the euro area economy could face contraction of about 10%, with services and manufacturing in freefall. morgan stanley says the u.s. will suffer a 38 percent contraction in the second quarter as the world awaits march's job numbers. opec-plus trying to meet on monday, open to all producers. prices extend their one-day rally. welcome to "bloomberg daybreak: americas" on this friday, april 3. i'm alix steel. happy friday. happy jobs day. s&p futures are lower following yesterday's move in the oil market. it is no surprise you're going to see some de-risking ahead of the jobs numbers, as well as the weekend, where anything can wind up happening. not a lot of bid in the bond market. the dollar much stronger in the g10 space. people rolling over due to

terrible composite pmi's from the region. oil continuing that record-breaking rally yesterday. some delegates a little bit more optimistic about getting deals done. now i want to update you on our top stories from our new york team. we want to begin with europe. thentioned the economies in slump of unprecedented scale, pointing to a contraction of about 10%. bloomberg's michael mckee joins us with more. good morning, mike. michael: we are getting to the point where economic data are almost irrelevant to investors. yeah, it is terrible. we know that. we've traded it. that's why you are not seeing a huge reaction in equity markets in europe because it was largely expected. it is sort of exactly what you think would've happened. services pmi's and composite pmi's just falling off a cliff. the story in spain and italy there, but also france and germany.

those economies have basically shut down. economists try to put a number on what that means, and that is where you get that 10% contraction figure, but we have never had numbers this low, so there are no established correlations. everyone is just kind of guessing. it goes back to the idea that this is terrible, we know it. we traded on it. once the stay-at-home orders are lifted, you will see a snapback. we will get that v like we saw in the chinese data, but it will just mean things are better this month,han they are last and that won't necessarily mean a big start up rebound in the economy. the people's bank today lowering the reserve ratio for small banks, cutting the interest on excess reserves, which could augur further cuts ahead. i did have an investor say to me today in the u.s., this is the least important jobs report ever. or at least in his lifetime. he's probably not wrong. it is old news.

we will capture the depths of despair and destruction in the job market, and as is the case with the other data, it's not like we haven't traded it already. jobless claims numbers the past two weeks really give us a much better picture. they were so large that when you look at the figures for what is forecast today, the unemployment rate basically is kind of a sick joke at this point. we've already gotten over 10%, if you calculate the numbers. one data point, if we get that forecast 100,000 job loss today, that would be the first loss since september 2010. if you want to get nerdy in the data, look at the birth-death ratio. that usually falls off rapidly. will the labor department have changed at this month? that may affect the figures. they may be waiting for additional data. if there is anything this month's data is going to be useful for, maybe as a baseline. this is where we were. this is where we would like to

get back to someday. alix: exactly, someday. morgan stanley says they now see that day pushed to the end of 2021. thanks very much. i want to go to oil. seeing its biggest one-day rally on record following president trump's deal to cut oil supply. pres. trump: it should be an easy one. it may be 10 and it may be more than that. i was told it may be 10, as i told somebody before, it may be 10, and it may be more than that. maybe it's 15. be it goes up to 15. could be as high as 15. alix: opec+ will hold a virtual meeting monday to discuss the cut. annmarie hordern joins us with more. is it opec+, or is it opec+ plus? a little brazil, canada, the u.s.? annmarie: basically, they will

call for this urgent meeting opec+ andt it is others that are invited. the latest is that they want to global output cut. that includes opec+, plus other producers. the united states being one, especially if president trump is touting the steel on twitter, ,ut also look to norway, brazil mexico. yes,ther big question is, donald trump is also meeting with executives today from the oil industry. i don't think there's a single executive from the oil industry in the united states that won't say these prices have been hard on them, but what is the strategy going forward? they are not going to all agree that they want to cut production. that is something the u.s. has stayed away from. we had politicians last year nopec antitrust law. even if there was to be a cut of 10 million barrels a day, or as

president trump was saying, potentially as high as 15 million barrels a day, what does that do to demand? analysts say it is too little, too late. alix: 6000 shale drillers in the u.s. getting them all to agree would be something. thank you. one thing we are taking a look at for now is dependent fallout. american companies are expected to cut dividends at the fastest rate since the financial crisis. so far, 21 companies in the s&p are likely to reduce payouts in the second quarter. among them, consumer discretionary stocks are expected to eject the biggest hit. the reason why that is so important is that many look at things like the dividend yield on the s&p outpacing the 10 year , meaning the matter how you look at it, u.s. equities are still cheap relative to treasuries. if that yield starts to come down, what does that when deb doing to how you value equities,

especially when a lot of these companies are slashing their buyback program? this raises a lot more questions than it does answers. coming up, deal or no deal? we will break down more on what to expect from the opec+ virtual meeting monday, as well as the meeting at the white house with u.s. producers. willrgan's christyan malek join me next. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." another blow to boeing's troubled 737 max program. tilling -- firm came a leasing firm canceling an order for 75 of the jets. the 73 maxan a year,

has been grounded because of two fatal crashes. president trump's family business has asked deutsche bank about delaying loan payments. bloomberg has learned formal discussions are taking place. the trump organization the german lender about $340 million -- the trump organization owed the german lender about $340 million. opec+ has organized a meeting organize an try and output cut. it is open to all producers, not just opec and its allies. one delegate telling bloomberg a cut of 10 million barrels a day is realistic. that is your bloomberg business flash. alix: thanks so much. for more on oil, we are joined now by christyan malek, jp morgan head of the maa -- head of em ea oil and gas research.

