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tv   Bloomberg Daybreak Australia  Bloomberg  April 20, 2020 6:00pm-7:00pm EDT

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shery: good evening from bloomberg's world headquarters. i'm shery ahn in new york. haidi: i'm haidi stroud-watts in sydney. welcome to daybreak asia. here are the top stories this hour. protesters calling for the u.s. to reopen and warned that could cause more harm. the world health organization says the worst of the virus is still to come. the pandemic is crippling demand to energy. oil collapses further into u.s. trading with west texas
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futures and negative territory for the first time on record. air travel is floundering with carriers slashing services and grounding planes. richard branson says the virgin operation may not survive. today was big story the crash in oil prices. we have the wti futures settling at -$37.63 per barrel. you are taking a look at june futures at the moment. this of course still at a volatile level, but the real question being is will it suffer the same fate? today, we saw the technical auditing exacerbating the price plunge away from the may futures contract ahead of the energy companies running out of place to store oil. u.s. futures jumping 3/10 of 1% after they pulled back from a six week high. quibi stocks under pressure. us now is
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what was interesting in today's session was it a virgins we saw in the market. we had the price of oil collapse but at the same time, really not a lot of movement when it comes to the u.s. stock market for the treasury market. why are we seeing such divergence in the markets and will this continue? jim: it is pretty dramatic anytime you see -- you have people paying to actually offload their oil. when you see a negative price for oil, that means in order to deliver that oil, you have to pay someone to take it. the headlines are obviously interesting around that phenomenon, but it did not really affect the overall curve. if you look at june, july, deliveries further out, the curve shifts. it is mainly a technical situation. some of the issues are they are running out of storage, so oil
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in the u.s., wti crude is based on delivery in oklahoma. they are physically running out of places to put the oil. if you go down there and get paid $25 to take the oil, put it in the swimming pool and sell it in june and make a $45 spread. there are some rumors about big bankruptcies among large energy traders, especially out of asia. there were some positions being liquidated. if you put those things together, that is why you saw this unprecedented move. if you look at the real economy, the decline of the price of oil in one contract for may, that does not tell you about demand. i don't think this is really a demand story. if you look at the curve, it will rebuild as the economy reopens. that is why you see the markets with this really dramatic selloff in oil prices. given that energy is
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still a chunk of the s&p 500, not to mention the u.s. economy, that the u.s. is now the largest oil producer, there's a lot of jobs depending on the sector, high-paying jobs. can there really be market stabilization and a sustained recovery if we don't have stable elation first in the oil market? jim: that is a really important question. if you go back 20 years, the u.s. was a big player in the energy market. if you look at the resurgence of manufacturing in the u.s. after the 2008-2009 recession, a lot of that resurgence was to build up the infrastructure to support the oil and gas industry in the u.s. that emerged out of this fracking phenomenon. the development of technology to make worthless tracts of land in north dakota and texas become the most valuable properties in the world. the problem is those tracts of land, that process to cost about 10 times as much of taking a barrel of oil out of saudi arabia. probably four to five times as
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much of extracting oil out of russia. that cost difference means unless the price of oil goes up in the u.s., the manufacturing sector as well as the energy sector are at risk. i think you might see some policies out of the administration, especially in an election year, that are going to prop up the price of oil. there has already been talked about energy tariffs, which means if oil cannot come into this country unless it comes at a certain price. that would be very beneficial to the energy producers and manufacturing sectors, which the president is in order to win his election. it will be hard to recover in the u.s. and the manufacturing sector unless you have higher energy prices, but i think we might see some help from the admin initiation because it is definitely a politically sensitive topic. whether you see that materializing, because we have been talking about when you get this close to the roll, it is better to look at the second month contracts which are holding up for june.
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is there any expectations that the supply and demand overhang and levels of inventory we are seeing at the moment is going to show any improvement by the time we get to that contract? jim: the real question is whether or not the june contract is going to collapse the same way the may contract did. at june contract settled 2043. the may contract settled at negative. there's a long way to go. what's interesting is that it does take time to turn off these wells. andwells are pumping feeding raw oil into the pipeline. and it iss going down taking time to shut production off. with that said, the fracking wells in the u.s., the energy sector in the u.s. is probably the most noble in the world. it is easier to take production off-line here then it would be in saudi arabia or russia, the older field that does not have the technology the u.s. has.
