good morning welcome to "street signs." sell in may. european markets play catch-up with oil and autos leading the losses as escalating u.s./china trade tensions weigh on sentiment with president trump piling more blame on beijing. >> this never should have happened they should have put it out. they should have let us and other people in other countries go in and put it out

swiss drugmaker roche wins emergency approval ceo tells cnbc it will take more time to deliver a vaccine. >> it will take years to develop a new medicine, so most experts agree that it will take at least 12 to 58 months until we see effects and available in the necessary quantities for patients. travel stocks as billionaire investor saying he was wrong to buy into the sector. and the uk looks to overtake itsly as the worst hit country with death toll nearing 29,000 as rome eases restrictions while the british government plans to ease its road map later this

week welcome to "street signs." let's kick off with fresh data this is the eurozone april final manufacturing pmi. this, a number just crossing the wires. it has come in at 33.4, broadly in line with flash estimates of 33.6 we -- in terms of the detail here, the final new orders pmi, one of the components came in at 18.8 that was slightly worse than the flash numbers at 19.1 and marks a survey low new orders are looking very, very weak. we got the detail in terms of the different countries earlier this morning germany and france broadly in line with expectations and first reads for italy and spain. but overall, the manufacturing sector taking in a huge hit. really collapsing in april as the virus made its way through europe and the lockdowns meant

manufacturing activity contracted very, very sharply. so, that's what we're looking at in terms of the severity of the economic hit that's what we're dealing with 33.4, the manufacturing pmi for the entire eurozone. the latest pmi figures show the extent europe's economic lockdown has battered manufacturing. in gather mane and italy, it contracted at its fastest rate on record. president trump ratchets up pressure on china over its handling of the pandemic, warning he may impose fresh tariffs on china the president has accused beijing of covering up the outbreak without any any evidence speaking in a virtual fox news town hall, the president promised a u.s. intelligence report and explained why he would consider restarting the trade war with fresh levies. >> again, i don't like to tell you -- we're all playing a very complicated game of chess or

poker. name whatever name you want to name, it's but it's checkers, that i can tell you. we have a very complicated game going. our country was being ripped off by every nation in the world and now we have made unbelievable stradz unfortunately, we get hit by this whole situation, but we have done so well, we have taken in so much money going before the virus china had the worst year they had in 67 years. that's a reason. i'm not happy about that, but what it does is, it says they were taking us for a ride. >> u.s. officials reportedly believe china covered up the full extent of the outbreak in a bid to hoard medical supplies. according to a department of homeland security intelligence report seen by president associated press, beijing concealed the true contagiousness of the disease while moving to increase imports and cut exports of key equipment in early january u.s. secretary of state mike pompeo echoed his boss's message

in a weekend interview saying there is, quote, enormous evidence the virus originated in a chinese lab. speaking to abc news on sunday, he also said china has been responsible for the spread of the disease in the past and must be held accountable for the pandemic that originated in the country. >> china has a history of infecting the world and history of running substandard laboratories this is not the first time we've had at world exposed to virus from a chinese lab while the intelligence continues to do that i can tell you there is a significant amount of evidence that this came from that laboratory in wuhan. >> let's get a check of european pashgts. red across the board for markets closed on friday for the labor day celebrations the dax now opening about 2.7% lower. the cac 40 under particular

pressure down 3% in italy as the economy reopens today, parts of the manufacturing sector getting back to work that index is down about 2.1%. the uk was open on friday and we are now seeing a little bit of a bounce back taking place this morning up about 0.2%. now, all of this is happening after some pretty decent selling took place at the end of last week wall street taking a big leg lower on friday. energy leading the losses there. all 11 s&p sectors ending in negative territory as investors digest president trump really ratcheting up pressure yet again on beijing, raising concerns we could be dealing with another bout of tensions -- trade tensions on top of the health concerns and all that the pandemic is bringing to markets. now, let's push on and get a check at sectors, what's behind these losses this morning. we have health care, one of the best parts of the market this morning. that's down just about 30 basis points the health care stocks are