christyan: i think the entire opec+ group underestimated the impact on demand, but let's be clear, the saudis are looking for market share. they are looking for capitulation across the cost curve. so whatever this deal is, it will fall short of the point where everyone can come back. we are still looking for entrenchment of volume and capex by u.s. shale in the majors. whatever this deal is, it will still ensure the base case market share plan is intact. alix: the saudis have been very strict in terms of we will not cut unless others are with us. does that others now extend to the u.s.? christyan: i think we may see some sort of u.s. concession, but the way we are thinking about that is two tracks between the u.s. and saudi. one track is strategic. it could potentially be removed

fdi's from the u.s., maybe other sort of agreements in place between the saudis in the u.s. the other truck is looking for restructuring of the industry and the majors. the reason i mention that is if you think about that first track being concessions, saudi may not request or push for u.s. to cut. they may push for something else in regard to those concessions. in the same question for russia. what does russia get? no doubt, the talk has been around sanctions, right? christyan: absolutely. with demand so week in russia, they've got oil that nobody wants. rosneft, they are looking to increase production, but that demand hasn't responded. we could see russia potentially

present up to one million barrels a day of reversal in production cuts, but then again, russia would have to agree with saudi, and saudi would have to do the lion's share of the cuts. i don't see how we get anywhere close to 10 million barrels, even if saudi and russia were to collaborate on this. we do see everybody else across , but wed provide cuts think it's very unlikely. alix: in your models, what kind of cuts are going to need to see , toot have wti go to $20 stabilize at $30? christyan: we would need at least 15 million barrels of cuts to the end of the year. if we see production cuts of six to 7 million barrels, which would be a saudi plus u.s. plus russia, that would see oil at around $30. we've lost between 30 and 50

million barrels of demand this year. there's no way that can be recouped in terms of production cuts at this point, which you could argue is a miscalculation of opec in the context of not agreeing to a deal. they didn't see how bad demand will be, and now it is too little, too late. base caseaudi's strategy still remains market share, even if they are in a sort of compromised deal in the interim. thing it could do is actually lower freight rates. you have saudi fighting for market share like you said. seesare using a lot of vlc -- a lot of vlcc's to transport crude. that is not going to ship to asia necessarily if freight rates climb too high. will we have a valve in the u.s. to export? isistyan: i think that

probably the positive corollary from this. you put a deal in place, even if it is a soft deal, and that does mean that freight rates come down. a also means you can find home for some of the storage. so there's a bit of relief or than the system. even in the process of trying to put a deal through, we have the risk that it falls apart or we see lack of compliance. this could be a one step forward, two steps back situation. not to mention, the clearing price for oil as we have seen for the next four to six weeks could see oil prices fall to as low as $10 to $15 as a function of that clearing price. i do think this is worse than the oil embargo of the 1970's. to bek what is trying defined by president trump, the reality is that the net-net be a lot worse in two to three months based on the clearing price of oil and the deal collapsing. consensusare out of

for the longer-term oil price, and that you think the destruction we are seeing in the oil market is going to lead to higher prices later because we are going to have a real supply fieldsaning that the oil now are not getting the capex they need, the maintenance to be able to get going, so we will see a supply gap. what does this do to that thesis now? christyan: someone this morning we looked at was looking at roughly $15 billion being cut. i would argue canceled, given it is unlikely to come back in the near future for this year. that's only four weeks since the opec deal. interpolate the u.s., we are talking one million barrels of production being deferred from 2020 to 2021. i don't think that production comes back because that is slightly -- because that capex

is likely redirected elsewhere. with that production now being deferred, we are pulling forward that peak into the second half of next year. so i do think there is a level where the oil price that is unsustainable. investors are asking about sustainability over the medium-term. what it does mean is that there's clear volumes being taken off the market, which you can then marry with where current production is for the oil market, and that generates this sort of line of sight that we just don't have enough oil to sustain production beyond the middle of next year onwards, which clearly creates a super which,so the thesis interestingly, looking at how european equities are trading, looks more and more like a positive decoupling to oil in the near-term, and a more rico into the forward curve because that is more relevant -- a more oupling to the forward

curve because that is more relevant. alix: what kind of global recovery do we need to see after this virus to make that thesis pan out? christyan: it's a great point. the thesis is predicated on recovery from 21. we may not go back to 95 to 100 million barrels. it is likely we are in the mid-90's in terms of demand. there will be some structural impairment demand. we are still not sure what is going to be permanent damage versus cyclical. having said that, given we have lost about one million barrels of production already through we areuts, given that not seeing supply sustained, through 2022 when we do see demand recovery, it is the high 90's as a base case. that is where we can see demand effectively catch supply out by virtue of their not being enough. the key assumption here is that saudi moves ultimately back

towards a cut rather than market share beyond next year. we do think they will ultimately come back to a more strict framework around quotas. if that is the case and opec behaves, and will be likely that they ensure that supply gets neutralized through whatever new demand emerges in 2021. mosthe thing i think investors are considering, even in this bare rout, is whatever ut, is whatever we see, there's not enough demand out there. demand recovers, there just won't be enough supply to meet that demand. alix: based on that, i know you have a buy rating on a couple of the european majors, like bp. when is it good for a longer

term investor to start investing, and which ones? christyan: we are recommending right now. lower throughmuch the clearing price. we see there is this correlation towards the mid to back end, and leerefore stocks like tota which have got loads of super cycle leverage, but a lot of oil volume still coming online, plenty of oil under their bonnet, so to speak, but also the resilience through balance sheets that can absorb the dividend even if this is a prolonged downturn of 12 to 18 months. it really is who has the barbell of resilience and super cycle leverage. the flipside are companies that are more exposed to dividends at ell., sh those will find a lot more occult to find -- a lot more difficult to find the dividend. alix: really great to catch up

with you. christyan malek of jp morgan, thank you. coming up, it is jobs day in the u.s., and the scope of the iris just barely going to scratch the surface -- scope of the virus just barely going to scratch the surface. we will break it down with dean economist --ef point72 chief economist.

alix: we are just about an hour away from the u.s. jobs report for march, expecting a loss of about 100,000 jobs. maki, point72 chief economist, joining me. for ao we do prepare terrible april number? dean: this will give us information on some timing on when the downturn started. is, that will just be a bit of information.

