recession. in economy falls almost 6% march. open up please. fed officials warn if business failures that will leave a scar on the u.s. economy. investors wait for jay powell to speak at 9:00 a.m. gop senators announcing a bill that lets president trump sanction china over the coronavirus, while beijing says it will buy american farm products as long as the u.s. creates a friendly atmosphere. red,ean stocks deep in the down 1% to 2%. equity futures in the u.s. up despite the really ugly close from yesterday. we had the nasdaq and the s&p tumble 2% into the close. the price action today in u.s. equities very important. broadly weaker dollar story. also take a look at the bond

market. three year and 10 year bond options coming in superstrong. watch how that winds up performing. time now for today's top market moving news from our new york team and washington team. we want to begin with economic the u.k. economy shrinking on the 6% in march. predicting what could be its deepest contraction in more than three centuries. bloomberg's michael mckee has more. michael: ask not for whom the bell tolls. it is the u.k. this time. just one week under lockdown was still enough for a 2% contraction during the first quarter. as you mentioned, a 6% contraction during the month of march. britain plunging into what may be its worst depression -- or recession, at least, since 300 years ago.

three centuries, according to those who have been figuring out. tourism fell by 46%, air transport down 44%. engine ofpending, the the economy, down 1.7% in the first quarter, the largest drop since the financial crisis. we got data from the british retail consortium saying total sales down 19.1% in april from a year earlier. that is the most in a quarter-century. in the city, the pound up because as bad as those numbers were, they were slightly better than the consensus expectation. that doesn't always work. the euro is down against the dollar even though industrial production in the euro zone is marginally better than can insist during the month of april, contracting 11.3% in march, 12% over the last year. germany, 11.9 percent

in spain, 16.1% in france, and in italy, 28 .1 percent. in the u.s., jay powell and his on the possibility of a long recession. what is powell going to say about it today? he is speaking at 9:00 a.m., a virtual conference with the peterson institute in washington. they don't meet for a month, so he will probably not give a lot of clues about what they do next, but will he give an updated outlook, and will he push back against negative rates? they are not only fed agenda, i can tell you now. they don't think it helps the economy. they think it hurts banks, hurts savers, and would destroy the money market system in this country. if you are trading fed futures on the idea that jay powell is going to give you a lifeline, probably not a good trade today. alix: fair. i am not trading that.

but president trump talking on twitter about negative interest rates, that would be a different story. thanks for sticking with me. let's turn to washington. house speaker nancy pelosi unveiling a $3 trillion relief bill with direct cash payments, as well as expanded unemployment insurance. rep. pelosi: we must put more money into the pockets of american people. this is not only necessary for their survival, but also a stimulus to the economy. we must think big for the people now because if we don't, it will cost more in lives and livelihood later. alix: the house expected to vote on the package as soon as friday. joining me as kevin cirilli, bloomberg chief washington correspondent. what is in the bill? what is the likelihood that any republicans like it? kevin: the republicans don't like it. it is immediate helicopter cash for families, as well as individuals under a certain income.

beyond that, it also bolsters funding to hospitals and to federal and state employees. however, republicans saying they don't want to just send a blank check to states or individuals while we are still in the middle of a health crisis. i spoke with one senior republican strategist yesterday, who told me the chances of senate majority leader mitch mcconnell getting on board with this or next to zero. beyond that, there doesn't appear to be a timetable coming from the senate as to what they in anotherto see economic stimulus bill moving forward. the president has said he is open to having some type of economic stimulus. however, he wants to see more tax deductions included in it. it all comes at a time following dr. anthony fauci's virtual testimony before the senate yesterday. he warned against reopening the economy to quickly and the cost that would have from my death's

perspective and an economic perspective, but faced a tepid response from republicans. during one notable showdown, kentucky senator rand paul urged dr. fauci to take advice from others in the medical industry from an education perspective. bottom line, the response coming from washington has been, for lack of a better word, incredibly polarizing. that may not be as polarizing is the conflict that continues to heat up between china and the u.s. over trade and the latest on the coronavirus. kevin: earlier this week, i was at the state department and spoke with the undersecretary of economic affairs. he said they are trying to develop international standards with europe that would allow for the united states and european allies to disentangle themselves ,rom china as it relates to 5g the energy sector, and financial services. domestically, republicans and

democrats are working together on several issues to try to distance the u.s. from china. china says they want to keep purchasing agricultural products agreed to in the u.s.-china phase i trade agreement. however, given the backdrop of the pandemic, there's been a variety of tools at the government's disposable and isposal as it relates to higher education, senior citizens savings accounts, and as it relates to a national security perspective. the state department working with republicans and democrats to try to protect the infrastructure in education, energy, higher ed and the like. but also to diversify, they say, the unitedchains, states supply chain from china. alix: thank you very much. one other story we are watching today, elon musk versus

california officials. looks like he actually won this battle with health officials in the state, that say he may open his auto factory as soon as next week. tesla just has to adapt the extra safety recommendations to battle the virus. on monday, musk said the factory would restart production despite any orders to stay closed. he said the factory installed and plastic curtains, and temperatures were taken as well. coming up, more of your morning news, trade and analysis of the markets in today's first take. this is bloomberg. ♪ >> mr. speaker, yesterday the overall figures even in the press conference from those that died from covid-19 was 32,692, each one a tragedy.

for many weeks, the government has compared the u.k. number against other countries. ♪

alix: time now for bloomberg first take. we give you the news. you get the trade and analysis of the markets. joining me is michael mckee, plus sarah hunt, alpine woods portfolio manager. happy wednesday. good morning. sarah, always love having you on the show. if today was a truly ugly close. futures today separating from european equities. what are you making up the price action right now? sarah: honestly, given the fact that the markets have run back so fast and so far compared to where we were in the depths of

march, i was sort of surprised at how strong may had been. when you get incremental news that people don't love to hear, like l.a. might be closing for longer, i think the markets are really expecting the economy to snap back pretty quickly, and i am surprised when they act so well. so it wasn't surprised to see them come down a bit. alix: but maybe today's rally is, especially when it is diverging with what happens in europe? sarah: i think everyone is waiting to hear something from the fed, and expecting some more incremental good news from that. i think central banks have really driven this recovery because the implication is that there are a million measures to try to help things along. i think the question is really going to be you have a real problem with revenue, is the fed action enough to backstop all of that?

