alix: markets risk on for a second day as the virus spread slows and china reports no new coronavirus deaths from first time. you crunch time. european finance ministers meet on joint backstops and liquidity lifelines for companies. and private equity in crisis time. we speak to steve schwarzman, ceo of blackstone, who just donated to new york, to get his take on the recovery. welcome to "bloomberg daybreak: americas." i'm alix steel. we have a two day rally underway. who would've thought? overall, you are looking at the two day rally for the s&p, looking at a dollar finally rolling over. you still see the bear steepener happening in the treasury market. more of a selling coming back on the long end. crude finding some stabilization

here as well. also want to point out some breaking news. macy's says their cfo paula price is going to leave the company. they are looking at an external search currently. premarket withn the overall market. exxon mobil also coming out, finally the last of the big majors to cut their capex. they see overall capital investments for this year about $23 billion. they saw up to $33 billion. they are also cutting operating expenses by about 15%. they are maintaining their long-term outlook. they say capital allocation priorities remain unchanged. the longest chunk of all these cuts are going to be spending in the permian basin. that is interesting. we heard something very similar with chevron, a little easier to shale.ex within

they are dealing with the fallout of the crisis. watching those stocks as we head into the open. u.s., as wellthe as the markets, but the collapse of the small business optimism i was just talking about. gauge falling by 8.18 points in march. michael mckee joins us with more. we were expecting it to be bad. can you put it in perspective how bad this actually was? michael: it is a record monthly decline. that is not a shock. most small businesses in this country appear to be closed right now, so you won't be surprise the national federation of and been a business reports we haven't seen a decline like this ever. and 96.4.index it was at 104.5. looking six months out, they don't see a whole lot of progress being made. the number of small businesses who think conditions will be

better in the economy six months 5%. now, just the federal reserve says it is going to create a program to help speed loans to small businesses. it is going to provide term financing to banks against loans issued as part of that small business administration paycheck protection program. the program slow to get moving because nonbank lenders say they have to wait seven months to get repaid by the federal government, and that limits the amount of lending they can do. community banks say they left the liquidity to continue lending under that circumstance. the fed says they are expecting to set up a special purpose vehicle at will by the loans from the banks, giving them additional liquidity to make more loans. no word what happens to the loans once they hit the spv. further details later this week. another problem with the lending program, two key regulators have not yet joined the federal

reserve in lowering the liquidity ratio, the ratio that compares assets to the amount of money the banks have that they have to hold against their assets. the office of the comptroller of the currency and the federal withit have not done one the fed yet. they are deciding whether that is too dangerous or not. the federal reserve bank of new york telling us they're going to start their new facility to assist the commercial paper market april 14. applications for per dissipation must be submitted by thursday. a couple of overseas notes, china support currency holdings have fell the most by march. there was suspicion they might be selling treasuries to raise money, but analysts say that is probably not true. they are blaming asset prices dropping and a stronger dollar, which pushed down the value of their reserves. in europe, finance ministers holding a conference call today as they continue to work on how

to set up some sort of fiscal bailout for countries in the euro zone. in general, southern nations want some sort of joint debt issuance, a corrado bond, if you were, well northern countries say use the bailout fund, the esm. leaders are supposed to meet on thursday to figure out what they are going to be deciding on. alix: all right, thank you so -- thanks a lot. michael mckee will be sticking with us. back to that breaking news on exxon cutting its capital budget by about 30% to the lows since 2016. that company is the latest major oil company to retrench. and marie horton joins me on the phone with more. walk us through some of the details.

annmarie: as you say, they are just the latest joining the raft of major producers slashing expenditure to try to boost cost savings. you think even exxon is feeling the pinch, the collapse in crude price has been so severe. they are cutting their 2020 capex by 30% to bring them to $23 billion. they saw originally up to $33 billion. this is the lowest for exxon since 2016. another sticky on the bloomberg, they see industry refining output to decline, which reverses course on a massive investment drive exxon was planning for. it is going to be quite painful for them. the ceo is looking at investing heavily through the downturn. they just join the rest of others. ep also announced spending and slashed about 25%. the industry is obviously bleeding cash. then expecting to watch is what happens with the dividends. question.e big today, we do have prices a bit

higher. brent is trading north of $33 a barrel. nymex wti, nearly funny seven dollars a barrel. there's been a lot of drama with opec. to thecomes down numbers. who is willing to cut, and by how much? alix: exactly. and exxon is looking at exploits its percent evident yield. it feels really unsustainable with oil prices around $30 a barrel. thanks so much, annmarie hordern. one other story where watching today, the latest eruption to supply chains caused by the coronavirus. this time it involves food. truckers hauling food are facing delays pretty much around the globe. in europe, they face lengthy derting times at bor crossings. one result is higher prices. freight rates for refridgerated truck and lives in the u.s. have spiked in the last few weeks and has broader ramifications, especially for workers who

actually work with the food that fall ill. that as theatching long-term consequent as of the virus wanda playing out. coming up, more of your morning news, trade and analysis on the markets in today's first. this is bloomberg -- first take. this is bloomberg. ♪

♪ alix: time now for bloomberg first take. ,ith us today, damian sassower emerging-market credit strategist. they're going to put you on the spot yet again to tell you what all the news is here. what are you looking at today? damian: we've seen this rally in equities, and a lot of people

are pointing to that this may be technical in nature. we seen shorts on spx futures down 20% since april 3, on the dow down 11%, so on and so forth. fundamentals have yet to fall into play, but i am positioning for when that does occur. for me, if you just look at where em is today relative to august of 2018, they seem to be in a much better place, at least from a liquidity perspective. by and large, i am hoping that we see a bit of a transition to fundamentals where we can begin to start picking away at some of these dislocations. what did you make of imf repairing short loan dollars to countries that don't like to treasuries -- from countries that lack the treasuries to be able to benefit from these swap lines? damian: i think every dollar

counts for emerging markets. the imf is doing everything they can. morocco are tapping their imf lines. you see countries like myanmar and iran that don't have imf lines really approaching it for help in the current crisis, but there's still a lot on the table. zambia,ot argentina, ecuador, pakistan. there's plenty to look at with regards to the imf, and they play a critical role in providing assistance to those central banks that don't qualify with lines with the federal reserve of new york. alix: does that wind up fixing it? i say that tentatively because until the virus slows, it is hard to say if anything can really be fixed. but with heard reports in south africa that that the economy is just waiting for devastation. there's been no really for the low income workers that aren't

