Transcripts For BLOOMBERG Bloomberg Go 20160908

Lot of political crosswinds depending on which way they choose to do it. Jonathan a big story for us in fx volatility as well. David the big story comes up in just about 45 minutes from now. The ecb will be announcing its latest Monetary Policy decision. We will break that down when it happens. Well bring you to Mario Draghis News Conference. First, lets take a look at those markets. Jonathan a look at the market futures. In europe, it is a decent session with the ftse up. The dax is marginally negative. It is sitting very close to the january 2016 high. No drama and the market. No drama in the fx market, that is the story. A boring currency market implied volatility. It is approaching new load for the year. The boring one so far as the euro dollar currency cross. It is stable and stronger today. We have been in a very tight range. We trade stronger ahead of draghi. Four days of gains for crude. A 46 and 4627. In the bond market, we come in at basis points to 2. 26 . Fulltime year bonds four times ahead of druggie. Draghi. David it is quite a story in spain. Lets get back now to our big story that is the ecb. Our colleague Caroline Hyde is covering the decision from frankfurt where mario draghi will be holding his News Conference. Give us a sense what are the options available to him today . Caroline 80 economist to think he could pull the trigger sometime this year. About half think it could be s s today. That would be notably extended quantitive easing. Going past march 2017, past 1. 7 trillion euros of bond buying to extend that to try to lift that inflation figure to go up. Trying tos personal growth. Interestingly, abb will see a downgrade of some projections coming up to terms of 2017 growth prospects. Howeally is a question of he can make his life easier. How can he keep buying 80 billion euros worth of debt per month. Theres plenty of selfimposed rules that actually make many of the bonds ineligible . David we have various options about raising the limit of what he can buy. What of the political consequences he has available to him . Jonathan the most politically palatable option would be to be a third of more than each individual bond issued. Potentially, they moved to 50 . They have already raised at that once. Stomached by the likes of germany even though it does make the ecb a powerful bond owner. The number two possibility which could be it could be worthwhile considering the deposit rate. Theme rate you cant buy that are less than that. Farewell 17 of the german debt market, 30 of all euros on sovereign debt. That could certainly make their lives easier. Will it just crash yei crush yields lower . Notably, the socalled t. Capital key. Up italian debt based on the size of its economy, german debt based on the site of its economy. They can have more spanish and italian. Is that just moving into monetary financing of debt . Is that letting them get away with it . David thank you so much. Were coming back to caroline regularly to the program as we have the announcement of a press conference. That sets the stage for the program. Now lets bring in a global chief economist from the city of london. It is great to have you with us on the program. I want to begin with the forecast. A series of downgrades to inflation. You can put that up on the screen. Bes year, it is likely to seen for 2017 and 2018. The question is whether this is still the ecbs job. You dont so Much Research on the output gap. It hasnt been the lack of Monetary Policy accommodation it the is itn draghis job . It is, because his job is to to getnflation to inflation to 2 . If do it with the headline inflation number which is now also impacted by all of this. This is a difficult job. There was help coming up. The fiscal side is down. Jonathan it is starting to ease up a bit but the pressure is on him once again. I wonder what he can do and what is left on the table. Were talking about an extension of qe. Draghi ever said that was the end date. What do you expect . At the the try to avoid it today. I would be surprised if they avoid say anything i post march the prepared statement. I am sure that they would ask about it. I dont know how they handle it apart from saying that they are probably continuing somewhere. The fact is, i think there was a plausible argument to be made that there is not a whole lot more the ecb can, or should do. You dont want to say they should stop. You have monetary tightening a bit certain not ecb should be doing. They have to find a way of smoothing after march. Jonathan it will be tricky. To make a subtle point of subtles can we make a point of politics. how significant is that for the frankfurt bank. I dont think it is that important to be honest with you. There is broad support for the ecb in the policy community. Urse, lobbyistso including germany and other places who are suffering. Banks suffer also in this game. Helps same time, if it the economy will benefit from it down the line. It is got no bit tougher in germany lately. Is supportive of the ecb. The speaker is moved to bit. I wouldnt be surprised if they ecbd quite like to see the take the foot off the accelerator little bit. Jonathan another question is whether not the bill changes their headline anytime soon. A differentat is one altogether. You could however politics devolve in germany altogether. In more perspective and others have. Others have said this is a warning sign for angela merkel. In your view it is not a representation of the water germany. Are you worried about this shift to the right as many are in europe . No, iam much more worried about it in america. It is conceivable that trump wins the election. That is seriously dangerous for markets. There is no realistic probability in europe than any of the super right or nationalist parties get to power. I cant see it. The worst case in germany you get is that the mainline party are shifting out to a dress some issues like migration. Yesterday, it is on a back step now and in a reverse unfortunately. Economist like it but it is the political reality. It is not, to my best assessment, not any place where there is any measurable probability of the major countries getting a nationalistic government. Direct linkere a between what the ecb and other Central Banks have been doing with respect to Monetary Policy and what you are talking about with the retrenchment on globalization . What theyre showing us a they can get asset values up. That tends to increase the disaffection with globalization postup should Central Banks be concerned about that problem . Yeah, they should. But they didnt really have an alternative. The antiglobalization movement is much greater and more complicated than Monetary Policy for sure. The Central Banks didnt have much of a choice because they dont have a mechanism or you can help the poorest of society. From thehey do it is asset prices first of that is unfortunate in this setting. It comes back to the policymakers, the politicians of could have done a version helicopter money and then fiscal expansion and help the weaker in society to what happened what have you. Toy couldve played that fiscal policy. That would have been better policy. We didnt get that. That is not the Central Banks fault it is the politicians fault. Erik will be sticking with us. In europe, stocks are stable, features pretty stable. A few things i want to get up to speed on. Start with apple, day two after the introduction of the newest iphone, the iphone seven which features getting rid of the headphone jack. The Wireless Headphones the company introduced. Shares are down among many folks analystghing in is an at wells fargo who is downgrading the stock saying the positives are largely known. It will be effective the a neutral market performer. If apple moves laughs less today that would be unusual compared with recent history. We went back and looked over the appleear period since moved its Product Introduction to the fall. There is not a clear trend except that the day to move has always been larger in percentage terms. They try to analyze what the changes will mean. Seenis the actually have over the past several years. Of course, as we alluded to, nintendo was the big mover on the back of the apple announcement. Mario brothers would be coming to the apple iphone. That is another verification of nintendos strategy to monetize their product on mobile devices. The stock was up 13 . It is not more than 80 since nintendo go started catching fire earlier in the summer. The other stock were watching his micro focus. It is a u. K. Company combining some of the Software Asset with hewlettpackard enterprises. The ceo has been slimming down that company. You can see micro focus shares are up 17 . Hp shares are down a little bit. In contrast with the jonathan coming up, the cost of borrowing in hong kong hits a sevenmonth high. We talked china, next. In less than 30 minutes, 35 minutes to be precise the ecb will release their decision on Monetary Policy. Just how likely is mario draghi to expand his program . More coming up next from new york city. Outd china trade data just shows both import and export rising. The question is, whether these point towards a strengthening economy or are the result of a cheaper rmb. Now here to give us the strength of china as an engine for global growth. Which is it, is this a matter of adjusting the value of the yuan, or real strengthen the chinese economy . Is littleme there doubt that the chinese economy is picking up steam again. Theere down for a time, last few quarters thing to put the better. The latest trade members are in line numbers are in line with that. The business on the Interest Rates i think is silly speculation. Speculators have this idea that after the g20 you would have a different evaluation or a yuan move down. We dont think that is likely. Our forecast is for the yuan to stay. I think what you are seeing is the central bank fighting that speculative attack. David the story was a pretty notable jump up in the cost of borrowing money overnight for banks in hong kong. Is that because the pboc is intervening to try to affect the liquidity of offshore yuan . Erik i dont know that. Were not close enough to know exactly what theyre doing. It would be a good guess. Typical with a lot of levels on the system not only but what the chinese can do is to call the big banks and tell them to slow down the lending numbers of they want in certain areas. I think it is the Central Banks and how exactly to do it i dont know. And the fact of the placings the need for Chinese Companies to pay back loans and dollars to go offshore. How big a factor is that in what is happening . Theres a longerterm structural issue. You talk about the speculative attack is also the speculative speculation that when the fed hikes. That is noise in the system. On the structural side there is pressurental longterm on the chinese in the sense that a lot of money was looking for assets offshore. That may not be in line with what the government wants. David put aside the noise and get back to the signals. What is the signal youre looking at to determine what you say is the Chinese Government im sorry, the chinese economy picking back up again. Equivalentat the pmi in the retail numbers, we like trade numbers quite a bit. It is one of those that youre pretty sure theyre not cheating on. We have these leading indicators were you put a dozen indicators together from trade in retail a decent there is reason to think that we are moving slightly higher. Drop in growth rate is come to an end. It is slightly higher again. David erik, thank you very much. Jonathan fantastic to have him on the program. Timup, we talked to cook says this is the best iphone ever made. We look at the new product that is coming up next. From new york city this is bloomberg. David yesterday, it finally happened. The apple Product Announcement we were all waiting for. Did it deliver what apple needs to get its momentum back . Buy recommendation on apple. It is a top rated apple analyst on the board. Good to have you here. Answer the question, didnt get done what tim cook needed it to . At least for now, to deliver on the expectations. It was an iphone that had improvements. What they have done with this launch is created some different releases. E different difference can move the product. David everything apart from the jack, which is controversial, are they just catching up with samsung . Absolutely. Gotten to a point in this industry where the technology has gotten where all these theyre moving 36 months behind each other. Is of what were seeing at some point, appling to deliver on some big step up and functionality. This market the way we look at it it is a market which is going to become david lets bring up and look at the analyst