really need to try to separate the near term from the longer term as an investor. when we think about fixed income investing, we are in general investment funds, retirees, and we are trying to get people to be relatively calm. in the event that they are not overly invested in risk assets, start to take a look at opportunities. alix: where? mike: the credit markets and the mortgage market are two areas that are somewhat interesting. thirdly, the muni market has become a little bit interesting as well. munis has been the darling asset class for the last couple of years for individuals. treasuries have way outpaced municipals, so munis are now trading at 130% the yield. corporate credit, we are going

to have some continued blood in the corporate credit market over the course of the next six months. in the end, energy is the area that is the biggest risk, but there are a lot of companies that have significant free cash flow, so those are companies that we look aut a year, you returns.ble to earn that is significant. in the mortgage market, there has been a lot of dislocation. it is a high-quality asset class, something that rallies when equities selloff. it is very interesting right now because you have a situation where you have a good chance of winning on both sides. the world gets better, rates go back up. that is a good thing for mortgages. in the event that the world gets worse, it is likely the fed is going to purchase mortgages again. you have a good shot of winning in both sides of the equation, so it is an interesting asset

class for more conservative investors. alix: megan, are we definitely going to be in a global recession? is there a chance we avoid it, and how? megan: it is not definite. the answer depends on epidemiology and not economics. it really depends on how far and wide this virus spreads and how quickly it can be contained. what started as a clear supply-side stock does seem to be turning into a demand-side stock. you see that in inflation expectations, for example. they cratered. that would not be the case if it was just a supply-side stock. it in therting to see market. markets have really been operating, functioning normally at a macro level. at a micro level, particularly in the credit markets, the spreads are pretty big, and there are signs that liquidity is pretty scarce. if this does continue and we end up turning this into i financial

crisis, whatever president trump said about it not be in one, that will determine the path on this. it also depends on the policy response. some kind of joined up response between the fed and the treasury department would be useful, some kind of joined up response globally would be useful. getting much more fiscal policy then we have seen rather than forcing central banks to be on the front foot, that would help a lot as well. alix: let's tackle those things separately. in terms of liquidity, what could the fed do to help liquidity in the market? megan: there's not a whole lot the fed can do. they can buy treasuries. they can lend to banks. they can offer repo operations. they are already offering repo operations. but other than that, the fed can really only backstop the banks. their hands are pretty tied because of dodd-frank. the fed is coming out from a

relative position of weakness. something they might be able to do is offer some kind of term funding scheme a lot bank of england, or some kind of tltro operation like the ecb has. that might help, but that doesn't exist yet, so they would have to come up with it. that part of it i thing is very high. mike: not only due to the fact that there is higher pub ability of recession and a lot of volatility in markets, but you have a situation where a lot of banks and asset managers are separating people to avoid infection. that is leading to an environment of poor liquidity, so you have to have a confluence of events. ,t has not only had an impact but people are talking about the market impact. this is one of the things that long-term capital was very challenged by in terms of liquid

versus illiquid. i think it is something to watch very closely. what can the fed do and central banks? there are a lot of things it can do to improve look through the -- improve liquidity in parts of the market, with hopes it spills over to the other side. repo is one thing, and they were very successful in calming the repo market. they can get bigger there. they can implement qe again. it is unlikely that as long as we continue down the road we are going from an economic perspective that you are likely to see qe, not only expanding in europe, but pretty meaningful qe in the u.s. the fed is more limited than other central banks, but it can be very active in treasuries, driving mortgage rates down to low levels. what that does is it moves investors out of defined yield. that is where liquidity can come back over time as we go throughout the year. the fed kind of price everybody

out of the treasury market and the mortgage market, so as a result, you saw liquidity come back to the credit markets. we think that is likely to happen at some point in the future, be third quarter, fourth quarter. alix: we will leave it there for just a second and talk more about it in just a second. coming up, we will take a look at the ecb, but fiscal policy response can be in europe and the u.s., and will we see any surprise cut from the ecb. we are also getting some overnight information here. let's see what we have for you. you have singapore coming out and saying the government is planning a second virus, package -- second virus economic aid package. also, apache cutting its dividend and 2020 capital forecast. theseareholders, risks are really punished.