even technically employed. when are we talking about this when it gets really bad for emerging markets? andan: a lot of investors practitioners have been saying that these em downgrades are priced in. we knew this was coming. yet the outflows are relentless off the back of the news, which means despite the fact people knew it was coming, they were still hanging on perhaps a bit too long, trying to clip those higher coupons in places like mexico and south africa. but now all bets are off. we do need to see some of the bloodletting come off a bit and some of those countries and hotspots. fundamentally, south africa is in a very difficult place. it's budget deficit originally planned for 5% of gdp is going to rise to potentially as 12% of gdp. it is not good, i promise you that. the imf definitely plays a

critical role, but initially, i am looking at these swap lines with the fed. i think that's the best way for dollars to fund their way into the system to provide short-term relief. risinge've also heard demand for euros as well. do you make anything of that, any sort of funding stress moving to europe? for is that banks need the cash in order to lend, and that is what we are seeing play out? really in europe, you're just talking three months forward relative to ois. you not widening out, which does have a bit of a positive impact. dollare perspective of a investor on a cross currency basis. anything we can do to alleviate some of these dislocations in the market, it goes without saying i think everyone is trying to do what they can. for me, at least in the short term, the focus is back here in

the u.s. on the commercial mortgage-backed market. apollo, elliott, looking for distressed valuations. we have steve schwarzman on the line in just under an hour. i think we will hear from him what you are seeing in terms of valuations in the commercial mortgage-backed market. are they getting more attractive? i think there's a big pothole there. i think we need to see the markets in the u.s. stabilize for investors to get a little bit more comfortable, and we need to see the big private equity players begin to engage in this market. damian: if that doesn't happen or if it -- alix: if that doesn't happen or if it comes to late, do you think the fed will step in on that? do you think the fed will step in on that level if we don't have private equity come in the way that you're talking about needs to come in the markets? damian: yes, i do. i think they met expand the facility to include even private

level mortgages, perhaps even commercial real estate clo's. rating firms are going to downgrade all of these aaa rated securities in mortgage land, and those are the ones that currently qualify. if they are all downgraded from aaa, they are going to have to adjust their program and start expanding it. that is perhaps one of the reasons we are hearing about these private it would he players circling the market. alix: we've been hearing a lot about investment grade, too, what happens if they lose their credit rating. one last quick question for you, taking a look at the dollar falling off a cliff today, do you feel like we can finally fight the up dollar trend? are we going to go lower in the dollar, which would provide really for the markets? damian: it is hard to say because ethics is not like any other market. we can't really say if this is short covering as well, solar to equities.

everything is up versus the dollar today, including the swiss franc and the japanese yen. it has taken especially the high off theiross currency losses, but there is still significant risk, and we are so very close to some no man's land levels, where if it goes through them, you just don't know where the bottom is. i remain very suspect on currency levels at this point. i think there is inherent bid for the dollar structurally. it's a very difficult battle to fight. anyone trying to fight the dollar and the imf hasn't lived to tell the tale, at least in my career. alix: i really appreciate it. always good to catch up with you. reminder, any charts we use throughout the show, go to gtv on the terminal. browse the features, check it out. coming up, oil moving higher on potential output cuts. a the flipside, exxon cutting

$23 billion. to 23 billionex dollars. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." samsung posted better-than-expected profit in the quarter that just ended. the south korean electronics company's cloud business soaring. there's hope internet usage from people staying at home will keep rising, and that could offset the drop off in demand for smartphones and other consumer electronics. inbnb raising $1 billion debt and equity securities from silverlake and six street partners. like the rest of the travel industry, the coronavirus outbreak hampering airbnb's business. a possible ipoe this year uncertain.

exxon mobil slashing spending by billions of dollars. capital expenditures are being to $23 billion. there will be if team percent cut in cash operating expenses. like allcompanies -- other companies, they are being hammered by the coronavirus outbreak. alix: thanks so much. let's stay on oil and break it down with michael tran, rbc capital markets managing director. good to chat with you. on one hand, we have these voluntary cuts from the big guys in terms of capex, and then we have reports that russia, saudi arabia maybe close to a deal. how does the u.s. filter into all of this? michael: it's becoming abundantly tear that the saudi -- the larger coalition of the willing.

they have all seemingly rhetorically answered the call. anything about russia, what do we need to get them across the finish line? putin once sanctions released because there's been several individuals and many russian corporates that have been heavily sanctioned since 2014. they also want u.s. shale to come to the table. we seemingly got close to their when trump tweeted and put together that press conference. some will say that is a typical trump head fake. others will say it is trump potentially foreshadowing a deal, but make no mistake, it is all contingent on the u.s.. countries have the u.s. as a potential dealbreaker. if they can really stick the landing and get the u.s. on board, we could be on a rough ride back into the low 20's or even into the teens for oil prices. alix: do we get there? saudi arabia and russia can see a quick drop off within oil

production, but the u.s. is going to be much slower to react. can you talk us through how you are modeling something like that? it looks like we might have lost mike tran. it looks like there's some difficulty there with his mic. can you hear me? it looks like we had technical difficulties with my tran. just want to update you on what is happening with oil. part of that is russia, saudi arabia, some reporting that they may be close to a deal. on the flipside, exxon cutting their capital budget to $23 billion. most of that coming from the permian basin. ate cutly see a moder to production in 2020. in the u.s., even if you slow capex, you are not going to

really see or feel that until 2021. that's what they are talking about there. they also say they have the capacity to increase capital cuts if need be, and 2021 is when we will feel the production issues. taking a look at oil real quick on the market, looking at wti about in at $26, but by 3%, and brent crude up by about 3% as well. a broader check in on the markets here, we are able to hold onto two days of gains as you have the s&p up by about 85 points. it was up 7% yesterday. some sectors continue to stay in a bull market. just byin a bear market about six weeks ago. now we are just waiting on the nasdaq, as well as the s&p. in the bond market, taking a look at yields sitting at 74 basis points. bunds getting hit as well. for some, this is been a very

painful period, and for others, it has been a money making period. billionaire investor bill ackman considering selling his portfolio because he was worried about the impact of the coronavirus. in a letter to investors, ackman said "we are worried about the economic and health considerations of the virus. for the first time ever, liquidating the portfolio in its entirety because it was believed that markets would decline materially. -- instead,in ♪ ackman earned about $1 billion in profit when the market turned, so a lucky turn for him. nonetheless, a very scary statement from legendary investor bill ackman. coming up, if you want some fundamental help, you usually want to look to earnings season, but there are questions as to whether that will provide any clarity for you. we will break that down with lauren goodwin of new york life.