i am not so certain it is going to be so easy. echoing what stanley druckenmiller said overnight in a webcast, the consensus seems to be don't worry, the fed has their back. our analysis says it is not true. isn't it kind of true, the? michael: what stan was isgesting, what sarah said exactly right. you're going to have earnings problems, and the fed isn't going to be able to counteract that. they can only do so much. right now, you've got a drowning a lifethe ocean, and preserver with all the stimulus we have gotten, but it is not getting him out of the ocean. we're going to see people go back to work, but a lot of jobs will have disappeared, or they aren't going to be ready to come back to work yet. so the economy is going to be struggling for quite some time. that is struck in miller's drucke -- that is

nmiller's message. alix: new zealand overnight said negative rates are most definitely on the table. now in the u.k., they are pricing in negative rates for 2021. you had another record low on the two-year gilt yield, and you have pressure politically. j.p. morgan had a note that said short-term, they could actually work and help credit supply. for how long can you say no? michael: how long can you hold out against your daughter asking for cookies all the time? alix: two and a half seconds, mike. [laughter] michael: then you are not going to be chairman of the fed. it is just not going to happen. the fed doesn't believe they work. it is possible we could see treasuries go slightly negative if there's enough market pressure on the market side, but on the fed side, you don't think the policy is going to work, and it would probably destroy the

money market system that finances many, if not most companies in the united states, it? why would you do plus, the aspect of penalizing savers at a time when everyone needs extra cash. there's just no point to it at this time. considering the benefits, if there are any, are very small, more and more studies show they will not work. there's a whole school of thought that if you go really negative, 400 or 500 basis points, you could make a difference because you would have to spend your money before it is all gone, but we don't have the capability of doing that. you have to get rid of cash. everyone would have to use digital currencies. that is a nice theory, but it is not going to happen. alix: sarah, what do you think? how do you look at it as we head into jay powell today? michael: i love that an out -- sarah: i love that analogy of the person with the life raft,

but not getting out of the water. the point about lower rates is you need more demand, and you need something to spend it on. how do we get out of everybody staying home? ?ow do we get normal activity the idea that negative rates would somehow push us into activity i think is a little bit troublesome. i look at europe and the banks and how that affected them, and i don't see how that is a positive mental to move to negative rates -- a positive at all to move to negative rates. it is getting dangerously close to that, whether you are asking for it are not. i don't see that that is a positive, and i don't see that that would be something -- i mean, the equity markets might like that because it drives everybody into equities, but it doesn't do much for the rest of the economy. alix: if you wrap that into the ances -- if you

wrap that into the treasury issuance, it would bring a total of $6 billion just to fight the virus. michael: at some point, you've got to wonder how much additional debt can the markets absorb. right now, doesn't seem to be anything on the horizon that would suggest a crowding out. we are still seeing corporate borrowing fairly strong. a lot of this is driven by the fact that the fed is going to buy those papers if they need to. druckenmiller's point is the fed might not be able to absorb everything you want to give them. but for now, it is a question of we will do whatever we can. with interest rates so low, we have some runway to do that. then the question becomes how much additional do you want to spend. we were talking to kevin cirilli about the democratic bill. that is $4 trillion in itself, and that is only aspirational. it is basically putting together everything democrats want to mind they throw it out as a marker and negotiate down from that.

we'll get some sort of initial stimulus this summer, but it won't be anywhere close to that. people will say, how much can we really afford over time, and how much do we really need? then the question becomes how much closer we get to the edge of not doing enough. the 2009 era program wasn't big enough because they were afraid of deficits. this time we will see if they can overcome that fear. alix: on the flipside, you have the u.k. with their support for workers, truly unprecedented, expanding how much they are going to pay you to stay at home. also, india's budget deficit, 10% of gdp. i can hear mike mckee rolled his eyes. how do you deal with a short-term deflationary growth scenario versus longer-term, these massive budget deficits? i don't know how that doesn't come to inflation at some point. irah: neither do i, but also,

expected that after 2008 and 2009. i think when you have demand problems and you have oversupply globally, it is harder to get inflation than when you really are chasing fewer things. i think to the extent that people and governments are going to ask corporations to move their supply chains because of the issues we have seen because of this pandemic, and that corporations are going to look to move their supply chains, that is not going to take capacity out of the system. you have the ingredients for a continued inflationary move, and i think that is what has governments worried. all of that debt is much more problematic than in an inflationary environment. clearly that is not some people want to see, but if you look at the last 10 years, you could argue you have seen or problems on the deflationary or disinflationary side then you have on the inflationary side. but the governments are buying up all of their debt.

it is a strange situation that doesn't seem like it should indwell come about at the moment, it doesn't seem to be having as many problems as one would expect. alix: which i feel like i debate with mike all the time. sarah, what is your topic right now? -- your top pick right now? sarah: i think the hard thing right now is the stocks you want to like have run back so fast. many of them are higher than they were even in february. the stocks and the sectors you know are going to be least affected by what is going on here are the ones that have run the most. i think technology is going to end up being a winner in this. i think there are going to be a lot of sectors people are afraid of getting into. but there's clearly some danger there, if you thing about transports and travel and some of the places where you don't know when the activity is going to come back. to the extent you are betting on government subsidies to help them, you have seen some major

volatility across some of those sectors. we like the big tech stocks. it is difficult because they are expensive, but in the end, going forward, those are the companies and good balance sheets that are going to be dealing with this in a better way. but i also think the market is not reflecting the fact that revenues are going to be much more difficult to come by on both a corporate and personal scale, because wages are the revenue of people. we are not taking into account that there is going to be a lot of small and medium businesses that are not going to be able to buy some of these services even from some of the bigger tech companies. i am worried that the market is over its skis in terms of anticipation of consequences for some of the larger tech companies. you could see some more volatility into the summer as some of this becomes more clear, and we see how we start to come out of this and how much activity either picks up or doesn't pick up. alix: that is such an interesting point when it comes to tech services. thank you so much, bloomberg's

michael mckee -- did you i rolled me two or three times -- lld ui role -- did you eyero me two or three times? michael: i missed your question there. alix: oh, he didn't. a reminder, any charts we use throughout the two hours, gtv on your terminal. rouse the features, check it out. gtv . this is bloomberg. ♪

