♪ >> good morning from london. manus cranny joins me from dubai. these are today's top stories. donald trump temporarily halts funding to the who. he says the organization took china's coronavirus claims at face value. global cases approach 2 million. goldman sachs, citigroup, and bank of america reporting. provisions on covid-19 will be watched.

the pboc cuts medium-term borrowing costs again amid expectations for further easing. holds a virtual spring meeting. welcome to daybreak europe. emerging markets are very much in focus with the imf meeting. what a dire warning on the great lockdown recession. this is a bank of america survey. the pessimism with cash levels at their highest since 9/11. globalinvestors expect a recession in the next year. manus: the question is, our markets prepare for that? we woke up to a world which is driven by unilateralism over multilateralism. the halting of payments to the world health organization, the policy in the g7, unilateralism

within the united states of america is alive and well. theavorite line apart from 450% increase in provisions of jpmorgan is from howard marks. a healthy fear of loss in the market has been taken away. we've got results. forfirming the guidance 2020. that's a big call. nejra: the red headline is that asml is refraining from giving guidance for the second quarter. 2020, twoll year weeks ago it cut its revenue outlook and help to did share as there were supply chain problems. two euros 40 per orderly share. the demand outlook is unchanged. that is something crucial to note. from guidanceng

due to increased uncertainty. perhaps concerning for investors there was so little visibility going into earnings. we need that guidance. they are refraining for now. they said revenue would shift to the second and third quarter of 2020. we will speak to the ceo later this hour to get more details on that. with all the doom and gloom that came out yesterday from the imf, the bank of america survey, it seems that equity markets are shrugging that off. one month high for european and asian equities. it turned around from earlier in the session. u.s. futures on the back foot. european futures recouping some of the losses. we are seeing the dollar index pretty much flat. the aussie dollar underperforming. the yen is also gaining. consumer confidence in australia slumping to a record low. the 10-year treasury yield.

oil regaining a little bit of ground after a 10% slump yesterday. president donald trump temporarily cutting off u.s. funding to the world health organization. china'sed it of taking claims about the coronavirus at face value and for failing to spread -- share information as it spread. the u.s. is the biggest single funder. it has contributed $900 million to the operations. pres. trump: today, i'm instructing my administration to halt funding of the world health organization while a review was conducted to assess the world health organization's role in severely mismanaging and covering up the spread of the coronavirus. joining us now from new york is annmarie hordern. great to see you.

run us through the details. unprecedented move by a u.s. president during a pandemic. talking about cutting off funding to the world health organization. he is saying that the world health organization took what china was reporting at face value and they failed to share the information about the spread. the united states is the biggest member in terms of funding. is this actually going to happen? congress are the ones that are authorizing these payments. it's unclear whether this whole thing is actually going to happen and whether president trump has authority over this. we heard from the democrats. they have denounced this decision and said the president lacks legal authority to do so. they call it a desperate attempt for him to deflect blame. we've yet to hear from the world health organization. we did hear from the u.n. secretary general. he said that later run would be a time to investigate how the pandemic spread, now is the time to have unity.

he said now was the time that we need the funding critically for the world health organization and other humanitarian organizations. manus: thank you very much. tracking the world health organization. the imf says the current downturn could be the steepest in the century. they are urging policymakers to avoid the mistakes of the great depression, ramp up the post pandemic stimulus in what they are calling the great lockdown recession. our baseline is that the crisis, the epidemic will become to traded in the second quarter for most countries in the world. containment- measures will become to traded in the second quarter. there will be a gradual removal after that. we will see initial signs of recovery in the second half.