this is bloomberg. ♪

♪ alix: welcome to "bloomberg daybreak." i'm alix steel. ands&p approaching approachable market over the

past two days. , also seeing a nice follows her rally. the dollar now per dissipating in that risk on feel, sliding -- now participating in that risk on feel. the vix now comes down. oil holding onto its games. exxon cutting by about 30%. for more on the markets, i am joined by lauren goodwin, new economistinvestments and multi-asset portfolio strategist. usually i love earnings season, and it is a relief to get a good fundamental window into companies. how do you view at this time ?hen we have zero clarity lauren: you said it, we are going to have zero clarity. matters for the market, and especially equity , what do the next couple

of quarters of earnings look like? , they look bad, and they will probably stay pretty poor until we can get the economy back running. a function ofally anything these companies can but rather a function of the macro risk. there's not a lot they can tell us that we don't already know. it begs the question to me, why would one by this rally? lauren: we are not buying the rally. , we were defensively positioned coming into the year and even before because pre-existing witnesses to risk asset like high valuations were very much a play. those witnesses have now been exacerbated by what is going on with the virus and its impact on the economy.

bear markets don't really bottom until the risks that prompted them are solved. while it is great to see some of the bull market characteristic was have seen over the past couple of days, and we are active in the market, we are actually selling into rallies and buying selloffs when data doesn't really justify the extent of the selloff. i don't think we are out of the woods until we see the liquidity and credit and health underlying risks to the economy resolved. fair. i feel like the other thing we have to contend with is removing a huge buyer of the market, and that has been buybacks. goldman sachs had a note out this morning saying that reduced the manned from the principal buyer of shares during the past decade means wider trading ranges, less downside support, and slower earnings growth, not too much and how you find what pe is supposed to be under the circumstances. how do you look at that, and how

much of a long-term effect can that be? typically, when we were looking at the seer, we are accepting about 100 basis points of equity market improvement, seven extra full percentage point of growth for the s&p 500 just from buybacks alone. so the fact that buybacks are likely to be under pressure this year, not only because of the cash flow challenges the companies are facing, but because of a sentiment pressure against buybacks, means that that is going to provide less of a boost for equity markets as a whole. but i think the underlying fundamentals outweigh even that. the lack of buybacks in the market is perhaps just another headwind for u.s. equities over the next couple of months. , what ared on that you buying on the debt and selling on the risk?

how do you structure a portfolio for the longer-term term and also manage the day-to-day? lauren: when it comes to the long-term strategic allocation, it is going to sound trite, but the most important thing in asset allocator can do right now is to think about your overall risk posturing. high levels of volatility to the downside and the upside amplify any active risk you are taking in the portfolio. investors have to be wary of those big moves. that's one of the reasons why we are still defensively positioned in our portfolios with these major risks to markets not being resolved. when it comes to how you manage in the short term, it is all about picking winners from losers. again, it sounds trite, but this revenuee when a zero circumstance is impacting all asset classes. we are underweight u.s. equity and credit, but that is not to say that there aren't

opportunities for investors that have a higher risk tolerance and who can pick those winners from losers. in this case, balance sheet capacity and cash are going to be king for the foreseeable future. i guess it raises the question, what does that balance sheet look like at the end of this? the companies that still survive are going to have to bleed through some cash. there's only so much cost cuts they can do. there's a potential that operating margins will be shifted and potential growth will be forever changed. how do you even structure a model on that? is giving uscrisis a really interesting opportunity to move away from our models. while it can be frustrating and can contribute to some of the volatility, it is kind of fun. you get to bring out your geopolitical risk playbook and think about what the future might look like. cycle comingthe up

out of this virus might really look different from what we have seen in the past. what i mean by that is if we recover in the second half of the year, which is i think what markets are pricing right now, even if that recovery is slow rather than all at once, we might have avoided a painful leveraged stakeout across the board. arehat's the case, then we not simply going to move back into early cycle territory. traditional cyclical sectors like small caps, emerging-market, value stocks may not be as attractive under the circumstances because, as you are saying, balance sheet fundamentals won't have improved. ,o from an investor perspective picking winners from losers is going to be more important than picking the right traditional style box like small caps versus large caps. alix: lauren, really good to catch up with you. always good to get your

perspective. lauren goodwin of new york life investments, thank you very much. we want to give you an update on headlines outside the business world. viviana hurtado is here with first word news. viviana: british prime minister boris johnson is now in intensive care and receiving oxygen. he was trying to shake off the effects of the coronavirus. yesterday, his condition worsened. foreign secretary dominic raab will run the government on a temporary basis and at a crucial time. this week, the u.k. pandemic is expected to peak. shinzon, prime minister abe declared a state of emergency in tokyo and surrounding regions. there's been a surge in the number of coronavirus cases. the emergency will last for a month. it gives local governments more power to contain. the spread of the disease the trump administration -- contain the spread of the disease. the trumpet ministration reaching a deal with 3m to provide masks for health-care workers. it will allow the company to keep exporting some masks from

the u.s. to canada and latin america. earlier, president donald trump blocked those exports. 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've viviana hurtado. this is bloomberg -- i'm viviana hurtado. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, dan tarullo, former fed governor. ♪

viviana: -- with your bloomberg business flash. fiat chrysler setting a new date for reopening its u.s. and canada factories and resume production on may 4. this effectively extends its shut down by two weeks. general motors and ford haven't said when there are some lay lines will restart. tesla is expanding its lineup in china. bloomberg has learned the company will offer a chinese built model three sedan. it has a longer driving range. on one charge, the car would have a range of 104 miles, almost 50% more than the base model three. s keyparts of the world' food prices surging because of the coronavirus outbreak. wheat and rice are making rapid

climbs in the staples market. countries like vietnam adding to the pressure, restricting exports to make sure they have enough food for domestic demand. i'm viviana hurtado. that is your bloomberg business flash. alix: thank you so much, viviana. now we are joined by a special guest -- no? looks like we are still waiting. ok. we are having a lot of technical difficulties this morning. we are going to be talking to steve schwarzman in just a little bit, ceo of blackstone. blackstone donating $50 million to new york for recovery efforts. we will be right back. this is bloomberg. ♪

