plunges into a recession. growth sinks nearly 6% in march due to restrictions to combat the pandemic. pessimism rains and markets. on sentiment. and a top german judge says the ecb is a master of the universe and must be held accountable, macron micron -- as tries to reopen the french german border. london andcine from new york. -- tom and francine from london and new york. markets are seeing a bit of risk off, worrying about a second wave of infection. they worry about the number of deaths going up in the economies around the world, having a second period of lockdown. tom: i think yesterday was a very difficult day mathematically, francine, for this pandemic. we saw that not only in america,

the dawning realization of what we are seeing across all of latin america, but, yes, it was a testimony of dr. fauci. i would point out that an hour and a half before dr. fauci spoke, there was very difficult inflation data, disinflation the, deflation data in united states of america, and that seemed to shift the mood. francine: and also it is , a pretty bigood plunge, and a lot of people say this is only a taste of things to come. that's get to first word news in new york city with richie but the -- let's get to first word news in new york city with ritika gupta. tolda: the head of the cdc the committee that the u.s. is not out of the woods yet on from. anthony fauci warned that communities that ignore guidelines for reopening are in danger of new outbreaks.

he said he has a confrontational relationship with president trump. we are waiting to see if jerome powell gives anything away about what he will do next. time, he.m. new york may announce doing something about mass unemployment. he displayed his lack of enthusiasm for negative rates. delivery speed returning to normal for some nonessential items. sunday it lifted restrictions on the amount of inventory suppliers consent to amazon warehouses. the u.k. will take steps to a to come out of the lockdown. the real estate market has reopened and people who cannot work from home -- who can work from home are being encouraged to come to their jobs.

global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, ritika gupta. this is bloomberg. francine? tom? thanks so much. the two-year yield, i would let francine talk about it. for more important is the churn on the market. they be waiting for chairman powell's virtual speech. i want to point out the brazilian real. i am watching euro-swissie carefully. stronger swiss franc. we are not to recent records strength, but we are on the cusp of it. i'm watching that very carefully. francine: this is what i'm looking at. it is very similar to what you are watching, and the u.k. economy is plunging into a recession with many people, the worst is yet to come. euro-dollar, 10842.

that's 1.0842. falling,stocks yesterday treasuries climbing. we will have plenty more on that throughout the day. coming up next, we speak with christian keller, barklay's head of research. we will ask him about the reopening of the franco german border. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom keene is in new york. i'm francine lacqua and london. we will talk about the u.k. economy with christian keller in a second. it track almost 6% in march,

plunging into what may be its deepest recession in centuries. the monumental task of restarting the economy as it -- earlieress toward on we spoke with the chancellor of the u.k. -- the shadow chancellor of the u.k. do you worry that things are going to get much worse in the u.k., and is this a taste of things to come worldwide the ec? >> the second quarter is going to be worse than the first. we have examples of china, but particularly of other european countries, what it means to lock down your economy. things are going to shrink much worse than the numbers today for the first quarter. the big question now is no longer how things move forward in the second quarter, but really how strong can we recover in the rest of the year.

this is the main focus. it is already a done deal, more or less. francine: what is your main worry? do we underestimate the severity of the crisis and the recession, or do we underestimate or overestimate the power of the recovery? i think by now it is the power of the recovery. i think it took economist a while to really get a handle on how deep the decline would be. we are having good indications whether young on look at it quarter to quarter or annualized, we will get 40% to 50%. across the economy there is some variation, but if you put an economy into lockdown, you will big question is how quickly we will recovery.

we have a keen eye on china. high-frequency is actually encouraging. at the same time, i think a big -- this is about the virus, whether it can come back, create a second wave suddenly the third or fourth quarter, that suddenly would put into question all the forecasts we have done now, which imply significant boost in the third and fourth quarter from a very weak second quarter. tom: we have negative rates this morning on the u.k. two-year, and they are ever so slight as well. a little bitlue to of negative rates versus the swiss 20 year or the person is the -- or the persistence we have seen with the german two-year? is there a value in having a teensy wednesday negative

two-year rate? christian: the issue about negative rates and policy rates -- i think it is not something .hat banks want to consider in the u.k. or elsewhere. there is some studies that it has done a lot for sweden. i think in the u.k., moving into negative rates will have all kinds of indications possibly path the bank the of gone so far by doing massive quantitative easing is essentially facilitating the government services. i think this is really the way to go. movingadvantage of two-year treasuries into negative territory, i am not so

