The other big central bank today, talking about the ecb in a moment, turkeys benchmark , in cut 425 basis points line with president erdogans plan for the country. He lira is stable guy amazing. Getcut 425 basis points and your currency going in exactly the opposite direction. Lets talk about the ecb. This is maybe not the reaction mario draghi would have wanted. Initially, yields went down. He says inflation, we are really worried about it. Someone asks, why didnt you do anything this time around . He says we didnt even talk about doing anything this time. Yields go exactly the opposite direction. We are 41. An amazing day in terms of bond Market Action in europe. Lets take a look at other assets as we continue to focus on this story. Eurodollar trading higher. Again, not what draghi would have wanted. Thanks stocks have gone up because there was an expectation that next time we will see some structure. Ring that is really worrying for the snb in switzerland. Vonnie lets get to some analysis of that. Ecb president mario draghi sending a strong signal that stimulus will be set up after the summer break, with lower Interest Rates and renewed asset purchases on the table. Have a listen. Inflation expectations have been at historical lows for some time, so we have to consider admission, and i stress this, that we dont like this. Vonnie we are joined now by strategasnert, Research Partners chairman. Did the ecb send a confusing message today . Messaget is clearly a that is not resonating with investors. In the 1930s, there was the term that came about called pushing on the string. The idea that youre going to provide more stimulus to the european economy that is somehow going to work you have already 13 trillion worth of negative yielding sovereign debt seems very uninspiring to me. Confusing,omewhat but i think what investors are really coming to grips with is youve reached the limits probably a long time ago of what you can expect central banking to do. It seems to me that europe has to try capitalism. Orhas to try fiscal stimulus regulatory stimulus, things that would spur capital formation. Just lowering rates clearly is not going to do the trick. Vonnie and indeed, he said fiscal stimulus is very necessary. But on the Monetary Policy about, he talked the economy getting worse and worse, and that the ecb was not forecasting imminent recession. Jason the good news from my perspective is that investors, if everything goes wrong, it doesnt grow or it declines , i think, and my opinion, its justified to be gloomy about europe because theres nothing particularly affirmative coming as far as fiscal stimulus or regulatory stimulus or other changes, so it is hard to get optimistic if you are not doing anything other than what youve been doing before. Guy can i take you back to what you just said about fiscal stimulus . Berns 75 the ecb is not there yet, but could be because it is allowing tiering on banks. One of the reasons why governments may not be dealing with structural inefficiencies in europe is they still believe the ecb has got some wiggle room. Does the ecb need to go all the way to the edge, all the way to the end . Where do you think that line is . Jason i have to say, it is a great question. You are talking to someone who probably think they reached that line a long time ago. It seems like when all you have is a hammer, everything starts to look like a nail. I think that is the attitude of a lot of central bankers around the world, with the possible exception of the fed, but of course, in the u. S. We had the trump administration, who had a very expansive view of fiscal policy, regulatory policy, and certainly a big change in trade. I think if you continue to ease, you also let elected officials off the hook. You give them more wiggle room to delay and less of an impetus to try things that would really stimulate the economy. Argue, ae, i would moral hazard in terms of elected officials to do things that would affirmatively help the economy grow. Guy do you think we are reaching a point where we see a turning point for european banks . European banks have been badly beaten up because the ecb tiering structure like the snb does to protect overnight deposits. There was a hint today that maybe they will look to buy other assets. Could this double whammy of actuallylus purchases mark a turning point for the european Banking Sector . Jason it could come up but i would argue that that is a bandaid when surgery is required. It certainly is not a compelling case. It makes european banks and interesting trade, and my opinion, but it doesnt make them an interesting investment longterm. I think mario draghi has and wondered idea, aloud, whether there are unintended consequences to negative rate. On the the impact it has Banking System makes it pretty clear that the unintended consequences are actually quite large. Those things might help in the shortterm, but i think there are much bigger structural issues that cant be solved through financial engineering. You need a change in approach and attitude to really get the economy going if that is what you are going for. Growth, it like slow is sort of a bad way to do it. Vonnie we have a new Prime Minister. Take us inside the dinner you had last night with some strategas clients. Comebackt partys vehicle is winning over remainers and tory hardliners. Im curious as to whether you came away with that dinner with anything new or fresh outlook. Jason the biggest take away is thatit seems to be now Prime Minister johnson has to put up or shut up. It seems to me that most of the people who are remainers, a good portion of the people would probably vote to leave right now , just given all of the drama and angst over the last couple of years. I think theres a general , and this is nigels view in my