this is bloomberg. ♪

alix: some breaking news, the u.s. urging a 14 day isolation for americans coming from europe. not only are we looking at travel ban's for 30 days, they are also urging a 14 day isolation for americans coming home from europe. still with me, mike swell of goldman sachs asset management and megan greene of harvard. what would be the best fiscal response that would actually help the sectors in need and help the economy get through this? megan: i think the bill that has been tabled in the house is pretty constructive. it has paid sick leave, it includes provisions for the small business administration to increase loans at low cost.

it offers free testing for the coronavirus. really importantly, it increases the federal matching for medicaid, which will free up state budgets just as they are coming under more stress. that is all good, but i actually think one thing we need to thing about doing is cutting checks to everyone. i know everyone doesn't need checks, but at a moment like this when we are trying to get money out really quickly, that is an effective way to do it. i think cutting checks to everyone would really help. i also think loan loss provisions would help, so to have liked with the u.k. or bank yesterday announced with the treasury department. basically, if small and medium enterprises have loan losses, the government will backstop them. i think that would really help try to get cash where it is needed to those small companies that really just need a bridge loan for a quarter or two as we get through this shock. alix: is that going to be enough to save the distressed areas of

the credit market? mike: i think on the tangible side, helping individuals, particularly that are going to be impacted in the near term in terms of job losses, and terms of being out of work for a period of time, those are going to be tangibly very meaningful for people. but i think the bigger issue is i think markets, institutions, and individuals want to see leadership and functionality out of washington. i think if we see the appropriate level of leadership and functionality through whatever legislation is passed, it's got to be big, far-reaching, and i think the details about it matter less. i think the bigger impact for the credit markets is going to be confidence that washington, as well as other nations, are taking this very seriously, have the ability to be able to act. we know central banks have limited ability to act. they are doing things that are going to have an impact, but

i think if there is confidence that washington can function and actually act, i think that can have a bigger impact than what is actually passed through congress. alix: that brings me to europe because it is a trickier situation for the ecb. if you got the deposit rate more, what is that really going to do? they wind up needing fiscal. what happens if this turns into a deflationary longer-term event versus just a disinflationary demand shock? megan: there is something that the ecb can do. you are right, they need fiscal policy, and there is no single fiscal authority in europe. but if they do cut the deposit rate, that would make the rates for tltro's, the targeted long-term refinancing operations, even more negative. so it would be even more of a subsidy to banks if they lend that to the real economy, so that could be marginally helpful.

i think what they need to do is totally divorced the deposit rate from the tltro rate, and cut the tells her rate deeply negative as a real subsidy -- the tltro rate deeply negative is a real subsidy to banks. if they are benefiting borrowers and savers at the same time, that is unable u.s. stimulus across the board. they might offer another tltro, particularly for sme's, but i don't think they will introduce dual interest rates today. they could also fire up qe again, but there are questions about how effective qe is broadly. that doesn't necessarily match up with the countries that need it, for example, italy. they could change issuer limits. maybe they are self-imposed. that would be a signal that the ecb is trying to throw the kitchen sink at this. but the tltro dual interest rates, that is where the real power lies. it would be great if they announced something on that

today, but i doubt that. mike: in general, i agree with megan. post look at qe in europe financial crisis, it had a pretty big impact on reopening the capital markets, so you have a situation in europe where banks are very challenged, they haven't recapitalized the same don'tericans have, so i think european banks will be the lender of last resort. i think companies are really going to rely on and need to capital markets to be able to be open to fund themselves. i think expanding qe in europe could have an impact on improving spreads, improving liquidity, and reopening the capital markets in europe. alix: what is the risk that we just stay here for a long time? we have five year breakevens, 10-year breakevens, real rates under 1% or negative. we have the curve continuing to

steepen, yet we have rates plummeting to all these record levels. if we stayed here for a long time, what happens to psychology? does that fundamentally change where we had? -- where we head? megan: it does, and it depends on your explanation for why rates are so low. if it is low growth prospects, i think there's a good chance we will be stuck here for a long time. the term premia had already collapsed, so they are quite low as well. i think the scenario you point out or that you paint is quite likely. does that change psychology? much more mix it difficult to play on the fixed income space, so it does feel like a pretty unsafe space for a lot of investors. just spoke at a pension conference, and someone said you should treat your 401(k) right now like your face. just don't touch it.

