oil chaos. prices flirting with single digits while bps ceo says the worst of the virus driven crisis is yet to come. european bank risk. loss could hitit $11 billion this year. look through earnings. goldman-s has u.s. stocks could look past bad news as companies report. industrial and tech heavyweights on deck. welcome to "bloomberg daybreak" on this tuesday, april 28. i'm alix steel. take a look at us and be futures. we are right around the house of the session. potentially part of that as they weaker dollar. the dxy dropping like a stone in the market. yields pretty much go nowhere. oil very volatile as well. you have indices and etf's suspending buying spot month contracts, so they are rolling over, creating a really murky world for the oil landscape.

lots of earnings coming out. ups is the latest. they are withdrawing their 2020 forecast for revenue, as well as eps, as we have seen from many companies trying to estimate the impact. theirre withdrawing forecast. they are suspending the share buyback for 2020. we want to get you all of today's top moving news from new york and our london team. we want to begin with the volatility in the u.s. oil market. wti at one point falling below $11 a barrel. bps ceo, after the company released first-quarter results which showed a 2/3 drop in profit. >> we have a situation where we have excess supply, and storage is filling up. cushing is 70% full. people think we will reach completely full sometime in may.

we are very fortunate to have a large trading organization, and they have been able to find a physical home for our crude, but not everyone is that fortunate. what is happening here is a very simple case of supply and demand, and the market really isn't going to find some stability until that comes back into balance. alix: bloomberg's annmarie hordern has more. walk us through what is happening in the oil market. the bp ceo really speaking to what we see in the market. what bp was doing with the results today is really outlining the plan to be able to deal with this slump in prices. are barring more, cutting spending, and driving down costs. one thing that did remain intact for bp is the dividend, which you and i both know is considered sacrosanct for the industry. bernard looney did say it would be a quarter by quarter decision.

analysts say serious questions still remain about its affordability. last week we heard from equal the firstm equinor, ones to slash the dividend. for now, it is remaining intact for bp. one thing is unclear, whether or not this will work. bp is pegging the oil price next year to $35 for brent. where are we trading the right now? $20, clearly well below that. i want to talk about what we are seeing in terms of volatility in the market. this week, brent will be in focus. that trunk -- that contract expires thursday, but uti is where all of the volatility and action is. etf and indices are now fleeing the front month june delivery contract. yesterday is the u.s. oil fund. today it was the s&p commodity index. they said this was due to concerns and risks that prices

could go negative. we will continue to see strain on the market as we have consumption collapsing at the same time storage is near running out. one thing tomorrow to look forward to is the u.s. stockpile . really a lot to look out for this week for oil. alix: great round up. thank you very much. turning to more earnings, european banks also out with results. hsbc, ubs all making loan loss provisions as the pandemic has roiled economies. the hsbc ceo doesn't see those challenges easing up soon. >> we still think europe and the u.s. is going to go through a very difficult second-quarter, and i think it will depend very recoveryhe degree of that we see into the third and fourth quarter later this year. alix: bloomberg's dani burger has more. as you say, hsbc reported

today. we also heard from banco santander. it is the same thing we keep hitting over and over with banks this quarter, possible defaults and bad loans. for both hsbc and santander, they have so far the biggest amount they are setting aside for loans. ,sbc setting aside $3 billion specifically for losses related to the virus. one of the numbers to throw out is $11 billion. that is how much hsbc says bad loan charges might rack up. that is by far the highest of the financial crisis. it is a little different from some of the u.k. banks in that it is very asia focused. for example, they had a really big loss this quarter because one of their clients in singapore, an oil trader, had a loan of $600 million that failed. but for hsbc, that also means it is going to benefit from the recovery in china and hong kong

taking place sooner than the rest of the globe. one of the things they said on the call, which i think is absolutely telling of the times, is they are trying to calculate the losses they see from bad debt. they say it is part science, part art. thanks are in the dark terms of what their forecasts should be. not to mention, they are also getting significant government support, which also complicates the task of forecasting. a different beat completely was ubs. it gained as 5% in today's session so far. really confident it can dodge what is likely to be a waterfall of defaults in the market. they say they can avoid some of the pitfalls of leverage lending that other banks have done. it has only put aside $268 million for bad loans. again, that compares to $3 billion from hsbc. strategists like their results.

all the otherlike banks, another key part of why the forecast does not look rosy is falling prices is going to hurt any income to get from their asset management develop data asset management division. we get barclays tomorrow and standard chartered, followed by deutsche bank. it will be interesting to hear the details behind that beat. alix: let's recap more u.s. earnings as they come out before the bell. ups higher. the company beat revenue estimates for the quarter, withdrawing this 22 any forecasts for revenue, as well as earnings, and suspending share buybacks for the year. harley davidson rallying, but saying they are looking at motorcycle sales for retail in the u.s. down by over 14% in the first quarter. caterpillar shares also touring a negative -- also turning

negative. they are shelving their 2020 outlook, saying you could see all revenue pieces could reach double-digit decline in 2020, so a pretty ugly forecast. higher.s are growing the company is cutting capex

alix: time now for bloomberg first take. joining me from our in-house team of wall street veterans and insiders, michael mckee, bloomberg international economics and policy correspondent, and damian sassower, bloomberg intelligence chief emerging market credit strategist. imian, i do want to ask, when read the headlines, oil rolling ,ut of bed, $11 a barrel earnings continue to come in suspending dividends, halting buybacks, and yet stocks are rallying. is a market person, how do you understand that? [laughter] alix.: that's a mouthful, i think the first order of business is to look at volatility. what we are seeing is normalization across most asset classes. i think a lot of the short strategies have been flushed out

of the market and we will probably see them regained popularity in the near term. for me, it is identifying where vol has risen the most and that what points you can take advantage of that. side, and this kind of speaks to commodities and where you live and breathe, you look at the steep vol surface in gold, that is something that is unusual. as markets normalize, i probably can see markets see that steep vol curve flattening in the near-term. i think that is one area of focus for traders this morning. alix: i wonder how much of that will then depend on what christine lagarde and jay powell say this week. can they basically keep the volatility curve flat? michael: i think they can. they probably won't say a whole lot. that may be enough for traders at this point because the real focus is on the virus curve, and

