Index is up 1 today as well. Key banks saying memory chipmakers are possibly on the rebound come so that has some rallying today. So that has semis rallying today. Its get to our guest, Charles Dumas of ts lombard. What will mario draghi announced tomorrow . Charles i think he will come through with some further 10 basis point move may be on the negative rates, from 42 50. 40 to 50, and with tiering on the banks. That is the important thing. Theres also likely to be a revisiting of quantitative sing, for which theres about , yeorth of scope Something Like 30 billion a month. Vonnie weve been hearing from strategists and economists that say there is really not much that that kind of easing will do, that that kind of stimulus, and even earlier on, our guest took exception to the word stimulus, saying this is not going to stimulate european economy. Charles i dont think it does. I think your guest was correct. The basic point is for 10 years now, or at least since 2011, the euro zone has run a fiscal tightening and monetary loosening, and theyve reached the end of the road in terms of the impact of that. In particular, the inflation target is a bit of a farce because theres no particular reason for inflation in europe, and trying to get inflation up seems inherently perverse. If you are running on Monetary Policy come of the normal thin you might expect to affect is gdp, which is a compound of inflation and growth. What people are really concerned with his growth, so focusing purely on inflation is sort of indirect and unnecessary. Vonnie youre talking about changing the entire mandate of the European Central bank. If that is the right thing to do, it is not going to happen, right . We had the debate in the United States as well. Targeting Something Else is just not going to happen in the near term. Charles no it is not. That is quite right. That is why what gets announced tomorrow will be thoroughly ineffective. There are some respects in which socalled easing actually german demand because savers, for example, tend to put their money in the bank. If they are saving with a view for retirement, they have some idea about a standard of living they want to maintain. The extent that negative rates it even more negative in real terms, they have to save more, both because they need a larger with,um to buy annuity but also they have to save more in the interim because the pension fund they are building up has a negative yield in it. So negative rates, to the extent they become more negative come actually encouraged germans to save more. That in turn means that they reduce demand, which is the opposite of what a stimulus is supposed to do. Vonnie given that we cant change the European Central bank mandate at this point, is there an argument for fiscal stimulus out of germany . Charles yes, of course there is, but the germans have a socalled that break, which is socalled debt break, which is to say the constitutional amendment says they should not an deficits unless there is emergency declared by the bundestag. I dont see very much sign that the bundestag is about to declare an emergency. We all have our favorite candidates for the sort of emergency they might try to declare in order to spend a bit of money for a change. Somethings case is like Climate Change, for example. They could just decide they wanted to do something on that front. Say,natively, they could as a matter of fact, the best way of getting Climate Change to stop happening at such a rate is , and that carbon tax would enable them to reduce taxes elsewhere. There are quite a lot of things they could do on the fiscal front, but no one is expecting anything urgent soon. Vonnie right. Really, everything seems to be quite gloomy, if anything mario draghi does is not going to help on term, and we are not expecting the germans to do anything longterm. I think they are in recession at the moment. Gdp is down in the Second Quarter and probably in the third quarter. Rather more likely than not, we will be down in the Fourth Quarter a bit, too, so that is clearly a recession. It is not a massive downswing. It is not the end of the world with any kind of respect. In due course, trade will pick up at some stage, and germany will pick up with it. The fact is that structurally, they are now unbelievably, excessively dependent on exports and world trade, and that i beginning to count against them. Vonnie what makes you so convinced that world trade will pick up . We are seeing overtures from china to the u. S. Today, but generally speaking, the tone on trade is not going in the way of increased trade globally. Charles when i looked at the german orders numbers that came out last friday, the noneuro up, andort orders were they were up for a pretty good reason. When we did a recalculation that we do every quarter on chinese gdp, we found that chinese domestic demand was reasonably strong in the Second Quarter. Thatasic point here is inventory liquidation in china was massive in the First Quarter and at the end of last year, but slightly less in the Second Quarter, which means more of the growth of demand was being satisfied from new products rather than from inventory. China inventory cycle in looks as if it is turning a bit. Vonnie charles, stay with us. We have lots more to discuss. Charles dumas is ts lombards chief economist. Lets check Global Markets now. Heres out go to local. Abigail it has been eight heres abigail doolittle. Abigail its been a choppy week, but we have moderately solid gains around the week. The s p 500 and the nasdaq higher. Tech leading the way. The german dax sharply higher. Take a look at the emerging market index, up abou 0. 9 , so it is a risk on day. All said, look at this. Over the last three days, the of three days, these are the futures. Flat, up about 0. 