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between now and june, a, quite a bit of production will turn off and that will keep a similar scenario from happening when we get to the june settlement. interestingfind people who figure out how to store more oil and take advantage of the fact there probably won't be as much demand for the june oil as people may suspect today. if you do expand storage capacity and simultaneously expand, reduce the amount of oil showing up, that will keep what happened to the may contract from happening to the june contract. i don't think we will see this again anytime soon. this was a historic event, interesting event, one of the multi-standard deviation events we will talk about. as we think through what is possible in the energy market. it is not likely to affect the june contract. certainly interesting event to hear in asia. i want to get your thoughts on
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the broader bear market because even at the time we see recessionary conditions and expectations really jumping globally, we are seeing a number of markets jumping back into bull territory. i'm curious about -- a lot of people are looking at the different types of recession driven shots right now. it is really an event driven bear market. what does that mean in terms of implications for how you position your investment strategy? is the market fairly priced of the moment given that it is a shock to the system? jim: it is always impossible to predict the short-term. if you look at other event driven shots -- if you look at 2008-2009, that was a systemic problem that we had bid there was just too much debt in every level, especially household going over and borrowing too much money. that was systemic and you needed to wait when you push out that excess debt. if you look at an event driven
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or the russia1 debt default in the 90's, generally, the underlying economy was in pretty good shape before you went into the event which means taking the right precautions, resolving whatever negative effect, that leads to a relatively steep recovery. while we are not going to get the v-shaped recovery might have been hoping for at the beginning of this for a whole host of reasons, i think there's a reason to believe we are not going to see the low or touch the lows of this particular crisis as some analysts were suggesting. i think we have probably seen the worst from an equity market perspective. does not mean we will not see a lot more volatility. every headline that i see about it is negative. bull market case has to be we have half a quick reopening and see earnings they've allies. even though the next two quarters are going to be abysmal, we saw that in the u.s. this morning with jp
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morgan earnings. i have to believe this also low interest rate environment coupled with government stimulus is going to drive earnings growth in the third and fourth quarter. if that happens, think the bulls are right. the bear market case, we stay shut down with containment measures lasting through the summer. we have permanent changes to the growth rate in the u.s. and europe, which means even when people can go to restaurants, they decide not to. even when they decide to go to the office, they decide not to. ceos making decisions whether or not to invest in new factories, they are more hesitant with what capital to work. finally, the huge explosion of government debt is ultimately going to raise interest rates. with higher rates comes lower equity prices. the markets are fairly priced as is. if you really push me, i will tell you i think they are little stretched given the noise i see ahead of us. shery: despite the fact we
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continue to see pretty weak numbers on the economic front, we continue to go higher when it comes to equity prices. we have seen two weeks of gains already in the u.s. market so where do we go from here? and how much does it depend on how soon we can really get rid of this virus impact? jim: i think it really depends on whether or not we can live with it because we are not going to be able to get rid of the virus impact unless there is a medical breakthrough like we get a vaccine in the next six months as opposed to the next 12 to 18 months. or we find a credible way to treat the virus trade there has been a lot of fake news about." drugs. -- miracle drugs. we are going to have a slow reopening, 22 million people that are likely unemployed in the u.s. are not going to get their jobs back anytime soon. if it doesn't happen, it is very hard to see corporate earnings rebuild and actually get to a higher place than they were in
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the fourth quarter of 2019. i think it is difficult to see much more to the upside. if i look at to asia and i can see what's going on in china and korea and even what's going on in singapore and japan, but those countries are so further along in dealing with issues, especially china and korea who seem to have a very good approach to testing and tracing. which means the probability of a resurgence of the virus has declined quite a bit in those countries. in the u.s. and europe, we can look at those models to keep resurgence from occurring here, then i think we have a chance of stabilizing. but if we don't follow those approaches, we don't test and trace and don't keep the virus contained, it is very hard to see that the u.s. is going to be able to rebound even under the slower assumption that economists are putting forward. it is all about testing, tracing and doing what they have done in asia, bringing that here so we can reopen.