the fact that some countries in europe in particular are starting to talk about opening. we are supposed to get plans from spain and perhaps france today. that will keep people feeling a little bit better about the outlook. the fed may be giving us more guidance about how long it intends to keep interest rates low, although it may not be in their best interest to be too specific yet. the ecb could perhaps increase lending program, but central banks have done so much so far that it doesn't appear they need to do a whole lot more to keep the market satisfied for right now, until we have a clearer picture of what is happening and where we are going. alix: before we leave off oil for a second, to your world, this is obviously going to be very difficult for some of the gulf states. you have a couple of options if you are a huge sovereign wealth fund. you are going to have to sell reserves or sell out of stuff

that you own. yet, they still have been able to sell debt. damian: the u.s. dollar appreciation move in march triggered a wave of reserve selling from large central banks across em. china and brazil alone each sold over $100 billion of u.s. dollar assets in march alone. that could be a function of reserve rebalancing, but more likely due to fx intervention. we are going to see more extraordinary measures by emerging market central banks to keep their fx in line. we have talked about qe-like measures, but we we -- but what we are also seeing right now is mmt, modern monetary theory. we saw purchases in the market effectively monetizing debt last week. qe is one thing. buying bonds in the secondary market. but literally inflating your rate by per does baiting in the primary market is an area for emerging-market central banks

that could be devastating if things go wrong and inflation picks up. alix: will it? what would have to happen for that to go wrong? well, i think it is safe to say that u.s. inflation has a stronger growth sensitivity than the eu. if growth were to pick up, you would probably see a sharper rebound in cpi swaps. for me, the market right now is pricing inflation to be very low , offering the opportunity for a lot of central banks to put his fate in the stimulus we are seeing. i think that is not going to change in the near term, but who knows when inflation recovers? about the weaker dollar, how significant that my did not be into all of the countries trying to support their economies. damian: at some point, you would

have to think that the weakness we have seen across these emerging-market companies, eventually ceos say 50% destruction, 50% at some point you have to look at the currency and say, you know what? maybe it does make sense to take advantage of those cheap labor costs, those cheap input costs that come hand-in-hand with a declining currency in a place like brazil. at some point you are going to see corporate take advantage of some of these moves in fx. alix: mike, what do you think? ishael: i think damian right. the only question is how bad, how quickly does the virus get a foothold in latin america as the weather cools down. there are predictions that we will see a real outbreak, and of course, and brazil, where bolsonaro has pretty much denied the existence of the disease, that could change some minds very quickly.

again, so much depends on the progress of the virus at this point. one thing you are hearing over the last couple of days is not just talk about opening up again, but what do we do if and when it comes back in the fall. now we are beginning to develop a consensus that it is likely to do that, and until we have some sort of treatment or vaccine, and a vaccine is still a long way away, there is this possibility you are going to get and seeo the markets things start to improve, and then all of going to have to pull back again. maybe not shut all the way down, but pullback some. i look at contango getting steeper in oil markets. people are really thinking something is going to turn around quickly, and i don't know if that is necessarily going to be true. alix: i love it, contango at 7:17. you know the way to my heart. we are going to leave it there. see. to

you both a reminder, any charts we use throughout the show, go to gtv on your terminal to gtv on your terminal 2 browse the features and check them out. coming up, we were just talking about an oil plunge. we will talk about what it means for companies next with christyan malek, jp morgan head of em ea oil and gas research. this is bloomberg. ♪

viviana: you are watching "bloomberg daybreak." ubs expressing both confidence and caution. the swiss bank says it can survive an increase in bad loans, but warns the coronavirus outbreak will put pressure on its wealth management business. ubs says falling asset prices will erode fee incomes. hsbc took its biggest charge for bad debt in almost nine years. europe's largest lenders saying in the first quarter, affected credit losses soaring to $3 billion. for the year, that could lies to $11 billion.

ceo noel quinn had a plan to increase profits. the coronavirus outbreak has derailed it. bp building up its financial reserves to write out the coronavirus outbreak. the british energy company taking on a $10 billion credit facility. it also sold $7 billion of bonds. in the first three months of the year, bps profit plunging. bloomberg asked ceo bernard looney where the company has to be to breakeven. >> are breakeven in 2019 was around $56, so going to $35 by next year i think is the right thing to do. we will drive it lower if we can. the economic uncertainty here is immense on how this recovery is going to play out over the coming months, but we are very focused on the basics of the business. . viviana: as you know, bp already announced this year it was cutting costs by 25%. that is your bloomberg business flash. alix: thanks so much.

we are joined now by christyan emea, jp morgan head of oil and gas research. what did you make of the quarter , as well as questions now around the sustainability of the dividend? christyan: i think the most surprising part was the breakeven. theas a solid quarter, but cash breakeven into 2021 speaks to that resilience in terms of being able to manage over oil, even if it does get extended to next year. so what about the gearing? that is probably the negative, that we have seen a larger increase in the gearing. having said that, i think triangulating cash breakeven one side, gearing on the other suggests to us that although dividend payments are still a large part of their cash flow, they have been able to buy time in the context of what the demand backdrop is. alix: buying time really seems

to be key. each company is going to have to recalibrate their free cash flow and dividend based on how long this goes on for. walk me through your production of where the bottom is in oil, when we start to have some kind of recovery, and what the supply outlook looks like in nine to 12 months. christyan: you are absolutely right. you've got to think about oil as the backdrop in the next steps for majors in terms of decision-making. there are two major milestones in the next few months. one is demand in terms of inflection. second is negative growth year on year and month on month. the third order of that flowing, because once it slows, we can then start to see what demand looks like. going to cuti is much more. before the opec deal, we were very skeptical. we think they're going to be serious this time with coming through with a cut, potentially

down to 6 million barrels. the key take away from the last is that if saudi were to go to six, russia would do the same. but notwithstanding the line of sight on demand. so those are the things that together serves a very important purpose for the boards of these majors to decide what we do with our capital frame now that we've got a bit more visibility. though, the meanwhile, you're still having indices, etf's in the u.s. changing how they are allocating future contracts. how do you think about that in relation to the medium to longer term picture of the oil market? christyan: the indices changing contracts, to some extent, you got oil going to buyers who don't need the oil