♪ ritika: this is "bloomberg daybreak." about $20ns to cut billion in annual fixed costs. the japanese automaker will also book restructuring charges. bloomberg has learned these are likely part of a three-year plan to be unveiled may 28 aimed at turning around nissan after a tumultuous few years. the world's largest container

line warns that the coronavirus outbreak could drive volumes down by as much as 25%. maerskalready said -- already suspended its full-year outlook. working from home has become more than a temporary policy for twitter. ceo jack dorsey told employees that once the company reopens its doors, most can work from wherever they want. twitter is headquartered in san francisco. it has more than 35 offices worldwide. that is your bloomberg business flash. alix: thanks so much. some breaking news for you, huber is going to offer -- for you, uber is going to offer $75 million in debt. they say they could use some of this capital for potential foroses, but primarily working capital purchases. talking about returning from

home, twitter can keep working from home. thousands of bankers have returned to their desks in asia's biggest financial hub, but it is a very different world. , andmasks, desks shields closed company cafeterias. hsbc says 30% of its staff can return in hong kong monday. is looking at fewer passenger rides in its elevators. all of that a preview of what awaits us here in new york. coming up, usn china. we will break it all down. this is bloomberg. ♪ these days staying connected is more important than ever.

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we're committed to keeping you connected. for more information on how you can stay connected, visit xfinity.com/prepare. ♪ alix: welcome to "bloomberg daybreak." i'm alix steel. for the u.s., terrible close yesterday accelerated 2%

declines of the s&p. now we are seeing higher features versus europe, where you are seeing a drag. the u.k. also in a recession. terrible growth data in march. two year gilt yields for you, at one point hitting a record low. the market starting to price in 2021 negative rates for the u.k.. i also have the new zealand dollar, the only g10 currencies down against the dollar. part of that is more central bank bond buying and the possibility of negative rates over there as well. i do want to highlight a very successful italian bond auction, so i and continuing to come into europe as well. focusing on the broader picture, what is happening between the u.s. and china. republican senators announcing a bill which will allow president trump to sanction china over the virus pandemic. themore on how that affects trade deal, i am joined by amy celico, albright stonebridge group principal.

she was also the director for china affairs at the office of the u.s. trade representative. the issue was that -- the fear was that th trade issue would turn into a financial issue for the u.s.. now it fears like we have -- now it feels like we have a trade issue and a financial issue. conflagration that is extremely dangerous. the relationship is basically in , so both policymakers areashington and in beijing putting aside the imperative to work together on things like covid-19, and instead are arehing up tensions -- retching up tensions -- are ratcheting up tensions that are going to threaten the trade deal. alix: how does that unravel?

we heard from cultural experts that china is going to need to farmers, butican the environment needs to be friendly. amy: the concern is that the phase one trade agreement showed signs of this unraveling because of the economic impact of covid-19. obviously, china is not going to be able to purchase the same amount of goods and services that it had committed to in january because of covid-19 and the economic impact. but then we have this larger in thef rising tensions relationship and the prospect for u.s. actions and chinese retaliation. i think as we have seen over the past year and a half during the trade war, the united states has taken action, and the chinese have been quite measured in

their retaliation, not really ratcheto asymmetrically up tensions. for example, we heard a lot of talk about the chinese releasing the unreliable entities list that would sanction u.s. companies on the ground in china, and response to huawei being added. that never materialized. in 2020, with china's economy really suffering in q1 and continuing to suffer in q2, there is this need for foreign investment, so we should be seeing signs that the trade deal is reinforced and strengthened. however, again, politics come back to play here. right now, between washington and beijing, there is this tit-for-tat blame game over covid-19, and that is why you

saw the introduction of that and by senator graham republican colleagues. act covid-19 accountability is meant to call on china to give a full accounting of the origins of covid-19, to close its wet markets that could have been the place of origin, and there is an additional element to release pro-democracy advocates in hong kong that were arrested after covid-19 crackdowns. all of these are incredibly political issues, and we already heard from china's ministry of foreign affairs condemning the u.s. for continuing to politicize covid-19. , this isming back incredibly damaging to trade negotiators on both sides trying to implement this trade agreement a bit -- agreement

amid increasing tensions. alix: what part of this is justified? by all accounts, china did hold back relevant information, and there could be cases of force majeure, which might be an excuse to not buy stuff from the u.s.. if this kind of reaction justified? where does that fit? amy: it has become increasingly politicized. the united states has taken a pretty tough tack in blaming china for the global spread of covid-19, which has put china on the defensive. we have seen china overreacting in response to that rather than sharing information with the who or responding to international calls for investigation into the origins of covid-19 in china. the chinese are pushing back

against that and saying we don't know if covid-19 even originated in china. did,of us assume that it so again, this tit-for-tat set of rhetoric is actually damaging our ability to get back to the issues you just mentioned, which are, given the impact of covid-19, there is force majeure in effect. china can't buy so much that it committed to buying. what will it by less still because of political tensions with the united states government? it is possible. just this week, we are seeing china threatening import bans on australian beef and potentially putting tariffs on australian imports into china because australia is calling for investigations into covid-19, and the chinese have explicitly

linked those two issues, saying if you are going to spread lies about china, we are going to take retaliatory action. against't seen that united states imports into china yet, but that is the fear that we could see that happening because of this downward spiral in the political relationship. appreciatei really that perspective. it really helps us clarify some of those issues going forward. celico of albright stonebridge, thank you very much. we want to give an update on headlines outside the business world. here's ritika gupta with first word news. ritika: investors are waiting to hear what fed chair jerome powell has to say about the prospect of mass bankruptcies and long-lasting unemployment. powell speaks at 9:00 a.m. new york time and is likely to call on congress to provide additional relief funds. powell may also again signal he's opposed to setting the fed benchmark interest rate below