seeing more of a bid than the rest of the market media, telecom and utilities faring better than broader markets. autos down 4.3%. major step lower for that cyclical part of the market. oil and gas down 4.3%. following the losses we saw on u.s. energy friday construction, technology, banks and industrials coming under pressure all sectors down more than 2.5%. travel stocks in focus after warn buffet announced he sold out of his stakes in all of the u.s. airlines. he doesn't know that in two, three years travelers will be returning to the airways the way they have been in the last year or investors' minds this morning. we've seen a lot of losses come through for the travel sector. more than 6% in some cases air france, klm down more than 6. pretty steep losses for the

travel sector. asian markets, bearing in mind japanese and chinese markets are closed for the holiday. we have the kospi down 2.7%. the hang seng, down 4.2% in india, the nifty 50 down 5% australian stocks bucking the trend up 1.4%. the prospect of renewed tensions between u.s. and beijing are weighing on that sentiment let's bring in managing partner of sabile capital. what do you make up the ratcheting up of tensions, pressure on beijing from president trump over the last few days we're already dealing with so much in terms of controlling the pandemic now investors dealing with the prospect of heightened trade tensions >> absolutely. thank you for having me on good to see you all. this trade tension noise is just

salt on the wounds the market has enough to deal with and enough downside pressure coming in q2 from the actual earnings numbers flowing through from the coronavirus pandemic economic effects. on top of that, the market now has to process the chance of another bout of trade tensions between two major global economic powers. i think we're going to continue to see major downside risk and volatility risk on the equity markets, which isn't going to help an already fragile situation. >> in terms of what we're seeing play out in markets, in public markets anyway, investors have been showing a preference for reliable companies showing some growth and have strong balance sheets what about in you're world, in private equity and private markets, what does the landscape look like now? >> you're seeing a similar flight to quality. if you think about private equity, private equity thrives on leveraged buyouts of strong,

stable companies with recurrent cash flows you're seeing similar behaviors in public and private markets as investors seek out just those kinds of companies that flight to cash flow, flight to profitability, flight to resilience in the balance sheet is showing up in all parts of the capital structure, especially in equity, whether it's private or public >> so, in terms of -- very nice to speak to you. looking at your distress in special situation, hot ticket among private capital investors where demographically, where on a sec toerl basis is this big increase in the hot ticket special situations >> well, distress in special situations are showing up because they've been underweighted in investor portfolio. these are pension plans and endowment foundations. they've been underweight special situations and distressed investing for most part of the

last half of the cycle, the last five years or so most of these institutional investors are signaling finding managers or finding opportunities in this space to ensure they have adequate risk on in that part of the capital structure. so, where? in particular in the u.s. investors expect to see better risk slaib reward tradeoffs in distressed and special situations where you're able to pick up credits in healthy companies, relatively cheaply when the spreads blow out. you're also able to make some qualitative analysis where there's a bailout by the government or the fed of your sector before that gets priced into the credit, you're able to buy that credit effectively other times very healthy and otherwise well-run companies will go through liquidity issues we have to make a delineation between liquidity and solvency

if there is a healthy company with liquidity issues and you could be a credit provider to that company, you stand a good chance of making money of course, the analysis becomes very fundamental and very bottoms up because you have to separate liquidity from solvency we heard warn buffet sold all his positions in the airline sector i was casting my eye over comments a few weeks ago from black stone where they're talking about a recovery and asset prices but particularly in strong companies do any of the airlines or any companies in the airline space fit that profile where you think private equity might want to get involved >> today there's too much downside risk. it's all about risk/return tradeoff and where do investors find enough of a cushion the cushion comes from cash. it comes from balance sheet strength airlines are not where you find balance sheet strength airlines have the highest probability of government