i think that is probably good advice for a lot of retail investors in particular. it depends on what your timeframe really is. if it is a medium to long-term timeframe, once the virus is contained, we should get some kind of rebound, but it does seem like we will be stuck in the slow rate, low growth, low inflation environment for even longer than some of us expected. mike: when i first walked in here, they said we have to touch your face to put makeup on, so i'm not sure i have the same option. [laughter] mike: i think this gets down to bankslevance of central and the efficacy of central banks. they are not here to sustain ofwth over a long period time. they are intended to revert disasters, avert a crisis . i think you will see the book thrown at it here in a way similar to what we saw during the financial crisis.

the difference is that the lever s are more limited. i agree, investing in treasuries right now is a pretty dangerous proposition, but when you look at the potential for high quality companies to survive through here, whether you are looking at the equity markets or the credit markets, there really an opportunity to upgrade your portfolio. a lot of us bought credit indices, we on a lot of energy, a lot of growth. there are a lot of companies that have been very conservatively managing their balance sheet and have the ability to be able to withstand this. your question was around will would be in this for an extended perioed of time -- extended period of time. i think the idea of multi-year inflation, multi-year recession, we are in better shape than that. if you can, as an investor, and

this comes down to active management in equities or in credit, really take advantage of this very interesting move that's happened. recently, investors and dealers have sold what they can, and the soul what's up. so what has lagged very significantly is riskier credits, riskier companies. the big underperformance is the higher quality stuff. you have an opportunity as asset-manageme -- as an asset manager to really upgrade. alix: unfair question then, what is the bottom of the 10 year? mike: that's an unfair question. i think the bottom is negative territory. that's the potential. i think really, around your question is what happened yesterday in the breakdown of the relationship between rates and credit and equities.

the question that investors have to ask is in kind of a dangerous environment where they are both going in the same direction, this stagflation type of indictment. think you still have on the long end of the curve a lot of positive yield, a lot of ability for central banks to act, to lower rates, to buy assets. i think there is still some positive hedging attributes in the long end of the treasury curve that you will likely have the normal relationship between treasuries and spreads. alix: you guys are going to be sticking with me, mike swell of goldman sachs and megan greene of the harvard kennedy school. coming up come up to tutor will be joining us -- coming up, bobby tudor will be joining us. this is bloomberg. ♪

alix: breaking news for you, germany is ready to ditch the balanced budget in order to combat the coronavirus. right now we are learning as

ditchinggoing to be what they have stuck with for quite a long time. there was leeway for other countries to take fiscal action to fight it and it won't count against them reaching the fiscal deficit, but now germany seems to be ready to adjust the balanced budget, the 10 year yield paring off the gains. i want to take a look here at what's happening in the currency market. .uro-dollar is down 5/10 of 1% breaking news for you here in the u.s., initial jobless claims less thanat 211,000, estimated, sequentially a bit lower than the week before. doesn't look like yet we are seeing any go through with the jobs market on a weekly basis because of the virus. a quick check here on the next level, ppi came back up, food energy, much lower than estimated. sequentially a lot lower on a month by month basis. we are negative without, 3/10 of

1% for the core ppi. heading into march we have oil down to $30 per barrel. are two headlines, right, looking at the incoming data in the u.s. what is the dow to you? thisgela merkel indicated might be coming on wednesday when she said she would do whatever was necessary to support the german economy. i think it's a positive move. probably an inevitable what. i wouldn't go and assume that germany is about to much a massive fiscal stimulus plan, though. it's not even clear that they need to issue more debt in order to spend. it's great to get past the black -- but iet, government wouldn't anticipate stimulus yet. alix: in the u.s., megan, kicking off february on a negative, looking at 1.4% year

on year, how are we set up for when we actually get into the depth of the virus here? positiveat's not a indicator, but to be honest most of our economic data has been fairly robust coming into this. so, i think the u.s. was in a decent position before the coronavirus hit. that means virtually nothing actually terms of trying to figure out where we are going. negative, you know that speaks to inflation absolutelys cratering, suggesting that this is a demand-side shock. we arty do that. but static you surprised. u.s. data has been strong coming into this. 7 mike -- alix: mike? like: we have to look at the fact that the u.s. economy was strong coming into this. massively impacted

by the coronavirus. as investors we have to think about how we come out of this and i think that the starting point for the u.s. economy matters. i think it matters a lot. i think it matters in terms of the health of the consumer, the consumer balance sheet. the jobs number in terms of how many people are employed, you will see unemployment obviously take up, but where you are starting from obviously matters and i think that the prudent corporate balance sheet management is a very important factor, important equities. how are companies? how are individuals going to be able to weather this storm. alix: here in the u.s. again, to recap the news, germany is ready to ditch their balanced budget. for the next conversation we are