ratings. Buy, throughuy, 2016. Envelope cut collation, looking at a 12 upside. What gets us there . It is between the now in the yearend it will be positive data points. As we look at this quarter you would get about eight days of ship ends. Uplift. S a natural next quarterly will expand teacher vision much faster. Between now and december we without positive news in terms of the iphone seven units. That can get us closer to our price target. David if you are tim cook, you have to get every nickel and dime until the next release next year. What about geography . Are there markets they can pursue more aggressively . Done aink they have pretty good job expansion wise. At this point, india is one of the markets there been focused on. David are they way overpriced for india . Absolutely. They need to come up with forms at a lower price point. In terms of geographic expansion, they need to come up with a much lower price form. David so, you are confident in your target price. You think you will get to that point. What multiple do you need to do to get there . Times withnine or 10 the cash flow. That can get us to around 120. When it comes to be sentiment on the stock it is fairly muted. At this point, expectations are not that high either. David thank you so much. The securities analysts on apple. Jonathan expectations in the market either unchanged. Coming up, this is the most boring trade. The flood of Central Bank Cash with more to come. It is crushed volatility in the eurodollar cross. Will that finally end today . What has happened to the price action . We will discuss his recount down to an ecb decision 19 minutes away. Full coverage right here on bloomberg. It is 7 30 on wall street. He was what you need to know this hour. Mario draghi and the European Central bank make a Monetary Policy decision. Investors are waiting to see the ecb will expand its Quantitative Easing Program to kickstart a lackluster economy. We have full coverage including the News Conference right here on bloomberg go. Japans economy expanded more than the government initially reported. 7 , that was higher than the initial reading. Hewlettpackard is combined think some assets with micro focus international. It is valued at 8. 8 billion. It is part of the chief executives efforts to slim down the u. S. Companys operations. That is what you need to know this hour. Jonathan as a market participant, if you had a decision to mario draghi or janet yellen i think we would all take the dinner date with the lady herself. At that shouldnt take any drama away from the potential of a move today first of this is how we are set up in the market. The stock is firmer in europe. The dax just pulling back. The fx market is interesting one. The ecb is on so much for the last 24 months in terms of Monetary Policy. A credit easing program, qe, the whole shebang. Stable,lar has been so it goes across the whole fx market for the lows for 2016. What will give the price action as we approach that monitor policy decision by one of the big chiefs. In the bond market this is the action for you. Not much on treasuries. Move the most interesting is the ecb buying a ton of debt. It yields plunging to new record lows. He said that once again in spain. David the spain story is extraordinary. You can borrow money at that low rate from spain. That is extraordinary. We turn to politics back here in the United States. There is a new bloomberg poll trumpday shows donald leading Hillary Clinton among white voters who have a High School Diploma or less. That is 35 to 33 . At Hillary Clinton overwhelming aad in minorities gives her lead in less educated voters overall. Now, the Senior Executive editor of government and politics from washington. Marty knows politics. Tell us about how significant this really is for donald trump and Hillary Clinton. Marty it is significant. It does bring up the volatilities of donald trump among less educated voters. Leadrys extraordinary among minorities, it is really 10 . S 7 10 87 david i wasnt surprised he was leading among White High School educated and less people. He actually is less ahead in that group than mitt romney was four years ago. That was extraordinary. Is for Percentage Points behind how romney performed with that group. The market of error is four percentage point on this poll. It is clearly is not doing nearly as well as romney was among that group. David there was some news out last night, i program there a program with donald trump and Hillary Clinton talking about commander in chief. One the things they both addressed is how they would approach isis. We will play a little bit about mr. Trumps approach to isis. When i come up with a plan that i like and i may love of the generals come back with. You have your own plan . I have, but i dont want to i have a substantial chance of winning. We are going to make America Great again. I have a substantial chance of winning. David we have the slogan in there at the end. He insisted he will beat isis. We dont know much about what that plan is. He doesnt seem willing to tell us. Somethingprobably has in his mind. He is keeping his options open. I make this point, what happens when you take that off of office can change radically from what officepose oath of can change radically from what you propose before. Once you take office, you have to listen to all opinions and make a call. Who knows what he will do. David are we seeing an evolution of mr. Trump . He is not quite as didactic or emphatic, hes keeping options open . Marty i think Hillary Clinton thinks donald trump is all in terms of being reckless. That term a lot. At the same time, donald trump is trying to paint Hillary Clinton as reckless. You have to take your pick. Had thisllary clinton to say about what she would do with respect to isis. Theyre not putting ground ever again. Iraq we are not putting ground should into syria. We will defeat isis without committing american Ground Troops. David that is a pretty did narrative declarative statement. Can she have a plan without the possibility of Ground Troops . Marty she can say she does. Circumstances can change. I found it surprising that she boxed yourself in that way. It reminded me of no new taxes. You have to wait and see what happens when you get into office. If russia proposes a plan, will she say im not doing that . It is rather interesting. David marty, thank you very much for joining us. Lets turn to the big event today. Ecb Monetary Policy minutes away looking at the euro. That is a stronger euro session. It has been dead boring for global fx. For thisring a low year. Dramatically decreasing since the brexit vote back in june. Joining us now is the head of ethic strategy. Touring it the most currency trade on the planet. When does this get interesting again . I agree that it is got boring. Really, the ecb we think they will deliver an extension of qe today. It will be an extension of time. It will not change. The ability of the ecb and the lever on fx has changed. That is the fed now. Jonathan the test for every monitor policy decision was get up draghi could here. We all expect a sixmonth extension whether it comes in this meeting or in december. Does the president of the ecb still need to play that game . Think he is under less pressure than were used to two overdeliver. The year on year change is flat. It is not up against the big inflationary headwind from fx. He is not under pressure to overdeliver. We dont think needs to knock the cover off the ball this time. David he is having trouble getting up to the 2 number. What he has done so far hasnt gotten there. Is he going tore be under particularly at the press Conference Today to say how he will make that number . That will obviously be a question. Shockhe ability for qe to and awe the market and make a big impact on Inflation Expectations when the fed first rolled it out is less. There was something he can do about that. Fiesta say we will continue to do what we are doing until we get back there. Jonathan do you think we have to move away from the juvenile word that they have to do more . Do you think you need to get more targeted and look at the existing programs and the competition of it composition of it. Tried to get some to the bank of japan and governor kuroda . Role for those credit easing type policies as well. The big picture of topdown policy is still the main weapon in the toolkit. I think he will still emphasize that. We think we see some changes in the program to accommodate the scarcity problems we have had increasingly. Months thend by six market needs to understand that there will be enough paper for you to buy over the whole period. They may make changes to how they allocate or how low they can buy yields, things like that. David we talk a lot about this quantitative easing. When it came out we thought it was paying banks to make new loans. Do we have a report card on whether that is actually having an effect in the marketplace . Get some preliminary indication, maybe he can give us some idea of if this is beginning to have an effect. By nature, that will play out over time. Global fx, lets wrap things up where we started. The lack of it, it is not great for you as a market participant. It is pretty boring. There is not much price action. For the global economy, is that a good thing . I think it is not bad unless it is reflecting complacency or witness pricing. Jonathan is it . Cases, the market is underpricing the scope for a big dollar move. If the fed were delivered tightening this year. I think these levels of implied mean there are opportunities if you think the market is mispricing. Jonathan what is it, dollar upside . That is our view. We think the fed can still deliver. Were running out of time to move market expectations. We think the Economic Data warrants it. Jonathan if you want to play the dollar upside story, which currency cross . How do you play it . We think the position is most retched is the dollaryen. We think the market is also long aussie dollar. Be there likely to biggest movers if we get an adjustment in expectations. The adjustment is not that big. We think with the fed tightening, we are looking for an explosive collapse. Arent looking for an explosive collapse. Jonathan coming up, one trillion euros and counting. Resident draghi could extend his line of credit to the markets for stuff that is next, live in frankfurt. Avid this is bloomberg , coming of chief global strategist joins us on set to discuss the ecb decision. Jonathan moments away from an ecb Rate Decision. Lets check in on the market. Remarkably resilient coming into this. It is a stop the dollar session on all the spaces. This is how we trade, up by 0. 14 . Rate expected to remain unchanged on our survey. Rate is expected to stay, the deposit facility rate expected to remain at 40 basis points. The Asset Purchase Program running expected to remain unchanged. A bigd date for qe is focus as well. Will we get an extension . Will they have to tweak the Bond Buying Program . It is 45 minutes past the hour and the Rate Decision comes out in line with expectations, the refinancing rate remains at 0 . Remained at 40 basis points. A marginal Lending Facility remains unchanged. The back of that also remaining unchanged. The ecb saying qe will run through march 2017 or beyond if needed. It will run until inflation passes consistent with its a goal. They will reaffirm the plan to run qe2 march 2017 all or beyond if needed. No sign of an extension just yet. Maybe it is in the language itself. Reaffirming the plan to run qe two march 2017 to march 2017. Theres a widely held assumption that they would have to tweak the rules that qe program. Lets check in on the market chowing . Shall we . Lets go to the others and get to the bond market for you. The german tenure now up i three basis points. Action the bond market the day was on the periphery, an alltime low of yields in spain. Some of those gains just double little bit higher. So, no big changes at the ecb. The will be saw, i want to bring in a team live from frankfurt. Ahead ofaroline hyde the decision in london. Also Richard Jones the bloomberg first word. Rates were expected to remain unchanged. We wonder whether we would get a firm signal from president draghi today of an extension or if they would widen the assets. What do you make of what you heard . Maybe the fact that there was little volatility in the market is allowing him some breathing space. Dryants to keep his powder until he is seeing some risk a version. At the moment the data hasnt looked very pretty. A 19 month low for eurozone inflation still failing paleing in significant. To do economists we spoke think at some point we will see an extension of quantitative easing this year. Not this time around. Once again, the want to see the devil is in the details. Will the