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europe is going to go before us but it will be very difficult. thank you so much for joining us. wealth enhancement group cio jim cahn with us. an update from the reserve bank of australia. interesting proposition to remove loan to value ratio restrictions. essentially measures of how much a bank and loan in terms of a mortgage property. at this point, there is a 20% to do banks are permitted no more than 5% of the rate residential mortgage lending to these high lvr loans. ones where you are seeing 20% or less than 20% of a deposit being provided. the rbnz is hoping to provide alleviation of pressures on banks proposing the removal of the valley restrictions in line with the financial stability mandate. this is going to be open to
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consultation. lots more to come. this is bloomberg. ♪
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haidi: you are watching daybreak australia. let's get to the first word headlines. the role health organization is warning against virus optimism saying the worst may be yet to come. as countries around the world began to discuss how and when to reopen their economies. he says the crisis is not over and the worst may still be yet to come, saying many politicians and advisors do not understand the nature or the danger of covid-19. us, the worst is yet ahead of us. that many people
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still don't understand.. , very developed, putting the wrong conclusions because they didn't know it. haidi: the city where the coronavirus was first reported is rejecting any role in spreading the infection around the world amid increasing speculation in the u.s. and elsewhere about the origins of the pandemic. wuhan's top disease laboratories denied the disease was liberally released, telling chinese state media that patient zero had no contact with its staff. singapore saw its highest number of virus cases, with infections topping 1000 for the first time. the figure was driven by illness among migrant workers and dormitories. indonesia is proposing urgent virus testing with restrictions as infections more than quadrupled since the start of april.
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the indonesian death toll is the highest in asia outside of china. shery: u.s. continues to see a slowing rate of increasing virus cases with the latest figures showing a rise of 2.7%. let's get an update on the situation from max, great to have you with us. we are seeing some southern states taking steps towards reopening their economies. what are we seeing across the united states? because it seems that cases, deaths diverge greatly among the west, east and southern states as well. statesah, so these are that are a little bit earlier in their curve and have tended to lag a bit in testing. part of it is they generally did than you haveess seen in the tightly packed areas like new york, washington or california. the question that we will get an
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answer to in a few weeks as they start to open up his whether they generally -- genuinely did get the operates under control or whether they are being too optimistic and working off of data that is not necessarily reliable given testing. we are seeing in some other countries that with a better health care infrastructure, a better test and trace program, we are still seeing resurgence is. we will definitely get a quick verdict on whether those states are making the right decision. max, testing and contracts theact tracing is something we have seen in asia, one of the first steps in mitigation strategies. reopening,es to there are lots of conversation tapping about whether there needs to be more health data available. there needs to be clearly the consensus that there needs to be immunity, antibody tests.
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are we any closer to seeing that rolled out in a widespread enough way where you can get confident that economies can reopen and people can go back out? beginnings,e especially in the united states. the thing about serology testing, it is very easy to understand the appeal. you find the full extent to which the virus is spread. you get a sense of who had it and may be commute -- immune. the thing we don't fully understand and won't for some time to come is the extent to which a positive serology test means you actually have acquired immunity. that is for two reasons. we are not quite sure how accurate these tests are. the fda's mandate has been sort about speed than validation. that is for good reason, you have to get testing out there but it does have uncertainty.