looking at where the next >> are terms of the broader economy. that is coming up in the credit markets. under performance with increased pressure on the energy markets, so joining me now is francis gannon, co-cio of pickering company. , the underperformance in small cap, is that an energy issue or something else that is happening? francis: it hasn't been an energy issue, it's a corrective issue. for the past five years. it happens. if you go back and look at the history of the russell 2000, you would have seen a double-digit correction. corrections happen. the reason for this one is different. as mike has pointed out, it's an

interesting opportunity to go long-term for the next couple of quarters. francis: one of my hopes out of this is that what works going into a bear met -- bear market doesn't always work coming out. the non-earning portion of the small caps space, when i think ofwhat could work coming out it, it's exactly those companies. having a strong balance sheet is a way to think that risk in a way that i think people don't understand small-cap companies can have high return on cash flow and fundamentals. it's something people have forgotten about in the small caps space since the great recession, i would say. those are the types of businesses i would be focusing

on. take what francis is talking about and weave it into the carnage that we are seeing. our their actual opportunities right now? bobby: there are clearly opportunities, but the nature of them is highly tied to your outlook on commodity prices. what we are seeing right now is that even prior to this spat between saudi arabia and russia, the view of the market on commodity prices was that we were stuck at a level that was highly unlikely to result in attractive returns for the sector. and this big downturn has just exacerbated those concerns. but, but there are a lot of really outstanding companies in the energy space. balance sheets that can withstand this, that will come out of this on the back looking just fine, i'm sure. alix: can you give us some

names, bobby? in the last hour i heard net-net under 40 shale is not worth it. looking at oil prices that could have a to handle, where could you find the other opportunities? at a to handle, oil does not work for anyone and even at a three handle it doesn't work or anyone. the question will be who can hunker down and survive this period in which the market will need to rebalance at a higher commodity price? learnedwhat we have over the course of the past year or so is that the breakeven price for u.s. producers, particularly small and mid-cap is something around $50 wti and even $50 wti, there's not much excess cash flow in the system. at $30 it really doesn't work for anyone. what you are going to see his massive capital budget cuts and people looking to preserve their

balance sheet and live to fight for another day, but the industry simply doesn't work at these levels really for anyone. mike, this has ramifications, obviously, in the high-yield sector, where we have seen the most stress. but i talked to the chairman of continental yesterday, they were triple negative. it doesn't look pretty. talk to me about the risks. mike: while i have a ton of energy when i speak, i'm not necessarily an energy expert. but when you are in the credit markets, you have to become one. i think that this is one of the areas where there is a potential long-term fundamental problem and the problem is that you have had a lot of these companies in this space that find themselves in a robust investment-grade market and right now with oil down at these levels, if we have the combination of low oil prices and low growth, you will be in a situation where companies are going to very much what's what's in the

market. you have a significant population of energy issuers that are likely over the course of the next couple with high-yield, but the real challenge with that is the smooth transition widening with prices going back up and hopefully you are able to continue to run your business. i think the issue here is that the movement into high-yield can be significant and large, so i think that energy companies in particular, that's a big risk. when people talk about the downgrade of the triple b's at the end of the world, the problem lies much more so in the energy space. when you have other big companies you have seen before, there are a few prudent bets in energy management. many more of the companies downgraded from high-yield, that will be the eye of the storm. heady feel this affects your world? what happens? francis: what you want to do is

invest in businesses with a strength the balance sheet to take advantage of a dislocation, any that takes place. good businesses continue to grow because of their strength the balance sheet. the competitors might have too much leverage, they might have to sell the part -- sell a part of it. they might have to use this environment in that way during what is perceived to be a difficult time. that is what we are doing. the funny part about all of what's going on in my head today is that three weeks ago, a month ago, things were expensive. we were worried about certain extremes in the market and the risks associated with that. they i'll most feel like good news is the risk in the market right now and if we get an inkling of good news out there, the market has the opportunity to move much higher. alix: we do have a headline that the ecb's leading banks run lower capital ratios due to the

coronavirus. megan green, you are still with us as well. what do you make of that headline? completethink it makes sense. we were expecting tweaks. we were looking at the possibility of countercyclical buffers. it doesn't necessarily mean that banks are going to want to lend to smes that have loans that they are not going to repay, so i still think there is a risk there, but the european banks broadly are less well-capitalized than u.s. banks , so it does raise a some risks if we get through this that actually we are creating or laying the foundation for the next downturn if we go ahead and allow banks to deplete their capital buffers. but in this instance i think it makes total sense. alix: carnival princess cruises

