, bad growth and dividend cuts. spain sees the worst growth since world war ii. big oil slashes dividends. powell worried about long-term growth, while ecb president christine lagarde faces pressure from investors to take on more credit risk. and strong results push shares of tech companies higher, while restaurants offer a cloudier outlook. we will speak to david gibbs, yum! brands ceo, later in the show. welcome to "bloomberg daybreak" on this thursday, april 30. some breaking earnings this morning. mcdonald's front and center. stronger than expected comes in a little bit light. that stock still eking out again of 0.6%.- out a gain

outperformance of small caps for a sixth straight day, so that is sort of the good news, but it is all a wait-and-see game as we head into the ecb. underperformance happening with btp's in europe. twitter earnings breaking as well. revenue coming in stronger than estimated at it hundred $7.6 million. $876are shifting -- at .illion has a look at the monitor bullet daily active users, they came in at 166 million. that did beat estimates. they did add 14 million average monthly daily active users since the previous quarter. seeing more activity. now it is about monetizing that activity. twitter is up by about 10% in

premarket. more coming out later on in the show. we do want to give you a snapshot of all that is moving the market from our team in new york. we are going to begin with the data overnight in europe. recession,s record plunging into record contraction, shrinking about 3.8%. the slump adding a lot more urgency for joint physical support and puts more pressure on christine lagarde later today. bloomberg international economics and policy correspondent michael mckee has more. michael: the european statistical agency says the bad news on top of the bad news is that the data are probably worse than we are even seeing because so many companies are closed down, they are not getting accurate reports. expect everything i am about to tell you to be revised, and probably lower. to say thats weird a not to it is weird because everything is the worst ever.

the french economy shrunk by 5.8% in the quarter, the worst ever for them. italys economy down 5.2%, 4.7%. we will get more on that. the government schemes to support wages so far, successful across europe, but in germany, where employees worked reduced hours and the government subsidizes the difference, has helped some, but germany today still reporting that andployment jumps to 5.8%, 370 new jobless -- 370,000 new jobless claims. in the previous month, they had just 8000. this could be a lot worse than people expect. in italy, the unemployment rate for march actually fell to 8.1% from 5.7%. locked down. they can't go look for work, so they are not in the labor force.

finally, separate figures show ,nflation in the arizona area just zero point -- the eurozone area, just 0.4%. dismal news across the continent, and the only thing you can say is it is probably worse than reported. alix: thanks for that, mike. a really great, uplifting report. looking forward to the assessment from christine lagarde. we want to turn to earnings now. coming in with earnings at 0.45 per share. thatrk contrast to shell, cut its dividend by 60%. conoco saying they ended the quarter with about $14 million liquidity. annmarie hordern is checking out the earnings. annmarie: i think we need to

begin with shell. cutting the dividend for the first time since world war ii, they are saving $10 billion, but the dividend for big oil is sacrosanct. this shows the depth of the crisis they are facing. a lot of pressure will be on chevron and exxon with a report tomorrow. you either cut the dividend or load up on more debt. spoke to bloomberg tv exclusively. he called the move prudent, but the market certainly doesn't like it. shares are down more than 6.5%. another bleak earnings report from socgen, already one of the worst performers among european banks. it is a loss for the quarter and they suffered a massive blow for the revenue trading business. we are seeing a domino effect. the bank saying they lost a lot of money from products hit when companies started to cancel dividends, so the pandemic

hitting different sectors of the corporate world. yesterday we had big tech a little more upbeat than what i just gave you from europe. facebook nearly 9% premarket trading. they saw a jump in revenue. as people remain on lockdown, they are glued to their screens. products like whatsapp and instagram. microsoft, similar situation. they are helping people move to accommodate from their office to the kitchen table. they saw a jump in internet and cloud services. tesla shares are up more than 8.5%. the company's third street quarterly profit. i don't know if you have seen it, but that report is being completely overshadowed by the rant elon musk went on during that call, saying that these lockdown measures are undemocratic. that is getting a lot of traction on twitter. today we have amazon and apple to look forward to after the bell. alix: thanks a lot.

really appreciate that. for more on corporate results, tune in later for my interview with david gibbs, yum! brands ceo. let's recap some of those earnings. on the one hand, you have mcdonald's. .evenue did beat slightly company sales began to decline in the second half of march due to covid-19. twitter is up by 12% in premarket after first quarter revenue and monetize black of users beat. conoco also up by 4% in premarket. zeros quarterly dividend dollars 42 cents per share, and they are accelerating oil output in june. plus, comcast beating on the bottom line. it's internet business got a

nice boost of people working and going to online school. coming up, much more of your morning trade, news, and analysis on the markets in today's first. this is bloomberg. ♪ rg. ♪

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, plus damian sassower, chief emerging-market credit strategist. happy end of april. that came out of nowhere. data,eady broke down euro

so i want to start with the fed. what was your biggest take away from yesterday? michael: the way the markets should be looking at it, the idea that the fed is looking at a one to two your problem for the u.s. economy. phrase medium-term could describe the damage to the economy, and that is code for a year or two in fed speak. jay powell underscored that, saying we are not going to get out of this very easily. we need to do more probably from the fed, and the fiscal authorities need to do a lot more. --ot of pledges of future not a lot of pledges of future but the idea that we are not coming out in a v shape is the thing i think people really need to focus on. focused on that, the market didn't really seem to reflect that. em currencies were up pretty big yesterday into today.

i think mike is spot on. the biggest risk to markets coming into this week is a policy error by the fed in terms of trying to time it's exit strategy, saying that it is time to pull back on these policy measures, but there was none of that. carryys are putting trades back on again in emfx. that is just an indication to me that sentiment is for sure improving here. doesn'tat is why it square up with what mike was talking about. if you are worried about a more hawkish fed, you didn't get that. if you are still looking at a one to two year potential recovery, that is not good. damian: not for asset prices. we may very well have to put our chief u.s. economist on furlough. no, i am just kidding. the fact is lower for longer is

a good thing for asset prices, specifically in emerging markets. alix: that begs the question, and if you look we have been talking about this for the last couple of weeks, you have this v-shaped recovery and asset prices, but not with the economic data. is that something sustainable? michael: it is probably not sustainable. and by the way, carl, don't worry. [laughter] the fed chair was saying yesterday that the markets do seem disconnected because they are sort of discounting way ahead, and you don't know when this is going to turn around. they are trying to figure out where the transition point is to once again making profits that would justify higher valuations. also, he didn't want to say it, but they are being powered by all of the liquidity central banks are pumping into the economy at this point,

particularly the fed. that sustains people even if they don't have a lot of visibility. so this powell put on a massive scale has created this rebound. the question is, do we get some bad news that cuts the legs out from under it? i think that is what everyone is watching for. will probably tell you markets like to climb a wall of worry, so maybe it is good for stocks. alix: right. so what did you make of the china pmi's falling more than expected? it does show dispersion between the large companies in the small companies yet again, the markets taking that in stride. pmian: the official indicates some expense in in surface,t beneath the

as you rightly point out, the can -- the production component was strong. china is reopening, but external demand is not there. are means that china banks going to be contending with a lot more bad loans. we are seeing that in the u.s. and europe. even hsbc this week warned of $11 billion in credit losses. there's definitely some bad times ahead, specifically on the credit side, and i think that's where your focus has to be. you'vesentiment side, got to look at spreads relative to ig. i think that is a great indication of where sentiment lies. alix: it feels like the fed is going to come in and maybe take on more credit risk at the end of the day. did we learn anything about that from jay powell, and you walk me through what christine lagarde will have for the press conference later today? michael: the fed will do more.