but this report will be one of the least informative that we get because we know the april report is just going to be awful. alix: how bad is it going to get? morgan stanley had a shocking note out overnight, looking for 38% second-quarter contraction for gdp, and the unemployment rate deking at 15.7%. what is your call? dean: those numbers, while they sound shockingly weak, are somewhat realistic. i don't think anyone knows the exact numbers at this point. we know that a very large decline in gdp is coming. we know of the surge in the unemployment rate already happening. i think those numbers, while shocking, are not out of reality. what also struck me is that many economists wind up seeing some kind of v-shaped, or some kind of letter, but they

say we will not get back to pre-virus economic levels until 2020 one. what kind of recovery are you now modeling? dean: it is a little deceptive to try to put letters on it because you can get some very strong growth rates off the bottom, but because you are so far down in terms of the level of gdp, you can have very strong growth rates, but still not get up to the previous level for a long time. you could call that a v because the growth rate numbers are so strong, but in level terms, you don't get back to the prior level for a long time. i do think this is going to take quite a bit of time to get the economy back to where it was. i think we should be prepared for a long and slow recovery in level terms. me.: dean, hang tight with coming up on the program, a glimmer of a recovery within china's businesses.

what does that mean for global companies? we are going to talk to rich lesser, boston consulting group ceo, next. that will give us some range on how the recovery looks. in the markets, still looking at a risk off friday within the s&p. little europe, we have a but of weakness. spain trying to get into positive territory, but the dax still off by about 0.5%. this is bloomberg. ♪

alix: welcome to "bloomberg daybreak." we are entering today's session an hour away from jobs day. some things to note, you had the

pboc cutting the amount of cash that small banks have to hold to put aside reserves, pumping money into the system. european data for composite pmi's just terrible, whether in the u.k. or over in europe. not a lot of movement within the treasury market. theerday, the two yield -- two-year yield hit a 2013 low. oil trying to hold onto yesterday's record move. european pmi's coming out terrible. they contracted about 29.7% in march. you are looking at 10% contraction for the overall economy. point72 is still with me. italian prime minister giuseppe conte says we need more firepower. do you agree? the casetypically is that europe is a little slower to roll massive stimulus measures than the u.s..

i think that is the case in this period as well. i wouldn't describe what the u.s. is doing really as stimulus. it is more trying to fill holes. a lot of people are losing income and trying to replace some of that with the fiscal measures. i do think europe has to do more in terms of going into this deep hole in the second quarter. there needs to be more action out of europe. alix: what is it specifically that you think they can do? it seems like the crisis is moving faster than a lot of policies. dean: the basic strategies have to be income replacement, trying to ease financial conditions in whatever way possible. there are many different ways to them. address

every place has their own it is that has their own ideas. every place has their own ideas. the service sector is closing around the world, and that is not something we've seen before, this kind of coordinated, synchronized service sector shut down that is occurring because of these virus related shutdowns. everyone has to come up with a new playbook relative to previous recessions. up for herep that in the u.s., what more do they need to do? mortgage services are complaining that default rates are going to be spiking. there's the muni issue. what hole does the fed need to plug? dean: one point is i don't think it is realistic for the fed to plug every hole. this is going to be a very difficult couple of months, no matter what the fed does. really, it can't be the fed's job to try to do that.

so i think what is most important in the u.s. is really to see how these new fiscal programs work, try to figure out where the holes are, where the biggest lost income is, and try to come up with bigger or different programs to address those remaining holes. i don't think anyone really knows yet how effective these programs will be and how many people are still going to fall through the cracks. alix: totally right. thanks a lot. point72. of viviana hurtado is here with first word news. the march jobs report coming out at 8:30 new york time. bloomberg estimates last month, 100,000 jobs were lost due to coronavirus. the actual situation is likely to be worse.

employers were surveyed before the heavy layoffs of the last two weeks. now to spain, where the death rate from coronavirus declined for the first time in four days. the spanish reported 932 fatalities in the last 24 hours. the death toll now approaches 11,000. we end with global air traffic demand falling in february by the most since the 9/11 terror attacks. traffic was down 14%. march figures are certain to be worse. the international air transport association says the coronavirus crisis is the biggest the aviation industry has ever faced. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: thanks so much. we are just about an hour away from the latest jobs report for march. you are going to look at potentially a nonfarm payrolls number of 100,000, so that would

be the first in years. it is risk off in the equity market. the question is, did you want to be rotating into the cyclicals? do you want to be buying value, rotating out of defensive names? what is defensive anymore? if you have dividends being cut as well as buybacks? crude able to build onto its gains. the vix staying elevated at 50. take a look at the bond market, pretty much going nowhere, but there's so much supply coming on. t-bills putting pressure on the front end of the curve. the two-year hit the lowest level since 2013. the backend unable to be supported by any stimulus yet. it is not yet stimulus. it is just stem the tide. the recovery is going to wind up coming later. in the currency market, some really interesting things happening. you have a stronger dollar, but

if the commodities currencies that are getting hit, australian dollar, thezealand currency is not playing ball. the cable and the euro flipping because of the pmi that became the issue. the composite just rollover, terrible for both, forecasting a really deep contraction for those economies. as the recovery going to look like? for that, we need to change our focus and look at china, and how the economy there is recovering. 20 me to provide some insight into that, rich lesser, boston consulting group ceo. really great to get your perspective on this. how is china opening up right now? rich: pleasure to be with you. couple of things. first, we are seeing more andings in industrial .thers, restaurants

other things are about 80% open. we are seeing consumers thinking the worst is behind them at much higher levels than the rest of the world, but there's two important things. one is we have to remember how much behavior has changed. people are wearing masks, taking temperatures. there's rules about who can go out and who can't. china has been very rigorous in terms of how it is reopening, which is just as important area of the other thing is the lost of trust consumers are feeling. while things are open, spending on things like fashion, restaurants, travel are still way down from precrisis highs. people still don't feel confident to go out, don't yet feel confident to spend. this recovery, even in china, down seems to have come pretty well, is going to take time. alix: any sense of a second wave? hong kong had to re-shut bars