outline whether he will indeed start to encapsulate more bonds within the buying . That is what we are seeing a selloff. So far, they will not allowing them to buy below that deposit rate. Richard, it is a juvenile debate isnt it . There was no language saying this will end in march 2017. It is to run qe until 2017 or beyond if needed. The widely held consensus is it is needed. The question is if they have to widen the pool of assets. Richard mr. Draghi has done this previously. In october of last year he set up deposit rate cuts that came in december. Caroline is onto something with the devil might be in the details. This comes closely because he may try to foreshadow what is coming in the coming months. Really, this is one of the more Important Press conferences it had for quite some time. Jonathan an important News Conference, what do you the most dominant question will be regarding the ecb must Monetary Policy . Given the importance of elections in the referendum in italy, what are your thoughts . Caroline they will want to know what are the key risks for him. Is it brexit, or were secondly overblown . Is it the italian referendum, the italian banking crisis . Or indeed, is the spanish election. Will he make his life easier in terms of what he can buy. The selfimposed rules for the buying per month. What i want to ask is, in terms of negative rates, what about Exchange Traded funds . What about the stock market . Would he consider going there . Who does he follow . Is it the fed to come or the bank of japan . David the volatility, whether that gives you more flexibility, is this the cat chasing its tail . Is the reason we are not seeing volatility is because the Central Banks have become so dominant . Right now, market so to expect them to do anything. It is a self of filling prophecy. Richard i think that is very true, david. Dominant in so many different asset classes. I think that is one of the things that they really damp down volatility. If you look at the stop and start we have had at the federal reserve. Butistically, many market is it that are saying it doesnt look like they will hike. It doesnt look like we get anything from the ecb today. The coming months, it will perhaps be something that is forthcoming. Realistically, the trading horizons are so short term because the Central Banks are so involved with these markets. Jonathan i spoke to ecb governor councilmember just a couple of months ago who basically said the importance is diminished somewhat over the last couple of years. Do you buy that . But this offense, is their realization of the euro is not what it once was for the ecb . Something between the 105 and 115 range in eurodollar is probably something that the ecb is comfortable with. Much higher than that, it little less comfortable. Near the highest levels we have seen since january of 2015. A lot of that has to do with the fact that the pound has weakened since the referendum. It will be interesting to see once brexit actually happens, it is still only a theoretical thing. We havent seen any of the details. Once we see that, it will be interesting to see what it will do to the trading basis. David thank you very much to both of our bloomberg colleagues. Up,than fantastic, coming some European Companies are getting paid we go to this account you down to the ecb News Conference. We are 38 minutes away, this is bloomberg. Jonathan this is bloomberg. It is time for off the charts. The ecb is left rates unchanged. There was a considerable Bond Buying Program. They are buying credit in europe as well. Draghi is creating a monster credit bubble and doesnt seem to care. That seems to be his goal. I will tell you what we mean by that. He wants to have a borrowing cost to weaken and show the u. S. Yield compared with europe. Europe yielding the least relative to the u. S. Almost on record. You see this chart with u. S. Double rated bonds trading far above where european credit is trading. European companies, that is great. This market and tap it cheaply. Investors have been buying here. Lets pick up another chart. I will talk you to this. This is corporate issuance annually in europe. What youre seeing is in 2016 alltime record tense 1999 when the euro was introduced in europe. Fantastic news, they can to tap the market cheaply. Heres the chart and wants to be into, siemens in the bond market with negative yields. That is one thing, one story. Look at this white line, that is junk rated. Shortterm debt, with a negative yield at one point today. Much is your percent custom you are a junk rated company and getting paid to borrow. David, draghi might want more issuance but the question is, is that of Financial Stability risk . David that is exactly right, coming up we had overdue frankfurt for Mario Draghis press conference. Unchanged, the ecb its Sales Program intact and will run qb run qe into march 2017. Jon apple changes the way people listen to music on the new iphone. The new product released next. And is the pboc in the market . High fromsevenyear it speculation of central bank intervention. Welcome to the second hour of bloomberg with jonathan ferro. Alix steel is off. No big surprise ecb decision, but it puts more decision in a press conference. Jon to widen the pull of available assets. The question remains, if they want to go beyond 2017 and march in march, how do you do it at a rate of 80 billion euros . There will be a million questions in the News Conference which is 28 minutes away. What will changes will they need to make . Jon inflation may be the lowest target. And maybe someone elses problem. David we will be heading to frankfurt in just under 30 minutes and listen at eight live and listen to a live News Conference. Jon really looking for to the News Conference. Future slightly negative on the back of an unchanged decision. Because the consensus view was at some point, they will have to lay out how they will do it. Off the back of it, a little bit on the margin. Equities comeback 6 10 of 1 of the dax in frankfurt. European stocks rolling over a little bit. Euro up. 5 . A 113he briefly with handle. Atasury yields coming up 1. 55 . The story in the bond market was record low yields in spain. Yields taken higher again. Is an extraordinary story with no government over there. Ourre going to bring in colleague, Caroline Hyde, there for the press conference. Would you take away from what we know about the decision . The heat is in frankfurt about 29 degrees. It is getting hot in there in terms of the press conference. We can still hear if they downgraded the future prospects. That could still come. They are not announcing yet if they will go beyond march 2017. They said they could. That is being applied. We want to understand that they are going to tweak the bond purchasing and what they are eligible to buy. That could make their life significantly easier. Packets move the market once again. We are seeing german bonds in spanish bond selling off. They may hence that they could buy below the deposit rate. That currently renders 30 of the entires eurozone solid space. Maybe they want to tweak by more than 30 of each issue or issuer. Areas re political david there are politics involved as you think about things that might change. Put yourself in Mario Draghis shoes. Is there any reason why he wants to give guidance to the marketplace of those options he will choose, or does he want to keep his cards close to the vest . Not a. P. Of shoes i want to be wearing right now, david not a pair of shoes i want to be wearing right now, david. He wants to be in a space where he could guide the market expectations. We know he has a voice that moves markets. Maybe he wants to attend at where he wants to go maybe he wants to cant at where he wants maybe by each individually. More tech. Could buy say, that is getting dangerously close to Monetary Policy fading into fiscal policy. He will want to guide the government side of the equation i will call out for fiscal policy to act. Monetary policy cannot do it all anymore, but it is a pair of shoes i dont want to be wearing. David it doesnt seem to work so far. Thank you so much, caroline. Good to have you with us. Jon lets bring in our chief global strategist at Morgan Stanley investment management. It is great to have you with us. Inflation forecast and the ecb. It used to be cut, cut, cut. People are expecting things in the coming quarters. Looking at the forecast, the question remains whether that chart right there is a problem just for the ecb, or a problem for everybody. There are two things going on with the central bank community. There is a slow recognition taking place. The potential growth rate has moved lower. If you look at europe, the fact that it is growing 1. 5 is a pretty significant achievement because they are seeing the main drivers of growth productivity and Labor Force Growth have dropped significantly. In europe, the underestimated factors there is so much about demographics. The fact that in japan, you have record low unemployment rates with no Economic Growth rates. In europe, what we are seeing is a big swing in the labor supply. The labor supply growing positively. All in a matter of a decade. This is a broad recognition. The growth rate has moved lower. We will see a significant change from early next year. Because of the price of oil. Early next year when the price of oil bottomed out a year ago at about 27 yearoveryear, you will see inflation moves up in most places at a headline level. We are way off target. That will subside next year. Jon i want to pull out of frankfurt and have a bill conversation and have a real conversation. These guys, they say it is believed that it will got to do something about it. Why inflation is running low is a big issue . I am totally with you on this. The phase of deflation, if you history of deflation over the last 500 years, we have gone through many periods of deflation. This is something in the Financial Community that is been there, but the central bank community, they have ignored it. It is about asset price. Economic impact has been asset prices have gone up. People think that Central Banks will be there to underwrite any problems that may be in the global economy. It is not helping Economic Growth. As a Price Inflation is a very serious concern. How do you end this period . Volatility is so extremely low because everyone thinks the Central Banks are there to underwrite their risks. I think that is a central i think that its a serious problem. David the economy is more challenging. You wrote about this in your book. The problems across the world, what is the solution . Is it immigration . Mentioned three solutions to this problem in the book. One is a part immigration is not a solution for the world, but a solution for individual countries. In this political atmosphere, to talk about immigration, it seems impractical. Theis to do something with retirement ages. As i mentioned in the book, Retirement Data is a 20th century complex. Thing is increasing the participation of women in the labor force. Point, is we speak about demographics being a big headwind in the developed world. In the emerging world, too, it major headwind led by china. China for the first time last year saw contraction in its working age population. It is a very major deal. Taiwan, russia, most of Eastern Europe we are seeing this economic head when everywhere. This is something we do not speak enough about. We have an anchoring bias. We want to get back to the growth rate of the last decade without realizing those growth rates were facilitated by an increase in the worlds working population. Ore that, the population the working population was barely growing. Jon mario draghi will step into the News Conference. They will talk about the word law. How much Financial Stability is bubbling away in the back of these Central Banks as they push for more. In the case of china, it is interesting. They are clearly a knowledge aim that as a price theyre crowing acknowledging that asset prices is a problem for them. They are concerned that housing prices are on fire out there even know Economic Activity has been dull. Also, debt growth what brought about the debt crisis we know is the fact that it got massive increases in debt in the western world. In chinas case, the increasing debt that we have seen is unprecedented. They have replicated an entire u. S. Banking system in the space of five to seven years. Is is an increasing worry. Everyone is very focused on inflation targets. What should inflation targets be . Theyve lost the broader is why did people come up with the inflation targets . They thought it would help Economic Growth. We have become obsessed with those targets. Price inflation, that is a very destabilizing think for the global economy, of china is at the forefront that risk barometer. Sticking withbe us because we will be talking about emerging markets in just a moment. We are 18 minutes away from the News Conference. Lets get up to julie hyman. Julie there is the big picture and in the micro picture. Down 4 10 of 1 in the day after it came out and introduced the new iphone 7 and other features including an updated apple watch. Not saying as Much Movement as yesterday. The stock closed higher. Among others, wells fargo weighing in this morning downgrading the stock to market performance. The performance twitter ahead of its Board Meeting. Cnbc reporting there are no bids for the company on the table and twitter is exploring costcutting. Lastly, cnbc said the Company Might get interest from activist. Shares are down 5 this morning. 