the question is what and when. it will probably go to a more specific form of forward guidance first, and then expanded qe. we will get more bond buying, but until they get a sense of the depth of this, and when it would do some good, you'll to something. do today from christine lagarde, with those numbers that we had theurope and the idea that real story is worse than they are telling us, it is pretty certain that the ecb is going to at least hint at strong action, even if they don't take it. the two items we might see our expansion of the pandemic emergency lending program, and which they are buying bonds from all of the countries, but saying they can do it outside the p -- the capital key, which gives them the ability to buy more,

say, italian bonds. and given the italian package coming, they may be absorbing even more of that. the other is to change the interest on the tltro's, so banks could take, if they went to 75 basis points, they could take a loan from the ecb at 75 basis points and then deposited back at 50 basis points. a 25 basis point profit on it, which in theory is supposed to be lent out, but it would help the banking system. alix: fair point. if we walk that forward to the market, what i can understand is you can still have risk assets climb the wall of worry as you have central banks being able to itically support it, yet necessarily look like you want to buy risk, so what do you do with that? damian: i think the one thing that stands out this time around is the willingness on the part of the big three rating agencies to initiate downgrades

specifically at the sovereign level. thee go back to 2008, rating agencies were way behind the curve in terms of downgrading sovereigns, but just this morning we saw south africa get cut deeper into junk by s&p. now it is double b minus. it's bonds are being removed from global indices, which is obviously leading to outflows. but i think in the euro zone, we could expect to see more of the same thing. maybe continued downgrades to italy. maybe even spain falls in that camp soon enough. but those are the events that i think will catch investors' e yes and could derail the recovery. alix: this is a really simple question, but are investors caring now? we have seen the gulf nations come under pressure because of oil. yet, they are still able to tap the debt market. terms of caring about fundamentals, not at all. it is almost cute when i hear

people talk about fundamentals right now. this market is trading on technicals. the set, the ecb, the central banks have all backed it up. things appear much but -- much better than they did just a short month ago. alix: how does jay powell address something like that? we've heard about moral hazard. it felt like now is not the time to deal with that. is that true? michael: that's fair. they know they have a problem. hase's a massive put that maybe caused massive dislocations in the markets, but given that the economy is in such bad shape, they are not thinking it is going to be a problem for right now. the idea is this is kind of an exception to what would happen. you just have to do everything possible to prop up the economy and worry about it later. that is what they are going to do. i am not sure how they ever walk this back. the balance sheet is going to be huge forever. the idea that the fed will always step in is going to be so deeply drilled into traders' minds that it would be really

.ard for the fed to step back their whole view is this is a problem for another day. looking at maybe $11 trillion balance sheet? ecb we look forward to the in the short term as an emerging market credit guy, what are you paying attention to? what are you caring about? damian: certainly i look for spillover into the central and eastern european economies. there are winners and losers here. if you just take that forward and look at places like asia, you see that countries like taiwan and the philippines have behaved. their currencies have behaved with much greater stability than the broader region. you see that in eastern europe. i think the ecb, it is really about the lack of fiscal unity. bond buying is really the only option there. we would love to see a little more fiscal stimulus on that front, but i think the fed is leading the charge, and that is

starting to spill over into emerging markets and risk assets, so that is a good thing. alix: mike, what gets investors bumped at the ecb meeting? when did they say we will not get the support we need? michael: that may be if the ecb decides it is a little too early to expand the pepp program. that is what people are watching for. we could see christine lagarde make another verbal mistake like last time, when she said we are not here to close your spreads. but i think she will be a lot more careful this time. alix: that would not be good. dies, think a lot. really appreciate it. charts we useny throughout the two hours, go to gtv under terminal. browse those features, check it out, and save all of those charts. this is bloomberg. ♪

viviana: you are watching "bloomberg daybreak." royal dutch shell cutting its dividend for the first time since world war ii. the ceo: the decision inevitable. -- the ceo calling the decision inevitable. shares of facebook are higher today. the social network reporting and 18% jump, and that shows advertising budgets were strong before the coronavirus outbreak hit. facebook also says in the first few weeks of april, business was steady. workingith the surge in from home boosting microsoft orderly sales and profit. there was increased demand for internet-based software and cloud services. units didce device better than microsoft projected.

that is your bloomberg business flash. alix: thanks so much. speaking of the tech giant, wall street was concerned that the rally in stocks was too dependent on heavyweights like microsoft, facebook, all of the nowarch cap tech names, but small caps seem to be holding their own. yesterday at000 is 6.8%, and that sort of streak only happened once before in january of 2000. it may signal further gains. say it is hards to really find a bottom in stocks until you get a shift in leadership momentum. if this is a shift, that could mean more upside for the equity markets. coming up, we are stuck near zero. the fed holding rates and voicing concerns about long-term economic image from the coronavirus. we will break it down with mark cabana, bank of america head of u.s. rates strategy. earnings tumbling out this morning. estimates,ing

cutting its production outlook. facebook still up, and twitter surging by about 9% in premarket as they deliver a solid quarter, but do warn about ad sales revenue coming in a little soft for the last couple of weeks of march. this is bloomberg. ♪ staying connected your way is easier than ever.