♪ x: blackstone announcing it

will donate $15 million to new york to aid with the coronavirus. joining me now is blackstone ceo stephen schwarzman. good to chat with you. thank you for that donation to new york state. as the crisis goes on, do you plan to give more? can you give me perspective of how you see that long-term play out? stephen: thanks, alix. it is great to be on. i would say it is very important to support all of our communities. blackstone happens to be headquartered in new york, so we are doing a lot there. this is really the tip of the iceberg for us. we have our portfolio companies doing all kinds of things. we are bringing doctors up from the south to work in new york. we are giving out apartments to first responders.

u.k., for example, we have a facility very much like the javits center in new york to convert into a hospital. i came on reasons today is to let people know that we think at blackstone, i think personally that it is extremely important for each of us in our respective communities to help our hospitals, help our governments, to help the first .esponders people like ourselves, we are not on the firing line. we are behind the lines being protected by doctors and nurses and ems people. ,e have to do things for them provide meals and places to live and other types of extraordinary things. alix: i appreciate that.

thank you. and you do have a good perspective in terms of what is needed, how to move around resources, through all of blackstone's channels. i wanted to get your take on how are the companies you are invested in or have taken over, how are they doing right now? we have anll, extraordinary thing going on. this is the first time that i know of historically where we basically ask businesses to suspend their activities. there are some companies still functioning, but most places where you leave your place of business, they don't function as well. we are basically creating a huge disruption in the business community. adp -- we have gross -- and itroduct

washes throughout society, whether it is governments that will lose tax revenue, the inability to pay people and provide services, and this is happening almost in a mandated way. fortunately, it is going to be temporary, but it is putting stress on every business organization. it doesn't matter whether it is walt disney or macy's. all are looking to find more ways of dealing with their current debt loads, paying their people, trying to keep people on . it is going to result in a lot of disruption and unemployment, as you see. fortunately, it is going to be temporary because the government way,tepped in in a huge

starting out with roughly $2 trillion of stimulus going to people, so if they are unemployed they can have higher incomes than they ever would've expected in an unemployed situation, loans going out to companies encouraging them to hire people, and forgiving those loans for smaller companies if they do. the government has also done a remarkable job with the federal reserve, where they are providing liquidity, and they are going to multiply that to $2 trillion with more loans, and there will be more stimulus after this. i anticipate another $1 trillion to $1.5 trillion. thisthis will do is bridge economy in the united states to get to the point where we can all go back to work physically again. so all companies are under some

strain unless they are providing food or doing certain other unique services. alix: if you could to speak up for me a little bit, sorry, i'm having a hard time hearing with your equipment. that would be super helpful. i want to pivot off of that in terms of what companies are doing. there seems to have been a push by some private equity firms to get some access to some of that bailout money for small businesses. are you on the camp that says our businesses need that support, despite the fact that we are private equity? stephen: i think there are a few different levels of these programs. i don't really know what the criteria are for any of those programs. there are companies that are going to run through the fed

with a lot of leverage, and the smaller companies. it is up to the government to for loans forrms small companies. if they want us to make that available, we will look at some things, but basically, we assume that, for the most part, we've got to solve our own problems. based on that, solving problems and where we are seeing the pricing pressure has really been in, say, leverage loans, clo's, org its backed securities. can you give us a sense as to where you are finding value? are you going to swoop in and buy a bunch of loans right now are mortgage backed securities? stephen: that is a great

question because right now, i ,hink the biggest value necessarily buying new companies , as they say come on the screens. there's a lot of displacement going on. agoe was, we can do have an -- a week and a half ago, panic selling. a lot of securities have dropped significantly. i think there are some very significant investments that could be made, and we are looking at all of those things. at blackstone, we have $150 -- billioninvested

uninvested -- billion ted that we could put to work. we are looking into that. in this business, you can be too early, but you also don't want to be too late. you correctly identified where the action is today, and i think some of those people will look back and say these don't look so easy. we think it could be easy and certain of those areas. in the meantime, though, you are still obviously huge into real estate. are you going to let off any of your renters during this time? we've heard some landlords starting to do that in brooklyn. are you doing that for your tenants? doing withat we are , if people can

show us that they've been displaced or under financial , we will obviously make some kind of accommodation for that. the whole country is going to be months,d the next few and then we will get back to doing business. business isn't quite good shape, actually. that is because we've concentrated in warehouses and office buildings, as well as , and we've avoided develop into almost in its , owning malls where there are a lot of issues with close retailers, and we have a very low percentage and hotels. remains ae for us really excellent asset class.

question to you, steve, we were talking about the distressed areas right now we were looking to get into, but not yet. what about junk bonds? the using the fed needs to come in and buy junk bonds? stephen: that's an interesting question. i actually leave that to the fed. they recently have purchased , even inted securities the new program at the fed, commencing them to go down to gradeto full investment bbb's is a big stretch. junk bonds are a little out of their normal range. i think they will look at that but also skepticism,

within the context of creating illiquid markets. one area they are going to have to do that with is mortgage at theies, with cm bs aaa level and going down a bit. they will find their way. actually willonds be low on their list. alix: fair. unfortunately we have to leave it there, but it was really wonderful to talk to you. thank you so much for your donation to new york state as well. steve schwarzman, ceo and chair of blackstone. much more coming up. this is bloomberg. ♪

♪

alix: welcome to "bloomberg daybreak" on this tuesday, april 7. i'm alix steel. let's take it right from the top. secretary dominic raab tries to reassure the nation as prime minister boris johnson is moved to intensive care in case he needs a ventilator after his coronavirus symptoms worsened. >> we are making sure that we anddefeat coronavirus further steps will be taken. two whole days have passed, and people are wondering maybe he's a little bit worse. throughout this process, they are feeling that perhaps the whole story hasn't been told. alix: experts now protect the country will suffer the peak of its coronavirus outbreak in the next seven to 10 days. the pound has fallen on the news. pres. trump: we could very well do a second round of direct.