we also have more adverse scenarios. manus: let's talk about ways you see that more pronounced. is that led by countries like china, like the united states? is it a first-in, first-out situation? how do you expect this to build in the coming months? >> china was the epicenter of the pandemic and it was hit severely in the first quarter. we have a very deep contraction for china in the first quarter. we are seeing signs of recovery. it is not business as usual. for china's growth, what matters -- it matters what is happening in the rest of the world. there are still severe lockdowns in many parts of the world. that could be extended. emerging markets are still at the beginning of this whole pandemic. for the global economy as a whole, it matters a lot what is happening in the world. our baseline is right. most of this will be concentrated in the first half and we should start seeing strong recovery starting in the second half of the year. >> on the forecast come in an

environment like this, how difficult is it to throw at a forecast when you have no precedent right now for reopening and establishing normalization? >> this is unprecedented. we like to rely on historical data and analysis to come up with our projections. when you don't have much data, that's very hard to do. when you have a shop like a housing crisis, that is something that we know about and have seen in the past. here, we have to rely on public health officials to tell us how the virus will evolve, what kinds of therapeutics might come about. this is very difficult. you -- that as long as containment measures are in place, some sectors will be more severely hit than others. travel, tourism, entertainment. if you are a country that relies on the sectors for growth coming will be badly hit. this is not just a health crisis. this is a financial crisis and a

commodity price collapse. vulnerabilities are magnified. complex set of crises to think about. >> i don't think we really quite understood the shop to em yet. i don't think we have seen the way -- the shockwave through em and back into the global economy just yet. what are you expecting to see play out in emerging markets in the coming months? >> i see that as a very major downside risk to our baseline. things could get worse in emerging markets. we are assuming in our baseline that emerging markets will have a more severe health crisis than what we are seeing right now. but not at the same level as what we have seen in the euro area or the u.s. in terms of containment measures. that could change. that could be very different. it's not just the health crisis. we have a collapse in external

demand. we have a big reversal in capital flows coming into the economies. exposure, a commodity you have a major drop in commodity prices. they are starting out with more fragile health systems, very high death levels. these can compound the problem. i think that is one area where the downside risks are severe and why it is very important for the international community to pay close attention to emerging markets and low income company -- countries. nejra: that was the imf chief economist talking to bloomberg's jonathan ferro. coming up, earning season getting underway. stocks missed -- mixed. this is bloomberg. ♪

♪

manus: [inaudible] what are we absorbing this morning? china moving on the mlr. that is in play. asian stocks with gained. imf working about e.m. risk. about theessimism economy is at extreme levels. catches at the highest level since 9/11. the rest of the market is also seeing 10 year government bond yields. i huge pickup and three-month paper. we will talk about that later. a dash for coverage. fx market, the dollar rolling over. some relief in the oil market this morning. a little bit of yen strength.

let's get to our guest host this morning. great to have you with me this morning. what the imf is thinking about. the worst-case scenario is a ,ingering and rolling lockdown a return of the rolling lockdown. do you think equity markets are riskred for or pricing the of rolling lockdown? jim: can you hear me? can you hear me? it is manus in dubai. jim: i can hear you. manus: ok. we will fix the side issues. in the meantime, we will take you through a little bit of what's going on in the markets.

i think the risk of a lingering and return to a rolling lockdown, let's check in on the markets. here you go. this is what we have for you in terms of the equity market this morning. trying to absorb the implosion of 3% in global growth in this year. to imf warned -- think back 2009. that was a contraction of 0.1%. economyey say that the will grow by 5.8%. nejra? nejra: it's really interesting. one thing that i would comment as well as that there is a great story on the bloomberg talking about the fact that investors and traders seem to ignoring a lot of the data and actually just focusing on the potential rebound at the end of all of this. jim mccormick is with us. i hope you can year me. i want to put that question to you. you point out in your latest notes the divergence between

growth assets and the global compass it pmi. is this a market that is looking through bad data and focusing on the rebound at the end of all of this? jim: yeah. listen. we had gone neutral three or four weeks ago. a 25% increase in the s&p 500. month forward ceo is very close to its all-time high. it's a worry here that there has been good news. there's good news around the virus. there's good news around policy. you have to recognize that we are living in the weakest growth in many years. we are worried about that. manus: good morning. hopefully it is easier going now. contraction of 3% this year.