40 on the news that volkswagen but be taking a stake in the company. Today, it is down 4 . Revenue in the Third Quarter down 18 missing estimates and navistar said it got a subpoena from the department of defense inspector general. It has to do with sales of its independent suspension system. In 2009 and 2010. Jon thank you. Up, assets continue to rally with stocks at a 13 month high. Will the fed keep the rally going . We are heading to frankfurt. We are 17 minutes away from mario draghi News Conference. Tweak thethey have to process . This is bloomberg. Jon from new york city, this is bloomberg and im jonathan ferro. Gearing up for the session on wall street. Futures flat, stable. Equities in europe, rolling on the back of an ecb not decision. The dax not unchanged down by six tens of 1 . It is ang up softer dollar story. Very briefly with a 113 handle. The story in the bond market today was this right here a record low, alltime low, new record for spanish 10 year yields. Then we reverse and yield push higher. Potentially, by more debt on the periphery supporting the likes of spain, italy, etc. We will raise some of the sessions moves. The big question from mario draghi is the News Conference coming up in 13 minutes time is when you going to extend qe . Are you going to have to change the rules . That is the countdown as we wait 8 30 eastern time for that ecb News Conference. Lets get to the headlines with emma chandra . President obama has not changed his mind on donald trump. Today, the president called the republican president ial candidates ideas contradictory and outright wacky. As far as mr. Trump, i have offered my opinion. I dont think the guys qualified to be president of indebted states. Speaks, thate he opinion is confirmed. Over the weekend, trump called president obamas policies weak. A new poll shows trump beating Hillary Clinton decisively among white voters who dont have more than a high school education. According to the online poll for bloomberg politics, trump is backed for 55 of the group compared to 30 for Hillary Clinton. 42 in aeads to 7 to threeway contest. Francois hollande needs to set poll showed that francois a lot is the most unpopular leader since polling began. Global news 24 hours a day, powered by 2400 journalists, in more than 150 news bureaus across the world. This is bloomberg. A diversified portfolios what every investor wants, but over the last two years, it has been more difficult to build a diversified portfolio as commodities have increasingly moved up and down. It is a cross market contagion. I love the name. It shows that correlation is over 60 . People have looked to emerging markets to find diversification. Does e. M. Offer that hedge . He travels around the world looking for opportunities. Does e. M. Give you that uncorrelated asset class . If you look at emerging markets in the past decade, you had emergency markets emerging markets consistently perform. Now they have started to outperform since then. At the aggregate level, i agree that the cross assets are very high, but you do find a lot of you see massive differentiation between countries. Agree that centralbank policy in general, when you have too much liquidity, it elevates all asset prices, but in emerging markets, if you look a big factor that has played a role of late has been politics in emerging markets. Which are the countries that are outperforming this year . It is those countries were new leaders are coming to power. Countries where you have seen reform take place. Latin america has all of a sudden come back in fashion. Brazil, peru, argentina you are seeing new leadership come to par promising economic change and reforms. If you look back at what is happening in asia, countries like indonesia, we have seen a pickup in the reform prospects there. The country has done well. Even in india, once we had the passing of the bill, widow positive reaction from the marketplace. We are seeing this reaction. On the other hand, with the politics, poland, we have seen massmarket did badly hit by politics. Just this week in the philippines, politics is playing very big role in driving david lets take brazil we have been promised reform in brazil for a long time. Should we believe that brazil does offer that opportunity . That is a pattern with emergency emerging markets. That is why in brazil youre seeing the reform process pick up. Privatizationin coming back to the playbook. Because their backs are to the wall, theyre counting on economic reforms. That is the circle of life. Many of these countries only reform when their backs are against the wall. Complacent and that slows the seed for the next crisis. David thank you very much. He is Morgan Stanleys investment manager. Jon what would the extension of the ecbs qe me for European Assets . We asset question. We ask that question. Were counting down to Mario Draghis News Conference. From new york city, we will go live to frankfurt. This is bloomberg. Jon from new york city, this is bloomberg. The attention of Global Financial markets will be in that room occupied by mario draghi and approximately five minutes time or he will commence the ecbs latest News Conference on the back of a decision to keep. Rates unchanged in the qe Program Unchanged at th. The euro flirted with a 113 handle for much of the day. 5 of 1 . Y we will bring you that News Conference in full on bloomberg. Black going to start with rocks senior investor. Great to catch up with you as always. As we look ahead to president draghi, do you expect more of the same more qe . Us already and what he will say is they stick to the inflation targets and not going to change the inflation forecast. To language was very clear extend the purchasing program the on march 2017. Move will be over the next couple of months, a lot of negotiation around exactly how to compass that because they will run out of assets under the current set of rules and 45 months time. Jon i want to navigate some of this. If they leave it too long and we get to the end of the year may have not addressed it, is there a sense of nervousness for some Market Participants . There are a lot of people trying to position against what theyre trying to do. We know they will carry on with at least 80 billion euros a month. To do that, they have to change the rules. Either they except that they buy bonds for deposit, or they widen the range of assets. Change the capital key. The last is important because you get into fiscal space. I think most likely, whitening the range of assets whitening the range of assets the range of assets and change the rules on a deposit floor. Butay lose money on a bond, on the portfolio basis, we may make money. Jon that is not exactly what you want to tell clients. As you look at these markets, with a 10 year trading around 90 basis points off another record low, what levels are we going to see . We are a long way down that path. Worried. S really they are concerned about making sure the Financial System isnt impaired. They will talk about the funding opportunities. The question specifically how they are going to go i dont know. I genuinely dont know. That there squeezing down debt spreads is high. Jon we had been following financial risk and show shortterm debt with a handle of zero. Yielding nothing. Does that not concerned you in any way at all . It is huge financial repression, jon. Ofre is a nationalization the bond market going on, and clearly, on any other basis, the assets are mispriced. That is the rules of the game at the moment. The risk premiums are wrong, but that does not mean to say they wont carry on being wrong for a long period of time. Jon i guess the big question for the equity market is where are our capital returns . The bond market has done well in europe. Outpour tocks stocks outperforming europe . What we are seeing is not substitute, dividend growth, highquality businesses outperforming. In the last couple of months, we have in a rally in european banks. This is a good situation for european banks with their funding side effectively underwritten in the asset quality review. I think it is a Stock Selection within europe. The currency is not going to begin weaken to help this thing overall. Jon thank you so much for joining the program. Senior director of blackrock. I want to go live to frankfurt where you can see ecb president mario draghi. The decision, rates unchanged. The qe Program Expected to go beyond march 2017. The question for mario draghi is if you want to take it beyond march 2017, do you run out of bonds to buy and do you have to widen the pool of available assets . Plenty of questions for mario draghi. We will take this News Conference in full right now in bloomberg. We will start to listen to mario draghi as he begins News Conference at any moment . Ladies and gentlemen. The Vice President and i are very least welcome you to the press conference. We will now report on todays meeting of the governing council which was attended by the commission Vice President. Regular Monetary Analysis, we decided to keep the key ecb rates unchanged. We expect them to remain at present or at lower levels for an extended period of time, and well past are net asset purchases. Regarding nonstarted Monetary Policy measures, we confirm that the monthly asset purchases of 80 billion euros are intended to 2017,til the end of march or beyond, if necessary. In any case, until the governing council sees a sustained adjustment in the path of inflation consistent with its inflation aim. Economic assess the monetary data, which had become available since our last meeting , and discussed the new ecb projections. While the Available Evidence so far suggests economyce of the euro with political uncertainty, our baseline scenario remains subject to downside risks. Our comprehensive policy measures continue to ensure supportive conditions, and underpin the momentum of the European Economic recovery. As a result, we continue to grow at al gdp to moderate, but steady pace and for inflation to rise gradually over the coming months in line with the path already implied in our june 2016 staff projections. The council will continue to monitor economic and Financial Market developments very closely. Preserve the very substantial amount of monetary support that is embedded in our stock projections. And that is necessary to secure the return of inflation to to 2 below, but close over the mediumterm. If warranted, we will act by using all of the instruments available within our mandate. Councile, the governing asks the committees to evaluate to ensures implementation of our Purchase Program. Assessmentexplain integration in detail starting with the Economic Analysis. Increased byl gdp 0. 03 quarter on quarter in the Second Quarter of 2016 after 0. 5 in the First Quarter. Data going to ongoing growth in the Third Quarter of 2016. At around the same rate as in the Second Quarter. Looking ahead, we continue to expect economic recovery to proceed at a moderate, but steady pace. Remains demand past monetaryur policies. Favorable financing conditions and improvements in the demand outlook, any corporate profitability, continue to promote the recovery. David we have been listening to president Mario Draghis press conference in frankfurt. We lost the feed for rarely, but we will go back to it he lost the feed temporarily, but will go back to it. Draghi in addition, the fiscal stance in the euro area is expected to be widely remainonary in 2016 and probably neutral and 2017 and 2018. However, the economic recovery in the euro area is expected to demand,ned by foreign related to the uncertainties following the u. K. Referendum outcome, the Necessary Balance sheet adjustments and a number of sectors, and a sluggish place of implementation of Structural Reforms. The risk to the euro area Growth Outlook remain stilted to the downside. Thes broadly reflective in september 2016 ecb staff projections for the euro area, which for see real, annual gdp insing by 1. 