because there's no throughput, and that is very unusual, but also specific to this period when no one is driving, no one is doing frankly anything. i do not think that is sustainable. thesesee demand, so conditions are probably transitory rather than permanent. we've got to see where the dust settles around demand before we can make conclusions around how the medium-term, which is why i think coming out of this locked down looking at feet,demand finds its that new equilibrium i think will set the course for the oil market of the next 12 to 18 months. alix: always great to get your perspective. thank you so much, christyan malek of jp morgan. bp shares now flat of the day. earnings, shel

l and exxon come on thursday. coming up, more with megan greene, harvard senior fellow. this is bloomberg. ♪

alix: welcome to "bloomberg daybreak." let's get your check on the markets. we have a slew of earnings. the majority of them withdrawing

their 2020 guidance with no visibility into what the virus means for their business. yet, you still have a rally pushing higher on the s&p. same thing over in europe as well. taking a look at big oil earnings. bp is pretty much flat on the day. for europe indices is higher. euro-dollar moving higher. not a lot of move in the 10 year. a lot of supply came online yesterday, and it was relatively well digested. we have more coming today on the seven year timeframe. take a look at volatility. that is moderating as well, even though oil is now $11 a barrel. you can blame it on contract roles and decision by indices, but nonetheless a significant point highlighting the lack of demand picture in the economy. was an the u.s., there relaunch of a small business administration loan program yesterday that got off to a rocky start again.

the administration said it faced unprecedented demand. do they need to expand it for a third time? megan greene, harvard kennedy school senior fellow, joins me now. it all boils down to the supply and demand for money for small businesses. how big does that need to get? megan: i think they definitely need to expand this again. it probably needs to be at least another $600 billion, but it is not even just the size of it. it is also the question of getting the loans out the door. if your systems crashed yesterday, it is a shame we didn't have this in advance. but now have it set up, hopefully we can get some of the kinks out and it will be there for the next time around. alix: what do you think the stomach is to do that? we have mitch mcconnell already left week talking about maybe not wanted to provide loans to states, saying bb we can take a pause here. we've already put a lot of money out into the system. megan: there are a lot of

initial hints that may be are running out of appetite for throwing money at this problem, and we saw the same in 2008. that being said, we are seeing political capital wane in the absence of lots of economic data. as economic data shows how badly a lot of these businesses need these loans, we might get some support. i think an average small business has about 27 days of cash, and we've been in lockdown for more than 27 days now, so a ton of businesses have just shuttered given that we haven't gotten this money out quickly enough. that is going to start to see through into the data as it comes out. alix: tied at into what central banks can actually do because we monetization of debt, the appetite among investors to finance it, but it seems to be working. just look at the two-year and five-year auction yesterday,

despite the fact that supply is really increasing. program think the ppp hasn't been behind that. i think largely, the fed has. the fed has succeeded largely in reducing all of the dislocations in the markets. that is off the back of just announcing a bunch of these facilities. they haven't rolled many of them out because i think in terms of what they will announce later this week, we will probably hear very little. think the fed is focused really on getting this alphabet soup of new programs set up and rolling them out. monetizationin a of debt situation, whether you want to call it mmt or something else? megan: i don't think we are there yet. we will get there? possibly. it depends on what the fed is doing with its balance sheet. if you don't think the fed is ever going to shrink its balance sheet, it is just going to hold onto these assets forever, it is

essentially debt monetization. mmt kind ofn situation, though. for the most part, we are seeing some limits in terms of what we are willing to spend. you mentioned in the fiscal side that there are some signs that politicians aren't willing to throw all the money they cannot this. but i think we are going to need to see more, but we are not in an mmt situation, nor should we be. but i do think central bank's around the world are having to step in. the ecb is already meeting this week. are they willing to monetize the debt? not yet either. the only actors who could act quickly and often, i think they are going to step in and continue to buy up assets. if they continue to keep them on their balance sheet, that would also be debt monetization. alix: in reading analyst aborts ahead of the ecb and the fed, i feel like no huge changes

expected. but what are some of the nuances you will look for either in the statement or in the press conferences after? fed, we think for the might be able to hope for some semblance of forward guidance. that is probably the most we will get out of the fed. that being said, there's so much uncertainty about the outlook. according to the bloomberg survey of professional economists, estimates for q2 fromh annualized range plus 0.4% to negative 65%. that is a huge range. i don't think the fed has a magic crystal ball, so it might be too soon to get any kind of forward guidance. there are some hopes that the ecb will increase the pandemic emergency purchase program, the pepp, into the end of the year. i think it is probably too soon for that, but it is not impossible.

to ditch the s capital key, but for both central banks, i think we will get a little more detail on how they are feeling about the economy without any major announcements. alix: at what point would you say that central banks are taking on too much credit risk, or they should stop taking on credit risk? megan: it is a catch 22. i have commended the fed to along with many others, for moving huge distances in a short time in terms of willingness to buy up things that they previously would never have considered buying, like municipal debt, high-yield bonds . that was necessary given the dislocations in the market. however, there is a degree of embedded in that the fed is essentially bailing out some private equity

companies, although that is limited, given the limits on what kind of debts the fed is willing to buy. i do think the lesson for investors this time around is that the fed will have your back. we saw inbubbles that corporate credit prior to this pandemic, that is not necessarily the right message, but it is what the fed had to do in order to support the economy, and ultimately to try to achieve a mandate. so there's moral hazard, but they had to do it. investors is a lesson have been learning for the past decade, every time the economy wobbles. a have shown that they are willing to do that again. alix: how does that play out? the narrative before the virus was that it is going to play out in the debt market because covenants attached to loans were so light that that's where this bubble is going to come home to roost, and then it

did, and the fed steps in any way. so i wonder where this all ends up. megan: it is hard to guess where the line is. i do think that there is still a chance that high-yield debt could be a problem, given how many fallen angels there are, and given their limitations on how much high-yield the fed can take on, but do we expect the fed to come in and support more credit? absolutely. i don't think the fed would throw the kitchen sink at this and then allow market dislocations to reemerge and allow markets to tank off the back of that. so there is a question about where the fed line is now. are they going to buy up equities? i don't think they are going to come i don't think it is necessary. but i do think it is a real slippery slope, and the fed is doing everything it can come about the message is clearly market'sfed has the

back. alix: the other thing i have been thinking about his protectionism and supply chain disruption shorter-term, but things take a, as more protectionist feel. also in terms of growth and hiring and productivity, do you have a sense of what kind of economy we are going to be looking at in two years? megan: i think that you're right, that from the top down, we are going to see more nationalism. we certainly seen that come out already in terms of countries taking on an increasingly go it alone attitude and approach. we have even seen this just within europe, where they are all supposed to be part of the same currency area, for the most part. so i think we will see top-down globalization fall. along with that, we could see supply chain's shift.