assets -- the imf says contraction of 3% this year. remind our audience, 2009. 1/10 of 1%. your growth asset is not even pricing a mild recession. last week, everyone told nejra and i, nobody capitulated. does your growth asset need to reprice? jim: yeah. listen. i think it does. said, there is a lot of uncertainty about what the recovery looks like. is, we are just at the very beginning of will be a very weak period of growth, a terrible period for earnings. we are more negative. i don't think that we will touch new lows in this cycle. i certainly think 25% rally is

too high. nejra: yeah. we've been talking about the bank of america survey through the hour so far. investors at the pessimism in terms of cash levels. the key risk for them is credit default. do you still see that as a key risk, despite the latest moves from the fed to stop buying junk debt? certainlynk the fed has been very helpful to the credit market. it is quite remarkable that it was only three weeks ago that the fed didn't have capacity to buy any corporate debt. the fed is only buying high-yield debt that went high-yield over the course of this crisis. sizablegoing to be a default cycle in this economic cycle. we don't think that credit prices enough of that risk in. look about relative crisis -- credit pricing dude activity.

it is priced as though this is the 2016 many global slowdown. it is clearly not. manus: i ask you then, picking up on what howard marks, a wonderful op-ed piece written. investor, as it were. markets need a healthy fear of loss. the fed backstopping literally everything including junk in your trunk, they have removed a healthy fear of loss. i think more importantly, the market, they have ripped that out. that's what brought real fear in 2009 which was market to market realistic asset prices. jim: listen. i do have some sympathy. i've written over the last three years, central banks have

distorted a lot of financial markets. there was certainly a case to be made that central banks needed to come in and sort out some of the dysfunction that was occurring back in the middle of march. by now, look at asset pricing. it does not reflect the economic reality. is that reason for that activity. you want the central bank to be active. you want governments to be active about fiscal policy. mucher there has been too relative to what we need right now. our guest stays with us for the hour. we will get back to you when a moment. coming up, jpmorgan and wells fargo set aside a staggering amount of bad loans. we look ahead for results from goldman sachs. this is bloomberg. ♪

nejra: this is bloomberg daybreak: europe. manus cranny in dubai. let's get to bank earnings. u.s. lenders grapple with an economic standstill. a staggeringe amount of capital for bad loans. jpmorgan and wells fargo hosted their highest low loss provision in a decade, setting aside more than $12 billion to cover default. droppingreported a job first-quarter provision of a $.3 billion. in 2019, it's a $6.8 billion increase and a jump of four -- 450%. goldman sachs is reporting today and we will be watching out for low loss provisions but also its trading income which is expected to rise 3%.

we spoke to the cfo was wells fargo -- of wells fargo. >> as it relates to loan losses, that's right. there's a new accounting standard that came in in this quarter. our provision isn't terribly different as a result for this quarter. estimatione of loan but we analyzed our allowance under the old gap and under the new gap and came to a similar outcome. the difference in this quarter is that you are estimating the a the assumptions about capacity, gdp growth. the path of things like unemployment. home price depreciation, the s&p, a variety of things. you are estimating the impact on loans you have on your books. loadingainly front end

what the loss content might be if those particular scenarios play out. it is so early in the process. the facts have changed on the march as banks were closing their books. folks are doing their best. scenarios, running that through models, and setting aside the right amount. that's a big piece of this. mccormick is still with us. how are you factoring your expectations for earnings into your overall strategy? jim: yeah. listen. i think earnings like gdp, as we heard from the imf, are a moving target. it could be anything in the second quarter. do isk the best thing to

earnings. those jpmorgan -- provisions are 450%. how far away are you -- you see that provisioning in the first quarter of this global close down. how far away are we from systemic issues? does that not apply? jim: unfortunately, i can't hear you very well. nejra? manus: how concerned are you, given the profits that we have seen from j.p. morgan? given the profit and provisions we have seen by j.p. morgan. how far away are we from a systemic risk in banking?

i've said this from the very beginning. distinctionr between this crisis and 2008 is that it is not a banking crisis. we fixed the banking problem by capitalizing banks quite substantially over the last 12 years, by putting in a lot of regulations. about therry so much global banking system. timeme in for five months if it is still completely strut. if you're talking about a three month economic shutdown, i don't worry too much about banks. i worry about other parts of the economy. i think banks will be ok. manus: thank you very much. [inaudible] up, a look at the

semiconductor industry and how it has been affected by the coronavirus. our supply chains holding up? ceo of asml. ♪