7 in 2017 2016. The june 2016 euro systems projections, the outlook for real gdp growth has been revised downwards slightly. Euro estimates, euro area annual inflation in 0. 2 unchanged from july. Inflation continues and no energyces and good inflation is slightly lower than in july. Looking ahead, on the basis of current oil futures prices, inflation rates are likely to remain low over the next few months before starting to become toward the end of 2016. Part, the annual rate of change of energy prices. Supported by a Monetary Policy measures and expected economic recovery, inflation rate should increase further in 2017 and 2018. Reflectedrn is also in the september 2016 ecb staff projections for the euro area, which foresee annual inflation as 0. 2 in 2016. And 1. 6 in 2018. June 2016son with the euro systems projections, the outlook for hiv inflation is inflation isp greatly unchanged. Turning to Monetary Analysis, it increased at a robust pace in july 2016. With its annual rate of growth standing at 4. 8 after 5 in june. As in the previous month, annual growth was mainly supported by its most liquid components with a narrow monetary aggregate and expanding at an annual rate of 8. 4 in july after a. 7 in june 8. 7 in june. Loan dynamics following the path a gradual recovery sees the beginning of 2014. Of annual rate of change unethical corporations increased 2016 comparedy of to 1. 7 in june. The annual growth rate of households remain stable at 120 in july. Stable at 1. 8 in july. They continue to reflect the light relationship with the ininess cycle, credit risk the ongoing adjustment of financial and nonfinancial sector Balance Sheets, the since 2014 in place are increasingly filtering to support more conditions for firms and households, and thereby, credit flows across the euro area. Up, a crosscheck of the outlook of the Economic Analysis with the signals coming from the Monetary Analysis confirm the need to preserve the very substantial amount of monetary support that is necessary in order to save your ever turn on inflation rate towards levels that are close to 2 without undue delay. Furthest onicy is the price stability on the mediumterm. And it supports Economic Activity. As emphasized repeatedly by the in bothg council and national and International Policy discussions in order to get the full benefits, other policy areas will be treated much more decidedly, both at the national and of the european level. The limitation of Structural Reforms needs to be substantially stepped up to reduce structural unemployment, and boost growth in the euro area. Necessary reforms are in all euro area countries. The focus should be on actions to raise productivity, and improve the Business Environment , including the provision of inadequate public infrastructure, which are vital to increase investment and boost job creation. Currentncement of investment initiatives, including the expansion of the plan, progress on the Capital Markets union, and reforms that will improve the resolution of nonperforming loans, will also contribute positively to the subjective. Of monetarynment policy, the swift and effective implementation of Structural Reforms will not only lead to higher, sustainable Economic Growth and that euro area, but will make the euro area more resilient to global shots. Icks. Ocks. Full and consistent implementation of the stability and growth over time and across countries remains crucial to ensure confidence in the fiscal framework. At the same time, all countries globalstrive for a more for a more growthfriendly we are at your disposal for questions. Mr. President , you said looking at potential instruments going forward. Twomuch time do they have reassess and decide . You, howu think, are close are we to the extension of the qe program considering we are sixmonth away from your deadline . Thanks. Draghi retasked the committees we tasked the committees for the limitation needed for the smooth limitation of our program. We discussed the growth projections. We did not discuss anything else. Im sorry, the second president was . That is what i am saying. We did not discuss it. You have excluded bank bonds from your Bond Buying Program. Why . Second question, given that you are already buying Corporate Bonds, what steps you from buying corporate equity . Thank you. Draghi i will answer both questions at the same time. Our program is effective and we focus on it limitation. The current projections do reflect the full impact of our march decisions. And we will continue with this limitation for the ecb program. Financial times. Mr. Draghi, i am wondering how we should read the decision to set up these committees to look into redesigning them and looking at new measures. Is this because you think we will hit shortages to buy before march 2017, or should we take this as an acknowledgment that you need to extend the aggressive policies beyond next spring . My second question we see you slightly downgrade the outlook for growth and inflation again. Remains towards the downside. If growth is low for a long time and unemployment is high, that could cause quite devastating, longterm damage to economies. And if inflation is low for a long time, it can risk limitation. Why not do more now in spite of these forecasts . Draghi let me First Respond to the first question. I will use the words that were used by the chief economist in his presentation. Months, over the coming ecb inflation is expected to pick up in large part to base effects. Yet, underlying price pressures continue to lack a convincing upward trend, and remain and like ongoing source of concern. Importantly, the projected path of inflation remains conditional on exceptionally supported financing conditions, which to a large extent, reflect our Monetary Policy. Sked therning council ta committees to look at the options that ensure a smooth and limitation of our Purchase Program. And, let me remind you, in the introductory statement, our Purchase Program is intended to run into the end of march 2017, or beyond, if necessary. And in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its inflation aim. Question,your second why we have not acted. The assessment was for the time notg, the changes are substantial as to warrant a decision to act. We see that our Monetary Policy is effective, and we can discuss that later, it is fully effective in fact. We see its full impact of the march decisions are in the projections, but we also see we see there has been considerable decreases in all Interest Rates. Example, longterm Interest Rates are below 43 basis points from where they were before. Reflect, low rates do to some extent, expectations of a continuation of him as i just said, the extraordinary, Monetary Policy support that is being extended. Mr. Draghi, the ecb has published a working paper saying there is some signs of Inflation Expectation being unanchored, or becoming an awkward. Marketbased flirtations have covered around record lows. Marketbased expectations have hovered around record lows. Can you explain a little bit how you read the data and what signals you take from it, and why it is not more concerning in your view enough to act . And then you said you would tell us more on how effective your policies are, so it would be great if you can do that because is, we are still far below target. Inflation is at 0. 2 . Thank you very much. Mario draghi thank you. Is following the baseline scenario. From that viewpoint, no more, no less. It will take a little longer than our previously forecasted to get to a level of below 2 . For the time being, the main being the main thing was to make sure the program and decisions taken in march can be an cemented in the new can be implemented in the new constellation of much lower Interest Rate, which clearly, have restricted the eligibility universe. And that is why we tasked the committees. Existing projections remain are predicated and remain conditional on exceptionally supported financial conditions, which to a large extent, do reflect our Monetary Policy. Therefore, the council tasked the committees and let me remind you again that our program is meant to run to the end of march 2017, or beyond, if necessary, and in any case, until the council sees a with its adjustment inflation aim. Economists committee of the governing the committee of the governing council , as iis no question about think i have said on other times, the will to act, the capacity to act, and the ability to do so. Your first question about it occasions, we are observing two types of behavior here. We had the no market based are by ands, which large, stable. For 2016. Ell us, 0. 3 the longterm Inflation Expectations remain stable at 1. 8 . Then we have the market based expectations, which had been ,rending down over, i would say after breakfast, but even before. After bring, but even before. We have one next to nation for brexitappened after break when these expectations declined considerably. These expectations are based on bonds, bonds that have traded, and that have been significantly sent to market, which alter the price of the bonds in a way that does not truly reflect the Inflation Expectation component. But, after that, it is harder to explain. It is more difficult. However, these expectations are subject to considerable volatility, and we have observed, even in the past, disconnect between the behavior these expectations and the behavior of oil prices. So, the conclusion of this reasoning is we are monitoring these developments very closely, and we are ready to act if we were to detect the signals that there could be second round effects at play here. Evidence we have about deflation measures, they have not increased. Mr. Draghi, a question as well. Effectiveness of your Monetary Policy, would you say more stimulus has a decreasing, marginal return . More you add, the more would you say the more you add, the more it helps . My second question would be whether you are concerned about the negative side of ex your policy is having looking at the Banking Industry and looking at what happens to insurance companies, and whether you believe your stimulus is reaching those who put is reaching those who could benefit who, like the middle class have the capacity to spend more, or if your policy is spending most of the people who dont have a high propensity to spend because they are well off . Thank you. Mario draghi thank you. The first set of relays to the effectiveness of our Monetary Policy. I dont want to go through the list of financial variables, namely Interest Rates, equity prices and etc. They have improved dramatically since the beginning of our nonconventual Monetary Policy nonconventional Monetary Policy. Let me say what matters most in previous time, we observed fragmentation, and we observed a very subdued credit development. Nowadays, because safely say the fragmentation is over. That credit is growing constantly and has been growing constantly since the beginning of 2014 month after month. That wasads demonically fragmental he that was dramatically fragmenting credit has vastly disappeared in the sense that it differentials in nothing more than that. Survey, itnk lending , credit ist now reaching the nonfinancial sector of the economy. Both for private companies and households. So, i would conclude that our policy has been very effective. Was, will youion consider, censure assumption that it was not effective, would you consider doing more of that . , certainlyo that is if that is needed to reach our objection. But suppose we had not done that . What would the situation be . There are interesting analysis showing, especially over the last week, seven months, the stimulus of our Monetary Policy basically counteracted the negative impact of shops happening in other parts of the world. You remember the beginning of the year. Then we had brexit if we had not done that, the negative effects would be affecting without any other factor. Your second question was the negative side effects of Monetary Policy. Well, first let me reiterate hat we have a mandate, and the governing council is unanimous about complying with this mandate, which foresees the return of the rate of inflation to 11, which is below or close to 2 . Econd, in the sense ive answered the first part of my answer, i would say the transmission of Monetary Policy has never worked better than it does today. We see changes in Interest Rates, different parts of the markets are immediately transmitted into changes in lending rates, volumes of lending, as i just said are regularly increasing. And the Service Shall both be demand and supply going up. Service show that risk aversion is not any longer a factor in lending, but its actually competition between banks hats driving lending. The third consideration is that some people are saying negative Interest Rates will carry the risk of cash hording, hording cash. Well, we