because of a second wave of infections. have you seen, heard that? rich: i think what we are seeing in china, including hong kong, is what is going to be coming in general, which is how we sustainably flatten the curve is the huge issue in front of the economy globally, and certainly in the u.s. for the next year. we flattened the curve the first time by extreme social distancing. in some places, it seems to be working. other places have hope that it will. it comes at a massive economic cost. the next phase of this is how do we sustainably flatten the curve. changes in practices, changes in rules, the ability to deal with resurgence in infections when they occur in hotspot. i think the world is just figuring that out. obviously, china is a bit ahead of the others given where it is on the curve. i think we are going to see that

in hong kong. we are going to see it all over the world. flattened,e was phase two is fight. it is going to be fighting this disease in ways that allow the economy to operate and preserve both lives and livelihoods. it is not going to be easy. alix: i think it also raises the chin that a lot of economists are dealing with. we tend to think of economic conferees in terms of letters, j.e a v or u or to me, that would mean that the recovery we are going to see is like the recoveries we have seen in the past. is that the correct assumption? way: first of all, the only to engage in this right now is scenarios. there is no point estimate. nothing we've seen could lead you to believe in a point estimate right now. i think there will be some key dependencies. how fast can we roll up testing?

-- can we roll out testing? we are a ways away from a vaccine, but we will see medicine that can deal with those suffering the worst effects. how effective will these measures be to change behaviors, to preserve more ability to do , to respondntation to people who can return to work. ? how effectively we do these will dramatically affect our ability to sustain the curve. i think the odds of a simple what, we were talking about when this first started, have gotten much lower. but those other letters, i think the jury is still out and it depends on our actions. alix: really appreciate the perspective. rich, you will have to give us an update on what you see in a few weeks. coming up, we are going to take a look at the health of the credit markets. it is our exclusive interview with david hunt, pgim ceo.

if you have a bloomberg terminal, any charts we use, go to gtv to check them out. gtv . this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up later today, larry kudlow, national economic council director. ♪

welcome back. erik now, bloomberg's schatzker is standing by with david hunt, pgim ceo. have davids great to hunt with us. as ceo of pgim, he oversees $1.3 trillion. david, i know your first concern is for the health of your employees, for the health of the country -- but the health of the country has to be a close second. what is your base case scenario for how long the economy is in shut down? david: there's been an enormous amount of work that has gone into try to estimate the gdp impact, both for the u.s. and for the global economy. i have to tell you, i think this is largely an exercise in futility. at the moment, i think we are better off acknowledging that

effectively, that is an unknowable question, and that we are better off focusing on the things that we do know and what we can take action on. we do know that this is going to be the largest single drop in demand that we've had in modern economic history. that is going to create an unbelievable squeeze on liquidity for small businesses, for large businesses, and for individuals. that this could turn into a very significant credit crisis. what we are focused on is how long the economy is likely to stay shut. if it stays shut for a short see this staying largely in a liquidity problem. if it remains shut for six to nine months, that is where you get into the questions of very significant credit impairments, and that as a whole different kind of crisis that we need to

be prepared for. but we are working hard on both of those without, at this point, trying to predict what we would say is an unknowable outcome for the basic path of the infection. erik: as time goes on, respecting the point you just made that in many respects, trying to make predictions is, as you called it, an exercise in futility. as more information becomes available, as you get a better sense for how fast the virus is spreading, particularly in this country, are you finding toward thating conclusion, that this is going to play out for much longer than three months? it is not going to be over at the beginning of june? that we are looking at september and possibly later? david: i think our view very much is that investors at the not taking seriously enough the possibilities that this could be a much longer and

more drawn out affair, and that the popularity of the sharp v-shaped recovery, we would say, has gotten significantly less likely. sayhe same time, we would that investors need to be preparing their portfolios for the very significant opportunities that present themselves on the other side of this. if we look at what happened in the very bestof vintages of money would put to work were in 2009, the beginning of 2010. it is very important we get our clients to the point where they have strong foundations, money to put to work, and that we move aggressively into risk assets when we see this thing turning. it is at that point we will be able to say that acting management has really begun to take advantage of these opportunities through the cycle, and that is certainly what happened to our investment track record.

alix: the s&p 500 --erik: the s&p 500 is still trading at -- times earnings. have financial markets fully and properly discounted the fact that we are entering what is likely to be the deepest recession in modern history? at the moment, we would say the market is struggling to effectively price in the various scenarios, and partly because it is almost an unknown how this is going to play out. erik: sorry to interrupt, but if it is an unknown, what is the most prudent course of action, ,ptimism or frame of mind optimism or pessimism? david: our view is both.

in the short-term, we are more pessimistic than the consensus estimate, and we are working hard on consensus positions for our clients. on the other hand, longer-term, we remain very optimistic, and we think that there will be significant investment opportunities that come out the other side of this, and we want to make sure we have the cash and the firepower to take advantage of that on the other side. erik: are you seeing evidence in your credit and real estate portfolios that businesses are starting to miss payments? david: we do. there's been no question that businesses have started to decide that they are not going to pay rent as one of their levers to pull. in the equities business, i would say it is too early to say. those tend to lag by six to nine months the public markets, so we will see that play out over time, but the early signs of

stresses in real estate and in private credit certainly can be seen. erik: i know pgim is a significant investor in structured product. i've heard that there is still a serious lack of liquidity in places like nonagency mortgage market. are you seeing that? are you experiencing that? do you see liquidity stress elsewhere in fixed income and credit? david: i would say that the liquidity stresses have gotten much better over the last 10 days. we have been talking about the beginning part of last week, there were whole parts of the fixed income markets where you could not get a bid, and we were very worried about the basic alone the level of liquidity in the market. i give full credit to the fed that moves very rapidly, and we now see for the most part

liquidity has returned to most parts of the bond market. it is an awful lot better. there are pockets such as the mortgage market where there are still real stresses, and we do need more support. erik: a growing number of investors say the fed's new program is inadequate because it backstops only aaa rated debt. what do you think? does the fed need to loan against a broader range of investment grade collateral? buy if you -- david: if you my argument that we are now in a liquidity event, but that has the real possibility of moving to a credit event, as we see that this becomes a credit event, the government will absolutely need to provide more support into the credit markets broadly, without a doubt. erik: but it doesn't need to do that just yet? david: i don't think we have