♪ manus: good morning from dubai. it is daybreak europe. your top stories this morning. donald trump temporarily halts funding to the who. he says the organization took china's coronavirus claims at face value. global cases approach 2 million. bank results ramp-up with goldman sachs, citigroup, and bank of america reporting. provisions on covid-19 will be washed out.

jpmorgan set aside the most cash in a decade. the pboc cut medium-term borrowing costs again amid expectations for further easing. the imf urges post-pandemic fiscal stimulus as it holds a virtual spring meeting. nejra, it is daybreak. good morning to you. it's about that survey we have from bank of america which is when we reach these extremes, you wonder whether the capitulation really has ever been pessimism about the damage to the global economy. good morning. nejra: absolutely. when you talk about peak pessimism, what we are talking about is cash levels at the highest since 9/11. equity allocations, the lowest since 2009. a record 93% of investors seeing a global recession over the next year. you have the very grim outlook

from the imf as well. what is interesting is the focus on emerging markets. we had a line come through from emmanuel macron saying that african countries debt moratorium is essential. a peek from the premise of ethiopia a few days ago saying what africa's economies need to survive coronavirus is a fast restructuring of debt. perhaps that is something that will come into focus at the imf meeting as well. yes.: it may well do. encouraging debt forgiveness or a moratorium on debt payments at the moment. we will come back to that. have a look at global equities. you are looking, back in bull territory despite the pessimism of of investors. the market charging ahead on gold. gold stocks moving at a

seven-year high. the g7 backing more dollar liquidity. limited the moratorium on debt. what does that mean for the dollar? what does it mean when they buy junk? what does it mean in terms of the rolling over? and in terms of the rest of the markets, pete olson market -- focus. 19%, the highest since 2010. the highest amount of buying since 2010. did the aussie's get ahead of themselves as we wait for the china data later in the week? that's the state of play on the markets. let's talk about asml. you have a number of different issues at play. , refrainingraining from giving guidance for the second quarter and for the full year.

we will come to that in a moment. we have to get an update on coronavirus. nejra: exactly. coronavirus related deaths in europe now past 50,000. some signs of stabilization. european leaders planning strategies for lifting the lockdown. angela merkel will ease restrictions in germany. the european commission has drafted a proposal to court make moves across the continent. donald trump has temporarily cut off u.s. funding to the world health organization. he accused it of taking china's claims about the coronavirus at face value and failing to share information as it spread. the u.s. is the who biggest single funder. a contributed $900 million to the organization's operations in its current two-year funding cycle. >> i'm instructing my administration to halt funding of the world health organization assessesreviews and

the world health organization role in severely mismanaging and covering up the spread of the coronavirus. manus: let's turn our attention back to asml. first quarter results are in. the semiconductor maker has refrained from giving guidance for the second quarter. blaming covid-19. the company says that michigan uncertainty will impact their manufacturing capability and the supply chain as well. the ceo joins us now. ceor when it, seo know -- of asml. demand implosion in the first quarter. what i need to understand from you, are you still in the demand delayed camp? with the demand that we saw dissipating in the first quarter , will it materially come back in the second quarter?

peter: yeah. you have to look at it from the following point of view. the delay is an accounting delay. it's a bookkeeping delay. machines actually shipped. you can say from a demand point of view, we're still pretty strong. the fact that we have revenue delay has to do with the fact that our customers wanted our most advanced machines. very quickly because of all of the logistic issues and serving issues around the world. don't to the final test which lead to revenue recognition. don't do these at your premises. doing it our premises. there's a few months delay where we can recognize the revenue. the underlying shipments are there. this is also what we are seeing today. the underlying demand for our product is still pretty healthy. as you said, we have significant concerns about the ability of

our supply chain to keep shipping us the products. until now, we have been doing this reasonably well. globe.ns across the you are finding out that parts need to be delivered to us and are suddenly in lockdown. that creates a highly uncertain situation. this is the reason why we have a pretty good demand profile. ,ince we don't know whether throughout this year, we will be able to get all the materials to manufacture the machines, that's why we are refraining from guidance. nejra: make sense. great is because you this morning. what does that mean for the prospect of a restart of the buyback program in the third-quarter? peter: yeah. we will take it quarter by quarter. i don't have a crystal ball. nobody has it.