are positive operations for 60 days and they plan to be back in operation starting may 11. the stock was down and is now halted in free market. so companies are really retrenching as the virus takes hold in the global travel ban from the europe to the u.s. on friday. we are seeing central bank coming in again. the headline was that they were going to let them run capital ratios lower because of the virus. pivoting back here to energy companies in the u.s., watch me do it, bobby, if we wind up getting the support that investors seem to want from the government in terms of fiscal, does that keep some of these zombie companies alive in the bobby: it's hard to predict but that is what has happened before. the expectation is that this time it's different.

when we had the commodity price drop into 2015, fundamentally global demand was still fine. what we had within a year was equity and high-yield markets opening back up to these companies. they rushed back in, recapitalized balance sheets and charged forward. that seems highly unlikely to happen this time, both in the equity and debt markets. so, the overall tone for the sector is quite different. access to capital is much more highly constrained. so, we feel like the likelihood that large-scale consolidation likely, so we expect the next year to be active in that regard. mike, what do you think? mike: giving away from energy

into other topics, watch me. [laughter] there, iith the points think it is going to be much more challenging for the energy companies to deal with the confluence of events in terms of lower oil prices and i think that is an area that sticks with us for a while. think that other companies in the broader economy were going to move out of this environment and i think it is going to take time, but at one point, one thing that hasn't been discussed enough is this whole kind of central-bank movement to zero on a global basis is going to exacerbate the global demand for yields. as everybody gets priced out of all the good stuff, the high-quality stuff, the governments that are investment-grade in europe because central banks can buy them all, there is going to be a massive global demand for yield that is going to accelerate. i think that long-term will bode

well for the credit markets, for the equity markets in particular and for the high dividend paying stocks in europe and the u.s. unfortunately we have to leave it there. mike and megan will be sticking with me as the ecb decision gets ready. we already knew that they would let banks run a lower capital ratios due to coronavirus. we had the tenure erasing gains briefly before the decision .roke dollars around the lows of the session, ecb is that main refi ,ate remaining unchanged negative half of 1%, marginal lending facilities at one quarter of 1%. they did however announce a new refinancing operation and they are looking at rates past or at lower levels with an inflation goal that is near, not a big surprise there. they did announce a further

road, i'm trying to find the official information for measures to provide immediately to liquidity support. you had the two-year bond yield where the ecb came out. boosting qe and liquidity tools, they kept interest rates on hold with a temporary envelope of 120 billion euros and asset purchases, boosting liquidity and qe interest rates on hold to go nowhere. really interesting stuff coming out from the ecb and they say that their liquidity measures are a backstop and that the additional buying in the market will take place at the end of the year. you are looking at euro-dollar around the lows of the session there. i want to get a quick check on what's happening over in the bond markets. over there you are seeing a little bit of selling, but not a ton of movement there.

aboutre also talking additional buying and qe focusing on the private sector buying. really interesting. they will have the rate that is -50l to the deposit rate, basis points. lots to digest year. you can see nothing on rates, but they have expanded the qe program to include the private sector by an. they are also announcing a new tltro program. the rate is still going to remain at about -50 basis points. joining me now is stephanie flanders, bloomberg economics senior executive manager. ofll with me is megan greene the harvard kennedy school. stephanie, war -- walk me through the initial reaction to the news we are getting. stephanie: it's interesting that they made it strategic decision not to cut the key policy rates.

may potentially don't think that that is going to be something that makes a difference for what should be a short-term hit to the euro zone economy. they focused on the measures that certainly a lot of people have been expecting. a new lending program for banks, which would i think incentivize them to increase lending and support for smaller and medium size businesses. across the world those are the businesses we are the most concerned about going out of business unnecessarily because of this sudden disruption from the virus. so, that will certainly be something in line with expectations and there was an expectation that they might do a small change in rates. i guess we will need to know abouthe press conference whether that was, remember, there was a big disagreement on the council last time that they cut rates in september.

the last decision that mario draghi took was christine lagarde, was she prevented from doing that because of the agreement from the council? or were they not going to get much bang for their buck on that , focusing on the others are just the other measures? i'm sure they have a good way of finding out what happened on the actual meeting later today. alix: they are coming in at 120 billion euros in qe, but megan, what's your reaction? megan: i think you have papered over the biggest part of the announcement, which is the rate , thoseey are offering could be the deposit facilities with the introduction of dual rates.