enough information yet to make that call, but if this does , and we saw a on big chunk of downgrades, if those numbers continue, then we will absolutely need the fed to expand this program. erik: what about the banks? i've heard that some banks are being very aggressive with margin calls. margin calls may not be something pgim is seeing, but what is your perception of bank behavior right now? are they being constructive, or are they pouring gasoline on the fire? really,e have been really pleased with the behavior of the banks. we have obviously been working hard hand in hand with them on our portfolios and real estate, and very unlikely situation we had in 2008. they have been both empathetic to the situation with borrowers, and we have found them to be

flat civil and adaptive this time around. so i have many positive things to say about our experience so far. erik: they are working hard to turn out some of the revolving credit. was pgim among the buyers of debt we have seen issued recently, including by carnival and tenet healthcare? david: we are obviously and a norma's player in the fixed income markets. when you look at the hold of the month, we have been very important buyers of the whole range of the new issues that have come to market. that has actually been an important part of beginning to solve some of the liquidity crisis. we have finally really opened, in a big way, the new issue market. erik: david, phenomenal perspective. thank you for entertaining some any questions and sharing your views on somebody critical -- of so many critical aspects of the

markets. that is david hunt, ceo of pgim. alix: thanks so much. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i'm alix steel. the jobs data coming out in just about a half-hour. yields go nowhere. oil still getting a bid if we do get some kind of global production cut. coming up, lara rhame will be joining us, fs investments chief economist. this is bloomberg. ♪ shouldn't you pay less when you use less data? now you can.

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and more savings. plus, get $300 off when you buy a new samsung galaxy s20 ultra. that's simple. easy. awesome. go to xfinitymobile.com today. ♪ alix: welcome to "bloomberg

thiseak: americas" on friday, april 3. i'm alix steel. let's take it right from the top. effect say ripple for the global economy. alix: the euro area economy is in a slump of unprecedented scale. composite pmi pointed to a contraction of about 10%. >> some data out of the euro pmi's coming in lower than expected, and they were already low. alix: italian prime minister giuseppe conte urging the eu to deploy the kind of firepower the u.s. is using and avoid things by the book. vice president mike pence tries to offer reassurance to the 10 billion people -- the 10 million people that filed for unemployment at the jobs market starts to show cracks.

michael: jobless claims numbers the last two weeks give us a much better picture. when you look at the figures from what is forecast, the unemployment rate basically is kind of a sick joke at this point. aix: morgan stanley now sees 36% drop in second-quarter gdp, with activity only returning to pre-virus levels at the end of 2021. pres. trump: it may be 10, and it may be more than that. alix: president trump says he expects russia and saudi arabia to cut production, with brent seeing its biggest one-day rally on record. now the opec-plus coalition is trying to pull together a meeting of its members and possibly other oil-producing nations in a virtual meeting on monday. >> the question is, what is the strategy going forward? they are not all going to agree that they want to cut production. that is something the u.s. has really stayed away from. we had politicians last year touting this nopec antitrust

law. alix: analysts remain skeptical that a cut would do anything to demand.he the latest headline is that russia producers are ready for oil cuts to stop the price rout if u.s. and saudi joins. the u.s. is definitely a wildcard. there are 6000 shale players in the u.s.. getting them to agree on something will be quite difficult. in other areas of the market, it feels like there's a little de-risking in the equity market in the u.s. europe is going to hold off on some looser bank accounting rules for now. european stocks trim any kind of gains on those headlines. you also have not a lot of movement happening within the treasury market. yields pretty much unchanged, and oil still able to hold on to its rally. we are about half an hour away

from the u.s. march jobs report, with economists expecting a loss of 100,000 jobs and the un-play mid rate -- and the un-meant rate -- and the unemployment can you give me what you care about in this report, given that much of it is going to be so backward looking? lara: we are looking obviously at both the household numbers and the payroll numbers. those household numbers give us the view of not only who is the newly employed, but the newly unemployed. because of that, to me what is interesting is if companies are still hiring going into this. but at the end of the day, given the ghastly initial claims numbers we have seen, i think markets are really positioned far, if we get a better report than expected, they are just expecting the shoe to drop next month. alix: right. and we saw that yesterday with

those terrible jobless claims. you didn't see a huge market reaction on that. mike, do we have any idea of how many workers can actually work from home versus how many jobs they are going to have to be lost as the lockdown continues? michael: you can probably go through the various categories and figure out who could work from home. if you do something that involves the computer or telephone, you can do that. it is all of the people who have to be on location, the people who sell you things, who repair things, who clean up things, or doctors and dentists, people like that. i haven't seen any particularly good numbers on that, but we did speak with researchers from the new york federal reserve who had looked into the situation in the tri-state area of new york, new jersey and connecticut. they found a week or so ago that about 40% of the workers who would normally be in manhattan were working from

home. maybe that is a rough figure at this point. what it is going to be a while until we figure that one out. alix: which raises the question, how does that impact longer-term productivity? it impacts it very much. as we break down business investment spending over the next year, you may see that technology and intellectual stayrty piece continued to fairly resilient because at this time, more than any, companies need to really make sure that those workers who are communicating through technology have the latest up-to-date ability to do that. i think everybody would say that the productivity has been changed in some way. the numbers, the productivity numbers are residual of other output inflation and investment data that we have. it is going to be a little while

before we get the long-run trends. but i don't think this is necessarily bad for productivity. it is just catastrophic for income and output. alix: so how does this wind up playing out for income? as mike was talking about, in terms of the jobs you can work from home versus not, the ones you can work from home are going to be the higher paid jobs. it is the lower skilled workers who get furloughed, laid off completely, or have to go back to work in this environment. can you give us a sense of how you model wage growth? lara: i think this is going to be one of the most fascinating aspects of this. it won't just be apparent this month. we are really starting to see some of the lower paying jobs for either demand higher pay, given that there is a higher level of risk now associated with some of those jobs. you're going to get this massive