it's very difficult to predict when this covid-19 crisis will to asoff and we will get small as we can. the three difficult. we will take it quarter by quarter like we normally do. manus: i'm taking it day by day. peter: yes. manus: talk about the supply chain. can we did deeper? you talk about the risks in the supply chain. geographically, where are the biggest risks? where are the biggest component and geography risks as you said today? peter: actually in many places. we have seen a shelter-in-place in the bay area where we have suppliers. we also have 30 suppliers from mexico that need to deliver to our supplies on the west coast in the united states. we've had a lockdown in malaysia. it's basically everywhere.

and it's very difficult to protect how governments will react and how governments well extend these very severe measures that they currently have in place. that is why it is very difficult to predict what's going to happen. we can give formal guidance. without covid-19 crisis, the second quarter would look very good. we would see at least a 50% increase in sales in q2 as compared to q1, without any covid-19 impact. because of the uncertainties i just mentioned, it's very difficult to give you formal guidance. nothing can happen next week or the week after. we don't get the parts, we can't ship. listen, let's take a pause. don't go to formal guidance. like you said, take it day by day. we take it quarter by quarter. we will see how the world looks

in three months from now. nejra: difficult as it is to give any kind of forward guidance, i wonder what assumption you are working under. is the assumption that we get a protracted recession globally, perhaps even depression? is your assumption that we actually do see some kind of rebound in the second half of this year in the global economy? peter: yeah. it is difficult to give you an exact forecast for the global economy. we have to look at the facts the way we see it in the way our industry works. yes, there is a general consensus that we will see a recession. it will have an effect on consumer spending. it will also have an effect on consumer spending and consumer electronics. there's an expectation that we of the demandwing for smartphones, for instance. on the other hand, -- that will

have a negative impact on our customers. seehe other hand, you also a significant demand for high-end computers solutions. that caters very well to us. we are all about bleeding edge. that is in the space of the data infrastructure, of the communication infrastructure. it's in the data centers. it's in the data centers of amazon. the data traffic is enormous. front, the personal people are upgrading their personal communication. there's a negative which is felt on the gdp contraction. as a positive on the other hand, we are moving into a digital world that is now accelerating. that's good for our industry. there are pluses and minuses. our industry will be hit come i'm pretty sure. there are also significant opportunities there.

what gdp will do, it will be difficult. it all depends on how quickly we can return to a certain level of economic activity. certain countries actually have come to a grinding halt. manus: absolutely. hour, feela spare free. you are welcome in this living room. , life afterk you covid. hopefully we will get there. we woke up inn -- a unilateral world this morning. the u.s. pulling funding from the who. what is going to be the potential consequence for asml? do you expect lash back from the u.s. on your ability to sell into business in china? peter: that's a highly political question. we have the ability to sell to china. we have chinese customers.

we've had chinese customers for 30 years. there are hundreds and hundreds of our systems in china, shipped over the last 30 years. end, if china is prohibited to receive any kind , you really need to ask the question whether the end demand of chips will go down. that could be as a result of gdp. if we get out of this crisis in gdp recovers, those chips will need to be made somewhere. not in china, it's going to be in korea, japan, singapore , the united states come everywhere. there will be machines. i think you need to look at the worldwide recovery of demand for chips. like i said, in the leading edge and high powder -- telecommuters coming will have increased demand. manus: very comprehensive

discussion this morning. we wish you well. very pragmatic response to the questioning here. ceo of asml. the very latest on the numbers and guidance. coming up, the race to find a virus vaccine. the number of deaths and new cases continue to climb. trials. start human bloomberg. on ♪