zero. there's little chance the democrats' new financial aid package will be turned into law. senate republicans are in no rush to begin negotiations, but passage in the house would give democrats a marker to set down while they position themselves for the election. the british economy has plunged into what may be its deepest recession in more than three centuries. gdp fell almost 6% in march when the lockdown was imposed. it was down 2% for the quarter, and things are expected to get a lot worse this quarter. the bank of england is a staggering recession. 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. alix: coming up, japan's largest drug maker and how it is responding to the virus. we will speak to christophe

weber, takeda pharmaceutical ceo and president. if you miss anything throughout the show, go to tv . scroll through, check it out. tv . this is bloomberg. ♪

ritika: this is "bloomberg daybreak." speedsays it's delivery -- amazon says it's delivery speed is returning to normal. on sunday, it lifted restrictions on the amount of inventory suppliers could send amazon warehouses. officials in washington and u.s. cities are looking at

uber's offer to buy grubhub. takeda forecasted operating profit will triple. aseda is in its second year the biggest firm. it is pursuing therapies for coronavirus patients. i'm ritika gupta. that is your bloomberg business flash. alix: thanks so much. for more on takeda's earnings, i am joined by christophe weber, takeda pharmaceuticals president and ceo. thank you for joining me. i don't see how you are not come to have some kind of impact from covid, considering a large part of your business comes from the u.s. how do you see the virus playing out? know, our: you

portfolio of medicine's life-saving medicines, so we are treating very severe disease, and you cannot stop the treatment for the disease for really lifesaving medicines. they are not linked to elective surgery. i think there will be some impact in some products, but overall, we feel confident that over time, our medicine will still be used by patients. alix: but unless i'm wrong, it seems like one of your main drugs is for crohn's disease, which isn't necessarily life-threatening, and your other is for a plasma business, and that basically means an infusion. i have a hard time to gain that is still going to be safe, or people are going to be ok doing that in the short-term. christophe: you know, would you have crohn's disease, you want to continue to get your treatment. it is not life-threatening, but this is very bad.

of course, getting an infusion is more complicated. but over time, you need to get your treatment. so i think there will be some short-term impact, but overall, we are assessing our overall portfolio. we feel confident about the guidance we gave today. would it comes to the immunoglobulin treatment, for example, you have immunodeficiency's that can be vital, so when you have a disease you are treating that is very severe, over time, these people will get access to that treatment. for: let's stay with plasma a second, dealing with your plasma derived therapy for covid-19. analysts have noted that sourcing the plasma from recovered patients can be a problem, but you seem pretty optimistic in your trajectory for it. how are you moving so quickly? are looking at a treatment for coronavirus that

is very promising. we have cocreated an alliance with other companies which is quite unique so that we can pool our resources and move faster. in fact, today we are starting the manufacturing of its clinical trial batch that will be able to start in july. of course, we have to convince delay their plans more, and it is something we are working on. alix: what is the biggest hurdle so far for that? christophe: i think we have to demonstrate the efficacy and how many patients a donor can save, i think that would be very important to demonstrate. convincing people that it is the right thing to do because there might be treatment there will always

be the need for other therapies. alix: can you give us a sense of, if you get the right kind of plasma and it works, etc., how quickly you can scale it up? factors, weon two need to convince people to donate, and increase the ratio of donors to patients. how many patients will a donation treat? we don't know this for sure today. we depend on the clinical trial will start this summer. alix: are you having any issues? you mentioned having people to get the plasma from, but aside from that, are you having any issues with supply chains? christophe: we have been able to maintain our supply chain. we have started our own crisis management back in january. we have an in-house infectious disease expert, and we have been safe, but also

maintain our supply so far. alix: what are the signs you look for that shows you there are crack emergings -- there are cracks emerging? where do you think those might be? christophe: the health-care system has been paralyzed by the corona crisis. even doctors visits have been stopped or greatly reduced. that. monitoring i think we are entering in many countries a new phase where the thinkty will reopen, so i society will have to find a andnce between activity monitoring a spike very closely. alix: which brings me to the

whole vaccine point. takeda is not working with a vaccine, but when you were at glaxo, you use to run the vaccine unit. do you have any thoughts about how you can ramp up a vaccine? , i thinke: first off we should be very clear that there's always the risk of lack , so i am convinced that a few will succeed, but not all of them. then the scalability of the manufacturing is a very complex endeavor. so -- [indiscernible] that will take time. so when we are talking about 2021, we are talking about in many cases the probability of the vaccines. it might take one or two years to scale up the manufacturing. alix: not news people want to

hear, i am sure. take me inside what takeda is doing in terms of your workforce. have you made any sort of long-term shifts in how you structure the business, how you are hiring, what your medical centers look like, etc.? christophe: in early january, we to keep employees safe. , keeping oure manufacturing side running with alternative shifts. now it is how to regain some activity, but it will never be back as before because you need to keep the physical distancing. there is no way people can go back to the office.

we stay there for a long time, and our thinking is that i think it will accelerate a shift towards a new way of working, which in fact we should embrace for the long-term. i think this is an opportunity for a company like us and society as a whole. alix: does that mean renting less office space, keeping more people at home? hiring different types of people? christophe: people working more perhaps having virtual. i think any are discovering that working at home is not bad. every person is reacting differently, so i think it will change a lot of how we work.