view, that you had a and now itprocess, is time to actually go through with this. We heard from mr. Berridge and our clients mr. Farage and our clients whether johnson is committed to a real brexit or whether it is likely to be delayed. We came along with the idea that it could be delayed further. On the is there a view element . E the farage jason be more confusion, more concern about volatility. Longerterm, if you can get this process behind us, i would be a big buyer of pound sterling. In the short term, i would be quite cautious because theres going to be a lot of handwringing and gnashing of teeth about this process and the impact it would have on economic growth. I think there was an acknowledgment on the part of nigel that if there was a hard brexit, you would have to do other things to stimulate the economy like cut the Corporate Tax rate and also had a very strong keynesian public works project on the other side. It clearly would have an impact on the economy, a negative impact, but you have to do other things to smooth that over and get the u. K. Back on track. Vonnie jason, come back again soon. Jason i hope so. Vonnie Jason Trennert of strategas Research Partners. Get a bloomberg first word news update. Heres kailey leinz. Kailey the first day with Boris Johnson as new Prime Minister, hes made it clear hes willing to go with a no deal brexit. He said he would turbocharge negotiations for a no deal divorce with the european union. He met with his new cabinet. Members under theresa may are no longer in their jobs. Kim jonguns regime has resumed missile testing. South korea says they fired at least two short range missiles into the sea north of the johnsula, just after bolton left south korea. Beenerican rapper has charged with assault in sweden. President trump says he offered to personally vouch for his bail. Kim kardashian west reportedly brought the case to the president s attention. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im kailey leinz. This is bloomberg. Turkeysoming up, central bank makes its biggest rate cut on record, slashing its benchmark by 425 basis points even as inflation runs around 15 . A look at what it means for turkeys economy, next. This is bloomberg. Guy a bit of breaking news. Barnier talking about the speech Boris Johnson delivered a little earlier on in parliament and the comments he made last night. Barnier, the eu brexit , said become its on the backstop were unacceptable. The elimination of the backstop is on except about. To be honest is an acceptable. To be honest is unacceptable. To be honest, not surprising that barnier is not particularly happy about that. Vonnie it couldnt go unsaid, and there we have it. Now the line in the sand. Lets check markets with abigail doolittle. Abigail we are looking at a risk off tone for Global Equities at this point. Take a look at the s p 500 and the nasdaq in the u. S. , dealing with a number of earnings reports. We will take a look at two of the key ones dragging at this point. The dax down and emerging markets down fractionally, most likely in reaction to Mario Draghis comments about the outlook getting worse and worse. If we look at the 10 year german bund yield, we see something pretty remarkable. Earlier today, hitting a record low 41 basis points. That would be a seventh down day in a row, but after that Ecb Press Conference in statements by mario draghi, we are seeing a up backup in rates, net three basis points, but still down sharply. As for those earnings reports in the u. S. , take a look at tesla plunging, down 13. 8 , its worst day since january. Some question whether profit ability as possible. There was also the surprise anmenouncement of the cofounder in of the cofounder. Investors not liking met. A strongdown despite quarter. Finally, we are still in the summer doldrums because we have slightly bigger losses for the s p 500. When we go into the bloomberg terminal, we are going to see that last summer, we had a series of months all the way into the end of september of the s p 500 not making moveo the upside or the downside. Moves inolatility, big the beginning of this year. Right now we are in day 33 of the s p 500 not making a move greater than 1 up or down, mimicking last summer. Guy you wonder whether the fed next week can jolted out of that range. Thank you very much indeed. Lets focus on turkey. The nations new Central Bank Governor delivering the biggest Central Bank Interest cut in 17 years. Joining us is our Turkish Bureau chief. Good afternoon. Normally if you cut by that amount, your currency falls. It didnt. It went up against the u. S. Dollar. It is back to flat now. Just walk me through this, and why. Reporter it did actually go down for like 10 seconds. Then it came back up again. It was quite surprising. If you were to ask me what would happen if there was a 425 basis point cut, i would probably say the lire would decline massively against the dollar. It didnt turn out to be the case. Speaking to different people in the markets, people seem to think that a lot of people are trading the lira and just looking at the massive rate cut, and just focusing on what the real yield on the lira is, which is still among the highest among peers when adjusted for inflation. Vonnie i have a graph of it up here, and it looks like we are 15. 