, at leasth on shoring through utilizations. so u.s. supply chains move away from china back towards our region. but at the same time, i think bottom up still could increase. i am sitting in boston, but i could be doing my job from absolutely anywhere right now. and so could you, in theory. the fact that we have all been able to work from home for a really long time, the technology is there, but i think this pandemic will certainly accelerate that. that could mean that we can live anywhere, and that would increase globalization even as supply chains are brought closer to home. alix: megan, so good to catch up with you. thank you so much. megan greene of harvard kennedy school. our interview with alan greenspan will become an about 1:00 p.m. in new york.

we want to give you headlines outside the business world. viviana hurtado is here with first word news. states receiving new guidance on how to build testing capacity, plus retailers including walmart and cvs say they will open hundreds of new test sites to speed up testing so states can reopen their economies. scientists in china joining a growing consensus that they say the virus cannot be eradicated. instead, they expect the pathogen to return in waves. chinese medical researchers say the big problem, the coronavirus can be spread undetected because it infects some people without causing obvious symptoms. the head of sweden's central bank saying a record $30 billion bond purchase program will probably get bigger. bloomberg speaking with the governor. >> the main objective for us presently is to ensure the credit supply is really working,

and that rates don't go up, and that in order to avoid rates going up, we are buying mortgage backed securities, buying commercial paper, and doing all sorts of other things, and that is much more important than just the policy rate. viviana: sweden ended five years of negative rates in december. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: thanks so much. coming up, hedge funds hit pretty hard. outlooks forhdraw you have a bloomberg terminal, check out tv . if you missed anything in our program, you can scroll through my check it out. this is bloomberg. ♪

viviana: you're watching. -- you're watching "bloomberg daybreak." southwest is cutting the number of 737 maxes by more than half that it will take through december 22 anyone. that is because -- december 2021. that is because of the bleak travel outlook. novartis posted first-quarter sales and profit that beat estimates. forents rushed to buy drugs the coronavirus lockdown begin. . we ask the ceo how long he think that will take to get a vaccine. >> i think it would be an astonishing feat if we were able to get a vaccine already out by this year. in my own experience of decades

working on vaccines, the r&d and distribution, it does take many years to get a safe, highly effective vaccine. viviana: the pandemic forcing novartis to stop enlisting patients in a big trial, but this one is for a cholesterol drug. march the worst month ever for renaissance technologies hedge billionaire --y last month, the fund fell 8%. now the firm is looking to retool the model it uses. the fund has to keep its position for weeks or months. that is your bloomberg business flash. alix: next so much. let's turn to wall street beat -- thanks so much. let's turn to wall street beat. we will talk about hedge funds. investors withdrew over $33 billion in the first quarter. here to help me break it down is

fabio savoldelli, colombia school of business edge and professor viviana: do you have a sense yet -- school of business adjunct professor. whatu have a sense yet of performed in this selloff, and what didn't? fabio: in general, the more the beta, the worse it has been. without a doubt, the epicenter of poor performance has been once again even driven, which lost 15% in the first quarter and has added to that. your to date, the five-year return for event driven is now barely 1% annualized. a lot of these guys are just , but this stock is so specific it is not going to move with the market. when you get this kind of milk on, everything moves with the market, and the event driven --

this kind of meltdown, everything moves with the market, and the event driven got hammered. alix:alix: you're still looking at large-cap tech names leading on the upside, and the downside are the ones lester -- the ones less hurt. how is that affecting the demand for hedge funds? fabio: that is a very good point. microsoft is owned by about 71% of hedge funds. everybody owns microsoft. apple is owned by about 50% of hedge funds. google is owned by about 62%. regardless of strategy, they all seem to own the same five. what we have seen is that those five stocks count for 20% of the world market cap -- the u.s. market cap, which is the highest concentration on record. to your point, this should be shorts for equity long

going forward. if everyone says, listen, we do our own independent research. i don't listen to what wall street said. what 90% of companies are saying is that we are not going to kill our buybacks and do anymore announcements going forward. 90% of companies have withdrawn guidance. so if you are so good at it, this is your chance. it is also true that they have been saying etf's killed dispersion. the gap between the three-month returns of the top-performing stocks and the bottom performing , twicehas reached 40% the 10 year average. in theory, the winners are really whizzing and the losers are really losing. alix: you just have to be in the right stocks. that brings me to one asset class, commodities in particular.

we have seen distortions in the oil market that have repacked on etc.ny brokerage firms, -- volatility doesn't seem to be the right word for it -- how does that affect hedge funds? fabio: i think it has been absolutely defining, if you will. it is interesting because probably one of the few last remaining, if you are thinking about oil, one of the few last remaining pure oil plays is around around -- is pierre rhonda ron. he's been all over twitter, all over anyone who would listen, saying that this was going to be a disaster. he's made around 122% for the first three month of the year. month,short to the front looking for increased contango.

what is interesting is he made it incredibly public. i think of all the people out there that have profited from howard and his team at brevan howard. it is nice to see him after such a long dry period come back with 18% return as well. so some have actually captured this. any have gotten crushed, as you know. alix: really great to catch up with you. fabio savoldelli of columbia business school, thank you very much. when we come back, oil approaching $10, moving to later dated contracts, wreaking havoc within the market viviana:. we will break that -- within the market. we will break that down for you next. this is bloomberg. ♪ ♪