the field we have medical doctors, medical representatives . it will change the way we work with health care professionals. i think that will never come back to where it was before. alix: really interesting. my last question for you from your ceo sweet, -- your ceo any supplyou see chain movement to more protectionism, closer to home activities since you are so diverse? case,ophe: i think in our we have a very balanced supply chain, and also, we never rely on one source. we have a dual sourcing strategy. i think the trend will be much to a world where you can source.more than one

so when you thick about risk de-risknt and how to the dependence in your supply chain, i think this is where the trend will be. really interesting. i really appreciate your candor. christophe weber, takeda pharmaceutical's president and ceo. shock?up, what oil we will take a look at saudi arabia and russia's positive bondibution to the performance. this is bloomberg. ♪

alix: time now for trader's take. joining me is damian sassower of bloomberg intelligence. i would not expect to see this chart and see the positive em debt from russia and saudi arabia. damian: no come on the back of

this year's plunge and subsequent rebound in oil prices, i have fielded the number of questions about who is winning the oil price war. is it saudi arabia or russia? from the perspective of long-term u.s. dollar creditors, the short answer is both. as you can see from the chart, we break down the contribution to return for the e.m. sovereign bond index, and saudi arabia and russia stand out as the two biggest contributors. saudi arabia dollar bonds have returned 21% over the period, russian dollar bonds returning 27%. it has kind of made a more moderate impact on the index, but the key take away is that collectively, the second and third largest oil producers in the world are now responsible for nearly 60% of the e.m. dollar sovereign bond returns over the past two years. this comes despite the opec+

dispute, negative oil prices, covid-19, the khashoggi death, and a host of other risks. alix: it is sort of like the price versus market share conversation, too. good to catch up with you, as always. coming up on the program, jan hatzius, goldman sachs chief economist, will be joining us. we are just about an hour away from fed chair jay powell. this is bloomberg. ♪ bloomberg. ♪

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daybreak" on this wednesday, may 13. i'm alix steel. let's take it from the top. >> i can announced today that the job retention scheme will be extended for four months, until the end of october. u.k. the chancellor of the furlough program through the end of october. this comes as growth in the country shrank 5.3% in march alone and 2% in the first quarter. >> it almost certainly puts the u.k. into a deep recession, potentially the deepest and more than three centuries. gdp fell 2% in the first quarter. christophe: the u.k. -- alix: the u.k. today takes baby steps to reopen the economy, but people will spend limited time outdoors. rep. pelosi: we must think big for the people now because if we don't, it will cost more in lives and livelihood later. alix: house democrats a $3 trillion release bill --

democrats propose a $3 trillion release bill. kevin: republicans saying they don't want to just send a blank check to states or two individuals still in the middle of a health crisis. alix: it is largely seen as the opening bid in negotiations with republicans. >> there is still a long period of economic recovery. we don't get back to the current level of gdp until 2022. alix: new zealand almost doubles its asset purchase program and is toolbox includes negative rates, something the president continues to push the fed to do. pushes back against this. michael: jay powell and his carry down the possibility of a terrible recession. what is powell going to say about it?

alix: this comes after anthony felt he warns about reopening the economy too soon, risking new coronavirus outbreaks. let's get a check on your markets here. it is a divergence between what is happening in europe and the u.s.. you had a terrible close yesterday for u.s. markets, but u.s. equities higher. terrible industrial production out. he also had terrible growth forecasts and growth in march coming out in the u.k.. some breaking headlines, though. watch oil on this news. russia sees signs of oil recovery, along with saudi arabia. russia welcomes voluntary output cuts from saudi, uae, and kuwait, and says both countries are firmly recommitted to balancing the remark -- are firmly committed to rebalancing the market. also watch bond yields. record 30 year auction coming at 1:00 p.m. today.

the main event is about one hour away. fed chair jay powell will be speaking. joining me to break it down, jan hatzius, goldman sachs chief economist, and michael mckee, bloomberg international economics and policy correspondent. what do we expect to hear today from jay powell? jan: i think he will deliver a message that the economy is contracting very rapidly in the mored quarter, and that support is still needed in a broad sense. the fed is doing a lot, both in treasuries,ular qe mortgage backed securities, and in terms of rolling out the various credit facilities now being implemented. but i think he will also probably sound sympathetic, and in a broad sense, while

recognizing the fiscal authorities of already done a lot. but it is still probably not sufficient relative to the scale of the downturn. i think in terms of other measures for monetary policy such as negative rates, my expectation would be that if he addresses it, he will continue to sound pretty skeptical. an effective to be tool. there may also be talk about longer-term forward guidance, more concrete forward guidance than what they have said so far, which is basically that they will keep policy extremely accommodative as long as needed. that is something that is definitely going to be interesting, how extensively they discuss what else could be done on the forward guidance side. michael: i want to ask about inflation and get your view on what is going to happen with prices, and what you think jay powell can or would say about it

. obviously we are in a disinflationary period right now. there are questions about whether we are going to hit deflation, and how the fed is going to react, and whether all of the economy is going to produce inflation they will have to react to. jan: my own view is that right now, many prices are falling. other prices are rising sharply. on net, if you look at the consumer price index for april, it was an extremely weak reading. the core environment is highly disrupted, so you could say that at the moment, inflation is just very difficult to measure. how do you measure, for example, the price of sit down restaurant meals when you can't have a sit down restaurant meal in many parts of the country at any price? i think what is more relevant is what is the outlook for

inflation be on this crisis? our view is at that point, the economy is going to be normalizing in a lot of ways, but we are still going to have a lot of slack in the labor market and the economy more broadly. there will be a lot of people trying to find a drop, and i think that is going to be weighing on inflation, keep inflation below the target. theink that keeps aggressive policy support, and i think the fed's view is going to be broadly similar. michael: with all the money coming into the economy, does it find its way into the markets? jan: it is always a possibility that financial markets do things that could create instability down the road. i don't think that is the main focus at the moment, though.

i think at the moment, the focus is really on stabilization and bringing the economy back to normal, and if you are much closer to normal and you feel that there is an imbalance in the financial markets that has developed, then maybe that is a debate for putting 21 to things back in. at the moment, i don't that is a major concern. alix: can you give me your base case for what happens to growth in the u.s. and the letter you are attaching to that? letterthink the discussion is problematic because different people look at levels or year on year changes quarter on quarter changes, and depending on what you focus on, you get a different letter. our expectation is that q2 sees a very deep decline, at -39% quarter on quarter annualized,

and then we have strong 29, plusl growth, plus 11 in q4. from that perspective, it is a fairly rapid recovery. that said, if you look at the year on year rates, which might give you a better sense of the underlying trend, we are at the quarter, and a decline of more than 5% year on year in the fourth quarter. -5.4%s important because in the fourth quarter would actually be the weakest number in history on a year on year basis if it weren't for q2 and q3 of this year. i would say it is a partial recovery, faster and some sectors than in others. i think the industrial sector and construction are probably going to recover more quickly than ansumer services