dont see that. There are limited stories that obviously have a lot of coverage, but its really not there. Now then there are issues about bank, the point you touched upon. So far, and i was to stress so far, we have not seen that. Weve seen that, for example, profits, bank profits went down between the First Quarter of 2015 and the First Quarter of 2016 by Something Like 20 , but they went down by 20 because, in the First Quarter of 2015, banks post the huge Capital Gains because of the beginning of our Purchase Program. So if you look at the Net Interest Income that state by and large stable, doesnt mean its going to be this way forever. Of course not. We are aware that the Current Situation of negative interest tes will have consequences and challenges for the banks, which we have to be aware. However, if you conclude observations, first of all, i think low Interest Rate shall not be used as the justification for everything that goes wrong with banks today. I think it would be a mistake to do so. I think thats the and second, i think ultimately weve got to be patient. Interest rates have to say low for the economic recovery to for the proceed economic recovery to firm up, which, in the end, will have a positive effect on banks Balance Sheets as well. So i think, as i said, on another occasion, Interest Rates have to be low today for being high tomorrow. Thank you. My first question was on Interest Rates, and you said that theyll stay at the same level or lower into the future, and youve said before they could be cut again. It seems as though officials have been expressing greater skepticism about negative rates recently, and during the july meeting, for instance, there was a discussion about whether that was undermining banks ability to make loans. Is there a sense that the Interest Rates are now a second best tool and the q. E. Is the priority . My second question is on government, what government should do to help. You seem to make a longer statement than usual on this. And i think janet yellen also made a point about how maybe governments and Central Banks needed to Work Together in order to get out of the Current Situation. I mean, is that correct, that you think that the e. C. B. Couldnt do this, that there needs to be government selling more debt in order for bond purchases to work . Thanks. Mario draghi well, to your first question, i just said that right now the transmission mechanism is really working very well. Its never worked better. So the ability to make loans has not been affected by negative Interest Rates. Also consider that thats only one side of the story. Taltro, which is helping the banks Balance Sheet on another side. I wouldnt take this criticism as serious now. Now, on the second question, just let me read to you the press communication of the g20 , which just came out on september 5. We are determined to use all policy tools, monetary, fiscal, and structure ideal, individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth. Monetary policy will continue to support Economic Activity and ensure price stability, consistent with bank central mandates, but Monetary Policy alone cannot lead to balanced growth, underscoring the essential role of Structural Reforms, we emphasize that our fiscal strategies are equally important to support in our common growth objectives. We are using fiscal policy flexiblely and making tax policy and public extend tour more growthfriendly, including by prioritizing highquality investment while enhancing resilience and ensuring debt as a share of g. D. P. Is on a sustainable path. Thats the answer to your second question. Basically its something ive been saying for months that to reap the full benefits, and i think i did say this in the introductory statement today, to reap the full benefits of an extraordinarily accommodative Monetary Policy, one needs olicies. Reporter thank you. The first one is on the future work of the comment and the options they should look at, and this would include also the argue that changes to the capital are politically too sensible to really discuss them. And the second question also, follow up on this discussion about the effectiveness of q. E. At the start of the year, you presented us some precise, pretty precise figures about the effects on growth and inflation measures since mid 2014. I want to see if you have some updated figures, including march and december 2015, so it would be great if you share them with us. Thanks. Mario draghi thank you. The can he is at full mandate. They will look at all the to ons that might be used redesign the program and the new con sell asian of Interest Rates. And then, of course, well have a discussion about issues like the one you mentioned and others as well. They the time being, will examine they will have a broad exam of all the options. The second question, yes, indeed, we have numbers showing the impact of our Monetary Policy on growth and inflation over the forecast horizon. I think, but i stand i could well because i dont remember them exactly, i think its 0. 5 over the forecast horizon as far as growth is concerned, and i think its 0. 3 as far as inflation, but well have to check that. Let me do this. Ill check to let you know after. Oh, its 0. 3 and 0. 5 . Its either. Over the forecast horizon from now. I think we should be able to give you full figures in a oment. Reporter mr. Draghi, a lot of people hope that you consider the option of buying stocks or even hope you consider the option of helicopter money. Do you so, and if not, do you rule that out . And the second one is, can you guarantee that for the average consumer, the Interest Rate will remain positive . Thank you. Mario draghi we havent discussed either. So i cant answer the first question other than say that eve not discussed them. The average consumer is actually the one whos now being the main actor in the recovery. This recovery is based, and thats why its firmer, more robust than other recoveries weve seen in the past. Its based on consumption. Domestic consumption. Different from past recoveries that were based more on exports, and then as soon as he can term conditions change, they waned. So thats important. And, of course, the drivers of , very recovery remain accommodative Monetary Policy. We observe a continuation of growth in real disposable income, which, of course, feeds into consumption. Its relatively low on prices, and what looks like a more, likely more expansion fiscal policy. Thank you. Reporter mr. Draghi, youve been urging governments to act for some time, and im wondering if maybe theres a sense maybe they might be now be more willing to act and that the e. C. B. Could encourage that willingness by not raising excess i have expectations out future Monetary Policy easures, hence the tone today. Mario draghi thank you. The e. C. B. Cant be in a sort of well, let me say, what the e. C. B. Can do is basically flag what is needed for Monetary Policy to be even more effective at the present time. And what i think i just read in the g20 is a quite powerful statement of commitment. The g20, just to make sure, its not central bankers, its governments. Its finance ministers. So they committed in this statement to use all policies, structural policies, fiscal policies, tax policy, and to make growth more friendly, which is something that all of you have heard me saying several times, to have a fiscal policy, to say basically that the composition of fiscal policies is as important if not ore important than its size. After all, before the financial crisis, wee seen several countries in the eurozone increasing their government xpenditure, and really growing drawing very little benefit in terms of output growth and employment, showing that perhaps size is not the first thing one should look at, but rather, how this money is being spent. And you heard me say several times that a growthfriendly fiscal policy is one where taxes are lower, current government expenditure is lower, and investment is higher. And its encouraging to read this press communique, because it really means a collective commitment by the governments of the g20, of the world. Ok, i was just given the figures here. It has a cumulative upward impact of g. D. P. Growth of 0. 6 over the projection of the horizon, marginally above the impact entailed in the june 016 projections. In particular, the september projection also contains a small impact on real g. D. P. Related to the Corporate Bond program, which in the meantime has taken off the ground. And which led to a further and stronger than expected narrowing of Corporate Bond spreads since june. For inflation, the cumulative impact is 0. 4 over the projection horizon. In line with what was forecast in june. Thank you. If you want the figures in 2015, then ill provide you i mean, i have the ones in une. Reporter as was said before, the option for buying shares, corporate shares, or even doing helicopter money was not discussed at all. Would you subscribe that we didnt discuss it yet . Thats my first question. And the send one, you outlined this bold statement of the g20, but the facts are , and according to there will be a german current account of 280 billions this year, so its simply the World Championship in this category. O there are calls from ashington to promote the import and to do more to support the domestic demand. And then to contribute to less trade imbalances between countries. Would you join this call, especially germany, that could be maybe part of your message you will deliver at the end of this month . Mario draghi well, first of all, i cant answer i mean, the first question, lets say we havent discussed it whether to discuss it yet or not. So its just, we havent discussed it. On the second question, clearly be in line with the recommendations of the are ssion, lower surpluses a lower surplus for the area ould be welcome. However, and thats certainly any action to this extent is to all ive always been a little puzzled by the ea that sometimes conveyed with these words. Its like its not like we can lower the surplus if we push a button. Ts not a planned economy. So if an economy is naturally one can do one economic policies that sort of get the benefit of this higher surplus and transform it into domestic aggregate demand. And i think thats the recommendation, and that could be said in different words. Countries that have fiscal space should use it, and countries that dont have fiscal space should instead focus on the composition also, rather than on the composition s a primary fiscal tool. But its not it was always a puzzle thinking you can lower the surplus, and then you move around, the aggregate demand component. No, it doesnt work that way. Thank you. Reporter earlier this week, it was said that theres too much liquidity in the market, so do you feel that there could be a german opposition to the eventually extension of the g. E. , and when you say that some countries, they have margins to make investments, do you mean germany, especially meaning they presented the budget this weekend . They said they give a lot of money to refugees, but do you think they couldnt do more for investment in infrastructure or other measures to push the growth . Thank you. Mario draghi thank you. O your first question, i think they were referring to world liquidity and not eurozone liquidity as such. But its very difficult to estimate whats the adequate amount of world liquidity. It does depend on many other many other variables, one of which is the state of the us, my and, of course, for what matters is price stability, because we have this in our mandate. So liquidity, if we look at that from our central bank perspective, like the size of our Balance Sheet, is just a Monetary Policy instrument that we have to use for reaching our objectives. The second point, as i said before, countries that have fiscal space should use it. Ermany has fiscal space. Reporter thank you. Imbalances in the target two Payment System have been rising quite significantly recently. And in some cases they are reaching the level of the height of the euro crisis in 20112012, like in the claims of germany and the liabilities of italy. In a recent paper, the Dutch National bank has attributed this to q. E. Liquidity created by the asset purchases by national Central Banks in the southern european euro area state flows, according to the Dutch National bank to countries like germany, the netherlands, luxembourg. And according to them, this is because investors view these countries as less risky, and they say that this points to persistent fragmentation in the euro area. Do you share this analysis, and are you at all worried about that . Thank you. Mario draghi the answer is no, i dont share it, and im not worried. The reason why target two bonds go up following our q. E. Has of to do