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the second level of uncertainty is we do not yet have a good sense of how -- whether people are vulnerable to reinfection. how much that risk varies between people and based on the depth of their infection. when you think about the fact that potentially the majority of people who contract the virus do not show symptoms, there is the possibility they may not have -- stuff we don't know yet. just underscores at this point in the pandemic how much there is still to be learned about the virus. max nisen in new york. plenty more to come on daybreak australia. this is bloomberg. ♪
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shery: a quick check of the latest business flash headlines. disney slumped after ubs and credit suisse lower the rating,
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saying its exposure to the coronavirus outweighs any gains from its move into video streaming. ubs says profitability will be impaired for longer than originally, foreseen while credit suisse noted disney's lack of operational visibility. disney theme parks are still shut down and is unclear when they may reopen. british billionaire richard branson is appealing for state help for his beleaguered airline and the u.k. in australia, saying they won't survive the coronavirus without it. branson says he is doing everything he can to keep virgin atlantic and virgin australia in the air but needs funds to write out the crisis. bresson says he will offer his caribbean island anchor as potential collateral. a lengthy list of companies declining to offer guidance, failing to give a fully revenue projection for the first time in years as it tries to assess the impact of the coronavirus. it says it cannot give a forecast until the pandemic recedes, despite the infection
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boosting demand for i.t. services. it says covid-19 will hit revenue by 5% to 10% this year. let's get a quick check of how the markets are trading. we are seeing wti june futures gaining 1.5%, holding about the $20 a barrel. this coming after wti may futures settled at -$37 a barrel, plummeting into the red. the lowest number in data going back to 1946. in this trading session, we have seen it recoup some of those losses and now trading at -$16 a barrel. when it comes to u.s. futures, gaining 2/10 of 1%. still above the 2800 level. we have seen u.s. stocks pulling back from the six weeks high. the resilience in the u.s. equity market has been pretty impressive given that we have seen this crash in oil prices. same thing when it goes to
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resilience in the treasuries market. small move up. that really applies to safety trade. this big divergence in markets. we are seeing kiwi stocks at the moment down 1/10 of 1%, haidi. we are just getting some breaking news crossing the bloomberg from bhp. the energy giant saying third quarter petroleum output reported just lower than estimates. equivalent of million barrels. we've got petroleum, iron ore and coal changed. guidance for copper unchanged as well. coal guidance also remaining pretty much unchanged, although it is saying the energy core production guidance is currently under review. we will be watching out for lines when it comes for capex and cost control. bhp saying the big iron ore development project is still on
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track. still not much in the way of changes in terms of business planning despite the impacts of covid-19 and that shutdown of china. lots more to come on that, but coming up, we will be discussing the wild swings and historic lunch we have seen in oil. the may contract turning negative for the first time. rebecca joins us next for her thoughts on whether this has implications for the june contract and what it means in terms of demand overhang. will opec be forced to do more? this is bloomberg. ♪
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>> we probably will not see this again in my lifetime but it is a reflection of how oversupplied the market is, how weak demand is and how tight the term structures have gotten. >> i think we will start to see at next year this coming to the forward,but going north american production will be impaired. >> really, it is a perfect storm for the oil producers out there and you are seeing that reflected in the prices today. >> an oil patch that is in this much trouble is not good for the u.s. economy. >> everybody will be looking and taking signals from what's happening to crude. and whether that is recovering. if it isn't, you may end up
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falling in may. shery: some of our guests speaking on the outlook for oil amid the unprecedented wipeout in a key segment of u.s. oil. taking a look at what oil prices are doing at the moment. if you take a look at may futures, we are seeing it in negative territory. really at the lowest level in data going back to 1946. we have fallen below -$30 a barrel. we have pared back some of those losses and now standing at -$16. june futures still holding steady, $21 a barrel level. the key question is will the june wti contract suffer the same fate as the may one? tomorrowne expiring and energy companies running out of places to store oil. let's bring in sophie for another look at the markets. what are you watching? sophie: oil very much and focus.
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as pointed out, we are seeing oil rebounding in trading, but oil contracts for june just thing above $20 a barrel. talking about $60 overnight given the weakness we are seeing in the physical market. the oil curve does remain and deep entangled with it not anticipating anytime soon. while investors are looking for potential allah see response -- potentially looking for a response. junk energy bonds with more downgrades likely in the space. increasingly, the focus will be on how oil companies will manage the next few months. jeffrey's says and makes the earnings season almost irrelevant for the sector. as you can see on the chart right here for asian energy players, the forecast has been slashed across sectors in the region, down 35% from the start of the year. we have been watching for an update in australia. haidi. haidi: intercontinental hotels
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triggered the demand by the coronavirus pandemic is worse than the state of the financial crisis or the aftermath of 9/11, the attacks on the u.s. the ceo told us how it is affecting the company's staff and their business model. >> we have a model where we are basically a franchise for most of the businesses. most hotels we have around the world are really small businesses. individually owned hotels may employ 15, 20, 50 people. 400,000 people working there are hotels around the world and many of those people today have been furloughed or have been made unemployed. thankfully, the u.s. passed the cares act and has the paycheck protection program which allows small businesses hopefully retain a lot of it's staff. at the corporate level, we have been cutting people's calories -- salaries, capital expenditures.