it is absolutely under serious consideration. alix: president trump talks about more payments to american, while nancy pelosi says the next stimulus bill will be at least $1 trillion. now it is europe's turn. michael: europe finance ministers holding a conference call today as they continue to work on how to set up some sort of fiscal bailout for countries in the euro zone. alix: japan also working on a nearly $1 trillion stimulus package, and japanese prime minister shinzo abe says spending won't be limited. pres. trump: they are already coming back, and cutting back very seriously. if they ask me, i will make a decision. alix: world oil producers pushing ahead for an unprecedented deal that would include saudi arabia, russia, and the u.s. the u.s. energy secretary held a productive discussion over the phone with his saudi counterpart, while energy companies try to mitigate the disastrous effects on their businesses. annmarie: it is the latest

joining a raft of major producers trying to boost cost savings, and you even think exxon is feeling the pinch, even for them, the collapse in crude price has been so severe. alix: russia and saudi arabia could curb production significantly, while the u.s. is more likely to offer up gradual reductions. in the markets, we have a sort of weird event, a two day rally underway for the s&p. if you break it down by sector, almost half of the s&p sectors have already risen 20%, which means they are in a bull market. s&p not quite yet, but we are getting there. you are seeing the dollar .ollover the bear steepener continues in the treasury market, heaviest here in the u.s. on the long end. we also have $25 billion worth of 10 year notes coming on at 1:00. a little bit iffy three year auction yesterday because of all that supply.

joining me now is julia coronado, macropolicy perspectives founder and president. i want to pick up where steve schwarzman left off. he said the fed might have to think about buying leverage loans, junk bonds, commercial mortgage-backed securities. they may not want to come about they may have to start ticking about it. what do you think? julia: this is a tricky line for the fed. they are not here to save every investor from every loss. there certainly were a lot of leverage loans. they were concerned about the quality before all of this started. they don't want to completely eliminate all discipline and capital markets. they are more focused on getting cash to consumers, getting cash to the high-grade an investment-grade companies. i think that is not going to be on the front burner for them in terms of getting to the junk bond market. alix: it does raise the question, where are the holes

that the fed needs to plug? we saw them backstopping the banks. where are the other holes they need to get into? julia: the other active margins are the main street companies. that is a mandate from congress. they've got to get that up and running. they are working actively on that. then there's the question of the minutes of the bond market. state and local governments are experiencing a severe cash crunch, and they really need money. is a very complex task for them, and they are working on that. the lending backed asset facility -- the asset-backed lending facility, that is another thing they are working on.

we also heard yesterday nancy pelosi apparently learned on a call, talking about another $1 trillion of stimulus. do you believe that number is correct, or what does that number need to be? julia: we clearly need expansion of the small business lending capacity. $350 billion.d we need at least $800 billion probably to satisfy demand. could they expand unemployment benefits or add cash payments for consumers? in terms of the length of the disruption and activity, that is probably likely on the table. it is still open via the federal government and the fed. the other outstanding question is this is not necessarily

congress, but when and how are the markets agencies going to step in and provide this financing for services to get them mandated forbearance that is required of the cares act for consumers? they have been dragging their feet. there's no reason to come up really. they have the capacity and the ability to step in with that financing, and the sooner they do that, the better. that point, it feels like they are in the business of truly backstopping investors. is this now solidifying the unofficial mandate from the fed? between fiscal and monetary policy has definitely blurred, and i don't think we will ever be the same again. there's a lot of lines that have

been crossed. i think this was a severe global shock. there's a lot that needs to be done to stabilize the economy, but i don't know how we put that genie back in the bottle. i think there's going to be a lot of evaluation as we move forward as to which tools stay in the toolkit and which get put back on the shelf, but we certainly know now what the fed can do when the chips are down. going to be a lot of trying to go back and put afterure on all of this we get through the crisis. with the meeting of european finance ministers today, there's a host of things that are already there. the european stability mechanism, outright transmissions, a lot of things being floated like the guaranty fund, unemployment program, supplementary lending. i could go on, and then joint bonds.

what should they do? what will they do? julia:julia: obviously with europe, there's a whole other layer of complications in terms tion of riskliza across the euro zone. one of the things and all of these exercises, whether it is the fed or the ecb, is the operational and legal complexities required to work through in terms of getting these things from concept to actual cash flowing. most of the cash is still not flowing. meanwhile, unemployment is decliningnsumption is , we are starting to hear the of getting things going again, so the crunch is still very real despite all of these planned efforts and the operational feasibility is one of the considerations that is very much front of mind right

now for the ecb and the fed. a piece in "the ft" today saying it would actually widen the risk between the north and the south, the peripheral countries and the countries that really took care of their budget deficits, and that that would be even more anti-euro in the coming election. what do you think? i'm not sure i agree with that. mechanismld it be the that imposes a kind of eurozone wide fiscal mechanism and discipline, and provide a structure for that mutualization of risks? i think it is a positive direction to go in. alix: what kind of program to you think we would need?

what kind of bank you are a, or would beof stimulus needed to help get europe back up on its feet? julia: i'm not sure i have a great answer for that. detailed look at the eurozone and the needed size of is stillabilities unknown. it depends on how far the disease reaches, how well we get , what iscontrol available to manage the restarting of operations. so i don't have a great answer for you there. i do think it needs to be large. i think despite market optimism, we are going to be in for a pretty protracted decline in activity. it is not going to be easy to restart these economies, so i think that policymakers shouldn't be overly complacent

and should err on the side of .oing big stopping and restarting the global economy is going to be far from an easy task. my finalch leads me to question. what are you forecasting for u.s. gdp and/or global gdp for this year? julia: we have u.s. gdp down 4.5% for the year, which is more than we saw in the great recession of 2008 and 2009. we do have the growth restarting going tot we are not make up for lost time. loss is the output lost. we expect to lose 30 million jobs in q2 and only regain about half of those by year-end. we are still looking at

double-digit unemployment by , so for all that the fed and ecb and others are doing, i don't ticket is going to be easy to just flip the switch and get everything back to normal. i think it is going to be a longer, more protracted painful process, with bumps along the road. alix: thanks so much. really great to catch up with you. julia coronado of macropolicy perspectives, thanks so much. coming up, we will talk about what is happening in leverage loans and the opportunities in credit. winnie cisar, wells fargo securities head of credit strategies, will be joining us. this is bloomberg. ♪