lot of face-to-face interaction. that will be a disrupted sector until we find much better medical options. that still seems like it is a ways off. alix: it does. so how much do you model that we need to see from the government in terms of stimulus, backstopping, whatever we need to support the economy to get back to your forecast? jan: i think we need additional fiscal support. we are building in a phase four, 500h would deliver another billion dollars, $600 billion in additionalrobably numbers beyond that for 2021 that are probably well above .hat that is our expectation, that we will get in particular, a

significant amount of support for state and local governments. we are not assuming quite as much as what was in the house package that was passed yesterday. they had about $1 trillion. we don't think it is going to be as big as that, but we think there will be more. the extended that unemployment benefits are going to be partially extended, and we are expecting another round of rebates to households. so a substantial amount of thetional help to build on effort that has already been made, which has been very substantial. we have seen a very large amount of fiscal support, both in absolute terms and relative to other countries that have been hit by the same shocks. that is clearly one of the ways in which the u.s. is may be in a better place than others for an economic recovery. there are also ways in which the

u.s. has bigger problems. confirmedk at the numbers and active numbers, while improving, it is not improving as quickly as it is in some other countries. but on the fiscal side, the u.s. has definitely done more. when we going forward, get through this, given what you know right now, how do you see the economy developing? we came out of the great financial recession with growth potential of about 2%. every slow wage growth. if that's what we are looking at now? are we going to see an economy when we come back with lots of bankruptcies, lots of people out of work for many years, no increment -- no income growth? how bad is it going to be? jan: i think we will see much

than comingth out of the 2008 recession because it is a much different downturn. we shut the economy down in part in order to get on top of the virus. as the medical situation improves, we are going to be able to bring back economic activity in a measured fashion, but that measured fashion is still going to mean much more rapid growth than what you have seen coming out of past recessions. i also think that over time, people are going to learn, we as a society are going to learn what types of activities we can isng back in a way that compatible with continued virus control, and what types of activity we have to stay away from for a longer time. there is still a lot of information that has really not yet been revealed. one example is school closings. you look at similar places around the world. the experts disagree on the role

of children in spreading the virus, and we are getting a lot more data on that, and we are going to be finding out from the experience of my for example, denmark and germany and the czech republic, austria, places that have brought back schools for different age groups. , we do think that over time will adapt, but it is still going to be with us for several .ears, no question alix: thank you very much come up bloomberg's michael mckee. hatzius wills' jan be sticking with me. this is bloomberg. ♪

>> we are, like many others,

expecting some kind of u-shaped recovery. right now, we believe we are the bottom, and we will probably be here for a while, but in the third quarter, the fourth quarter, we should start to see some recovery. that was the maersk ceo speaking with bloomberg earlier today. jan hatzius of goldman sachs still with me. from your perspective, can you talk about the strength of the u.s. stimulus? what country can really recover the fastest here, irrespective of a vaccine or a treatment? alix: well, we have

ritika: this is "bloomberg daybreak."

tesla ceo elon musk looks like he's won his battle with local health officials in california. they say he can reopen his auto factory there as soon as next week. factoryy, musk said the would restart production despite orders that it stay closed. nissan plans to cut about $2.8 billion in annual fixed costs. the japanese automaker will also book restructuring charges. bloomberg has learned these are likely part of a three plan to be unveiled may 28, aimed at turning around nissan after a tumultuous last few years. deutsche bank will resume its huge job cuts program. in bank stopped firings march as the coronavirus outbreak hit, but ceo christian sewing says transformation is essential. deutsche bank will cut as many as 18,000 jobs, 20% of its workforce. the bank has been trying to boost profits for years now.

that is your bloomberg business flash. alix: thanks so much. for more on deutsche bank, i am joined by bloomberg's correspondent from frankfurt. what did you make of the job announcement? reporter: good morning. it feels a bit weird because the story is basically, with all of the virus going around, it is kind of strange that we go back to business. but in general, deutsche bank still has a lot of work to do, and we should not forget that with all of the virus trouble at an onto that. the main objective is to save costs, and the only thing to get those costs down is jobs, so i am not surprised that they are now highlighting that they have to go back to it. alix: do you expect pushback from the government at all? what can they do about it, particularly when every other bank has announced a freeze on layoffs or other work changes? jan-patrick: it depends on the timing they will lay out later,

so we don't know the details of when they will resume exactly, what scale, and in which areas. of course, it is a very tough topic right now with everybody trying to keep the economy as a whole together. on the other hand, the government is very well aware that the bank needs to do something to keep its business healthy and keep its balance sheet healthy. they can't do much about that. alix: what else does deutsche bank have to do, other laborers -- other levers that they need to pull? they are still looking at where they might not want to compete or can't compete with the competition. they cut already a little bit on that front. they are still going to go bigger in germany for corporate lending. it is actually a good time right now. there will be demand for lots of loans.

they just have to make sure that they don't get too many bad apples in their basket. revivere we going to the conversation of commerzbank, deutsche bank as it struggles to get out of all of this? jan-patrick: that is a very good question. we had very serious talks between them, and i am certain that -- [indiscernible] -- merger possible, but the thing is it is not easy, and it must make sense on an economic basis. they came to the conclusion that it doesn't, and i don't see how that has changed since then. alix: there you go. deutsche bank bucking the trend for all of the major banks. thank you so much, bloomberg's jen patrick -- bloomberg's jan -patrick barnert. what is in store for the

producer price index? we will break it down with matthew hornbach, morgan stanley head of global microstrategy. this is bloomberg -- head of global macro strategy. this is bloomberg. ♪

alix: welcome to "bloomberg daybreak: americas." 20 seconds away from the latest read on ppi.