♪ nejra: this is bloomberg daybreak: europe. france says that close to 60% of

french industry has restarted. that's the france finance minister. let's get a look at the risk radar. green on the screen in asia. negative bias to u.s. and european futures after the benchmark hit one your height yesterday. you are seeing the yen bid for the safe haven bid. oil making a comeback after a 10% drop yesterday. back to earnings season. great increases dividends. they have reigned in their outlook for the year. the coronavirus pandemic caused a first quarter surging demand for tylenol but sales of medical devices have taken a hit. bloomberg intelligence says the impact of covid-19 on the company is worse than consensus, making the first quarter sales beat immaterial. the race to find a vaccine continues. the drugmaker's plan to start human trials in the second half

of the year. warns that finding one vaccine may not be enough. announced today what we think is an unprecedented partnership of two of the world's biggest companies in vaccines, leaders in vaccines, with proven technologies and pandemic -- in pandemic vaccination. or whatthat be antigen we used successfully in the last pandemic. exactly as you said, the key is that it can be antigen sparing. you can get to producing more volumes and therefore protect more people sooner. if we are successful, there's an enormous amount of work to do. we're still in early stages. if they are able to accelerate the timeline, as we hope to do,

we should be able to get hundreds of millions of doses by the end of next year. that still means the world is going to need more than one successful vaccine which is why this is one of seven partnerships that we have announced. do. to clearly, getting a vaccine that is safe and works and at scale is a number one priority in terms of what we can contribute for solutions. >> let's talk about the scaling. where do you see it being manufactured? presumably, it will need to be manufactured around the world. where to the current manufacturing facilities exist that will allow you to scale it quick enough? >> we are obviously contributing -- here.

to get to an urgent solution here, we need partnerships and a global approach. things, of this side of we expect to be manufacturing in the u.s., europe, potentially the u.k.. that is under ongoing review at the moment. we have to prepare a degree of capacity. , with multiple vaccines that come forward, to make sure we can support access globally. initially to those that most urgently needed. the most memorable or the most exposed. also make sure we have access for some of those developing economies that are going to be very hard hit by this and often with more vulnerable health care systems. >> you said you are going to be equitable when it comes to supplying poor and richer countries.

how do you plan on doing that? how do you make that work? >> well, first of all, this is a global challenge of epic proportions. again, the world will need more than one vaccine to make sure that we can supply everybody that needs it. goal -- obviously, this initial partnership is supported in part by barter. we hope to engage as urgently as possible with global governments. expect toside, we do donate a certain volume. we will do this by governments and institutions that are committed to access, particularly supporting delivery on the front lines.

markets,s a developed we will also be pricing respons ibly, as we have a good track record of doing. manus: that was the ceo speaking to us. they were and i will take you to the markets in just a moment. coming up, oil. sunk as a result of the global response. we discussed the historic opec-plus deal. can it bolster the markets for real? this is bloomberg. ♪

♪

manus: this is bloomberg daybreak: europe. jim mccormick is our guest and is still with us. i want to get straight to what the g7 are saying. they are supporting limited moratorium on debt payments for four countries. there are a number of exclusions there. how significant is this in terms of dollar liquidity relief valve? jim: i think it's modestly important. at thelearly targeted poorest countries, which is probably right. the medium sized merging the market economies, -- emerging-market economies, not much support there. -- iare getting support think it is the right signal at

the right time. people are worried about emerging markets. i don't think it's a game changer. nejra: this was pre-coronavirus. you are positive on emfx. --that a part of the asset fx market you are still positive on now? jim: i think it's harder here. the em fx story was really a story of growth in 2020. up until february, it looked like a very good call. emerging-market currencies have two problems. you don't have the growth. you don't really have the kerry and a lot of these places. pockets. parking -- we are positive on mexican peso. we have just run out of time.

we will get your thoughts on another time. great to have you with us. futures with a negative bias. that's it for bloomberg daybreak: europe. the european open is up next. this is bloomberg. ♪

>> good morning. welcome to bloomberg markets. this is the european open. i am live from berlin. the cash trade is an hour away. let's hear the top headlines. donald trump cuts off funding to the who, after accusing it of taking china's coronavirus claims "at face value." u.s.s trade lower after banks make mammoth provisions for bad loans.