sure. i think the indications of negative rates, the negative implications are many, and i think it would be an experiment not worth doing. francine: are we -- are we shifting our magnitude? i sent my colleague jon ferro and email last night that we are shifting our magnitude of economic challenge out well into july.and even i do you see it that way? myistian: yeah, that is concern, that, you know, while we thought -- once the virus is contained, people go back, i think we had hoped -- with this not being a banking crisis but really a health crisis, once it is over people could go back to normal and you would see a sharp

v, and now i think there are concerns that once you have in the u.s., and unemployment jumping up a record to historical highs within eight weeks, you know, we don't know how to -- what the consequences of this is, and how the labor markets recover, and what this could mean for demand if they do not. i think this is exactly the question of how we move up already in june and july, or will we have a weak third quarter, and then the annual recession, will it be worse than what we have now? francine: christian, what is your biggest concern out there in terms of legacy? is it the political ramification in europe? there is the salado dairy -- there is the solidarity that there will be a bailout, or will countries want to leave the euro, or is it global unemployment? is it something else?

christian: i think it is a combination of things. i think first of all a massive factor here, governments have been quick to respond. programs for some institutions, settings for various countries, why the euro -- a shorter workweek. there has been a massive response. but nevertheless, we never have seen such sharp increases in unemployment, and how quickly people come back to work, and what this means for them, i think this is a huge global challenge. europe, i do think unfortunately that this crisis, again, points its finger at europe's vulnerability. solidarity,d the

finding the right policy responses. europe again is -- it is volatile. tom: let's come back with christian keller. lots to talk about. i do want to quiz him on sweden as well. certainly that was front and center, and the fiery testimony that we saw yesterday between dr. fauci and the jr. senator from kentucky, dr. paul, as well. two doctors going at it yesterday in that testimony. we are going to go at it in the 6:00 hour. later in the 6:00 hour, we will catch up with ian bremmer and speak with him about the new international relations. we will speak to him about every nation for himself. and i have promised that i will --ak with ian bremmer about we will get to that in the 6:00 hour. stay with us. this is bloomberg. ♪

ritika: this is "bloomberg surveillance peter: the world's container line warns that the coronavirus outbreak could drive volumes down by as much as 25%. merck had already suspended its outlook. quarter revenue was better-than-expected. ceo elon musk looks like he has won his battle with

california officials. they have to adapt to recommendations to battle coronavirus. on monday, he had said the factory would restart production despite orders that it stay closed. plenty 2.8 billion dollars in annual fiscal costs, soda plans for restructuring -- toyota plans for restructuring plans and at turning around after a tumultuous past few years. that is the bloomberg business flash. tom? francine? tom: thank you so much. of course, a wednesday, midweek, a really changing set of currencies in the world. i am looking at the virus statistics. it is an aside with our discussion with how good guest, but the mathematics in latin america is really appalling. by that i mean for mexico on down to argentina, particularly

brazil, "the new york times" doing a wonderful job of summing together all of the different trends we are seeing there, of factors in this pandemic that are really quite bad. tom, i don'th, think it is that much different to what we are seeing because everything is linked. economists need to track in real time how the numbers are affected. it is important to have virus updates on an hourly basis. what we know is that russia is reporting more than 10,000 cases again, although the growth rate has slowed. britain will start easing some of the restrictions from today. isa shows that the economy slumping at margins, a sign of things to come. tom: christian keller with us from barclays, and of course with a wonderful advantage of europe, and particularly scandinavia. christian, separately from economics, dr. fauci testified

in the united states yesterday and really went at it with rand paul, dr. paul, of kentucky, over the sweden model. not so much of the virus, but give us an update on how sweden is doing versus norway, versus denmark, versus finland, this morning. how is sweden doing? now we are talking regard todegree we the virus, not the degree with regards to negative rates. bek, i cannot prepare to really an expert on details, but the models, it is not as drastic with regard to social distancing measures, and the swedish society is already a society where there is a certain distance about people. is prone to live

keeping distance, and therefore the population was quite distancing, and so therefore they did not need the restrictive policy that they had in europe. at the same time, from my understanding, there is quite a high death rate. so i think as we see in many other cases, by the way, in singapore, korea, there are some countries where early on we thought there were models and we did not know how well they dealt with it. and suddenly a few weeks later we see results and we start to ,oubt, for example, with korea singapore. so i think this is really the seey part, that we seem to models which work and we think well, maybe not, sorry. tom: to speak of negative rates -- and let's bring it back to the shock here of the negative in ther the two year united kingdom -- should governor bailey react?