backings and bailouts but not all airlines are going to make it through this and not all should depending on their business model the other part of the equation is what does the demand side look like once we're through this crisis? whatever shape this recovery takes, there's a big question mark over long-term or certainly medium term demand hit what do consumers look like two years from now, three years from now? will we have more reticence to spend or fly like we have the last 50 years? how long will it take to get back to 2019 flight levels that question is too uncertain right now and it really depends on how long and how deep this crisis is. we're just in the middle of it, just at the start of the middle of it. no one really knows. that's why airlines don't fare high on anyone's list of trying to be a buyer whether in the private space or public space. >> i mean, just extending the

conversation on that topic a little further, this is really an opportunity for investors to try to form a view on where we could be in three to five years, as you say, looking at what the consumer could look like under these new conditions how long do you really have to work with given -- i know there is obviously so much uncertainty, but now presumably is the time to be forming those views and taking positions >> absolutely. and if you have to take positions today, if you're trying to shore up your portfolio to take a view for three to five years, you go up the quality curve. you go through to companies where you really know that they are going to be here three to five years from now. they have enough cash to ride out however long this storm lasts. companies like microsoft, companies like alphabet. tech is a better space to be in, especially the profitability tech sector is where you want to

focus your time and attention. beyond that, any time you start doing demand analysis on a company, you've got to ask yourself, do you know the full story today? you have no idea on the duration ands ive airty of the economic shock we're facing any time you think of retailers or travel or any sector where you have to take a bet on what consumers do 6, 12, 18 months from now, i would urge you to take pause and see if that bet is worth taking today or whether you'll have more information six months from now to make a better assessment once you see a few more economies trying to leg back out of the crisis we're starting -- we're at the very early, early days or hours, in many cases. focus your attention on companies that have the balance sheet and also have the resilience to make it through

this shock, through the other side and not taking outside risk. >> fair enough always a pleasure to have you on the show thank you for joining us this morning. karen and steve, thank you as well. i want to just bring you some fresh comments out of japan. prime minister shinzo abe announcing state ofemergency will be extended nationwide to may 31st he's asked experts to assess the coronavirus situation around may 14th we'll get an update there. that's the latest out of japan. in terms of the latest on the virus and the united states, president trump says as many as 100,000 americans could die in the pandemic this after the country recorded its deadliest day on record over the weekend. he added he was confident the united states will have a vaccine by the end of the year, contradicting his own health advisers who say it could take up to 18 months. >> a vaccine has never gone like it's gone now. we're ahead of any vaccine in history. these things would take two,

four, six years. by the end of the year, i think we'll have vaccine. >> roche has announced it will more than double testing of antibody testing by the end of the year the swiss diagnostics company has received emergency u.s. fda approval speaking to cnbc earlier, ceo hailed the potential benefits of greater antibody testing. >> antibody testing allows us all testing so we get a much clearer picture of how much the pandemic has spread, whether infection rates continue to increase or decrease on top of it, all the time, as soon as we know, we also acquire immunity, it will allow people to return to work and to norm normalize our society. i think it's really important. it's a big step forward. >> the roche ceo also played down hopes for a quick vaccine

breakthrough. >> no doubt that this time, as so many companies are working on a vaccine in parallel, and as we see such a great collaboration with regulatorregulators, inclu fda, we can actually speed up the vaccines but still typically it would take years to develop a new medicine, so most experts agree that it would take at least 12 to 18 months until we see a vaccine, which is also available in the necessary quantities for patients >> so, the end of the year does seem a little bit of a stretch then as far as president trump's view is concerned. >> it's certainly an ambitious goal, yes. coming up on "street signs," it's the question that all parents around the world are asking -- when can we end this home learning and when can the kids go back to the classroom? we'll talk about the government and especially the department of

education's plans to reopen the classrooms here on "street signs. these days staying connected is more important than ever.

so we're working 24/7 to maintain a reliable network, to meet your growing internet needs. we're helping customers who are experiencing financial difficulties stay connected. we're increasing internet speeds for low income families in our internet essentials program. and delivering self-install kits to your door. nos comprometemos a mantenerte conectado.