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from all of that on xfinity.com. faster than a call. easy as a tap. now that's simple, easy, awesome. alix: welcome to "bloomberg daybreak." i'm alix steel . 100 featuresnasdaq outperform.

watching small caps as well. mixed picture in europe as well. if you switch up the board, take a look at what is happening in the bond market. we are watching btp's as well as treasuries. you do have btp's still seeing seeing, but all wait and for the ecb rate decision, coming in about 15 minutes. oil getting a bit of a relief rally as well. norway stepping up and cutting production. all the news is whether or not withe going to deal central banks, and how much risk they will take on. traders seeing little prospect in the foreseeable future. fed chair jay powell said more action may be needed to shield the economy from the virus fallout. chair powell: congress has also reacted quite aggressively and strongly with the c.a.r.e.s. act and other laws, several other laws, and that is appropriate, with finance done in limit

insurance and the paycheck protection program. we have seen historically large reaction. but i would say it may well be the case that the economy will need more support from all of us if the recovery is to be a robust one. mark joining me now is cabana, bank of america head of u.s. rates strategy. that sounds pretty pessimistic from jay powell. what was your biggest take away from yesterday? mark: i think the fed definitely struck a dovish message, recognizing they probably need to do more across all fronts, both fiscal and monetary, and recognizing the risks to the outlook are skewed to the downside. ,here were considerable risks which is a pretty downbeat assessment for the fed. so the fed needs to do more. one of the things we were struck with a lack of willingness for the fed to provide more clarity around their asset purchases, in

particular around the treasury and mortgage asset purchases. they continue to talk about how these purchases would be structured supports move market functioning, but refrain from really providing more stimulus to the economy. that would be a nice secondary benefit of the ongoing purchases, but i think the market was looking for a little bit more. when he says fiscal and monetary authorities need to do more, they really want to provide some concrete guidance to that effect. the risk is that the fed is going to continue to taper their purchases or reduce the amount of woodley and monthly purchases they have been doing. -- amount of weekly and monthly purchases they been doing. that just seems inconsistent with the message fed is trying to deliver. alix: what did you make of the fact that they didn't? mark: it seems like they want to preserve optionality. they want to see how much they need to buy.

because they didn't do that, it seems that they are very uncertain about the outlook, and they don't really know what the right answer is at the moment. so they are going to be flexible, but what i think the bond market interpreted that to mean was that the fed is going to test the market to see how little they actually need to buy in order to ensure smooth market functioning. , that sends the risk of perhaps an unwarranted policying in terms of with regards to apps asset purchases. we think they will try to reduce their footprint in markets, not being willing to commit to a certain amount of purchases that need to be done on any given month, or giving guidance about the outlook for purchases more than a week at a time. it seems a little inconsistent because the fed is saying the

outlook over the medium-term was going to be bad, but the fed is unwilling to provide guidance on asset purchases. they should deliver more guidance to that effect, so that is why we saw elements of the fed guidance a little inconsistent between what they said in words and what they followed through with in actions. alix: it was interesting that they said they had more tools in the toolbox, that money was somewhat unlimited is what i took away as well. did we learn something about the credit risk appetite that the fed is willing to take on right now? mark: that i think was another area where the market wanted to hear a little bit more. not necessarily with regards to the amount of credit risk as i think the fed has been pretty clear about how much they are willing to do in the ig space and how they are going to dip their toes into the high-yield space to some extent, but i think the market was really

hoping for some additional clarity on when these purchases in credit would get going, and size thehe potential fed is sinking would need to be implement it. the fed and chair powell didn't provide a lot of guidance. clearly believes the fed, given how price action has developed in credit markets, but i do think more explicit guidance on when they will start, plus the amount we will likely be looking at, would be helpful in forming market expectations. chair powell noted that he doesn't know how large these programs will be because they've already had some meaningful announcement impact. the markets have already moved in the direction the fed would like, but i do think more clarity would be helpful to the market. alix: so what we are seeing today is basically able flatten bowl flattenly a

-- a bull flattener. mark: it seems to be, at least for the moment. i would say that on a go forward marketi expect that the every friday, when the fed announces their purchases, to begin speculating how much are they going to do, and at least for the fed in the near term, to try and dial back the amount of purchases they are signaling to the market. if they do that, i think that will allow for a cheapening of treasuries across the curve. i think the back end of the curve would probably be the most impacted by that. they seem to be quite sensitive to the amount of buying the fed has been doing recently. 30 year bonds sold off the most last week. it is also way a couple of weeks ago, when the fed announced a

smaller pace of weekly purchases, you saw the biggest impact on the back end of the curve. i think that is until the fed provides a bit more clarity or until the market as a better understanding of how much the fed is going to be looking to , and before they transition to a more typical qe program targeted towards easing financial conditions. alix: j.p. morgan was talking yesterday about qe moving to ce, credit easing, versus quantitative easing. do you feel like that is isewhat off the table, as the debt monetization conversation? mark: it certainly seems like the fed wants to go a little bit further out the risk spectrum, other markets,o including corporate credit, so i am synthetic to that view. that seems to be the direction they are headed in. i don't think you can really

ease credit conditions or do credit easing more broadly without also supporting lower treasury risk, and without allowing for better facilitation of a lot of the debt issuance we know is going to be coming out of the u.s. treasury. so it just seems like the fed was unwilling to take the steps to announce more concrete guidance around their asset purchases, whether it be treasuries, mortgages, or credit at this point in time. certainly on the treasury mortgage front, it seems like the fed remains uncertain about the outlook and once more clarity before announcing a more concrete pace of purchases, but my take away from powell's comments is that the fed is very concerned, as i think they should be. therefore, i don't really know how much additional information the fed need because we know the macroeconomic outcomes are going to be quite bad. we know we won't see a v-shaped

recovery. if that is the case, having more clarity and doing more as opposed to less would be the more appropriate policy response. alix: mark, really good to catch up with you. always great to chat. thanks so much. earnings continue to trickle out this morning. the latest is american airlines, off the premarket highs after reporting larger than expected first-quarter loss of $2.65 a share. says second quarter cash burn rate will be about $70 million a day, suspending buybacks and dividends, all of that coming in as receiving $5.8 billion in federal aid. we want to give you an update on what is minting headlines outside the business world. viviana hurtado is here with first word news. viviana: president trump blaming coronavirus response on politics.

he says they are considering ways to punish the chinese government. china says it has no interest in interfering in u.s. internal affairs. fed chair jerome powell worrying about the long-term economic damage from the coronavirus. chairman powell suggesting that even if the economy starts to recover in the third quarter, the battle would be far from over. he is urging the u.s. congress to do more. 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. just moments away from the ecb's latest policy decision. we will break it down with mike pyle, blackrock global chief investment strategist. if you have a terminal, go to tv . check out anything you may have missed. tv on your terminal. . . this is bloomberg. ♪

viviana: this is "bloomberg daybreak." we begin with some breaking news. the german government setting out a unified position on a bailout for lufthansa. it sees the government taking at least a 25% stake in the airline and receiving at least one seat on the firm's supervisory board in exchange for about $11 billion in aid. they say the details are still being negotiated. blastedo elon musk stay-at-home orders on an earnings call. he went on a profane rant, calling them fascist.