should he respond? should he speak and address negative interest rates? know, he: i think, you has not done so directly. on anw broadband was interview yesterday where he touched upon it. i believe the message from the bank is that it is not something they consider at the moment. i think clearly they do not excluded forever. i think no central bank would do this. the broader communication from the bank of england going before his last speech, really laid out what the negative implications are, particularly for the u.k. ,ome institutional differences for the u.k. and for other countries. so i think the bank will stay away from it, frankly. francine: how do you see --

christian, when you look at some of the asian economies, because they have been through this, you know, before us, will the balance of power shift? will they have a much more strong economy, and have you seen the trade war with the u.s. and china developing? large,an: that is a very strategic question. and the u.s.china is going back into negotiations, and, you know, maybe in the short-term they will try positive news, but overall i believe the geopolitical engine between not all of asia necessarily but asia -- sorry, china and the u.s., and also really europe, has deteriorated. i think unfortunately one consequence of the current pandemic, with an increased suspicion toward china and probably also some disappointment of china with the rest of -- i think that is

something that we are to prepare for. increased tension. with regard to the economies, i think it is clear that asia will ,ontinue to be faster growing and every country will continue to grow, and become a bigger share in global gdp as they have been in the past. i think this will be unchanged. ofmay have some reassuring -- i think economists and people who look at business from a micro perspective expect there to be change, global value change, that there will be some reassuring in global production. francine: christian, thank you so much. trish and keller of barclays. we are getting breaking news -- christian keller of barclays. news that italy is approving a stemless package.

it was hit quite hard by the virus and they were also the first ones to reopen. we have a look at italy, and also what it means for bond spreads, and also being the epicenter of the virus, but also the epicenter of the spike between southern and northern countries. this brings back the solidarity from european countries. we will see. coming up, we look at the litmus paper of the system with some real indicators today not only persistently a strong dollar, but also in brazil, a challenged real. adam cole joins. stay with us. this is bloomberg. ♪

there are times when our need to connect really matters. to keep customers and employees in the know. to keep business moving. comcast business is prepared for times like these. powered by the nation's largest gig-speed network. to help give you the speed, reliability, and security you need. tools to manage your business from any device, anywhere.

and a team of experts - here for you 24/7. we've always believed in the power of working together. that's why, when every connection counts... you can count on us. francine: bloomberg "surveillance," tom and francine from london and new york.

the european commission executive vice president will be unveiling the travel and tourism time, angela u.k. merkel will give the bundestag an update on the coronavirus. pmq's,ohnson will have the first since changing the lock down. discuss theill economy in a webinar and ursula von der leyen will address the european commission -- european parliament. tom: right now on the litmus paper of the system, a gentleman who is particularly astute in the trenches of market foreign-exchange analysis, he is adam cole with rbc in london, and always provides a really interesting perspective away

from the certitude of consensus. consensus most get wrong this wednesday? adam: i think the creeping consensus into markets has been -- and i'm thinking of powell in particular -- this creeping consensus of negative interest that will goicies into effect. that will become more entrenched after the reserve bank of new zealand opened its arms to the policy. so i think what we see in market pricing and what we see from market participants is that the fed is starting to contemplate using negative rates. adam, this is so, so

crucial. thank you so much for bringing in new zealand. the flies flying around here are the new york honed flies that come out in may and fly across you while you are on air. adam, i want to talk about the snowball effect we are getting of when the facts change, the central banks change. are the facts changing for all the central banks? adam: no, and it is crucial to bear in mind the facts are different in different countries. rbc contemplating negative interest rates and other central banks tried it and did not like it. the signal from the riksbank was they had a prolonged period of negative rates and are highly resistant to going there today. the s&p still sits -- snb still

sits at negative rates. a large moneyf market sector which is highly exposed or would be highly exposed to negative interest rates and it is the constraint that most european banks face. the balance of risks to the fed looks different to the central banks with negative rates around the world. the facts are different between markets and the balance of risks the fed is looking at are not snb.ame of the rbz or the francine: what would a policy mistake from the fed look like now? mistake would work in either direction given the huge degree of uncertainty on the debt and speed of the rebound inactivity.

over easy would be one policy that ignited inflation at some point in the future. more likely, people's balance of risk would be the fed not reacting quickly enough, something they could not be accused of so far, but both directions is so large and the magnitude of the falling out putting the second -- potential of the rebound in the second half of the year, you have to say that errors could happen in either direction. not -- does francine: what does that all mean for dollar? adam: the way we see things from here, we have come through a couple of months, march and april in particular where our markets in fx were dollar directional.