, afteril continuing it

oil etf's move into later dated contracts. . to precut down -- here to break it down with us is bloomberg's oil analyst. can you help me understand how the six planes what is happening in the market? basically, everyone is getting out of dodge, meaning the front month contracts. here is the problem. aren't ominous, but the real catalyst is the lockdown. will needs people to move. so there is an earthquake here that's afraid that the june contracts will go to negative and they will have to owe people money. uso was out of june i think completely yesterday. it is all the way down and every month already down to june 2021. the indices were announced this

morning. now,have $130 billion although only a sliver of that is front month oil contracts. s&p, bloomberg, and rogers indices did it last week. everyone is moving down the curve because of this extreme situation, and there's a lot of debate around this issue. but we had 15 years of these .hings nobody really cared. this is just like an earthquake hitting. alix: so are these etf's anymore, or are they kind of hedge funds, or actively managed? fabio: uso has effectively -- eric: uso has effectively turned into an active fund. what people like about it etf's is they are robotics based. alternative is potentially owning that front month contract

and owing money. they basically took the lesser of two evils. if oil rallies, uso certainly won't feel lit much now because it is too diversified to have that pop. alix: good point. not as levered. greatly appreciate it. coming up on the program, alessio de longis, invesco investment solutions senior portfolio manager. this is bloomberg. ♪

♪ alix: bochum to "bloomberg on this: americas"

tuesday, april 28 -- welcome to "bloomberg daybreak: americas" on this tuesday, april 28. let's take it from the top. bp profit plunges and the oil giant prepares for slower production, and says the worst is yet to come. u.s. etf's and commodity indices rebalance holdings away from the spot month, creating another violent shake out in the market. >> this week, brent will be in focus. that contract expires on thursday to potentially put downward pressure on brent prices, but wti is where all of the volatility is. alix: chevron and exxon reporting links friday -- report earnings friday. ubs ceo sergio ermotti expect a drop in client activity, while sounding optimistic on widespread defaults due to the high quality of the credit portfolio.

hsbc takes its biggest charge for bad debt in almost nine years. >> $11 billion. that is how much hsbc says that bad loan charges might wreck cap to. that is by far the highest since the financial crisis. alix: santander also setting aside $4.2 billion for bad loans as it has exposure to bad markets like brazil and mexico. pres. trump: we are continuing to rapidly expand our capacity as we have enough testing to begin reopening. alix: the white house issues a strategy to expand u.s. testing for the virus. retailers will open hundreds of new sites to provide tests. the administration plans to provide enough for all 50 states to screen at least 2% of the residents. meanwhile, the world waits for a vaccine. >> it would be an astonishing feat if we were able to get a vaccine already out by this , in my own that

experience, it does take many years to get a safe and highly effective vaccine. alix: novartis is more skeptical. china's top scientists say the virus will not be eradicated, joining a growing consensus that says it will return in waves. markets, you have lots of earnings coming out, like caterpillar, 3m, all withdrawing their 2020 guidance. southwest is issuing shares. retail sales for harley davidson coming in really light for the first quarter in the u.s.. equity futures right around the highs of the session. 37 futures still up by about points. you have the dollar weakening. that could provide some boost for u.s. equity markets. more supply coming online today in the seven year, and oil continues to really suffer .round $10, $12 a barrel and whaton what crude

it means for the economy, with , alessio de longis, invesco investment senior portfolio, joins me. this speaks to the underlying growth in the overall economy. alessio: thank you. yes, we are experiencing now a rebound in equity markets which is starting to be substantial, but it is largely driven by the size of the previous fall. what you highlighted earlier is really the main challenge here. we are accepting that this virus will be with us and will affect our investment posture and comic outlook, potentially for the next 12 months, as it is likely to recur in the fall and next winter. in that environment, i think it is important to understand that

as we prepare for those false starts and accelerations in the economy that have risk of falling back into some kind of pinpoint contraction, we think that credit markets probably offer the best course of action as of today because credit markets, number one, they tend to be the class that leads out more thanon, but also equities. you have credit premia areas you have very large spreads available across all credit segments. it is not going to be a pain free experience, but compared to equities, equities will continue to have false starts as a result of disappointing earnings seasons down the road and false starts in the economy. we believe, as a bridge between now and the recovery, credit

markets are a very attractive way to position the portfolio and harness some of the opportunities this sum of has created -- this selloff has created. alix: is that a simple as buying what the fed is buying, or do you go down lower in the quality of credit? alessio: that is a very good question. in the beginning, it is tempting and makes a lot of sense to just buy what the fed buys. obviously, as we know, this will likely create also a dragging effect for other spread products , and there will be some mismatches in supply and demand. fed is also buying high-yield debt. i think there's two approaches that are valuable here. exposurecusing a large

on investment grade credit, whether it is corporate or em for youn debt, spread your fixed income high-yield, and all the others you buy long-duration treasuries were chinese government bonds. basically, the safest part of sovereign bond markets come are you have high sovereign quality and also some sort of guild because that is not easy to defined anymore. of -- some sort of gilts because that is not easy to define anymore. alix: do you have to make a call on the recovery right now, or can you hold off on that and just sort of ride the tide with central banks? it is really a function

of risk tolerance. basically, my comment on credit ofers to one spectrum investor. so if you are volatility and the ,ynamics of the next one year then credit markets offer a better way to increase risk in the portfolio, harvest the opportunities that have been created by the selloff. if you have an investment horizon beyond one year or two with, i completely agree that statement. theties ultimately will be asset class that will provide the most enduring potential for our performance's. ultimately, this recession shall pass as well, and given the large fiscal stimulus and the unprecedented monetary support .e are serving

hows really a sequencing of risk assets tend to behave at the beginning of a recovery and as the recovery lasts. alix: in the meantime, when you get earnings numbers coming out that may be grim, economic done a -- economic data not so good, pick your spots before? alessio: i think you don't dismiss the good or bad news we will be receiving. i think this is a terrific opportunity to merge some of the cyclical dynamics taking place, the opportunities that were brought up, with some of the areer-term things that

likely to prevail for the next 10 years. know that we are restarting the clock on the cycle, knowing that certain asset classes are more overvalued than others, and that have benefited from the previous decade of outperformance. what are those? the dollar is expensive. dollar-based assets have outperformed for the past decade. international assets in credit, in equity markets, and in quarantine. out of this recovery come out of this recession it is a very good opportunity to be able to execute on that plan. will changeweight

as soon as the recovery start. equities would be a very good place to see that high beta recovery take place very quickly. another big theme we see from this recovery potentially is the reemergence of value and small caps at the expense of growth, one isin, i think that one in which the recovery is more mature. alix: hang tight with me. coming up, bad loan pain. we will break that down with -- hsbc,k of santerre banco santander, ubs. this is bloomberg. ♪