the outburst following news the company posted its third straight quarterly profit. those restrictions are putting tesla at risk. general -- at societe generale, setting aside $800 million to cover bad loans this year. bancshares have lost more than half their value among european value.- half their among european banks, one of the worst performers. that is your blubber business flash. alix: thanks so much. we are a few seconds away from the latest ecb policy decision. equities kind of going nowhere ahead of this decision, although tech still outperforming in the u.s. if you switch of the board, you can see btp's still a little bit of selling. yields up by about two basis points. also want to take a look at the euro-dollar as well, coming in

at $1.08. a little stronger on the day. we are still looking for not the sara lee any sort of cut on the refi rate or anything along those lines. we are looking for the details of if they will buy junk bonds or expand their purchase power program, or potentially lower the rate on tltro's, so banks can get more money for less. we are just moments away from the ecb decision as we await christine lagarde coming out at about 8:30 to answer questions and dissect material there. the decision out. no surprise, the main refinancing rate is 0%. the foss -- deposited facility at -50 basis points. no surprise there. just trying to look for some of the details. they do say they are going to leave their rates at present or the inflationntil

goal is near. they do say tltro conditions have eased further, and they are going to buy 20 billion euros a month, plus 120 billion euros this year under the asset purchase program, the app. they do just reaffirm the size of the pandemic purchase program at 750 billion euros. some analysts say that by the time this is said and done, that size will be doubled. currently, they do not increase the size of the pandemic purchase program. they say that the overall asset purchase program is going to run until right before interest rates rise. they will continue to invest qe debt. within the market reaction for this, just want to take a look at the bond market. a little bit more selling puts pressure on italian btp's. yields up by about three basis points, and terms of the currency. not a ton of movement. euro-dollar now flat on the day. joining me now to help break it

all down and what it means for ,he market is michael mckee bloomberg international economics and policy correspondent, and mike pyle, blackrock global chief investment strategist. you are digging into the details as we get them. what stood out to you so far? michael: well, they are adjusting the tltro program and the long-term loans to banks. they have lowered the rate on that, 50 basis points below the average of the main lending facility, which is 25 basis points right now. you are looking at a 75 basis point telstra rate -- point tltro rate. you can qualify for as much as 50 basis points below the deposit rate, which means you could go down to a -1%. they are also announcing this new pandemic emergency purchase program for bonds, calling it guess, seven

additional refinancing operations that basically last for three to six months. they will be carried out with an interest rate of 25 basis points below the average rate on main refinancing operations, again, so you can -- the banks will be able to get more access to cash. it is basically what seems to be the ultimate bottom line of this statement, no change in interest rates, but we will make a lot more cash available for banks, and we will make it cheaper if you then use that to lend. alix: real quick come of this new refinancing operation for banks, how different is that from what banks regularly access? michael: it seems to be a little more focused on the idea of what has happened in the pandemic program. they do run short-term refinancing operations every so

often, so it isn't hugely different from what they have done the past, but it does seem more focused, and also at a lower interest rate to than in the past. at this point, near as i can tell, they are not following the capital key exactly in this. likeis point, it does look a targeted operation to get cash where it is needed in the short run right now. pyle, what is your reaction to what the ecb has done? mike: certainly some incremental steps in the right direction, but i think when we compare what we are seeing in the ecb, including today, to what we have seen out of the federal reserve and policymakers more broadly, the scale and response is much different, and you are seeing that reflected in the way italian government bonds are

trading today versus where they were in march, or just not seeing the kind of compression of financial conditions or the loosening of financial conditions on the back of the ecb that we have seen here in the u.s. i think we will see quite a bit ahead.oking see? what do you want to things,would say three not only on the ecb. we recognize the way in which the ecb is in a much different institutional framework than the u.s., and they face challenges the federal reserve doesn't. standing upit is the pepp program, making it an overwhelming backstop for the system. secondly, i think expanding into fallen angels. beyond that, i think we just

need to see much more sightedness and coordination from the -- more to sightedness and fiscal coordination. we need to see something similar from europe. , it whatever it takes mindset of the kind we saw in 2012 from ecb president draghi that i think we are seeing now from chairman powell and u.s. fiscal policy makers for the time being. the ecb also saying they are fully prepared to boost the size of their asset purchase programs if needed, potentially referring to the 750 billion euros. i guess i am wondering why they didn't do that now, if that is to put more fiscal pressure on european leaders, or if there is something else going on here, why they didn't do it today. which micro talking about here? -- which might are

we -- which mike are we talking about here? alix: sorry, you're both named mike. go ahead. michael: the market seemed disappointed by all of this. you are looking at market spreads and italian debt up by five basis points, basically doubling on the news this morning. the market may have expect them to put more money out using aely rather than lower interest rate on the money they are making available. alix: and mike pyle, your reaction? mike: i very much agree with what mike mckee just said. very much the combination of wanting to see how what they've announced plays out, combined with just the institutional challenges around getting consensus, but the consensus among the fiscal policy makers on the political side in europe continues to mean they're having

to take incremental steps rather than just the big, decisive steps we have seen out of the u.s. system to date. risks are there ahead, though. alix: i guess one of my broader questions is they are cutting all of these interest rates on loans and targeted operations, and the difference is if you wind up lending some of the money that you wind up taking from the ecb, you get a super low interest rate, 50 basis points below deposit, all of that engineering. does it matter if there is no demand, that factories restart but there is no one to buy the stuff? mike: i think we saw that during the aftermath of the global , and with theis euro zone crisis, that it can be very challenging in the absence of demand for credit and for

goods and services, or for all of the improved plumbing in the world that really changes the trajectory of activity. that said, it is the toolkit that the ecb has, and i think it is an important thing they are using to the best extent possible. they are encouraging, but we need to see a lot more. alix: mike mckee, you mentioned italian bonds. still in the 10 year, you're looking at borrowing rates of 1.83%. i have to wonder at what point does it become prohibitive where it really puts the pressure on eu leaders because that is still a really cheap rate to wind up getting money to fund the stimulus you need. michael:michael: it is a really cheap rate compared to where they were in the last financial crisis in europe, but when you compare it to german bund yields, it is much higher. the spread is blowing out this morning on this news.

so there is concern that people are going to move away from those bonds, and it sets italy up for more problems for its banks. that is the concern. it will be interesting to see what madame lagarde has to say about that. remember at the last meeting, she said we are not here to lower their spreads. now they've got the spread problem backup and -- problem back again. that will maybe drive people away from italian investments at a time when they really needed. alix: fairpoint. guys, really great conversation. mike pyle, thanks for joining us. michael mckee will stick with me. just to recap what the ecb actually did, it cut its lowest interest rate on targeted loan operations. it also launched a new program to really target pandemic loans. they add seven more additional refinance operations, and also lowered rates 25 basis below that main rate. they did not refinance the

purchase program, but said they stand ready to do that. some firepower being held, but a lot still being done, particularly on the lending facilities to support acts, as we wait for the pressure on eu leaders -- to support banks, as we wait for the pressure on eu leaders. coming up in the next hour, we are going to be speaking with someone who is very familiar with what the eurozone is facing now. . we are going to talk to george papaconstantinou. i am going to get that right in the next five minutes. the former greg feynman's minister -- former greek finance minister. that is coming up. this is bloomberg. ♪ these days staying connected is more important than ever.