getting a dollar call was what mattered and what you saw weakening was that all the g10 currencies moved in the same direction against the dollar. that is probably done for now so going forward, a much more nuanced market. we have got to think about individual stories. it may be u.s. policy that drives the moves. is an-yen on the downside important call at the moment. we have kind of left behind the environment where all we have to worry about is where the dollar was going. going forward, markets are becoming more nuanced. -- tom: where is the tradable play, yen, and how many figures? 95 that is a decent tradable move and that is a

reflection not of anything that is safe to do going forward, but a reflection of what investors are doing in response to what has happened, and that is an ongoing trend. investors are liquidating foreign investments wholesale and bringing money home, and in doing that -- tom: i don't mean to interrupt, but this is way too important for global wall street. a 95 strong moving, richard edelman today survey of pandemic populism. stunnednese people are at the government's response to the pandemic. what happens to their expert capitalif we get an rbc ¥95? adam: it is dependent how it happens. if you have a move of that

magnitude within a couple of trading sessions or weeks, that would be nothing to catch the attention of policymakers, japan and the boj. if it happened over the course of a few months, from the levels we are at now where the yen is but current levels are , inrvalued on most metrics the context of other shocks it is absorbing, it depends on the context of how we get there a move -- get there. i think it will be manageable. if it were a rapid move driven by speculative flow, that is something the authorities would have on their radar. -- radar quickly. tom: a good summary from adam cole with rbc capital markets. ritika: there is a little chance

that the house democrats' package will be turned into law. a $3 trillion package includes and food stamps. passage in the house would give the democrats a marker to sit down while they position themselves for the election. investors are waiting to hear what fed chair jerome powell has to say about the prospect of mass bankruptcies and long-lasting unemployment. he is likely to call on congress to provide additional relief signals that gain he is opposed to cutting the benchmark interest rate below zero. the british economy has plunged into what may be its deepest recession in more than three centuries. -- was down 2% for the quarter and things are expected to get worse.

the bank of england is forecasting a staggering 25% contraction. the judge in the case of former national security advisor michael flynn is saying not so fast. the justice department wants to dismiss the case but the federal judge emmett sullivan wants to hear what outsiders think. pleaded guiltydy to lying to fbi agents. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. , ancine: coming up conversation with the goldman sachs chief economist at 8:00 a.m. new york. they will talk about treasuries and the staggering unemployment figures. this is bloomberg. ♪

francine: this is bloomberg "surveillance," tom and francine. this marks the 10 year anniversary -- anniversary of the flash crash. day trader was arrested for market manipulation. how did one man trading from his bedroom because such a big crash? joining us as a bloomberg news investigative reporter and : the most"flash crash mysterious market crash in

history." congratulations on the book. as you explored and did your investigation on this trader, what struck you the most? is there anything you think made the book? liam: thank you. i think he is a completely unique character. i have been a financial journalist for 15 years and i write about what kind of crimes -- white-collar crimes, and you come across various characters. taughtessentially self and lived underneath the heat euro -- heathrow flight path, lived in a basement and went to mcdonald's, but was a genius level financial trader, accumulated $70 million from his bedroom, did not tell his family and friends. he used to drive around on a bike he called his lambeau.

-- lambo. worldsct melding of two when the u.s. authorities and fbi come knocking on his door and this kid from the wrong side of the tracks grappling with the american government. tom: in your article with nick guyer and your book, this was going to get 380 years in prison. he got a slap on the wrist. why? liam: there is two reasons. when they knocked on his door, they saw him as some sort of critical mastermind -- criminal mastermind. he had money and various offshore accounts. they found a kid and his parents' house so the authorities realized he was vulnerable. he spent a short amount of time in a u.k. prison and did so

badly they wanted to show some leniency in recognition of that. once they arrested him, he did a deal that he would assist them to build other cases. showingd with the fbi, them videos he had made of himself trading and giving them the schooling. he was so cooperative that the doj recommended he get time served, which is a pretty remarkable turnaround as you say. more systems there in place to try to stop that sort of thing? liam: because of the flash crash itself, yes, technical changes were made to the various exchanges. even though we have huge volatility at the moment, i think you could probably be slightly reassured there has not been a repeat of this, although the markets have lurched around