>> there is obviously a great degree of uncertainty around that range viviana: -- that range. we saw $3 billion of expected credit losses in the second quarter. on q4 ofup four fold last year. the range is an estimate of what we can see today. very dependent on the duration and economic impact of the virus during the remainder of the year. optimisticelatively about the strength that rick -- the strength that which losses will impact our future. >> it is really difficult to pretty outcomes. we fill certain this is particularly true when producing -- when protecting across multiple markets and regions.

more on european banks, bloomberg's sonali basak joins me now. what is your take away from the european banks we have gotten so far and how they compare to u.s. banks? sonali: european banks have the same problem as far as loan loss provisions go come up but the question is how exposed they are to the consumer. of their business or more is tied to the retail consumer. it did worse than ubs, where so much of their clientele is the wealthy consumer, as well as an institution. at ubs, you will see that, ok, revenue rose, but it's fixed business is a lot smaller than the u.s. investment banking businesses. doesn't existwind at that scale for the european banks that has all of these other problems they have to contend with. seen regulators do

something different over in europe, lowering the leverage ratios, etc. where are we on that front? sonali: to be clear, regulators are trying to make concessions and it comes to the big banks to allow them to lend more. in europe, they want to use because weal buffers are expecting more losses to come forward, and we want those banks to lend more, especially to regional companies and smaller companies that might have credits that are a lot less attractive then big national players. one of the big deals everyone talked about in the quarter was the thyssenkrupp elevator deal. it was a large leveraged loan deal, where ubs was caught with some of that exposure. and that is a big national company. when you are dealing with things like that, which had a lot of losses tied to oil, you have large national clients taking losses, but a whole host of smaller players to deal with.

alix: alessio de longis of invesco still with me as well. when you hear and read what happened with bank earnings, what do you key into? what is the most important part for you? alessio: at the moment, i think for q1, the impact of the pandemic in europe was partial and limited to march, by and large. i think we can expect bank earnings not to be too indicative of what is like to they might q3, and be very well boosted by surging because theevenues financial aspect of bank fullngs impacted the quarter, while the slow economic impact on bank earnings will come relatively low in the next

few quarters. europe, so much more of the credit flow is dependent on bank lending. so the easing of capital buffers is allflexibility functional to keep in that credit flow alive, which will be a challenge because even in the best times over the past years, qe, loan growth reached 3% to 4%, which is just above nominal gdp growth, so it is going to be a challenging environment. alix: i am glad you brought up investment banking and trading. that is what we heard from banks in the u.s. the question we had for them, will the trading revenue benefit continue in the second and third quarter. do we know what some of the guys in europe are saying about that? sonali: they are falling in line

with what the u.s. folks are saying. morgan stanley said the first few weeks were lower than what they saw and their first quarter. at ubs, it was really foreign-exchange and rates that helped that revenue go higher. tomorrow will be a very big tell because we will have barclays and deutsche bank, which are much bigger trading desks, and their ability to continue weathering this storm will be very crucial for the larger investment bank. alix: alessio, do you want to buy btp's? if the ecb is going to be very strong in the markets if we can't get any kind of fiscal joint stimulus from european leaders, go buy btp's. buyou by standish debt -- spanish that, portuguese debt? alessio: we are bullish on this

debt because of the challenges you raised about the ability to source income anywhere else. , it is important to tomindful of the risk recovery. there's a lot of debate between the northern and southern part of europe, with respect to the balance between how much of this recovery fund will really grants versus loans that need to be repaid, and if repaid,needing to be what is the condition. we should make no mistake, without this type of very large-scale fiscal type of support, europe cannot get out of this recession, and when those in the

south cannot really recover from this because the consumers and businesses will see such a sharp increase in the rate that there will not be enough to make the debt dynamics look more attractive. as for now, we have bridge that gap with the emergency facility for about 540 billion, which carries little to no conditionality. some of then domestic support for this that the sellofftrigger to do mustard audiences. -- two domestic audiences. alix: thank you so much for the conversation. coming up, we are going to stay with earnings. 3m out with results this morning. we will break that down, coming

up after the break. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." withe going to continue your bloomberg business flash with ubs expressing confidence and cautioning. the swiss bank says it can survive an increase in bad loans, but warns the outbreak will put pressure on its wealth management business. ubs says falling asset prices will erode fee income. taking its biggest charge for bad debt in almost nine years. europe's largest lender says in the first quarter, expected credit loss is soaring to $3 billion. for the year, that could rise to $11 billion.

itsrpillar putting traditional earnings forecast for 2020 on hold. the fallout from the coronavirus mining, tilting construction, and energy. this year, revenue declines in all three businesses could hit double digits. that is your bloomberg business flash. much.thanks so joining us for more on caterpillar is caring for the heart ofis karen vogel bloomberg intelligence. reporter: i have been covering this for a long time, and i have 5% declines0%, 20 in revenue across the board in all three segments, all at the same time. so that is kind of startling. i certainly expected double digits, and also, the first quarter wasn't a bad quarter, so it is going to get even worse on the volume side. they did ok on the cost side so

far, but it is just the swiftness and the order of magnitude of the decline. alix: where does the company go from here? can they whether this ok? everyone is going to get hit with this exact problem. they are entering this downturn in very good shape. , whichetrimental margins 2018, 2019.2016 and they've had softness along the way since they implemented their new strategic plan in 2017, and their detrimental margins have actually been quite good. they lowered again in this quarter. when sales went down in the double digits, they would have 45% incremental margins. they are doing 25%, 30% now, with 22% decline in sales. also, their liquidity condition

is in very good shape as well. alix: karen, really appreciate it. staying with the industrial sector, bloomberg television is going to have an interview with michael rahman, the 3m ceo -- with michael roman, the 3m ceo, later on in new york. this is bloomberg. ♪ these days staying connected is more important than ever.