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to make sure we can get through this very challenging time. >> having said that and having business, how has that protected you as a company overall from falling into a deeper crisis? keith: really, we were some of the less leverage companies out there in this industry since we don't own a lot of assets, we have a lot of exposure. our focus has really been on customers, colleagues and owners, and how do we help all those individual stakeholders get through this. customers, it has been about giving them flexibility on bookings. with our colleagues, it is helping them access the programs around the world, whether it is a program here in the u.k. where the government is funding up to 80% of someone's pay up to 2500 pounds. accessing the federal employment and local employment in the u.s. with owners accessing the small business loans that turned into grants. very focused on that because those are the people that are being the hardest impacted.
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we know by looking after all those people and helping them get through this, we can come out of this a stronger and healthier business. but again, people talk about challenging. i have been through the financial crisis, i have been through 9/11 then we have never seen demand drop like this. i think the industry will have to think about how do we work with government and work as an industry to help businesses stay vibrant during this timeframe, reopen and then see what the new normal looks like going forward. >> we want to talk about the new normal for sure but one thing i want to ask you about before we get too far away from it is what the experience of your owners and your colleagues has been in terms of accessing those small business loans. because we are seeing varying reports about availability, we have heard a little bit of controversy of who is getting it, who is not. what is coming back to you as your colleagues report in? keith: let me start by saying for the record, we have not
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received any funds from the paycheck protection program, full stop. we have been focused there. we have been hosting webinars from day one helping our partners get to these programs and having good success. a number of wonderful stories about hotels, holiday inn express that was closed was able to access the program and then reopen and hire the staff back. it has not been perfect, clearly. but you think about the small business association, the process is normally about $30 billion a year. they have done $300 billion in a month. real testament they're trying to help out as many businesses as they can. one of the things we have been saying to the government is great first step, but these programs will have to expand and be extended because this is not going to be over in a month. businesses will not go back to normal tomorrow. we had to think about the long-term health and stability of an industry. one in 10 jobs globally and in the u.s. is in the sector. that's a lot of people we need
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to look after and a lot of small businesses who buy from local vendors, hire local construction workers to build these hotels. it is the interconnectedness of our economy we have to recognize. carol: does the government understand that? do you think they understand when you get on the other side what really needs to be done? keith: i think so. i had a couple of calls with the u.s. that. we have been engaging with the white house, the senate. they really do understand they have to move quickly. they do seem to understand they are going to have to do more. hopefully, they will be able to get the next part of the package out. i think it is the responsibility of business to help educate them on how this is unfolding, the impeccable have more broadly, and how we are part of the solution. we are trying to help out as much as we possibly can. interdict --as the intercontinental hotels group ceo keith barr speaking earlier to bloomberg radio. let's get more on the historic
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move of the oil prices and the effect, let's bring in senior energy trader rebecca babin. great to have you. is this just an extreme, but at the end of it a technical glitch because we are so close to the rollover of the may contract? rebecca: so, it is in some ways an extreme and technical glitch, but it is also a huge red flag for spec players in the market who forget the fact that we are in a physically constrained commodity market, where storage and logistical bottlenecks really can drive prices negative. i think it will serve as a little bit of a begin and a warning -- beacon and a warning looking how aggressive and how negative wti traded this morning to what can happen when storage capacity really starts to get filled up. so, i do think there is a very aspect of this that is
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technical. but there is a fundamental factor at play in terms of how we got here. we got here through unprecedented demand drops and unprecedented supply increase out of saudi arabia. so, there was a fundamental component that certainly played into this. but when we look at june at this point, it is still trading $20, not negative. -$37 we sawsible wti trade at today was the technical impact in the short-term. what is the expectation that the fundamentals of the supply overhang will improve? yes, china has reopened. yes, perhaps by the next contract, we might see some reopening in some parts of the world but do you expect demand will have picked up significantly and do you expect that the production and output would have weighed more,