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on this: americas" thursday, april 30. i'm alix steel. let's take it right from the top. >> you have a higher cost for managing the portfolio in this dislocation environment. alix: market volatility wipes out equity trading revenue for socgen. also delivers a gloomy outlook and cuts its dividend. >> these countermeasures are not enough to deal with the aggressive uncertainty we are seeing, so the board has decided that it was prudent to also reduce the dividend. 2/3 cut will shock investors who relied on shell's generous returns for decades. the decision underscores the gloomy outlook for the energy industry this year. alix: this was the first cut for shall since at least world war ii. chair powell: this is the time

to use the great fiscal power of the united states to do what we can to support the economy and try to get through this. alix: federal reserve chairman jay powell says economic activity will drop at an unprecedented rate and the second quarter and urges lawmakers to deliver more fiscal stimulus, a theme echoed by christine lagarde as france and spain face record contractions in the first quarter. michael: european gdp figures, negative three point 8%, the worst ever. it seems weird to say that i'm not think it is weird because everything is the worst ever. alix: the fed and the ecb still have fires to fight. ecb leaders have only agreed on a rough outline for a reconstruction plan, was a key issue to resolve, if money should be loans or grants to member states. >> we are able to do a lot of the essential functions without coming into the office. alix: facebook reports and 18% increase in first quarter revenue and says this and this was steady in the first few weeks of april as earnings

visibility for most companies is murky at asked -- murky at best. >> people are glued to their screens. they saw a spike in users on facebook, but also whatsapp and instagram. they did warn on a little bit of pain for ad sales. alix: let's take a quick check on where markets are trading. it is all about reaction from the ecb. you are seeing euro-dollar somewhat flat, but seeing selling with the btp's. you have yields jumping, and that spread wiping out. the european central bank is intensifying its response to the crisis when it comes to some new loans, yet stepping back and not expanding the pandemic purchase program, which now sits at 750 billion euros. all of this trying to put pressure on eu leaders to come up with some kind of coordinated action to really help struggling countries. let's break it down in terms of what you leaders can do, what the ecb should do even more. ,oining me is michael mckee

bloomberg international economics and policy correspondent, and george papaconstantinou, former greek finance minister. he did negotiate that 110 billion euro loan agreement for greece with the eu and the international monetary fund, so he knows firsthand what it is like to be in italy's shoes right now. we really appreciate you joining us. what should eu leaders be doing? what did you learn when you were the finance minister? what worked, what didn't? george: one key difference between the two crisis is the speed. a decade ago in the euro sovereign crisis, it took two years before the ecb really stepped up. this was the well-known whatever it takes statement. this time around, it was much faster. it moved within a couple of weeks. it announced the pandemic asset program, which, if you count all

of these commitments, it is over $1 trillion, so the ecb has done its job. the remaining question is what are the remaining eu institutions, and what is the eu doing as a whole. national governments are spending. some can afford it, and others cannot. for those that cannot, the debt will be sustainable. here we have had this long discussion about the recovery front. we had some proposals on the table. as humans and earlier, there's a big question of how much to grant, and how much are going to be loans. i hope we come up soon with a big number, with one that is a central fiscal capacity for the euro zone and which womanly grants rather than loans. -- and which is overwhelmingly grants rather than loans. michael: we saw the same sort of divide this time as when you

were negotiating, north versus south in the euro zone. you wrote in your book in 2016, "game over," that the two sides had to move closer together, and it doesn't look like that had happened. are they going to be able to come up with something that keeps the union together? george: it is the same conversation, but with a twist. whichral hazard rhetoric was so prevalent back then is less present now, and it is very interesting to see that within media and the political class are openly talking about the need to support the rest of europe because it is not simply a question of data, but of keeping the project together. , whichs an outlier here is taken a very strident view on this. mainnk that is one of the

blocks to have an agreement. theink it is clear that politics are not there to mutualized past debt. in that sense, the moral hazard argument can be evacuated. if we focus on the new debt that is created to respond to the crisis and help our economies recover, the discussion will be much easier. and i do want to believe that we are edging towards an agreement. it will be a good enough agreement to get european economists on their feet again -- european economies back on their feet again. michael: they have wanted solidarity and response, and the northern countries say if we do that and take on debt, even going forward, we are going to be stuck with the lower credit ratings that come with countries like greece. peppere included in the lending program, but still have

a lower credit rating. -- much of the lives he have how much validity does that have? george: i don't think it has much weight, to be honest. i think a lot of proposals out an extremely low cost. for example, a recovery fund based on the european commission , issuing bonds on the market based on the existing eu budget and resources. the additional cost of the richer states is very small, and certainly much smaller than the broader economic cost of the collapse of the euro zone or of some larger countries in the euro zone because they will be unable to sustain very high levels of debt, which are not because they made the wrong economic choices. it is a next journal shock, i

catastrophe which they could not have predicted. the problem that continues is the feeling that it isn't a complete union yet. there's a lot of hope that coming out of the financial isis, you would have more fiscal agency, if not a one budget kind of situation. enough situation moved to not have us extrapolate from this that somebody might leave the euro zone? i think it depends what your expectations are. it is certainly not what i would like it to be. i do not think we are facing a danger of collapse as we were facing 10 years ago, but i do worry about the politics, both north and south, if we do not find a solution that convinces the south the north is there to help them, and the north feels

comfortable. but every time i hear about the lack of solidarity, i look across to the u.s. and see the discussion about how each state brings into the budget and how much each state takes out of the budget. is nothe european union in such a bad place after all. alix: that a sort of a fair point. but it is an add-on to that question as well that we focus a lot on southern countries wanting to pull away from the eurozone so they can grow their own way, but will we see a backlash now for northern countries aside from germany that may say, if we are going to bail you out like this, we went out of the union? george: if they did, that would mean a currency with a very different valuation. they realize very well that actually, at the end of the day, they are the main beneficiary of

being part of a common currency area. this may not be in the public discourse, but the analysts and policymakers realize that countries such as germany and the netherlands outside of the european currency area would find a lot of problems that come at the moment, are resolved because of an equilibrium currency rate, which presents a whole area and not just those particular countries. not think,se, i do especially because of the additional debt wording, these would really not be large. a huged not imply additional effort. therefore, i don't think that even though there are political voices in that direction, i an't think those could drive voluntary withdrawal from the

euro zone. michael: a lot of people in greece and in europe are saying that greece has done a lot better job than most countries in dealing with the pandemic. what is the situation in greece right now? how much aid do you think you need? are you able to get there this -- to get through this without the package they are talking about for italy and other countries? george: in terms of the health aspect, greece has moved very fast and has managed to keep the pandemic under control in terms of having, for example, one of the lowest debts per 100,000 people -- lowest deaths per 100,000 people in europe, and a very manageable number of people in hospitals and icus. we have gone into complete lockdown early, and this has helped very much to keep numbers low. million,try of 11 we've had about 150 fatalities in total. that is for the health aspect.