we're committed to keeping you connected. for more information on how you can stay connected, visit xfinity.com/prepare.

welcome back to "street signs. uk prime minister boris johnson said his country had a contingency plan in place in case of death. in anner interview they were ca of dealing with a death of stalin type situation. let's get out to steve who joins us with more on this important dilemma facing governments across europe. parents across the country would love to get their productivity back and also get their children back in school, but it comes with huge risks. where does the government stand on this? >> well, the risks, julianna, one thing, thankfully throughout this coronavirus pandemic, which we can also be pleased about, is

that thankfully children seem to be less infected, transmitting it less and hopefully that will continue there seem to be a demographic which is relatively safe, if i can say that obviously, i'm on shaky scientific grounds myself but this is what the experts are saying as well we must remember in the united kingdom, many if not most schools have had a degree of operation throughout this. of course, they have heroically created places in the classroom for a lot of the key workers throughout this period they have some experience of coping with situation already. whether it be a phased return with certain year groups or certain -- primary versus secondary. maybe you have half a group coming in and rotating on a weekly basis one thing as you quite rightly say, the government seems to have given some very strong signals to various members of the press over the weekend we can talk about those in a few

moments' time. first, let's listen into the subject which was touched upon yesterday by the cabinet office secretary who addressed this very issue >> we have all learned to adapt. we must carry on doing so. after the prime minister sets out how we will get back to work later this week. his comprehensive plan will explain how we can get our economy moving, how we can get our children back to school, how we can travel to work more safely and make life in the workplace safer. but, before we can ease the existing restrictions, we must ensure the government's five tests are met that the number of cases are falling, death rates are declining, the nhs has what it needs and measures are in place to stop a second peak. >> you have to love this government, any government, the way they put out a load of ideas and say, nothing is firm "the sun", the prime minister

had an interview saying potentially schools prioritize for open as early as june. the guardian saying younger people need routine. goodness me, i know that as well it's a great deal of logic to get the children back. the department of education maintaining no date is set the unions very concerned about the impact on public health. of course, on the teachers as well the sunday telegraph said boris johnson will announce this on sunday, which is light will thely later than more people would have hoped gavin williamson, education secretary, talked about a phased return only when it's safe as well we've seen a lot of information that has been fed to the press but i'm sure the government would deny that. >> thanks for the update look forward to your continued coverage. i want to flag another comment out of japan the prime minister shinzo abe, as i told you before the break, they have announced a state of emergency is set to be extended nationwide to may 31st

they will have experts assess the situation on may 14th. now the prime minister adding that japan wants to consider lifting the state of emergency before may 31st if experts decide that's possible based on analysis of regional infection trends the base case seems to be extension of that state of emergency to may 31st, but hopes remain alive that they could see improvements that means they could reopen earlier. coming up on the show, hong kong is due to report its first quarter gdp as they continue to ease restrictions.

welcome back to "street signs. i'm julianna tatelbaum these are your headlines sell in may. european markets play catch-up with oil and autos leading the losses as escalating u.s./china tensions weigh on sentiment with president trump piling more blame on beijing >> they should never have happened this virus should not have spread all over the world. they should have put it out. they should have let us and other people in other countries go in and put it out

lockdowns push eurozone manufacturing activity to a fresh record low in april. as europe's factories face both supply and demand disruptions. travel stocks sew red after warren buffett sells all his airline positions saying he was wrong to buy into the sector. shares in steel giant thysse 'n sync after they say sales will be badly eroded by the coronavirus impact saying equity buyers need help raising funds to pay for the deal we've got some fresh data just coming through out of hong kong this is along awaited from the hong kong authorities. q1 gdp coming in down 8.9% year-on-year this is the government's advanced estimate on a quarterly

basis. it's come in at 5.3%, which i believe is worse than the market was expecting. these are fresh numbers. q1 gdp for hong kong emily tan will be able to give us more detail on how these numbers stack up to expectations emily, please, thank you for joining us run us through what these numbers mean >> this is a staggering, a huge miss, julianna much worse than expected that is probably why the financial secretary paul chan will be meeting with the media at 5:00 p.m. he does not normally come out for these gdp releases but he'll hold a press conference alongside the government's economist in half an hour's time this comes down q1 gdp, down 8.9% 3% contraction quarter on quarter following the quarter's