♪ alix: we saw credit markets practically screeched to a halt over uncertainty caused by the amendment. investors found few havens, but have we finally found some stability? winnie cisar of wells fargo securities, head of credit strategy, doing to me now. e: we have been fairly constructive on the higher quality parts. we thought that the first move in this market volatility was very much associated with liquidity rather than fundamentals. now we have transitioned to the point where it is going to be

all about fundamentals. while we are not saying sell everything in the leveraged finance side of things, it is clearly not time to step in and you have thet, as fed very much backstopping investment grade through its three programs with issuers. alix: does that mean you just have to buy what the fed is buying and be aware of any fallen angel potentials? winnie: i think there is some atortunity to take some risk the front end of the ig market. that is where we look to put our beta trades on. the transition is going to be pretty bumpy, particularly if investors are not in their typical seats, and having some liquidity issues in the markets.

pollinators -- generally, pollen angels over the long term ash generally, fallen angels perform well over the long term. if you get access to capital to at least pay down that short-term debt, that can sometimes reprice the longer part of the curve, so we are not writing off fallen angels in their entirety, but investors have to be very aware of how fallen angels are going to begin to reprice the higher quality segments of the high-yield market. alix: is that going to be sector specific or company specific at this point? winnie: we do have a sector strategy, and the sectors that we are more constructive on are clearly the ones that are going to be a bit more defensive. however, company specifics really do matter. credit investors who have a keen specific on analyzing

credit fundamentals are the ones that are going to be able to really outperform in this market volatility. we think that having that issue or specific analysis first and foremost is going to be crucial for portfolio performance. if you are an investor in looking at the next six to 12 months, how do you know when it is going to be the right time to actually start putting money to work? what kind of indicator are you looking at? if you look at the spread of high-yield versus investment grade as opposed to the s&p, high-yield implies a lot more downside. winnie: it really does. i think that within high-yield and leveraged finance, you have to look for a few things. first, you have to see the new issue markets begin to be more forptive to higher leverage more storied names. we have seen a little more issue

come through the leveraged market, including some companies in these more stressed sector like restaurants. we think that is an encouraging sign. but in order for us to say let's go wholesale overweight high-yield, it is time to buy everything, you have to see ccc's, energy and discretionary trading at prices that you feel are close to recovery levels. we do think there is going to be a pretty significant default cycle in the next 12 months, so the sectors i just mentioned are clearly the ones that are going to be under the most pressure. we are really looking for continued prices to reflect what we think are appropriate recovery levels because that is really where investors can start to get in and see some very solid upside opportunity. in the meantime, we are very much focused on curves for higher-quality yield issuers

inverted or flexed significantly. alix: inverted or flexed winnie, thanks a lot. winnie cisar of wells fargo, think very much. coming up, americans skip homeland payments. we touched on this with steve schwarzman. we will look into more distressed areas next. this is bloomberg. ♪ this is bloomberg. ♪

viviana: you are watching "bloomberg daybreak." its capexl slashing by billions of dollars to about $23 billion. there will be a 15% cut in cash operating expenses. like all energy companies, exxon being hammered by a drop in demand because of the coronavirus outbreak. samsung posted

better-than-expected profit in the quarter that just ended. the south korean electronics company's cloud business soaring, and there is hope that internet usage from people staying at home will keep rising, and that could offset the drop in demand for smartphones and other consumer electronics. americans hurt by the coronavirus pandemic are skipping home loan payments. they are in talks with the trust that own the mortgages to buy them. funds are looking for a big discount. among the bargain hunters, elliott management and appaloosa. that is your bloomberg business flash. alix: thanks so much to mother yana -- thanks so much, the fianna -- thanks so much, viviana. basak.e on that, sonali walk me through what you learned in your reporting. sonali: lots of people are starting to look at the mortgage market pretty significantly.

the last two weeks, we saw a lot of these mortgage trusts come in with a lot of pain, having to face margin calls from banks, and having to raise cash to pay off some of those margin calls. initially, what i've been hearing from my sources is that a lot of these hedge funds wanted to buy org its bond portfolios at a discount, and we did see some sales in the last .ouple of days but then also, we are hearing that a lot of other firms are in a lot of distress, trading at a fraction of their book value, very highly levered and seeking rescue financing deals that will come at a very steep cost. not only that, but the funds that want to buy them, can you technique through what their cost profiles are like? they don't have exit strategies for their current investments,

and i am sure the markets close for them as they want to sell to get the cash. are these guys just sitting on tons of money? sonali: some of these are deep-pocketed folks already with a lot of dry powder. you see apollo is one of the players here. you see oaktree is one of these players. appaloosa, elliott. you see people in a very good position to enter this market at what they see is very cheap prices that might rebalance significantly. they are looking at returns of 20 to 30%. if you don't have money already, you are probably not able to enter these trades. but with that said, because there are a pretty hefty list of buyers, all of them have different cost to capital, so let's see how much they are really able to get that for. alix: 20% to 30% returns, that's huge. sonali pesek, thanks so much. excellent reporting. coming up, one hot wall street we just sort of talked about in

terms of whether the fed should or can buy mortgage backed securities, but also, what to they do about banks, their dividends and buybacks? we will break it down next. this is bloomberg. ♪ to help you stay informed of the latest news

just say "coronavirus" into your xfinity voice remote to access important information and special reports from around the world. and to keep your kids learning at home, say "education" to discover learning collections for all ages from our partners at common sense media, curiosity stream,

history vault, reading corner and many others. for more information on how you can stay connected, visit xfinity.com/prepare. yeah. this moving thing never gets any easier. well, xfinity makes moving super easy. i can transfer my internet and tv service in about a minute. wow, that is easy. almost as easy as having those guys help you move. we are those guys. that's you? the truck adds 10 pounds. in the arms. -okay... transfer your service online in a few easy steps. now that's simple, easy, awesome. transfer your service in minutes, making moving with xfinity a breeze. visit xfinity.com/moving today. alix: welcome to "bloomberg daybreak." i'm alix steel. markets holding onto the gains we saw.