they have been responding to genuine macro events. what happened before was scary because it came out of nowhere ,nd the markets plummeted within four minutes losing 5%. could that happen again? i think it could, but the measures they have taken seemed to have done the job for now. tom: liam vaughn, greatly appreciated. i cannot believe i am saying this, 10 years ago, the flash crash. a required global read for wall street. coming up later, david rubenstein -- let me look on my terminal to make sure i get this correct -- david rubenstein, a timely and important conversation with eric schmidt of google in the 4:00 p.m. hour. this is bloomberg. ♪

ritika: this is bloomberg "surveillance." let's get bloomberg business flash. las vegas sands is giving up on

it $10 billion casino project in japan. it objects to language that would limit its japanese license to 10 years. in that timeframe, government officials could change the terms. officials in washington and major u.s. cities are turning offers to take over grubhub. analysts say if there is a deal it is likely to face antitrust scrutiny. americans should be prepared to pay more for meat. running slower than normal because of social distancing and some production lines will be fully automated. the likely result is higher cost for an industry that has been efficient at pumping out cheap meat. that is your bloomberg businessweek. tom: he is very different within the trump administration, with

public service to george bush the younger, working with ford motor company as their advisor, and more than anything spending hours with congressman billy townsend, he is exceptionally experienced given the trump administration proclivity for friends of the president, friends of the family, and friends of politics. here is a conversation with the secretary of energy. >> we now have 23 states opening up. they are local economies that represent approximately 40% of the gasoline demand in the united states. we are seeing oil prices stabilize. this increase is good for consumers in the sense that jobs are protected across the economy , and we have seen no dramatic impact on gasoline prices across the country which is important. david: take us behind the scenes. mr. trump has a good

relationship with the crown prince of saudi arabia. was that something the president encouraged or arranged? >> he has been personally engaged in the conversation for the last few weeks. opec gannets conversations around the early march timeframe and saudi arabia and russia got themselves into a dispute over there production numbers. when the saudis decided to take action at the beginning of the pandemic that led to increased reduction and reduction in the pricing of oil across the world, it impacted the u.s. producers dramatically. the president engaged in heads of state with both countries, russia, and saudi arabia. the point of those conversations is to bring stability to the marketplace and producing community, and that is our goal.

risk the u.s.e a price may come back too far too fast? shale is coming back quite fast. it was down 8% and a quarter of that is online. are you concerned that will undermine the attempt to stabilize the oil price? >> i think what we will see shortly, if you are familiar with our energy administration, they just put out a report that talks about the economic boom i think we are on the verge of seeing. the third and fourth quarters in 2020 and first quarter in 2021 will be robust, and production will come back online as the economy takes off. numbers, what the the president has referred to as a v-shaped recovery looks very clear in the charts and you will see production match that curve.

on importsrictions equipment, it raises the larger question on supply chains from around the world. what was the threat you saw that required that restriction? >> the president issued an executive order about a week or so. we have identified certain threats within the bulk power electric grid. the pieces are the components that make up the electric grid and provide the enormous amounts of electricity that keep the lights on. the supply chains have moved from the united states to other parts of the world and in some cases, to parts of the world that candidly do not have our interest at heart and our adversarial. we are beginning to see the imposition of certain types of tech knology into these component -- technology into

these components that make up the grid that would allow data-transfer and manipulation of the grid, and that is concerning for us because if you think about where we are today in this pandemic, if someone who was not aligned with our goals in the united states, who did not have our interest at heart decided to turn the lights off at new york city, the hospitals go dark. that is concerning and the president recognized this. we have been evaluating the grid and are working with industry players at the government level and private industry level. francine: that was the u.s. energy secretary. contractsooking at is on the s&p 500 fluctuating higher. dollar is pretty much steady. we will hear from the fed chair jay powell but in the last few

minutes or so, the slump in european stocks is not as severe as it was. when you look at the s&p 500, they are turning higher. this has to do with markets trying to figure out this late decline on wall street. that probably has to do with the concerns we will have a second lock down. we have plenty more coming up. we will look at what we can with jack ablin, the markets and inflation. he joins us next. this is bloomberg. ♪

♪ tom: this morning, it is a

"gift" that keeps on giving. president trump for negative interest rates. it is virtually certain the chairman will agree to disagree in a speech this morning. hands a grim view on the pandemic or the brutal admitted death toll in south america. history made for francine lacqua as she will pay the bank to keep the kids' money, a negative rate. the cusp of new swiss strength. it looks like deflation is here. this is bloomberg "surveillance," tom keene in new york, francine lacqua in london. famous bluebird red headline