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we're committed to keeping you connected. for more information on how you can stay connected, visit xfinity.com/prepare. alix: welcome to "bloomberg daybreak." just a few seconds away from the latest read on inventories and the goods trade balance.

u.s. equity futures pushing their way higher despite cloudy earnings from harley davidson, caterpillar, as well as 3m. you can see the dollar is weaker. that is the trade of last few days. 10 year yield goes nowhere. a lot of supply coming online. oil continues to rollover. here is the data. this is march data for retail inventory, up .9%. i can only imagine it will get worse in the april as most -- it will get worse in april as most of the u.s. is shut down. the advanced good trade balance is -$64.2 billion on that level as all of the data gets distorted by the virus. joining me to help break it down is bloombergs michael mckee. this sets the stage for what will be a terrible april with the majority of the country shut down.

michael: the problem is when you're looking backwards you're only getting a picture of where we were going into it all. the trade deficit widened. that was not supposed to happen because we were shutting down imports into the country. obviously something went down with that. we were supposed increased exports a lot because of the china trade deal. that has fallen by the wayside. evidence from bloombergs economics is the chinese are not living up to that. the trade balance widening significantly is only going to contribute to the contraction in the economy that is forecast for the first quarter. we will get those numbers tomorrow. right now the consensus is for 3.8% annualized rate of decline. it could be worse when you add this in. alix: could you give me a perspective for retail inventories. how that supply chain winds up working. you have all these stores they cannot sell anything and not

that much online. they just sit there, and then what? michael: that is the question. and then what? how did they get rid of this. tocks will only start increase. we were still working off the holiday season. around this time we are looking for summer stuff in the stores and it will not be there. how they get rid of the old stuff? probably see a lot of sales that will depress retail sales numbers because those are calculated on a dollar basis. you are not looking for good earnings report from the retailers going forward. jcpenney, nordstrom's, i'll talk to people about bankruptcy. also joining mike and i is joshua younger, head of jp morgan u.s. interest rate strategies and derivatives. i mentioned we will get a lot of supply coming online today. what is the appetite despite the data for investors to keep

buying u.s. treasuries? ua: it is one of these big a nose. there is clearly an appetite to buy treasury, the question is how much. the cbo forecast showed a federal deficit of $3.7 trillion. we have not done that since the second quarter. it is a question of how bad that deficit gets because these are always projections and their uncertain. keep in mind we are talking about receipts and payables. we know how government wants to spend and how much they would get in in taxes. the second is how the treasury will fund that since the data has been in the short term insurance and treasury bills, but ultimately that will have to get turned out into longer maturity securities and that is where the questions live. they are introducing new maturity to try to diversify that demand based.

think the treasury will have to find out, like the rest of us, by trying and seeing where the appetite is. i was going to ask about the range for treasury yields. 65 basis points seems to be a pivot point for the 10 year. we have the central bank meeting coming up with the fed and the ecb on thursday. the combination affecting the dollar. where do we see yields going. are we where we are going to be at this point, even with all of this issuance? joshua: it depends on what the fed does tomorrow. in particular, how they think about their asset purchases. qed was all about ,epressing term premium depressing the risk you took by

taking long-term treasury risk. the treasury was buying more every day a couple weeks ago than they bought a month during qe operations. it was not about term premium or the shape of the yield curve, it was about the structure and function of the markets. a big question tomorrow is how does the fit view the success or not of that exercise. do they think markets are functioning effectively and does that mean their purchases slow down? if you're buying $10 billion a day at a reduced pace, that will have an impact on the level of yields. the market is very focused on that to try to figure out what the next move in the 10 year note is. there is quite a bit of uncertainty, mostly because it is not so much do not understand what the fed is trying to do, they have been very clear about that, it is about market functioning, are they going to move the goal post, will it

become a more nontraditional intervention like quantitative easing or will they say market seem like they are working a lot better things feel a lot , debt is getting a lot better all of these dislocations that were so worrying in march have mostly gone away, so they can say mission accomplished or they could say this is about the macroeconomy and our purchases are having an impact. michael: what do you think the markets want to hear? we tend to have to put out stories that say the fed is meeting tomorrow and something will happen. is it possible the fed declares victory and goes home and does not do anything? how would the market react to that? markets are still skittish after march. what they want is the central bank to be backstopping the

functioning of the treasury market and a range of others, including credit and a variety of others. line is the demand for cash and liquidity has been much greater than what the private sector can provide. if the issue is a shortage of cash, the fed is any good position to fix that problem. it is not so much about fixing it at the moment as it is about the exit. there always be concerned when you have an intervention of the back that is the fed pulls , markets will become disorderly again and will have to revisit the experience of mid-march. one of the planks of the fed program is to think about providing temporary relief of certain regulations to allow commercial banks, traditional banks to take the place of the fed, to increase leverage, to provide market banking and treasuries and other asset classes as the fed pulls back

their footprint. that is a work in progress. the markets want to hear the fed is behind all of these markets and able to provide that backstop. alix: do you think at some point we get a version of yield curve control, either specifically signaled or not? joshua: we might have it already. when you're buying $10 billion a day of treasuries it has an impact on the curve. that purchases certainly having an impact on the level of yields. in that sense they are controlling the yield curve. whether it lasts for a long time is an open question. in japan we think over the near-term, something markets are thinking about, is kind of the next step. if we are thinking about ways the fed can provide stimulus to the economy through interest rate policy, they can go to negative policy rates, which introduce all kinds of issues

and experiences in europe that are not necessarily effective, specifically an environment like this. this is not an interest rate problem. it introduces all kinds of issues and the banking system when you have negative yields. yield curve control is the next potential thing to do and it is a version of pushing investment into slightly more risky areas, but they were doing in 2011 and 2012. speculation, i just think it is early in the process. alix: joshua, thanks a lot. joshua younger of jp morgan and michael mckee, thanks a lot as well. stay with us for an exclusive interview with alan greenspan at 1:00 in new york. we want to give you an update on what is making headlines outside the business world. here is viviana hurtado. we begin with a

blueprint to increase coronavirus testing released by the white house, but the strategy leaves it up to the u.s. states to develop their own plan. local officials insist widespread testing is the key to ending the stay-at-home orders. they have crippled the economy. now to the federal reserve. it is expanding and emergency lending program to cover smaller cities and counties. now cities with as few as 250,000 people can apply. the program allows them to sell short-term debt to the fed's municipal liquidity facility. under previous rules, cities such as atlanta, come boston, and new orleans, had been included -- had been excluded. and spain are anxious to restart their economy. there are still concerns moving too quickly could backfire. france reported the most new coronavirus cases since april 18. in spain, they rose by less than

