>> from new york city, i'm jonathan ferro, a special hour of bloomberg surveillance starts right now. coming up, the end of the bull market. the s&p 500 plunging. the ecb dropping. the federal reserve stepping back in as the vision and washington, d.c. puts the brake on its fiscal response. i'm jonathan ferro joined by bloomberg lisa abramowicz where we begin with the big issue, monetary policy. tate -- >> the ecb will not be able to

offset those near-term disruptions. >> does not going to be able to go on a cruise. >> this is a potential supply and demand shock. >> the supply shock, now and oil price shock. >> it is difficult for monetary policy alone to reassure markets. >> monetary policy has to go to zero. >> monetary policy is at its limit. >> it is not sufficient. . >> it is wasting valuable ammunition. >> just cutting into it is ineffective. >> we have much further to go for it to be truly effective. >> you need massive, not kind of, massive monetary and fiscal stimulus. >> the monetary response has been there. focus needs to shift onto a fisc -- onto fiscal stimulus. jonathan: the key question, what will stop the bleeding? city,g us in new york michael and alexia of invesco. it got real and it got real quickly. tom: extraordinarily day --

expert and airy day. i disagree to the parallels of 1987. the price changes are there but this is a medical event. we saw the ncaa giveaway on madness. you have all the other news around including mr. macron becoming action -- active in france. with that is the market. what we are doing is some -- have some great guests across economics, finance and investments. along with us, we will get to that. michael, i'm thrilled you are here. i have seen something today i have never seen before or studied in history, which is a six standard deviation move in dollar over the last four or five days. we have gone from dollar weakness widely predicted by people, to the mother of all dollars snap backs to strength. if that is the deepest thing in the system, the deepest thing in the ocean, why did we see dollars snap back today? what does it indicate about the crisis? michael: there is a lot of things putting downward pressure on the dollar, particularly the

rate differential. the fed was the one central bank that had the room to cut. and they did. that helped confirm the move. look at the euro, up to 112. now we are giving some of that back. i have been arguing since the surprise rate cut that making -- the fed does not have a dollar mandate. it is a huge tightening or loosening lever, not just domestically, but particularly in asia. where the last thing that those economies need is a strong dollar. tom: it is the last thing dollar -- last thing donald trump needs as well. will he reach out with 100 basis point call today? publishing literally as we speak. will we see the demand further for 100 basis points? michael: if there are big rate cuts, it is not about my mortgage getting refinanced. it is about the dollar. the mortgage refinancing, providing relief, the cost of

capital going to lower levels on the consumer, the corporate level, sure. that is helpful. really it is about the dollar. if we see emerging currencies seize up. tom: these are litmus papers within the greater pain everybody is feeling. jonathan: that has been the story, big trades really unwinding and unwinding really quickly. lisa: that's where i wanted to go. this market, hard to put a larger geopolitical story on it. it felt like a mass unwind of a lot of different funds. i would love to get your perspective. i point to gold. prices plunging since 2013. 30 year treasury yields rising after the new york fed pump -- it offered up stimulus that could amount to trillions of dollars. put this into perspective for us. >> you are really touching on the interesting points. this has been a crazy few weeks. today yoully, only

started seeing things breaking down. what i mean by that is nonintuitive ways. patterns you -- that you start wondering, i didn't see that coming. the dollar sold off in the last few days. the euro, the yen, was predictable. getting unwound. today, the dollar strength is a sign of dollars shortage. credit functioning markets, and i think the intervention of the fed on the liquidity side is aimed at primarily addressing that. andding an unnecessary unwarranted tightening in financial conditions. it does not have any economic reasoning besides a function of market dislocation. easter to see some interventions. it might stabilize if anything, a partial still -- silver lining, people have been doing this, these equity moves use to equate too much larger em fx