about half of the s&p is now in a bull market, up 20% from its lows. the dollar has continued to rollover. waiting to see what we will get out of the euro area finance ministers meeting. we get a bunch of supply coming online. the dollar extending its drop. the bloomberg dollar index looking at a daily drop of 1% and crude trying to find support. exxon mobil cutting by 30%. this raises the question of has the fed done enough, what more can they do? we have been asking this question all morning. they have taken steps to stem the pandemic -- to protect the public from the pandemic. earlier i spoke to steve schwarzman on the action the fed may have to take. steve: the fed will have to go from aaa's to full investing

great is a big stretch. are out of their normal range. i think they will look at that with some skepticism. alix: joining me now is daniel tarullo, former fed governor. board ofmember of the governors responsible rate regulating financial institutions. will havenk the fed to expand its balance sheet more and by things like junk bonds? fed is i think the surely going to have to expand their balance sheet further, probably substantially further. the issue is to what kind of assets they buy or lend against is one they are not going to make on their own.

under their authorizing legislation, which was reemphasized by congress in the cares act, the fed is not supposed to take losses on the emergency lending it does. the question of how far to extend will in part due to the greek degree -- will in part due mnuchinegree secretary will use the funds congress appropriated to back assets, some of which might entail greater losses than things like investment grade corporate paper. the question has an economic component. is important for the fed to do that? secondly, to what degree does treasury want to allocate the funds it has to back assets where they could well take losses rather than provide insurance money.

alix: what do you think? if you are still on the fed would you be advocating the fed to take on more risk if it was backstopped by the treasury? , i do not this crisis think there is much question that the fed can and should take more risk than it did in the great financial crisis. if you will recall, and the great financial crisis, not a single fed facility had to dip into the treasury money that was used to backstop it. there were some problems with some loans, but the income from others more than offset that. this time around, given the breadth and rapidity of the problem, i would say particularly for things like main street facility, which is presumably going to be coming on board, they need to contemplate

their maybe losses. those losses are supposed to be backed by treasuries. i think the fed should be prepared to set up a facility that is not profitable on net so long as they are reassured by the equity which treasury has put in. alix: when you have things like mortgage servicers wanting to be backstopped by the fed, making payments when people are not paying their mortgage payments, or private equity thinking the businesses they own should get access to the small business loans, it seems like you are saying you would be open to all of that as long as the treasury stepped in and gave the vet permission because this is an extra ordinary time. in my reading you right on that? daniel: the fed will still have to prioritize. 450 $4 billion is a lot of money. it is not an unlimited amount of

money even as it gets leveraged. i did not think this is a question of saying the fed can or should step in to back everybody. it is a matter of the fed in consultation with treasury deciding where the most important areas for the economy are. this raises a larger question. several of your guests have mentioned leveraged lending this morning already. 2013,ll recall that in the banking agencies put it in guidance that try to limit the amount of leveraged lending, at least the highly leveraged lending taking lies. there was a big cash taking place. there was a big gash taking plight -- taking place. there was a big push back against that. we are seeing what happens when there is not guidance or

regulation for the migration of risk to highly leveraged short-term funding entities. that is something that the fed has to address now because of the present problem. we will have to address it after the crisis. alix: that sounds like more regulation or restrictions. is that what we will learn from the crisis? daniel: i think so. people have been saying for years that there was going to be migration of risk precisely because the banks had been made stronger and are required to hold more capital. we have seen that migration of risk. we have seen repeated reports about leverage markets, collateralized loan obligations, problem for funds that holds liquid bonds. there has not been anything done to try to address those risks. although this is not the time to

debate what should be done, this is the time to stabilize markets and to help the economy, just as after the financial crisis we had to ask about bank regulations. after this crisis we will have to act -- we will have to ask about nonbank regulations. alix: many have been talking about that for a while in terms of the rest. itying on banks, in europe has basically put the composite on buybacks for banks. you think we should be doing the same thing in the u.s.? daniel: i do. banks have been a source of strength rather than vulnerability as we enter this crisis, and that is a good thing. it is precisely now, when the banks are strong, but where there is enormous uncertainty as to how long problems will continue. as julia coronado said they may come back periodically.

now would be the time to husband banks capital. this goes back to something we thought we had learned after the last crisis. you remember when some of large banks were continuing to pay out dividends in the middle of 2008. all of the bank capital is needed as a buffer for losses against this crisis, but we do not know. it all needs to be done together. all of the banks need to have it done at the same time so there are no signal sent about any individual bank. i think it would've been appropriate for the fed to use authority to require all of those larger banks to submit new capital plans in light of the dangers and risks we are seeing now. alix: interesting. they are living the stress test but can still be stressed.

i have a question from a viewer. how large do you see the fed balance sheet growing? you mentioned it would get larger. considering we are up by $1 trillion in two weeks, the numbers are enormous. can you give me an idea of what you would be thinking about? daniel: this is pure guesswork, as i think it would be for all of us. i do not think anybody should be surprised to see a doubling of the fed balance sheet. depending on how severe and how long the problems continue, may be more than that. alix: that would be enormous. the follow-up question to that is what kind of letter recovery d.c.? see?covery do you are you looking at something like an l shape or a long you shape? e? a long u-shap daniel: so much of this depends on the epidemiology rather than

the economics. we are amateurs in economics on some level. if you look at the depth and the speed of the decline, as you probability that we will have continued social distancing measures of some sort, continued restraints, even after the initial acute phase of the epidemiological crisis is over. when you look at the fact that the tools, both fiscal and monetary will of been stretched to their limit to contain the crisis, it does seem to me that it is just as likely we have a somewhat slow, painful recovery a classicwe have v-shaped recovery. i would not predict that, but it seems that while one can hope for a quicker recovery, and public policy terms one should

be planning for something which is a little bit like a flattened but a upe not an l, where the right side is flattened. alix: we are running out of letters. great to catch up with you. daniel tarullo, former fed governor. we want to give you an update on what is making headlines outside the business world. viviana hurtado is here. boris johnson is now an intensive care and receiving oxygen. [no audio] alix: looks like we are having some audio problems with viviana. coming up, we will be talking to matt gallagher, ceo of parsley

energy. one of two energy companies calling for a 20% output cut as saudi arabia and russia inch closer to a deal. this is bloomberg. ♪

viviana: this is bloomberg daybreak and i'm viviana hurtado you're looking at the principal room. power,"p on "balance of new york's lieutenant governor.