2.8% decline the hong kong government just coming out with commentary saying the covid-19 pandemic causing a severe contraction of global economic activity and hong kong exports remain under noticeable pressure. we'll get trade data from hong kong later this week retail sales number comes out tomorrow and restaurant receipts come out on wednesday. these are all data points that have fallen sharply on the back of the coronavirus outbreak. we'll continue to watch all this data trickle in this week. the hong kong government has announced some social distancing measures that have been in place for the past month they are set to be relaxed some time this week as some of them are set to expire on thursday, may 7th. we are expecting the hong kong government to come out this week on the back of carrie lam's weekly executive council meeting, a meeting with top advisers she'll get their approval first and most likely announcing it in

the next day or two. this is what i'm reading from the media. more commentary coming through saying the government says in view of the severe global economic impact of covid-19, real gdp growth forecast for 2020 is revised to negative 4% to negative 7% the financial secretary already mentioned this in his weekly blog yesterday, saying the recession will be worse in the global financial crisis and asian financial crisis and already gave this full-year forecast of negative 4% to negative 7% growth for this year, saying the threat of the worst recession ever the government says local economic activity is likely to stay subdued in the near term if the threat of the pandemic continues. on the coronavirus outbreak here in hong kong, we've had no new cases for the last two days. we've had no local infection or community spread in the last 14 days all the cases we are getting, and it was just one over the weekend, was imported. the government is in the process

of repatriating 3,000 residents from india as well as pakistan all the increases is likely to be imported. more commentary coming through from the government saying near-term economic outlook is subject to very high uncertainties, hinging crucially on the evolving global public health and economic situation. all this coming on the back of very big fall, a sharp fall in economic growth, a contraction of 8.9% in the first quarter of this year annually we got, of course, this -- just to put some history on this, if we do get a 2020 contraction, it will be the first back-to-back contraction since the handover in 1997. in 2019 it was negative 1.2% growth we had the trade war coupled together with 11 months now of social unrest. this is the anti-government

protest. you add to that the coronavirus outbreak, and the economy is really reeling we have a lot of shops as well as restaurants having to operate in the social distancing -- restaurants can only have four people to a table right now. this is expected to be relaxed cinemas, many entertainment venues have been closed as a result of the coronavirus outbreak you're just looking at file pictures here. on may 1st we did have some protests cropping up because the situation is stabilized now in terms of the outbreak, so many of theets protesters are starting to come back. we'll be watching this closely as the anti-government protests will mark the one-year anniversary come june 9th. we're about one month out from there. clearly today we're watching this gdp number which comes in far worse than what we expected. a contraction of 8.9% in the first quarter of this year back to you. >> thank you for breaking it down for us. certainly when we pair these

numbers out of hong kong with the numbers from eurozone earlier this morning, it paints a very, very grim picture of the economic hit we are seeing on the back of the lockdowns in place. we are seeing some pretty decent losses accumulate now across the board in europe. at one stage the ftse 100 was trading higher the ftse 100, the only indices that was open on friday. a bit of a catch-up taking place in german, french and italian markets. since those hong kong numbers have come out, we've seen a turn for the worse. the dax 3.4% lower the cac 40 has been under a particular bit of pressure the airlines, air france klm under significant pressure the overall index down 3.8 in italy, which is reopening parts of its economy today, the ftse mid down 2.8% the ecb was in focus with madame lagarde saying they would do whatever is necessary for as