2000. global news 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 am viviana hurtado. this is bloomberg. alix: thanks so much. coming up, oil sinking nearly 80% this year. we will look at what those oil prices mean for tankers. what oil is being stored where? outbloomberg users, check gtv . check out any charts we may have used throughout the show. gtv . this is bloomberg. ♪

viviana: you're watching "bloomberg daybreak." i'm viviana hurtado with your bloomberg business flash. harley davidson is in talks with major u.s. banks to get $1.3 billion in funding and expects to tap banks for more. in the u.s., sales have dropped for 13 quarters in a row. quarter posting first sales and profits that beat estimates. patients rush to buy drugs before the coronavirus lockdown begin. we asked the ceo of novartis how long he thinks it will take to get a vaccine. >> an astonishing feat if we were able to get a vaccine out by this year, given that my own experience spending decades of working on vaccines, the r&d of distribution, it does take many years to get a safe vaccine.

viviana: the pandemic forcing stop a big trial for a cholesterol drug. nissan expects to take a loss. the japanese automaker blaming the coronavirus pandemic. nissan is also delaying its earnings report until may 28. before the virus broke out, the company was struggling with plunging sales. i am viviana hurtado and that is your bloomberg business flash. alix: time for bottom line. we look at companies worth watching this morning. today we will focus on the energy transport and storage sector. many oil storage units are at capacity. that is forcing companies to turn to tankers as a form of floating warehouses and that is weighing on shorter-term oil prices. wti at $11. joining me is lois zabrocky, international seaway's ceo. international seaway's provides

transport for international petroleum and oil. they operate 40 vessels and 38 tankers. what are your tankers being used for right now and where? we are trading internationally, and of our 40 tankers, every one of their markets are very strong. from being engaged in products trade in the caribbean to the be trading-- to the blcc in the middle east, trading is strong. storage attracted storied levels right now for large crude carriers or 2 million barrel vessels are around $100,000 a day for six months. it throws off an enormous amount of ebida.

many of the vessels in our fleet and the worldwide fleet are delayed in their discharges. this is a way of informal storage for many of the customers where you have arrived at your discharge port and they do not have space for you. vesselse most of your being used as storage for that $1000 six to 12 months or are you still transporting stuff from location to location for previous contracts? lois: it is a mix. the majority of our vessels are still trading, still actively engaged in the point-to-point transportation. around $150,000 per day. vessels are still loading and cargo's are still being quoted and secured for loading in the arabian gulf or discharge into china. we have seen china come back in march, one million barrels a day up on their imports

year-over-year. you have seen china come back into the market supporting it strongly. alix: how long do you think we will be talking about oil and lower spot prices? will this be a quick turnaround or will be we be dealing with the overhang for a long time? lois: it looks like through the second quarter there will be excess production because the western hemisphere is delayed in are experiencing this coronavirus pain. the demand will start to come back, perhaps in the third quarter more robustly. very low prices and more expensive prices, or the contango situation which encourages storage etsy looks like it -- storage at sea looks like it will persist through the

next few months. alix: what does that wind up meeting for your business? at what point will you be able to capitalize at these higher rates? what does that mean for you? lois: in the second quarter, when we are fixing the spot for ages at over $100,000 per day and even storage rates of $100,000 per day, if we fix a couple of seven-month contracts at $100,000 per day on average, and that itself will add $33 million to our ebida and our bottom line. these rates we are experiencing right now will flow into our bottom line in the second quarter, and then where we fix them for a longer period, we will be enjoying that going forward. the markets are very strong. we are now seeing it on the carriers that carry gasoline and diesel fuel.

those markets are now rising strongly. some of your vessels might be in port waiting to discharge on yesterday's rates. a great portion is available and can take advantage of today's rates. alix: do you have any insight into where the biggest oversupply is right now and who is trading it and who is storing it? lois: all of the opec-plus customers will be rolling into the market in may. we are starting to see some lower volume on the market. supply all over the world. in, west shutting africa is starting to shut in. i am sure the middle east will be cutting back in may. the bottom line is even all of these cutbacks are not enough to match the lower demand for coronavirus. for healthy oil

sectors is for everyone to go back to work. work, caning about you give me insight into your workforce? are you having any labor issues? what is it like for your workers? lois: our seafarers are our frontline, the guys out there on their contracts working, they have been incredibly professional. we are trying to get them to be designated as key workers so we can rotate them so they can go home. a lot of them live in the philippines or eastern european countries, and we would like to be able to give them the opportunity to go home to their families and put our fresh seafarers to work. because there international travel bans, that has become difficult. all of our seafarers are still working and being very productive. alix: lois, great to get your perspective. thanks for joining us. lois zabrocky, international

seaway's ceo. stay with bloomberg for more ceo interviews. carlisle cofounder david rubenstein will be speaking with later on ceo leadership live at 4:30 p.m. in new york. coming up, crude tumbling back towards $10 as the futures curve comes under pressure get again. more in today's technically speaking. this is bloomberg. ♪

alix: time for technically speaking. joining me is mike mcglone. he is the commodity guy. want to ask you about oil under pressure again. 10 or $11 in the front month wti contract. mike: it is all about get me out of the june contract, which expires in three weeks. what we are showing in the first chart in white is open interest

on the june contract. it is plunging compared to june of last year, where it took longer to get down. people are saying get me out, i do not want to get in there. it had a spike earlier. now people are getting out. we can roll over the next one, which shows june relative to brent. alix: a lot of people say if it is happening here will it happen in brent. what does the chart tell you there? mike: the first thing to remember about brent's it is seaborne and cash settled. wti. not land locked like it is unlikely to give negative. this expires thursday. that is what we show you in magenta. this is the front brent contract , it is below 20. going negative like wti is unlikely also look in the big picture. futures are the trade.

the big picture is the deflationary trend. bond yields are declining with crude oil prices. that is the trend of the moment. it is not friendly for inflation. alix: it is not. thanks a lot. mike mcglone, appreciate that. withg up on "the open" jonathan ferro, david herro. this is bloomberg. happy tuesday. ♪

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jonathan: from new york city for our audience worldwide, good morning, good morning. "the countdown to the open" starts right now. equity markets with a left. 30 minutes away from the opening bell, the s&p 500 higher 1.5%. in the bond market, no lift for treasury yields. yields on the 10 year lower. to 0.64%.asis points the tension in the june contract on wti. we will talk about this later. andcoming in 7%, to $11 $.90 -- $211.90. e begin with the program -- to $11.90. we begin the program with the issue of opening the country. it is the road toward the unknown. a road toward the unknown where no guidance is the new guidance.