you are watching bloomberg daybreak. i am viviana hurtado with your bloomberg business flash. date for reopening of its u.s. and canada factories and resuming production on may 4. this extends the shutdown down by two weeks. general motors and ford have not said when there shut down -- when there shut down factories will start. bloomberg has learned the company will offer a chinese -- it has a longer driving range. the car would have a range of more than 404 miles, that is 50% more than the range of the basic tesla model three. for the first time, billion are investor bill ackman considered liquidating his hedge fund portfolio because he was so concerned about the coronavirus. opted forill ackman another strategy and bet on a credit hedge. when the market plunged, it

earned $2.6 billion in profits. i am viviana hurtado. that is your bloomberg business flash. thanksso much -- alix: so much. time for bottom line. today we will focus on energy. joining us now is matt gallagher , ceo of parsley energy. parsley is one of two permian producers, along with pioneer, going to cut 20% if everyone does as well. good to chat with you. let's pretend saudi arabia and russia come to some kind of deal. it is hard to get 6000 shale players to agree on something. how much would you be willing to cut alone? matt: good morning. it is great to be with you. we are calling for a 20% cut in the state of texas. that might not be enough. what we need is a symphony of solutions. operators have to do their part, we have to cut.

states need guidelines. be in an orderly fashion and fair across the board. other countries need to pitch in , canada, norway, mexico, brazil , and opec-plus needs to come to an agreement. it looks like they're willing to talk to each other again and then he dramatic cuts as well. everybody needs to pitch in. this is truly a global problem and we need a global solution. alix: i chatted with scott chatfield last week and i asked how much you cut on year-round. he did not give me an answer. can you give me an answer on how much you're willing to cut on your own? would definitely be willing to adhere to 20% if they land on that number or a larger number.

capexe already cut our we on a go forward basis and have lower producing wells -- even though 90% plus of our wells -- some of the lowest operating cost in the country. this allows us to get out and look at the long-term impact of what is going on right now. ,f we do not get a global cut we saw we could go pricing at $12 a barrel -- united states -- we would basically be exporting those jobs long-term to opec countries. those jobs will not come back. the service industry will be crushed and devastated and they will have no access to capital.

their cost of capital will increase over the next 12 to 24 months. domestic producers will not be able to compete on a global scale. alix: those are staggering statements, no doubt when you have exxon putting 30% of its, that could turn out to be true. what needs to be cut? can you give me a perspective on what you see as the supply and demand imbalance? you are looking at global 30% cut? what do you think? higher as the response to the covid-19 grips the entire planet. it was 10 million barrels a day and then 20 to 25 and people thought they were out in front on those estimates. we are seeing the latest estimates of 30 to 32 million againstand demand drop 100 million barrels of global demand.

30% of short-term demand impact. 14 million barrels of saudi oil on top of their historic import rates. we cannot allow -- secretary perry did mention a 60 to 90 day pause on imports as things stabilize. that is something the president needs to look at and look at --t pause, especially alix: when you take a look at the broader market, how quickly can you guys shut something in? the rhetoric is russia and saudi arabia can shut something in quickly, but will be difficult for shale producers to shut it off. can you give me insight into that? matt: i challenge that view. we have a great team in the field.

we have live data, live dashboards. our workers get out every day. within a week we would be able to constrain production and adhere to volume curtailment. you can stem the flow of the wells. there is an unknown impact on the other site of what that will do to the reservoirs. these are unconventional reservoirs that do not have water mechanisms. we think they're fairly resilient to conditions. we will be able to bring them .ack over time alix: we will have to leave it there. i apologize for my daughter singing katy perry in the background. matt gallagher, parsley ceo.

we will have to check back with you to get any final details on that. much more coming up. are we actually in a bear market bottom for the nasdaq? we will break that down. this is bloomberg. ♪

alix: time for technically speaking. we are joined by mike mcglone. have we hit the bear market bottom for the nasdaq? what do you see? mike: it is probably do or die. the first chart shows the market at the first solid resistance. if it is a bear market, responsive sellers should be coming out. its 50%aq just reached retracement of the full bear market of the full correction. problemhite line, the is the nasdaq underperforming

the s&p 500, which is a bad sign. for the bull market, the nasdaq outperformed. a sign of recovery in the s&p 500. alix: what does that wind up meeting. you not alone in that, there are a lot of guys saying this is not fundamental buying. can you extrapolate the nasdaq to the broader s&p? mike: the broader s&p broke its trendline for the entire premarket -- the entire bull market. line, note on the bottom the significance is we are looking at markets this year that has been a massive correction. if we look from the future, 2020, the beginning of a potential recession, the market only corrected 52% -- 15% on a 52 week basis. what i expect is more rational bear market type trading which means you sell rallies and should expect responsive selling at these levels right now. alix: appreciated.

mike mcglone joining us from bloomberg intelligence. taking a calm approach to the equity rally we have seen. that wraps it up for me at "bloomberg daybreak: americas." coming up on the open with jonathan ferro, bob michele. we are seeing a strong rally overall, s&p futures up 84 points. still seeing a selloff in the bond market. up eight basis points for the 10 year. the bear steepener continues as the dollar continues to rollover. a risk on currency like the swedish krona taking a spotlight. this is bloomberg. ♪ nowadays you do more from home than ever before.

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jonathan: from new york city for audience worldwide, good morning, good morning. "the countdown to the open" starts right now. let's begin with price action. the cash open just around the corner. equity futures shaping up as follows. the s&p 500 advancing 89 points, up 3.37%. equity futures looking good. a better market, better data. better health data. countries across europe showing improvement. even in the united states. i should highlight that it is early days. i should emphasize that things can change. i think we can say with confidence that the mitigation efforts in united states and across europe are starting to work. the unknowns remains the same. when can the economy reopen? how much of it will reopen?