selloffs. somehow, in proportion, even theared to 2008, it means positioning, because em has been an asset class for the decade, the positioning might be less extreme. jonathan: really searching for the silver lining on a day like today. to pick up on lisa's work and about,essio was talking tell us what you can, not what you want, another day of that. it is never pretty. michael: you saw the treasury market, duration, that is not a safe haven anymore. have beenmart traders getting very bullish treasuries on the cuts and everything else. they were taking profits. cash is the only true safe haven. gold was off because of market dysfunction. and part of the dynamic. everyone in the world is trying to go to cash. they are not trying to figure out a clever option trade. lisa: trying to get to cash and

meanwhile, to your point about the federal reserve, you were talking about how deutsche bank is predicting a 100 basis point cut. you know who else is protecting that? everybody else on the market. if you look at the implied fed funds rate it is 0.15% at this point. we are talking about in the 100 basis point rate cut going to zero, going to the lower bound we have seen in recent history. jonathan: the story in the market is pricing the rate cuts but also, they will not work. that seems to the story in the yield curve. we think the fed is going to cut. we also think it will not work. alessio: we are in this horrible situation where the only worst thing then cutting rates is not cutting rates. we all agree that it will not do much. thein my opinion, it is only message that all policymakers can send to really delegate the next steps to government authorities and fiscal authorities. michael: there are three

policies. there's monetary policy, fiscal policy.and health the reality is we are not fighting our own creation of subprime mortgages into thousand eight. we are fighting a virus. that means health care policy has to be aggressive. aggressive health care policy means bad economic conditions. what happens, arguably in d.c., is they are not squaring the circle. that is really -- i have been arguing the best policy, what we really need from how you stop the bleeding and the markets point of view, is an aggressive health care policy. you take the pain nationally jonathan: reinforcing that. the fed -- if the fed does anymore, they are fated, reinforcing the argument that monetary policy is not the cure. the fed did through more added. look at an intraday chart. you will see this pump around midday. it was when the fed took further action to stabilize markets.

the treasury securities operations schedule includes a change in the maturity competition of purchases to support functioning in the market, u.s. treasury securities. michael mckee joining us now for more. it smells like qe. is it qe? mike: it is sort of qe. it is important to realize that we had two central banks are doing two different things. the ecb trying to prop up its economy. the fed trying to prop up the market.rkings of the you mentioned a minute ago selling what you can. what if you can't sell? that was the gist of the problem. let me show you on this chart, when stocks go down, we should see bonds rise. look at the 30 year yield. it went the other way yesterday. some of thees and longer maturities were not finding buyers. we have got a statement from the fed today that you mentioned. they are going to put $60 billion that they were spending on treasury bills, they will put it into the whole curve, buying across the curve, and then they

are conducting massive repo operations. $1.5 trillion today. and they will continue with $1 trillion in the coming weeks and continue with their overnight repo operations. you can see the result of that has been this liquidity. taylor was mentioning this earlier, the overnight repo rate has just collapsed. the fed coming you mentioned qe. here is what we are looking at. and why it is not really qe. is very small. this is the amount, the green, is the amount of key bills they have been buying. that is what they will be replacing with across the curb. it is only going to go until april. it really is not going to add much to the overall balance sheet and it is not really going to push down on interest rates, but it is going to spread out the fed's buying and take pressure off the markets, especially because the fed tends to buy off the run securities. the ecb trying to help its economy.

they didn't do so well. there was no rate cut. they are doing a temporary bank lending program, dual rate delta row. that could be really important down the road. because banks can borrow at a cheaper rate than they can lend. maybe that will force them to push money out. they will do an additional $120 billion in their own qe. only short-term. there will be capital relief for banks. a lot of criticism, and we talk about this, earlier today of christine lagarde for her comments in the press conference. not only was there no rate cut the markets wanted, but she said we are not here to narrow your spreads. that did not go over well. she tried to walk that back a little bit. this is not a liquidity flood from the ecb in the way the fed did it. the question is, will it have an effect on the markets? i have one more chart to show you. loansat is the demand for in the euro zone has been falling for some time. even if you lower interest rates, even if you put more