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particularly if we have an inevitable reduction on the u.s. shale side? rebecca: i think the expectation is that demand flat lines between now and the june -- may 21. i don't think there's a huge expectation we see demand explode higher but i think we start to see a decelerate from just coming off extremely, extremely aggressively. on the output side, we will see the readthrough of some shut-ins. i am seeing estimates that look at 20% to 25% of u.s. production could come off over the next month. that is 3 million to 4 million barrels, i significant amount. that would probably put us in a place where june could be trading in the more equilibria status and at least provide some stability to the commodity and take some of the extreme volatility out of the daily trading. shery: happening right now, president trump giving his daily
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presser, right now saying that negative oil prices are affecting financial, not the oil situation. this is largely a financial squeeze, according to the president, saying that the decline in oil prices are very short-term. we have seen the president really put pressure on opec-plus to cut production, but that we are way behind the curve. if so, could we see a rebound potentially in the next futures contract in the next few months? rebecca: i think his comments are obviously in response to the fact this is an unprecedented move to seed negative wti prices. it certainly takes people by surprise. and there is an aspect of it that is short-term. there are some things he could do in the meantime to kind of support the commodity. he was not able to push that through on the last stimulus bill.
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if he can negotiate some additional production cuts that may become out of texas. we are seeing the texas railroad commission vote on potentially pro rationing some u.s. production. there are a few things that could help in the near term, but the real thing that's going to help crude recover over the long-term is the demand side. shery: president trump earlier today saying the u.s. will put as much as 75 million barrels into the national petroleum reserve. you mentioned the texas railroad commission on pro-russian tomorrow. what are your expectations there and do they even have the resources to carry this out? rebecca: that is an excellent question. expectations are low that they will be able to pass it. there is three commissioners. one is very vocally in favor of pro-russian -- ration, but two ar e undecided, but leaning
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negative due to headlines. it is a low probability, but after today's price action, but maybe they will think they don't want to see this type of volatility again. in terms of enforcing it and putting it into place, think that is very tricky. they have done it in the 1970's. they have a mechanism in place, but i don't think it is going to be fast enough to counteract this very imminent demand which is happening at playing out in real time today. shery: senior energy trader rebecca babin, thank. coming up next, coronavirus cases and deaths continue to slow in europe as governments work to reopened their economy. worst of. warns the the outbreak is yet to come. this is bloomberg. ♪
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haidi: the world health organization is warning against virus optimism, saying the worst is yet to come. let's get more on the coronavirus outbreak with tom mackenzie who joins us now from beijing. the we have seen, i guess, caution out of beijing given there have been ways of subsequent of infections.
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what is the caution we are now hearing from the who? tom: absolutely. we have heard from the well he world health organization director who said the worst is coming to a head. many people still don't understand this disease and has warned about the spread in africa. he also for the first time really compared it to the spanish flu of 1918 and 1919 which killed up to 100 million people. this is coming at a time where we have seen sectors pick up again in some parts of asia. concert in china about a potential second wave. in europe as well and some parts of this region, some countries looking to ease those lockdowns. it seems like it is a cautionary note from the general of the world health organization. he also pushed back against u.s. claims that they were not transparent at the beginning of the operate.
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pointing out that cdc officials in the u.s. have talked to the world health organization since the beginning. again, this comes amid continuing criticism from the trump administration about how this organization handled the operate. shery: what about progress some countries are making in easing their lockdowns? what are we seeing? tom: particularly in europe, there is growing pressure from the business lobby as the rate of infections slows to some extent and moderates. there is that pressure to ease some of the lockdown. in the u.k., boris johnson is actually resisting some of that pressure to ease the coronavirus lockdown where the economy has come to a grinding halt. he's concerned about that second wave, according to his spokesman. there has been a surge in welfare applications and that is something officials in the u.k. will be cognizant about.