with a settlement the claims that arise with the implementation of q. E. To the extent that these claims are settled by interimmediate airs to redeposit this money in germany and the netherlands, you will naturally see target two bonds going up, and that has nothing to do with fragmentation. In other words, its a completely different phenomena from what we observed in 2012 nd 2011. The final question. Reporter thank you. The latest figures for wage growth in germany has been the lowest i think for more than five years. How worried are you about that, and would it not also be would it not be necessary to have much higher wages in rmany also to reduce the current account to better balance the current account in the eurozone . And my second question is on the inflation target, theres now an ongoing discussion or some economists propose that the e. C. B. Should target a level of nominal g. D. P. Instead of inflation, what do you think about that . Thank you. Mario draghi we havent really discussed the second point, and frankly, the reasons why it was chosen 2 target many years ago are still there. But we didnt have this discussion yet. Im sorry. I added too much. We didnt have that discussion. [laughter] mario draghi your first question is absolutely right. The wage determination is a decision is the result, the outcome of the interplay of forces. You have the employers and the employees. But what one can make today, what central bank, what economists can make is an undisputable case for the benefits of having higher wage growth. Because of had, lower prices, because of the labor market in the past few years, we had low inflation fire long time, and one of the questions that we are asking ourselves is, is this pro tracted low inflation, has it filtered through Wage Negotiations somehow, either because you have the mechanism because they are formal or informal, or through the negotiation process. And if that were true, we would be extremely concerned, and we are monitoring this these developments very closely. But the case for higher wages is unquestionable. Thank you. Thank you very much. That wraps up the e. C. B. s latest News Conference in frankfurt, with the e. C. B. President , mario draghi. One News Conference wraps up, and another one is set to begin. Exactly. We are waiting right now for Hillary Clinton, whos decided shes going to have a News Conference up at Westchester County here, just near her home. Shell be monitoring that and bring you any news. Yeah, lets get back to the markets then. President draghi wrapping up a News Conference. The new staff forecast coming out relatively unchanged, changed at the margin, but the bottom line is relatively unchanged. For Market Participants, the case of disappointment versus expectations, the expectation was that q. E. Could well be expended. According to president draghi, that wasnt even discussed. Lets see what the Market Reaction is. Its a stronger euro story off the back of those comments, a euro dollar that approaches 11315 and yields tick higher. You can see the futures market at the market slightly negative. S p 500 futures negative. Theres the stronger euro story at 113. 14. Yields ticking higher in core Government Bond markets, 1. 57 is the yield on the u. S. 10year. Were up around 5 across the periphery and on german debt as well. That wraps up the market moves. Lets bring in some of the bloomberg team. Lets bring in vincent here in new york to wrap up what is happening in the markets at least. Vince, you look at this, and Caroline Hyde in frankfurt as well, the disappointment largely because they didnt discuss more q. E. For you, i mean, read between the lines, come, whats the bottom line . Vincent it sounds to me more of a situation where theyve come to the conclusion that more q. E. Just wouldnt help. He kept referring to the g20 on communique and fiscal policy, that fiscal policy needs to step up to the fore at this point. But at the same time, in europe, you have austerity measures dampening fiscal stimulus. So im not sure where he sees this growth is going to come from. Q. E. Has largely been pushed back by central bankers around the world, as weve kind of done as much as we can. Its somebody elses turn. Somebody elses turn in a ghess particular government. We talked about expectations and expectations were that q. E. Would be extended. A disappointment maybe, but surely by the end of this year its something that will be addressed, and draghi said that he had a kerr looking at options. Should we just read between the lines, and the same question for vince, the inevitable is going to happen, its just a matter of time . Caroline i mean, exactly. At the moment, weve got 80 of economists thinking some point this year there will be an extension, and in his very words, he said they can go beyond march if necessary. But for the time being, the fact that he slapped down, even disgusted, of course, he must realize there will be a negative reaction to that. Overall, this key takeway is i think, listen, market, my Monetary Policy is working, give it time. The transmission mechanism, the passing on of these low rates to banks to the consumer, to the Business Environment, he says theyve never been better. His number two key takeway was just fascinating, banks, stop your complaining, i hear your comments. I hear you, Deutsche Bank c. E. O. Stop trying to blame your low profits on me. I actually helped you out back in 2015, you managed to mark up your book. Now just hollering just because youre trying to blame your profits on that. Thats not the case. The Net Interest Income is still broadly flat. And third, i do think it is also government, heed me, it is time for you to step up to the plate. It is time for fiscal action. But he is leaving that door open, and you nailed it there, that he is still saying ive got a kerr, and they have the mandate to do whatever they want in terms of redefining the way in which they implement quantitative easing, john. Caroline, hes trying to guide markets in his answers. What was he trying to tell markets in saying we didnt even talk about the extension, and weve appointed this comitiee to look at it . Dd can he i think this is where the market on the one hand was allowing him the breathing space for volatility on the stocks, the index of fear, lois we have in at any time in the past ecb meetings, 20 percent below average. Bond market in the trading range below night in 91. Joke he is trying to get a to the market. That trying to anticipate that i will at all the time to stimulus says they have got the will and the capacity and actor. Act as right now, they do not need to. Jonathan lets have a look at eurodollar. Boring. When does the change . I think this is implying to you. Ofis pricing in the lack expectations to do anything on the 21st. There have been lower expectations for the boj as well. There is a lot of surprise in these numbers and opportunity of Central Banks do turn a little away from what the expectations are. To me, the key take away is how he is convinced Monetary Policy is working. One mandate they have is inflation. I would hardly call that a success and i am not sure what the success would be. Normally we think of i took volatility as a sign of risk. Is the volatility down so low tanks around the world are so dominant in the marketplace, isnt that if risk and it self . It is a the more qe, the lower the probability of risk. Even though he did not do anything today, the markets are very much going to anticipate that it is going to be offended. You cannot just stop this on a dime. The ecb is out of the business of buying bonds, you will see were yields just leap to ridiculous levels and crater the market. It is not something a central banker can do. Jonathan looking at comments in the last hour or so, there was a message for banks and government as well. And markets to some extent. Forecast to remain unchanged. Prominentage remains in the last 60 years . Sorry, i missed the last of that. Of a think was more prominent coming from president draghi . Markets, it felt to me. He was off again and again. Potentially trading funds and shares, will you look at helicopter money, did you even dabble in thinking about extended quantitative easing . He says no. It felt like he was saying, ive given you what you need for the time being and i will not always build it into your market forecast. It felt like a market message that he hoped governments would eat and banks would heat. David thank you very much. Now, jonathan . Jonathan lets get to the markets. Futures in the open. We are three or four minutes into the session at the moment. Dr. Opening a little bit low, down by one third of 1 , up by a quarter. The dax down over one full percentage point. Looking at the euro, it is stronger with the euro back at 113. If i can whip through as well, spain, 10 year yields, an alltime low. We look at the yield right now and 94 basis points, given some of the losses and manage debt in the last hour or so. German bonds quickly, somewhat of a disappointment, yields higher after the ecb decision. Wrap up u. S. Stocks and get across to julie hyman. Julie in terms of u. S. The movement came after the mario draghi comments we have been talking about. We saw features unchanged and then they turned dramatically lower. Oil is spiking. We get weekly inventories numbers at 11 00 a. M. I did day and time this week. That can also affect things. Apple, after the iphone seven yesterday,n here, the stock was up and today, down one point or percent, as we are seeing some disappointment asked rest, wells fargo downgrading the stock saying the positives are known at his point here we mostly knew about some of the features that the phone was coming out with. Also watching walgreens as well as righted. Walgreens is saying it will likely have to invest more than ive hundred stores, walgreens and righted say they will remain actively engaged with the federal trade commission to get the deal done. Deal they expect the will be too adjusted earnings per share. You see walgreens up a little bit in getting a bigger lift up 6. 5 . Up and one big down this morning on the back of movers. Mens wearhouse and jos. A bank together, that companys Second Quarter numbers beating estimates. Comparable sales up 2. 9 . Jos. A bank seeing a big slide in its comparable sales. Looking better on the earnings versus sales sides. Looking negative as the ceo says he wills that down. Second quarter delimiter he lost worse than estimated. Twitter is having a Board Meeting today and a report that the company did not is exploring cost cuts after reporting last week that activists might get interested in the company. Shares rising now down or. 5 . Next, coming up Westchester County for Hillary Clintons press conference. That is next and this is bloomberg. David coming up, Coldwell Banker president ceo charlie young. This is bloomberg. Im jonathan ferro. Market or you, 10 minutes into drama is in the europe down by one full percentage point on the margin, a slight disappointment from the ecb compared to expectations. The expectation was we might get an extension. That wasnt discussed. A stronger euro, a 113 handle, eurodollar at the moment. Have a look at this up by. 6 . Core Government Bond yields from the United States to germany and europe as well, spain and italy, up two basis points to 1. 