long as necessary when it comes to the emergency pandemic purchase approach. the euro this morning is trading on the book foot versus the greenback down 40 basis points some same haven bidding underpinning the dollar strength the pound also trading weaker versus the dollar. down half a percentage point to 1.24%. moving on, let's take a look at wall street how we're poised to open the week. last week we saw major indices -- all 11 s&p 500 ended in negative territory led to the downside by energy and u.s. tech names were in focus last week, giving up some ground at the back end of the week as you can see, we're in for more losses. the dow jones looking to open more than 250 points lower president trump's comments around china ratcheting up pressure around beijing, no doubt weighing on sentiment. the corporate bond market has seen a marked increase in

activity since the coronavirus outbreak corporations issued nearly $265 billion in debt through april 27th, according to some estimates. boeing became the latest major issuer last week completing a $25 billion bond offering, despite plans to cut its workforce and reduce production across its platforms our net guest believes many of these companies are at risk of becoming fallen angels that's barnaby martin bank of america global research, steve karen will join the conversation thank you for being with us. let's kick off with this boeing issuance stunning $25 billion raised despite all of its operational challenges to what extent is demand for a bond issue like that down to the federal reserve's commitment, unprecedented commitment, to buy bonds across the rating spectrum >> well, good morning. thanks for having me on. there's no doubt that the

intervention of central blanks globally fed the ecb in shielding bond markets has been enormously successful in allowing these more challenged companies to come to the bond market central banks are telling the markets, look, we have your back we will make sure that we are a life line to those companies that really are running out of liquidity and we will -- they've been tremendously successful the corporate bond market in some places, such as u.s. high yield, the retracement from the recent have been close to 350% of the selloff this is ironically one of the shortest bear markets we've ever seen but one of the fastest and most aggressive recoveries it's in very large part due to the intervention of central banks. >> barnaby, i'm confused last time round when we had central banks and the ecb buying bonds from corporates, they were

buying investment grade, buying companies that probably could have raised the money anyway at incredible low coupons this time around they seem to be going a little more indiscriminately are they setting themselves up for central bank losses? basically the business models are temporary, are broken? >> again, it's the counterfactual if you're a central bank on the side of caution and says, i'm like the federal reserve, i'm not going to do this move into fallen angels. if you were to make that point and say, look, our red line is here, we're not going to cross it, you have to weigh out the economic impact down the line. they are the guardians of stability. they do realize the onus is on them and they're quick enough to intervene and creative enough to come out with these policies i believe the central bank community is sitting down and having a long, hard, you know, reflective moment and saying, if we don't break to lose here, if

we don't cross the rubicon with new policies we have never done before, this will come back to bite us in terms of a very, very miniscule recovery down the line they're having to cross the rubicon. yes, it sets them up for more risks down the line but their job is financial stability >> but the problem with the rubicon, it was a mythical river in northern italy that no one found the source of or no one knows the source of. it's the same with this policy there's a whole host of companies we never know will work again you know nestle bonds, because they'll be around in ten years of time. another think buying automakers, their model was broken way before coronavirus i feel they're setting themselves up for buying assets in a load of companies, regardless of coronavirus, things weren't working well, barnaby. >> they are taking on greater solvency risks, no doubt about it i think if you look at the nitty

gritty of what they're saying and what they plan to buy, there's an element of caution. the federal reserve, for instance, will buy high-yield etfs, as you say, will expose them to energy credits, but the fed made the point, this won't be the priority of their buying. so, on the one hand, they're saying, look, we're going to cross the rubicon. on the other hand they're saying, we're going to maintain some caution they have no choice. if they don't step in, we have defaults, abundant defaults, within the next few months across the globe -- across global financial markets there's no choice. they have to stand up and honor their title, which the guardians of financial stability >> the barnaby, i can see the list of fallen angels from your report back in april you list some french auto companies, renault, auto parts companies like vallejo as well as financial stocks, looks like