in the market still seeing it outperformance of u.s. equities after a terrible close yesterday. still single broadly dollar weaker story and still buying in the long end of the bond market despite the fact we have a record amount of 30 year supply coming online at 1:00 p.m. oil trying to get a bid as russia supports a saudi voluntary can't and will presumably continue that relationship into the future. the data out. it looks like producer prices, if you back out food and energy, fall .3% month on month. the final demand on a month by month basis is terrible, down 1.3%, and a year on year basis down 1.2%. if you look at the you're on your moves if you back out to .6t energy, it is up percent. that is lower than estimated. it continues the conversation of these terrible numbers in a disinflationary environment we

find ourselves in after the terrible cpi numbers from yesterday. joining me to help break this all down is michael mckee, bloomberg international economic and policy correspondent. it is hard to dig into the details right away, but what can you tell me? michael: the headline decline is the largest since 2015, which is ,hen we saw that many recession in the midwest particularly, in industry led by the oil patch. in april, 80% of the decrease in the final demand can be traced to a 3.3% drop in prices for demand goods. service down .2%. isis the fact that everybody spending on buying things, companies in particular. you back out food and energy, and we used to just do that, but the labor department likes to add trade services into it, that the9 down, and that is

biggest decline ever since the revised ppi was put in place in 2013. the ppi does not have a direct relationship to changes in the cpi. both were terrible. it does suggest we are seeing a disinflationary impulse across the economy, not just in the consumer sector and what we are buying in stores. companies were also not able to raise prices and have to cut prices because there is no demand right now. alix: how does disinflation become deflation? michael: deflation is a broad decline in prices across the entire economy. it would see a number below zero. disinflation is a slowing in the rate of inflation. at this point, this number is a deflation, but would not cause deflation until several months. alix: fair enough.

i am looking through the summary chart and the final demand changes to see where the demand was hit in april. obviously energy down 19%, but also warehousing was down 3.5% there, if no surprise you back out food was down 3.9%. that is speaking to the lack of demand everywhere. i cannot find one positive number. all is lower. i guess the question is when you go forward and we have these deflationary numbers and disinflationary trend, what you look for? michael: you want to see how brought it is and and what categories. this month was terrible because everything is down. if we see some firming going forward, that would suggest we will see low prices but we will not seek continuing disinflation

turning into a deflationary problem. we do not have that yet. it is too early. if especially businesses in the ppi can raise prices for some goods, that would be at least a time to be bottoming out. alix: fair point. stick with me. hornbach, is matthew morgan stanley head of global interest rate strategy. your take on these numbers plus the number we got yesterday? matthew: thanks. it is nice to be with you. the inflation data we are going to get over the next several months are almost undoubtedly going to show a similar theme, which is that of disinflation. our economists are pretty convinced that what we have just lived through and what we will probably be living through for the next couple of quarters is going to be a disinflationary

demands the hit tag certainly is going to outweigh the hit to aggregate supply. we should expect to see these types of numbers coming out. i think the challenge with any of this inflation data is to understand that not all of the source data that the bls is collecting is available in the same way it used to be. much like none of us are living the same life we used to live, the data collection process has been challenged. we have to understand that. i think the fed understands that. what i will be most interested in seeing his once we get to the june fomc meeting and the fed releases their perspective on the future of inflation, that will be most interesting to compare how their expectations are matching up with the data we

get from now on. in terms of your trades, you see that play out. on the short term you are looking for steepeners but you still like the 10 year on a long-term basis and you are betting on inflation breakevens in the medium term. how do you see that trajectory and match it up to some of your trades? matthew: the challenge with the inflation markets today is the tips product will have some pretty bad kerry profile over the course of the next month or two. it makes it challenging to be betting on a reflationary environment as you see playing out another markets like the equity market or even the shape of the yield curve, which has been steepening. preferred way of playing the reflation narrative

in the near term is through the yield curve. i think playing it on a more medium-term basis, you are supposed to be involved in the breakeven inflation market. what we are suggesting today is that investors focus those inflation bats on the long end of the yield curve, where ultimately we can see the greatest chance for inflation in the united states to get back to its normal run right, which is closer to 2% on cpi, which is ultimately what the tips product is linked to. that is how we are recommending it tactically on the yield curve and more structurally in the breakeven inflation markets. is that dependent on any particular type of economic recovery? so our economists are

taking a stand on the shape they think the recovery will take, and the shape they are looking at is a v-shaped recovery. seemme people, that may overly optimistic. i think the speed with which the economy went into recession ultimately will be matched to a certain degree by the speed at which it will come out. our economists do see the rate of change in growth, which is important, markets trade off of the rate of change of growth, i think will be v-shaped. that is their perspective. that does not necessarily mean the total output of the u.s. economy will get back to pre-covid-19 levels very quickly. do not, our economists have a total output getting back

to pre-covid-19 levels until the end of 2021. the rate of change will inflect quite dramatically once we make our way past the second quarter ways weear, and in some are seeing the equity market, that should be reflationary. alix: last question. as we head into fed chair jay powell speaking at 9:00, he will be answering the negative rate question quite a bit. from a supply and demand question, can we get to negative rates? matthew: i don't think the fed will pursue negative interest rates for some time. one easy explanation is the fact that over the past decade, the fed did not need to take interest rates into negative territory in order to have the economy recover, and in order to get inflation back to the fed 2% target. it was not necessary for

negative interest rates. the fed will lean on that for as long as they can before considering taking rates into negative territory. alix: thanks so much. great to catch up with you. matthew hornbach of morgan stanley. bloombergs michael mckee, thanks a lot as well. we want to give you an update with what is making headlines outside the business world. ritika gupta is here with first word news. ritika: investors are waiting to hear what jerome powell has to say about the prospect of long-lasting unemployment. he speaks at 9:00 new york time and will likely call on congress to provide additional relief funds. he also -- he may also signal he is opposed to cutting the fed benchmark interest rate below zero. there is a good chance the house democrats new relief package will be turned into law. includesillion package eight estates and local government.