money into the banking system, the banks have to go get it. then they have to find people who want it. if this line doesn't turn around, the ecb will have to do something else. two different banks doing two different things. the fed more successful so far. jonathan: great to catch up with you. we will touch on the ecb decision later. let's turn to deutsche bank research. tom keene sent this to me. it comes from someone who writes a following we have changed it looking for an immediate 100 basis point fed cut. one wonders if the fed has to start talking about qe as well. tom: moments ago publishing on this. the keyword is immediate. i really want to convey the urgency to get there fast, like tonight. jonathan: feels like a lifetime away. joining us on the phone, pre-out. walk me through all of this. you are one of the first bloomberg customers to find a message and soon as the terminal. your thoughts, please? >> sure. thanks for having me on.

i think we have been talking -- and i have been on your show before, we talk how this went from a supply shock to a demand shock. to the last couple of days, it felt like the market was breaking. the u.s. rates market, the most there, u.s.t out treasuries, it seemed market functioning had become an issue. that is why i think the market was screaming for policy help across the board. fiscal, we have not had anything. the president didn't give us anything specific. monetary, and think we are looking for the fed to cut rates to zero. they have not done it. on the market functioning front, they need it to come out. i was thrilled they did. at least on balance sheets, the fed is providing $60 billion a month. i think we can debate qe versus non-qe, the fed will probably say this was not qe. they are buying across the curve. their big distinction between what is not qe versus qe weather

was across the global bills. they are taking people off the balance sheets. and essentially, as we move to return off capital rather than return on capital, everyone flocks to the most liquid assets. it will end up holding onto the less liquid. at least now we have an outlet at the fed. i think it was a big deal. does it solve the virus? no. at least it can solve the market functioning. tom: with your mathematics, you understand magnitude and scale. the basic theme icy, and this is to all of our viewers and listeners who are saying wait a minute, market turmoil should do something, it sounds like fdr in 1932. here's the reality. there's a little bit of were neat -- of worry that their tour de force did not do enough along with the chancellor. michael for row of jp morgan moments ago said that washington is way behind and they need to look at half $1 trillion of fiscal stimulus immediately. are we talking about the

solution being a much greater magnitude of assistance? priya: i think so, yes. i think if you listen to talk from washington, it is targeted. i think we have gone way beyond targeted relief. targeted relief would make sense if this was just an issue with the airlines or cruise companies. this is spreading. when you look at financial condition tightening, it affects everyone. we don't see it in the data yet, but i think as you start seeing that, it will move up. consumer confidence. if we are in complete lockdown mode because we are trying to control the spread of the virus, this will spread out significantly more into the economy. i would love something like $500 billion. you do something broader, large to pump aggregate demand into the system. that can help. tom: with a moving target that we have, they talk about economic contraction for the next six months. i don't think anybody including

the senate majority leader understand that in washington. lisa: there's a question about the economy versus the markets. i would love for you to weigh in. on what we are pricing into markets at this point. is that what we are hearing from priya and others that we will see a prolonged contraction? alessio: what we are seeing is necessary but not sufficient conditions to stop any of this. what we learned from china is not quarantines and factory shutdowns work. the new infection rate in china was 12, over the last week, in the population north of one billion. we need to follow that lead. instead of procrastinating, if we want to solve the health part of it, the virus part of it, the first necessary condition is to shut down and quarantine very aggressively so that you can start counting. is this a q1 contraction, q2 contraction, or something we will deal with for a longer time? jonathan: the longer you wait, the more you will have to do.