the laundry list from the last financial crisis i want to get to the performance of these names it almost seems like a sector you should avoid but you also point out that effectively when the halo, a lot of original balance sheets remains with these companies so they're not a bad bet for some investors. >> these are companies that pride themselves on being investment grade rated because of unprecedented economic shocks, we feel they'll be in high yield it's not necessarily a market where they can easily fund themselves going forward these are large companies that roll over tremendous amounts of debt what we tended to see historically is fallen angels, you know, perhaps they feel a little embarrassed being high yield. as soon as they suffer a downgrade, they try to focus to deleveraging balance sheets and getting back to investment grade. for those investors with patience and long-term capital,

buying fallen angels in a recovery trade is, as we've shown, you know, a good place to be because they typically outperform original issue high-yield companies >> barnaby, what's priced in in european credit markets at this stage around the ecb and their potential to include these fallen angels in their pandemic emergency purchase program >> yeah. well, last thursday was a little bit disappointing for the credit market it was clear the markets thought there was going to be announcement on formally buying fallen angels as part of qe or even extending it to noninvestment grade bonds. that didn't come the market was a little upset so we sold off. i think if you look back at the last two or three weeks for the ecb have been about banks, banks, banks, and liquidity, liquidity, liquidity the decision on tweaking qes is for another time down the line what the ecb is cognizant of is the tremendous demand on banks companies drawing down huge

amounts of revolving credit facilities the central bank had to make sure they provided banks with abundant liquidity at super cheap prices we got that. we got collateral changes. we've got the new peltros. in the end, last week's ecb meeting was about making sure companies have abundant access to liquidity down the line, amadame lagarde said, we'll do whatever it takes with respect to our asset purchases, i think it is only a matter of time before fallen angels are included in the quantitative easing policy. >> the central bank measures across the world have really been targeting liquidity, as you just outlined there. solvency, to steve's earlier point, is clearly an issue or risk we need to be thinking about. in your view, do you think ther is a default cycle coming? what would it look like?

when would those warning signs begin to flash up? >> there will be a default cycle. interesting what the bond market is doing at the moment, it's clearly to happy to lend to those companies which can survive lockdowns even though their profitability may be stressed what we call the distressed ratio, the percentage of high yield that yields above 10%, which is classically a good leading indicator for defaults that has not come down the credit market is saying, look, you've got your winners here from liquidity and your losers from solvency, which central banks can't do anything about it you look at that tale of distressed companies and it tells us in the u.s. we may see a cumulative default cycle amounting to 21%, which is painful. in europe it looks like we'll have a default cycle over the next year of about 5% to 6%. we will have -- we will companies that can't make it and we will have failures. >> pretty staggering numbers out of the united states there

>> yeah. >> thank you for being with us barnaby martin, b of a global research. thyssen warned the cash gains from sale of elevator unit will be eroded by the losses related to coronavirus the ceo said, quote, the financial leeway created by the sale will be much lower than originally anticipated they sold their elevator unit to private equity consortium in february for 16 billion euros. they received 1 billion euro until the funds clear in june. rolls-royce set to cut 18% of jobs as the engine maker becomes one of the latest companies to feel the effects of falling demand in the airline sector the staff reduction is the biggest in over 30 years for the british company and comes despite wage support programs

offered by the government. coming up on the show, berkshire hathaway sells itses stakes in america's biggest airlines as chairman warren buffett warns of gloomy times ahead for the sector i know that every single

time that i suit up, there is a chance that that's the last time. 300 miles an hour, thats where i feel normal. i might be crazy but i'm not stupid. having an annuity tells me that i'm protected. during turbulent times, consider protected lifetime income from an annuity as part of your retirement plan. this can help you cover your essential monthly expenses. learn more at protectedincome.org .