need for jobs in some of those small, lower paying areas. we know the few areas hiring aggressively our delivery, of the stores, some amazon folks out there fulfilling orders. but a lot of those people are now really demanding some additional compensation for taking those risks. this will be an interesting dynamic, and as you say, unfortunately this is not the first time we have seen this in a downturn, the folks that lose out are often the lower middle tend to bebs that the first laid off. i think how soon hiring restarts as we start to see some of this shelter-in-place lifted, to me it is going to be a longer road back to recovery than i think a withf people are expecting

calls for a v-shaped rebound. michael: i want to follow-up on that a little bit. out thele who figure income situation are going to be real nerds because you've got to dive into it into the coming months. a lot of the people who are going to be out of work are going to be getting the unemployment benefits that income mayo national not drop as much as the unemployment rate might suggest to us. the question is parsing out that, it is not going to be hourly earnings anymore. it will come in the pte numbers. we will see huge government transfers money. at the same time, you have now today in theory the paycheck protection plan going in, where small businesses can go to their bank and get a loan if they keep people on the payroll. maybe these people drop out of the unemployment numbers and program, back ppe

on the company payroll. ,hey may, if they still are showing up in payrolls. we may not see as much of a payroll drop or income drop as we might think. it is going to be very complicated to figure this out and to parse all of this out going forward because of the many programs being put into place. point, theo that programs that are put in place, are they actually enough, and how do you pull back on them at any point? what mike is saying, but the reality is some of the estimates, 15%, 30% drop in gdp, all of these numbers sound really large come about $350 billion transfer to households in the grand scheme of our economy is not that much. it is helpful. it will mitigate the immediate downturn of this.

but i think when you look at the unemployment side, you just look at ground zero. hotels, restaurants, conferences, airline travel. these are areas that are large. if you just look at the ground ofo numbers, that is 17% employment in our economy. ,hose jobs are most likely gone and you will get some of those government transfers still help on the downside to mitigate the downturn, but i think it is going to be a long road back for some of those industries. i don't think they all 2020.back for january it's what congress is now talking about a phase four. this is a bigger gap than i think a lot of people can wrap their heads around. alix: thank you very much. lara rhame of fs investments,

you will be sticking with me. oil producers are eyeing and output cut. russia says they will get on board if saudi and the u.s. are. this is bloomberg. ♪

♪ pres. trump: it should be an easy one. it may be 10 and it may be more than that. i was actually told it may be 10, as i told somebody before. it may be 10, and maybe it's 15. maybe it goes up to 15. it could be as high as 15. alix: that was president trump yesterday, surprising the oil market, saying there could be potential cuts from saudi arabia as well as russia. for more, we are joined by bloomberg's annmarie hordern.

the latest headline was russia saying they will cut production if the u.s. and saudis do, yet they are still looking at their budget of $20 oil. what is going on behind the scenes? annmarie: the sentiment has changed. they realize prices have gotten too low, and crucially, demand is not there. i think everyone in the market is realizing that whether or not they agree to production cuts, they are still going to be producing less. there are going to be declines no matter what. if you are going to have to decline in russia, you might as well get some of your competitors on board. it is a drastic turn of events from that opec meeting, when the reason why we know russia didn't want to go for deeper cuts is theuse rosneft's ceo was -- to commence putin that one to convince putin that now is the time to kill shale.

alix: we will see how that goes come of that meeting with oil executives coming up for president trump. still with me, lara rhame of fs investments. i want to take a broader long-term view of this. even if we get a production cut, we are still looking at prices in the 30's. that is going to put enormous pressure on budget deficits. sovereign wealth funds are going to have to keep dropping. what norway had to do. what does that mean for how these countries can actually recover, when their main source of revenue is kind of wrecked? lara? hi, sorry. i think there's such an instinct return to business as usual. countries still aren't rapping their heads around the amount of dislocation, and probably what is going to be a slower speed to

return. for that reason, many of them still may be pumping, but storing. we know storage is running out. think what we see was in the u.s. is the continued decline in oil demand adding insult to injury. oil is a unique area because you see the help that fiscal policy, monetary policy are able to provide to the economy on a broad level and to financial markets, but oil is so driven by actual underlying demand. you just can't plug that gap in the same way. i think we are going to continue to see lower oil prices for some time. alix: so speaking of the stimulus, part of the criticism or suggestion for the fed is that they need to get in and buy things like leverage loans, like high-yield, help the mortgage bankers, non-bank mortgage bankers. that?y need to do

a lot of the high-yield default rates are going to come from the oil market, but it is a smaller portion of the overall market. how do you see it? lara: i think there's the very real possibility that should function, theo fed will step in to help. i think they've done enough. throwing a lifeline to corporate investment grade debt has really supported the high-yield market as well. this is outside of oil, of course, but we are so focused on high-yield several months ago as a potential vulnerability, but when market volatility really , it was the treasury market that showed severe lack of liquidity and became an area of difficulty. as far as oil goes, there is no doubt that this is a sector that continues to really come under stress. i think when we think about the u.s. and how they are going to be able to interact and support

oil prices with china and russia , this administration may face some really tough decisions about national interest versus industry. we are in a place where you are just trying to fight gravity, and that is very difficult. it has a big regional impact, too. you mentioned texas. i think that is the insult to injury with all of this. you have really bad local employment problems, and certain communities that are heavily reliant on shale got hit extraordinarily hard during this time. alix: no kidding. that is going to be brutal for texas and oklahoma, for example. lara rhame of fs investments will be sticking with me. coming up, we are going to talk ceo.ck pinchuk, snap-on this is bloomberg. ♪