i want to bring a headline from the new york city mayor. the aim is to keep a trading going with no issues. new york city's mayor is to keep the stock exchange trading going with no issues. i want to turn to the ecb. i thought it was this -- tom: extraordinary. jonathan: this one stunning line from christine lagarde. listen to what she had to say. said will be there, as i earlier on, using the flexibility. but we are not here to close spreads. this is not the function of the mission of the ecb. there are other tools for that. and there are other actors to actually deal with those issues. jonathan: i have been grappling with that one line through the rest of the session and trying to work out whether that was one of the most reckless moments from a central bank ever, or the bravest. i guess time will tell. what is your take? priya: the central bank ports that every credit investor, every investor looks for.

she is telling you it is not there. the threshold is not here. you should price that put appropriately. i think we have been so used to central banks bailing out every risk asset at the first sign of trouble, getting easing, and now you have one central bank -- any way you think about the effectiveness of monetary policy, but you are hearing the willingness being a little questioned, that nobody can take a loss. i think it will exacerbate this flight to quality because the central bank is not as strong as people thought. tom: i have to go to other fossils on the desk. that would be to my right. take a wide shot of the two fossils. lisa:lisa: are you kidding? come on. tom: i take real issue, young one, with a banner that says worst drop since 1987. this has nothing to do with 1987. it -- this is the heart of the matter, the inability to take

losses. we have slid along and slid along with theories that were not in the textbooks you had or i had or john had or whatever. we slid along, trying not to take losses. is this a time where we take losses? michael: i would rather take a 5% loss than a 20% loss. personally, my own view on the market is that we are heading lower from where we close today. that does not mean a tragedy. -- i think on the point of one of the fascinating things is back in 2008, we had lehman, we had systemic issues, it started downtown and wall street and emanated throughout the world and the economy. that is not one -- what we are talking about now. over since then, we have had a huge change in market structure. a huge financial is asian of the s&p 500. a huge cache volume in the s&p have been going down and down. options, futures have been going up and up.

everyone is trying to find their 1987, a little bit of 1987, a little bit of 1998, with the ruble client -- ruble crisis. little bit of -- even december 2018. you are the true fossil. jonathan: i want to jump back in. was statement today borderline tone deaf. . from the ecb president. eight years of work from president mario draghi can be undone with one line. we can all sit here and say it was a luck of genius. but i thought this was not the moment to have a high risk strategy like that from a central banker in a moment like this. alessio: i want to believe -- i do believe that she is a great communicator. and that this was more of a misstep of a couple of wrongly chosen words. when the bottom line of the guarantees we cannot

-- but we are here to support and do whatever it takes. i want to believe that this is not a question about willingness. that this was just a badly chosen sentence. lisa: i personally interpreted this as the death of a central bank put. we saw it from both ecb and what they did, and we saw from the federal reserve. jonathan: i'm not disagreeing. i think the height of the financial crisis in europe, one of the most delicate moments in the history of markets for the year zone, someone stepped in and did something absolutely magnificent without buying a single bond. president lagarde has been unwilling to back that up in the months. that is a big problem we can sit here and say it is not a problem, but if the political situation gets worse, and you don't think the ecb will backstop italian debt, they must be a problem. alessio: if there was some

deliberate intention, why did she do it? was it to really force the eu commission and fiscal authorities at the european pact,' turnap the loose and say yo guys connect much faster and address this? there is a risk. we know draghi did a tremendous work. but what the risk of that is that he -- because of his success, he may have postponed the required physical adjustments and coordination within europe for the last eight years. jonathan: we may not have a credit problem in europe, but in corporate credit, we have a bigger problem at the moment in the united states and elsewhere. credit spreads were so tight to start the year. and they started to blow a big-time. taylor riggs, this is the concern this week. taylor: 100%. . we got the news a couple hours ago. getting the biggest outflows they have had in record. $7 billion, high yield getting big. everyone is piling into

treasuries and i guess cash would be the other flipside. let's look at high-yield energy spreads. blowing out to 15%. that is 1500 basis points over treasuries. we will get you the high yield spread one we can. come inside and look at my terminal, the entire investment-grade debt, bbb makes up 50% of that. if a fallen angel scenario occurs, that could be problematic if there are four stellar's and the mutual fund that cannot hold the high-yield debt. also a problem given bbb spreads now are at 229 basis points. spreadeim said watch the to blowout to 400 basis points. tom: i'm so glad you mentioned mr. minor. you look back at hindsight, i know mike wilson, who looks like a genius through this crisis, and it is extraordinary how scott minard has been out front of the shocks of the system. i want to go to invesco and all of your abilities, particularly

with oppenheimer acquisition and international investment. chairman powell, a central itker to the world, he sees as well. what is brazil with the five rio? what is turkey standing out near the record? what do they need from chairman powell tonight or even tomorrow morning? certainly a very strong attempt at stabilizing financial conditions. as i said, i think this is necessary but not sufficient conditions. i do think on the positive side, that we, compared to 2008 where we were in the opposite corner, flows to emerging markets have been lighter. positioning has not extended. it has been the asset class out of favor for the last 10 years. the last decade was a decade of dollar-based assets. when we take a long-term investment purpose -- perspective, when you take a 10 come up,, where we

with all different methodologies, is in emerging markets. tom: we are going to go to michael purves. the mother of all trades has been by america, by big cap, and some of the collateral damage is in the china stocks. are they worn out? michael: it's funny, the ratio of the x ok tef to the buy had made a fresh eye today. tom: what does that signal? michael: over the last couple of years, if you made money in the equity market, it was probably in big cap tech. tech has gotten hammered but not as hammered as small caps, which were horrible performers. i still think what we are dealing with within the equity complex, is sort of a cascading of new sellers. i think some of the long-term allocators are just getting to their committees. jonathan: this is a really key insight -- tom: this is a really key insight to push the stop button.

we are maybe not there yet. jonathan: the biggest one-day move on the s&p, going all the way back to 1987. we close lower by 9.51%. michael purves and alessio de longis will both be sticking with us. price action at the close up next on the program. treasury yields all over the place. at the end of the day, yields higher for all of the wrong reasons which we will discuss in a moment. my focus in the next part of the program has got to be on the financials. we will catch up with mike wilson of morgan stanley. tom: it is going to be wonderful to see mike wilson and talk to him about his great call. is caution on the market has been just extraordinary. jonathan: from new york city along signed tom keene and lisa abramowicz, for our audience worldwide, this is bloomberg tv. ♪

what really matters is the risk to the economy. we saw a risk to the outlook for the economy and chose to act. >> we decided on a conference of package of monetary policy measures. >> this is a big package. >> it is the story of the last week, central banks stepping up to act and markets totally failing even as they cut rates. the thursday session is down. the yields higher on the longhand. banks are down 40% on the s&p

500. that is where the pain is. down 11% on the s&p 500. also down about 26% over the past four days. the idea that if we head toward the session, some of the things we have seen in past recessions and past crises, this may weigh on the banks. you see that reflected in a lot of the names on the board. they are all moving significantly lower this week. we should point out that despite some of the concerns, we are .eeing the financial stresses you have the hiltons, the boeing, these big companies drawing down credit lines.

carlisleblackstone, drawing down credit lines. that is why it might make some investors nervous. most of that was concentrated among for banks. , younes i just mentioned can see just a little bit more of this drawdown. that puts stresses on the banks. some analysts are saying don't get too concerned. they say this could be the bridge that the economy needs and that the banks have a cushion, much more of a cushion, a wider cushion then we saw back during the financial crisis. this is what you're up against here. you take a look at the s&p 500 index. you're stripping out what people think they are worth.

we are seeing that trading below book value right now. the members,to you're talking about 14 of the 18 members of this index trading below book value. the concern is if that cushion turns out not to be ample enough, if we start to see an increase in business debt default, that could put stresses on this. this is where a lot of people are thinking right now. about theay enough phrase dash or cash. it is a must read article for global wall street. i will link that on twitter tonight if i find time. terrific reporting for bloomberg news. you think of the equity markets.

this is michael wilson. he is morgan stanley's chief equity strategist. 29,000 on the dow is too good to be true. fantastic. i will tell you where the banks are in focus. >> to be very clear, people are comparing this to 2008 but they are not saying this is like 2008 where there is a solvency issue. capital markets shutting down. much of the pain to come has been priced out? that is the main thing to consider here. let's take them in their hole. are health effects there. that will have a big impact on the economy.

we also had a big punch on the oil price war. that kind of got overlooked a bit. caused some issues in the funding markets. that is with the fed addressed today with step one of what will probably be multiple steps over the next couple of weeks. our view is that the markets have been moving towards recession for the past two years. something we have been talking about for a while. never got this going. we felt that the fourth quarter was a liquidities piece. events in predict any the last week. now we think a recession is the base case. it will be a mild one. we hope this won't turn to financial crisis.

of the damage is done. for some stocks it is fully done. some stocks have been correcting for quite a while. you don't want to draw a line in the sand. you have to start somewhere. a place where you have to start. >> this is really important. i want you to our -- elaborate and unpacked that. -- elaborate and unpacked that. -- elaborate and unpack that. overople who are investing the next 6-12 months, this is what we have been waiting for. this is a cyclical bear market that began two years ago. there are many non-confirmations . a lot of stocks did not.

this is the finishing move to that. it is ending with a recession. that has always been our base case. is the chart from yale university. it is hard to see over on the upper right corner. we reverted to the mean. this in the carter malaise. we did that in 2008. we are back to the mean on the long-term chart. we will stay at the mean. >> that is the right question. what separates us from that is whether you think we are still in a secular bull market or going into a new secular bear market. that -- been that a secular bull

market. we have been in this for 11 years. market.a cyclical bear >> this is brilliant. i don't have to get out on triple leverage is. -- leverages. >> that was michael. what you make of that? chart, weoking at a are in the middle. after today, we are in the , the riska five-year aversion, the delayed selling, i would think that tech and the s&p 500 have another 10% down easily. i walked into this year looking at a dull year that was going to be good for equities.

i was at 3654 the year. in january, i was aggressively shorting tech. the valuation overextension coming into this was getting ridiculous. particularly in the tech sector. that is where all the money had been made. we could easily go another 10% lower in the near term. there are other factors coming in here. what are the systemic issues to push? we are talking about two quarters or six quarters. >> if we do agree that we are trading, look at credit markets. credit markets are always the first place that signals you're getting out of it. not equities. the right question is to look at credit across all the different ratings. thisr two, we mentioned

seems to be like a light recession. i think the jury on that is still out. cause of this recession, a virus spreading. we have done nothing to contain it outside of china. we don't know when the clock starts ticking for us to say the contraction is coming to an end. spreads look at credit across our ratings, high yield, creditnow in the 97-2001 crisis. credit is a good place to look. there is no underlying structural trend. credit is mean reverting. the question is if we can get to those dislocations like 2008 or not. in palm beach in

florida, they said that everyone is flat on their back. people are gaining a massive consumer slowdown. that is a fundamental issue. >> this is the week that credit took over. the credit market fund in the hopes and dreams of the equity investor for the last 10 years. we have to thing about protecting credit rating. it is not about the hopes and dreams of equity investors. the credit market is taking over. it is a big inflection point for me. when we used to see spread widening, people would come back in,400 basis points back 450, i will have that, 500, i will have that. the bond market, the spread widening, right now, we are this close to buying. >> there are number of questions i have after today. one of them is the market

functioning. hearing about a lot of lists for sales as people try to liquidate their positions. i am trying to understand where the risks -- risk is. etf,u look at the biggest we saw the biggest one-day drop since 2008. chris is joining us from charlotte. we are talking about credit and the plunges we saw today. where is the biggest risk going forward? investment grade? government yield? high debt? >> you still have some risk in the high-yield markets. skewed because of what you're seeing in the energy sector. i think high-yield is where the risk is. you saw a lot of investors taking a look at those triple bees and saying what if those get downgraded to double be? that is what we are looking at.

i think today is the start of that repricing. reflects all of those discontinuities you were mentioning. >> i am trying to discern what happened with the action in today's market. were people expecting a mass of default or was today fire sales and mark was at the technical unwind of a lot of trade that is coming out? >> at this point, i feel like people are moving ahead of what may happen. the demand shock has not happened yet. everyone is racing ahead to try to figure out how big the demand shock will be. for now, i would say it is more fire sales, people shooting first and asking questions later. it is hard to know what the defaults will be. we don't know how long this demand shock will last and how far and wide the virus will

permeate our society. clearly, a love these events being canceled, whether it is the final four tournament, the nba season being canceled, it is reaching a level of consciousness and society where we are seeing some of the things that the bond market was worrying about six weeks ago. the stock markets are worrying about it over the last week or two. guest on that said the same thing repeatedly. the economic fear is taking over. the interesting thing is the economic fear in the united states took over before all this started. in the united states, the economic fear has really started to kick in before this got going. it is a medical event. the president did not address that last night. you can see that in the market right from the beginning. investment is this hugely broad

umbrella. what is the point of research given this to of economic contractions and the nature of how far out this will go? >> we have multiple venues. there is no such thing as a central isotope. we are a collection of independent boutique investment teams. from our perspective, the investment solutions, for sticking to a disciplined investment process -- >> you can do that? >> absolutely we can do it. i would say we have to do it. that discipline, staying calm. fears and the breaking up the established processes, that is a recipe for

bad investment decisions. servicet to do a public message right now. there was november. by december and january, it was done. on 9/11, should we leave new york? all of that. , no, we camele back from 9/11 in short order. there is a point where you heal off of a virus. >> it is a public health crisis. as we said multiple times around this table over the last few weeks, what will dictate whether it becomes a temporary economic shock or something worse will be good policy. if you can build a bridge into the back half of next year with good policy, make sure that the of these funding some companies, these areas of distress. we don't have that cyclical

reaction that really starts to feed on itself. that is why we need a way to go.ical what is concerning is that lack of urgency to provide that countercyclical circuit breaker. this is not about beating up the administration. this is about a lot of europe as well and policymakers seeing the risk in front of them and responding. >> absolutely. take about what we heard yesterday. i think it was yesterday. days are now looking like a turn it is. fiscal stimulus will be required when the economic impact is evident. i say wrong. we know the economic impact will be evident to quarters from now. almost every, financial economic shock is temporary by definition. it is amazing how much emphasis

you on predicting recessions which are by definition temporary. we just met some of these shocks as temporary. let's be clear. all of these events are temporary unless you have structural policy mistakes that 1997 japano a situation where you pay the price later. in washington, one of these was very clear, the action of the senate majority leader. i found it remarkable, the about-face. was he ordered by the white house to stop with the recess talk and get to work with speaker pelosi? >> that was a surprise. they said we are not going to go away next week. they said there is no change to the schedule.

suddenly, an abrupt decision to stay. senators had mostly left the building. the house is still negotiating with the white house. expect that to go on for several more hours. health aides say that they are hopeful there could be about tonight. that could spill over into the wee hours of tomorrow morning or later in the day on friday. >> we saw brian moynihan sitting next to the president yesterday. remarkable, the distance from washington to wall street. describe that distance tonight given the market action we have seen. >> you have not seen things pick up. it has been the usual washington playbook where they are hopeful of a deal. there are broad strokes of a deal, talks pick up and things take twoare times -- or three times longer than you thought they will. that is still a possibility. laura: maybe we don't see action