- 58 million latinos live in the united states. if we all participate in the 2020 census, we can ensure fair funding for our schools, libraries, hospitals, and other public services. the census is safe, it's confidential, and our community is counting on us to do our part. we know who we are and how vibrant our community is. let's make sure our nation knows it too. for more information, say "census 2020" into your x1 voice remote, and to participate, go to census.gov.

welcome back to the program. shares in paris airport operator adp are trading lower over amid reports that they should stay shut fran's transport and ecology minister said orly's reopening hinges on when airlines will be allowed to fly again. the european commission has approved a 7 billion euro support package for air france, including state guarantees and a shareholder loan to the carrier by the french government the franco dutch airline said it needed support to continue operations saying it could run out of cash in the third quarter.

lufthansa told its staff rescue talks with the french dpovt will continue soon but added they are also looking at alternative measures as a precaution in a letter ceo said, we romain convinced we will not have to fall back on alternatives given talks with berlin. they are seeking as much as 10 billion euros in bailout funds that would see the german government take a large stake in the airline. berkshire hathaway, meanwhile, has sold its stakes in america's four largest airlines as chairman warren buffett warned the world had changed for the industry due to coronavirus lockdowns. he got rid of positions in united, american, southwest and delta, a combined investment worth more than $4 billion speaking at the company taes closely watched agm, buffet defended the decision saying airlines have been hit hard by travel restrictions during the pandemic he added berkshire does not trim positions or take half measures. this after berkshire hathaway

posted a record $49.7 billion loss in the first quarter, citing the impact from a slump in global stocks due to the coronavirus outbreak the holding company's cash pile grew to a high of $37 billion during the period as it continued to shy away from major acquisitions the company instead moved much of its cash reserves into u.s. treasuries while also limiting spending on stocks and share buybacks i want to bring steven back into the conversation pretty strong message there from warren buffett that the world has changed. there he is making a play on what's not going to work on a two to three-year view it begs the question to my mind, steve, perhaps you want to weigh in, how much more of a shakeup are we due to see in broader markets as investors picture themselves in what the world will look like more broadly in two to three years. >> i think you're right. what is extraordinary is warren buffett thought the market mechanism had done their job, they would be in value

territory. he clearly feels there's a way to go to the downside for this sector what is also quite worrying is he has $137 billion of cash, which he's sticking in places such as treasuries that he can't think of anywhere to put this extra money at this time despite this enormous schickout of the market warren buffett isn't trying to be a specialist, he's not trying to turn a quick profit, he's there for the longer term. if he's saying the airlines are not finding their value level at the moment, that's a worrying sign at least for that sector, maybe the broader market warren buffett is invested in the market he still has $760 billion, the vast amount in equities, insurance, apple, bank of america, a chocolate company he is there in the market. one shouldn't think he's lost faith in the market and the levels, but certain sectors he's saying, i can't be part of this for the foreseeable future going back one stage, any trader out there, and we're all looking at the markets and thought, is it worth hanging onto bad

trades, this is an example of what you do. do not fall in love with a trade, even if it's come down. many are tempted to double up on airlines warren buffett says, that's not how i do the things. you have to admire the bloke. >> you can imagine them sharing the airline assets at the height of the crisis. we are hearing from some u.s. main carriers they may have passengers wear masks. imagine doing that along haul and with a family as well. you can imagine how depressed demand might be for some leisure travel down the track. about the wassets, $137 billion they're sitting on, doesn't that tell you investors have hopes in a vaccine and treatment as dealing with phase one of a lockdown there's hopes of emerging from

the worst of the virus but what about the second and third round effects on the market and perhaps that's what long-term investors like warren buffett is looking at >> thank you for weighing in we will now get a quick check on u.s. futures before i hand you over to our colleagues stateside. last week we saw wall street end the week on the back foot with a selloff taking place on friday all 11 s&p 500 sectors ending in negative territory we're in for more losses dow jones set to open 240 points lower at the open. s&p 500 and nasdaq also poised for more losses. that's it for today's show thank you for watching i'm julianna tatelbaum warr "worldwide exchange" is coming up next.

it is 5:00 a.m. in new york city could it be sell in may and go away stock futures are lower again as the white house and warren buffett giving recent investors new reason to worry. topping that list, new tensions between washington and beijing amid the fallout from the pandemic the president reportedly weighing new tariffs and more. this as a u.s. intel report ais accusing china of covering up the severity of the initial outbreak in order to hoard supplies of its own. warren buffett dumping out of airlines an