2 . We finally have bonds no longer selling off. We had a five day backup for bonds. The biggest for the 10 year yield going back to november 2016. Right now, you can see that the german tenyear and 30 year are both lower, telling you haven bonds in germany are rallying. That is true, too, in the u. S. A bit of a relief for investors. It is not something that you always see. Those yields shooting higher were concerning investors for a while. That was pressuring the momentum space, but not as much today. The momentum etf is slightly red right now. Earlier, it had been up a little bit. Tech helping out. Now it is one of the top sectors on the day. All week, weve had value doing quite well. That is true once again today, up more than 1 several days in a row. A piece of that action, the energy sector. Take a look at that, up 1 . Overall today, shaping up as risk on. Vonnie abigail doolittle, thank you for that. Now we want to bring you back to ground zero in lower manhattan. Pictures the immediate. It is 18 years since the 9 11 terror attacks on the United States. The victims are being were memory as their names are read out. That continues. There is a wreath laying ceremony taking place later, with former president george bush in attendance as well. This is bloomberg. Vonnie live from new york, im vonnie quinn. This is the european close on bloomberg markets. Lets check in with the bloomberg first word news. Heres courtney donohoe. Courtney the Hong Kong Stock Exchange has made an unexpected offer for the london Stock Exchange. The bid could be seen as a potential takeover from china. U. K. s business secretary tells bloomberg the government will look at anything that has security applications. Are antitrust regulators investigating whether amazon is using its market power to hurt competition. A team of federal trade Commission Investigators began interviewing Small Businesses that sell products on amazon. Bloomberg has learned the interviews suggest the agency is skeptical about amazons claims shoppers and suppliers have real alternatives. China announced a range of u. S. Goods it will exempt from tariffs put in place last year, but it is keeping the pressure on american farmers. It will not be lifting the tariffs on products such as soybeans and pork, placed to retaliate on tariffs placed on chinese goods. President trump commemorated 9 11 by placing a wreath at the pentagon. He spoke to survivors and those whose relatives died there. Pres. Trump we come here any knowledge that we cannot a race the pain cannot erase the il ofor undo the ev that dark day, but we offer you have. At we our undying devotion and our eternal pledge that your loved ones will never, ever be forgotten. Courtney at the World Trade Center here in new york, family members gathered to read the names of those killed in the attacks. Never forget. 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. Donohoe. Ney this is bloomberg. Vonnie thank you. Dumas,ith us is charles ts lombard chief economist, london. Us from im interested in your thoughts on how brexit has proceeded in the last week or two, and what happens next. What is your Current Base Case . Charles well, right now weve just had a little bit of news today in that the scottish the closuredeclared of parliament until the middle of next month is illegal. What the consequences of that will be i sibley dont know, and nor does anyone else i simply dont know, and nor does anyone else. What is clear is we are headed towards some electoral solution because parliament cant resolve this issue either way. They havent been able to specify what they really do want. Theyve been pretty clear about what they dont want, which is a if brexitexit, but happens and there is no deal, then youve had a no deal brexit. The moment, things are scheduled to end on october 31, sayshe law passed recently that mr. Johnson has to make an application to have that extended. Just exactly whether or not that law is entirely enforceable remains to be seen, and the fact that it is enforceable or whether it is enforceable will be something that the government tries to test. Vonnie i want to point out that an official has told bloomberg that in spite of that court ruling in scotland, the legislature will remain suspended pending an appeal of that ruling kisses bring court that ruling to the supreme court. What happens to the british meantime . The we talk about stagnation and stasis in 70 different areas, from trade to inflation targeting in europe to Monetary Policy, and now brexit. What happens . Charles the first thing to register is the fact that the british economy over the last not onlyexpanded faster than germany, but quite a bit faster than france, which is not so restrained as germany because it is not so export dependent. I think things arent quite as bad as you might think. It is only fair to say that from my standpoint as a purely analytical matter, i think that brexit is a significantly less important than most people imagine. Vonnie are we seeing better data out of britain because some gdp growth is being pulled forward . People are spending because they are uncertain about what is going to happen next, and perhaps there is a mood element to it, too. Will britain suffer from this incoming quarters when we know the outcome suffer from this in coming quarters when we know the outcome . Charles in short, the answer is no because certainly there is a little to stockpiling going on at the moment, which is people who want to make sure they still have toilet paper if there is a no deal brexit, so theres a little bit of that kind of thing. Verys a matter of fact, large numbers of transactions are to some degree being put on hold, or at least postponed, because people are uncertain about brexit. So it is much more likely, actually, that when nothing is settled, and was perhaps a short delay, there will be a significant upsurge in activity. Vonnie charles, explain to me because it seems slightly counterintuitive. Maybe i am just not getting something you are saying. You seem to be gloomy on the outlook for europe, pretty gloomy on the outlook for the u. S. , but pretty optimistic britain. Is that right . Charles