the economic aspect, of course, is problematic as we move forward, especially because the country rely so much on tourism, and tourism has complete we collapsed for this year. there's a big question mark on how it will be next year. we are looking at going to the official government projections, anything between -4% and -8% per this year. with a country with a very high that to gdp ratio, this means you could have debt exceeding 200% of gdp because of the collapse of gdp. so the country will need help, and we are fortunate in that we are now in the ecb program, and ecb is also purchasing government debt, but we are very much looking forward to that discussion at the european level to conclude, to be included in the broader fiscal effort that will be done at the eu level.

alix: you and italy and all other countries as well. thank you so much. i really appreciate you joining us, george papaconstantinou, former greek finance minister. stay with us. we are going to bring you christine lagarde's news conference in about 15 minutes. one market participant saying a helicopter drop for banks, so we will delve into that. coming up, yum! brands says its first quarter was a tale of two realities. i will be joined by the ceo david gibbs, next. this is bloomberg. ♪

alix: earnings continue to trickle out. yum! brands reporting after the

bell yesterday. earnings coming in short of expectations, but the quarter reflect momentum at the beginning and the heavy impact of covid-19 at the end. joining me is yum! brands ceo david gibbs. really appreciate getting your perspective today. thank you for joining us. it seems like the question after earnings is how long do you expect the sales downturn to really last? david: thanks for having me. obviously that is a great question, and nobody can know with certainty. we have the benefit at yum with our brands being in over 140 countries of seeing some of the

learnings coming out of markets that have experienced this a little longer than others. i think the recovery curve will vary by markets depending on the kinds of stores you have any each market. if you have a heavy preponderance of dine in business, that takes a little bit longer to come back. off premise business is pretty well designed for this environment to come back a lot quicker. alix: one analyst was talking about trying to glean what that meant, and said 20% of global units are still closed, so you could be looking at double-digit 30% sales decline. when do you expect to have that kind of visibility. david: we are off the lows when it comes to unit closures. at one point we had 11,000 other over 50,000 units closed. now we are below 10,000 and we are reopening units every day. we just announced that we would be reopening about 100 units, kfc units in the u.k., by next week. andelieve of the closures, as you know, and a lot of markets, people are reopening dining rooms, so we are on the upswing, but we can't predict exactly the timing of all of the reopening's. that is why a lot of companies are redrawing guidance until we get a better sense of what these curves look like. china, one of our

largest license businesses, reported the other day and talked about the fact that they are on the other side of this, seeing almost all their stores reopen. that is all very encouraging for us, and we love the fact that we have this off premise business that is really designed to succeed in these times. as you reopen, what have you noticed are your bigger issues, regardless of the demand on the customer side, and terms operations? is the of ourunit 90% havee open drive-through's on them, and the hut business is designed

for carryout. we rolled out contactless delivery and carry out. that is working quite well in the u.s., so the challenge of reopening dining rooms in the u.s. is now a new challenge. we are going to take our time on that to better understand what the landscape is, what the challenges are going to be, learn for others that go early on that, and we will make sure that we never put our customers or employees in danger. internationally, varying by market, the challenge of reopening can vary. what we are seeing in a lot of markets is the best way to reopen the store is to start by reopening the off premise business, and then shift to opening the dine in overtime as we learn more. alix: are you having any issues with food supply chains? david: i think you are seeing a lot of headlines about the supply chain and the impact on it. certainly when you have such a massive shift with restaurants closing and people going to grocery, the supply chain was not designed for the mix we are

seeing now between grocery and restaurant, so that is pressuring it, coupled with plant closures, and creating this pressure on the supply chain. have good visibility to our near-term supply chain, and we are working to create contingency plans for the longer-term. i think we will work through it in partnership with our suppliers. we are also fortunate that we witha purchasing co-op fantastic expertise that does a great job of buying on behalf of all of our brains in the u.s., so that scale gives us advantages in working with suppliers to make sure we get the supply we need. are you seeing meet shortages? -- seeing meat shortages? is there one thing you've got to make sure you're getting? david: everyone is talking about beef and pork being the biggest challenges. for our businesses, chicken is our biggest protein at kfc,

obviously, so we are very focused on that. but that is not as pressured. but beef is a critical ingredient for us in our taco bell business in particular, so that is where our focus right now, just making sure we have that assured supply. alix: if you tie all of these things together, the issues that you confront when you are opening stores, as well as dealing with food supply chains, are you looking at a world where businesses like yours are going to be facing structural lower margins going forward a few have to rejigger all of your businesses? david: we are looking at a different world, but i wouldn't conclude that we have lower margins. consumers are looking for things that can satisfy their need to serve a larger party size. and youe eating at home are seeing our brands and all of

the brands open right now in the restaurant industry start to cater to a larger party size. for us, that is kfc serving the $30 family meal, where you can get something to serve for the family tonight and tomorrow night, or pizza hut with the big offering. those kinds of offers are obviously very efficient for us and have good margins, but we still have to provide great value to customers in these challenging times where money is tight. but you are also seeing deflation in supply chains as well, things like cheese our way down from the typical level. that is going to help restaurant businesses over the long term. i wouldn't necessarily conclude that margins are going to get squeezed. i think the biggest issue right now is the top line, particularly if you are in the dining business. if you have dining rooms that have a lot of social distancing, which means a lot of seats have been lost, it is just going to impact your capacity. for us, particularly in the

u.s., not as big an issue given our off premise business, and you are seeing a shift off premise. it is sort of a re-scrambling of the environment we all operate in. i thick a lot of these changes will stay over time, but that doesn't mean they are going to be bad. it just means you need to be nimble and adapt to them. companies like us that have had brains that have been around for 60 years, that is a hallmark -- brands that have been around for 60 years, that is a hallmark. you have seen that in the industry, people shifting around and offering new consumer needs like contactless, and that will continue. alix: david, i really appreciate your candor. really great to get that perspective. david gibbs, yum! brands ceo, thank you very much. this is bloomberg. ♪ ♪

alix: we have a lot of earnings

coming out this morning. american airlines down more than 2%, reported larger than expected first-quarter loss at $2.65 per share. they are also suspending buybacks and dividends. -- now now in take it of in negative territory by about 4%. they initially jumped 12%. business impacted quite a lot from the virus. conoco higher in premarket, maintaining the quarterly dividend and ramping up production cuts. coming up, moments away from ecb president christine lagarde. this is bloomberg. ♪

alix: welcome to "bloomberg daybreak." a couple of seconds away from data in the u.s. as well as

christine lagarde's press conference for the ecb. it is a pressured equity story right i want to point out a headline from bloomberg saying the saudi wealth fund is building a team to holland for global -- to hunt for global bargains. a lot of hedge funds doing the same thing. and the other areas of the market, we did wind up seeing a greatf with an btp euro-dollar a touch weaker pretty stable going into the press conference. the data in the u.s. is out. the number we are focusing on his initial jobless claims, coming in at 3.8 million, that is more than estimated yet sequentially we are following. if we have reached the peak, that is good thing, but we are still around 27 million unemployed. a check in on inflation rate the month on monthor