4 on the 10 year. It has come down quite substantially, but still it is extraordinarily elevated relative to comparable yields across europe. We can show the chart here in the bloomberg. Are traders playing this for carrie, then for carry, then . Onur thats right. Quite a few investors thought if it were to liver if it were ,o deliver a massive rate cut investors are backing the lira for the carry it offers. Guy president erdogan has a different view of economics than many of us. He believes that high rates contribute to high inflation. How low, how much pressure is he going to put on the new Central Bank Governors to deliver a series of rate cuts like this . Onur we know one of the reasons the previous Central Bank Governor was ousted was a somewhat unexpected or sudden decision. Rates diverged massively from erdogan. It is unusual view on how the cost of money and cost of goods interact with each other. We know that no one forward, hes going to push for lower rates as turkish inflation is expected to slow down, which is something expected because with all other factors contributing to turkeys inflation, how far he will go will depend on how the lira reacts. Erdogan may have certain ideas about the economy, but after all, hes a pragmatist. He will look at how the lira reacts, how it is taking a toll on the rest of the economy, including inflation and unemployment. Guy hes going to look at today and take a very interesting conclusion away, maybe. Thank you very much indeed, ant, aunt onur bloombergs Turkish Bureau chief. Vonnie taking up, our factor funds discussion. This is bloomberg. Vonnie live from new york, im vonnie quinn. Guy in london, im guy johnson. This is bloomberg markets. Lets turn our attention to factor investing. We are seeing it start to seep into the fixed income market, which is slow beer than the equity market. Here to discuss is it sleepy an theis slippier th equity market. Psarofagis. Is tom why has it taken so long to get to this point, but now that we are at this went, what impact could it have . Anasios the two things that i think held it back was the increased complexity compared to equities. When youre looking at trades and all of that. The other thing is when you look at these, theres a huge bench of Academic Research that goes back decades and decades. Fixed income is not quite as built out. Data backer to get that far and harder to validate it. Youre starting to see it go over, it is just a lack of data and fixed income that has been more on the equity side. Vonnie we have the likes of aqr in this space. Are there other Asset Managers joining in . Athanasios there definitely are. Why i think this is interesting, we have Bank Earnings and all of these companies coming out with earnings releases. ,f you listen to Blackrock Larry fink mentioned building out new exposures as one area they are focusing on. When you look at what has been happening over the last several years, theyve been away from nontraditionals. Not your broad, aggregate exposures. It is these factorbased strategies. Inres been a big uptick new, nontraditional product launches. Guy today is all about the ecb, so i have to ask you an ecb question. Draghi has pointed the staff to examine other assets that the ecb could buy. Ownsalready owns xe etfs. Is there much there that these be could own . That the ecb could own . Athanasios im sure they are looking at what japan has done. It is just a matter of is it politically or regulatory, will they be able to do it . Im sure they will be looking at equity etfs and even bond etfs. Guy thats an interesting point. We will watch and wait until september. Thank you very much. Bloomberg etf analyst tom psaro fagis. You can find all of these factors on your bloomberg. Is your function. This is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Vonnie live from new york, im vonnie quinn. Guy from london, im guy johnson. This is bloomberg markets. Lets get a first word news update with kailey leinz. Kailey the European Central bank is sending the strongest signal yet it will step up monetary support for the economy. They expect borrowing costs to stay at present levels or lower for the first half of 2020. That opens room for a rate cut in september. The ecb also signaled it will resume its Bond Buying Program if needed. Theres a sign that Corporate Investment in the u. S. Is regaining momentum despite tariffs and a global slowdown. Orders placed with american sactories for businesse increased. That indicates secondquarter gdp due tomorrow may be betterthanexpected. The federal government awarded million forna 237 hurricane recovery come but as of this month, the state had only spent about 6 of it. Europe is sweltering through record High Temperature today. Paris has beaten its alltime mark, 105 degrees. It was a july record 98 degrees at Londons Heathrow airport. Summers in much of europe are usually mild, and few homes have air conditioning. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im kailey leinz. This is bloomberg. Vonnie thank you. Lots of news in the auto business today. Tesla shares are tumbling as the Company Cofounder leaves, and earnings werent exactly and earnings coming out, and wasnt exactly an earnings quarter. It reminds me of the old prevailing wisdom, im not sure which of the carmakers said it, that what you lose in a car you can make up for in volume of sales. Is tesla hoping to do that . Yes, you now have people openly positing this morning with tesla, is the model three structurally unprofitable . Hashave a car that tesla come into their credit, proven that they are able to sell at high volumes. They are moving a lot of metal, but they are not making money. They had a record quarter of deliveries, and yet the loss was quite a bit worse than analysts were expecting. This is an open question at this point, whether or not this is a company that can make money. Threere selling the model at prices on average about 50,000, so we havent even really seen the average price the down with more of purchase is being some of the lowerpriced cars. This was a car that was supposed to start at 35,000, and theyve never really gotten to that price point in any sort of large numbers. Guy was at the numbers that freak to the market out, or the fact that one of the cofounders is w