the fact that they didn't cut most of the rates, it wouldn't have helped anyhow. demand-side shock is the most important development. can you walk us through the importance of what it actually does? stephanie: the ecb's offering to allow banks to borrow from it and lower the deposit rate. basically ecb will be paying banks to borrow from it, and they have to go on in this case to lend to the real economy at the race they are choosing, which could also be negative so that they can pay borrowers to borrow from banks. the generates demand for loans. banks are benefiting from a carry trade at that point.

subsidized, they will need to see the bridge this quarter into the coronavirus shop. this is the result you want to see. more powerful would be if the ecb hike to the deposit rate. savers are being punished for such low negative deposit rates. know, it's benefiting borrowers transactionally but they can go ahead and benefit savers because they have divorced the deposit rate and they don't have to be the same anymore, which was initially the case. if you can provide a stimulus to both, that's an unambiguous stimulus across the economy and it is more powerful than what other central banks have, since most can just hike or lower a rate and they have to make a decision about whether they will provide a stimulus to borrowers or savers and the ecb could do both, which could be monetary policy rocket fuel. mike, your reaction?

mike: the headline will be that the ecb doesn't ease, but i think that's the wrong headline. i think that they are very, very tactical in this release in terms of what they attempted to implement in terms of really affecting the parts of the economy that can make a difference, getting loans to people without harming savers. that's a big benefit. the ecb, they have done a little to increase the size of the .ltro, increasing qe there is more room to go. my expectation when speaking about this is that this is an initial step and there is likely to be more to do but the fact that they are focusing on lending and purchasing assets is a step in the right direction. alix: the bond market in particular, we are seeing huge moves in the u.s. and over in

europe italian yields are off by 32 basis points. the yield is down by three basis points. movesnd in italy, huge with 56 basis points now on the u.s. tenure. inphanie, does that put this your move, fed? now what? one of the things that we talked about in this crisis was that this is the nitty-gritty of the micro measures that people are going to have to judge the effectiveness of. we actually know that the fed ,oved larger in headline terms but didn't necessarily get the market reaction they were looking for. it may be a reflection of where we are with monetary policy because the traditional tools in these to europe, but

u.s. as well, central banks eventually ended up with more tools for being calibrated in their response and if you think that the immediate problem is short-term liquidity of banks and their ability to help the liquidity of small and medium-sized businesses, they had a ready tool that they didn't have a few years ago to address that in a targeted way. i think that this is probably one of the advantages of having been in this difficult area going into negative rates, where they have a wider sweet of things to do and maybe the fed could learn a few things. alix: megan? megan: i think at the hands of ,he fed are more tied unfortunately, and it's not clear these are legal in the u.s., but i do think it's great that other central banks are finally embracing it. at the end of the day the game that they are playing though,

what you pointed out, keeping these companies live, keeping demand forward from the future. it's not clear how much demand we can continue to pull. as long as they are the ones that have to act, that has to be there game, but it can only be so effective. mike? mike: one of the biggest differences between efficacy and is fed efficacy in the u.s. that the capital markets are not as deep and the banking system is not as healthy in europe. there is more of a need for the ecb to step in and play a significant lender role. in the u.s. we have much more robust capital markets and in the event that you can change or sentiment within the capital markets, that could be the lender of last resort for the economy or the central bank. alix: i really appreciate your time today, guys.

great to see you. recap what happened they basically offered operations -- offered operational relief to banks, saying that they are doing a new tree and the rate is 25 basis points. it's still a -50 basis points. businesses, you still see the equity market rolling over at 8% in europe. that's it for me here, mohamed el-erian is up next on "the opened your account this is bloomberg. ♪ awesome internet.

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coming up, stocks plunging, equity futures hitting down. with the president's address failing to inspire confidence in the ecb program providing relief to banks. yourmorning, here is thursday morning price action. equity futures down. yields comemarket, down 22 basis points. off the back of the ecb decision, the euro weaker. if you want to read on this equity market, check out the spider etf. down by four .9% on the s&p 500. that's the one to watch as equity futures test limits out there in early trading. joining us, bloombergs michael mckee on the ecb rate decision. in taylor riggs on a volatile week we've had and it isn't over yet. mike, good morning. >>