♪ alix: we are about 10 minutes away from the jobs report. let's get an inside look with nick pinchuk, snap-on ceo. snap-on manufactures tools and equipment for various industries , with 12,000 employees all over the world. it is always a pleasure to talk to you. i want to start with the labor market in particular. have you further -- have you furloughed, laid off, or hired any people? >> we haven't furloughed anybody. we have pretty much stayed in place. i don't think we are hiring in particular right now. our business is sort of like this. we are working from home, but we are involved -- where we can, we are working from home, but our operations are active, serving the essential customers we serve like the military, transportation fleets, and critical vehicle repair, things like that. so we have kind of stayed in place because we have demand for our products. alix: how long do you think that

is sustainable for? if this shutdown lasts x amount of weeks or months, you have to start rethinking how you do things. nicholas: i think that is true. i think this, though. this isn't our first rodeo around here. so i would say this. we are looking at the situation very carefully, but uncertainty is sort of the parent of precipitous action. this has only been going on in the united states for a short period of time, so we are going to look at it for a while, and then we will take action with alacrity. but if we do that, we are going to think about the long-term value of our company. we believe we come out of this stronger than we went in. we did that in the last recession. art of that is to think about our brand, our product line, but the really capable and committed people that are the snap-on team.

we are going to think about them in any action we take. alix: it seems to imply that you are going to want to stick with them as long as possible. do you also have to do things like raise wages or change your health benefits in order to support workers as well? well, our health benefits are pretty good. people would say our health benefits are pretty strong. i'm not saying that we won't furlough people and take other actions in terms of pay reductions and so on. if we take pay reductions, i will be first in line, of course. one of the disadvantages of being a leader is, on occasion, you have to act like it. we may have tonk raise wages. we pay fair wages across our factories and offices. we haven't had problems attracting people throughout the time because people like to work for snap-on.

i think we are able to hire people if we need to. alix: have you been tasked by the government or other companies to try and manufacture things for ventilators, for example? nicholas: no. we have some, through our distributions, we have things like gloves and masks and certain things in our stores. pairs donate over 500,000 of gloves to local hospitals for use in that situation, medical type gloves. alix: are you ramping up production of any more of those things as more areas shutdown? lara: nope --nicholas: no, sorry. we had those for selling to our customers. we sell to auto repair garages around the country, around the world, and they sometimes use products like those gloves. they happen to be medical grade.

we had them in our stores. we don't manufacture them. we got them from other suppliers. alix: i see. the other question is how you keep your workers safe. what are your contingency plans if some of your workers wind up getting sick on your production floor? how do you do that and maintain the level of activity you are expected to? nicholas: that's always a question. so far, we've had a few across our businesses, i few in the united states, a few more in europe. generally, every day we practice physical distancing. i don't like the word social distancing because i think we want to stay in touch with people. but certainly, physical distancing. we have rigorous cleaning after every shift in our organizations. when we have a case, we follow the cdc procedures or the who procedures to make sure we deal with that. basically, once you find out

about it, you cordon off the the associate was working. make sure he gets a deep cleaning and sanitizing, and inform people who were involved. determine who has interacted with that person. you asked them to poor and teen themselves and keep a watchful eye for other incidents. ando quarantine themselves keep a watchful eye for other incidents. alix: really appreciate it. good to chat with you. the latest read on jobs just about four minutes away, potentially the first decline since 2010. this is bloomberg. ♪

alix: "bloomberg daybreak. welcome to" --welcome to "bloomberg daybreak."

frome a few minutes away the latest numbers on jobs. you are looking of currency market. -- strong.the strong terrible pmi. michael mckee will join us with these numbers as they come down. mike? alix, the numbers are coming out. they are worse and expected. maybe we did expect some of the hirings, the firings in march. in major storms or something like that. payrolls are down. manufacturing payrolls down 18,000. the unemployment rate rises to 4.4%. in terms of earnings, we don't .ave a number for the month but it rose to 3.1%. that would be an effect of who

got laid off. we do have a major impact on the overall labor market. kind of surprising. we will want to dig into this. i will come back with more analysis in just a second. since march.lost first time since september 2010. alix: terrible. that number is terrible. the month-to-month basis rose up .4%. what is interesting is the market reaction. and looking at futures. they are off 23 points on the s&p. that is maybe 1% down.

just a quick check in on what is happening with the dollar. all thoughtthink we we are looking at -100,000 jobs. -- 1.5 the bond market basis points you are still at 56 basis points. very close to the record low we saw in early march. terrible unemployment numbers. just bad, bad, bad. our guests.ow -- lack of make of the market reaction to these really bad numbers? see the change in the nonfarm payroll number was higher than consensus expectation, but i really am concerned about how big this number could get. aprilk we may have

numbers that are quite consequential. that is where the focus is going to be going forward. we will see double digits for employment., that is where the bond market is focused, i would say. alix: what does that mean for 10-year? it seems like we will preach floor?sis -- breach that >> yes. i think it will grind lower as ak data points.e we could bit -- we could get closer back to the lows we saw earlier in march. , broadlyy the trend speaking is we will see

volatility day-to-day. alix: what did you make of these numbers? if they are that bad now, how much worse are they going to get? yeah, that is what everybody is thinking. it is so striking. this is the worst that we got since 2008. entire country. if you look at the breakdown, you had 460,000 jobs. get a rollingyou blackout. these of the jobs that were on the chopping block the earliest. think that is where there was by most decisive action

companies to pare back and go into bunker mode. every category was broadly down except for government hiring. you do not -- i think you will see the knock on effect from other industries. you may have seen the start of layoffs coming from other industries, the bulk of it in leisure and hospitality. super startling stat. mike, you have a little while to dig into it. anything you want to add? ix, i can tell you this is the worst labor report since march 2009. the labor department put a note out, explaining what they know about the coronavirus impact on jobs numbers and they say it does predate most of the

layoffs. before we even get to the majority of the layoffs. it is clear that the decrease can be ascribed to effects of the illness. they say it is important to remember that this predated business closings and school closings in the second half of the year. a large increase. but absent from work as well. so, we are seeing an employment report that is completely distorted by the coronavirus and much more so than we anticipated. setting the stage for a very bad april report. this is what they saw before things got really bad.

with that lady of the land, as you are pointing out, going to get a lot worse, with when do we see negative rates in the u.s.? -- >> hopefully never. think the fed has steadfastly held the view that they will not move rates into negative territory. i support that given that negative interest rates tend to be a task on banks. they are relying on banks to divide the stimulus. it's not good timing to move into negative interest rates. also, broadly speaking, it has this has beenn, stimulative to the broader markets. i think really where you're going to see the impact of stimulus is where it is during the recovery phase.