until monday. that would be helpful incoming investor worries. there are big things they are worried about. paid sick leave. that is a sticking point. they can't get some of these lower hanging things done. stimulus,e larger that is an even bigger hurdle to get through. >> there is a question of leadership. president trump in his speech was widely panned. it had a number of errors. europe was taken off guard with it. there is a question of who is driving the boat. i am wondering if there is cohesion among the democrats and the republicans in the house and the senate? coming up with some sort of fiscal stimulus they can present to president trump? been a house led effort, specifically, nancy pelosi has been at the wheel. steven mnuchin has been the thetiating partner for

executive branch. they are trying to keep it very professional, business and not emotionalof the more surprised swings you can see with donald trump. the democrats are trying to show they are the adults in the room, they are in charge. >> we are seeing the research common -- come in. we are going to open tomorrow morning. we will be here with our coverage starting monday, tomorrow morning as well. they do granular gdp analysis. quarter 4, 2 .3%. the quarter we are in right now, 2.2%. we are going to fall off a cliff on economic growth. >> you're probably looking at a couple of zeros in q2 and q3.

where does that washout? 1% for the year? look at europe. we are talking about recessions in germany and italy, recessions in japan. we are talking about some real pain in china. we are talking about a recession and south korea. at thes looking inflation expectations. in germany, they are the lowest on record. falling off a cliff. >> this is your wheelhouse right now. we?below are you look at the whole fabric of the global economy. close to looking at zero growth in china. but i'm more concerned about is q2. -- what i am more concerned about is q2.

that is when you start factoring in europe and the u.s.. let's learn what is happening in a developed country when we go through that kind of shutdown and quarantining. we could be talking about large negative growth rates. >> weigh in on what you saw in england. i hear reports that england did not do enough. they did a lot but did they get the magnitude right in the budget? >> that is an example of coordination in the united kingdom. not often positive but on this occasion, i think on the monetary and fiscal policy side, that is what is being replicated worldwide. >> absolutely and kudos to both countries doing immediate reactions and prompt responses. they were able to do ample liquidity provisions but these numbers are starting to look

pretty shy to me if we start talking about one or two quarters of economic activity gone. >> i would like to finish with something that could really be important. an important conversation. over the last couple of days, i heard so many people talking about debt credit lines and talking about the stress that can cause a financial system. for anyone out there looking at these price moves, i have not heard from a single source that thinks we are the problem in a financial system for the banks. i think that is something we should be talking about every day to ensure that people are not worried about the kinds of things that don't matter. >> and talking about orderly disorder. i did not sense disorderly. we are going to blow up in etf's.

>> there is a wholesale issue here. >> the central banks specifically, i think there are things we need to address there. panic, fear, 2008. >> these banks and regulators have had 10 years of rehearsal for this exact event. radically, they are different to the shape they were in in 2007. it is much more about market structure, how the training in the markets is happening than it is about one bank being able to lend to another when we know the fed is watching that very closely. >> i don't know that it is bad actors, i think when we step back, people are not looking at risk parity signs. people are looking at private investment managers that are facing liquidations and margin calls.

they are not looking at the big banks. i think that is the distinction to draw. the issue is the system does not break down in the same way when that is not in the big financial institutions. >> thank you to both of you. what a week. i understand it is still march. it feels like the end of the year. so much has happened. >> i will bring it back to where we were in the beginning of the show. six standard deviations of dollar strength. i not sure what that identifies for the asian open coming up. >> much more to discuss on bloomberg tv and bloomberg radio. to my guests.ks if you want to catch up, catch us on bloomberg radio every morning at 7:00 a.m. eastern time. from new york city, for our audience, worldwide, this was a special edition of bloomberg

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>> welcome to daybreak australia. i am heidi stress more -- heidi strathmore in sydney. >> we are counting down to asia's major market opens. >> here are the top stories we are covering in the next hour. wall street suffers it's worth -- worst recession since black friday. meltdown as the stimulus dap