that is right. The fundamental reality is that british assets, in particular sterling itself, have been pulled down very significantly by people worried about this no deal brexit, and to a limited extent, people are worried about a socialist government under Jeremy Corbyn if labour wins the general election, but actually, these are very small chances of happening. , but a lot of now transactions, particularly in property and real estate, but more generally, have been put on hold because of this brexit uncertainty, and when the matter is resolved, they will go out there and do whatever it is they want to do. Vonnie well, we look forward to that day. Charles, thank you for joining us. Charles dumas, ts lombard chief economist. Morgan stanley Ceo James Gorman says he is surprised at the current level of interest rates. He also warns that the fed should be cautious in its approach to rates in the current economic climate. Jasonke with bloombergs kelly and carol massar in new york. Lows we have record unemployment. China is still performing strongly. Europe is obviously mixed, but its been mixed for two decades now. So at one level, the fundamentals are actually quite strong. At the other level, the sense of confidence, there is a sense of inevitability we are at the end of a cycle. It doesnt have to be. Statistically, there is a recession every seven years. But it doesnt have to be. In australia, they havent had a recession for 28 years in a row. Carol why is there so much pressure, then, on the Federal Reserve to continue to cutting rates . Does that make sense . James because the economy is slowing. Rates when feather the economy is getting hot. Her job is to raise rates, slow it down, and the reverse. I suspect they will be one or two more. But then it is time for a pause and really absorb this. The problem with cutting is it is one of the few tools youve got. If you give it away too easily, what do you have if we have a real problem . Jason i want to go back to what you said a minute ago about squaring some of the elements out there, specifically this and this is that seymour cautious with a consumer that that seem more cautious with a consumer that doesnt seem cautious at all. How do you talk to your customers, and what do you see that could help explain that dichotomy . James we are in a bit of an echo chamber. If you are a business leader, you go to Business Leadership meetings. We bounce a lot of it off of each other, so the thinking is, gee, we must be at the end of the cycle. Weve had an inverted yield highlywhich has been productive of a recession. Highly productive of a recession. There are some evidence that things are likely to slow down at some point. I dont think theres any doubt about that. So thinking about Capital Investment over multiple years, you would be prudent in being cautious at this point. Consumers arent yet experiencing that. Theyve got very cheap debt. Housing is starting to recover. Sheet ismer balance still very strong, and that is why it is lagging where the consumer isnt. Vonnie that was james gorman speaking with jason kelly and carol massar at columbia business school. In an epic industry shift, the balance of shower shifting to passive from active. Assets in mutual funds and etfs tracking equity index is 4. 271 trillion. This is bloomberg. Vonnie some headlines now from the Morgan Stanley conference in laguna beach, where boeings ceo is speaking. Boeing stock is rising on the session. Returnstill targeting of service for its max, and sees a phased ungrounding around the world. Dennis muilenburg says he sees the crisis as a defining moment and notes that they still face open questions with the faa. Max upgrades are being tested in labs, and he doesnt see independent reviews slowing become back of the max. Once again, boeing still targeting the early Fourth Quarter returned to service for the max. It has flown more than 600 flights with updated software. Stock is really taking a leg higher now, up 2. 7 . Checking u. S. Markets broadly, we are shaving off some gains, but still higher on the session, with the dow and the s p up 0. 3 , and the nasdaq up 0. 6 . Gains, too, in europe. 0. 7 ,x in germany is up the cac 40 up 0. 4 , and the ftse 100 powering up. The european close is next. This is bloomberg. Vonnie stocks finishing up the day in european trading. It was probably an update. Quite positive for most of the major markets, including germany, britain, and france. A small decline in spain and iceland. Generally a positive day. Lets have a look at the individual markets. The ftse 100 of 1 . The dax in germany up two thirds. 7 . Toxx 600 up gains in industrials. Lets have a look at our next board. The german 10 year yield, 57 basis points. It has been around the 55 basis point mark. This before the ecb policy decision tomorrow. Froms aware a ways away where we were at negative seven 70. Lots of china overtures to the United States making it look like trade is on a better footing. Brent crude trading at 62. 15. It has had about. Lets look at the sectors in the s p that are trading higher. Primarily onvices the lse potential deal. The hong kong board is looking to buy the lse. Travel and chemicals, although sectors higher. Most every sector is higher. Just small declines for the auto parts sector and also oil and gas. We are talking about shaving off some of the previous sessions gains. Lets get to the United States and see where we are trading here. Some positive sentiment today. We are trading a little bit off the highs. The s p 500, 2990. The dollar index continues to strengthen. , memory chip demand coming back sometime soon and the back ofx up on those memory chipmakers. We can see we have going up to point boeing up 2. 8 . Bloomberg speaking at the conference in laguna beach, california and ingesting some positivity into the return of the boeing 737 max 8. More than 600 flights have taken place with the max new software and all is going well and that front. He says theyre all