down .1%. all in line with estimates. spending and income, personal spending down 7.5% and personal income down 2% during both of those not great as we continue to see the not great day to roll in. bloomberg's michael mckee joints me yet again. earlier when this we talked about a year of growth. is it weird that the data is not weird? michael: yes. it is weird the data is not weird. when you talk about 3.8 million people filing for jobless claims in one week. we are at 30 million jobless claims for the month of april and the end of march. i suspect a lot of the numbers thathis week are catch up all of the applications have started to finally catch up and

maybe we will see this decline in the coming weeks. if we do not, it is a real problem. it will be hard to separate out companies bringing people back on because of the paycheck protection program. the personal spending number is even lower than the retail sales number which suggests spending which does not show up in retail sales and services spending and most of the economy, we know all of the stores were closed. hair salons and nail salons. it does show the depth of the problem and these are march numbers. we have not started to get into april. alix: it is a fair point. s&p futures are holding onto their losses, down 15 points. nasdaq futures able to hold onto some of the gains. we will take a quick check on the dollar, coming in weaker on the dollar index, but it feels like the story will mostly be about italy and what is happening with the ecb and what christine lagarde did in terms of their helicopter money for

banks is actually going to be enough. we do want to go to christine lagarde as she kicks off who -- as she kicks off her news conference discussing plans and the policy. pres. legarde: the vice president and i are pleased to welcome you to our press conference. we will now report on the outcome of today's meeting of the governing council, which was also attended by the commission executive vice president. is facing an economic contraction of a magnitude and speed unprecedented in peacetime. measures to contain the spread of the coronavirus, covid-19, have largely halted economic activity and all of the countries of the euro area and across the globe. further indicators for consumers and business sentiment has

plunged, suggesting a sharp contraction in economic growth and a profound interior ration in labor market conditions. given the high uncertainty surrounding the extent of the economic fallout, growth scenarios produced by ecb staff suggest euro area gdp could fall year,n 5% and 12% this depending crucially on the duration of the containment measures and the success of policies to mitigate the economic consequences for businesses and workers. as the containment measures are gradually lifted, the scenarios for see a recovery in economic activity, although the speed and scale remain highly uncertain. declined as a

result of the sharp fall in oil prices and slightly lower hic be inflation, excluding energy and food. targeted policy measures we have taken since early march have provided crucial support to the euro area economy, and especially to the sectors most exposed to the crisis, in particular our measures on supporting liquidity conditions and helping to sustain the flow of credit to households and firms, especially small and medium-sized enterprises and to maintain favorable financing conditions for all sectors and jurisdictions. welcome the measures taken by euro area governments and the european institutions to ensure sufficient health care resources and to provide support to affected companies, workers, and

households. at the same time, continued and ambitious efforts are needed, notably through joint and coordinated policy action to risks and underpin the recovery. mandate, theour governing council is determined to continue to support households and firms in the face of current economic disruption and heightened uncertainty in order to safeguard medium-term price stability. accordingly, the governing council decided today to further ease the conditions on our targeted long-term refinancing operations, also known as tltro three. specifically, we decided to reduce the interest rate on

tltro three operations during the period from june 2020 to 20 to june 21une two below the average interest rate on -- prevailing over the same period. moreover, for parties whose eligible net lending reaches the negative performance threshold, the interest rate over the period from june 22 june 21 will have now been 50 basis points below the average deposit facility rate prevailing over the same period. series decided on a new emergencyeted longer-term refinancing operations that we will call tltro's to support liquidity

conditions in the euro area preserve the smooth functioning of money markets by providing an effective liquidity backstop. 's consist of seven additional refinancing options commencing in may 2020 and maturing in a staggered sequence 2021,n july and september in line with the duration of our easing measures. at awill be carried out fixed rate standard procedure with full allotment with an interest rate that is 25 basis onnts below the average rate the main refinancing operation prevailing over the life of each

tltro. for the details on the amendments made to the terms of tltro three and on our new pltro will be published in dedicated atss releases this afternoon 3:30 continental european time. march, we beenf conducting purchases under our new pandemic emergency purchase , pep, which has an overall envelope of 750 billion euros to ease the overall monetary policy stance and counter the severe risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the coronavirus pandemic. these purchases will continue to be conducted in a flexible

manner over time, across asset classes, and among jurisdictions. we will conduct net asset purchases under the cap -- under the pep until the governing council judges the coronavirus crisis phase is over. in any case, until the end of this year. purchases under our asset purchase program will continue at a monthly base of $20 billion, together with the purchases under the additional 120 billion euros until the end of the year. we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the

accommodative impact of our policy rates and to end shortly before we start trading the key ecb interest rates. intend to continue -- in full,in food principal payments and securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation. keepdition, we decided to the key ecb interest rates unchanged. we expect them to remain at their present or lower levels until we have seen the inflation outlook converge to a level sufficiently close to but below 2% in our projection, and such

convergence has been consistently reflected in underlying inflation dynamics. together with the substantial monetary policy stimulus already in place, these measures will support liquidity and funding conditions and help to preserve the smooth provision of credit to the real economy. at the same time, and the current, rapidly evolving theomy environment, governing council remains fully committed to doing everything necessary within its mandate to support all citizens of the euro area through the extremely challenging time. foremosties first and to our role in ensuring our monetary policy is transmitted to all parts of the economy, and in thejurisdictions

pursuit of our price stability mandate. we are therefore fully prepared of theease the size pandemic emergency purchase program and adjust its composition. by as much as necessary, and for as long as needed. in any case, the governing council stands ready to adjust all of its instruments as appropriate to ensure inflation moves towards it same in a sustained manner in line with its commitment to symmetry. let me now explain our assessment in greater detail, starting with the economic analysis. the latest economic indicators and survey results covering the period since the coronavirus spread to the euro area have pointing to ae

significant contraction in euro area economic activity and rapidly deteriorating labor markets. the coronavirus pandemic and the associated containment measures have severely affected the manufacturing and the service theters, taking a toll on productive capacity of the euro area economy and on domestic demand. 2020, first quarter of which was only partially affected by the spread of the gdpnavirus, euro area real decreased by 3.8% quarter on quarter, reflecting the impact of locks down measures in the final weeks of the quarter. the sharp downturn in economic activity in april suggests that the impact is likely to be even more severe in the second

quarter. looking beyond the major disruptions stemming from the coronavirus pandemic, euro area growth is expected to resume as the containment measures are gradually lifted, supported by ,avorable financing conditions the euro area physical stance, and a resumption -- the euro area fiscal stance, and a resumption of global activity. given the uncertain duration of andpandemic and recession the subsequent recovery are difficult to predict. however, we are advancing the upcoming macro economic projections published in june, growth scenarios published by gdpstaff suggest euro area could fall between 5% and 12%