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they also come under pressure about how they handled the disease. there has been some very negative coverage in the press as well. johnson's team will be digesting. in germany, angela merkel is warning against rushing, even a small shops open on monday. the option to reimpose restrictions does remain. in italy, some good news. reporting the fewest new virus cases in nearly six weeks. 256 cases versus 3000 a day earlier. tragically, italy has registered more than 24,000 deaths. in terms of what the government of italy is saying in terms of the lockdown, they say hospitals are better equipped, but they will not ease restrictions until after may 4. haidi: in the meantime, the finger-pointing and speculation continues into the origins of
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the virus. china has denied its link to wuahn. what exactly have they been refuting? tom: we heard a profile from the director, the wuhan national fire and safety lab. fertilityon state that his facility had anything to do with spreading the coronavirus. absolutely no way it originated in his institute, he said. as i said, this is the most high-profile in months. speculation about have this disease may have came from animals into humans. some republicans in the u.s. have pushed the idea that the virus originated from the lab and trump himself projecting that china was knowingly responsible and will face consequences if it was. shery: tom mackenzie in beijing. coming up, we will discuss the future for virgin australia amid reports it is heading for voluntary administration.
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aviation consultant joins us next. this is bloomberg. ♪
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haidi: the virgin australia board has signed off on placing the airline into voluntary administration. of $63 hour appeal million from the australian government to buy out what was
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rejected. we are joined by strategic aviation solutions chair neil. great to have you with us. what is your best scenario on what happens from here given that we continue to see this government versus virgin standoff? neil: what will happen is that 90% overseas shareholders declared they were not prepared to put any more funds into the company, it was pretty much well-written from administration was going to be the only route to allow time to talk to other investors. because the government said we've got a shareholder base here of billionaires and governments who are not prepared to invest in the airline. the valuation funds were not. the only source was government and they are investing in industries to be saved, not companies.
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haidi: just as we started speaking to give, the announcement of virgin australia will recapitalize its business. version saying the decision is being made to secure the future of the group. no surprises there that this is the point that we have reached with virgin. i'm wondering -- we heard from the australian finance minister saying that virgin has an opportunity to restructure, recapitalize and kind of rejuvenate its business. we are just getting this line coming through on the bloomberg -- breaking news, virgin australia collapsing as the airline calling in administrators. i'm sort of harking back to what we saw. is this something that the government would allow to happen if then wanted came to that, given we know how important it is to the government, for consumers to have a competitive aviation industry here? neil: absolutely.
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the government has no role in this one. when the shareholders who have money and the valuation funds to represent the money every year all say that they don't want to put in one sent, how could a government used taxpayer money to try to prop up something that is clearly a badly run business that has accumulated over $1 billion in losses in about $23rs on billion of turnover and not paid any tax? shery: virgin australia saying it has hired deloitte administrators. velocity frequent fliers not in the administration and they will continue to operate scheduled fights. flights. explain to us how this would work. what is the process going to look like? neil: the process in australia and other states is the
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management is retained by deloitte who are running the company. while it says it is running services, these services for the next eight weeks are underwritten by the australian government. these are underwritten services that both virgin are flying for essential workers. not leisure, as we still have all of our lockdowns throughout all the states. it is breathing time, but there is no chance that virgin will come back. a company that has had so many strategic poor decisions. they were going into expansion when they didn't have money in the bank. demise, the debt was about 20% of the debt of what is in virgin. shery: what the story had been very much different if it was under threat and what does it
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mean as you have one dominant airline in the industry? just quickly come if you can. neil: wiki writing this touring that this is going to be enough of the. we are consumed by laws in this country and the oversight will make sure you don't go back to the anset days. yes, there will be an increasing fear, but we went back to fear level that were 15 and 20 years old. in today's cost structures, that is not achievable. neil hansford, thank you very much, strategic aviation solutions chairman. coming up the next hour, one of australia's most experienced long short equity managers joining us to discuss how to identify winners and losers in the markets. sage capital cio's sean fenton will be about in about a half-hour. plenty more on daybreak: asia. this is bloomberg. ♪
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shery: welcome to "daybreak asia ." i am shery ahn in new york. i am haidi stroud-watts in sydney. we are counting you down to asia's major market opens. let's get you our top headlines this hour and protesters are calling for the u.s. to reopen. they warned that might cause even more harm. the world health organization says the worst of the virus is still to come. the pandemic is crippling demand for energy. oil recovered from a


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