central publicans are no rush to begin negotiations, but passage in the house will give the democrats a marker to set down as they prepare for the election. gdp fell almost 6% in march when the lockdown was imposed in britain. things are expected to get worse this quarter. the bank of england is forecasting a staggering 25% contraction. 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. . am ritika gupta this is bloomberg. alix: thanks so much. breaking news. the opec monthly report is out. always love to dig into the details. opec cuts second quarter demand estimates for crude by 3 million barrels of oil a day. that is demand for its crude. howcall on opec crude is

much they expect to be able to deliver. they also trim their 2020 demand 260,000s for crude by barrels of oil a day and they do say they boosted supply last month, but remember, they are into the cutting mode in may and they will actually cut, at least saudi arabia will cut another one million barrels a day in june. market just over $30 a barrel. we will recap any news from that report. to remind you about what happened with ppi, if you back out food and energy, you are looking out up .6%. month on month, much lower, -.3%. final demand really bad, down 1.3%. not too much movement within the markets on that. coming up, i will speak with managing risk and uncertain times. i will speak with scott stephenson, the ceo of risk

assessment and data management firm averis. if you miss any of the charts and want to check them out, go to gtv . this is bloomberg. ♪

alix: time for bottom line. we look at companies in sectors worth watching. today our focus is on business risk. ,oining me is scott stephenson verisk analytics ceo. specializes in insurance

and financial services. i want to highlight something tighten is talking about. they are saying they see a long road to a post covid recovery. they see higher costs because of the covid and they see structural changes in their business. are you hearing that a lot from your customers? scott: yes. the primary thing i'm hearing from our customers, and i think this is partly a function of the fact we are a data analytics company and that is what we support our customers with, is i hear many companies knowing they need to become the better digital version of themselves. as they have gone through this moment and they have been forced into remote operations and they have felt the gears grinding, if they have felt the gears grinding, they naturally draw the conclusion that if we were more digital, if we were more

virtual, then it would be possible to more easily sustain our operations going forward. that is the dominant theme i'm hearing. it isher would be i think very clear most companies will think differently about physical space in terms of their offices, and not that companies will move away completely from physical space, but they will probably use it differently. --re will probably more there will probably be more comfort with a hybrid approach where there is more remote work than there was in the past. alix: how does that translate on a practical level? how does that strange their margins and how they structure? scott: great question. you talked about time dependency and i think that is an important part. there will be some investment that is required up front,

particularly on the digitization front. yourself.o platform we have to bear in mind that we live in a world where if you use the plowed, it costs $25,000 to a terabyte of storage capacity. that was $8 million 20 years ago. the cost of being digital is considerably lower. the other time dependency, on the other topic, which is the occupancy cost associated with how are we using our offices, it will be hard for companies to change the amount of commitment they have made to office space in the near term. upfront, may be is even more costly than not, but i would say open even intermediate periods of time, companies will find ways to make these platforming assessments to be digital and productive and will find them to

be marching enhancing. companies will find ways to reduce their office footprints and thereby save some of you that way. alix: let's talk about supply chains. you will have a unique view for some of your clients. how have supply chains evolved? how they protect their existing supply chains? scott: i see two things. one is supply chains will shorten. it is just unavoidable to conclude in this moment that there has to be a re-think on what is essential and there has to be a sense of security around what is essential, and the natural way to deal with that is to shorten the supply chain. i would definitely expect that in many categories. the other is there has been a lot of talk for a long time about understanding one's supply , assessing the risk of

one's supply chain. that will become serious work. there are supply chain optimization teams inside of a lot of companies. i think they have been seen as cost centers. they will get more attention from the corner office than they used to. they will get more attention from boards of directors than they used to. i've been asking this question to most ceos out there. did they see higher corporate taxes to pay for all of this record stimulus every country seems to be committing to? have you heard any conversation, are you worried about that, are your ceo clients worried about that? scott: i've a chance to sit with terrifics through organizations like business roundtable. the focus at the moment is the moment. people are focused on caring for their teams and making sure

their businesses are operating with continuity. folks are focused on executing well in this moment. that theto acknowledge federal government of the united states has done something extraordinary with the stimulus package, and there will be consequences, there have to be. i find businesses are focused on their customers, their people, and getting the job done at this moment. alix: it was great to catch up with you. super great perspective. if i could sneak in one more quick question, do you and your about a u-shaped or v-shaped recovery? ?s there any consensus scott: i will make a very general comment. what is needed on the part of leaders is an embrace of complexity because this is a complex situation.

any things are being balanced, there is one a metal science at work, we have to think probabilistically and embrace complexity in order to be able to act with precision. we need to act precisely in order to make sure we are doing the right place. for example, in our company, we operate in 100 locations. we are not going to open 100 offices at the same moment and we will not open them at the same rate because we have to cap for local conditions. the reason i wanted to say that is the difference between youaped and u-shaped or w, have to go component by component inside of the economy in order to answer that question. in terms of the overall economy, it will be the summation of lots of those curves across different parts of the economy and society. alix: super thankful, scott. scott stephenson of verisk,

thank you very much. for more on the business risk faced by those in the c-suite, stay with us. our interviews with the imax ceo coming up in new york at 3:00. and we are just moments away from jay powell. this is bloomberg. ♪

away we are just moments from fed chair jay powell speaking. michael mckee is with me. what are the key points we can expect? michael: we have heard from a lot of fed officials of last couple of days. it is not clear what jay powell adds to this. markets are desperate for any kind of indication what might happen next. especially there has been a focus on negative interest rates. the fed does not like it. powell has been against it. what does the fed do another cases? they have stopped making forecast because they say it is too difficult.

will powell offer any kind of forecast for what will happen to the economy with the next couple of months or the next couple of years? those are the things to look for from the fed chair. alix: looking forward to that. producer price index for april came in negative on a month by month basis. michael mckee, thanks a lot. that wraps it up for me. withg up on "the open" jonathan ferro, fed chair jay powell, and also tony dwyer will be joining him after jay powell finishes speaking. this is bloomberg. happy wednesday, everybody. ♪

♪ jonathan: from new york city for

our audience worldwide, good morning, good morning. the countdown to the open starts right now. 30 minutes away from the opening bell and just moments away from hearing from the chairman of the federal reserve. equity futures positive, up 14 points on the s&p 500. we advance around .5%. in the bond market for treasuries, yields set up as follows. your 10 year yield coming in a single basis point. that is the price action as we start to digest the headlines coming from the federal reserve chairman. let's start like -- let's start there and bring in michael mckee for comment. good morning. michael: of the contraction without modern president, significantly worse than any recession since world wari,