this year, followed by a recovery and normalization of growth in subsequent years. the extent of the construction and the recovery will depend on the duration and the success of .he containment measures supply capacity and demand are permanently affected, and the success of policies in mitigating adverse impact on incomes and employment. area annual -- euro inflation decreased from 0.7 in april, largelyn driven by lower energy price inflation, but also slightly lower hi cp inflation, including -- including energy and food. on the basis of the sharp

decline on current and future prices for oil, headline inflation is likely to decline considerably further over the coming months. the sharp downturn in economic activity is expected to lead to negative effects on underlying inflation over the coming months. however, the medium-term implications of the coronavirus areemic for inflation surrounded by high uncertainty, given that downward pressures linked to weaker demand may be partially offset by upward pressure related to supply disruption. indicators of longer-term inflation expectations have remained at depressed levels. even though survey based indicators of inflation expectations have declined over the short and medium-term, longer-term expectations have

been less affected. turning to the monetary analysis. increased torowth 2020.n march it -- reflects bank credit creation for the private sector, which is driven by drawing on credit lines and low opportunity costs of holding m3 relative to other financial instruments while heightened economic uncertainty appears to have triggered a shift towards monetary holdings, likely for precautionary reasons. in this environment, the narrow monetary aggregate encompassing the most liquid forms of money

continues to be the main contributor to broad money growth. developments in loans to the private sector have also been shaped by the impact of the coronavirus. the annual growth rate of loans at 3.4% inds stood march 2020 after 3.7% in february, while the annual loans tote of nonfinancial corporations stood in5.4% in march after 3% february. these developments are also clearly visible in the result of the euro area bank lending survey for the first quarter of 2020, which indicates a surge in the firm's demand for loans and for drawing on credit lines to meet liquidity needs for working needsl, while financing

for fixed income investment declined. to householdsns for house purchase increased less than previous quarters. credit standards for loans to , whileeightened slightly credit standards for loans to households tightened more strongly. in both cases, this was related to the deterioration in the economic outlook and a decline in the creditworthiness of firms and households. expectsame time, banks an easing of credit standards for loans to firms in the second quarter of 2020. our policy measures, in particular the more favorable operationstro three and the collateral easing measures, should encourage banks

to expand loans to all private entities. together with the credit support measures adopted by national governments and european institutions, they support ongoing access to financing, including for those most affected by the ramifications of the coronavirus pandemic. to sum up, a crosscheck of the outcome of the outcome of the economic analysis with the signals from the monetary analysis confirmed that an ample degree of monetary accommodation is necessary for the robust convergence of inflation to levels below but close to 2% over the medium-term. policy, andscal ambitious and coordinated fiscal stance is critical in view of the sharp contraction in the euro area, me.

-- in the euro area economy. andures should be targeted temporary in nature in response to the pandemic emergency. we welcome the endorsement by the european council of the euro group agreement on the three safety nets for workers, businesses, and sovereigns, amounting to a package worth 540 billion euros. at the same time, the governing council urges further strong and timely efforts to prepare and support the recovery. in this regard, we welcome the european council agreement to work towards establishing the recovery fund dedicated to dealing with this unprecedented crisis. we will shortly take your questions. , on behalf of the

entire euro system and all members of the ecb, i would like to acknowledge once more that this is a global health crisis, and that the highest priority has to go to trying to save lives and prevent the spread of the disease. ,ince our last press conference about three additional million people have been affected by coronavirus and one third of them in the euro area. while it is heartening to see the curve of death flattening, as you've heard many times, we must remember that each death is stay,edy for those who and we would like to express our sympathy and our condolences to all of those who are suffering those deaths. we would like to also express gratitude to, deep

all of those, from doctors to nurses to ambulance drivers and all of those on the front line of this fight against the virus and who risk their life. , these are strange and uncertain times. it is demonstrated by the absence of the vice president next to me. he is with us online. we have been operating in split teams, and therefore we do not see each other, we do not contact each other. he is with us on the phone if there are questions directed to him, he will be able to take them. he is with us. with that, we are going to operate also in a strange way.

the room is not like any room we have had in press conferences before. it is empty. you are all online and i know you are submitting questions or you will be cementing questions in relation to the governing council that has just concluded. thank you very much. >> thank you. with that we will start with the first question from reuters. thanks for taking my question. the first is about the asset purchases. i wanted to know if you discussed changing the composition or the pace of the asset purchases, i am interested in whether you discussed included junk rated debt in app. the second question is omt and whether you see omt as an appropriate tool in the current crisis for some of the countries? do you think a blanket efm program for all of the euro zone

would be a viable solution? thank you very much for your question. i'm going to take the opportunity of this first question to take you back a little bit to the last two days we have had with governing council numbers, and i also want to take this opportunity to walk eurohrough the changes the system and the ecb together have decided, and for most of them have implemented in the last few weeks. in terms of the current situation, we are facing an economic contraction of a magnitude and speed that is unprecedented in recent history. the spread of the coronavirus and the associated containment measures have literally halted

economic activity across the globe. are seeing rapid evolution of the economic effects of the necessary containment measures in our area. initially, there were only some sectors that were badly affected . we are talking about transportation and tourism and entertainment. gradually as the containment measures to called -- containment measures took hold, entire sectors of the economy were simply shut down. it is reflected, and it will continue to be reflected. the hard numbers are just beginning to come. we just had a few numbers from the first quarter. our forecast for the second quarter in our severe scenario points to -15% on a quarterly basis.

consumers, business sentiment indicators, are in freefall. while labor market conditions have deteriorated massively great if you look at the pmi composite, in april, 13.5%. marches from 29.7 in comment before that 51.6 in february. decline is also remarkable and explains a lot of things, and was driven by the manufacturing sector. very much by the service sector as well. commission consumer confidence also dropped. , itou look at labor forces is now more than 718,000 companies in germany that have short term special

work program. in france, the number of foranies that have applied the unemployment special schemes went from 24,000 425,000, covering over 10 million employees. it is really, it is more than 4.6 million employees covered -- in italy, it is more than 4.6 million employees covered. we do not have clarity about the course of the pandemic and the duration and degree of containment measures that will be taken. this is critical for us to take an assessment of what the economic situation will be. forecasting job of and all of those trying to for cost around the world extremely difficult. as i said, our scenarios on an annual basis, from the mild to the more severe, varied from 5% to 12% negative, depending on

the containment measures that are taken. of course, when the containment measures are lifted, we expect a recovery in economic activity, but we cannot tell at what speed and what will be the scale of it. let me now turn to the number of measures we have taken since march. all of those measures are aimed at ensuring ample liquidity conditions, protecting the smooth flow of credit to business and households, and preserving highly accommodative financing conditions. those are the three goals we are pursuing good there are pandemic --rgency purchase programs 750 billion euros combined with increased app decided on march 12, 120 billion