55 . That wraps it up. Lets head to the nasdaq and get you some movers with abigail doolittle. One surprising source of weakness, the secondbiggest drag on the nasdaq today. Shares down nearly 16 , the after aap preannouncement of the downside yesterday cutting the fullyear view. We have a lot of downgrades, at least seven. Teedos targets taken lower with analyst saying there is a lack of visibility. Weakness clearly goes beyond the weather, which has been cited in the past. Do have david mckie defending the shares, saying to by the weakness but with the stock down so much, it has taken out Technical Levels of support and it will be interesting to see how this plays out over time. Right now, pretty weak. Another stock trading lower, tesla. Initiated kurds with an underperform rating and a 160 price target suggesting tesla could drop about 20 from current levels. Jeff austin when thing he likes the story over the longterm but in the near term over the next 12 to 18 months, there is an execution risk especially around the proposed solar city merger. After you. Back to you. David we are waiting for Hillary Clintons press conference. About 25 minutes north of the city. She has been criticized for not holding a press conference for some time. She has been changing some rules and now will have a press conference for the first time in seven months from hillary ensign. Clinton very glad to begin a conversation with the American People and offer some of my about isis, iran, and how leaves reform the v. A. System to provide better care for our veterans. Last 24 hours, more retired generals than have and admirals have decided to endorse my campaign. Crucial more on the challenges, tomorrow, im convening a meeting of partisan nationals surety leaders and , including former secretary of homeland security, general johnanet allen, former acting director of the cia michael jarell, and mer nato should see supreme commander, and others. We will discuss how to intensify efforts to defeat i the country safe. I want to underscore something i mentioned last night. We should make it a top priority to hunt down the leader of isis. Atbat daddy, and bring him to justice just as we did with Osama Bin Laden. That operation, getting out i got a getting him would be a focused river at the highest levels. It would send a resounding corege that nobody directs inspires attacks against the United States and gets away with it. Night, a test, donald trump failed to get again. More evidence that he is temperamentally unfit and totally uncalled to be commanderinchief. He trashed talked american generals, saying they have been reduced to rubble. He suggested he would fire them and replace them with his handpicked general. He attacked dozens of former flag officers by saying that we a longen losing for time. That is how he talks about distinguished men and women who haves and their lives serving the country, sacrificing or us. That is how he would act as of chief. Meanwhile, he praised vladimir then, even taken astonishing step of suggesting he prefers the russian president to our american president. Just unpatriotic and insulting. To our commanderinchief. It is scary. It suggests he would let putin do whatever putin wants to do. Then make excuses for him. I was just thinking about all the president s that would just be looking at one another in total astonishment. What would Ronald Reagan say about a republican nominee who attacks americas generals and heaps praise on a russian president . I think we know the answer. When asked how he would stop the spread of global terrorism, trump simply said take the oil. The United States of america does not invade other countries to plunder and pillage to we do not spend just send them around the world to steal oil. That is not getting into the absurdity of what it involves. Infrastructure, a large number of truth is, troops, many years on the ground. Trump has not thought through any of that. Every Republican Holding or seeking office in the country should be asked if they agree with donald trump about the statements. Hear fromyou did not complex night is any plan to take on isis, one of the biggest threats facing our country. A says the plan is still secret but the truth is he simply does not have one. That is not only dangerous. It should be disqualifying. Have a different vision of how we keep our country safe and strong. I respect the men and women who put their lives on the line to serve america. I will work with our allies to defeat isis and i will hold true to our countrys most cherished values. Even with all the attention being paid to the campaign, we cannot forget how important this decision is. This weekend is the 15th anniversary of 9 11. I will never forget the horror nevert day but i will forget, either, the victims and survivors and the great First Responders and Emergency Responders that i met with served and worked for as senator of new york air that is what kept me working so hard in a senate on behalf of 9 11 families. That is who i was thinking of 10 years later in the white house situation room. With president obama when the decision was made to bring Osama Bin Laden to justice. That is the kind of commander in be, someone wholl bring us together and common purpose to keep our people safe and the country strong. The latest real clear politics average has you by an average of 2. 8 Percentage Points over donald trump. Given what you say are his historic net inadequacies in altercation on the commanderinchief point you just made, shouldnt you basically be running away with it at this point . Clinton i always thought this would be a close election. That is why we have been putting organizations in place, gearing the final weeks to mobilize and turn out our voters. We will doctly what it i feel we are in a strong position but we are not taking anything for granted. We will keep working as hard as pull out asopefully many voters who agree with me as we can muster. Hi, jeff. He said last night that you would not put troops into iraq ever again. Doesnt that ignore Ground Forces there and also boxing yourself in should your military commander if elected advise that you in fact need to do that . Clinton first of all, i have said that before on numerous occasions. I believe it. I think putting a big contingent of american Ground Troops on the ground in iraq and syria would not be in the best interest in the fight against isis and other terrorist groups. Think it would fulfill one of their dearest wishes, which is to drag the United States back into a groundwork in ground war in that region. I supportn clear enablers and surveillance reconnaissance. I will be prepared to do whatever is necessary to support the arab and kurdish fighters on the ground, to take out as much of the infrastructure and isis on the air to go after in with abu bakr albaghdadi, with a focused commitment to taking him off the battlefield. The approach i have outlined intensified what we are doing but it also recognizes that there is no in my opinion, half forward to the Ground Troops that would be in our interest. Good morning. Secretary clinton, you have been criticized by the rnc for your demeanor last night, that you were too serious and you did not smile enough. Can you react to that . There is aggested double standard . Ms. Clinton i will let all of you ponder that question. I think there will be a lot of phd theses writing on that subject for years to come. I do not take my eyes and anything seriously that is from the rnc. We were talking about serious issues last night. Betweenhe difference what we have to do to fix the to takeat we have to do the fight to isis, and just making political happy talk. Inad a short window of time that event last night to convey the seriousness with which i ld approach the issue issues that concern our country. Donald trump chose to talk about his deep admiration and support for vladimir putin. Maybe he did it with a smile and i guess the rnc would have liked that. I like the hat. A new look . No, it is kind of an old look now. I am bringing it down bringing it back. Ms. Clinton shopping in your closet . I do a lot of that. Briefings,ecurity they made a suggestion or continuation that the cia was not pleased with the decisions of the administration and what president obama has made so far. Impressionthe same in the briefings you got and can you otherwise comment on the suggestion from mr. Trump . News clinton i think what he said is totally inappropriate and undisciplined. I would never comment on any aspect of an intelligence briefing i received. What does that mean for you going into the debate . Ms. Clinton that is a fair question. We have been listening to Hillary Clintons press conference to her she called this to respond to what happened last night in a program about commanders in chief. Two pointed one is what she would do about the islamic state. She would go after the leader. She has said that would be her strategy and really taking on mr. Trump, and he is peramentally unfit, saying for trashing american generals and also comparing president putin of russia a replay to our own president obama. Ins is the first time several months she has given a press conference and we will continue to monitor it. Jonathan the ecb keeping rate unchanged and the asset Program Unchanged saying only if needed. Joining us now, pimco head of Portfolio Management in germany. Thank you for bearing with us. The previous News Conference from mario draghi, a margin of disappointment that they did not get the qe extension. It inevitable, and of as you have said already, yes, i think were playing tour december now. Mario draghi made it clear in an indirect way that the Government Counsel is not satisfied with the trend in inflation and they are committed to keep on purchase and asset until they see the parts of inflation back and a sustainable direction, so no move today but i think the forecast of 1. 6 and inflation in 2018, it is not quite in line with the target and all points 20 extension with the meeting. We look at expectations and we look at president mario draghi and you say, you got to be the menu have got to do more than that. Is that what we expect . Another hurdle . Alyssa naeher were a few of the of action today, given the markets. So yes, those expectations will be carried forward. It is hard for the ecb, the ecb cannot control market expectations. Mario draghi is doing a good job, i think. Hes keeping the information see thet and we will market prices still pricing in an extension. I think we will see that. No big reason to be concerned about what will happen in december. You are looking at hader spreads. Lets begin with a titer spent. Spain over germany around one full percentage point. Spain is trading near wreck loan terms of yield. How tight can it get . Previously, we thought it could get down to 75 aces points on the 10 year. Given some of the longer term concerns about where the isozone is hitting, that probably the tightest level. If the ecb does do what we think theoes do, that is till allocation of the purchases away from germany, did come in a little bit more, but we are really talking about 25 eighths points. Jonathan i want to talk about a different spread versus spain. Recently, you have had been a shield straight under italy for a time now. With anticipation of the upcoming referendum in italy, would you like to play a wider spread between spain and italy . We are broadly neutral in terms of that take your spread. We have a bit more of a preference towards spain, economic fundamentals there, also to what you will need to come of the uncertainty of the referendum in italy, but even if the outcome of the referendum were to be a rejection of it, i do not think it is the end of the world in terms of the eurozone. s borrowing one trillion plus of liquidity at the entire market. And that is going into countries like spain and italy. Alone ical force if ecb decided tilt bond forces away from the likes of italy with a significant risk on the horizon and both of those countries . How politically sensitive with that he . As you talked about before, itre are three rules that will publicly have to adjust if it goes ahead with an extension of qe. All of those three rules are controversial, if they are to be relaxed. I think t is one of the least controversial and it is not that much original because it in the day, it is the national Central Banks doing the risk sharing, taking on the risk of the government on their purchasing. If the banks are buying a few more Government Bonds from respected respective governments, they will not there any eventual losses from it. The controversial did is what are the fiscal implications for the various treasuries, the finance ministries. But it is aedge it legal path of least resistance to actually move that one. I think lying bonds below the 33 ,ity and relaxing the those are more controversial. Jonathan cohn in about 20 seconds, what will give us the yuan to pay in these countries . Get them to spend a bit more money and finance them. Great to have you with us. Thank you. Pimcoss head of Portfolio Management in germany, thank you. This is the most interesting in action i remember in recent times. I wonder whether what mario draghi was really doing was showing tough love to the markets and the banks. He was insensitive to the plight of the banks and also the fiscal authorities, saying, get off the dime. G20, some would say that is a little sign of a desperation. Saying in frankfurt, we helped you out last year in the head of the financial racist am a do not complain about negative rate now and we will continue to bring you coverage of the story right here on bloomberg. Stocks open a little lower in the United States. Talks are much lower over in europe by over one full percentage point. Marketswith bloomberg with vonnie quinn and mark aren. This is bloomberg. Markets. Good afternoon. Take you live from San Francisco to hong kong. We cover stories out of new york and frankfurt. Here is what we are watching today. The ecb keeping its Stimulus Program and rates unchanged in a sign that policymakers do not see any immediate danger to the euro area. Spanish bonds are raising. Hewlettpackard has a spinoff and merger of Software Assets. The latest on its deal with micro focus