once people get back to work, that is when you'll see the greatest impact of low interest rates. sure that will need to get to negative territory interest rates. alix: totally fair. i just wonder if we can actually stop it. had the same question. we are emailing each other right now. if you look at the leverage ratios so they can consume more negatives, can we see rates on the two-year, the three-year, the 28? >> from the supply-demand perspective, you saw building go into negative territory.

we are expecting this to be issued in the next three months. yesterday, the treasury came and increased its guidance. i think some of the impact is going to come from supply demand , when the treasury starts oflding staggering amounts coupon issuance in the coming months. alix: lara, do you agree? yeah, i get asked all the time. at zero, justs coming negative. i think that there definitely is enormous bill issuance coming

down the pike. , and if weironment have another risk off at -- episode, if we look at what is we are concerned that there is cessation on the second quarter. the number one thing i am watching is china. if china gets back to work, if they are able to lift the social distancing, i like how the last guest put it, the physical distancing, or if they will have to retain some of that. know, that is the concern. i don't think markets are

focused and not on that. i think we could be in for a longer-term adjustment and the recovery could be more sluggish, which to me leads to higher uncertainty in the future. havenld see the new safe push that brings rates quite low. alix: wow. really staggering. thank you. thank you so very much. just to recap you on the numbers here, really terrible. jobs.0 of worst report since march

2009. the underemployment rate may not have been counted. average earnings are ticking up a little bit. the market reaction though, very muted. we still have a stronger dollar. .aybe a tiny bit of selling but that is it, which makes it interested -- interesting how we will be pricing the bad news as it comes. we want to give you the headlines. viviana hurtado is here with first word news. >> opec will be scheduling a meeting next week to try to into the market collapse. agreed to an output cut. have ae scheduled to meeting on monday. now to spain. 942spanish reporting

fatalities from the disease in the last 24 hours. the death toll is approaching 11,000. with british prime minister worst johnson. last night he appeared on his round ofjoining a mass applause for health care workers. global news 24 hours a day powered by more than 2700 journalists and analysts. this is bloomberg. alix: thanks so much. coming up, it it's how working at home will weigh on the infrastructure. technical aspects of working at home. we will speak to a man who oversees part of that infrastructure. he will be joining us next. can check out any of our

charts if you go to gtv . check them out. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." i am viviana hurtado. coming out, the national council director. -- coming up. ♪ you are watching "bloomberg daybreak.

" yourviviana hurtado with bloomberg business flash. introduced elon musk touch plus deliveries at a time when authorities began urging future car buyers to stay home. firm canceled an order for 75 jets. year, these 737 has been grounded because of two fatal crashes. we end with president donald -- he owed the german letter 240 million dollars. viviana hurtado. thank you.

let's recap those of us. the u.s. economy losing 701,000 dollar -- 71,000 jobs, the worst since march 2 dozen down. mike mckee has been digging into the details. mike, it's a was a pleasure. newre talking about the normal. but this will not be normal in any sense of the word. mike: no, it's not. 80,000 hospitality jobs, hotel workers and we expect a lot more of those coming up. a lot of buyers early, but what's interesting to me, you see health care services and this time it's down 71,000 jobs. not clear what's going on there. worked out has to be

in terms of who is on payrolls, how long they are, whether they come out -- come back because of the lending program today. know.'t the numbers are worse to be destined to be expected. we knew they were going to be bad. not worse than expected. are we just going up. mike: hospitality workers are the lowest paid workers in the country in general. waiters and waitresses get a sub normal wage because the get paid in tips. we are looking at tremendous number of them dropping out of -- dropping off payrolls. i'm sure that skew the numbers higher. alix: the oil and gas extraction

payroll rose, so most in the pipeline trancelike -- pipeline payroll, that will be a very hard hit sector with the april payrolls now. mike: we were watching that. we had seen a decline cause with falling, we were wondering what would happen. that may not come back as quickly as some areas. we talk about the number of bankruptcies. -- been courtesies among exploration companies. that's the case we will not have as many people on payrolls. the same will be true for other

categories. retail did not lose as many jobs as we thought it might. macy's is just for lowering all of their workers last week. that is going to hit hard. now you have to think, are the stores going to reopen. a lot of questions about what the labor market is going to look like when we do get back to it. eightguest: -- alix: percent of the labor force being lost due to jobless claims. mike -- mike mckee may be the

hardest working person in the bloomberg offices. this is bloomberg. ♪

our time now -- technically speaking. we have to do oil, continuing its huge rally from yesterday. what do you see? alix.lo, we do have to talk about oil. it has bounced. but guess where it is balancing? the old lows. it's right about 30. i think it is adjusting to the lower plateau and we should be stuck in this range for quite a while. alix: i guess that range would be better than going to do $10 oil. the market does not react that much, i wonder that is meaning all -- meaningful? old news. his

if you look at gold versus the s&p 500, they are about the same. it looks like the stock market is transitioning to a bear market, which means it should be selling rallies and gold is transitioning to a bear market. one significance of the charts, it started at 2000. it looks like the s&p 500. we will have to get to that base to stabilize the lower plateau. that's probably what you need to do. alix: 701,000 jobs lost in the month of march. the unemployment rate rises. the market reaction is not very extreme. ucsd futures that -- you see s&p futures down by eight points.

10-year at 60 basis points. a little selling. so, all of that is contributing as we continue to grind into the virus and the lockdown. that wraps it for me. , larryup on the open kudlow. definitely do not miss that. happy friday. this is bloomberg. ♪

♪ city,an: from new york

good morning, good morning. the count to the open-source now with 30 minutes to the opening bell. equity futures down a third of 1%. no big price action off the back report.y decent payroll we are looking at 60 basis points. in commodities a big rally. we begin this program with take issue. the expectation, -100 k. the reality? negative 701. of -- 130 months of payroll growth gone like that. and it is set to get worse before it is better. michael mckee, you have been looking at the number's pure to you, mike. mike: